Phibro Surpasses Expectations as MFA Drives 41% EBITDA Spike

Date of Call: Feb 5, 2026

Financials Results

• Revenue: $373.9M, up 21% YOY
• EPS: Adjusted diluted EPS increased 58% YOY
• Gross Margin: Not explicitly provided
• Operating Margin: Not explicitly provided

Guidance:

• Net sales increased from $1.425B-$1.475B to $1.450B-$1.500B, representing 12%-16% growth (midpoint ~14%).
• Total adjusted EBITDA increased from $230M-$240M to $245M-$255M, representing 33%-39% growth (midpoint ~36%).
• Adjusted net income increased from $108M-$115M to $120M-$127M, representing 41%-49% growth (midpoint ~45%).

Business Commentary:

Strong Financial Performance:

• Phibro Animal Health reported consolidated net sales of $373.9 million for Q2 2026, reflecting an increase of $64.6 million or 21% over the same quarter one year ago.
• This growth was driven by a 26% increase in Animal Health sales and a 41% rise in adjusted EBITDA, attributed to successful integration of the new MFA business, increased demand, and improved gross margin.

Segment Growth and Contribution:

• The Animal Health segment grew 26%, with the new MFA business contributing 34% growth, while Nutritional Specialties and Vaccines also showed significant increases of 9% and 13%, respectively.
• Growth was supported by strong performance in Medicated Feed Additives, increased North America demand for dairy, and Latin American poultry product growth.

Leadership Transition and Strategic Focus:

• Daniel Bendheim was announced as the CEO Designate, with the leadership transition occurring during a period of strong momentum and operational excellence.
• The transition is supported by a unified leadership team and a focus on sustainability and profitability through investments in R&D and digital capabilities.

Guidance Increase:

• The company raised its full-year fiscal 2026 guidance, with net sales expected to increase to a range of $1.450 billion to $1.500 billion, representing 12% to 16% growth, and adjusted EBITDA expected to increase to $245 million to $255 million, a 33% to 39% growth range.
• The increase in guidance reflects strong performance in the acquired MFA portfolio and effective leveraging of existing infrastructure.

Market Demand and Stability:

• The company observed continued strong demand in livestock markets, with favorable feed costs and global demand resilience.
• The MFA acquisition enhanced the company's diversification and presence in key global livestock production markets, supporting sustainable growth.

Sentiment Analysis:

Overall Tone: Positive

• Management stated 'These results are encouraging,' 'real sustainable momentum,' and 'the strategy is working.' They raised full-year guidance across revenue, EBITDA, and income, citing strong performance and customer optimism. The tone was confident, highlighted by a leadership transition occurring 'from a position of momentum and operational excellence.'

Q&A:

• Question from Ekaterina Knyazkova (JPMorgan Chase & Co): What are the main drivers of the strong gross margin, and how should we think about it over the next few quarters? Also, what's driving the EPS and EBITDA upside in the guidance update?
  Response: Gross margin driven by strong price realization, favorable mix (higher-margin products), and internal focus on growth in those areas. The upside in guidance is due to strong revenue performance, successful integration of the acquired MFA portfolio, leveraging existing infrastructure, and continued improved mix.

• Question from Unknown Analyst (Bank of America, on for Michael Ryskin): Can you talk about the impact of customer timing on the MFA business and what to expect for legacy MFA and Zoetis MFA growth rates? Also, how sustainable are the favorable livestock end markets?
  Response: The $10M negative impact from a large customer's inventory timing in legacy MFA is expected to improve in Q3 and normalize in the second half. Long-term growth for the combined MFA business is expected to be low to mid-single digits. Favorable protein demand is seen as sustainable due to strong global demand, favorable feed costs, and geographic diversification.

• Question from Unknown Analyst (Bank of America, on for Michael Ryskin): Are you taking market share with the combined MFA portfolio?
  Response: Yes, management noted strong performance in poultry anticoccidial and swine rhinitis products, allowing more participation in customer programs and driving growth.

• Question from Navann Ty Dietschi (BNP Paribas): What drove the outperformance of the Zoetis MFA portfolio, and should we expect the $10M legacy impact to return in Q3?
  Response: Zoetis MFA outperformance is due to strong team execution, integration, and share gains. The $10M negative impact from the legacy customer is expected to come back within the second half of the year, though the timing between Q3 and Q4 depends on orders.

• Question from Navann Ty Dietschi (BNP Paribas): Can you expand on commercial traction and vet feedback for Restoris in companion animal?
  Response: The launch has gone more or less according to plan, with strong interest at VMX and continued excitement in the vet community. It will be a more meaningful contributor in future periods.

• Question from Linda Bolduc (Morgan Stanley, on for Erin Wright): What's been realized to date from Phibro Forward initiatives versus what remains ahead? How much of margin expansion is structural vs. cyclical/mix-related?
  Response: Phibro Forward contributions are accelerating, with optimal benefits expected in fiscal 2027. It drives structural changes (higher gross margin, revenue strategies) and R&D/technology for future growth.

• Question from Linda Bolduc (Morgan Stanley, on for Erin Wright): Is the innovation in companion animal (oral health) a meaningful contributor to 2026 or more so going forward?
  Response: Oral health innovations will be more meaningful going forward, with limited contribution in the current quarter and more material impact expected in fiscal 2027 and beyond.

Contradiction Point 1

Gross Margin Sustainability and Outlook

Contradiction on near-term gross margin pressure and sustainability.

What are the main drivers of the strong gross margin this quarter, including mix or one-time factors, and how should we think about gross margins over the next few quarters? - Ekaterina Knyazkova (JPMorgan Chase & Co, Research Division)

2026Q2: Overall, underlying gross margin performance is strong. - Glenn David(CFO)

What margin profile and expense dynamics should be expected for the remainder of the year? - Erin Wilson Wright (Morgan Stanley, Research Division)

2026Q1: margins are expected to drop slightly through the year as investments continue. - Glenn David(CFO)

Contradiction Point 2

MFA Business Growth Outlook

Contradiction on specificity and forward-looking nature of MFA growth expectations.

Can you discuss the impact of customer timing on the MFA business, provide details on the recent developments, whether the effect will reverse in Q3, and how to assess the normalized growth rates for legacy MFA and Zoetis MFA considering recent quarterly fluctuations? - Unknown Analyst (Bank of America, on behalf of Michael Ryskin)

2026Q2: Long-term, the combined MFA business is expected to grow at low to mid-single digit rates. - Glenn David(CFO)

How sustainable is the growth in the legacy MFA business, and can you break out price versus volume, provide the underlying run rate, and clarify if timing dynamics or faster-than-expected Zoetis growth contributed? - Erin Wilson Wright (Morgan Stanley, Research Division)

2026Q1: Expectations for future growth are positive, with synergies... enabling more comprehensive customer programs. - Larry Miller(COO)

Contradiction Point 3

Growth Expectations for the Legacy MFA Business

Contradiction on the expected growth rate for the mature legacy MFA market.

Can you discuss the impact of customer timing on the MFA business and how to view the normalized growth rates for legacy MFA and Zoetis MFA, considering recent quarterly fluctuations? - Unknown Analyst (Bank of America, on behalf of Michael Ryskin)

2026Q2: For the full second half, the legacy MFA and Zoetis MFA portfolios will have a full year comparison. Long-term, the combined MFA business is expected to grow at low to mid-single digit rates. - Glenn David(CFO)

What are your expectations for the company's market share growth in the legacy MFA market? - Navann Ty Dietschi (BNP Paribas Exane)

2025Q4: The legacy MFA market is mature and is expected to grow flat to low single digits, which is built into the FY2026 guidance. - Jack Clifford Bendheim(CEO)

Contradiction Point 4

Phibro Forward Initiative's Timing and Benefits

Contradiction on when the Phibro Forward initiative will peak and deliver full benefits.

Could you provide an update on the Phibro Forward initiatives, specifically the progress made so far versus the remaining goals? - Linda Bolduc (Morgan Stanley, Research Division) - On behalf of Erin Wright

2026Q2: Halfway through fiscal 2026, contributions are accelerating. Optimal benefits are expected by the end of FY26, with full annualization of benefits in fiscal year 2027. - Glenn David(CFO) and Daniel Bendheim(CSO)

Can you quantify Phibro Forward's expected cost savings and highlight key low-hanging fruit areas? - Erin Elizabeth Wilson Wright (Morgan Stanley)

2025Q4: Phibro Forward contributed to FY2025 earnings and will continue to drive growth in FY2026. It is expected to peak in FY2027. - Jack Clifford Bendheim(CEO)

Contradiction Point 5

Drivers of MFA Business Performance

Contradiction on the primary factors affecting the legacy MFA business performance.

Could you discuss the impact of customer timing on the MFA business, whether it will reverse in 3Q, and how to view normalized growth rates for legacy and Zoetis MFA amid recent lumpiness? - Unknown Analyst (Bank of America, on behalf of Michael Ryskin)

2026Q2: A significant customer held different inventory levels, causing a ~$10M negative fluctuation in legacy MFA sales in Q2. - Glenn David(CFO)

What is the company's exposure to upcoming pharma tariffs, particularly in the U.S. Animal Health business, and can pricing mitigate potential impacts? What factors contributed to the core MFA business underperforming recent trends, and what are future expectations? - Ekaterina Knyazkova (JPMorgan)

2025Q3: The -3% growth in legacy MFA was driven by the timing of large customer orders and a strong comparison to Q3 last year, which grew over 16%. - Glenn David(CFO)