Balchem Corporation Aktie

Thank you for standing by, and welcome to the Balchem's First Quarter 2026 Earnings Conference Call. [Operator Instructions]

I'd now like to turn the call over to Martin Bengtsson, Chief Financial Officer. You may begin.

Thank you. Good morning, everyone. Thank you for joining our conference call this morning to discuss the results of Balchem Corporation for the quarter ending March 31, 2026. 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-K, 10-Q and 8-K reports. The company assumes no obligation to update these forward-looking statements.

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.

Thanks, Martin. Good morning, and welcome to our conference call. We were extremely pleased with the financial results for the first quarter of 2026 and the overall performance of our company as we kicked off the new year with positive momentum from the strong performance throughout 2025. Our healthy growth continues to be fueled by ongoing market penetration of our unique portfolio of specialty nutrients and delivery systems and the favorable better-for-you trends within the food and nutrition markets that are well aligned with our food ingredient formulation systems and capabilities.

We delivered record first quarter consolidated sales, adjusted EBITDA, adjusted net earnings and adjusted EPS as well as strong cash flows. We also delivered year-over-year sales and earnings growth in all 3 of our reporting segments. The first quarter of 2026 was the 27th consecutive quarter of quarterly year-over-year growth in adjusted EBITDA for Balchem. We are very proud of this accomplishment, particularly in light of the market environment within which we have operated over the last 27 quarters.

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 geopolitical and macroeconomic situation as well as some of the progress we have made on several important strategic initiatives.

We continue to see healthy demand across the vast majority of our end markets. Our Human Nutrition & Health segment continues to perform very well, driven by healthy demand for both our unique portfolio of minerals, nutrients and vitamins and our food ingredients and solutions, which are benefiting from trends toward nutrient-dense, high protein, high fiber and low sugar or better-for-you foods, where our nutrient portfolio and our formulations expertise bring considerable value to our customers.

In the Animal Nutrition & Health segment, we delivered another quarter of year-over-year growth on improved demand in both our monogastric and ruminant businesses as a result of further market penetration of our rumen-protected precision release encapsulated nutrient portfolio and the ongoing improvement of market conditions in the European monogastric market, and we remain encouraged by the overall performance of our Animal Nutrition & Health product portfolio.

Within our Specialty Products segment, both our Performance Gases and our Plant Nutrition businesses are performing well, driven primarily by higher demand within Performance Gases as a result of healthier market conditions and successful margin management and geographic expansion growth within Plant Nutrition. As we have shown over the years, we have been able to deliver strong historical performance while facing significant market volatility, and we believe we remain well positioned to effectively manage through this current geopolitical and macroeconomic environment as well.

We are once again entering a period of significant inflation, largely petrochemical-based and primarily impacting our Animal Nutrition & Health segment as well as potential supply chain disruptions due to the ongoing conflict in the Middle East. We will once again leverage our robust global supply chain, our procurement expertise and our strong market positions to raise prices where necessary to help manage through this dynamic market environment.

While we are likely to experience some modest margin compression resulting from the timing lag that occurs between input cost inflation and pricing adjustments, particularly within our Animal Nutrition & Health segment, we do expect to deliver continued quarterly year-over-year growth on a consolidated basis over the coming quarters. We will continue to monitor the developments closely and adjust accordingly as we have done effectively in the past.

Additionally, I would like to share some significant progress we have made on several important strategic initiatives that will further support our future growth. A newly published peer-reviewed research study using functional magnetic resonance imaging, a noninvasive safe neuroimaging procedure that measures brain activity by detecting changes in blood flow and oxygenation was published in the peer-reviewed journal Nutrients.

This important study examined the effects of Balchem's VitaCholine nutrient on working memory-related brain activation and functional connectivity in post-menopausal women. The results showed that VitaCholine intake significantly enhanced functional connectivity within the working memory network, improving brain efficiency within 3 hours of consumption.

This study helps highlight the benefits of VitaCholine across different life stages with previous research showing that VitaCholine supports fetal brain development during pregnancy and lactation with lasting effects beyond birth. It also suggests that VitaCholine may help enhance cognitive health in older adults. We are excited about these results, and we will continue to invest in both research and marketing around VitaCholine to raise awareness and drive market penetration of this important essential nutrient.

Additionally, on April 22, Earth Day, we released our 2025 Sustainability Report, highlighting our sustainability initiatives and accomplishments. Guided by our core values and our vision of making the world a healthier place, our sustainability report demonstrates our commitment to bringing innovative solutions for global health and nutrition needs and to operate with excellence as strong stewards of our employees, customers, shareholders and communities.

We are very proud of the progress made on our 2030 sustainability goals to reduce both greenhouse gas emissions and water usage by 25%. Compared to our 2020 baseline, in 2025, we successfully reduced Scope 1 and 2 greenhouse gas emissions by approximately 31%, surpassing our 2030 goal. And we reduced water withdrawal by approximately 16%, showing substantial progress toward our water usage reduction objective.

Now, regarding the first quarter financial results. This morning, we reported record quarterly consolidated revenue of $271 million, which was 8.1% higher than the prior year quarter. We delivered record quarterly GAAP earnings from operations of $56 million, an increase of 9% versus the prior year. Consolidated net income closed the quarter at $40 million, an increase of 8.7%. This quarterly net income translated to diluted net earnings per share of $1.25 on a GAAP basis, up 10.6%.

On an adjusted basis, we delivered record quarterly adjusted EBITDA of $74 million, an increase of 12.1%. Our quarterly adjusted net earnings were $43 million, an increase of 7.4%, which translated to $1.33 per diluted share, up 9%. Overall, it was an excellent quarter for Balchem, marked by strong financial results and meaningful progress made on our strategic priorities.

And with that, I'm now going to turn the call back over to Martin to go through the first quarter financial results in more detail and the results for each of our business segments.

Thank you, Ted. The first quarter was a strong start to 2026. Our record first quarter net sales of $271 million were 8.1% higher than prior year, driven by strength across all 3 segments: Human Nutrition & Health, Animal Nutrition & Health and Specialty Products. The impact from foreign currency exchange, driven primarily by the stronger euro had a favorable impact to our sales growth of approximately 2% in the first quarter.

Our gross margin dollars were $101 million, up 14.6% and our gross margin percent expanded to 37.3% of sales, up 210 basis points. The gross margin performance was driven primarily by the sales growth and manufacturing efficiencies, partially offset by raw material inflation.

Consolidated operating expenses for the first quarter were $45 million as compared to $37 million in the prior year. The increase was primarily due to higher compensation-related costs and an increase in professional services.

GAAP earnings from operations for the first quarter were a record $56 million, an increase of 9%. On an adjusted basis, as detailed in our earnings release this morning, record non-GAAP earnings from operations of $61 million were up 9.5%. Adjusted EBITDA was a record $74 million, an increase of 12.1% with an adjusted EBITDA margin rate of 27.4%

Net interest expense for the first quarter was $2 million, a decrease of $1 million, primarily driven by lower outstanding borrowings and lower interest rates. Our net debt was $96 million with an overall leverage ratio on a net debt basis of 0.3.

The effective tax rates for the first quarters of 2026 and 2025 were 23.3% and 22.7%, respectively. The increase in the effective tax rate from the prior year was primarily due to an increase in certain state taxes.

Consolidated net income closed the quarter at $40 million, up 8.7%. This quarterly net income translated into diluted net earnings per share of $1.25, a 10.6% increase. On an adjusted basis, our first quarter adjusted net earnings were $43 million, an increase of 7.4%, which translated to $1.33 per diluted share. Cash flows from operations were $40 million with free cash flow of $34 million, and we closed out the quarter with $73 million of cash on the balance sheet.

As we look at the first quarter from a segment perspective, our Human Nutrition & Health segment saw sales of $172 million, up 8.3%, driven by growth in both our Nutrients business and our Food Ingredients and Solutions businesses. Earnings from operations of $40 million were up 5.4%, driven by the higher sales and a favorable mix, partially offset by certain higher manufacturing input costs and higher operating expenses. First quarter adjusted earnings from operations for this segment were $43 million, up 6%.

We were encouraged by the continued momentum in Human Nutrition & Health, where our differentiated ingredients and solutions aligned with the consumer shift toward better-for-you nutrition. We believe this positions us well to further leverage our formulation expertise and portfolio of differentiated branded ingredients to drive sustained growth.

Our Animal Nutrition & Health segment delivered sales of $62 million, up 8.6%. The increase was driven by higher sales in both the monogastric and ruminant businesses. Animal Nutrition & Health delivered earnings from operations of $6 million, up 8.7%, driven by the higher sales, partially offset by certain higher manufacturing input costs and higher operating expenses. First quarter adjusted earnings from operations for this segment were $6 million, up 8.2%.

We delivered another quarter of improved performance in our Animal Nutrition & Health segment. We continue to drive adoption of our encapsulated rumen-protected nutrients in the dairy market. Our U.S. monogastric business remained steady, and our European monogastric business continued to improve following the EU antidumping duties.

Looking ahead, we're paying careful attention to the conflict in the Middle East and the potential impacts it may have on the animal nutrition markets. We are seeing increases in raw material input costs, along with increased freight costs, which will either be offset or passed on to our customers.

We feel good about the momentum we have built within our Animal Nutrition & Health segment. And while we are likely to experience some modest margin compression resulting from the timing lag that occurs between input cost inflation and pricing adjustments, we remain confident in our ability to continue to drive growth in this segment over time.

Our Specialty Products segment delivered quarterly sales of $35 million, up 4.4%, driven by healthy growth in Performance Gases. Specialty Products delivered a record quarterly earnings from operations of $12 million, up 24.5%, driven primarily by higher sales and a favorable mix. First quarter adjusted earnings from operations for this segment were a record $13 million, up 21.2%.

We were very pleased with the performance of Specialty Products, delivering yet another quarter of solid growth, and we believe Specialty Products is well positioned to continue to deliver consistent profitable growth as we look forward.

So overall, the first quarter was another strong quarter for Balchem, and we are really pleased with the results. While the global geopolitical and macroeconomic environment remains dynamic and includes areas of uncertainty, we believe we are well positioned to continue executing our strategy and to deliver continued growth through the rest of 2026.

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

Thanks, Martin. We were very pleased with the financial results reported earlier today. We executed well within a dynamic and evolving macroeconomic and geopolitical backdrop, delivering another strong quarter of solid growth while at the same time, advancing our strategic initiatives.

Looking ahead, we remain excited about 2026 and confident in our ability to deliver continued top and bottom line growth while further advancing our long-term growth platforms.

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

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

Your first question comes from the line of Bob Labick from CJS Securities.

Congratulations on another record quarter.

Thank you, Bob.

Thanks, Bob.

Sure. Yes. So one of the keys to your growth and success has been the branded ingredients. And Ted, you spoke a little about VitaCholine already. I know you're kind of like early-ish on a branding strategy so far. But what percent of sales are branded that's -- out of what's applicable now? And what could that look like in 5 or 10 years?

Yes. Again, Bob, thanks for your comments. Our branded ingredients, and let's just talk about Human Nutrition & Health, make up about, I would say, 40% to 50% of our Human Nutrition & Health business today. And that doesn't mean to say on the other 50% to 60%, we don't have brands, but they're more B2B brands.

The power brands, as we refer to them, like VitaCholine that you talked about, K2VITAL and K2VITAL DELTA, OptiMSM, Albion Minerals, for example, are brands that obviously we're selling to supplement nutritional beverage manufacturers, but are recognized by the consumer. And so those are the ones that we're really investing in.

So let's say, 40% to 50% of H&H today. And that part of the business is obviously growing faster than the other parts of the business. So over time, we will clearly become a bigger and bigger part of our portfolio.

Okay. Great. And we've talked on previous calls about the Jets partnership and the new customers that have come, notably in VitaCholine and I think energy drinks in particular. Are there other areas of expansion still to come from this? Are there opportunities for just more general sports drinks versus energy drinks? Or how do you take the company down that path, if possible?

Yes. So obviously, historically, supplements have been our primary targeted market. But as you mentioned, we've had pretty significant success more recently relative to sports beverages, energy drinks and the like. And as you can imagine, it's a great application for our products, partly because you don't have the capacity or volume limitation that you can have in a supplement or a multivitamin. And so we've found it to be an excellent application for our products and trends are leading to significant growth in those areas.

So I do think that, that will continue to grow and kind of that word energy drink versus nutritional beverage, I do think many of these products started to be more kind of in the energy drink and all that comes with that term in that category. And now those drinks are expanding much more broadly to more of a nutritional beverage focus, meal replacement focus, a much healthier product than -- or better-for-you product to use those words, than the historical energy drinks. And we really believe that, that nutritional beverage market is a significant opportunity for us and will grow rapidly over time.

So I think that's really where the predominance of our opportunity lies in the near to midterm. And relative to investing marketing dollars in the brands, it does expand far beyond partnering with an NFL team. We're already partnering with a Women's professional soccer team in Europe and the Bayern Munich Women's team. We're investing in other sort of influencer areas, digital media areas and so forth. So we do continue to expand that effort in other areas.

So we really -- I think, we talked about on calls many, many quarters ago that the investment in the Jets was a pilot to some extent. We certainly look back on that as being a successful pilot and one that we want to now expand through other consumer marketing awareness campaigns, some of which I just mentioned.

Okay. Super. And one last one for me, I'll jump back in queue. But looking at the P&L, the gross margins, the 37.2% surprised on the upside. It was really strong, in fact. So maybe just give us a little more details of what kind of drove that. And I know with raw material cost pressures coming, how should we think about gross margins going forward?

Yes. Bob, strong performance on the gross margin, as you pointed out, and as you're familiar, we've talked about in the past that we do have a favorable tailwind in our portfolio from the fact that our higher-margin businesses are the ones growing the fastest. So minerals and nutrients in H&H being an example of that. And similarly, on the Animal Nutrition side of ruminant being higher margin and generally growing faster than monogastric. And just from a portfolio perspective, we have that tailwind that supports expansion of the margins.

On top of that, we have been fairly effective more recently to just manage the balance between price and inflation and drive some benefits that way as well, along with having effective manufacturing operations here supporting the P&L. So everything has just been working fairly well from a gross margin perspective, and you're seeing that come through. The reference we made to seeing inflation is true and real. We do see inflation coming. and we see that accelerating a bit with what's happening in the Middle East.

And as you know, from the past, when we went through this with COVID, we've been quite effective historically at managing that, both through our supply chain and through our procurement, but also in terms of pricing that through to our customers where needed. But it tends to have a little bit of a dilutive impact, right? If your costs go up $1 and you price through $1, mathematically, your margin rate goes down. So I think we'll see a little bit of that to a modest extent as we go forward in this inflationary environment. So while we continue to grow our margin dollars, we may see a little bit of a margin rate compression as a result of the environment.

Your next question comes from the line of Ram Selvaraju from H.C. Wainwright.

Firstly, I was wondering if you could comment on sort of ongoing evolution of your thinking regarding the positioning of VitaCholine and in particular, how you are thinking about optimizing the value of this franchise, especially given the most recent data that you cited published in the peer-reviewed journal Nutrients and how this might evolve going forward.

When you think about historically, the work that's already been done demonstrating that choline is an essential prenatal nutrient. Now you have data showing that it has applicability to enhance potentially cognitive health in older adults. Just give us a sense of how you're thinking about the evolution of that brand and how best to position it, particularly from the perspective of promotional and marketing strategies that you may not necessarily have employed in the past?

Secondly, I think it would be helpful if you could give us a sense, particularly in light of the most recent geopolitical developments, how this might affect the industrial side of Balchem's business, especially when we think about potentially increased U.S. stateside-based oil and petroleum production that may include enhanced fracking activity?

And then lastly, Martin, I was wondering if you could just comment on the effective tax rate. It was a little bit ahead of what we had originally projected. So I was wondering if we should use that as kind of the serviceable tax rate assumption going forward or if you anticipate the effective tax rate to modulate a little bit over the course of the remainder of this year?

Thanks, Ram, for your questions. And maybe I'll take the first 2, and Martin, you can answer the last one. And I'll start, Ram, with your second one around industrial. As everybody knows, we no longer report out industrial separately. But that business continues, has continued for a number of years at a very low level, I would say. But that business is clearly up. It's still not a measurable contributor to our overall results and business.

But regardless of that, the results are up, sales are up, demand is up, which is what you would expect given the current situation with increased activity in that part of the economy. So we are seeing new business from that. Again, it's not to a material nature. And we strongly believe it will never return to what it once was, but it's nice to see higher demand in that area based on the increased activity.

Relative to the ongoing VitaCholine positioning, we are really excited about the results of this most recent study, specifically for servicing post-menopausal women in that community and that targeted market. But it does suggest that older adults can benefit from VitaCholine intake more broadly. And that is a huge market compared to the prenatal market that you mentioned.

Historically, choline was a product that was sold into infant formula and really didn't even appear that much in prenatal vitamins. I think we can look back and say we were very, very successful in doing the science, having the studies to support the prenatal market. And today, it really is broadly part of a prenatal vitamin regimen.

It's incredibly rare for me to ask a pregnant woman what her vitamin regimen is and not to include choline. So I think we've been very successful there. But the reality is that's a relatively small market. So this could be an absolute breakthrough from a VitaCholine perspective and really open up that, as I used the word earlier, huge adult cognition market.

I think it's an early study. It's a study that has definitive results for post-menopausal women. We need more studies for sure to show effectiveness across a wider segment of the population in that age group. But this is a good first start, and we always expected this just to be the start. So we're investing in some more studies.

And then as we've also learned, we need to support that science and those studies with marketing and obviously, marketing to aging adults that either are experiencing cognitive issues or are concerned about cognitive issues is a very different marketing campaign to positioning VitaCholine as a nutrient that athletes should take, which is what we were doing for the New York Jets.

So we will have to reposition our marketing efforts or newly position our marketing efforts to support the emerging science in this area and to build awareness in the aging population and ultimately to drive market penetration of VitaCholine in that category. And that's exactly what we're going to do.

So with that, I'll hand it over to Martin to talk about tax.

Yes. Ram, as we spoke about in the past, we tend to use 23% effective tax rate as sort of the planning rate for you. And I think when we spoke last time, I thought we were probably error on the side of doing better than that. In Q1, we had 23.3%, so a bit above that just based on timing of various items and some changes in state tax laws that impacted that negatively and also various discrete items that hit the quarters differently.

I think, as we look forward here, I think the rate will be higher in Q2 as well versus that 23%. And then I think you will be lower in the back half of the year as we're working our way towards that 23%. So I think it's still a good planning rate to use, the 23%, as you model things for the full year.

Your next question comes from the line of Daniel Harriman from Sidoti.

Ted, Martin and again, congratulations on continued execution and great performance. I've got 2 questions this morning. I'll start with one for Ted. Last quarter, I had kind of touched on or asked you about international growth. And I was just wondering if you might be able to provide us on an update or if there's anything been going on that we should pay attention to there -- across the 3 businesses?

And then, Martin, on the European monogastric side of things, I was just curious if you could give a little bit more color about where we are in the recovery there and if there's more room for you guys in terms of both volume and pricing? Really appreciate it.

Yes. So on the geographic expansion and international growth, that continues to be a primary strategic focus area for our company and one that we feel really good about the progress that we're making. Part of that progress involves hiring people in the various international regions around the world, and we're doing that, and we're hiring really good people.

I would say when you look at our OpEx this quarter, Martin talked a little bit about it being higher than normal. And part of that at least is driven by some onetime items, but part of it is also driven by an investment in sales and marketing around the globe as we do invest in geographic expansion. So we're making good progress in hiring people, building out the infrastructure that we need to drive geographic expansion and the results are showing.

We are seeing higher growth rates in most international locations versus the U.S. We're still driving really good growth in the U.S., but the international growth rates have been better for us because of the low base that we're starting in. So we're focused on it. It's a primary strategic objective for us, and we're making really good progress relative to that strategic initiative.

Yes. On the Animal Nutrition, Europe and the recovery of the monogastric business there, we are clearly seeing an uptick following the antidumping. In Q1, we did see a double-digit volume improvement. So it's definitely there combined with improved pricing.

So there is clearly an upward trend in that business that I think has the potential to continue to strengthen further. And the sort of impacts that we're keeping an eye on around now is really stemming from the Middle East conflict, right, and whether or not that will have an impact to the European end markets or not, just given the higher input costs that they will be facing here going forward. But in terms of the EU antidumping, we are clearly seeing benefits from that at the moment.

Your next question comes from the line of Artem Chubarov from Rothschild Redburn.

Ted and Martin, congrats on a good quarter. Yes, I would like to ask probably 2 questions. The first on H&H. Any color on how Nutrients or Food Ingredients businesses performed in the quarter would be helpful just to understand the magnitude of growth and whether you expect these to persist?

And the second question is on Specialty Products. Obviously, you've reported quite exceptional improvement in profitability. So it would be just helpful to understand where it came from, perhaps whether it was a price or volume? And how did that develop by region, whether it was Europe or the U.S.

Sure. So maybe I'll take a stab at this, and Martin, you can chime in as needed. We were really pleased with the overall performance of H&H really as we have been for many quarters. And the story, I would say, in Q1 was very similar to the story that has played out over previous quarters. So not much changing.

The minerals and nutrients portfolio growing very strong, I would say, double-digits growth, fueled, I think, particularly by growth in our minerals business, which is performing really outstandingly, broadly speaking, but all of the nutrients are growing nicely. And that business is performing well and really fueled by, yes, to some extent, the better-for-you trends, but just the adoption of supplementation and the inclusion of nutrients in beverages as we talked earlier. So a little bit more of the same, which I view as positive.

The Food Ingredient and Solutions business grew, I would say, sort of lower to mid-single digits. So again, continue to grow at what I would say would be nice rates for that business. And that growth truly is really being fueled by the better-for-you trends, whether it's meat sticks that we've talked about before, where some of our ingredients are included or high-protein bars, high fiber beverages, organic, high-fiber cereals, those kinds of products are really all performing very well for us. And really driving the vast majority of growth within H&H.

And again, I would say that story has been true for quite a number of quarters. So we're overall very pleased with the performance of H&H, and we continue to believe that, that story will continue for some time to come. We think it's quite sustainable.

Relative to Specialty Products, it's a little bit of a different story. The favorable growth really is driven primarily from the Performance Gases part of Specialty Products. Again, very pleased with the overall performance of Specialty Products. But in this quarter, it was primarily driven by performance gases where we're seeing healthy demand, both in the U.S. and in Europe.

It seems odd a number of years later to still be talking about the pandemic, but those were markets that were pretty severely impacted by the pandemic, and it had a result -- kind of a long played out impact, I would say, on those markets. And we would say those markets today are back to where they were, very healthy, and our business is doing very well, both in the U.S. and Europe just on healthy demand.

The growth, as we talked about in Plant Nutrition has been primarily driven by geographic expansion over time. We didn't deliver growth in Q1, but we're bullish about the performance of Plant Nutrition over the course of the year. We had significant margin improvement in that business in Q1, delivered healthy geographic expansion growth. And generally speaking, it's a healthy planting environment right now. And so again, we feel good about our ability to deliver growth in that business this year.

So really pleased with the performance of Specialty Products as well and believe that this performance that we've been delivering in that segment over the last number of quarters and in Q1 is sustainable.

So hopefully, that answers your questions.

It does indeed.

And that concludes our question-and-answer session. I will now turn the call back over to Ted Harris for closing remarks.

Yes. Thank you very much. Once again, thank you all for joining our call today. We are very pleased with how we have started 2026, and we really appreciate your support and your time today. And we look forward to reporting out our Q2 2026 results in late July. And in the meantime, we will be participating in the Wells Fargo Industrials and Materials Conference in Chicago on June 10 and the CJS Summer Investor Conference in White Plains, New York on July 9. And we certainly hope to see some of you there. Thanks again.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to Balchem's Fourth Quarter Full Year 2025 Earnings Call. [Operator Instructions]

I would now like to turn the call over to Martin Bengtsson, Chief Financial Officer. Martin, please go ahead.

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 December 31, 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 statement. 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-K, 10-Q and 8-K reports. The company assumes no obligation to update these forward-looking statements.

Today's call and commentary 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.

Thank you, Martin. Good morning, and welcome to our conference call. We were very pleased with the financial results reported earlier this morning for the fourth quarter of 2025, which capped off another very strong year for Balchem. We delivered record fourth quarter consolidated sales, adjusted EBITDA and adjusted net earnings. And I was particularly pleased that we delivered solid year-over-year sales and earnings growth in each of our 3 reporting segments.

Before we get into more detail on the quarter, I would like to reflect for a few minutes on some of the significant accomplishments the Balchem team achieved over the past year. Overall, 2025 was another excellent year for Balchem. For the full year of 2025, we delivered record sales of $1.037 billion, growing 8.8% compared to the prior year and passing the $1 billion mark for the first time. And all 3 of our reporting segments contributed nicely to the strong growth of the company.

We also delivered record earnings from operations of $209 million, an increase of 14.4% and record adjusted EBITDA of $275 million, an increase of 9.8% from the prior year. In addition, we generated record free cash flow for the year of $174 million, while investing $43 million in capital projects to support our continued growth. allowing us to further pay down our debt and reduce our leverage ratio on a net debt basis to 0.3x.

Financially, a very strong year, capped off with an excellent fourth quarter and a continuation of Balchem's consistency and performance. Q4 was our 26th consecutive quarter of year-over-year adjusted EBITDA growth. Throughout 2025, each of our business segments delivered solid growth on both the top and bottom lines each and every quarter. This consistency is a testament to our strategic focus the excellent execution by our teams and the resilience of our business model.

2025 turned out to be another eventful year from a macroeconomic and geopolitical perspective. We navigated a dynamic global trade and tariff environment in a disciplined and proactive way. In our intra-regional manufacturing and sales model, with approximately 85% of products sold in the same region they are made. Our global supply chain with minimal reliance on China, our robust U.S. manufacturing footprint, combined with our strong market positions, have enabled us to maneuver through the current situation successfully.

We offset tariff impact through a combination of alternate supply chain options and pricing actions, and we have remained nimble as conditions evolve. At the same time, we have continued to invest in and advance our strategic growth priorities that will support our future success. We made meaningful progress expanding our sales and marketing reach, both domestically and internationally.

In 2025, more than half of our sales growth came from markets outside the United States. Our marketing partnership with the New York Jets around our VitaCholine brand and our partnership with Bayern Munich women's soccer team around our K2VITAL brand have both been successful initiatives in our Human Nutrition & Health segment. While our real science exchange platform in the Animal Nutrition & Health segment continued to grow as an industry information and technology resource supported by clinical studies in various stages of completion. Podcasts and symposiums across major streaming platforms and was just recently recognized as the #1 animal nutrition podcast by Million Podcasts.

We also significantly advanced our scientific and clinical research pipeline. We continue to invest in the science behind brands such as VitaCholine, K2VITAL, OpTiMSM and Albion Minerals and our current pipeline includes over 20 active clinical studies. Additionally, we continue to make progress on our 2030 sustainability goals to reduce both greenhouse gas emissions and water usage by 25%. Compared to our 2020 baseline, we have successfully reduced greenhouse gas emissions by approximately 31%, surpassing our 2030 goal, and we have reduced water withdrawal by approximately 16% showing substantial progress toward our water usage reduction objective.

We also continue to invest in our future growth while returning capital to shareholders. We made important and significant new investments in plant and equipment in 2025, resulting in capacity additions for our Human Nutrition, Animal Nutrition and Plant Nutrition businesses. Of particular note, was the commencement of the construction process for our state-of-the-art food ingredient and nutraceutical microencapsulation manufacturing facility in New York State which will further support our continued growth with this technology.

We also repurchased shares under our stock repurchase program to both offset the dilution associated with our equity incentive plan and provide a return of capital to our shareholders. We repurchased approximately 685,000 shares at an average approximate cost of $158 per share. This stock repurchase program is one component of our overall capital deployment strategy that focuses primarily on investing in organic growth opportunities to provide an attractive return, augmenting our organic growth through strategic M&A, where appropriate, paying down debt and maintaining a strong balance sheet and retaining and growing our dividend to our shareholders.

And regarding the dividend, in December, we announced another increase to our annual dividend, taking the dividend from $0.87 to $0.96 per share, a 10% increase year-over-year. This most recent increase marked the 17th consecutive year of double-digit growth of our dividend, which once again reinforced our commitment to our long-standing dividend strategy.

So overall, as we look back on the year, we are proud of the combination of strong financial performance and tangible progress on strategic initiatives, and we maintain a positive outlook as we look forward. I would like to thank all of our employees and stakeholders who contributed to our success throughout another excellent year. Thank you all.

Now regarding the fourth quarter of 2025, this morning, we reported fourth quarter consolidated revenues of $264 million, which were 9.8% higher than the prior year quarter. GAAP earnings from operations for the fourth quarter were $52 million, higher by 10.2% versus the prior year and we delivered quarterly adjusted EBITDA of $68 million, an increase of 8.1%.

Consolidated net income closed the quarter at $39 million, an increase of 16.8%. This quarterly net income translated to diluted net earnings per share of $1.21 on a GAAP basis, up 17.5% compared to the prior year. On an adjusted basis, our fourth quarter adjusted net earnings were $42 million, an increase of 14.8% from the prior year. which translated to $1.31 per diluted share.

From a market and demand perspective, we continue to see healthy demand across the vast majority of our end markets. In Human Nutrition & Health, performance remains strong, driven by healthy demand for our portfolio of minerals, vitamins and nutrients as well as our food ingredients and solutions. We continue to benefit from the broader consumer and customer shift toward nutrient dense, high protein, high-fiber and low sugar better-for-you foods for our nutrition portfolio and formulation capabilities bring meaningful value.

In Animal Nutrition & Health, the dairy market remains relatively healthy, particularly for dairy protein, and we continue to penetrate the market with our ruminant protected precision release encapsulated nutrient portfolio. And we are seeing modest improvement in market conditions in Europe for our feed grade choline business after the finalization of the European Commission's antidumping duties on Chinese choline in late December.

In Specialty Products, both our Performance Gases and Plant Nutrition businesses are performing well, supported by stronger demand and healthier market conditions within Performance Gases, and continued progress in geographic expansion within Plant Nutrition. Overall, we continue to see healthy demand across all 3 of our business segments.

I'm now going to turn the call back over to Martin to go through the fourth quarter consolidated financial results for the company and the results for each of our business segments in more detail.

Thank you, Ted. As Ted mentioned, overall, the fourth quarter was another very strong quarter for Balchem with strong growth in sales, earnings and free cash flow. Our fourth quarter net sales of $264 million were up 9.8%, driven by growth in all 3 segments: Human Nutrition & Health, Animal Nutrition & Health and Specialty Products. Our fourth quarter gross margin dollars of $94 million were up 8.8%, and our gross margin percentage was 35.6% of sales, down 40 basis points compared to prior year primarily due to certain higher manufacturing input costs.

Consolidated operating expenses for the fourth quarter were $42 million, up 7% compared to the prior year. The increase was primarily due to higher compensation-related expenses. GAAP earnings from operations for the fourth quarter were $52 million, an increase of 10.2%. On an adjusted basis, as detailed in our earnings release this morning, non-GAAP earnings from operations of $57 million were up 9.3% compared to the prior year.

Adjusted EBITDA was $68 million, an increase of 8.1% compared to the prior year, with an adjusted EBITDA margin rate of 25.8%. Net interest expense was $2 million, a reduction of $1 million compared to the prior year, driven primarily by lower outstanding borrowings and lower interest rates. The effective tax rates for the fourth quarter of 2025 and 2024, were 21.6% and 24.5%, respectively. The decrease in the effective tax rate from the prior year was primarily due to a decrease in certain foreign taxes.

Consolidated net income closed the quarter at $39 million, an increase of 16.8%. This quarterly net income translated into diluted net earnings per share of $1.21 and an increase of $0.18 or 17.5% compared to the prior year. On an adjusted basis, our fourth quarter adjusted net earnings were $42 million, translating to $1.31 per diluted share, an increase of 15.9% from prior year.

We continue to translate our earnings into cash and fourth quarter cash flows from operations were $67 million, and we closed out the quarter with $75 million of cash on the balance sheet. Our net debt decreased to $89 million with an overall leverage ratio on a net debt basis of 0.3%.

As we look at the fourth quarter from a segment perspective, our Human Nutrition & Health segment generated sales of $166 million, an increase of 12.7% from the prior year. The increase was driven by higher sales within both the Nutrient's business and the Food Ingredients and Solutions businesses. Our Human Nutrition & Health segment delivered quarterly earnings from operations of $37 million, an increase of 8.9% primarily due to the aforementioned higher sales and a favorable mix, partially offset by certain higher manufacturing input costs and higher operating expenses. Adjusted earnings from operations for this segment were $40 million, an increase of 9.6%.

We are very pleased with the strong performance of our Human Nutrition & Health segment where demand continues to be robust for our differentiated portfolio of ingredients and solutions. As consumer preferences increasingly shift toward better-for-you ingredients and solutions, we see a compelling opportunity to further leverage our formulation capabilities, nutrient portfolio and unique solutions to drive sustained growth in Human Nutrition & Health.

Our Animal Nutrition & Health segment generated quarterly sales of $61 million, an increase of 4.9% compared to the prior year. The increase in sales was driven by higher sales in both the ruminant and monogastric species markets. Animal Nutrition & Health delivered earnings from operations of $6 million an increase of 8.6%, primarily due to the aforementioned higher sales and a favorable mix, partially offset by certain higher manufacturing input costs and higher operating expenses.

Fourth quarter adjusted earnings from operations for this segment were $6 million, an increase of 9.2%. We were pleased to deliver another quarter of solid top and bottom line growth in our Animal Nutrition & Health segment. We continue to see increasing penetration of our ruminant protected encapsulated nutrient solutions in the dairy market. And on the monogastric side, the U.S. market remains steady while the European market has shown clear signs of improvement following the provisional antidumping duties on Chinese choline announced in the second quarter and the final duties announced by the European Commission in December.

Looking ahead, we're confident that Animal Nutrition & Health is well positioned to drive sustained long-term growth as adoption of our differentiated technologies continues to expand across key markets.

Our Specialty Products segment delivered sales of $35 million, an increase of 6% compared to the prior year due to higher sales in the Performance Gases business. Earnings from operations were $11 million, an increase of 5.5% versus the prior year. The increase was primarily driven by the aforementioned higher sales, partially offset by higher operating expenses. Fourth quarter adjusted earnings from operations for this segment were $12 million, an increase of 6%.

We're very pleased with the continued performance of our Specialty Products segment which delivered another quarter of solid growth across both sales and earnings. And as we look ahead, we believe this segment is well positioned to continue delivering consistent profitable growth. So overall, the fourth quarter was another very strong quarter for Balchem.

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

Thank you, Martin. We are extremely pleased with Balchem's financial results reported earlier this morning for the fourth quarter and the full year of 2025. As an organization, we continue to demonstrate the ability to perform consistently across a wide range of market environments, supported by our strong competitive positions and differentiated value-added product portfolio.

Once again, we effectively navigated a dynamic macroeconomic backdrop with limited impact on our results. At the same time, our growth momentum has continued to build as we execute around our core strategic initiatives. I am excited about 2026, and I believe the company is well positioned to deliver continued top and bottom line growth on a full year basis while further advancing our important growth initiatives.

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

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

[Operator Instructions] Your first question comes from the line of Bob Labick with CJS Securities.

Congratulations on another record quarter and year.

Thanks, Bob.

Yes. That's great. And so, Ted, you mentioned in your prepared remarks, the New York Jets. And so I just want -- we haven't talked about it in a couple of quarters. Can you discuss the partnership and really what's come from it? What have you learned? What are the benefits? And what do you see in the future? Are there more partnerships like this to come? Do you renew? Or how are you thinking about it? What have you learned?

We certainly have learned a lot, and I think I talked about on one of the calls when we made the investment in the partnership with the Jets. We really viewed it as a pilot investment that based on the fact that we essentially have done it again with the Bayern Munich women's team suggests we viewed it as a successful venture.

But the partnership with the Jets, in particular, relative to VitaCholine, what we hope to get out of it and what we learned from it was that choline and our brand of choline, VitaCholine, was really primarily known for its importance in infant and child cognition. It's been long included in infant formula. We've been very successful in getting it part of a typical prenatal vitamin regimen.

But the discussion was largely around infant and child cognition. And this investment really has allowed us to change the dialogue because choline is really important for adult cognition, adult health, liver health and so forth. And so it really has shined a light on the fact that this is also an important nutrient for adults.

And I think that, that -- if that was the only thing we got out of it, that was worth doing from our perspective. But several brands have adopted VitaCholine in energy drinks and active nutrition formats, while others have decided to launch new SKUs that include choline in supplements. And this all came from the partnership with the Jet and our team being able to leverage that partnership.

So financially, we can look back on it and say there was a very good ROI. But I think what was most important was it really gave us the ability to highlight the importance of VitaCholine and the nutrient, the essential nutrient choline for adult health. And similarly, the investment with Bayern Munich women's team is allowing us to do that with a very different product, a vitamin, vitamin K2 and our brand, K2VITAL relative to the benefits of K2 in women's health, in particular, given that investment.

So we really are pleased with that investment. And it comes on top of a rich science backing that supports the nutrients, and we need to continue to invest in that. But I think you'll see us continue to push the bounds of marketing investment as well because we really have recognized it's an important part of the process. But we really are very pleased with both those investments despite, as you and I have joked the Jets performance in 2025, but there's always the new year, and we're excited about how the Jets will do in the coming year.

Absolutely. And we're in the off-season, which is their best season.

That's right.

So I guess just moving on, you mentioned the science basis for all of your marketing and things like that. Can you talk about -- I think on the previous calls, you said you had something like 20 or so clinical trials running. Are any of those trials coming up for conclusion in 2026? And how -- and assuming positive results just for now, how would you leverage that information into new sales?

Yes. So we do. We're really excited about the -- you're right, the 20 studies that are currently underway. We actually had 18 publications in 2025 based on studies that have been done earlier. And I think that's just an indication what do we do with these clinical findings. All of them that I've been associated with have been positive in one way or another and getting those results out in front of the right audience, whether it's practitioners or influencers or important people within the industry, so they understand the science behind their products but also being able for us to offer claims to our customers who are ultimately selling the product.

For example, in 2025, there are a few publications that allowed us to make a claim around vitamin K2, our K2 delta product, and it helps maintain a normal age-related calcification. And that's an important claim to be able to introduce. K2 has been a product that has typically been talked about relative to bone health, but with long believe that it played an important role relative to cardiovascular health. And so these studies helped us bring that ability to make that claim to our customers. So that's what we do with these studies.

And yes, in 2026, there are definitely a few studies that will come to fruition, hopefully, be published in 2026. And I think maybe just to mention one that I'm particularly excited about, that we have talked about before on these calls, but it relates to and MD Anderson, University of Texas, MIT clinical study around the effect of high doses of choline in older people with the gene APOE4 relative to Alzheimer's and the ability for these high doses of choline to potentially impact the development of Alzheimer's and delay it.

So we're very interested in the study. We're excited about it. Obviously, we don't have results. Hopefully, the results will be positive. But if we could have a highly credible study from institutions such as those that could allow us to make a claim relative to choline and adult cognition, it could be very powerful. So that's one that's coming up in 2026 that we're quite excited about.

Your next question comes from the line of Ram Selvaraju with H.C. Wainwright.

Sort of 3 categories here. Firstly, I was wondering if you could comment on planned sales and promotional activities in 2026 that represent a meaningful or marked evolution versus 2025. In particular, and this relates to what was asked about earlier already, the relationships with professional sports teams. I'm particularly interested in soccer. But if there are other professional sports leagues that you plan to take a look at potentially aligning with, sponsoring, partnering with going forward in order to aid promotion and deployment of H&H products in particular that would be very helpful to know and understand better.

Secondly, I was wondering if you could comment on what it seems is the only thing most people can talk about these days, which is the Supreme Court decision overturning the current administration's tariff regime. And if there are any potential ways in this -- in which this could conceivably be disruptive what mitigation measures you already have in place? I think you alluded to those in your prepared remarks that would effectively field the company from organizational disruption.

And finally, if you see any potential opportunities, if tariffs are indeed rolled back on mass? And then lastly, standard question for Martin. What should we be thinking about in terms of effective tax rate assumptions as we refine our projections going forward.

Thanks, Rob. I'll try to take a stab at the tariff one, maybe we'll do that one first. Obviously, that's hot off the press, and we're all just trying to figure out exactly what it means. I would just start by saying that we were very pleased with how we manage through the disruption of Liberation Day and I would say the confusion and volatility and ups and downs we feel like we're relatively well positioned from a manufacturing perspective, as I've talked about a few times relative to tariffs with the fact that the majority of our products that we sell within a region are made in that region. I think that positions us well.

But also, our strong market positions allowed us where we had to raise prices to offset any tariffs that we ended up having to pay. Obviously, as we think about this ruling we think about a few things. One is, will there be immediate replacement of the current tariffs using some other section, whether it's 122 or 301 or 338, will they just be replaced with some other tariffs, will there potentially be refunds that we might receive from some of our suppliers and/or that some of our customers might need to receive from us.

And I think what I would say about that is that at the end of the day, that is a manageable number. We talked about several calls ago that kind of theoretical impact of tariffs. So on us was about $20 million. So in the grand scheme of the company, it's a manageable number. Ultimately, that number came down to closer to $10 million based on our efforts to find alternate supply chain solutions and so forth. So the magnitude of the impact was not significant.

And I firmly believe that whatever ultimately happens, we'll be able to manage through that as effectively as we manage through liberation day. But for sure, it's going to create some volatility and uncertainty and supply chain planning challenges and so forth but feel very good about our position. I don't necessarily see any significant opportunities coming from this, but again, I think it's hot off the press, and we'll just have to see.

Going back to your first question around planned sales and promotion, I would just highlight that both the Jets and the Bayern Munich investments were multiyear investments. So I think it's important to lead with those will continue and we're excited to have those continue, and they will be sort of our leading, I would say, public type partnerships. But what we plan to do more of in support of those is a little bit more social media, digital marketing, influencer marketing to further enhance those kind of headline investments. So that's something that we'll do.

And we also are kind of next on our list of nutrients to invest in from a marketing perspective is MSM, which really is a product that is known for joint health but also has important sort of skin, hair and nails benefit, and you'll be seeing more from us relative to a beauty from within campaign, which is also a significant and important trend right now. And we feel like we have a product that fits perfectly into that trend, and we'll be investing pretty significantly in that brand and a beauty from within campaign. So that will be something that you'll see more of in the not-too-distant future.

And I'll hand it over to Martin to answer your tax question.

Ram, I would use 23% for modeling purposes. We ended this year at 22.2% and last year at 22.8%. So we've been in that 22% to 23% range. We just sort of look at the math of where we do business and international and where we're making our money, the math would suggest somewhere in the 23% range for effective tax rate. And then becomes what sort of discrete items that come up during the year and actions we can take to try to make that a little bit lower, but I would use 23% for modeling.

Okay. And then just very quickly, with respect to FX potential headwinds or tailwinds, can you maybe talk about how potential additional decline relatively speaking, and the value of the dollar might impact things for Balchem going forward? Or if you feel that you're reasonably well shielded from FX headwinds. And also, if you could just give us a sense of how you are prioritizing capital deployment at this time with respect to, in particular, debt repayment versus share repurchases?

Sure, Rob. Maybe I'll start on the FX one at least. For us, it's really the U.S. dollar euro. That's the primary exposure we have that's of any sort of relevance. If we look at the impact on FX to us in 2025, it sort of had a 0.7% impact to growth. It benefited us by 0.7% on a full year basis based on the movement between the U.S. dollar and the euro that we had in the year. if you were to do that same math on the fourth quarter, the impact was just over 1%, sort of favorable to our growth from a stronger euro to giving us more dollars when we translate it back.

So it's there, and it's not insignificant, but nor is it sort of a really material driver for us. Obviously, as we continue to grow internationally, that will become bigger, and we've seen good growth internationally in 2025. So we keep an eye on it and manage it. And if need be, we will hedge that, but we don't do a lot of hedging at this point in time as the exposure has been very manageable to us from an FX perspective.

From a capital deployment, I would say that our priorities remain consistent from the perspective that our organic growth is still our primary area where we deploy our cash, and we'll continue to grow our dividend, as you've seen in the past, and we'll continue to focus on our M&A as a key area for deployment and we'll continue to pay down debt. At this point, though, our leverage is so low. So we have, as we've often said in the past, we will try to keep our share count flat and offset anti-dilution over time from equity issuance, et cetera, so we've done that. More recently, we've deployed more capital into share repurchases to catch up on some of those antidilutive purchases.

So that share count remains flat over time because our debt leverage is so low. So you could say that this is a better time for us and also sort of where we've been trading recently, it was a good time for us to deploy more capital in that space. But fundamentally, has anything changed in how we view capital deployment, No. It's still organic growth and M&A probably as the top 2 that we're focused on.

Your next question comes from the line of Artem Chubarov with Rothschild & Co Redburn.

I'd like to ask first about the performance within segments, specifically in 8 and A&H. When I look at our H&H crop in the quarter, 13% obviously, very good result. It looks quite similar to Q3 on the run rate. If I look within the division at nutrients or food ingredients, are we looking at the same dynamic? Or have you seen any change there? And probably a similar question on AMH, so ruminants versus monogastric, any color there would be very helpful.

Yes, Artem, thanks, and thanks for joining the call. Focusing on H&H for a minute. I think the simple answer is no, there really hasn't been a significant shift over the last few quarters. I would say over the last year or so, there has been a more meaningful shift from lower growth in our Food Ingredients and Solutions area to higher growth in that business as the better-for-you trends have had a bigger impact on our business.

So if we look back, 2024, for example, our business, our Food Ingredients and Solutions business really wasn't growing significantly. And that has changed over time. But I would say, certainly relative to the last quarter or so the dynamic has been quite similar where we're seeing very significant growth in our Minerals and Nutrients business, as we call it, clear double-digit growth last quarter, 30%. Previous quarter, something similar to that.

And the reason that the H&H business has been growing faster overall is because the food ingredient solutions business has now been for the last few quarters, growing at a higher rate. and this past quarter at around 4%, which we think is higher than what the market is growing, and it's importantly because of our focus on better for you.

Relative to A&H, I think the answer is also somewhat similar in that the primary growth driver in that business over time has always been our ruminant business. and lower growth has come from the monogastric business. And if we go back to 2024, we were seeing no growth in the monogastric business or even some negative growth in the monogastric business because of the situation in the European monogastric business that we have talked so much about over the last few years.

And what we have seen is that, that business has started to recover, started to deliver some growth while the ruminant business continues to grow. And so we're seeing higher growth in A&H because we have the historical ruminant growth now coupled with some improved growth in the monogastric business. So -- but that's really been, I think, the story within ANH for the last few quarters. So nothing's really changed over the last few quarters, the change really has been over the last year or so.

Your next question comes from the line of Daniel Harriman with Sidoti.

Congrats on another great quarter and another great year. I've got a question for each of you. you called out in the opening remarks, just the success that you're seeing with sales outside of the United States. And I know that's been a particular focus within Specialty Products. I was hoping to get an update there. And then within A&H in Europe, are you seeing any early impacts on the pricing dynamics or competitive conditions there after December's announcement? Really appreciate it, guys.

Sure. Thank you, Daniel. Maybe I'll take the first one, and I'll ask Martin to take the second one. But maybe why don't you start with that one, Martin.

Yes. Absolute. Thank you, Daniel. The short answer is, yes. We are now starting to see the improvement in Europe, where it is clearly a shift versus just sort of noise in the system. So with the final ruling in December and leading up to that ruling, which was highly anticipated, we have started to see improved volumes and as we go forward here into Q1 and into Q2, we've also seen some firming up of the prices.

So the short answer is, yes, it is definitely improving. We'll see how far it goes and how much share shift you see and what happens to the price structure, et cetera. I think we're still relatively early innings there. but it is clear that it is moving in a favorable direction. And I will take this opportunity maybe to call out a great win we had that we haven't spoken much about in this area, and that is that was a definition of sort of the country of origin of how to view the country of origin where it's really been defined as where the chemical reaction happens of choline which means that you can't just ship the coal into a different country, dry it there and ship it into Europe and say that, that intermediary country is the origin.

And that's really a huge win for us in trying to sort of combat or the circumvention that we see happening out there and being able to really make it much harder for various suppliers to circumvent these dumping duties. So we're pretty excited about that, and we're starting to see improvement. So yes, it's starting to move in a favorable direction.

And Daniel, going back to the international growth we did in the prepared remarks make a comment about half of the growth that we've seen recently has come from growth in international markets. And so we're very excited about that. And if you kind of step further back and we reflect on our strategic priorities as a company and priorities that we sort of build our strategic plans around driving growth through geographic expansion is an important one of those priorities. So we're very focused on doing that still as a company. We're primarily a U.S. company, still approximately 75% of our sales come from the U.S.

So we see a huge opportunity for us to grow internationally. And we think that our products and solutions fit well with international markets and international needs. So we're very focused on it, and we're working hard on it. And while you mentioned Specialty Products as an area that we're focused on geographic expansion, that's very true. I would say the majority of that differential growth that we've experienced recently internationally is really coming from our Human Nutrition & Health business, where -- we really are focused on adding people geographically in Asia and South America and Europe, really, I would say, doubling down on our team in Europe, and it's delivering results, and we are growing faster in international locations than we are domestically.

And the really good thing about Balchem is our home market still is growing. We have significant growth opportunity in our home market, whether through just market growth or further market penetration. So we can drive healthy growth as a company domestically, but our international expansion efforts are delivering even faster growth and Human Nutrition & Health is the biggest part of that.

But our Animal Nutrition & Health business, if you put European monogastric business aside, our ruminant business is growing very nicely, particularly in Europe, but also, I would say, in Asia and South America. And yes, our Specialty Products business, the plant nutrition business and even the performance gases business is growing internationally. So it's an important strategic focus area and we're really having some success really across all 3 reporting segments. So we're excited about that opportunity for us going forward.

That concludes our question-and-answer session. I will now turn the call back over to Ted Harris for closing remarks.

Thank you. And once again, thank you all very much for joining our call today. We really appreciate your support throughout the year as well as your time today, and we look forward to reporting out our Q1 2026 results in April. In the meantime, we will be participating in a couple of conferences, the JPMorgan Consumer Ingredients Conference in London on March 10 and the BNP Paribas Exane Consumer Ingredients and Chemicals Conference in London on March 11. So we hope to see some of you there. Thanks again for joining.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Balchem's Third Quarter 2025 Earnings Call.

I would now like to turn the call over to Martin Benson, CFO. Please go ahead.

Thank you. Good morning, everyone. Thank you for joining our conference call this morning to discuss the results of Balchem Corporation for the quarter ending September 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 statement. 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-K, 10-Q and 8-K reports. The company assumes no obligation to update these forward-looking statements.

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.

Thanks, Martin. Good morning, and welcome to our conference call. We were extremely pleased with the financial results for the first quarter of 2025 and the strong performance of our company, fueled by the ongoing market penetration of our unique portfolio of specialty nutrients and delivery systems and the favorable better-for-you trends within the food and nutrition markets that are well aligned with our food ingredient formulation systems and capabilities.

We delivered record quarterly 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. The third quarter of 2025 was the 25th consecutive quarter of quarterly year-over-year growth in adjusted EBITDA for Balchem.

We are very proud of this accomplishment, particularly in light of the market environment within which we have been operating over the last 25 quarters. 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.

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 nutrients and the further expansion of our marketing efforts to help drive awareness and market penetration. We continue to see healthy demand across the vast majority of our end markets.

Our Human Nutrition & Health segment continues to perform extremely well, driven by strong demand for both our unique portfolio of minerals, nutrients and vitamins and our food ingredients and solutions, which are benefiting from trends toward nutrient dense, high protein, high fiber and lower sugar or better-for-you foods, where our nutrient portfolio and our formulations expertise bring considerable value to our customers.

In the Animal Nutrition & Health segment, we delivered another quarter of year-over-year growth on improved demand in both our monogastric and ruminant businesses as a result of further market penetration of our rumin-protected precision release encapsulates nutrient portfolio and mostly -- or modestly, sorry, improving market conditions in the European monogastric market and we remain encouraged by the overall performance of our Animal Nutrition & Health product portfolio.

And within our Specialty Products segment, both our Performance Gases business and our Plant Nutrition business are performing well, driven primarily by higher demand as a result of healthier market conditions within Performance Gases and successful geographic expansion growth within Plant Nutrition. Year-to-date, on a consolidated basis, we have delivered strong growth, both on the top and bottom lines while continuing to generate strong free cash flow, and our outlook for the remainder of the year remains positive.

As discussed on the last few earnings calls, we believe we are relatively well positioned to effectively manage through the current global trade environment. To date, we have managed to fully offset the impact of tariffs associated with the U.S. administration's evolving trade policy, either through alternate supply chain options or subsequent pricing actions. And based on what we know today, we expect to similarly be able to offset any impact of future tariffs as the trade situation further evolves.

Additionally, I would like to share some progress we have made in our scientific and clinical research pipeline, which continues to bolster our Human Nutrition & Health segment. We continue to actively invest in the science behind our brands such as VitaCholine, K2VITAL, OptiMSM and Albion Minerals. These studies are integral to our strategy for entering new markets, expanding our ingredient categories and building consumer awareness.

I would like to highlight one of the studies published recently that is of particular importance. Late in 2017, we informed you that Balchem funded a pilot study, Dr. Steven Zeisel, the former Director for the University of North Carolina's Nutrition Research Institute, received a $2.6 million grant from a unit of the National Institutes of Health or NIH, to develop a blood-based test or a biomarker to help measure choline status in humans. The NIH-funded choline biomarker study was known to be a lengthy study, only further delayed by the COVID-19 pandemic that has now been completed, and the results have been published as a preprint.

This was an important study from our perspective since it promised to help more easily identify choline deficiency in humans by identifying a choline biomarker in order to ultimately help address deficiencies through supplementation while also facilitating research on the benefits of choline supplementation in humans.

The study was a double-blind, randomized crossover controlled feeding study, in which all 101 subjects received 100%, 50% and 25% of the choline recommended daily intake in 2-week segments separated by 2-week washouts. The results of the study showed that plasma choline and betaine when measured together are highly predictive of actual dietary choline intake.

These findings offer a new opportunity to assess choline dietary adequacy and will likely be included in future clinical and population studies and ultimately be used as a common measurement in health screenings of choline intake versus daily recommended intake levels.

On the marketing front, within our Animal Nutrition & Health segment, we continue to expand our reach and impact through marketing. We have strengthened our marketing capabilities in Balchem's real science exchange platform now celebrating 5 years since its launch, has grown into a leading industry information and technology resource with webinars, podcasts and symposiums that is attracting a strong following across the industry with high-quality content across leading streaming platforms such as YouTube, Spotify and Apple podcast.

This channel to the industry gives Balchem a unique opportunity to reach and interact with an expanded target audience. We will continue to invest in our marketing capabilities, and we recently partnered with Progressive Dairy magazine to introduce the real producer exchange for practical insights for dairy farmers. And later this month, we are excited to expand into the companion animal sector with new webinars and podcasts. Reinforcing our commitment to advancing animal science and industry collaboration. So some exciting progress being made on our strategic growth initiatives, while at the same time, delivering strong financial results.

Now regarding the third quarter of 2025's financial performance. This morning, we reported record quarterly consolidated revenue of $268 million, which was 11.5% higher than the prior year quarter. We delivered record quarterly GAAP earnings from operations of $55 million, an increase of 13.7% versus the prior year.

Consolidated net income closed the quarter at $40 million, an increase of 19.1%. This quarterly net income translated to diluted net earnings per share of $1.24 on a GAAP basis, up $0.21 or 20.4% compared to the prior year.

On an adjusted basis, we delivered record quarterly adjusted EBITDA of $71 million, an increase of 11% compared to the prior year. Our record quarterly adjusted net earnings were $44 million, an increase of 19.1% from the prior year which translated to $1.35 per diluted share, up $0.22 or 19.5% compared to the prior year.

Overall, another excellent quarter for Balchem as we continue to deliver strong financial results 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 third quarter consolidated financial results for the company in more detail and the results for each of our business segments.

Thank you, Ted. As Ted highlighted, the third quarter was a great quarter for Balchem with record sales, earnings from operations, adjusted EBITDA, adjusted net earnings and adjusted earnings per share. Our third quarter net sales of $268 million or 11.5% higher than prior year, driven by strong performance in all three segments: Human Nutrition & Health, Animal Nutrition & Health and Specialty Products.

Our third quarter gross margin dollars were $95 million, up 11.8% compared to the prior year. our gross margin percent was 35.7% of sales, up 10 basis points compared to the prior year. Consolidated operating expenses for the third quarter were $41 million as compared to $37 million in the prior year. The increase was primarily due to an increase in professional services and higher compensation-related costs. GAAP earnings from operations for the third quarter were a record $55 million, an increase of 13.7% compared to the prior year.

On an adjusted basis, as detailed in our earnings release this morning, record non-GAAP earnings from operations of $60 million were up 12.1% compared to the prior year. Adjusted EBITDA was a record $71 million, an increase of 11% compared to the prior year with an adjusted EBITDA margin rate of 26.7%. Net interest expense for the third quarter was $3 million, a decrease of $1 million compared to the prior year, driven primarily by lower outstanding borrowings.

Our net debt decreased to $89 million with an overall leverage ratio on a net debt basis of 0.3. The effective tax rates for the third quarter of 2025 and 2024, were 22.6% and 22.9%, respectively. The decrease in the effective tax rate from the prior year was primarily due to certain lower state taxes.

Consolidated net income closed the quarter at $40 million, up 19.1% from the prior year. This quarterly net income translated into diluted net earnings per share of $1.24, an increase of $0.21 compared to the prior year.

On an adjusted basis, our third quarter adjusted net earnings were a record $44 million, an increase of 19.1% from the prior year, which translated to $1.35 per diluted share. Cash flows from operations were $66 million, with free cash flow of $51 million and we closed out the quarter with $65 million of cash on the balance sheet.

As we look at the third quarter from a segment perspective, our Human Nutrition & Health segment generated record sales of $174 million, an increase of 14.3% from the prior year, driven by higher sales within both the Nutrient's business and the food ingredients and solutions businesses. Our Human Nutrition & Health segment also delivered record quarterly earnings from operations of $41 million an increase of 14.8% compared to the prior year.

This was primarily driven by the aforementioned higher sales and a favorable mix, partially offset by certain higher manufacturing input costs and higher operating expenses. Third quarter adjusted earnings from operations for this segment were a record $44 million, an increase of 13.2%. We are extremely pleased with the overall performance of our Human Nutrition & Health segment.

And as Ted mentioned earlier, we continue to experience strong demand for our unique portfolio of ingredients and solutions. We believe our Human Nutrition & Health businesses are well positioned to build on the momentum we are seeing across our end markets. And as consumers increasingly favor better-for-you ingredients and solutions, we see significant opportunities ahead to leverage our formulation expertise, nutrient portfolio and strong market positions to continue to deliver healthy growth in Human Nutrition & Health.

Our Animal Nutrition & Health segment generated quarterly sales of $56 million, an increase of 6.6% compared to the prior year. The increase was driven by higher sales in both the ruminant and monogastric businesses. Animal Nutrition & Health delivered earnings from operations of $4 million, an increase of 5.2% from the prior year. The increase was primarily due to the aforementioned higher sales and a favorable mix, partially offset by certain higher manufacturing input costs and higher operating expenses.

Third quarter adjusted earnings from operations for this segment were $4 million, an increase of 1.2% compared to the prior year. The end markets for Animal Nutrition & Health remain relatively stable at the moment, and we were pleased to see another quarter of top and bottom line growth. We continue to see market penetration of our room and protected encapsulated nutrients for the dairy market, including our reassure encapsulated choline and our more recently launched AminoShure-XL encapsulate lysine.

On the monogastric side, we see a relatively stable U.S. end market at the moment and a modestly improved European market environment following the provisional antidumping duties on Chinese choline that were announced last quarter. As we look forward, we expect Animal Nutrition & Health to continue to deliver growth over the long term.

Our Specialty Products segment delivered quarterly sales of $36 million, an increase of 7.5% compared to the prior year, driven by higher sales in both the performance gases and Plant Nutrition businesses. Specialty Products delivered record quarterly earnings from operations of $12 million, an increase of 9.7% versus the prior year, primarily driven by the aforementioned higher sales.

Third quarter adjusted earnings from operations for this segment were a record $13 million, an increase of 8.8%. We continue to be really pleased with the performance of Specialty Products, delivering another strong quarter of growth, both on the top and bottom line. Within Performance Gases, our international reach is creating value for our customers and helping to drive growth rates above historical levels.

And similarly, within our Plant Nutrition business, we're having good success with our geographic expansion efforts, particularly in Latin America and Asia Pacific. Specialty Products is performing well and going forward, we expect to be able to continue to drive solid growth for the Specialty Products segment.

So, overall, the third quarter was another excellent quarter for Balchem, and we believe we are well positioned for continued growth as we head into the remainder of the year. I'm now going to turn the call back over to Ted for some closing remarks.

Thanks, Martin. Once again, we are extremely pleased with the third 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. The company is performing very well. We have once again effectively managed through the latest macroeconomic and tariff-related trade environment with minimal impact on the company.

And at the same time, our growth has strengthened as a result of the accelerating better-for-you trends within the Health & Nutrition markets, given our unique portfolio of nutrients coupled with our food ingredients and solutions capabilities. We are extremely proud of delivering 25 consecutive quarters of quarterly year-over-year growth in adjusted EBITDA with the third quarter results reported earlier this morning. 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.

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

[Operator Instructions] And your first question comes from the line of Bob Labick with CJS Securities.

Congratulations on another record quarter. I wanted to start with the Food Ingredients & Solutions. For the last several quarters, it's kind of really picked up after previously lagging the minerals and nutrients growth rate. You just mentioned the better-for-you trend, but could you drill down a little more and talk about the changes in Food Solutions and the drivers and the outlook for each of the subsegments in 2026?

Absolutely, Bob. And first of all, just stepping back a little bit. We really -- we're extremely pleased with the performance of the entire segment, Human Nutrition & Health. Just to kind of peel that onion back a little bit.

Sales for H&H were up 14% and then if you talk about the Nutrient Portfolio was up about 30%, but as you highlight, the food ingredient business was up nicely as well. So it was really good to see the food business up almost 7%. And we don't see that growth rate differential necessarily changing over time. We always see the nutrient portfolio is growing faster than the food portfolio.

But as you point out, the food growth was kind of low single digits there for a while and now significantly increased. And the primary driver of that is, what we touched on in the prepared remarks. And that really is the benefits we're seeing from the better-for-you trends in the market, whether it's in meat sticks, which is a high protein snack to replace other snacks or whether it's a high fiber nutritional beverage that is trying to address even some of the negative implications of GLP-1 drugs, for example, we see quite a few of our customers introducing new products targeted to that audience, and we all know that's pretty sizable consumer base or whether it's high protein bars, for example, with our Z-Crisps and our ability to add high protein crisp to certain kind of bars in the marketplace.

So all of those trends are really helping support and strengthen our overall growth in food ingredients. And it's really a combination of our nutrient expertise from the nutrient business, our unique products encapsulated products, our kind of emulsified fat powder systems, our flavor systems.

And our ability to combine all of those and solutions for our customers as they're introducing new products to kind of serve those trends. And we think those trends are likely to continue for the foreseeable future. I think the better-for-you trends have been going on for decades. And of late, we've seen some accelerates to those trends, whether it is the GLP-1 drugs that I touched on that have side effects and have sort of unique nutrient needs, if you will, for the consumers of those products. That's an opportunity for us.

Certainly, the RFK junior focus on healthier-for-you products, less processed food products is creating an accelerant, if you will, to this long-term trends. So we're really pleased that our portfolio of products caters to those trends is allowing for us to get new wins in the marketplace and grow our food business at a higher rate than we have historically. So we're quite excited about that.

That's great. And then just on the nutrient and minerals in nutrient side, the growth was phenomenal as well, your major markets of choline, K2, MSM, magnesium, et cetera. Can you talk about -- it's been a penetration story for a while. Where are you in terms of product penetration? And what is the opportunity? And how much longer of a runway is there for penetration and awareness of your products?

The short answer is we're a long way from that endpoint. Again, as I've talked about in the past, to some extent, our challenge is the majority of our portfolio, whether it's choline or vitamin K2 or even MSM are not very well known. And I would even add the idea of chelated minerals, higher bioavailable minerals are not so well known and kind of recent studies show that they're, yes, a little bit better known today than they were 5 years ago, but still not well known.

So we think that we have a significant way to go. We think that the market opportunities are still 3, 4x multiples the size of the market today. And in the minerals, you mentioned magnesium in the mineral space, the overall mineral market is huge and the position that chelated minerals have within that market remains tiny.

So the opportunity there is to both eat away at that bigger minerals market with these higher bioavailable more effective products, but also kind of drive market penetration to users that aren't supplementing with those minerals as well. So it's really sort of two vectors of growth. But we certainly see very strong double-digit growth in each of those portfolios, and we expect that to continue for some time.

Your next question comes from the line of Ram Selvaraju with H.C. Wainright.

Congratulations on a very strong quarter. I was just wondering if you could comment on international antidumping practices being enacted at the state, regional governmental level that could conceivably boost sales, particularly in the H&H segment ex U.S.?

And especially if you could give us maybe just an overview of the status of the European anti-dumping campaigns as these pertain to choline specifically, where that is currently? And what impact you expect it to have over the course of the coming months and indeed into next year?

Yes. Thanks, Ram, for your comments and your question. There are really sort of two aspects to antidumping and maybe I'll start with the current initiative where the European Union has preliminarily put antidumping duties on China origin choline chloride. And maybe to your specific question, that's both for human choline chloride as well as animal choline chloride and it's just a clear recognition by the European Union of unfair trade practices by China and trying to create a level playing field. Those duties are still preliminary.

There's quite a process that is underway. We initially announced that the duties were, I think, it was 95% to 120%. And after further calculations that we reduced those by about 5 percentage points, so not significantly, which we were pleased to hear and later this year, certainly by the end of the year, they should have a final vote for the enactment of those duties and then they will become approved in their final form and would be in place for 5 years, which also would be a very good thing.

And there is an opportunity for us to work with the European Union to try to address some of the typical reaction from China of moving the product through other countries, and we're working to try to do that, and that would only strengthen the impact of the duties.

But certainly, broadly speaking, across the nutrient sector, whether it's in animal or in human these types of pricing practices are quite prevalent from China as well as others. And I do think that there is an improved environment within which to bring these kinds of cases to the government entities and to get an appropriate response. So we are kind of actively reviewing where that makes sense, where we believe these practices are happening and kind of using that tool.

Unfortunately, it is expensive and it is lengthy. And so you have to go through that. But clearly, in the U.S., and we think in the U.S., there's an improved environment for us, companies like ours to bring those kind of cases to the governments and we'll do that as appropriate going forward.

Okay. Great. And then also just wanted to ask about the Orange County microencapsulation manufacturing facility. Can you just summarize again for us when you expect construction to be completed on that facility now that you have the state approvals in place? And also, if you can give us a sense of what the magnitude of impact is likely to be on revenues and earnings quality once that facility comes fully online?

Yes, sure. We're really excited about that. We announced that in our second quarter earnings release, and we felt like we should update our shareholders on the progress that has been made. And essentially, what we tried to say and the highlight on the press release is that we're moving forward, and we have gotten the most recent approvals to do just that move forward with the plant and we -- essentially, what we're doing is building a new plant that has twice the capacity of the old plant and will effectively shut down the old plant, which was one of the first sites that we ever had as a company.

In fact, the first site, we bought it back in the '60s. And at that point in time, it was an old creamery that we use to make food ingredients and has kind of sort of far outlived its effectiveness. And so it was time for us to upgrade and monetize, and we've done that just down the road so that we can continue to use the employee base from the old site. And so forth.

And so we're really kind of putting in place in this new plant, some new technology around our micro encapsulation and more efficient technology. The encapsulates business, for example, just in Q3, grew about 26%. So it's a fast-growing part of our portfolio and has been growing significantly really over the last few years, and we need the capacity.

Our current capacity is getting us by, but we're soon going to start to run out of capacity in the coming couple of years. And so the plant will be from a construction perspective completed early in 2027, and we expect be producing new product by the middle of 2027.

So the way we're looking at it is it's going to allow this important product line to continue to grow at double-digit rates. And our encapsulate business is certainly on the higher end of our gross margin profile of the businesses within our company. So we're excited to invest in that product line, and we're excited to be able to allow it to continue to grow kind of beyond our current capacity levels.

Okay. And then just two quick questions for Martin, if I may. Firstly, I wanted to ask if you expect the pace of debt repayment to be the same in the next couple of quarters as what you just -- most recently reported particularly in light of the significantly lower debt burden and the very low net leverage ratio that Balchem currently has.

Just wanted to see if you're planning to take your foot off the gas on debt repayment schedule or if you're intending to keep going at the most recently reported pace on a quarterly basis? And also, if you could just give us a sense of whether you expect the most recently reported quarterly effective tax rate to be an appropriate assumption to carry forward for the remainder of 2025.

I'll start with the second one as it's a quick answer for the tax rate. I think sort of -- our best estimate for the year is around 22.5% plus or minus a little bit. So that's kind of where we're at year-to-date and where we think we'll finish the year at around 22.5%, plus or minus a little bit. On the debt repayment pace, I mean, obviously, we've generated strong free cash flows. And as you know from the past, we deploy that capital and paying down our debt is part of that. I think it will depend a little bit the pace on timing of M&A.

As you know, we talk a lot about pursuing various opportunities all the time. Unfortunately, we haven't done anything over the finish line more recently, that is not to say we're not actively participating, actively discussing, actively pursuing strategic M&A. So I think that will impact it a little bit on how we see sort of those opportunities develop here as we go forward.

Also, you know from the past that we do deploy some of our cash into keeping our -- sort of share count relatively flat. So we do some share repurchases for antidilutive purposes just to keep sort of our shareholders' ownership relatively stable. So that will impact it as well in terms of at what pace we repurchased share just to keep our share count flat.

But meanwhile, we will continue to reduce debt as there is excess cash. And then I think the big trigger that will change that is sort of when the next M&A transaction occurs because I think that is more a matter of timing than anything else.

Your next question comes from the line of Daniel Harriman with Sidoti.

Congrats on another great quarter. Just a couple of quick ones from me today. Within Specialty Products, with that 7.5% year-over-year growth, can you give us a breakdown of how much came from performance gases versus plant nutrition? And then with the Plant Nutrition growth, could you just update us and provide a little bit more information about the success you're seeing with your geographic expansion within that business?

Yes, sure. Just to give you some kind of growth numbers within Specialty Products. So as you said, overall, we grew about 7.5%. The Performance Gases business grew about 7% and the plant nutrition business grew about 13%. So that combined resulted in the 7.5% growth. So we're seeing nice growth out of both Performance Gases, traditionally were viewed as kind of a lower growth business. But after a number of years of different impacts on growth, whether it was air emission systems upgrades or nursing shortages, COVID impacting elective surgical procedures and so forth.

That market seems to have stabilized and is doing well. But we're also seeing nice growth in that business geographically, particularly in Europe. So we're seeing some differential growth there as well. So Plant Nutrition, obviously, is a smaller business for us, but historically has been more focused on the United States.

And I would say, particularly California, we tend to sell into higher-end crops like grapes and so forth. And so an important strategic initiative for us has been to expand internationally for multiple reasons for obvious growth reasons, but also to balance out some of the seasonality that we experienced in that business.

As you know, the first half of the year is much stronger than the second half of the year because of the growing season in the U.S. So we've had a very deliberate effort to try to offset some of that down part of the season with growth in either the Southern Hemisphere or other geographies. And we're having some success in that and that was worth noting, particularly in Latin America, we're seeing stronger growth as well as in Asia Pacific.

Some countries that are sort of kind of stand out Brazil, India, for example, are areas where we're having some good success. And it's been quite a deliberate effort on our part, and we're pleased with that growth, while the U.S. business has been relatively flat, I would say, the international business has been driving the predominance of the growth in plant nutrition.

There are no further questions at this time. I will now turn the call back over to Ted Harris for closing remarks.

Once again, thank you all very much for joining the call today. We really appreciate your support and your time and we look forward to reporting our Q4 2025 results in February of next year. That sounds like a long way away, but that's when it will be.

In the meantime, we we'll be participating in Baird's 2025 Global Industrial Conference in Chicago on November 12, and we certainly hope to see some of you there. So thanks again for joining.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

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 2025 Earnings Call. [Operator Instructions]

I would now like to turn the conference over to Martin Bengtsson, Chief Financial Officer. You may begin.

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, 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-K, 10-Q and 8-K reports. The company assumes no obligation to update these forward-looking statements. 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.

Thanks, Martin. Good morning, and welcome to our conference call. We were extremely pleased with the financial results for the second quarter of 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 & 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 & Health segment, we delivered another quarter of year-over-year growth on healthy demand in both our monogastric and ruminant businesses as market conditions continue to improve. We were very pleased with the European Commission's recently announced provisional antidumping duties on Chinese choline of 95% to 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 U.S. 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 & Health segment. Our current pipeline features over 20 active clinical studies focused on evaluating the benefits of certain nutrients, including VitaCholine, K2Vital, OptiMSM and Albion Minerals.

These studies are integral to our strategy for entering new markets, expanding our ingredient categories and building consumer awareness. In Q2 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 7.5 years with 27% of participants developing Alzheimer's disease. The study found that a daily intake of choline above 350 milligrams was linked to a 51% reduction in the incidence of clinical Alzheimer's diagnosis when compared to those consuming less than 200 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 OptiMSM, our premier branded methylsulfonylmethane and its favorable impact on exercise-induced oxidative stress. This study explored whether OptiMSM could offer protection against significant oxidative stress from intense exercise in experienced runners.

Participants received 500 milligrams of OptiMSM or a placebo for 27 days, followed by 1,000 milligrams or a placebo for another 3 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 4 distinct immune response pathways within 2 to 4 hours post exercise. This suggests that OptiMSM 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 million 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 2025's financial performance. This morning, we reported record quarterly consolidated revenue of $255 million, which was 9.1% higher than the prior year quarter. We delivered record quarterly GAAP earnings from operations of $51 million, an increase of 12.3% versus the prior year.

Consolidated net income closed the quarter at $38 million, an increase of 19.4%. This quarterly net income translated to diluted net earnings per share of $1.17 on a GAAP basis, up $0.19 or 19.4% compared to the prior year. On an adjusted basis, we delivered record quarterly adjusted EBITDA of $69 million, 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 million, an increase of 16.8% from the prior year, which translated to $1.27 per diluted share, up $0.18 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.

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 million were 9.1% higher than prior year, driven by strong performance in all three segments: Human Nutrition & Health, Animal Nutrition & Health and Specialty Products.

Our second quarter gross margin dollars were $93 million, 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 million as compared to $37 million 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 million, 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 million were up 10% compared to the prior year.

Adjusted EBITDA was a record $69 million, 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 million, a decrease of $1 million compared to the prior year, driven primarily by lower outstanding borrowings. Our net debt decreased to $125 million with an overall leverage ratio on a net debt basis of 0.5. The effective tax rates for the second quarters of 2025 and 2024 were 21.9% and 22.2%, 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 million, 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 million, an increase of 16.8% from the prior year, which translated to $1.27 per diluted share. Cash flows from operations were $47 million with free cash flow of $41 million, and we closed out the quarter with $65 million of cash on the balance sheet.

As we look at the second quarter from a segment perspective, our Human Nutrition & Health segment generated record sales of $161 million, 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 & Health segment delivered record quarterly earnings from operations of $38 million, 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 million, an increase of 10.8%. We're very pleased with the overall performance of our Human Nutrition & 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 & Health.

Our Animal Nutrition & Health segment generated quarterly sales of $56 million, 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 & Health delivered earnings from operations of $4 million, 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 million, an increase of 27.8%. We were once again pleased to see our Animal Nutrition & 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 & Health remain relatively stable at the moment, and we believe the Animal Nutrition & 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 antidumping duties on Chinese choline will certainly provide further support for the Animal Nutrition & Health segment's growth outlook. Our Specialty Products segment delivered record quarterly sales of $37 million, 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 million, 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 million, 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.

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.

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

[Operator Instructions] Our first question comes from the line of Bob Labick with CJS Securities.

Congratulations on the recent antidumping news. So hopefully, obviously, that will get things back on track and the even playing field, as you said. Could you -- and we've been focused on that a lot. Could you give us -- take a step back and give us an update on the macro environment? What's European monogastric demand like -- 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 A&H that you see over the next 6 to 18 months?

Thank you, Bob. Yes, on your question on monogastric demand in Europe, I 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 antidumping provisional ruling, what will play out over the coming quarters is obviously what market share will they have as we establish a more 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 A&H more broadly in terms 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 U.S. 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 AminoShure-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.

Yes, it's been super. 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 double 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 if it's going to be margin or faster throughput or market share? Or what are you looking for from this new facility?

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 foundation of Balchem was on microencapsulation technology and manufacturing. 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 '60s. We have since expanded to now make similar products in our Missouri site as well as overseas in Italy, but Slate Hill remains our primary site. But as you can imagine, it's a relatively old site and not very efficient because of the age of the site and the original construction and so forth. It's very choppy 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 our production. And we really have been a little bit tight on capacity for the last year or so in the business, over the last couple of years has been growing at 20%, 25% a year and so doubling of the capacity is in order.

So I think that the primary way to think about this is that this investment will allow us to continue to grow that business 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 de-bottlenecked and stretched capacity as best we can, and it's tied for 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.

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

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.

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 million to $40 million a year on CapEx, and we really think that we can accomplish this new project within that sort of sized CapEx spending because it will happen over the course of 3 years. And so we're not expecting a significant increase in our CapEx spending. So yes, it will come from existing cash as well as our debt facility, so we're not concerned at all about funding this site.

And then 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 kind of, I'd say, late in 2027 into 2028. And we feel like we have enough capacity in our existing facility with all that de-bottlenecking that I talked about to allow us to grow to that point, but we really need this facility to come online in that time frame in order for us to continue to grow.

And then a couple of other items on the H&H front. Firstly, I was wondering if you could comment on the status of VitaCholine, Pro-Flo and the progress that's been made on integrating that specific product offering into multivitamin products -- 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 Balchem's move more concertedly into the human health front, maybe into the medical 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.

Sure, Ram. I'll try to answer all of those questions. I think that this is both an industry trend as well as an ongoing evolution of our company. And when I speak about an industry trend, the good-for-you nature of foods, greener labels, healthier eating, personalized nutrition has been a multi-decade trend that we have benefited from.

But there certainly are some accelerators to that multi-decade trend of late. I think the advent of the GLP-1 drugs is certainly part of that, that has kind of risen to prominence very, very quickly and results in kind of changing needs from a nutritional perspective, maybe even 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-1 drugs that obviously have kind of protein intake issues potentially as well as liver health concerns and just broad-reaching nutrition deficiencies that come with consuming less food and so forth.

And so -- 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 the market trends are headed that way. And we are moving along our evolutionary path toward being able to better and better service that. 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 capabilities, 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 a shift relative to the studies. I think we've been highlighting the marketing element of our strategy. But we've always 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 penetration of markets, the building of awareness and so forth. So we're continuing to do that while investing in marketing.

And I do think that where the markets are evolving and where Balchem is evolving is a little bit more toward that health side as you describe it. 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 in maybe some of our updates.

And because we've been highlighting marketing so much, we wanted to remind everybody that we continue to invest into science. And relative to the new products that we have launched, VitaCholine and Pro-Flo is as we've talked about, an interesting new product that we have that facilitates the inclusion of choline into multivitamin solutions.

And we are starting to introduce that to customers and the reception is positive. We still can't report out on any -- very large successes there. But it is just adding to our portfolio of solutions. And we were a little bit blocked out of the multivitamin component of the supplement market. And now we have something that we can really talk about there.

So we are excited about that. I think the one thing that I'm 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, energy drinks and 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.

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 and 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 second half of 2025.

Absolutely, Ram. 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 our primary focus is always 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&A that we feel accelerates some of those growth initiatives.

And then 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 will continue to pay down debt. And I think sort of when we do our next M&A transaction, obviously, that debt level will rise again, and you'll probably see a repeat of history of we adding on some 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&A transaction happens. And then on the effective tax rate...

And the effective tax rate -- yes.

Yes, on the effective tax rate, we're sort of humming along those 22% so far this year. I think I've said before that sort of we expect that to be between the 22% and the 23% for this year. And as you look into the second half, that'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.

Our next question comes from the line of Tony Polak with Aegis.

I just 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?

Sure. So on tariff, 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 million impact from tariffs, and that's primarily on us buying raw materials for the U.S. from international locations.

And obviously, it's a little bit of a kind of 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 also some countries that are important to us like Indonesia, Malaysia and the Philippines. And if we look at that $20 million impact number that we talked about last time, it hasn't changed significantly. It's up to approximately $25 million 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 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 relatively well positioned. We're going to be able to manage through this, but it's certainly something that we're having to work and manage and it's taking energy and time, but 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 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 our understanding and based on our regular calls with them, they are working hard on that with various consultants and so forth.

And -- so yes, 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 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.

And our last question comes from the line of Daniel Harriman with Sidoti.

Just a couple of quick ones for me here. First, within A&H, 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 second quarter of 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.

Yes, absolutely, Daniel. Yes, maybe starting with the second part of the stock repurchase, yes. No, that's really just in line with sort of historic. We repurchased share for anti-dilutive purposes in '22, in '21 and in '23 in 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 focused on lowering the debt instead. And now we've sort of a little bit opportunistically saw a good opportunity to buy back some stock for anti-dilutive purposes. So it's not any larger change in strategy, it's truly sort of the same just for anti-dilutive purposes, yes.

So on your question on A&H -- I mean, overall -- the overall A&H sales growth was obviously 13% in the quarter. And actually, there was growth on both sides, right? So if you take the monogastric, a 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.

I apologize, Martin. I was actually asking about H&H and nutrients versus ingredients.

Okay.

Well, you got some good insights into A&H as well.

Yes. No, that's fantastic.

And we are pleased that monogastric being a stable business continues to grow. And then, of course, ruminant, we view as a growth business and 30% growth is really good to see as well. So on H&H, we grew about 9%. And once again, a little bit like A&H, both the food business as well as the nutrients business grew and actually similar percentages. So the Nutrients business grew at 8.8% organically, and the Food Ingredient and 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, I would say, pretty much played out as we expected last year. We saw double-digit growth in our nutrients business last year and quite low single-digit growth in food, and we thought that the growth in nutrients would moderate a little bit given the accelerated growth 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 K2 product line is growing at high double-digit type growth. So very pleased with that, in the 30% to 40% type range. Our MSM business growing at solid double digits. And our Minerals business continues to grow very nicely with kind of a standout continuing to be magnesium with growing awareness of that important mineral.

And 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 20% plus. But generally, our good-for-you formulations, whether they be in kind of our powders or cereal systems businesses are growing quite well. So hopefully, that gives you a little bit of an insight into the H&H growth.

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.

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 Q3 2025 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.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.