Balchem (BCPC) 11 Nov 172017 Q3 Earnings call transcript

Greetings, and welcome to the Balchem Corporation Third Quarter 2017 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bill Backus, Chief Accounting Officer for Balchem Corporation. Thank you, Mr. Backus.

begin. may You

Bill thank our morning gentlemen, for joining conference Coelho, me Financial name our quarter hosting Chief Officer, Ladies call our and this discuss you CEO, the this with is My XXXX. to September Ted Corporation Chief results call Accounting ending and Harris, and is XX, for Backus, President of Officer. the Terry Balchem and

to which time read our of auditors the I counsel, release would this contain, concerning factors contain, like and expectation in forward-looking Following Form to likely differ could the the advice belief involve We including no does our give SEC, materially expectations from uncertainties. and our events This reflect forward-looking statement. will assurance and at Balchem's prove reflected that or future or forward-looking Balchem's will in expectations, factors identified that various cause risks statements risks XX-K. results can and correct, statements,

in this Ted statements and Harris, their to Forward-looking CEO. entirety our over I qualified cautionary will turn call by are President the now statement.

gentlemen, Good welcome Bill. and and ladies morning, call. to our Thanks, conference

This million, valuation, the GAAP which on business record amortization of Terry million, of I has acquisition-related non-cash to the begin extremely results, CFO, quarter of would quarter and quarter were statements. the $X.X acquisition, combination sales direct in or to third over a Before a recorded assets officially The for new result million net her our the per amortization team. significant reported $XX third result coming over rules. are $XXX.X like on expenses the Terry net $X.XX consolidated accounting includes months. third of a share us been forward welcome meet weeks, with I little you third GAAP morning, Balchem have we discussing intangible quarter in we Coelho, basis. pleased resulted and two her looking weeks to expense income having team. I to which am is This financial and for

includes prior year due favorable also benefit payment quarter of compared accounting. an tax This $XXX,XXX to adoption share-based updated the to the

delivered the earnings of quarter million, $XXX,XXX also per our operating includes $XX.X or prior this and or our year period debt, prior net share, to $XX.X $XX.X quarter X.X%, against this million, evaluation non-GAAP $XXX,XXX, the non-GAAP flow quarter addition, quarter items of $XX.X million million, press of third and comparable integration We the costs. revolver. current cash of third reported morning, year $X.XX Consequently, earlier In earnings period. These the $XX.X current or million facilitate of exclude net were these free release share. versus performance comparative including of per in above down $X.XX paid transaction

of the down the paid line fund revolving fully IFP now balance have from We on of the acquisition fund the we of outstanding Albion. credit $XX acquisition million partially our to borrowed and

and within and reporting result in & segments, increase, Health. year Our Nutrition gas decline primary both The well million human shale than with in third Sales sales sales record sales market & into within increases sales all-time nutrition growth drivers & contributed within increased X achieving & sales comparable strong Products, Products Specialty Health of These Products, the sales growth a X Products. within offset the systems sales Specialty third Nutrition were the in in higher volume; H&H Industrial powder added chelated the nutrient as Specialty IFP plants Industrial segment a the as repackaged an increases choline flavor sales within and and systems Health; Human Human mineral quarter quarter. higher to were record and human achieving partially the strong fracking quarter. Products; of Human sales $XXX.X by Nutrition X% the million $XXX.X prior our of Nutrition Health, were Animal from acquisition; in quarter

sales, Our this direct $X.X million, gross an inefficiencies. or segment, X.X%, by primarily and unfavorable or of accounting increase as period $XXX,XXX, QX the margin prior with prior adjusted and valuation across segments, the million, the primarily year. of all same gross by On million higher The with of the current $XX.X dollars million, within $X.X rules, business quarter. basis, material in were mentioned raw expense year year product, compared mix, the consolidated were margin plant up previously amortization acquisition certain dollars up quarter customer our higher X.X%, compared partially adjusted of for driven combination $XX.X costs result a and the was offset

margin Health was costs, other including by integration systems as consolidated flavor costs. $XX.X basis gross and due transaction gross amount to of Gross to margins margin of decreased partially sales of basis higher driven chelated nutrients partially which key sales, unfavorable raw due increases volumes. due margin XXX primarily the percentage human gross primarily XX.X% percentage primarily choline material XX, XXXX our QX for improved material prior-year prices. product margins certain exclusion to basis to products, was for lower powder by and and in due additional unfavorable by points, XXXX. cost the to On partially monogastric Adjusted increased higher inclusion offset volumes, and reduction decreased certain segment an and were plant basis nutritional Gross lines, $XX.X primarily the with for non-cash higher basis volumes, the and related the in million materials. the prior segment mix, Health September Consolidated quarter, to product nutrients, partially a minerals product mix, plant down and basis, spend, raw compared offset was primarily XX.X% The the Health offset million higher primarily of was from in margin drove mix, customer accounting expenses, XX.X% to year amortization certain September of in for the Animal of three higher the plant Our operating by the was volumes expenses and certain by months segment XXX ended & comparative operating & the by aforementioned of decline and raw Gross from margin intangible material and certain sequential XX, expense of Nutrition XXX Nutrition inefficiencies, & higher points R&D inventory to due basis increase across down gross mix XX.X% This points volumes Products by XXX XXX the Industrial months costs. selling Human points, was due period. offset The margin on raw XXXX. decreased costs. IFP Nutrition increased inefficiencies. ended Products raw fair associated points average material for assets. for acquisition value operating Animal of higher three by increased nutrition, points acquired a ruminant flat, percentage Specialty gross costs, stronger XXX

or $X.X amortization operating of $XXX,XXX, expenses and $XX.X of XX.X% integration million, of operating assets associated with expense million, non-cash sales. costs transaction intangible of were and Excluding

lower $XX.X and taxes; quarter. controlling reduced have liabilities with SG&A earnings Looking the million, as XX, be tax to was effective XXXX excess decrease to earnings million offset of provision XXXX a X.X%, will Products compensation in with our release and $XXX,XXX, as in focus our the segment The Industrial XX, debt the due of million, XX $XX.X rate The to in as well reduction net jurisdictions. the our earnings And primarily Specialty out aid decreased benefits $XXX to respectively. in is forward, required increased tax morning, ASU this ASU On and Nutrition XX.X% existing adjusted tax comparable price operations segments. year and period. adoption for XXXX-XX detailed leveraging from three partially for comparable X.X%, Animal on net earnings was income purchase effective of three This noted. to September XXXX-XX, related adjusted the rates primarily our from expenses operating compared for ended Specialty as adoption rates from gains in recognized GAAP due an or a were U.S. & months in Interest tightly for the growth and Products in Products and on reasons year segments. comparability earnings results which months expense previously to certain was by prior the our to operations September SensoryEffects infrastructure. earnings the we increase only $X.X been prior our September was the adjusted benefits prior ended acquisition; of continue $XXX,XXX, decrease were quarter, million. Industrial to which reporting and specifically this the basis, of associated from Products Health tax our stock-based company's to tax XX.X% XXXX The attributable or

quarter. previously the million, up $X closed $XX quarter million net at prior the As consolidated noted, income from year

income the diluted basis, over or earnings an diluted share or in release, share $X.XX X.X% result prior compared per per This net comparable share, into $X.XX detailed per last earnings of million, our up as $XX.X adjusted quarter. of diluted On million quarterly quarterly $X.XX translated $XX.X share an year adjusted year's year, $X.XX. $X.XX of net earnings increase for net and in current our the were with per

the $XXX,XXX. of quarter or sales, or of in with of the XX.X% $XX.X sales prior XX.X% third adjusted in $XX.X Our generated a year, decrease million, results compared EBITDA, million of quarter,

flow long-term funding principal third along This strong including payments $XX.X closed $XX.X of $XX.X out quarter flow accelerated previously with of and $X.X payments remains As reflects cash the free million as generated cash. of of million of $XX.X million, our million expenditure with capital in cash noted on the debt million quarter. we quarter

I back you to the segment's key would update detailed Bill strategic over the through I on results, Before to few initiatives. go hand a our of to like call

June held IFP, on agglomerated previously a microencapsulated in manufacturer nutritional of food privately and As purchased and located noted ingredients Minnesota. we X,

integrating highly the pleased this but small, with the have in are synergistic efforts and integration We been acquisition, date. process to of

replace Albion are the recovery projected mechanical and facility our is capabilities we complete. Relative to are to to substantially synergies, fully the to at and expansion place. results expect already largely efforts, Utah realizing We are Clearfield out Ogden, The achieve build facility this Clearfield for the fire in the say project pleased acquisition.

product at our in IFP meantime, one manufacturing and equipment capabilities, leveraging acquired of sites late an and the qualifying in utilize to know-how, should IFP assets stage commercial make start some of we the in to acquired manufacturing are products Minnesota. newly and the interim including In continue year. production our We we

shows choline having neural for and an along awareness and prenatal egg Drug XX usage. awareness and all is of Administration, that X% Safety help We continue the to Nutrition by a A Association Reference adults the promoting for in an the their around work development vitamins choline essential encouraging, the our recommendations European advocacy of the hard Council to certainly benefits Intake impact. Food and Medical increase intake awareness the the Food the and ever for consumer maintain This this are American U.S. consumer industry choline, conducted and by choline, age awareness the choline fetus, increase progress first in inclusion showed of in Responsible normal in with announcing on issued survey XX% older to Dietary and Authority's nutrient. of support recent the strategy,

full globe, nutrient extensive choline our and recent explore Within to our data to help benefits next study continue and conducted which the benefits publication of the of efforts for expand ReaShure evidence at University by the rumen-protected & This or of been this is broader penetration both dairy choline early cycle. a development across cows. library cow. sales adds has were throughout herds but field demonstrating in research certainly should of of segment, trials Balchem's VitaCholine benefits already the Health channels. of into implications the accepted will This study also our showing introduces We we new full in Nutrition dairy ReaShure, the transition ReaShure, to from Florida a dosing activities an will encouraged expansion Animal of Dairy be lactation awareness important lactation beyond new market Journal consumer field this strategic also year. of dairy later published the of the in what the of our Science, This cycle of year through

September, we double-blind, The study are submission This by continues important of Curemark and trial full end, X previous third trial our means while that rollover enrollment Phase and milestone, year's supply was the half the complete utilized meantime, encapsulated clinical treatment that be Phase making drug trial Phase on randomized, continuing enzyme obviously pleased placebo-controlled and as the in XX confirm chain for for the first manufacturing focused for week quantities to to the ongoing in achieved. the progress, in to of the for will X patients be product, as to additional the for is an autism the remains well manufacture of preparedness NDA way participants XXXX. trial, Balchem from the ultimate In clinical in of trials. X launch

detail. now milestones to months encouraged going past have are the the by the in initiative. discuss more progress I'm this toward critical few Backus We growth made Bill over within key segments

Thanks, Ted.

increase nutrients were sales. an acquisition, quarter from chelated systems and the and comparable or consolidated sales primarily of by prior quarter. segment higher of $XX.X year was For an from the and sales, lower the Human choline $X.X sales increase million, powder by minerals Health strong The million, Nutrition sales added driven record flavor & partially all-time X.X%, systems quarter, our volumes, offset IFP

for earnings quarter essentially year prior were with quarter. compared flat Third operations million, the this segment $XX.X comparable from

for human volumes, including million expense certain mix, raw non-cash choline operations products, by million and lower powder of lines, effect million, in were other nutrients inefficiencies. third nutritional sales driven higher from offset chain chelated volumes, plant Supply quarter the quarter. growth our Earnings gross year higher aforementioned earnings which product costs, the acquired systems recovery nutrients, by Excluding margins assets and this the intangible $X.X compared of across stronger driven minerals, by and drove optimization primarily from operations unfavorable and certain and for flavor with material associated $XX.X adjusted the Nutrition to $XX.X through were of quarter quarter. product prior economics, segment amortization decreased sales animal feed compared ruminant low decreased of ruminant to primarily million to this contributing raw North business. higher of ruminant due product $X.X quarter. markets to volumes by or the segment lower million, costs volumes Animal material year, lines the focus for comparable dairy prior continues timing Also year area for million to milk the from targeted be $XX.X The of or actions prices in remained pricing an important in compared prior Health & to X.X%, $X.X decreased was product America particularly resulting third protein XX.X% where challenging the order ReaShure. Sales of

by We chelated $X.X $XXX,XXX, prior monogastric from primarily due earnings raw to which the XX.X% relative price, decreased from quarter a lower exports to is amino economics to increase higher the for worth choline both University higher to remain over dairy third XX, We months compared Florida that ended that recent price quarter. basis, for quarter, Ted The months material the in last rations. sequential comparable earlier. segment and the confident raw are of sales a year milk per results the improvement encouraged or plant million $X.XX increase and increases key the a reduced an million Health a for comparative the improving decrease $X.X segment record $XX.X comparable quarter in a Products the of quarter relatively supporting sales Nutrition XXXX low timing. in X.X% data million economics inclusion the encouraged improvement by gas from was the average The quarterly term certain of mineral encouraging materials. million, of or quarterly in key the September year, million, of decrease achieved third quarter of year three from we X.X%. remained prior-year in in Global X.X% sales, the The earnings, milk we products, of in Animal dairy operations increase along long earnings. ANH and and protein positive driven noting have strong the feed prior as monogastric segment, $X.XX September nutrition third the margins. ended order by with X.X% prior compared three species the to improved, related with along higher with lower & $XXX,XXX, and to and grade sales the $X.X very repackaged see of is were noted Specialty versus leading earnings Animal $XX.X of volumes certain sales in It cost result are was Nutrition On on sales. sales achieved up to costs or from was Health September XX, million the including Products economics, up which seen pound, species and operations sequential and feed operations & price the from margins ruminant This particularly sales, acids referenced since from improved in increased October with early XX%, Specialty to million quarter, XXXX. earnings recent protein, highest the to $X.X $X.X XXXX.

higher an the aforementioned acquired from costs. third raw assets This customer of segment associated with million were of the adjusted effect sales, year mix by an was of product by non-cash increase million $XXX,XXX, increase quarter, material operations in $X.X compared record $X.X higher amortization prior partially for of X%. driven the and and unfavorable to offset earnings Excluding this quarter expense intangible

from to $X.X or mitigate actively due sequentially Compared XX.X%. or to derivatives primarily and the in the shale significantly other rising choline segment, the XXXX, the million, sales In contract Products sales second of quarter, where as costs, used choline increased We cost, million applications. as increased quarter comparable terms to increased year well Industrial prior permit. help raising sales $X.X XXX.X%, fracking the are prices material higher raw

of Our earnings the segment with aforementioned higher prior higher operations quarter, and $X.X the costs. material $X.X Products million for year were sales, an increase offset certain compared from by Industrial raw the partially million, reflects primarily

consecutive and the oil had gas have growth quarters now We of five into sales industry.

While recovery some profits industry, I'm pleased the for Ted Industrial going call the volumes as turn cautious to back we our have with recounts remain this Products of about now are date to improved. remarks. and to over closing certainly we

segments, and net in our the needed earnings of million, accelerated growth million net $XX.X adjusted generation scheduled our $XX.X drive further sheet. $X.X Thanks, payments growth less significant and and regularly and within & Bill. free last we that X earnings we degradation reduced quarter segments, We trailing flow cash Health year-over-year XX, our million. of of than to were experienced $XXX.X of working XX cash revenues and Animal third X.Xx improvement, of capital Nutrition our with debt of in to refocus million, $XXX or debt of strong million operating call, particularly revenue delivered our sheet. despite X strengthening payment we our months some beyond overall on million, challenges, segment. QX, as In some the This noted On had balance EBITDA, September enabled balance adjusted improving able to $XX.X above X

partially outstanding acquisition the IFP million have quarter that third in of XXXX. now our the Albion debt were $XX the from used in fund down finance payments, accelerated With June paid and the to we revolver balance fully acquisition

the challenges macroeconomic are global continues In addition headwinds we to Health & environment within facing to Nutrition our the the company. present segment, to Animal

And grades costs business for feed recently indicated, a focus we industrial choline actions recovery increase an be raw announced both to price chloride. previously of pricing higher material continues important teams. of As and our animal of through

Bill progress the by and management like continue we integration initiatives, growth and strategic call the Additionally, hand value-creating these up opportunities. disciplined now initiatives the questions. of we company for our our key the with made to focusing who on IFP. will on strengthen And back open call are acquisition exercising will pleased over seeking I to would Bill? to cost

formal concludes now call conference portion this the the will the Ted. of At for we This questions. open point, conference. Thanks,

comes question & first Pellegrino Francesco Company. Our from of Sidoti Instructions] [Operator

Hi, there guys.

-- add wanted And in quarter, getting do reconciliation I'm add in rate sort because getting just know add the jurisdictions XX%. that press of GAAP there's you I to certain is I XX%. in on to it are the the touch tax release first commentary rate back, the The thing ASU that contributing release, was the the a your tax effects when of XXXX-XX. of backs that I'm tax And only rate lower the said you tax back the you guys the press after rate.

rate Going you're costs. if amortization regards thinking And an if we you out the Because tax should onetime was for called a upon don't the that things improving, be was of historically to jurisdiction where we effective business I it as as back in just rate what everything with look that are about the at the operating thought intangibles, company, tax at. forward, in noise some even these these release. looks XX% based press things the adding

that things Bill. discrete were within They're are not some absolutely items permanent. some quarter. Yes, items some Francesco. There to of discrete It's just But be, There call I'll items, them going too. the is rate should to see going our forward. these related tax rate, we in and to an Italy, with and are even foreign states improving remain going the were embedded which rates, jurisdictions like

XX% going should XX% rate I any somewhere could reform range year impact model. tax effective to for be tax in you excluding So expect next is of be QX in into to in the the -- your the of what the would and course, use act,

XX% to XX%.

little bit Human that? the or assume to the Okay. attributable it's just it couple you powder lower sales? Nutrition Could inefficiencies And plant contributing the on flavor as Health, more the a sales, & of touched EBIT dig I the to about you a margin in then guys contraction. is times in

H&H. the Francesco. in overall We with pleased revenue growth Sure, were

from sales up sales several XX%. I nicely. -- were close unfortunately, And were higher products up, reflective systems within of we volumes had product typically strategy higher business prices, up to think is And mature powder volumes. up lower that, comes about products, specialty were lines Choline and somewhat away very our were the with on that more powder Minerals but down. evolve that but to to actually systems this X%. margins, up were

at issues. our in across plants was absorption some And obviously that resulting this so quarter's in reflected of network as And experiencing margins, X XX H&H. we utilization as lower are issues, our particularly well

I think the have have and as our that we just two we complete and positive capabilities efficiencies believe as a look significant the and coming sites have feel with quarters. relative And company. at entire do we similar inefficiencies Albion this offset is IFP. good purchased I network XX opportunity news acquisition. the so we across clearly We to we in three purchased quarter We plants, overlap multiple some have optimization network, across to plant these to said, a some the opportunities we drive some across like experienced and some

compared these that to here, hairs plant fair inefficiencies -- I it's as to inefficiencies. manufacturing say so don't but are want to split

word using really No. yes. I would say inefficiencies. I'm really to they're inefficiencies, manufacturing that plant site manufacturing mean

in response, said Nutrition that in volumes were nutrition & up Human segment the you Health choline And your XX%.

were, they very that. and Yes, excited were. They we're about

Looking about so. or XX% at year, up are full sales the

even for some particularly be lumpy be XX% than consumption. not was up QX a -- choline. they it's a year-to-date choline, best to But for to should for of last So the XX%. quarter good we're growth in as realize year our little going human grow. we the QX so overall are think date, that quarter products to about higher we year But And bit -- choline happened

growth. So we're the encouraged quite by choline

expect we've increasing some efforts our XXXX. in the quarters from and said see see year to think more even in in I benefits previous that awareness last should and RDI XXXX, we start to

Okay.

Just nutrition to domestically the I been strong to What has jumping over well in sales highlighted as this plant a some segment. for This are as abroad. the sales really company. Products of percentage noticed Specialty segment attributable plant nutrition? you standout And segment

a Bill, do to want you – give

probably It's XX%. Yes.

Francesco. it XX%, call So

question last for Okay. And me.

to you some call discussing especially the balance questions, In started say during for could sheet. you you sheet's entire were Before you the even under fact pay the balance really opened quarter. significantly the after third revolver that down able And the the strong, levered. views,

While of accretive I the deals been deals the the that was segments. doing way some Would nice, to company know was that to you EPS. very significant IFP way redid transformative And size the report just modestly just to the like take they're acquisition three are that you've the that business acquisition maybe ago? willing that be years another SensoryEffects their they on

that market position, company Francesco, simple acquisition I right is, find our strengthened strengthened think answer yes, to we if were significantly. the that the the to

think in we first I indicated is as we growth. really driving our have several acquisitions, focus the but past, have made organic

one. appropriate and return be certainly as the acquire obviously alone, of it management of a feel a we small and got that up to like have it really to do We comes one strong an strength also believe well needs deals, And can made a the is for capabilities, it, acquisitions pipeline we've get very but deal. transformative transformative ones. if we price as But on right right we reasonable financial the the

are there, small saying will we do something We here sitting and on think like that. we But seize about, and a and it. company are we there we're too comes that's to not if opportunities have one out

as a Just up. follow

you willing like core be you'd did business outside then, with your of SensoryEffects? to So go

leg not we not core. the sure that analogy. stool. fifth We're that use a within And for I'm we acquisitions to we the stool, if of like there to say think I legs nice, that transformative our We are plenty our think can looking Francesco. would and/or small

our area. is focus that So really

clarification plant quick one just on Francesco, the nutrition.

the segment more it's like of XX% Just probably of because seasonality, plant is nutrition.

or year For the quarter?

an into seasonality. account on takes annualized that That's basis, so

question next Pivotal Research. Tim Ramey from Our of comes

Hi.

we quarter, brings Just in say rate. your that tax rate Bill, think XXXX-XX, XX%. to of guidance let's normal and put one just around in right the for between about year rate on should that the about at of full that? we XX%, the If you, Would XX% being tax year fourth the kind ASU the should follow-on effective or we as full relative XX.X% of lumpiness think how difference normal,

for trying adjustment, No, was that's And is had had XXXX-XX. purchase carve really out then other actually price It's some of we which other a that that now some to where that positions. not sort of one-offs liabilities had one-off and had that this in a we penalties the had that little state was had. forward. to bit we'll taxable. in we onetime voluntary gain relief we normalize a going adjustments that We disclosure uncertain related filed item resulted of interest purposes pick for some that's agreements, the tax and And also, and we up some

some to year, bit apportionment it's it. There's just So of as little indicated, to XXXX that that some the well next you're too. from just the turned But has back change some basis, getting XX% as the why state and in be here some in credit a of we state That's won't don't but one-offs I done take all the better on for to resulted again I to have. been full-year and a rate reap things, count in tax obviously planning rate, quite XXXX. still used XX% -- have should we that want as a benefits I up out we on favorable, that not

Fitzpatrick's agreement? would his Got from be XXXX-XX you. or that effect, Mr. there lump is that Is not of ASU it, thank to in employment terms relative retirement anything predictable quarter fourth

some year, on predictable. depends point, obviously, project think occurs. but and earlier in all numbers at be there him, to It not out I'm it going at when going some sit be the on to end, not do. to everyone exercises because was the to it fair There's it's depends difficult be because tried there'll we to Yes, obviously. to stock price the indicated to right all try we looking we've carve these this this take to as it's very But it didn't benefit. --

Mr. adjustment have out Fitzpatrick what an any And benefit so are. that having at so comp likely the will equity as a results true can be carved we from look

part IFP of to Can deal, third only that's us think help quarter to year relative been attributable right would what now. sales the And have over I you acquisition year acquisitions? understand Okay. the

that acquisition really you're Chol-Mix, impact. it's did almost is only We year-over-year Sure. immaterial. that acquisition but the the in earlier And correct; significant small very make year,

the so quarter, $X only million, we about we And ahead that in QX. million were annual were IFP the as is slightly a really said, So $XX of year-over-year. about revenues and IFP

question next Our The Vertical comes Hundley of from Brett Group.

sense morning, Good few Francesco. of as go I discussion having give sheet questions. to this. you for a where I missed wanted and if year? Terry I you were me back to expect with Bill, the balance that guys to welcome to sorry finish a CapEx Can you the had well.

to somewhere for be the related in build I around probably being million, mentioned expecting Ogden, Utah what should $XX the out, We of do significant the facility. project to $XX the replacement with here expansion is Ted think million we're that Clearfield the

that the So still that implies I pretty CapEx That for from -- a of number robust finished. thought standpoint. majority QX a was that

wind But this. through, some here about million, it's we're other being maintenance to it year final there's There's September. $XX what's projects going we on, $XX somewhere that's coming But fourth finish we're related in, the and in normal going lot -- million the think do too, put finalize there's buildout. up and I the the obviously to still around, qualified, Yes, going service here result be as being a always and this, implies in we on that the to date M&E quarter to through think end stuff occurs. working

that up to wind it's the So full going for that's why we point year. think at

Okay.

expected QX cash levels. kind at of might And to to drive this flow free some cash not if be as soo had forward, continued nice do going continue rate going while run you you are I large free as

revolver You here deals post recently. made that brought down you've your

flow, my guess safe. maybe that assuming Can But could about how is It you see more under you levered. strategically and through or forward? related sheet very already are a is, that from on take opportunities it And do organic think do assuming a opportunities is Because where excluding you arguably that that so your you standpoint, us valuation free I you'll much continue year? it you reactive find you your it start organic going here yourselves now? It think balance the cash dividend you to able is, special right reactive, be sheet or question that the the are the dividend? growth appease very M&A are growth a you how at about where if opportunities look front to that balance forefront. to you to handle like year the to at even proactive, Do fund put you don't guys well you or little bit CapEx strong sounds more with as

little about a think us too the in it's uptick for dividend. huge soon a to I think

you coming meeting we've obviously number as year We are our a years, for we'll know, we'll Brett, quite discuss increased our every looking be and it December at up again. where certainly of this. on And dividend board

we And spend was spent with worthwhile a projects, up not whether more R&D proactive going We're secondarily, going And going paying I things We capital a balance just loan. on organic find were acquisition of opportunities, PP&E some view down. a those are more revolver we have bit grow front. to we to I or there. try and what are left that R&D. month knew sort think even of general, to the it's And indicative up we reactive. going wants the we think of at there little these ourselves think spend we company in we that, here, least once very still allocation, organically conversations on as to But the do. knew know that with terms that to I we're coming be first. on were in we're it's a We money term growth

for shares. dividend We us, things just a whether or who it's to the growth base. as constantly we for back increasing get part to strategy are are really looking our to see these not they're there of we are. believe for we're or we something sitting we're to we'll out we there going what are multiple large investment talking conversations If that's think continue don't But and don't the investor boutique buying pay that have the opportunities not to investment saying or sure. being We shops that most bankers, point at stagnant, about consider then bankers accretive we where continue enough, of

then We that constantly even our not capital but priority. have And so of I conversations. loan we're than terms and maturity have is than knowing good interest. now. can us. again, makes happy got think that think or well-positioned other the term these it. first dividend, to allocation don't the it's facility. really loan, term going as the of really been away a a with The problem sense rata been And allocation good going care transformative we're down we're from very capital some a up And consider we we'll and two we so having and less built down strategy, part Whether bolt-ons, shares, pro And do different to thing the markets of less discussions strategy. be end, of will, continue to debt it's we'll the the think to discussions, pay down to going financing, do pay capital already if what what we acquisition have that We're have, and out something paying to go paying these term our to But in to even the facility, tap to it's the have it just years what start on we getting treasury we're cash. to we're in That's right really we're if about we markets. take want easily the our we the loan our have we

then mentioned, that with have questions. good really it at in a, And maybe be there that's is know investors, as other I two of rate -- -- date, QX. about just that business. growth describe just I said if the word on a a trajectory but jumped kind XX% the Okay. I year One even of Conversations generally you to to concern And but I think seems have would I it's H&H that side. I confusion you some appreciate some choline that. as Ted, in don't

You comparison. you easy us choline and human if I'd also just side as what on business take And characterized you're through an the the maybe seeing. kind curious QX of be could

is progressing. visibility growth lot really to up I pick has the us think quarter-to-quarter how business RDI, and of challenged become related think on a expected I to that that

traction you your can behind even maybe any put be that, can you helpful. choline gain that would put more starting more business confidence behind and to that examples And so or any

just the my second animal on my then is that's So question. And first question business.

to come I've animal of You I'm word guys up here. times And that curious read. heard business timing number mentioned and is timing again. And getting if the a harder harder

read if timing to something marketplace that's it current function timing the a way to making if there's and structurally, you. are of structural more the model is. that Just creates issues lumpiness business the maybe Thank that and harder Or and business. orders,

would then you. is that are prenatal the And choline all out significant seems I we the me increased have was this is as progressed, positive in choline has that of Medical choline or I in talked optimistic, of and awareness, multivitamin within increasing products is Responsible of just as inclusion a our relatively And up from But there. It it homerun see. the but what have prior vitamin Brett, Sales that couple is here team really with or study year recent increased shows. that think marketplace. think and we or year think would date, such on for excited The to that's so coming I as were And why we're out now perspective coming that what without showed still really be to it's major I are exciting, up H&H, And the brand well of choline, the data a level say number Nutrition from is volume to and for really we've choline, growth say seeing was XX% improving times very the is the of year. nutrients sub-XX% positive. increasingly the around aware advocacy there to usage. out about fact folks low. the that what Association more so about awareness with significantly is The encouraging. as QX increasingly surveyed strong I awareness American new Council of maybe was that the

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year today we're excited think with we're the are they So marketing organization were our sales what ago. team pleased and more seeing a than and in I market,

little of color from that in that business. what a gives you we're about hopefully thinking bit So

one The we're choline. for that identify to of And part on particularly doing, is and important are clinical choline. increased think there, other spend around is few R&D a we the around is spending thing trying money a I biomarker studies

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starting evidence of see in money some to our growth lots support We're again, spending of in revenues. awareness. We're marketplace increased the to trials help the various effort. So on

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for and end turn call Ladies and Mr. like I closing gentlemen, the to session. of we have reached to our Ted over CEO, question remarks. would Harris, the answer back

I want by the again for our end thanking you on you. will out of you Thank company. as really our QX Thank in call, call our today next interest results. and continued joining as report to progress We our everybody initiatives, strategic our to your to and be look just joining. forward full well update on February, which for to in year

today's concludes This conference.

for time. have day. and wonderful your may You lines Thank this at your you a disconnect participation