PHIBRO ANIMAL HEALTH CORP Q2 FY2025 earnings call

• Successfully integrated the Zoetis medicated feed additive portfolio with a customer-centric approach.
• Phibro Forward initiative driving operational excellence and growth.
• Exceptional financial results with total sales declining 24% while adjusted EBITDA surged 64%.
• Animal health segment led growth with MFA and other product sales rising 47%, legacy animal health business showed double-digit growth across categories.
• Mineral Nutrition grew 3% and Performance Product grew 7%.

The animal health segment had net sales of $229.4 million for the quarter, an increase of $56.3 million or 33% versus the same quarter prior year. Legacy MFA and other net sales grew $11.7 million or 11%. The new MFA business contributed $36.7 million in sales for the quarter, driving total MFA and other growth to 47%. Nutritional specialty products net sales increased $4.5 million or 11%, vaccine net sales grew $3.4 million (12% increase). Mineral Nutrition had net sales of $63.3 million, an increase of $1.9 million or 3% due to increased sales volume and price. Performance Product had net sales of $16.6 million, an increase of $1.1 million or 7% as a result of higher demand for ingredients used in personal care products.

• Total net sales for fiscal year 2025 expected to be $1.25 billion to $1.3 billion, a 23%-28% growth.
• Total adjusted EBITDA expected to be $172 million to $180 million, a 55%-62% growth.
• Total adjusted net income expected to be $76 million to $82 million, a 57%-70% growth.
• Adjusted diluted EPS expected to be between $1.87 and $2.01 for fiscal year 2025.

• Geopolitical factors such as newly announced tariffs.
• Emerging diseases like avian influenza.
• Integration transition impacts including destocking of inventory, blackout periods, and incremental costs related to transition service and distribution agreements.

Q: Hey. Thank you so much, and congrats on the quarter. So first question is just on the guidance update. I think you have touched upon this a little bit, but perhaps you can give a bit more color. So how much of the fifty-cent increase for the EPS range, how much of that is coming from the acquisition versus the underlying business? And I guess what is some of that change relative to the outlook you provided last quarter and that twenty-five cents number you were talking about? And then the 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 trends you are seeing across the portfolio and which products and regions have been driving some of that performance.

A: Thanks for the question, Ekaterina. I will start with the EPS guidance, and I will let Jack comment a little bit on the business performance. When you look at the overall increase in EPS at both the bottom and top of the range, it is about fifty-three cents. 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 guided to probably about an additional twenty-five cents of EPS related to Zoetis. The current guide does include more than twenty-five cents. But, again, it is a combination of both improved performance in our expectations for Zoetis, but also improved performance in our legacy business as well.

Q: Hello. This is Gemma on for Mike. Two questions related to the MFA acquisition, please. The first, on your updated revenue guidance, which now includes the MFA acquisition, this aligns with our prior expectations or estimates. EPS 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 have owned the MFA asset for about three to four months, is there anything you would like to call out that you have heard about the business that surprised you? I know in the release, you called out the contribution of thirty-seven million for the last two months. That seems a bit light if it is going to be two hundred million in eight months. Can you talk about, if you have it started versus expectations? And anything unusual you are seeing in terms of stocking, destocking, transition, like that.

A: Sure. So just to address the first part of your question in terms of the revenue guidance being aligned with the incremental two hundred million dollars which we had initially called out, this is 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 is driven by a couple of factors. A, timing of hiring some of the colleagues across the organization whose cost will see a little bit more in the second half of the year. So that timing benefits us a bit as well just in general, we have seen, you know, some pretty positive mix as well with, you know, the US being one of the stronger performers and we continue to expect that for the full year as well. Related to the performance in the quarter and the thirty-seven million dollars that we had in the quarter. 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 work through some of the blackout period impacts as well as the destock impacts. Not fully out of the destocking, but we see a nice trend moving forward that we feel confident in the two hundred million dollars that we had guided previously.