Balchem (BCPC) 26 Jul 242024 Q2 Earnings call transcript

Greetings, and welcome to Balchem's Second Quarter 2024 Earnings 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. Thank you, Martin.

You may begin.

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

Following of auditors our and this SEC, at statement. the I our would forward-looking advice time, like counsel, the to read

X-K expectations call considered no actual today's from in factors that in the forward-looking assurance most and risks reports. We made historical various are expectations, identified are our will Statements facts results statements in recent give statements. can that and and materially prove Balchem's reflected forward-looking XX-K, not Form including factors to correct, differ cause could XX-Q

no details. forward-looking and these turn assumes will company the statements. financial Please update further to also the commentary over Chairman, in Ted refer obligation for I CEO. call reconciliations release measures. Harris, and to non-GAAP our include to President now call earnings Today's our The

I the Good welcome our segment, from reported with particularly Nutrition to we call. record morning, financial This quarter once adjusted second which with within delivered & solid earnings. in and Martin. record EBITDA. and growth again sales, pleased and record growth morning, operations excellent our earnings sales results conference Thanks, Health am Human results strong

which pleased also am I record very the Products with sales delivered strong strong our growth segment, addition, In within earnings. results Specialty and

Health. by Products higher Human offset a & year, the in with million partially consolidated Nutrition Nutrition in Our Animal prior revenues Specialty and strong $XXX by & decline X.X% the were versus of Health growth being

XXX versus margin to and our prior gross basis Earnings the X.X% X% year prior XX operations increase by quarter, million adjusted were grew million, from and we Our from sales, basis the with gross percentage dollars year. $XX XX.X% of up X.X%, of points margin higher XX.X%. expanded EBITDA record of quarterly of of delivered an points we margin an adjusted $XX EBITDA by

of non-GAAP $XX of an of $X.XX quarter $XX in per on for million XXXX, million, per of second highlights Cash the from resilience model. second basis, quarter operations flows earnings net flow $X.XX share increase quarterly Our our X.X%, on business of the performance of with an million $XX of net for our a resulted in a Overall, free resulted earnings quarter of and non-GAAP an $XX earnings basis. were million. with cash X.X% income increase basis. adjusted a On GAAP quarter of Balchem second solid strength that share

Before call the to market environment back in the passing comments like make and are cover to few would seeing. more about results the a to detail, we I overall financial what Martin

continue seen gradual we customers our for we experienced XXXX quarters excellent where minerals, Over portfolio businesses, so, seeing segment, the a our food unique returning of after across see vitamins & to Nutrients Health we last and and more X part demand early have normalized XXXX. portfolio of look to our When volatility order in of the we we patterns or our stabilization in are systems. Nutrition end demand and performance steady for led Human and by Minerals demand and strong consumer our nutrients business, of the

a launch. out half to XXXX first first the contribution second market. along have is compared the bottomed with here Our time, early the in of We Animal XXXX expect and economics of modest new improvement through challenging we segment animal on half Nutrition improving dairy the & half believe Health product a in and from additives broader a going the feed

perspective, volatile to business have through to over primary I continue. a am we these to Gases stable overall pleased market, which us well in perform Specialty segment, our this and our which Balchem maneuver propositions, market business, Products positions value times Performance and the very last our expect the years. enabled For is From with continues an few

In Balchem experienced quarterly delivered fact, EBITDA growth of in the adjusted all the in over turmoil consecutive last this has years. despite XXth year-over-year quarter global represents the where quarter markets X

That is and significant all towards take would performance I like thank to quite to very an Thank the exceptional and team for contributions you this entire Balchem much. accomplishment, the opportunity their achievement.

the for an Additionally, all market, that excellent patented tissues bioactive recommended available transport which ingredient is meet of supports means choice this and that is stages is the launched a new that product life. in I active, share body May requirements. in year, Vitamin to biologically excited use choline-enriched readily human reduced Optifolin+, health and to am folate Balchem a of which cellular Optifolin+ at into Optifolin+ making BX

and This of product offering a making to more now for world even over second value to that, results call us the vision our And supporting for Martin healthier our launch Martin? add of while the minerals, I'm consolidated to through the and segments. to with of each results and the go at financial vitamins existing company time the same will going bring to to our the nutrients enable customers, our place. back turn quarter business

you, Thank Ted.

a from was As EBITDA. earnings the mentioned, growth, and Ted quarter overall, adjusted sales operations second for solid record with record quarter Balchem

higher in than quarter performance net strong X.X% were Human driven our prior Health million both by year, second Products of Specialty and Our segments. Nutrition sales $XXX &

in dollars year. gross mix favorable expenses to million, as of our X.X% a the Our were to XX.X% basis year. prior the in $XX costs. operating were to up points up gross quarter million certain million of compared manufacturing $XX to the prior $XX And due year. margin primarily and second for percent compared was input sales, Consolidated XXX margin prior second The quarter decreases was compared increase

this to were from increase due favorable million, X.X% well GAAP of charges for year and services transaction net to operations as increase the to was outside impact an in compared year. impact year. primarily costs higher of from to impairment $XX the second earnings prior The prior charges restructuring-related quarter the as adjustments related

X% $XX operations XX.X%. non-GAAP expense prior $XX prior adjusted with million million $XX adjusted year, of lower million, for of of second compared of to Adjusted our (sic) earnings Interest basis, compared were was year. an EBITDA the prior the the from grew this driven On $X quarter by rate primarily to X.X% detailed [ million million margin to an EBITDA outstanding as up borrowings. release ] compared decrease $X.X a in earnings year, morning,

respectively. our debt million with of and effective an up and of overall benefits compensation XX.X% rate certain tax rates quarter The ended higher for lower from X.X. million of continue debt effective offset a XXXX down tax cash pay lower state debt and The and foreign our primarily quarter debt and flows by ratio XXXX with $XXX the a the the leverage in increase net net the second second taxes certain to We in stock-based to $XX prior partially quarter use tax to by on strong year reduced from were XX.X%, due basis was the taxes.

closed income up quarter net from prior the year. X.X% Consolidated million, $XX the at

our the $X.XX from per diluted an increase share diluted net On income of adjusted second net prior quarterly X.X% million, basis, share. year. year, quarter compared increase $XX of an $X.XX, per were prior into adjusted earnings translated translated of net to the $X.XX an to earnings This which

we out cash with cash quarter million $XX the from free Cash of closed flow million $XX were $XX million, the operations balance with on flows sheet. and of

As segment at second a look the from we quarter perspective.

the year, For an nutrients $XXX the of the business. prior increase of X% Human Nutrition million, driven segment & from quarter, higher by within and Health second our sales generated sales primarily minerals

segment Health favorable the year. mix sales, operations partially XX.X% driven costs, record by input and & Nutrition delivered million, an was the aforementioned by operating earnings from increase certain prior lower a of higher offset $XX Human Our expenses. compared quarterly of higher to manufacturing This

increase Second $XX this quarter of Nutrition operations. earnings XX.X%. strong with were operations were sales & pleased segment, performance earnings very from an the for record segment overall Human We delivering of our adjusted and from Health million,

see beverage strong business. demand in our We demand and normalized in and business our food continue minerals picture and a to more nutrients

Health lower & markets. in the a of decrease monogastric quarterly Animal The species Our $XX ruminant and generated of compared XX.X% sales prior sales Nutrition year. was both segment by driven to the decrease million, Health partially offset sales, $X prior decrease decrease a million, XX.X% lower The from Nutrition aforementioned of certain the earnings & year. the input of lower delivered to by from costs. operations was Animal primarily manufacturing primarily due

operations quarter for XX.X%. from segment Second decrease earnings adjusted a million, $X of this were

prices, half. We're along period the over feed segment, As has European earlier support a market recently of to the product year. XXXX a rumen-protected through competition relatively a earlier that More the U.S. market not from calls, milk recently, broader the dairy we've we of returned next-generation animal American milk be market has milk the shared the And demand than flooding launched demand show animal dairy period believe half will and improvement better We've gone yet nutrients. been tough North an improve. soft half last interest second additives to continued market. And as for milk Nutrition low-cost impacting second protein through demand our with Health our started expect levels, few and prices European also and protein have continues with the Animal further the in to and low economics stabilization shared first in quarters. a the modestly that we market we've of in going early imports rumen-protected the U.S. while seen a do & to feed healthy in market has demand pleased encapsulated

input an in earnings to by offset of the plant XX.X% of but aforementioned record primarily prior by expenses. prior sales supported of Specialty Performance due delivered quarterly sales also higher the Gases million, and $XX business $XX certain year, partially primarily increase Products Products lower million, year, costs, sales versus compared higher to driven delivered manufacturing operating sales. Specialty Our nutrition of segment operations an higher by from X.X% higher the increase the

increase second in with demand Products $XX growth the record and very Second from sales to earnings remain of expect for earnings and pleased from operations quarter, as from the both Specialty year quarter an perspective, performance of segment this progresses. a XX.X%. We're operations were the resulting margin adjusted million, healthy in

some another to back going the Balchem. the second over remarks. for overall, I'm quarter now was solid turn for quarter So to Ted closing call

with variety pleased morning. this financial Once the of again, level, an show very Thanks, results are in results market we to to Consolidated deliver earlier reported we ability solid continue conditions. Martin. a

will call products, up strong for long-term who hand and questions. position open will of I over portfolio remain our our the in market for company. Balchem confident Martin, the now to the Given outlook value-added a as we back Martin? call growth

were I And correction. non-GAAP have from Thank earnings should quick mentioned one said I just you, million. Ted. million, operations $XX $XX

forward. move just we So be that let corrected as

formal this the concludes now of portion for this At questions. the open conference will we up So the conference. point,

is Our Instructions] [Operator Sidoti first & question May with Company. from Kyle

new Ted, I Martin, on start that the congratulations to mentioned. a quarter. want Optifolin you the product, great with

maybe market or the curious should there? for the that about maybe Just think you revenue your about and generation product expectations if expand can talk and on how maybe we new potential opportunity

Yes. stages a It Swiss life our are developed of a Sure, innovation health ingredient Kyle. bioactive so cellular reduced a really have Optifolin+. [indiscernible], choline-enriched, supports life. about in -- at partnership science It's, we that all company. perspective, patented, from is excited that is with and We life, it's folate breakthrough which

great folic So enhanced active, basic in means that for unlike biologically use folic transport it's the a and acid, readily which available making body, replacement acid. for Optifolin+ it is

And market. so a really which here folic is the the market, huge market acid target is

to $X.X many about so a it that the in more probably very, we the better of our better unlike that And expensive total. very but opportunity product, product, in is is large billion penetrate not size other we market opportunity a with It's product. products in have have, obviously,

sliver using target of active replace to that's reduced a biologically a folic And here is so folate, the that acid. increase product to market market the

percentage $XX given kind that's realistic like of we is So market. X, opportunity to our the million a product but to we've that's opportunity X the view maybe is under we the of in that $XX of feel so large, the is million an launched that next course clubbing or And take that for goal of this so. And the market over opportunity, as size marketplace. new goal years this a

So we're excited it. about

thinking bit is improve This expand was continue more to My exciting. color of you can around is little area Any to the but of as you more is different next hit -- mentioned this? a help question better you input is understand, wondering an kind margins. peak? maybe about the of have then Is it this Or That's year, you're lower on. us I also, could if company? the factors, we back guys it kind there? efficiencies I out of you know squeeze and a several continue costs? And by half Excellent.

Yes.

Let me Kyle. that one, take

I return kind we've dollar, our up, margins back what for just perspective, and think bit step and exactly taking in a got that seen. and how a sort to sort of but a dollar got a from the we period. And percent we've got inflationary of expected as of materials deflationary little we into we come in margin as the talked saying period, going were squeezed first right, past, just we passing were through said about we what back and that they more that that's were raw squeezed

customers, We're it. necessarily ROCE now come but to So seen not back passing some of price XXX% we've down.

that margins. you customers. have right, coming down And seeing you ROCE a little timing in your things there, back So prior to a you're benefit of of uplift to bit passing

a you in boost a our get mix bit lag. That timing we of portfolio. in favorable So that little also from seen a have being said, margin that

a very within nutrients which doing our of doing and Human specialty products & segment a also our is Nutrition is relatively a the portfolio well, very, our from time, percentage down portfolio. And part moment. minerals higher margin being back obviously That coming while Nutrition at our tougher like we through of seeing a portfolio, & is part so is also well a mix our have part We We're that higher-margin very perspective. portfolio. supports Health a favorable lower don't margin Animal that margin Health of speaking, that going

the to moderation think give forward, in as some some As customers. we we move back rates our I deflation -- we see are this raw margin of we'll material

negative here gave in and in is us gave quarter, the for price quarter. in next continue I quarter. price back We back pricing price expect to give back to We So us. prior the some

little that moderate little that as bit, as come little see So will will they rate to overalls. are segment Nutrition ANH, we dilutive moderate a And a bit a also or Animal bit. the margins the back well will the

bit, at moderate little but I that's they think forward, going stabilize will historic above So a probably or at rates. something

can Is us That's the Excellent. last new year? second & one, mentioned else anything product great. you the that of launch Martin, about Nutrition there the had Health. in And you in Animal tell product half

to rumen-protected sort of come established amino positioned and it established introduced next-generation up very well with market in market is an We an today acid. There we to for an we're encapsulated Yes. as share already, there, product think that of we've gain do. sort a which

inventory ramp us. it in as ramping just and we up have the should here more start we'll then XXXX be the through we'll after in we it millions go half up cetera, production for of going it. started year. And be couple bit that harder sort significant So selling and of year But a as contribute of second a we little levels, the et and

is with H.C. Selvaraju from Ram Our next Wainright. question

again OptiFolin respect X with to things So there. just product, the

innovations you that many of Firstly, this can product of potential more I or that technology approach some And this to was the technological Optifolin? could power you're wondering come give a out additional how technological same if of you new if using that sense franchises confirm formulate use OptiMSM. you might us of platform

MSM, So only. but similarity it's name really there a there without name is in the in

external this as my we did technology mentioned, Kyle, would with in was I response a -- that the partner. is to So different. completely say there my And innovation an to I

choline innovation. with quite plays part this in of unique reduced this I of solubility is as important choline-enriched But issue an is the choline it an role said, important product, so It's, inherently plays an technology. which and And folate. other

where a that technology choline hydroscopic this in connection for and can opportunity aligned have be also the there. capability but which OptiMSM we with I applications, choline very no nature used to in leveraging but into think and to this is is of a leadership does an new it developed type used But So it, well do be for there's that it our this there problem franchises. feel in real this innovation to And technology. that being certain is really, position fact we're technology, that's benefit, additional case, unique the

It's Obviously, is Optifolin+ think, but that's ways I the product -- mean, the innovation on I actually could is, But Optifolin+. get enrichment away. first incorporating a choline been a the There this and using kind one. the there this others, let's shelves already of store that's launched. be

and that, about see goes. how this let's excited we're So one

brands the you of that us sense you key the to the developing now you've a space, time. franchises, out size one terms H&H the respect got you've a relative But shake important in with you're contributor got expect can been for Optifolin+. where Clearly, you've key to has an give then of And lengthy VitaCholine period now within those versus of others. KXVital, got OptiMSM,

us think contributors which just to you are significant give forward? maybe these a the of likely sense most of So be going

And question well. maybe a is for as Martin this

future think forward, individual go us you key start and we the reporting when granularity As in sales some perhaps break you these brands might to out periods? of do of more give

a just a billion So for Optifolin+ Albion as or of little $X.X the like Today, broader we market market our massive is them let I relative like acid bit The minerals just line so. Minerals large folic of me what brand relative largest first talked kind size. very is opportunity go that. to and about of

at largest massive our of away mineral us in significant because business, Minerals while have inorganic largest I chelated will our very to it continue that I very, our eat less bioavailable, opportunity our is market. business, mineral, to think the Albion minerals of a today, line be our we minerals ahead And so also that think future

So our broad would forward. because think KX have will of choline I its therapeutic business, going KX also think similar of The that similar addressable having and And very sizes. market choline say, maybe than position category are largest opportunity kind business I remain of the opportunities, I kind even the more benefit. market

while in franchise of, a category. XX choline of than today, KX therapeutic breadth the because would So size X, probably the years, think larger they're similar be I again, would our

VitaCholine, the the I to has where that's market Largest market So opportunities VitaCholine KX opportunity growth market and largest. sizes, and bigger or term. rank long Albion-branded be today, today same minerals would but products. a those continue chelated the

I be KX So #X expect that to would term. be and #X to long

Ram, terms And I them in think, of breaking out.

have at plans that in to Obviously, you of there's out exactly by competition the the We moment that. commercial do have terms don't brand no in sensitivity markets. knowing in and then some breaking and what

So plans no point. at this

in expect Okay. to the rate, effective additional lastly, is the if what on as to And And the I'm we you with quarter Martin, what of higher? half rate expect or second a year? this trend you with in like it look expect some reported effective if to the for respect should additional tax then it bit second you line tax for just to typical, granularity, again, be looking guidance

Yes. I I probably still And And to below I year-to-date. XX% sort I going closer it be said land and was between that, XX%. somewhere just we're to expecting the think to XX% to of mean we're previously XX%.

where this at based in in is a think the probably So on estimate bit a or we good minus point XX% plus are little year. I time

time. for at to questions I would further like Harris no to this hand Ted closing are over comments. floor There back any the Instructions] [Operator

really results to forward New X, be Global XXXX in call much again, joining hope City you participating October. some out Paul. so and look in your Annual QX the reporting thank In We so in we very Once H.C. Wainwright our appreciate will there. on York Investment September to Thanks, today. time, for and Conference Thanks we the you see meantime, of we much. our

conference. This today's concludes

participation. Thank for this your You lines may disconnect at time. your you