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 fourth quarter and fiscal year 2025 results webcast and 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. To withdraw your question, press star 1 again. I would now like to turn the conference over to Glen David, Chief Financial Officer. Please go ahead.

Thank you, Regina. Good day, and welcome to the Fibro Animal Health Corporation earnings call for our fiscal fourth quarter and full year ending June 30th, 2025. My name is Glen David, and I am the Chief Financial Officer of Fibro Animal Health Corporation. I am joined on today's call by Jack Bentime, Fibro's Chairman President and Chief Executive Officer, Donnie Bentime, Director and Executive Vice President of Corporate Strategy, and Larry Miller, Chief Operating Officer. Today, we will cover financial performance for our fourth quarter and full year 2025 and provide financial guidance for our fiscal year ending June 30th, 2026. At the conclusion of our remarks, we will open the line for your questions. I would 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 annual Form 10-K, 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 statement section in our earnings press release. Our remark includes 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 for 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 expense as separately reported in the Consolidated Statement of Operations, including foreign currency losses, gains, net, and income taxes related to pre-tax income adjustments and unusual or non-recurring income tax items. Now, let me introduce our Chairman, President, and Chief Executive Officer, Jack Bentine, to share his opening remarks.

Jack? Thanks, Glenn, and good morning, everyone. I'm pleased to report another strong quarter and a standout finish to fiscal 2025 for Fargo Animal Health, Our results this quarter reflected continued momentum across the business, led once again by animal health, where we saw a 53% sales growth and a 47% increase in adjusted EBITDA. Within animal health, our MFA and other portfolio, bolstered by the ZOAS MFA integration, grew 77% in the fourth quarter. Nutritional specialties and vaccines also delivered solid gains of 11% and 21% respectively. These results underscore the strength of our diversified portfolio and the value we're delivering to customers across geographies and species. Looking at the full year, animal health sales rose 36% with adjusted EBITDA up 53%. MFA's and others grew 54% while nutritional specialties and vaccines increased 9% and 13% respectively. Our legacy animal health business contributed meaningfully with a 7% growth for the year. once again outpacing the growth of the underlying industry. Beyond animal health, we saw continued growth in mineral nutrition and performance products, both in the quarter and for the full year. Consolidated sales were up 39% in the fourth quarter and 27% for the year, while adjusted EBITDA rose 49% and 65% respectively, highlighting the operating leverages we're achieving through disciplined execution. According to guidance of fiscal year 2026, outlook reflects continued confidence and non-trajectory. We're projecting net sales between $1,425,000,000 and $1,475,000,000, adjusted EBITDA of $225 to $235,000,000, and adjusted EPS of $2.52 and $2.70. These targets are grounded in the strength of our portfolio and the momentum we've built. They also reflect the tangible impact of our FibroForward strategy. We've made deliberate investments in scaling operations, strengthening our global footprint, and enhancing our innovation pipeline. While it's a long-term initiative, we're already seeing benefits in how we operate and deliver value. I'll now turn it back to Glenn for more detail on our performance and guidance, and I look forward to your questions at the end.

Thanks, Jack. And starting with our Q4 performance on slide four, consolidated net sales for the quarter ended June 30, 2025, worth $378.7 million, reflecting an increase of $105.5 million, or a 39% increase over the same quarter one year ago. The animal health segment grew 53%, while mineral nutrition grew at 3%, and performance product segment grew by 13%. Gap net income and diluted EPS increased significantly, driven by the successful integration of the new MFA business, increases in demand, improved gross margin due to favorable mix and lower input costs, offset by increased SG&A due to higher employee-related costs. After making our standard adjustments to gap results, including acquisition-related items, foreign currency losses, and certain one-off items, the fourth quarter adjusted EBITDA or 49% versus prior year. Adjusted net income and adjusted dual VPS both increased 39%. Increased gross profit driven by sales growth was partially offset by higher adjusted STNA and higher adjusted interest expense. Moving to the full year. Consolidated net sales for the year ended June 30th, 2025 were $1,296,000,000 reflecting an increase of $278.5 million, or a 27% increase over the prior year. The animal health segment grew 36%, while mineral nutrition grew 4%, and performance products grew by 19%. Definite income and diluted EPS increased significantly driven by the successful integration of the new MFA business. The initial positive impact of FriBrow Forward Initiative and favorable gross profit due to higher product demand in the animal health segment, partially offset with increased SG&A due to higher employer-related costs and higher interest expense. After making our standard adjustments to GAAP results, including acquisition-related items, foreign currency losses, and certain one-off items, full-year adjusted EBITDA increased $72.4 million, or 65%. Adjusted net income and adjusted diluted EPS both significantly increased as well. Increased gross profit driven by sales growth was partially offset by higher adjusted SG&A and higher adjusted interest expense. Moving to segment level financial performance. The animal health segment posted $292.5 million net sales for the quarter, an increase of $101 million, or 53%, versus the same quarter prior year. Within the animal health segment, we reported legacy MSA net sales decline of $4.6 million, or a decline of 4%, due to timing of specific customer orders and strong performance in Q4 last year. The new MSA business contributed a full quarter of sales of $94.5 million, driving the total MSA and other growth to 77%. Nutritional specialties net sales increased $4.6 million, or 11%, mostly due to higher demand for microbial and companion animal products. Vaccine net sales growth of $6.6 million, a healthy 21% increase driven by continued growth of poultry products in Latin America and higher international demand. Animal health adjusted EBITDA was $60.6 million, a 47% increase Driven by the new MFA business, higher gross profit from improved mix in the legacy business, partially offset by higher SG&A. Moving to full-year performance for animal health on slide seven. The animal health segment posted $962.8 million in net sales for the year, an increase of $256.3 million, or 36% versus the prior year. Within the animal health segment, we reported Legacy MFA and other net sales growth of $17.6 million, or 4%, due to demand in both domestic and international regions. The new MFA business contributed $208.2 million in sales in the eight months post-acquisition in fiscal year 2025, driving the total MFA and other growth to 54%. Nutritional specialty net sales increased $14.6 million, or 9%, primarily due to increased domestic demand for dairy and higher sales of microbial and companion animal products. Vaccine sales growth of $16.3 million, a 13% increase, driven by continued growth of poultry products in Latin America and increased domestic demand for swine products. Animal health adjusted EBITDA was $222.3 million, a 53% increase, driven by the new MFA business Higher gross profit from improved mix in the legacy business, partially offset by higher SG&M. Moving on to fourth quarter financial performance from other business segments on slide eight. Starting with mineral nutrition, net sales for the quarter was $64.2 million, an increase of $2.1 million, or 3%, due to an increase in demand for copper and trace minerals. Looking at our performance product segments, Net sales of $22.1 million reflects an increase of $2.5 million, or 13%, primarily because of higher demand for the ingredients used in personal care products. Mineral nutrition and performance products adjusted EBITDA were nearly the same as the prior year. Corporate expenses increased $2.9 million, driven by higher employer-related costs and strategic investments. Moving on to the full year of financial performance for our other business segments. Starting with mineral nutrition, net sales for the year were $253.2 million, an increase of $9.6 million due to increase in demand for copper and trace minerals. Mineral nutrition adjusted to EBITDA was $20.8 million, reflecting a year-on-year increase of $4.4 million, or 27%, driven by increased gross profit. Looking at our performance product cycle, net sales of $80.2 million for the year reflects an increase of $12.6 million, or 19%, as a result of higher demand for the ingredients used in personal care products. Adjusted EBITDA was $10.5 million, an increase of $2.8 million versus the prior year. Corporate expenses increased $11.5 million due to higher incentive-related employee costs and strategic investments. Turning to key capitalization-related metrics on slide 10, we generated $42 million of positive free cash flow for the 12 months ended June 30th, 2025. We generated $80 million of operating cash flow and invested $38 million in capital expenditures. Cash and cash equivalents and short-term investments were $77 million at the end of the year. Our gross leverage ratio was 3.1 times at the end of the fourth quarter based on $725 million of total debt and $231 million of trailing 12 months adjusted EBITDA. Our net leverage ratio was 2.8 times at the end of the fourth quarter based on $648 million of net debt and $231 million of trailing 12 months adjusted EBITDA. Please note that the trailing 12 months of adjusted EBITDA includes 12 months from the Zoetis medicated feed additive portfolio, four months of Zoetis history, and eight months from five-year ownership. In September of 2024, we entered a new swap arrangement for $150 million at a fixed rate of 3.18% plus applicable margin that runs through September 2029. In March of 2025, we entered a new swap arrangement for $275 million at a fixed rate of 3.64% plus the applicable margin that runs through February 23rd. In March 2025, we also entered into a forward starting interest rate column starting in July 2025 for $250 million with an interest rate cap and floor of 4.75% and 1.99% respectively through June 2026. Turning to dividends. Consistent with our history, we paid a quarterly dividend of 12 cents per share, or $4.9 million in aggregate. Now let's turn to slide 11, which lays out our guidance for fiscal year 2026. Please note that this guidance includes a full 12 months of the ZOEBIS Medicaid and Feed Added Portfolio. Also included in this guidance for fiscal year 2026 are benefits related to our 504 income growth initiative that will help drive additional evens and margin growth. One-time costs related to this initiative are also included in our GAAP guidance and primarily consist of one-time consulting fees. This initiative is focused on unlocking additional areas of revenue growth and cost savings, areas such as potential price increases, expanded product offerings, procurement initiatives, and other cost-saving initiatives. Our guidance for fiscal year 2026 is as follows. Net sales of $1,425,000,000 to $1,475,000,000. This represents a growth range of 10% to 14% and a midpoint of approximately 12%. Total adjusted EBITDA of $225 to $235 million. This represents a growth range of 22% to 28% and a midpoint of approximately 25%. adjusted net income of $103 to $110 million. This represents growth of 21% to 29%, with a midpoint of approximately 25%. GAAP net income and EPS assumes constant currency and no gains or losses from FX movements. Also included in our GAAP net income and EPS are one-time costs related to our 5-year forward income growth initiative. In closing, We're excited about the strong performance we saw throughout fiscal year 2025 and the momentum we were carrying into fiscal year 2026. We are confident in the demand for our products around the world and look forward to seeing continued improvement in our business as we move forward in the coming months. With that, Regina, could you please open the line for questions?

We will now begin the question and answer session. To ask a question, simply press star one. Our first question will come from the line of Erin Wright with Morgan Stanley. Please go ahead. Great.

Thanks for taking my question. What does guidance now assume in terms of the underlying organic growth? And can you speak to some of those key headwinds and tailwinds embedded in your guidance assumptions for 2026? Thanks.

sure thanks for the question so in terms of um underlying organic growth there are a number of things that are driving the sales performance as we move into fiscal year 2026. obviously the full 12 months of zoetis versus eight months is a key driver but in terms of the underlying growth for the legacy business we're essentially assuming what we see more in the long term we look at our mfa business sort of growing in that you know flat to low single digit area and then we expect accelerated growth or continued higher levels of growth in both vaccines and nutritional specialty. And both of those businesses performed particularly well in fiscal year 2025. You know, we expect them to continue to perform well in fiscal year 2026. However, you know, particularly our vaccine portfolio grew, you know, over 13% this year. We do expect that to start to stabilize a little bit, but still, you know, provide significant growth as we move into fiscal year 2026.

Okay, great. And then on FibroForward, can you quantify anything for us in terms of your expectations there and in what's ultimately kind of dropping through in terms of cost saves and what some of the key low-hanging fruit areas are for you there? And then also kind of on the cost side, some of the strategic investments that you're making, could you expand a little bit on that? Is it more about global expansion efforts, or is it more focused on innovation? Any of that more one-time in nature, or how should we think about those investments going forward?

Yeah, thanks, Erin. So, I'll address the first part of your question, and then I'll let Donnie address some of the strategic investments that we're making. In terms of Five Row Forward, we saw contributions from Five Row Forward in fiscal year 2025, and that helped generate the significant earnings growth that we've seen on top of a lot of the other areas that we've talked about as well. We expect that to continue as we move into fiscal year 2026. You know, when you look at the guidance range for EBITDA, for example, you know, it's a growth of anywhere from $40 to $50 million. And as we look at that, you know, a good part of that growth is coming from the annualization of the ZOES portfolio. But the remainder comes from contributions from a legacy business, and contributions from FibroForward as well. The other thing is we look at FibroForward, we expect that to peak in fiscal year 2027. So we do expect it to continue to be a driver of growth as we move into fiscal year 2027 as well. I'll let Donnie talk about some of these cheating areas of investment.

Yeah, thanks, Aaron. So FibroForward really is across the entire business. And, you know, on the sales side, it involves, you know, customer-related focus involves CRMs, building up our turn desk, for instance, looking at customers. In other areas, it would cover areas like setting up a global procurement organization. So we've never, previously we had not had a global procurement organization. It was more regional. We've now stood up a global procurement organization. So I think that's giving you a color of, it's a cross-organization. It's not one-time. It's It's embedded in the SG&A numbers that you're looking at. There are areas on the R&D side as well. But again, those are more kind of baked into the business as opposed to one time, you know, increasing our focus across the business, both on, you know, the livestock business as well as companion animals. We see opportunities there still. So it's, you know, I think it's an inflection point for our business. And as Glenn said, We'll see even more in 2027, and we hope to embed it within the business itself and to continue to see growth in the years to follow.

Okay. That's great. Thank you so much. Our next question comes from the line of Ekaterina Kiskova with JP Morgan. Please go ahead.

Thank you so much, and congratulations on the results. The first question is on the Zolotis medicated feed additive business. You have the asset, I think, for several quarters now. Just where are we in terms of the integration process, and is there anything kind of that you guys still working through, anything kind of left for you to do? And if you've kind of been going through the process, are you seeing any areas where you can kind of maybe put additional resources behind the portfolio, both on the manufacturing side and the commercial side? And then second question is just around tariffs. Can you just remind us what you're embedding in terms of the impact this year, and maybe specifically talk about kind of the Brazil side, which is kind of given some of the headlines. Thank you.

Thanks, Katarina. So I'll talk a little bit about the Zoetis integration, and Larry will join in as well, and then, you know, from a tariff perspective. So in terms of the Zoetis integration, we're, you know, we had eight months of results in this year, and, you know, we're another two months in now at this point. And the integration is going very well. So all of the major system implementations are now complete. And we continue to progress in terms of doing the market transitions and authorizations across the globe. We're pretty much operating independently for about 90% of the revenue. At this point in time, there are a number of markets that still need to transition over the next few months, but we expect to be operating fully independently by calendar Q4 So everything is going very well and according to plan and all of the major integration items have been completed or on schedule. I'll let Larry talk to a little bit of additional resources.

Yeah, so again, we're seeing opportunities that we're exposing our current products to new markets and new customers, particularly in areas like Asia, Western Europe, and also this allowed us entry into the U.S. beef cattle segment. That has really helped us bring not only the acquired products, but also the combined basket of the type of solutions that we can bring to our customers. And so we are seeing some geographic as well as some market segment expansion opportunities.

And in terms of tariffs, so our guidance does include tariffs as we know them today. You know, any significant changes, any changes in pharmaceutical tariffs or things of that nature, are not fully embedded in the guidance. That being said, obviously, we have a guidance range, and, you know, we could probably accommodate some of that, but any major shifts have not been accounted for.

Thank you. Our next question comes from the line of Michael Riskin with Bank of America. Please go ahead.

Hey, thanks for taking the question, and congrats on a strong end to Fiscal Year 25. Starting on the 26th guide, maybe just follow up on an earlier question, you did a 208 million um from the zoetis mfa contribution in 2026 so should we assume be assuming about 100 million um in fiscal year 26 of inorganic contribution before it turns organic from those first four months um and additionally if you could say anything um glenn in terms of how much of the ebitda and eps adjusted but then just eps in 2026 is some of that um you know lapping those last four months before it turns organic, just so we can break that out. Thanks.

Sure. No, thanks for the question, Mike. You know, as you said, we did $208 million in fiscal year 25. We initially guided to about $200 million, so we're pleased with the results that we saw in fiscal year 25 for this MFA portfolio. You know, within that $208 million, as we talked about previously, you know, the first few months, there was some destocking. So, you know, if you're going to run right out you know, another four months would probably be a little higher than just half of the 208. You know, when you look at the contribution from Zoetis to the EBITDA, you know, as I mentioned, when you look at our current guidance range, you know, it implies anywhere from, you know, call it $40 to $50 million in incremental EBITDA next year. I would say, you know, at least half of that is coming from the contribution of having the full 12 months of Zoetis versus eight months in fiscal year 2025, and the remainder comes from the growth in the legacy business and the contributions that we're seeing from Fibro forward.

Okay, that's really helpful. And then for follow-up, I want to go back to last year, the animal health business, you know, 7% overall, I'm talking about the legacy business to be clear, 7% total growth, you know, four in MFAs, nine, 13 in nutritional specialty vaccines. I think as you answered earlier to Aaron's question, Glenn, those are really strong numbers. And it sounds like your assumptions for going forward are just a little bit more sort of back to historical trends for MFAs, maybe a little bit more low single digits, maybe a little bit more high single digits, 10% for NS and vaccines. So could you just talk about What worked so well for you in fiscal year 25? Why were you able to execute so much better, um, to hit that, you know, 7% in animal health this past year? Um, and any specific drivers you could call out or just sort of what drove that, uh, outsized performance? Thanks.

Yeah. So I'll start just from a number perspective and then I'll have Larry add in, uh, you know, a little more strategic color. Yeah. I think one of the things to look at from a number of perspective, particularly when you look at the, uh, the MFA growth that we saw this year is when you look at fiscal year 2024. You know, the start to fiscal year 2024 was pretty subdued from an MFA perspective. So the comparators that we had this year helped enable, you know, stronger growth for the overall year. You know, sort of seeing, as you mentioned, a little above what we typically see with the 4%. I think some of that was driven by a weaker comparator than last year. Whereas going into fiscal year 2026, we had strong performance this year from the MFA business, which is why we expect slightly, you know, slower growth as we move into fiscal year 2026.

Yeah, in addition to the MFAs, we saw a very continued strong sales growth in demand for our vaccines really across all of our geographic regions and also growth in our nutrition specialty products. So that's growth in both of those segments has come through some new product introductions in countries, but also penetration.

Okay, that's all real helpful. Thanks a lot, guys.

Our next question will come from the line of Niven T with BNP Paribas. Please go ahead.

Thanks for taking my question. Sorry if I missed it, but can you discuss the expected growth of the legacy MSA business? So what are your expectations of underlying market growth? And are you expecting the legacy MSA to outpace market growth here? And also, have you seen any pull forward ahead of tariffs in the international quarter? Thank you.

You're a little hard to hear, Nirmal, but I'm going to try to interpret what I think the questions were. So in terms of the expectation of the legacy MFA business, as we said, this year we had strong growth, 4%. We generally expect that market being a very mature market to grow, you know, sort of flat to low single digits. And that's the expectation that we have built into our guidance for fiscal year 2026. I think your questions around tariffs, were there any pull forward ahead of tariffs into fiscal year 2025? And, you know, obviously from an inventory perspective, if there are opportunities for us to purchase inventory in advance of any potential tariffs, we took advantage of that where we could. But from our sales perspective, we don't believe that there was any advancement of sales and, you know, the sales that we had for Q4 fiscal year 2025 represent a good reflection of underlying demand.

Thank you.

Thanks, Glenn. And that will conclude our question and answer session. I'll hand the call back to Glenn for any final comments.

Thank you, Regina. And thank you, everyone, for listening on today's call. We really appreciate your time, attention, interest, and support of Fibromyalgia Health. I hope you all have a great day. Thank you.

This concludes today's call. Thank you all for joining. You may now disconnect.