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 Phibro Animal Health Corporation Second Quarter 2026 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' 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'd now like to turn the conference over to Glenn C. David, Chief Financial Officer. Please go ahead.

Good day, and welcome to the Phibro Animal Health Corporation earnings call for our fiscal second quarter ended December 31, 2025. My name is Glenn C. David. I'm the Chief Financial Officer of Phibro Animal Health Corporation. I am joined on today's call by Jack Clifford Bendheim, Phibro's Chairman, President, and Chief Executive Officer, Daniel M. Bendheim, Director and Executive Vice President of Corporate Strategy and recently announced our CEO designate, and Larry L. Miller, Chief Operating Officer. Today, we will cover financial performance for our second quarter and provide updated financial guidance for our fiscal year ending June 30, 2026. At the conclusion of our remarks, we will open the lines 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 investors section of our website, you will find copies of the earnings press release, quarterly Form 10-Q, 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 US GAAP. I refer you to the non-GAAP financial information in our earnings press release for a discussion of these measures. Reconciliation of these non-GAAP financial measures to the most directly comparable US 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 statements of operation including foreign currency losses gains net, and income taxes related to pretax income adjustments in unusual, or non-recurring income tax items. Now let me introduce our Chairman, President, and Chief Executive Officer, Jack Clifford Bendheim, to share his opening remarks.

Thanks, Glenn. In the second quarter, we delivered 26% growth in animal health sales and a 41% increase in Animal Health adjusted EBITDA. A clear sign our strategy is working. Medicated feed additives led with 34% growth supported by strong gains in nutritional specialties and vaccines. This reflects our continued success integrating the MFA portfolio into our operations. While our total legacy business continues to perform with a 3% growth, beyond animal health, we saw continued growth in minerals with a decline in our performance product segment. Consolidated sales were up 21% in the second quarter, while EBITDA was up 41%. As Glenn will discuss in more detail, we are raising both our full-year sales and earnings guidance. Results are encouraging, but what's impressed me just as much is what I have seen firsthand from our people and our customers in the past few weeks. It's one thing to see performance in the numbers, another to hear directly from the teams and customers while living this momentum every day. Earlier this month, more than 150 of our global leaders came together in Barcelona. The largest meeting of this kind in over a decade. The energy and alignment were outstanding. I heard a consistent message across regions. Our teams remain deeply focused on customer partnerships. We are sharpening our innovation agenda with stronger global coordination. We are executing better and more consistently across the business. And the unity across our leadership team has never been stronger. I left Barcelona feeling incredibly proud of our people and confident in the direction we are heading. When you see the level of alignment and enthusiasm, from long-tenured leaders to newer faces, it tells you that the culture is strong and the strategy is working. Last week, I was in Atlanta for the IPPE, the annual poultry show. While it was a very cold Atlanta, the conversations there were warm and optimistic. IPPE is always a great pulse check on the protein sector. This year, the tone was upbeat. Producers across poultry and the broader protein markets are seeing more stability. Events remain strong. Customers are prioritizing performance, reliability, and cost efficiency. All areas where we are delivering real value. We heard a lot of positive feedback about the MFA integration and the strength of our technical support. It's clear that the work our teams have done over the past year is resonating where it matters most with customers. Taken together with our financial performance, Barcelona and IPPE make it clear that Phibro has real sustainable momentum. And as I look at that momentum, the strength of our business, the alignment of our people, and the opportunities ahead, it's also clear that this is an opportune moment for a leadership transition. And with that, I turn it over to Daniel M. Bendheim.

Thank you. Before we move into our results, I want to share how honored I am to be stepping into this role in July. I'm deeply grateful for the trust the board and the entire Phibro team have placed in me. I'm especially pleased that my father will continue as Executive Chairman. The culture and foundation he has built over five decades are the bedrock of this company. I think his continued guidance and experience is a significant advantage for Phibro, and incredibly meaningful to me personally. Equally important is the stability of our broader leadership. Our full management team remains in place. These are the leaders who know our customers and our global operations. That continuity across every region and function is one of our greatest competitive strengths. Ensure this leadership transition is occurring from a position of momentum and operational excellence. I'm stepping into this role at a dynamic moment for our industry. We are seeing genuine momentum in the protein markets. Producer confidence is rising, and global demand remains resilient. The energy we felt at IPPE recently confirmed this. Our customers are moving forward, investing, and planning for growth. Looking ahead, we are entering a new era of opportunity. Producers today are under pressure to do more with less. At Phibro, we see sustainability and profitability as one and the same thing. In our gut health, improved feed conversion, and reduced disease pressure, they drive profitability. They don't just support sustainability. By investing in R&D and our digital capabilities, we are positioning Phibro to lead the next wave of breakthroughs in animal health. These efforts are central to our Phibro Forward strategy, and build on the strength of our core business and our unified leadership team. With that, I'll hand it over to Glenn to discuss our performance for the quarter and our outlook for the remainder of the fiscal year.

Thanks, Daniel. Starting with our Q2 performance on slide four. Consolidated net sales for the quarter ended December 31, 2025, were $373.9 million, reflecting an increase of $64.6 million or a 21% increase over the same quarter one year ago. The animal health segment grew 26%, while nutritional specialties grew 9%, and performance products declined by 10%. GAAP 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, partially offset by increased SG&A due to higher employee-related costs. After making our standard adjustments to GAAP results, including acquisition-related items, foreign currency losses, and certain one-off items, the second quarter adjusted EBITDA increased $19.9 million or 41% versus prior year. Adjusted net income increased 60% and adjusted diluted EPS increased 58%. 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 $290 million of net sales for the quarter. An increase of $60.6 million or 26% versus the same quarter prior year. Within the animal health segment, we reported legacy MFA's net sales decrease of 5% driven by the timing of inventory purchases from a particular large customer. Excluding the impact of this timing, our legacy MFA growth would have been a positive 3%. The new MFA business contributed a full quarter of sales of $94.1 million versus a partial quarter last year. Driving the total MFA and other growth to 34%. The nutritional specialty net sales increased $4.3 million or 9% due to increased North America demand for dairy. Vaccine net sales growth of $4.5 million or a 13% increase driven by continued growth of poultry products in Latin America and higher international…

We will now begin the question and answer session. In order to ask a question, simply press star followed by the number one on your telephone keypad. Our first question will come from the line of Ekaterina V. Knyazkova with JPMorgan. Please go ahead.

Congrats on the results. So first question is just on gross margins, obviously a very strong number this quarter. You've touched upon this, but what are the main drivers of this and how much is mix or anything potentially one-time in there? And how should we think about gross margins over the next few quarters? Then second bigger picture question just on the guidance update. Can you just elaborate a bit what's kind of doing better than expected as you kind of think about the EPS and the EBITDA upside? How much of this is Phibro Forward versus mix versus commercial execution versus anything else? Thank you.

Sure. Thanks for the question, Ekaterina. So in terms of the gross margin, there are a number of factors that are driving it, particularly in this quarter and also on a year-to-date basis as well. So, a, we've been successful in taking additional price particularly on the Zoetis portfolio, which has exceeded our expectations and helps drive improved margin. We've also seen very positive mix. We continue to see strong performance in our nutritional specialties, our vaccine products, which do come in at a higher margin as well. So really strong mix, strong price, and strong overall performance. And also just a focus internally on driving growth on the higher margin products as well has helped. In the quarter in particular, I think I mentioned in last quarter's call, that we should have some returns coming as part of our transition from what we call tier three markets to tier one markets. Those returns came at full cost, so the price of sales the price of cost was the same. So that partially elevated the gross margin as well for that quarter, but that's less than, call it, a 100 basis points. But overall, really strong underlying performance from a gross margin perspective. And from an EPS and guidance perspective, a number of factors that have driven the positive view that we have for the rest of the year. A strong revenue performance, as I mentioned, a really strong performance in our acquired portfolio. Really exceeding our expectations in how we're performing there. And our ability to leverage our existing infrastructure without building, you know, as quite as much additional staff or resources to support the new business as well has continued to perform positively, and the improved mix that we mentioned as well that helps us for the full year guidance as well. So a lot of factors that are going in the right direction and helping our performance for the first half of the year. But also for our guidance for the full year.

Our next question will come from the line of Michael Leonidovich Ryskin with Bank of America. Please go ahead.

Hi. This is Alexa on for Mike. Thank you so much for taking our question. I was wondering about if you could talk about the impact of the timing on the MFA business. If you could give any details on what happened there and if it will slip into 3Q and how should we think about legacy MFA business and Zoetis MFA and those normalized growth rates going forward? For both businesses given some of the lumpiness in recent quarters? And then I have a follow-up question. Thank you.

Okay, sure. So in terms of the customer timing that we mentioned for the legacy MFA business, that's one customer that we do a significant amount of business for. They hold different inventory levels at different times, so sometimes within a quarter, we'll have pretty significant fluctuations. That ends up varying throughout the year and evening out through the year. It was roughly $10 million in this quarter. We do expect it to improve as we move into the next quarter, so we don't expect that significant negative hit as we move into the second half of the year. In terms of the legacy MFA and the Zoetis MFA, as we move into the second half of the year, we'll have a full comparative. Right? So this is the last quarter we sort of had a partial quarter of the previous year. So as we move into the second half, we'll have a full comparative for both the legacy portfolio as well as the recently acquired portfolio, which will obviously slow growth. And, you know, I think what we talked about for the long term is we expect this business to grow sort of in the low to mid single digits, you know, with the strength that we have from a field force perspective and technical expertise, we'll look to drive that greater. But overall, you know, we expect this business to be a low to mid single digit growth business.

Okay. Got it. Thank you. That's super helpful. And then my follow-up question is on end markets. So they've been really favorable in my livestock in recent quarters with very strong results. Can you just talk about how sustainable this is for it being a cyclical upside? Thank you.

Yeah. Larry, you want to address the protein markets and the sustainability?

Yeah. Sure. Thanks for the question. So you know, the demand for high-quality clean proteins continues to be very strong. And we see benefits, for that, particularly in our beef sector, our chicken broiler sector, pork, turkey, dairy, and also for eggs. We certainly see continued favorable feed costs which is obviously the largest input cost of producing animals. And that's helping to maintain margins. We'll probably expect to see a little bit of some shift, you know, in trade between certain countries which is sometimes driven by tariffs. And also some disease outbreaks. But I want to emphasize, we really feel good about our amongst our livestock species as well as geographic presence in all the key global livestock production markets. Including many markets which are increasing their domestic production to be more food secure and less reliant on imports. Our diversity has certainly been enhanced with the MFA acquisition.

Great. Thank you. And if I can just ask one quick follow-up, on the MFA business again. I want to talk about share gains. Are you taking share from others given the stronger combined portfolio? And my final question, and thank you, and congrats on the great results.

Thank you. So, Larry, you want to address the share gains? So I would say that we in the quarter and in the first half, we've certainly seen strong performance in our poultry anoxidil range. We are able to offer a much more complete portfolio of offerings particularly in broiler coccidiosis management. Often people, you know, change and rotate every few months on these, so it's allowed us to have, you know, more opportunities to participate in those anoxidil programs. We've also seen good growth in our swine enteritis business.

Great. Thanks. Again, for any questions, press 1. Our next question comes from the line of Navann Ty Dietschi with BNP Paribas. Please go ahead.

Good morning. Thanks for taking my questions. What drove the outperformance of the Zoetis MFA portfolio specifically? And a clarification on the legacy one. So shall we expect $10 million to come back in Q3, just to make sure? And then I'll have a follow-up. Thank you.

Yes. So just in terms of the legacy business, and the negative impact to the quarter, we will expect that to come back in the second half of the year. How much of it comes between Q3 and Q4? That will depend on the orders that we receive, but we do expect it to come back within the second half of the year. I'll start on the drivers of the Zoetis MFA. But, Larry, you know, if you could add as well. In terms of the outperformance. I think, A, it's been tremendous execution. From the team in terms of the integration. We've built a very strong team that's been extremely effective in their interactions with our customers. We have been able to take share on some, you know, particular products in the marketplace as we continue to gain momentum, and we expect that, you know, hopefully to continue as well. But, Larry, I don't know if you have additional things to add on the Zoetis MFA outperformance.

You know, I think, you know, our team has done a really good job of focusing on these. We've got a lot of shifts, particularly in the segments and people are our customers are growing animals to larger heavier harvest weights. And so that's changing some of the dynamics that they have to deal with, and our team is really doing a great job in promoting the and reminding customers of the indications and claims that we have for these new products and how those fit some of these trends and challenges of feeding animals longer. So, you know, we're really seeing good receptivity from our customers. Obviously, the value of animals are at historic highs, so customers are very interested in investing to protect their animals to keep them healthy. And healthier animals are more efficient. And help optimize the margin and opportunities for returns. Jack and Daniel talked about our presence at the International Poultry and Egg Conference last week in Atlanta. I'm actually at the National Beef Cattlemen's Association right now in Nashville. Where we're able to have a presence, you know, in the trade show and in a lot of the activities here. And, we're meeting a lot of great customers here that are in the beef production segment. And I have to say their interest in these products how they can fit and help them solve the challenges they're facing, really are excited to see us with representing these products, owning these products, and investing in these products. And, enthusiasm for this beef segment is really high right now. Obviously, consumption of beef has grown for the first time in quite a long time. And so people are feeling really good about this acquisition as are we.

Thank you for that. And then in companion animal, can you maybe expand on the commercial traction and the vet feedback of Restore since the launch?

So hi. It's Daniel. I'll take that. So we launched it, obviously, late last year, you know, into the holiday season. It's actually gone more or less according to plan. I don't know if you had a chance to be in Orlando for VMX. We actually had our first time that we have been an exhibitor. A lot of foot traffic, a lot of interest. We've seen a boost since then. We'll be continuing, you know, on the circuit. We'll be in Vegas for the Western Veterinary Conference, and overall, there is a lot of excitement within the vet community for what Restore offers.

Thank you. And a final reminder, to ask a question, simply press star followed by the number one on your telephone keypad. Our next question will come from the line of Erin Wilson Wright with Morgan Stanley. Please go ahead.

Hi, good morning. This is Linda on for Erin Wilson Wright. Thanks for taking our questions. So could you please provide an update on the Phibro Forward initiatives, specifically what's been realized to date versus what may remain ahead? Also how much of the margin expansion embedded in the latest outlook is driven by structural cost initiatives versus cyclical or mixed related benefits?

Sure. So on the Phibro Forward, as in the past, we haven't given specific dollar amounts in terms of the contributions or the expectations. What we have said is it continues to be a significant driver of our growth. You know, we are now halfway through, you know, fiscal year 2026. And we expect sort of the optimal or the max coming, you know, from a full year fiscal year of '27. Let's say, you know, we're sort of halfway through the process. You know, we expect the contributions from Phibro Forward to continue to accelerate as we move through the end of fiscal year 2026. And then, you know, we'll get a full annualization of benefits as we move into fiscal year 2027, and that will be, you know, a key contributor to growth in fiscal year 2027. I'll turn it to Daniel to see if he has anything additional to add.

Thanks, Glenn. What I'd say is Phibro Forward really touches upon all parts of our company. So there are the structural changes and we are seeing it in our higher gross margin. I think we're seeing it in some of our revenue strategies, but, you know, it's also overall on how we approach R&D on how we approach technology. We've laid the groundwork for future growth with these initiatives. And it puts us in a really strong place both for today and as we enter kind of the next era.

Thank you. That's helpful. And then also, there have been a number of innovation developments across companion animal, notably oral health. Is this a meaningful contributor to 2026 or more so going forward?

So that'll be more so going forward. So within the quarter, it was a limited contributor. We'll expect, you know, a little more in the second half of the year. I think we'll start to see more material contributions in fiscal year '27. And then beyond.

Great. Thank you. And that will conclude our question and answer session. I'll hand the call back to Glenn C. David for any closing comments.

Thank you, Regina, and thank you, everyone, for listening in on today's call. We really appreciate your time, attention, interest, and support of Phibro Animal Health Corporation. Have a great day.

This will conclude our call today. Thank you all for joining. You may now disconnect.