Good morning, and welcome to the ImmuCell Corporation conference call to discuss unaudited first quarter 2026 financial results. Today, all participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event today is being recorded. I would now like to turn the conference call over to Joe Diaz of Lytham Partners. Please proceed.
Thank you, Chris. Good morning and welcome. As the operator indicated, my name is Joe Diaz with Lytham Partners. We are the investor relations consulting firm for ImmuCell. I thank you for joining us today to discuss the unaudited earnings for the first quarter ended 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 a safe harbor statement, provided with the press release that the company filed last night, along with the company's other periodic filings with the SEC. Information discussed on today's call speaks only as of today, Friday, May 15, 2026. The company undertakes no obligation to update any information discussed on today's call. Please note that references to certain non-GAAP financial measures may be made during today's call. With that said, let me turn the call over to Olivier te Boekhorst, President and Chief Executive Officer of ImmuCell Corporation, for opening remarks. Olivier.
Thanks, Joe. 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.
We also achieved 45% gross margins after absorbing legacy Re-Tain-related costs that shifted from product development to cost of goods sold and reduced gross margins by approximately 2.4% during the quarter. We also grew net income 34% compared to the first quarter of 2025. In previous calls, we explained the rationale behind our new strategy to focus on First Defense, 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're gaining share in this market, competing against the world's largest animal health companies.
Historically, ImmuCell's challenges have centered less around market demand and more on manufacturing capacity and product availability. For a company our size, it makes a lot of sense to focus on our successful on-market product and solve those challenges, and we are well underway to do that. Our results in the first quarter give us confidence in this decision. I will review some of these drivers in more detail and share some of our market observations after Timothy 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, Olivier. I'll start with a short recap of product sales results, which are unchanged from our April 8th 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 to 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 non-recurring 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 Olivier mentioned, this is a 34% increase in net income year-over-year. As usual, we provided EBITDA figures in yesterday's earnings release. We believe looking at EBITDA assists management and investors by looking at our performance across reporting periods on a consistent basis, excluding certain charges from our reported income before income taxes.
EBITDA improved to $2.6 million in 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 Olivier. Olivier?
Thanks, Tim. Congratulations to the team for the excellent results in the first quarter of 2026. 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've achieved the record $10 million product sales, and Tri-Shield particularly has showed very strong growth. It is the most advanced protection against scours that we offer in the market. Our focus on First Defense makes a lot of sense when you consider calf values have increased almost sevenfold in the past three years, and scours is a condition that affects up to 15% of pre-weaning calves and is the leading cause of death in these calves.
We believe it causes up to $1 billion of economic burden in the U.S. due to treatment costs, performance losses, and mortality. High and rapidly increasing calf values have driven an increased appetite to invest in premium prevention products, and scours is top of mind for many producers due to prevalence, morbidity, and mortality. In 2025, we estimate U.S. farmers spent approximately $93 million on scours prevention products for about 14% year-over-year growth. In Q1 2026, we saw a slightly moderated 11% year-over-year growth for the overall scours biologics category. 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 three common pathogens that cause scours.
In addition, it also offers a lot of other bioactives that help calves stay healthy as a result of being derived from colostrum. 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, the key part of our strategy, given the tailwind from the macro environment and our excellent value proposition for customers, is to ensure we have product available. This has been challenging for ImmuCell, and we are working hard every day to ensure we maximize yield and increase our output to keep up with demand.
We made decisions in late 2025 to address manufacturing capacity constraints, 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. 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 single big lever. The team got together and committed to ensuring availability. 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 difference in 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. 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. We will 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. He's helping us transition from a reactive approach to international opportunities to a planful strategic approach.
We are using a rigorous process involving management and the board to understand market opportunities and product requirements, go-to-market investments, regulatory activity and timelines, and our capacity expansion timelines as well. While we believe the international opportunity is significant, success will require disciplined market prioritization and time to prepare for and execute successfully. Our efforts are focused on building the right foundation for sustainable global expansion. In the meantime, we have expanded our sales territories in the U.S. by three instead of the previously announced two territories since we see so much momentum in the domestic market. Finally, I will repeat what I'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 three new board members who bring extensive animal health and functional expertise. I look forward to working with the new board on executing our focus 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.
Thank you. We will now begin the question and answer session. As a reminder, please limit yourself to one question and then rejoin the queue. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If your question has been addressed and you would like to withdraw it, please press star then two. At this time, we will pause momentarily to assemble our roster. As a reminder, if you do have a question, please press star then one. Today's first question comes from Frank Gasker, a private investor. Please go ahead. Frank, your line is open.
Yes, outstanding quarter, and congratulations to the team on that performance. Could you talk a little bit about your First Defense 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. 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. It essentially has our First Defense technology inside. It uses the same colostrum. It reduces our cost to manufacture, and it's offered to the market at a lower price point. It is particularly useful for those operations that don't want to feed each calf individually, but can add this to either water or colostrum or milk that they're providing to the calves as a group. 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. We're still in a product launch phase, for us.
Oh, thank you.
Okay.
The next question comes from George Melas-Kyriazi with MKH Management. Please proceed.
Thank you. Yeah, totally outstanding quarter. Congratulations to a fantastic start. I wanna 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 levels. Can you tell us a little bit more about what were some of the key improvement that led to the yield improvement? Also, with your current capacity and your four freezers, what do you see is your maximum capacity at this point?
Thank you, George, for your question. The, 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. The primary levers in the past four to six months have been improving our planning. Aligning our sales forecasts with our production forecasts 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. With this planning, we also added some overtime capacity to some critical steps in the manufacturing process. If you do that in a planned way, it's actually manageable.
You know, it ties into back to the planning 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. Reusing and just focusing on that waste and reducing that increases output. Finally, there were a couple of steps in the process where minor, I would say, investments in capital, 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. 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. We review that program more several times a week actually, we're working on it. We don't know and have a specific number in mind of what is our maximum. We're just improving yield kind of on a percentage basis, if you will, on a continuous basis. At the same time, as I mentioned in my comments, it is time to think about a major capacity expansion.
We're very fortunate or that we have the payment from our contract manufacturer that we can deploy towards that. We are in the midst of, you know, actively planning a capacity expansion for our plant.
Okay, great. Thank you for that. If I look at slide five, where you have basically the product mix over the last three years, help us understand the trajectory with 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, Maybe help us understand that, if you can.
Hi, George. 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, you know, there is the back order dynamic. It really a lot of time depended on what was available to sell to customers. I think that creates some different dynamics that, you know, may not be intuitive. 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 I, you know, that's the trend that we're focused on.
Okay, great. Thank you very much.
George, 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. In the calving season, you know, the that we just had, it's the least price-sensitive segment that had a lot of demand in the last quarter or two. That helps explain some of the uptake on Tri-Shield as well.
Okay. Yeah.
Again, as a reminder, if you do have a question, please press star then one. The next question is a follow-up from Frank Gasker, a private investor. Please go ahead.
Yes. Thanks for taking my questions. Your increase in sales force again that you just mentioned, I am curious as to what the main drivers of that is. As far as regionality and the target market for those regions, could you get into that? Because it's my understanding that the market is divided into dairy and beef. Where is your growth headed? Where is your sales directed? Thank you.
Thank you, Frank. 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, we're seeing significant increases in the beef as well because beef calves are also increasing in value. With the increase in value of calf, investing in a preventative like First Defense makes a lot of sense for producers and they get a really good return on investment.
Our goal is that, you know, 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, you know, really helps close the deal, helps educate the customer, and they appreciate the time and investment in them. Our, our strategy around sales force expansion is that more customer contact equals more revenue. We've been seeing that now for a couple of quarters.
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, for that, for that region. 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? 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.
We're looking at kind of the fastest, highest ROI when we, when we talk about adding commercial people to our team.
That was great. Thank you very much.
Thank you.
At this time, this concludes our question and answer session. I would now like to turn the conference back over to Joe Diaz with Lytham Partners for any closing remarks.
Thank you, Chris, and thank all of you for participating on today's call. We look forward to talking with you again to review the results for the quarter ended June 30, 2026, during the week of August 10, 2026. Thanks again, and have a great day.