Phibro Animal Health Corporation (PAHC) Earnings Call Transcript & Summary

Ladies and gentlemen, the program is about to begin. [Operator Instructions] At this time, it is my pleasure to turn the program over to your host, Michael Ryskin. Please go ahead.

Great. Thanks for joining us, everyone for our next session. My name is Mike Ryskin, from the Bank of America Life Science Tools, Diagnostics and Animal Health team. And for our next session, we're pleased to host Phibro Animal Health. Joining us, we've got Glenn David, CFO; and Danny Bendheim, Director and EVP, Corporate Strategy. Go ahead, Danny. Thanks for being back with us.

Thanks for having us, Mike.

Great to be here.

Same format as all our sessions. It will be a sort of a fireside chat format for 40 minutes. [Operator Instructions] I guess just to kick things off, our easy intro question was you guys recently reported fiscal 2Q. You had some moving pieces in the quarter, but then you also reiterated the guidance. Any opening comments and anything you want to sort of have us as the takeaway message from the quarter?

Yes. I think the first thing to highlight from the quarter, Mike, is probably the performance of the Animal Health sector. So when you look at the Animal Health sector, in particular, it grew 6% for the quarter and 5% for the first half. So really strong performance there. We're also pleased to be able to reiterate guidance. When guidance was restated in the first quarter, there was a lot of uncertainty in the market, particularly with our operations in Israel, and we're incredibly thankful to our colleagues there. And the operations really are performing with really limited disruption. So very glad to be able to restate and confirm the guidance for the full year. We really see good momentum as we move into the second half of the year. As the guidance indicated, it does indicate an uptick in revenue in the second half of the year, and that will come from continued strong performance in our Animal Health business but also improved performance in the Mineral Nutrition and Performance Products, which did lag in the first half of the year. So really excited about the second half of the year. We see good momentum, and we see good demand for our products.

All right. And then maybe one for you, Glenn, while you're doing -- just a question we got a couple of times. You recently joined Phibro, you're still early in your tenure. But anything you want to touch on in terms of the initial earnings, anything that sort of you put down as your early goals as incoming CFO.

Yes. Thanks, Mike. And as you mentioned, I am really early, right? I think I'm 3 weeks in right now. So maybe it helps to just talk a little bit about what attracted me to Phibro in the first place. So first, Phibro does play a leadership role particularly in livestock and the MFA space, and obviously, I have a strong passion for the industry. So really glad to be able to join a leader, particularly in the livestock segment. Also, as I was going through the process, I'm really impressed with the leadership team that I got to me, really strong team with great experience in animal health. And also just some of the few observations. I do see opportunity for continued growth in this business, right, starting at the revenue line. As we've talked about in the past, the livestock market does have opportunities for growth moving forward, growing in that low to mid-single-digit range. And with our portfolio, we see our ability to do that. And also as we continue to expand within vaccines, we see opportunities for significant growth. And in the medium term, the opportunities that we see in companion animal as well for revenue growth. And then from an income perspective, I do see opportunity to improve margins as the mix of the portfolio shifts a little bit more towards vaccines but also as we continue to be disciplined in taking price and also with opportunities in savings in both COGS and OpEx. So really excited about the opportunities to drive income growth moving forward and working with the management team to do so.

Got it. That's really helpful. You touched on a lot there, Glenn, that I want to follow up on. But first, let me just kick it off on the livestock market. And as you said, low to mid-single-digit growth that's typically how we think about the broader livestock market over a multiyear period, pretty defensive market and then you don't have a lot of downside for most of them. Obviously, it's going to vary year by year and species by species. But yet your 2024 guidance is a little bit below that or on the lower end of that and you're calling for about 2% -- or 2% to 2.5% sales growth. So what are the factors there? What are you seeing in livestock markets in your business this year versus that long-term dynamic?

Yes. So I'll start, and I'll let Donny add any color. I think you really need to look at the performance of the different businesses when you look at the performance for Phibro in the first half and also the guidance for the full year. So when you look at the performance for the first half, the Animal Health segment within Phibro did grow 5%, so sort of in line with those expectations for the livestock market. Really what's driving the 1% growth for the first half of the year were some particular issues within the Performance Products and the Mineral Nutrition products portfolio. Those businesses declined in the first half of the year, driven by some inventory adjustments, both from our side as well as on the customer side. So when you look at the guidance, which implies a 2% growth at the midpoint, we are expecting an improvement in growth in the second half and that comes from continued, strong performance in the Animal Health business. So again, as we talked about growing in line with the market but also better performance from both our Performance Products and our Mineral Nutrition Group.

Okay. And then thinking about end market itself in 2024 -- excuse me, it has been a little bit volatile in the last couple of years. Some segments done a little bit better, some a little bit worse. Danny, maybe you, how do you feel about the moving pieces there? What's got you most excited as you go through this year and start thinking ahead to fiscal year '25?

Yes. Internally, we kind of have a checkerboard of all the different regions that we operate in, all the different species. And red is trouble, yellow is doing okay, green is doing well. And it's mostly yellow and green. There are some reds out there. I think we've highlighted in the recent past kind of the U.S. dairy being a challenge for us, and that's a business that where we have a significant exposure to with our nutritional specialty products still under a lot of price pressure there. The less efficient producers are probably losing money right now. China has been a little bit of an issue. But I think the U.S. as a whole, pretty strong across the species with the exception of dairy. You have -- Mexico has been doing nicely. Brazil, mostly yellow or green. So overall, we feel pretty good about the industry, about the livestock side of the industry. As you mentioned, weather plays a huge part and capacity and El Nino, how does that affect it. In Brazil that could theoretically be a bigger issue depending on what their seasons are. So always, it's hard to give like say, hey, how we think about guidance for next year, obviously, we're still -- [ we got ] 4 months of this fiscal year, and we'll give that next guidance. But I think as a whole, we feel pretty good about the industry.

Okay. That's a good overview. I'd love to take a look at that checkerboard one day just to see if you want to just sneak that in at some point that would be very useful. But maybe just on the dairy, U.S. dairy and nutritional specialties in particular. I'd love to get your thoughts on that. I mean you mentioned the price pressure. But it feels like that's a market that was really, really strong for a multiyear period. And we really thought it would continue, and it seems like it's hit a little bit of a harder time. Anything else you can offer in terms of what's behind that? And is that a market that you think can return to that high single-digit 10% plus growth?

Are you saying the dairy market or our nutritional specialties sales?

Your nutritional specialties business, but understanding the underpinning of that is...

Yes. I mean listen, there's obviously -- there's the market itself and then our market share within that market, and we're continuing to grow share overall. So we don't need to see necessarily a huge growth in the overall market. We still have a lot of room. We have new products that we continuously look to introduce. Our nutritional specialties reporting segment is both dairy and poultry, and our companion animal currently is also reported in there. So it's not kind of a direct proxy to the U.S. dairy industry. Historically, we've guided towards kind of low double-digit growth in nutritional specialties. And despite the fact that this year has not started out that way, I think our long-term guidance on that segment remains the same. It's a big focus for us, and we're still excited about it.

And then maybe you could just -- you touched on Mexico, you touched on Brazil, but I have to ask you the Argentina question. Obviously, we're all paying attention to what happened with the Argentina peso and the devaluation there. I mean could you provide a little more color on sort of magnitude of your exposure, any possibilities to offset, just how we think about that coming through the model?

Yes. I mean I think when you look at our overall exposure, right, it is somewhat limited. Our business in Argentina is less than a few percent of our total revenue. But we're not really seeing any real changes to customer behavior, right? So just for some context, the P&L hit was really related to restating the balance sheet assets in terms of mostly inventory and accounts receivable, and we'll continue to look to minimize those balances moving forward. But price list in Argentina is actually tied to the U.S. dollar. So the business has been really good in terms of making sure that we're taking aggressive price increases to reflect the devaluation of the peso. So we really haven't seen any long -- we don't expect any long-term negative impact from a business perspective.

Okay. That's helpful. And now that you've taken that adjustment on the balance sheet assets, is that -- I'm not going to say it's fully derisked going forward because, obviously, you could see further devaluation. But do you feel like that's sort of a onetime hit?

Yes, in terms of reflecting the current currency conversion. But to your point, if there was future devaluations that could have additional impact.

Okay. All right. That's helpful. All right. So maybe I want to switch a little bit to some of the individual products and the individual business lines. Your vaccine business within the Animal Health subsegment, it's been doing incredibly well in the last couple of quarters. I'd love to hear your thoughts on what's really driving that, where you're seeing the biggest strength, how we've been able to post such good results there.

Yes, I'll take that. So yes, it has -- like nutritional specialties, we call out vaccines for low double-digit growth historically and repeating it this year. I think our business is small enough still that you sometimes have these strong years and then some smaller years and it averages out just similarly with nutritional specialty. So last year, fiscal '23, I think we did about $100 million in vaccines.

Exactly [ $100.0 or so ].

And we're at about $56 million in the first 2 quarters here, including $30 million last quarter. So obviously, we're ramping really nicely. What you're seeing is a combination of both our commercial poultry vaccines. These are vaccines that we sell in many markets around the world. We've had -- it takes years of work to get there but we've had registrations that have begun to come through in different markets. Most notably, we've called out some South American registrations that have been approved. And as we start selling those products, we obviously get an initial boost in those years. So this year is the end of the -- the tail end of last year, really the calendar year, beginning like last February through this year, we saw some nice registrations get approved, and we're seeing the effects of that. Obviously, we'll start overlapping as we get to towards the second half of the year, but we are still building share. So you have that. And we've also called out we've built an autogenous vaccine facility in Brazil and that's impactful as well, not at the same level as the conventional vaccines that you've seen, but still impactful and going forward, that will increasingly be impactful. So we have a long list of registrations for our vaccines around the world. It's obviously stuff that is behind the scenes, but we have a strong vaccine portfolio on poultry. We actually had our first approval in Israel for an aqua vaccine, an aqua portfolio, which we will look to be rolling out over the next few years. You need the kind of the host country to get approval and then you can start looking for exports that will take 2 or 3 years in general. So we have a lot that we're excited about in vaccines, and we'll continue to highlight, and we'll continue to grow as Glenn mentioned in his starting comments.

Okay. That's helpful. And you actually touched on a couple of things there I want to follow up again. When you talk about registrations and approvals and things like that, the last one for aqua you mentioned Israel. Should we assume that most of the approvals you're talking about are in the U.S. first and other geographies later or somewhere else and...?

Yes. So on the vaccine side, actually, so the U.S. -- well, so our vaccine -- our commercial poultry vaccines are manufactured ex U.S., we have a facility in Israel. We have a facility now in Ireland, which is still ramping up, but -- and it's taken longer than we expected, but is nearing the end of that ramp. So that's an exciting period of time as well for us. Having said that, it's actually the -- so it'll be the host countries, it'll be Ireland, it'll be Israel are the initial approvals and then you'll move on to other countries. We actually -- U.S. has some substantial laws that prevent, for the most part, vaccines being manufactured outside the country being brought in. So the U.S. is one market we actually don't have a lot of access to on the commercial vaccine side. We do have, though, our autogenous vaccines in the U.S. And it's not really an approval process there, but that's also been a very strong and great business for us. That's based in Omaha. And we -- I think we called out that we have expanded there as well. We purchased the neighboring property, and we are expanding our production there as well. So on the autogenous side, we have -- so our commercial vaccines, which is -- the larger part of our business is Israel and Sligo, Ireland; autogenous we have in the United States; we have the recently opened one in Brazil; we have a small autogenous, actually, in Israel as well. A lot of -- there are a lot of synergies between our different autogenous vaccine facilities. The technology that we have is a strong technology, and we do see that as a competitive advantage. So our ramp-up in Brazil will be faster than I think you would historically see an autogenous vaccine facility get share. So it is something that we're -- as you can tell we're excited.

And specifically for the aqua vaccines, Mike, as you know, the U.S. isn't big market for the aqua vaccine, so we wouldn't be starting there. For cold blooded species, it's more Europe and Latin America; and for warm blooded species, more Latin America, more APAC as well.

Okay. And on the traditional, commercial vaccine, is there any interest in expanding facilities in the U.S. in the future? Or is that not in the near-term plan? Or just to get into that market domestically?

I'd say, we have a lot on our plate right now with our opening of our Ireland facility. And I think the strategy that we've -- I kind of having stressing of late is autogenous vaccine facilities, and I do think that there's opportunities to grow -- as we talked about, grow our U.S. -- we are growing our U.S. presence there and other areas as well.

Okay. Okay. And then how should we think about the margin profile of some of these businesses? I don't know to what level you want to go into this. But whether it's vaccine overall or autogenous versus commercial vaccine as they ran -- Animal Health -- this Animal Health segment, overall, is certainly above your corporate average. That's where the majority of the profit come in, but I would imagine vaccine would be on the higher end of that as well, right?

Yes. So I think vaccines are higher -- I mean taking a step back, I'm not sure if everyone understands what autogenous vaccines are. They're custom or bespoke vaccines. You go to a farm and you'll find the bacteria disease there or the viral disease there, you'll make a vaccine specifically for that. As you can imagine, that's more costly than kind of a commercial vaccine where you're making one vaccine that covers a specific disease, obviously, a disease that does not move that much, it does not mutate that much, commercial vaccine is the more effective angle. But for diseases that do have a lot of mutations, you'll look to autogenous. Commercial vaccines have a lower cost of goods as a result, better margin profile. Autogenous vaccines are more expensive for the customer, higher cost as well, the net margin might be similar. But obviously, from a margin percentage, you have a better percentage on the commercial vaccines.

Okay. But both would be accretive to your total company margins?

Yes. Absolutely, right. As you said, Mike -- I mean as you look at, commercial vaccine is probably the highest percentage, the autogenous next then the MFA and then obviously, we have the Mineral Nutrition and Performance Products as well.

Okay Yes. It makes sense. that's pretty much exactly I ranked it. Okay. I mean, Danny, maybe on the point you just touched on there at the end would be an easy transition as you talked, you talked about price. It's been very rapidly evolving environment in the last couple of years in terms of price, both in terms of COGS to you and your input costs, but also price you're going to take with your customer. As we're here in 2024 and halfway through your fiscal year, would you say the pricing dynamic is normalizing a little bit? Are we coming back to more traditional pricing levels? Or is it still really volatile?

I think it's funny because Phibro, I guess, pre-COVID, we were historically not a company that looked at pricing as a lever that we would really chase after because there are so many volume opportunities for us. During COVID, we had no choice but to take price. And frankly, I think there's still -- within our cost structure, there's still some places where we haven't fully realized the cost. So I would say that as we look internally at our company, we haven't fully shaken out kind of where those opportunities still exist. I don't think we'll have our final say on the matter. So I would expect some volatility still going forward. I don't know, Glenn, if you want to...

Yes. I'm still learning the business but as I would always say, price is always an area that I think is important to really be aggressive on and an area that, obviously, I want to focus on and understand particularly for the Phibro portfolio.

Have you noticed any of your customers -- we often talk about your customers as being relatively price agnostic to a certain degree. Just because the other day, for them it's about margin, it's about end customer demand, things like that, but the value-add of the products you're offering, would you say that's still the case? Are they becoming more aware of price that you're taking? Or is it still something that they're not really bothered by as long as their margins there in the back end and as long as the demand is there?

I don't think anyone's ever happy when you take price. So I'm sure, I can't speak for all of our customers, there's appropriate pushback. I think we take price -- we're taking price because we can show that why we're doing it. So we recognize this is an economic decision for -- on the livestock side. I will say, when you move to the vaccine market, it really is more disease -- in response to specific diseases or immediate pressures as opposed to, let's say, nutritional specialties which is more of getting ahead of -- immune boosters, things of that nature. So on the vaccine side, really -- your product really typically is differentiated from other producers and that's why that's usually a little bit with stronger margin profile.

Okay. All right. I'm going to start to work on a couple of product-specific questions that we always get. One is there's been a lot of news about Mecadox over the last couple of years but also over the last 6 months. Any updates you can give us on the ongoing dialogue with the FDA there?

I'll use ongoing dialogue loosely. The FDA has almost for a decade now or maybe even longer been raising questions about Mecadox. What it comes down to is right now they are challenging -- they're not challenging the safety of Mecadox. They're not challenged -- in any respect. What they are challenging is whether or not we're complying with the rules as far as having a marker within the product. We believe we are. They have taken an approach to say we haven't. If they are able to pull a marker which is required, then we would have -- obviously, would ultimately have to pull the product. We think that this is a back-ended way the way the FDA is doing this. We've challenged them both internally and externally. And we're -- we think -- we're very confident in the health and safety and the strength of our arguments. But it is the FDA. So we have to be cognizant of that. And I'll say we're -- this is kind of the third time they've made a run at it. We're still standing. We continue to support the product, and the industry continues to see the need for the product and stands strongly with us.

And when you say marker, sorry, what do you mean -- can you expand on that a little bit? I'm not sure what do you mean there.

I mean that's -- so this is really getting into the weeds. There is a potential carcinogen in Mecadox. When you have those types of products, there is something called Delaney Clause. You have to have a different marker within -- you have to have another product that degrades at the same or faster pace than the -- or slower pace, I should say, than the potential carcinogen. So we have -- since this product was approved decades ago, the FDA and us agreed to what the marker should be. Frankly, the USDA has different marker that they use. The FDA has now come around saying that they don't believe that the marker that they've chosen is the appropriate on. Rather than sit down with us and say, hey, let's find a different marker like the USDA, like the Canadian authorities have, they said, okay, we're going to try to pull this marker and therefore you're not going to have a marker and that's just not the way that the FDA has traditionally acted in other similar situations. And I think we spoke -- we've written that to them. So we'll see. We -- again, it's not -- there's an administrative hearing, there's other avenues to take if you're not successful on the administrative hearing. So we feel pretty strongly that, a, even the current marker is correct. But if it's not, there's other markers out there and there's -- this product remains safe and necessary for the industry.

Okay. That makes a lot of sense. The marker allows you to track sort of the degradation or the breakdown of the product and therefore, by tracking the marker, you can say, okay, if the marker has dropped to this level that means Mecadox has dropped to this level and therefore...

Not Mecadox, but the area of concern within Mecadox.

Okay. Makes perfect sense, actually. And yes, it sounds like you're not really worried about it being pulled off the market or anything like that?

No, I don't want to overstate it. I mean, because it is -- when the government says they want to do something, so -- and historically, most products that the government has said they want to remove are not on the market 10 years later. So I'm not forecasting whether or not we'll be successful. I'm just trying to say, our belief is it's a -- it's a safe and efficacious product that the -- that we're meeting the regulations that if we're not meeting the regulations, there's a process to go through to find other ways to have -- that they should go through to find other ways for the marker. But I don't -- I can't tell you what ultimately, the government is going to try to do here.

Okay. Fair enough. We certainly run to that a number of times as well, it's impossible to predict or even just get the timing right of it. All right. And then the other product we want -- I want to touch on is Rejensa, your companion animal product. It's been on the market for a couple of years now. They had a very strong start when it launched. You're kind of projecting a gradual ramp. I think you've been pleased with how it's done. Any updates you can give us on performance in recent quarters? And any notable we should be looking forward to on that side?

No. Listen, I think it's -- I don't think we gave guidance this year exactly on Rejensa. It had been that when initially ramp kind of doubling year-over-year, law of big numbers or I won't say huge numbers, but it's a bigger number. It's hard to do that. We're still growing very nicely, and we're still very pleased with it. And it's kind of our cornerstone -- our initial step into the companion animal market. I anticipate that with our pipeline, eventually, we'll have Rx products in the mid-to-longer term and then our strategy is to kind of move to more sophisticated products. But Rejensa is a great product. It continues to be a great product and has carved out a role in the vet clinic. And even though it could be sold over the counter, we sell exclusively through the vet channel. And we're in 3,000 clinics and growing every day. So we see still huge opportunity there, and it's doing well.

Is there -- I mean you mentioned Rx, over-the-counter versus through the clinic. Is that something you would consider changing down the road maybe as it got more recognition sort of brand awareness?

I said listen there, ultimately -- every option is ultimately open. I think there's a lot of benefit to going through the vet. It is the trusted voice of the pet parent, and we're certainly working hard to make sure that our vet partners are not competing against an over-the-counter great product for instance, or for sure, Phibro itself is not looking to compete with our vet partners. So I'll never say never down the road as the industry dynamics change as competition changes. But right now, there's a lot of runway ahead with the vet channel.

And then again, at start one thing you talked about was the rest of the pipeline in companion going beyond Rejensa, you talked about going into Rx at some point down the road, some more specific -- even assets. You also previously talked about your canine oral care pipeline. Just any tidbits you can give us on how to think about companion animal development over the next, let's say, 1, 2, 3 years?

Yes, I'd say for sure, in the short term, it's still just spend, right? It's definitely taking a little bit longer than we anticipated, but we are making progress. And I think we've shown that when we start making progress, we'll turn off our project and look at other areas. So overall, it's a real spend for us as a company, but we still -- we continuously kind of update what the risks are, what the projections are and risk-adjusted returns or anticipated returns. And it's still a very strong positive and looking for ways to grow it. I think the cost of doing -- of bringing a product to market have -- during the kind of the FDA approval phase has gotten a little bit more expensive across the board. So there are challenges on finding dogs to test. There's challenges on seasonality, things of that nature. So I think we're all -- the entire industry is facing that. That's not a Phibro problem alone. But we still are very, very, very excited about our pipeline and do believe that in the mid- to long term, it will be a significant part of Phibro.

And how do you think about -- you touched about the cost component of it and the difficulty of it. How do you think about fully internal development versus something like a partnership, JV collaboration model versus flat-out in-licensing later-stage products or buying assets? You've got a couple of different options there, how do you balance those priorities?

Yes. And we're doing a number of those things. So some of -- our lead product, our derma care was a licensed API, but we're in charge of developing it. Now we do have partners, CROs and CDMOs that we're working with because we don't have the in-house capabilities to completely do it ourselves, but we're in charge of it. We're spending the money, and we make the full decisions. Other places we have partners who are responsible for making decisions as far as getting the product to market, but we have milestone payments that they do get into market and things of that nature. Obviously, as you go higher up or closer to commercialization, the cost changes. And at this stage, we don't have the synergies that, perhaps, some of our competitors would have as far as the sales force and things of that nature. So it's harder for us to justify some of the larger prices that you would get. But I think eventually, we'll be there. So we do ourselves -- we do see ourselves as being in the future a major player on the pet side.

Okay. And just on the topic of M&A and capital deployment, there was a transaction in the aquaculture space just a few weeks ago between Elanco and Merck Animal Health. It was on the larger side but still it just shows that there are still deals being done, assets moving around. Are there any opportunities that you will get there just from a straight capital deployment perspective? And if could you talk about your balance sheet, you're willing to spend to bring some assets in-house?

Do you want to start, Donny and then...

Well, I mean, Glenn could talk about the balance sheet. I'd say we're definitely -- there's -- it's an active industry. So there's no shortage of M&A opportunities. I think we see a decent amount comes across our desk, and we take a look at where it's appropriate.

Yes. And just to Donny's point, obviously, we'll be active, we'll look at things that become available. Our current debt levels are relatively high, but we do see a path to work those down, but we do have capacity for the right deal to make the right move.

Okay. All right. Fair enough. We got about 3, 4 minutes left. A reminder to clients if you've got any questions, feel free to ping me or send them over the chat. We got a couple more myself in the meanwhile. But one is, I think Danny mentioned this earlier or maybe it was Glenn in the initial remarks. You talked about your presence in Israel and obviously, everything that's been going on over the last couple of months there and how your team has handled it. Could you remind everyone sort of the scale of your presence there, what assets you have, what facilities do you have, and how you've been able to handle just the operating environment over the last couple of months with everything that's happening in the region.

I'll take that. We have a vaccine facility there. We have a small premix facility there, and we have an API manufacturer as well. We have sales within Israel, but most of our sales are ex Israel from those facilities. It's been a challenge there's no question about it. It's been a challenge mostly, I'd say, from a workload point of view. It's a small country, Israel. Everyone is one step we move from either tragedy or someone being called up for reserve duty. So you'll have -- we have a few employees who that might have occurred to. You have employees whose spouses maybe were called up and have to work from home but people have really stepped up. We probably have a very diverse workforce in Israel. And obviously, in the current environment that could have been an issue as well and we're proud to say that it hasn't been. And on the opposite, people have -- who are able to -- have stepped up, we have not missed the beat at the end. Costs maybe are a little bit higher. Transportation, fewer flights going in and out of Israel. I mean United -- I think, it is actually El Al continue from the United States, but United had stopped starting again next week, so that should allow for -- there is some kind of transportation sometimes we have that's indicative of stuff that we have to buy from the states or whatever that maybe as costs go up because there's fewer options but that should be less than going on. So I do think, without predicting the future, the worst is hopefully behind us. I think -- I say that not just as a business, but I think all of us hope that this is winding down. And I'm very proud of how our team did and handled and at the end of the day, kept our customers fully stocked and really stepped up.

Okay. I agree with you there. I obviously wish the best on that end. Thanks, Danny. I got one quick follow-up question for you, Glenn and then maybe I'll throw in a concluding one. So the follow-up question is to the point of the balance sheet, what's your goal in terms of leverage? And do you have sort of like end of fiscal year or long-term target you kind of want to be around on debt-to-EBITDA leverage?

Yes. So to my knowledge, we haven't stated a specific goal, Mike. So that's something I'm reviewing right now, and we'd like to get a better understanding of. The intention is to continue to work down the overall debt levels. But I don't know that we've stated a specific target of net -- less than -- I wouldn't even say a number but that's something we will look to do.

Okay. All right. Fair. And then maybe for you, Danny or Glenn, feel free to jump in obviously. As you look out to the rest of the fiscal year, what are the key things you're focused on as upside risk downside risk. You've got -- especially on the EPS line, you still have a little bit of a broad range. So anything you can say in terms of this is what we're focused on that could go really well for us or this is what we're worried about where things could come in a little bit late or early, what are the key factors we should be focusing on to gauge the year?

Glenn, do you want to take that?

Yes. So I'll start. I mean some of the things that I mentioned in the beginning, right, continued strong performance from our Animal Health business, right, continued growth in our vaccines, we see those as upside and continue positives in our business. But equally important is some of the turnarounds that we're expecting, particularly in Mineral Nutrition and Performance Products. I think you might have highlighted at one point, Mike, the impact of EBITDA and EBITDA not growing as fast as revenue. That's really been driven by those 2 businesses. And there were some particular issues in the first half of the year that drove that, that we are expecting improvements on in the second half of the year that will really improve our EBITDA performance in the second half and lessen the impact for the full year.

Okay. Anything to add Danny or is that a good overview?

I couldn't say it better.

Okay. All right. Fantastic. With that, I think we're out of time. Thanks so much, gentlemen. Great to chat again as always. And everyone's on the line, thank you for participating. Thanks for listening in. If you've got any follow-up questions, you know where to find us. Thank you.

Thanks so much, Mike.