Q2 2025 Phibro Animal Health Corp Earnings Call
Regina: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today.
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 second quarter 2025 earnings 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: At this time, I would like to welcome everyone to the Phibro Animal Health Corporation's second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise.
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, then the number one on your telephone keypad. To withdraw your question, press star one again.
If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad to withdraw your question Press Star One again I would now like to turn the conference over to you Glen David Chief Financial Officer. Please go ahead.
Glenn David: I would now like to turn the conference over to Glenn David, Chief Financial Officer. Please go ahead.
Glenn David: Thank you, Regina. Good morning and welcome to the Phibro Animal Health Corporation earnings call for our second quarter ended December 31st, 2024. My name is Glenn David and I'm the Chief Financial Officer of Phibro Animal Health Corporation.
Glen David: Thank you Regina good morning, and welcome to the Fibrotic Animal Health Corporation earnings call for our second quarter ended December 31 2020 for.
Glen David: My name is Glenn David and I'm, the Chief Financial Officer, Brian in the whole Corporation and I'm joined on today's call. Thank Jack made time outdoors, Chairman, President and Chief Executive Officer, and Donny Bedtime Director and executive Vice President of corporate strategy.
Glenn David: I am joined on today's call by Jack Bendheim, Phibro's Chairman, President, and Chief Executive Officer, and Donny Bendheim, Director and Executive Vice President of Corporate Strategy. Today, we will cover our financial performance for our second quarter and provide updated financial guidance for our fiscal year ending June 30th, 2025. At the conclusion of our remarks, we will open the lines for your questions. I would like to remind you that we are providing a simultaneous webcast of this call on our website pahc.com. Also, on the investor section of our website, you will find copies of the earnings press release and quarterly form 10-Q, as well as the transcript and slides discussed and presented on this call.
Glen David: Today, we will cover our financial performance for our second quarter and provide updated financial guidance for our fiscal year ending June 32025.
Glen David: At the conclusion of our remarks, we will open the lines for your questions.
Glen David: I would like to remind you that we are providing a simultaneous webcast of this call on our website <unk> Dot com also on the investors section of our website you will find copies of the earnings press release and quarterly Form 10-Q, as well as the transcript and slides discussed and presented on this call.
Glenn 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 presentation. 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 measurements. Reconciliations of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures are included in the financial tables that accompany the earnings press We present our results on a gap basis and on an adjusted basis.
Glen David: Yeah.
Glen David: Our remarks today will include forward looking statements and actual results could differ materially from these projections.
Glen David: For a list and description of certain factors that could cause results to differ.
Glen David: Are you to the forward looking statements section in our earnings press release.
Glen David: Our remarks include references to certain financial measures, which were not prepared in accordance with generally accepted accounting principles or U S. GAAP.
Glen David: We refer you to the non-GAAP financial information section in our earnings press release for a discussion of these measures.
Glen David: Reconciliations of these non-GAAP financial measures to the most directly comparable U S. GAAP measures are included in the financial tables that accompany the earnings press release.
We presented our results on a GAAP basis and on an adjusted basis.
Glenn David: Our adjusted results exclude acquisition-related items, unusual, non-operational, or non-recurring items, including stock-based compensation. Other income expense as separately reported in the consolidated statements of operations, including foreign currency losses gains net.
Our adjusted results exclude acquisition related items unusual nonoperational or nonrecurring items, including stock based compensation.
Glen David: Other income expense is separately reported in the consolidated statements of operations, including foreign currency losses gains net.
Glenn David: and Income Taxes Related to Pre-Tax Income Adjustments and Unusual or Non-Recurring Income Now, let me introduce our Chairman, President, and Chief Executive Officer, Jack Bendheim, to share his opening remarks.
Glen David: And income taxes related to pre tax income adjustments and unusual or nonrecurring income tax items.
Jack: Now, let me introduce <unk>, Chairman, President and Chief Executive Officer, Jack <unk>.
Jack Bendheim: Jack. Thank you, Glenn, and good morning, everyone. By every measure, this was one of the strongest quarters since going public. We successfully integrated the Zoetis Medicaid Feed Added Portfolio, a testament to our unwavering customer-centric approach, one that I believe Zoetis shares as well. While no integration is without challenges, our guiding principle remains clear, serving the customer. This focus has ensured seamless execution of our most critical priority. At the same time, our Phibro Forward initiative continues to drive operational excellence, helping us identify opportunities for growth while improving efficiency and execution. Financially, we delivered exceptional results, driven by strong demand in our animal health business and two months of contributions from the Zoetis MFA portfolio.
Speaker Change: Sure his opening remarks Jack.
Speaker Change: Thank you Glenn and good morning, everyone.
Speaker Change: <unk>. This is one of the strongest quarters since going public.
Speaker Change: Successfully integrated resilience medicated feed additive portfolio, a testament to our unwavering customer centric approach when I believe is the latest shares as well.
Speaker Change: Now what you patients without challenges our guiding principle remains clear serving the customer. This focus has ensured seamless execution of our most critical priorities.
Speaker Change: At the same time, our fiber forward initiatives continued to drive operational excellence, helping us identify opportunities for growth, while improving efficiency and execution.
Speaker Change: Financially, we delivered exceptional results driven by strong demand in our animal health business and two months of contribution from the joint MFA portfolio.
Jack Bendheim: Total sales climbed 24% while adjusted EBITDA surged 64%, demonstrating both top line strength and expanding profitability. Our animal health segment led the way with MFA and other product sales rising 47%. Even excluding Zoe's contribution, our legacy animal health business delivered double-digit growth across all three product categories, with MFA and other sales increasing 11%, vaccines expanding 12%, and nutritional specialties up 11%. Rounding out our performance, our mineral and nutrition segments grew 3% while our performance product segment posted a 7% increase. As noted in our press release, these results highlight the strength of our diversified portfolio, our relentless focus on execution, and our commitment to delivering essential solutions to customers worldwide.
Speaker Change: Total sales declined 24%, while adjusted EBITDA surged, 64%, demonstrating both top line strength and expanding profitability.
Speaker Change: I don't know how segment led the way with MSA and other products sales rising to 47%.
Speaker Change: Even excluding this contribution legacy animal health based on its own the double digit growth across all three product categories with MFA and other sales, increasing 11% vaccines, expanding 12% and nutritional specialties up 11%.
Speaker Change: Rounding out our performance and mineral nutrition segments grew 3%, while our performance products segment posted a 7% increase.
Speaker Change: As noted in our press release. These results highlight the strength of our diversified portfolio, our relentless focus on execution and our commitment to delivering essential solutions to customers worldwide.
Jack Bendheim: The momentum we've built positions us well for the remainder of fiscal 2025 and beyond.
Speaker Change: The momentum, we built positions us well for the remainder of fiscal 2025 and beyond.
Jack Bendheim: We remain confident in our ability to drive sustainable growth and create long-term value through fiber-forward strategic innovation. Targeted Portfolio Expansion and Disciplined Financial Management. The broader protein industry, both in the U.S. and globally, remains strong. We expect continued growth despite challenges such as emerging diseases like avian influenza and geopolitical factors, including the newly announced tariffs. We are confident that Phibro is well positioned to navigate these headwinds and capitalize on the opportunities ahead.
Speaker Change: We remain confident in our ability to drive sustainable growth and create long term value fiber fiber forward.
Speaker Change: Strategic innovation.
Speaker Change: Aggregate portfolio expansion and disciplined financial management.
Speaker Change: The board of protein industry, both in the U S and globally remained strong we expect continued growth despite challenges such as emerging diseases like avian influenza and geopolitical factors, including the newly announced tariffs. We are confident that <unk> is well positioned to navigate these headwinds and capitalize on the opportunities ahead.
Glenn David: As Glenn will discuss, we are updating our fiscal year 2025 guidance to reflect this momentum and our strengthening outlook.
Speaker Change: As Glenn will discuss we are updating our fiscal year 2025 guidance reflect this momentum and our strength and our strengthening outlook Glenn.
Glenn David: Thank you, Jack. Starting with our Q2 performance on slide four. Consolidated net sales for the quarter ended December 31st, 2024, worth $309.3 million, reflecting an increase of $59.3 million, or a 24% increase over the same quarter one year ago. the animal health segment grew 33% while mineral nutrition grew at 3% and the performance product segment grew by 7%. Gap net income in diluted EPS increased significantly, driven by the integration of the new MFA business, increases in demand in both domestic and international regions, improved gross margins due to favorable mix, and lower input costs, offset by increased SG&A due to higher employee-related costs.
Glenn: Thank you Jack.
Speaker Change: <unk> Q2 performance on slide four Consol.
Speaker Change: Consolidated net sales for the quarter ended December 31, 2024 were $309 3 million, reflecting an increase of $59 3 million.
Speaker Change: Or 24% increase over the same quarter one year ago.
Speaker Change: The animal health segment grew 33%, while mineral nutrition grew 3% in the performance products segment grew by 7%.
Speaker Change: GAAP net income and diluted EPS increased significantly driven by the integration of the new MSA business increases in demand in both domestic and international regions.
Speaker Change: <unk> gross margins due to favorable mix and lower input costs.
Speaker Change: Offset by increased SG&A due to higher employee related costs.
Glenn David: After making our standard adjustments to GAAP results, including acquisition-related items, foreign currency losses, and certain one-off items, the second quarter adjusted EBITDA increased $18.7 million, or 64% versus prior year. Adjusted Net Income and Adjusted Diluted EPS both significantly increased as well. Increased gross profit driven by sales growth was partially offset by higher-adjusted SG&A and higher-adjusted interest.
Speaker Change: After making our standard adjustments to GAAP results, including acquisition related items foreign currency losses, and certain one off items second quarter, adjusted EBITDA increased $18 7 million or 64% versus prior year.
Speaker Change: Adjusted net income and adjusted diluted EPS, both significantly increased as well increased gross profit driven by sales growth, partially offset by higher adjusted SG&A and higher adjusted interest expense.
Glenn David: Now moving to segment level financial. The animal health segment posted $229.4 million of net sales for the quarter, an increase of $56.3 million or 33 percent versus the same quarter prior year. Within the animal health segment, we reported legacy MFA and other net sales growth of $11.7 million or 11% due to demand in both domestic and international regions. The new MFA business contributed two months of sales, or $36.7 million in the quarter, driving the total MFA and other growth to 47%. Please note that November sales for the Zoetis MFAs were impacted by blackout periods and other transition factors.
Speaker Change: Now moving to the segment level financial performance.
Speaker Change: Animal Health segment posted $229 4 million of net sales for the quarter, an increase of $56 3 million or 33% versus the same quarter prior year.
Speaker Change: Within the animal Health segment, we reported.
Speaker Change: Legacy MFA and other net sales growth of $11 7 million or 11% due to demand in both domestic and international regions.
Speaker Change: The new MSA business contributed two months of sales or $36 7 million in the quarter driving the total MFA and other growth to 47%.
Speaker Change: Please note that November sales, but as well as msas, where impacted by blackout periods and other transition factors. We saw a nice acceleration of sales in December with sales approximately double that of November.
Glenn David: We saw a nice acceleration of sales in December with sales approximately double that of November. Nutritional specialty products net sales increased $4.5 million, or 11%, mostly due to higher sales of microbial and companion animal products. vaccine net sales growth of $3.4 million, a healthy 12% increase driven by vaccines in Latin America, plus an increase in both domestic and international demand. Animal Health Adjusted EDITA was $58.2 million, a 48% increase, driven by the new MFA business, higher gross profit from increased legacy sales, and partially offset by higher risk G&A.
Speaker Change: Nutritional specialty products net sales increased $4 5 million or.
Speaker Change: We're 11%, mostly due to higher sales of microbial and companion animal products.
Speaker Change: Vaccine net sales growth of $3 4 million, a healthy 12% increase driven by vaccines in Latin America, plus an increase in both domestic and international demand.
Speaker Change: Animal health adjusted EBITDA was $58 2 million or 48% increase driven by the new MSA business higher gross profit from increased legacy sales and partially offset by higher SG&A.
Glenn David: For comparison purposes only, we are providing a rough estimate of Zuetta's EBITDA contribution. Please note that many expenses are not easily attributed to the new business. Our estimated EBITDA of $12 million includes only those expenses that can be directly attributed to the new MFA business.
Speaker Change: For comparison purposes, only we are providing a rough estimate of the wettest EBITDA contribution please.
Please note that many expenses are not easily attributed to the new business.
Speaker Change: Our estimated EBITDA of $12 million includes only those expenses that can be directly attributed to the new MSA business.
Glenn David: Moving on to the second quarter financial performance for our other business segments on slide six. Starting with mineral nutrition, net sales for the quarter were $63.3 million, an increase of $1.9 million, or 3%, due to increased sales volume and price. mineral nutrition adjusted EBITDA was $5.7 million, reflecting a year on year increase of $2.2 million, driven by higher gross profit and improved cost position. Looking at a performance product segment, net sales of $16.6 million reflects an increase of $1.1 million, or 7%, as a result of higher demand for the ingredients used in personal care products.
Speaker Change: Moving on to the second quarter financial performance for our other business segments on slide six.
Starting with mineral nutrition net sales for the quarter was $63 3 million and.
Speaker Change: An increase of $1 9 million or 3% due to increased sales volume and price.
Speaker Change: Mineral nutrition, adjusted EBITDA was $5 7 million.
Speaker Change: Year on year increase of $2 $2 million driven.
Speaker Change: Driven by higher gross profit and improved cost positions.
Speaker Change: Looking at our performance products segment net sales of $16 6 million.
Speaker Change: It reflects an increase of $1 1 million or 7% as a result of higher demand for the ingredients used in personal care products.
Glenn David: Adjusted EBITDA was $1.9 million and grew $1.1 million versus the same quarter prior year. Corporate expenses increased $3.4 million, driven by increased employee-related costs.
Speaker Change: Adjusted EBITDA was $1 9 million and grew $1 $1 million versus the same quarter prior year.
Speaker Change: Corporate expenses increased $3 $4 million driven by increased employee related costs.
Glenn David: Turning to Key Capitalization-Related Metrics on Slide 7. We generated $15 million of positive free cash flow for the 12 months ended December 31st, 2024. We generated $55 million of operating cash flow and invested $40 million in capital expenditures. Cash and cash equivalents were $67 million at the end of the quarter. Our gross leverage ratio was 3.1 times at the end of the second quarter based on $760,000,000 total debt and $242,000,000 of trailing 12-month adjusted EBITDA. Please note that the trailing 12 months of adjusted EBITDA includes 12 months from the Zoetis Medicated Feed Additive Portfolio, 10 months of Zoetis history, and two months from phibro ownership.
Speaker Change: Turning to key capitalization related metrics on slide seven.
Speaker Change: We generated $15 million of positive free cash flow for the 12 months ended December 31 2024, we.
Speaker Change: We generated $55 million of operating cash flow and invested $40 million and capital expenditures.
Speaker Change: Cash and cash equivalents were $67 million at the end of the quarter.
Speaker Change: Our gross leverage ratio was three one times at the end of the second quarter based on $760 million total debt and $242 million of trailing 12 month adjusted EBITDA.
Speaker Change: Please note that the trailing 12 months of adjusted EBITDA includes 12 months from this the wettest medicated feed additive portfolio 10 months or so what does history and two months from fiber ownership.
Glenn David: Our net leverage ratio was 2.9 times at the end of the second quarter, based on $693 million of net debt and $242 million for trailing 12-month adjusted even.
Speaker Change: Our net leverage ratio was two nine times at the end of the second quarter based on $693 million of net debt and $242 million and trailing 12 months adjusted EBITDA.
Glenn David: Turning to dividends. Consistent with our history, we paid a quarterly dividend of 12 cents per share, or $4.9 million in aggregate. As a reminder, $300 million of our debt is at a fixed rate of 0.51% plus the applicable margin through June 2025. In addition, in September of 2024, we entered into a new swap arrangement for $150 million at a fixed rate of 3.18% plus the applicable margin.
Speaker Change: Turning to dividends.
Speaker Change: Distant with our history, we paid a quarterly dividend of <unk> 12 per share or $4 9 million.
Speaker Change: As a reminder, $300 million of our debt is at fixed rate.
Speaker Change: Five 1% plus the applicable margin through June 2025.
Speaker Change: In addition in September of 2024, we entered into a new swap arrangement for $150 million at a fixed rate of 318% plus the applicable margin.
Glenn David: Let's turn to slide eight, which lays out our guidance for fiscal year 2025. Please note that our guidance now includes the acquisition of the Zuetas Medicaid Feed-It-Out Portfolio. Included in this guidance for fiscal year 2025 are early benefits related to our Phibro Forward Income Growth Initiative that will help drive additional EBITDA and margin growth. One-time costs related to this initiative are also included in our GAP guidance and primarily consists of one-time consulting. The initiative is focused on unlocking additional areas of revenue growth and cost savings. areas such as potential price increases, expanded product offerings, procurement initiatives, and other cost savings initiatives.
Speaker Change: Let's turn to slide eight which lays out our guidance for fiscal year 2025.
Speaker Change: Please note that our guidance now includes the acquisition of this wettest medicated feed of that portfolio.
Speaker Change: Included in this guidance for fiscal year 2025 are early benefits related to our fiber forward income growth initiatives that will help drive additional EBITDA and margin growth.
Speaker Change: One time costs related to this initiative are also included in our GAAP guidance and primarily consists of one time consulting fees.
Speaker Change: The initiative is focused on unlocking additional areas of revenue growth and cost savings areas.
Speaker Change: Areas, such as potential price increases expanded product offerings procurement initiatives and other cost savings initiatives.
Glenn David: Please note that we do not anticipate significant headcount reductions as part of this initiative.
Speaker Change: Please note that we do not anticipate significant head count reductions as part of this initiative.
Glenn David: Our increased guidance for fiscal year 2025, updated to include the acquisition of the Zoetis Medicaid feed editor portfolio, is as follows. Total net sales of $1,250,000,000 to $1,300,000,000. This represents a total growth range of 23 to 28% and a midpoint of approximately 25%. Total adjusted EBITDA of $172 to $180 million. This represents a growth range of 55 to 62% and a midpoint of approximately 58%. Total adjusted net income of $76 to $82 million. This represents growth of 57% to 70% with a midpoint of approximately 63%. The preliminary estimates for the ZOETAS MFA contribution to fiscal year 2025 include some of the usual impacts you would expect during an integration, such as destocking of inventory, the impact of blackout periods and incremental costs related to transition service and distribution agreement.
Speaker Change: Our increased guidance for fiscal year 2025 updated to include the acquisition of the Suez Medicated feed additive portfolio is as follows.
Speaker Change: Total net sales of $1 $250 million to $1.300 billion.
Speaker Change: This represents total growth range of 23% to 28% and a midpoint of approximately 25%.
Speaker Change: Total adjusted EBITDA of $172 million to $180 million.
Speaker Change: This represents a growth range of 55% to 62% at a midpoint of approximately 58%.
Speaker Change: Total adjusted net income of $76 million to $82 million. This represents growth of 57% to 70% with a midpoint of approximately 63%.
Speaker Change: The preliminary estimates for this witness the MSA contribution to fiscal year 2025 includes some of the usual impacts you would expect during an integration such as destocking of inventory the impacted blackout periods and incremental costs related to transition service and distribution agreements.
Glenn David: Gap Net Income and EPS assumes constant currency and no further gains or losses from FX. also included in our Gap Net Income and EPS are one-time costs related to our Phibro Forward Income Growth Initiative and acquisition-related costs from the new MFA product. We are confident in our ability to deliver a total adjusted diluted EPS between $1.87 and $2.01 for the full fiscal year of 2025, which represents a growth of 57 to 69%, with a midpoint of approximately 63%.
Speaker Change: GAAP net income and EPS assumes constant currency and no further gains or losses from FX movements.
Speaker Change: Also included in our GAAP net income and EPS are one time costs related to our fibro forward income growth initiatives and acquisition related costs from the new MSA products.
Speaker Change: We are confident in our ability to deliver total adjusted diluted EPS between $1 87 and $2 <unk>.
Speaker Change: For the full fiscal year of 2025, which represents a growth of 57% to 69% with a midpoint of approximately 63%.
Glenn David: In closing, with our updated financial guidance, we reaffirm our commitment to strong performance and enhancing shareholder value. We are excited to include the new MFA portfolio in our guidance, which reflects our confidence in seamless integration and strong performance, alongside improving profitability in our legacy business.
Speaker Change: In closing with our updated financial guidance, we reaffirm our commitment to strong performance and enhancing shareholder value.
Speaker Change: We're excited to include the new MSA portfolio guidance, which reflects our confidence the seamless integration and strong performance alongside improving profitability in our legacy business with.
Regina: With that, Regina, could you please open the line for questions? At this time, if you'd like to ask a question, simply press star followed by the number one on your telephone keypad.
Regina: With that Regina could you. Please open the line for questions.
Speaker Change: At this time, if you'd like to ask a question simply press star followed by the number one on your telephone keypad. Our first question will come from the line of Ikat Arena, Keith <unk> with J P. Morgan. Please go ahead.
Ekaterina Knyazkova: Our first question will come from the line of Ekaterina Knyazkova with J.P. Morgan.
Ekaterina Knyazkova: Please go ahead. Hey, thank you so much. And congrats on the quarter.
Ikat Arena: Okay. Thank you so much and congrats on the quarter. So first question is just on the guidance update I think you've touched upon this a little bit, but perhaps you can give a bit more color.
Ekaterina Knyazkova: So first question is just on the guidance update. I think you've touched upon this a little bit, but perhaps you can give a bit more color. So how much of the 50 cent increase for the EPS range? How much of that is coming from the acquisition versus the underlying business? And I guess what's the net change relative to the outlook you provided last quarter and that 25 cent number you were talking about?
Ikat Arena: The 50% increase for the EPS range, how much of that is coming from the acquisition versus the underlying business and I guess, what's the net change relative to the outlook you provided last quarter and that 25% number you were talking about.
Ekaterina Knyazkova: And then second question is just on the animal health performance. Seems like another very strong quarter of growth backing out the acquisition. Just elaborate a bit on the trends you're seeing across the board. Thanks.
Ikat Arena: And then second question is just on the animal health performance. It seems like another very strong quarter of growth backing out the acquisition just elaborate a bit on the trends youre seeing across the portfolio and which products or regions have been driving.
Ikat Arena: Some of that outperformance.
Glenn David: Thanks for the question, Ekaterina.
Ikat Arena: Thanks for the question.
Glenn David: So I'll start with the EPS guidance, and I'll ask Jack to comment a little bit on the business performance. So when you look at the overall increase in EPS at both the bottom and top of the range, it's about $0.53. The majority of that is coming from the addition of Zoetis, with a portion coming from continued strong performance in our legacy business as well. As you mentioned in previous calls, we got into probably about an additional $0.25 of EPS related to Zoetis. The current guide does include more than $0.25. But again, it's a combination of both improved performance in our expectations for Zoetis, but also improved performance in our legacy business as well.
Speaker Change: So I'll start with the with the EPS guidance and I'll ask Jack to comment a little bit on the on the business performance. So when you look at the overall increase in EPS at both the bottom and top end of the range is about 53.
Speaker Change: The majority of that is coming from the addition of <unk> with a portion coming from continued strong performance in our legacy business as well as you mentioned in previous calls we guided should probably about an additional 25.
Speaker Change: Of EPS related to the West. The current guide does include more than 25.
Speaker Change: But again, it's a combination of both improved performance and our expectations for <unk>, but also improved performance in our legacy business as well.
Jack Bendheim: and then on the general performance of the business.
Speaker Change: Yes.
Speaker Change: Then on the general performance of the business.
Jack Bendheim: This has been a great time for our customers, our customers across The U.S. and the world, and this is true for every category of protein, whether it's in cattle, in chickens, in pigs, they're doing okay. And when they're doing okay, you know, the concern is let's keep these animals healthy so they perform better and they get better to the market. And that's what we're seeing around the world, and that's basically what's driving the business.
Speaker Change: This has been a great time for our customers' customers across.
Speaker Change: The U S and the World and this is true for every category in protein whether it's in Canada.
Speaker Change: And chickens.
Speaker Change: In page.
Speaker Change: Okay, and when they're doing okay.
Speaker Change: Incentives, let's keep these animals healthy.
Speaker Change: For embedded and they get better to the market and that's what we're seeing around the world and basically what's driving the business.
Speaker Change: Thank you.
Michael Ryskin: Our next question comes from the line of Michael Ryskin with Bank of America. Please go ahead.
Speaker Change: Our next question comes from the line of Michael Raskin with Bank of America. Please go ahead.
Michael Ryskin: Hello, this is Gemma on for Mike. Two questions related to the MFA acquisition. First, on your updated revenue guidance, which now includes the MFA acquisition, this aligns with our prior expectations.
Speaker Change: Hello, This is Jamie on for Mike.
Speaker Change: Two questions related to the MSA acquisition. Please the first on your updated.
Speaker Change: <unk> guidance, which now includes stainless acquisition is that this aligns with our prior expectations or estimates.
Michael Ryskin: PS guidance came in quite a bit higher than And you walk us through the drivers behind that upside. And then similarly, now that you've owned MFA asset for about three to four months, is there anything you'd like to call out that you've heard about the business that surprised you? I know in the release, you called out the contribution of $37 million for the last two months. But that seems a bit light if it's going to be $200 million in the future.
Speaker Change: This guidance came in quite a bit higher than expected can you walk us through the drivers behind that upside and then similarly now that you've owned MSR fit for about three to four months is there anything you'd like to call out that you've heard about the business that surprised you I know in the release you called out the contribution of $37 million for the last two.
Speaker Change: That seems a bit light if it can be chunky.
Michael Ryskin: when you talk about how it started, risk expectations, and anything unusual you're seeing in terms of stocking, destocking, transition, things like that.
Speaker Change: Can you talk about.
Speaker Change: How it started versus expectations and unusual that you're seeing in terms of stocking destocking transition things like that thank you.
Glenn David: Sure, so just to address the first part of your question in terms of the revenue guidance being aligned with the incremental $200 million, which we had initially called out for the Zoetis guidance versus the EPS guidance being a bit higher. So two factors there. One, as I mentioned, we are seeing improved performance in the underlying business. But also related to Zoetis, we did see some higher profitability than initially anticipated, and that's driven by a couple of factors. The timing of hiring some of the colleagues across the organization whose costs we'll see a little bit more in the second half of the year, so that timing benefits us a bit as well.
Speaker Change: Sure. So just to address the first part of your question in terms of the.
Speaker Change: The revenue guidance being aligned with the incremental $200 million, which we had initially called out so theres the wettest guidance versus the EPS guidance being being a bit higher. So two factors. There one as I mentioned, we are seeing improved performance in the underlying business, but also related to the way. It is we did see some higher profitability than initially anticipated and thats driven by a.
Speaker Change: Couple of factors the timing of hiring some of the colleagues across the organization, whose costs, we'll see a little bit more in the second half of the year, so that timing benefits us a bit as well and just in general we've seen some pretty positive mix as well with the U S being one of the stronger performers.
Glenn David: And just in general, we've seen some pretty positive mix as well with the U.S. being one of the stronger performers, and we continue to expect that for the full year as well.
Speaker Change: And we continue to expect that for the for the full year as well.
Glenn David: Related to the performance in the quarter and the $37 million that we had in the quarter, you know, as we mentioned on the previous call, we did expect some transitionary impacts related to the integration, related to destocking as well as blackout periods. And in the prepared remarks, we mentioned a little bit how the month of November, the sales were about half of the month of December. And what that means essentially is we saw a nice acceleration from November to December as we worked through some of the blackout period impacts as well as the destock impacts.
Speaker Change: Weighted to.
Speaker Change: The performance in the quarter and the $37 million that we had in the quarter.
Speaker Change: As we mentioned on the previous call. We did expect some transition impacts related to the integration related to destocking as well as blackout periods and in the prepared remarks, we mentioned a little bit how the month of November the sales for about half of the month of December and what that means essentially is we saw a nice acceleration.
Speaker Change: From November to December as we worked through some of the blackout period impacts as well as the destock impacts we're not fully out of the destocking, but we see a nice trend moving forward that we feel confident in the $200 million that we had guided previously.
Glenn David: We're not fully out of the destocking, but we see a nice trend moving forward that we feel confident in the $200 million that we had guided previously.
Speaker Change: Thank you.
Balaji Prasad: Our next question comes from the line of Balaji Prasad with Barclays. Please go ahead.
Prasad: Our next question comes from the line of <unk> Prasad with Barclays. Please go ahead.
Mikaela: Hi, this is Mikaela on for Balaji. Thanks for taking our questions. Just a quick one. So with the MSA deal now complete, can you guys talk to us just a bit more about your priorities and companion animal? Is this still a key focus area? And if so, can you provide any additional details on your pipeline here? Thanks.
Speaker Change: Hi, This is <unk> on for <unk>. Thanks for taking our questions. Just a quick one so with the MSA deal now complete can you guys talk just a bit more about your priorities in companion animal is this still a key focus area and if so can you provide any additional details on your pipeline here. Thanks, so much.
Donnie Bendheim: Hey, good morning. It's Donnie. I'll take that. Companion animal continues to be a key priority for us. However, you know, we are making nice progress.
Anthony: Hey, good morning, Anthony I'll take that.
Anthony: Companion animal continues to be a key priority for us however.
Anthony: Yeah.
Anthony: We're making nice progress.
Donnie Bendheim: We purposely in this quarter, you know, wanted to not call it out in our prepared remarks because We are excited as well about our livestock business, and we want to focus on our continued strength in livestock and continued investment in livestock, and there's actually a lot of pipeline products within livestock as well. So, while we continue to make progress on our pipeline in pets, I think the livestock business is a shining star for us, and we do want people to recognize the growth that we're having and continue to have and continue to expect to have.
Anthony: Purposely in this quarter.
Anthony: Wanted to not call it out in our prepared remarks because.
Anthony: We are excited as well about our lifestyle business and we want to focus.
Anthony: Our continued strength in livestock.
Anthony: Stock and there's actually a lot of pipeline products within livestock as well so while we continue to make progress on our pipeline and pets.
Anthony: I think the the lifestyle business is shy.
Anthony: Assigning star for Us and we do want people to recognize the growth that we're having and continue to have and continue to expect to have there.
Nevin T.: Our next question comes from the line of Nevin T. with BNP Paribas.
Speaker Change: Our next question comes from the line of <unk> with BNP Paribas. Please go ahead.
Nevin T.: Please go ahead.
Donnie Bendheim: Hi, good morning. Can you discuss the integration of the Redis MSA portfolio to date and your plans for the rest of the year, and if you expect any potential impact of the headcount reduction? Thank you. Yeah, so in terms of the integration to date, the integration is moving very smoothly. Obviously, our key priority on day one was to make sure that we were able to effectively support our customers and our colleagues across the globe. They did a tremendous job on that. And I think, you know, we've gotten very positive feedback from our customers in terms of our ability to support them and the care that we're able to provide and their pleasure with us having a broader portfolio now and able to support their needs.
Speaker Change: Hi, Good morning, and can you discuss the integration of the Lady and the staple showing year to date and your plans for the rest of the year end.
Speaker Change: If you expect any potential impact of the head count reduction. Thank you.
Speaker Change: Okay.
Speaker Change: Yes, so in terms of the integration to date the integration is moving very smoothly, obviously a key priority.
Speaker Change: On day, one was to make sure that we were able to effectively support our customers and our colleagues across the globe just tremendous job on that.
Speaker Change: We've gotten very positive feedback from our customers in terms of our ability to support them and the care that we're able to provide there.
Speaker Change: Pleasure with us having a broader portfolio now enabled to support their needs. So that was priority number one and that has progressed very well also obviously onboarding and colleagues from the wettest since our organization those priority.
Donnie Bendheim: So that was priority number one, and that has progressed very well. Also, obviously, onboarding the colleagues from Zoetis into our organization, that was priority, key priority as well, and that's gone extremely well. You know, there are some additional things that we need to do over the next number of months, including, you know, some system transitions on the manufacturing side, as well as as we continue to, you know, evolve with marketing authorizations. But everything is going according to plan, and we're very pleased with the progress that we've made with the integration. In terms of headcount reduction, we've never indicated that there would be headcount reductions related to this initiative.
Speaker Change: Priority as well and that's gone extremely well.
Speaker Change: Some additional things that we need to do over the next.
Speaker Change: Number of months, including some system transitions on the manufacturing side.
Speaker Change: Well as as we continue to evolve with marketing authorizations, but everything is going according to plan and we're very pleased with the progress that we've made with the integration.
Speaker Change: In terms of head count reduction, we've never indicated that there would be headcount reductions related to this initiative just as a reminder.
Donnie Bendheim: Just as a reminder, the majority of the acquisition was six plants globally. And obviously, we need those colleagues to continue to produce the product. So we never had any intentions of headcount reductions as part of the acquisition.
Speaker Change: The acquisition was six plants globally.
Speaker Change: And obviously, we need those colleagues who continue to produce the product. So we never had any intentions of head count reductions as part of the acquisition.
Speaker Change: Thank you.
Linda Bolduc: Our next question will come from the line of Linda Bolduc with Morgan Stanley. Please go ahead.
Speaker Change: Our next question will come from the line of Linda Bolduc with Morgan Stanley. Please go ahead.
Linda Bolduc: Thanks.
Linda Bolduc: Morning. This is Linda on for Aaron Wright, and thanks for taking our question. So for the company, what are the implications of tariffs on fibro and any potential color on the exposure that you could share with us? Also, any thoughts on EBITDA margin progression throughout the year? And additionally, what is your latest view on underlying demand trends across key species groups in animal health? And how do you expect those to play out for the balance of the year?
Linda Bolduc: Thanks. Good morning. This is Linda on for Erin Wright and thanks for taking our question.
Speaker Change: So for the company what is the implications of tariffs on FIFO and any potential color on the exposure that you could share with us.
Speaker Change: And also any thoughts on EBITDA margin question throughout the year and Additionally, what is your latest view on underlying demand trends across key species groups in animal health and <unk>.
Speaker Change: How do you expect those to play out for the balance of the year.
Linda Bolduc: Thanks.
Jack Bendheim: I'll take the easy one, the terrace. So, I would say, sort of based where we are on, let's recall, last night's announcement of the White House, we're just dealing with Chinese tariffs right now. And overall, looking at the portfolio and looking at the fact that we have no production in China directly, and our factories are in Brazil and in Israel and the United States. We do import from China some stuff, but overall, we think the impacts will be very, very small. and in in terms of even the margin and progression.
Speaker Change: Okay.
Speaker Change: I'll take the easy one tariffs.
Speaker Change: Sure.
Speaker Change: So I would say sort of base, where are we on that could call last night's announcement now of the White house.
Speaker Change: We're just dealing with Chinese tariffs right now and overall looking at the portfolio and looking at the fact that most of them we have no production in China It correctly.
Speaker Change: And our factories are in Brazil, and in Israel, and the United States, We do import from China, some stuff, but overall, we think the impact would be.
Speaker Change: Be very very small.
Speaker Change: And then in terms of EBITDA margin and progression.
Glenn David: You know, we continue to see improvements in EBITDA margin in our core business with the Phibro Forward initiative, as well as with the acquisition of the Zoetis portfolio. So, you know, we saw, you know, in terms of adjusted EBITDA versus last year, you know, 380 basis points improvement, you know, we'd expect that with the continued focus that we have with the Phibro Forward growth initiative, as well as, you know, continuing to optimize the Zoetis portfolio that we would continue to see strong margins in the business moving forward.
Speaker Change: We continue to see improvements in EBITDA margin in our core business with the fiber forward business with fiber forward initiative as well as with the acquisition of <unk> portfolio. So we saw in terms of adjusted EBITDA versus last year 380 basis points improvement.
Speaker Change: We would expect that with the continued focus that we have with the fire fibro forward growth initiatives as well as continuing to optimize this weather portfolio that we would continue to see strong margins in the business moving forward.
Speaker Change: Okay.
Jack Bendheim: And in terms of demand trends for the rest of the year, you know, as Jack mentioned earlier, you know, we're seeing very good profitability across, you know, many of the categories across poultry, swine, cattle, and in many of our major markets, you know, so just, you know, we get a dashboard internally that shows green, yellow and red, and all of our key markets, the majority of those flashlights are flashing green, which, you know, we see is very positive for us for the for the rest of the year.
Speaker Change: And in terms of demand trends through the rest of the year as Jack mentioned earlier, we're seeing very good profitability across.
Speaker Change: Many of the categories across poultry swine cattle and in many of our major markets. So just on <unk>.
Speaker Change: Dashboard internally that shows green yellow and red and all of our key markets. The majority of those flash lights are flashing green, which we see as very positive for us for the for the rest of the year.
Regina: And as a reminder, if you would like to ask a question, press star followed by the number one on your telephone keypad.
Speaker Change: And as a reminder, if you would like to ask a question press star followed by the number one on your telephone keypad, well pause for approximately 30 seconds to allow analysts to Keith for any last minute questions.
Jack Bendheim: We'll pause for approximately 30 seconds to allow analysts to queue for any last-minute questions. And just, you know, just to follow up on the on the tariff implications, you know, as Jack said, those aren't we are working through the implications of the tariffs. You know, we do have a plant in China that we acquired as part of Zuetta's acquisition. You know, we've looked across all of our business units to understand the exposure there. You know, it varies across some of the business units between animal health and nutrition, and we do have mitigation plans in place, you know, in the event that some of those tariffs do become burdensome to to our profitability.
Speaker Change: And just just to follow up on the on the <unk>.
Speaker Change: <unk> applications.
Speaker Change: Jack said those are we are working through the implications of the tariffs we do have a plant in China that we acquired as part of this as well as acquisition.
Speaker Change: We've looked across all of our business units to understand the exposure there.
Speaker Change: Varies across some of the business units between animal health mineral nutrition, and we do have mitigation plans in place in the event that some of those towers do become burdensome to to our profitability, whether that's passing on to the customers.
Jack Bendheim: You know, whether that's passing on to to the customers or looking for alternative sources, you know, we feel very confident in our ability to mitigate the impact. And when you look at our guidance for fiscal year 2025, the majority of the tariffs would impact our cost of goods sold. And based on inventory terms, we wouldn't really see any impact into into 2026. So we feel very confident that the guidance that we provided today would accommodate any implications of current or further tariffs.
Speaker Change: We're looking for alternative sources, we feel very confident in our ability to mitigate the impact and when you look at our guidance for fiscal year 2025. The majority of the towers would impact our cost of goods sold and based on inventory turns we wouldnt really see any impact into into 2026. So we feel very confident that the guidance that we provided.
Speaker Change: Today would accommodate any implications of current or prototypes.
Glenn David: And that will conclude our question and answer session.
Speaker Change: And that will conclude our question and answer session I'll turn the call back over to Glenn David for any closing remarks.
Glenn David: I'll turn the call back over to Glenn David for any closing remarks. Thank you, Regina, and thank you, everyone, for listening in on today's call. We really appreciate your time, interest, and support of Phibro Animal Health, and we hope you have a great day. Thank you so much.
Glenn David: Thank you Regina and thank you everyone for listening in on today's call. We really appreciate your time interest and support of fiber.
Speaker Change: Fiber envelope and we hope you have a great day. Thank you so much.
Regina: That will conclude today's call. Thank you all for joining.
Speaker Change: That will conclude today's call. Thank you all for joining you may now disconnect.
Regina: You may now disconnect.
Regina: Please wait, the conference will begin shortly.
Speaker Change: Please wait the conference will begin shortly.
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