# Neogen Corp: Form 10-Q for the period ended Feb 28, 2025

- Company: [Neogen Corp](/companies/neog.md) (CIK 711377)
- Form: 10-Q
- Filed: 2025-04-09
- Accepted by EDGAR: Apr 9, 2025, 16:04 ET
- Period: 2025-02-28
- Accession: 0000950170-25-052497
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/711377/000095017025052497/neog-20250228.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/711377/000095017025052497/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-02-28.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-12-01 to 2025-02-28 | $221.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-06-01 to 2025-02-28 | $669.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-12-01 to 2025-02-28 | $110.7m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-06-01 to 2025-02-28 | $340.7m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-12-01 to 2025-02-28 | $110.3m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-06-01 to 2025-02-28 | $328.5m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-12-01 to 2025-02-28 | $4.5m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-06-01 to 2025-02-28 | $14.8m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-12-01 to 2025-02-28 | $5.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-06-01 to 2025-02-28 | −$449.8m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-12-01 to 2025-02-28 | $1.2m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-06-01 to 2025-02-28 | −$22.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-12-01 to 2025-02-28 | −$11.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-06-01 to 2025-02-28 | −$479.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-12-01 to 2025-02-28 | −$0.05 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-06-01 to 2025-02-28 | −$2.21 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-12-01 to 2025-02-28 | −$0.05 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-06-01 to 2025-02-28 | −$2.21 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-12-01 to 2025-02-28 | 217,031,907 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-06-01 to 2025-02-28 | 216,845,782 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-06-01 to 2025-02-28 | $41.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-06-01 to 2025-02-28 | $88.5m | us-gaap:PaymentsToAcquireProductiveAssets |
| Cash and equivalents | at 2025-02-28 | $127.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-02-28 | $551.7m | us-gaap:AssetsCurrent |
| Total assets | at 2025-02-28 | $4.04bn | us-gaap:Assets |
| Current liabilities | at 2025-02-28 | $141.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-02-28 | $1.38bn | us-gaap:Liabilities |
| Long-term debt | at 2025-02-28 | $890.6m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2025-02-28 | $2.66bn | us-gaap:StockholdersEquity |
| Shares outstanding | at 2025-02-28 | 217,038,267 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 37,880 characters.

The information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations contains both historical financial information and forward-looking statements. Neogen does not provide forecasts of future financial performance. While management is optimistic about the Company’s long-term prospects, historical financial information may not be indicative of future financial results.

### Safe Harbor and Forward-Looking Statements

Forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, are made throughout this Quarterly Report on Form 10-Q, including statements relating to management’s expectations regarding new product introductions; the adequacy of our sources for certain components, raw materials and finished products; and our ability to utilize certain inventory. For this purpose, any statements contained herein that are not statements of historical fact are deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are intended to provide our current expectations or forecasts of future events; are based on current estimates, projections, beliefs, and assumptions; and are not guarantees of future performance. Actual events or results may differ materially from those described in the forward-looking statements. There are a number of important factors that could cause Neogen’s results to differ materially from those indicated by such forward-looking statements, including many factors beyond our control. Factors that could cause actual results to differ from those contained within forward-looking statements include (without limitation) the continued integration of the 3M food safety business and the realization of the expected benefits from that acquisition; the relationship with and performance of our transition manufacturing partner; our ability to adequately and timely remediate certain identified material weaknesses in our internal control over financial reporting; competition; recruitment and retention of key employees; impact of weather on agriculture and food production; global business disruption caused by the Russia invasion in Ukraine and related sanctions and the conflict in the Middle East; identification and integration of acquisitions; research and development risks; intellectual property protection; increasing and developing government regulation; and other risks detailed from time to time in the Company’s reports on file at the Securities and Exchange Commission, including this Quarterly Report on Form 10-Q.

In addition, any forward-looking statements represent management’s views only as of the date this Quarterly Report on Form 10-Q was first filed with the Securities and Exchange Commission and should not be relied upon as representing management’s views as of any subsequent date. Except to the extent legally required to do so, the Company specifically disclaims any obligation to update forward-looking statements, even if its views change.

### Trends and Uncertainties

In prior years, production was negatively impacted by broad supply chain challenges and labor market disruptions. Additionally, input cost inflation, including increases in certain raw materials, negatively impacted operating results. In fiscal year 2024, despite a slowing rate of inflation, there were economic headwinds of softening consumer demand and higher interest rates, coupled with ongoing geopolitical tension in certain regions.

Interest rates have risen sharply, particularly in fiscal year 2023, as a way to combat inflation. This increased our borrowing costs and raised the overall cost of capital. Although the federal funds rate was reduced in 2024 and there are indications of future rate cuts, the overall interest rate we pay on our Credit Facilities remains higher than when the debt was incurred in 2022, which increases interest expense on the unhedged portion of our Term Loan. In response to the historically high inflationary environment, we took pricing actions to mitigate the impacts on the business in the prior two fiscal years. The impact of inflation continues to affect us in the current fiscal year, although at a lower rate compared to prior fiscal years.

Beginning in the first half of fiscal year 2024, we implemented a new enterprise resource planning system and exited our transition distribution agreements with 3M, which led to certain shipment delays and an elevated backlog of open orders, specifically in the Food Safety segment. At the conclusion of fiscal year 2024, order fulfillment issues were largely resolved, however, the impact of lost market share stemming from these fulfillment issues has continued in fiscal year 2025. Also in fiscal year 2025, we have experienced negative impacts from delays in restarting full production of our sample collection product line, which we relocated from 3M into a Neogen facility. However, at the end of the third quarter of this fiscal year, we resolved these delays, with production having returned to the prior normal levels. With a change in administration in fiscal year 2025, there has been an economic policy shift towards increasing tariffs, which in turn has led and could lead to further retaliatory tariffs. These have the potential to negatively impact our international sales, as the majority of our purchases and production is done within the U.S.

Although we have no operations in or direct exposure to Russia, Belarus or Ukraine, we have experienced intermittent shortages in materials and increased costs for transportation, energy and raw materials due, in part, to the negative impact of the Russia-Ukraine military conflict, which began in February 2022, on the global economy. Our European operations and customer base have been negatively impacted by the conflict. Similarly, the military conflicts in the Middle East have increased overall geopolitical tensions. As the respective conflicts continue or worsen, they may further impact our business, financial condition or results of operations throughout fiscal year 2025.

Within the Food Safety industry, the end market continues to have a lower level of food production, partly due to significant inflation in food prices. However, there has generally been gradual end market improvement that has coincided with an increasing focus on food safety from both consumers and regulators. Within Animal Safety, the end market is at or near cyclical lows. As a result, we are optimistic about future revenue growth in the segment, particularly if the distribution channel begins to meaningfully restock inventory.

The restructuring actions undertaken in our genomics business have resulted in the voluntary attrition of revenue, following the shift in focus already made away from smaller production animals. A portion of our genomics business also serves the companion animal market, which has been experiencing weakness recently, primarily due to the impact of continued inflation, a lower number of pet adoptions, and a higher level of customer in-sourcing.

We continue to evaluate the nature and extent to which these issues impact our business, including consolidated results of operations, financial condition and liquidity. We expect these issues to continue to impact us throughout the remainder of fiscal year 2025.

### Critical Accounting Estimates

During the second quarter of fiscal year 2025, we incurred a goodwill impairment charge of $461.4 million associated with our Food Safety reporting unit. Subsequent to the goodwill impairment charge, the fair value of this reporting unit approximated its carrying value. The fair value of the reporting unit is estimated based on a combination of an income approach, which utilizes discounted cash flows and a market approach, which utilizes pricing multiples derived from an analysis of comparable public companies multiplied against historical and/or anticipated financial metrics of the reporting unit. The rate used to discount the cash flows under the income approach was 10.0%. These calculations contain uncertainties as they require management to make assumptions including, but not limited to, market comparables, future cash flows of the reporting unit, and appropriate discount and long-term growth rates.

A decline in the actual cash flows of the Food Safety reporting unit in future periods, as compared to the projected cash flows used in the valuation, could result in the carrying value of this reporting unit exceeding its fair value. Further, a change in market comparables, discount rate or long-term growth rate, as a result of a change in economic conditions or otherwise could result in the carrying value of this reporting unit exceeding its fair value, which would result in an additional impairment charge.

Our critical accounting estimates are included in our Annual Report on Form 10-K for the year ended May 31, 2024 and did not materially change during the three months ended February 28, 2025.

### Executive Overview

|  | Three months ended February 28/29, 2025 | 2024 | Increase / (Decrease) | Nine months ended February 28/29, 2025 | 2024 | Increase / (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Total Revenues | $220,980 | $228,812 | $(7,832) | $669,202 | $687,428 | $(18,226) |
| Cost of Revenues | 110,715 | 111,929 | (1,214) | 340,681 | 337,010 | 3,671 |
| Gross Profit | 110,265 | 116,883 | (6,618) | 328,521 | 350,418 | (21,897) |
| Operating Expenses |  |  |  |  |  |  |
| Sales and marketing | 44,595 | 47,920 | (3,325) | 136,939 | 138,535 | (1,596) |
| General and administrative | 55,782 | 52,087 | 3,695 | 165,224 | 148,929 | 16,295 |
| Goodwill impairment | — | — | — | 461,390 | — | 461,390 |
| Research and development | 4,473 | 4,853 | (380) | 14,780 | 17,331 | (2,551) |
| Total Operating Expenses | 104,850 | 104,860 | (10) | 778,333 | 304,795 | 473,538 |
| Operating Income (Loss) | 5,415 | 12,023 | (6,608) | (449,812) | 45,623 | (495,435) |
| Other Expense |  |  |  |  |  |  |
| Interest income | 699 | 1,612 | (913) | 2,466 | 5,265 | (2,799) |
| Interest expense | (17,737) | (18,285) | 548 | (54,493) | (54,773) | 280 |
| Other expense, net | 1,896 | (1,172) | 3,068 | (69) | (4,021) | 3,952 |
| Total Other Expense | (15,142) | (17,845) | 2,703 | (52,096) | (53,529) | 1,433 |
| Loss Before Taxes | (9,727) | (5,822) | (3,905) | (501,908) | (7,906) | (494,002) |
| Income Tax Expense (Benefit) | 1,230 | (3,800) | 5,030 | (22,060) | (3,900) | (18,160) |
| Net Loss | $(10,957) | $(2,022) | $(8,935) | $(479,848) | $(4,006) | $(475,842) |

### Results of Operations

### Revenues

Revenue decreased $7.8 million during the three months ended February 28, 2025 compared to the three months ended February 29, 2024. The decrease included a $7.1 million unfavorable foreign exchange rate impact and a $1.2 million unfavorable impact due to discontinued product lines, offset by $0.5 million of growth in the business. The increase in the business was driven by new sales in the food quality and nutritional analysis product line paired with continued strength in indicator testing and pathogens product lines. These were partially offset by reduced sales of sample collection products due to production constraints, lower genomics volume due primarily to weakness in the companion animal market and a decline in sales of veterinary instruments, which have been impacted by tariffs.

Revenue decreased $18.2 million during the nine months ended February 28, 2025 compared to the nine months ended February 29, 2024. The decrease included a $21.9 million unfavorable foreign exchange rate impact and a $1.8 million unfavorable impact due to discontinued product lines, offset by $5.5 million of growth in the business. The year-to-date increase was driven by continued strength in indicator testing paired with new sales in the food quality and nutritional analysis product line. These increases were partially offset by production constraints within the sample collection product line and lower genomics volume, which was impacted by a shift to focus on large production animals and weakness in the companion animal market.

#### Service Revenue

Service revenue, which consists primarily of genomics services provided to animal production and companion animal markets, was $24.5 million and $72.6 million during the three and nine months ended February 28, 2025 and $26.6 million and $77.0 million during the three and nine months ended February 29, 2024, respectively. The decrease in the three and nine months ended February 28, 2025 was primarily due to lower genomics sales into the companion animal market, as well as lower sales into the domestic poultry market, primarily due to a shift in focus towards large production animals, offset by an increase in genomics sales into beef markets.

#### International Revenue

International sales were $105.6 million and $335.7 million during the three and nine months ended February 28, 2025 and $104.6 million and $338.6 million during the three and nine months ended February 29, 2024, respectively. The increase during the three months ended February 28, 2025 was driven by increases in the Latin American countries, partially offset by a $7.1 million currency headwind and decreases in the Europe region. The decrease during the nine months ended February 28, 2025 was due to $21.9 million of currency headwinds, partially offset by an increase in the Latin American countries and to a lesser extent, countries within Asia Pacific and Europe.

### Gross Margin

Gross margin was 49.9% and 49.1% during the three and nine months ended February 28, 2025 and 51.1% and 51.0% during the three and nine months ended February 29, 2024, respectively. The decrease in margin during the three month period was primarily due to lower volume and higher manufacturing costs related to our sample collection product line. The decrease in margin during the nine month period was primarily due to higher freight costs in the current year and $4.6 million of restructuring charges. Additionally, a sales decline in the first and third quarters contributed to lower gross margin for the year-to-date period.

### Operating Expenses

#### Sales and Marketing

Sales and marketing expenses were $44.6 million and $136.9 million during the three and nine months ended February 28, 2025 and $47.9 million and $138.5 million during the three and nine months ended February 29, 2024, respectively. While we experienced higher shipping costs in the current year, as we took over distribution of FSD products from 3M during the second and third quarters of the prior fiscal year, these increased costs were more than offset by a decrease in fees paid to 3M for distribution services and lower royalty expense.

#### General and Administrative

General and administrative expenses were $55.8 million and $165.2 million during the three and nine months ended February 28, 2025 and $52.1 million and $148.9 million during the three and nine months ended February 29, 2024, respectively. For the Food Safety segment, increases compared to the prior year comparable periods were driven by a fixed asset impairment charge of $2.1 million. For the Animal Safety segment, an increase in expense for the full year was attributable to restructuring charges, which included $6.9 million of charges that were primarily incurred in the second quarter of the current fiscal year. Corporate expense has increased primarily due to additional headcount and higher costs associated with our prior year enterprise resource planning system implementation.

General and administrative expenses include amortization expense relating to definite-lived intangible assets of $23.3 million and $70.4 million during the three and nine months ended February 28, 2025 and $23.7 million and $71.1 million during the three and nine months ended February 29, 2024, respectively. Estimated amortization expense for fiscal years 2025 through 2029 is expected to be in the range of approximately $90 million to $96 million per year.

#### Goodwill Impairment

During the nine months ended February 28, 2025, goodwill impairment charges were $461.4 million. There were no goodwill impairment charges recorded during the prior year comparable period.

#### Research and Development

Research and development expense was $4.5 million and $14.8 million during the three and nine months ended February 28, 2025 and $4.9 million and $17.3 million during the three and nine months ended February 29, 2024, respectively. The decrease during the three and nine months ended February 28, 2025 is primarily the result of lower contracted services and employee costs in the Food Safety segment, as we continue to realize synergies in certain areas from the 3M FSD business.

### Other Expense

Other expense was $15.1 million and $52.1 million during the three months ended February 28, 2025 and $17.8 million and $53.5 million during the three and nine months ended February 29, 2024, respectively. The decrease in expense during both comparable periods was due to a gain related to a settlement regarding the Company's prior acquisition of certain fixed assets. The decrease in expense was also driven by lower interest expense during both comparable periods. The lower interest expense was a result of our interest rate swap instrument. These favorable impacts were partially offset by a reduction in interest income associated with our money market portfolio.

### Provision for Income Taxes

Income tax expense was $1.2 million during the three months ended February 28, 2025 and income tax benefit was $22.1 million during the nine months ended February 28, 2025 compared to income tax benefit of $3.8 million and $3.9 million during the three and nine months ended February 29, 2024. Income tax expense for the quarter is related to changes in the Company’s forecasted pre-tax income using an estimated annualized effective tax rate. The net tax benefit for the nine month period is primarily related to pre-tax losses due to amortization expense and interest expense from the 3M FSD acquisition as well as an income tax benefit of $9.2 million associated with goodwill impairment charges. The Organization for Economic Cooperation and Development (“OECD”) Pillar 2 global minimum tax rules, which generally provide for a minimum effective tax rate of 15%, are intended to apply for tax years beginning in 2024. We are closely monitoring developments and evaluating the impact these new rules will have on our tax rate, including eligibility to qualify for certain safe harbors. Where no safe harbor is met, we have included in our income tax for the three and nine months ended February 28, 2025, a forecasted amount of “top-up” tax for our foreign subsidiaries as required under the applicable rules of the countries that have adopted the Pillar Two directives.

### Segment Results of Operations

|  | Three months ended February 28/29, 2025 | 2024 | Increase / (Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Food Safety | $152,731 | $157,754 | $(5,023) | (3)% |
| Animal Safety | 68,249 | 71,058 | (2,809) | (4)% |
| Total Revenues | $220,980 | $228,812 | $(7,832) | (3)% |
| Food Safety | $19,315 | $15,915 | $3,400 | 21% |
| Animal Safety | 6,750 | 14,781 | (8,031) | (54)% |
| Segment Operating Income | $26,065 | $30,696 | $(4,631) | (15)% |
| Corporate | (20,650) | (18,673) | (1,977) | 11% |
| Operating Income | $5,415 | $12,023 | $(6,608) | (55)% |

22

|  | Nine months ended February 28/29, 2025 | 2024 | Increase / (Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Food Safety | $476,314 | $488,435 | $(12,121) | (2)% |
| Animal Safety | 192,888 | 198,993 | (6,105) | (3)% |
| Total Revenues | $669,202 | $687,428 | $(18,226) | (3)% |
| Food Safety | $(399,578) | $62,485 | $(462,063) | (739)% |
| Animal Safety | 8,977 | 30,876 | (21,899) | (71)% |
| Segment Operating (Loss) Income | $(390,601) | $93,361 | $(483,962) | (518)% |
| Corporate | (59,211) | (47,738) | (11,473) | 24% |
| Operating (Loss) Income | $(449,812) | $45,623 | $(495,435) | (1086)% |

### Revenues

Revenue for the Food Safety segment decreased $5.0 million during the three months ended February 28, 2025 compared to the three months ended February 29, 2024. The decrease was primarily due to $6.9 million of currency headwind and $0.5 million from discontinued product lines, partially offset by $2.4 million of growth in the business. The increase in the business was driven by new sales in the food quality and nutritional analysis product line and strong sales in the indicator and pathogens product lines. These increases were partially offset by lower sales from the sample collection product line due to production constraints and lower sales in the culture media and general sanitation product lines.

Revenue for the Food Safety segment decreased $12.1 million during the nine months ended February 28, 2025 compared to the nine months ended February 29, 2024. The decrease was primarily due to $21.8 million of currency headwind and $0.5 million from discontinued product lines, partially offset by $10.2 million of growth in the business. The growth was driven by continued strength in indicator testing, new sales in the food quality and nutritional analysis product line and higher sales of cleaner and disinfectant products in the Europe and Latin America regions. These increases were partially offset by production constraints impacting the sample collection product line and lower sales in the natural toxins product line.

Revenue for the Animal Safety segment decreased $2.8 million during the three months ended February 28, 2025 compared to the three months ended February 29, 2024. The decrease was due to a $1.8 million decrease in the business, a $0.7 million impact from discontinued product lines and a $0.3 million unfavorable currency impact. The decline in the business was primarily related to decreased sales of veterinary instruments, which have been impacted by tariffs, and lower genomics volume, due primarily to weakness in the companion animal market. These decreases were partly offset by continued strength in rodent control products.

Revenue for the Animal Safety segment decreased $6.1 million during the nine months ended February 28, 2025 compared to the nine months ended February 29, 2024. The decrease was primarily due to a $4.7 million decline in the business, a $1.3 million impact from discontinued product lines and a $0.1 million unfavorable currency impact. The decline in the business was driven by lower genomics volume due to a shift to focus primarily on large production animals and weakness in the companion animal market paired with lower sales in the insect control and veterinary instruments product lines. These decreases were partially offset by strength in rodent control products.

### Operating Income

Operating income for the Food Safety segment increased $3.4 million during the three months ended February 28, 2025 compared to the three months ended February 29, 2024. While revenues decreased on a quarter-to-date basis, these decreases were offset by a higher gross margin and reduced operating expenses, partially due to restructuring activities that were incurred in the second quarter of the current fiscal year.

Operating income for the Food Safety segment decreased $462.1 million during the nine months ended February 28, 2025 compared to the nine months ended February 29, 2024. The decline was primarily due to the impairment charges of $461.4 million in the second quarter of fiscal 2025.

Operating income for the Animal Safety segment decreased $8.0 million during the three months ended February 28, 2025 compared to the three months ended February 29, 2024. The decline was due to both decreased sales and a reduced gross margin, as certain overhead charges increased during the quarter.

Operating income for the Animal Safety segment decreased $21.9 million during the nine months ended February 28, 2025 compared to the nine months ended February 29, 2024. The decline was due to a decrease in sales and restructuring charges incurred primarily in the second quarter of the current fiscal year, which impacted both gross profit and operating expenses.

The increased corporate expense during each comparable period related to headcount increases, increases in equity-based compensation and costs associated with our new enterprise resource planning system.

### Non-GAAP Financial Measures

This report includes certain financial information for the Company that differs from what is reported in accordance with U.S. GAAP. These non-GAAP financial measures consist of EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin. These non-GAAP financial measures are included in this report because management believes that they provide investors with additional useful information to measure the performance of the Company, and because these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties as common performance measures to compare results or estimate valuations across companies in industries the Company operates in. The Company also uses Adjusted EBITDA as a performance target to establish and award certain executive compensation awards, as disclosed in our proxy statement filed with the Securities and Exchange Commission on September 13, 2024.

#### EBITDA

We define EBITDA as net income before interest, income taxes, and depreciation and amortization. We present EBITDA as a performance measure because it may allow for a comparison of results across periods and results across companies in the industries in which Neogen operates on a consistent basis, by removing the effects on operating performance of (a) capital structure (such as the varying levels of interest expense and interest income), (b) asset base and capital investment cycle (such as depreciation and amortization) and (c) items largely outside the control of management (such as income taxes). EBITDA also forms the basis for the measurement of Adjusted EBITDA (discussed below).

#### Adjusted EBITDA

We define Adjusted EBITDA as EBITDA, adjusted for share-based compensation and certain other fees and expenses. We present Adjusted EBITDA because it provides an understanding of underlying business performance by excluding the following:

- Share-based compensation
- FX translation (gain)/loss on loan revaluation and other revaluation
- Certain transaction fees and integration costs
- Restructuring
- Goodwill impairment
- Contingent consideration adjustments
- ERP expense
- Other income and expense items that do not recur on a frequent or regular basis

#### Adjusted EBITDA margin

We define Adjusted EBITDA margin as Adjusted EBITDA as a percentage of total revenues. We present Adjusted EBITDA margin as a performance measure to analyze the level of Adjusted EBITDA generated from total revenue.

These non-GAAP financial measures are presented for informational purposes only. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not recognized terms under GAAP and should not be considered in isolation or as a substitute for, or superior to, net (loss) income, operating income, cash flow from operating activities or other measures of financial performance. This information does not purport to represent the results Neogen would have achieved had any of the transactions for which an adjustment is made occurred at the beginning of the periods presented or as of the dates indicated. This information is inherently subject to risks and uncertainties. It may not give an accurate or complete picture of Neogen’s financial condition or results of operations for the periods presented and should not be relied upon when making an investment decision.

The use of the terms EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin may not be comparable to similarly titled measures used by other companies or persons due to potential differences in the method of calculation.

These non-GAAP financial measures have limitations as analytical tools. For example, for EBITDA-based metrics:

- they do not reflect changes in, or cash requirements for, Neogen’s working capital needs;
- they do not reflect Neogen’s tax expense or the cash requirements to pay taxes;
- they do not reflect the historical cash expenditures or future requirements for capital expenditures or contractual commitments;
- they do not reflect any cash requirements for future replacements of assets that are being depreciated and amortized; and
- they may be calculated differently from other companies in Neogen’s industries limiting their usefulness as comparative measures.

A reader should compensate for these limitations by relying primarily on the financial statements of Neogen and using these non-GAAP financial measures only as a supplement to evaluate Neogen’s performance.

For each of these non-GAAP financial measures below, we are providing a reconciliation of the differences between the non-GAAP measure and the most directly comparable GAAP measure.

Reconciliation between net loss and EBITDA and Adjusted EBITDA and between net loss margin % and Adjusted EBITDA margin % are as follows:

|  | Three months ended February 28/29, 2025 | 2024 | Nine months ended February 28/29, 2025 | 2024 |
| --- | ---: | ---: | ---: | ---: |
| Net loss | $(10,957) | $(2,022) | $(479,848) | $(4,006) |
| Net loss margin % | -5.0% | -0.9% | -71.7% | -0.6% |
| Income tax expense (benefit) | 1,230 | (3,800) | (22,060) | (3,900) |
| Depreciation and amortization | 29,373 | 29,650 | 89,222 | 87,853 |
| Interest expense, net | 17,038 | 16,673 | 52,027 | 49,508 |
| **EBITDA** | **$36,684** | **$40,501** | **$(360,659)** | **$129,455** |
| Share-based compensation | 4,160 | 3,679 | 12,961 | 9,829 |
| FX transaction (gain) loss on loan and other revaluation (1) | (255) | 638 | (191) | 1,350 |
| Transaction costs (2) | 518 | 1,103 | 1,636 | 2,360 |
| 3M integration costs (3) | 662 | 3,807 | 5,450 | 8,930 |
| Sample collection transition and ramp up costs (4) | 2,843 | 541 | 4,676 | 800 |
| Petrifilm duplicate startup costs (5) | 645 | — | 794 | — |
| Transformation initiatives and related costs (6) | 2,438 | — | 3,265 | — |
| Restructuring (7) | 168 | 938 | 10,106 | 3,353 |
| Goodwill impairment | — | — | 461,390 | — |
| Contingent consideration adjustments | 470 | (200) | 470 | 250 |
| ERP expense (8) | 633 | 1,701 | 3,184 | 3,904 |
| Other | (453) | 33 | 526 | (21) |
| **Adjusted EBITDA** | **$48,513** | **$52,741** | **$143,608** | **$160,210** |
| Adjusted EBITDA margin % | 22.0% | 23.0% | 21.5% | 23.3% |

(1) Net foreign currency transaction (gain) loss associated with the revaluation of foreign denominated intercompany loans and certain 3M agreements.

(2) Includes legal, accounting, tax and other related consulting costs associated with corporate transactions and capital structure initiatives.

(3) Includes costs associated with 3M transition agreements and related integration costs.

(4) Includes costs associated with the transitioning of the 3M transition contract manufacturing agreement and ramp up costs associated with our sample collection product line.

(5) Duplicate costs associated with the startup of Petrifilm manufacturing.

(6) Includes consulting and other costs, including severance, associated with transformation initiatives.

(7) Severance, non-cash impairment, and other related exit costs primarily associated with a reduction in our global genomics business and consolidation of certain facilities.

(8) Expenses related to ERP implementation.

Adjusted EBITDA decreased $4.2 million and $16.6 million during the three and nine months ended February 28, 2025. Expressed as a percentage of revenue, Adjusted EBITDA was 22.0% and 21.5% during the three and nine months ended February 28, 2025 and 23.0% and 23.3% during the three and nine months ended February 29, 2024 2024, respectively. The lower Adjusted EBITDA in the current year was driven primarily by lower sales and higher operating expenses compared to the prior year period.

### Financial Condition and Liquidity

Our primary sources of liquidity are cash and cash equivalents, cash flows from the operations of our business, and available borrowing capacity under our revolving facility. Our principal uses of cash include working capital-related items, capital expenditures, debt service, and strategic investments.

Our future cash generation and borrowing capacity may not be sufficient to meet cash requirements to fund the operating business, repay debt obligations, construct new manufacturing facilities, commercialize products currently under development or execute our future plans to acquire additional businesses, technology and products that fit within our strategic plan. Accordingly, we may be required, or may choose, to issue additional equity securities or enter into other financing arrangements for a portion of our future capital needs. However, we continuously monitor and forecast our liquidity situation in light of industry, customer and economic factors, and take the necessary actions to preserve our liquidity and evaluate other financial alternatives that may be available to us should the need arise. As a result, we believe that our cash flows from operations, cash on hand, and borrowing capacity will enable us to fund the operating business, repay debt obligations, construct new manufacturing facilities, commercialize products currently under development, and execute our strategic plans.

We are subject to certain legal and other proceedings in the normal course of business that have not had, and, in the opinion of management, are not expected to have, a material effect on our results of operations or financial position.

As of February 28, 2025, we had cash and cash equivalents of $127.7 million, and borrowings available under our revolving line of credit of $150.0 million.

In June 2022, Neogen Food Safety Corporation entered into a credit agreement consisting of a five-year senior secured term loan facility (“term loan facility”) in the amount of $650 million and a five-year senior secured revolving facility (“revolving facility”) in the amount of $150 million (collectively, the “Credit Facilities”). The term loan facility was drawn on August 31, 2022 while the revolving facility remained undrawn and continues to be undrawn as of February 28, 2025. In accordance with the prepayment feature, the Company paid $100 million of the term loan facility’s principal in fiscal year 2023. The term loan facility matures on June 30, 2027 and the revolving facility matures at the earlier of June 30, 2027 or the termination of the revolving commitments.

In July 2022, Neogen Food Safety Corporation closed on an offering of $350 million aggregate principal amount of 8.625% senior notes due in 2030.

The finance lease is a building lease that is classified within property and equipment and the current portion of debt on the condensed consolidated balance sheets as of February 28, 2025. The Company intends to elect the purchase option within the lease agreement prior to the end of the lease term.

There are no required principal payments on our Credit Facilities through fiscal year 2026. Financial covenants include maintaining specified levels of funded debt to EBITDA, and debt service coverage. As of February 28, 2025, the Company was in compliance with all financial covenants under the Credit Facilities.

#### Cash Flows

|  | Nine months ended February 28/29, 2025 | 2024 | Increase (Decrease) |
| --- | ---: | ---: | ---: |
| Net Cash provided by Operating Activities | $41,702 | $8,517 | $33,185 |
| Net Cash used for Investing Activities | $(83,266) | $(11,786) | $(71,480) |
| Net Cash provided by Financing Activities | $515 | $1,999 | $(1,484) |

28

### Net Cash provided by Operating Activities

Net cash provided by operating activities increased $33.2 million during the nine months ended February 28, 2025 compared to the nine months ended February 29, 2024. The increase is due to improved net working capital changes, offset by a decrease in income from operations. Prior year net working capital reflected large net cash outflows due to inventory purchases, as we exited transition distribution agreements and stocked FSD inventory.

### Net Cash used for Investing Activities

Cash used for investing activities increased $71.5 million during the nine months ended February 28, 2025, compared to the nine months ended February 29, 2024. The increase was primarily the result of lower proceeds from marketable securities in the current year period and an increase in capital expenditures of $1.3 million, partially offset by $4.9 million in proceeds from the sale of a building. Capital expenditures were $88.5 million and $87.2 million during the nine months ended February 28, 2025 and 2024, respectively.

### Net Cash provided by Financing Activities

Cash provided by financing activities decreased $1.5 million during the nine months ended February 28, 2025 compared to the nine months ended February 29, 2024. The net outflow was primarily due to taxes paid on employees' share-based compensation.

We continue to make investments in our business and operating facilities. Our estimate for capital expenditures in fiscal year 2025 is $100 million. This includes approximately $70 million in capital expenditures related to integration of the acquired 3M FSD products, the most significant portion of which is related to the construction of, and acquisition of equipment for, our new manufacturing facility in Lansing, Michigan.

## Market risk

As filed, 333 characters.

We continuously evaluate our exposure to currency exchange and interest rate risk. There have been no meaningful changes in our exposure to risk associated with fluctuations in foreign currency exchange rates and interest rates related to our variable-rate borrowings under the Credit Facilities from that discussed in our Form 10-K.

## Controls and procedures

As filed, 3,762 characters.

### Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of February 28, 2025 was carried out under the supervision and with the participation of the Company’s management, including the President & Chief Executive Officer and Chief Financial Officer (“the Certifying Officers”), using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013). Based on the evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures were not effective as of such date due to material weaknesses in internal control over financial reporting, referenced below.

### Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

As disclosed in Part I - Item 4 of our Quarterly Report on Form 10-Q for the quarter ended November 30, 2024, management concluded that the Company had deficiencies in the control activities and information and communication components of the COSO Framework that constitute material weaknesses, either individually or in aggregate as of November 30, 2024. These material weaknesses continue to exist as of February 28, 2025.

### Ongoing Remediation Efforts

Management continues to implement measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. Our remediations actions include:

- Enhancing the design and implementation of existing control activities and developing new control activities as needed to address identified risks;
- Enhancing internal controls documentation, including retaining adequate documentary evidence for certain management review controls and maintaining evidence of precise review procedures performed to demonstrate effective operation of internal controls;
- Expanding, enhancing, and formalizing comprehensive accounting, business operations, and information technology policies and procedures;
- Developing a training program and educating control owners concerning the principles of the Internal Control - Integrated Framework (2013) issued by COSO;
- Hiring qualified personnel and outside resources to support enhanced control ownership and internal communications, including the hiring of a full-time Director of Internal Controls.

### Changes in Internal Controls over Financial Reporting

Other than with respect to the remediation efforts in connection with the material weaknesses described above, no changes in our internal control over financial reporting were identified as having occurred during the quarter ended February 28, 2025 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

## Risk factors

As filed, 1,757 characters.

This Form 10-Q should be read in conjunction with Part I Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended May 31, 2024. With the exception of the risk factors noted below, which update the risk factors in our Annual Report on Form 10-K for year ended May 31, 2024, there have been no material changes from the risk factors previously disclosed therein. The following risk factors and other information included in this report should be carefully considered. The risks and uncertainties described below are not the only ones we face; others, either unforeseen or currently deemed not material, may also have a negative impact on our Company. If any of the following occurs, our business, operating results, cash flows, and financial condition could be materially adversely affected.

***Tariffs and other trade measures could adversely affect our results of operations, financial position and cash flows.***

Our international operations subject us to discriminatory or conflicting tariffs and trade policies. As a result of the new administration's trade policy, tariffs have increased and may continue to increase our material input costs. Any further trade restrictions, retaliatory trade measures and additional tariffs could result in higher input costs to our products. We may not be able to fully mitigate the impact of these increased costs or pass price increases on to our customers. While tariffs and other trade measures imposed by other countries on U.S. goods have not yet had a significant impact on our business or results of operations, we cannot predict further developments, and such existing or future tariffs could have a material adverse effect on our results of operations, financial position and cash flows.

Filed Apr 9, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-052497. Last ingested by Listed: Nov 4, 2026, 17:07 ET. No prices; not investment advice.