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Phibro Animal Health Corporation Reports Second Quarter Results, Updates Financial Guidance

1. Phibro's Q2 net sales rose 24% to $309.3 million. 2. Adjusted EBITDA increased by 64%, reaching $48.2 million. 3. Acquisition of Zoetis MFA portfolio drove significant revenue growth. 4. Updated 2025 guidance projects 25% sales growth at $1.25B to $1.30B. 5. Net income of $3.2 million, up from $1.3 million a year prior.

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FAQ

Why Very Bullish?

The strong revenue increase and favorable guidance should boost investor confidence, similar to previous reports where significant earnings growth drove stock price gains.

How important is it?

The advancements in sales, integration of MFA products, and positive outlook are critical for Phibro's market positioning and attractiveness to investors.

Why Long Term?

The sustained revenue growth and strategic investments suggest ongoing improvements, akin to past patterns leading to a upward trajectory in stock performance.

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ZOETVIVOBIDU
TEANECK, N.J.--(BUSINESS WIRE)--Phibro Animal Health Corporation (Nasdaq: PAHC) (“Phibro” or the “Company”) today announced financial results for its second quarter ended December 31, 2024, and its updated financial guidance for the year ending June 30, 2025. Highlights for the three months ended December 31, 2024 (compared to the three months ended December 31, 2023) Net sales of $309.3 million, an increase of $59.3 million, or 24% Net income of $3.2 million, an increase of $1.9 million Diluted earnings per share of $0.08, an increase of $0.05 Adjusted EBITDA of $48.2 million, an increase of $18.7 million, or 64% Adjusted net income of $21.9 million, an increase of $8.5 million, or 63% Adjusted diluted EPS of $0.54, an increase of $0.21, or 64% We have updated our fiscal year 2025 guidance, which includes: Net sales of $1.25 billion to $1.30 billion Adjusted EBITDA of $172 million to $180 million COMMENTARY “Phibro has achieved exceptional results this quarter, fueled by robust demand in our Animal Health segment and the successful integration of the Zoetis Medicated Feed Additive (MFA) portfolio,” stated Jack Bendheim, President and Chief Executive Officer. “Our impressive 24% revenue growth and notable enhancement in profitability underscore the strength of our diverse product offerings, our commitment to operational excellence across all segments, and our dedication to delivering essential solutions to customers worldwide.” Jack added, “The momentum we've established positions us favorably for the remainder of fiscal 2025 and beyond. We are optimistic about our capability to foster sustainable growth and create value through our Phibro Forward initiative, strategic investments in innovation, targeted portfolio expansion, and disciplined financial management. With our updated financial guidance, we reaffirm our commitment to strong performance and enhancing shareholder value. We are excited to include the new MFA portfolio in our guidance, which reflects our confidence in a seamless integration and strong performance alongside improving profitability in our legacy business.” QUARTERLY RESULTS Net sales Net sales of $309.3 million for the three months ended December 31, 2024, increased $59.3 million, or 24%, as compared to the three months ended December 31, 2023. Animal Health increased $56.3 million, while Mineral Nutrition and Performance Products increased $1.9 million and $1.1 million, respectively. Animal Health Net sales of $229.4 million for the three months ended December 31, 2024, increased $56.3 million, or 33%. Net sales of MFAs and other increased $48.4 million, or 47%, due to incremental revenues of $36.7 million from sales of products from the Zoetis MFA portfolio acquired on October 31, 2024 and increased demand for our MFA products in international regions and for our processing aids used in the ethanol fermentation industry. Net sales of nutritional specialty products increased $4.5 million, or 11%, primarily due to increased domestic dairy demand and higher sales of microbial and companion animal products. Net sales of vaccines increased $3.4 million, or 12%, primarily due to continued growth of poultry products in Latin America, plus an increase in international demand. Mineral Nutrition Net sales of $63.3 million for the three months ended December 31, 2024, increased $1.9 million, or 3%, due to an increase in demand for copper and trace minerals. Performance Products Net sales of $16.6 million for the three months ended December 31, 2024, increased $1.1 million, or 7%, as a result of higher demand for the ingredients used in personal care products. Gross profit Gross profit of $101.9 million for the three months ended December 31, 2024, increased $23.3 million, or 30%, as compared to the three months ended December 31, 2023. Gross margin increased 140 basis points to 32.9% of net sales for the three months ended December 31, 2024, as compared to 31.5% for the three months ended December 31, 2023. The comparison to the prior year includes a net increase of $1.3 million for acquisition-related cost of goods sold related to purchase accounting adjustments for acquisitions. Excluding this purchase accounting item, gross profit increased $24.6 million, or 31%, and increased 200 basis points to 33.5% of net sales due to increased sales, an increase in average selling prices, and the favorable impact of foreign currency exchange rates. Animal Health gross profit increased $20.8 million, primarily driven by higher sales volume, higher average selling prices, and the favorable impact of foreign currency exchange rates. Mineral Nutrition gross profit increased $2.5 million, driven by higher average selling prices. Performance Products gross profit increased by $1.3 million, driven by increased sales volumes. Selling, general and administrative expenses Selling, general and administrative expenses (“SG&A”) of $76.3 million for the three months ended December 31, 2024, increased $13.4 million, or 21%, as compared to the three months ended December 31, 2023. SG&A for the three months ended December 31, 2024, included $8.8 million for acquisition-related costs, $1.7 million of costs associated with Phibro Forward income growth initiatives, and $0.2 million of stock-based compensation expense, partially offset by $1.3 million related to an insurance settlement gain. SG&A for the three months ended December 31, 2023 included a $4.2 million cost for an unfavorable litigation result related to Brazil employment taxes paid from January 2013 through December 2015, an additional $0.2 million true-up to the pension settlement cost and $0.1 million of stock-based compensation expense. Excluding these items, SG&A increased $8.5 million. Animal Health SG&A increased $4.9 million, primarily due to an increase in employee-related costs due in part to the incremental headcount added as part of the Acquisition. Mineral Nutrition and Performance Products SG&A was comparable to the prior year. Corporate costs increased by $3.4 million, due to an increase in employee-related costs and professional fees. Interest expense, net Interest expense, net of $9.0 million for the three months ended December 31, 2024, increased by $4.3 million, as compared to the three months ended December 31, 2023, due to the higher debt levels associated with the financing of the Acquisition. Foreign currency losses, net Foreign currency losses, net for the three months ended December 31, 2024, were $11.7 million, as compared to $7.5 million of net losses for the three months ended December 31, 2023. Current period losses were driven by fluctuations in certain currencies related to the U.S. dollar, most prominently, in the Brazil Real. Prior year period losses were driven in large part by a major currency devaluation in Argentina. Provision for income taxes The provision for income taxes was $1.7 million and $2.3 million for the three months ended December 31, 2024 and 2023, respectively. The effective income tax rates were 34.2% and 64.3% for the three months ended December 31, 2024 and 2023, respectively. The effective income tax rate for the three months ended December 31, 2024 decreased primarily due to higher pretax earnings and higher forecasted annual pretax earnings than the three months ended December 31, 2023, which reduced the impact of certain items such as Global Intangible Low-Taxed Income. The provision for income taxes for the three months ended December 31, 2024 included (i) exchange rate losses, (ii) changes in uncertain tax positions related to prior years and (iii) acquisition-related costs. The provision for income taxes for the three months ended December 31, 2023, included various items including (i) exchange rate losses, (ii) the release of certain valuation allowances and (iii) changes in uncertain tax positions related to prior years. Excluding the impact of these items, the effective income tax rate was 26.4% and 26.7% for the three months ended December 31, 2024 and 2023, respectively. Net income Net income of $3.2 million for the three months ended December 31, 2024, increased $1.9 million, as compared to net income of $1.3 million for the three months ended December 31, 2023. Operating income increased $9.8 million, driven by favorable gross profit, partially offset by higher SG&A. Gross profit increased primarily as a result of higher sales in the Animal Health segment, driven in part by incremental revenues associated with sales from the Zoetis MFA portfolio acquired on October 31, 2024. SG&A increased by $13.4 million, which included $8.8 million for acquisition-related costs and $1.7 million of costs associated with Phibro Forward income growth initiatives. Interest expense, net increased $4.3 million due to higher debt levels, due in part to the financing of the Acquisition. Foreign currency losses, net increased by $4.2 million. Income tax expense decreased by $0.6 million. Adjusted EBITDA Adjusted EBITDA of $48.2 million for the three months ended December 31, 2024, increased $18.7 million, or 64%, as compared to the three months ended December 31, 2023. Animal Health Adjusted EBITDA increased $18.9 million due to higher sales and gross profit, partially offset by increased SG&A. Mineral Nutrition Adjusted EBITDA increased $2.2 million, due to higher sales and gross profit. Performance Products Adjusted EBITDA increased $1.1 million due to higher sales and gross profit. Corporate expenses increased $3.4 million due to higher employee-related costs. Adjusted provision for income taxes The adjusted effective income tax rates for the three months ended December 31, 2024 and 2023, were 26.4% and 26.7%, respectively. Adjusted net income Adjusted net income of $21.9 million for the three months ended December 31, 2024 increased $8.5 million as compared to the prior year period. The increase was driven by higher gross profit, partially offset by higher SG&A expenses and higher interest expense. The higher gross profit resulted from higher sales. SG&A expenses increased due to higher employee-related costs. Interest expense increased due to higher debt levels, due in part to the financing of the Acquisition. Adjusted diluted earnings per share Adjusted diluted earnings per share was $0.54 for the quarter, an increase of $0.21, as compared to the adjusted diluted earnings per share in the prior year period. BALANCE SHEET AND CASH FLOWS Free cash flow was $15.3 million for the twelve months ended December 31, 2024 (Free cash flow equals cash flow from operating activities less capital expenditures). 3.1x(1) gross leverage ratio as of December 31, 2024 $760.3 million total debt $241.9 million(1) Adjusted EBITDA for the twelve months ended December 31, 2024 Cash and short-term investments of $67.1 million as of December 31, 2024 FISCAL YEAR 2025 FINANCIAL GUIDANCE Our updated fiscal year 2025 financial guidance is as shown below. Year-over-year percentages are calculated using the midpoint of the guidance ranges. Net sales of $1.25 billion to $1.30 billion, 25% growth Net income of $39 million to $45 million Diluted EPS of $0.96 to $1.11 Adjusted EBITDA of $172 million to $180 million, 58% growth Adjusted net income of $76 million to $82 million, 63% growth Adjusted diluted EPS of $1.87 to $2.01, 63% growth Adjusted effective tax rate of ~25% Guidance for GAAP measures assumes no additional foreign exchange (gains) losses for the year ending June 30, 2025. (1) – Includes Adjusted EBITDA for the ten months ended October 31, 2024 from the Zoetis Medicated Feed Additive portfolio, certain water-soluble products and related assets from Zoetis, Inc acquired on October 31, 2024. WEBCAST & CONFERENCE CALL DETAILS Phibro Animal Health Corporation will host a webcast and conference call during which the Company will review its financial results and respond to questions. Date: Thursday, February 6, 2025 Time: 9:00 AM Eastern Location: https://investors.pahc.com U.S. Toll-Free: +1 (888) 330-2022 International Toll: +1 (365) 977-0051 Conference ID: 3927884 NOTE: To join this conference call, all participants will be required to provide the Conference ID number. A replay of the webcast will be archived and made available on Phibro’s website. DISCLOSURE NOTICES Forward-Looking Statements: This communication contains forward-looking statements that are subject to risks and uncertainties, including with respect to any future debt and leverage levels. All statements other than statements of historical or current fact included in this report are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “outlook,” “potential,” “project,” “projection,” “plan,” “intend,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. These statements are not guarantees of future performance or actions. If one or more of these risks or uncertainties materialize, or if management’s underlying assumptions prove to be incorrect, actual results may differ materially from those contemplated by a forward-looking statement. Forward-looking statements speak only as of the date on which they are made. Phibro expressly disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. A further list and description of risks, uncertainties and other matters can be found in our Quarterly Report on Form 10-Q and Annual Report on Form 10-K, including in the sections thereof captioned “Forward-Looking Statements” and “Risk Factors.” These filings and subsequent filings are available online at www.sec.gov, www.pahc.com, or on request from Phibro. Non-GAAP Financial Information: We use non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, adjusted diluted EPS and free cash flow to assess and analyze our operational results and trends and to make financial and operational decisions. Management uses adjusted EBITDA as its primary operating measure. We report adjusted net income to portray the results of our operations prior to considering certain income statement elements. We believe these non-GAAP financial measures are also useful to investors because they provide greater transparency regarding our operating performance. The non-GAAP financial measures included in this communication should not be considered alternatives to measurements required by GAAP, such as net income, operating income and earnings per share, and should not be considered measures of liquidity. These non-GAAP financial measures may not be comparable with non-GAAP information provided by other companies. Reconciliation of non-GAAP financial measures and GAAP financial measures are included in the tables accompanying this communication and/or our Quarterly Report on Form 10-Q and Annual Report on Form 10-K. We are not providing a reconciliation of forward-looking guidance of non-GAAP financial measures to the most directly comparable GAAP financial measures because of the uncertainty regarding, and the potential variability of, certain of the items required for a reconciliation; accordingly, a reconciliation of the non-GAAP financial measure to the corresponding GAAP financial measure is not available without unreasonable effort. These items are uncertain, depend on various factors and may have a material impact on our future GAAP results. Internet Posting of Information: We routinely post information that may be important to investors in the “Investors” section of our website at www.pahc.com. We encourage investors and potential investors to consult our website regularly for important information about us. Phibro Animal Health Corporation Consolidated Results of Operations Three Months Six Months For the Periods Ended December 31 2024 2023 Change 2024 2023 Change (in millions, except per share amounts and percentages) Net sales $ 309.3 $ 249.9 $ 59.3 24 % $ 569.7 $ 481.3 $ 88.4 18 % Cost of goods sold 207.4 171.3 36.1 21 % 384.3 335.0 49.4 15 % Gross profit 101.9 78.6 23.3 30 % 185.4 146.3 39.0 27 % Selling, general and administrative expenses 76.3 62.9 13.4 21 % 142.1 131.4 10.8 8 % Operating income 25.5 15.7 9.8 63 % 43.2 15.0 28.3 * Interest expense, net 9.0 4.7 4.3 93 % 16.6 9.2 7.4 80 % Foreign currency losses, net 11.7 7.5 4.2 56 % 12.1 14.2 (2.0) (14) % Income (loss) before income taxes 4.8 3.6 1.3 36 % 14.5 (8.4) 22.9 * Provision (benefit) for income taxes 1.7 2.3 (0.6) (28) % 4.3 (1.7) 6.0 * Net income (loss) $ 3.2 $ 1.3 $ 1.9 * $ 10.2 $ (6.7) $ 16.9 * Net income (loss) per share basic $ 0.08 $ 0.03 $ 0.05 * $ 0.25 $ (0.17) $ 0.42 * diluted $ 0.08 $ 0.03 $ 0.05 * $ 0.25 $ (0.17) $ 0.42 * Weighted average common shares outstanding basic 40.5 40.5 40.5 40.5 diluted 40.7 40.5 40.6 40.5 Ratio to net sales Gross profit 32.9 % 31.5 % 32.5 % 30.4 % Selling, general and administrative expenses 24.7 % 25.2 % 24.9 % 27.3 % Operating income 8.3 % 6.3 % 7.6 % 3.1 % Income (loss) before income taxes 1.6 % 1.4 % 2.5 % (1.7) % Net income (loss) 1.0 % 0.5 % 1.8 % (1.4) % Effective tax rate 34.2 % 64.3 % 29.7 % 19.9 %   Amounts and percentages may reflect rounding adjustments. * Calculation not meaningful Phibro Animal Health Corporation Segment Net Sales and Adjusted EBITDA Three Months Six Months For the Periods Ended December 31 2024 2023 Change 2024 2023 Change (in millions, except percentages) Net Sales MFAs and other $ 150.3 $ 101.9 $ 48.4 47 % $ 258.2 $ 196.0 $ 62.1 32 % Nutritional specialties 45.9 41.4 4.5 11 % 88.6 81.6 6.9 8 % Vaccines 33.2 29.7 3.4 12 % 65.2 55.9 9.3 17 % Animal Health 229.4 173.1 56.3 33 % 411.9 333.6 78.3 23 % Mineral Nutrition 63.3 61.3 1.9 3 % 122.3 117.4 4.9 4 % Performance Products 16.6 15.5 1.1 7 % 35.4 30.3 5.2 17 % Total $ 309.3 $ 249.9 $ 59.3 24 % $ 569.7 $ 481.3 $ 88.4 18 % Adjusted EBITDA Animal Health $ 58.2 $ 39.3 $ 18.9 48 % $ 98.6 $ 67.8 $ 30.8 45 % Mineral Nutrition 5.7 3.5 2.2 63 % 9.5 6.4 3.1 48 % Performance Products 1.9 0.8 1.1 * 4.2 2.2 2.0 88 % Corporate (17.6) (14.2) (3.4) (24) % (33.4) (28.3) (5.1) (18) % Total $ 48.2 $ 29.5 $ 18.7 64 % $ 78.8 $ 48.1 $ 30.7 64 % Ratio to segment net sales Animal Health 25.4 % 22.7 % 23.9 % 20.3 % Mineral Nutrition 9.0 % 5.7 % 7.7 % 5.4 % Performance Products 11.4 % 5.3 % 11.8 % 7.4 % Corporate (1) (5.7) % (5.7) % (5.9) % (5.9) % Total (1) 15.6 % 11.8 % 13.8 % 10.0 % Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA Net income (loss) $ 3.2 $ 1.3 $ 1.9 * $ 10.2 $ (6.7) $ 16.9 * Interest expense, net 9.0 4.7 4.3 93 % 16.6 9.2 7.4 80 % Provision (benefit) for income taxes 1.7 2.3 (0.6) (28) % 4.3 (1.7) 6.0 * Depreciation and amortization 11.6 8.9 2.7 30 % 20.6 17.8 2.8 16 % EBITDA 25.4 17.1 8.3 48 % 51.7 18.6 33.1 * Acquisition-related cost of goods sold 1.6 0.3 1.3 * 1.6 0.3 1.3 * Acquisition-related other 8.8 — 8.8 * 12.2 — 12.2 * Phibro Forward income growth initiatives(2) 1.7 — 1.7 * 2.0 — 2.0 * Stock-based compensation expense 0.2 0.1 0.1 * 0.4 0.2 0.2 * Pension settlement cost — 0.2 (0.2) * — 10.7 (10.7) * Brazil employment taxes — 4.2 (4.2) * — 4.2 (4.2) * Insurance settlement gain (1.3) — (1.3) * (1.3) — (1.3) * Foreign currency losses, net 11.7 7.5 4.2 56 % 12.1 14.2 (2.0) (14) % Adjusted EBITDA $ 48.2 $ 29.5 $ 18.7 64 % $ 78.8 $ 48.1 $ 30.7 64 %   Amounts and percentages may reflect rounding adjustments. * Calculation not meaningful (1) Reflects ratio to total net sales (2) Phibro Forward is a company-wide initiative focused on unlocking additional areas of revenue growth and cost savings. Phibro Animal Health Corporation Adjusted Net Income Three Months Six Months For the Periods Ended December 31 2024 2023 Change 2024 2023 Change (in millions, except per share amounts and percentages) Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income Net income (loss) $ 3.2 $ 1.3 $ 1.9 * $ 10.2 $ (6.7) $ 16.9 * Acquisition-related intangible amortization (1) 1.6 1.7 (0.1) (6) % 3.2 3.3 (0.1) (3) % Acquisition-related intangible amortization (2) 0.6 0.8 (0.2) (27) % 1.2 1.6 (0.4) (24) % Acquisition-related cost of goods sold (1) 1.6 0.3 1.3 * 1.6 0.3 1.3 * Acquisition-related transaction costs (2) 8.8 — 8.8 * 12.2 — 12.2 * Pension settlement cost (2) — 0.2 (0.2) * — 10.7 (10.7) * Brazil employment taxes (2) — 4.2 (4.2) * — 4.2 (4.2) * Insurance settlement gain (2) (1.3) — (1.3) * (1.3) — (1.3) * Stock-based compensation expense (2) 0.2 0.1 0.1 * 0.4 0.2 0.2 * Phibro Forward income growth initiatives (2) 1.7 — 1.7 * 2.0 — 2.0 * Refinancing expense (3) — — — * 2.0 — 2.0 * Foreign currency losses, net (4) 11.7 7.5 4.2 56 % 12.1 14.2 (2.0) (14) % Adjustments to income taxes (5) (6.2) (2.6) 3.6 * (7.7) (8.7) (1.0) (11) % Adjusted net income $ 21.9 $ 13.5 $ 8.5 63 % $ 36.0 $ 19.0 $ 17.0 89 % Statement of Operations Line Items - adjusted Adjusted cost of goods sold (1) $ 204.2 $ 169.3 $ 34.8 21 % $ 379.5 $ 331.3 $ 48.2 15 % Adjusted gross profit 105.1 80.6 24.5 30 % 190.2 150.0 40.2 27 % Adjusted selling, general and administrative (2) 66.3 57.6 8.7 15 % 127.5 114.8 12.8 11 % Adjusted interest expense, net (3) 9.0 4.7 4.3 93 % 14.7 9.2 5.5 59 % Adjusted income before income taxes 29.8 18.4 11.4 62 % 48.0 26.0 22.0 85 % Adjusted provision for income taxes (5) 7.8 4.9 2.9 60 % 12.0 7.0 5.0 71 % Adjusted net income $ 21.9 $ 13.5 $ 8.5 63 % $ 36.0 $ 19.0 $ 17.0 89 % Adjusted net income per share diluted $ 0.54 $ 0.33 $ 0.21 64 % $ 0.89 $ 0.47 $ 0.42 89 % Weighted average common shares outstanding diluted 40.7 40.5 40.6 40.5 Ratio to net sales Adjusted gross profit 34.0 % 32.2 % 33.4 % 31.2 % Adjusted selling, general and administrative 21.4 % 23.0 % 22.4 % 23.8 % Adjusted income before income taxes 9.6 % 7.3 % 8.4 % 5.4 % Adjusted net income 7.1 % 5.4 % 6.3 % 3.9 % Adjusted effective tax rate 26.4 % 26.7 % 25.0 % 27.0 % Amounts and percentages may reflect rounding adjustments. * Calculation not meaningful (1) Adjusted cost of goods sold excludes acquisition-related intangible amortization and acquisition-related cost of goods sold. (2) Adjusted selling, general and administrative excludes acquisition-related intangible amortization, acquisition-related transaction costs, pension settlement cost, Brazil employment taxes, an insurance settlement gain, stock-based compensation and costs associated with Phibro Forward income growth initiatives. (3) Refinancing expense includes third-party costs and the write-off of unamortized debt issuance costs related to the refinancing of the Company’s credit facility in July 2024. (4) Foreign currency losses, net, are excluded from adjusted net income. (5) Adjusted provision for income taxes excludes the income tax effect of pre-tax income (loss) adjustments and certain income tax items. About Phibro Animal Health Corporation Phibro Animal Health Corporation is a leading global diversified animal health and mineral nutrition company. We strive to be a trusted partner with livestock producers, farmers, veterinarians and consumers who raise or care for farm and companion animals by providing solutions to help them maintain and enhance the health of their animals. For further information, please visit www.pahc.com.

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