Q1 2022 Balchem Corp 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. As a reminder, this conference is being recorded I would now like to turn the conference over to your host Martin Bengtsson Chief Financial Officer for Abalkin. Thank you you may begin.
Thank you Melissa good morning, everyone and just for clarity. This is their first quarter conference call enough that fourth quarter.
So thank you everyone for joining our conference call. This morning to discuss the results are back in corporation for the quarter ending March 31st 2022 My.
My name is Martin Bengtsson, Chief Financial Officer, and hosting this call with me is Ted Harris, our chairman CEO and President.
Following the advice of our counsel auditors and the FCC 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. Thanks, Martin Good morning, and welcome to our conference call. This morning, we reported very strong first quarter results with strong revenue and earnings growth.
Revenues of $228 $9 million were up 23.3% and our adjusted earnings from operations were $44 $6 million up 19, 4% versus the prior year quarter.
Our first quarter net income of $28 $9 million, an increase of 23.6% resulted in earnings per share of 89 cents on a GAAP basis on an adjusted basis, our first quarter non-GAAP net earnings were $33 4 million.
Or one dollar and three cents per share an increase of 17.3% cash from operations was $7 million for the first quarter of 2022 .
Overall, a great start to 2022 with performance that highlights the strength and resilience of our business model, particularly given the inflationary and supply chain challenges the markets have been facing the demand for our products remains strong and.
In servicing this demand through these macroeconomic and geopolitical challenges is a top priority before passing the call back to Martin to cover the detailed financial results by segment I would like to spend some additional time talking about the extraordinary inflationary and supply chain challenges.
Our company is currently facing and some of the actions we've been taking to address the challenges.
The macroeconomic and geopolitical environment that we are working within today is truly unprecedented we are experiencing significant supply chain disruptions in the form of raw material shortages logistics delays long lead times on parts and equipment and of course significant inflationary.
Pressures on most if not all of our input costs in the first quarter of 2022 we experienced year over year inflation of approximately $28 million and subsequently from the fourth quarter of last year, another $9 million of inflationary headwinds.
While it is obviously very difficult to predict what will transpire moving forward given all of the current market volatility we expect inflationary headwinds to continue at least through the next few quarters. We are pleased with the pricing actions, we have taken thus far and believe ultimately.
That we will be able to recapture the majority of these higher costs overtime in many areas. We have moved from annual or quarterly pricing actions to taking monthly and even weekly in some cases pricing actions to add increased flexibility for us to respond to changes.
And our input costs. This is a dynamic environment and we have needed increased pricing flexibility to respond accordingly, and we were pleased to have realized margin improvement in Q1 of 2022 sequentially versus Q4 of 2021 based on our pricing actions.
We have yet to see material demand destruction as a result of the cost increases that we have passed on today.
Our customers are in turn raising prices, we are working closely with our customers to together combat. These inflationary challenges and we will continue to do so while watching demand indicators closely while prices are critical response lever to offset the inflationary pressures we are facing.
We are also look working hard throughout our supply chain to address the broader supply chain challenges as you know our company is primarily a north American focused company with approximately 78% of our revenues coming from products sold in North America with the <unk>.
Overwhelming majority near 90% of those North American sales coming from products manufactured in North America with raw materials sourced in North America, while we aspire to become more international over time. This aspect to our business has been and will continue to be helpful. As we.
Manage these global supply chain challenges.
When and where possible we are actively working to build inventories of both finished goods and raw materials to build buffer qualifying alternate suppliers to expand sources of key raw materials partnering with third party logistics providers to ensure dedicated service for certain routes.
In adding new production capacity like we have done for our plant nutrition and food encapsulation businesses to add both needed capacity, but also supply chain redundancy. We are pleased with our response to these challenges to date and certainly the performance of the company in this environment, but it is.
A challenging operating environment, and we remain prudently cautious about our outlook for the coming quarters from a supply chain disruption and inflationary pressure perspective, once again the demand for our products remains strong and servicing this demand through these macroeconomic and geopolitical challenges is a.
Top priority and before I hand, the call back over to Martin I would like to let you know that last week on Earth day, we.
We released our 2021 sustainability report, which captures the company's commitment to managing our environmental social and governance performance Falcons sustainability initiatives are fully integrated into our business strategies and are critical to our vision of making the world a healthier.
Place, we have taken meaningful steps toward advancing diversity inclusion and belonging biochem and remain committed to fostering a diverse and inclusive culture in which everyone feels welcomed valued and appreciated well inspiring our external stakeholders to share our vision.
Our sustainability report demonstrates the company's continuing promise to provide our employees customers shareholders and the communities within which we operate with information on Balcombe sustainability initiatives and includes our progress on our 2030 goals and strategies for both.
The emissions and water usage reduction by 25% I would encourage you to go to <unk> Dot com to read the report to get a broader perspective on all of the great work we are doing.
And with that I will now turn the call back over to Martin to go through the detailed results for each of our segments.
Thank you Ted.
We delivered overall strong financial results in a challenging environment, our first quarter net sales of $228 $9 million or 23, 3% higher than the prior year comparable quarter.
We delivered double digit sales growth in all three segments human nutrition, <unk> health animal nutrition, <unk> health and specialty products.
The growth was driven both by increased volumes and increased average selling prices as we continue to recapture higher input costs by raising prices in this inflationary environment.
Our first quarter consolidated gross margin dollars of $71 $5 million were up $12 $8 million or 21, 8% compared to the prior year.
Our gross margin percentage was 31, 2% of sales down 39 basis points compared to 31, 6% in the first quarter of 2021 and up 110 basis points sequentially versus the fourth quarter of 2021.
Input cost inflation continues to be significant.
While we started to see signs of slowing inflationary pressures in the later part of Q4 last year, we have since seen a further acceleration of rising input costs in the first quarter of 2022 compared to the fourth quarter of 2020 one.
Due at least in part to the geopolitical environment.
Fairly successful so far and racing average selling prices to help offset the inflationary pressures.
Continues to have a dilutive impact on margins.
Consolidated operating expenses for the first quarter of 2022 were $33 2 million as compared with $28 $2 million in the prior year.
The increase was principally due to certain higher compensation related costs and an increase in outside services.
GAAP earnings from operations for the first quarter were $38 $3 million, an increase of 25, 4% compared to the prior year quarter on.
On an adjusted basis as detailed in our earnings release. This morning, non-GAAP earnings from operations of $44 $6 million were up 19.4% compared to the prior year.
Record adjusted EBITDA of $53 $6 million was $7 $9 million or 17, 2% above the first quarter of 2021.
Interest expense for the first quarter of 2022 us half a million dollars and our net debt was $64 $1 million with an overall leverage ratio on a net debt basis of 0.3.
The company's effective tax rates for the first quarter of 2022 and 2021 or 23, 1% and 29 21, 9% respectively.
The increase in the effective tax rate was primarily due to reduction in certain tax credits and increased international income subject to higher foreign tax rates.
Consolidated net income closed the quarter at $28 $9 million up 23.6% from the prior year.
This quarterly net income Trask translated into diluted net earnings per share of 89 cents for the current year, an increase of 17 cents or 24, 3% from last year's comparable quarter.
On an adjusted basis, our first quarter adjusted net earnings were $33 $4 million or $1.03 per diluted share up 17, 3% compared with the prior year quarter.
Cash flow from operations were 7 million for the first quarter of 2022, compared with $40 6 million in the prior year comparable period. The decrease in cash flows from operations was primarily driven by changes in working capital and the timing of increased sales restocking of inventory in payments to suppliers we.
These timing impacts to be less impactful on a full year basis, and we expect to continue to generate strong cash flows overall.
As we looked at it from a segment perspective for.
For the quarter, our human nutrition, and health segment generated record quarterly sales of $122.4 million.
Increase of 17, 2% from the prior year.
The increase was primarily driven by strong sales growth within food and beverage markets and higher sales of key late in minerals.
As a result of both higher volumes and higher selling prices.
Our human Nutrition and health segment also delivered record quarterly earnings from operations of $23 million, an increase of point $6 million or three 1% compared to the prior year.
Primarily due to the aforementioned higher sales, partially offset by higher manufacturing input costs and distribution costs, along with increased compensation related costs within operating expenses.
Excluding the effect of noncash expense associated with amortization of acquired intangible assets of $4 million adjusted earnings from operations for this segment were $24 $3 million, an increase of 1% compared to the prior year quarter.
Our animal nutrition, and health segment generated record quarterly sales of $69 $3 million, an increase of 35, 6% compared to the prior year.
Increase in sales was primarily the result of higher sales in both the mono gastric and ruminant species markets, partially offset by an unfavorable impact related to changes in foreign currency exchange rates negatively impacting growth by $1.1 million or two 2%.
These higher sales were driven both by higher volumes, primarily a feed grade choline reassure our encapsulated choline product Aminosugar exam are encapsulated in methionine product and offerings for the companion animal market.
And higher average selling prices across most of our product offerings.
Animal nutrition and health delivered a record earnings from operations of $11 $3 million, an increase of 123, 9% from the prior year quarter, primarily due to the aforementioned higher sales, partially offset by increased manufacturing input costs and distribution costs due to inflation.
And higher compensation related costs within operating expenses.
Excluding the effect of noncash expense associated with amortization of acquired intangible assets appoint $1 million.
Adjusted earnings from operations for this segment were $11 $5 million, an increase of 119, 8% compared to the prior year quarter.
Our specialty products segment delivered quarterly sales of $33.3 million, an increase of 19% compared to the prior year quarter. The.
The increase was primarily due to higher sales of products in both the plant nutrition business and the medical device sterilization market, partially offset by an unfavorable impact related to changes in foreign currency exchange rates.
Negatively impacting the growth by one 8%.
These higher sales were driven by both volume growth, particularly with our plant nutrition business and higher selling prices.
Specialty products segment had first quarter earnings from operations of $7.8 million, an increase of 8% compared to the prior year.
The increase was primarily due to higher sales, partially offset by increases in manufacturing input costs and distribution costs and higher compensation and related costs within operating expenses.
The effect of noncash expenses associated with amortization of intangible assets of $1.1 billion first quarter adjusted earnings from operations for this segment were $8 $8 $9 million an increase of 3%.
Now I'm going to turn the call back over to Ted for some closing remarks. Thanks. Martin we are extremely pleased with <unk> financial results reported earlier this morning, and a strong start to 2022 .
We delivered all time record revenues with revenue growth in all three of our business segments, not only versus the prior year's quarter, but also sequentially versus the fourth quarter 2021 .
We also delivered strong earnings growth. Despite the extraordinary inflationary environment, we are operating within showing the resilience of our business and our ability to recover the cost increases through pricing that being said the markets continue to be very volatile and disruptions to global supply chains continue to make it extremely dip.
Adult to operate effectively and efficiently our employees continued to do an exemplary job in finding creative solutions to challenges never seen before I would like to once again take this opportunity to thank all of our employees for an incredible work they do for our company our customers and our key stakeholders.
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 if you'd like to ask a question. Please press star one on your telephone.
A confirmation tone will indicate your line is in the question queue you May press star two.
A question from the queue.
For participants using speaker equipment, it may be necessary.
Sorry to pick up your handset.
Darcie.
Our first question comes from the line.
Okay.
Please proceed with your question.
Good morning, Thanks for taking the question.
Oh God.
Hi, So obviously, you're operating a well through a ton of macro volatility and you outlined that very well congratulations on making it look easy I wanted to.
Maybe just shift the focus a little N C and just ask what are the biggest areas that you're focused on that are under your control when youre, not blocking and tackling and like.
Reworking the business to get through this volatility what do you have your eyes set on for the biggest kind of our internal goals for 2022.
So Bob you know, thank you for the comments and and the comment specifically around making it look easy I just want to make.
Make it clear that it really isn't easy.
It's pretty pretty tough out there with all these supply chain challenges in an inflationary challenges, but I do feel good about how the company has responded and how we're managing through it.
You know I think that that are the things that we can control by and large are our strategic growth initiatives and so we continue to set our eyes on achieving those milestones and when I think about you know our business segments and in H and H. It's.
Driving awareness of the benefits of choline.
And building science around that building, our marketing programs that we've talked about in the past yeah. Those are all largely within our control and know that again I don't think we can officially say that the pandemic is behind us but.
We're back investing in doing a scientific studies that we took a bit of a pause from early in 2022 early in the pandemic and yeah.
We're back making those happen and those are the types of actions that will ultimately.
Drive the prolific growth and in our minerals and nutrients business that we believe is there and so that's within our control and we continue to to drive those actions you know focusing on on building our R&D pipeline.
Of products, whether it's in the human nutrition health or ammonal animal nutrition health or even plant nutrition.
You know, where we are I would say you know very much back on track relative to all of those kinds of investments and those are within our control the caremark delivery system, we continue to.
Work on our manufacturing preparedness for ultimately and hopefully the launch of that product. So we're working hard there that's within our control and and feel good about that yeah, if I think about animal nutrition and health.
There's still a significant opportunity for us to drive penetration of our flagship product reassure our rumen protected or encapsulated.
Choline and trying to drive the increased penetration of not only the U S Cal population, but but the European.
Further penetration of the market with our <unk> X M product I think is is clearly yeah in air control and something that that yes, largely we can continue to focus on and then yeah plant nutrition. It's similar we've been driving you know.
Very strong double digit growth in that business for some years and Q1 was a continuation of that in and are launching new products. There driving geographic expansion and are driving adoption of our products in a broad.
What are a group of crops is again, all within our control and so yeah, we really do.
Believe that that the growth initiatives that we've talked about as a company.
For quite some time are still available to us still largely within our control and that's where we focus our you know much of our resources and and you know you're you bring up a really good point you know how do you how do you not get completely 100% disk.
Drafted by all of the macroeconomic and geopolitical challenges that are out there and I feel like we're doing a pretty good job of that yeah. We're obviously, having to dedicate significant resources to dealing with all of those those challenges but.
As we said in the press release and I'll say it now you know I feel really good about our Q1 results.
Particularly in light of the challenges that we face from a financial perspective, but also from our progress on our strategic initiatives perspective. So we do continue to make progress in those areas. We can control a little bit of a long winded answer to your question, but a very very relevant for everything that that the.
She is facing and certainly we're not alone there.
I don't have a super answer and thank you for all of that that's appreciated.
And then shifting to the balance sheet, maybe give us I noticed that you know maybe a little acceleration of the repurchase in the quarter talk about capital allocation I know you've you always look for acquisitions, it's been tough of late given given the volatility in the market and then valuations and things like.
So maybe an update on kind of expectations for capital allocation given the strength of the balance sheet.
Yeah, absolutely Paul this is Martin.
Fundamentally nothing has changed in our capital allocation strategy in terms of focusing.
Primarily on our organic growth first drive R&D and so on so forth.
And paying our dividend as you've seen over the last decade, and I sort of committing to that one and continuing to grow that one and.
And we've been paying down debt to your comment of whether we've accelerated our repurchases of shares I would say as we've said in the past when we repurchase shares really for anti dilutive purposes.
Our equity programs just to try to keep the share count relatively flat over time and that we're not necessarily venturing off on any large or share repurchases programs asset strategy and that is still our strategy. In this case that happened a little bit earlier in the year than some other years, but fundamentally.
It's just kind of to offset the dilutive impacts all of other programs to our share counts.
And that's really what you've seen out there from an M&A perspective, it continues to be very active.
We have been active despite the fact that nothing has closed over the last two years as you've noticed we have been participating in a lot of processes and then evaluating targets are and we.
To do that and it is very active at the moment as well.
It's just very hard to.
Predict whether you're going to close on any transactions or not we keep a participating in and identifying the right targets, but you also want to make sure that you're very disciplined in your evaluation Oh purchase price and risk. So that you don't make any mistakes that you regret later and we keep.
To maintain that discipline.
Okay Super Thank you so much.
Thanks, Bob.
Thank you. Our next question comes from the line of Ram Silverado.
Please proceed with your question.
Thanks, very much for taking my questions then Rick Congrats on solid performance under challenging conditions as always.
Firstly I was wondering if you could talk a little bit about where you think the tipping point might lie with respect to our being some kind of price elasticity of demand given the current inflationary environment. The fact that Oh, those pressures don't appear likely to abate.
So is there a tipping point and if so you know.
Where might you expect to see it both from temp oral perspective, and with regard to you know actual percentage increases in pricing.
Okay.
Yeah, you know, obviously again, a very relevant question given what we're facing and in the prepared comments you heard me say that we have not seen any demand destruction of materiality yet.
And that's absolutely the case, but.
Given furthering of inflationary pressures and a continuation of of inflationary pressures.
Yeah, we need to obviously be cognizant of of getting to a point, where you might see some demand destruction.
But again just to be clear, we have not seen that to date b are the area that that we feel is an area maybe that that we'll see it first and maybe we've seen some signs of it would be I think in the air.
Ruminant business within animal nutrition.
So that the dairy industry, where.
Our products are not necessarily a designated as essential nutrients. They have a clear value proposition of our turn on investment.
That very much.
Holds true today.
Relative to a return on investment, but you know can be taken out at the discretion of the dairy farmer and so if dairy prices come down and margins of the dairy farmers get.
Get squeezed heavily and overall inflationary pressures continue we think that that would be one area.
That we would see some demand destruction I think from a positivity perspective, there the value proposition is real and so we do feel that that would be a temporary demand destruction, but that that is probably the first area that we have concern.
About and so we're watching that carefully and if if we peel the onion back a little bit on the margins of error a portfolio of products, we've seen more margin.
Deterioration in that business, because we've been a bit cautious about that and it's quite different than the rest of our animal nutrition business, where choline. Our primary product is designated as an essential nutrient.
So we don't feel as though today.
Choline would be taken out of our companion animal or pet food formulations.
Formulations, because it is as a central nutrient and our customers in and those spaces are by and large are raising prices.
You know do we think that there is some point at some time, where our consumers may start buying less.
Our pet food or treats or things like that that could possibly happen.
Happen certainly transition to lower cost.
Products, but again, we're not there its very very hard to judge at what point.
You would get there, but our primary concern is really around the ruminant business, which again is a relatively modest part of our overall portfolio, we have not seen any signs of of our.
Demand destruction and air.
Minerals and nutrients business, but at some point as the consumers start to respond by.
Taking pure supplements that that could possibly happen, but again, we're not we're not seeing that it's really difficult to tell.
To tell at what point, we get there and again as I said in the prepared remarks, where you know we're working closely with our customers. We're walking watching market indicators to see early signs of those types of things and we're not there yet but.
But but we need to watch it closely.
That's very helpful.
Two other quick areas.
Interest for me one is you know when we look at the overall geopolitical environment.
Central interest re emerging and boosting domestic oil production do you think that this might signal down the road a return to a you know fracking rates of years gone by and potentially increased demand industrial demand for choline use and then all side was wonder.
If within human nutrition, and how you're thinking about the possibility of moving into higher margin areas, such as medical foods to complement your existing ingredients business.
Okay.
So let me tackle the oil and gas question first you know first of all in Q2 Q1 of this year. So the current quarter that we're talking about or oil and gas volume was up 62%.
So we are seeing growth in that business now quickly it's important to say that's from a very low.
Base and the overall contribution of that that business is still quite small.
But we are seeing a logical grows in that business based on the.
The increased rig count that are that we are seeing there, but you know the overall rig count still.
As you know a fraction of what it once was at its peak.
We believe that that the fracking activity well will you know methodically continue to grow and likely we will see a continuing tailwind.
In that business through a throughout the year, we do think that things are fundamentally changed in that business that that our business will never.
Grow back to the 100 million dollar business that it was in 2014.
But.
You know could it double from where it is today.
We do think that that that's possible because you know choline does bring an important benefit to certain fracking fluids.
And we believe that we will see some growth, but again there have been fundamental changes there's increased recycling of.
Of.
Fluids are in the process at all or already have chlorides.
And there's a bit of a less need for choline. So we we really don't think it's the same market today, but we're going to continue to see some nice tailwind, albeit pretty small.
From that business with increased fracking in this country. So that's that's the answer to the oil and gas and in human nutrition and health I think this is a very interesting.
Comment then and we just had our strategic planning session with our board a few weeks ago and spent some time talking about this very topic ROM around medical foods, and maybe higher margin applications and we really do if you can kind of think of yeah.
Three joining circles and and you have the food business you have the nutrition business and then you have an emerging opportunity in and.
Masuda coal that are certainly cure mark as part of that we have some other opportunities as well and there are some very interesting overlapping areas. So you have the fortified foods space where.
We really do have.
Interesting technology, both from a nutrition perspective, and a food perspective, where we can take advantage of those fortified.
Food opportunities nutritional beverage opportunities and we are seeing nice gains there and an opportunity it's not.
What we would like it to be yet there's a significant addressable market that we have to go after but there's also that same overlap between the nutrition circle. If you have that that thought in your head and that that pharmaceutical area, which is really more medical foods and.
And we do believe also we have some unique capabilities there to take advantage of that and see that you know as the trends move more toward personalized nutrition.
That that will be a growing space and an opportunity that we can.
Focus on you know, we did make that investment a couple of years ago and S. N P which is.
Really a DNA dot dark diagnostic company.
A company that is focused on identifying essentially DNA errors in people around that impact there are absorption and metabolism of certain nutrients that ultimately will will lead to an individualized medical food.
<unk> or <unk>.
Yes supplement regimen, and we really feel like being part of that investment in and kind of on the ground floor. There I think is an important growth opportunity for us to go after just that market that you are you highlight so so yes, we do feel like there's an opportunity we don't have a whole lot of business there.
But we've got capabilities in <unk>.
And where we're focused on it.
And then lastly, just for Martin I was just wondering if you could give us some guidance regarding expectations around effective tax rate and if that 23, 1% great.
What we should be expecting for the remainder of this year.
Yeah, I think that's a not.
Not a bad estimate or maybe a little bit higher a little bit below but it's a good estimate.
To use for the full year as well.
Thank you.
Thanks, Rob.
Thank you. Our next question comes from Mitra <unk> with Sidoti. Please proceed with your question.
Yes, hi, good morning, and thanks for taking the questions.
First congrats on the.
Nice job you've done in terms of being able to combat this environment.
And the success you've had with implementing price increases just curious if you have more flexibility on that front as the year progresses or is this.
Things do get worse, you probably have to kind.
Kind of keep some of that.
So thanks Mitra for your comments.
Yeah, we feel like at this point in time, we have restructured how we do pricing to provide us the flexibility that we need as as they talked about.
Even in some cases, it's not a significant part of our portfolio, we've moved to weekly pricing.
Which you know is there's just a long way from from anywhere we've ever been and we've gone from kind of a norm, maybe not even a contractual situation, but in a normal.
Operating situation of of annual pricing increases to our <unk>.
Monthly price increases, which was a huge shift so I feel really good about the flexibility that we now have to be able to respond monthly and in most cases.
Two weekly in some cases and maybe the longest we really have is quarterly.
So I think that we're well positioned from a pricing perspective too.
Kind of recover the costs as as needed and obviously, what what we really need is a slowing of of the inflationary pressures are.
As the the you know increase rate of of course diminishes.
We'll start to catch up and and that's what we're looking forward to.
Okay, No that's great and then just on the specialty products.
Segment I know you had highlighted.
Nutrition business seem like based on what we saw in <unk> versus this quarters, It's obviously had a nice uptick.
So I'm, just curious what might be driving that.
So plant nutrition.
It really has been a business now for the last.
Two and a half years I want to say we have been.
Growing that business that 20% to 30%.
Annual Lee, which yeah, we feel really really good about and.
It has been a combination of introducing new products to the market.
Our geographic expansion and just expanding the number of crops and types of crops that that we've been on and we've accomplished that through some additional investments in our agronomists are selling our products as well as some marketing.
Expertise so.
Part of it is certainly you know us executing our strategic plan to add those those are agronomists to target those geographies to invest in new product development to launch those products.
And and so forth.
We really feel like we've got a very good product line that is differentiated that works well.
And you know, it's a matter of driving the market penetration for the last few years with we've had.
Better weather conditions I would say then.
Then we did in the previous three years, while certainly, California is not out of of the drought.
The winter Snow has has helped.
And so that hasn't been a as big of a negative on that business in the last few years as maybe it was a prior to that but I think by and large it really has been the actions that we have taken.
That have.
Driven that a significant double digit growth in and we're excited about it it's still a very small product line across our company, but we're excited about the growth potential of it.
Okay, No that's great and then finally, just curious in terms of S.
SG&A leverage I know one thing you've talked about in the past is.
IDT liking.
We turned back to the office so to speak and.
Wondering if you're starting to incur some incremental expenses as a result of.
That's starting to happen more and more.
Yeah.
Mark than.
We are starting to see that.
If we look at our our Opex as a percentage of sales is still very low is we're obviously growing the sales of lots of the percentage can maybe be a little bit misleading. If you look at the actual spend has gone up a little bit really driven by by two things.
It's primarily actually compensation driven as we've made further investments into our sales and marketing and R&D capabilities.
Hired people to enable us to drive that growth that's the bigger chunk of it but we are seeing the discretionary spend gradually coming back in you know in terms of increased traveling going out there to see the customers also the outside spend.
Some of the research trials that have been on hold are now kicking in again in starting up together with universities et cetera, and also a little bit more of the the typical sales.
Sales conferences trade shows et cetera that we see sort of gradually coming back and so it's I would say when we look at the spend today. It does feel that were emerging into sort of the post pandemic kind of spend level again as opposed to the pandemic reduced spend level.
Okay. That's great. Thanks, again for taking the questions.
Thanks Peter.
Thank you ladies and gentlemen. This concludes our question and answer session I will turn the floor back to Mr. Harris for any final comments.
Thanks, Melissa once again, thank you very much for joining our call today, we really appreciate your support as well as your time today and we look forward to reporting out our Q2 2022 results in a in July in the meantime, we will be presenting at the H C. Wainwright conference on May 23rd as well.
As the Sidoti Conference on June 16th and potentially some others. So stay tuned for press releases about those.
But thank you again for joining us today, we really appreciate it.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.