Phibro Animal Health Corporation

related costs, higher interest expense, and higher foreign currency losses, partially offset by favorable gross profit as a result of higher product demand in the animal health segment. Income tax expense also decreased by $0.5 million. After making our standard adjustments to GAAP results, third quarter adjusted EBITDA increased $2.3 million. Animal health improved by $2.3 million for 7%. due to gross profit from increased sales partially offset by higher SG&A. Mineral nutrition increased $0.8 million, driven by higher gross profit. Performance products adjusted EBITDA remained relatively the same. Corporate expenses increased $0.7 million, driven by increased employee-related costs. Adjusted net income and adjusted dual DPS both increased 9%. Increased gross profit driven by sales growth, was partially offset by higher adjusted SG&A and higher adjusted interest expense, with a partial benefit from a reduced adjusted provision from income taxes. Moving to segment level financial performance on slide five, we covered the third quarter performance of our largest segment, animal health. The animal health segment posted $181.3 million net sales for the quarter. an increase of $16.9 million or 10% versus the same quarter prior year. Within the animal health segment, we reported MFA and other net sales growth of $15 million or 16% due to demand in both domestic and international regions. Vaccine net sales growth of $6.7 million, a healthy 26% increase during byproduct launches in Latin America, plus an increase in domestic demand. Nutritional specialties net sales declined $4.8 million, or 11%, mostly due to lower demand for microbial and dairy products. Animal health adjusted EBITDA was $36.5 million, a 7% increase due to higher gross profit from increased sales, partially offset by higher SG&A. Moving on to the third quarter financial performance for our other business segment on slide six. Starting with mineral nutrition, net sales for the quarter were $64.2 million, an increase of $1.3 million due to increased sales volume, partially offset by decreased average selling price. Mineral nutrition adjusted EBITDA was $4.7 million, reflecting a year-on-year increase of $0.8 million driven by higher gross profit. Looking at our performance product segment, net sales of $17.7 million for the three months ended March 31, 2024, reflected a decrease of $0.7 million, or 4%, driven by decreased demand for personal care product ingredients and industrial chemicals. Adjusted EBITDA was $2.4 million, and declined 2% versus the same quarter prior year. Corporate expenses increased $0.7 million, driven by increased employee-related costs. Now turning to key capitalization-related metrics on slide seven. We saw $40 million of positive free cash flow for the 12 months ended March 31st, 2024. We generated $79 million of operating cash flow and invested $39 million in capital expenditures. Cash and cash equivalents and short-term investments were $99 million at the end of the quarter. Our gross leverage ratio was 4.4 times at the end of the third quarter based on $487 million of total debt and $110 million of trailing 12-month adjusted EBITDA. Our net leverage ratio was 3.5 times at the end of the third quarter, based on $388 million total debt and $110 million of trailing 12-month adjusted EBITDA. Turning to dividends, consistent with our history, we paid a quarterly dividend of 12 cents per share, or $4.9 million in aggregate. As a reminder, $300 million of our debt is at a fixed rate of 0.61% plus the applicable margin. The remaining $187 million of total debt is subject to variable interest rates, although offset somewhat by interest income earned on short-term investments. Let's turn to slide 8, which lays out our updated guidance for the fiscal year ending, June 30, 2024. We have affirmed our guidance for net sales, adjusted EBITDA, and adjusted diluted EPS. We have updated our guidance for GAAP net income and GAAP diluted EPS. The updated guidance includes one-time costs related to the integration of Zoetis products. This is reflected in our GAAP guidance, but are excluded from adjusted measures. Our affirmed or updated fiscal year 2024 financial guidance is shown in the table. Comparisons are to the prior fiscal year, and year-over-year percentages are calculated using the midpoint of the guidance range. Net sales of $980 million to $1.02 billion with growth of 2%. Net income of $7 to $12 million. Diluted EPS of 17 to 30 cents. Adjusted EBITDA of $106 to $112 million, a decline of 3%. Adjusted net income of $42 to $47 million, a decline of 9%. Adjusted diluted EPS. of $1.04 to $1.16, a decline of 9%, and our adjusted effective tax rate range of 28% to 30%. In closing, we are optimistic as we enter the final quarter of our fiscal year. We are confident in the demand of our products around the world and look forward to seeing continued improvement in our business as we move forward. And we are very excited about the pending Zoetis MFA acquisition. With that, Regina, could you please open the line for questions?

At this time, I'd like to remind everyone, in order to ask a question, simply press star 1 on your telephone keypad. Our first question will come from the line of Erin Wright with Morgan Stanley. Please go ahead.

Great. Thanks. So on the MSA side of the business, what drove some of the strength, I guess, even on the tough comp? And does this continue? And were there any kind of one-time dynamics we should be thinking about and how do we think about kind of the normalized underlying growth rate for the MFA business now? And then once you fold in Zoetis, their MFA portfolio, kind of what does the underlying growth look like for that MFA other segment? Thanks.