Good morning. My name is Shantal, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Phibro Animal Health Corporation Third Quarter 2022 Conference Call. Damian Finio, Chief Financial Officer, you may begin your conference.

Thank you, Shantal. Good morning, and welcome to the Phibro Animal Health Corporation earnings call for our fiscal third quarter ended March 31, 2022. My name is Damian Finio, and I am the Chief Financial Officer of Phibro Animal Health Corporation. I'm joined on today's call by Jack Bendheim, Phibro's Chairman, President and Chief Executive Officer; and Daniel Bendheim, Director and Executive Vice President of Corporate Strategy. Today, we will cover financial performance for our third quarter as well as revised financial guidance for our fiscal year ending June 30, 2022. 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, pahc.com. Also on the Investors section of our website, you will find copies of the earnings press release and third quarter Form 10-Q filed with the SEC yesterday, 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 statements 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 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, nonoperational or nonrecurring items, including stock-based compensation and restructuring costs; Other income and expense are separately reported in the consolidated statement of operations, including foreign currency gains and losses net; and lastly, income tax effects related to pretax adjustments and unusual or nonrecurring income tax items. Now let me introduce our Chairman, President and Chief Executive Officer, Jack Bendheim, to share his opening remarks, which will include his perspective on Phibro's third quarter financial performance and revised financial guidance for our fiscal year 2022. Jack?

Thank you, Damian, and good morning, everyone. Our fiscal year-to-date sales reflect year-over-year growth of 12%, driven by double-digit sales growth across all segments. Consolidated sales growth was driven by a 10% improvement in our core Animal Health segment. We also posted sales growth of 16% and 12% in our Mineral Nutrition and Performance Products segments, respectively. Sales in these two segments correlate with the underlying costs of materials such as copper. We're seeing the benefits of higher prices in our top line. Third quarter sales grew 13% over the same quarter one year ago driven by growth across all segments as well. During the quarter, we also acquired a business that provides product and services chiefly to the sugar-based ethanol industry in Brazil. We see this acquisition a chance to replicate the success we have had in the U.S. industry, providing products and services for both the production of ethanol and its co-products, many of which are consumed by livestock. Pro forma information giving effect of the acquisition has not been provided because the results are not material to the consolidated financial statements, but the acquisition is an important part of our Animal Health, MFA and other product categories. While our business is strong, macroeconomic headwinds persist. The Russian conflict with Ukraine and lingering impact of COVID-19 in some markets where we compete, specifically Asia Pacific, are driving higher-than-anticipated inflation and could result in broader economic impacts and security concerns, which could adversely affect our business. Since the conflict began, our company employees have provided support to Ukraine in the form of monetary donations, free product, and humanitarian services. We sell products indirectly to a European distributor in Russia. These sales represent less than 1% of our annual consolidated net sales. Like most of our industry, our limited intent…

Thank you, Jack. I will start with consolidated financial performance on slide four, then cover segment level performance, key balance sheet metrics, and conclude with a review of our revised financial guidance for the full year 2022. Consolidated net sales for the quarter ended March 31, 2022, were $239.6 million, reflecting a $27.9 million or 13% increase over the same quarter one year ago. This increase was driven by improvements across all reportable business segments, major product categories, and geographic regions. GAAP-based net income and diluted earnings per share increased 45% and 47%, respectively, versus the same quarter one year ago. The net income increase and resulting diluted earnings per share increase were driven by stronger volumes and selling prices driving higher gross profit; a $10 million increase in foreign currency gains, offset by a $3.5 million increase in income tax expense and higher SG&A expenses. Although we reported a foreign currency gain again this quarter, volatility in foreign currency exchange rates continues. For Phibro, the impact was primarily driven by the effect of translating intercompany balances to the U.S. dollar for reporting purposes at the end of the reporting period. After making our standard adjustments to GAAP results, including acquisition-related items, foreign currency movements and one-offs, third quarter adjusted EBITDA was comparable to the prior year's quarter. Included in the calculation of adjusted EBITDA is higher gross profit in our Mineral Nutrition business segment, offset by lower gross profits in our Animal Health segment and a slight increase in corporate expenses. Adjusted net income and adjusted diluted earnings per share declined 4% and 3%, respectively, due to the increases in employee-related and technology-related costs, partially offset by higher gross profit driven by an increase in volumes and average selling prices. Moving to segment level financial performance on slide five,…

Our first question comes from Michael Ryskin with Bank of America. Your line is open.

This is Wolf Chanoff on for Mike. Thanks for taking the questions. I saw that you noted that sales of Rejensa continued to grow in the quarter. Can you give us a bit more color on how things have trended and maybe a high-level outlook for the balance of the year?

So sales for our companion animal product, Rejensa, have been very strong. As we had said, I think, on earlier calls, we expected sales in fiscal year '22 to double over fiscal year '21. Our guidance reflects that, that will be the case. And we'll get into guidance for fiscal year '23 on our call later in the summer, but we would expect that trend to continue next year as well.

Great. And then kind of turning to a bit more macro topic. Can you talk to the effects that you're seeing throughout in the U.S. on your beef and dairy franchises. How should we think about the implications of more cattle and feed lots for the sales of MFAs in the coming year? And is there any sense from customers that this may have a longer-term impact on U.S. herd sizes? Or should we be thinking about this as kind of a temporary headwind?

Thanks for the question. As we've stated in the past, our sales to the U.S. beef industry is sort of limited to the dairy industry. So the effect of the drought in the U.S. is not directly affecting us. There might be some indirect effect for our sales to the beef industry in Brazil and in Mexico and Argentina and other markets where we participate in. But what you're reading is happening, I mean, the drought is affecting, it's moving more cattle to feed lots, and the level of slaughter is much higher than it has been the past.

There are no further questions at this time. I'll turn the call back over to Damian Finio for closing remarks. Damian?

Okay. Thank you, Shantal, and thank you, everyone, for listening in on today's call. We appreciate your time, attention, questions, and interest in Phibro Animal Health Corporation. Have a great rest of your day, and let's all hope for a peaceful resolution of the conflict in Ukraine very soon. Thank you.