Balchem Corporation

Greetings and welcome to the Ball Chem Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Martin Benson, CFO. Thank you, Martin. You may begin.

Thank you. Good morning, everyone. Thank you for joining our conference call this morning to discuss the results of Ball Chem Corporation for the quarter ending September 30, 2023. My name is Martin Benson, Chief Financial Officer, and hosting this call with me is Ted Harris, our Chairman, President, and CEO. Following the advice of our Council, auditors, and the FCC, at this time, I would like to read our forward-looking statement. Statements made in today's calls that are not historical facts are considered forward-looking statements. We can give no assurance that the expectations reflected in forward-looking statements will prove correct, and various factors could cause actual results to differ materially from our expectations, including risks and factors identified in Ball Chem's most recent Form 10-K, 10-Q, and 8-K reports. The company assumes no obligation to update these forward-looking statements. Today's call and commentary include non-GAAP financial measures. Please refer to the reconciliation in our earnings release for further details. I will now turn the call over to Ted Harris, our Chairman, President, and CEO.

Thanks, Martin. Good morning, and welcome to our conference call. This morning, we reported solid third-quarter financial results with strong margins and higher profitability year over year despite softer sales volumes. Our revenues of $230 million were down .9% versus the prior year's very strong quarterly results. It is worth noting that the prior year's quarter was Ball Chem's strongest revenue quarter in its history, and as such, a challenging comparable from a revenue perspective. Gross margin grew 11.9%, and we expanded our gross margin percentage by 530 basis points to 33.3%. Earnings from operations of $44 million were up .7% versus the prior year quarter, and we delivered a record quarterly adjusted EBITDA of $60 million, an increase of .4% with an adjusted EBITDA margin of 26% of sales, up 400 basis points from the prior year. Our third-quarter net income of $29 million, an increase of 15.2%, resulted in earnings per share of 90 cents on a GAAP basis. On an adjusted basis, our third-quarter non-GAAP net earnings of $34 million, an increase of 4.3%, resulted in earnings per share of $1.04 on a non-GAAP basis. Cash flows from operations were $47 million for the third quarter of 2023, with record quarterly free cash flow of $38 million. Overall, another solid quarter for Balcom with performance that highlights the strength and resilience of our business model in a market environment that continues to be challenging. Before passing the call back to Martin to cover the financial results in more detail, I would like to take a few minutes to talk about the broader market conditions within which we are operating today, as well as update you on some of our key strategic initiatives. The global macroeconomic situation and the dynamics within our markets remain quite challenging. And while the de-stocking we experienced late last year and in the early part of this year is largely behind us, our customers are adjusting to changing consumer buying behaviors as a result of inflationary pressures on consumer spending, as well as the high level of uncertainty around the overall macroeconomic and geopolitical environment. While it is hard for us to predict the timing of when the broader markets will truly normalize and reset for continued growth, we do believe the underlying fundamentals of the market we serve will continue to allow for growth over time and that we are well positioned with our portfolio of products and solutions to deliver above market growth over the long term. We are pleased to report that our strategic initiatives in the human nutrition and health or H&H segment are progressing well. One area of focus is on increasing consumer awareness and driving market penetration through enhanced marketing and communication efforts. To begin, we have laid a strong marketing foundation to help build awareness and to make our ingredients more appealing to end consumers. This includes strengthening our brand positioning and modernizing and unifying our H&H portfolio's identity for brands such as Albion Minerals, Vitacoli, K2 Vital, and Opti MSM. Our goal is to expand brand recognition, enhance our premium positioning, and create consumer awareness campaigns that resonate with our target audience. Additionally, we have formed a new partnership with the American Nutrition Association or ANA to drive growth through increased consumer awareness. In 2024, ANA and BalCam will launch campaigns to educate consumers about the health benefits of choline and underappreciated nutrient. This partnership will involve creating evidence-based content to effectively communicate our shared goals. We believe that this collaboration with ANA, a nonprofit organization that promotes personalized nutrition, will complement our existing marketing initiatives and help expand the market size of choline. Ensuring quality and transparency in the supplement market is another key priority for us. We have implemented initiatives such as True Quality for K2 Vital and TRAX for Albion Minerals to demonstrate our commitment to excellence. These programs involve partnering with selected customers, retailers, and analytical labs to ensure that the supplements available in the market meet the highest quality standards either by identifying and removing counterfeited products from the market or via improving the quality of the current formulations to further enhance stability and consumer benefits. These efforts build trust in our product brands. Furthermore, we are focused on accelerating the cross-selling of our H&H portfolio. At the recent Supply Side West trade show in Las Vegas, we showcased innovative nutritional concepts that leverage our portfolio of minerals, nutrients, and food ingredients. By combining these elements, we aim to create synergies across categories in supplements, food, and beverages. For example, the combination of Albion chelated minerals and K2 Vital Delta offers manufacturers a competitive advantage by providing a patented and stable vitamin K2 formulation in the presence of minerals like magnesium, which is in high demand in the market. In addition to our marketing efforts, we continue to prioritize scientific research for our specialty nutrients. A recent study on OptiMSM, our premium organic sulfur compound known for its unmatched purity, safety, and consistency, demonstrated significant improvements in hair density and diameter. This study adds further support to the value proposition of Balchem's OptiMSM brand, which is widely used in products promoting healthy aging, joint support, and hair, skin, and nail care. Within our animal nutrition and health segment, we are proud to announce the publication of three new papers from a study conducted by Dr. Heather White's laboratory at the University of Wisconsin. These papers add to the existing body of research that highlights the benefits of feeding reassure to transition dairy cows, cows that are transitioning from their dry period through calving to the data showing that feeding reassure helps to not only enhance milk production, but also improve offspring health and growth. This research further strengthens the value proposition of Balchem's market-leading rumen protected coli, making it a recommended choice for all transition dairy cows, regardless of their health status or production level. Overall, we are making significant progress on our strategic initiatives, and we remain committed to driving consumer awareness, expanding market penetration, and delivering high-quality products in both the human nutrition and health and animal nutrition and health segments. In the quarter, we also continue to advance our sustainability efforts and make progress on our higher purpose of making the world a healthier place. As reported on previous calls, over the last several years, we have achieved noteworthy -over-year reductions in both our Scope 1 and Scope 2 greenhouse gas emissions. In the third quarter of this year, we were very proud to have successfully completed our first ever public disclosure to CDP climate. This milestone in our sustainability journey underscores our commitment to transparency. We are preparing to report our Scope 3 emissions in 2024 alongside our Scope 1 and 2 emissions that we have been reporting for a number of years. Additionally, in the quarter, Valchem's Board of Directors was very pleased to elect two new board members to the Board of Directors to replace two long-tenured board members who retired from the Valchem board after reaching our mandatory retirement age. Olivier Rigaud, Chief Executive Officer of Corbion N.V., a global food and biochemicals company based in the Netherlands, and Monica Vicente, Senior Vice President and Chief Financial Officer of Fresh Del Monte Produce Inc., a global agricultural and fresh food produce company based in the United States, were elected to the board on September 6. Mr. Rigaud and Ms. Vicente each bring relevant market experience and expertise and strong global business acumen to the board. We are excited to have them both on the Valchem board and look forward to their contributions over the years to come. And with that, I will now turn the call back over to Martin to go through the financial results in more detail.

Martin? Thank you, Ted. As Ted mentioned, overall, the third quarter was another solid quarter for Valchem. The strong margin rate performance from gross margin, earnings from operations, and adjusted EBITDA, we're encouraging to see and in line with our expectations that we would be able to restore our margin profile to more normalized levels following the margin contraction we saw during the highly inflationary period we experienced in the prior year. Our third quarter net sales of $230 million were .9% below prior year, primarily driven by lower volumes as end market demand has continued to be volatile. And we're yet to see a more broad-based recovery across our segments. Our third quarter gross margin dollars of $77 million were up $8 million, or .9% compared to the prior year. Our gross margin percent was .3% of sales, up 530 basis points compared to 28% in the prior year. The significant improvement in margin was primarily driven by favorable mix and lower manufacturing input costs. Consolidated operating expenses for the third quarter were $33 million, as compared to $35 in the prior year. The decrease was primarily due to favorable adjustments to transaction costs and lower integration related expenses, offset partially by a restructuring related impairment charge and higher compensation related expenses. Gap earnings from operations for the third quarter were $44 million, an increase of $10 million, or .7% compared to the prior year quarter. On an adjusted basis, as detailed in our earnings release this morning, non-gap earnings from operations of $45 million were up .3% compared to the prior year quarter. Adjusted EBITDA of $60 million was $6 million, or .4% above the third quarter of 2022, with an adjusted EBITDA margin rate of 26%. Interest expense for the third quarter was $7 million, an increase of $3 million compared to the prior year. This increase in interest expense is driven by the significantly higher interest rate environment. We continued to use our solid cash flows to pay down debt, and we reduced our debt by $25 million in the third quarter and ended the quarter with net debt of $304 million, with an overall leverage ratio on a net debt basis of 1.3 times. Our company's effective tax rates for the third quarters of 2023 and 2022 were .3% and .8% respectively. And consolidated net income closed the quarter at $29 million, up .2% from the prior year. This quarterly net income translated into diluted net earnings per share of 90 cents, an increase of 12 cents compared to the prior year. Our third quarter adjusted net earnings were $34 million, an increase of .3% from the prior year, which translated to $1.04 per diluted share. Cash flows from operations were $47 million, an increase of $5 million, or 11.8%, and we were particularly pleased with delivering record free cash flow of $38 million in the quarter as we continue to translate our earnings into cash. As we look at the quarter from a segment perspective, for the third quarter our human nutrition and health segment generated sales of $144 million, an increase of .3% from the prior year. The increase was driven by higher sales within the minerals and nutrients business, the incremental contribution of two months of the Bergstrom acquisition since we acquired it in late August of 2022, and a favorable impact related to changes in foreign currency exchange rates, partially offset by lower sales within food and beverage markets. Our human nutrition and health segment delivered quarterly earnings from operations of $31 million, an increase of .9% compared to the prior year. This was driven by the aforementioned higher sales, favorable mix, lower manufacturing input costs, and favorable adjustments to transaction costs, partially offset by restructuring related impairment charge. Third quarter adjusted earnings from operations for this segment were $36 million, an increase of $7 million, or 26.1%. We were very pleased with the overall performance of our human nutrition and health segment in the third quarter. With de-stocking behind us within H&H, the overall demand picture seems to be normalizing. The acquisitions we made last year are contributing nicely, the minerals and nutrients business has returned to growth, and the food and beverage business appears to be stabilizing despite inflationary-driven shifts in consumer buying behaviors. While volatility and uncertainty remain, we're encouraged by the -over-year top and bottom growth in our human nutrition and health segment, as well as the sequential improvement. Sequentially compared to the second quarter of 2023, sales for Balakamp's human nutrition and health segment were up 6.5%. Our animal nutrition and health segment generated quarterly sales of $54 million, a decrease of .8% compared to the prior year, driven by lower sales in both the ruminant and monogastric species markets, partially offset by a favorable impact related to changes in foreign currency exchange rates. Animal nutrition and health delivered earnings from operations of $5 million, a decrease of .9% from the prior year, primarily due to the aforementioned lower sales, partially offset by a decrease in manufacturing input costs. Third quarter adjusted earnings from operations for this segment were $5 million, a decrease of 38.2%. Similar to what we discussed in our Q2 earnings call, our animal nutrition and health segment is experiencing challenging market conditions, particularly in Europe, but also increasingly in the North American dairy market. The European animal feed market continues to show market demand softness and also increased competition from low-cost Chinese products. Additionally, recent decreases in US milk and milk protein prices have further challenged the US dairy industry, impacting demand for our ruminant-protected encapsulated nutrients in North America. We continue to believe that the animal protein markets provide significant growth opportunity for Balakamp over the longer term, but they remain very challenging markets at the moment. Looking forward, as input costs come down and the domestic Chinese market strengthens, we do expect to see our European monogastric business normalize, but this may take some time. Regarding our ruminant business, we anticipate that over the course of the remaining months of 2023 and the early part of 2024, dairy farm margins in the US will improve as a result of the lower feed costs and higher milk prices, and the overall US dairy market conditions will improve, enabling a return to growth of our ruminant business in the near term. Our specialty product segment delivered quarterly sales of $30 million, an increase of .2% compared to the prior year due to higher sales in the plant nutrition business and a favorable impact related to changes in foreign currency exchange rates, partially offset by lower sales in the performance gases business. Specially products delivered earnings from operations of $9 million, an increase of 23% versus the prior year, primarily driven by higher average selling prices and lower manufacturing input costs. Third quarter adjusted earnings from operations for this segment were $10 million, an increase of 21.1%. We were pleased with the performance of specialty products in the quarter, as improved margins on modest sales growth delivered strong earnings growth. While volumes continued to be challenged in the quarter as a result of ongoing de-stocking in the medical device markets, as well as customers taking down time to upgrade their emissions control systems in anticipation of updated environmental regulations, the overall market conditions further stabilized as the quarter progressed. We were very pleased with our ability to drive earnings growth within specialty products in this environment, and we believe we are well positioned to benefit as volumes fully normalized. So overall, the third quarter was another solid quarter for Balkem with sales and earnings growth in two out of our three reporting segments in a challenging market environment. I'm now going to turn the call back over to Ted for some closing remarks.

Thanks Martin. We are pleased with the solid financial results reported earlier this morning with significant improvement in margin performance leading to record adjusted EBITDA for the quarter, particularly in light of the strength of the prior year's comparable quarter and the continued economic and geopolitical uncertainties we are facing in the marketplace. We continue to show an ability to deliver results in a variety of market conditions, and we remain confident in the long-term growth outlook for our markets and for Balkem as a company. Now I'd like to hand the call back over to Martin to open up the call for questions. Martin?

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

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from Bob Leibich with CDS Securities. Please proceed with your question.

Good morning. Congratulations on some solid performance, and thanks for taking our questions.

Thank you, Bob.

Thanks, Bob. I wanted to start with A&H and following up on Martin's comments you just made there. Maybe if you could break it down a little bit further. It sounds like the European feed situation has two headwinds between demand there from the farmers and then also competition from Chinese imports. Maybe give us a sense of how that's flowing. Then overall talk about the level has dropped to 54 million. You haven't seen since early 2021. How do you see sales recovering going forward? Maybe just break down Europe first, please.

Bob, thanks for the question. I'll give it a shot and Martin you can chime in to add some color. I do think it is worth noting just out of the gates that 2022 was quite a strong year for A&H. We grew revenues about 16% and profits up almost 30%. We're coming off of a very strong year. Having said that, we're clearly experiencing some real challenges in our A&H business. Really starting with the European situation. I guess to put it into context, our European monogastric business is about 20% of our A&H business. It's on the smaller side of the geographies. We are experiencing both lower demand driven I think certainly in part by the economic situation in Europe with high energy costs, high commodity costs. There's just the feed market generally speaking is down in Europe and that's driving lower demand for us. We do see that stabilizing and starting to come back a little bit. I think Q3 was a little bit better than Q2 from a volume perspective. We expect Q4 to be a little bit better than Q3. We do see as energy costs have come down, some commodity costs have come down, that volumes are starting to pick back up a little bit which is encouraging. As you noted, the other part of the equation is the increased competition from imports That's being driven by certainly the low demand that is occurring in the Chinese marketplace and not enough demand to soak up their capacity. It is moving offshore and that's impacting us. As we said, believe that as demand picks up in Europe a little bit, as the economy and China picks up as well, that we should see some easing of that situation in Europe. But again, it is a challenging environment and it may take some time for that to fully recover. But we do feel like it's stabilizing where it is which at least is the first step that you need to see. The ruminant situation is quite different. I think there is a little bit of timing associated with this quarter versus the quarter last year that was particularly strong as well as Q2 that was quite healthy. So there is a timing element to Q3 of this year. But also milk prices have really come down significantly, milk protein prices as well in the US market and that's just having an impact overall on the market. But we see this as a much shorter period of kind of depressed demand and that over the course of the next three to four months we should see demand to pick back up somewhat as commodity costs decline in this country. The farm margins improve and the appetite to add supplements to feed increases. So we do see the ruminant business in the US turning around in the near term. We also are excited about several new innovations, one of which we should bring to market in the coming three to four months that will give some tailwind to sales as well with a new product on the marketplace. So ruminant certainly is a shorter term issue that we're facing. The European situation is a little bit longer term. And I guess it's also important to note

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percent of the business is the North American monogastric business and that actually is performing quite well. That includes our companion animal business and our poultry and swine business. So two issues that we're focused on, European monogastric and the global ruminant business with global ruminant turning around we believe in the near term.

OK, super. Thank you so much for that color. And then just was, you know, obviously happy to hear you discuss, you know, more about raising awareness for Colleen and your other products. And maybe you could dig in a little bit more about the investment next year you plan on making with ANA. How does it impact the P&L? How do you measure success for it? You know, what should we expect to see out there, if anything?

We're really excited about the broad program of building awareness that we've been talking about a little bit over the last few quarters on the calls, but working very hard behind the scenes. We have a great marketing team that is really helping us drive increased awareness and ultimately increased penetration in the marketplace. The ANA partnership is really only one part of that, but we really think that they are a high quality nonprofit organization that can help us deliver sort of quality content to consumers, maybe like we've struggled to do in the past and address that gap that we've had in our communication with consumers. But it comes more broadly than just the partnership with ANA. We talked a little bit about something I'm very excited about is these efforts on our part to identify products that aren't what they are represented to be in the marketplace. And we've had some very good success in working with our customers and retailers, as well as other industry associations, to identify these products in the marketplace as essentially counterfeit products or not having the mineral or vitamin or nutrient content that they claim to have. And we've been identifying those, bringing those to the attention of the retailers, having them taken off the marketplace. And what that does is, a couple things for us, it certainly strengthens our value proposition of bringing high quality trusted products to the marketplace, but also eliminates some of those products from the sales of those retailers and allows our product to shine more brightly, which has been encouraging. So overall, we're really pleased with this effort. Ultimately, we're going to see from it higher sales. We're going to be able to talk about higher penetration rates. We ultimately should be able to see it in Nielsen data around the consumer purchases of our products and those growth rates. And we should be able to report out on those kinds of numbers and facts over time, which really is what all of this is about and what we're trying to drive.

OK, super. Thanks for that, Coller. I'll jump back in queue. OK.

Thanks so much, Bob.

Thank you. Our next question comes from the line of Tony Polak with Aegis Capital. Please proceed with your question.

Yeah, I was wondering if you could go over the interest in other expense item, which significantly increased. Is that mostly for interest from this K acquisition or is that other expenses also?

Tony, this is Martin. It's really driven by the interest expense on the debt. So if we think about the interest rate environment, we are essentially fully variable from an interest rate perspective. So we pay a sulfur index rate plus a spread. And that has gone from, you know, where were we a year ago, maybe down at two percent, two and a half percent. And now there's an effective rate of six and a half. So it's really that change in the interest rate applied to our debt. Now, we we keep reducing our debt. So, you know, we're down to three hundred eighty million or so of outstanding debt. So we continue to pay that down at a fairly rapid clip. But the increase in the interest rate has more than offset that. And that is really the change in the interest expense.

And is there anything new on the autism drug scenario?

Tony, there really is no new headline to talk about. And we certainly will address that proactively and in future earning calls as there are changes or things to update. But that doesn't mean to say that there hasn't been a whole lot of progress and work done behind the scenes. We have, as we have talked about in the past, moved our manufacturing to a new contract manufacturer. That's taken us well over a year to do. But that is now complete. We have completed all of the kind of engineering batches and and stability batches that needed to be completed in order to file the BLA with FDA. And so from Balcom's perspective, we've been working very hard behind the scenes to get all of that done to both support the submission of the BLA as well as to ultimately support any market launch that there could be over the course of the next year or so. We do believe and what we're hearing from the team at Puremark is they are feverishly working on finalizing the BLA for submittal to FDA. And while there's only a couple of months left in the year, our expectation was that that would be filed this year. And then it would be in the hands of FDA. Obviously, this is completely out of our control and that could leak in the next year. But we do know that they're working very hard and we're on, you know, every other week calls with them to make sure there's nothing more that we can provide. And there isn't at this point in time. And just to see how things are going. And we know that they're working very hard on that. So that's encouraging. But nothing headline worthy that we would have talked about such as submittal of the BLA. When that happens, we'll certainly let everybody know. And of course, the biggest milestone being, you know, ultimate approval of the BLA. So that's where we are on that, Tony.

Thank you. OK.

Thanks. Thank you. Our next question comes from Kyle May with SODOTI. Please proceed with your question.

Hi. Good morning, everyone. Hey, Kyle. Welcome to the team. Hey, appreciate it, Ted. Looking forward to getting to know the story even better than I already do. But one thing that I really wanted to come back to, you had a really strong quarter from the human nutrition and health segment. You know, Ted, you talk about several strategic initiatives. And I was wondering if you could clarify if these initiatives already are starting to contribute to the growth that we saw in the third quarter or if this is something that is just going to further strengthen the business.

No, I think that it is more something that will strengthen the business going forward. But there's no question we're seeing some of it now. I think that we can't give much credit to those initiatives for the strong human nutrition health quarter that we had. But there is some in there. And we are really seeing the value of our portfolio paying off. And what I mean by that is when our sales reps are visiting our key customers and maybe our legacy customers who are buying choline or maybe our chelated minerals that we added to the portfolio in 2016, they're also having opportunities to talk about MSM and K2 and K2 Delta. And opportunities are coming from that and sales are coming from those opportunities. So part of the expectation of adding some of these products to our portfolio was Synergy and we are seeing some of those materialize. I think it's early days, but we'll start to see that ramp up. And I think these broader marketing and science initiatives that we have will just further accelerate over time. We are really excited about the portfolio. Our whole team is out. Unfortunately, I can't be there because of this call, but it's the supply side west in Las Vegas. And we're really spending this trade show, which is really the premier supplement trade show. We're really focused on the synergies across our portfolio. And it's not just the minerals, nutrients and vitamins, but it's also the food and beverage system formulation expertise that we have. And all the feedback from the team out there, it's gone really well. So more to come on all of this. I think it's helping a little bit right now, but we'll contribute more as time passes.

Got it. That's helpful. And then maybe a big picture question. I know you and Martin both kind of touched on some of the uncertainty in the market, but just wondering if you can maybe expand on that and give us a sense of kind of what you're seeing now from a macro perspective and how that translates as we look ahead to 2024.

I think that we use the word uncertainty because I think it is a good descriptor of what's going on. We went through this phase of de-stocking as we talked about late last year, the early part of this year that really resulted from the very high demand during the pandemic that slowed the supply chain issues that eased, resulting in most customers having excess inventory for normal demand levels to now a period where I think those inventory levels have normalized, but there is kind of uncertainty around soft landing, hard landing, what will demand really look like in the coming three months, six months that's causing customers generally speaking to keep I think lower levels of inventory, managing their cash and controlling what they can control now that they have assurance of their supply chains. They know they can get products within regular normal lead times and so they're hunkering down a little bit because of the uncertainty of the recessionary environment that we're in or nearing or that's right around the corner. And of course then the geopolitical uncertainties on top of that. That's really what we're talking about, that there just seems to be a heightened amount of uncertainty as to what future demand will look like. Having said that, in our human nutrition and health business, we were really pleased to see that our minerals and nutrients business returned to real year over year growth in the quarter. Our nutrition business was up organically four or five percent in the quarter after having been organically down for a few quarters. So that business is stabilizing. Our food and beverage business was still down a little bit year over year, but less so than it was in Q2. And so we see a sequential improvement in that. And so we do see some stabilizing, if you will, going on in this still uncertain environment. And so we were really encouraged by the performance of the human nutrition and health business. Obviously, we have a couple of clear challenges that we're facing in the A&H business, but I think the human nutrition and health business shows signs of stability and kind of getting past at least some of the uncertainties.

Great. That's helpful and I appreciate the overview. One more question for me. Just as we think about maybe the strategy or the environment for acquisitions, the last deal was completed in August of last year. Obviously, you can't tell us about anything that's going on behind the scenes, but just curious if you can give us a sense of maybe the landscape or the environment for M&A activity.

We still remain active, at least internally, from an M&A perspective. We feel like our leverage is conservative and at a healthy position, so we can make additional acquisitions. But having said that, the market is relatively slow from an M&A perspective. The activity has not gotten back to a more normalized – we keep using that word – but even the M&A market, I would say, is not normal today and hasn't gotten back to a more normalized level. So, there are fewer deals today than we normally see, so that creates some barriers. Then, of course, with interest rates being high, that does change the math around valuations and so forth. We continue to have a healthy portfolio of opportunities that we've identified, that we continue to work, but it is a little bit of a slower environment. That's going to likely impact the timing of the next acquisition that makes sense from a strategic and value perspective for BalCamp.

All right, great. Appreciate the time this morning.

Thanks so much, Kyle. Again, welcome to the team.

Thank you. There are no further questions at this time. I would like to turn the floor back over to Ted Harris for closing remarks.

Thank you, Alicia. I would just like to thank everybody for your time today. We really appreciate your support, as well as the time you spent on the call today. We look forward to reporting our Q4 2023 results. That seems like a long time away, but late February of next year. In the meantime, we will be participating at the Baird Global Industrial Conference in Chicago on November 7th, and we certainly hope to see some of you there. So, with that, we'll end the call, and thank you again for joining us today.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.