Balchem (BCPC) 16 Feb 242023 Q4 Earnings call transcript

Greetings, and welcome to the Balchem Corporation Fourth Quarter and Year-end 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Martin Bengtsson, Chief Financial Officer of Balchem Corporation. Thank you, sir.

You may begin.

everyone. morning, Good joining the for ending call morning this XX, Thank of our Balchem discuss results quarter Corporation to XXXX. you conference for December the call Financial My President Chairman, and Bengtsson, is CEO. is Chief name hosting Harris, Martin and this with our me Ted Officer;

can time, statement. actual cause release measures. not advice assumes Please the We to commentary in update Statements could most in the forward-looking today's that differ Balchem's recent are financial this made facts expectations, that counsel, our like Form are to Today's statements. the reconciliation SEC, our include auditors earnings prove these XX-K, in no non-GAAP details. forward-looking Following no including would obligation and statements. read historical further expectations considered X-K from statements call company our risks forward-looking results factors XX-Q at and refer correct, of factors The assurance in I to and the give identified and for to our forward-looking call various and reflected will materially reports.

I will call now Harris, to and President turn our Chairman, Ted the CEO. over

our particularly fourth with sales continues record to what and pleased earnings. modestly Nutrition morning, Good were with be fourth to segment in record demand record delivered financial our and conference adjusted pleased another and lower the which call. flow quarter challenging environment. I cash sales for results We EBITDA for am capped on XXXX, We Balchem. welcome the free of off & quarter a posting Martin. year Thanks, Human solid Health fourth quarter

year more significant past Balchem. a minutes like Balchem achieved accomplishments into on XXXX solid detail some for the the on Before would for the quarter, few Overall, another over to the team was of year. reflect we I get

levels of an year EBITDA we restored operations were prior year. X.X% $XXX record million, X.X% $XXX.X And delivered XXXX margin from adjusted and net down have of increase of earnings last pressures following us normalized and full cash an X.Xx. basis a from sales we increase profile down the we the flow the ratio to record X.X%, also million experienced over fully of pay While leverage our we debt our further on years. And debt inflationary our to more to net reduce generated record allowing free few

progress our to the XXXX. The made needs large. methylsulfonylmethane Bergstrom of Kappa at integrated we nutritional broader strategic customers broader Nutrition also starting portfolio with play the or in We that made XXXX, for our fully good KX vitamin our and we on we of the Bioscience to our and product In ability of and indeed as MSM, innovative our second out acquisitions now expected array the and initiatives. half enhancing portfolio health addition a is of to solutions world provide

they studies penetration. and end communicate particularly strengthen the drive promote as to am as the more support consumers. market XXXX well from pleased and to these will awareness effectively the our made and we results efforts ultimately positive increased have market, with for science We studies that you portfolio studies of light, support year vitamins human the nutrition. These the and of science over and new and of of to augment the new minerals, shared nutrients course exciting animal bring a existing supplementation and our progress customers with both to in our both number I

products leverage can behind meeting strong the that We drive ultimately their so awareness build science enhanced have penetration. capabilities to clearly our we and

and our the believe keeps grow the to progress. are for we of technologies our to enhanced, making there's are clearly portfolio library as excited well. the While here, be marketing portfolio and we that be market continue of capabilities products done of good about we very our with science work opportunities that opportunity will Overall, growing more as exist products. And unique

We autism as behaviors entitled young Association, delivery for their in company American a development. In The unique pharmaceutical the maladaptive X for technology that are Therapy uses demonstrating autism years maladaptive in children modification of as data as treatment our their by progress long-term of age was disorder Medical encouraged was clinical spectrum disorder published microencapsulation children with JAMA. bio in in the or behaviors Journal with is preschool recent currently Replacement December, Pancreatic system in disease the disorders CureMark, the for published. by also paper autism that spectrum

milestone towards the initiative, which now protracted remain encouraged XXXX, application filing this by progress about collaboration. happen excited the the FDA, will their the time important potential of biologics we are license for believe in Despite and reaching year line the with this over past we of made we

important meet brand of output allow human for the choline. plant for known supplement nutrient, and particular in upgrade equipment well in the increase health. Additionally, rising Of and of XX% will investments this we cognitive, demand industry facility relation and better to market-leading in will made by the in essential company completion manufacturing our was note VitaCholine, XXXX. expanded expansion to the liver Balchem's and The overall

operating our our main world approach focus goal that we we as for already on stewards to of the greenhouse as an gas by significant also relating towards usage XXXX with social health our extremely continue are company's providing and update remains goals of are to innovative on X responsibilities. we made nutritional to in the report XX%. And emissions excellence stakeholders. pleased corporate Balchem's our unchanged report emissions greenhouse solutions fifth XXXX, water tracking and which on its Balchem XXXX gas objectives: reduce in We we to the XXXX strong our reductions. in sustainability ahead and both released of progress needs provided progress

to marked Newsweek result a As we consecutive which $X.XX from once America's year. commitment another This annual for announced dividend, strategically lastly, taking our Balchem. our growth the an reinforced strategy. All our increase for Balchem in our our $X.XX of named the of dividend most solid year in long-standing recently increase was and both again once XX% another magazine the again And increase of by efforts, financially double-digit share, responsible consecutive to companies per dividend, of most all, year dividend recent to one fourth December, year-over-year. XXth

Now fourth XXXX. of the quarter regarding

While profitability delivered margin gross in record rates earnings. our of X growth with growth X.X%, segment revenue sales we operations fourth down percentage expanded $XXX Nutrition Health reporting strong & quarter. We quarter earnings in earnings net delivered of the our on posting segments million and from Human margin, in X was and income with the

per reflection the operations going of fourth flows share company resulted $X.XX for million, net flows, quarter call basis, Our in with income over $XX the year. On of Cash the from which each earnings for of a our free turn to of back in a share $X.XX quarterly go for and on we is results $XX record the a an a to adjusted to fourth segments. on to quality quarter. I'm million our of cash to $XX net increase financial an results increase earnings. record basis. earnings of quarter $X.XX prior basis were earnings XX.X% up fourth strong consolidated deliver continue the of were million now the the of non-GAAP business cash flow our through non-GAAP Martin of an And resulting per compared million, strong GAAP X.X% $XX

Ted. you, Thank

quarter margin and quarter As fourth overall, was for flows. solid cash Ted Balchem with strong performance another mentioned, the

sales than million year. net quarter prior fourth the were Our $XXX of X.X% lower

but Our segment. Nutrition grew Health in Nutrition offset softness quarter & nicely in segment Human Animal by Health & the this continued was our

euro had the stronger Foreign driven of currency growth sales our a by primarily exchange, impact to favorable X.X%.

million $XX up margin Our X.X% of year. fourth quarter the gross prior compared to were dollars

services XXXX prior Our mix year, due operating and XX.X% of compared lower expenses primarily gross due a to margin favorable the The year. was X.X%. $XXX of million was XX.X% of X.X% or tax X.X% in to increase quarter in $XX Consolidated were compared XX.X% $XX percent compensation-related expense above of the the to an XXX were detailed the The quarter year. On points fourth was GAAP were the million, quarter, overall Interest million increase XX%, manufacturing input net for rate was and from net and $XX basis the million, million in to XXXX operations an in partially higher fourth for to fourth sales an earnings up outside by of adjustment taxes prior X.X. were primarily our up from for million, EBITDA non-GAAP costs. Consolidated the stock-based quarter or an increase quarter $X operations million quarters up primarily closed prior ratio XX.X% benefits million of tax debt compared XXXX. debt our the adjusted certain earnings transaction and with this effective $XX of and the due on prior basis at $XX release year. offset year increase prior effective as fourth Adjusted was the basis, from to was from the of respectively. costs. earnings state and net a increase $X favorable rates leverage expenses, morning, to the an $X compensation. income lower million, a tax from The

$X.XX, an adjusted net earnings increase XX.X% net quarter. $XX of translated per year's net quarterly were On share or quarter of $X.XX basis, fourth income from earnings an with quarter into last This million, from diluted comparable adjusted operations $X.XX closed and increase $XX Cash share, the diluted flows cash quarter million, we translating balance the million $XX on sheet. of an to out per X.X%. the of for were our

Human the and at both driven X.X% sales business, of and segment and by $XXX segment from generated increase markets. increase prior fourth nutrients million, our look This Nutrition was a an year. quarter perspective, beverage of sales Health the from minerals the we As & food higher within

& $XX an adjusted higher input from Our segment fourth our from operations the appears year-over-year. year delivering food minerals the we made The lower in expenses manufacturing $XX operations. we favorable demand primarily We improving in of and side, pleased this quarterly are for were Human acquisitions fully by of growing compared are healthy growth. sales, and million, earnings integrated capabilities. Fourth as due be operations beverage increase to from prior overall to and the to & aforementioned continue in and record the partially XX.X%. to were delivered Health selling marketing The XX.X% markets. And very operating seeing of quarter our demand and Nutrition higher mix we sales million, offset Health on and now increase with Human earnings quarter an performance segment segment picture overall earnings of Nutrition costs, XXXX nutrients invest

heading growth and segment are encouraged volatility well and they line our by Nutrition in feel XXXX. some top year-over-year positioned While Human bottom and uncertainty the remain into & we're Health

million, the still challenging to discussed Animal and of call, partially show experiencing demand $X both of animal in million milk the our from continued and show Health lower Nutrition QX low-cost earnings year decrease the European but XX.X%. sales markets. our XX.X% improvement. The in primarily Nutrition of offset American the encapsulated what of decrease also signs stabilized continues was & decrease & a quarter particularly market segment conditions, were North from ruminant but million, a And feed Chinese our costs. Fourth have delivered lower a the appear market North by Animal to Europe, have monogastric to is products. earnings input earnings to Animal in to prior by $XX sales, The America. prices sales yet and in competition due in market adjusted demand XX.X% $X impacting for compared Health Similar rumen-protected of from of experiencing nutrients the North protein dairy for Nutrition year. The Health lower Our market. dairy conditions manufacturing & American low real milk operations segment segment U.S. driven soft generated in quarterly this market market prior we decrease operations aforementioned to from sales is

in and towards futures able We third protein But protein half, believe growth improved be with markets second and in Nutrition growth improvement to said compared all challenging the European market economics animal early fourth part in at situation animal sequential for deliver term certainly to the U.S. provides the the opportunity first moment. Animal to later dairy expect of encouraged the half second the the our of year see continue suggesting half of to starting part quarter the the milk we the the Balchem of of XXXX. We in longer stabilize over significant remain that, this having segment in year-over-year the quarter. business were the to the to

by Gases to the to delivered year of due Nutrition business sales lower of an the and were segment The business. Specialty $X an Products margins with lower $XX primarily in increase driven adjusted of Specialty performance quarterly increase Our delivered growth. in input a million, both of X.X%. as costs. X.X% Products from was sales Fourth year. earnings the million, versus $XX Products improved were segment for pleased Performance prior from million, X.X% of decrease of delivered Specialty the prior manufacturing We compared this operations earnings quarter earnings Plant the good the operations quarter fourth increase

in to And volumes we the continue stabilization year-over-year in position in continue top progressed. returning while see further also Products a to growth. XXXX, earnings We believe as Specialty to great quarter growth again is to line deliver

growth Balchem segments overall, fourth X in for So the in a continues market out be environment. quarter reporting with what solid to earnings X our another of quarter was challenging

remarks. over Ted call the turn for closing some to going now back I'm to

Thanks, Martin.

reported of morning results another Balchem. year off this financial capping solid Balchem's earlier fourth with pleased XXXX, the are quarter for for We

the year XXXX business in challenging highlight resilience full volatile model and of market our results Our environment. a

performing XXXX. Specialty also Nutrition Products Human organic is fueling we the and segment growth with Health in QX. well we expect delivered the and performing quarter QX as earnings, continue & earnings growth mid-single-digit Our by margins strong in is evidenced fourth record to this in well,

about term. XXXX, further believe momentum to return I a challenge bottom Health positioned challenges Nutrition Products. year U.S. supported and our dairy growth also expect to deliver the The where expect company while in We where excited competitive internationally and further I growth near advancing is our this economics see in am line core initiatives. full to well continued will revenue dynamics the XXXX this both top is we some to growth an Specialty with in segment continue the on basis combined segment, for by continue important Animal area to & expected

for the hand who call to open questions. up I will call now over will Martin, back the

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

[Operator the Instructions] CJS from Bob of comes Labick with Our line first question Securities.

on year. you Can Congratulations strong quarter a and me? hear

Thank you, Bob.

Bob. Thanks,

Okay.

perspective, line, you've getting what product hard of line top as really that resumption both surface. through there's a working last I pipeline from impacts on a band quarters, if But and go you into in changes the going lot to operated know new P&L for on the and yes, discuss us do you've that various about maybe we a obviously you've you the So and kind been tight maybe see help outlined. in X bottom and can get in for XXXX, potential top 'XX growth think to that as well? headwinds

Yes, sure. call. the one, for joining that thanks Bob, I'll and take

we as think prepared as XXXX, outlook I are the the for we excited XXXX. said that I look at statements, in about

of to have Our some Human portion our growth after performing markets i.e., period, business cap that Health that to extent market Nutrition is & the well, really to the destocking that's and growth. going of recovered business, return kind

so. or a lacking was for year So that

back. really And so feel we like that is

really expected year-over-year, feel further now levels acquisitions made that to perform. And going that them the to the are at We in provide we XXXX we performing for growth also us. like that's

growth of we've as some have talking for & incremental applications to been new new also additional Human that about sales, starting the years expansion. well both as in Nutrition products, from We geographic contribute Health, platforms

continuing and good I'll then QX, forth. in & of a the the been in and of Nutrition the to the plant with to for so of in while. year, to back wet poor very much kind specialty jump the fields products solidly and rains we really Health, nutrition performing the XXXX. had products momentum that all kind really saw but year feel last we business Animal about So of California specialty a that And portion has go But start

of right So But a we XXXX. year, And weather that see, as this we about to we what we talk negative. performance business on And don't too like in the was that certainly, now. really don't materially we and now, for was don't reason see reoccurring what impacted that business. based on much year, weather necessarily negatively see a last see based

have business like should We've feel recently new pay to start XXXX. really did Plant Nutrition products in launched also some XXXX. they in that we off much stronger in that XXXX than year So will a in

growth to are driven but help surgeries and So elective Gases top also the that return by coming in line the to primarily also Products, pre-pandemic levels, is will Specialty back in volumes business. that Performance

also solace though more will just them Health. is seen as isn't will about Products Nutrition year-over-year costs, for able worse. And & taking Volumes encouraged in XXXX the and some but Nutrition for But simply be of prepared we've that there, So getting to any that the business. business a that's bit and energy in Health fact, difficult Specialty a that that improved, statements, about Obviously, experienced Europe bit outlook QX we last lower of situation QX XXXX. & feel been in were becoming growth. Part signs we quarters difficult. compared sequential little lap talked We're in we're as little costs really is a Animal a the for we've The sequentially in we with nicely about actually second while. of we to improvement going we're the the fact lower the in quarters, that even the few feedstock healthier. half bit Animal be kind deliver market is in to see why for the some up QX

peel really that there So modest well. our business business, progresses, it When components there. & Animal we more many specialty expect ruminant performing which extremely of onion that improvement the is within are really you are And year the some Health. as Nutrition back,

grew in poor despite new the previous product growth choline back pick do start there. some XXXX in U.S., to other products in in like feel we of will prices. And significantly return which believe a as provide continue. Health up the XXXX also digits our the launch in expect and calls, Animal We Our dairy additional low flagship U.S. should dairy momentum we that to ReaShure, growth. will is I our within & double business product, that help mentioned And economics and product, will some that encapsulated prices our Nutrition that to

confidence few us the return after does year-over-year had in when the together, continue top we growth wrap we earnings of reduction years that momentum last that and we So that growth XXXX. for of that all can give really we've that line to positive the will X%-ish

Got it. question helpful. Great. and I'll jump was one super That And queue. back just then in ask more

compare you investment in how that? some little how I and you to products about they like boosting the and marketing that talked for and do things them core vitamins bit. You you choline KX your can like just other close? a measure measuring? awareness get wondering, about was you're that? And how think maybe there do out And D C Or do and

it's lead low. measure one our and awareness depending own done But We surveys. relatively I'll surveyed fortunately measure. look we it. we we is -- with tried have surveyed that. But have on difficult The unfortunately, way And have is And to supplement you users. Yes. unfortunately, to at how consumers, again, we've

those have We're take vitamin awareness XXs. as So in more certainly a as the higher. if D, down XX% XXs Most would people or vitamins. of or be C you heard the high and

programs haven't and about do things ultimately coming it to headway haven't been looking we're historically our challenge. But marketing really the But light of. done that do before our so from really just help that's in we that the forth. make penetration. positively, to we've need see starting we that's the why that we now we bringing largely that you'll opportunity. build science will can -- that to and awareness. And talking drive and even so more because And believe more are only simply us we're also that's out consumer XXXX not we to awareness And do relative that And at done awareness some really

our such going to that it, over awareness around do to measure your also can to back doing. we question as we based see But continue product expect fundamental those. we're doing what we'll surveys that based launches so And improve on on ingredients. do measure include new and And numbers by time

our the and As talk we start consumers customers what around they the they're also to care products it's consumer doing partly nutrients, about. demand our to key include because analysis launch and that

ingredients, so bit. a a are to we'll number the we're is and our of so And try co-branded for of We're us. from increased but which number the see perspective, consumer super us and launches consumer out seeing consumer and look reach that But our about market there a with want with excited way feel own kind our at we an continue we've that we not also we're many that our we measure, to I opportunity. launches of for brands, of ingredients, excited why to little Balchem about also to the while include get of But addressable for as kind an think, be do to important big this market, the a awareness. potential that is surveys we in part got real where our

Sidoti. comes from line May Kyle of with Our the next question

impact was if top how bottom gave to the that could you you partnership I comments the an color expand with there, but wanted and you? CureMark appreciate the the that all CureMark and for I us line could with on. on start potentially drug the I update and wondering autism

about to quality manufacturing changed. But and of on getting batches that we've hard setting been that need and standards decades, capabilities our long coming in that's kind much So scenes, project because drug a X.X producing getting has decades least And not take at working get approval. talk up, been it much time not does this materially I we or tend a development new has time say, the again, long to drug approval. that this ultimately dare produced to for, be behind been but a introduce a and the for

of been from lot And -- has they were on December. side. So lot a in been has to -- going was that from work excited doing studies published CureMark in of work. their Jan our We see a the data

think designed was their of file make great approved, And so specifically of order as children consultants suffer that could get could use from really hard it really our autism. work with unfortunately, they're ultimately first be, expand. And autism in the to treatment to a continues combination autism a they these know is ultimately we parents is number that approval. treatment that for working their ultimately so for difference This we real is therapy perspective in the can approved, I -- it children. to that them, for again, behavioral this And increase with continues with step. documents if and that's that, this is drug forth and for and drug if the

very and And forth. a estimate. We're hard so is very It's on a not when access very, you successful, start is This we data this to drug our put paper, to and expectations where sizable their market have so around to CureMark's pricing numbers -- could down treatment. product product. don't be it

ultimately, it So a early royalty. successful. so we We on we launch. But of past. treatment. royalty about are will And the get we the or ultimately we've some at in in X% nuances very talked significant, this could make stages -- there be get And of if the sales estimates. But

essence. if and blend we in to the and a certainly manufacture pass encapsulation take it forth, but be product impact the We company. approved, we technology that enzyme, then and so and aren't successful We encapsulate overall manufacturing if our again, the with marketplace, So the of packager. unique it our on raw in enzyme it could, material

process, play are portfolio. a We're we all so and drug of our this part master some our the role, of an role patents important things. of part -- of patent file in those and CureMark's in And critical very used

there's opportunity position So filed license all of FDA about by significant and ultimately this that is this the and for approved hopeful we us. our because application certainly in are feel good biologic

that Got a sounds drug. like it it. Appreciate could color. it And very be helpful

around you're you Maybe how couple represented eye any wondering on different switching and know some that's potentially American context guess, if how color gave questions But sort the percentage like some of you could of protein of improving Health is So of I then it those sense milk was we'll later these some by a And I of the of see I this keep the A business. the going a growing kind ReaShure just lagging. of seeing maybe one. & you then dairy to Nutrition close [Technical that of giving area. Animal over prices market. because products latest start year. But by us this business that this still sales forward you Difficulty] the sounded and around progressing year? of

let's you Nutrition million chime about $XXX million, $XXX is So $XX business million, bit as call little business of say. into it, I'll Animal our well. & ruminant being try kind in of about if kind about can But U.S. think to the get that, Kyle, that, and a the Martin Health of

often they of goes they condition, this produce get metabolism goes less you produce the down, -- more the these ReaShure, more too prophylactically eat and to And fatty liver, ultimately tied detail, for milk. address needs if of the you in different but that their And so that's into have cow milk. And address helps kinds fatty ultimately And transition. not the liver for impacts. health dairy and nutrients up really address ultimately, cow to they they if markets. And that much what's example, get cow's metabolism have

and no is So the of helps see partly though efficiency ingredient, the to ReaShure that product the that really why where it's a milk high-cost in matter valued prices continue improve cow. think really growth line. that's are. almost nice And something that's we Even I

ability of incredibly we're health studies growth rates. these about it excited The nice helps the that increases growth colostrum to helps does is that, seeing showing that are of also It that about that some but liver, that other yes, reason helps not fight disease, ReaShure the cow, we've the product we're in overall fatty talked in mothers. only it line address

And maybe dreamt we And increased proposition, penetration. if for so some having we now And value have And we products future a ReaShure for much and than really be will, industry. we into about increased years we're feel that's reason, science ultimately, for adoption at. originally and the you there's something getting marketed that that broader for discussion. expanded could have like there, beef

But in cow. the ReaShure in helps case, efficiency any create

Some other the acids the within of of some components the the encapsulated amino milk. products, impact

milk of the protein mean, low. that will -- to effective been any methionine comes right we feel kind encapsulated that to on a the that And it It's called, as dairy Milk the that are products. and so milk U.S. lower global And component gives behind start overall overall products. boost growth. those products, quite differentiated up. one they're we've to now, price you the milk dairy for There's that of product example, component, little able fat address animals milk pick element and we'll a And protein prices fat as feel pick have milk. We healthiest these price helps start as those down, return up prices. do this the little them. the and really that I protein help very a of I these our of that. prices. But is to to days. component, the our prices will will components supply prices really none bit return to to of That's good our we specifically by -- prices that's are position the though up, products There marketplace feel. probably turn said, allow hopefully, products in is to to fat priced not depends do are expect prices good go ultimately, think of that and the a lot really dairy the about is high growth that a And bit start an complicated, in protein today the the But And portfolio the products part really for and but science be we in. most boost price amount are business the got impacted has in of particularly we of

for end of turn over would comments. like floor the Mr. have I question-and-answer session. We reached you Harris, the back the to closing to

support and participating know in today. results XXXX already And we we're call joining February, Paribas but we Christine. well Ingredients very the others once the XX early of QX as for as in London we XX, Consumer your again, to really to on Thanks, going reporting it's Exane see it's will all appreciate as forward the and some time to forward look today. And meantime, much to throughout our hope In thank your there, in year to We our Conference you you March we look be BNP believe we well. hard see -- May.

joining the again thanks call for So today.

does and conclude today's Ladies gentlemen, this teleconference.

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