Q2 2020 Balchem Corp Earnings Call
[music].
Greetings and welcome to the Balchem Corporation financial results Conference call.
At this time, all participants are in listen only mode.
Well, if all the formal presentation.
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As a reminder, this conference is being recorded.
It's now my pleasure to introduce your host Martin bags, the Chief Financial Officer, Mike You May begin.
Good morning, everyone. Thank you for joining our conference call. This morning to discuss the results Balchem Corporation first quarter ending June Thirtyth 2020. My name is Martin Bank, Some chief financial Officer, and hosting this call with me as Ted Harris, Our chairman CEO and President following the advice to our council auditor somebody else they see.
At this time I would like to read our forward looking statement.
This release does contain or likely will contain forward looking statements, which reflect balchems expectation or belief concerning future events that involve risks and uncertainties. We can give no assurance that the expectations reflected in forward looking statements will prove correct and various factors could cause cost results to differ materially from Rx.
Fictitious, including risks and factors identified about comes form 10-K forward looking statements are qualified in their entirety by this cautionary statement.
Well now turn the call over to Ted Harris, our chairman CEO and President.
Thanks, Martin Good morning, and welcome to our conference call.
This morning, we reported record second quarter consolidated net sales the $173.4 million, which resulted in record second quarter net income of $21.1 million or 65 cents per share on a GAAP basis.
On an adjusted basis, a record second quarter adjusted non-GAAP net earnings were $27.6 million or 85 cents per share cash flows from operations were $44.6 million for the second quarter of Twentytwenty with quarterly free cash flow.
$37 million.
Our second quarter net sales of $173.4 million were 7.3% higher than the prior year comparable quarter.
We achieved sales growth in all three of our segments as compared to Q2 2019, with all time record sales in human nutrition, and health and specialty products and record second quarter sales and animal nutrition and health.
The impact of foreign exchange to our sales was a negative zero point $5 million, primarily due to the weaker euro driving a negative 31 basis point impact to our year over year sales growth.
Our Q2 consolidated gross margin dollars, a $55.4 million were up $1.5 million or 2.7 per cent compared with $53.9 million for the same period in the prior year.
Our consolidated gross margin percent was 31.9% of sales in the quarter down 143 basis points compared to 33.4% in Q2 as 2019th the 143 basis point decrease was primarily due to mix and certain covert 19 related.
Fences, partially offset by certain lower raw material costs.
Consolidated operating expenses for the second quarter of 2024 $28.5 million as compared to $27.5 million in the prior year. The increase was principally due to incremental operating expenses related to the camera gas and zumbro acquisitions and a good well.
Impairment charge related to business formally included in the industrial product segment, partially offset by lower selling expenses, primarily due to reduced travel and lower bad debt expense.
Excluding non cash operating expense associated with amortization of intangible assets the $6.2 million.
Operating expenses were $22.2 million or 12.8% of sales looking forward. We will continue to focus on tightly controlling our operating expenses and leveraging our existing SGN a infrastructure.
GAAP earnings from operations for the second quarter were $26.9 million, an increase of zero point $5 million or two per cent compared to the prior year quarter on an adjusted basis as detailed in our earnings release. This morning earnings from operations of $35.9 million.
$2.6 million for 7.8% compared to $33.3 million in the prior year.
Record adjusted EBITDA of $43.9 million was $3.9 million or 9.8% above the $40 million posted in a second quarter of 29 team.
Interest expense for the second quarter, Twentytwenty was $1 million and our net debt was $142.2 million with an overall leverage ratio on a net debt basis of zero point nice strong cash flows in the second quarter enabled the company to make 35 no.
In dollars of repayments of its revolving debt.
The company the effective tax rates for the second quarter, Twentytwenty and 29 team were 18.7% and 20.3% respectively. The decrease in the effective tax rate is primarily attributable to lower enacted tax rates from several states certain higher tax.
Credit and excess tax benefits from stock based compensation.
Consolidated net income closed the quarter at $21.1 million up 6.5% from the prior year quarter. This quarterly net income translated into diluted net earnings per share of 65 cents for the current here an increase of four cents from last year's compare.
Well quarterly result of 61 cents.
On an adjusted basis, our second quarter adjusted net earnings were $27.6 million or 85 cents per diluted share up $2.3 million or 9.2% compared with $25.2 million worth 70 said.
One cents per diluted share in the prior year quarter.
These adjusted non-GAAP net earnings exclude tax adjusted noncash amortization and other items as detailed in our earnings release. This morning of $6.4 million to facilitate comparative evaluation of operating performance versus the prior year period.
We generated quarterly free cash flow was $37 million, how many closed out the quarter with $76.4 million of cash on the balance sheet.
Second quarter cash flows from operations benefited by approximately $8.2 million due to deferred tax payments related to the cares Act now we expect third quarter cash flows from operations to be negatively impacted by the same $8.2 million to be paid in the third.
Third quarter.
Before passing the call back to Martin to cover the detailed results by segment I would like to update you on the impacts of Cobot 19 on our company as well as a few of our important strategic activities and growth initiatives.
As we shared in the press release. This morning. The covert 19 response effort has been a primary focus for the company since earlier in the first quarter.
Our focus has been on employee safety first keeping our manufacturing sites operational satisfying customer needs preserving cash in ensuring strong liquidity and responding to changes in this dynamic market environment as appropriate.
Today, all of our manufacturing sites are operating at near normal conditions, enabling us to supply our customers with the important products and services they need.
Our research and development teams are advancing our innovation efforts and all of our other employees are effectively carrying on their responsibilities and functions remotely.
Last quarter, we indicated an expectation that sales over the next few quarters and for the duration of the pandemic would be challenged by weaker demand for various of our market segments as we expected in aggregate our revenues in the second quarter were indeed negatively impacted by the global response.
Efforts to the pandemic.
Of particular note, we have seen lower demand from Foodservices medical device sterilization due to fewer elective surgeries and lower fracking activity.
These negative impacts to demand were only partially offset by higher food ingredient sales to retail and other outlets and higher sales of our immunity strengthening minerals and coleen nutrient solutions.
We're extremely pleased with the fact that despite the aggregate negative impact on our sales from the pandemic, we were able to drive significant year over year sales growth as a result of the resilience of our business model and the sales contribution from various organic and inorganic strategic growth initiatives.
All uncertainty continues to exist as the second quarter progressed, we were able to see some evolution of these various market drivers for example, within the quarter, while we did see some recovery in certain sub segments of our food service related business, we have seen little recovery and other negatively.
The impacted markets, indicating at least for now a relatively protracted and slow recovery. Additionally, while the significantly higher demand for minerals and coli nutrients tapered off somewhat as the quarter progressed, there appears to be some sustained higher demand for these immunity boosting products.
Going forward.
Also the boost in food ingredient sales to retail and other outlets gradually returned to more normal levels throughout the quarter. We will continue to watch each of the Mark These markets very closely and remain nimble flexible and ready to respond accordingly.
Moving onto an update on important strategic activities and growth initiatives within human nutrition and health, we made a minority stake investment in S&P therapeutics.
Research based genomics company founded by Dr. Stephens I sell the director of the University of North Carolina's Nutrition Research Institute and the World renowned sign scientist and Coleen expert.
As a focus on identifying genetic misspellings or mutations called Smith for a single nucleotide polymorphisms, which impair nutrition metabolism and contribute to diseases and other health related issues.
SMP therapeutics evaluate each patients Gino and translated into meaningful actionable information by utilizing the company's proprietary custom genetic tests and algorithms.
Once SMP therapeutics has evaluated a patients genome data the company can provide information to patients and physicians. So treatment options can be explored physicians can then prescribe a scientifically based medical food or recommend supplements solutions for many of these medical and nutritional conditions and.
Including personalize vitamin mineral and other nutrient solutions.
Balchems investment in S&P therapeutics, well will enable us to participate in this exciting venture that provides relevant learning the prospect for building coleen awareness and future commercial opportunity for our human nutrition Health segment.
Relative to animal nutrition and health the launch of our previously discussed Aminoshure XM. Our next generation rumen protected assigning continues to progress very well. This next generation product offers enhanced biovail a bit bio availability and superior feed stability that allows it to.
Deliver industry, leading value for dairy farmers.
Nutritionists and dairy farmers around the world agree as market penetration grows for this new product, which is being further boosted by healthier dairy protein prices.
Additionally, we have been extremely pleased with our animal nutrition health E learning platform and Webinars series that have attracted over 4000 attendees to our 11 live real science Webinars and over 5000 people viewing them online via Balchems Youtube channel.
With the global pandemic, we have had to pivot to increase virtual marketing and the animal nutrition and health team has leveraged existing tools and technical content to reach current and prospective customers was important technical information.
Within specialty products in May we celebrated the one year anniversary of the chemical gas and the acquisition, which significantly expanded balchems geographic presence in the package ethylene oxide market, enabling us to offer worldwide service and support to our medical device sterilization customers we are.
Stream, we pleased with the acquisition and how it has enabled the creation of valve Cam performance gases are now global business unit focused on providing ethylene oxide and other chemicals to most notably the medical device sterilization market worldwide Chemokine gas has been fully integrated into the.
Specialty products segment and is meeting our expectations from a strategic and economic perspective.
We also realized Arse released our second annual sustainability report in April in support of our environmental social and corporate governance ideals and 2019, we issued our first sustainability report consolidating all of the great work. The Balchem has been doing for many years into a concern.
Elevated report, we're committed to providing solutions for the health and nutrition needs of the world and acting as strong stewards of all of our stakeholders. We're proud of our E.S.G. accomplish cements today and look forward to sharing updates with you as we progress our initiatives as well as or higher per.
Because of making the world a healthier place.
And lastly, as we as discussed in previous quarters.
We have embarked on an important project to consolidate our five ERP systems into one Microsoft dynamics 365 in the second quarter, we elected to pause activities related to our global ERP implementation project due to our global Pandemics response efforts just.
Color traveler sticks and made it impossible to provide on the ground support for additional site go lives. So we chose to refocus our ERP project teams efforts on optimization of the new ERP system for sites that have already gone live while preparing for future go lives when restricts.
Since our lifted while we still believe that we will be able to implement the full project within our $12 million budget. The project will now take approximately nine to 12 months longer than originally planned with our current expectation for full implementation by the middle of next year.
Now going to turn the call back over to Martin to go through the detailed results for each of our segments.
Thank you Ted.
For the quarter, our human nutrition and health segment achieved all time record quarterly sales of $97.4 million, an increase of $11.6 million or 13.5% from the prior year.
Sales increase was primarily driven by strong sales growth of key Leighton minerals, and coli nutrients as well as increased sales into the food and beverage markets from both the legacy business and the Soomro acquisition, we closed in December 2019.
Partially offset by lower sales to foodservice related markets and the elimination of sales associated with the Redding, Pennsylvania manufacturing site that we divested in 2019.
Our human Nutrition and health segment also delivered all time record quarterly earnings from operations up $15.5 million, an increase of $3.2 million or 25.6% compared to prior year, primarily due to the aforementioned higher sales and lower selling expenses prime.
Due to reduced travel and lower bad debt expense.
Excluding the effect of non cash expense associated with amortization of acquired intangible assets of $4.8 million adjusted earnings from operations for this segment, where an all time record up $20.3 million, an increase of $3.1 million or 18.3 person.
Sent compared to $17.2 million and the prior year quarter.
The increase as mentioned earlier resulted from the higher sales lower selling expenses, primarily due to reduced travel and lower bad debt.
Our animal nutrition and health segment delivered record second quarter sales of $46.3 million, an increase of 6.6% or $2.9 million compared to the prior year.
The increase in sales was primarily the result of higher volumes in both the ruminant and Mona gastric markets ruminant volumes were up over 6% with strong demand for reassure our flagship room unprotected coating in terms of dairy economics, we're pleased to see the significant dip in milk prices during the pending.
Make was very short lived and as we finished the quarter milk and milk protein futures were at a relatively healthy levels.
Well clearly uncertainty continues this V shaped recovery in the dairy markets has been really encouraging.
Monogastric volumes were up approximately 4% primarily driven by growth in key late in minerals and companion animal offerings.
We also have solid demand for aequus and dry coleen domestically, but did experienced softness in Europe due to a pullback of demand at least partially related to the pre buying we experienced in the first quarter related to the earlier response to the pandemic as we discussed last quarter.
Animal nutrition and health quarterly earnings from operations of $6.4 million were up $1.4 million or 27.5% from the prior year quarter, primarily due to the aforementioned higher sales certain lower raw material costs and lower selling expenses per.
Mainly due to reduced travel.
Excluding the effect of noncash expense associated with amortization of acquired intangible assets of zero point $2 million adjusted earnings from operations for this segment were $6.6 million, an increase of $1.4 million or 26.6% compared to five point.
$2 million in the prior year quarter.
Our specialty products segment delivered quarterly sales up $28.2 million as compared with $24.9 million for the prior year quarter. This increase of 13.2% was driven by higher sales of ethylene oxide for the medical device sterilization market due to the increase.
Mentor contribution of chemo gas, partially offset by lower legacy sales, which were negatively impacted by reduced elective surgical procedures during the pandemic.
The plant nutrition business was essentially flat in the second quarter. Following a very strong first quarter and we're pleased with achieving double digit growth for this business in the first half of the year the seasonally stronger portion of the year.
The second half of the year for specialty products will remain somewhat challenged due to both the seasonally lower plant nutrition sales and our expectation that ethylene oxide sales will continue to be negatively impacted by the jurisdictional restrictions of elective surgeries and patience remaining reluctant to visit hospitals for it.
Active procedures.
The specialty product segment had second quarter earnings from operations of $8.0 million versus $8.9 million in the prior year quarter, a decrease of several point $9 million or 9.8%. The decrease was primarily due to mix and higher operating expenses due to the acquisition of chemo.
Yes.
Excluding the effect of non cash expense associated with amortization of intangible assets of $1.6 million second quarter adjusted earnings from operations for this segment were $9.6 million compared to $10 million and the prior year, a decrease of zero point $4 million or three point.
9%.
I'm now going to turn the call back over to Ted to for some closing remarks.
Thanks, Martin we're extremely pleased with Balchems financial results reported earlier. This morning in the second quarter, we delivered record consolidated sales and year over year revenue growth across all three of our segment with record consolidated GAAP net earnings and record non-GAAP adjusted.
Net earnings and strong cash flows from operations, while facing and overcoming significant challenges and uncertainties related to the global pandemic.
I would like to take this opportunity to thank each and every one of the approximately 1400 balchem employees across the world who have responded so courageously to the events of the last few months.
He is very strong results reported today are a direct result of the extraordinary talents in efforts of the Balchem team as well as the strength of our market positions and the resilience of our business model.
We further strengthened our already strong balance sheet this quarter by reducing our net debt by $37.4 million, finishing the quarter with a net debt leverage ratio of 0.9.
We have strong positions within the markets, we serve and these unique positions coupled with our strong balance sheet will enable us to generate healthy growth over the years to count.
I would now like to hand, the call back over to Martin who will 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, ladies and gentlemen at this time or would like to begin a question and answer session. If you'd like to ask your question you May Press Star one on your telephone keypad, a confirmation tone wanted to take your line is in the question Q.
You May press Star too if you would like to remove your question from the Q4 participant using speaker equipment, and maybe necessary to pick up your handset before pressing the star keys.
Our first question comes from the line of set of Ram.
Hi, Raj you with H.C. Wainwright. Please proceed with your question.
Thanks for taking my questions about a couple detailed points first could you elaborate on the nature of the goodwill impairment charge related to the industrial products business you mentioned.
This quarterly result.
Sure. Good morning, the dose approximately a 1.2 million impairment, which reflects essentially all of the goodwill associated with the former industrial product segment.
So given the performance of that business and where it's now after the sort of prolong downturn, but we see in the oil and gas space.
That felt appropriate too.
To write that goodwill off at this point in time.
Okay.
Thats a pretty aggressive approach there you don't expect to be recurring.
No. There is no more goodwill related to that segment that was 100% of it.
I will go.
And whether you have been any indication of sustainable recovery, yet and if you have whether this rebound.
Thanks to the whether you're seeing it be substantively affected by the resurgence in cobot 19 infections that we began seeing.
June and also.
This month.
Ron the short answer to your question is no we really have not seen at the rebound yet.
Obviously late in Q1 very early in Q2, the impact the negative impact of lower.
Elective surgeries was masked somewhat by higher sterilization of co. Good response items.
But as we really got into Q2, we we started to really see the negative impact associated with fewer elective surgeries.
We do here from our customers and we have.
Very good relationships with the large medical device.
Companies around the world and they are seeing.
Some improvement as the core as second quarter progress than we've gotten into third quarter really month on month as far as their order books go and so we know that it's it's coming but we actually today really have not seen any measurable.
Return to.
Normal levels within our sterilization business at this point.
Okay, and then just a couple of other quick thing, but I was wondering how sustainable you expect the higher volume in the animal health and nutrition business to be going forward.
Where you expect the effective tax rate trend in the coming quarters, and what factors might influence that particularly with respect to stock based comp. Thanks.
Okay.
I'll take the first one Martin maybe you can take the second one relative to.
The volumes in animal nutrition health, we really have had I think going back to the second half of last year.
Really good encouraging performance from our animal nutrition and health business and we really believes that that will continue.
Obviously, there were some significant.
Market dynamics that occurred in Q2, but they really proved to be relatively.
Short lived or we were able to overcome them through significant growth in other areas specifically in the monarch gastric business in Q3.
We did see some impact.
In Europe relative to.
The pre buying that happened in Q1, and so pullback in demand we did see some impact in the U.S. from some of the supply chain disruptions at some of our big customers.
Had but for example in that market strength and companion animal market really helped to offset some of.
Those impacts and we see that really continuing for the rest of the year.
And in the dairy market Similarly.
As we had this call a quarter ago, we were seeing milk and milk protein prices really spiked down and as Martin talked about in his prepared remarks.
That truly was a V shaped recovery I would say a now milk and milk protein futures are looking very healthy and we've seen the response to those healthy milk and milk protein prices with.
Increased orders as the quarter progressed.
And so we also in the ruminant area believes that Matt the stronger volumes will continue for the foreseeable future. So that's the kind of the detail behind the short answer yes, we do think that those higher volumes will continue.
For the foreseeable future Martin on the tax just quick gone on the tax reform US you know, we're sort of around 19% year to date with 18.7 in the the second quarter.
The the part that's always a little trickier to forecast. This how people will exercise options et cetera, since that's outside of our control and it does have an impact on the rate.
But if you're asking for what's what would we expect us as we forecast here.
We're putting that 21 to 22 for the effective rate does a reasonable estimate on a full year basis.
Great. Thank you very much.
Thanks, Ron.
Our next question comes from the line of Mark Connelly with Stephens. Please proceed with your question.
Thank you.
Okay, and we're hearing a lot about new encapsulation technologies from from a lot of sort of newer more innovative companies and I'm curious if if you're getting deeply involved in newer technologies or whether its.
Affect your view of the encapsulation business.
Hi, Mark Thanks for the question and we certainly appreciate the new coverage by Steven So.
Welcome to to Balchem.
The the there are a lot of.
Technologies when it comes to micro encapsulation.
And.
For various applications, whether its industrial food pharmaceutical and and so forth and our technology really is focused.
One lifted based micro encapsulation and.
We continue to innovate in that area and bring to the market new technologies and we've seen some of that.
Relative to our next generation Aminoshure XM.
Product that we launched last year, clearly, bringing something new and.
Innovative to the market. So we continue to innovate and develop next generation products and technologies to.
Bringing to the market and others are are doing the the same but I certainly we're not seeing any technology that I would describe as disruptive out there that that is.
Replacing any of the existing technologies that that.
I'm aware of in any case, and we feel really good about the technology that we had and the our ability to continue to innovate to.
Make air micro encapsulates more robust.
Differentiated from a release profile perspective, and so forth.
That's helpful.
A question on on supplements in general.
Obviously, we've seen a pickup in supplement sales.
But more broadly Theres also a lot of innovation in terms of more fortified healthier food.
Im curious if you're seeing a shift in the development work.
Away from trying to get people to swallow more pills and.
Trying to get them to eat and drink things that have your products in Im just curious if that's showing up in your development pipeline.
I would say, yes, but very slowly.
Supplements still tend to be the primary.
Outlet for our products, but we do see.
Nutritional beverage fortified foods.
Increasingly including.
Our vitamins and minerals so.
We do see.
Fairly modest shift there, but I wouldn't say that it's it's.
Really material shifts were excited about some products that have recently come to market. For example, one of our customers Dan on has launched a new fortified milk targeted for children.
Under the brand horizon, and it's called the growing years in it is fortified with DHL, Jay and coli.
And we're really pretty excited about that one because number one it has are calling in and number two.
They are clearly.
Marketing the fact that it includes coal weighing on the front very prominent play and so that's just an example of a bit of.
Shift in that direction and I could name several others it hasn't taken over the market, but that is really what makes us very.
More than hopeful very excited about the opportunities for coal mining and minerals going forward and I do think that.
Covert 19, and peoples increased interest in immunity boosting vitamins and minerals will.
We will survive that pandemic and I think products like denizens horizon milk really.
Well, we'll be products that that can meet that trend and we.
Well drive significant growth for us into the future.
Yeah, I would agree I think it's going to be a big trend.
Coming back to the international animal market for just a second are you, where you expected to be more or less with market penetration or has cobot changed your expectations and I was also hoping you could tell us whether there's any lingering impact from the Chinese competition.
Yes, I think generally speaking, we're about where we thought we would be from a penetration perspective. So I don't think any any surprise there the Chinese really are.
A competitor that we see specifically in Europe, and again, specifically in air.
Poultry and swine business, I would say or kind of non companion animal Mano gastric business.
In Europe, and they are as as ever present as they were before the pandemic.
And so nothing really has changed there it hasn't really gotten any.
Worse or better and I think were.
What kind of figured out how to manage that market environment with the competitive dynamics that have existed for awhile and haven't really seen much change relative to the.
Chinese competition competition.
Kind of prior to Gerringer now a little bit coming out of the pandemic.
Okay, and I don't want to be selfish good to one more quick question and that is on the companion animal market. We're hearing some you're obviously, it's a pretty good growth market rules are hearing about some disruption in terms of some of the channels. There how is that working out for you.
You know it really has been I would say Q1 and Q2, so largely before and during the pandemic.
We really have have seen only strength through through that period of time, you know I guess.
I tried to think logically about the.
Impacts submarket that we see and many of US are working from home and I think we all her feeding our pets more than that and then we ordinarily would and probably feeding them better than we ordinarily would and and that's what we're hearing from our customers and that's what we're seeing in.
Our orders so so we've seen real strength.
Through this period of time.
And certainly have not been impacted by any.
Kind of market disruption so to speak.
Super Thank you very much.
Thanks, again, Mark and welcome again.
Our next question comes from the line of Mitra Ramgopal with Sidoti and company. Please proceed with your question.
Yes, hi, good morning, Thanks for taking the questions.
So just wanted to get a sense as it relates to.
Covert you clearly incurred some incremental.
Costs and expenses and just trying to get a sense. This does we look for the second half.
How is that.
I'm going to continue or perhaps even.
Level off for decline.
You want to take that one sure the.
I mean as cost involved managing the situation last year, you would imagine both from Jeff increased in and things that safety supplies for example.
And we'll obviously continue for the foreseeable future until something happens and.
Overall environment around us.
I think that what we saw in the second quarter will continue there in terms of expenses related to that.
There has also been various things we've done internally to incentivize and motivate people.
In terms of special bonuses and things like that which has incurred cost to us.
And how we proceed with that is to be determined so to speak I think we will we will take the actions needed to ensure that we remain operational and effective and have a motivated workforce et cetera.
But I do think in one way that that Q2 is quite of a relatively representative quarter of the types of costs will also see going forward for the foreseeable future until something changes and the broader environment.
Okay, that's great.
Ted.
A lot of companies are obviously.
Reevaluating their business as and restructuring what have you just curious as it relates to your industrial products.
Business, obviously is something you.
You've looked at them to pass and have decided to keep I. Just wondering if anything has changed in light of coal, but in light of the numbers, you're seeing coming out of that business now.
Mitra really and short answer is no.
The business there has declined so significantly it really has become.
Material to the company, but as a fundamental.
Issue or opportunity, we've always had with that business is is.
The product that we sell there is fundamentally Colin car chloride and it's made in the same plants, where we make.
The other coleen chloride products, we sell into animal nutrition, or even human nutrition for that matter and so.
The incremental costs.
To manufacture that product sell that product are very.
Minor and to sell that business, there really isn't much to sell so we'll continue to sell those products. They are contributing incrementally positive.
EBITDA, it's just very.
Immaterial at this point in time, so we'll continue to do that obviously, we reserve the right.
We continue to assess that and make a difference decision going forward, but for right now we plan to continue to market. The products that we are currently marketing, albeit not not.
Not a whole lot.
To the industrial market.
Okay No that's that's great. Thanks.
And then on the acquisition front, obviously this environment makes it very difficult.
To do a lot of things, but I know, you've obviously had great success at chemo gas and some ROE and you have the balance sheet.
Pursue some additional opportunities and I'm, just trying to maybe get a sense in terms of the environment out there if it's becoming.
A little more Failover before you know.
Yes, again, I think the short answer to that is yes.
I think that very very early on in there in the.
Yes, Kogut pandemic.
Yes, there was a little bit of reluctant see how could how could you do an acquisition remotely.
We need 10 management presentations, we need to.
Visit all these plans then and you know like everybody else, our thinking has evolved there and our learnings have evolved then and we have actually indeed attended some management presentations virtually and and are working on.
Opportunities I would say nothing is imminent, but we've gotten over that initial how could we possibly do that phase, which was very short and I I would say, we're kind of back to yes, we can accomplish.
These type of acquisitions in this environment and so as I've always said, our pipeline is quite rich relative to opportunities and we.
C.
Assets companies.
Coming onto the market and.
Ready and willing to have discussions so.
We think the opportunities are there and we're hopeful to be able to continue.
Now in the second half of 2020 and into 2021 with some acquisitions like.
The successful ones that we've accomplished in the past.
Okay. No that's fair and then finally again I'm, assuming is really not much to update regarding the.
Partnership.
Is that fair.
I think Thats fair Maitre, we really have not.
I had any significant milestones head or new news to report in and we certainly will.
And there is something to report but.
They're continuing to do what they need to do and we're continuing to do what we need to do from a manufacturing operations perspective.
They are activities going on but nothing.
Really to report.
Okay. Thanks, again for taking the questions I'd say traffic.
Our next question comes on the line of Lawrence Goldstein with Santa Monica Partners. Please proceed with your question.
In in the report you mentioned.
Saving money.
People not having to travel and you also mentioned that people are working from away.
And working for away I presume also save money.
Is that correct.
Well, Hey, Larry how you doing.
Thanks for the question.
You know it yes or no.
Here's what I really want to know.
I have a hypothesis to.
Spend my reason for asking that New York City.
May look like a parking lot.
Yes.
Hum.
You may have read that Google for example, which has the most gorgeous offices maybe in the world.
And plan on bringing any body back.
At the earliest 2000.
Three.
And.
And my conversations with companies.
I find many companies with hundreds and thousands of employees.
Plan on ever bring them back.
Conversation with a company.
A few days ago, that's not only are we not going to renewal leases.
Not bring all people back we're now finding that we can hire people who were not near our facilities and we can hire from around the world.
And it's a matter of fact, we are we getting people better educated at lower costs, which a lot of companies learn to do years ago, Obviously and you can you can't hire factory people that way, but you can hire people.
Front on computers.
Some other jobs.
Marketing so.
It's going to be a change.
World and all the people on this telephone call.
Probably in that firms.
Don't Miss going to the office would maybe they missed but they don't have too so what I'm getting at is.
Our savings that you are getting.
Maybe somebody as mine, it's not clause and Youre office rent.
Your leases up I don't recall, when but relatively soon.
Material item saving and please if you don't need a facility like office building now what's a little about.
So I certainly agree with a lot of what you said.
We spend about let's say 300300 $50000 a month on on travel in an ordinary.
Period of time, so by and large we've been saving that of course, some of that's been offset with higher expenses.
For safety precautions and some of the things Martin talked about but think about it as 300 $350000 months on travel.
Our office expenses.
Our our largely still expenses that were experiencing because.
We have the leased properties.
Some of them. We do have for example in our headquarters in New Hampton New York.
Has also the side of our laboratories and air scientists have been indeed coming to work. So there hasnt even been any savings from.
Vectrus city, and so forth so by and large.
We still have those expenses I haven't really been saving.
Anything there, but I you know your point is absolutely valid and we are spending some time thinking through what should our future footprint.
Look like and is there some real estate savings that that.
We could have long term based on either consolidation or or some more permanent increased work from home. So we are looking at that our leases by and large continue for another year or so so it's not imminent but.
But we are thinking through it but I have to say personally.
You know I do think that we lose something.
By everybody working from home and I think that there is some balance so I'm not sure I foresee a future about cam to not have a headquarters because I do think there is value and and developing teamwork and.
Corporate culture and creativity bye bye.
By working together, but there's no question going forward it will be different and I can see more working from home than than.
And what we've done in the past and a different environment, but I'm not sure I'm ready quite yet.
For the 100% virtual Balchem and that's measured by the way the new term is not working from home, but working from away you don't have to be at home you could be anywhere on the planet.
That right, Okay, well, let's let's let's see where it all.
Ends up appreciate I'm, just wondering whether whether there's any material number that you think you can save.
As a result of what you learned from.
It's now yes, I think that I mean, if you added up all of our leases, you're probably not even talking about $1 million. So a million dollars. There's a lot of money and I certainly don't want to minimize that at all and I would if there was a way to save some fraction of that that could be very interesting but.
It's not going to change the nature of our and the way you market you would travel you said is 350 a month so yes.
Maybe you won't be necessary to do crime traveling. So there is if you if you kind of added both those together maybe there is $2 million.
The play within a different way.
Okay. Thank you hey, thanks, Larry.
Our next question comes on the line of Tony Polak with Aegis capital. Please proceed with your question.
Okay.
Your line is live Mr., Paul It do you have yourself on mute.
Okay, Tony maybe.
Separately, we can't we can't hear you for whatever reason and Doug maybe we can just wrap things up.
Yes, there are no other questions in the queue I'd like to hand, it back to Mr. Harris for closing remarks.
Yes, Thanks, Doug once again, just like to thank you very much for joining our call today and your continued interest in our company. We are really very pleased with the strong Q2 and year to date results.
Resilience of our business model in the face of these difficult market conditions and the as I've mentioned the extraordinary response of the backend team. So thank you again, we appreciate your time today, we look forward to reporting out Q3 2020 results in late October Thanks again.
Ladies and gentlemen, this does conclude todays teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.