ImmuCell Corporation (ICCC) Earnings Call Transcript & Summary

Thanks. Morning, everyone, and welcome aboard. Per what the operator on this conference call said, I'm Joe Diaz, and I work with Lytham Partners. Our firm serves as the investor relations consultant to ImmuCell. I appreciate each of you taking the time to be with us to go over the unaudited results for Q2 along with the 6 months that closed on June 30, 2026. A reminder and a caution for those listening: anything management says while this call is underway falls into the category of forward-looking statements, and that covers any remark touching on events still to come, anticipated results down the road, or forecasts regarding moves the company intends to make going forward; such statements should not be taken as assurances of how things will turn out and carry risks and uncertainties that might lead actual results, outcomes or events to wind up materially different from what gets discussed today. You can find further details about forward-looking statements, plus the risks and uncertainties that might affect future results, outcomes or events, in the cautionary note on forward-looking statements or the safe harbor statement included with the press release the company filed last night, as well as in the company's other periodic filings with the SEC. Anything we talk about on today's call is accurate only as of today, Friday, August 14, 2026. The company assumes no duty to revise any information covered on today's call. Also be aware that we may reference certain non-GAAP financial measures at points during today's call. Having said that, I'll hand things over to Oliver Te Boekhorst, who serves as President and CEO of ImmuCell Corporation, so he can offer a few opening comments. Oliver?

Joe, thank you, and good morning everyone. It's a pleasure to have you with us while we walk through ImmuCell's second-quarter 2026 results. Our review of those results will be accompanied by a handful of slides, and you'll find those same slides within our refreshed investor presentation, accessible through the Investor page at immucell.com/investors. During late 2025, ImmuCell carried out major changes aimed at improving our prospects for success, including a strategic emphasis on the calf scours market, plus investments in leadership, growth of our sales force and manufacturing. The rationale for this change was that within the sizable and expanding calf health sector, we hold a strong competitive position thanks to First Defense, our highly differentiated product for preventing calf scours, and we see substantial room for additional growth for our portfolio both within the U.S. and abroad, as well as through targeted innovations. Ever since we began emphasizing First Defense and stepped up our efforts to improve yield, our growth has sped up and our share has risen. The strength of our commercial outcomes speaks to what we've gained from having product availability back in place, from putting money into our commercial team and product portfolio, and from a supportive domestic calf market. As we've noted before, making certain that product supply is dependable has been a major priority for us. A great deal has been reworked by the team throughout the supply chain, and we expect to turn out close to 1 million additional manufacturing units in this year compared with 2025. With the plant we have today, we're now in a strong position to serve rising customer demand as we carry out a significant capacity expansion program, one projected to increase our present capacity by more than threefold and to bring down product cost over the long term. During this call, we'll go over what's influencing gross margin, the steps being taken to boost yields, and the capacity investments we have planned. Given where we stand as an organization of our scale, concentrating on the products we already sell successfully remains highly logical, as does addressing the availability issues that have long held back our expansion—and we're glad to share our latest developments on that front. At this point I'll hand things over to our Chief Financial Officer, Timothy Fiori, who will walk through our second quarter financial results in greater detail. Tim?

Thanks, Oliver. First, a quick review of product sales results—these match what we put out in the July 9 press release. Every figure I mention is rounded and approximate. For the second quarter of 2026, product sales reached $7.2 million, up 11.5% from the second quarter of 2025. That second-quarter growth stands out because the comparison against the second quarter of 2025 is a tough one—back then we had cleared the backorder situation and saw sizable restocking orders from distributors. Domestic sales rose 27.7% in the second quarter versus the second quarter of 2025, hitting $6.2 million, whereas international sales fell 38.9% to roughly $1 million over that same span. Canada represented most of that drop, tied to the 2025 backorder clearing. For the 6-month period that ended June 30, 2026, product sales were $17.5 million, a 20.9% gain over the 6-month period that ended June 30, 2025. Oliver will cover sales out of distribution, which are strong and moving in the right direction. Gross margin as a percentage of product sales stood at 33.9% for the second quarter of 2026, versus 43.7% for the second quarter of 2025. The year-over-year drop in the second quarter mainly came from moving costs that used to sit with Re-Tain into cost of goods sold, plus reduced output in one of our manufacturing process subprocesses. On a sequential basis, gross margin was down 11.1 percentage points from the first quarter, which breaks down as 7.5 points from lower manufacturing output, 2.1 points from roughly $150,000 of scrap tied to a purchased material, and 1.9 points from the Re-Tain cost shift. The weaker second-quarter output reflected anticipated sales volumes and planned process changes meant to improve future yields. Even with those pressures, we met demand and grew finished goods inventory. Reported operating expenses benefited from a reduction of the previously announced $2 million settlement with our former Re-Tain contract manufacturer, shown on the income statement as other operating income. Sales, marketing and administrative expenses climbed to $2.4 million in the second quarter of 2026, up from $1.4 million in the second quarter of 2025. That increase came from investments in leadership and expanded commercial activities, both as previously announced. Product development expenses dropped from approximately $800,000 in the second quarter of 2025 to approximately $120,000 in the second quarter of 2026, driven by cuts in spending on Re-Tain product development and the shift mentioned earlier of former Re-Tain-related expenses into cost of goods sold. Excluding the settlement, operating expenses were $5.2 million in the 6 months ended June 30, 2026, compared with $4.5 million in the 6 months ended June 30, 2025. Bringing our income statement review to a close, net income for the second quarter of 2026 came in at $1.8 million, which works out to $0.20 per share, versus $500,000, or $0.06 per share, in the second quarter of 2025. Over the first 6 months of 2026, net income reached $3.8 million, compared with $1.9 million in the same period a year earlier. Included in both the second quarter and the 6-month 2026 results is the $2 million settlement that came in during the second quarter. As we always do, adjusted EBITDA figures were included in yesterday's earnings release. In our view, adjusted EBITDA helps management and investors alike by showing how we perform across reporting periods on a consistent basis, leaving out certain charges from our reported income before income taxes. Adjusted EBITDA for the second quarter of 2026 was $2.7 million, versus $1.4 million in the second quarter of 2025. Adjusted EBITDA for the first 6 months of 2026 was $5.4 million, compared with $3.7 million in the same period last year. The $2 million legal settlement mentioned earlier is included in both 2026 figures. Wrapping up on financials, let me call out a few key balance sheet items. As of June 30, 2026, our balance sheet remains strong; we closed the second quarter of 2026 with $8.9 million in cash on hand and $9.1 million in inventory. Working capital rose from $13 million at the close of 2025 to $16.6 million at the close of the second quarter of 2026. The settlement added $2 million to our cash and to the improvement in working capital. ImmuCell recently announced a $3.5 million investment in freeze-drying capacity, aimed at building scalable manufacturing capabilities and ensuring continued reliability — a reliable supply of First Defense. We anticipate finishing this initial phase of the expansion during the first half of 2027. Today, we are announcing our intent to invest approximately $4.5 million in our liquids processing capacity. This phase should be finished by the end of 2027. Both investments take advantage of existing equipment and facilities that were built for the discontinued Re-Tain product. We expect this capacity expansion will more than triple our current capacity and lower product costs over the long term. At present, we intend to fund the majority of this expansion with cash on hand and cash from operations; we may add to this investment with our line of credit facility as needed. With that, I will hand the call back to Oliver. Oliver?

Tim, thank you. During my opening comments, I noted that ImmuCell chose in late 2025 to concentrate on our scours prevention lineup, First Defense. During the opening six months of this year, product revenue reached $17.5 million, which represents a 20.9% gain over the opening six months of 2025. Our flagship offering, Tri-Shield, delivers the most advanced protection against neonatal diarrhea, and it posted solid 25.1% growth across this year's first half. Tim also described how well the U.S. did, growing 32.5% in the first half of 2026 versus 2025. We're pleased to share as well that roughly 20% of that growth came from our functional feed line. Among the other measurements we track to gauge commercial performance are distributor-level volume gains and our market share; we obtain data revealing how our distributors' out-the-door revenue and the volumes of our products shift monthly. That provides a solid picture of how our products perform at the producer level. Our distributors recorded volume growth of 21% and 28% during the first and second quarters of 2026, respectively, versus those same quarters a year earlier, or 24% for the first half of 2026 versus the first half of 2025; our market share grew too, measured as First Defense's portion of animals given a biological scours preventative within the U.S.; and that share climbed from roughly 15% in December 2025 to roughly 19% by the end of June 2026. Our price sits at about double what our competitors charge, meaning our portion of producer spending climbed from roughly 29% to 38% across that same stretch; we take great pride in how well our product works, yet this share gain also stems directly from investments made to grow our commercial team. Each day we reach and win over additional producers. Keep in mind that the market we compete in is appealing, buoyed by considerably higher calf values. A day-old calf's value has risen from roughly $400 to $1,700 since 2024, which strengthens the economic rationale for stopping scours in those calves. Among pre-weaning calves, scours is still a top cause of death and produces as much as $1 billion in yearly economic losses within the U.S. Over half of all calves continue to receive no biological scours preventative whatsoever. So we must engage, pose the proper questions and demonstrate the health and economic advantages of our solutions in ways suited to each particular production environment. Historically, manufacturing capacity has limited ImmuCell's growth. Thus securing dependable supply stays a strategic priority. Between January and July, our team finished a thorough planning effort spanning process design, equipment and facility needs, cost estimates and implementation planning, and that effort underpins our choice to proceed with an investment of roughly $8 million in freeze-drying and colostrum processing capacity, drawing on the facilities and equipment tied to the former Re-Tain program. The plan we've come up with pairs fresh equipment with our proven know-how when it comes to preserving, concentrating and purifying antibodies derived from colostrum. It isn't simply a matter of tacking on one more production line. What this project aims to do is bring our manufacturing approach up to date, cut down processing times, grow capacity and enhance product economics over the long haul. Under the new processes, total processing time should drop from the 2 to 3 months it takes today to under 1 month down the road, while more than tripling the capacity we have now. Contracts are now in place with the suppliers of that equipment, and we anticipate kicking off engineering and construction work before long. As Tim said, at present we plan to fund the bulk of this expansion out of cash on hand, and the $2 million settlement gives a helpful boost to the cash we have available. In the near term, getting better yields out of the plant we already have stays a top priority. During the first quarter, we hit record production of over 450,000 units each month. Then in the second quarter, output came in at roughly 350,000 units per month on average, and June accounted for most of that decline. Some of the softer output was intentional. Revenue in the second quarter is always our lowest of the year, and better planning on our part demonstrated we could satisfy demand without pushing production too far ahead. On top of that, we carried out deliberate process changes and halted some activities so we could make quality investments and do maintenance work meant to lift future yields. As Tim walked through, weaker manufacturing output dragged gross margin down by about 7 percentage points versus the first quarter. The important thing is that we continued to satisfy customer demand and built up finished goods inventory over the quarter. Tim also pointed out that we took on roughly $150,000 of scrap tied to a fairly minor purchased material. Our quality controls caught the problem early, halted the manufacturing process and kept the impact contained. So our focus stays on raising yields, tightening our process discipline and dependably supporting ongoing demand growth. On our previous call, I noted that improving yield is hard and results from executing many different things extremely well each and every day, and I'm endlessly grateful to the team for what they've put in. Plenty of work remains if we're going to keep pace with demand through the rest of 2026. We must remain vigilant about managing contamination risk. We must continue delivering excellent service to our colostrum suppliers, and we must handle yield improvement at the same time as we carry out a major capacity expansion at our colostrum plant. The headway we're making on yields, alongside our 2-phase expansion program, leaves us more confident than before in our capacity to satisfy customer demand and build a supply that is sustainable, scalable and reliable. On a tactical level, with that added confidence in meeting customer demand, we're now putting product cost improvements first and bolstering colostrum sourcing capabilities to underpin scalable growth. The battle for high-quality colostrum is heating up, and our answer is new payment programs, enhanced technical services and broader farm recruitment efforts. Roughly 50% of what we spend on products goes to colostrum, which means that expanding what we collect and boosting the output we get from colostrum serve as extremely significant engines for our company; on earlier calls we've talked about how firmly we believe in the global potential for what we sell. The international business development executive we recently brought on board is assisting us in shifting away from reacting to situations toward acting in a more forward-looking, strategic manner. We are diligently evaluating opportunities in various markets and balancing those against what we would need to spend on regulatory work and launching. It will require a while before our international strategy bears fruit. In the interim, the 3 new members of our U.S. sales force are ramping up and producing outcomes that exceed our projections, as Tim mentioned previously during this call. Last, let me restate what I've said on every call. At ImmuCell, our foremost objective is strong execution throughout the entire organization, spanning sales, farm management, vaccine production, and colostrum processing, along with all the supporting areas that enable profitable growth down the road; working alongside the team is a joy as we carry out our concentrated plan to perform now while ensuring tomorrow. Having said all that, we'd be glad to answer your questions. So let's ask the operator to open the lines.

I had an opportunity to look at the Form 10-Q. On it, I notice that your company is still carrying out investigation studies regarding Re-Tain. Is there any additional update you could give on that? Has Michigan State perhaps reached out to you about possible time lines for when that work might be finished? Anything more you can share about how things are progressing would be useful.

Appreciate that question. Yes, we've had Michigan State team up with us to look into what you could call one more application for Re-Tain. That research is still underway. Talks regarding the interim findings are continuing, and completion won't happen until, I'd say, the close of September, possibly the start of October. So once we've got the complete results at that stage, we'll make them available to investors.

It's really nice to see revenue getting better and the attention you're giving to margins. You gave enough specifics that my question about margins has actually been answered. In the 10-Q, I noticed the share held by the 2 main customers declined, and I take that as proof of what's coming from having more salespeople. Is — might you say more about that? Would that be a reasonable enough thing to assume?

Alright, that's a really good question. I'll begin by laying out how our commercial side is set up; basically, every sale we make goes via distribution. On top of that, we have a commercial group whose job is bringing in new customers, and those customers then place orders for their products through the distributors we work with. So when we move into new segments or new geographic regions, you might see temporary fluctuations in terms of which distributors are the ones supporting those customers. But really, it comes down to a matter of timing and simply where those new customers are situated and which distributors they'd rather work with, rather than any deliberate shift on our side. Hopefully that's clear. The one other point I'd make is that our customer acquisition numbers this quarter have looked quite strong, and we've included that in the investor deck on our website; so the data is there for you to look at, but honestly it's been a really solid couple of quarters when it comes to bringing in new customers.

While we’re waiting to see if any more questions come in, I have a few here that I believe you may want to address. Oliver, could you walk us through how ordering is behaving in your distribution channels right now? Is it basically where you’d like it to be? Are there any specific problems you’re seeing? Could you speak to that?

Absolutely, Joe. I'll handle that question myself. Over the last 12 months, we've discussed quite a bit the ways distributor ordering behaves, as well as how backlog fulfillment orders move, since our year-ago comparisons included fulfillment activity. And we've consistently maintained that we anticipated catching up to that by the close of this quarter — the quarter just finished, at the conclusion of Q2 2026 — and we still believe that's exactly what occurred; backlog got fulfilled roughly by the close of the second quarter of 2025, so at this point our comparison base is somewhat cleaner.

I might have missed it — did we already talk about Re-Tain? What I'd like to know is whether the data has been gathered and a package put together that could be licensed.

I appreciate that question. As it happens, we are still waiting on findings from the research trial being run by Michigan State. Our expectation is that it will wrap up around September or October, and only after that will we move forward with any additional choices regarding Re-Tain.