• Consolidated Net Sales: $309.3 million, a 24% increase year-over-year.
• Animal Health Segment Sales: $229.4 million, a 33% increase.
• Mineral Nutrition Segment Sales: $63.3 million, a 3% increase.
• Performance Products Segment Sales: $16.6 million, a 7% increase.
• Adjusted EBITDA: Increased by $18.7 million or 64% year-over-year.
• Animal Health Adjusted EBITDA: $58.2 million, a 48% increase.
• Free Cash Flow: $15 million for the 12 months ended December 31, 2024.
• Operating Cash Flow: $55 million.
• Capital Expenditures: $40 million.
• Cash and Cash Equivalents: $67 million at the end of the quarter.
• Gross Leverage Ratio: 3.1 times.
• Net Leverage Ratio: 2.9 times.
• Quarterly Dividend: $0.12 per share, totaling $4.9 million.
• Fiscal Year 2025 Guidance - Net Sales: $1.25 billion to $1.30 billion, growth of 23% to 28%.
• Fiscal Year 2025 Guidance - Adjusted EBITDA: $172 million to $180 million, growth of 55% to 62%.
• Fiscal Year 2025 Guidance - Adjusted Net Income: $76 million to $82 million, growth of 57% to 70%.
• Fiscal Year 2025 Guidance - Adjusted EPS: $1.87 to $2.01, growth of 57% to 69%.

• Warning! GuruFocus has detected 8 Warning Signs with PAHC.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Phibro Animal Health Corp (NASDAQ:PAHC) reported a 24% increase in consolidated net sales for Q2 2025, reaching $309.3 million.
• The animal health segment experienced a significant growth of 33%, driven by strong demand and the integration of the Zoetis Medicated Feed Additives (MFA) portfolio.
• Adjusted EBITDA surged by 64%, showcasing improved profitability and operational efficiency.
• The company successfully integrated the Zoetis MFA portfolio, contributing to a 47% increase in MFA and other product sales.
• Phibro's Phibro Forward initiative continues to drive operational excellence and identify growth opportunities, enhancing long-term value creation.

Negative Points

• Total sales declined by 24%, indicating challenges in other segments despite strong performance in animal health.
• Increased SG&A expenses due to higher employee-related costs partially offset the gains in gross profit.
• The integration of the Zoetis MFA portfolio faced transition challenges, including blackout periods and destocking impacts.
• Corporate expenses increased by $3.4 million, driven by higher employee-related costs.
• Potential geopolitical challenges, such as tariffs, could impact cost structures, although mitigation plans are in place.

Q & A Highlights

Q: How much of the EPS increase is attributed to the Zoetis acquisition versus the underlying business? A: The majority of the EPS increase, approximately $0.53, is due to the Zoetis acquisition, with some contribution from strong performance in our legacy business. The guidance includes more than the previously mentioned $0.25 from Zoetis, reflecting improved performance expectations for both Zoetis and our legacy business. - Glenn David, CFO

Q: Can you elaborate on the trends driving growth in the animal health segment? A: The growth is driven by strong performance across all protein categories, including cattle, chickens, and pigs. Customers are focused on keeping animals healthy to ensure better market performance, which is driving our business globally. - Jack Bendheim, CEO

Q: What are the drivers behind the higher-than-expected EPS guidance following the MFA acquisition? A: The higher EPS is due to improved performance in the underlying business and higher-than-anticipated profitability from Zoetis. This is partly due to the timing of hiring costs and a positive mix, with the U.S. being a strong performer. We also saw an acceleration in sales from November to December, which supports our confidence in the $200 million revenue guidance. - Glenn David, CFO

Q: Is the companion animal segment still a key focus area for Phibro? A: Yes, companion animals remain a priority, but we are also focusing on our livestock business, which is showing strong growth. We have a robust pipeline in both areas, but we want to highlight the significant progress and investment in livestock. - Daniel Bendheim, EVP Corporate Strategy

Q: How is the integration of the Zoetis MFA portfolio progressing, and are there any expected headcount reductions? A: The integration is progressing smoothly, with positive feedback from customers and successful onboarding of Zoetis colleagues. We have no plans for headcount reductions, as the acquisition includes six global plants that require the existing workforce to maintain production. - Glenn David, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.