ImmuCell Corporation (ICCC) Earnings

Management highlights

### Strategic Focus Shift and Commercial Progress • In late 2025, ImmuCell refocused its strategy on its differentiated First Defense line of calf scours preventative products, with investments in leadership, sales team expansion, and manufacturing capacity. This shift has accelerated growth and gained market share. • First Defense's U.S. market share (share of treated animals) increased from 15% in December 2025 to 19% at the end of June 2026; producer spending share rose from 29% to 38% in the same period, driven by commercial team expansion and product efficacy. • Distributor out-the-door volume grew 21% YoY in Q1 2026, 28% YoY in Q2 2026, and 24% YoY for the first half of 2026. ### Supply Chain and Capacity Expansion • The company expects to produce nearly 1 million additional manufacturing units in 2026 compared to 2025, and finished goods inventory expanded in Q2 2026 even as output was adjusted seasonally. • The company is executing an $8 million total capacity expansion program that will more than triple current production capacity, reduce processing time from 2-3 months to under 1 month, and lower long-term product costs. The program repurposes existing facilities/equipment from the discontinued Retain product. An initial $3.5 million investment in freeze-drying capacity is expected to complete in H1 2027, and a newly announced $4.5 million investment in liquids processing capacity is expected to complete by the end of 2027. • Most expansion funding will come from cash on hand (including a $2 million legal settlement with a former contract manufacturer) and operating cash flow, with potential line of credit supplementation as needed. ### Operational Yield and Cost Improvement • Lower Q2 2026 manufacturing output was planned, driven by seasonal low demand, intentional inventory management, planned process changes, and maintenance to improve future yields. Lower output reduced gross margin by ~7 percentage points sequentially, alongside a 2.1 percentage point impact from $150k in purchased material scrap and a 1.9 percentage point impact from the Retain cost shift. • The company is prioritizing yield improvement, contamination risk management, and strengthening colostrum sourcing, as high-quality colostrum accounts for ~half of product costs and competition for supplies is rising. Improvements include new supplier payment programs, enhanced technical services, and expanded farm recruitment. ### International and Go-to-Market • A newly hired international business development executive is shifting the company from a reactive to proactive strategic approach to global market opportunities, with results expected to materialize over time. New U.S. sales hires are performing ahead of plan.

Guidance

• The company confirmed it has now lapped the 2025 backorder fulfillment comparison that distorted year-over-year international sales growth in H1 2026. • The $3.5 million first phase of capacity expansion is expected to complete in the first half of 2027, and the $4.5 million second phase is on track to complete by the end of 2027. • The ongoing Retain investigational study with Michigan State University is expected to complete by late September to early October 2026, after which full results will be shared with investors. • No material changes to prior full-year 2026 financial outlooks were announced.

Segment performance

For Q2 2026, total product sales were $7.2 million, an 11.5% increase year-over-year. Domestic product sales reached $6.2 million (86.1% of total Q2 revenue), growing 27.7% YoY. International product sales were $1 million (13.9% of total Q2 revenue), declining 38.9% YoY driven by the 2025 backorder clearance comparison in Canada. For the first half of 2026, total product sales were $17.5 million, up 20.9% YoY. By product line, TriShield (flagship neonatal diarrhea prevention) delivered 25.1% H1 2026 YoY growth, with U.S. TriShield growth reaching 32.5% YoY. The company's functional feed line contributed 20% of total H1 2026 growth.

Risks & headwinds

• The company faces growing competition for high-quality colostrum raw materials, which could increase input costs or constrain production if sourcing targets are not met. • Contamination risk remains a key operational concern that requires ongoing focus as the team manages yield improvement alongside major capacity expansion work. • Gross margin is currently pressured by planned output reductions for process improvements, the ongoing shift of former Retain program costs to cost of goods sold, and occasional raw material quality issues that result in manufacturing scrap. • International expansion requires significant regulatory and go-to-market investment, and results from the new proactive international strategy will take time to materialize. • Capacity expansion execution carries inherent risk of delays or cost overruns that could impact long-term supply targets.

Analyst Q&A

• Q: A private investor asked for an update on the ongoing Retain study being conducted with Michigan State University, including an expected completion timeline. /

  A: Management confirmed the additional use case study for Retain is ongoing, with interim results currently under discussion. Full study results are expected to be complete by the end of September 2026, potentially as late as early October 2026, and will be shared with investors once finalized.

• Q: An investor noted that concentration of revenue among the company's two largest distributors decreased, and asked if this was a result of successful new sales team expansion. /

  A: Management explained the company sells entirely through distribution, with its commercial team focused on winning new producer customers that then order through existing distributors. The shift in distributor concentration is not a deliberate strategic change, but rather a natural outcome of new customer acquisition in new geographies and segments where producers prefer different distributors. Management added that new customer acquisition results have been very strong over the past two quarters.

• Q: An analyst asked for clarification on business seasonality for dairy vs. beef calf markets, and the impact on distribution channel dynamics. /

  A: Management confirmed dairy demand is consistent year-round, while beef has a concentrated calving season that creates peak demand in Q4 and Q1 annually. Different distributors have different regional and segment (dairy vs. beef) strengths, but the company does not actively manage volume split between distributors, instead focusing solely on new customer acquisition. Changes in concentration are natural outcomes of where new customers are located, not intentional channel shifting.

• Q: An investor asked if the ongoing cost impact from the Retain cost shift to COGS is a permanent recurring change. /

  A: Management confirmed the cost shift is recurring, representing ongoing building-related costs previously categorized separately. Dollar amounts are relatively fixed, so percentage impact on gross margin varies with total quarterly revenue, with a larger impact in lower-revenue quarters like Q2 2026. There is slight quarterly variability in the dollar amount, but the overall recurring impact is now established.