Q4 2021 Balchem Corp Earnings Call
Greetings and welcome to your <unk> Corporation fourth quarter, 2021 financial results.
At this time all participants are in a listen only mode.
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 Bengtsson Chief Financial Officer. Thank you you may begin.
Good morning, everyone. Thank you for joining our conference call. This morning to discuss the results of <unk> Corporation for the quarter ending December 31, 2021. My name is Martin Bengtsson Chief Financial Officer hosting this call with me is Ted Harris, our chairman CEO and President.
Following the advice of our counsel auditors and the SEC 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 <unk> 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 results to differ materially from our expectations.
Including risks and factors identified in <unk> Form 10-K forward looking statements are qualified in their entirety by this cautionary statement I will now turn the call over to Ted Harris, our chairman CEO and President.
Martin Good morning, and welcome to our conference call.
Before I get into the quarter I would like to reflect for a few minutes on some of the significant accomplishments the bell Chem team achieved over the past year.
Overall 2021 was another very strong year for Balco.
Financially, we grew 13, 6% and achieved record sales of $799 million with year over year growth and record sales in all three of our business segments.
We also delivered record adjusted net earnings of $116.6 million, an increase of eight 2% and record adjusted EBITDA of $189 $8 million, an increase of 8.9% from the prior year.
In addition, we once again generated strong free cash flow delivering $124 $4 million of free cash flow in 2021 and all time record while at the same time investing $36 $1 million in capital projects to support our continued growth.
And we delivered these strong record results, while maneuvering our way through all of the challenges of the pandemic and the subsequent supply chain and inflationary pressures that we faced throughout much of the year. It was a team effort and a job incredibly well done by our employees our partners and all of our stakeholders who.
It to us and contributed to our success throughout a difficult and challenging year.
Thank you to all of them.
Strategically.
We had a very good year as well, we made significant progress throughout the year across all of our business segments and advancing the science behind our products and we capped off the year with another publication from the groundbreaking research at Cornell University on the cognitive benefits of maternal choline intakes.
We are very pleased to report that the research published in a peer reviewed journal last December confirms that pregnant women, who took more than twice the recommended dose of choline during pregnancy had children that demonstrated statistically significant cognitive benefits, which were sustained through <unk>.
Early childhood.
This study was a follow up to the original Cornell findings published in 2018, demonstrating that higher doses of choline during pregnancy led to improved cognitive performance in infant offspring. This new paper now highlights that cognitive improvements were both significant and enduring.
In those same children at age seven more specifically the seven year old children of the high maternal choline intake group had superior overall sustained attention scores and superior ability to maintain correct signal detection throughout the testing regimen compare.
To the other kids, whose performance suffered as the testing progressed both of these findings were statistically significant.
We are excited by the outcome of this very important paper and ongoing analysis of the research data also points to additional enduring cognitive benefits in children that will be the subject of future publications.
We are mobilizing omnichannel marketing promotions to highlight the benefits of Vita choline in the prenatal segment and working to activate a consumer education campaign aimed at driving awareness and benefits of Vita choline for pregnant Moms, we are proud to support ground breaking science like this with <unk>.
World Class researchers who are exploring the breadth and depth of choline benefits throughout the human and animal life cycles. We also continue to bring new products to the market as well and are pleased that our new product development metric that measures the percent of sales coming from products commercialized over the.
Last five years, and which really measures the vitality of our product portfolio. Once again was close to 28% showing that we are indeed, bringing new innovation to the market with one of the best examples of this being <unk> XM, our highly engineered rumen protected methionine product that.
<unk> continues to make significant inroads in the market with over 50% year over year growth once again in 2021 .
Additionally, we made important and significant new investments in plant and equipment in 2021 , resulting in significant capacity additions for our human choline chloride and choline bitartrate product lines, our animal encapsulates, our human encapsulates in our plant nutrition chelate.
Minerals product line with the ladder to additional capacity being added in EMEA for the first time, which will alleviate supply chain constraints and facilitate geographic expansion and growth in the coming years.
From a corporate perspective, we have now fully completed our project to consolidate seven ERP systems into one Microsoft dynamics 365, with the final site go live occurring in the fourth quarter. We now have 100% of our revenues on the new system.
We are extremely pleased with the completion of this project that was delivered on budget and on time. This initiative was critical for the continued growth and operational efficiency of the company and we are very pleased to move from focusing on implementation to realization of the many benefits of being on <unk>.
One integrated system across the entire company.
We also made significant progress in 2021 relating to the company's efforts to advance our environmental social and governance or ESG initiatives Biochem released its third sustainability report in 'twenty, 'twenty, one and which we announced our 2030 goals to reduce both green.
House gas emissions and water usage by 25% the.
The report details many of the ways, we are advancing our environmental social and governance initiatives across the organization in alignment with widely accepted ESG reporting frameworks earlier in the year, we proudly sign the CEO action for diversity and inclusion pledge as a further commitment to.
Advanced diversity and inclusion within our workplace. We also celebrated the one year anniversary of our commitment to the UN global compact confirming our alignment with the 10 principles on human rights labor the environment and anti corruption.
Recently as a result of our efforts Falcon was named one of America's most responsible companies by Newsweek magazine for the second consecutive year. These efforts are fully integrated into our business strategy and we will continue to support our commitment to operating responsibly and creating a sustainable future for our.
Tumors suppliers employees communities and shareholders. We continue to take many other important steps and have made significant progress in our continuous improvement journey relative to our corporate social responsibilities and the achievement of our higher purpose of making the world a healthier place.
Additionally, I was very pleased that our board of directors added Ms. Kathy fish to our company's board in June of 2021 .
Fish, formerly was the Chief Research development and innovation officer at Procter <unk> Gamble company. So she brings to the balcony board important new product development and direct to consumer experience, along with our international business acumen and ability to build a growth culture. We are very pleased.
To have Kathy on our board and she will undoubtedly make significant contributions to our growth over the years to come.
And lastly in December we announced another increase to our annual dividend, taking the dividend from 58 to 64 cents per share of 10, 3% increase year every year. This most recent increase marked the 12th 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 for biochem, both financially and strategically and we look forward to continuing our momentum into 2022 and beyond.
Now regarding the fourth quarter of 'twenty 'twenty. One this morning, we reported strong fourth quarter results, our revenues of $213 $1 million were up 17.9% on 8% organic volume growth and our adjusted earnings from operations were <unk> 37.
$7 million up four 4% versus the prior year quarter, our net income of $24 $9 million, an increase of 12.6% resulted in earnings per share of 76 cents on a GAAP basis on an adjusted basis.
Our third quarter non-GAAP net earnings were $27.8 million, an increase of 3.5%, resulting in earnings per share of 85 cents on a non-GAAP basis.
And we continued to deliver strong cash flows cash flows from operations were $44 $5 million for the fourth quarter with quarterly free cash flow of $35 million.
I'm now going to turn the call back over to Martin to go through the detailed consolidated financial results for the company and the results for each of our business segments.
Thank you Ted.
As Ted mentioned overall, we delivered strong financial results in a challenging environment, our quarterly net sales of $213 $1 million were up 17.9% versus prior year with growth in all three segments human nutrition, <unk> health animal nutrition, and health and specialty products.
Our fourth quarter gross margin of $64 $1 million was up $7.2 million or 12, 8% versus the prior year.
Our consolidated gross margin percent was 30.1% of sales in the quarter down 138 basis points from 31, 4% in the fourth quarter of 2020.
138 basis point decrease was primarily due to increased raw material and freight and distribution costs, partially offset by higher average selling prices.
We've been managing inflationary pressures on here, although input cost increases further accelerated into the fourth quarter.
In the fourth quarter, we experienced approximately $22 million of raw material inflation compared to the prior year quarter, and approximately 9 million sequentially compared to the third quarter.
In addition, freight and distribution costs have increased dramatically driving approximately $3 million of increased costs in the quarter compared to the prior year.
Well, we are actively working to mitigate these challenges through alternate sourcing strategies and to recover these increased costs through pricing actions and in the fourth quarter, we pass through approximately $19 million in price increases.
As we've shared before there's usually a timing difference of approximately one to two quarters between increased costs and our ability to raise prices.
Salting and a negative impact to our gross margin in the interim period.
We've implemented additional price increases here in the first quarter of 2022 to help offset the higher input costs.
Following a rapid escalation of input costs.
Through the third quarter and into the third fourth quarter of 2020 . One we have seen a moderating increase of inflationary pressures in the later part of the fourth quarter of 2020 , one and into the first quarter of 2022.
In a scenario where material inflation is no longer escalating we believe we will be able to gradually return to more historic gross margin percentage levels in a few quarters' time period.
Operating expenses for the fourth quarter of 'twenty or 'twenty, one were $32 million as compared to $27.9 million in the prior year. The increase was primarily due to an increase in research and development.
Along with higher selling expenses, driven by an increase in compensation related costs.
GAAP earnings from operations for the fourth quarter were $33.8 million, an increase of $4 $9 million or 16, 9% compared to the prior year quarter.
On an adjusted basis as detailed in our earnings release this morning.
non-GAAP earnings from operations up $37.7 million were up $1.6 million or four 4% compared to the prior year.
Fourth quarter, adjusted EBITDA of $45 $6 million was $2 $1 million or four 7% above the fourth quarter of 2020.
Interest expense for the fourth quarter 2021 was zero point $6 million and our net debt was $5 $3 million with an overall leverage ratio on a net debt basis of 0.03 times.
The company's effective tax rate for the fourth quarter 2021 and 'twenty 'twenty were 24, 7% and 21% respectively. The increase in the effective tax rate was primarily attributable to a reduction in certain tax credits and lower tax benefits from stock based compensation.
Net income closed the quarter at $24 $9 million up 12, 6% from the prior year quarter. This.
This quarterly net income translated into diluted net earnings per share of 76 cents for the current year quarter, an increase of eight cents or 11, 9% compared with the prior year quarter.
On an adjusted basis, our fourth quarter adjusted earnings were $27.8 million.
Or <unk> 85 cents per diluted share up $1 million or three 5% compared with the prior year quarter.
We generated quarterly free cash flow of $35 million, and we closed out the quarter with $103 $2 million of cash on the balance sheet.
As we looked at it from a segment perspective.
Our human nutrition, and health segment generated strong quarterly sales of $115 $5 million, an increase of 11, 3% from the prior year.
Sales increase was driven primarily by strong sales growth within both our minerals and nutrients business as well as our food ingredients business.
Earnings from operations for our human Nutrition, and health segment was $17.5 million, an increase of seven 7% versus prior year.
Primarily due to the higher sales higher average selling prices and.
And an insurance reimbursement related to a flash flood event that occurred during the second quarter of 2021 <unk>.
Really offset by significantly higher manufacturing input costs higher freight and distribution costs and increased operating expenses, resulting from increased research and development costs.
Excluding the effect of noncash expense associated with amortization of acquired intangible assets of $4 $3 million impairment of convertible notes of $1.7 million in.
And offset by net insurance reimbursement of $2 $3 million adjusted earnings from operations for this segment were $21 $2 million, an increase of 0.3% compared to the prior year quarter.
Our animal nutrition and health segment also generated strong quarterly sales of $65 million, an increase of 27, 7% compared to the prior year quarter.
The increase was the result of higher sales in both the mono gastric and ruminant species markets.
Overall volumes within the animal nutrition and health segment were up 12, 1% with strong growth in sales to mono gastric species on higher volumes of feed grade choline and offerings for the companion animal market.
And solid growth in sales to ruminant species with our proprietary rumen protected encapsulated products.
Animal nutrition, <unk> health quarterly earnings from operations of $10 $1 million were up 19, 1% from the prior year quarter.
Due to the higher sales higher.
Higher average selling prices and an insurance reimbursement related to a flash flood event that occurred during the second quarter of 2021, partially offset by significant increases in manufacturing input costs and freight and distribution costs excluding.
Excluding the effect of noncash expense associated with amortization of acquired intangible assets of <unk> $1 million and offset by a net insurance reimbursement of $1 $7 million adjusted earnings from operations for this segment were $8 $6 million a decrease of <unk>, 9%.
Compared to the prior quarter.
Our specialty products segment delivered strong fourth quarter sales of $27.4 million, an increase of 12, 3% compared with the prior year quarter.
The increase was primarily due to higher sales of products for the medical device sterilization market, partially offset by lower sales into the plant nutrition market.
Sales of our performance gases products, which largely go into the medical device sterilization market grew volumes, two 6% versus prior year quarter, and one 7% sequentially versus the third quarter.
Showing a gradual recovery of this market. Despite the negative impact the omicron variant had on the number of elective surgeries.
Specialty products generated earnings from operations of $6 $6 million, an increase of $1 $2 million or 21, 8%. The increase was primarily due to the higher sales, partially offset by increases in manufacturing input costs and freight and distribution costs, excluding the effect of noncash.
Expense associated with amortization of intangible assets of $1 $2 million and offset by net insurance reimbursement of zero point $3 million fourth quarter adjusted earnings from operations for this segment were $7 $6 million, an increase of seven 6% with that.
I'm now going to turn the call back over to Ted for some closing remarks.
Thanks, Martin we are pleased with <unk> financial results reported earlier this morning capping off another great year for <unk>, where we delivered solid growth in both sales earnings and cash flows.
All of this while managing an exceptionally challenging environment with COVID-19 directly and indirectly bleeding to disruptions in global supply chains labor shortages and escalating cost inflation. We also continue to progress our strategic growth initiatives and remain encouraged about the long.
Term growth opportunities ahead of us.
Our results show that we are well positioned in attractive markets, where we have the leadership and capabilities to be successful not only today, but also into the future 2021 was a unique and challenging year for all of US I would like to once again take this opportunity to thank all of the <unk> employees across.
The World, who help make it happen every day.
You very much I will now 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, we will be conducting a question and answer session.
To ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.
You May press Star two if you would like to remove your question from the Q4.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the starkey.
Our first question comes from the line of Bob <unk>.
With CJS Securities. Please proceed with your question.
Yeah.
Good morning, Congratulations on strong operations.
Hey, Bob Thank you.
Absolutely.
So obviously some very good news certainly out of the Cornell study and stopping and really kind of in the last six months you have two very big kind of outside validation.
Including the Cornell study and then the NRC.
Recommendation as well so.
I guess my question is.
With this good positive backdrop and validation how do you.
Go grow the market further how do you lead Intuit what steps do you take is there incremental spending for raise awareness is at lobbying.
Just how do you take this with great information and validation yeah.
And drive growth going forward.
So Bob you're right we've had a.
Certainly those two recent validation, but but others as well and I think there are more and more to come and you know one reason we've talked about our investments in marketing over the last year or so is.
To some extent in anticipation of this because we really do need to it's not a matter of lobbying gov.
Governments, if if you will it's really a matter of of driving awareness building knowledge in the market place.
With the the the.
Institutions that matter with the.
The kids in the marketplace with our doctors nutritionists.
And with honestly, the supplement and and vitamin.
Manufacturers and in nutritional beverage manufacturers and so forth. So we've been investing significantly in marketing over the years and that's an important.
Part of of how we're going to leverage.
These new points of validation by driving awareness using you know different you know channels of communication are you know digital and otherwise.
To build awareness around these are these studies and the benefits of choline in and that's really the the the legwork and hard work that that we've been doing for some time, but we really need to continue to do an and it's not just these studies, but you know there are more to come we're really hopeful.
That you know the early part of 2022 we'll be able to talk about the important study that shows the the criticality of of choline with a D. H a mega three metabolism.
Again, just this is another validation that we can use in the marketplace, but that's.
That's really how we are we need to go about it.
Okay Super helpful. Thank you and then you gave us the update and you spoke about your new.
New product development and vitality.
Translated into sales in the past year can you talk about the pipeline going forward. How are you improving the product any exciting new products coming out this year that you're looking forward to getting to the market.
Yeah, Yeah, absolutely I think you know I'm not sure that that you know any are ready for prime time quite yet that we're ready to disclose but we will be releasing additional products. This year really you know across all three of our.
Business segments, we have some interesting new products in the plant nutrition space that we're really excited about that.
That bring a a bio stimulant capability to our micronutrient product line. So we're very.
We're excited about that.
In the animal nutrition and health space, we will be launching new products in 2022, both from a next generation perspective, as well as a really new to the market and whether that's new to the market ones are in the latter part of the year or in <unk>.
Year Theyre being worked on in and we're really excited about them and then also in our in the human nutrition <unk> health space and that really you have to look at that.
In in the two sub business units within that segment, the food ingredient space, where really we're constantly introducing new and exciting products to the marketplace. Many of those are our plant based protein beverage systems.
And so forth and we'll be introducing many products in that area and then on the other side, where we think about the minerals.
And choline nutrients business.
We're working on some some interesting new developments there so.
Yeah, we're spending more money today on R&D than we ever have arguably we should be spending even more.
But we're we're definitely differentially, adding investment to our R&D organization and importantly, as we just talked to go out marketing as well because I think they go hand in hand.
So we're beefing up investment we're excited about the portfolio.
And we're looking forward to introducing yes, new products to.
To the marketplace this year and in the coming years.
Okay Super Thank you so much.
Thanks, a lot Bob.
Our next question comes from the line of Ram <unk>.
With H C Wainwright.
Please proceed with your question.
Hi, Thanks, very much for taking my questions. Firstly, just generally with respect to the overall economic macro environment.
Can you maybe talk a little bit about how.
How you're anticipating you know pricing adjustments may be outstripping inflation or if youre looking at just sort of keeping pace with inflation going forward and.
What you expect the outlook to be with respect to our you know.
Updated pricing levels may be sticking around even after inflation abate.
And then also if you could maybe drill down a little bit on you know what additional actions you can take to mitigate transportation costs now that you know you have a.
Clearer sense of where the worst culprits are we know what the most significant drivers of those costs are if there's anything you can really do operationally on that front that would be helpful to know.
Yeah. Good morning Ram. This is Martin maybe we'll start on the pricing side of the house, where you know.
Throughout the year actually in 2021 we have consistently been proactively taking price increases in response to the inflation. Many times actually thinking that we were getting ahead of the inflation.
For example, if we thought we had a a dollar of inflation, we would you know.
Price of $1 25, or so and that inflation has sort of accelerated in outstripped our expectations that we've ended up on the short side of it in many of our pricing actions, which was the case for full year.
We have here in the first quarter and late in the fourth quarter implemented additional price increases that would put US ahead, if inflation stopped so to speak if prices were flat. We have we have priced through so that we can recover some of what we've lost here in the year.
So the question is really we're pricing to recover and to get our margins to return where they have been historically, so that we get back there, but we don't control is really where where inflation goes.
So I cant tell you that that.
What play out that way, but should inflations.
Continue to go up we do expect that our margins will recover based on the price actions that we've already taken and the ones that are coming here in the next month or so based on the plan.
The sticking around of the prices to your second part of the question of Okay, well these elevated prices hanger.
Hanging around even if if input costs come down that varies a little bit depending on where in the portfolio you look.
We have some parts of the portfolio that follow more index pricing, where we've been hurt in 'twenty 'twenty. One S prices have gone up and the index sort of if there's a delay in the pass through that we've talked about many times in a reverse scenario where input costs come down there is a benefit to us right of a delay in the price.
<unk> coming down.
The other parts of the portfolio, where it's not tied to any index or so obviously like any any good business you try to hang onto the prices are.
To the best of your abilities, then that's really going to be dependent on the competitive dynamics and vary across the portfolio, where we can hang on to the elevated levels and where we have to give some of it back.
But.
And.
You know.
Deflation or if you've called it that aura in and a reduction in input costs.
We definitely you know.
Benefit from that net net.
And I guess on that last question, maybe I'll chime in on that on the transportation cost.
You know we've we've we have found some ways to mitigate the overall costs, but there's.
No way to avoid.
The inflation.
But we've we've dampened the impact somewhat and we've found that air freight spend was more fragmented.
I have multiple third parties than it needed to be or should be and so we've been consolidating some of that spend to to the extent that we can and we've found that.
You know leveraging a bigger spend with fewer.
Three pls has been beneficial from a cost perspective, particularly on certain lanes.
And so we're doing that we've also found.
That we can change.
Some of our supplier base and sourcing I'm thinking of one example, as we speak that we were buying a a European.
Manufactured product and shipping it to Malaysia for further processing and we've now found a more local or kind of within the area a source of that raw material that is enabling us to.
Really just avoid less you know reduce the amount of freight.
That we're using in and buy from from companies closer to air a point of need so we're doing that.
As well as the consolidation of our spend with fewer third parties and and that's helping but it's still a significant inflationary environment. We.
We will continue to work it.
But there's kind of no way around some inflation with we've found yet anyway.
Yeah.
Okay, and then just a couple of other quick ones. Firstly in general when you look at the HMH portfolio and the opportunities for expansion are you interested at all yeah broadening your exposure to the anti aging verticals, specifically and if so you know what might be some strategies that you pursue in that arena.
If not you know why not do.
Do you just not feel that it's attractive for that it's a good.
Overall strategic fit and then margin as usual I'll ask the recurrent question of you know what would your guidance be for us on 2022 effective tax rate evolution. Thank you.
Yeah, So maybe I'll take that one first on the tax rate I wouldn't change it to.
To what we've guided in the past around tax rate.
You know I think we came in here just above 23%.
Effective tax rate for 2021.
And I would expect a similar give or take a little bit plus or minus for 2022. So I would use that same number as the best estimate.
And ER to ER to the initial part of your question on the on the anti aging obviously there are anti.
Anti aging elements of the existing products that that we we serve some minerals more than than others, but yeah for <unk> M has an anti aging element to it and.
Even choline.
From a cognition perspective, we.
Firmly believed then and to date, there really arent any human studies, but theyre animal studies. There are the studies in young children that clearly show the cognitive benefits of choline and we will be embarking this year one of the studies that where we're at.
Really most excited about this year will be a study that looks like looks at choline.
The impact on dementia and Alzheimer's et.
And are we really believe that that there's an opportunity here for choline to be part of.
That discussion so of course that has a.
Events for our.
Anti aging so it is an interesting.
Category for US we already participate to some extent and we will continue to find ways to.
Play in that that area.
Great. Thank you very much.
Thanks, Rob.
Our next question comes from the line of Mitra Ram Gopal with Sidoti. Please proceed with your question.
Yes, hi, good morning, and thanks for taking the questions.
First just coming back on the pricing in terms of you clearly been having success implementing a several increases and just curious in terms of how much of a pushback you're getting and then maybe if you can talk about the pricing also in Europe .
Sure Yeah.
It's similar in many ways in in in Europe as it is in North America, but there are also some differences around product category and what's impacting us with Europe right now.
The natural gas situation in Europe is having a pretty significant impact on us many of our raw materials are natural gas derived so ah.
That's something that we're watching.
<unk> very closely and it is impacting us quite significantly but all in all we're seeing significant inflationary pressures both in Europe and and.
And in the U S and relative to push back I guess I would answer that.
This way that that you know, it's a really difficult.
Environment to be and we're having very difficult discussions with our suppliers about you know are we used to have quarterly cost increases from our suppliers. Our annual that went to quarterly in quarterly that went to monthly and monthly that have now gone to weekly in many cases and so.
You know those are are difficult discussions, where we're trying to represent ourselves and our customers and we're having to have those very difficult discussions with our customers as well as we pass on these are significant increases and and you know it kind of takes away from.
The discussions you want to be have been around growth the new product introductions and all of those things, but I would say generally speaking.
Given the fact that.
Everybody is experiencing a significant inflation, whether its minimally labor inflation to a whole host of yeah raw material input Inflations were doing this in an environment, where we're sort of all in the same.
But if you will and so I think generally speaking with with a better received by our customers with support and understanding and and we are able to move.
Move prices forward, because they're having to move you know their prices as well because it's not just us coming to them with these inflationary increases. So so all in all I think we're in the same.
Boat together, it's difficult, but but generally.
Ah well received the one area that I have talked about I think I talked about in Q3 that.
<unk> is a bit more of a challenge than others are.
B and some of the <unk>.
<unk> areas, particularly in the dairy industry, where some.
Some of these cost increases, whether it's air products or others can.
You know caused some demand destruction.
And so that's one area that where we're maybe having a little bit more pushback or more of a cautionary.
Approach than than elsewhere, but well that's a very important market for us and then we are bullish about it long term. It's again in the Grand scheme of the company relatively small part of the company.
Hopefully with activity.
Yeah, no. Thanks for the color there.
And then just on the M&A front pre pandemic, you're able to get a couple of deals are done just before the onset.
Of Covid, but nothing since then with it.
The pandemic receding just curious in terms of your appetite for M&A and you know has.
The environment changed as it relates to maybe some opportunities that are out there that might not have existed before and potential what youre seeing in evaluation front.
Yes, I think certainly our appetite is the same as it's always been.
We've always been very keen on.
Leveraging our balance sheet too too.
Improve the strategic positioning of our company and the growth profile of our company by making really smart.
Acquisition, so our appetite is exactly the same.
Covid.
It impacted us a little bit I think I've also been clear about that for maybe six months and early Covid. We were scratching our heads how can we do an acquisition you know without touring the plant in meeting the people in and all of that you know I think that's certainly behind us and and you know where we're active.
And I would say as active as we were pre COVID-19 valuations are high and so I do think that may be more than ever.
We need to be we need to do all the appropriate due diligence and modeling and in cash flow discounted cash flow analyses.
To make sure that we're getting something that we can.
Have a return on them. So you know valuations I would say are creating some challenges, but you know everybody knows it's been an incredibly hot M&A market. There are a lot of properties on the market for sale, partly because they wanted to take advantage of those high.
Valuations are.
So we're active our appetite is the same as it ever has been.
We will continue to identify as we have for the last 18 months.
A really interesting strategic opportunities for our board too.
To consider and and I'm confident that as we continue to do that we will you know.
Add acquisitions to two our company once again like as you pointed out we did more actively pre COVID-19 .
Okay. Thanks, that's great and then finally just quickly I don't know if you.
You have an update on.
Cure Mark relationship and what's going on there.
Yes, I do have a you know I I.
Theres nothing significant or material to report, but I do I can speak to.
An update there the relationship with Caremark is.
As strong as it ever has been I've talked about in the past that we decided.
A couple of years ago to change our third party manufacturing partner and I'm very pleased that that we did that and.
The.
Struction of that equipment in that cell.
Is complete and we're running as we speak validation batches in that equipment.
And so you know that.
<unk> is very near ready to.
Ron.
Launch type quantities of.
The needed materials, so from our perspective, after making a pretty significant decision a couple of years to go to change our manufacturing partner, we feel like we're very very close to being ready to.
Manufacturer product to supply to our to the market.
As it evolves and relative to Caremark again, we've got a very good working relationship with them.
They continue to be doing everything that they need to be doing to file the BLA.
Again, we believe based on what we're seeing and what we're hearing that will happen.
Happen this year.
And part.
Part of that filing is.
<unk> has been waiting a bit on us to complete this this manufacturing capability and so that milestone will soon be behind us and.
We'll be supporting data from <unk>.
Those those qualification batches and so forth for the BLA and so.
So we continue to progress you know we still are excited about the possibilities of of caremark in not too distant future.
Okay. Thanks for taking the questions.
Thanks, So much mitra thank you.
That is all the time, we have for questions I'd like to hand, it back to Mr. Harris for closing remarks.
Yeah, Thanks, Doug and once again I'd just like to thank everybody for joining our call today, we're really pleased with our results for the fourth quarter of 2021 .
Particularly given the macroeconomic challenges that we've been facing and the full year of 'twenty 'twenty. One was just another very strong year for the company and one that we're very proud of we set new records financially while.
While continuing to make good progress strengthening our company strategically so we really appreciate your support throughout the year as well as your time today and it's hard to believe we're all going already going to be announcing our Q1 2022 results in April , but we look forward to doing that.
And thank you again for joining the call. This morning. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Yeah.