Balchem Corporation

Greetings and welcome to Balchem's fourth quarter and full year 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. Please note that this conference is being recorded. I will now turn the conference over to our host, Martin Bengtsson, Chief Financial Officer. Thank you, sir. You may begin.

Thank you. Good morning, everyone. Thank you for joining our conference call this morning to discuss the results of Baltham Corporation for the quarter ending December 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 , and 8K 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 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. We were very pleased with the financial results for the fourth quarter of 2024. which capped off another strong year for Balcam. We delivered record fourth quarter consolidated sales, adjusted EBITDA, and adjusted net earnings, with year-over-year sales and earnings growth in all three of our reporting segments. I am particularly pleased with the ongoing strength in our human nutrition and health and specialty product segments, both of which achieved record fourth quarter sales and earnings from operations, as well as the significant sequential improvement and modest year-over-year growth delivered in our animal nutrition and health segment. Before we get into more detail on the quarter, I would like to reflect for a few minutes on some of the significant accomplishments the Balchem team achieved over the past year. Overall, 2024 was another strong year for Balchem. We achieved record full-year sales of $954 million, growing 3.4% compared to the prior year, with strong sales and earnings growth in both the human nutrition and health and specialty product segments. We also delivered record earnings from operations of $183 million, an increase of 14.9%, and record adjusted EBITDA of $250 million, an increase of 8.4% from the prior year. In addition, We generated strong free cash flow of $147 million, allowing us to further pay down our debt and reduce our leverage ratio on a net debt basis to 0.6 times. We also made very good progress on our strategic initiatives. We have continued to innovate and launch new or enhanced products to support our growth. Our human nutrition and health segment brought three innovative new products to market. The first is K2 Vital Delta Fermented, which is a specialty vitamin K2 from fermentation in a patented microencapsulated form. The second is Vitacholine Proflow, which is an enhanced formulation of our existing Vitacholine specifically designed for inclusion in multivitamins. And the third is OptiFolin Plus, which is a patented choline-enriched bioactive reduced folate ingredient that supports cellular health at all stages of life. These product launches will add to our existing offering of minerals, nutrients, and vitamins and enable us to bring even more value to our customers while simultaneously supporting our vision of making the world a healthier place. Our animal nutrition and health segment also launched a newly developed product, AminoSure XL, which is a next-generation rumen-protected precision-release lysine designed to consistently, reliably and economically meet the lysine amino acid requirements of lactating dairy cattle. AminoSure XL offers leading performance when considering feed stability, lysine content, and bioavailability, and is a great addition to the animal nutrition health segment's portfolio of high-performing encapsulated products focused on optimizing dairy cow productivity and sustainability. We have also made progress on building consumer awareness for some of our market-leading brands. Vitacoline, Valchem's market-leading brand of the essential nutrient choline, became a proud partner of the New York Jets, a major professional NFL sports team. And K2 Vital, Valchem's market-leading brand of the specialty vitamin K2, just recently partnered with the Bayern Munich women's soccer team to further drive awareness and increase focus on women's health. These partnerships, in addition to our increased social media presence, is indeed helping to build awareness and drive market penetration for our brands. We also made significant progress in 2024 on our 2030 sustainability goals to reduce both greenhouse gas emissions and water usage by 25%. We were extremely pleased to report out in our sixth annual sustainability report that we are already tracking ahead of our 2030 goal on greenhouse gas emissions reductions. In 2024, Valchem successfully reduced water withdrawal by approximately 15% compared to our 2020 baseline, showing substantial progress toward our water usage reduction objective. We also completed in August of last year several important capital projects that collectively were designed to allow us to reach our water usage goal within the next year or so, well in advance of the 2030 goal. Valchem's approach remains unchanged as we continue to focus on our two main objectives, providing innovative solutions for the health and nutritional needs of the world and, at the same time, operating with excellence as strong stewards of our stakeholders. And lastly, in December, we announced another increase to our annual dividends, taking the dividend from 79 to 87 cents per share, a 10% increase year over year. This most recent increase marked the 16th consecutive year of double-digit growth of our dividend, which once again reinforced our commitment to our long-standing dividend strategy. All in all, another strong year, both financially and strategically, for Balcom. Now, regarding the fourth quarter of 2024. This morning, we reported record fourth quarter consolidated revenues of $240 million, which was 4.9% higher than the prior year quarter. Gap earnings from operations for the fourth quarter were higher by 23.8% versus the prior year. And we delivered record quarterly adjusted EBITDA of $63 million, an increase of 13.4% with an adjusted EBITDA margin of 26.2%, up 200 basis points from the prior year. Consolidated net income closed the quarter at $34 million, an increase of 26%. This quarterly net income translated to diluted net earnings per share of $1.03 on a GAAP basis, up 21 cents or 25.6% compared to the prior year. On an adjusted basis, our record fourth quarter adjusted net earnings were $37 million, an increase of 19.3% from the prior year, which translated to $1.13 per diluted share. Overall, another very strong quarter for Balcom, which, as I said earlier, capped off another strong year for us. I am now going to turn the call back over to Martin to go through the fourth quarter consolidated financial results for the company and the results for each of our business segments in a little more detail.