BCPC - Earnings call transcript Q3 2021

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Operator

Greetings and welcome to Balchem Corporation's Third Quarter 2021 Financial Results. At this time, all participants are in a listen-only- mode. A question-and-answer session will follow the formal presentation [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Martin Bengtsson, Chief Financial Officer. Thank you.

begin. may You

Martin Bengtsson

Martin Thank our morning everyone. for joining conference me name our quarter hosting Officer Good call CEO this discuss you, and the this with is My XXXX. to September Ted Corporation Chief results call Financial ending and Harris morning, is XXth, for Bengtsson, Chairman, of the Balchem President.

or involve our counsel, to forward-looking likely give at this no release would statements like expectations, factors read Following which identified including will to forward-looking Form factors assurance expectation in SEC, does contain correct. We prove reflect the time, or results future will the reflected contain advice various forward-looking risks statements, belief And and auditors expectations and and risks of events Balchem's will could in This our uncertainties. our from that XX-K. materially statement. can Balchem's I that cause the differ concerning

qualified their CEO statement. statements and Forward-looking Chairman, this call now President. our turn cautionary will I in to Harris, the are over Ted entirety by

Ted Harris

well of quarter morning, free reporting morning EBITDA cash quarter Thanks, This conference sales call. record quarter reported all strong record strong to net third in earnings three our and Good and results as third third welcome segments with Martin. as and we record with our adjusted flow.

operations Our revenues quarter. of $XX.X million, were our from X.X% $XXX.X XX%. up the earnings up million year were adjusted versus prior And

the operations deliver third year continue with from free million. and basis $X.X flow $XX an of basis, million, flows flows. were million, XX.X% increase on non-GAAP increase cash per $XX quarterly XX% for of non-GAAP GAAP of income per the quarter, in an quarter earnings a of on increase million net $XX.X our a $XX.X adjusted Cash in net On we share resulting resulted million strong of of to prior $X.XX were Our an cash share an $X.XX of third from basis. earnings earnings

to external another year third damaged associated any additional event, associated not with expense in subsequent quarter, back expenses May. items. to the focus help like a this such several affected to to impact call detailed write-off in inventory the expense Missouri turned and And additional used impact categorized the We safely few insurance will in We our XXX results, providers you The passing plant I recognized cover event event. of update at that flood coming quarter, of flash to functional. primarily actions the Verona further associated due in service that experienced Last reimbursements mitigate efforts. has the expect the as start the our time, repaired the was clean financial equipment, informed Martin Before a to restarted manufacturing second facility, to plant shutdown do has we on and an quarter, that and we cleanup been quarters site event the would implementing with of once you activities. weeks should event quarters. the while in for receive costs while for Since was with a to the this fully we $XXX,XXX

in safety liquidity the priorities through preserving and changes and same environment sites the remain the cash market satisfying remain our company needs, maneuvering focused this we and pandemic responding customer employee as manufacturing strong appropriate. dynamic to While on our keeping operational, first, ensuring

we are to increasingly, supply focus We the disruptions chain markets within. extraordinary operate challenging are the managing having on that

quarter. the have to has the year. the through experiencing the and material are inflation, progressed challenges beginning some since accelerated been severe disruptions have labor certainly These year and logistics of cost We But availability third shortages, us input raw issues. with extent, as

of quarter trend with And the this expect be fourth first half XXXX. in the XXXX. us to of We to least, continue through at accelerate

were supply to dampening by can on inflation. impacts conducted We will at by research global is of adequate submitted to leveraging our from completed input Human acid Within extraordinary and these X-year challenges, follow-on manuscript where X pregnancy. to raising the University choline Marie choline The into paper children for has reporting during in & Nutrition a Cornell first pregnancy offset be the third has redundancies results Health of on of are variety stages cognitive role DHA final of University peer tests our and capabilities production, to the Cornell to soon. chain and we cost review been study while old offspring X.X mothers during focus review. to supplemented and prices segment continue a year their Codell and subjected metabolism published levels Also trimester with ensure omega-X expected validated the the the fatty of Professor of of a long-awaited been from continuity

further results to the the supplementation. expect support choline studies of these for both of We need

we chelated functional and choline launching introducing for continue promoting novel dairy extruded the based beverage our protein in market. quarter, and minerals beverage our accelerate and Additionally, applications marketing efforts campaign plant functional to crisps the campaign to a a

products Ninja quarter food an for demand the for children's deliver that to partners our several best-selling We enable also the with In key the portfolio. and progress branded products for technical to continued innovations announced Health segment our third series children's advances secure support author agreement Nutrition of around to Lipex nutrition. strategic consumer food the on Animal Book strategic &

release was of The available beliefs that the Sciences. or team the the of reviewed will emphasizes caving certainly dairy will on and incidence preview as transition encapsulated and period. years NRC from long-awaited lactation and the new to source the while validated Our choline choline fed more effective cycle, rumen dairy Academies bring of National committee in room efficacious during past a subsequent several after cows as all such reducing XX Reassure This the of requirements of the focus supplemental over fundamental of and cattle production efficiency disorders. NRC to health early an from research the results NRC to importance and protected before increase it an milk protected exciting nutrient also metabolic present the updated and dairy nutrient products the

manufacturer food were return pet forum highly the unique in that with accepted and nutritious that proteins was presented meetings. our derived business companion made technical industry's This the our proprietary of pet was publications treat and other novel code at ingredients important value of the the portfolio. for industry and for National food Albern in during highly was animal of restructuring the in also value was research demonstrating City included event for premier PetShure held numerous Missouri. uses Symposium our proposition the presented there Research of technology. Kansas a encapsulated event research of Association The products These surrounding anticipated pet this It animal two important and University and collaboration food pet demonstrated the new Scientific presentations forum Additionally, the application treats. food the the allows option presentations Technology Animal sustainable ingredient manufacturers. for return Science nutritious International Food venue Valcom's several from

the salmonella diets meat value demonstrating University. and was Kansas State PetShure at based towards conducted of raw first new The encapsulated research acids controlling

at of led in The obesity controlling PetShure University by that second talk Veterinarian on being College Ontario and focused benefits research cats the the invited the of choline Wealth. with supplemental

customer Specialty production products production the foliar base line segment a capability and robustness North This Products nutrition in growing existing American will up Within we Metalosate manufacturing chain to will for Balchem's our our strengthen existing Europe, and augment the in applied the new new serve complex started our our our plant Italy. ability of of international supply at enhance capabilities. Merano, needs

system. project XXX% manufacturing one substantially We the revenues our Microsoft our completed ERP XXX to have system. last Dynamics seven the on into our recent now also have near site on major go-live consolidate of new We with of systems the

one pleased and on company operational We the company. efficiency to and many realization pandemic This focusing are relative move that entire project completion on time to for with very on-time to is this adjusted system the pleased of critical are from delivered being we integrated the continued extremely growth of budget initiative the the benefits line. of the implementation and on was of across

of publishing across April water realize in are progress year both this reduce our XXXX XX% goals. of emissions continuing the and these the we going UN work to to our efforts, environmental, and ESG greenhouse significant that goals advance celebrated important Global of our or and and is all our a Additionally, gas Since XX, Compact signing on XXXX, to Balchem in governance principles. commitment social of Global becoming Compact effort the have made the our usage to September proud by one-year UN of particularly on anniversary member company of we

place. through and consolidated of company the each go joining the journey for relative segments. the Martin healthier making results important detailed on was and the improvement year, going to Global purpose now UN to for corporate higher over social our world the step to back look responsibilities achievement we of our to a turn of As back the Compact continuous call our in the the I'm financial last results business our an

Martin Bengtsson

Thank you, Ted.

financial As challenging in Ted a results we mentioned, delivered strong overall, environment.

Specialty Health; all products. of net Nutrition year the XX% our three positive due delivered Animal strong Our to million a prior were $X.X third to sales and we quarter & impact The compared Human in of minimal Health; exchange to quarter, growth Nutrition the million & in and euro. sales stronger up $XXX.X sales was primarily foreign segments:

to million $XX.X compared margin quarter Third gross up of year. or prior $X.X million X.X% were

to to further sequentially We've increased primarily XX.X% million although quarter third we and decrease third third million was XXXX. In raw material partially compared and the to points the inflationary distribution in the percent sales been margin by to selling the experienced quarter. quarter $XX was XXX XXX higher prices. year accelerated second approximately gross the costs, compared and material year, all quarter point approximately cost in increases the offset of due managing of prior The basis Our compared XX.X% $X inflation basis of input freight quarter. in quarter pressures raw down

freight distribution costs prior addition, have $X increased In million costs of quarter increased approximately driving and year. the to compared dramatically the in

fourth Ted pressures costs into inflationary XXXX. by our trend to this we of expect increased earlier, mentioned the and on As continue into quarter input

an continue approximately increases customers. we'll increases. cost and price our by a partially $XX driven we third The increase and the quarter, in hard passing operations to timing we passed these for million year. have to research increased recover In increase $X.X due to by to an the work earnings to prior prior $X.X higher There's to expenses them between timing usually such, the to compared through and and On basis were of the difference recovery. million $XX.X from As primarily a million, Operating million GAAP offset costs work in insurance third expenses or of an compared period the the development, million time. increase $XX.X and compensation-related was non-GAAP recover the by fully million higher of $XX.X costs our selling quarter increase were quarter to raise from XX% an hard for to as quarter. the ability we X.X% in will XXXX prices an operations continue of year adjusted prior of million $XX.X compared third earnings costs or quarter. up to over year of were through

with of million at were quarter EBITDA XXXX company's or XX.X% third the tax and XX% higher XXXX. an or above year. XXXX into quarter. adjusted benefits net income quarter cash $X.XX adjusted were respectively. related year generated tax XX.X% $XX.X diluted decrease tax X.X% regulations tax primarily up earnings up We were the for rates quarterly million from comparable we $XX.X being from The cash closed year's impacted diluted The million million XX.X% the basis $X.XX year due of out on and reform. and the $XX compared stock-based compensation prior prior million net from with effective flow quarter share effective quarter. in share or of to prior $XX rate last of third Net the of $XX closed quarter and Third XX.X% clarifying quarter $X.X by free the to sheet. million the was earnings per adjusted the negatively our translated On balance million per or of an the This of increase $X.XX $X.X

$XXX.X choline delivered business We with prior primarily strong from a our the encapsulated third look continues & X.X% Human grew growth products. both our choline sales within and business segment our year. growth growth Health food sales it the and in demand. minerals driven sales of generated we mineral product that at double-digit while increase Nutrition in The segment of by to record As notable an strong modestly nutrients perspective sales see lines increase quarter million, was from

from of million, Our Human the year primarily Nutrition earnings higher prior quarterly XX.X% timing due manufacturing Health by of quarter of input partially $XX.X aforementioned costs. to recovery mix & costs the insurance and compared favorable an segment to operations delivered the distribution an higher and increase offset sales

of and expenses $X.X assets from related million an X.X%. were adjusted effect expense of million, of segment of the flood event increase intangible of the noncash million Excluding Verona direct with associated $XX.X to this earnings excluding the flash $X.X operations for amortization

monogastric of million both volumes sales ruminant prior Our Animal to year. record all-time Nutrition and an was increase the higher of sales result & the of The quarterly prices in markets. $XX.X and increase compared Health in XX.X% segment animal generated primarily

volumes we volatile successfully prices in The dairy levels business continued to relatively remain market. ruminant X.X% penetration positively. at protected protein ruminant milk and are products drive market remains trending grew and encapsulated healthy our the Our milk of although and

sales, On well offerings operations strong as costs Animal for increase the higher nutrition of up and cheleate demand volumes the animal for quarter XX.X%, aforementioned year due million volumes by and driven overall the earnings the from and partially distribution up market. prior in monogastric held quarterly higher choline companion minerals X.X% of grade input animal from an manufacturing were to our feed by as costs. our offset were side $X.X

million, flood of of $X.X X.X%. and of million intangible of quarter effect third flash of to expenses direct adjusted operations expense were assets amortization this for non-cash related excluding $X.X Verona the associated $X.X an with from event the earnings million, the increase Excluding segment

sterilization which due go segment and showing Our nutrition surgeries medical the the market an the products sequentially plant compared year-over-year, into sales Products quarter quarter Sales of largely were sales of device medical XX% markets. in to the nicely return prior the of increase delivered business our down year of higher elective Specialty record in to volatility gases performance but of products device third recovery sterilization grew both the market. this $XX.X and million, of

million, strong in Products segment seasonal earnings by versus offset in business quarter the the of from distribution in growth plant our growth partially to operations increase half the continue the that with third we was an The of in is and business. XX% $X.X of with growth While manufacturing see prior aforementioned XX.X% Specialty majority increases first business higher quarter nutrition to to third an input the contributing of the increase good being had business costs year. year-over-year year, sales, in this approximate primarily costs. year-to-date due

remarks. going an Ted third expense of earnings associated now segment of with amortization closing I'm intangible adjusted the for to turn operations from some quarter Excluding over non-cash of million, $X.X $X.X this were million, the to assets for back of effect call XX.X%. increase

Ted Harris

Martin. Thanks,

very record operations. all this our strong We with in three earlier EBITDA net of adjusted third Balchem's are and pleased earnings morning. business third record quarter and delivered reported segments, revenues We flows cash financial from quarter results

open successful, who well the not leadership I back have like call into questions. we while us. raw the positioned in Martin, All to the results up are facing the costs of to only remain global future. will we hand attractive opportunities also to continue our material to would of long-term markets, for strategic distribution over show higher growth that and continue call the logistics and this, challenges, These about where ahead capabilities we but and initiatives to progress, now also be Martin? encouraged growth strong and continued today,

Martin Bengtsson

concludes the the we This open now this the point, Ted. conference. portion call formal At up for questions. you, conference of will Thank

Operator

proceed you. first line Thank Bob [Operator of your Instructions] from Labick Our question Please with the comes Securities. question. CJS with

Bob Labick

on Congratulations nice morning. execution. Good Great a quarter.

Ted Harris

Bob. Thanks,

Martin Bengtsson

Thanks, Bob.

Bob Labick

to wanted start. I

the XX% you little be environment. volume overall way about on volume of there side. growth a much You demand a but the the mice Maybe is lots so of top might touched I hard, on related animal that of bit there the know about a versus maybe is demand it little material on and labor price what to guess been constrained line think talk the how to And to chain now? of, have is because raw able right supply higher out then, question reaching the related? I of volume could have the is transportation kind you even tack supply in demand than higher be you're

Ted Harris

from very perspective, XX% the Animal in growing almost a well quarter on growth did revenue. Bob. Yeah,

remaining where the selling If half volumes and higher almost prices. being were and price, you XX%, volumes separate it's half, piece that around up and between

between So it's those half about and two. half

In really whether board. very is we could limiting board, at And the the demand, in not raw demand where more, across many bit the cases is material availability, distribution almost factor factors it a availability, the but in is given in not only at where these little of labor the all demand sell that terms but areas strong across of moment a of our availability, freight the businesses, areas is businesses, limiting moment the in and all sits. versus and

a guess, I there's customers. not answer can effectively would operations, a run the you the a effective moment. issue products procure it labor, material, So is really of demand to I the retain and at matter how get It really as

Martin Bengtsson

of areas, growth volume areas, whole XX% and that just numbers And you And when whole, the I there. it's growth, mix it that volume not or growth at points, point. areas if company, of across by a pricing think this and at over that of you some we're revenue, might by certainly, we've significant, able Bob, we're be capacity of just hundred of, a maybe growth, related to volume round the little the couple constrained But in leaving adding could of being XX% kind on as at growth, XXX kind bit driven think that driven some not rest about of in little constraint bit delivered basis quite point in half think been basis so supply and that whether X% of the it's I company because material raw to we in table. some look think it look you a I a fully all

deal in everything So demand able satisfy it does challenges we're remain marketplace. the that doing But facing these to strong. we're not fully We're all to can of we all. with

Bob Labick

the Thanks. nutrient That's the NRC, market it, dairy how How relates forward? going helpful. the for it information And then really does affect validation that you Got release does for great. is as lagging Europe, get cattle the and the potentially in to et of Reassure? the mentioned cetera, that do for Reassure a the the kind you I there? ultimately this requirements out is play do put word How this out organization, will US? you US-centric penetration help think or in boost think which And

Ted Harris

certainly. Yeah. released. That's It officially years. very true NRC remember the It's talking not we've has been about still that last some for been if delayed. And you been statement

be science obviously, in use that guide basically a talked And with. us, to We primarily forth NRC December a efficacious to the this is but in first to how that what this feeding, it's out the use effectively and and what would through we're clear enhance critical good handbook book much slam And pleased and have expect of so see as there basic exactly America there. does they with released really does many results. also, protected production about but them it this feed it as should cows. isn't you unfortunately the finding a feed out was we're also is now dairies They you the for that lactation a to amount time say a we North nutritionists cycle. pleased and officially book maybe if said But the had protected, opinions guide point we've for that The rumin choline is of recently. have results lot very grand are been because grand that you and not and rumin but is And with the a slam saying not the shared is industry the preview should the guide it industry. their milk of that

series this We ourselves of taking release are what finding out on and fact average and mean full does the this what that webinars podcast of it for is to communicate prior to the is the a the in dairy.

and of important this outside the it's think to So it. some US. and trying does leverage step And we're new taking really it. have running we're it impact We really with an

one I is in think that world. US of the markets the efficient most dairy the

that's dairy increased think singularly but look markets outside think will it new so not clearly I able and NRC believe by the to I a finding. do the US, to be driving the we penetration, be US So leverage US benefited we'll outside US thing, US this

Bob Labick

That's great. very a That's exciting. Super.

to Okay. you've One last sheet been Any one back I'll and time out update balance for for at opportunities in looking quite busy of you? I or continues availability and queue. cash. get know M&A on valuations or there M&A me the some add for

Ted Harris

we It's are certainly. we but with obviously, a very sale any of the that can't M&A hottest opportunities there's one about highest probably have lot valuations active. of that is that markets Yeah, we're that But some been. There ever comes specific the all probably ever also working that We, for know this properties on. talk of seen.

organic strategy with very but And around wanting so smart doing seriously in where taking can our it a growth return. we're way earn also responsibilities targeted a augment to we acquisitions, our

we didn't so the those And at not in end was part in to value at value like you the to present will, asset. if opportunities contribution strategic been right processes active. -- feel hot the that. day the involved at We owner continue We're appropriate have we'll new of correct the we've then this assets least us company. for And will think our the because do of and for several market

$XX have point of we out So million you're right to cash.

we're been ability that we effectively come. on ratio selective we to debt net they And the confident we have can over to going come leverage be think time, zero. on continue I always acquisitions the Our will act to we're make And these. return and sure but right those get have as as is

we the of our we portfolio haven't So somewhat years couple to over the we're add that's done are last where foreseeable but working been to able that disappointing acquisition to get something in future. an hard

Bob Labick

very Thanks great. Pretty much.

Ted Harris

Bob. Thanks,

Operator

Our next H.C. question your Selvaraju Please of proceed from question. comes line the with with Ram Wainwright.

Ram Selvaraju

Hi. my continue Thanks questions certainly and congratulations be much to taking order on very for for relatively the what performance and time. challenging

to in take In So the after of environment, of pricing other more have increased situation the sustainable words, is prices. seeing on issues chain supply even at chain these the one and you're the talking down likely supply are be. how may that to volume remain Because about away? demand gone current if increases what context think even to we're implications about things its whether I wanted drill you I long-term here, price curious the learn healthy

that does what So paradigm were to you be going as sustainably the might able implications forward? that for it pricing have, enforce

Ted Harris

will Maybe Yes. that of take that more give really any any Martin, extreme than environment Obviously, have chime complicated seen specifics. at maybe with a us it's a I'll is in before. and stab

more up obviously, certain seeing XXX%, many up are lanes raw we're with some We X,XXX% freight increases. in XXX% cases materials modest seeing

it's used word unusual today unprecedented very So maybe but environment. unusual a it's a ever very

falls the And over very start will it's to that question, in of the down as There's see that lag, our when they'll over and because down negative. to environment question time to lag much And how down to will margins And no come beneficial of inflationary an to and much margins our just lag, start maybe so that see, forth. we no I sustains the costs come to how formulas effect specific but we positive going as predict their have the a to your that we're so of nature point, come as time. there's hard normalize back. we're see to costs and think speed

come our of of costs are benefit benefit the get customers as go those we'll down. Some as up getting those of costs and the

So products ourselves the to new that's the I in that think I they we our bring but we'll forward find based certain to it these challenge this around and your and primary of question, question that on areas pricing going new situations have does our the raise information opportunity in. think, and pricing the that practices of answer kind and evaluate value

So we'll have go. as see just we to

Raghuram Selvaraju

with you the of Okay. the food increasing importance some your coming speaking, featured just remarks. I to this meaningfully respect do And growth driver segment, then a in of pet as extent you relativistically this was segment prepared see to in wondering over course revenue the quarters?

Ted Harris

Yes.

take I'll that one as well. So

growth healthy. are choline us I pet are over a other products that is answer that a modest that's about yes. rapidly, What's quite The and last essentially for few our the to pet think have industry encapsulated we the more have still going already growing the food business, monogastric third selling, total really more into specialty the but food products. launched that of to business sizable is business PetShure in years is food pet

QX. in a drive feel that we to segment innovation, growth. choline novel that products is you there's this when grow have the to introduce business. market the meaningful can And lot to For you to lot And and us for companion sell, of a those year-over-year kind the we us kinds a of at opportunity have impact business example, and XX% it, when rates to an like the to add of grew that we animal of continue the those base meaningful important

market that we have the so to and companion the we're products it. excited about offer And animal pretty to

Raghuram Selvaraju

few ones. quickly just couple last a Okay. very And then

to Firstly, was I these employ think extent M&A going. see wondering furthering Martin. then, equity currently potentially the could tax particularly offer specifically where if the tool, what just And are to trades? on for M&A stock effective issuances discussion, some you you rate I I given was you as wondering the commentary an expect where

XX%. around effective around think it towards were guiding currently I rate you XX%. quarter being it's The like tax last looks

we flood weight how then payouts expect you. forward? should that whatever of when be So in do to the view insurance flash going receive And you are Thank thinking the about incident?

Ted Harris

to first Having maybe for in So likely two. we the to Relative a first and said last then will and use definitely equity. equity. take we take ability component equity borrowing have believe the our of move using debt and I'll maximize Martin our tool toolbox on one that, it's that to highly that can the acquisitions, is we

would sizable see we But that in to past. something as a done Martin? use primarily M&A if So, I tool where types more in transformative very of been. our deals the we recent us toolbox type we acquisition have has on a only equity opposed more than have on think typically needed that but probably you use the would that transformative of the it's focus definitely that

Martin Bengtsson

With regards that GAAP XXXX from around XX% really point the to has being a the not tax with good tax percentage a number based Yes. like that rate it higher where estimate last adjusted sit on a XX%, of changed we discussion still than rate, the more rate quarter today. call

today. to so less $X.X $X.X of of around on million P&L. asked second had expenses based had floods. impacting reimbursed we're about We impact We call get seeing another third the to You the We expect that fully what impacting do deductible the the flash also quarter here, million $X.X quarter. million for the it

early then remaining company. full the year of through insurance next some recovery quarter, payments fourth work with up payments We the all tying everything the We as receive expect deductible. expect in less the you the here to do go and

Raghuram Selvaraju

Thank you very much.

Martin Bengtsson

Ram. Thanks,

Operator

with comes private question your question. from of proceed Lawrence investor. the a next Our Goldstein, line Please

Unidentified Analyst

Hi. to be a it's On perspective inflation, is runaway. my own going

with me for raise time make that you But been the the with a the now? lag, want The raising are that. moment, company with has If to assumption able prices. -- see historically to time you margins you lag can't don't prices

are of the don't any grown important what about if yours, that an increases of that us increases Secondly, the you of on showing but stickiness it's public wondering market? companies big inflation And you'll companies your as us said that Bob idea The acquired you service, your Does can phone are? stops, during pandemic they've have about are me. United indeed you phone finally, So of ever which ring gone price some to the in pet got by I'm know enormously similar hundreds have States making you're many market acquisitions tell reverse has yours? like the pet thirdly, And had the being the the the sales eye it's of of give others? if ring? or size millions

Ted Harris

questions. the Thanks Larry for

ever I On call, the have last not point guess, I does a received one blank. our phone ring, a

yet. rung not has phone the So

a we're situation first Going important of think, back -- because it's type say, question. It relative on hands I almost question, is, and a Ram similar to really all absolutely to deck asked I with yes, negative want And question, lag your to the raise really that and is we the to inflation raising dealing And prices. to are are margins. today prices, up, with when costs our but needing lag. that going

you numbers And significantly. are on margins, gross gross they And fairly the margin. you see so impacted the give heard you Martin when our

So we had we $XX L about raised inflation We about prices. tune million. our to QX, in are and raising P& million the approximately of prices hitting $XX of

additionally QX. sort that raising we're extent And million continue so the lag. to And raw in escalate. we some also as materials to said $X And prices unfortunately, of reflects

unfavorable QX lag. to So that negative side of we be expect the in or continue to on

is There's at we'll a costs of We'll significant a at of Ram for much focus very favorable our little point bit how as And the do And much in of point much And things my have situation effort the I But this will that. so a answer inflation getting raising continue And sticky. marketplace that at even is, are it's right volatility be kind down. it come lag prices we start this to side absolutely was now really to aggressively to depressed. and team on so the margins benefiting market. hard see is size-wise, we'll the I up. it's just tell sizable the there guess time. and to pet market get very, evolves. in as our some and prices really think If that then catch up. to because that. we decline would be that. significantly when margins doing But hadn't done flatten And of So that we're

probably market You're choline the food a in All and been $XX growing pet market base the is is a market that faster of that about we we market. million a the these whole. have absolutely a the kind business being supply introducing our to right. being of smaller that that business position. portion new even in monogastric But all ingredients than as But novel total relatively base we've of that part the bulk with small of the into

we're So pet food have we our pet us new these and access can sizable very the pretty is business positions gives food on and that market. voice that of ingredients. the piece important a relevant again and with million for $XX we A companies with big us novel leverage company contacts a bullish

pretty companion Balchem. So partly bullish for about market animal that's I we're the think why

Unidentified Analyst

you. Thank

Ted Harris

Yes. Thanks, Larry. Appreciate it.

Operator

line next with Sidoti. Our question the Ramgopal your of from Mitra comes Please question. with proceed

Mitra Ramgopal

good for Hi, morning. the question. Thanks Yes. taking

inflationary shortages, was seeing terms environment you et a little the inclined just costs sort in curious aggressive expansion I less and cetera, aggressively? are manage be cetera more to of and of given So headcount labor et more you're

Martin Bengtsson

it. based Mitra. evaluate always all morning, headcount we expansions really return would say on Good do for I get in what we

So of terms our I has not that structure opportunities. cost think in we changed how evaluate versus the fundamentally

workers, inflation years R&D, the wage or look done When and two ability based And you environment current of a with generating manufacturing look overhead and returns footprint investments in plants marketing challenging the at and as last et also the you that's our the at and we costs is et we very see a scarcity where of sense on result. at the it. the environment your think cetera, cetera, when opportunities a call is a staff over and I this very selling moment. seeing have hourly actually unique labor number the properly we're to competitive that it on we're

we fundamentally or anything that here. anything changed don't or unless similar, cuts has something unexpected think I So will go happens after aggressive cost

to through I it on kept delivering. that the evaluate always delivered this you're two pandemic, far during based we've the going we've expect proven continue that. reassess And well. situation the that deployed should and so the manage obviously, we've we that and so continue change together, all we'll and to now You results last But think years then But that strategy far. strong performance for

Ted Harris

to things to Mitra add a in. market the competitors are same is is the we and whole. the And relative in do same not impacted would the geographic I buying really as we thing are experiencing, that experiencing everybody Martin's differentially like are we really we other feel that materials The our have been comments that that regions raw

to but really, So that it hard there's with don't we that differential here to mean working with and it. nothing have really deal we're doesn't deal

Mitra Ramgopal

we Okay. in Thanks. fourth medical you segment, had to of your little Specialty That's wondering then on this seeing for the And counted as you're specifically terms XXXX? bump what Products great. down into quarter device the sterilization, more was in nice I growth just sequentially. business back a on year-over-year, expectations and the

Ted Harris

up year-over-year and then plant third partly surgeries you both in with just get somewhat elective came I rise in the second And pent-up grew accurately back the very and elective the they it US performances was as the Yes. some down think also Again, industry but in sequentially. partly the the We in sterilization pleased fulfilled. quarter results that think And we basically sequentially. that data was the business down business the it's Products I but morning the surgeries said, did this nutrition our The delta validated that the business were nicely. sterilization was variant around demand year-over-year are quarter. in cases QX, Specialty of from indeed that that up

to think, be relatively industry similar is and year-over-year QX QX. what in saw growth it QX the in growth continue as recovers. But I in we see saw will year-over-year this extent that, we we'll to not Our modest expectation to that

Mitra Ramgopal

Belgium what Thanks. cetera on and both terms Okay. a international comment maybe a on the presence? areas markets on the you cost you And of especially have then, little in in like seeing et where the could the physical demand you're side

Ted Harris

Yes.

one probably you're things to the business So, issues in of around of gas inflation I our side well think Europe, of particularly start extent from cost sterilization and another. the aware the many natural choline materials as our for going example, stem or raw I'll for gas all Well, unfortunately, that's on extreme there. as and on natural

going behind of really say would to QX Europe accelerating, part crisis continues pressure I urea, for will like started impacting products continue that and natural gas that's natural from like perspective methanol and really in that dramatically. in that what's us raw things and those are so And September and in But our a significant experiencing. we're And us build come like things all materials QX. built severely costs are gas are really important the in ammonia, up that

our cutting area on example for production, but itself It's they're suppliers not costs. are curtailment raw because only through back most some Europe one allocation it. certain the in the is would that just materials, up. we're also So, extreme, of also XX% is managing because manifesting There's inflation I say are higher giving us costs

Europe chain the in it in the that what's your it's extreme managing think just we're is even right question flexibility So, right pricing that and US. is a again, in behind recognition now. We do than supply complicated power And I more is it. Europe. But have now

We fewer kind in of Europe. customers our have lock-in with contracts

So prices raise little able faster. bit we to are a

quarters. return Europe for that really than certainly our a again and still of So in the have would market seeing that US leveraging From across side, quite our in the the few a sales monogastric Europe demand that to I see lag demand businesses so so remains and in is elective similar continuing in similar all we and our in been next so, US, strong demands little the our remains in from strong it surgeries we're board the shorter demand position. healthy Europe say, is we're

Mitra Ramgopal

again Thanks questions. Congrats. for Okay. taking the

Ted Harris

Mitra. Appreciate Thanks, it.

Martin Bengtsson

Mitra. Thanks,

Operator

Tony comes Polak, Our question. investor. the a line from private next proceed of with your question Please

Ted Harris

morning. Good Tony.

Unidentified Analyst

few questions. A

new any I bit If about the if versus a on? was little that successful. quarter been you the amount what quarter? Second, you can know I talk this products could, some see you're didn't in very money last working R&D past of have in

a little So about situation you've abandoned. bit what's and Chinese talk happening? choline Could you the

Ted Harris

you don’t why Martin, take that?

Martin Bengtsson

is Martin. Martin. is This this Yes. Tony,

quarter corded in R& $XXX,XXX the on quickly in versus quarter, $X.X the the an more approximately and from D million the million about third the so in first prior $X.X Just We R&D. quarter prior than quarter perspective. spent X.X%

Ted Harris

it's has significant and of say, Okay. an of Skies seeing is on to Maybe was we're having but restricted situation, there costs China. reasons, years in €XX,XXX all China material shipped. costs, And whether producers been where over product be contaminated shipped know Malaysia in incredibly used again, to in put Blue their it container to that fairly Chinese again, has these third situation your the the high now, word example, extreme a increases, production of choline the we forth. costs grade various deal we're and than be as dramatically just and maybe The right and Antwerp some Chinese or animal now, shipment participation with up so and in in more production their and what initiatives from industrial And out in the down about raw it all volatile containers of markets are question it's I'll choline, to for are the China overused maybe now are seeing. and containers western freight answer as right next. I €XX,XXX. they up, would an also in They're so and so even you grade And

of choline. awful that container So a lot adds an to

up There's coming coming So is And initiative production. somewhat we're around that higher curtailment prices. supply discussion of China today and seeing of the China the there's back. Skies coming is Olympics supply the certain is so China at Blue less in and of out out

having on So that is also an production their capabilities. impact

higher. to short-term, and China produce the or for opportunity raw some in above. Providing us from are restricted to on ability capacity able restrained costs is and supply our So be at get again, depending the materials

I the notch tolling the volatile of of just China. kind product that's of Chinese in out would So another on history latest say coming

products. new develop to continue we products New

new is is lot a also been penetrate The meaningful very and a of and and some our plant-based. Z-crisps the protein that products there AminoShure-XM so that excitement content product labs within market the a product and we those about as line have we can for feel have that making throughout the the like a being I inclusion with products high those for protein market but we significant pea little and systems the protein-based again is bit about we're ideal hopes flavor trying and up talked products. and are a nutritional inclusion R&D bars bringing well. that we crisps to are the we're the earlier also We're continuing that a very A&H about pandemic. word dairy, excited of crisps bars a little that plant PetShure in content, relatively market our about. have that which Our earlier used is That couple most we've a to that teams ago. Ram innovate talked having years the talked product meaningful I that but of come launched revenue it's into the and to have encapsulated on bit impact largely products about hemp to protein

and we're that new as to on the that last to of to we're a products in really what product additional be So part definitely We're about based going new development we still XX% with view market continues and continue upwards of pleased achieving the our to an growth. product important we've our push to with revenues launches. metric that introduced strive five years

Ted Harris

Appreciate Thanks, the question. Tony.

Operator

the the closing further Harris no Ted are back over queue. I'd questions remarks. for to like There hand call to in

Ted Harris

the Okay. your making Once the We ongoing today. appreciate results look coming very a call released in in be forward It's meantime Investment we'll We growth the in today in conference But conferences it's Stephens at strategic believe joining key February already the third December. are the XXXX on talk for year. to November we're of conference QX results pleased XXXX. again hard thank out to Annual of presenting our again really the we We end reporting that you and and very time. In in the initiatives. quarter few much XXXX industrial our Baird February. you on to with we progress really will

So joining Other thank than see one to those at that for again hopefully talk you you it. or Appreciate you we'll today. meetings. upcoming of

Operator

and Ladies conclude does today's this Thank participation. teleconference. your gentlemen, you for

at You have time day. may a disconnect lines your this and wonderful

Balchem (BCPC) 29 Oct 212021 Q3 Earnings call transcript