Q3 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. At this time, I would like to welcome everyone to the Fibro Animal Health Corporation 3rd Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.
Regina: After the speakers remark, there will be a question and answer session.
Regina: If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad.
Speaker Change: 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.
Speaker Change: Thank you Regina, good day, and welcome to the Phibro Animal Health Corporation earnings call for our third quarter and March 31st, 2025. My name is Glenn David and I'm the Chief Financial Officer of Phibro Animal Health Corporation.
Speaker Change: I'm joined on today's call by Jack Bendheim, leverage chairman, president and chief executive officer, Donnie Bendheim, director and executive vice president of corporate strategy, and Larry Miller, a chief operating officer.
Speaker Change: Today we will cover our financial performance for our third quarter and provide updated financial guidance for our fiscal year ending June 30th, 2025.
Speaker Change: At the conclusion of our remarks, we will open the lines for your questions.
Speaker Change: I would like to remind you that we are providing the 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 10Q, as well as the transcript and slides discussed and presented on this call.
Speaker Change: Our remarks today will include forward-looking statements, and actual results could differ materially from those 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 running stress release.
Speaker Change: Our remarks include references to certain financial measures, which were not prepared in accordance with generally accepted accounting principles for US
Speaker Change: I refer you to the non-gab financial information section in our earnings press release for a discussion of these measures.
Speaker Change: Reconciliation of these non-GAF financial measures to the most directly comparable U.S. GAF measures are included in the financial tables that accompany the earnings press release.
Speaker Change: Now adjusted results exclude acquisition related items, unusual non-operational or non-recurring items, including start-based compensation.
Speaker Change: Other income expense has separately reported in the consolidated statements of operation, including foreign currency losses, gains net, and income taxes related to pre-tax income adjustments and unusual or non-recurring income tax items.
Speaker Change: Now, let me introduce our chairman, President, and she's executive officer, Jack Bendheim, to share his opening remarks. Jack, thanks, Glenn. Good morning, everyone. I'm pleased to report another solid quarter for Phibro Animal Health Corporation.
Speaker Change: Our performance is quartered, let's continue strength across the business, deported by the integration of the Zoetis MFA portfolio and steady execution across our teams.
Speaker Change: Trolls sales increased 32% year-over-year while Justin E. Badaire rose 85% and adjusted diluted EPS more than double. These results reflect both top line growth and improve operating leverage.
Speaker Change: By segment, Animal Health led the way with 42% revenue growth.
Speaker Change: with an add to Silverat, newly integrated MSA and other products, increased 68%
Speaker Change: I'll legacy MSA and other sales and a slight decline in vaccines grew 1% largely due to the timing of customer orders. Overall, the second continues to perform well.
Speaker Change: The nutritional spec please maintain its possible momentum with 8% revenue growth, while mental nutrition and performance products pose the strong gains of 4% and 28% respectively, highlighting the strength of our diversified portfolio.
Speaker Change: Across all segments, this quarter's results demonstrate how our focus on execution and operational excellence.
Speaker Change: Sengal themes of our private forward strategies help drive meaningful progress.
Speaker Change: My Fibro Forward is a long-term initiative, its emphasis on discipline operations and continuous improvement is already contributing to our performance.
Speaker Change: The same focus, helping us navigate external challenges like the evolving caravan environment.
Speaker Change: While the situation remains fluid, we do not expect any material impact on our financial results for the remainder of fiscal 2025.
Speaker Change: Through five before, when we've made targeted investments procurement and supply chain resilience that are already helping us manage potential disruptions.
Speaker Change: Looking at the fiscal 2026, based on currently announced tariffs, we anticipate some pressure on certain inputs and markets in the range of $5 to $10 million, but we believe we're a well-positioned to manage these impacts effectively and stole the liver growth.
Now turning to guidance.
Speaker Change: Based on a strong third quarter results and improved visibility into the remainder of the year, we are narrowing our full year guidance ranges and in most cases raising the midpoint [inaudible]
Speaker Change: We now respect net sales between $1.26 billion and $1.29 billion, Adjusted EBITDA of $177 million to $1.99 billion, and Adjusted EBITDA of $1.96.
Speaker Change: 2009. Gap EPS is projected to be in the range of 98 cents to $1.11. This updated guidance reflects solid execution across our businesses and continuing momentum as we close out the fiscal year.
Speaker Change: Now I'll turn it back to Glenn's traditional color on the cordious performance. I will throw it to your questions at the end.
Glenn David: Thanks, Jack, and starting with a few three performance on slide to work.
Glenn David: Consolidated net sales for the quarter ended March 31st, 2025, with $347.8 million, reflecting an increase of $84.6 million, or a 32% increase over the same quarter one year ago.
Glenn David: The animal health segment grew 42%, mineral nutrition grew 4%, and the performance product segment grew by 28%.
Glenn David: Gapning income in diluted EPS increased significantly during buying the integration of the new on-the-fade business. Increases in demand, improves gross margin through the favorable mix and lower input costs offset by increased S-GNA through the higher employee-related costs.
Glenn David: After making our standard adjustments to gap results, including acquisition of related items, foreign currency losses, and certain one-off items, the third quarter adjusted EBTA increased $25.2 million, or 85% versus prior year.
Glenn David: Adjusted End Income, and Adjusted Duality PS, both significantly increased as well. Increased growth process during my sales growth was partially offset by higher adjusted SGNA and higher
Thank you for listening. We'll see you next time.
Glenn David: Animal health segment posted $258 $4 million in bed sales for the quarter, an increase of $77 1 million or 42% versus the same quarter prior year.
Glenn David: Within the animal Health segment, we reported.
Glenn David: Legacy MFA and other net sales decline of $3 5 million or negative three.
Glenn David: 3% due to the timing of specific customer orders and strong performance in Q3 last year.
Glenn David: The new MSA business contributed a full quarter of sales of $77 million in the quarter driving the total MSA and other grew to 68%.
Glenn David: Nutritional specialty products net sales increased three to $3 or 8%, mostly due to higher sales of microbial and companion animal products.
Glenn David: Vaccine sales growth of half a million dollars.
Glenn David: 1% was driven by vaccines in Latin America, plus an increase in domestic demand offset by timing of specific international market registration renewals, which was expected and resolved with limited sales for the quarter.
Glenn David: Animal health adjusted EBITDA was $63 1 million or 73% increase driven by the new MSA business higher gross profit from improved mix and the legacy business, partially offset by higher SG&A.
Glenn David: For comparison purposes, only we are providing a rough estimate of the wettest EBITDA contribution.
Glenn David: Please note that many of the expenses are not easily attributed to the new business are estimated EBITDA of $23 $4 million includes only those expenses that can be directly attributed to the new MMA business.
Glenn David: Moving on to the third quarter financial performance of our other business segments on slide six.
Speaker Change: Starting with mineral nutrition.
Glenn David: Net sales for the quarter was $66 $8 million an increase.
Glenn David: <unk> of $2 5 million or 4% due to increased sales volume and price mix.
Glenn David: Interim nutrition, adjusted EBITDA was $5 8 million.
Glenn David: Collecting the year on year increase of $1 $1 million driven by higher gross profit and improved cost positions.
Glenn David: Looking at our performance products segment.
Glenn David: Net sales of $22 7 million.
Glenn David: Flex and increase of $5 million.
Glenn David: We're 28% as a result of higher demand for the ingredients used in personal care products.
Glenn David: Adjusted EBITDA was $3 3 million.
Glenn David: And grew $1 million versus same quarter prior year.
Glenn David: Corporate expenses increased $3 4 million driven by increased employee related costs.
Glenn David: Turning to key capitalization related metrics on slide seven we.
Glenn David: We generated $49 million of positive free cash flow for the 12 months ended March 31 2025.
Glenn David: We generated $87 million of operating cash flow and invested $38 million and capital expenditures.
Glenn David: Cash and cash equivalents were $70 million at the end of the quarter.
Glenn David: Our gross leverage ratio was three <unk> times at the end of the third quarter based on $734 million total debt and $245 million of trailing 12 month adjusted EBIT.
Glenn David: Please note that the trailing 12 months adjusted EBITDA includes 12 months from this whether its medicated feed additive portfolio.
Glenn David: Seven months in <unk> history, and five months from fiber ownership.
Glenn David: Our net leverage ratio was two seven times at the end of the third quarter based on $664 million net debt and $245 million of trailing 12 month adjusted EBITDA.
Glenn David: As a reminder, $300 million of our debt is at a fixed rate of five one.
Glenn David: <unk> plus the applicable margin through June 2025.
Glenn David: In September of 2024, we entered into a new swap arrangement for $150 million at a fixed rate of three 8% plus a margin that runs through September 2029.
Glenn David: In March of 2025, we entered into a new swap arrangement for $275 million at a fixed rate of 364% plus the applicable margin that runs through February 2013.
Glenn David: In March 2025, we also entered into a forward starting interest rate collar starting in July 2025 for $250 million with an interest rate cap and floor of $4, 75% and 199% respectively through June 2026.
Glenn David: Turning to dividends consistent with our history, we paid a quarterly dividend of <unk> 12 per share or $4 9 million.
Glenn David: Yeah.
Glenn David: Let's turn to slide eight which lays out our guidance for fiscal year 2025.
Glenn David: Please note that.
Glenn David: Our guidance includes the acquisition of the <unk> medicated feed additive portfolio.
Glenn David: Included in this guidance for fiscal year 2025 by early benefits related to our fiber forward income growth initiatives that will help to drive additional EBITDA and margin growth.
Glenn David: One time costs related to this initiative are also included in our GAAP guidance and primarily consist of one time consulting fees.
Glenn David: The initiative is focused on unlocking additional areas of revenue growth and cost savings areas, such as potential price increases and expanded product offerings procurement initiatives and other cost savings initiatives.
Glenn David: Our revised guidance for fiscal year 2025 is as follows.
Glenn David: Total net sales of $1 $260 million from $1 $290 million.
Glenn David: This represents total growth range, 24%, 27% and a midpoint of approximately 25%.
Glenn David: Total adjusted EBITDA of 177% to $183 million.
Glenn David: This represents a growth range of 59% to 66% and a midpoint of approximately 62%.
Glenn David: Total adjusted net income of $80 million to $85 million.
Glenn David: This represents growth of 65%, 76% with a midpoint of approximately 70%.
Glenn David: The estimates for the wettest MSA contribution to fiscal year 2025 includes some of the unusual impacts you would expect during integration such as Destocking of inventory the impact of blackout periods and incremental costs related to transition service and distribution service agreements.
Glenn David: GAAP net income and EPS assumes constant currency, no further gains or losses from FX movements.
Glenn David: Also included in our GAAP net income and EPS are onetime costs related to our fiber forward income growth initiatives and acquisition related costs from the new MSA products.
Glenn David: We're confident in our ability to deliver total adjusted diluted EPS between $1 96, and $2 nine for the fiscal year of 2025, which represents a growth of 65%, 76% with a midpoint of approximately 70%.
Glenn David: Regarding tariffs as Jack mentioned and based on what we know today, we expect very limited income from towers through our fiscal year 2025 results and expect the impact from fiscal year 2026 to be manageable and remain confident in our ability to drive strong income growth next year.
Glenn David: This growth will come from continue.
Glenn David: Continued strong performance in our legacy business driving revenue growth at or above the livestock market rates.
Glenn David: Accelerated EBIT to growth from our fiber forward income growth initiatives and.
Glenn David: And a full year of revenue and adjusted net income contribution from those orders MFA portfolio versus eight months in fiscal year 2025.
Regina: With that Regina could you. Please open the line for questions.
Speaker Change: We will now begin the question and answer session. Thank you if I could ask a question simply press star followed by the number one on your telephone keypad. Our first question will come from the line of E. Caterina, Keith <unk> with J P. Morgan. Please go ahead.
Speaker Change: Hi, Thank you so much oh, so first just on tariffs you've touched upon this but maybe you can elaborate and give a little more color as to how youre thinking about exposure for the company I think specifically around the upcoming pharma tariffs how much of the U S. Animal health business do you think could be potentially exposed.
Speaker Change: From a manufacturing standpoint, and just can you potentially mitigate some of the headwinds to be a price and then second question is just around the medicated feed additives business, just kind of adjusting for the latter.
Speaker Change: Let us acquisition I think the core business performed a little bit worse.
Speaker Change: Recent trends just elaborate a bit on what drove that and maybe how to think about performance for that segment going forward. Thank you.
Speaker Change: Sure So I'll start with the with the tariffs and the <unk>.
Speaker Change: And MFA is and others will certainly certainly add on.
Speaker Change: From tariffs that can be cut arena one of the things when you look at our manufacturing the majority of our manufacturing is done in the U S as well as with manufacturing in Brazil and Israel.
Speaker Change: We do have manufacturing sites in Italy, and China as well, but the majority of our manufacturing is done locally and provided for local markets. There are certain inputs as we called out in our prepared remarks that we do get from other markets and those tariffs are reflected in our in our guidance and our estimates, but we believe there are ways.
Speaker Change: To mitigate impacts of tariffs there and we've taken many of those actions. So some of the ways that we do that or we have built inventory on certain of those inputs. We've also switched suppliers to other markets, where we could we've also renegotiated with number of suppliers to absorb the tariff impact and as you mentioned, we do have the ability to take price increases.
Speaker Change: And we have announced price increases on products that have been particularly impacted by the by the tower. So there are a number of mitigation items that in areas that we've been able to implement already.
Speaker Change: Regarding the slower MFA growth of negative 3% in this quarter that was driven by a number of factors. The main one just being the timing of orders to some of our larger customers, which negatively impacted growth for the quarter, but overall, our MFA and other segment.
Speaker Change: Year to date perspective has grown 7%.
Speaker Change: Things to think about in the quarter as we had particularly strong growth in Q3 of last year. So in Q3 of last year, our MFA and other segment grew over 16%. So it was a very difficult comparative quarter to this year, but overall, we remain confident in the performance of that segment and the underlying demand with our customers.
Speaker Change: Thank you.
Speaker Change: Once again to ask a question simply press star one on your telephone keypad. Our next question will come from the line of Michael Ruskin with Bank of America. Please go ahead.
Michael Ruskin: Great. Thanks for taking the question and congrats on the quarter guys.
Speaker Change: Hum.
Speaker Change: I want to talk about the guide update Youre keeping revenues.
Speaker Change: A less unchanged at the midpoint the same but you took up your EBITDA and EPS guide pretty meaningfully from where we are in the year.
Speaker Change: Talk about what's driving that is it mix.
Speaker Change: Is it fiber a forward initiative I'm, just sort of unpack that a little bit just given how late we are in the year is a pretty impressive bump.
Speaker Change: I've got a follow up.
Speaker Change: Yes. Thanks for the question I think there are a number of factors that are driving the increase in the guide to your point a bit of it is mix and continued strong performance that we expect for the year and our vaccine portfolio. It is the fiber forward income growth initiatives continuing to to drive incremental growth for the year, but also you know what.
Speaker Change: Equally or not the greatest contributor would be the Zoe added MFA portfolio and the improved margins that we continue to see I think we've been able to leverage our global infrastructure, even to a greater extent than we initially anticipated and we're seeing very positive margin contribution from that again, we will caution that the numbers that we share our estimates they don't fully reflect.
Speaker Change: Costs that arent, 100% dedicated to these <unk> portfolio, but overall, we're seeing greater profitability come from the inclusion of that portfolio into our business.
Speaker Change: Okay. Thanks.
Speaker Change: That's helpful and a follow up on tariffs.
Speaker Change: I know this is a privacy so could you give us a little more color on you mentioned the geos, but is there any particular product.
Speaker Change: Or product category, where the tariffs that's coming from is it more from sort of the API and the raw underlying kemet.
Speaker Change: Chemicals or sub components.
Speaker Change: Is it specific to China.
Speaker Change: Just trying to think of not only what's been seen now but potential future tariffs, whether it's pharma tariffs or regional tariffs. Just so we can continue to model this as the situation evolves.
Speaker Change: I'll take it.
Jack Bendheim: Jack Thank you.
Speaker Change: It's a great question.
Speaker Change: Thank you.
Speaker Change: The impact was saying alright, not necessarily from China I think.
Speaker Change: Glen I'd say, we produce most of our active ingredients in the U S.
Speaker Change: With the sale.
Speaker Change: In Israel we.
Speaker Change: Very very little of the active ingredients in China.
Speaker Change: The inputs that come from the overall sort of intensive enhanced across the board.
Speaker Change: That we're seeing from inputs.
Speaker Change: Over the world.
Speaker Change: So there it's a combination.
Speaker Change: Looking how we how we use those products can we use a few of those products.
Speaker Change: It's going back to suppliers.
Speaker Change: And asking them to absorb that cost.
Speaker Change: And maybe changing some of our materials. So it's not a huge amount of money.
Speaker Change: But it's.
Speaker Change: We're reflecting it in the sort of de Minimis discussion of how we have to handle that but we're working on it.
Speaker Change: Okay. Thanks.
Speaker Change: I'll leave it there.
Speaker Change: Our next question comes from the line of <unk> with BNP Paribas. Please go ahead.
Speaker Change: Hi, Good morning, and just a follow up on tariff issue to expect lobbying for an exception for animal health from potential China tariffs, we know that the bigger players that discussing that.
Speaker Change: And second if you can discuss the FX impact on the quarter and the rest are from here. Thank you.
Speaker Change: So too.
Speaker Change: The first question.
Speaker Change: We're involved with.
Speaker Change: While the animal health companies.
Speaker Change: And lobbying in the various markets towards <unk> for animal health.
Speaker Change: As you're well aware.
Speaker Change: Yes.
Speaker Change: The end result of these products are in the price of food.
Speaker Change: At least for a sector of the business.
Speaker Change: And to that extent.
Speaker Change: Nobody's really either to increase the inputs. So I think we are.
Speaker Change: And as of right now.
Speaker Change: The initial reactions, we are seeing a positive but.
Speaker Change: Well no.
Speaker Change: In the next couple of weeks, where this thing is.
Speaker Change: Regarding FX for the quarter, we saw limited impact in the quarter one of the things we've talked about and discussed in the past as many are in international markets, particularly at the revenue line, we try to.
Speaker Change: And transact in U S dollars and match our pricing to U S. Dollar so that we see limited impact from FX on a year over year basis. There was some favorability within our cost related to FX, but overall limited impact for the quarter and the.
Speaker Change: And the year.
Speaker Change: Thank you very much.
Speaker Change: Once again for any question simply press Star followed by the number one on your telephone keypad, well pause for a moment to compile the Q&A roster.
Speaker Change: And we have no further questions at this time I will hand the call.
Glenn David: Back over to Glenn David for any closing comments.
Glenn David: Thank you Regina and thank you everyone for listening in on today's call. We really appreciate your time attention and interest and support of antimony fiber, Adam well have a great day.
Glenn David: Ladies and gentlemen, this concludes today's call. Thank you all for joining you may now disconnect.