Phibro Animal Health Corporation

Good morning. My name is Chantal, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Fibro Animal Health Corporation second quarter 2022 conference call. All lines have been placed on mute to prevent any background noise. 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 followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. Damian Finio, CFO, you may begin your conference.

Thank you, Chantel. Good morning and welcome to the Fibro Animal Health Corporation earnings call for the quarter ended December 31st, 2021, which is the second quarter of our fiscal year 2022. My name is Damian Finio and I'm the Chief Financial Officer of Fibro Animal Health Corporation. I'm joined on this call today by Jack Benheim, Fibro's Chairman, President, and Chief Executive Officer. and Daniel Benheim, Director and Executive Vice President of Corporate Strategy. On today's call, we'll cover financial performance for our second quarter, as well as revised financial guidance for our fiscal year ending June 30, 2022. At the conclusion of our opening remarks, we will open the lines for questions. I'd 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 the second quarter Form 10Q filed with the SEC yesterday, as well as the transcript and slides discussed and presented on this call. 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 statements 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 for U.S. GAAP. I refer you to the non-GAAP financial information section in our earnings press release for discussion of these measures. 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 present our results on a GAAP 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 restructuring costs, other income and expenses as separately reported in the consolidated statements of operations, including foreign currency gains or losses net, and lastly, income tax effects related to pre-tax adjustments and unusual or non-recurring income tax items. Now, let me introduce our chairman, president, and chief executive officer, Jack Benheim, to share his opening remarks, which will include his perspective on Fiverr's second quarter financial performance and revised financial guidance for our fiscal year 2022. Jack?

Thank you, Damien, and good morning, everyone. We had a strong second quarter. In fact, we posted $233 million of net sales, the highest single quarter of sales in the company's history. This was an 8% increase over the last quarter and a 13% increase over the same quarter prior year. As we discussed on our last call, in light of the rising costs to do business over the course of the last few months, we have taken stronger steps to raise prices and paths to incremental freight costs. This is reflected in our performance this last quarter. Where in our core animal health segment, we saw our margin improve each month over the previous month, and we expect it to continue to play out positively over the balance of our fiscal year. Notwithstanding our pricing actions, we still continue strong demand for our products globally, and we expect this trend to also continue for the balance of this fiscal year. Our larger segment, Animal Health, posted sales growth of 11% over the same quarter prior year, driven by continued strong growth in our vaccine product lines, but also 12% growth in the MFAs and others. And middle nutrition seems to perform well, posting a net sales increase over the prior quarter of 23%. Strong top-line sales drove adjusted EBITDA of $29.1 million, reflecting a 2% improvement over the same quarter period last year. More importantly, this equates to a second quarter of adjusted EBITDA margin of 12.5%, which is at 200 basis point improvement versus last quarter. And just 40 basis points shy of our fiscal year 2021 adjusted EBITDA margin of 12.9%. Given our first half performance and outlook for the remaining of the fiscal year, we are raising full year net sales guidance for a second time. We're now projecting net sales for the year of 890 to $920 million, We are maintaining our adjusted EBITDA guidance for $110 to $114 million and raising our guidance on adjusted net income and adjusted diluted EPS by about 5%, driven by the favorable change in our projected adjusted effective tax rate. Lastly, I've said it before and unfortunately need to say it again, COVID-19 variants remain a risk. The Omicron variant has created sketching challenges with a higher than normal number of employees having to quarantine. We seem to be feeling the worst of it, though we remain optimistic the FIBR will continue to navigate the situation successfully as we've done in the past. Now let me ask David to review our financial results, and we'll come back to you with questions.