Q3 2024 Phibro Animal Health Corp Earnings Call

Regina: Hello, and thank you for standing by. My name is Regina, and I will be a conference operator today. At this time, I would like to welcome everyone to the Fibro Animal Health Corporation third quarter investor conference call. All lines have been placed on mute to prevent any background noise.

Hello, and thank you for standing by my name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the Phibro Animal Health Corporation third quarter Investor Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Regina: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, send the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. I would now like to turn the conference over to Glenn David, Chief Financial Officer. Please go ahead. Thank you, Regina.

Regina: If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad, if you'd like to withdraw your question Press Star One again I would now like to turn the conference over to Glenn David Chief Financial Officer. Please go ahead.

Glenn C. David: Thank you, Regina, and good day, everyone. And welcome to the Phibro Animal Health Corporation earnings call for our fiscal third quarter ended March 31st, 2024. My name is Glenn David, and I am the Chief Financial Officer. I am joined on today's call by Jack Bendheim, Fiverr's Chairman, President, and Chief Executive Officer; Daniel Bendheim, Director and Executive Vice President of Corporate Strategy; and Larry Miller, our Chief Operating Officer

Glenn C. David: Thank you Regina and good day, everyone and welcome to the fiber of Animal Health Corporation earnings call for our fiscal third quarter ended March 31 2024.

Glenn C. David: My name is Glenn David and I'm, the Chief Financial Officer.

Jack Clifford Bendheim: I am joined on today's call by Jack <unk>, Chairman, President and Chief Executive Officer.

Glenn C. David: Daniel Manheim director and executive Vice President of corporate strategy, and Larry Miller, our Chief operating officer.

Glenn C. David: Today, we will cover our financial performance for the third quarter and provide an update on financial guidance for our fiscal year ending June 30, 2024. At the conclusion of our remarks, we will open the line for your questions. I would like to remind you that we are providing a simultaneous webcast of this call on our website, pachc.com. Also, in the investor sections of our website, you will find copies of the earnings press release and third quarter Form 10Q, as well as the transcript and slides discussed and presented on this call.

Glenn C. David: Today, we will cover our financial performance for the third quarter and provide an update on financial guidance for our fiscal year ending June 32024.

Glenn C. David: At the conclusion of our remarks, we will open the line for your questions.

Glenn C. David: I would like to remind you that we are providing a simultaneous webcast of this call on our website BBC dot com.

Glenn C. David: Also on the investors section of our website you will find copies of the earnings press release, and third quarter Form 10-Q, as well as the transcript and slides discussed and presented on this call.

Glenn C. David: Our remarks today will include forward-looking statements, and actual results could differ materially from these projections. For a list and description of certain factors that could cause results to differ, I refer you to the forward-looking statement section in our earnings press release. Our remarks include references to certain financial measures which were not prepared in accordance with generally accepted accounting principles or U.S. GAAP. I refer you to the non-GAAP financial information section in our earnings press release for a discussion of these measures.

Glenn C. David: Our remarks today will include forward looking statements and actual results could differ materially from these projections.

Glenn C. David: For a list and description of certain factors that could cause results to differ.

Glenn C. David: I refer you to the forward looking statements section in our earnings press release.

Glenn C. David: Our remarks include references to certain financial measures, which were not prepared in accordance with generally accepted accounting principles or U S. GAAP.

Glenn C. David: I refer you to the non-GAAP financial information section in our earnings press release for a discussion of these measures.

Glenn C. David: Conciliation of these non-GAAP financial measures to the most directly comparable U S. GAAP measures are included in the financial tables that accompany the presence.

Glenn C. David: We presented our results on a GAAP basis and on an adjusted basis. Our adjusted results exclude acquisition related items unusual nonoperational or nonrecurring items, including stock based compensation and Brazil employment taxes.

Glenn C. David: Other income expenses as separately reported in the consolidated statement of operations, including foreign currency losses gains net.

Glenn C. David: And income taxes related to pre tax income adjustments and unusual or nonrecurring income tax items.

Glenn C. David: Reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures is included in the financial tables that accompany the press release. We present our results on a gap basis and on an adjusted basis. Our adjusted results exclude acquisition-related items, unusual, non-operational, or non-recurring items, including stock-based compensation and Brazil employment taxes. Other income expenses, as separately reported in the Consolidated Statement of Operations, including foreign currency losses, gains met, and income taxes related to pre-tax income adjustments and unusual or non-recurring income tax items. Now, I will introduce our Chairman, President, and Chief Executive Officer, Jack Bendheim, to share his opening remarks.

Glenn C. David: Now, let me introduce our chairman President and Chief Executive Officer, Jack and time to share his opening remarks.

Jack Clifford Bendheim: Thank you, Glenn, and thank you to everyone joining us this morning. We had a very strong third quarter performance, led by our Animal Health Division, which delivered double-digit top line growth. In animal health, our vaccine segment achieved 26% growth, and we delivered exceptional 16% growth in our MFA and other segments, which translates to an overall growth of 9% adjusted. As I'm sure you can all imagine, it has been a busy few months for all of us here at Phibro.

Jack Clifford Bendheim: Thank you Glenn and thank you to everyone joining us this morning.

Jack Clifford Bendheim: On a very strong third quarter performance led by our animal Health Division, which delivered double digit top line growth within animal health.

Jack Clifford Bendheim: Segments achieved 26% growth and we delivered an exceptional 16% growth in our MFA and other segment.

Jack Clifford Bendheim: This translated to an overall growth of 9% and adjusted EBITDA.

Jack Clifford Bendheim: As I'm sure you could imagine it has been a busy few months for all of us here at Ciber.

Jack Clifford Bendheim: And I am proud to reflect that this growth was achieved while, at the same time, my team was heavily involved in the process that led to our announcement last week of our signed agreement to purchase the latest Medicaid free data portfolio. We are excited to onboard new colleagues and products from Phibro, and we are very confident that we have the operational strength and focus to ensure a smooth transition. This acquisition will also serve to enhance, diversify, and broaden Phibro's species and product offerings, and we are confident in our ability to maximize the opportunities related to this portfolio.

Jack Clifford Bendheim: To reflect the disclosed was achieved while at the same time my team was heavily involved in the process of led to announcements last week.

Jack Clifford Bendheim: Signed agreement to purchase the latest medicated feed additive portfolio.

Jack Clifford Bendheim: We are excited to onboard new colleagues and product supply growth and we are very confident we have the operational strength and focus to ensure a smooth transition.

Jack Clifford Bendheim: This acquisition will also serve to enhance diversifying burdened by both species and product offerings.

Jack Clifford Bendheim: We are confident in our ability to maximize the opportunity related to this portfolio.

Jack Clifford Bendheim: We anticipate this transaction will lead to strong earnings accretion and debt pay-down and will also serve as the engine that will continue to power our investments in the faster growing vaccines, nutritional specialties, and companion animal products, where we continue to see and invest in both short and long-term opportunities. Looking ahead, we expect continuing growth in the animal health business as we close out our fiscal year. We also expect to see continued improvements in our mineral nutrition and performance product business as we work through inventory imbalances and now see a rebound in demand. We have affirmed our guidance for net sales, adjusted EBITDA, and adjusted diluted EBIT. And then we'll go into greater detail in this presentation. I look forward to hearing your questions following Glenn's review of our finances.

Jack Clifford Bendheim: We anticipate this transaction will lead to strong earnings accretion and debt Paydown.

Jack Clifford Bendheim: Also serve as the engine that will continue to power our investments and the fashion between vaccines and nutritional specialties and companion companion animal product segments.

Jack Clifford Bendheim: Where we continue to see and invest in both short and long term opportunities.

Jack Clifford Bendheim: Looking ahead, we expect continuing growth in the animal health business.

Speaker Change: Closeout on physically.

Jack Clifford Bendheim: We also expect to see continued improvement in our mineral nutrition and performance products businesses.

Jack Clifford Bendheim: We will do it.

Glenn: Imbalances and now see a rebound in demand.

Jack Clifford Bendheim: We have affirmed our guidance for net sales adjusted EBITDA and adjusted diluted EPS.

Glenn: Then we'll go into greater detail in his presentation.

Jack Clifford Bendheim: Look forward to hearing your questions following <unk> review of our financials.

Glenn C. David: Thanks, Jack. I am also really excited about the strong results in the quarter. Total company sales for the quarter grew 7%, and our adjusted EBITDA and our adjusted net income grew 9%. As Jack mentioned, our animal health sales grew 10%, with vaccine growth of 26% and MFA growth of 16%, offset by declines in our nutritional specimens. In the quarter, our Mineral Nutrition Segment grew 2%, offset by a decline in our performance. The performance of both mineral nutrition and performance products improved in Q3 versus the first half of the year, as we expected.

Glenn: Thanks, Jack I'm also really excited about the strong results in the quarter.

Glenn C. David: Total company sales for the quarter grew 7% and our adjusted EBITA and our adjusted net income grew 9%.

Glenn C. David: As Jack mentioned, our animal health sales grew 10% with vaccines growth of 26% MFA growth of 16%.

Glenn C. David: Set by declines in nutritional specialties.

Glenn C. David: In the quarter, our mineral nutrition segment grew 2% offset by a decline in our performance products.

Glenn C. David: The performance of both mineral nutrition and performed products improved in Q3 versus the first half of the year as we expected.

Glenn C. David: On a fiscal year-to-date basis, we have seen revenue growth of 3% and adjusted EBITDA growth of negative 3%. Year-to-date performance is led by animal health, with 7% growth in revenue, with vaccine sales growth of 23%, our MFA business at 7%, and declines in nutritional specialties. Growth in animal health is partially offset by declines in both the mineral nutrition and performance product segments. As we spoke last week, we're also excited about the acquisition of the Zoetis MFA business. These products are a strong strategic fit with our existing Fibro core competencies and capabilities, and we expect to deliver a rapid de-leveraging profile and significant adjusted EBIT appreciation. As discussed, we expect this transaction to close in the second half of calendar year 2024.

Glenn C. David: On a fiscal year to date basis we.

Glenn C. David: <unk> seen revenue growth of 3% and adjusted EBIT growth of negative 3%.

Glenn C. David: Year to date performance is led by animal health with 7% growth in revenue with vaccine sales growth of 23%, our MSA business at 7% and declines in nutritional specialties.

Glenn C. David: Growth in animal health is partially offset by declines in both the mineral nutrition and performance products segments.

Glenn C. David: As we spoke last week. We're also excited about the acquisition of the <unk> MSA business.

Glenn C. David: These products are a strong strategic fit with our existing fiber core competencies and capabilities and we expect to deliver a rapid deleveraging profile and significant adjusted EBIT accretion.

Glenn C. David: As discussed we expect this transaction to close in the second half of calendar year 2024.

Glenn C. David: For guidance, we are affirming our guidance on net sales, adjusted EBITDA, and adjusted EPS. We have updated our Gap Net Income and Diluted EPS to reflect one-time costs related to the Zoetis MFA agreement. I'll start with consolidated financial performance on slide four, then cover segment-level performance, capitalization metrics, and conclude with a review of our affirmed or updated financial guidance for the full fiscal year 2024. Consolidated net sales for the quarter ending March 31, 2024 were $263.2 million, reflecting an increase of $17.6 million, or 7%, over the same quarter one year ago. The animal health segment grew 10%, while mineral nutrition grew at 2%, and the performance product segment declined.

Glenn C. David: For guidance, we are affirming our guidance on net sales adjusted EBITDA and adjusted EPS.

Glenn C. David: We have updated our GAAP net income and diluted EPS to reflect one time costs related to this the wettest MSA acquisition.

Glenn C. David: Okay.

Glenn C. David: I'll start with consolidated financial performance on Slide four then cover segment level performance capitalization metrics and conclude with a review of our affirming our updated financial guidance for the full fiscal year 2024.

Glenn C. David: Consolidated net sales for the quarter ended March 31, 2024, with $263 2 million.

Glenn C. David: Reflecting an increase of $17 6 million.

Glenn C. David: Our 7% increase over the same quarter one year ago.

Glenn C. David: The animal health segment grew 10%, while mineral nutrition grew at 2% and the performance product segment decline.

Glenn C. David: Gap net income and diluted EPS decreased, driven by increased SG&A due to higher employee-related costs, higher interest expense, and higher foreign currency losses, partially offset by favorable gross profit as a result of higher product demand in the animal health segment. Income tax expense also decreased by $0.5 million. After making our standard adjustments to GAP results.

Glenn C. David: GAAP net income and diluted EPS decreased driven by increased SG&A due to higher employee related costs higher interest expense and higher foreign currency losses, partially offset by favorable gross profit as a result of higher product demand in the animal health segment.

Glenn C. David: Income tax expense also decreased by <unk> 5 million.

Glenn C. David: After making our standard adjustments to GAAP results third quarter, adjusted EBITDA increased $2 3 million.

Glenn C. David: Third quarter adjusted EBITDA increased $2.3 million. Animal Health improved by $2.3 million for 7% due to gross profit from increased sales, partially offset by higher SG&S. Mineral Nutrition increased $.8 million driven by higher growth profits. Performance products adjusted Ibetta remained relatively the same.

Glenn C. David: Adam will help improved by $2 3 million or 7% due to gross profit from increased sales, partially offset by higher SG&A.

Glenn C. David: Mineral nutrition increased $8 million driven.

Glenn C. David: Driven by higher gross profit.

Glenn C. David: Performance products adjusted EBITDA remained relatively the same.

Glenn C. David: Corporate expenses increased $0.7 million, driven by increased employee-related costs. Adjusted net income and adjusted dual EPS both increased 9%. Increasing gross profit driven by sales growth was partially offset by higher adjusted SG&A and higher adjusted interest, with a partial benefit from a reduced adjusted provision from the contract. Moving to segment level financial performance on slide five, we come to the third quarter performance of our largest segment, Animal Health. The animal health segment posted $181.3 million in net sales for the quarter, an increase of $16.9 million, or 10%, versus the same quarter last year.

Glenn C. David: Corporate expenses increased $7 million driven.

Glenn C. David: Driven by increased employee related costs.

Glenn C. David: Adjusted net income and adjusted diluted EPS, both increased 9%.

Glenn C. David: Increased gross profit driven by sales growth was partially offset by higher adjusted SG&A and higher adjusted interest expense with a partial benefit from a reduced adjusted provision for income taxes.

Glenn C. David: Moving to segment level financial performance on slide five.

Glenn C. David: We cover the third quarter performance of our largest segment animal health.

Glenn C. David: The animal health segment posted $181 $3 billion net sales for the quarter, an increase of $16 9 million or 10% versus the same quarter prior year.

Glenn C. David: Within the animal health segment, we reported MFAT and other net sales growth of $15 million, or 16%, due to demand in both domestic and international retail; vaccine net sales growth of $6.7 million, a healthy 26% increase during byproduct launches in Latin America, plus an increase in domestic demand. Nutritional Specialties net sales declined $4.8 million, or 11%, mostly due to lower demand for microbial and dairy products.

Glenn C. David: Within the animal Health segment, we reported MSP.

Glenn C. David: <unk> and other net sales growth of $15 million or 16% due to demand in both domestic and international regions.

Glenn C. David: Vaccine net sales growth of $6 7 million.

Glenn C. David: The healthy 26% increase driven by product launches in Latin America, plus an increase in domestic demand.

Glenn C. David: Nutritional specialties net sales declined $4 8 million or.

Glenn C. David: Our 11%, mostly due to lower demand for microbial and dairy products.

Glenn C. David: Animal health adjusted EBITDA was $36.5 million, a 7% increase due to higher gross profit from increased sales, partially offset by higher SG&A. Moving on to the third quarter financial performance for our other business segments, on slide six. Starting with mineral nutrition, net sales for the quarter were $64.2 million, an increase of $1.3 million due to increased sales volume, partially offset by decreased average selling prices. Mineral nutrition adjusted EBITDA was $4.7 million, reflecting a year-on-year increase of $0.8 million, driven by higher gross profit.

Glenn C. David: Animal health adjusted EBITDA was $36 5 million.

Glenn C. David: A 7% increase due to higher gross profit from increased sales, partially offset by higher SG&A.

Glenn C. David: Moving on to the third quarter financial performance for our other business segment on slide six.

Glenn C. David: Starting with minimum nutrition net sales for the quarter were $64 2 million, an increase of $1 $3 million due.

Glenn C. David: Due to increased sales volume, partially offset by decreased average selling price.

Glenn C. David: Mineral nutrition, adjusted EBITDA was $4 7 million.

Glenn C. David: Reflecting a year on year increase of $8 million driven by higher gross profit.

Glenn C. David: Looking at our performance product segment, net sales of $17.7 million for the three months ended March 31, 2024 reflects a decrease of $0.7 million or 4% driven by decreased demand for personal care product ingredients and industrial chemicals. Adjusted EBITDA was $2.4 million, a 2% decline versus the same quarter a year ago. Corporate expenses increased $0.7 million, driven by increased employee-related costs. Now turn to key capitalization-related metrics on

Glenn C. David: Looking at our performance products segment net sales of $17 7 million.

Glenn C. David: For the three months ended March 31, 2024 reflects a decrease of <unk> 7 million.

Glenn C. David: 4% driven by decreased demand for personal care product ingredients and industrial chemicals.

Glenn C. David: Adjusted EBITDA was $2 4 million and declined 2% versus the same quarter prior year.

Glenn C. David: Corporate expenses increased $1 7 million driven by increased employee related costs.

Glenn C. David: Now I'll turn continued capitalization related metrics on slide seven.

Glenn C. David: We saw $40 million in positive free cash flow for the 12 months ended March 31st, 2021. We generated $79 million of operating cash flow and invested $39 million in capital expenditure. Cash and cash equivalents and short-term investments were $99 million at the end of the third quarter. Our gross leverage ratio was 4.4 times at the end of the third quarter based on $487,000,000 of total debt and $110,000,000 of trailing 12-month adjusted EBIT. Our net leverage ratio was 3.5 times at the end of the third quarter based on $388 million in total debt and $110 million in trailing 12-month adjusted EBIT.

Glenn C. David: We saw $40 million of positive free cash flow for the 12 months ended March 31 2024.

Glenn C. David: We generated $79 million of operating cash flow and invested $39 million and capital expenditures.

Glenn C. David: Cash and cash equivalents and short term investments were $99 million at the end of the quarter.

Glenn C. David: Our gross leverage ratio was four four times at the end of the third quarter based on $487 million with total debt and $110 million of trailing 12 month adjusted EBITDA.

Glenn C. David: Our net leverage ratio was three five times at the end of the third quarter based on 388 million total debt and $110 million of trailing 12 months adjusted EBITDA.

Glenn C. David: Turning to dividends, consistent with our history, we paid a quarterly dividend of $0.12 per share, or $4.9 million in aggregate. As a reminder, $300 million of our debt is at a fixed rate of 0.61% plus the applicable margin. The remaining $187 million of total debt is subject to variable interest rates, although offset somewhat by interest income earned on short-term investments.

Glenn C. David: Turning to dividends consistent with our history, we paid a quarterly dividend of <unk> 12 per share or $4 $9 million in aggregate.

Glenn C. David: As a reminder, $300 million of our debt is that a fixed rate of six 1% plus the applicable margin.

Glenn C. David: The remaining $187 million of total debt subject to variable interest rates, although offset somewhat by interest income earned on short term investments.

Glenn C. David: Let's turn to slide 8, which lays out our updated guidance for the fiscal year ending June 30, 2024. We have affirmed our guidance for net sales, adjusted EBITDA, and adjusted diluted EPS. We have updated our guidance for GAAP Net Income and GAAP Diluted EPS, which includes one-time costs related to the integration of Zoetta's products.

Glenn C. David: Let's turn to slide eight which lays out our updated guidance for the fiscal year ended June 32024.

Glenn C. David: We have affirmed our guidance for net sales adjusted EBITDA and adjusted diluted EPS.

Glenn C. David: We have updated our guidance for GAAP net income and GAAP diluted EPS.

Glenn C. David: The updated guidance includes onetime costs related to the integration of <unk> products.

Regina: This is reflected in our GAP guidance but is excluded from adjusted measures. Our affirmed or updated fiscal year 2024 financial guidance is shown in the table. Comparisons are to the prior fiscal year, and year-over-year percentages are calculated using the midpoint of the guidance, Net sales of $980 million to $1.02 billion with growth of 2%, net income of $7 to $12 million, and diluted EPS of 17 to 30 cents. Adjusted EBITDA of $106 million was increased to $112 million, a decline of 3%.

Glenn C. David: This is reflected in our GAAP guidance, but are excluded from adjusted measures.

Regina: Our firms our updated fiscal year 2024 financial guidance as shown in the table.

Regina: Comparisons are to the prior fiscal year and year over year percentages are calculated using the midpoint of the guidance ranges.

Regina: Net sales of $980 million to $1 <unk> billion.

Regina: With growth of 2%.

Regina: Net income of $7 million to $12 million.

Regina: Diluted EPS of <unk> 17 to 30.

Regina: Adjusted EBITDA of $106 million to $112 million of.

Regina: A decline of 3%.

Regina: Adjusted net income of $42 million to $47 million.

Regina: A decline of 9%.

Regina: Adjusted diluted EPS of $1 four to $1 16, a decline of 9% and our adjusted effective tax rate range of 20% to 30%.

Regina: Adjusted net income of $42 million to $47 million, a decline of 9%. Adjusted diluted EPS of $1.04 million to $1.16 million, a decline of 9%. And our adjusted effective tax rate range of 20% to 30%. In closing, we're optimistic as we enter the final quarter of our fiscal year. We are confident in the demand for our products around the world and look forward to seeing continued improvement in our business as we move forward, and we are very excited about the pending Zoetis MFA acquisition. With that, Regina, could you please open the line for questions?

Speaker Change: In closing we are optimistic as we enter the final quarter of our fiscal year. We are confident in the demand of our products around the world and look forward to see continued improvement in our business as we move forward.

Regina: And we are very excited about the <unk> MSA acquisition.

Regina: With that Regina could you. Please open the line for questions.

Regina: At this time, I'd like to remind everyone that in order to ask a question, simply press star 1 on your telephone keypad. Our first question will come from the line of Erin Wright with Morgan Stanley. Please go ahead.

Regina: At this time I would like to remind everyone in order to ask a question simply press star one on your telephone keypad. Our first question will come from the line of Erin Wright with Morgan Stanley. Please go ahead.

Erin Wright: Great, thanks. So on the MFA side of the business, what drove some of the strength, I guess, even on the tough comps? And does this continue? And were there any kind of one-time dynamics we should be thinking about? And how do we think about kind of the normalized underlying growth rate for the MFA business now? And then once you fold in Zoetis, their MFA portfolio, kind of what does the underlying growth look like?

Erin Wright: Great. Thanks.

Erin Wright: On the MFA side of the business.

Erin Wright: Some of this strength I guess, even on the tough comp in <unk>.

Erin Wright: Does this continue.

Erin Wright: Are there any kind of one time dynamics, we should be thinking about and how do we think about kind of the normalized underlying growth rate for the MSA business now and then once you fold in <unk>.

Erin Wright: Their MSA portfolio kind of what is the underlying growth look like for that and that's a second.

Larry L. Miller: Hi Aaron. Thanks for the questions. This is Larry.

Speaker Change: Hi, and thanks for the questions as Larry ill address.

Larry: The first part of your question, having to do with what drove the growth that it's really strong growth in our animal health segment.

Larry L. Miller: I'll address the first part of your question, having to do with what drove the growth. And it was really strong growth in our animal health segment. As Glenn stated, very strong growth was seen in our medicated feed additives and in our vaccines, in particular. And so those were the key growth drivers. We experienced that growth geographically in North America and also in South America. Those were the highest, you know, growing areas of our

Larry L. Miller: As Glenn stated very strong growth in our medicated feed additives and in our vaccines in particular and so those were the key growth drivers, we experienced that growth geographically.

Larry L. Miller: North America.

Larry L. Miller: And also in South America.

Larry L. Miller: Those were the highest.

Larry L. Miller: Areas of our of our business.

Unknown Executive: Just to add some context to it, we said the MFA was through 16 percent in the quarter, which is obviously above the run rate that we would expect. There were some one-time dynamics in the quarter with some larger customers based on the timing of their purchases, as well as some strong performance. We call it MFA and others.

Speaker Change: Yes, just to add some context to it right. So you said the Msas grew 16% in the quarter, which is obviously above the run rate that we would expect there were some onetime dynamics in the quarter with some larger customers based on the timing of their purchases as well as some strong performance right, we call that MFA and other there was some strong performance in the other category as well which is.

Unknown Executive: There was some strong performance in the other category as well, which is related to our EPG group. On a year-to-day basis, though, we have seen seven percent growth in our MFA business, so strong performance throughout the year as well. Related to the terms of when we are able to integrate the Zoetis MFA products, we do expect those products, after we bring them into our hands, to get to a growth rate probably in that low single middle digit.

Unknown Executive: Related to our <unk> group.

Unknown Executive: On a year to date basis, though we have seen 7% growth in our MFA business. So strong performance throughout the year.

Unknown Executive: Well and related to in terms of when we are able to integrate those the wettest MFA products. We don't expect those products. After we bring them onto our hands to get to a growth rate probably in that low single mid middle digit range.

Unknown Executive: Okay. And then when we think about the $0.60 accretion from the Zoetis deal, and that's obviously a notable accretion number. So what's the jumping off point? I think consensus EPS is at about $1.25 for 2025, or your fiscal year 2025. So is that the right ballpark that we should be at from a jumping off point? Or are there other dynamics we should be modeling out for the underlying business in 2025?

Unknown Executive: Okay, and then as we think about the 60% accretion from the <unk>.

Unknown Executive: And that's obviously a notable accretion number so what's the jumping off point.

Unknown Executive: I think consensus EPS is at about $1 25 for 2025 of your your fiscal 2025. So is that the right ballpark that we should be at from a jumping off point or are there other dynamics, we should be modeling out.

Unknown Executive: But the underlying business in 2025.

Aaron: This is Aaron. Obviously, you know, for our own guidance for 2025, we'll be providing that on our next call as we update guidance. In terms of the $0.60 accretion that we referenced on the call last week, that we do see in the first 12 months of acquiring the business. So depending on the timing of close, whether we have a full fiscal year or not, that might impact the $0.60. But I do also want to mention that we do see that accretion growing over time as we continue to pay down debt and lower our interest expense related to the deal.

Unknown Executive: And it's very hard obviously for our own guidance for 2025, we will be providing that on our next call as we update guidance in terms of the <unk> accretion that we referenced on the call last week that we do see in the first 12 months of acquiring the business. So depending on the timing of close whether we'd have a full fiscal year.

Aaron: Or not that might impact the 60, but I do also want to mention that we do see that accretion growing over time as we continue to pay down debt and lower our interest expense related to the to the deal.

Unknown Executive: Okay, great. Thank you so much.

Speaker Change: Okay, great. Thank you so much.

Regina: Your next question will come from the line of Nevin T. with BNP Paribas. Please go ahead.

Speaker Change: Your next question will come from the line of <unk> with BNP Paribas. Please go ahead.

Nevin T.: Hi, good morning. Thanks for taking my question. I wanted to ask if you could discuss the companion animal pipeline and your capital allocation after the latest acquisition. Thank you.

Nevin T.: Hi, good morning, Thanks for taking my question.

Nevin T.: I wanted to ask if you could discuss the companion animal pipeline and your capital allocation. After two related questions. Thank you.

Jack Clifford Bendheim: Hi, it's Donnie Bendheim. Thank you for the question. No real new update on the companion animal pipeline, but we continue to make progress. Nothing in the short term to announce, but we do see this overall, this acquisition of the MFA, of the Zoetis MFA business, as furthering our ability, along with deleveraging, but furthering our ability to invest in companion animals. There's no shortage of pipeline ideas brought to us, and to date, I think we've been fairly judicious, and we'll continue to be judicious, but this will definitely allow us Yeah, and so the second part of your question related to

Nevin T.: Hi.

Speaker Change: Dani been time, thank you for the question.

Jack Clifford Bendheim: No real update on the companion animal pipeline, we continue to make progress.

Jack Clifford Bendheim: Nothing.

Jack Clifford Bendheim: In the short term to announce.

Jack Clifford Bendheim: But we do see that overall this acquisition of the MSA of these latest MFA business as furthering our ability.

Jack Clifford Bendheim: Along with deleveraging, but furthering our ability to invest in it.

Jack Clifford Bendheim: Painting animal Theres no shortage of a pipe.

Jack Clifford Bendheim: Pipeline.

Jack Clifford Bendheim: Idea is brought to us.

Jack Clifford Bendheim: To date, I think we've been fairly judicious and we will continue to be judicious, but this will definitely allow us to ramp up our efforts with inconvenient.

Unknown Executive: The second part of your question related to capital allocation, obviously, the first priority will continue to be to invest in our business. As Donnie mentioned, areas such as companion animal, vaccines, and nutritional specialties will be key areas of focus. Second, obviously, we'll always continue to look for opportunities outside. But obviously, this is a large deal for us with the Zoetis MFA acquisition, so I'd expect those to be in smaller nature.

Speaker Change: Yes, so the second part of your question related to capital allocation. Obviously, the first priority will continue to be to invest in our business and as Donnie mentioned areas, such as companion animal vaccines and nutritional specialties as well will be key areas.

Unknown Executive: Focus.

Unknown Executive: Second obviously, we will always continue to look for opportunities outside but obviously this is a large deal for us, but does the widest MSA acquisition. So I would expect those to be in small in nature and then we'll look to continue to delever over time and I think we've committed that we will get to a net leverage ratio of below three before.

Unknown Executive: And then, you know, we'll look to continue to delever over time, and I think we've committed that we will get to a net leverage ratio below three before the end of fiscal year 2027. And then we'll continue to return capital to our shareholders in the form of our dividend or remain committed to the dividend. We are in the process of refinancing all of our debt to support this deal. There may be some covenants related to the dividend, but our projections show us well below those covenants, and we understand the importance of the dividend to our shareholders and plan to maintain it.

Unknown Executive: At the end of fiscal year 2027, and then we will continue to return capital to our shareholders in the.

Unknown Executive: In the form of our dividend we remain committed to the dividend. We are in the process of refinancing all of our debt to support.

Unknown Executive: This deal there may be some covenants related to the dividend, but our projections show is well below those covenants and we understand the importance of the dividend to our shareholders and plan to maintain that.

Speaker Change: Thank you.

Regina: Our next question will come from the line of La Laji Prasad with Barclays. Please go ahead.

Balaji V. Prasad: Our next question will come from the line of <unk> Prasad with Barclays. Please go ahead.

Balaji V. Prasad: All right, good morning. Thanks for the questions. Two from me.

Speaker Change: Hi, good morning, Thanks for the questions two from me.

Speaker Change: Back to the deal can you help me understand what this means to incrementally in terms of yellow.

Speaker Change: Focus on companion animal and the appetite for potential business development deals on the site.

Speaker Change: Second could you also comment on the shift in the veterinary feed delek teams on the change from no antibiotics ever to no human antibiotics and what does this mean to you in terms of market opportunity opening up thanks.

Balaji V. Prasad: Getting back to the deal, can you help me understand what this means to you incrementally in terms of your focus on companion animals and the appetite for potential business development deals on the site? Second, could you also comment on the shift in the veterinary feed directives on the change from no antibiotics ever to no human antibiotics? And what does this mean to you in terms of market opportunities opening up?

Speaker Change: Donnie again I'll take the first question.

Balaji V. Prasad: Again I think.

Balaji V. Prasad: As was stated in the opening comments.

Balaji V. Prasad: We view this as the.

Jack Clifford Bendheim: Awesome. Donnie, again, I'll take the first question.

Balaji V. Prasad: The opportunity to invest even stronger or even more in companion animals in nutritional specialties and vaccines this will be.

Jack Clifford Bendheim: Again, you know, as was stated in the opening comments, we view this as the opportunity to invest even more in companion animals and nutritional specialties and vaccines. This will be because we anticipate a lot of cash being generated from the combined business. And we recognize that the larger growth opportunities are in those areas that I just highlighted. So I do anticipate, or we do anticipate that, you know, we will redouble our efforts and continue to invest in those areas. Hi, it's Larry. On the second part of your question,

Larry: Dissipate a lot of cash being generated from.

Larry: From the combined business.

Larry: We recognize that.

Larry: The larger growth opportunities are in those areas that I just highlighted so.

Larry: Do anticipate or we do anticipate that.

Larry: We will redouble, our efforts and continue to invest in those areas.

Larry L. Miller: Hi, it's Larry. The second part of your question. The Zoetta MFA business actually has a significant weighting of products that are not considered medically important for human medicine by the World Health Organization. These include ionophores, none of which are used in human medicine, anti-coxidials, none of which are used in human medicine, and the basotracians are not regarded as medically important. Therefore, the combined.

Larry: Larry on the.

Larry L. Miller: Second part of your question.

Larry L. Miller: So let us MFA business actually has a significant weighting in products that are not considered medically important for human medicine by the World Health organization. These include ion enforce no products in this class are used in human medicine.

Larry L. Miller: Hi Tech cereals, no products in this class for use in human medicine, and the <unk> are regarded are not regarded as medically important. Therefore, the combined so it is MSA and phibro portfolios of medicated feed additives in nutritional specialties and vaccines offer several choices to livestock pre.

Larry L. Miller: Users, including those who produce it antibiotic free <unk> no antibiotics used in human medicine.

Larry L. Miller: Zootis MFA and fibro portfolios of medicated feed additives, nutrition specialties, and vaccines offer several choices to livestock producers, including those who produce that at antibiotic-free and or no antibiotics used in human medicine. As to your question about the poultry industry and some of the changes we've seen there, that refers to the reintroduction of ionophores, which are again not medically important antimicrobials. They're used to control coccidiosis and other enteric diseases. Biro does not currently have IonaFORs in the U.S., so we really haven't seen an impact on our business. However, the ZOEDA business does contain IONIFFORs, which will allow us to serve customers.

Larry L. Miller: As to your question about the poultry industry and some of the changes we've seen there.

Larry L. Miller: First the reintroduction of ion and <unk>, which are again are not medically important antimicrobials.

Larry L. Miller: We're used to control coccidiosis and other <unk> diseases by Bureau does not currently have on inventories in the U S. So we really haven't seen an impact to our business. However.

Larry L. Miller: So let us MFA business does contain a force, which will allow us to serve customers with these with products in this in this class.

Larry L. Miller: Yeah.

Speaker Change: Thank you.

Larry L. Miller: Yes.

Glenn C. David: And that will conclude our question and answer session. I'll hand the call back to Glenn David for any closing remarks.

Larry L. Miller: And that will conclude our question and answer session I will hand, the call back to Glenn David for any closing remarks.

Glenn C. David: Thank you, Regina, and thank you everyone for listening in to today's call. We really appreciate your time, attention, interest, and support of Phibro Animal Health Corporation. Thanks again. You may now disconnect. Please wait. The conference will begin shortly.

Glenn C. David: Thank you Regina and thank you everyone for listening into today's call. We really appreciate your time attention interest and support of fiber Animal Health Corporation. Thanks again.

Operator: Thank you all for joining us today. That will conclude our call today. You may now disconnect. Please wait. The conference will begin shortly.

Speaker Change: Thank you all for joining that will conclude our call today and you may now disconnect.

Operator: Please wait the conference will begin shortly.

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