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PHIBRO ANIMAL HEALTH CORP (PAHC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered double‑digit top-line and profitability growth: net sales $309.3M (+24% YoY), adjusted EBITDA $48.2M (+64% YoY); GAAP diluted EPS was $0.08 and adjusted diluted EPS was $0.54 .
  • Animal Health drove the quarter: segment net sales $229.4M (+33% YoY) led by MFAs & Other (+47% YoY) including ~$36.7M contribution from the newly acquired Zoetis MFA portfolio; Nutritional Specialties (+11%) and Vaccines (+12%) also grew .
  • FY2025 guidance raised to include Zoetis MFA: net sales $1.25B–$1.30B and adjusted EBITDA $172M–$180M; management also guided adjusted EPS to $1.87–$2.01 and an adjusted tax rate ~25% .
  • Balance sheet shows $760.3M total debt and 3.1x gross leverage; cash and short-term investments $67.1M; dividend maintained at $0.12 per share, payable March 26, 2025 .
  • Stock reaction catalyst: integration progress of Zoetis MFA with stronger profitability than initially anticipated, accelerated December sales vs November due to transition normalization, and guidance raise underpinning margin trajectory via Phibro Forward initiatives .

What Went Well and What Went Wrong

What Went Well

  • “By every measure, this was one of the strongest quarters since going public… adjusted EBITDA surged 64%” – CEO on operational momentum and integration execution .
  • Animal Health strength: MFAs & Other +47% YoY with ~$36.7M from Zoetis MFA, plus Vaccines +12% and Nutritional Specialties +11%; segment adjusted EBITDA +48% YoY to $58.2M .
  • FY2025 guidance raised and includes Zoetis MFA; management highlighted early Phibro Forward benefits driving EBITDA and margin growth .

What Went Wrong

  • Foreign currency losses increased to $11.7M in Q2 (vs $7.5M prior year), with Brazil Real volatility noted; FX excluded from adjusted measures but weighed on GAAP EPS and pretax income .
  • Interest expense rose to $9.0M (+$4.3M YoY) due to higher debt for the acquisition; gross leverage 3.1x at quarter-end .
  • Integration transition effects: November sales in Zoetis MFA were about half of December due to blackout/destocking; while improving, management is not “fully out of destocking” yet .

Financial Results

Headline Financials: Prior Year vs Prior Quarter vs Current

MetricQ2 2024 (Dec 31, 2023)Q1 2025 (Sep 30, 2024)Q2 2025 (Dec 31, 2024)
Net Sales ($USD Millions)$249.9 $260.4 $309.3
Gross Profit Margin (%)31.5% 32.1% 32.9%
Operating Income Margin (%)6.3% 6.8% 8.3%
Net Income ($USD Millions)$1.3 $7.0 $3.2
Diluted EPS ($)$0.03 $0.17 $0.08
Adjusted EBITDA ($USD Millions)$29.5 $30.7 $48.2
Adjusted Diluted EPS ($)$0.33 $0.35 $0.54
Consensus Revenue ($USD Millions)N/A (SPGI unavailable)N/A (SPGI unavailable)N/A (SPGI unavailable)
Consensus EPS ($)N/A (SPGI unavailable)N/A (SPGI unavailable)N/A (SPGI unavailable)

Note: S&P Global Wall Street consensus data was unavailable at time of request; estimate comparisons not included.

Segment Net Sales – Q2 2025 vs Q2 2024

SegmentQ2 2024 ($M)Q2 2025 ($M)Change ($M)Change (%)
MFAs & Other$101.9 $150.3 $48.4 47%
Nutritional Specialties$41.4 $45.9 $4.5 11%
Vaccines$29.7 $33.2 $3.4 12%
Animal Health Total$173.1 $229.4 $56.3 33%
Mineral Nutrition$61.3 $63.3 $1.9 3%
Performance Products$15.5 $16.6 $1.1 7%
Total Net Sales$249.9 $309.3 $59.3 24%

KPIs and Balance Sheet

KPIQ2 2025
Free Cash Flow (TTM)$15.3M
Total Debt$760.3M
Cash & Short-Term Investments$67.1M
Gross Leverage (Debt/Adj. EBITDA)3.1x (TTM)
Adjusted Effective Tax Rate~26.4% (Q2 adjusted)
Foreign Currency Losses (GAAP)$11.7M

Guidance Changes

MetricPeriodPrevious Guidance (Nov 2024)Current Guidance (Feb 2025)Change
Net SalesFY2025$1.05B–$1.10B (standalone, excl. Zoetis MFA) $1.25B–$1.30B (includes Zoetis MFA) Raised
Adjusted EBITDAFY2025$124M–$132M (standalone) $172M–$180M Raised
Net Income (GAAP)FY2025$36M–$42M $39M–$45M Raised
Diluted EPS (GAAP)FY2025$0.89–$1.04 $0.96–$1.11 Raised
Adjusted Net IncomeFY2025$55M–$60M $76M–$82M Raised
Adjusted Diluted EPSFY2025$1.34–$1.48 $1.87–$2.01 Raised
Adjusted Effective Tax RateFY202524%–26% ~25% Maintained/Refined
DividendCurrent$0.12 per share quarterly (declared) $0.12 per share quarterly (declared) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Zoetis MFA acquisition/integrationProposed acquisition, anticipated closing; guidance excludes MFA Acquisition closed Oct 31; prelim FY25 Zoetis ~$200M sales, ~20% adj. EBITDA margin; ~$0.25 adj. EPS impact Smooth integration; $36.7M 2-month contribution; December sales ~2x November; higher-than-anticipated profitability; not fully out of destocking yet Improving contribution; integration headwinds fading
Phibro Forward (margin/productivity)Company-wide initiative; expected to drive revenue growth and cost savings Ongoing; adj. SG&A and initiatives referenced Early benefits incorporated in FY25 guidance; one-time consulting costs included in GAAP Margin tailwinds building
Tariffs/macroNot highlightedNot highlightedChina tariff exposure expected “very small”; mitigation plans; minimal FY25 COGS impact due to inventory turns Manageable risk
FX volatilityFY2024 elevated FX losses (Brazilian real, Argentina) Lower FX losses vs prior year FX losses $11.7M; Brazil Real noted Persistent headwind, embedded in GAAP only
Segment demand (protein markets)Animal Health Q4 strength (vaccines, MFA); Mineral/Performance recovering Broad-based demand across MFAs, vaccines, nutrition “Customers performing well”; green dashboard across poultry, swine, cattle; Animal Health +33% Strong demand backdrop
Companion Animal pipelineInvestment continuing; discontinued atopic dermatitis project Continued pipeline progress Still a priority, but Livestock is near-term focus; pipeline progressing Deprioritized in near-term narrative

Management Commentary

  • CEO: “By every measure, this was one of the strongest quarters since going public… Total sales climbed 24%, while adjusted EBITDA surged 64%” .
  • CFO: “Animal Health adjusted EBITDA was $58.2 million, a 48% increase… we estimate Zoetis EBITDA contribution of ~$12 million for the quarter” .
  • CFO on guidance: FY2025 net sales $1.250B–$1.300B and adjusted EBITDA $172M–$180M, including Zoetis MFA and early Phibro Forward benefits .
  • CEO: Confidence in navigating Avian Influenza and tariffs while maintaining growth .

Q&A Highlights

  • EPS guidance raise drivers: majority from Zoetis MFA, with improved legacy performance and timing of hiring leading to higher profitability than anticipated; positive U.S. mix .
  • Zoetis MFA run-rate and transition: $37M in Q2 (2 months); November sales ~half of December due to blackout/destocking; trendline supports ~$200M FY25 contribution .
  • Tariffs: limited direct exposure; no China production; mitigation via pricing and alternate sourcing; minimal FY25 impact on COGS due to inventory turns .
  • Headcount: no reductions planned; acquisition included six plants globally requiring staffing .
  • Margins: adjusted EBITDA margin +380 bps YoY; expected to continue improving with Phibro Forward and Zoetis optimization .

Estimates Context

  • Wall Street consensus via S&P Global for Q2 2025 revenue and EPS was unavailable at the time of this analysis; therefore, estimate comparisons and beat/miss determinations are not included. Management’s raised FY2025 guidance implies stronger adj. EPS trajectory ($1.87–$2.01) and EBITDA expansion versus prior standalone outlook .

Key Takeaways for Investors

  • Strong Animal Health-led quarter; MFAs & Other benefitting from Zoetis MFA integration and legacy demand strength; expect continued contribution as transition headwinds fade .
  • Margins expanding: gross margin +140 bps YoY; operating margin +200 bps YoY; adjusted EBITDA +64% YoY – Phibro Forward and product mix underpin further progress .
  • Guidance reset upward with Zoetis included: FY2025 net sales $1.25B–$1.30B and adjusted EBITDA $172M–$180M; adjusted EPS $1.87–$2.01 – a clear positive narrative change vs prior standalone guide .
  • FX and interest expense remain GAAP EPS headwinds; adjusted earnings better reflect operating momentum as FX is excluded from adjusted measures; watch Brazil Real sensitivity and debt service costs .
  • Tariff risks appear contained with mitigation levers; near-term COGS impact limited given inventory turns; monitor policy evolution and sourcing strategies .
  • Capital structure: 3.1x gross leverage post-acquisition; cash $67.1M; ongoing dividend indicates confidence in cash generation .
  • Trading setup: narrative catalysts include Zoetis MFA integration progress, December acceleration, and FY25 guidance raise; near-term volatility may come from FX prints and any tariff headlines, but demand dashboard is broadly “green” across species and regions per management .