Q2 2024 Balchem Corp Earnings Call

July 26, 2024

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Theodore Harris: Theodore Harris, Robert Labick, Carl Bengtsson, Raghuram Selvaraju, Kyle May, Anthony Polak, and welcome to Balchem's second quarter, 2024 earnings call. At this time, all participants are in a listen-only mode.

Operator: Greetings and welcome to Balchem's second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A brief 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.

Speaker Change: Greetings and welcome to the Balchem's second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.

Operator: A brief 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.

Speaker Change: 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, Martin. You may begin.

Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Martin Bengtsson, Chief Financial Officer. Thank you, Martin. You may begin.

Operator: It is now my pleasure to introduce your host, Martin Bangston, Chief Financial Officer.

Operator: Thank you, Martin. You may begin.

Martin Bangston: Thank you, and good morning, everyone. Thank you for joining our conference call this morning to discuss the results of Balchem Corporation for the quarter-ending June 30th, 2024. My name is Martin Bangston, Chief Financial Officer, and host in this call with me is Ted Harris, our Chairman, President, and CEO.

Carl Martin Bengtsson: Thank you, and good morning everyone. Thank you for joining our conference call this morning to discuss the results of Balchem Corporation for the quarter ending June 30, 2024. My name is Martin Bengtsson, Chief Financial Officer, and hosting this call with me is Ted Harris, our Chairman, President, and CEO. Following the advice of our Board, our Auditors, and the SEC, at this time, I would like to read our forward-looking statement. Statements made in today's calls that are not historical facts are considered forward-looking statements.

Carl Martin Bengtsson: Thank you and good morning everyone. Thank you for joining our conference call this morning to discuss the results of Balchem Corporation for the quarter ending June 30th, 2024. My name is Martin Bengtsson, Chief Financial Officer, and hosting this call with me is Ted Harris, our Chairman, President and CEO .

Carl Martin Bengtsson: We can give no assurance that the expectations reflected in forward-looking statements will prove correct, and various factors could cause actual results to differ materially from our expectations, including risks and factors identified in Balchem's most recent Form 10-K, 10-Q, and 8-K reports. The company assumes no obligation to update these forward-looking statements. Today's call and commentary also includes non-GAAP financial measures. Please refer to the reconciliations in our earnings release for further details. I will now turn the call over to Ted Harris, our Chairman, President, and CEO.

Martin Bangston: Following the advice of our council, auditors, and the ICC, at this time, I would like to read our forward-looking statement. Statements made in today's cost that are not historical facts are considered forward-looking statements. We can give no assurance that the expectations reflected in forward-looking statements will prove correct, and various factors could cause actual results to differ materially from our expectations, including risks and factors identified in Balchem's most recent Form 10-K, 10-Q, and 8-K reports. The company assumes no obligation to update these forward-looking statements.

Speaker Change: Following the advice of our council, auditors, and the SEC, at this time I would like to read our forward-looking statement.

Speaker Change: Statements made in today's cause that are not historical facts are considered forward-looking statements.

Speaker Change: We can give no assurance that the expectations reflected in forward-looking statements will prove correct and various factors could cause actual results to differ materially from our expectations, including risks and factors identified in Balchem's most recent Form 10-K , 10-Q, and 8-K reports.

Speaker Change: The company assumes no obligation to update these forward-looking statements.

Martin Bangston: Today's calling commentary also includes non-GAAP financial measures. Please refer to the reconciliation in our earnings release for further details.

Speaker Change: Today's call and commentary also include non-GAAP financial measures. Please refer to the reconciliations in our earnings release for further details. I will now turn the call over to Ted Harris, our Chairman, President, and CEO .

Ted Harris: I will now turn the call over to Ted Harris, our Chairman, President, and CEO.

Theodore L. Harris: Thanks Martin. Good morning and welcome to our conference call. This morning, we reported solid second-quarter financial results with growth in sales, record earnings from operations, and record adjusted EBITDA. I am particularly pleased with the excellent results within our human nutrition and health segment, which once again delivered strong sales growth and record earnings. In addition, I am very pleased with the strong results within our specialty products segment, which also delivered strong sales growth and record earnings.

Ted Harris: Thanks, Martin.

Ted Harris: Good morning, and welcome to our conference call. This morning, we reported solid second-quarter financial results with growth in sales, record earnings from operations, and record adjusted EBITDA. I am particularly pleased with the excellent results within our human nutrition and health segment, which once again delivered strong sales growth and record earnings. In addition, I am very pleased with the strong results within our specialty product segment, which also delivered strong sales growth and record earnings. Our consolidated revenues of $234 million were higher by 1.2% versus the prior year, with the strong growth in human nutrition and health and specialty products being partially offset by a decline in animal nutrition and health.

Theodore L. Harris: Thanks Martin. Good morning and welcome to our conference call. This morning we reported solid second quarter financial results with growth in sales, record earnings from operations, and record adjusted EBITDA.

Theodore L. Harris: Our consolidated revenues of $234 million were higher by 1.2% versus the prior year, with the strong growth in human nutrition and health and specialty products being partially offset by a decline in animal nutrition and health. Our gross margin dollars grew 7.3 percent, and we expanded our gross margin percentage by 210 basis points to 35.5 percent. Earnings from operations of $46 million were higher by 6.9% versus the prior year quarter, and we delivered record quarterly adjusted EBITDA of $62 million, an increase of 5%, with an adjusted EBITDA margin of 26.6% of sales, up 90 basis points from the prior year.

Theodore L. Harris: I am particularly pleased with the excellent results within our human nutrition and health segment, which once again delivered strong sales growth and record earnings.

Theodore L. Harris: In addition, I am very pleased with the strong results within our specialty product segment, which also delivered strong sales growth and record earnings.

Ted Harris: Our gross margin dollars grew 7.3%, and we expanded our gross margin percentage by 210 basis points to 35.5%. Earnings from operations of $46 million were higher by 6.9% versus the prior year quarter. And we delivered record quarterly adjusted EBITDA of $62 million, an increase of 5%, with an adjusted EBITDA margin of 26.6% of sales, up 90 basis points from the prior year. Our second-quarter net income of $32 million, an increase of 6.5%, resulted in earnings per share of 98 cents on a GAAP basis. On an adjusted basis, our second-quartered non-GAAP net earnings of $36 million, an increase of 3.3%, resulted in earnings per share of $1.9 on a non-GAAP basis.

Theodore L. Harris: Our gross margin dollars grew 7.3% and we expanded our gross margin percentage by 210 basis points to 35.5%.

Theodore L. Harris: Earnings from operations of $46 million were higher by 6.9% versus the prior year quarter.

Theodore L. Harris: And, we delivered record quarterly adjusted EBITDA of $62 million, an increase of 5%, with an adjusted EBITDA margin of 26.6% of sales, up 90 basis points from the prior year.

Theodore L. Harris: Our second quarter net income of $32 million, an increase of 6.5%, resulted in earnings per share of 98 cents on a GAAP basis. On an adjusted basis, our second quarter non-GAAP net earnings of $36 million, an increase of 3.3%, resulted in earnings per share of $1.09 on a non-GAAP basis. Cash flows from operations were $45 million for the second quarter of 2024, with quarterly free cash flow of $38 million.

Theodore L. Harris: Our second quarter net income of $32 million, an increase of 6.5%, resulted in earnings per share of 98 cents on a gap basis.

Theodore L. Harris: On an adjusted basis, our second quarter non-GAAP net earnings of $36 million, an increase of 3.3%, resulted in earnings per share of $1.09 on a non-GAAP basis.

Ted Harris: Cash flows from operations were $45 million for the second quarter of 2024, with quarterly free cash flow of $38 million.

Theodore L. Harris: Cash flows from operations were $45 million for the second quarter of 2024, with quarterly free cash flow of $38 million.

Ted Harris: Overall, a solid quarter for Balchem with performance that highlights the strength and resilience of our business model. Before passing the call back to Martin to cover the financial results in more detail, I would like to make a few comments about the overall market environment and what we are seeing. Over the last four quarters or so, we have seen a gradual stabilization of demand and customers returning to more normalized order patterns. After the volatility we experienced in 2022 and the early part of 2023. When we look across our portfolio of businesses, we are seeing excellent performance in our human nutrition and health segment led by our minerals and nutrients business, where we continue to see strong end consumer demand for our unique portfolio of minerals, nutrients, and vitamins, and steady demand for our food systems. Our animal nutrition and health segment is going through a challenging time, along with the broader animal feed additive market.

Theodore L. Harris: Overall, a solid quarter for Balchem with performance that highlights the strength and resilience of our business model. Before passing the call back to Martin to cover the financial results in more detail, I would like to make a few comments about the overall market environment and what we are seeing. Over the last four quarters or so, we have seen a gradual stabilization of demand and customers returning to more normalized order patterns after the volatility we experienced in 2022 and the early part of 2023.

Theodore L. Harris: Overall, a solid quarter for Balchem with performance that highlights the strength and resilience of our business model.

Theodore L. Harris: Before passing the call back to Martin to cover the financial results in more detail, I would like to make a few comments about the overall market environment and what we are seeing.

Carl Martin Bengtsson: Over the last four quarters or so, we have seen a gradual stabilization of demand and customers returning to more normalized order patterns after the volatility we experienced in 2022 and the early part of 2023.

Theodore L. Harris: When we look across our portfolio of businesses, we are seeing excellent performance in our human nutrition and health segment, led by our minerals and nutrients business, where we continue to see strong end consumer demand for our unique portfolio of minerals, nutrients, and vitamins, and steady demand for our food system. However, our animal nutrition and health segment is going through a challenging time along with the broader animal feed additives market. We believe we have bottomed out here in the first half of 2024 and expect a modest improvement in the second half of 2024 compared to the first half due to improving dairy economics and the early contribution from a new product launch.

Carl Martin Bengtsson: When we look across our portfolio of businesses,

Carl Martin Bengtsson: We are seeing excellent performance in our human nutrition and health segment, led by our minerals and nutrients business, where we continue to see strong end consumer demand for our unique portfolio of minerals, nutrients, and vitamins.

Carl Martin Bengtsson: and steady demand for our food systems.

Carl Martin Bengtsson: Our animal nutrition and health segment is going through a challenging time, along with the broader animal feed additives market.

Ted Harris: We believe we have bottomed out here in the first half of 2024 and expected modest improvement in the second half of 2024 compared to the first half on improving dairy economics and the early contribution from a new product launch. For a specialty product segment, the primary business is our performance gas as business, which continues to perform well in a stable market, and we expect this to continue. From an overall BALCAM perspective, I am very pleased with our market positions and value propositions, which have enabled us to maneuver through these volatile times over the last few years.

Carl Martin Bengtsson: We believe we have bottomed out here in the first half of 2024 and expect a modest improvement in the second half of 2024 compared to the first half on improving dairy economics.

Carl Martin Bengtsson: and the early contribution from a new product launch.

Theodore L. Harris: For our specialty product segment, the primary business is our performance gases business, which continues to perform well in a stable market, and we expect this to continue. From an overall Balchem perspective, I am very pleased with our market positions and value propositions, which have enabled us to maneuver through these volatile times over the last few years. In fact, this quarter represents the 20th consecutive quarter where Balchem has delivered quarterly year-over-year growth in adjusted EBITDA despite all of the turmoil experienced in global markets over the last five years.

Carl Martin Bengtsson: For our specialty product segment, the primary business is our performance gases business, which continues to perform well in a stable market, and we expect this to continue.

Carl Martin Bengtsson: From an overall Balchem perspective, I am very pleased with our market positions and value propositions which have enabled us to maneuver through these volatile times over the last few years.

Ted Harris: In fact, this quarter represents the 20th consecutive quarter where BALCAM has delivered quarterly year-over-year growth in adjusted EBITDA, despite all of the turmoil experienced in global markets over the last five years. That is quite an accomplishment, and I would like to take this opportunity to thank the entire BALCAM team for their exceptional performance and contributions toward this significant achievement.

Carl Martin Bengtsson: In fact, this quarter represents the 20th consecutive quarter where Balchem has delivered quarterly year-over-year growth in adjusted EBITDA despite all of the turmoil experienced in global markets over the last five years.

Theodore L. Harris: That is quite an accomplishment, and I would like to take this opportunity to thank the entire Balchem team for their exceptional performance and contributions to this significant achievement. Thank you all very much. Additionally, I am excited to share that in May of this year, Balchem launched a new product into the market, Optifoline Plus, which is a patented, choline-enriched, bioactive reduced folate ingredient that supports cellular health at all stages of life. Optifolin Plus is biologically active, which means that it's readily available for transport and use in the human body and tissues. This makes Optifolin Plus an excellent choice to meet vitamin B9 recommended requirements.

Speaker Change: That is quite an accomplishment, and I would like to take this opportunity to thank the entire Balchem team for their exceptional performance and contributions toward this significant achievement. Thank you all very much.

Ted Harris: Thank you all very much.

Ted Harris: Additionally, I am excited to share that in May of this year, BALCAM launched a new product into the market, Optifolen Plus, which is a patented, coldly enriched, bioactive-reduced folate ingredient that supports cellular health at all stages of life. Optifolen Plus is biologically active, which means that it is readily available for transport and use in the human body and tissues, making Optifolen Plus an excellent choice to meet vitamin B9 recommended requirements. This product launch will add to our existing offering of minerals, nutrients, and vitamins and enable us to bring even more value to our customers while at the same time supporting our vision of making the world a healthier place.

Speaker Change: Additionally, I am excited to share that in May of this year, Balchem launched a new product into the market.

Speaker Change: Optifolin Plus, which is a patented, choline-enriched, bioactive reduced folate ingredient that supports cellular health at all stages of life.

Speaker Change: Optifolin Plus is biologically active, which means that it is readily available for transport and use in the human body and tissues, making Optifolin Plus an excellent choice to meet vitamin B9 recommended requirements.

Theodore L. Harris: This product launch will add to our existing offering of minerals, nutrients, and vitamins and enable us to bring even more value to our customers while at the same time supporting our vision of making the world a healthier place. And with that, I'm now going to turn the call back over to Martin to go through the second quarter consolidated financial results for the company and the results for each of our business segments.

Speaker Change: This product launch will add to our existing offering of minerals, nutrients, and vitamins and enable us to bring even more value to our customers.

Speaker Change: while at the same time supporting our vision of making the world a healthier place.

Martin Bangston: And with that, I'm now going to turn the call back over to Martin to go through the second quarter consolidated financial results for the company and the results for each of our business segments.

Carl Martin Bengtsson: And with that, I'm now going to turn the call back over to Martin to go through the second quarter Consolidated financial results for the company and the results for each of our business segments Martin

Martin Bangston: Martin? Thank you, Ted. As Ted mentioned, overall, the second quarter was a solid quarter for Balchem with sales growth, record earnings from operations, and record adjusted EBITDA. Our second quarter net sales of $234 million were 1.2% higher than prior year, driven by strong performance in both our human nutrition and health, and especially product segments. Our second quarter gross margin dollars of $83 million were up 7.3% compared to the prior year, and our gross margin percent was 35.5% of sales, up 210 basis points compared to prior year. The increase was primarily due to a favorable mix and decreases in certain manufacturing input costs.

Carl Martin Bengtsson: Thank you, Ted. As Ted mentioned, overall, the second quarter was a solid quarter for Balchem, with sales growth, record earnings from operations, and record-adjusted EBITDA. Our second quarter net sales of $234 million were 1.2% higher than the prior year, driven by strong performance in both our human nutrition and health and specialty product segments. Our second quarter gross margin dollars of $83 million were up 7.3 percent compared to the prior year. And our gross margin percent was 35.5 percent of sales, up 210 basis points compared to the prior year. The increase was primarily due to a favorable mix and decreases in certain manufacturing input costs.

Carl Martin Bengtsson: Thank you, Ted. As Ted mentioned, overall, the second quarter was a solid quarter for Balchem with sales growth, record earnings from operations, and record adjusted EBITDA.

Carl Martin Bengtsson: Our second quarter net sales of $234 million were 1.2% higher than prior year, driven by strong performance in both our human nutrition and health and specialty product segments.

Carl Martin Bengtsson: Our second quarter gross margin dollars of $83 million were up 7.3% compared to the prior year. And our gross margin percent was 35.5% of sales, up 210 basis points compared to prior year.

Carl Martin Bengtsson: The increase was primarily due to a favorable mix and decreases in certain manufacturing input costs.

Martin Bangston: Consolidated operating expenses for the second quarter were $37 million as compared to $35 million in the prior year. The increase was primarily due to net favorable impact in prior year from adjustments to transaction costs and the impact of restructuring related impairment charges, as well as higher charges related to outside services this year. Gap earnings from operations for the second quarter were $46 million, an increase of 6.9% compared to the prior year. On an adjusted basis, as detailed in our earnings release this morning, non-GAAP earnings from operations of $55 million were up 4.2% compared to the prior year.

Carl Martin Bengtsson: Consolidated operating expenses for the second quarter were $37 million as compared to $35 million in the prior year. The increase was primarily due to a net favorable impact from adjustments to transaction costs and the impact of restructuring-related impairment charges, as well as higher charges related to outside services this year. GAAP earnings from operations for the second quarter were $46 million, an increase of 6.9% compared to the prior year.

Carl Martin Bengtsson: Consolidated operating expenses for the second quarter were 37 million dollars as compared to 35 million dollars in the prior year.

Carl Martin Bengtsson: The increase was primarily due to net favorable impact in prior year from adjustments to transaction costs and the impact of restructuring-related impairment charges, as well as higher charges related to outside services this year.

Carl Martin Bengtsson: Gap earnings from operations for the second quarter were $46 million, an increase of 6.9% compared to the prior year.

Carl Martin Bengtsson: On an adjusted basis, as detailed in our earnings release this morning, non-GAAP earnings from operations of $55 million were up 4.2% compared to the prior year. Adjusted EBITDA of $62 million grew 5% compared to the prior year, with an adjusted EBITDA margin rate of 26.6%. Interest expense for the second quarter was $4 million, a decrease of $0.9 million compared to the prior year, driven primarily by lower outstanding borrowing. We continued to use our strong cash flows to pay down debt, and we reduced our debt by $35 million in the second quarter and ended the quarter with a net debt of $203 million, with an overall leverage ratio on a net debt basis of 0.9. The effective tax rates for the second quarters of 2024 and 2023 were 22.2% and 21.6%, respectively.

Carl Martin Bengtsson: On an adjusted basis, as detailed in our earnings release this morning, non-GAAP earnings from operations of $55 million were up 4.2% compared to the prior year.

Martin Bangston: Adjusted EBITDA of $62 million grew 5% compared to prior year, with an adjusted EBITDA margin rate of 26.6%. Interest expense for the second quarter was $4 million, a decrease of $0.9 million compared to the prior year, driven primarily by lower outstanding borrowings. We continue to use our strong cash flows to pay down debt and reduce our debt by $35 million in the second quarter and end up the quarter with a net debt of $203 million, with an overall leverage ratio on a net debt basis of 0.9. The effective tax rates for the second quarter of 2024 and 2023 were 22.2% and 21.6%, respectively.

Carl Martin Bengtsson: Adjusted EBITDA of $62 million grew 5% compared to prior year, with an adjusted EBITDA margin rate of 26.6%.

Carl Martin Bengtsson: Interest expense for the second quarter was $4 million, a decrease of $0.9 million compared to the prior year, driven primarily by lower outstanding borrowings.

Carl Martin Bengtsson: We continue to use our strong cash flows to pay down debt, and we reduced our debt by $35 million in the second quarter.

Carl Martin Bengtsson: and ended up the quarter with a net debt of $203 million with an overall leverage ratio on a net debt basis of 0.9.

Carl Martin Bengtsson: The effective tax rates for the second quarters of 2024 and 2023 were 22.2% and 21.6% respectively.

Martin Bangston: The increase in the effective tax rate from the prior year was primarily due to lower tax benefits from stock-based compensation and certain higher state taxes, partially offset by certain lower foreign taxes. Consolidated net income closed the quarter at $32 million, up 6.5% from the prior year. This quarterly net income translated into diluted net earnings per share of 98 cents, an increase of 5 cents compared to the prior year. On an adjusted basis, our second quarter adjusted net earnings were $36 million, an increase of 3.3% from the prior year, which translated to $1.9 per diluted share.

Carl Martin Bengtsson: The increase in the effective tax rate from the prior year was primarily due to lower tax benefits from stock-based compensation and certain higher state taxes partially offset by certain lower foreign taxes. Consolidated net income closed the quarter at $32 million, up 6.5% from the prior year. This quarterly net income translated into diluted net earnings per share of $0.98, an increase of $0.05 compared to the prior year. On an adjusted basis, our second quarter adjusted net earnings were $36 million, an increase of 3.3% from the prior year, which translated to $1.09 per diluted share.

Carl Martin Bengtsson: Consolidated net income closed the quarter at $32 million, up 6.5% from the prior year. This quarterly net income translated into diluted net earnings per share of $0.98, an increase of $0.05 compared to the prior year.

Carl Martin Bengtsson: On an adjusted basis, our second quarter adjusted net earnings were $36 million, an increase of 3.3% from the prior year, which translated to $1.09 per diluted share.

Martin Bangston: Cash flows from operations were $45 million, with free cash flow of $38 million, and we closed out the quarter with $64 million of cash on the balance sheet. As we look at the second quarter from a segment perspective, for the second quarter, our human nutrition and health segment generated sales of $148 million, an increase of 9% from the prior year, driven primarily by higher sales within the minerals and nutrients business. Our human nutrition and health segment delivered record quarterly earnings from operations of $33 million, an increase of 21.3% compared to the prior year. This was driven by the aforementioned higher sales, a favorable mix, and certain lower manufacturing input costs, partially offset by higher operating expenses.

Carl Martin Bengtsson: Cash flows from operations were $45 million, with free cash flow of $38 million, and we closed out the quarter with $64 million of cash on the balance sheet. As we look at the second quarter from a segment perspective,

Carl Martin Bengtsson: Cash flows from operations were $45 million, with free cash flow of $38 million. And we closed out the quarter with $64 million of cash on the balance sheet.

Carl Martin Bengtsson: As we look at the second quarter from a segment perspective.

Carl Martin Bengtsson: For the second quarter, our Human Nutrition and Health Segment generated sales of $148 million, an increase of 9% from the prior year, driven primarily by higher sales within the Minerals and Nutrients business. Our Human Nutrition and Health Segment delivered record quarterly earnings from operations of $33 million, an increase of 21.3% compared to the prior year. This was driven by the aforementioned higher sales, favorable mix, and certain lower manufacturing input costs, partially offset by higher operating expenses. Second quarter adjusted earnings from operations for this segment were $37 million, an increase of 17.6 percent.

Carl Martin Bengtsson: For the second quarter, our human nutrition and health segment generated sales of $148 million, an increase of 9% from the prior year, driven primarily by higher sales within the minerals and nutrients business.

Carl Martin Bengtsson: Our Human Nutrition and Health segment delivered record quarterly earnings from operations of $33 million, an increase of 21.3% compared to the prior year.

Carl Martin Bengtsson: This was driven by the aforementioned higher sales, a favorable mix, and certain lower manufacturing input costs, partially offset by higher operating expenses.

Martin Bangston: Second quarter adjusted earnings from operations for this segment were $37 million, an increase of 17.6%. We were very pleased with the overall performance of our human nutrition and health segment, delivering strong sales and record earnings from operations. We continue to see strong demand in our minerals and nutrients business, and a more normalized demand picture in our food and beverage business. Our animal nutrition and health segment generated quarterly sales of $50 million, a decrease of 19.2% compared to the prior year. The decrease was primarily driven by lower sales in both the monogastric and ruminant species markets.

Carl Martin Bengtsson: Second quarter adjusted earnings from operations for this segment were 37 million dollars, an increase of 17.6 percent.

Carl Martin Bengtsson: We were very pleased with the overall performance of our human nutrition and health segment, delivering strong sales and record earnings from operations. We continue to see strong demand in our minerals and nutrients business and a more normalized demand picture in our food and beverage business. Our animal nutrition and health segment generated quarterly sales of 50 million dollars, a decrease of 19.2% compared to the prior year. The decrease was primarily driven by lower sales in both the monogastric and ruminant species markets.

Speaker Change: Our animal nutrition and health segment generated quarterly sales of $50 million, a decrease of 19.2% compared to the prior year. The decrease was primarily driven by lower sales in both the monogastric and ruminant species markets.

Martin Bangston: Animal nutrition and health delivered earnings from operations of $3 million, a decrease of 64.9% from the prior year. The decrease was primarily due to the aforementioned lower sales, partially offset by certain lower manufacturing input costs. Second quarter adjusted earnings from operations for this segment were $3 million, a decrease of 61.1%. As we've shared in earlier calls, our animal nutrition and health segment, along with a broader animal feed additives market, has been going through a tough period over the last few quarters. We've shared earlier that the European animal feed market continues to show relatively soft market demand and continued competition from low-cost imports flooding the market.

Carl Martin Bengtsson: Animal Nutrition and Health delivered earnings from operations of $3 million, a decrease of 64.9% from the prior year. The decrease was primarily due to the aforementioned lower sales, partially offset by certain lower manufacturing input costs. Second quarter adjusted earnings from operations for this segment were $3 million, a decrease of 61.1%.

Carl Martin Bengtsson: Animal Nutrition and Health delivered earnings from operations of $3 million, a decrease of 64.9% from the prior year.

Carl Martin Bengtsson: The decrease was primarily due to the aforementioned lower sales, partially offset by certain lower manufacturing input costs.

Carl Martin Bengtsson: Second quarter adjusted earnings from operations for this segment were $3 million, a decrease of 61.1%.

Carl Martin Bengtsson: As we've shared in earlier calls, our animal nutrition health segment, along with the broader animal feed additives market, has been going through a tough period over the last few quarters. We also shared earlier that the European animal feed market continues to show relatively soft market demand and continued competition from low-cost imports flooding the market. And the North American dairy market has gone through a period of low U.S. milk and milk protein prices, impacting demand for our rumen-protected encapsulated nutrients.

Carl Martin Bengtsson: As we've shared in earlier calls, our animal nutrition health segment, along with a broader animal feed additives market, has been going through a tough period over the last few quarters.

Carl Martin Bengtsson: We've shared earlier that the European animal feed market continues to show relatively soft market demand and continued competition from low-cost imports flooding the market.

Martin Bangston: The North American dairy market has gone through a period of low US milk and milk protein prices, impacting demand for our room and protected and capsulated nutrients. More recently, we've seen a stabilization in European demand and an improvement in dairy economics as US milk and milk protein prices have started to improve. And while the market demand has not yet returned to healthy levels, we do expect the second half of 2024 to be modestly better than the first half. We're also pleased with the early interest in a recently launched next generation room and protected product that we believe will further support the second half of the year.

Carl Martin Bengtsson: And the North American dairy market has gone through a period of low U.S. milk and milk protein prices, impacting demand for our rumen-protected encapsulated nutrients.

Carl Martin Bengtsson: More recently, we've seen a stabilization in European demand and an improvement in dairy economics as U.S. milk and milk protein prices have started to improve. And while market demand has not yet returned to healthy levels, we do expect the second half of 2024 to be modestly better than the first half. We're also pleased with the early interest in a recently launched Next Generation Rumen Protected product that we believe will further support the second half of the year.

Carl Martin Bengtsson: More recently, we've seen a stabilization in European demand and an improvement in dairy economics as U.S. milk and milk protein prices have started to improve.

Carl Martin Bengtsson: And while the market demand has not yet returned to healthy levels, we do expect the second half of 2024 to be modestly better than the first half.

Carl Martin Bengtsson: We're also pleased with the early interest in a recently launched next-generation rumen-protected product that we believe will further support the second half of the year.

Martin Bangston: Our specialty product segment delivered quarterly sales of $35 million, an increase of 7.2% compared to the prior year. Primarily due to higher sales and the performance gases business, but also supported by higher plant nutrition sales. Specialty products delivered record earnings from operations of $11 million, an increase of 20.8% versus the prior year, primarily driven by the aforementioned higher sales and certain lower manufacturing and put costs, partially offset by higher operating expenses. Second quarter adjusted earnings from operations for this segment were $12 million, an increase of 17.1%. We're very pleased with the performance of specialty products in the second quarter.

Carl Martin Bengtsson: Our specialty product segment delivered quarterly sales of $35 million, an increase of 7.2 percent compared to the prior year, primarily due to higher sales in the performance gases business, but also supported by higher plant nutrition sales. Specialty Products delivered record earnings from operations of $11 million, an increase of 20.8% versus the prior year, primarily driven by the aforementioned higher sales and certain lower manufacturing input costs, partially offset by higher operating expenses.

Carl Martin Bengtsson: Our specialty product segment delivered quarterly sales of $35 million, an increase of 7.2% compared to the prior year, primarily due to higher sales in the performance gases business, but also supported by higher plant nutrition sales.

Carl Martin Bengtsson: Specialty products deliver record earnings from operations of $11 million, an increase of 20.8% versus the prior year, primarily driven by the aforementioned higher sales and certain lower manufacturing input costs, partially offset by higher operating expenses.

Carl Martin Bengtsson: Second quarter adjusted earnings from operations for this segment were $12 million, an increase of 17.1%. We were very pleased with the performance of specialty products in the second quarter, both from a sales growth and margin perspective, resulting in record earnings from operations, and expect the business to remain healthy as the year progresses. So overall, the second quarter was another solid quarter for Balchem. I'm now going to turn the call back over to Ted for some closing remarks.

Carl Martin Bengtsson: Second quarter adjusted earnings from operations for this segment were 12 million dollars, an increase of 17.1 percent.

Carl Martin Bengtsson: We're very pleased with the performance of specialty products in the second quarter, both from a sales growth and margin perspective, resulting in record earnings from operations and sales.

Martin Bangston: Both from a sales growth and margin perspective, resulting in record earnings from operations, and expect demand to remain healthy as the year progresses. So overall, the second quarter was another solid quarter for Balchem.

Speaker Change: and expect the man to remain healthy as the year progresses.

Speaker Change: So overall, the second quarter was another solid quarter for Balchem.

Ted Harris: I'm now going to turn the call back over to Ted for some closing remarks.

Speaker Change: I'm now going to turn the call back over to Ted for some closing remarks.

Ted Harris: Thanks, Martin.

Theodore L. Harris: Thanks, Martin. Once again, we are very pleased with the solid financial results reported earlier this morning. At a consolidated level, we continue to show an ability to deliver results in a variety of market conditions, given our strong market positions and our value-added portfolio of products. And we remain confident in the long-term growth outlook for Balchem as a company. I will now hand the call back over to Martin, who will open up the call for questions. Martin? Thank you.

Ted Harris: Once again, we are very pleased with solid financial results reported earlier this morning. At a consolidated level, we continue to show an ability to deliver results in a variety of market conditions, given our strong market positions and our value added portfolio products. And we remain competent in the long-term growth outlook for Balchem as a company.

Theodore L. Harris: Thanks, Martin. Once again, we are very pleased with the solid financial results reported earlier this morning.

Theodore L. Harris: At a consolidated level, we continue to show an ability to deliver results in a variety of market conditions, given our strong market positions and our value-added portfolio of products. And we remain confident in the long-term growth outlook for Balchem as a company.

Martin Bangston: I will now hand the call back over to Martin, who will open up the call for questions.

Theodore L. Harris: I will now hand the call back over to Martin, who will open up the call for questions. Martin?

Martin Bangston: Thank you, Ted.

Carl Martin Bengtsson: Thank you, Ted. And just one quick correction. I mentioned non-GAAP earnings from operations were $55,000 million dollars. I should have said $51 million.

Martin Bangston: And just one quick correction. I mentioned non-GAAP earnings from operations were $55 million. I should have said $51 million. So just let that be corrected as we move forward.

Carl Martin Bengtsson: Thank you, Ted. And just one quick correction. I mentioned non-GAAP earnings from operations were $55 million.

Carl Martin Bengtsson: million dollars, I should have said 51 million dollars, so just let that be corrected as we move forward. So this now concludes the formal portion of the conference. At this point we will open up the conference for questions.

Operator: So just let that be corrected as we move forward. So this now concludes the formal portion of the conference. At this point, we will open up the conference for questions. Thank you.

Operator: So this now concludes the formal portion of the conference. At this point, we will open up the conference for questions. Thank you.

Operator: We'll now be talking about a question and answer session. If you would like us a question, please press star 1 on your telephone keypad. A confirmation phone will indicate you're lying into the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your hand, step up for pressing the star keys. One moment please, while we pull for questions.

Operator: Thank you. Now, we can go to the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Thank you. Well, now we can go to the question and answer session.

Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.

Operator: One moment, please, while we poll for questions. Thank you. Our first question is from Kyle May with Sidotian Company. Please proceed with your question.

Operator: Thank you.

Kyle May: Our first question is from Kyle May with the Dodean Company. Please proceed with your question.

Speaker Change: Thank you. Our first question is from Kyle May with Sidotian Company. Please proceed with your question.

Kyle May: Hey, good morning, everyone. Ted Martin, congratulations on a great quarter. Thanks, Kyle.

Kyle May: Hey, good morning everyone. Ted Martin, congratulations on a great quarter. Thanks, Kyle. I want to start with the new product, the Optifolin that you mentioned. Just curious if maybe you can expand on that and maybe talk about your expectations for the new product and maybe how we should think about revenue generation or the potential, you know, market opportunity there.

Kyle May: Hey, good morning everyone. Ted and Martin, congratulations on a great quarter.

Kyle May: We're going to start with the new product, the Optifolan, that you mentioned. Just curious if maybe you can expand on that.

Ted Martin: Thanks, Kyle.

Kyle May: I want to start with the new product, the Optifolin that you mentioned. I'm just curious if maybe you can expand on that and maybe talk about your expectations for the new product and maybe how we should think about revenue generation or the potential market opportunity there.

Ted Harris: Let me talk about your expectations for the new product and maybe how we should think about revenue generation or the potential market opportunity there. Yeah, sure, Kyle. We really are excited about Optifolan Plus. It's from our perspective a breakthrough innovation that we have developed in partnership with Apryphal to the Swiss... Light Science Company. It is patented, coldine enriched, bioactive, and it's a reduced folate ingredient that supports cellular health at all stages of light. So, life. So, unlike folic acid, Optifolone Plus is biologically active, which means that it's readily available for transport and use in the body, making it a great enhanced replacement for basic folic acid.

Theodore L. Harris: Yeah, sure, Kyle, we really are excited about Optifolium Plus. It's, from our perspective, a breakthrough innovation that we have developed in partnership with Aprifol, which is a Swiss uh... life science company uh... it is patented by Coleen and Rich, bioactive, and it's a reduced folate ingredient that supports cellular health at all stages of life. So unlike, you know, folic acid, Optifolin Plus is biologically active, which means that it's readily available for transport and use in the body, making it a great enhanced replacement for basic folic acid.

Speaker Change: Yeah, sure Kyle. We really are excited about Optifolium Plus. It's, from our perspective, a breakthrough innovation that we have developed in partnership with Aprifol, which is a Swiss

Theodore L. Harris: And so the target market here is really the folic acid market, which is a huge market. It's probably about a billion and a half in size in total. And the opportunity that we have, not unlike the opportunity we have with so many of our other products, is to penetrate that very, very large market with a better product. Obviously, a more expensive product, but it is a better product, that sliver of the market that's using a reduced folate, you know, a biologically active product to replace folic acid.

Speaker Change: Life Science Company. It is patented, choline enriched.

Speaker Change: Bioactive, and it's a reduced folate ingredient that supports cellular health at all stages of life.

Speaker Change: Unlike folic acid, Optifolan Plus is biologically active, which means that it's readily available for transport and use in the body.

Speaker Change: You know, making it a great, enhanced

Speaker Change: replacement for

Ted Harris: And so, the target market here is really the folic acid market, which is a huge market. It's probably about a billion and a half in size and total. And the opportunity that we have, not unlike the opportunity we have in so many of our other products, is to penetrate that very, very large market with a better product. Obviously, more expensive product, but it is a better product. And so, the target market here is to increase that sliver of the market that's using a reduced folate biologically active product to replace folic acid. So, our goal is to take a percentage of that market.

Speaker Change: basic folic acid. And so the target market here is really the folic acid market, which is a huge market. It's probably about a billion and a half in size and in total.

Speaker Change: and the opportunity that we have, not unlike the opportunity we have in so many of our other products.

Speaker Change: is to penetrate that very, very large market with a better product. Obviously, more expensive product, but it is a better product. And so, you know, the target market here is to increase...

Speaker Change: that sliver of the market that's using a reduced folate, a

Speaker Change: you know, a biologically active product.

Theodore L. Harris: So, you know, our goal is to take a percentage of that market, and we view this as an opportunity that it is. You have 20 to 30 million dollars of opportunity over the course of the next, uh... three, four years or so, and uh... maybe that's uh... kind of underestimating the opportunity given the market size is so large, but we feel like that's a uh... realistic goal for this uh... this new product that we've launched in the marketplace, so we're excited about it.

Speaker Change: to replace folic acid. So, you know, our goal is to take a percentage of that market, and we view this as an opportunity that is

Ted Harris: And we view this as an opportunity that is 20 to 30 million dollars of opportunity over the course of the next three, four years or so. And maybe that's kind of underclubbing the opportunity, given the market size is so large, but we feel like that's a realistic goal for this new product that we've launched in the marketplace. So, we're excited about it.

Speaker Change: You have 20 to 30 million dollars of opportunity over the course of the next

Speaker Change: three, four years or so. And maybe that's kind of under-clubbing the opportunity given the market size is so large, but we feel like that's a realistic goal for this new product that we've launched in the marketplace. So we're excited about it.

Kyle May: Excellent. That's exciting.

Kyle May: Excellent, that's exciting. My next question is around margins. This is an area you guys continue to improve on. I was wondering if maybe you could expand a little bit more and kind of help us understand is this, I know you mentioned several different factors, but is it lower input costs? Is it better efficiency by the company? Any color there? And then also, as you're thinking about the back half of the year, can you continue to squeeze more out of this, or have we kind of hit a peak?

Kyle May: My next question is around margins. You know, this is an area you guys continue to improve on.

Speaker Change: Excellent, that's exciting.

Speaker Change: My next question is around margins.

Kyle May: I was wondering if maybe you could expand a little bit more and kind of help us understand, is this? I know you mentioned several different factors, but is it lower input cost? Is it better efficiencies by the company? Any color there?

Speaker Change: This is an area you guys continue to improve on. I was wondering if maybe you could expand a little bit more and kind of help us understand is this...

Speaker Change: I know you mentioned several different factors, but is it lower input costs, is it better efficiencies by the company?

Ted Harris: And then also, you know, as you're thinking about the back half of the year, can you continue to squeeze more out of this, or have we kind of hit a peak? Yeah, let me take that one. I think just taking a step back first and what we've said in the past, we talked about sort of how our margins got squeezed a little bit in the inflationary period, right? As raw materials were going up, and we were passing that through kind of dollar for dollar, but just from a margin per cent perspective, they got squeezed. And we were sort of saying that we expected that to come back and return, as we got into a more deflationary period.

Speaker Change: Any color there, and then also, you know, as you're thinking about the back half of the year, can you continue to squeeze more out of this, or have we kind of hit a peak?

Carl Martin Bengtsson: Yeah, let me take that one, Kyle. I think just taking a step back first and looking at what we've said in the past. We talked about sort of how our margins got squeezed a little bit in the inflationary period, right, as raw materials were going up, and we were passing that through kind of dollar for dollar, but just from a margin percent perspective. They got squeezed, and we were sort of saying that we expected that to come back and return as we got into a more deflationary period, and that's exactly what we've seen.

Speaker Change: Yeah, let me take that one, Kyle. I think just taking a step back first and what we've said in the past.

Speaker Change: We talked about sort of how our margins got squeezed a little bit in the inflationary period, right? As raw materials were going up and we were passing that through kind of dollar for dollar, but just from a margin percent perspective, they got squeezed.

Speaker Change: We were sort of saying that we expected that to come back and return as we got into a more deflationary period, and that's exactly what we've seen. So now we've seen rolls come down. We're passing some price back to customers.

Ted Harris: And that's exactly what we've seen. So now we've seen roles come down. We're passing some price back to customers, but not necessarily a hundred percent of it. So, you're seeing that uplift in margins. And you have a little bit of a timing benefit there, right? Of roles coming down prior to you passing things back to your customers. So, you get a little bit of a boost in that margin from that timing lag.

Carl Martin Bengtsson: So now we've seen ROAS come down. We're passing some of the price back to customers, but not necessarily 100 percent of it. So you're seeing that uplift in margins, and you have a little bit of a timing benefit there, right, of ROAS coming down prior to you passing things back to your customers. So you get a little bit of a boost in that margin from that timing lag. That being said, we have also seen a favorable mix in our portfolio.

Speaker Change: not necessarily 100% of it.

Speaker Change: So you're seeing that uplift in margins, and you have a little bit of a timing benefit there, right? The raw's coming down prior to you passing things back to your customers, so you get a little bit of a boost in that margin from that timing lag.

Ted Harris: That being said, we have also seen a favorable mix in our portfolio. We have our minerals and nutrients within our human nutrition and health segment doing very, very well at the moment. That is also a higher margin part of our portfolio. We're seeing specialty products coming back, doing very well, which is a higher margin part of our portfolio. And while we obviously don't like that animal nutrition and health, this is going through a tougher time. That is relatively speaking a lower margin part of our portfolio. So, that being down also. You know, supports a favorable portfolio mix from a margin percentage perspective.

Speaker Change: That being said, we have also seen a favorable mix in our portfolio. We have our minerals and nutrients within our human nutrition and health segment doing very, very well at the moment.

Carl Martin Bengtsson: We have our minerals and nutrients within our human nutrition and health segment doing very, very well at the moment. That is also a higher-margin part of our portfolio. We're seeing specialty products coming back and doing very well, which is a higher-margin part of our portfolio. And while we obviously don't like that animal nutrition and health is going through a tougher time, that is, relatively speaking, a lower-margin part of our portfolio. So that being down also. Theodore Harris, Robert Labick, Carl Bengtsson, Raghuram Selvaraju, Kyle May, Anthony Polak, Theodore Harris, Robert Labick, Carl Bengtsson, Raghuram Selvaraju, Kyle May, Anthony Polak, Balchem Corp

Speaker Change: that is also a higher margin part of our portfolio.

Speaker Change: We're seeing specialty products coming back, doing very well, which is a higher margin part of our portfolio.

Speaker Change: And while we obviously don't like that animal nutrition and health is going through a tougher time, that is relatively speaking a lower margin part of our portfolio. So that being down also.

Speaker Change: You know

Speaker Change: supports a favorable portfolio mix from a margin percentage perspective.

Ted Harris: As we move forward, I think we are, you know, we'll see some moderation in the margin rates as we give some of this raw material deflation back to our customers. So, you know, pricing is negative for us. We gave back price in the quarter. We gave back price in prior quarter. I expect us to continue to give back. We gave back some price here in the next quarter. So, that will moderate the rate a little bit. And also, as we'll see A&H, our animal nutrition segment, come back a little bit. That will moderate the margins a little bit, as well as they are dilutive to the overalls.

Speaker Change: As we move forward, I think we are, you know, we'll see some moderation in the margin rates as we give some of this raw material deflation back to our customers. So, you know, pricing is negative for us.

Speaker Change: We gave back price in the quarter, we gave back price in the prior quarter and I expect us to continue to give back some price here in the next quarter, so that will moderate the rate a little bit, and also as we'll see A&H, our animal nutrition segment,

Speaker Change: come back a little bit, that will moderate the margins a little bit as well as they are dilutive to the overall. So I think, you know, going forward they will moderate a little bit, but probably stabilize. That's something that's at or above historic rates.

Kyle May: I think, you know, going forward, they will moderate a little bit but probably stabilize that something that's after above historic rates. Excellent.

Kyle May: Excellent. That's great. And the last one, Martin, you mentioned the new product launch in animal nutrition and health. Is there anything else you can tell us about that product in the second half of the year?

Kyle May: That's great.

Martin Bangston: In last one, Martin, you had mentioned the new product launch in animal nutrition and help.

Speaker Change: Excellent, that's great. And last one, Martin, you had mentioned the the new product launch in animal nutrition and health. Is there anything else you can tell us about that product in the second half of the year?

Martin Bangston: Is there anything else you can tell us about that product in the second half of the year? Yeah, we sort of introduced this as an encapsulated room and protected amino acid. There is an established market for that today already. And we've sort of come up with the next generation product to gain share in an established market there, which we think we're very well positioned to do.

Carl Martin Bengtsson: Yeah, we sort of introduced it as an encapsulated rumen protected amino acid. There is an established market for that today already, and we've sort of come up with a next generation product to gain share in an established market there, which we think we're very well positioned to do. So we've just started selling it, and we'll sort of be ramping that up a little bit as we go through the year. And as we ramp up production and inventory levels, et cetera, we'll start going harder after it. But it should contribute a couple of millions here in the second half of the year and then be more significant in 2025 for us.

Carl Martin Bengtsson: Yeah, we sort of introduced it as an encapsulated rumen-protected amino acid.

Speaker Change: There is an established market for that today already, and we've sort of come up with a next generation product.

Speaker Change: to gain share in an established market there, which we think we're very well positioned to do. So we have just started selling it.

Martin Bangston: So, we have just started selling it, and we'll sort of be ramping that up a little bit as we go through the year. As we ramp up production and inventory levels, et cetera, we'll start going harder after it. But if it should contribute a couple of millions here in the second half of the year and then be more significant in 2025 for us.

Speaker Change: And we'll sort of be ramping that up a little bit as we go through the year and as we

Speaker Change: ramp up production and inventory levels etc. We'll start going harder after it but it should contribute a couple of millions here in the second half of the year and then be more significant in 2025 for us.

Kyle May: All right, great. Thanks for the time this morning. Thanks, Kyle.

Kyle May: Alright, great. Thanks for your time this morning.

Speaker Change: All right, great. Thanks for the time this morning.

Operator: Thank you.

Operator: Thank you. Our next question is from Raghuram Selvaraju, with HC Wainwright. Please proceed with your question.

Kyle May: Thanks, Kyle.

Ram Salvador: Our next question is from Ram Salvador with HC Wainwright. Please proceed with your question.

Speaker Change: Thank you. Our next question is from Raghuram Selvaraju with HC Wainwright. Please proceed with your question.

Ram Salvador: Thank you very much for taking my questions. Can you hear me?

Raghuram Selvaraju: Thank you very much for taking my questions. Can you hear me?

Operator: Yes, Ram, thanks for calling in.

Ram Salvador: Yes, Ram. Thanks for calling in. So, with respect again to the OptiFull in product, just two things there.

Raghuram Selvaraju: Thank you very much for taking my questions. Can you hear me?

Raghuram Selvaraju: So, with respect again to the Optifolin product, just two things. Firstly, I was wondering if you could give us more of a sense of how many additional potential new product franchises might come out of this technology platform or this technological approach that you use to formulate Optifolin, and if you could confirm that you're using some of the same technological innovations that power OptiMSM.

Raghuram Selvaraju: Yes, Ram, thanks for calling in.

Raghuram Selvaraju: So, with respect again to the Optifol in product, just two things there.

Ted Harris: Firstly, I was wondering if you could give us more of a sense of how many additional potential new product franchises might come out of this technology platform or this technological approach that you use to formulate OptiFull in. And if you can confirm that you're using some of the same technological innovations that power OptiMSM. So, there is a similarity there in name without the MSM, but it's really in name only. So, I would say that the technology there is completely different. And as I mentioned in my response to Kyle, this was an external innovation that we did with a partner.

Raghuram Selvaraju: Firstly, I was wondering if you could give us more of a sense of how many additional potential new product franchises might come out of

Speaker Change: this technology platform, or this technological approach that you use to formulate Optifolin, and if you can confirm that you're using some of the same technological innovations that power OptiMSM.

Theodore L. Harris: So there is a similarity in name without the MSM, but it's really just a name. So I would say that the technology there is completely different. And as I mentioned in my response to Kyle, this was an external innovation that we did with a partner, and so it is a unique technology. But choline plays quite an important part in this innovation. As I said, choline-enriched, and choline plays an important role in the solubility of this product, which is inherently an issue with other reduced folates, so we feel that it is well aligned with our leadership position in choline, where we're leveraging that capability and technology, but it is very unique to the Opti-MSM technology, and really there's no connection there.

Speaker Change: So there is a similarity there in name without the MSM, but it's really in name only. So I would say that the technology there is completely different.

Speaker Change: And as I mentioned...

Speaker Change: In my response to Kyle, this was a

Speaker Change: external innovation that we did with a partner and so it is unique technology, but

Ted Harris: And so, it is unique technology, but Colleen plays quite an important part of this innovation. It's, as I said, Colleen enriched, and Colleen plays an important role in the solubility of this product, which is inherently an issue with other reduced folate. So, we feel that it is well aligned with our leadership position in Colleen, where we're leveraging that capability and technology, but it is very unique to the OptiMSM technology. And really there's no connection there, but the fact that Colleen does have this hygroscopic nature to it, which can be a problem in certain applications, but also in this case, a real benefit.

Speaker Change: Colleen

Coleen: plays quite an important part of this innovation.

Speaker Change: As I said, choline-enriched, and choline plays an important role in the solubility of this product, which is inherently an issue with other reduced folates.

Speaker Change: You know, we feel that it is well aligned with our leadership position in COBE, and we're leveraging that.

Speaker Change: capability and technology but it is very unique to the Opti-MSM technology and really there's no no connection there but but the

Theodore L. Harris: But the fact that choline does have this hygroscopic nature to it, which can be a problem in certain applications but also, in this case, a real benefit, I do think there is an opportunity for this type of technology that's being used for this new innovation to be used and developed in additional franchises. Obviously, that's a ways away, but OptiFolan Plus is, I think, kind of the first innovation that uses this choline enrichment.

Speaker Change: The fact that choline does have this hygroscopic nature to it

Speaker Change: which can be a problem in certain applications, but also, in this case, a real benefit. I do think there is an opportunity for this type of

Ted Harris: I do think there is an opportunity for this type of technology that's being used for this new innovation to be used and developed into additional franchises. Obviously, that's a ways away, but OptiFolen Plus is, I think, the first innovation that's using this Colleen enrichment, and there could be others. But let's get this one. It's been launched. There is actually a product on the store shelves already incorporating OptiFolen Plus. So, we're excited about that. And let's see how this one gets. Harris.

Speaker Change: technology that's being used for this this new innovation to be used and developed into additional franchises obviously that's that's a ways away but

Speaker Change: Optifolin Plus is I think that kind of the first

Speaker Change: innovation that's using this this choline enrichment and there could be others, but but let's get this one. It's been launched.

Theodore L. Harris: And there could be others, but let's get this one first. It's been launched. There is actually a product on the store shelves already incorporating OptiFolan Plus, so we're excited about that, and let's see how this one goes.

Speaker Change: There is actually a product on the store shelves already incorporating Optifolin Plus, so we're excited about that and let's see how this one goes.

Ram Salvador: And then with respect to, you know, the key franchise is the key brands that you're developing within the H&H space. Can you give us a sense now of where you expect those to shake out in terms of relative size, one versus the other? Is, you know, clearly Vitacoline has been an important contributor for a lengthy period of time, but now you've got K2 Vital, you've got Opti-MSM, you've got Opti-Folane Plus. So maybe just give us a sense of which of these you think are likely to be the most significant contributors going forward.

Raghuram Selvaraju: And then with respect to, you know, the key franchises, the key brands that you're developing within the H&H space, can you give us a sense now of where you expect those to shake out in terms of relative size, one versus the others? You know, clearly Vitacholine has been an important contributor for a lengthy period of time, but now you've got K2 Vital, you've got Opti-MSM, you' So maybe you could just give us a sense of which of these you think are likely to be the most significant contributors going forward.

Speaker Change: And then with respect to, you know, the key franchises, the key brands that you're developing within the H&H space,

Speaker Change: Can you give us a sense now of...

Speaker Change: Where you expect those to shake out in terms of relative size one versus the other is you know clearly Vitacholine has been an important contributor for a lengthy period of time, but now you've got K2 vital You've got Opti-MSM. You've got Opti-folan plus, so maybe just give us a sense of

Speaker Change: which of these you think are likely to be the most significant contributors going forward? And maybe this is a question for Martin as well. As we go forward,

Ted Harris: And maybe this is a question from Martin as well. As we go forward, when do you think perhaps you might start to give us more granularity and break out the individual sales of some of these key brands, you know, in future reporting periods? So let me, let me go first, just kind of relative size. You know, today our line of, as we brand them, how Beyond Minerals is the largest opportunity. And a little bit like what I talked about for Opti-Folane Plus relative to a very large full-legasted market of, you know, a billion and a half or so, the broader minerals market is massive, just like that.

Raghuram Selvaraju: And maybe this is a question for Martin as well. As we go forward, when do you think you might start to give us more granularity and break out the individual sales of some of these key brands, you know, in future reporting periods?

Speaker Change: When do you think perhaps you might start to give us more granularity and break out the individual sales of some of these?

Carl Martin Bengtsson: key brands, you know, in future reporting periods.

Theodore L. Harris: So let me, let me go first on just kind of relative size. You know, today, our line of, as we brand them, Albion Minerals, is the largest opportunity. And a little bit like what I talked about for Optifolan Plus relative to a very large folic acid market of, you know, a billion and a half or so, the broader minerals market is massive, just like that. And so, you know, I think that while our minerals business, our chelated minerals business, our Albion line of minerals is our largest.

Speaker Change: So let me let me go first just kind of relative size, you know, today our line of, as we brand them, Albion Minerals is

Speaker Change: This is the largest opportunity, and a little bit like what I talked about for Optifolan Plus relative to a very large folic acid market of a billion and a half or so.

Speaker Change: The broader minerals market is massive, just like that.

Ted Harris: And so, you know, I think that while our Minerals business, our key-rated Minerals business, our Albion line of Minerals, is our largest today, I think it also will be our largest in the future because we have a very, very significant opportunity ahead of us to continue to eat away at that inorganic mineral, less bio-available, massive mineral market. So I think that position will remain our largest going forward. The Colleen business and the K2 business, I would say, are kind of very similar sizes. And I think also have similar market opportunities, maybe the Colleen having even more addressable market opportunity than K2 because of its kind of broad therapeutic category benefits.

Speaker Change: You know, I think that while our minerals business, our chelated minerals business, our Albion line of minerals is our largest.

Theodore L. Harris: Today, I think it also will be our largest in the future because we have a very, very significant opportunity ahead of us to continue to eat away at that inorganic mineral, less bioavailable, massive mineral market. So I think that position will remain our largest going forward.

Speaker Change: today, I think it also will be our largest in the future because we have

Speaker Change: a very very significant opportunity ahead of us to continue to eat away at that inorganic mineral, less bioavailable, massive mineral market so I I think that position will

Speaker Change: remain our largest going forward. The Coleen business and the K2 business, I would say are kind of very similar sizes.

Theodore L. Harris: The choline business and the K2 business, I would say, are of very similar sizes and I think they also have similar market opportunities, maybe choline having even more addressable market opportunities than K2 because of its kind of broad therapeutic category benefit. So while they're a similar size today, I would think in five, ten years, our choline franchise would probably be larger than K2 because of, again, the breadth of the therapeutic category.

Speaker Change: and I think also have...

Speaker Change: similar market opportunities, maybe the choline having even more

Speaker Change: addressable market opportunity, the K-2.

Speaker Change: because of its kind of broad therapeutic category benefits. So, while they're similar size today, I would think in five, 10 years, our choline.

Ted Harris: So, while they're similar size today, I would think in five, ten years our Colleen franchise would probably be larger than a K2 because of, again, the breadth of the therapeutic category. So that's where I would rank those market opportunities and market sizes. The key-rated minerals are Albion brand of products, largest today, continue to be the largest K2, invited Colleen the same today, but invited Colleen has a bigger market growth opportunity long term. So I would expect that to be number two and K2 to be number three long term.

Speaker Change: franchise would probably be larger than a K2 because of again the breadth of the therapeutic category so

Theodore L. Harris: So that's where I would rank those market opportunities and market sizes. K2 and Vitacholine are the same today, but Vitacholine has a bigger market growth opportunity long-term, so I would expect that to be number two and K2 to be number three long-term.

Speaker Change: That's where I would rank those market opportunities and market sizes. The chelated minerals are Albion brand of products. Largest today, continue to be the largest.

Speaker Change: K2 and Vitacholine, the same today, but Vitacholine has a bigger market growth opportunity long-term, so I would expect that to be number two and K2 to be number three long-term.

Carl Martin Bengtsson: Yeah, and I think, Ram, in terms of breaking them out, we have no plans at the moment to do that. Obviously, there's some commercial sensitivity in breaking that out by brand in terms of competition and them knowing exactly what you have and don't in the markets. So, no plans at this point.

Martin Bangston: Yeah, I think we're all in terms of breaking them out.

Martin Bangston: We have no plans at the moment to do that. Obviously, there's some commercial sensitivity in breaking that out by brand in terms of competition and them knowing exactly what you have and don't in the market.

ROM: Yeah, and I think, Ram, in terms of breaking them out, we have no plans at the moment to do that. Obviously, there's some commercial sensitivity in breaking that out by brand in terms of competition and then knowing exactly what you have and don't in the markets.

Martin Bangston: Harris. So, no plans at this point.

Raghuram Selvaraju: So, no plans at this point.

Martin Bangston: Okay, and then lastly, with respect to the effective tax rate, you know, Martin, again, as is typical, I'm just looking for some additional granularity, additional guidance on what you expect the effective tax rate to look like in the second half of this year, and if we should expect it to be in line with what you reported for the second quarter, or if you expect it to trend a bit higher. Thanks. Yeah, I mean, we're sort of just below 22% year to date, and I previously said I was expecting it to land somewhere between 22 to 23, and I still think that, and we're probably going to be closer to the 22.

Raghuram Selvaraju: Lastly, with respect to the effective tax rate, Martin, again, as is typical, I'm just looking for some additional granularity, additional guidance on what you expect the effective tax rate to look like in the second half of this year and whether we should expect it to be in line with what you reported for the second quarter, or if you expect it to trend a bit higher. Yeah, I mean, we're

Carl Martin Bengtsson: Lastly, with respect to the effective tax rate, Martin, again, as is typical, I'm just looking for some additional granularity, additional guidance on what you expect the effective tax rate to look like in the second half of this year, and if we should expect it to be in line with what you reported for the second quarter, or if you expect it to trend a bit higher.

Carl Martin Bengtsson: Yeah, I mean, we're sort of just below 22% year-to-date, and I previously said I was expecting it to land somewhere between 22 and 23, and I still think that, and we're probably going to be closer to 22. So I think 22 plus or minus a little bit is probably a good estimate based on where we are at this point in time in the year.

Carl Martin Bengtsson: Yeah, I mean we're sort of just below 22% year to date and I previously said I was expecting it to land somewhere between 22 to 23 and I still think that and we're probably going to be closer to the 22.

Martin Bangston: So, I think 22 plus or minus a little bit is probably a good estimate based on where we are at this point in time in the year.

Carl Martin Bengtsson: So I think 22 plus or minus a little bit is probably a good estimate based on where we are at this point in time in the year.

Ram Salvador: Thank you very much, and congrats on all the progress. Thank you. Thanks a lot, Ron. Appreciate it.

Raghuram Selvaraju: Thank you very much and congratulations on all the progress.

Operator: Thank you. Thanks a lot, Ram. I appreciate it. As a reminder, if you'd like to ask a question,

Speaker Change: Thank you very much and congrats on all the progress.

Speaker Change: Thanks a lot, Ram. Appreciate it.

Operator: As a reminder, if you'd like to ask a question, please press star one on your telephone. Keep that. Thank you.

Operator: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Thank you. There are no further questions at this time. I would like to hand the floor back over to Ted Harris for any closing comments.

Speaker Change: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad.

Operator: There are no further questions at this time.

Ted Harris: I would like to hand the floor back over to Ted Harris for any closing comments.

Speaker Change: Thank you. There are no further questions at this time. I would like to hand the floor back over to Ted Harris for any closing comments.

Theodore L. Harris: Thanks, Paul. Once again, thank you very much for joining our call today. We really appreciate your time, and we look forward to reporting out our Q3 2024 results in October. In the meantime, we will be participating in the H.C. Wainwright Annual Global Investment Conference in New York City on September 9th, and so we hope to see some of you there. Thanks so much.

Ted Harris: Thanks, Paul. Once again, thank you very much for joining our call today. We really appreciate your time, and we look forward to reporting out our Q3 2024 results in October.

Theodore L. Harris: Thanks, Paul. Once again, thank you very much for joining our call today. We really appreciate your time, and we look forward to reporting out our Q3 2024 results in October .

Ted Harris: In the meantime, we will be participating in the HC Wainwright Annual Global Investment Conference in New York City on September 9th, and so we hope to see some of you there. Thanks so much.

Speaker Change: In the meantime, we will be participating in the H.C. Wainwright Annual Global Investment Conference in New York City on September 9th, and so we hope to see some of you there. Thanks so much.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Q2 2024 Balchem Corp Earnings Call

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