Immucell Corp 2026 Q2 Earnings Call

Good morning, and welcome. As the conference call operator indicated, my name is Joe Diaz with Lytham Partners. We are the investor relations consulting firm for ImmuCell. I thank all of you for joining us today to discuss the unaudited earnings for the second quarter and six months ended June 30, 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 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 events is available under the cautionary note regarding forward-looking statements or 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, August 14, 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 Olivier te Boekhorst, President and CEO of ImmuCell Corporation, for some 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 second quarter of 2026. Our discussion of results will be accompanied by a few slides that are also part of our updated investor presentation that you can find on our investor page, immucell.com/investors. In late 2025, ImmuCell made significant changes to better position ourselves for success, including a strategic focus on the calf scours market and investments in leadership, sales force expansion, and manufacturing. Our rationale for this shift was that we compete very effectively with First Defense, our highly differentiated calf scours preventative product, in the large growing calf health market, and that we believe our portfolio has considerable runway for further expansion domestically, internationally, and through selected innovations.

Since we introduced this focus on First Defense and enhanced our yield improvement efforts, we have accelerated our growth and increased our share. Our strong commercial results reflect the benefits of restored product availability, investments in our commercial team and product portfolio, and a favorable domestic calf market. As previously discussed, we have been highly focused on ensuring reliable product supply. The team has made a lot of changes across the supply chain, and we are on track to produce nearly 1 million more manufacturing units this year than we did in 2025. We are now well-positioned to meet growing customer demand with our current plan while we execute a major capacity expansion program that is expected to more than triple our current capacity and improve long-term product cost.

On today's call, we will discuss the factors affecting gross margin, the actions underway to improve yields, and our planned capacity investments. For a company our size, it continues to make a lot of sense to focus on our successful on-market products and solve the supply challenges that have historically constrained our growth, and we're excited to report on our progress today. I will now turn the call over to Timothy Fiori, our Chief Financial Officer, for a deeper review of the second quarter financial results.

Tim? Thank you, Olivier. I'll start with a short recap of product sales results, which are unchanged from our July 9th press release.

All the numbers I'll speak to are approximate and rounded. Product sales for the second quarter of 2026 came in at $7.2 million, an increase of 11.5% compared to the second quarter of 2025. Our growth in the second quarter is particularly significant given the challenging comparison with the second quarter of 2025, when we resolved a backorder situation and benefited from significant restocking orders by distributors. Domestic sales for the second quarter grew 27.7% compared to the second quarter of 2025 to $6.2 million, while international sales for the second quarter declined 38.9% to about $1 million in the same period. Sales to Canada accounted for the majority of the decline, which is related to the 2025 backorder clearing.

Product sales for the six-month period ended June 30, 2026, came in at $17.5 million, an increase of 20.9% compared to the six-month period ended June 30, 2025. Olivier will speak to sales out of distribution, which are both strong and trending in the right direction. Gross margin as a percentage of product sales was 33.9% in the second quarter of 2026, compared to 43.7% in the second quarter of 2025. This year-over-year decline in the second quarter primarily reflected the shift of costs formerly associated with Re-Tain into cost of goods sold and lower output in one of our manufacturing sub-processes. Sequentially, gross margin declined 11.1 percentage points from the first quarter, reflecting 7.5 points from lower manufacturing output, 2.1 points from approximately $150,000 of scrap caused by a purchase material, and 1.9 points from the Re-Tain cost shift.

The lower second quarter output reflected anticipated sales volumes and planned process changes intended to improve future yields. Despite these pressures, we were able to meet demand and expand finished goods inventory. Reported operating expenses were reduced by the previously announced $2 million settlement with our former Re-Tain contract manufacturer, which is presented on the income statement as other operating income. Sales, marketing, and administrative expenses increased to $2.4 million in the second quarter of 2026, compared to $1.4 million during the second quarter of 2025. This was driven by investments in leadership and expanded commercial activities, both as previously announced. Product development expenses declined from approximately $800,000 in the second quarter of 2025 to approximately $120,000 in the second quarter of 2026, driven by reductions in spending on Re-Tain product development and the previously mentioned shift of former Re-Tain-related expenses to cost of goods sold.

Excluding the settlement, operating expenses were $5.2 million in the six months ended June 30, 2026, compared with $4.5 million in the six months ended June 30, 2025. To wrap up our income statement discussion, our net income was $1.8 million, or $0.20 per share, during the second quarter of 2026, compared to $500,000, or $0.06 per share during the second quarter of 2025. For the first six months of 2026, net income was $3.8 million, compared to $1.9 million during the same period last year. Both the second quarter and six-month 2026 results include the $2 million settlement received during the second quarter. As usual, we provided adjusted EBITDA figures in yesterday's earnings release. We believe looking at adjusted 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.

Adjusted EBITDA was $2.7 million in the second quarter of 2026, compared to $1.4 million in the second quarter of 2025. For the first six months of 2026, adjusted EBITDA was $5.4 million, compared with $3.7 million during the same period last year. Both 2026 figures include the aforementioned $2 million legal settlement. To wrap up with financials, let me highlight a few key balance sheet items. Our balance sheet as of June 30, 2026, continues to be in a strong position. We ended the second quarter of 2026 with $8.9 million of cash on hand and $9.1 million of inventory. Working capital increased from $13 million at the end of 2025 to $16.6 million at the end of the second quarter of 2026. The settlement contributed $2 million to our cash and working capital improvement.

ImmuCell recently announced a $3.5 million investment in freeze-drying capacity to build scalable manufacturing capabilities and ensure continued reliable supply of First Defense. We expect to complete this initial phase of the expansion in the first half of 2027. Today, we are announcing our intent to invest approximately $4.5 million in our liquids processing capacity. This phase is expected to be completed by the end of 2027. Both of these investments leverage existing equipment and facilities that have been built for the discontinued Re-Tain product. We expect this capacity expansion will more than triple our current capacity and improve product costs long term. Currently, we intend to finance the majority of this expansion with cash on hand and cash from operations. We may supplement this investment with our line of credit facility as needed. With that, I will turn the call back to Olivier.