Balchem Corporation

Greetings and welcome to the BALCAM second quarter 2024 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 your host, Martin Bangston, Chief Financial Officer. Thank you, Martin. You may begin.

Thank you, and good morning, everyone. Thank you for joining our conference call this morning to discuss the results of Balcombe Corporation for the quarter ending June 30th, 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 counsel, auditors, and the SEC, 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 Bauchem'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 solid second quarter financial results with growth in sales, record earnings from operations, and record-adjusted EBITDA. I am particularly pleased with the excellent results within our human nutrition and health segment, which once again delivered strong sales growth and record earnings. In addition, I am very pleased with the strong results within our specialty product segment, which also delivered strong sales growth and record earnings. Our consolidated revenues of $234 million were higher by 1.2% versus the prior year. with the strong growth in human nutrition and health and specialty products being partially offset by a decline in animal nutrition and health. Our gross margin dollars grew 7.3%, and we expanded our gross margin percentage by 210 basis points to 35.5%. Earnings from operations of $46 million were higher by 6.9 percent versus the prior year quarter. And we delivered record quarterly adjusted EBITDA of $62 million, an increase of 5 percent with an adjusted EBITDA margin of 26.6 percent of sales, up 90 basis points from the prior year. Our second quarter net income of $32 million an increase of 6.5% resulted in earnings per share of 98 cents on a GAAP basis. On an adjusted basis, our second quarter non-GAAP net earnings of $36 million, an increase of 3.3% resulted in earnings per share of $1.09 on a non-GAAP basis. Cash flows from operations were $45 million for the second quarter of 2024, with quarterly free cash flow of $38 million. Overall, a solid quarter for Balcom 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 and what we are seeing. Over the last four quarters or so, we have seen a gradual stabilization of demand and customers returning to more normalized order patterns after the volatility we experienced in 2022 and the early part of 2023. 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 continue to see strong end consumer demand for our unique portfolio of minerals, nutrients, and vitamins, and steady demand for our food systems. Our animal nutrition and health segment is going through a challenging time, along with the broader animal feed additives market. We believe we have bottomed out here in the first half of 2024 and expect a modest improvement in the second half of 2024 compared to the first half on improving dairy economics and the early contribution from a new product launch. For our specialty product segment, the primary business is our performance gases business, which continues to perform well in a stable market, and we expect this to continue. From an overall Balchem perspective, I am very pleased with our market positions and value propositions, which have enabled us to maneuver through these volatile times over the last few years. In fact, this quarter represents the 20th consecutive quarter where Balchem has delivered quarterly year-over-year growth in adjusted EBITDA, despite all of the turmoil experienced in global markets over the last five years. That is quite an accomplishment, and I would like to take this opportunity to thank the entire Balchem team for their exceptional performance and contributions toward this significant achievement. Thank you all very much. Additionally, I am excited to share that in May of this year, Balchem launched a new product into the market, OptiFolin Plus, which is a patented, choline-enriched, bioactive reduced folate ingredient that supports cellular health at all stages of life. Optifolin Plus is biologically active, which means that it is readily available for transport and use in the human body and tissues, making Optifolin Plus an excellent choice to meet vitamin B9 recommended requirements. This product launch will add to our existing offering of minerals, nutrients, and vitamins, and enable us to bring even more value to our customers, while at the same time supporting our vision of making the world a healthier place. And with that, I'm now going to turn the call back over to Martin to go through the second quarter consolidated financial results for the company and the results for each of our business segments.