Phibro Animal Health (PAHC) Q2 2020 Earnings Call Transcript

Phibro Animal Health (PAHC -1.11%)
Q2 2020 Earnings Call
Feb 04, 2020, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Phibro Animal Health Corporation Q2 2020 conference call. [Operator instructions] Thank you. I would now like to hand the conference over to your speaker today, Richard Johnson, chief financial officer. Please go ahead.

Richard Johnson -- Chief Financial Officer

Well, thank you operator. And good morning everyone and welcome to the Phibro Animal Health earnings call for our second quarter ended December 2019. On the call today are Jack Bendheim, our chief executive officer; and myself, Richard Johnson. I'm the chief financial officer.

We'll provide an overview of our quarterly results and then we'll open the line for your questions. Before we begin, let me remind you that the earnings press release and financial tables can be found on the investors section of our website at pahc.com. We're also providing a simultaneous webcast of this morning's call which can be accessed on the webcast -- website as well. Today's presentation slides and a replay and transcript of the call will also be available on the website later today.

Our remarks today will include forward-looking statements and actual results could differ materially from those projections. For a list and description of certain factors that could cause results to differ, I refer you to the forward-looking statements section in our earnings press release. Our remarks today also include references to certain financial measures which were not prepared in accordance with generally accepted accounting principles or U.S. GAAP.

I refer you to the non-GAAP financial information section in our earnings press release for a discussion of these measures. Reconciliations of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures are included in the financial tables that accompany the press release. Before we get into the numbers, we want to remind everyone that we present our results on a GAAP basis and on an adjusted basis.

We present adjusted results that exclude acquisition-related items, unusual, nonoperational or nonrecurring items, including stock-based compensation and restructuring costs. Other income expense is separately reported in the consolidated statement of operations including, for example, foreign currency gains and losses and the income tax effects related to any pre-tax adjustments plus unusual or nonrecurring income tax items. So first, here is Jack Bendheim with some introductory comments.

Jack Bendheim -- Chief Executive Officer

Thanks Dick. And thank you everyone for joining us today. I'm quite pleased that our core animal health segment returned to growth this past quarter. China's issues notwithstanding, our vaccines and nutritional specialties product groups each saw double-digit growth in the quarter.

While, as expected, our MFA and other performance was down 1% versus last year driven by China. I expect our animal health segment to continue to show growth for the remainder of this fiscal year. Just two examples. We are seeing very strong demand for our poultry vaccines in many international regions and the imminent launch of our next-generation OmniGen product look to take advantage of the improving dairy market.

As we have guided, our sales turnaround is accompanied by increased spend as we look to position ourselves for the years ahead. The strategic growth initiatives we are undertaking are producing results. Just two examples. I've just returned from the IPPE, the annual poultry trade show in Atlanta.

And I can say without exaggeration that our pHi-Tech vaccination device, is one of the major innovations presented at the show. We had integrators from around the world signing up for trial. And it's a trial that had began a few months ago, have gone exceedingly well, and we have already signed up our first customers. I'm very confident that pHi-Tech will meaningfully enhance our revenue and EBITDA beginning in our next fiscal year.

Perhaps even more important, it is clear that producers that are introduced to pHi-Tech have begun to understand that Phibro was one of the market leaders in animal health technology. This is critical as we roll out our poultry vaccine through additional countries in South America and Asia. I am similarly encouraged by the progress we are making with Rejensa, our first foray into the U.S. pet market.

We have begun rolling out Rejensa nationwide. And today, we are in more than 500 vet clinics. We are working closely with our distribution partner, which is allowing us to limit our fixed expenses as we enter this extremely competitive market. We are receiving tremendous feedback both directly and indirectly through social media, and I'm excited to see our continued demands in here.

Finally, we continue to make headway on our vaccine against African swine fever. To date, the coronavirus outbreak has not affected our efforts. But this could change if the virus remains unchecked in the months ahead. We expect the trial, our initial candidate in pace later this spring, assuming no delay due to the coronavirus.

I will likely not have significant update to provide next quarter on this project, but certainly expect to have some results to share on this initial candidate later this year. With that, I look forward to your questions at the conclusion of the presentation, and I will now hand it back to Dick.

Richard Johnson -- Chief Financial Officer

Thanks, Jack. [Audio gap] '19 quarter. I'm looking at Page 5 of the presentation. Consolidated sales were $214 million for the quarter.

That was a 2% decline versus the same quarter last year. Increased sales in the animal health segment were more than offset by lower average selling prices in mineral nutrition and a slightly decreased volume in performance products. The increase in animal health sales was driven by our nutritional specialties and vaccine products, partially offset by lower sales of MFAs and others. We'll get into further details regarding segment results later in the presentation.

On a reported basis, net income of $11.9 million declined $2.9 million due to increased operating expenses, including increased costs for strategic investments as well as increased interest expense from a higher level of debt outstanding, partially offset by improved gross profit, driven by product mix. On earnings per share basis, diluted EPS was $0.29 per share for the current quarter, and that was $0.07 per share below the same quarter last year. So now let's look at adjusted results on the following page. Net sales overall, as I said, declined about $4 million.

I'll discuss the change in net sales in more detail at the individual segment level. Overall, adjusted gross profit increased almost $1 million or 1% compared to the prior year. Animal health volume growth in nutritional specialties and vaccines was partially offset by reduced volumes in MFAs and others. Mineral nutrition gross profit decreased as average selling prices and unfavorable product mix more than offset lower raw material costs.

And in performance products, gross profit decreased due to reduced volumes, partially offset by favorable product mix. Operating expenses overall or as we refer to them as selling, general and administrative SG&A, increased $4.4 million or 10%, driven by spending on strategic investments in key development projects to position ourselves for future growth and in addition, the effects of the recent acquisition of the Osprey business. Our adjusted net interest expense increased about $300,000 on higher debt level quarter over quarter. And from an adjusted income tax perspective, our effective tax rate for the current quarter was 28% as compared to 29% last year.

Looking more closely at the Animal Health business, net sales of 100 -- almost $144 million increased about $4 million or 3% compared to the prior year. MFAs and other sales declined $1 million or 1%. Increased U.S. demand was more than offset by lower volumes in China due to the effects of African swine fever.

In the quarter, our customers in China did make some purchases at the end of the current quarter in advance of regulatory changes that became effective January 1, 2020. In the nutritional specialties area, net sales were $33 million in the quarter, an increase of $3.6 million or 12%. The recent Osprey acquisition accounted for approximately two-thirds of the sales growth in that category. We also experienced organic volume growth in our U.S.

dairy and poultry businesses, which was partially offset by timing of sales in certain international markets. The increase in the domestic poultry segment was driven by the introduction of new product Provia Prime, a direct-fed microbial product that helps optimize the gut microbiome in poultry for improved health, immunity and productivity. Vaccines net sales of $18.7 million increased $1.6 million or 10% from last year, driven by strong strong international demand and increased market penetration. For the segment, adjusted EBITDA was $33.8 million, and that was a decrease of about $2 million or 6%, primarily due to increased SG&A costs, partially offset by the sales growth and increased gross profit.

The SG&A increase was due to the investment in strategic growth initiatives and also the effect of the Osprey acquisition. And now looking at our other segments. Mineral nutrition net sales were $55.7 million in the quarter, and that was a decline on the top line of $6.6 million or 11%. The decline was fundamentally due to lower average selling prices as related to -- correlated with the movement of underlying raw material costs.

We also saw slightly lower volumes this year compared with last year. From a gross profit perspective, the decline in -- and sorry, so overall, at the bottom line, mineral nutrition reported $3.7 million of adjusted EBITDA, that was a $400,000 decline compared to the same quarter last year. performance products net sales of $14.6 million declined $1.7 million or 10%. We saw some volume declines in copper-based products, with a partial offset from continued growth in ingredients for personal care products.

Segment EBITDA declined -- decreased slightly by about $100,000. Corporate expenses were $10.5 million that was an increase of $600,000 over last year again, primarily due to increased cost of strategic initiatives and in addition, increased investment in public company costs. Looking at our capitalization, our gross leverage ratio of debt to adjusted EBITDA was 3.6 times at the end of December with $374 million of total debt and on a trailing 12-month basis, $105 million of adjusted EBITDA. We had $75 million of cash and short-term investments on hand on the balance sheet at quarter end.

So on a net leverage basis, that gave us a net leverage of just under 3x. We had a strong cash flow month in the quarter. We generated $23 million source of cash in the quarter before financing and excluding changes in short-term investments. And we updated our guidance for our full fiscal year, really, just not major changes to our guidance at the key adjusted EBITDA line, we kept that that level unchanged at $103 million to $107 million of EBITDA for the full year.

On the net sales level, we brought down overall consolidated net sales expectations reflecting lower pricing in the mineral nutrition business, primarily which was correlated related to the underlying raw material costs. We also tightened the range on our animal health segment. On an earnings per share basis, adjusted earnings per share, we now expect $1.15 to $1.22 for the full year, a decline from the prior year, but an improvement from our previous expectations. We have -- our expectations now is for less interest expense than we had originally projected and guided to.

So the improvement in earnings per share is really all related to improved interest expense. And with that that's the end of my prepared remarks. So operator, if you would open it up for questions please.

Questions & Answers:

Operator

[Operator instructions] Your first question comes from the line of David Risinger from Morgan Stanley. Your line is open.

David Risinger -- Morgan Stanley -- Analyst

Great. Thanks very much and good morning Jack and Dick, and congrats on the performance. I have a couple of questions. First, maybe it would be helpful -- excuse me.

Jack, if you could just help us better understand the competitive marketplace that OmniGen competes in? Who the key competitors are? How much of an inflection for OmniGen, this is going to be that you're launching a next generation? So that would be very helpful. And then Dick, if you could comment please on the MFA growth excluding China. So we have a better sense for the growth ex China in the quarter. And also, if you could comment on the outlook for MFA growth prospects ex China going forward? Thanks very much.

Jack Bendheim -- Chief Executive Officer

David thank you. Thank you for those questions. So I think as we've talked in the past, OmniGen was an extremely successful product where most of our customers were smaller dairies, dairies of, say, 500 cows or less, which was the predominant dairies in the United States 10 years ago, but that has shifted very, very dramatically in these last 10 years. So the total amount of dairy cows in United States is about the same as it's been 10 years ago, about 9.2 million cows but it shifted from smaller dairies to larger dairies.

So we needed to do something with OmniGen, which was a very successful product on these smaller dairies. It was a successful product where the dairyman got out and saw the -- sort of basically physically saw the health of the animal and was able to see the results of OmniGen which had a lot to do with immune strength and immune health. So we reformulated the product to add some other components to it. And really remanufactured just not a blending and concentrating a bit more now on milk production which becomes more important when you have the 5,000 heads, 10,000 heads in some of these farms on United States.

They go as large as over 20,000. So for us it's taking the product relatively to new markets. Some of the same producers we saw or we knew when they ran 500 a dairy, we're calling are now with the bigger dairies. Their needs are slightly different.

So they know the product works immune help. And now we're introducing it as well with this new added function which is going to increase milk production. So it's sort of a wide open field. There's always competition.

There's no end of competition in the United States at every level but we have a good history. We have a great sales team and we're very confident we're going to grow this business, grow the segment.

Richard Johnson -- Chief Financial Officer

Yeah. David. And to your second question sort of the numbers around MFAs. In the second quarter just to reiterate, we saw overall, MFA is down about $1 million or 1%.

If we ex the China MFA effect, we did see growth. We saw growth in the probably 3% range year over year. On a full-year basis, we're expecting MFAs ex China to be somewhere around I'll call it breakeven to a slightly positive number as we well continue to overlap the effect of not having much if any China VM sales for really all of the year.

David Risinger -- Morgan Stanley -- Analyst

Great. Thank you.

Operator

Your next question comes from the line of Erin Wright from Credit Suisse. Your line is open.

Erin Wright -- Credit Suisse -- Analyst

Hi. Thanks. A follow-up on China. How big was that stocking dynamic in terms of the purchasing ahead of the regulatory changes? And can you just describe what that's all related to in terms of that purchasing dynamic and should we anticipate then a pullback kind of in the next period here in terms of destock? I guess any color you can give there would be helpful.

Thanks.

Jack Bendheim -- Chief Executive Officer

So Erin, as we sort of had forecasted, we didn't expect to do any business in China this fiscal year. Our distributors, our customers really in China had inventory which we expected them to sell down with the old registration. The old registration was a growth motion registration, and we have been working for the last many years, two, three years. And as we've done in most markets in the world now to change their registration from growth motion to a therapeutic claim and we've been successful.

Part of the problem with African swine fever in China, was obviously -- well, the pigs aren't there. So the market was declining. And this is taking a little long to answer your question but give me -- bear with me. So the pigs aren't there but it's also -- the government was not allowing us or anybody to move pigs around for testing.

So our ability to test on farms and to show either we need to do for the therapeutic claim was slowed down. So that's really where we want to going forward on a therapeutic claim. But in the meanwhile, the price of pigs in China rose so high that people felt, even though some pigs were going to die from African swine fever, it still pays to grow pigs because even if you only had a 30%, 40% yield, you can make more than enough money to cover the loss. So our customers there saw a big increase.

And with the calculation they had made to have enough inventory to get through the six months of -- first six months 2020 they felt they were wrong, and they know they had to get material before the end of the year by Chinese regulations. So that was a spur. It was not a huge bump. It was a bump.

A couple of million dollars. And that's gone.

Erin Wright -- Credit Suisse -- Analyst

OK, great. That's really helpful. And then can you give us an update on just the U.S. market across the species groups here, U.S.

poultry, swine and dairy markets. I guess in particular, I'd be curious around if you're seeing really a stabilization across dairy markets as well. But yes, if you could give us some color on where we stand today in the industry that would be great.

Jack Bendheim -- Chief Executive Officer

I think generally, we are seeing a stabilization, at least what we hear back, feedback from our customers. The market -- it depends where you are in the market. I think if you're still out there with a farm of 100 to 150 cows, you're under pressure. You're in trouble and you will most likely be out of the business.

But I think for the larger dairies, they are making money at these levels. And again, part of it is because China is looking for all sorts of protein. And so somehow, that affects directly, indirectly, all the big producers around the world of any protein.

Erin Wright -- Credit Suisse -- Analyst

OK. Thank you.

Operator

Your next question comes from the line of Balaji Prasad from Barclays. Your line is open.

Balaji Prasad -- Barclays -- Analyst

Hi. Thank you and good morning everyone. So I had -- coming back to the subject on ASF. I had a couple of questions on there.

Firstly, on the -- as you may have seen from the recent years report global pork exports had increased by 10%. And of course, you mentioned that you have some registration changes under way to be able to sell more. I wanted to understand which of the export markets, would you be able to target? And what are the time lines that you can see in a recovery year? And secondly, specifically also from a reherding prospect, how would that play into your animal health growth? The second comment of my question was on the ASF vaccines. I would love to hear your thoughts on the various development programs currently ongoing, including the progress at USDA.

And specifically from Phibro's perspective, can you help me understand how you're epitope-based development compares to the vaccine targeting the I177 L gene that the USDA is working on. Does this make any difference from a commercial or a time line perspective? Thank you.

Jack Bendheim -- Chief Executive Officer

Do you have an hour? So let's talk first about overall dynamics of protein and sort of called the pig protein versus the effect of African swine fever in China. So I mean as we sit here right now, there is no vaccine and -- that will control African swine fever. And the effect of it as we've seen, it sort of played out slowly. It's in excess of 50%, maybe even up to 70% of pigs that have gone missing, that doesn't mean pigs necessarily who've gotten the virus and died.

It means that people see -- they put pigs down. They get the virus, they die. So I am not going to put new pigs in the market, it doesn't pay overall. So that has affected a huge shortage of protein, pig protein in China.

And they're out there all over the world looking to buy all sorts of protein from every market. So yes, we are seeing our sales into customers raising. Again, all proteins, specifically, yes, pig protein but chicken protein, fish protein, cattle protein around the world, all those customers are doing better. Now in the U.S., it's a little bit ex.

I don't want to get into it because of the continuation on the trade war, on the tariffs, it's not clear, but I think that will get clear. But the business around the world, our business is getting better. Can you make up for the loss of, I don't know, 500 million pigs in a world that only is currently raising 250 million pigs? The answer is, no. It's going to take a long time, if ever.

But I think at some point, where there will be and that comes to your second question, where there will be a point where there will be a vaccine developed that will be able to slow or to control some of the ASF, where there'll be a meeting point where the Chinese will be able to start growing pigs again at decent prices, good prices, economic prices and the world will grow, producing more pig meat, and it would all be meet somewhere happily in the middle. We take an approach on our vaccine. We've taken an approach, different than what we see and what the USDA, what we see coming out of Plum Island. We're working mostly with the proteins that are found in the virus and we're now working to attenuate a virus.

So to that extent, as I've said often, I'll say it again, we don't know yet if our vaccine is going to work. I mean we're doing a lot of work and there's some positive indications but I don't want anyone to listen to this and think we're saying that it works. We have work to do and we will have a better indication, as I said earlier in my remarks, by late spring. But it's a different approach.

So there is an -- the star approach to making vaccines is, you basically attenuate a virus, you make the virus sort of softer, you then can -- you can vaccinate the virus, the pigs own immune system starts acting, and it will protect the pig against whatever the disease is, in this case, African swine fever. The initial work on that -- from viruses was not successful. They were unable to do it. And now with this USDA out of Plum Island, it looks like they have a candidate that could be very effective.

So that's great. I think it's -- we're in the business of making sure people have protein and are successful and live long time. So that we are 100% behind that. Our approach is a different approach.

And there is some logic to say, since we're not absolutely injecting -- vaccinating the virus that our approach might be safer, and if it's safer, then it might get to market faster than the approach which attenuates the virus. So that's a different approach. And again remember, there were 800 million pigs in China. It's a huge market.

Hopefully, everyone will be successful.

Balaji Prasad -- Barclays -- Analyst

Thank you.

Operator

Your next question comes from the line of Michael Ryskin from Bank of America. Your line is open.

Michael Ryskin -- Bank of America Merrill Lynch -- Analyst

Hey guys. Thanks for taking the question. I want to follow-up on a couple of things. I think people walk through a lot of the market implications so sort of try to dig in on to the guidance comments.

First, on the revenue guide. It looks like I can see that most of the update did come from mineral nutrition. You talked about how that sort of flows through from the underlying commodity prices, but looks like you did trim the top line for animal health, the high end of the guide by about $10 million from $557 million to $547 million. So I'm curious if that had anything to do with nutritional specialties and vaccines and more specifically with Osprey because I think by my prior notes, I heard Osprey is about $20 million contribution for the year.

By my math for the quarter, it looks like it was only about $2.5 million. And so first question is, is that where the delta is coming in? Is it Osprey is not contributing quite as much as you thought or sort of where is that on the numbers?

Richard Johnson -- Chief Financial Officer

Yeah. Yeah, all your numbers make sense Mike. This is Dick. Yes, I think we trimmed the top end of the Animal Health number for a variety of factors.

I would say, just in terms of expectations and that we continue -- I think our strongest growth expectations are going to be in the vaccine product area, then followed by nutritional specialties. Yes, we're seeing some. We're seeing some customer order patterns in Osprey, where those may reverse themselves later in the year. We'll have to see.

And -- but nutritional specialties otherwise were -- we've talked a lot about dairy. We talked about products that are going into poultry. And those are all doing well. And MFA is really outside of China are holding their own.

So not a huge modification, I think, to the sales guidance overall, but that gives you a little more color.

Michael Ryskin -- Bank of America Merrill Lynch -- Analyst

Got it. I appreciate the bridge there. And then a follow-up sort of a similar line on the P&L. The delta and the SG&A, I mean you talked about consistently about 2020 or fiscal year '20 as an investment year, both in sales force and R&D, the companion animal product, a lot of your investment in R&D for livestock as well, including the ASF vaccine.

You still trim the SG&A guidance pretty meaningfully by about $7 million to $10 million. Just curious, where is that extra spend coming from? Is that flexible spend you can take out of mineral nutrition because the lowered expectations there or sort of is it on the sales forces on the R&D line? Just trying to get a better sense of where the delta comes in there.

Richard Johnson -- Chief Financial Officer

I think the trimming comes in two places. Some of these strategic investments are they -- the timing of the spend is driven by a lot of factors that we can't necessarily control exactly the timing. So some of the spend on strategic initiatives has been -- has extended out a little longer than we initially expected. We've also just reduced our expectation for the base spend on operating expenses.

It's maybe -- specifically, it's really not around minerals. This spend is -- the bulk of the business is the animal health segment. And so when you're talking about changes in spending, you really fundamentally talking about changes in the animal health business.

Michael Ryskin -- Bank of America Merrill Lynch -- Analyst

OK. I appreciate that. And then sort of one last one along that line, if I may. You talked about ASF vaccine, you talked about the OmniGen expansion.

I would say, the third product that in terms of innovation have gotten a lot of attention, a lot of focus is the Companion Animal sort of direction you're moving into? Can you give us an update there? How that's trending sort of continued feedback and how you see that progressing over the next couple of years?

Richard Johnson -- Chief Financial Officer

Yeah. So will give you two answers. I can give you a number of answers. If the numbers in the P&L are still small, we don't break them out.

And they're not at this point really meaningful to trends. And we're -- I think where this go is still open to question. We're optimistic at what we're seeing. And with that, I'll turn it over to Jack for more of the color.

Jack Bendheim -- Chief Executive Officer

Right. So there were 25,000 vet clinics in the United States. And we have successfully gotten Rejensa, one product into 500 clinics. We are adding more clinics every week.

So we're still spending money. We are very optimistic. I mean the product is a great product. And with the feedback we see sort of unpaid for from customers on social media is really exciting.

So if anyone listening to this call has a dog which is a little bit old and has some trouble, arthritic trouble, I think go to the site and go buy some product. But -- so we're still spending money, and we might be -- this continues on the trend, it is continuous that it's on. We'll spend more money next year. And I think that's generally choice.

We haven't -- no one's asked that question, but I don't want to get ahead of it. So that Companion Animal product is looking good, and I think we'll expand and will be a proper product and will be a significant number in our numbers next year, when we get to over 1,000 or 1,500 or 2,000 clinics. The vaccines that Dick spoke earlier about is we're doing really well, where our products are well accepted in multiple markets and we're spending money. We'll continue spending money to get the new facility in Sligo up and running which is still 18 months away, which will give us the capacity to sell more because right now, we're budding up against the capacity at our Beit Shemesh facility.

I think OmniGen Pro, we just launched. We had a big launch meeting last month and looking good. We expect the growth there. African swine fever, we're spending money, don't know.

The crazy thing about spending money, looking at the same from an -- sort of an analyst numbers is, you won't spend money if the product is not successful and then oh my god, and then our EBITDA goes up. But in reality if it is successful, it's a great potential and we'll continue to spending money. So we're around that in all these products. We're -- as what -- many of you know me, we're not wasting any money here.

These are -- none of these products are boondoggles. All these are all serious products with serious opportunities for the company. So we remain excited about the opportunities here of the new product and obviously about the company.

Michael Ryskin -- Bank of America Merrill Lynch -- Analyst

Thanks so much. Appreciate all the color from both of you guys. Thank you.

Operator

[Operator instructions] Your next question comes from the line of David Westenberg from Guggenheim Securities. Your line is open.

David Westenberg -- Guggenheim Partners -- Analyst

Hi and thanks for taking the question. So most of mine have already been answered so mine will be pretty short. So first, on the mineral nutrition business, I know it's very susceptible to input prices. Now can you remind us if you're maintaining gross margin or if you're maintaining gross profit? Looks like -- I'm just trying to figure out the distinction between the two as prices go up and down.

What the objective is in terms of maintaining?

Richard Johnson -- Chief Financial Officer

David, so we have two objectives. One is we're -- on the traditional sort of base business, we are looking to make a profit per every unit we handle. And we tend -- we talk in terms of tons in the Mineral business. So we're looking to make x dollars per ton.

So whether the selling price is higher or lower, we want to make a certain amount of money on every ton we handle and get paid for the value we add, which is blending, sourcing, warehousing, logistics, etc. We are also adding over time and continue to add more differentiated, higher value-added and, therefore, higher-margin products into the minerals business. And we're seeing some early success in that. We've frankly, against our expectations -- not so much against last year, but against our expectation, we've been seeing the bite of some of the tariffs because some of these raw materials, many of the raw materials come from China and have been subject to a 25% tariff.

So depending on the competitive situation, in some cases, we've not been able to pass those costs through. So that's been -- that's been something we've been dealing with lately.

David Westenberg -- Guggenheim Partners -- Analyst

That was actually very -- that was very helpful. So back on to the pHi-Tech vaccination device. So it looks like kind of one of those products that could have maybe a portfolio effect. So is that a, the case? And could you see this contribute to better sales of the overall portfolio and not just vaccines, but kind of one of those things where it could have a halo effect on other sorts of businesses? And then just generally in speaking on that Phibro I mean, that pHi-Tech device, are there any maybe comps for us to look at it in terms of peak sales and sales ramp? I mean is it Embrex from Zoetis? I mean how can we look at that? That's all my question.

Thank you.

Jack Bendheim -- Chief Executive Officer

That's really a great question. So I don't think you can compare this. I think we're the first in the market with this type of machine. And it's not so much the fact that we replaced finger power on a vaccine device to battery-powered machine that you just pull and your finger is protecting that so on and so forth.

The main thing here is the amount of information the grower, the producer will get from what's going on. In other words, not just in terms of human resources, who is doing the right job, but at what temperature are the vaccines be putting in. Where -- what percentage of the birds, I'm getting back here, whatnot. That one -- that makes us very powerful.

That's why this was a very, very exciting addition at the poultry show last week. So we don't have the full range of vaccines that growers use to go through this thing. So right now, it's totally neutral. I mean when Embrex decided many many years ago, they tried to control the vaccines, they went through it, they mean they lease the equipment, but you had to use their vaccines.

That is no longer the case. They have competition. So we're not even starting there. I don't think that's important.

But at the end, we are building solid relationships with poultry producers around the world. And if you build those kind of relationships, then eventually, it enhances our relationships and then they will look at our vaccines like they'll look at anyone else's vaccine.

David Westenberg -- Guggenheim Partners -- Analyst

Thank you.

Operator

There are no further questions at this time. Mr. Johnson I turn the call back over to you.

Richard Johnson -- Chief Financial Officer

All right. We appreciate everyone listening and thank you for your questions. We'll talk again next quarter. Thank you and bye now.

Operator

[Operator signoff]

Duration: 44 minutes

Call participants:

Richard Johnson -- Chief Financial Officer

Jack Bendheim -- Chief Executive Officer

David Risinger -- Morgan Stanley -- Analyst

Erin Wright -- Credit Suisse -- Analyst

Balaji Prasad -- Barclays -- Analyst

Michael Ryskin -- Bank of America Merrill Lynch -- Analyst

David Westenberg -- Guggenheim Partners -- Analyst

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