Phibro Animal Health Corporation

At this time, I would like to welcome everyone to the Fibro Animal Health Corporation FY 2024 earnings 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'd like to withdraw your question, press star one again. I would now like to turn the conference over to Dick Johnson, Chief Financial Officer. Please go ahead.

Well, thank you, Regina, and good morning to everyone, and welcome to Fibro's earnings call for our fiscal first quarter ended September 30th. My name is Dick Johnson. I'm the Chief Financial Officer of Fibro Animal Health Corporation. I'm joined today on the call by Jack Bentheim, Fibro's Chairman, President, and Chief Executive Officer, and also by Daniel Bentheim, Director and Executive Vice President of Corporate Strategies. Today we'll cover financial performance for our first quarter and provide an update on our financial guidance for our full fiscal year ending June 2024. At the conclusion of our opening remarks, we'll open the lines for your questions. I'd like to remind you that we're providing a simultaneous webcast of this call on our website, pahc.com, and also on the investor section of our website, Later today, you will find copies of the earnings press release and the first quarter form 10Q filed with the SEC yesterday, as well as the slides and transcripts from our presentation this morning. Turning to slide two, just the standard disclaimers. 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 statement 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 US 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, Other income or expenses separately reported in the Consolidated Statement of Operations, primarily foreign currency gains and losses, and the income tax effects related to any of those pre-tax adjustments, plus any unusual or non-recurring income tax items. Now, let me introduce our Chairman, President, and Chief Executive Officer, Jack Bentine. to share his perspective on Fibro's first quarter financial performance and the outlook for our fiscal year 2024. Jeff? Thank you, Dick. Good morning, everyone, and thank you for joining us today.

Our first quarter had some strong positives, despite the overall disappointing results. Our core animal health business grew sales at a healthy 4%, and I was especially pleased to see that some of the measures we have taken The counteract margin erosion helped animal health even grow at an even faster rate of 6%. The short growth across all three product categories in animal health led by 14% growth in vaccines. We are seeing increased uptake of our vaccines across multiple regions, but especially in South America where we have launched several new commercial vaccines, as well as opened a new attached vaccine facility in Brazil. We are continuing to invest behind our successes. We're looking to introduce additional vaccines to the Americas and have just recorded our first sales of a new line of nutritional specialty products for U.S. poultry producers. We see vaccines and nutritional specialties as double-digit annual opportunities for the short and medium term, and we are making the necessary investments to enable us to achieve our targets. We are also continuing to support our other initiatives, such as companion animals. But considering the challenging macro environment, we are talking ways to curtail or delay some of the spend. As mentioned, we are in a challenging macro environment. A mineral nutritional business has seen revenue drop and margins drop even more, as we have recently been on the wrong side of commodity price movements and some inventory positions. While we anticipate our margins returning to some historical levels as we progress through the fiscal year, volumes could take longer to recover. Similarly, we see weaknesses in some of the other end markets, including dairy in the U.S. and China, and our feedlot businesses in Latin America. Finally, the horrific terrorist attacks in Israel a month ago and the subsequent war have increased the cost relating to our operations in Israel. We have confidence in our ability to meet our supply commitments to customers. For all these reasons, we have decided to lower our guidance for the remainder of this fiscal year. as Dick will go into in greater detail at the end of his presentation. Before I hand it back to Dick, I want to touch on the FDA's most recent action relating to Megadox. The FDA has been targeting Megadox for close to a decade. Megadox is a very important product for swine producers to help keep baby piglets healthy during the critical early period of their lives. It's been safely sold in the United States for over 50 years and continues to be available and to be used. We will continue to support this product and defend our customers' ability to use it. We are extremely confident in its safety and efficacy.