Phibro Animal Health Corporation

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 first quarter 2023 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 then the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. I would now like to turn the conference over to Damian Finio, Chief Financial Officer. Please go ahead.

Thank you, Regina. Good morning, and welcome to the FibroAnimal Health Corporation earnings call for our fiscal first quarter ended September 30, 2022. My name is Damian Finio, and I am the Chief Financial Officer of FibroAnimal 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 first quarter and provide an update on financial guidance for our fiscal year ending June 30th, 2023. 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 first quarter Form 10-Q 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 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 expense is separately reported in the consolidated statements of operations, including foreign currency gains, 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 first quarter financial performance and guidance for our fiscal year 2023. Jack?

Thank you, Davey, and good morning, everyone. Our first quarter net sales reflect year-over-year growth of 8%, driven by 10% sales growth in both our animal health and mineral nutrition segments. underpinned by strong growth in our largest regions, the United States, Latin America, and Canada. Our business is strong, but macroeconomic and operational challenges persist. Supply chain disruptions are less common, but still occur. As we previously discussed, we have experienced COVID-related labor and logistical challenges with a key supplier, which in turn has led to delayed sales and costlier shipping. We were successful in resolving these challenges before quarter end, although not before they had an unfavorable impact on the adjusted EBITDA contributed by our animal segment. In addition, sustained inflation is keeping our input costs high, which presents itself in our financial results as lower margins and higher inventory carrying values. To mitigate the risk these challenges present, we will continue raising prices subject to normal competitive conditions, managing discretionary spending, and carrying inventory required to support sales growth. We are overall bullish on our business and our ability to grow sales with both our current portfolio and the pipeline we are developing. Looking beyond these challenges, we are anticipating further benefits from our strategic investments. Our vaccines and official specialty product lines fuel current growth. With our vaccines, we expect new registrations, which will open new markets for our products. And in the second half of our fiscal year, expect to bring another autonomous vaccine facility online in Brazil. similar to our facility we have today in Omaha, Nebraska. With our nutritional specialty products, we've just received approval from Brazil to manufacture some of the products we have historically produced only at our off-street plants in Florida, which allows us to leverage our production capabilities more fully at both locations. Lastly, on companion animals, we license in a paid product for dogs that's in development. While our companion animal projects continue to progress as planned, At this point, with five active and named opportunities in the pipeline, we have reached our goal of having a meaningful portfolio of companion animal development projects. Finally, we are reiterating our full-year 2023 net sales guidance of $960 billion, with adjusted EBITDA guidance of $113 to $118 million. However, due to rising interest rates and total debt, as well as unfavorable changes in tax regulations, where we rise in guidance on net income, diluted EPS, adjusted net income, diluted EPS, and the adjusted effective tax rate. As I'm sure you're aware, everyone is navigating through a dynamic and complex operating environment, and we're facing an economic period that many suspect will more than likely worsen before it improves. Despite these short-term uncertainties, we, as I said, remain bullish on our business and our ability to drive profitable growth. Now I'll ask Damien to review our financial performances and fiscal year 2023 guidance in more detail before opening the lines for questions. Damien.