Immucell Corp (ICCC) Q1 2026 Earnings Call Transcript

Good morning and welcome to the MU Cell Corporation conference call to discuss unaudited first quarter 2026 financial results. Today, all participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event today is being recorded. I would now like to turn the conference call over to Joe Diaz of Litham Partners. Please proceed.

Thank you, Chris. Good morning and welcome. As the operator indicated, my name is Joe Diaz with Lithium Partners. We are the investor relations consulting firm for EmuCell. I thank you for joining us today to discuss the unaudited earnings for the first quarter ended March 31, 2026. Listeners are reminded and cautioned that statements made by management during the course of this call include forward-looking statements which include any statement that refers to future events or expected future results or predictions about the steps the company plans to take in the future these statements are not guarantees of performance and are subject to risks and uncertainty that could cause actual results outcomes or events to differ materially from those discussed today additional information regarding forward-looking statements and the risks and uncertainty that could impact future results outcomes or advances available under the cautionary note regarding forward-looking statements or better known as a safe harbor statement provided with the press release that the company filed last night along with the company's other periodic filings with the SEC. Information discussed on today's call speaks only as of today, Friday, May 15, 2026. The company undertakes no obligation to update any information discussed on today's call. Please note that references to certain non-GAAP financial measures may be made during today's call. With that said, let me turn the call over to Oliver Tabukar, President and CEO of ImmuCell Corporation, for opening remarks.

Oliver? Thanks, Joe, and good morning, everyone. It's my pleasure to welcome you to today's discussion of ImmuCell's results for the first quarter of 2026. Starting this quarter, our discussion of results will be accompanied by a few key slides that are part of our new investor presentation. You can find that on our investor page, imusel.com forward slash investors. In 2025, the company made significant changes to better position itself for success, including a strategic focus on the CAF scourish market and investments in leadership and in manufacturing yield improvement. In the first quarter of 2026, we are starting to see the results of this focus. We achieved our first ever 10 million exciting milestone for our commercial team and our manufacturing team. And we also achieved 45% gross margins after absorbing legacy retain-related costs that shifted from product development to cost of goods sold and reduced gross margins by approximately 2.4% during the quarter. We also grew net income 34% compared to the first quarter of 2025. In previous calls, we explained the rationale behind our new strategy to focus on first defense. Since 1991, IMICEL has competed successfully in the large, growing market for calf scars prevention with a highly differentiated product portfolio that we believe has considerable runway for further expansion domestically and internationally. As we will discuss later in the call, we believe we're a gaining share in this market, competing against the world's largest animal health companies. Historically, ImmuCell's challenges have centered less around market demand and more on manufacturing capacity and product availability. And for a company our side, it makes a lot of sense to focus on our successful on-market product and solve those challenges, and we are well underway to do that. Our results in the first one will review some of these drivers in more detail and share some of our market observations after Timothy Fiore, our Chief Financial Officer, completes a deeper review of the financials for the first quarter of 2026. I now turn the call over to him.

Thank you, Oliver. All the numbers I'll speak to are approximate and round. The number of 2026 came in at $10.4 million, an increase of 28.4% compared to what had been a record-breaking first quarter of 2025. Domestic sales for the first quarter grew 35.7% compared to the first quarter of 2025, to $9.7 million, to about $600. In terms of product-specific, 8.5% gross margin improvement in 2025. We achieved this improvement despite a headwind of 2.4% in the first quarter of 2026, coming from costs associated with former retained assets, which year-over-year have shifted to cost-of-goods sold from product development expense. Year-over-year reached $2.7 million in the first quarter of 2026, compared to $2.2 million during the first quarter of 2025. This was driven by increases in G&A, mostly related to investments in leadership, and higher sales expense related to expanded commercial activities, resuming a more normal pace following the backorder management period in the first quarter of 2025. Operating expenses were partially offset by lower product development expenses due to the previously mentioned shift of former retain-related expenses, $15,000 in the first quarter of 2026 compared to $330,000 of other income in the first quarter of 2025. This was driven by a non-recurring insurance payment in the first quarter of 2025. Our net income was $1.9 million or 21 cents per share during the first quarter of 2026 compared to $1.4 million or 16 cents per share during the first quarter of 2025. As Oliver mentioned, this is a 34% increase in net income year-over-year. Yesterday's earnings release and investors by looking at our performance across reporting periods on a consistent basis excluding certain charges from our reported income before income taxes to $2.6 million in the first quarter of 2026 from $2.3 million in the first quarter of 2025. Key balance sheet item on 2026 is in a strong position with improvements versus year-end 2025 driven by the robust performance in product sales that we discussed previously. We ended the first quarter of 2026 with $6.8 million of cash on hand and $8.7 million of working capital increase from $13 million at the end of 2025 to $15 million at the end of the first quarter of 2026. We will continue to closely monitor and manage cash and our other assets as we balance long-term investment with near-term operational needs. With that, I will turn the call back to Oliver.

Excellent results in the first quarter of 2026. As I mentioned in my initial remarks, EmuCell made the distinctive products called First Defense in late 2025. And TriShield, particularly, it is the most advanced protection against scourge. It makes a lot of sense when you consider calf values have increased almost sevenfold in the past three years. And scourge is a condition that affects up to 15% of pre-weaning calves and is the leading cause of death in these calves in the U.S. due to treatment costs, performance losses, and mortality. to invest in premium prevention products, and scours is top of mind for many producers due to prevalence, morbidity. In 2025, we estimate U.S. farmers spent approximately $93 million on scours prevention products for about 14% year-over-year growth. In Q1-2026, we saw a slightly moderated 11% year-to-year growth for the overall scours biologics category, but ImmuCell's first defense estimated was nearly 80% of revenues to end customers as reported by distribution partners and market research firms. We decided to report that our share of U.S. category spend expanded from 29.1% to 35.2%, and our share of animals treated increased from 15% in the first quarter of 2026. Another driver is our premium pricing and positioning in the market. Premium pricing is higher than our share of animals treated. When I visited with our customers this quarter, they told me that First Defense products have several advantages that create a premium value proposition for them. Specifically, First Defense provides immediate protection for immune-incompetent newborn calves against the three common pathogens that cause scours. And in addition, it also offers a lot of other bioactives that help calves stay healthy as a result of being derived from colitis. activities are now pivoting to winning new customers, since about 55% of calves are still not getting any biological treatments at all. We believe the addressable market in the U.S. is more than $200 million, and internationally, the TAM is at least five on these opportunities. As I discussed in previous calls, the key part of our strategy, given the tailwind from the macro environment and our excellent value proposition for calf, this has been challenging for Amucel, and we are working hard every day to ensure we maximize yield and increase our output to keep up with demand. We made decisions in late 2025 to address manufacturing capacity constraints, and as you can see, we had an excellence of 2026, reaching a record of more than 450,000 manufacturing units of output per month. And this compares to 380,000 manufacturing units per month we achieved in 2025, 344,000 in 2024, and 252,000 in 2023. This expansion of output, in addition to the price realization that Tim mentioned. Yield improvement is challenging and comes from doing a lot of, there's no magic bullet or single big lever. The team got together and committed to ensuring availability. And then we improved our planning, which allowed for more preventative maintenance and balanced workflows. We reduced waste and scrap events, and we increased utilization by deploying some overtime and making incremental investments in various equipment. I can't thank the team enough for their efforts. Just a note about manufacturing units, they do not match up with revenue because of the different and changing price points of our products and the different number of units used for different products in our portfolio. There's still a lot of work to do to stay ahead of demand for the remainder of 2026. We have to stay focused on managing and mitigating contamination risk. We have to keep providing great service to our colostrum supplying farms, and we have to manage yield improvement while we execute a major capacity expansion in our colostrum processing plant. We are pleased to $2 million settlement with a former contract manufacturer, and we plan to deploy this cash to meet long-term demand. We plan to use more advanced process flows, state-of-the-art drying, until it's previously purchased to manufacture retain the subclinical mastitis product that we have been developing until we focused on first defense in December 2025. We are finalizing these expansion plans, and we'll discuss other investments we're making to align with our new growth strategy. We hired an international business development executive with decades of dairy industry experience, and he is helping us transition from a reactive approach to a strategic approach and the board to understand market opportunities and product requirements, go-to-market investments, capacity expansion, while we believe success will require prioritization and time a foundation for success. In the meantime, we will repeat what I've communicated on these calls to farm management, to vaccine manufacturing and colostrum processing, including all the support functions that make future profitable growth possible. In the first quarter of executing our focus strategy to deliver the day, with that said, we open up the lines.

Thank you. We will now begin the question and answer session. As a reminder, please limit yourself to one question and then rejoin the queue. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If your question has been addressed and you would like to withdraw it, please press star, then 2. At this time, we will pause momentarily to assemble our roster. And as a reminder, if you do have a question, please press star, then 1. And today's first question comes from Frank Gasker, a private investor.

Please go ahead. And, Frank, your line is open.

Outstanding quarter. And congratulations to the team on that performance. Could you talk a little bit about your First Defense bulk product and its seasonality, its target market, whether or not it competes with existing products a bit more detail so our functional feed is particularly useful for those operations that don't want to feed add this to your colostrum

or milk that they're providing to the calves as a group and so it has a different a different dynamic in that regard we launched it late last year second half of last year essentially then the new formulations of this product, and so it's still in a product launch phase.

Thank you.

Next question comes from George Milos with MKH Management. Please proceed.

Thank you. Yeah, totally outstanding quarter. Congratulations, too. Fantastic start. I want to ask a few questions about production capacity. you said that there's no magic bullet to improving production and yield that there's so many different levels can you tell us a little bit more about what were some of the key improvement uh that led to to the yield improvement and also with your current capacity and your four freezers what do see is your maximum capacity at this point with our production forecasts on a very kind of sku

level and our workflow of the team and with this planning we also capacity to manufacturing process and if you do that in a planned way it's actually manageable and we also reduced waste in our process there are parts of our process where we're not using everything that we could and so reusing and just focusing on that waste and reducing that increase in the process where minor I would say investments in capital and a bigger tank some extra membranes I mean some things like like that really helped increase the throughput of a particular step in the process that was either a bottleneck or about to become a bottleneck and so those are the key things that we've done. There's other ways to further improve yields, and we're looking at them on a continuous basis. We have a program in place that we're all focused on to get to a higher yield, and we review that program several times a week, actually. We're working on it. And so we don't know and have a specific number in mind of what is our maximum. We're just improving yield, if you will, on a continuous basis. My comments, it is time to think about a major capacity expansion, and so we're very manufactured that we can deploy towards that, and we are in the midst of...

Okay, great. Thank you for that. So I look at slide number five, where you have basically the product mix over the last three years. help us understand the trajectory of Tri-Shield, how it dipped during 2025 and has had a huge rebound. What drove that? Was that demand-driven? I imagine you have some ability to influence demand, but it's a puzzling... It seems to peak in the first quarter, that it's maybe help us understand that if you can.

Challenging about some customers seem to be shifting to tri-shield. That seems to be really where we're growing.

Okay, great.

Calving season that we just had, it's the least price-sensitive segment.

Okay, yeah.

And again, as a reminder, if you do have a question, please press star, then one. And the next question is a follow-up from Frank Gasker, a private investor. Please go ahead.

Thanks for taking my questions. Your increase in sales force that you just mentioned, I'm curious as to what the main drivers of that is. And as far as regionality and the target market for those regions, could you get into that? Because it's my understanding that the market is divided into dairy and beef. Where is your growth headed? Where is your sales directed? Thank you.

Thank you, Frank. The contact you have with customers to explain how our product works, the differences between our product and some of our competitors, which are vaccines, and the differentiation that our product provides that goes the deal, and they appreciate the time and investment in them. So our strategy around Salesforce expansion is that more customer contact equals more revenue. We've been seeing that now for a couple of quarters, And so we decided that it may send a territory in the west of the U.S. that had been, frankly, open for almost a year now. We decided to accelerate the hiring for that region. So I hope that gives you some color. We're really looking at, in each region of the country, what are the number of CAFs that are out there, what can close a deal faster than others. And so we're looking at kind of the fastest, highest return of our investment when we talk about adding commercial.

That was great. Thank you very much.

And at this time, this concludes our question and answer session. I would now like to turn the conference back over to Joe Diaz with Litham Partners for any closing remarks.

Thank you, Chris, and thank all of you for participating on today's call. We look forward to talking with you again to review the results for the quarter into June 30, 2026, during the week of August 10, 2026. Thanks again, and have a great day.

And the conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.