Phibro Animal Health Corporation

Good morning, my name is Jeannie and I will be your conference operator today. At this time, I would like to welcome everyone to the FIBRO Animal Health Corporation Q2 fiscal year 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 followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star 1. Thank you. Damian Finio, Chief Financial Officer, you may begin your conference.

Thank you, Jeannie. Good morning, and welcome to the FibroAnimal Health Corporation earnings call for our fiscal year 2023. Second quarter ended December 31, 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 second quarter and share our current thinking on financial guidance for the 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, www.pahc.com. Also, on the investor section of our website, you will find links to the earnings press release and second quarter Form 10-Q filed with the SEC yesterday, as well as the transcript and slides discussed and presented on this morning's 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 disclosure notice marked forward-looking statements 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 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, other income expenses 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 perspective on FIBRA's second quarter financial performance and guidance for our fiscal year 2023. Jack?

Thank you, Damian, and good morning, everyone. Our top line continues to grow. Second quarter net sales of $245 million reflects growth of 5%, over the same quarter last year. This improvement was driven by 9% and 27 sales growth of our animal health and performance product segments, respectively, offset by an 8% decline in mineral nutrition. In our core business segment, animal health, we reported our seventh consecutive quarter of year-over-year sales growth in each of our three major product categories. Our calendar year basis This translates into sales growth of more than 20% in 2022 over 2020, which, relative to some industry reports, puts us in the top tier of animal health companies. Our mineral nutrition business was down year over year, primarily reflecting the lower value of the underlying commodity minerals, such as copper, that drives this business. Our mineral nutrition business is also the one area where we have exposed it to the U.S. feedlot industry, where we have seen fewer cattle placements as compared to the same quarter last year. In terms of sales by region, we realized 12% growth in Latin America and Canada and 7% growth here in the United States, while markets in Europe, the Middle East, Africa, and Asia Pacific declined due primarily to the lingering effect of COVID-19 and persistent economic challenges. Overall, we posted a strong financial performance for the first half of our fiscal year, with an even stronger projected second half. I also want to share that we added companion animal experience to our board of directors. On Monday, we announced that Alejandro Bernal, the newly appointed president and CEO of PetDX, joined our board. Alejandro is a former executive at Mars Veterinary Health and worked in senior positions at Soetis. We welcome his insights and believe they will be particularly impactful with respect to our companion animal businesses. which we seek to meaningfully grow over the coming years as we continue to focus on progressing our pipeline of projects in development and on growing Regenza. Looking beyond FIRO, the global economy is showing signs of improvement, but there are still challenges. The improving trend of the consumer price index is encouraging, but of course for margins to improve, input costs will need to decline, and we will need the folks to work through higher price inventory on hand We are focused on maintaining continuity of supply, which has resulted in us adding about one month of inventory in order to mitigate the risk of supply chain disruptions impacting our ability to get products to our customers on time. In the months to come, as we rebuild our confidence in the supply chain, we will look to bring inventory levels down, which in turn should help to improve our operating cash flows. And we continue to focus on raising prices where market conditions allow. I remain bullish on our business and our ability to grow sales, giving the strong demand for our current portfolio of products and the projected demand for the pipeline of future nutritional specialty, vaccine, and companion animal products we have in development. Finally, we are reiterating our full fiscal year 2023 net sales guidance of $960 million to $1 billion and adjusted EBITDA guidance of $113 million to $118 million. However, to reflect the unfavorable impact of the tax-adjusted non-operational environmental remediation costs charged to the P&M in the second quarter, we lowered guidance for GAAP, net income, and GAAP diluted EPS. Damian will explain these charges in more detail, but I also encourage you to read our update disclosures included in our latest Form 10Q. Overall, I am pleased with our second quarter and first half performance. Our full-year guidance implies an even stronger second half of fiscal year 2023, but these projections are achievable and consistent with how our financial performance played out last fiscal year. Like you, we are hopeful that the global economy will continue to improve, but irrespective of the global backdrop, I remain bullish on Fibro and our opportunities to drive growth. Now, I'll hand it over to David to review our second quarter financial performance and fiscal year 2023 guidance in more detail, before opening the lines for questions. Amy.