Phibro Animal Health Corporation (PAHC) Earnings

Management highlights

• Third quarter adjusted EBITDA increased 5.9 million dollars or 11% vs prior year; adjusted net income and diluted EPS increased 19%. Driven by higher gross profit, partially offset by higher SG&A and interest expense. • Animal health segment had various sales growths. • Mineral nutrition and performance products had respective net sales and adjusted EBITDA changes. • Generated $13 million positive free cash flow for 12 months ended March 31, 2026; operating cash flow $66 million, capital expenditures $53 million. • Cash and cash equivalents and short-term investments $77.5 million; gross leverage ratio 3.1 times, net leverage ratio 2.8 times. • Paid quarterly dividend of $0.12 per share or $4.9 million aggregate; upsized revolver by $125 million. • Excited about continued strong performance in fiscal year 2026 and confident in global product demand

Guidance

• Updated full-year guidance for fiscal year 2026: Net sales range $1,460,000,000 to $1,500,000,000 (13%-16% growth, midpoint ~14%). Total adjusted EBITDA range $247 to $255 million (34%-39% growth, midpoint ~37%). Adjusted net income range $122 to $127 million (44%-49% growth, midpoint ~47%). • Sales of Virginia Myosin in Brazil $26 million in fiscal year 2025; anticipate approval for therapeutic claims during six-month transition period, impact on fiscal year 2027 to be quantified later, but confident other areas will offset impact

Segment performance

Animal health segment: Net sales $291.2 million, +$32.8 million or 13% y-o-y. Legacy MSA net sales +5% due to NA demand and antimicrobials from ethanol performance; new MFA business $95.9 million, +25% y-o-y. Nutritional specialties net sales +$3.5 million or 8% due to NA demand and companion animal sales. Vaccine net sales +$5.2 million or 16% due to Israel demand and autogenous vaccines. Animal health adjusted EBITDA +$8 million or 13%. Mineral nutrition: Net sales $73.4 million, +$6.6 million or 10% due to zinc and trace minerals demand. Performance products: Net sales $18.9 million, -$3.8 million or -17% due to lower personal care product ingredient demand. Mineral nutrition adjusted EBITDA $5.1 million, -$0.6 million; performance products adjusted EBITDA $2.2 million, -$1.1 million. Corporate expenses +$0.3 million due to higher employee-related costs

Risks & headwinds

• Cash generation negatively impacted by inventory buildup in advance of tariffs and to meet increasing customer demand. • Guidance for fiscal year 2027 incorporates potential additional shipping costs and downsides related to Middle East conflict, though currently small risk

Analyst Q&A

• Q: First, just on the sustainability offering you've recently announced, just how are you thinking about the size of that opportunity, and how does the offering fit in relative to some of the other products out there like Xperia and Bovair? And the second question is just on the conflict in the Middle East. Just any exposure there as you think about shipping costs and higher oil prices?

  A: Hey, this is Donnie. I'll take the first question on the sustainability, so on Veritain. The market potentially is huge. uh i think we talked about in our press release the sustainability market based on scope three pledges um within the fortune 500 measured in the tens of billions to hundreds of billions of dollars obviously that's not the market for this product uh but it really depends on the ability of these companies that made these pledges to act on their pledges and what's special about veritain is we believe it allows these companies to actually achieve what they set out to do and allows them to hit their pledges with a product that until now it was just not economically feasible for them to actually act on their pledges. As far as the competitive products out there, you mentioned two. One of them is filled with ammonia. It's not really a greenhouse gas. It's not a carbon-intensity product. It actually has ammonia as well as production claims, so that's not really the competition. The other product is a methane reduction that is greenhouse gas. Obviously, it's a different form. There's plenty of room for both products. Our product works across species. The methane product would be primarily for the dairy industry. So, you know, that would be the competitive profile there. Yeah, in terms of the Middle East decadence, so, you know, our guidance that we have for fiscal year 27 includes any additional shipping costs or additional freight costs related to that. It also includes any potential downsides to our business in the Middle East as we do sell a number of vaccines there. We've currently haven't seen much of an impact, so we think on the downside that's a small risk, but our guidance range does incorporate that.

• Q: The four Q implied guidance does imply a notable slowdown. Was there any pull forward dynamics that may have occurred in this quarter or anything else you would call out that may be causing this cadence?

  A: Yeah, so we didn't have any pull forward in Q3. I think one of the things to note when you look at the growth ranges is particularly when you look at the comparators for 2025. So just for context, in Q3 of 25, we did $348 million of sales. The step up to Q4 of 25 was another $31 million to $379 million. So the comparator becomes a lot stronger between Q3 and Q4, which does impact the growth that we would expect in Q4. You know, the other thing that I would mention related to the revenue guide and the implied Q4, you know, we probably did take a somewhat conservative approach for the revenue guide for the year based on some of the unknowns with the conflict in the Middle East. We would anticipate to be towards the higher end