Balchem Corporation

Greetings and welcome to the BALCAM Corporation first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A 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. I would now like to turn the conference over to your host, Mr. Martin Bankson, Chief Financial Officer for BALCAM Corporation. Thank you, sir. You may begin.

Good morning, everyone. Thank you for joining our conference call this morning to discuss the results of Balcon Corporation for the quarter ending March 31st, 2024. My name is Martin Bengtsson, 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 SEC, at this time, I would like to read our forward-looking statement. Statements made in today's call 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 Balkan'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 also include non-GAAP financial measures. Please refer to the reconciliations 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 strong first quarter financial results with record sales and adjusted EBITDA and strong margins driven by a favorable product mix. I am particularly pleased with the excellent results within our human nutrition and health segment, which once again delivered strong growth and record sales and earnings. Our consolidated revenues of $240 million were higher by 3.1% versus the prior year. Gross margin grew 11.4%, and we expanded our gross margin percentage by 255 basis points to 34%. Earnings from operations of $42 million were higher by 21.1% versus the prior year quarter. And we delivered record quarterly adjusted EBITDA of $61 million, an increase of 8% with an adjusted EBITDA margin of 25.4% of sales, up 113 basis points from the prior year. Our first quarter net income of $29 million, an increase of 27.6%, resulted in earnings per share of 89 cents on a GAAP basis. On an adjusted basis, our first quarter non-GAAP net earnings of $34 million, an increase of 9.8%, resulted in earnings per share of $1.03 on a non-GAAP basis. Cash flows from operations were $33 million for the first quarter of 2024, with quarterly free cash flow of $27 million. Overall, a strong quarter for Balchem with performance that highlights the strength and resilience of our business model. Before passing the call back to Martin to cover the financial results in more detail, I would like to make a few comments about the overall market environment, provide a brief update on our progress around sustainability, as disclosed in our recently published 2023 sustainability report, and share some progress we are making on the marketing front to drive increased awareness for Vitacoline, Valchem's market leading brand of the essential nutrient choline. The current market environment continues to be dynamic. and circumstances vary greatly across our portfolio. As discussed on earlier calls, we experienced destocking in the early part of 2023 with customers adjusting their inventory levels down as supply chains became more reliable and the demand outlook became more uncertain. Since then, we have seen a gradual stabilization of demand patterns and customers returning to more normalized order patterns. When we look across our portfolio of businesses, we are seeing excellent performance in our human nutrition and health segment, led by our minerals and nutrients business, where we are seeing very strong end consumer demand for our unique portfolio of minerals, nutrients, and vitamins. Our human food solutions businesses return to more normalized order patterns, also contributed nicely to the overall growth of the H&H segment. Our animal nutrition and health segment is going through a challenging time from a market perspective. We have discussed earlier how our European feed grade choline business has been negatively impacted by low-cost product flooding the market, and we expect this to continue for some time. We are looking into this unfair pricing behavior in an effort to understand if there could be potential for anti-dumping or other tariff relief. Also, the dairy economics impacting our animal ruminant business is going through a tougher cycle with reducing but still elevated feed costs and low milk protein prices. While this is currently having a negative impact, we believe this to be more short-term in nature and we expect this market to recover gradually. For our specialty product segment, the primary business is our performance gases business which continues to perform well in a stable market. From an overall Balcam perspective, I am pleased with how we have managed through this dynamic environment. Our market positions and value propositions in the various markets we serve have enabled us to maneuver through these volatile times, and it has highlighted the strength of our overall portfolio mix and our ability to drive above-market growth over time. As we continue to drive growth, we are guided by our core values and our vision of making the world a healthier place. Supporting this is our dedication to corporate social responsibility. Last month on Earth Day, we published our 2023 sustainability report, and I'm very pleased with the progress Valchem continues to make in advancing our sustainability efforts. In 2023, Valchem exceeded our 2030 greenhouse goal gas absolute emissions reduction goal of 25% as we achieved a 32% improvement over our 2020 baseline. And we remain on track to achieve our commitment to reduce water usage by 25%. In 2023, Balchem reduced its water withdrawal by 8% compared to our 2020 baseline. In this latest report, we also disclosed our Scope 3 emissions for the first time and shared our internal assessment that determined that more than 70% of our product line revenues directly support three out of the 17 United Nations Sustainable Development Goals, or SDGs. SDG 2, zero hunger, SDG 3, good health and well-being, and SDG 12, responsible consumption and production. Our performance towards our 2030 goals and our broad progress on all of our other initiatives shows our commitment to our two main objectives, providing innovative solutions for the health and nutritional needs of the world and operating with excellence as strong stewards of our people, communities, and shareholders. Additionally, as I mentioned earlier, I would like to share with you some progress we are making on building consumer awareness for some of our market-leading brands of vitamins, minerals, and essential nutrients. Yesterday, we were excited to announce that Vitacoline, Valchem's market-leading brand of the essential nutrient choline, has become a proud partner of the New York Jets, a major professional NFL sports team. This is the first sponsorship for Vitacoline and the first sponsorship in the nutritional ingredient category for the Jets. The partnership will help Vitacoline reach a large and health-conscious audience and promote its message of improving well-being of body and mind. Vitacholine is a nutrient that supports both mental and physical performance by enhancing memory, accuracy, and muscle control. Raising awareness of the benefits and accessibility of vitacholine is an important aspect of the JETS partnership. To that end, vitacholine will become the presenting partner of the JETS official website, newyorkjets.com, receiving prominent branding at the top of each page on the site. Mighty choline will also have significant presence at MetLife Stadium with impactful exposure on stadium signage. Choline's crucial role in pregnancy has been well established by experts for many years. Now, with emerging clinical evidence showcasing its positive effects on adult mental performance and physical wellness, It's an ideal time to embark on this dynamic partnership with the New York Jets. We are excited about this opportunity to drive increased awareness. We are very pleased with the early response from our customers who manufacture and market the supplements, nutritional beverages, and fortified foods that contain our viticholine to this unique partnership as they clearly see and value the opportunity for increased awareness for viticholine. We look forward to sharing progress with you over the coming quarters on this advancement in our marketing efforts to drive market penetration for Vitacoline. And with that, I'm now going to turn the call back over to Martin to go through the first quarter consolidated financial results for the company and the results for each of our business segments. Martin?