ImmuCell Corporation Stock

Good morning, and welcome to the ImmuCell Corporation conference call to discuss unaudited second quarter 2026 financial results. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Joe Diaz of Lytham Partners. Please go ahead.

Thank you. 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 6 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 Oliver 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 plant 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 our second quarter financial results. Tim?

Thank you, Oliver. I'll start with a short recap of product sales results, which are unchanged from our July 9 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 the 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 6-month period ended June 30, 2026, came in at $17.5 million, an increase of 20.9% compared to the 6-month period ended June 30, 2025. Oliver 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 process subprocesses. 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 purchased 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 6 months ended June 30, 2026, compared with $4.5 million in the 6 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 6 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 6-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 6 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 reliability -- 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 Oliver. Oliver?

Thanks, Tim. As I mentioned in my initial remarks, ImmuCell made the decision to focus on our scours preventative products, First Defense in late 2025. In the first half of this year, we achieved $17.5 million in product revenue, a 20.9% increase compared to the first half of 2025. Tri-Shield, which is our flagship product that offers the most advanced protection against neonatal diarrhea, had strong 25.1% growth for the first half of the year. And as Tim explained, the U.S. performed particularly well with 32.5% growth in the first half of 2026 compared to 2025.

We're also excited to report that our functional feed line contributed about 20% of that growth. Some of the other metrics we review to measure commercial performance include volume growth at the distributor level and our market share. We access data that shows how much our distributors' out-the-door revenue and volumes from our products changes each month. This gives us a good idea of what our products are doing at a producer level. Our distributors saw 21% and 28% volume growth in the first and second quarter of 2026, respectively, compared to the same quarters last year or 24% for the first half of 2026 compared to the first half of 2025.

We increased our market share as well, defined as First Defense's share of animals treated with a biological scours preventative in the U.S. And we increased that market share from approximately 15% in December 2025 to approximately 19% at the end of June 2026. Our price point is approximately twice that of our competitors, and that means our share of spending by producers rose from approximately 29% to 38% in the same period. We're very proud of our product efficacy, but this market share gain is also the direct result of investments we made to expand our commercial team. We are reaching and converting more producers every day.

As a reminder, we compete in an attractive market supported by significantly higher calf values. The value of a day-old calf has increased from approximately $400 to $1,700 since 2024, strengthening the economic case for preventing scours in those calves. Scours remains a leading cause of death in pre-weaning calves and results in up to $1 billion of annual economic losses in the U.S. More than half of calves still do not receive any biological scours preventative. So we have to show up, ask the right questions and present the health and economic benefits of our solutions in ways that are appropriate for each specific production environment.

Now historically, ImmuCell's growth has been constrained by manufacturing capacity. So relying or ensuring reliable supply remains a strategic priority. From January through July, our team completed an extensive planning process encompassing process design, equipment and facility requirements, cost estimates and implementation planning, and that work supports our decision to move forward with an approximately $8 million investment in freeze-drying and colostrum processing capacity using the facilities and equipment associated with the former Re-Tain program.

The resulting plan combines new equipment with our established expertise in preserving, concentrating and purifying colostrum-derived antibodies. This is not just adding another production line. The project is designed to modernize our manufacturing approach, shorten processing times, expand capacity and improve long-term product economics. The new processes are expected to reduce total processing time from 2 to 3 months today to less than 1 month in the future and more than triple our current capacity. We've signed contracts with equipment suppliers and expect to begin engineering and construction activities shortly.

Currently, as Tim mentioned, we intend to finance the majority of the expansion with cash on hand with the $2 million settlement contributing nicely to our available cash. In the meantime, improving yields from our existing plant remains a primary focus. In the first quarter, we achieved record production of more than 450,000 units per month. And in the second quarter, our output averaged approximately 350,000 units per month, with most of that reduction occurring in the month of June.

Part of the lower output was planned. The second quarter is seasonally our lowest revenue quarter, and our improved planning showed that we could meet demand without running production too far ahead. We also made planned process changes and paused certain activities for quality investments and maintenance work intended to improve future yields. As Tim explained, lower manufacturing output reduced gross margin by approximately 7 percentage points compared to the first quarter. Importantly, we still met customer demand and increased finished goods inventory during the quarter.

As Tim also noted, we incurred approximately $150,000 of scrap related to a relatively minor purchased material. Our quality controls identified the issue early, stopped the manufacturing process and limited the impact. So we remain focused on improving yields, strengthening our process discipline and reliably supporting continued demand growth. I mentioned in our last call that yield improvement is challenging and comes from doing a lot of different things really well every single day, and I cannot thank the team enough for their efforts.

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 contamination risk. We have to keep providing great service to our colostrum suppliers, and we have to manage yield improvement while we execute a major capacity expansion in our colostrum plant. The progress we are making on yields, together with our 2-phase expansion program, gives us greater confidence in our ability to meet customer demand and establish a sustainable, scalable and reliable supply.

Tactically, with greater confidence in our ability to meet customer demand, we are now prioritizing product cost improvements and strengthening colostrum sourcing capabilities to support scalable growth. Competition for high-quality colostrum is increasing, and we are responding with new payment programs, enhanced technical services and expanded farm recruitment efforts. Colostrum represents approximately half of our product costs, so growing our collections and improving the yields we generate from colostrum are very important drivers of our business.

We have discussed in previous calls that we believe strongly in international opportunity for our products. Our newly hired international business development executive is helping us transition from a reactive approach to a more proactive and strategic approach. We're actively assessing market opportunities and weighing them against regulatory and go-to-market investments. The results from our international strategy will take some time to come to fruition. In the meantime, our 3 new salespeople in the U.S. are getting up to speed and delivering results ahead of plan, as Tim discussed earlier on this call.

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. It is a pleasure to work with the team as we execute our focused strategy to deliver today while we secure the future.

And with that said, we will be happy to take your questions. So let's have the operator open up the lines.

[Operator Instructions] And we have a question from [ Tom Fawkes ], a private investor.

I did get a chance to read the Form 10-Q. I do see on there that you guys are continuing investigation studies into Re-Tain. Could you provide any more update on that? Has Michigan State maybe talked to you guys about potential time lines as to when that would be done? Any further insight into how that's all going would be helpful.

Thank you for your question. Yes, we have asked Michigan State to work with us to investigate a, if you will, an additional use case for the Re-Tain product. And that study is ongoing. Discussions about the interim results are ongoing, and it will not be completed until, I would say, end of September, maybe even beginning of October. And so at that point, when we have the full results, we will be sharing those with the investors.

[Operator Instructions] The next question comes from [ Frank Gasca ] , a private investor.

Great to see the improvements in revenue and your focus on margins. You actually went in enough detail to satisfy my question on the margins. In your 10-Q, I saw that the 2 primary customers percent went down, and I'm seeing that as evidence of the results in your increased salespeople. Is -- could you elaborate on that? Is that a fair enough assumption?

So let me -- that's a great question. Let me just start off by describing our commercial structure. So we essentially sell everything through distribution. And then we have a commercial team that is focused on winning new customers who then will order their products through our distribution partners.

So as we are expanding into new segments or new geographic areas, there could be momentary shifts from which distributors are going to -- are the ones that are providing support to those customers. But it's more a question of a little bit of timing and just where those new customers happen to be located and which distributors those new customers prefer to use than a purposeful change on our end. I hope that makes sense.

And the only thing I would add is that we've seen quite attractive customer acquisition results this quarter, and we put that in our investor deck on the website. So you can see the data, but it's been a very good couple of quarters actually of winning new customers.

[Operator Instructions]

Gentlemen, while we wait for additional questions, I've got a couple of questions here that I think you might want to respond to. Oliver, can you describe your current distribution ordering dynamics? Is everything essentially set the way you want to see it? Any particular issues out there? Can you comment on that?

Yes. Thanks, Joe. I'll actually take that one. So we've talked a lot over the past year about distributor ordering dynamics and also backlog fulfillment ordering dynamics where we would have compares that had fulfillment in them in the prior year. And I do -- we have consistently said we expected to lap that at the end of this quarter -- this past quarter, at the end of Q2 2026, and our view is still that, that is what has happened. So backlog was fulfilled by approximately the end of the second quarter 2025, and now we have a little bit cleaner history to compare to.

The next question comes from [ John Ravlik ] with -- a private investor.

I'm not sure, has Re-Tain been discussed? I was interested if you've collected the data and set up a package for possible licensing.

Thank you for your question. So we're, in fact, awaiting the results of the investigational study by Michigan State, which we expect to be completed September, October time frame before we make any further decisions on our Re-Tain product.

The next question comes from George Melas with MKH Management.

Thanks for the explanation on the gross margin and also on the expansion. Can you give us a little bit more information on the seasonality of the business between dairy and beef? And I was looking at sales to your distribution, and it seems like when you sell in the beef season, they seem to be -- those 2 distributors seem to be a smaller share of the sales. So is there a different channel partly for the -- on the beef side?

Thank you. That's a great question. So my summary response would be that, yes, there are different distributors that have strengths in dairy versus beef, although many are, as you can imagine, more geographically focused in their strengths, but different industries will buy from different distributors. That's certainly true.

And what our strategy is to make sure that we have, first of all, distribution coverage for the entire country, which we do. And in many places, we have multiple distributors that can service customers so that we're leaving it up to the customer who they want to buy the product from. And that we then augment our distribution coverage with a focused commercial team that really works on new customer acquisition, which can be a fairly lengthy sales cycle for products like functional feed, somewhat shorter for other products.

And then we add to our commercial team based on where we see the greatest opportunity for short-term sales gain. So that has been our approach. We aren't actively managing the volume that goes through one distributor versus another. We are focused solely on winning new customers. So the result then of the concentration of those 2 big distributors within our overall revenue are really just kind of the results of the ordering pattern at a producer level more than anything else.

To your seasonality question, there is seasonality. Dairy industry tends to use our product all year long at similar levels, whereas beef industry has more of a calving season where a lot of calves are born in the same period of time, which is why we have peak seasons in Q4 and Q1 of the year.

Okay. Understood. And then just a follow-up question on -- I think you gave us some numbers on sell-through growth, which was up 24% year-over-year in the first half. Is that from the 2 large distributors? Or is that for the entire -- for all your distribution? And is that something you've been able to track for a long time? Or is that some new data that you have?

So the 24% growth is volume growth out-the-door by all our distributors. So it covers the entire market. And these are national data that we purchase and have access to and that we've had access to certainly for -- period, I don't know how long. I've only been here since November, but certainly for years, we've had access to this data to show us kind of what's going on at the producer level, which is ultimately how we measure our success.

And next, we have a follow-up from [ Frank Gasca ], private investor.

Yes. On your margin, your explanation for the decrease, the Re-Tain shift aspect, that's recurring and continuous. Is that fair?

Yes, that's fair. Keep in mind that when we talk -- when I talked about it earlier, onetime was sequential. So what happened is in Q2, it's -- even if it's the same dollars of shift, it's against a smaller amount of revenue, so you get a larger percentage impact. But also the dollars were slightly higher in Q2 than Q1. And there's slight variability. It's the same -- the recurring costs associated with the building essentially, but those can vary a bit.

I mean, is this the extent of that category or understanding it has a continuous impact? And the dollar amount, is that pretty much established and fixed, understanding the percent will change with volume?

Yes. The dollar -- so really, I can be completely transparent about this. This is the cost of the building. So it's utilities, depreciation associated with the building. Those are the 2 biggest pieces. And then any maintenance that the building needs, of course, that isn't capitalizable. So that dollar amount is pretty stable, but it will fluctuate a little bit as utility bills do.

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Oliver Te Boekhorst for any closing remarks.

Thank you for your questions. Before I turn it over to Joe, I would just like to thank the ImmuCell team once again for their hard work and for delivering another quarter of strong commercial growth. Joe?

Thank you, Oliver. We thank all of you on the call today for participating. We look forward to talking with you again to review the results for the quarter ending September 30, 2026, during the week of November 9, 2026. Have a great day.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the ImmuCell Corporation conference call to discuss unaudited first quarter 2026 financial results. [Operator Instructions] 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 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 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 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, 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 Te Boekhorst, 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, 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 the first quarter of 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. And we also achieved 45% gross margins after absorbing legacy Re-Tain related costs that shifted from product development to gross -- 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, our leading calf scours preventative product. Since 1991, 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. And for a company our size, it made 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 Fiori, 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. Tim?

Thank you, Oliver. I'll start with a short recap of product sales results, which are unchanged from our April 8 press release. All the numbers I'll speak to are approximate and rounded. Product sales for the first quarter 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, while international sales for the first quarter declined 30.2% to about $600,000 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 the first quarter of 2026 compared to the first quarter of 2025. We realized gross margin improvement in the first quarter compared to prior year. Gross margin as a percentage of product sales increased to 45% during the first quarter of 2026 compared to 41.6% during the first quarter of 2025. We achieved this improvement despite a headwind of 2.4% in the first quarter of 2026 coming from costs associated with former Re-Tain assets, which year-over-year have shifted the cost of goods sold from product development expense.

Year-over-year gross margin expansion in the first quarter of 2026 is coming from both price and manufacturing performance, partially offset by the aforementioned shift of former Re-Tain-related costs. Operating expenses increased to $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 Re-Tain-related expenses to cost of goods sold.

Other expense decreased to $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 nonrecurring insurance payment in the first quarter of 2025. To wrap up our income statement discussion, our net income was $1.9 million or $0.21 per share during the first quarter of 2026 compared to $1.4 million or $0.16 per share during the first quarter of 2025. As Oliver 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 the first quarter of 2026 from $2.3 million in the first quarter of 2025. To wrap up with financials, let me highlight a few key balance sheet items. Our balance sheet as of March 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 first quarter of 2026 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 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. Oliver?

Thanks, Tim. Congratulations to the team for the excellent results in the first quarter of '26. As I mentioned in my initial remarks, ImmuCell made the decision to focus on our scours preventative products called First Defense in late 2025. In the first quarter of this year, we achieved a 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 3 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 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 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 the first quarter of 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 3 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 5x as large. We will focus on these opportunities. As I discussed in previous calls, a 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 first quarter 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 helped improve our gross margin in addition to the price realization that Tim mentioned. Yield improvement is challenging and comes from doing a lot of different things really well every single day. There's no magic bullet or a 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 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 announce that we reached a $2 million settlement with a former contract manufacturer, 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 Re-Tain, 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 communicate more information on future earnings calls. In previous calls, we discussed 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 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 time lines and our capacity expansion time lines as well.

While we believe the international opportunity is significant, success will require disciplined market prioritization and time to prepare for and execute successfully. And 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 3 instead of the previously announced 2 territories since we see so much momentum in the domestic market.

Finally, I will repeat what I've 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 supports this focus. We now have a smaller independent Board with 3 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 the day 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.

[Operator Instructions] And today's first question comes from Frank Gasca, a private investor.

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

Thank you for that question. Let me see if I can give you a little bit more detail. So our functional feed product is a non-USDA-approved product that uses a different manufacturing process that we use a different process to make it, but it essentially has our First Defense technology inside. It uses the same colostrum. And it reduces our cost to manufacture, and it's offered to the market at a lower price point. And it is particularly useful for those operations that don't want to feed each calf individually, but can add this to the water or colostrum or milk that they're providing to the calves as a group. And so it has a different dynamic in that regard. We launched it late last year, second half of last year, essentially the new formulations of this product. And so we're -- it's still in a product launch phase for us.

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

Totally outstanding quarter. Congratulations to a fantastic start. I want to ask a few questions about production capacity. I think you said that there's no magic bullet to improving production and yield that there's so many different levers. Can you tell us a little bit more about what were some of the key improvement that led to the yield improvement. And also with your current capacity and your 4 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 some others that we are planning for that will hopefully yield more in the future. So the primary levers in the past 4 to 6 months have been improving our planning. So aligning our sales forecast with our production forecast on a very kind of SKU level and then planning our workflows so that it's balanced so that one part of the team isn't waiting for another part of the team.

And with this planning, we also added some overtime capacity to some critical steps in the manufacturing process. And if you do that in a planned way, it's actually manageable and it ties into back to the timing point that I made. 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 increases output.

Finally, there were a couple of steps in the process were minor, I would say, investments in capital and a bigger tank, some extra membranes, I mean some things 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 more -- 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 yields kind of on a percentage basis, if you will, on a continuous basis. And at the same time, as I mentioned in my comments, it is time to think about a major capacity expansion. And so we're very fortunate that we have the 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 plan.

Okay. Great. If I look at Slide #5, where you have basically the product mix over the last 3 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, but it's -- maybe help us understand that, if you can.

Yes, George, it's good to hear from you. This is Tim here. I think that the thing that's challenging about some of the trends in the past few years even is the back order dynamic. So it's really a lot of time dependent on what was available to sell to customers. And I think that creates some different dynamics that may not be intuitive. So that could be what you're seeing. I mean, overall, the trend is that more customers seem to be shifting to Tri-Shield. That seems to be really where we're growing. It's our flagship product, and that's the trend that we're focused on.

George, the only other thing that I would add to that is that Tri-Shield is a premium-priced product also compared to Dual-Force and our other products. And in the calving season that we just had, it's the least price-sensitive segment that had a lot of demand in the last quarter or 2. And so that helps explain some of the uptake on Tri-Shield as well.

[Operator Instructions] And the next question is a follow-up from Frank Gasca, a private investor.

Your increase in sales force again 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, Frank. We have expanded our sales team to essentially cover the entire country where there are calves, whether they're beef or dairy because both industries use our product. Although traditionally more focused on the dairy segment where we're seeing significant increases in the beef as well because beef calves are also increasing in value. And so with the increase in value of calf, investing in a preventative like First Defense makes a lot of sense for producers where they're going to get a really good return on investment.

So our goal is that we understand, and I understand this from my personal visits to customers, but the sales team sees this, of course, every day is that the more 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, it really helps close the deal, helps educate the customer, and they appreciate the time and investment in them. So our strategy around sales force expansion is that more customer contact equals more revenue. And we've been seeing that now for a couple of quarters.

And so we decided that it made sense to add a third territory, 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 calves that are out there, what percentage of them are getting any treatment at all. And what does the sales cycle look like? We have some experience in that because in some regions, if you can close a deal faster than in others. And so we're looking at kind of the fastest, highest return of our investment when we talk about adding commercial people to our team.

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 I 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 June 30, 2026, during the week of August 10, 2026. Thanks again, and have a great day.

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

Good morning, and welcome to the ImmuCell Corporation Conference Call to discuss Unaudited Fourth Quarter and Full Year 2025 Financial Results.

[Operator Instructions]

Please note, this event is being recorded.

I would now like to turn the conference call over to Joe Diaz of Lytham Partners. Please go ahead.

Thank you, Bailey, and good morning to all. 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 financial results for the fourth quarter and the year ended December 31, 2025.

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 the future events or expected future results or predictions about the steps the company plan 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, Thursday, March 5, 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 Te Boekhorst, 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 Full Year 2025 Results. 2025 was a very successful year for the company. In 2025, we hired a new management team. We increased manufacturing capacity to meet end customer demand and resolved a multiyear backorder situation. We pivoted to a strategy that is dedicated towards maximizing shareholder value from our highly successful First Defense franchise.

We achieved total product sales of $27.6 million, and we earned $1.6 million of net operating profit, which was an improvement of $3.3 million compared to 2024, largely driven by significantly expanded gross margins. In our previous calls, including our special investor call on January 9, 2026, to discuss our full year revenue and our shift in strategy to focus on First Defense, we explained some of the drivers of our revenue performance and the rationale for our new strategy. In summary, we compete in a large growing market with a highly differentiated product portfolio that has a lot of runway for further growth domestically and internationally. And so we decided to double down on this successful First Defense franchise.

Our results in 2025 give us confidence in this decision. I will review some of the drivers in more detail and share some of our market observations after Timothy Fiori, our Chief Financial Officer, completes a deeper review of the financials for the fourth quarter and full year 2025.

I now turn the call over to him. Tim?

Thank you, Oliver. I'll start with a short recap of product sales results, which are unchanged from our January conference call. All the numbers I'll speak to are approximate and rounded. Product sales for the fourth quarter of 2025 came in at $7.6 million, a decrease of 1.6% as compared to the fourth quarter of 2024. The Q4 decline was so modest is noteworthy. As you will recall, our very strong sales in the fourth quarter of 2024 benefited from increased demand and catching up from a prior backorder situation. We had earlier warned that quarter-to-quarter comparisons for the last half of 2025 would be affected by this catch-up factor. That same dynamic will continue to impact growth rates in the first half of 2026, but I want to be clear that this does not impact 2026 operationally, we're shipping orders every day.

Digging further into the details, domestic sales for Q4 grew 8.7% as compared to the fourth quarter of 2024 to $7 million, while international sales for Q4 declined a bit more than half to about $600,000 in the same period, mainly driven by order timing in Canada. It's important to note that international sales are only approximately 8% of total sales for Q4 2025. For the year as a whole, in 2025, we grew 4.3% as compared to 2024 to total product sales of $27.6 million.

Similar to the quarterly results, we saw growth in domestic sales and a decrease in international sales, again, influenced by order timing from our Canadian distributor. In terms of product mix, we're pleased to see continued shift towards Tri-Shield, reflecting new customer acquisition and migration from our lower-priced Dual-Force products by some customers seeking the broadest protection available. We realized gross margin improvement in 2025 as compared to prior year. Gross margin as a percentage of product sales increased to 38% during Q4 of 2025 compared to 37% during Q4 of 2024.

Notably, we achieved this improvement despite Q4 2025 gross margin being suppressed by noncash inventory write-downs. The full year results show the story more clearly. Gross margin increased to 41% during the full year 2025 compared to 30% during full year 2024. Gross margin improvement in 2025 was driven by increased manufacturing volumes and efficiencies as well as product price increases, partially offset by noncash inventory write-downs. As previously disclosed in our January conference call, we conducted a thorough review of fixed assets and inventories.

As part of that review, we took a noncash write-down across Q3 and Q4 of 2025 of approximately $650,000, mainly consisting of work-in-process colostrum inventory. This noncash write-down is approximately 5.9% of Q4 2025 revenue and approximately 2.4% of full year 2025 revenue. We will continue to carefully monitor assets, including inventory as part of a rigorous and disciplined capital allocation process. Operating expenses increased to $3 million during Q4 of 2025 compared to $2.2 million during Q4 of 2024. Operating expenses increased to $9.8 million during the full year 2025 compared to $9.6 million during full year 2024.

The increase in both period comparisons was primarily driven by increases in G&A, partially offset by reductions in product development expenses related to Re-Tain. Other expense increased to $2.8 million during Q4 of 2025 compared to $100,000 during Q4 of 2024. Other expense increased to $2.7 million during full year 2025 compared to $500,000 during full year 2024. The primary driver of both Q4 and full year 2025 increases came about as a result of our shift in strategy around Re-Tain.

In December, we announced a shift away from Re-Tain manufacturing to allow us to focus more on our highly successful First Defense product line. In December, we took a noncash write-down impairment charge of $2.7 million for certain Re-Tain-related property, plant and equipment. This is $200,000 or so less than I discussed in the January conference call, which is attributable to a slight increase in our estimation of future salvage value.

We continue to sharpen our overall assessment of the value of former Re-Tain assets that we plan to repurpose for use in First Defense manufacturing and our estimates of their net value are subject to change. We did have a onetime income from insurance proceeds of $427,000 in the first quarter of 2025, which provided a partial offset to the Re-Tain write-down in the full year view. I'll wrap up the income statement financials with some discussion of the improvements we've seen regarding 2025 net income and earnings per share as compared to prior year.

Net loss of $1 million during 2025 represents a $1.1 million year-over-year improvement compared to 2024, even considering the significant impact of the previously mentioned $2.7 million Re-Tain write-down. The year-over-year improvement was driven by higher sales and increased gross margins. Basic net loss per share during 2025 was approximately $0.12 per share in contrast to a net loss of $0.26 per share during the prior year.

Please note that we provided EBITDA figures in yesterday's earnings release. However, the EBITDA calculations do not adjust for the impact of write-downs for Re-Tain or inventory, which are obviously material to 2025 results. Lastly, operating income for 2025 was $1.6 million compared to an operating loss of $1.6 million in 2024, a year-over-year improvement of $3.3 million. To wrap up with financials, let me highlight a few key balance sheet items. We ended 2025 with $3.8 million of cash on hand. Working capital increased from $10.6 million at the end of 2024 to $13 million at the end of 2025, driven by higher finished goods inventory. As you may recall, we ended 2024 with near 0 finished goods. 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'll turn the call back to Oliver for some closing remarks. Oliver?

Thanks, Tim. Congratulations to the team for the excellent financial results in 2025. It was a challenging year for sure with a lot of change, but ImmuCell navigated it well, and we are ready to make 2026 a success. As promised, I will take a little time to review our strategic focus and share some market observations with you. ImmuCell competes in a very attractive, large and growing market for calf health solutions with our First Defense range of products. Calf's health is a dynamic market that has seen rapid and dramatic increases in the value of cats driven by dairy beef cross breeding and a contraction in the U.S. calverd, which has tightened calf supply relative to market demand. First Defense is a best-in-class preventative for calf scours, which is a condition that affects 14% to 15% of pre-weaning calves.

That's approximately 5 million calves every year in the U.S. alone and is the leading cause of death in these pre-weaning calves. Scours represents up to $1 billion of economic burden in the U.S. due to treatment costs, performance losses and mortality. And U.S. farmers spend $90 million to $100 million per year on scours prevention products. Our customers, whether they are dairies raising their own calves, calf ranches that raise calfs for dairies or cow calf operations are all interested in preventing scours outbreaks and protecting these calves that are the highest risk animals on the farm.

Calves are born immune incompetent. And in the first few weeks of their lives, they are particularly vulnerable to bacteria and viruses. Our product line protects against 3 common pathogens that cause scours, namely Bovine Coronavirus, E. coli and Rotavirus. First defense products are colostrum-derived and the only USDA-approved solutions for scours that aren't a vaccine and delivers 3 to 6x as many neutralizing antibodies against these pathogens than our primary vaccine competitor does. And being colostrum-derived, we provide these calves a lot of other bioactives to help them stay healthy, too. It should not come as a surprise that we are priced at approximately 2.5x competitive alternatives.

These product characteristics have helped us win market share, increasing from 10% to 15% of treated calves in the U.S. in the past 8 years, and we capture approximately 29% of the spend in this growing category. Specifically in the U.S. in 2025, producers spent approximately $93 million on calves scours category. That's vaccines and our antibody products, which was 14% higher than in 2024. 10% came from the increase in the number of calves using scours preventatives and the rest from price and product mix. And yet, about 55% of calves are still not getting any treatment for scours at all. So when you do the math, the total addressable market in the U.S. is more than $200 million.

And internationally, the total addressable market is at least 5x as large. ImmuCell maintained approximately 15% share of treated animals in the U.S. in 2025, and we are pleased to report that we added more customers with new account volume more than offsetting normal account attrition in 2025 and that recurring customers increased their purchasing in 2025, driven by higher coverage rates and inventory normalization. We believe momentum accelerated in the fourth quarter. So we gained revenue share against the 3 largest animal health companies in the world during a time when we were supply constrained due to the manufacturing challenges.

Now that we're addressing manufacturing capacity, we have a lot of confidence in future growth. In late December, we announced our strategy to focus on First Defense and pause investment in a subclinical mastitis product that the company had pursued for some time to allow us to focus on the scours market opportunity I just described and critically important, also on improving our manufacturing capabilities and capacity.

To give you some background, we grew our manufacturing capacity from approximately 3 million units in 2023 when we were in a backorder situation to 4.1 million units in 2024 and 4.6 million units in 2025. This helps you understand the gross margin improvement that drove our bottom line results in 2025, although not all that margin improvement was driven by volume, a portion of that was efficiencies and product price increases also.

In the past 3 months, we have completed an exhaustive analysis of our processes led by outside experts and key leadership inside the company, and we have identified over a dozen opportunities to further increase our capacity to between 5 million and 6 million units per year. Units don't match up exactly with revenue because of the different and changing price points of the products in our portfolio, so we will no longer communicate our capacity in terms of revenue.

Having said that, we recently implemented medium- and long-term demand and supply planning, and the team is confident we can meet demand in 2026 and 2027 by implementing yield improvements, while we work on our next major capacity expansion. When we focused on First Defense at the end of December, this enabled us to really dive into these yield improvement opportunities, and we are also excited to repurpose assets previously deployed for our subclinical mastitis product to First Defense, and we are now devoting all our time and investments to expanding a successful existing product line.

Finally, we previously announced that we are increasing our sales capacity, and I'm pleased to announce that we hired a senior international market development leader, added a new sales manager in the U.S. and are actively recruiting for a third commercial position. We will make additional territory hires based on continuous assessments of calf population density, adoption of calf level scours prevention solutions and demonstrated price acceptance within each region.

In the meantime, I just returned from a very successful sales meeting last week, where we implemented a new standardized sales approach that will enable us to scale our commercial activities more efficiently. Our top priority at ImmuCell remains solid execution across the organization from sales to manufacturing and including all the support functions that make future profitable growth possible.

With that said, we'd be happy to take your questions. Let's have the operator open up the lines.

[Operator Instructions]

Bailey, if I might interject here while the queue builds up, let me begin with a couple of questions for management. Oliver, 2025 certainly was a transformational year for ImmuCell. Looking ahead into '26 and '27, what are the biggest challenges ahead that you see for the company to achieve your goals?

Thank you, Joe, for that question. I see 2 types of challenges that we're addressing as a company. The first one is a planned increase in yield and followed by an increase in capacity through more major investments. So as I discussed, we believe that with the opportunities we identified in the last 3 months, we can increase our volume to between 5 million and 6 million units. And this is without making any major investments. This is through improved floor planning, some maintenance, some small additions to existing equipment and a whole series of activities that are planned for the year that will get us there.

So capacity and making sure that we have the capacity to meet market demand is our first order of business. And at the same time, we are now stepping up our commercial activities. So whereas our commercial team has spent a lot of time in the past year to 2 years, managing allocations of products due to our back order situation, it is now proving to a proactive outreach to gain new customers. And so it's all about growth on the top line for the company. So those would be our 2 primary initiatives that we're focused on in the coming year.

Will you be expecting any additional Re-Tain write-downs in 2026?

Joe, I'll take that one. We don't anticipate any large write-downs for the assets formerly associated with Re-Tain. We're evaluating the best way to roll out this larger capacity expansion project, medium term, using the former Re-Tain plan and the majority of the former Re-Tain assets. We have booked a modest salvage value, a couple of hundred thousand dollars associated with the assets that have been written down. And there's always a chance that we'll reevaluate a specific piece of equipment over time. But currently, we're really not seeing anything like that.

As it relates to 2025 revenue, how much do you consider to be recurring? And is that something that will be the case in '26 and '27?

Thanks, Joe. I'll take that question. So the -- once customers are on our product, they see a fairly dramatic change or reduction in scours related to the antigens that our products protect against. And despite price increases and some supply constraints over the last few years, they've largely remained loyal to the company and to the product because of its impact on their operations.

So we aren't at this time would have calculate things like churn to give you an exact answer around recurring revenue due to all the things that happened in back order situation. For example, if a customer couldn't get our product from one distributor, they would sign and ask another distributor for the product and that impacts the way that we can calculate churn. So that's just an example.

So what I can say with my sales team's input, but also from my own personal visits to customers over the last 3, 4 months is a high degree of loyalty and a high degree of satisfaction with our products.

Fantastic. Well, with that said, I think this will conclude the Q&A session. I want to thank all of you for participating in today's call. We look forward to talking with you again to review the results for the quarter ended March 31, 2026, during the week of May 11, 2026. Thanks again, and have a great day.

Thank you for attending today's presentation. The conference has now concluded. You may now disconnect.

Good morning, everyone, and welcome to the ImmuCell Corporation conference call to discuss strategic change in focus and unaudited 2025 sales results. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the floor over to Joe Diaz with Lytham Partners. Please go ahead.

Thank you, Jamie. Good morning, and welcome. As our operator indicated, my name is Joe Diaz with Lytham Partners. We're the Investor Relations consulting firm for ImmuCell. I thank all of you for joining us today to discuss the change in ImmuCell's strategic focus and the unaudited sales results for the fourth quarter and full year December 31, 2025. Listeners are reminded and caution 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, January 9, 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 will 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 opening remarks. We will then have further remarks from Tim Fiori, pardon me, the CFO of ImmuCell, and then we will open the call for your remarks and questions. Oliver?

Thank you, Joe, and good morning, everyone. This continues to be an exciting time at ImmuCell. We shared in late December that we are shifting our strategy as a company to focus on First Defense. And consistent with prior practice, we have an earnings call to discuss our full year financial results, which will take place in late February, and we will not be commenting on earnings estimates today. However, the strategic shift is significant for our company, and we decided it would be helpful to review the implications of that decision and our fourth quarter and full year unaudited sales results in today's call.

So we're happy to report that we had a near record sales quarter, and this one was without tailwinds from catching up on back orders in the fourth quarter of 2025. Our Chief Financial Officer, Tim Fiori, will walk us through the numbers in more detail, but 8.7% growth in the U.S. and 41.3% growth of Tri-Shield in the fourth quarter of 2025 compared to the fourth quarter of 2024 are exciting achievements for the company.

We're also seeing substantial improvements to our manufacturing output and with more to come. And as recently announced, we are now in a position to repurpose manufacturing assets from Retain to support our long-term growth in First Defense after we decided to suspend investment in manufacturing Retain. Our decision to redouble our focus on First Defense and pause investment in Rain is based on 2 factors. The first is that we have very high confidence in future sales and profit growth potential in our First Defense business that we feel justifies investment and focused execution.

The second reason is the unfortunate stumbling block post when the United States Food and Drug Administration, the FDA, issued an incomplete letter for our Re-Tain new animal drug application. The practical implication of the FDA's decision is that we are still years away rather than just months away from achieving an FDA-compliant manufacturing solution needed to launch this product.

Continuing to invest in Rain would have required an increased commitment to fund expenses and capital investments to bring this new product to market, diverting resources that could instead be devoted to expanding an existing successful product franchise, namely First Defense. But let's talk about First Defense. Our First Defense products address the critical industry need for protecting cats. The newborn calf market has evolved rapidly over the past 5 years as calf values have increased significantly driven in part by widespread adoption of beef on dairy cross-breeding and the shortage of beef calf related to drought and the closing of the Mexican border, amongst other things. As a result, newborn calfs can be worth approximately $1,300 on day 1 of life compared to roughly $200 in 2003. Historically, dairies would derive 2%, 3% of their yearly income from selling the calfs they don't need. And now it's up to 20% to 25%.

And this macro trend has raised the economic stakes of early life calf health and survival. ImmuCell's first defense provides proven protection against neonatal scours, helping to safeguard these high-value cats. So we believe we have great runway in the market for scours protection, which we have estimated is approximately $900 million in total addressable market worldwide. So our strategy is to get out and meet more customers with strong medical, scientific and outcomes-based arguments for trying and using our products.

We also have opportunities for increasing our First Defense manufacturing output through operational improvements. In 2025, we increased output of our key bottleneck process, lyophilization by more than 15%, and we believe we can achieve a similar rate of increase in 2026 and to do so without using significant incremental capital. So more on that later. All these opportunities in our First Defense business require and in our judgment, deserve increased focus and execution. Now a second reason for our shift is the FDA's incomplete letter for retain. We have been developing this innovative treatment of subclinical mastitis in dairy cows for some time and thought we were close to obtaining final approval. ImmuCell passed FDA requirements for safety, efficacy in 4 of the 5 technical sections of our application, and we had expected that our contract manufacturer's completion of the fifth technical section would soon follow.

You will recall that we decided to employ this contract manufacturer for filling the active ingredient into syringes in order to limit our capital expenditure and to reduce our risk. And unfortunately, that is not how things worked out. We are not in a position to comment on details, but we understand that the reason the FDA declined to approve our application was because our contract manufacturer had still not satisfactorily addressed previously cited inspectional deficiencies.

So we received the incomplete letter on December 23 and shared this news with you the next business day. The incomplete letter from the FDA -- combined with our contract manufacturers refusal to extend their contract beyond March 2026, meant that we would have had to restart our manufacturing section and spend an unknown period of time, years to obtain approval, incurring significant expenses along the way. We decided this is not the highest value use of our company's resources. Instead, we will complete the investigational studies that are underway to document efficacy in the field and then prepare the best case we can for a potential future partner for Rain.

In the meantime, we will redeploy most of the manufacturing assets that were built for Retain toward expansion of First Defense capacity. First Defense also uses liquid processing equipment, for example, and we have determined that most of the retain equipment can be repurposed. At this point, I'm going to turn the call over to Tim Fiori, our Chief Financial Officer, for a deeper review of the financial implications of this decision and the quarter and full year sales highlights. Tim?

Thank you, Oliver. I'll start with product sales results and then discuss implications of the change in strategy as well as some other balance sheet adjustments. Product sales for the quarter came in at $7.6 million, a decrease of 1.6% as compared to the fourth quarter of 2024. We are pleased with the overall product sales number. As mentioned in the last earnings call, we did anticipate difficult year-over-year growth rate comparison as the fourth quarter of 2024 significantly benefited from orders related to the catch-up of a backorder situation. I'd like to note that the first half of 2025 also significantly benefited from orders related to catching up from the backorder situation.

Domestic sales for the most recent quarter grew 8.7% as compared to the fourth quarter of 2024 to $7 million. We experienced a decline in international markets, mainly driven by order timing in Canada, with Q4 declining 52.6% year-over-year. Shifting to full year 2025 results now. We grew 4.3% as compared to the full year 2024 to total product sales of $27.6 million. Similarly -- similar to the quarterly results, we saw full year-over-year growth in domestic sales and a decrease in international sales. The other notable trend within the First Defense suite of products is that we are seeing a shift towards Tri-Shield in both the quarter and full year, reflecting a migration from dual force products and the acquisition of new dairy and beef customers seeking protection for their calves. Now let's talk a little bit about some balance sheet-related items, starting with some items related to the shift in Rain strategy. As Oliver discussed, we're shifting our resource allocation away from Rain and to First Defense. As part of that decision, we did an initial evaluation of over $15 million in property, plant and equipment related to Re-Tain and concluded that the majority of it, including our building and most of the equipment would be useful for the liquids processing part of our First Defense manufacturing process.

There are, however, certain pieces of equipment such as the aseptic filling machinery, which will not be useful in the manufacture of First Defense. The immediate financial impact of that assessment is a noncash impairment write-down of some existing assets, which will impact Q4 of 2025, currently estimated at $2.9 million.

As we continue to evaluate the repurchasing of the building, it is clear that modifications to the building and additional capital will be necessary, and we are currently in the process of evaluating the company's needs and related costs. In addition to our evaluation of retain assets and the shift in strategy to maximize the return on our assets and future cash expenditure, we conducted a thorough review of other fixed assets and inventories as part of the year-end closing process. In management's evaluation of inventory in conjunction with the manufacturing team, we have decided it would be prudent to take an estimated write-down of approximately $600,000.

This write-down mainly concerns previously purchased colostrum that we deemed not suitable for our requirements and which we, therefore, intend to sell on the open market without further processing. We take the management of assets and inventory seriously, and we have implemented rigorous and disciplined capital allocation processes to drive the highest and best use of our resources. With that, I will turn the call back to Oliver for some closing remarks. Oliver?

Thanks, Tim. We are very focused on the commercial opportunity that we have with the First Defense solutions, including new products in the functional feed line that were launched in June. As recently announced, we are expanding our sales team by 50%, creating 2 new U.S. sales territories and adding an international business development executive to our team. We want to spend more time with more customers to drive growth. We see expanded runway for First Defense sales, and we are excited to execute our growth initiatives. We're also very focused on operational excellence to ensure the consistent supply of quality products.

Our decision to redeploy former retained manufacturing assets for First Defense liquids processing will help us achieve our long-term capacity expansion objectives and prevent liquids processing throughput from becoming a challenge for us. In the meantime, we are continuously driving optimization of our lyophilization activities, which are typically our bottleneck.

In 2025, as mentioned, we saw more than 15% year-over-year increase in lyophilization output, and we are implementing more ideas to maintain that rate of improvement during 2026. These 2 actions give us confidence that we'll be able to meet customer needs for First Defense. When we finalize our capacity expansion plans in the coming quarters, we will provide more details. Our top priority at ImmuCell will continue to be solid execution across the organization. And with that said, we would be happy to take your questions. Let's have the operator open up the lines.

[Operator Instructions] And our first question today comes from Frank Gasca.

Great quarter. It was anticipated from your previous quarter that sales were kind of ipi, I'll say, but you've managed to have a remarkable quarter. With that being said, I have to say briefly, I've been an investor in ImmuCell for more than 25 years. So I have a working knowledge of the historical performance and questions.

So I do have some questions in regards to your focus, some of which is not necessarily new, but certainly welcomed such as the shift to also looking at foreign sales. With that being said, I know that in the past, it was certainly brought up in question. And one of the aspects of it was that there's some regionality in the pathogens. So I guess my question then is, to what degree do you think this impacts foreign development? And secondly, what qualifications, what requirements are you looking for, for this new position in regards to exploring and hopefully increasing foreign sales?

Frank, thank you very much for your question and for your trust in ImmuCell as a long-term investor, we really appreciate the confidence. International sales are complicated. And what we need to do is we need to hire somebody who has experience launching products in international markets. because there are very significant differences in product requirements, but also go-to-market strategies that should be deployed when considering international sales.

Now as you know, we're already in Canada and some other markets, Korea, et cetera, with our products. But there are differences in specific pathogens that drive scours in different markets. But there's also a lot of similarities. For example, rotavirus is a problem essentially everywhere. So our pivot to focus or double our focus on First Defense includes hiring expertise to help us drive those sales. You can't get there without that expertise and experience. So we're in the negotiating currently with somebody who has that experience and who hopefully will join our team. I hope that answers your question.

It does. I have further questions, but I'm going to get back in the queue and give other opportunity, but I do have several other questions.

And our next question comes from David Champoux.

My question relates to the contract manufacturer for Retain. Has the contract manufacturer provided an explanation for its failure or unwillingness to comply with the FDA requirements that resulted in the complete letter?

Thank you, David, for your question. We are in the midst of completing our conversations with this contract manufacturer. So I'm going to decline to give you more details at this point. But obviously, we're promoting the best interest of our shareholders in those discussions, as you might imagine.

Okay. I don't know how far you...

I might just add one other thing that based on the letter that we received from the FDA, it is clear the incomplete that we receive for our application is solely due to the circumstances at the contract manufacturer.

Understood. Is it -- I mean you may not be comfortable commenting on this, but I'll ask the question anyway. Is it your view that the contract manufacturer has a contractual obligation to ImmuCell to maintain its facilities in compliance with the FDA requirements?

Yes, that is my view.

Okay. So I'm not sure what's going on between ImmuCell and the CM at this point. But I would assume that as part of protecting the interest of ImmuCell, one possibility is pursuing the CM for damages resulting from its protracted and continued failure to comply.

So David, unfortunately, we can't comment on that.

Okay. One last question. Given the impact with the FDA and the pause on retained activities, in your view, how realistic is it to expect that a licensee buyer or other strategic partner for retained can be secured on favorable terms to ImmuCell?

Well, there's a lot of different components to your question. We have a high degree of confidence in our product and in its capabilities. And in its usefulness to dairy farms everywhere who are trying to combat mastitis without using antibiotics. So our job now is to find the best go-to-market strategy and the best kind of shareholder value-maximizing way to do that. And our determination is that manufacturing retained in-house is not the appropriate use of resources or the highest return use of resources.

So after we have completed our investigational studies in 2026, we will have a good set of arguments to go out and seek partners to help us maximize the value of retain.

Our next question comes from Felix Hettinger.

And I think 50% was also already short quested by David, so I will keep it short. So retrain, okay, I think you're in a situation where you cannot give any light on potential strategic. So that's fine for me. So I will focus now on the current business when it comes to the refires and as well as the cash needs in the future. So I read your letter on the 23rd of December as well as the update from your quarter. So congratulations to that. I understood that you currently developed or designed 2 new territories.

I was not sure if this already included new hires of the territories. So my question is, number one, if not, what is your expectation time line to hire new people to be able to run fully focus on the current portfolio? And number two, I read something that there is also a cash need for the business. So I would like to know if there are any additional, let's say, increasing of shares planned in the future, dilution of shares, anything else or that can be funded from current operations?

Thank you, Felix, for your 2 questions. Let me address the first one and then turn it over to Tim for the second question that you asked. So the first question is related to sales team expansion. So what we have done is we've taken a look at the market share and number of animals still to be won over to our product for each of our territories and determined that there are 2 territories, new ones that we should create because there is so much potential still in those territories. And so it's a question of number of cows and market share of cows or calfs, we should say, that are already on our product. And so we will be hiring 2 new individuals to augment our current U.S. sales team, field sales team. And those hiring processes are underway. There's quite a lot of interest because of the strength of our brand and our product in the market.

So we're going through that hiring process now. We've also, as I mentioned in the answer to a previous question, determined that international requires a dedicated individual. So we are in negotiations with somebody for that now, but have had a lot of interest in that role in all 3 roles. And so hope to complete those hiring processes as quickly as we possibly can, certainly this quarter. So I think that answers your first question. And then I'm going to turn it over to Tim for your second question.

Yes. Thank you for your question. Yes, you're correct that we will require investment as the company grows to meet that need in manufacturing. One of the things that we've talked about in the past is the freeze dryer # 5. That is still something that's on the radar, and that's around $3 million worth of capital outlay that would be required. Additionally, as we mentioned in the press release, we are looking at the costs associated with repurposing the former Rain facility.

As far as how we would fund something like that, I really would decline to comment on that. There are multiple ways. Of course, you can fund things through operating cash flow, also loans and/or capital raises, and I wouldn't take anything off the table. It all depends on what the economics of those choices look at the time we want to pull the trigger on investments. But I appreciate the question.

Our next question comes from Jonathan Rothschild.

Congratulations for making some very tough decisions. But I had a question on Re-Tain regarding the FDA's view of the API or the material that ImmuCell makes itself. Is that something that is distinct from what you referred to as the manufacturer of someone who's just making an intermammary injector and also keeping it separate from their other products. So the reason I'm asking this is, what is the FDA view of the API itself? This would affect efficacy, safety, all the 4 or 5 other technical sections that were already approved.

And what will happen as a result of you answering this question could give shareholders hope that there is an ability to partner this product since you have already decided that you're not going to do it in-house and you were not capable of doing it on scale anyway based on the time line that was already in effect. So let me know, please, how you expect the API itself to be judged as a subsection of the CMC section.

Jonathan, thank you for your question. Let me try to explain it this way. There's 2 manufacturing process. There is the manufacturing of our active pharmaceutical ingredient, also called drug substance. And then we have the second part of the process, which is taking that active pharmaceutical ingredient and putting it in an injectable format, aseptic injectable format, and we've called that drug product in various disclosures in the past. So there's 2 separate processes. The first process, we have proprietary capabilities here at ImmuCell that we've built over time to be able to do that. And the second process is what we have outsourced to a contract manufacturer who had experience with this process, who had previous FDA approvals and who was a reputable contract manufacturer, well known in the industry. The FDA has given us ImmuCell approval for everything other than manufacturing.

And then within manufacturing for our processes, we have passed inspections by the FDA. So flags on green or lights on green on the parts that we do here at ImmuCell. It is only the part that was done by our contract manufacturer, which is now blocking the FDA from being able to give us an approval.

So we -- like I think I mentioned before, have high confidence in our product, believe that the best strategy is to, in fact, find a partner and that, that is a better use of our resources, our cash rather than investing in our own commercial team and maintaining manufacturing while waiting years for a new FDA approval process to be completed. So I have previously mentioned that I believe there is a good product here and that a partner should be able to be found, but that's something that we now have to go do. we've decided to do that once we have our investigational study results because that gives us really good ammunition or arguments, I should say, to -- for any potential partner.

Yes. A question on that second point that you mentioned. There is a second pivotal study in process. And do you have a estimated time line when those results may come out?

I spoke to the Chief Investigator on that study in late December. And one of the things about these studies to have really good arguments. You need to have really good thorough study designs. You have a large number of animals enrolled in the study. And so we essentially completed our enrollment in December and expect Michigan State University, with just the University that we're working with here and a key opinion leader in the field of mastitis to complete these studies in the first half of the year.

But we're not going to rush that because the quality of the study, the rigor of the study is going to drive our success in figuring out our partnering strategy.

[Operator Instructions] Our next question comes from Tom Fox.

I'm just looking for a little bit of clarity on this self-imposed milk discard period for retain. So I'm going to fire off a couple of questions here. You say you're doing this out of abundance of caution. What exactly does that mean? I'm also wondering, is this going to be like a permanent issue? And how much milk -- how much less milk will be dumped compared to what farmers have to dump with antibiotics.

Thank you for your question, Tom. So we've discussed in previous calls and disclosures that our product is so effective against bacteria. -- that it also has a small impact on the good bacteria that you need to make cheese. And so what that requires is that for those farmers who are producing raw milk for use in cheese manufacturing processes, they need to not -- they need to voluntarily withhold the supply of the milk of a cow treated with retain for a few days while that flushes out of the cow system so that there is no impact on cheese manufacturing processes. So our withdrawal period when we started this project was 0 days, which is a very clear argument to be made in the market.

And now it's a few days, but it's still less than half of the withdrawal period of the main competition. So there's an advantage, clear advantage of retain. It's, I think, 4 milkings is the number of withdrawals that we would recommend for our product. It's 10 for the market leader out there. So clear advantage, but not as clear as 0. And so that does mean that we would probably need to invest more in our commercial infrastructure to be successful with this product than we originally thought. I hope that answers your question. It's certainly a factor in deciding the best use of our cash going forward that we believe a commercial partner might be a really good idea for this product.

So you are open to the idea that this might not be a forever thing that you could get at the discard period down to 0 days. Is that what you're saying?

No. I just want to be very clear about that. The discard period for those farmers who are providing raw milk to both cheese as well as fluid milk processing plants, it will always be more than 0. The FDA doesn't -- won't impose a withdrawal period because this does not impact in any way human health, and that is what the FDA imposes withdrawal periods for to prevent antibiotics from getting into the human supply chain.

There is a withdrawal period that the FDA requires for antibiotics used for mastitis or any other reason. The FDA will not require a withdrawal period on our product because our product is not an antibiotic and poses no issue for human health. But in practice, if you are a farmer that is providing raw milk for cheese processing, you should not -- we're suggesting a voluntary withdrawal period of those milkings. In the United States, it's increasingly common for farmers to obviously to provide raw milk for both uses. There may be some countries where those are still separated those processes so that you can sell to some farmers without a withdrawal period. But those are all not kind of -- those are not the key points in our decision-making in our largest market right here, we recommend a 4-day milking withdrawal period for retain.

Our next question comes from George Melas from MKH Management.

It's a fairly simple question. Your sales exceeded your expectations. Can you help us understand I don't know if you've had time to really analyze them, but how do they expect -- how do they exceed your expectations? How do you explain that?

So George, I really appreciate your question. As we've discussed in, I think, the 2 last calls, it is complicated to make good estimates of future revenues when you're coming out of a backorder situation because there are orders that are coming in because folks are trying to get back to regular inventory levels. I mean, our distribution partners and our sub-distributors. And then there's orders that are coming in because we're winning new customers. There's orders that are coming in because we're regaining customers we may have lost.

So there's a lot of different drivers, which makes compares kind of complicated. But when we looked at our results at the end of the third quarter, we -- as good management practice, we make estimates as to what we can expect in the fourth quarter and then execute accordingly. And I have to say compliments to the commercial team here at ImmuCell for achieving a higher level of revenue than we had anticipated just looking at some run rate trends at the end of the third quarter.

So we were very pleased with these results. It will continue to be difficult to completely analyze the effects of former backorder situations on current revenues. So in the next quarter or 2 will still be complicated. But overall, we're very happy with the -- I think this is our third highest revenue quarter ever. And once again, we believe that there is very minimal impact of the former backorder situation left in our results.

Yes. I would just add that we do -- we have published the back order numbers in each 10-Q as we've gone through time. So those are available when you're analyzing revenue.

Our next question comes from Russell Tolander from Capital Alliance.

Yes, great quarter of sales. And I think by my expectation, must have improved or over the second half of the quarter since the previous call was really in the middle of the operating period. So I guess, just kind of building on the question that George just asked, was there momentum in the last months specifically? And is there any feel for that momentum kind of continuing here early in this quarter given that this is really the peak caving season in -- domestically. So I guess I'm just looking for a little more color on the cadence of revenue during the quarter, if you can comment on that?

We wouldn't be able to comment on that -- well, so in Q3, when we were talking, we certainly weren't anything in our commentary they are related to Q4 or trends in Q4. We really were just presenting Q3 results and not offering anything forward-looking on that. I don't think I really want to get into the commenting on sales trend within the quarter either just because we haven't analyzed that specifically. I wouldn't say there's anything that struck me.

We do have shipping dates. So the way that we ship required at the end of the very end of the quarter, we had a little bit less shipping just due to holidays, but that's the only real trend within the quarter that I think might have been relevant. I don't really think there's anything there to be honest, yes.

And our next question is a follow-up question from Frank Gasca.

Further the previous caller. Q1 -- actually Q4 and Q1 are historically your best quarters. Do you see any deviation from that trend that's been going on for ever?

I think we'll still continue to see some seasonality in the business, of course, as we move into new products and customer bases, such as beef, there might be changes over time. But currently, right now, we still would expect to see the same type of seasonality, I believe.

Okay. And in your statement in December, you referred, and I quote here, "improved set of claims" and this is in regard to retain, and I'm assuming that it's also related to the, yes, the study. Could you elaborate on that a little?

Thanks for your question, Frank. So it's usual when you apply for an FDA approval for a product that you start with a claim and you go through the process to get that claim approved.

And along the way, you do more studies to see if that claim can be expanded, approved, both for the ability to market it more effectively or to address just a bigger, bigger set of problems that, in this case, dairy farmers are finding in their cows. And so in collaboration with the FDA, we obtained their approval to do some investigational studies to look at an expanded or better set of claims.

And we put together a very rigorous study to validate some of our hypotheses about how our product could be best positioned in the market. And we're all very anxious now awaiting the results of these studies because testing the product in the field in an active dairy farm situation and really kind of testing the boundaries of its capabilities is what we're trying to do here. So we're looking forward to getting those results. And as I mentioned, that won't be for a little while because it needs to be pretty -- it needs to be really well done the study in order for us to have claims that we can back.

Presently by my understanding, the claim is in regards to preclinical mastitis. Are you -- I would just -- I imagine that an improved set would indicate use on a clinical aspect. Is that a part of? Or is it potentially further potential for maximizing retain?

Well, expansion of claims in any direction is -- would enhance the value of retaining. I don't believe in the past, we've disclosed much about the current claims. It's also competitively sensitive information, to be honest. There is a very, very strong competitor out there who is the market leader in this space. So we're going to wait for what comes out of these studies, and we will be communicating at that time what the next steps are, and I can't really comment in the meantime on any of the specifics, unfortunately.

Okay. I have one more. And this might be a little tough, I guess. In the shift and the increase the Tri-Shield, very encouraging and it's certainly significant. But in previous calls, there was some regard in the fact that one of the reasons of reduced margins was the fact that Tri-Shield requires additional processing. To what degree my question would be, are you addressing the margin reduction that occurred from this aspect?

Yes. I think what we've said in the past is that Tri-Shield has -- it has the 2 components, we call manufactured units in it. So the cost is higher, but of course, the price is also higher. I don't believe we've ever specifically stated anything about the products margin. And in this call, we're not planning on covering anything related to margin, perhaps it's something we can consider for either the quarterly earnings call or future calls.

I'll add one more thing just to address your question about the improving margin over time. I think that when we increase the capacity, like we've been talking about in this call, 15% increase in output, this year -- or in 2025 and then striving for similar results in 2026, that will certainly help margin over time. But it's not specific to Tri-Shield. This is general manufacturing improvements where we're looking at bottlenecks and reducing -- or addressing those bottlenecks over time, so.

And ladies and gentlemen, at this time, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Joe Diaz for closing remarks.

Thank you, Jamie. I would now like to turn the call back over to Olivier te Boekhorst for closing remarks. Oliver?

Thank you, Joe, and thank you, everyone, for your excellent questions. Before we leave, I want to thank my predecessor, Michael Brigham, for his 30 years of service to ImmuCell, including 25 years as CEO and for his support during my transition. He -- today is his last day, and he will be missed sorely by all of us here. So thank you, Michael, and congratulations on your well-deserved retirement.

Thanks very much, Oliver. I have enjoyed my time at myself very much. I have a lot of confidence in the future of First Defense, and I wish the team the very best.

Okay. Thank you, Oliver, and thank you, Michael. We want to thank everyone for participating on today's call. We look forward to talking with you again to review the results for the year ended December 31, 2025, on February 26, 2026. Thank you, and have a great day.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

Good morning, and welcome to the ImmuCell Corporation Reports Third Quarter ended September 30, 2025, Unaudited Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Joe Diaz of Lytham Partners. Please go ahead.

Thank you, Rocco. Good morning, and welcome to everyone. As Rocco indicated, my name is Joe Diaz with Lytham Partners. We're the Investor Relations consulting firm for ImmuCell. I want to thank all of you for joining us today to discuss the unaudited financial results for the third quarter ended September 30, 2025.

Listeners are cautioned that statements made by management during the course of this call include forward-looking statements, which include any statements that refers to the 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 better known as the safe harbor statement provided with the Form 10-Q and 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, November 14, 2025. 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. The company included definitions of these terms as well as reconciliations of these figures to the most comparable GAAP financial measures in last night's press release in order to better assist you in understanding its financial performance. With that said, let me turn the call over to Michael Brigham, Special Adviser to the CEO of ImmuCell Corporation for opening remarks.

Michael?

Thanks, Joe, and good morning, everyone. This is an exciting time at ImmuCell. Lots of good change going on. Our financial performance over the first 9 months of 2025 has greatly improved compared to prior year, a turnaround, which was made possible in part by increasing our production output while improving gross margins. We are now in a great position as a company with a stock distribution channel and an energized commercial team. Our CEO and CFO will be commenting on the financial results in greater detail in just a moment.

On another topic of change, we are amidst 2 very positive management transitions right now at ImmuCell. First, as most of you know by now, we added Timothy Fiori, our CFO, to the team back in April. Secondly, back in June, we announced the CEO succession plan. This effort was completed successfully effective November 1, 2025, with the hiring of Oliver Te Boekhorst as our new President and CEO. I'd like to welcome Oliver to the company. Oliver brings over 25 years of leadership and results-focused execution experience in animal health to ImmuCell. Before joining ImmuCell, he served as an operating partner of [ Arkemed ], a global health care investment firm, where he focused on Animal Health Investments and served as Chairman and Chief Executive Officer of a portfolio company.

Prior to that, Mr. Te Boekhorst was at [ IDEXX ] for 18 years, IDEXX is a main-based NASDAQ listed company of more than $4 billion in revenue, where all of our lead strategy and M&A activities from 2004 to 2008 and then served as a Corporate Officer, Senior Vice President and General Manager of several business units from 2008 to 2021, including their livestock and dairy antibiotic residue testing businesses. He has a track record of driving growth and operational excellence in the livestock industry. And as I step away in January after 36 years with ImmuCell, I am very confident that we are in good hands with Oliver and Tim.

At this point, I will turn the call over to Oliver for a few comments. Oliver.

Thanks, Michael. I am very excited to be here, and I want to thank you for your support during my onboarding. I appreciate the warm welcome and the investment from employees in my onboarding process over the last 2 weeks as I'm starting to learn the business. In conversations with the team, I've been asked why I joined ImmuCell. And one of the reasons for my excitement to join at this juncture is the importance of the work here. Fundamentally, ImmuCell keeps cats alive and healthy. We don't just make and sell doses of First Defense. We provide protection to [ new more ] animals that cannot protect themselves.

Farmers trust us. because our technology works and they count on us to help them do their jobs better. And I tell the team that starts with the care and the effort we all put in every day. It is impressive to see the passion, dedication and pride of our staff in Maine and in the field as we support the larger mission of reducing the use of antibiotics in the food supply chain and ensuring the availability of safe, healthy and affordable dairy and beef products. I look forward to the next weeks of my onboarding process as I plan to spend a good deal of time in the field, meeting customers, colostrum suppliers, distributor partners, key opinion leaders and the commercial team. I'm a customer-focused leader, and I intend to bring customer perspectives to everything we do at ImmuCell

ImmuCell is poised to do great things, and I'm very excited to be a part of that. The company aims to deliver a strong value proposition for farmers and our financial and operational performance so far in 2025 reflects that. Execution across our supply chain will be laser focused on quality and product availability. From vaccine production, colostrum sourcing, liquid processing, formulation, packaging and shipping our final products, our team is rebuilding confidence in the market and our ability to consistently meet customers' needs. I look forward to working, to regain customers, to capture shares and to expand the use of scours preventatives. It's an exciting time to be at ImmuCell as we explore new more market opportunities aggressively.

Now turning to our revenue for the quarter. We had an 8% decrease in total product sales during the third quarter of 2025 compared to the third quarter of the prior year. This is in line with previous comments we made about the effect of restocking our distribution channels earlier this year. I'm encouraged that domestic sales were up 2% during the third quarter compared to the third quarter of 2024, and domestic sales were up 9.5% during the third quarter compared to the second quarter of 2025. So we are seeing positive momentum in the U.S. market that represented about 86% of our sales during the trailing 12-month period ended in September 30, 2025.

International sales, largely to Canada were down during the third quarter of 2025 compared to the third quarter of 2024 due to timing of shipments and allocations of our short supply, while we're managing our order backlog. This did create the 8% decrease in total sales during the third quarter that I just mentioned, but I do not believe this represents significant deterioration of underlying customer demand. It is worth noting that international sales during the 9-month period ended September 30, 2025, were 15% higher than the same period of the prior year. Longer-term growth trends are also meaningful. When we compare our trailing 12-month sales ending September 30, 2025, to the same period ending September 30, 2022, that is the period before we ran into significant supply issues. The 3-year compound annual growth rate is 11%.

Okay. Turning to net income. We delivered net income of $1.8 million during the 9 months ended September 30, 2025, compared to a net loss of $2.7 million during the 9 months ended September 30, 2024, which is a $4.5 million swing in the right direction, driven by a significant improvement in gross margins that Tim will discuss in detail. We are focused on production capacity and quality, and one way to measure that is the approximate level of revenue we can now support. During the 9 months ended September 30, 2025, we demonstrated that we can produce at an annual rate that is very close to our capacity expansion goal of $30 million per year. Our priority now is on operational excellence and execution while we review our next capacity expansion opportunities.

At this point, I'm going to turn the call over to Timothy Fiori, our Chief Financial Officer, for a deeper review of the third quarter financial highlights. Tim was my finance leader at IDEXX for 15 years, and it is a pleasure to team up with him again here at ImmuCell. Tim?

Thanks, Oliver. I'm happy to be working with you again. To start, I'd like to focus on improvements we've seen regarding the year-to-date net income and earnings per share as compared to prior year. Net income during the 9-month period ended September 30, 2025, increased by $4.5 million over the net loss during the 9-month period ended September 30, 2024. This significant improvement was driven by higher sales with increased gross margins and a 7.4% or $543,000 reduction in operating expenses. Basic net income per share during the 9-month period ended September 30, 2025, was approximately $0.20 per share in contrast to a net loss of $0.34 per share during the same period of the prior year.

As Oliver mentioned in his comments, product sales during the third quarter of 2025 decreased by 8% or $505,000 compared to the third quarter of 2024. Product sales during the 9-month period ended September 30, 2025, increased by 7% or $1.3 million over the 9-month period ended September 30, 2024. Product sales during the trailing 12-month period ended September 30, 2025, increased by 16% or $3.9 million over the trailing 12-month period ended September 30, 2024.

During the first half of the year, we effectively eliminated our backlog of orders and rebuild inventory and distribution, refilling the distribution pipeline after an extended backlog provided a temporary boost to sales. Overall, I'm pleased that we are out of the prior order backlog situation. As we can see in the Q3 results, backlog dynamics have created difficult conditions for year-over-year sales comparisons. During the Q2 call, we anticipated that we may experience a softening in sales during the second half of 2025, and that has happened as predicted in Q3. We believe that difficult comparisons may persist due to the back book fulfillment in prior periods for the next [ 12 ] quarters.

We should lap this backlog dynamic in the second half of 2026, given that we effectively exited the backlog situation as of June 30, 2025. You can see prior year backlog information by quarter in our most recent 10-K and in the 10-Q that we just filed. We have realized gross margin improvements in 2025 as compared to the prior year. Gross margin as a percentage of product sales increased to 43% during the third quarter of 2025 compared to just 26% during the third quarter of 2024. Gross margin increased to 43% during the 9-month period ended September 30, 2025, compared to just 27% during the 9-month period ended September 30, 2024. Gross margin increased to 41% during the 12-month period ended September 30, 2025, compared to just 27% during the trailing 12-month period ended September 30, 2024.

Future success will require continued achievement of strong production yields, coupled with strong sales growth. We have several opportunities to drive growth from the existing products, including regaining customers that we may have lost during the short supply in years past. We also have several new product offerings in our functional feed product line. I'd like to talk for a moment about adjusted EBITDA because the impact of noncash depreciation expense on our bottom line is significant.

To be clear, adjusted EBITDA includes an add-back of stock-based compensation expense, which is another noncash expense that's included in net income as calculated in accordance with GAAP. We created adjusted EBITDA of $751,000, $4.4 million and $5.8 million during the 3 months, 9 months and trailing 12-month periods ended September 30, 2025, respectively. These strong results compare favorably to adjusted EBITDA of $196,000, $35,000 and negative $175,000 during the 3 months, 9 months and trailing 12-month periods ended September 30, 2024, respectively. These strong results helped us increase cash to $3.9 million as of September 30, 2025, from $3.8 million as of December 31, 2024, while investing about $2.7 million in inventory build as we approach peak selling season. We will continue to closely monitor and manage cash as we balance long-term investment with near-term operational needs.

With that, I will turn the call back to Oliver for some closing remarks. Oliver?

Thanks, Tim. We are very focused on the commercial opportunity that we have with the First Defense suite of solutions, including the new products within the functional feed line that were launched in June. There is tremendous runway for First Defense, and we are excited to come out of a supply-constrained environment to execute growth initiatives. The energy and the commercial team is palpable. We are also very focused on operational excellence to ensure consistent supply of quality product. The year-over-year improvement in adjusted EBITDA that Tim just touched on are the results of this focus with increased sales at better gross margin and lower operating expenses.

As we discussed before, we are awaiting FDA approval for our Re-Tain product, which addresses an important market need for effective treatment of subclinical mastitis. We believe that treating subclinically infected cows with Re-Tain could enhance best practices in the industry with an alternative to traditional antibiotics that are also used in human medicine. While we wait for FDA approval, we have started investigational product use studies to collect market feedback about product performance in the field in collaboration with Michigan State University. These studies are well underway, and the data we gather from this work will inform us of our best strategies for Re-Tain in 2026. This disciplined approach is intended to support a successful market entry.

Our top priority at ImmuCell will be on solid execution across the organization. And I'm very pleased that we can leverage the foundation that Michael and the team have rebuilt and that we can now set our sights on defining and executing our strategy for long-term growth.

With that said, we will be happy to take your questions. Let's have the operator open up the lines.

[Operator Instructions] And our first question today comes from Frank Gasca, private investor.

First of all, and I wanted to just thank Mike for service, for the years that you put in at ImmuCell and we go back quite a way. It's about 25 years. So I wish him well in his upcoming retirement as I am enjoying mine. As far as my questions, I'm going to take a somewhat more critical tone. I don't see the clean slate that you referred to. I see more [ remark ]. In regards to First Defense, -- what has changed? It went from an expansion of capacity. We even committed capital, and now we're uncommitted to that expansion. I think it's on the -- some of the causes of that. But what I'm looking for is what active and steps are you taking to increase that growth that was somewhat anticipated even years ago.

Thank you, Frank, for your question. And let me maybe just start with -- what we mentioned is we are now at a level of capacity that we set out for ourselves when we started the capacity expansion project a few years ago. And while we had a contamination event, we have now arrived at a place where we are actually in a better shape than we even were when we started that capacity expansion project because we have put all kinds of quality measures in place to ensure that we can manufacture at a predictable level. So that is an improvement in our capability.

What I'm very excited to report after my first few calls with the commercial team is that after years of managing short supply, they are now able to go win new customers, talk to customers about increasing the use of First Defense, if they're already using it. And this is a very different approach that the commercial team can now engage with, and they are very excited. I will be visiting the field next week with -- visiting with customers and hopefully, we'll be able to report back to you firsthand what that excitement at both the customer and the sales team level is. So we're very pleased to be where we are. There is more to do but it does look quite positive from where I'm sitting. Thank you for your question.

[Operator Instructions] Our next question comes from George Melas with MKH Management.

Thanks. First of all, so I want to reiterate what the previous caller said, Michael, thank you very much for your service and really appreciated working with you. And I just want to say thank you very much. Oliver, welcome to the team. It's very exciting to have you. My question is a bit about the inventory. The [ WIP ] continues to grow. I mean a lot of it is the frozen colustrum, which is, I think you reported $3.3 million. But the finished good inventory right now stands at $2 million which is the highest bid, I think, in probably 6, 7 or maybe ever, or at least from my model in at least 6 years. I'm trying to see and -- trying to see how you plan to balance sort of production with sort of cash generation or cash management.

Well, first, George, thank you very much for your welcome. I'm going to turn it over to Tim to address the inventory question.

George, great to talk with you. Yes, we definitely have seen inventory levels come up a lot. Of course, we started the year with really practically nothing. And now we have a more desirable level, frankly, of inventory. And especially as we approach the peak selling season that's coming up in the -- around the first quarter, I meet with the team weekly with sales and the production team personally. And we have a good communication between the 2, and we do a planning process to seek those desired inventory levels. So we're paying a lot of attention to that. And I think we're in much better shape now than in the past couple of years for sure.

On the colostrum side, we want to have a considerable amount of colostrum. And I think you're right that we need to carefully manage that and make sure that it doesn't become too much and that is also on that regular review list of things that we're very focused on. But it is our key ingredient. And you're totally right that when you look at [ WIP ], that colostrum is a large component of that.

And George, if I could just add, I've worked with Tim for 15 years as my finance leader at IDEXX, as I mentioned earlier in the call, where we managed about $300 million business together. And Tim brings a very disciplined, rigorous process-focused approach to both operational and financial execution. And so I'm very excited to see that in place here and to continue working with him and also to partner with Bobbi Brockmann, our Vice President of Sales and Marketing, who has a very similar approach to commercial execution. And I'm bringing this up because I think that's the way forward for ImmuCell to build on what Michael has built for us and now to really focus on disciplined day-to-day execution of our plans. Thank you for your question.

Okay. This is Joe Diaz again, your moderator. I did want to have one question asked before we close the call out. The margin improvement in Q3 was very good. What do you attribute that to?

Thanks, Joe. Yes, the largest drivers of gross margin as we see it are the improved manufacturing performance as the primary one, but also the price increase. If you look around Page 37 of the recent 10-Q, we talk about our composite price increase in 2025 of around 6%. So those are both definitely important factors in gross margin improvement. And just the volume of sales, so you end up with that scale, that's helping in manufacturing and with fixed cost spreading it out over a larger amount of volume is always a big part of that as well.

Okay. That concludes our Q&A session. I want to thank everyone for participating in today's call. We look forward to talking with you again to review the results of the year ending December 31, 2025, during the week of February 23, 2026. Have a great day. Thank you for being with us today.

Thank you. That concludes today's conference call. You may now disconnect your lines, and have a wonderful day.