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 third quarter 2022 conference call. As a reminder, today's conference call is being recorded. All lines have been placed on mute to prevent any background noise. After your speech remarks, there'll be a question and answer session. If you'd 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. Financial Officer, you may begin your conference.

Thank you, Chantal. Good morning and welcome to the Fibro Animal Health Corporation earnings call for our fiscal third quarter ended March 31st, 2022. My name is Damian Finio and I am the Chief Financial Officer of Fibro Animal Health Corporation. I'm joined on today's call by Jack Benheim, Fibro's Chairman, President and Chief Executive Officer, and Daniel Benheim, Director and Executive Vice President of Corporate Strategy. Today, we will cover financial performance for our third quarter, as well as revised financial guidance for our fiscal year ending June 30th, 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 third quarter Form 10Q filed with the SEC yesterday, as well as the transcripts 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 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. 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 expense are separately reported in the consolidated statements of operations, including foreign currency gains and 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 Fibro's third quarter financial performance and revised financial guidance for our fiscal year 2022.

Jack? Thank you, Damian, and good morning, everyone. Our fiscal year-to-date sales reflect year-over-year growth of 12%, driven by double-digit sales growth across all segments. Consolidated sales growth was given by a 10% improvement in our core animal health segment. We also posted sales growth of 16% and 12% in our mineral nutrition and performance product segments, respectively. Sales in these two segments correlated with the underlying cost of materials such as copper, and we've seen the benefits of higher prices in our top line. Third quarter sales grew 13% over the same quarter one year ago, driven by growth across all segments as well. During the quarter, we also acquired a business that provides product and services chiefly to the sugar-based ethanol industry in Brazil. We see this acquisition a chance to replicate the success we have had in the U.S. industry in providing products and services for both the production of ethanol and its co-products, many of which are consumed by livestock. Perform information giving effect to the acquisition is not provided because the results are not material to the consolidated financial statements, but the acquisition report is part of our animal health MFA and other product category. While our business is strong, macroeconomic headwinds persist. The Russian conflict with Ukraine and lingering impact with COVID-19 in some markets where we compete, specifically Asia Pacific, are driving higher than anticipated inflation. It could result in broader economic impacts and security concerns, which could adversely affect our business. Since the conference began, our company employees have provided support to Ukraine in the form of monetary donations, free product, and humanitarian services. We sell products indirectly to a European distributor in Russia. These sales represent less than 1% of our annual consolidated sales. Like most of our industry, our limited intent for the Russian market is to continue providing medicines and vaccines and on-the-ground related regulatory and technical support to help existing customers combat disease challenges in the production of food animals on their farms. We have no production or direct distribution operations and no planned investments in Russia. On a year-to-year basis, net sales in our Europe, Middle East, and African regions represent 13% of consolidated net sales. Obviously, COVID is still a wild card in certain regions, such as Asia Pacific. On a year-to-year basis, net sales in our Asia Pacific region represent 7% of consolidated net sales. Our top-line growth includes the fact that we have taken price increases to combat historic levels of inflation. These price increases and freight surcharges partially dampened the impact of cost increases. But our third-quarter bottom line also fell short of our projections due to COVID-related challenges with the key supplier that led to delayed sales and cost for your shipments. as well as the lost portion of our indirect sales to Russia due to the conflict. The combined impact of these factors explains why we did not see the benefits of better pricing dropping to the bottom line. The supplier issue is getting behind us while the Russian challenge continues. So to drive profitable growth, we will continue to take aggressive actions to raise prices where normal competitive conditions allow. For these reasons, we are expecting improvement in our fiscal fourth quarter. We raised sales guidance and retained previous communicated just-evened guidance for the full year. Given year-to-date performance, revised full-year sales guidance is $930 million to $950 million, which is a projected year-over-year increase of 12% to 14%. However, given the aforementioned challenges, uncertainty persists, and therefore we are maintaining our fully adjusted EBITDA guidance, $110 to $114 million. Overall, our industry is dealing with a challenging economic environment, and I'm very proud of what our teams here at FIFO have accomplished to help us maintain our competitiveness. With that, let me hand it over to Damien to review our financial performance in more detail before opening the lines for your questions. Damien.