Transcript • May. 7, 2026 1:00 PM • Phibro Animal Health Corporation Class A (PAHC)
Transcript
May. 7, 2026 1:00 PM
Phibro Animal Health Corporation Class A (PAHC)
Glenn: million for the three months ended March 31, 2025. Income tax expense decreased by half a million dollars. After making our standard adjustments to GAAP results, including acquisition-related items, foreign currency losses, and certain one-off items, the third quarter adjusted EBITDA increased 5.9 million dollars, or 11 percent, versus prior year. Adjusted net income increased 19 percent, An adjusted diluted EPS increased 19%. The increase was driven by higher gross profit, partially offset by higher SG&A expenses and higher interest expense. A higher gross profit resulted from higher sales. SG&A expenses increased due to higher employee-related costs. Interest expense increased due to the expiration of an interest rate swap agreement. Now moving to segment level financial performance. The animal health segment posted $291.2 million of net sales for the quarter, an increase of $32.8 million, or 13%, versus the same quarter prior year. Within the animal health segment, we reported legacy MSA net sales increase of 5%, driven by demand in North America and certain antimicrobials sold by our ethanol performance businesses. The new MFA business contributed a full quarter of sales of $95.9 million, or 25% growth, versus last year. Nutritional specialties net sales increased $3.5 million, or 8%, due to increased demand in North America and higher companion animal sales. Vaccine net sales growth of $5.2 million, or a 16% increase, driven by higher sales demand in Israel and higher sales of autogenous vaccines. Animal health adjusted EBITDA increased $8 million, or 13%, due to higher sales and gross profit partially offset by increased SGMA. Moving on to third quarter financial performance for our other business segments on slide six. Starting with mineral nutrition, net sales for the quarter were $73.4 million, an increase of $6.6 million, or 10%, due to an increase in demand for zinc and trace minerals. Looking at our performance product segment, net sales of $18.9 million reflect a decrease of $3.8 million or a decrease of 17% as a result of lower demand for the ingredients used in personal care products. Mineral nutrition and performance products adjusted EBITDA were $5.1 million and $2.2 million respectively. Mineral nutrition adjusted EBITDA decreased $0.6 million due to lower gross profit. Performance products adjusted EBITDA decreased $1.1 million due to lower sales. Corporate expenses increased $0.3 million due to higher employee-related costs. Now turning to key capitalization-related metrics on slide seven. We generated $13 million of positive free cash flow for the 12 months ended March 31, 2026. We generated $66 million of operating cash flow and invested $53 million in capital expenditures. Please note that our cash generation has been negatively impacted by a buildup of inventory in advance of tariffs and to meet increasing customer demand. We expect inventory to stabilize in the coming quarters. Cash and cash equivalents and short-term investments were $77.5 million at the end of the quarter. Our gross leverage ratio was 3.1 times at the end of the quarter, based on $741 million of total debt and $241 million of trailing 12-month adjusted evens. Our net leverage ratio is 2.8 times at the end of the quarter, based on $663 million of net debt and $241 million of trailing 12-month adjusted evens. On interest rates, there are no changes to our current swap agreements. Turning to dividends, consistent with our history, we paid a quarterly dividend of $0.12 per share or $4.9 million in aggregate. As Jack mentioned, we also upsized our revolver by $125 million. This process was significantly oversubscribed, reflecting our strong financial position. Now let's turn to slide 8, which lays out our guidance for fiscal year 2026. Based on our performance to date and improved visibility into the remainder of the year, we updated our full-year guidance by increasing the lower end of several of our guidance ranges resulting in higher midpoints across key financial measures. Our guidance for fiscal year 2026 is as follows. Net sales updated from a range of $1,450,000,000 to $1,500,000,000 to $1,460,000,000 to $1,500,000,000. This represents a growth range of 13% to 16% and a midpoint of approximately 14%. Total adjusted EBITDA updated from a range of $245 to $255 million to $247 to $255 million. This represents a growth range of 34 to 39 percent and a midpoint of approximately 37 percent. Adjusted net income updated from a range of $120 to $127 million to $122 to $127 million. This represents growth of 44 to 49 percent with a midpoint of approximately 47%. Gap net income in EPS assumes constant currency and no additional gains or losses from FX movements. Also included in our gap net income in EPS are one-time costs related to our FIBRO Forward Income Growth Initiative. Regarding the Virginia Myosin in Brazil, sales of Virginia Myosin in Brazil were $26 million in fiscal year 2025. The margin profile of the product in Brazil is above our average for the company. As mentioned in the press release, we do anticipate receiving approval for therapeutic claims during the six-month transition period. We will be able to better quantify the impact for fiscal year 2027 once the final approval is received. While this will be a headwind for fiscal year 2027, we are confident that growth in our business in other areas will more than offset this impact. In closing, We're excited about the continued strong performance in fiscal year 2026. We're confident in the demand for our products around the world and look forward to seeing continued growth in our business. With that, Regina, can you please open the line for the questions?
Operator: We will now begin the question and answer session. In order to ask a question, simply press star followed by the number one on your telephone keypad. Our first question comes from the line of Ekaterina Kizkova with JP Morgan. Please go ahead.
Ekaterina Kizkova: Thank you guys so much. First, just on the sustainability offering you've recently announced, just how are you thinking about the size of that opportunity, and how does the offering fit in relative to some of the other products out there like Xperia and Bovair? And the second question is just on the conflict in the Middle East. Just any exposure there as you think about shipping costs and higher oil prices? Thank you.
Donnie: Hey, this is Donnie. I'll take the first question on the sustainability, so on Veritain. The market potentially is huge. uh i think we talked about in our press release the sustainability market based on scope three pledges um within the fortune 500 measured in the tens of billions to hundreds of billions of dollars obviously that's not the market for this product uh but it really depends on the ability of these companies that made these pledges to act on their pledges and what's special about veritain is we believe it allows these companies to actually achieve what they set out to do and allows them to hit their pledges with a product that until now it was just not economically feasible for them to actually act on their pledges. As far as the competitive products out there, you mentioned two. One of them is filled with ammonia. It's not really a greenhouse gas. It's not a carbon-intensity product. It actually has ammonia as well as production claims, so that's not really the competition. The other product is a methane reduction that is greenhouse gas. Obviously, it's a different form. There's plenty of room for both products. Our product works across species. The methane product would be primarily for the dairy industry. So, you know, that would be the competitive profile there.
Glenn: Yeah, in terms of the Middle East decadence, so, you know, our guidance that we have for fiscal year 27 includes any additional shipping costs or additional freight costs related to that. It also includes any potential downsides to our business in the Middle East as we do sell a number of vaccines there. We've currently haven't seen much of an impact, so we think on the downside that's a small risk, but our guidance range does incorporate that.
Operator: Thank you so much. Our next question comes from the line of Luis Mario Higuera with Citi. Please go ahead.
Luis Mario Higuera: This is Luis Mario. I'm for Daniel. The four Q implied guidance does imply a notable slowdown. Was there any pull forward dynamics that may have occurred in this quarter or anything else you would call out that may be causing this cadence?
Glenn: Thanks. Yeah, so we didn't have any pull forward in Q3. I think one of the things to note when you look at the growth ranges is particularly when you look at the comparators for 2025. So just for context, in Q3 of 25, we did $348 million of sales. The step up to Q4 of 25 was another $31 million to $379 million. So the comparator becomes a lot stronger between Q3 and Q4, which does impact the growth that we would expect in Q4. You know, the other thing that I would mention related to the revenue guide and the implied Q4, you know, we probably did take a somewhat conservative approach for the revenue guide for the year based on some of the unknowns with the conflict in the Middle East. We would anticipate to be towards the higher end.
Luis Mario Higuera: Thank you.
Operator: And once again, for questions, simply press star 1 on your telephone keypad. We'll pause for a moment to compile the Q&A roster. And we have no further questions at this time. I'll now hand the call back to Glenn for any closing comments.
Glenn: Thank you, Regina, and thank you for everyone for listening in on today's call. We really appreciate your time, attention, interest, and support. I'm from Rana Health Corporation. I hope you all have a great day. Thank you.
Operator: Thank you all for joining our call today. You may now disconnect.
