Immucell Corp /De/ Q1 FY2026 Earnings Call

Good morning, and welcome to the ImmuCell 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 Lytham Partners. Please proceed.

Thank you, Chris. Good morning, and welcome. As the operator indicated, my name is Joe Diaz with Lytham Partners. We are the investor relations consulting firm for ImmuCell. I thank you for joining us today to discuss the unaudited earnings for the first quarter ended 03/31/2026. 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 uncertainties 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 uncertainties that could impact future results, outcomes, or advances is available under the cautionary note regarding forward-looking statements, better known as the 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, 05/15/2026. 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 F. Olivier Te Boekhorst, President and CEO of ImmuCell Corporation, for opening remarks. Olivier?

Thanks, Joe, and good morning, everyone. It is my pleasure to welcome you to today's discussion of ImmuCell's results for 2026. Starting this quarter, our discussion of results will be accompanied by a few slides that are part of our new investor presentation. You can find that on our investor page, immucell.com/investors. In 2025, the company made significant changes to better position itself for success, including a strategic focus on the calf scours market and investments in leadership and in manufacturing yield improvement. In 2026, we are starting to see the results of this focus. We achieved our first-ever $10 million revenue quarter, which is an exciting milestone for our commercial team and our manufacturing team. We also achieved 45% gross margins after absorbing legacy retained-related costs that shifted from product development to cost of goods sold and reduced gross margins by 2.4% during the quarter. We also grew net income 34% compared to 2025. In previous calls, we explained the rationale behind our new strategy to focus on First Defense, our leading calf scours preventative product. Since 2000, ImmuCell has competed successfully in the large, growing market for calf scours 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 are 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. For a company our size, 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 quarter give us confidence in this decision. I will review some of these drivers in more detail and share some of our market observations after Timothy C. Fiori, our Chief Financial Officer, completes a deeper review of the financials for 2026. I now turn the call over to him. Timothy.

Thank you, Olivier. I will start with a short recap of product sales results, which are unchanged from our April 8 press release. All the numbers I will speak to are approximate and rounded. Product sales for 2026 came in at $10.4 million, an increase of 28.4% compared to what had been a record-breaking 2025. Domestic sales for the first quarter grew 35.7% compared to 2025 to $9.7 million, while international sales for the first quarter declined 30.2% to about $600 thousand in the same period. In terms of product specifics, we continue to be pleased with strong relative sales of Tri-Shield, our flagship product, which grew 38.5% in 2026 compared to 2025. We realized gross margin improvement in the first quarter compared to the prior year. Gross margin as a percentage of product sales increased to 45% during 2026 compared to 41.6% during 2025. We achieved this improvement despite a 2.4% headwind in 2026 coming from costs associated with former retained items that shifted from product development expense to cost of goods sold. Year-over-year gross margin expansion in 2026 is coming from both price and manufacturing performance, partially offset by the aforementioned shift of former retained-related costs. Operating expenses increased to $2.7 million in 2026 compared to $2.2 million during 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 2025. Operating expenses were partially offset by lower product development expenses due to the previously mentioned shift of former retained-related expenses to cost of goods sold. Other expense decreased to $15 thousand in 2026 compared to $330 thousand of other income in 2025. This was driven by a nonrecurring insurance payment in 2025. To wrap up our income statement discussion, our net income was $1.9 million or $0.21 per share during 2026 compared to $1.4 million or $0.16 per share during 2025. As Olivier mentioned, this is a 34% increase in net income year over year. As usual, we provided EBITDA figures in yesterday's earnings release. We believe looking at EBITDA assists management and investors by looking at our performance across reporting periods on a consistent basis excluding certain charges from our reported income before income taxes. EBITDA improved to $2.6 million in 2026 from $2.3 million in 2025. To wrap up with financials, let me highlight a few key balance sheet items. Our balance sheet as of 03/31/2026 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 quarter with $6.8 million of cash on hand and $8.7 million of inventory. Working capital increased from $13 million at the end of 2025 to $15 million at the end of Q1 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 Olivier. Olivier?

Thanks, Timothy. Congratulations to the team for the excellent results in 2026. As I mentioned in my initial remarks, ImmuCell made the decision in late 2025 to focus on our scours preventative products called First Defense. In the first quarter of this year, we achieved the record $10 million product sales, and Tri-Shield particularly has showed very strong growth. It is the most advanced protection against scours that we offer in the market. Our focus on First Defense makes a lot of sense when you consider calf values have increased almost sevenfold in the past three years, and scours is a condition that affects up to 15% of pre-weaning calves and is the leading cause of death in these calves. We believe it causes up to $1 billion of economic burden in the U.S. due to treatment costs, performance losses, and mortality. High and rapidly increasing calf values have driven an increased appetite to invest in premium prevention products, and scours is top of mind for many producers due to prevalence, morbidity, and mortality. In 2025, we estimate U.S. farmers spent approximately $93 million on the scours biologics category, representing 14% year-over-year growth. In Q1 2026, we saw slightly moderated 11% year-over-year growth for the overall scours biologics category, but ImmuCell's First Defense accelerated and accounted for what we estimated was nearly 80% of total category dollar expansion in the quarter. This is based on revenues to end customers as reported by distribution partners and market research firms. We are excited 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% to 18.1% between 2021 and 2026. We believe this performance is driven by an increase in sales activity that started last quarter and the market's increasing confidence in our product availability. Another driver is our premium pricing and positioning in the market. Premium pricing explains why our share of spend 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 colostrum. So our sales 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 times as large. We will focus 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 customers is to ensure we have product available. This has been challenging for ImmuCell, 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 excellent start to 2026, reaching a record of more than 450,000 manufacturing units of output per month. This compares to 380,000 units per month we achieved in 2025, 144,000 in 2024, and 252,000 in 2023. This expansion of output helped improve our gross margin, in addition to the price realization that Timothy mentioned. Yield improvement is challenging and comes from doing a lot of different things really well every single day. There is 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 to increase throughput. I cannot thank the team enough for their efforts. Just a note about manufacturing units: they do not line 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 is 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. We have to manage yield improvement while we execute a major capacity expansion at our colostrum processing plant. We are pleased to announce that we reached a $2 million settlement with a former contractor, and we plan to deploy this cash to expand capacity to meet long-term demand. We plan to use more advanced process flows, state-of-the-art drying equipment, and assets previously purchased to manufacture the retained subclinical mastitis product that we had been developing until we focused on First Defense in December 2025. We are finalizing these expansion plans, and we will communicate more information on future earnings calls. In previous calls, we discussed other investments we are making aligned 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 international opportunities to a planful strategic approach. We are using a rigorous process involving management and the board to understand market opportunities and product requirements, go-to-market investments, regulatory activity and timelines, and our capacity expansion timelines as well. While we believe the international opportunity is significant, success will require disciplined market prioritization and time to prepare for and execute successfully. Our efforts are focused on building the right foundation for sustainable global expansion. In the meantime, we have expanded our sales territories in the U.S. by three instead of the previously announced two territories since we see so much momentum in the domestic market. Finally, I will repeat what I have communicated on each call: our top priority at ImmuCell is solid execution across the organization — from sales 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 the year, we announced changes to our corporate governance that support this focus. We now have a smaller independent board with three new board members who bring extensive animal health and functional expertise. I look forward to working with the new board on executing our focused strategy to deliver for today while we secure the future. With that said, we will be happy to take your questions. Let's have the operator open up the lines.

Thank you. We will now begin the question-and-answer session. As a reminder, please limit yourself to one question. To ask a question, you may press star then the number 1. 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 the number 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 the number 1. And today's first question comes from Frank Gasca, a private investor. Please go ahead. And Frank, your line is open.

Yes, outstanding quarter. And congratulations to the team on that performance. Could you talk a little bit about your First Defense vault product and its seasonality, its target market, whether or not it competes with existing products?

Thank you for that question. Let me give you a little more detail. Our functional feed product is a non-USDA-approved product that uses a different manufacturing process, but it essentially has our First Defense technology inside that is derived from the same colostrum. It reduces our cost to manufacture and is offered to the market at a lower price point. It is particularly useful for operations that do not want to feed each calf individually, but can add this to either water, colostrum, or milk that they are providing to the calves as a group. So it has a different dynamic in that regard. We launched the new formulations of this product late last year, in the second half of last year, and it is still in a product launch phase for us. Thank you.

And the next question comes from George Melas with MKH Management. Please proceed.

Thank you. Yeah, totally outstanding quarter. Congratulations on a fantastic start. I want to ask a few questions about production capacity. You said that there is no magic bullet to improving production and yield, that there are so many different levers. Can you tell us a little bit more about what were some of the key improvements that led to the yield improvement? And also, with your current capacity and your four freezers, what do you see is your maximum capacity at this point?

Thank you, George, for your question. There are some primary levers that we used in the last quarter, and there are others that we are planning for that will hopefully yield more in the future. The primary levers in the past four to six months have been improving our planning — aligning our sales forecast with our production forecast at a detailed SKU level and then planning our workflows so that they are balanced, meaning one part of the team is not waiting for another part of the team. With this planning, we also added some overtime capacity to some critical steps in the manufacturing process. If you do that in a planned way, it is manageable and it ties back to the planning point I made. We also reduced waste in our process. There were parts of our process where we were not using everything that we could, and so reusing and focusing on that waste reduced losses and increased output. Finally, there were a couple of steps in the process where minor investments in capital — a bigger tank, some extra membranes, some things like that — really helped increase the throughput of a step that was either a bottleneck or about to become a bottleneck. Those were the key things we did. To further improve yields, we are looking at these on a continuous basis. We have a program in place that we are all focused on to get to a higher yield, and we review that program several times a week. We do not have a specific maximum capacity number in mind today; we are improving yield on a percentage basis continuously. At the same time, as I mentioned in my comments, it is time to think about a major capacity expansion. We are fortunate that we have the settlement payment from our contract manufacturer that we can deploy towards that, and we are in the midst of actively planning a capacity expansion for our plant.

Okay. Great. Thank you for that. If I look at slide number 5, 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. It is puzzling; it seems to peak in the first quarter. Could you help us understand that?

Hi, George. This is Sam. I think that the thing that is challenging about some of the trends in the past few years is the backorder dynamics, so a lot of the time it depended on what was available to sell to customers. I think that creates some dynamics that may not be intuitive and could be what you are seeing. Overall, the trend is that more customers seem to be shifting to Tri-Shield. That seems to be where we are growing. It is our flagship product and that is the trend that we are focused on.

I would add that Tri-Shield is a premium-priced product compared to Dual-Force, our other products. In the calving season we just had, it is the least price-sensitive segment and had a lot of demand in the last quarter or two, which helps explain some of the uptake in Tri-Shield as well.

Okay. Great. Thank you very much.

And again, as a reminder, if you do have a question, please press star then the number 1. The next question is a follow-up from Frank Gasca, a private investor. Please go ahead.

Yes. Thanks for taking my questions. You mentioned an increase in sales force again that you just referenced. I'm curious as to what the main drivers of that are, and as far as regionality and the target market for those regions. Could you get into that? My understanding is that the market is divided into dairy and beef. Where is your growth headed? Where is your sales directed?

Thank you, Frank. We have expanded our sales team to essentially cover the entire country where there are calves, whether they are beef or dairy, because both industries use our product. Although traditionally we have been more in the dairy segment, we are seeing significant increases in beef as well, because beef calves are also increasing in value. With the increase in value of the calf, investing in a preventative like First Defense makes a lot of sense for producers where they get a strong return on investment. Our goal is based on what I learned from my personal visits to customers and what our sales team sees every day: the more contact you have with customers to explain how our product works, the differences between our product and some competitors' products, which are often vaccines, and the differentiation that our product provides, the more effectively you can close the deal. It helps educate the customer, and they appreciate the investment in them. So our strategy around salesforce expansion is that more customer contact equals more revenue. We have been seeing that for a couple of quarters, so we decided to add a third territory in the West of the U.S. that had been open for almost a year and accelerate hiring for that region. We look at each region of the country to understand the number of calves that are there, what percentage of them are getting any treatment at all, and what the sales cycle looks like. In some regions you can close deals faster than others, so we prioritize the fastest, highest-return opportunities when we consider adding commercial people to our team.

That was great. Thank you very much.

Thank you. 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 Lytham 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 ended 06/30/2026 during the week of 08/10/2026. 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.