Earnings call transcript: Balchem Q2 2025 beats earnings expectations

Balchem Corporation (BCPC), with a market capitalization of nearly $5 billion, reported its second-quarter 2025 earnings, surpassing market expectations with an earnings per share (EPS) of $1.27, compared to the forecasted $1.12. The company also achieved a revenue of $255.5 million, exceeding projections of $250.31 million. Following the announcement, Balchem’s stock experienced a slight pre-market increase of 0.08%. According to InvestingPro analysis, the stock is currently trading above its Fair Value, with a P/E ratio of 36.2x.

Key Takeaways

• Balchem delivered record Q2 revenue and adjusted EBITDA.
• EPS and revenue both exceeded analysts’ expectations.
• The company continues to expand its manufacturing capabilities.
• Positive market reaction with a slight stock uptick.

Company Performance

Balchem Corporation reported a robust performance in the second quarter of 2025, with consolidated revenue reaching a record $255 million, marking a 9.1% increase year-over-year. The company’s consolidated net income rose by 19.4% to $38 million, reflecting strong operational execution and market demand. InvestingPro data reveals that Balchem maintains strong financial health with a current ratio of 2.44, indicating excellent liquidity. The company’s focus on innovation and manufacturing efficiency contributed to its impressive results, while maintaining its 39-year streak of consistent dividend payments.

Financial Highlights

• Revenue: $255 million, up 9.1% year-over-year
• Earnings per share: $1.17, up 19.4% year-over-year
• Adjusted EBITDA: $69 million, up 11.2% year-over-year
• Gross margin: 36.4% of sales, up 90 basis points
• Net debt: $125 million, leverage ratio 0.5

Earnings vs. Forecast

Balchem exceeded market expectations with an EPS of $1.27, a 13.39% surprise over the forecasted $1.12. Revenue also surpassed projections, with a 2.07% surprise, indicating strong demand and effective cost management. This marks a continuation of Balchem’s trend of outperforming expectations in recent quarters.

Market Reaction

Following the earnings release, Balchem’s stock price increased slightly in pre-market trading by 0.08%, reaching $152.21. This movement reflects investor confidence in the company’s ability to maintain its growth trajectory, despite broader market volatility. With a beta of 0.89, the stock historically shows lower volatility than the broader market. The stock is currently trading near its 52-week low of $145.7, significantly below its high of $185.96. For deeper insights into Balchem’s valuation and growth potential, including 12+ additional ProTips and comprehensive financial analysis, check out the full research report on InvestingPro.

Outlook & Guidance

Looking ahead, Balchem anticipates continued growth in its Human Nutrition and Health segment, supported by healthy demand and strategic initiatives. The company expects to mitigate tariff impacts partially and projects an effective tax rate between 22-23%. Balchem’s new microencapsulation facility is slated to come online in late 2027 or early 2028, positioning the company for future expansion.

Executive Commentary

"We delivered record second-quarter consolidated sales, adjusted EBITDA, adjusted net earnings, and adjusted EPS," said Ted Harris, CEO of Balchem. He highlighted the company’s strategic positioning as the lines between food, nutrition, and pharma continue to blur. Martin Bengtsson, CFO, emphasized Balchem’s strong cash flow generation and commitment to debt reduction.

Risks and Challenges

• Supply chain dynamics: Although Balchem maintains minimal reliance on China, global supply chain disruptions could pose challenges.
• Market competition: Increasing competition in the nutrition and health sectors may pressure margins.
• Regulatory changes: Potential shifts in trade policies or tariffs could impact cost structures.
• Economic conditions: Broader macroeconomic pressures might affect consumer spending and market demand.

Q&A

During the earnings call, analysts inquired about Balchem’s market expansion strategies and research focus. The company reiterated its commitment to scientific research and marketing to drive growth. Additionally, Balchem is preparing for opportunistic stock repurchases and continues to advance its CureMark BLA preparation.

Full transcript - Balchem Corporation (BCPC) Q2 2025:

Desiree, Conference Operator: Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Balchem’s Second Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer I would now like to turn the conference over to Martin Dengxin, Chief Financial Officer.

You may begin.

Martin Bengtsson, Chief Financial Officer, Balchem Corporation: Good morning, everyone. Thank you for joining our conference call this morning to discuss the results of Balchem Corporation for the quarter ending 06/30/2025. 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 counsel, auditors and the SEC, at this time, I would like to read our forward looking statements. Statements made in today’s call that are not historical facts are considered forward looking statements.

We can give no assurance that the expectations reflected in forward looking statements will prove correct and various factors could cause actual results to differ materially from our expectations, including risks and factors identified in Balchem’s most recent Form 10 ks, 10 Q and eight ks reports. The company assumes no obligation to update these forward looking statements. Today’s calls 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, Chairman, President and CEO, Balchem Corporation: Thanks, Martin. Good morning, and welcome to our conference call. We were extremely pleased with the financial results for the 2025 as well as the ongoing strong performance of our company. We delivered record second quarter consolidated sales, adjusted EBITDA, adjusted net earnings, and adjusted EPS with year over year sales and earnings growth in all three of our reporting segments. Before we get into more detail on the quarter, I would like to make a few comments about the overall market environment, including the evolving global trade situation as well as some of the new science that has recently been published supporting our various minerals, vitamins, and nutrients, and an important capacity expansion project that we are working on.

We continue to see healthy demand across the vast majority of our end markets. Our human nutrition and health segment continues to perform extremely well, driven by strong demand for both our unique portfolio of nutrients and our food ingredients and solutions, which are benefiting from trends toward nutrient dense, high protein, high fiber, and low sugar or good for you foods, where our nutrition and formulations expertise brings considerable value to our customers. In the animal nutrition and health segment, we delivered another quarter of year over year growth on healthy demand in both our monogastric and ruminant businesses as market content conditions continue to improve. We were very pleased with the European Commission’s recently announced provisional antidumping duties on Chinese choline of 95 to a 120%, which is an important step in reestablishing a level playing field within Europe. Final measures are expected by the end of the year And after many years of injurious pricing by Chinese suppliers, these measures should undoubtedly help contribute positively to the overall growth of our animal nutrition health segment in the coming quarters.

And within our specialty products segment, both our performance gases business and our plant nutrition business are performing well, driven primarily by higher demand. Our outlook for the second half of the year also remains positive. As discussed at length on the last earnings call, we believe we are relatively well positioned to effectively manage through the current global trade environment. As a reminder, we have several advantages of note, including an intra region manufacturing and sales model where approximately 85% of the company’s sales are manufactured in the same region where they are sold. A global supply chain with little reliance on China, a robust US manufacturing footprint, and strong market positions that historically have provided us with the ability to raise prices to offset rising costs.

Given today’s global trade environment, we remain nimble and flexible to adjust accordingly as market conditions evolve. Additionally, I am excited to share some progress we have made in our scientific and clinical research pipeline, which continues to bolster our human nutrition and health segment. Our current pipeline features over 20 active clinical studies focused on evaluating the benefits of certain nutrients, including VitaCholine, K two Vital, Opti MSM, and Albion Minerals. These studies are integral to our strategy for entering new markets, expanding our ingredient categories, and building consumer awareness. In q two of this year, our sponsored research and collaborations resulted in six significant publications.

And year to date, we have had a total of nine research studies published. I’d like to highlight two specific studies that we are particularly excited about. The first is focused on dietary choline and Alzheimer’s disease. This NIH funded study examined the relationship between dietary choline intake and the risk of Alzheimer’s dementia. Data was gathered from 991 retirees participating in the Rush Memory and Aging project in Chicago who were monitored for an average of seven and a half years with twenty seven percent of participants developing Alzheimer’s disease.

The study found that a daily intake of choline above three hundred and fifty milligrams was linked to a fifty one percent reduction in the incidence of clinical Alzheimer’s diagnoses when compared to those consuming less than two hundred milligrams per day. These findings align with previous research such as the Framingham Heart Study reinforcing the notion that higher choline intake is associated with a decreased risk of cognitive decline. The second publication that I would like to highlight is related to Opti MSM, our premier branded methylsulfonyl methane, and its favorable impact on exercise induced oxidative stress. This study explored whether Opti MSM could offer protection against significant oxidative stress from intense exercise in experienced runners. Participants received five hundred milligrams of Opti MSM or a placebo for twenty seven days followed by one thousand milligrams or a placebo for another three days just before participating in a half marathon.

Blood samples taken before and after the exercise analyzed 785 mRNAs connected to 47 immune response pathways. The results showed favorable modulation of 29 mRNAs across four distinct immune response pathways within two to four hours post exercise. This suggests that Opti MSM could support faster muscle recovery and protect against oxidative stress triggered by strenuous physical activity. We believe the research findings associated with these two studies along with all of the findings from the other studies that have been published recently will further strengthen the science behind our premium branded nutrients and continue to help advance our ability to expand market penetration. Additionally, I’d like to share that Balchem has announced its intent to build a new $36,000,000 state of the art food ingredient and nutraceutical microencapsulation manufacturing facility in Orange County, New York, just down the road from our legacy microencapsulation site.

If approved by the county, the facility will ultimately more than double Balchem’s capacity for its fast growing microencapsulation technologies and further support our continued growth. So some exciting progress being made on our strategic growth initiatives. Now regarding the second quarter of twenty twenty five’s financial performance. This morning, we reported record quarterly consolidated revenue of $255,000,000, which was 9.1% higher than the prior year quarter. We delivered record quarterly GAAP earnings from operations of $51,000,000, an increase of 12.3% versus the prior year.

Consolidated net income closed the quarter at $38,000,000 an increase of 19.4%. This quarterly net income translated to diluted net earnings per share of $1.17 on a GAAP basis, up 19¢ or 19.4% compared to the prior year. On an adjusted basis, we delivered record quarterly adjusted EBITDA of $69,000,000, an increase of 11.2% with an adjusted EBITDA margin of 27.1%, up 50 basis points from the prior year. Our record quarterly adjusted net earnings were $42,000,000 an increase of 16.8% from the prior year, which translated to $1.27 per diluted share, up 18¢ or 16.5% compared to the prior year. Overall, another excellent quarter for Balchem as we continue to deliver strong financial returns while making good progress on our strategic growth initiatives.

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 in more detail.

Martin Bengtsson, Chief Financial Officer, Balchem Corporation: Thank you, Ted. As Ted mentioned, overall, the second quarter was a great quarter for Balchem with record sales, earnings from operations, adjusted EBITDA, adjusted net earnings and adjusted earnings per share. Our second quarter net sales of $255,000,000 were 9.1% higher than prior year, driven by strong performance in all three segments: Human Nutrition and Health, Animal Nutrition and Health and Specialty Products. Our second quarter gross margin dollars were $93,000,000 up 12.2% compared to the prior year. And our gross margin percent was 36.4% of sales, up 90 basis points compared to the prior year.

The increase in gross margin percent was primarily due to a favorable portfolio mix, which was partially offset by certain higher manufacturing input costs. Consolidated operating expenses for the second quarter were $42,000,000 as compared to $37,000,000 in the prior year. The increase was primarily due to higher compensation related costs and professional services, partially offset by lower amortization expense. GAAP earnings from operations for the second quarter were a record $51,000,000 an increase of 12.3% compared to the prior year. On an adjusted basis, as detailed in our earnings release this morning, non GAAP earnings from operations of $56,000,000 were up 10% compared to the prior year.

Adjusted EBITDA was a record $69,000,000 an increase of 11.2% compared to the prior year with an adjusted EBITDA margin rate of 27.1%. Net interest expense for the second quarter was $3,000,000 a decrease of $1,000,000 compared to the prior year, driven primarily by lower outstanding borrowings. Our net debt decreased to $125,000,000 with an overall leverage ratio on a net debt basis of 0.5. The effective tax rates for the 2025 and 2024 were 21.922.2% respectively. The decrease in the effective tax rate from the prior year was primarily due to higher tax benefits from stock based compensation.

Consolidated net income closed the quarter at $38,000,000 up 19.4 from the prior year. This quarterly net income translated into diluted net earnings per share of $1.17 an increase of $0.19 compared to the prior year. On an adjusted basis, our second quarter adjusted net earnings were a record 42,000,000 an increase of 16.8% from the prior year, which translated to $1.27 per diluted share. Cash flows from operations were $47,000,000 with free cash flow of $41,000,000 and we closed out the quarter with $65,000,000 of cash on the balance sheet. As we look at the second quarter from a segment perspective, our Human Nutrition and Health segment generated record sales of $161,000,000 an increase of 8.7% from the very strong results in the prior year, driven by higher sales within both the Food Ingredients and Solutions businesses and the Nutrients business.

Our Human Nutrition and Health segment delivered record quarterly earnings from operations of $38,000,000 an increase of 14.9% compared to the prior year. This was primarily driven by the aforementioned higher sales and a favorable mix, partially offset by an increase in certain manufacturing input costs and higher operating expenses. Second quarter adjusted earnings from operations for this segment were $41,000,000 an increase of 10.8%. We’re very pleased with the overall performance of our Human Nutrition and Health segment, where we continue to experience solid end consumer demand for our unique portfolio of ingredients and solutions. As mentioned on our last call, we’re seeing healthy growth once again across our Food Ingredients and Solutions businesses, at least partly due to the good for you trends where our formulations expertise brings considerable value to our customers as well as continued growth of our nutrients business.

We believe our product offering is well positioned to meet growing market demands and that our strong market positions will enable us to continue to deliver healthy growth in human nutrition and health. Our Animal Nutrition and Health segment generated quarterly sales of $56,000,000 an increase of 13.1% compared to the prior year. The increase was driven by higher sales in both the ruminant and monogastric species markets. Animal Nutrition and Health delivered earnings from operations of $4,000,000 an increase of 30.5% from the prior year. The increase was primarily due to the aforementioned higher sales and a favorable mix, partially offset by an increase in certain manufacturing input costs and higher operating expenses.

Second quarter adjusted earnings from operations for this segment were $4,000,000 an increase of 27.8%. We were once again pleased to see our Animal Nutrition and Health segment deliver both top and bottom line growth in the second quarter and the continuation of the stabilization and recovery of the business. The end markets for Animal Nutrition and Health remain relatively stable at the moment, and we believe the Animal Nutrition and Health business has good momentum and is well positioned to deliver solid growth in 2025. As Ted mentioned earlier, the European Commission’s recently announced provisional anti dumping duties on Chinese choline will certainly provide further support for the Animal Nutrition and Health segment’s growth outlook. Our Specialty Products segment delivered record quarterly sales of $37,000,000 an increase of 6% compared to the prior year, driven by higher sales in both the Performance Gases and Plant Nutrition businesses.

Specialty Products also delivered record quarterly earnings from operations of $11,000,000 an increase of 0.4% versus the prior year, primarily driven by the aforementioned higher sales, partially offset by higher operating expenses. Second quarter adjusted earnings from operations for this segment were $12,000,000 an increase of 1.3%. We are very pleased with the performance of Specialty Products in the second quarter, both from a sales growth and margin perspective, and we expect healthy demand to drive another year of growth for the Specialty Products segment. So overall, the second quarter was another excellent quarter for Balchem, and we believe we are well positioned for continued growth as we head into the second half of the year. I’m now going to turn the call back over to Ted for some closing remarks.

Ted Harris, Chairman, President and CEO, Balchem Corporation: Thank you, Martin. Once again, we’re extremely pleased with the second quarter financial results reported earlier this morning. As a company, 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 Bengtsson, Chief Financial Officer, Balchem Corporation: Thank you, Ted. This now concludes the formal portion of the conference. At this point, we will open up the conference call for questions.

Desiree, Conference Operator: Thank you. We will now begin the question and answer And our first question comes from the line of Bob Labick with CJS Securities. Your line is open.

Bob Labick, Analyst, CJS Securities: Good morning. Congratulations on the recent antidumping news and thanks for taking our questions.

Ted Harris, Chairman, President and CEO, Balchem Corporation: Great. Thanks, Bob. Thank you, Bob.

Bob Labick, Analyst, CJS Securities: Yes. So hopefully, obviously, that will get things back on track in the even playing field, as you said. Could you and we’ve been focused on that lot. Could you give us take a step back, give us an update on the macro environment? What’s European monogastric demand like overall demand now?

And how should that play out for you? And beyond the recovery in monogastric, which hopefully follows, what are the other drivers for growth in ANH that you see over the next six to eighteen months?

Martin Bengtsson, Chief Financial Officer, Balchem Corporation: Thank you, Bob. Yes, on your question on monogastric demand in Europe, would say the demand picture is relatively stable and has been stable for quite some time. If you think about it from an overall market, what we’ve seen is obviously that in terms of the Chinese supply, the market share that they have had over the years have gone up and down depending on what period you’re looking at. So now as we with this anti dumping provisional ruling, what will play out over the coming quarters is obviously, what market share will they have as we establish a more leveling level playing field? The Chinese suppliers have a relatively significant market share in Europe, at the moment.

And if these provisional duties remain at this level, that puts their pricing sort of at par with the European producers. And historically, we have seen sort of a preference to buy more local supply if the price is not too different. Right? So we could see a scenario where, we get a higher market share in Europe compared to where we are today, which would obviously be positive for the business. But the overall market itself is more of a low single digit growth market for sort of feed grade choline, driven more by sort of protein production, in the region.

So if you then take a step back and look at ANH more broadly in terms of of growth, we do see quite a lot of growth ahead of us, on the ruminant side. So think about our dairy business there where there’s still a lot of market penetration, not just in The US, but also in Europe and elsewhere in the world, where there is more of innovation going on. We are bringing new products to market. You may remember last year, we launched the new AminoShore XL product, which is a rumen encapsulated lysine. And the innovation funnel there continues to evolve, as we work on bringing further products to market.

So you’ll see growth driven on the ruminant side. And then also we have the companion animal business, which provides quite a bit of growth opportunities for us, based on the technologies we have, while the monogastric business will always be a little bit of a slower grower, relative to the other parts of the portfolio as it’s a more mature market, more fully penetrated. So hopefully that provides some insights.

Bob Labick, Analyst, CJS Securities: Yes. That’s super. Thank you. And then kind of shifting to The U. S.

And I guess New York, could you talk more about the investment in the manufacturing facility? How much capacity I think you said doubles the capacity. How much revenue does that add? How long will this take? And what are the other benefits of standing up a new manufacturing facility as it relates to, I don’t know, it’s going be margin or faster throughput or market share?

Or what are you looking for from this new facility?

Ted Harris, Chairman, President and CEO, Balchem Corporation: Yes. We’re excited about this new investment, Bob. It’s something that’s been honestly a little bit of a long time coming. The as you know, kind of the the foundation of Balchem was on microencapsulation technology and manufacturing. Our our founders were scientists, technologists who invented a unique way to microencapsulate food ingredients, and they bought a small dairy in Slate Hill, New York.

And hence, that was the start of our company, and we have been manufacturing microencapsulated products in Slate Hill, New York since that time, since back in the in the sixties. We have since expanded to now make similar products in our Missouri site as well as overseas in in Italy, but Slate Hill remains our our primary site. But as you can imagine, it’s a relatively old site and not very efficient because of of the age of the site and the original construction and and so forth. It’s very choppy and and not ideal. So this is a purpose built microencapsulation site that will come with significant efficiencies that we’re looking forward to, but most importantly, expansion of of our production.

We really have been, a little bit tight on capacity, for the last year or so, and the business over the last couple years has been growing at, you know, 25% a year. And so doubling of the the capacity is in order. So, you know, I think that the the primary way to think about this is that this investment will allow us to continue to grow that business at, at double digit rates, for the foreseeable future. Whereas if we didn’t make this investment, we would be, restricted on our expansion. We have a debottleneck and stretched capacity as best we can, and and, it’s time for a a new footprint.

But, certainly, it will also be more efficient just because of the newness of it and the fact that it’s not a retrofitted dairy and it’s now a purpose built microencapsulation facility.

Bob Labick, Analyst, CJS Securities: Okay. Super. Well, that’s exciting. I’ll jump back in queue and let others ask questions, but thank you.

Ted Harris, Chairman, President and CEO, Balchem Corporation: Thanks, Bob.

Desiree, Conference Operator: Our next question comes from the line of Ram Selvaraju with H. C. Wainwright. Your line is open.

Ram Selvaraju, Analyst, H.C. Wainwright: Thanks very much for taking my questions and congratulations on another very solid quarter. Just to clarify on the previous point about the facility, I was wondering if you could just let us know specifically when you anticipate the facility fully coming online and how you are funding the facility construction costs. Just wanted to clarify that that’s all coming from existing cash resources.

Ted Harris, Chairman, President and CEO, Balchem Corporation: Yes, Bob. I mean, I’m sorry, Ram. Thanks for the question, and thanks for your comments. So from a CapEx perspective, as you know, we’ve been spending 35 to $40,000,000 a year on on CapEx, and we really think that we can accomplish this new project, within, that sort of size CapEx spending because it will happen over the course of three years. And so, we’re not expecting a significant increase in our CapEx spending.

So, yes, it will come from, you know, existing, cash as well as, our our debt facility. So, we’re not concerned at all about, funding, this site. And then I I sort of spoke to it, but we think that it will take a little over a couple of years to manufacturing this to manufacture or build this manufacturing site. So we’re expecting that we should be able to start production, you know, kinda, I’d say, late in 2027 into 2028. And we feel like we have enough capacity in our existing facility with all that debottlenecking that I talked about to allow us to grow to that point, but, we really need this facility come online, in that time frame in order for us to continue to grow.

Ram Selvaraju, Analyst, H.C. Wainwright: And thank you very much for that. And then a couple other items on the H and H front. Firstly, I was wondering if you could comment on the status of Vidacholine ProFlo and the progress that’s been made on integrating that specific product offering into multivitamin product lines and brands and how you expect that to evolve over the course of the remainder of this year? I also wanted to ask about in a general sense Balchem’s strategic outlook on the human health front as opposed to nutrition. On this call, it seems that you struck a markedly different tone with respect to the kinds of clinical studies that are being embarked upon.

And I was just wondering whether this might mark the start of Falcon’s move more concertedly into the human health front, maybe into the food space, maybe even into the pharmaceuticals or more pharmaceutical like nutraceutical domain. If you could provide us with any insights on that front, that would be much appreciated.

Ted Harris, Chairman, President and CEO, Balchem Corporation: Sure, Ram. I’ll try to answer all of those questions. You know, I think that this is a both an industry trend as well as an ongoing evolution of our company. And when I speak about an industry trend, you know, the good for you nature of of foods, you know, greener labels, you know, healthier eating, personalized nutrition has been a, you know, multi decade trend that we have benefited from, but there certainly are some accelerators to that multi decade trend of late. I think the the advent of the GLP one drugs is certainly a part of that that, you know, has kinda risen to prominence very, very quickly and results in kinda changing needs from a a nutritional perspective, maybe even, you know, as you, brought up a medical foods perspective.

But we really are seeing, our customers, launch new products that are specifically focused on people that are on GLP one drugs that obviously have kind of protein intake issues potentially as well as liver health concerns and just, you know, broad reaching nutrition deficiencies that come with consuming less food and and and so forth. And so, you know, our our food ingredient formulation business, I think, plays well into that trend. And, of course, our nutrient portfolio plays well into, that as well. And so, you know, the the market trends are are headed headed that way, and, you know, we are moving along, our evolutionary path toward being able to better and better service that. And and we’ve been talking quite a bit lately about our investments in marketing, as you know, because that was sort of new to, kind of our our capabilities, if you if you will.

But the investment in, science and studies has really always been there. So I wouldn’t want you to come away saying that this is this is a shift relative to the studies. I think we’ve been highlighting the marketing element, of, our strategy. But, you know, we’ve always, you know, tried to communicate that we wanted to add the marketing to our foundation that’s based on science. And these studies are critical to, the overall growth of the company, the overall, you know, penetration of markets, the building of awareness, and and so forth.

So we’re continuing to do that, while investing in marketing. And I do think that, you know, where the markets are evolving and where Balchem is evolving is a little bit more toward that health side as you describe it. You know, we’re we’re not focused on becoming a pharmaceutical company. We’re not focused on getting into, pharmaceuticals, but I think those lines between, food, nutrition and pharma are going to become increasingly blurred given the accelerators that are going on relative to that long standing trend. And so I think that’s what you’re noticing and maybe some of our updates.

And because we’ve been highlighting marketing so much, we wanted to remind everybody that we continue to invest in the science. And relative to the new products that we have launched, VitaCholine ProFlo is, as we’ve talked about, interesting new product that we have that facilitates the inclusion of choline into multivitamin solutions. And, you know, we are, you know, starting to introduce that to customers, and and, the reception is positive. We still can’t report out on, any, very large successes there, but it is just, you know, adding to our portfolio of solutions. And, we were a little bit blocked out of the, the multivitamin component of the supplement market.

And, you know, now we have, something that we can really talk about there. So we are excited about that. I think that one thing that I’m, you know, almost more excited about right now is the, predominance of choline being included in nutritional beverages and other food, systems. And, the more that we can, support the inclusion of choline in these nutritional beverages, any energy drinks, so forth, that’s a significant market opportunity for us. And we’ve seen some real wins in that area of late and are very excited about that.

Ram Selvaraju, Analyst, H.C. Wainwright: Great. And then just two very quick things for Martin as per usual. Just wanted to see if you could comment on the broader strategy with respect to debt reduction, What we might expect to see over the course of the remainder of this year if it’s steady as she goes or you expect to accelerate debt repayment? And also if you could give us a sense of your perspective on where the effective tax rate might shake out for the 2025? Yes,

Martin Bengtsson, Chief Financial Officer, Balchem Corporation: absolutely. I think as you talk about debt reduction, I think you have to think about it in the broader context of our capital allocation strategy, right, where, you know, our primary focus is always in in invest in our organic growth opportunities that we have internally and that you see us doing. And then, obviously, we try to complement that with strategic m and a that we feel accelerates some of those growth initiatives. And then, you know, we we focus on paying down debt with cash that we have on hand that we’re generating since we continue to generate strong free cash flows. We pay down that debt and we’ll continue to pay down that debt.

While at the same time, as you’ve seen over the last decade, maintaining and growing that dividend. You may have noticed if you look closely that we also occasionally, do smaller share repurchases for anti dilutive purposes. Right? So we try to keep our share count relatively flat. So we have done that as well, to keep that.

But as you look forward, we will continue to generate good cash flows. We’ll continue to pay down debt. And I think sort of when we do our next M and A transaction, obviously, that debt level will rise again, and you’ll probably see a repeat of history of add ons on debt and then we continue to pay it down. So I don’t think you’ll see any change in strategy here. We’ll continue to pay down that debt for a little bit further until the next M and A transaction happens.

And then on the effective tax rate tax. Yeah. Yeah. On the effective tax rate, we’re sort of humming along those 22% so far this year. I think I’ve said before that we expect that to be between the 22% and the 23% for this year.

And as you look into the second half, there’s probably we’ll probably be towards the lower end of that range. So probably a little bit closer to the 22 than the 23 is what I would expect for the second half of the year here.

Desiree, Conference Operator: Our next question comes from the line of Tony Polak with AGs. Your line is open.

Bob Labick, Analyst, CJS Securities: Good morning. I want to know basically two questions on tariffs to The U. S. Does that affect you at all? And, an update on CureMark, if I may.

Ted Harris, Chairman, President and CEO, Balchem Corporation: Sure. So on tariffs, you know, it does affect us, certainly. But as, we’ve said a few times, we really feel like we’re relatively well positioned. On the, call last quarter, we talked about approximately a $20,000,000 impact on, from tariffs, and that’s primarily on, us buying raw materials for The US from international locations. And, obviously, it’s a little bit of a kind of a a moving target, if you will.

But since the last call, some new, deals, I guess, they’re called, have come into play, specifically Europe, but but also some countries that are important to us like, Indonesia, Malaysia, and The Philippines. And if we look at that $20,000,000, impact number that we talked about, last time, it hasn’t changed significantly. It’s up to, approximately $25,000,000, today. And as we said last, time, we feel as though we can offset about half of, that number through supply chain shifts and moves, alternate suppliers, alternate manufacturing, and so forth. And that’s continuing to play out as we expected.

And then the other half will have to come from pricing. And and so and we’re in the midst of executing on that and remain confident that we’ll be able to accomplish that. So overall, we feel as though, again, we’re we’re relatively well positioned. We’re going to be able to manage through this, but it’s it’s certainly something that we’re we’re having to work and manage. And and it’s taking energy and time, but we’re we’re not concerned about its overall impact on the company’s performance at this point in time based on what we know.

And relative to CureMark, we don’t have a whole lot new to report relative to CureMark. We do understand that they continue to prepare to file the BLA. That is really the next step. We have done everything that we need to do from a manufacturing perspective and validation perspective and and and so forth. So it really is today completely in the hands of, the CureMark team to, file what they need to file with FDA, seeking ultimate approval.

And and our understanding. And based on our, regular calls with with, them, they are, working hard on that with various consultants and and so forth. And so, you know, we’re excited at some point in time in the future for them to reach that milestone of filing what they need to file with with FDA. But I really don’t have any insights into any more specificity on exactly where they are in that process other than knowing that they’re in the midst of it.

Bob Labick, Analyst, CJS Securities: Thanks. Appreciate it.

Ted Harris, Chairman, President and CEO, Balchem Corporation: Yeah. Thank you, Tony.

Desiree, Conference Operator: And our last question comes from the line of Daniel Herriman with Sidoti. Your line is open.

Tony Polak, Analyst, AGS: Thanks. Good morning, guys. Thank you for taking my questions. Just a couple quick ones for me here. First, within ANH, the 8.7% year over year growth, I was hoping you might be able to break that down between nutrients and ingredients.

And then Martin, I know you just discussed this, but I wanted to confirm, obviously, quite a large step up in stock repurchases versus the 2024. And just wanted to confirm from you that that is just an opportunistic repurchase due to valuation and not a shift towards more of an active return strategy.

Martin Bengtsson, Chief Financial Officer, Balchem Corporation: Yes, absolutely, Dan. Yes, maybe starting with the second part of the stock repurchase. Yeah. No, that’s really just in line with sort of historic. We repurchased share for antidilutive purposes in 2022 and in 2021 and in 2023 and the early part of the year.

Then we took a little bit of a break from doing that after the last two acquisitions we did and and focused on lowering the debt instead. And now we sort of little bit opportunistically saw a good opportunity to to, buy back some stock for antidilutive purposes. So it’s not any larger change in strategy. It’s truly sort of the same just for antidilutive purposes. Yeah.

So on your question on on, A and H, I mean, overall, the, you know, the overall ANH sales growth was obviously 13 in the in the quarter. And actually, there was growth on both sides. Right? So if you take the monogastric more mature business, it was up about 7% on the monogastric side, while the ruminant side was up around 30%. So on a relative scale, ruminant growing much faster than monogastric, which is also what we would expect to see over time as it is a higher growth business compared to the monogastric side.

Tony Polak, Analyst, AGS: I apologize, Martin. I was actually asking about HNH and nutrients versus ingredients.

Ted Harris, Chairman, President and CEO, Balchem Corporation: Okay. Well, you got some good insights into A and H as well.

Tony Polak, Analyst, AGS: Yeah. No. That’s that’s that’s fantastic.

Ted Harris, Chairman, President and CEO, Balchem Corporation: And we, you know, we we are pleased that that monogastric, you know, being a stable business continues to grow. And then, of course, ruminant, we view as a growth business, and 30% growth is is, really good to see as well. So on H and H, you know, we grew about 9%. And, you know, once again, a little bit like a and h, both the the the food business as well as the nutrients business grew and and actually similar percentages. So the nutrients business grew at, you know, 8.8% organically, and the, the food ingredient solutions business grew at 8.6%, organically.

So, again, very pleased with, the growth that we’re seeing in both of those. And it’s, you know, I would say, pretty much played out as we expected last year. We saw double digit growth in in our nutrients business last year and quite low, single digit growth in in, in food, and we thought that the growth in nutrients would moderate a little bit given the the accelerated growth that that we’ve seen, but would continue to grow. And so that’s exactly what’s happening, but the food, solutions business would, pick up. And so, really, pleased with that.

In the nutrients business, sort of stand out, I would say. Our k two, product line is is growing at, you know, high, you know, double digit type type growth. You know, very pleased with that, you know, in the 30%, 40% type range. Our MSM business, growing at at solid, double digits, and our, you know, minerals business continues to grow very nicely, you know, with kind of a, you know, standout continuing to be magnesium with with, growing awareness of that important, mineral. And then then in the food business, it’s really across the portfolio.

Our encapsulated acidulants, I talked a little bit earlier about the need to expand manufacturing has been growing at, you know, 20% plus. But, generally, our good for you formulations, whether they be in kind of our powders or cereal systems businesses, are growing quite quite well. So, hopefully, that gives you a little bit of an insight into the H and H growth.

Tony Polak, Analyst, AGS: Yeah. That’s really helpful. And, I’m sorry for the earlier confusion, but thank you so much.

Ted Harris, Chairman, President and CEO, Balchem Corporation: No problem. Thanks, Daniel. Really appreciate question.

Desiree, Conference Operator: That concludes the question and answer session. I would like to turn the call back over to our Chief Executive Officer, Ted Harris, for closing remarks.

Ted Harris, Chairman, President and CEO, Balchem Corporation: So thank you all very much again for joining the call today. We really appreciate the time today as well as your ongoing support, and we look forward to reporting out our q three twenty twenty five results in October. We will be participating in the H. C. Wainwright Investment Conference in New York City on September 9, so we certainly hope to see some of you there.

Thank you again for joining.

Desiree, Conference Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining, and you may now disconnect.

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