Neogen Corporation Reports Revenue Decline and Strategic Divestitures in Latest Financial Update

Neogen Corporation reported a decline in financial performance for the three and nine months ended February 28, 2026, as detailed in its latest 10-Q filing. Total revenues for the third quarter were $211.2 million, down from $221.0 million in the same period last year, marking a decrease of 4.4%. For the nine-month period, revenues fell to $645.1 million from $669.2 million, a decline of 3.6%. The decrease in revenue was attributed primarily to a $41.5 million unfavorable impact from divestitures, particularly the sale of the Cleaners and Disinfectants business, which was partially offset by a favorable foreign exchange impact of $9.8 million and nominal growth in other product lines.

The company's gross profit for the third quarter was $99.0 million, down from $110.3 million a year earlier, resulting in a gross margin of 46.9%, compared to 49.9% in the prior year. The decline in gross margin was attributed to lower sales volumes, higher inventory write-offs, and duplicative costs associated with the internal manufacturing of Petrifilm products. Operating expenses decreased slightly to $102.3 million from $104.9 million, with notable reductions in sales and marketing costs, which fell to $38.2 million from $44.6 million, and research and development expenses, which decreased to $3.8 million from $4.5 million.

Neogen's strategic developments included the announcement of a definitive agreement to sell its Genomics business to Zoetis Inc. for $160 million, expected to close by the end of the first half of fiscal year 2027. This move is part of a broader strategy to divest non-core assets and streamline operations. The company also initiated a restructuring plan aimed at reducing its global headcount by approximately 10%, which has already incurred $6.7 million in charges for the fiscal year 2026. These restructuring efforts are expected to conclude in the fourth quarter of the fiscal year.

Operationally, Neogen reported a slight increase in service revenues, which rose to $25.0 million for the third quarter, compared to $24.5 million in the previous year, driven by higher genomics revenue in the bovine and integrated protein markets. International sales also saw a modest increase, reaching $108.9 million for the quarter, up from $105.6 million, primarily due to favorable foreign exchange impacts. However, the Animal Safety segment experienced a significant revenue decline, with sales dropping to $54.5 million from $68.2 million, largely due to the divestiture of the Cleaners and Disinfectants business and lower sales in other product lines.

Looking ahead, Neogen's management expressed cautious optimism regarding future growth, particularly in the Food Safety segment, which is expected to benefit from improving market conditions. However, challenges remain, including ongoing supply chain issues and the impact of elevated interest rates on operational costs. The company continues to monitor its liquidity and operational efficiency, with plans for capital expenditures estimated at approximately $50 million for fiscal 2026, primarily related to the integration of acquired products and the completion of a new manufacturing facility.