Summary of Phibro Animal Health Conference Call Company Overview - **Company**: Phibro Animal Health (NasdaqGM: PAHC) - **Date**: February 26, 2026 - **Key Speakers**: Dani Bendheim (Chief Strategy Officer and incoming CEO), Glenn David (CFO), Larry Miller (COO) Key Points Financial Performance - **Fiscal 2Q Results**: - Revenue growth of **21%** year-over-year - Adjusted net income growth of **60%** - Total revenue for the quarter was **$94 million** [5][6] - **Legacy MFA Business**: - Experienced a **5% decline** due to timing of orders from a major customer, but normalized growth was around **3%** [5][6] - **Vaccine Portfolio**: - Grew by **13%** - **Nutritional Specialty**: - Grew by **9%** - **Guidance Update**: - Confidence to raise guidance for revenue, EBITDA, and adjusted net income for the year [6][7] Strategic Developments - **Zoetis Acquisition**: - Integration of the Zoetis Medicated Feed Additive (MFA) portfolio is progressing well, expected to enhance overall business [11][12] - Anticipated growth in MFA portfolio to be flat to low mid-single digits in the long term, with vaccines and nutritional specialties expected to grow mid to high single digits [12][13] - **Market Dynamics**: - Strong demand for animal-based protein consumption is driving growth in the livestock market [20][24] - The company is focusing on building relationships with customers and addressing new disease challenges [21][22] Competitive Landscape - **Positioning**: - Phibro is positioned as a strong competitor in the MFA market, likely the **number two globally** [47][48] - Competes with Elanco and Huvepharma in the MFA space, while facing more competition in vaccines from Zoetis, Merck, and others [48][49] - **Market Share**: - Growth in sales suggests potential market share expansion, particularly through innovation and addressing emerging diseases [52] Pricing Strategy - **Pricing Power**: - The company has identified opportunities for price adjustments, particularly in acquired products, without significant volume drops [54][56] - Future price increases are expected to be low single-digit as products mature [58] Companion Animal Business - **Growth Potential**: - Companion animal products like Restoris and Regensa are showing strong growth, with plans to reinvest profits into this segment [61][62] - **Long-term Strategy**: - Aiming to establish the companion animal segment as a fourth pillar alongside MFAs, nutritional specialties, and vaccines [63] Margin Expansion - **Drivers of Margin Growth**: - Positive mix dynamics, growth in higher-margin products, and initiatives from the Phibro Forward program are contributing to margin expansion [65][66] - **Future Outlook**: - The company expects to continue driving income growth faster than revenue, with Phibro Forward hitting its peak in fiscal year 2027 [67] Leadership Transition - **CEO Transition**: - Dani Bendheim will take over as CEO, emphasizing continuity in strategy and operations [70][72] Additional Insights - **Cultural Integration**: - The integration of Zoetis employees and culture has been positive, with excitement about the new direction [40][41] - **Customer Reception**: - Positive feedback from customers regarding the expanded product portfolio and support [44][45] This summary encapsulates the key points discussed during the Phibro Animal Health conference call, highlighting financial performance, strategic developments, competitive positioning, pricing strategies, and future outlook.

Financial Performance - Consolidated net sales for Q2 2026 were $373.9 million, reflecting a 21% increase year-over-year [12] - Animal health segment sales grew by 26%, while mineral nutrition increased by 9%, and performance products declined by 10% [12][14] - Adjusted EBITDA increased by 41% to $82.2 million, driven by the new MFA business and improved gross profit [15] - Adjusted net income rose by 60%, and adjusted diluted EPS increased by 58% [14] Business Segment Performance - Animal health segment net sales reached $290 million, a 26% increase, with the new MFA business contributing $94.1 million [14][15] - Nutritional specialties net sales increased by 9% due to higher demand in North America [15] - Vaccine net sales grew by 13%, driven by poultry products in Latin America [15] - Mineral nutrition segment net sales were $68.9 million, a 9% increase, while performance products segment sales decreased by 10% [15][16] Market Insights - The protein markets are experiencing strong demand, particularly in beef, poultry, pork, turkey, dairy, and eggs [32] - Favorable feed costs are helping maintain margins, with expectations of some shifts in trade due to tariffs and disease outbreaks [32] - The company is well-diversified across livestock species and geographic markets, enhancing its competitive position [33] Company Strategy and Direction - The company is focused on sustainability and profitability, emphasizing better gut health and improved feed conversion [11] - The Phibro Forward strategy aims to drive future growth through R&D and digital capabilities [11][50] - The leadership transition is seen as an opportune moment to capitalize on current momentum and operational excellence [10][11] Management Commentary - Management expressed confidence in the company's direction and the strength of its business, citing positive feedback from customers and strong alignment within the leadership team [7][9] - The integration of the MFA portfolio is yielding positive results, with management noting a strong performance in the acquired business [24][40] Other Important Information - The company raised its full-year guidance for fiscal year 2026, with net sales expected to be between $1.45 billion and $1.5 billion [18] - Adjusted EBITDA guidance was increased to a range of $245 million to $255 million, reflecting a growth range of 33%-39% [18] - Cash and cash equivalents were reported at $74.5 million, with a gross leverage ratio of 3.1 times [17] Q&A Session Summary Question: What are the main drivers of the strong gross margins this quarter? - Management highlighted successful pricing strategies, positive product mix, and internal focus on higher-margin products as key drivers [23][24] Question: Can you elaborate on the guidance update and what is performing better than expected? - Management noted strong revenue performance, effective integration of the acquired portfolio, and improved mix as factors contributing to the positive outlook [25] Question: What impact did customer timing have on the MFA business? - Management explained that fluctuations in customer inventory levels affected sales, but improvements are expected in the next quarter [29] Question: How sustainable is the current demand in livestock markets? - Management expressed confidence in the sustainability of demand due to strong consumer interest and favorable feed costs [32] Question: Are you gaining market share with the combined portfolio? - Management confirmed strong performance in poultry and swine segments, indicating share gains due to a more comprehensive product offering [35][40]

Financial Performance - Consolidated net sales for Q2 2026 were $373.9 million, reflecting a 21% increase year-over-year [11] - Animal health segment sales grew by 26%, while mineral nutrition increased by 9%, and performance products declined by 10% [12] - Adjusted EBITDA increased by 41% to $82.2 million, driven by the new MFA business and improved gross profit [13] - Adjusted net income rose by 60%, and adjusted diluted EPS increased by 58% [12] Business Segment Performance - The animal health segment reported net sales of $290 million, a 26% increase, with the new MFA business contributing $94.1 million [12][13] - Nutritional specialties net sales increased by 9% due to higher demand in North America [13] - Vaccine net sales grew by 13%, driven by poultry products in Latin America [13] - Mineral nutrition segment net sales were $68.9 million, a 9% increase, while performance products declined to $15 million, a 10% decrease [13][14] Market Insights - Demand for high-quality proteins remains strong across various livestock sectors, including beef, poultry, and dairy [30][31] - Favorable feed costs are helping maintain margins, with expectations of some shifts in trade due to tariffs and disease outbreaks [30] - The company is well-diversified across livestock species and geographic markets, enhancing its competitive position [31] Company Strategy and Direction - The company is focused on sustainability and profitability, emphasizing better gut health and improved feed conversion [10] - The Phibro Forward strategy aims to drive future growth through R&D and digital capabilities [10][48] - Leadership transition is positioned to occur from a place of momentum and operational excellence [9] Management Commentary - Management expressed confidence in the company's direction and the strength of its business, citing positive feedback from customers and strong performance metrics [6][8] - The integration of the MFA portfolio is seen as a significant contributor to current success [5][12] - Management anticipates continued strong performance and demand for products globally [17] Other Important Information - The company raised its fiscal year 2026 guidance for net sales to a range of $1.45 billion to $1.5 billion, representing a growth range of 12%-16% [16] - Adjusted EBITDA guidance was increased to a range of $245 million to $255 million, reflecting a growth range of 33%-39% [16] - Cash and cash equivalents were reported at $74.5 million, with a gross leverage ratio of 3.1 times [15] Q&A Session Summary Question: What are the main drivers of gross margins this quarter? - Management highlighted strong pricing, positive product mix, and effective internal growth strategies as key drivers of gross margins [20][21] Question: Can you elaborate on the guidance update and what is performing better than expected? - Management noted strong revenue performance, effective integration of the acquired portfolio, and improved mix as factors contributing to the positive outlook [22][23] Question: What impact did customer timing have on the MFA business? - Management explained that customer inventory levels caused fluctuations, with expectations for improvement in the next quarter [27] Question: How sustainable is the current demand in livestock markets? - Management expressed confidence in the sustainability of demand due to strong consumer interest and favorable feed costs [30] Question: Are there share gains from the stronger combined portfolio? - Management confirmed that the company has seen strong performance and share gains in poultry and swine segments due to a more complete product offering [33][40]