Balchem Corporation

Hello and thank you for standing by. My name is Tiffany and I will be your conference operator today. At this time, I would like to welcome everyone to Ballchem's fourth quarter full year 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, Simply press star, then the number one on your telephone keypad. I would now like to turn the call over to Martin Bankson, Chief Financial Officer. Martin, please go ahead.

Thank you, and good morning, everyone. Thank you for joining our conference call this morning to discuss the results of Valchem Corporation for the quarter ending December 31st, 2025. My name is Martin Bankson. 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 Balchem's most recent Form 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 reconciliations in our earnings release for further details. I will now turn the call over to Ted Harris, our Chairman, President and CEO.

Thank you, Martin. Good morning and welcome to our conference call. We were very pleased with the financial results reported earlier this morning for the fourth quarter of 2025, which capped off another very strong year for Balcon. We delivered record fourth quarter consolidated sales, adjusted EBITDA, and adjusted net earnings. And I was particularly pleased that we delivered solid year-over-year sales and earnings growth in each of our three reporting segments. 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 Valchem team achieved over the past year. Overall, 2025 was another excellent year for Valchem. For the full year of 2025, we delivered record sales of $1 billion and $37 million, growing 8.8% compared to the prior year and passing the $1 billion mark for the first time. And all three of our reporting segments contributed nicely to the strong growth of the company. We also delivered record earnings from operations of $209 million, an increase of 14.4%, and record adjusted EBITDA of $275 million, an increase of 9.8% from the prior year. In addition, we generated record free cash flow for the year of $174 million, while investing $43 million in capital projects to support our continued growth, allowing us to further pay down our debt and reduce our leverage ratio on a net debt basis to 0.3 times. Financially, a very strong year, capped off with an excellent fourth quarter and a continuation of Valchem's consistency and performance. Q4 was our 26th consecutive quarter of year-over-year adjusted EBITDA growth. Throughout 2025, each of our business segments delivered solid growth on both the top and bottom lines each and every quarter. This consistency is a testament to our strategic focus the excellent execution by our teams, and the resilience of our business model. 2025 turned out to be another eventful year from a macroeconomic and geopolitical perspective. We navigated a dynamic global trade and tariff environment in a disciplined and proactive way. In our intra-regional manufacturing and sales model, with approximately 85% of products sold in the same region they are made, our global supply chain with minimal reliance on China Our robust U.S. manufacturing footprint combined with our strong market positions have enabled us to maneuver through the current situation successfully. We offset tariff impacts through a combination of alternate supply chain options and pricing actions, and we have remained nimble as conditions evolved. At the same time, we have continued to invest in and advance our strategic growth priorities that will support our future success. We made meaningful progress expanding our sales and marketing reach, both domestically and internationally. And in 2025, more than half of our sales growth came from markets outside the United States. Our marketing partnership with the New York Jets around our Vitacoline brand and our partnership with Bayern Munich women's soccer team around our K2 Vital brand have both been successful initiatives in our human nutrition and health segment. while our real science exchange platform in the animal nutrition and health segment continued to grow as an industry information and technology resource supported by clinical studies in various stages of completion. Podcasts and symposiums across major streaming platforms and was just recently recognized as the number one animal nutrition podcast by a million podcasts. We also significantly advanced our scientific and clinical research pipeline. We continue to invest in the science behind brands such as Vitacoline, K2 Vital, Upti MSM, and Albion Minerals. And our current pipeline includes over 20 active clinical studies. Additionally, we continue to make progress on our 2030 sustainability goals to reduce both greenhouse gas emissions and water usage by 25%. Compared to our 2020 baseline, We have successfully reduced greenhouse gas emissions by approximately 31%, surpassing our 2030 goal. And we have reduced water withdrawal by approximately 16%, showing substantial progress toward our water usage reduction objective. We also continue to invest in our future growth while returning capital to shareholders. We made important and significant new investments in plant and equipment in 2025, resulting in capacity additions for our human nutrition, animal nutrition, and plant nutrition businesses. Of particular note was the commencement of the construction process for our state-of-the-art food ingredient and nutraceutical microencapsulation manufacturing facility in New York State, which will further support our continued growth with this technology. We also repurchased shares under our stock repurchase program to both offset the dilution associated with our equity incentive plan and provide a return of capital to our shareholders. We repurchased approximately 685,000 shares at an average approximate cost of $158 per share. This stock repurchase program is one component of our overall capital deployment strategy that focuses primarily on investing in organic growth opportunities that provide an attractive return, augmenting our organic growth through strategic M&A where appropriate, paying down debt and maintaining a strong balance sheet, and retaining and growing our dividend to our shareholders. And regarding the dividend, in December, we announced another increase to our annual dividend, taking the dividend from 87 cents to 96 cents per share, a 10% increase year over year. This most recent increase marked the 17th consecutive year of double-digit growth of our dividend, which once again reinforced our commitment to our longstanding dividend strategy. So overall, as we look back on the year, we are proud of the combination of strong financial performance and tangible progress on strategic initiatives, and we maintain a positive outlook as we look forward. I would like to thank all of our employees and stakeholders who contributed to our success throughout another excellent year. Thank you all. Now, regarding the fourth quarter of 2025, this morning, we reported fourth quarter consolidated revenues of $264 million, which were 9.8% higher than the prior year quarter. Gap earnings from operations for the fourth quarter were $52 million, higher by 10.2% versus the prior year. And we delivered quarterly adjusted EBITDA of $68 million, an increase of 8.1%. Consolidated net income closed the quarter at $39 million, an increase of 16.8%. This quarterly net income translated to diluted net earnings per share of $1.21 on a gap basis, up 17.5% compared to the prior year. On an adjusted basis, our fourth quarter adjusted net earnings were $42 million, an increase of 14.8% from the prior year, which translated to $1.31 per diluted share. From a market and demand perspective, we continue to see healthy demand across the vast majority of our end markets. In human nutrition and health, performance remains strong, driven by healthy demand for our portfolio of minerals, vitamins, and nutrients, as well as our food ingredients and solutions. We continue to benefit from the broader consumer and customer shift toward nutrient dense, high protein, high fiber, and low sugar, better for you foods. where our nutrition portfolio and formulations capabilities bring meaningful value. In animal nutrition health, the dairy market remains relatively healthy, particularly for dairy protein, and we continue to penetrate the market with our rumen-protected, precision-release encapsulated nutrient portfolio. And we are seeing modest improvement in market conditions in Europe for our feed-grade choline business after the finalization of the European commissions anti-dumping duties on Chinese choline in late December. In specialty products, both our performance gases and plant nutrition businesses are performing well, supported by stronger demand and healthier market conditions within performance gases and continued progress in geographic expansion within plant nutrition. Overall, we continue to see healthy demand across all three of our business segments. I'm 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 more detail.