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Balchem Corporation Reports Second Quarter 2024 Financial Results

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Balchem (NASDAQ: BCPC) reported strong Q2 2024 financial results with record earnings from operations and adjusted EBITDA. Key highlights include:

- Net sales of $234.1 million, up 1.2% YoY
- Adjusted EBITDA of $62.3 million, up 5.0% YoY
- GAAP net earnings of $32.1 million, up 6.5% YoY
- GAAP EPS of $0.98, compared to $0.93 in Q2 2023
- Record adjusted EPS of $1.09, up from $1.06 in Q2 2023
- Free cash flow of $38.4 million

The Human Nutrition & Health and Specialty Products segments showed strong performance with record earnings. Balchem also launched Optifolin+®, a new choline-enriched folate ingredient. The company's net debt decreased to $202.8 million, with a leverage ratio of 0.9x.

Balchem (NASDAQ: BCPC) ha riportato risultati finanziari solidi per il secondo trimestre del 2024, con guadagni record dalle operazioni e EBITDA rettificato. I principali punti salienti includono:

- Vendite nette di 234,1 milioni di dollari, in aumento dell'1,2% rispetto all'anno precedente
- EBITDA rettificato di 62,3 milioni di dollari, in aumento del 5,0% YoY
- Utili netti GAAP di 32,1 milioni di dollari, in crescita del 6,5% YoY
- EPS GAAP di 0,98 dollari, rispetto a 0,93 dollari nel Q2 2023
- EPS rettificato record di 1,09 dollari, rispetto a 1,06 dollari nel Q2 2023
- Flusso di cassa libero di 38,4 milioni di dollari

I segmenti Nutrizione Umana & Salute e Prodotti Speciali hanno mostrato una performance notevole con guadagni record. Balchem ha anche lanciato Optifolin+®, un nuovo ingrediente a base di folati arricchito di colina. Il debito netto dell'azienda è sceso a 202,8 milioni di dollari, con un rapporto di leva di 0,9x.

Balchem (NASDAQ: BCPC) reportó sólidos resultados financieros para el segundo trimestre de 2024, con ganancias récord de operaciones y EBITDA ajustado. Los aspectos más destacados incluyen:

- Ventas netas de 234,1 millones de dólares, un aumento del 1,2% interanual
- EBITDA ajustado de 62,3 millones de dólares, un incremento del 5,0% interanual
- Ganancias netas bajo GAAP de 32,1 millones de dólares, un aumento del 6,5% interanual
- EPS GAAP de 0,98 dólares, en comparación con 0,93 dólares en el Q2 de 2023
- EPS ajustado récord de 1,09 dólares, en comparación con 1,06 dólares en el Q2 de 2023
- Flujo de caja libre de 38,4 millones de dólares

Los segmentos de Nutrición Humana y Salud y Productos Especiales mostraron un rendimiento sólido con ganancias récord. Balchem también lanzó Optifolin+®, un nuevo ingrediente de folato enriquecido con colina. La deuda neta de la compañía disminuyó a 202,8 millones de dólares, con un ratio de apalancamiento de 0,9x.

발켐 (NASDAQ: BCPC)은 2024년 2분기 강력한 재무 실적을 보고했으며, 기록적인 운영 수익과 조정된 EBITDA를 달성했습니다. 주요 하이라이트는 다음과 같습니다:

- 순매출 2억 3410만 달러, 전년 대비 1.2% 증가
- 조정 EBITDA 6230만 달러, 전년 대비 5.0% 증가
- GAAP 순이익 3210만 달러, 전년 대비 6.5% 증가
- GAAP EPS 0.98달러, 2023년 2분기 0.93달러 대비
- 조정 EPS 기록 1.09달러, 2023년 2분기 1.06달러 대비 증가
- 자유 현금 흐름 3840만 달러

인간 영양 및 건강, 특수 제품 부문은 기록적인 수익으로 강한 성과를 보였습니다. 발켐은 또한 콜린이 풍부한 새로운 엽산 성분인 Optifolin+®을 출시했습니다. 회사의 순부채는 2억 280만 달러로 감소했으며, 레버리지 비율은 0.9배입니다.

Balchem (NASDAQ: BCPC) a annoncé de solides résultats financiers pour le deuxième trimestre 2024, avec des bénéfices record provenant des opérations et un EBITDA ajusté. Les points saillants comprennent :

- Ventes nettes de 234,1 millions de dollars, en hausse de 1,2 % par rapport à l'année précédente
- EBITDA ajusté de 62,3 millions de dollars, en hausse de 5,0 % par rapport à l'année précédente
- Bénéfice net GAAP de 32,1 millions de dollars, en augmentation de 6,5 % par rapport à l'année précédente
- BPA GAAP de 0,98 dollar, par rapport à 0,93 dollar au T2 2023
- BPA ajusté record de 1,09 dollar, contre 1,06 dollar au T2 2023
- Flux de trésorerie disponible de 38,4 millions de dollars

Les segments Nutrition Humaine & Santé et Produits Spéciaux ont montré une forte performance avec des bénéfices record. Balchem a également lancé Optifolin+®, un nouvel ingrédient de folate enrichi en choline. La dette nette de l'entreprise a diminué à 202,8 millions de dollars, avec un ratio d'endettement de 0,9x.

Balchem (NASDAQ: BCPC) hat starke finanzielle Ergebnisse für das zweite Quartal 2024 veröffentlicht, mit Rekordgewinnen aus den betrieblichen Tätigkeiten und bereinigtem EBITDA. Die wichtigsten Highlights sind:

- Nettoumsatz von 234,1 Millionen Dollar, ein Anstieg von 1,2% im Jahresvergleich
- Bereinigtes EBITDA von 62,3 Millionen Dollar, ein Anstieg von 5,0% im Jahresvergleich
- GAAP-Nettoergebnis von 32,1 Millionen Dollar, ein Anstieg von 6,5% im Jahresvergleich
- GAAP EPS von 0,98 Dollar, im Vergleich zu 0,93 Dollar im Q2 2023
- Rekordbereinigtes EPS von 1,09 Dollar, im Vergleich zu 1,06 Dollar im Q2 2023
- Free Cashflow von 38,4 Millionen Dollar

Die Segmente Humanernährung & Gesundheit sowie Spezialprodukte zeigten eine starke Leistung mit Rekordgewinnen. Balchem hat auch Optifolin+® eingeführt, eine neue Folatsubstanz, die mit Cholin angereichert ist. Die Nettoverschuldung des Unternehmens sank auf 202,8 Millionen Dollar, mit einem Verschuldungsgrad von 0,9x.

Positive
  • Record adjusted EBITDA of $62.3 million, up 5.0% year-over-year
  • GAAP net earnings increased 6.5% to $32.1 million
  • Record adjusted earnings per share of $1.09, up from $1.06 in Q2 2023
  • Strong sales growth and record earnings in Human Nutrition & Health and Specialty Products segments
  • Launch of new product Optifolin+®, expanding the Minerals and Nutrients portfolio
  • Net debt reduced to $202.8 million, with a low leverage ratio of 0.9 times
Negative
  • Animal Nutrition & Health segment sales decreased 19.2% to $49.6 million
  • Animal Nutrition & Health segment earnings from operations decreased 64.9% to $2.7 million

Insights

Balchem 's Q2 2024 results demonstrate a mixed performance across its business segments. The company reported overall growth, with net sales increasing by 1.2% to $234.1 million and adjusted EBITDA rising by 5.0% to a record $62.3 million.

The standout performers were the Human Nutrition & Health and Specialty Products segments. Human Nutrition & Health saw impressive growth with sales up 9.0% and record earnings from operations increasing 21.3%. This growth was primarily driven by higher sales in the minerals and nutrients business. Similarly, Specialty Products reported a 7.2% increase in sales and a 20.8% rise in earnings from operations.

However, the Animal Nutrition & Health segment faced challenges, with sales declining 19.2% and earnings from operations dropping 64.9%. This significant downturn in the animal nutrition market is a concern and warrants close monitoring.

Financially, Balchem maintains a strong position with a healthy cash flow. The company generated $45.0 million from operating activities and $38.4 million in free cash flow. This allowed for a $35.0 million repayment on their revolving debt, reducing their net debt to $202.8 million with a low leverage ratio of 0.9 times.

The launch of Optifolin+® demonstrates Balchem's commitment to innovation and expanding its product portfolio. This new offering could potentially drive future growth in the Human Nutrition & Health segment.

Overall, while the company faces headwinds in its Animal Nutrition & Health segment, the strong performance in other areas and solid financial position suggest Balchem is well-positioned to navigate current market conditions.

Balchem's Q2 2024 results offer intriguing insights into current market trends across various nutrition and health sectors. The divergent performance of the company's segments provides a snapshot of broader industry dynamics.

The Human Nutrition & Health segment's strong growth (9.0% sales increase) aligns with the growing consumer focus on health and wellness. The demand for minerals and nutrients suggests a continued trend towards preventative health measures and functional foods. The launch of Optifolin+®, a choline-enriched folate ingredient, further capitalizes on this trend, particularly addressing cellular health across all life stages.

Conversely, the Animal Nutrition & Health segment's significant decline (19.2% sales decrease) points to potential challenges in the livestock and agriculture markets. This could be due to factors such as changing consumer preferences, environmental concerns, or economic pressures on farmers.

The Specialty Products segment's growth, particularly in performance gases, might indicate increased demand in industrial or medical applications. This diversification helps balance the company's portfolio against fluctuations in other markets.

Balchem's ability to maintain profitability and even achieve record earnings in some segments, despite inflationary pressures and supply chain challenges that have affected many industries, is noteworthy. The company's focus on innovation and strategic initiatives, coupled with its strong cash flow and debt reduction, suggests a proactive approach to navigating market uncertainties.

Looking ahead, the contrasting performance across segments underscores the importance of diversification in the current market environment. Companies able to pivot and capitalize on growth areas while managing challenges in others are likely to be more resilient in the face of economic uncertainties.

MONTVALE, N.J., July 26, 2024 (GLOBE NEWSWIRE) -- Balchem Corporation (NASDAQ: BCPC) reported today financial results for its 2024 fiscal second quarter ended June 30, 2024. The Company reported quarterly net sales of $234.1 million, quarterly net earnings of $32.1 million, adjusted EBITDA(a) of $62.3 million, and free cash flow(a) of $38.4 million.

Ted Harris, Chairman, President and CEO of Balchem said, "We delivered solid second quarter financials with record earnings from operations and adjusted EBITDA. I am particularly pleased with the excellent performance in our Human Nutrition and Health and Specialty Products segments, both delivering strong sales and earnings growth.”

Second Quarter 2024 Financial Highlights:

  • Net sales were $234.1 million, an increase of 1.2% compared to the prior year quarter.
  • Adjusted EBITDA was a record $62.3 million, an increase of 5.0% from the prior year quarter.
  • GAAP net earnings were $32.1 million, an increase of 6.5% from the prior year quarter.
  • GAAP earnings per share of $0.98 compared to $0.93 in the prior year quarter and record adjusted earnings per share(a) of $1.09 compared to $1.06 in the prior year quarter.
  • Cash flows from operations were $45.0 million for the second quarter of 2024, with quarterly free cash flow(a) of $38.4 million.
  • Strong sales growth and record earnings from operations in both our Human Nutrition and Health and Specialty Product segments.

Recent Highlights:

  • On May 20th, Balchem launched a new product, Optifolin+®, which is a patented, choline-enriched, bioactive, reduced folate ingredient that supports cellular health at all stages of life. Optifolin+® is biologically active, which means that it is readily available for transport and use in the human body and tissues, making Optifolin+® an excellent choice to meet Vitamin B9 recommended requirements.
  • Strong cash flows in the second quarter enabled us to make repayments on our revolving debt of $35.0 million, bringing our net debt to $202.8 million, with an overall leverage ratio on a net debt basis of 0.9 times.

Mr. Harris said, "I am excited about the recent launch of Optifolin+® and our continued focus on bringing innovative solutions for the health and nutritional needs of the world. Optifolin+® adds to our already strong Minerals and Nutrients portfolio that includes leading brands such as VitaCholine®, K2Vital®, Albion® Minerals, and OptiMSM®.”

Mr. Harris continued, "We continue to make good progress on our strategic initiatives while delivering solid financial results. I am very pleased with our performance in the first half of 2024 and look forward to the remainder of the year."

Results for Period Ended June 30, 2024 (unaudited)
(Dollars in thousands, except per share data)
 
  Three Months Ended
June 30,
 Six Months Ended
June 30,
   2024   2023   2024   2023 
Net sales $234,081  $231,252  $473,740  $463,792 
Gross margin  82,994   77,349   164,508   150,519 
Operating expenses  37,197   34,513   77,035   73,275 
Earnings from operations  45,797   42,836   87,473   77,244 
Interest and other expenses  4,571   4,436   9,397   9,725 
Earnings before income tax expense  41,226   38,400   78,076   67,519 
Income tax expense  9,157   8,290   17,021   14,699 
Net earnings $32,069  $30,110  $61,055  $52,820 
         
Diluted net earnings per common share $0.98  $0.93  $1.87  $1.63 
         
Adjusted EBITDA(a) $62,270  $59,317  $123,136  $115,674 
Adjusted net earnings(a) $35,577  $34,441  $69,161  $65,022 
Adjusted net earnings per common share(a) $1.09  $1.06  $2.12  $2.01 
         
Shares used in the calculations of diluted and adjusted net earnings per common share  32,649   32,434   32,638   32,424 


(a)See “Non-GAAP Financial Information” for a reconciliations of GAAP and non-GAAP financial measures.
  

Financial Results for the Second Quarter of 2024:

The Human Nutrition & Health segment generated sales of $147.9 million, an increase of $12.3 million, or 9.0%, compared to the prior year quarter. The increase was primarily driven by higher sales within the minerals and nutrients business. Record earnings from operations for this segment of $33.4 million increased $5.9 million, or 21.3%, compared to $27.5 million in the prior year quarter, primarily due to the aforementioned higher sales, a favorable mix, and certain lower manufacturing input costs, partially offset by higher operating expenses. Excluding the effect of non-cash expense associated with amortization of acquired intangible assets and other adjustments, adjusted earnings from operations(a) for this segment were $37.4 million, compared to $31.8 million in the prior year quarter, an increase of 17.6%.

The Animal Nutrition & Health segment generated quarterly sales of $49.6 million, a decrease of $11.8 million, or 19.2%, compared to the prior year quarter. The decrease was driven by lower sales in both the monogastric and ruminant species markets. Second quarter earnings from operations for this segment of $2.7 million decreased $5.0 million, or 64.9%, compared to $7.7 million in the prior year quarter, primarily due to the aforementioned lower sales, partially offset by certain lower manufacturing input costs. Excluding the effect of non-cash expense associated with amortization of acquired intangible assets and other adjustments, adjusted earnings from operations for this segment were $3.0 million compared to $7.6 million in the prior year quarter, a decrease of 61.1%.

The Specialty Products segment generated quarterly sales of $35.1 million, an increase of $2.4 million, or 7.2%, compared to the prior year quarter, primarily due to higher sales in the performance gases business. Earnings from operations for this segment were a record $11.2 million, compared to $9.3 million in the prior year comparable quarter, an increase of $1.9 million, or 20.8%, primarily driven by the aforementioned higher sales and certain lower manufacturing input costs, partially offset by higher operating expenses. Excluding the effect of non-cash expense associated with amortization of acquired intangible assets and other adjustments, adjusted earnings from operations for this segment were $12.3 million, compared to $10.5 million in the prior year quarter, an increase of 17.1%.

Record quarterly consolidated gross margin of $83.0 million increased by $5.6 million, or 7.3%, compared to $77.3 million for the prior year comparable period. Gross margin as a percentage of sales was 35.5% as compared to 33.4% in the prior year period, an increase of 210 basis points, primarily due to a favorable mix and decreases in certain manufacturing input costs. Operating expenses of $37.2 million for the quarter increased $2.7 million from the prior year comparable quarter, primarily due to the impact of favorable adjustments to transaction costs in the prior year and higher charges related to outside services, partially offset by the impact of restructuring-related impairment charges in the prior year. Excluding non-cash operating expenses associated with amortization of intangible assets of $4.6 million, operating expenses were $32.6 million, or 13.9% of sales.

Interest expense was $4.2 million and $5.2 million in the second quarters of 2024 and 2023, respectively. The decrease in interest expense was primarily due to lower outstanding borrowings, partially offset by higher interest rates. Our effective tax rates for the three months ended June 30, 2024 and 2023 were 22.2% and 21.6%, respectively. The higher effective tax rate was primarily due to lower tax benefits from stock-based compensation and certain higher state taxes, partially offset by certain lower foreign taxes.

Second quarter cash flows provided by operating activities were $45.0 million and free cash flow was $38.4 million. The $206.8 million of net working capital on June 30, 2024 included a cash balance of $63.7 million. Significant cash payments during the quarter included repayments on the revolving loan of $35.0 million, income taxes paid of $18.2 million, and capital expenditures and intangible assets acquired of $6.9 million.

Ted Harris said, “The Balchem team delivered solid second quarter financial results, once again highlighting the resilience of our business model. Two of our three reporting segments are performing very well, with both our Human Nutrition and Health segment and Specialty Products segment delivering record earnings from operations, which are more than offsetting the challenges we are experiencing in our Animal Nutrition and Health segment. We are well positioned in the markets we serve and remain confident in the long-term growth outlook for our company as we continue to focus on progressing our strategic growth initiatives in 2024 and beyond.”

Quarterly Conference Call

A quarterly conference call will be held on Friday, July 26, 2024, at 11:00 AM Eastern Time (ET) to review second quarter 2024 results. Ted Harris, Chairman, President and CEO and Martin Bengtsson, CFO will host the call. We invite you to listen to the conference by calling toll-free 1-877-407-8289 (local dial-in 1-201-689-8341), five minutes prior to the scheduled start time of the conference call. The conference call will be available for replay three hours after the conclusion of the call through end of day Friday, August 9, 2024. To access the replay of the conference call, dial 1-877-660-6853 (local dial-in 1-201-612-7415), and use conference ID #13747779.

Segment Information

Balchem Corporation reports three business segments: Human Nutrition & Health, Animal Nutrition & Health, and Specialty Products. The Human Nutrition & Health segment delivers customized food and beverage ingredient systems, as well as key nutrients into a variety of applications across the food, supplement and pharmaceutical industries. The Animal Nutrition & Health segment manufactures and supplies products to numerous animal health markets. Through Specialty Products, Balchem provides specialty-packaged chemicals for use in healthcare and other industries, and also provides chelated minerals to the micronutrient agricultural market. Sales and production of products outside of our reportable segments and other minor business activities are included in "Other and Unallocated".

Forward-Looking Statements

This release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect our expectation or belief concerning future events that involve risks and uncertainties. These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," “likely,” "estimate," "forecast," "outlook," "intend," "strategy," "future," "opportunity," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result," or the negative thereof or variations thereon or similar expressions generally intended to identify forward-looking statements. Actions and performance could differ materially from what is contemplated by the forward-looking statements contained in this release. Factors that might cause differences from the forward-looking statements include those referred to or identified in Balchem’s Annual Report on Form 10-K for the year ended December 31, 2023 and other factors that may be identified elsewhere in this release or in our other SEC filings. Reference should be made to such factors and all forward-looking statements are qualified in their entirety by the above cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact: Jacqueline Yarmolowicz, Balchem Corporation (Telephone: 845-326-5600)

Selected Financial Data (unaudited)
($ in 000’s)

Business Segment Net Sales: Three Months Ended
June 30,
 Six Months Ended
June 30,
   2024   2023   2024   2023 
Human Nutrition & Health $147,928  $135,669  $300,672  $268,322 
Animal Nutrition & Health  49,557   61,329   103,478   126,218 
Specialty Products  35,094   32,726   66,707   64,957 
Other and Unallocated (b)   1,502   1,528   2,883   4,295 
Total $234,081  $231,252  $473,740  $463,792 


Business Segment Earnings Before Income Taxes: Three Months Ended
June 30,
 Six Months Ended
June 30,
   2024   2023   2024   2023 
Human Nutrition & Health $33,367  $27,499  $66,624  $45,934 
Animal Nutrition & Health  2,693   7,662   4,753   17,160 
Specialty Products  11,228   9,298   19,427   17,244 
Other and Unallocated (b)  (1,491)  (1,623)  (3,331)  (3,094)
Interest and other expenses  (4,571)  (4,436)  (9,397)  (9,725)
Total $41,226  $38,400  $78,076  $67,519 
         
(b) Other and Unallocated consists of a few minor businesses which individually do not meet the quantitative thresholds for separate presentation and corporate expenses that have not been allocated to a segment. Unallocated corporate expenses consist of: (i) Transaction and integration costs of $132 and $572 for the three and six months ended June 30, 2024, respectively, and $651 and $1,216 for the three and six months ended June 30, 2023, respectively, and (ii) Unallocated amortization expense of $0 and $0 for the three and six months ended June 30, 2024, respectively, and $0 and $312 for the three and six months ended June 30, 2023, respectively, related to an intangible asset in connection with a company-wide ERP system implementation.


Selected Balance Sheet Items     
(Dollars in thousands) June 30, 2024 December 31, 2023
  (unaudited)  
     
Cash and Cash Equivalents $63,738  $64,447 
Accounts Receivable, net  123,400   125,284 
Inventories  117,099   109,521 
Other Current Assets  15,919   14,990 
Total Current Assets  320,156   314,242 
     
Property, Plant & Equipment, net  272,539   276,039 
Goodwill  770,026   778,907 
Intangible Assets with Finite Lives, net  176,102   191,212 
Right of Use Assets  18,445   19,864 
Other Assets  17,698   16,947 
Total Non-current Assets  1,254,810   1,282,969 
     
Total Assets $1,574,966  $1,597,211 
     
Current Liabilities $113,322  $148,491 
Revolving Loan  266,569   309,569 
Deferred Income Taxes  49,956   52,046 
Other Long-Term Obligations  32,755   33,121 
Total Liabilities  462,602   543,227 
     
Stockholders' Equity  1,112,364   1,053,984 
     
Total Liabilities and Stockholders' Equity $1,574,966  $1,597,211 


Balchem Corporation
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
 
(unaudited)
  Six Months Ended June 30,
   2024   2023 
Cash flows from operating activities:    
Net earnings $61,055  $52,820 
Adjustments to reconcile net earnings to net cash provided by operating
activities:
    
Depreciation and amortization  26,174   27,074 
Stock compensation expense  8,636   8,518 
Other adjustments  (1,106)  (2,647)
Changes in assets and liabilities  (16,379)  (15,936)
Net cash provided by operating activities  78,380   69,829 
     
Cash flows from investing activities:    
Capital expenditures and intangible assets acquired  (13,788)  (17,880)
Cash paid for acquisitions, net of cash acquired     (341)
Proceeds from the sale of assets  272   1,881 
Proceeds from settlement of net investment hedge     2,740 
Investment in affiliates  (80)  (72)
Net cash used in investing activities  (13,596)  (13,672)
     
Cash flows from financing activities:    
Proceeds from revolving loan  26,000   13,000 
Principal payments on revolving loan  (69,000)  (48,000)
Principal payments on finance lease  (111)  (110)
Proceeds from stock options exercised  9,682   3,826 
Dividends paid  (25,568)  (22,869)
Purchase of common stock  (5,213)  (3,924)
Net cash used in financing activities  (64,210)  (58,077)
     
Effect of exchange rate changes on cash  (1,283)  2,216 
     
(Decrease) increase in cash and cash equivalents  (709)  296 
     
Cash and cash equivalents, beginning of period  64,447   66,560 
Cash and cash equivalents, end of period $63,738  $66,856 
 

Non-GAAP Financial Information

In addition to disclosing financial results in accordance with United States (U.S.) generally accepted accounting principles (GAAP), this earnings release contains non-GAAP financial measures that we believe are helpful in understanding and comparing our past financial performance and our future results. The non-GAAP financial measures in this press release include adjusted gross margin, adjusted earnings from operations, adjusted net earnings and the related adjusted per diluted share amounts, EBITDA, adjusted EBITDA, adjusted income tax expense, and free cash flow. The non-GAAP financial measures disclosed by the company exclude certain business combination accounting adjustments and certain other items related to acquisitions, certain equity compensation, nonqualified deferred compensation plan expense (income), and certain one-time or unusual transactions. Detailed non-GAAP adjustments are described in the reconciliation tables below and also explained in the related footnotes. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Investors should not consider non-GAAP measures as alternatives to the related GAAP measures.

Set forth below are reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

Table 1

Reconciliation of Non-GAAP Measures to GAAP
(Dollars in thousands, except per share data)
 
(unaudited)
  Three Months Ended
June 30,
 Six Months Ended
June 30,
   2024   2023   2024   2023 
Reconciliation of adjusted gross margin        
GAAP gross margin $82,994  $77,349  $164,508  $150,519 
Inventory valuation adjustment (1)     217      1,419 
Amortization of intangible assets and finance lease (2)  707   662   1,411   1,343 
Restructuring costs (3)     120      120 
Adjusted gross margin $83,701  $78,348  $165,919  $153,401 
         
Reconciliation of adjusted earnings from operations        
GAAP earnings from operations $45,797  $42,836  $87,473  $77,244 
Inventory valuation adjustment (1)     217      1,419 
Amortization of intangible assets and finance lease (2)  5,303   6,952   11,705   14,302 
Transaction and integration costs (4)  41   (7,349)  481   (5,184)
Restructuring costs (3)     6,266      6,266 
Nonqualified deferred compensation plan expense (5)  113   244   516   481 
Adjusted earnings from operations $51,254  $49,166  $100,175  $94,528 
         
Reconciliation of adjusted net earnings        
GAAP net earnings $32,069  $30,110  $61,055  $52,820 
Inventory valuation adjustment (1)     217      1,419 
Amortization of intangible assets and finance lease (2)  5,375   7,024   11,849   14,446 
Transaction and integration costs (4)  41   (7,349)  481   (5,184)
Restructuring costs (3)     6,266      6,266 
Income tax adjustment (6)  (1,908)  (1,827)  (4,224)  (4,745)
Adjusted net earnings $35,577  $34,441  $69,161  $65,022 
         
Adjusted net earnings per common share - diluted $1.09  $1.06  $2.12  $2.01 
 

Table 2
(unaudited)

Reconciliation of GAAP Net Earnings to EBITDA and to Adjusted EBITDA
(Dollars in thousands)
 
  Three Months Ended
June 30,
 Six Months Ended
June 30,
  2024   2023   2024   2023 
Net earnings - as reported $32,069  $30,110  $61,055  $52,820 
Add back:        
Provision for income taxes  9,157   8,290   17,021   14,699 
Interest and other expenses  4,571   4,436   9,397   9,725 
Depreciation and amortization  12,433   13,355   26,030   26,930 
EBITDA  58,230   56,191   113,503   104,174 
Add back certain items:        
Non-cash compensation expense related to equity awards  3,886   3,748   8,636   8,518 
Inventory valuation adjustment (1)     217      1,419 
Transaction and integration costs (4)  41   (7,349)  481   (5,184)
Restructuring costs (3)     6,266      6,266 
Nonqualified deferred compensation plan expense (5)  113   244   516   481 
Adjusted EBITDA $62,270  $59,317  $123,136  $115,674 
 

Table 3
(unaudited)

Reconciliation of GAAP Effective Income Tax Rate to Non-GAAP Effective Income Tax Rate
(Dollars in thousands)
 
  Three Months Ended June 30,
  2024  Effective Tax Rate  2023  Effective Tax Rate
GAAP Income Tax Expense $9,157  22.2% $8,290  21.6%
Impact of ASU 2016-09 (7)   620     448   
Adjusted Income Tax Expense $9,777  23.7% $8,738  22.8%


  Six Months Ended June 30,
  2024  Effective Tax Rate  2023  Effective Tax Rate
GAAP Income Tax Expense $17,021  21.8% $14,699  21.8%
Impact of ASU 2016-09 (7)   1,327     844   
Adjusted Income Tax Expense $18,348  23.5% $15,543  23.0%
 

Table 4

(unaudited)

 

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
(Dollars in thousands)
 
  Three Months Ended
June 30,
 Six Months Ended
June 30,
   2024   2023   2024   2023 
Net cash provided by operating activities $44,992  $34,991  $78,380  $69,829 
Capital expenditures, proceeds from the sale of assets, and settlement of net investment hedge  (6,602)  (3,280)  (13,175)  (12,892)
Free cash flow $38,390  $31,711  $65,205  $56,937 


(1) Inventory valuation adjustment: Business combination accounting principles require us to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company's cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustment to our cost of sales excludes the expected profit margin component that is recorded under business combination accounting principles. We believe the adjustment is useful to investors as an additional means to reflect cost of sales and gross margin trends of our business.
 
(2) Amortization of intangible assets and finance lease: Amortization of intangible assets and finance lease consists of amortization of customer relationships, trademarks and trade names, developed technology, regulatory registration costs, patents and trade secrets, capitalized loan issuance costs, other intangibles acquired primarily in connection with business combinations, an intangible asset in connection with a company-wide ERP system implementation, and one finance lease. We record expense relating to the amortization of these intangibles and finance lease in our GAAP financial statements. Amortization expenses for our intangible assets and finance lease are inconsistent in amount and are significantly impacted by the timing and valuation of an acquisition. Consequently, our non-GAAP adjustments exclude these expenses to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.
 
(3) Restructuring costs: Expenses related to a reorganization of the business.
 
(4) Transaction and integration costs: Transaction and integration costs related to acquisitions and divestitures are expensed in our GAAP financial statements. Management excludes these items for the purposes of calculating Adjusted EBITDA and other non-GAAP financial measures. We believe that excluding these items from our non-GAAP financial measures is useful to investors because these are items associated with transactions that are inconsistent in amount and frequency causing comparison of current and historical financial results to be difficult.
 
(5) Nonqualified deferred compensation plan (income) expense: Gains and losses on rabbi trust assets related to our nonqualified deferred compensation plan are recorded in other (income) expense while the offsetting increases or decreases to the deferred compensation liability are recorded within earnings from operations. The increases and decreases in the deferred compensation liability are driven by market volatility and are not a true reflection of company performance. We believe excluding these amounts from our non-GAAP financial measures is useful to investors because these items are inconsistent in amount based on market conditions causing comparison of current and historical financial results to be difficult. Adjustments have been made to the prior period presentation to conform with the current period presentation.
 
(6) Income tax adjustment: For purposes of calculating adjusted net earnings and adjusted diluted earnings per share, we adjust the provision for (benefit from) income taxes to tax effect the taxable and deductible non-GAAP adjustments described above as they have a significant impact on our income tax (benefit) provision. Additionally, the income tax adjustment is adjusted for the impact of adopting ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” and uses our non-GAAP effective rate applied to both our GAAP earnings before income tax expense and non-GAAP adjustments described above. See Table 3 for the calculation of our non-GAAP effective tax rate.
 
(7) Impact of ASU 2016-09: The primary impact of ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"), was the recognition during the three and six months ended June 30, 2024 and 2023, of excess tax benefits as a reduction to the provision for income taxes and the classification of these excess tax benefits in operating activities in the consolidated statement of cash flows instead of financing activities.

FAQ

What was Balchem's (BCPC) revenue in Q2 2024?

Balchem (BCPC) reported net sales of $234.1 million in Q2 2024, representing a 1.2% increase compared to the prior year quarter.

How much did Balchem's (BCPC) earnings per share grow in Q2 2024?

Balchem's GAAP earnings per share increased to $0.98 in Q2 2024, compared to $0.93 in the prior year quarter. Adjusted earnings per share reached a record $1.09, up from $1.06 in Q2 2023.

What new product did Balchem (BCPC) launch in Q2 2024?

On May 20th, 2024, Balchem launched Optifolin+®, a patented, choline-enriched, bioactive, reduced folate ingredient that supports cellular health at all stages of life.

How did Balchem's (BCPC) Human Nutrition & Health segment perform in Q2 2024?

Balchem's Human Nutrition & Health segment generated sales of $147.9 million, a 9.0% increase year-over-year, with record earnings from operations of $33.4 million, up 21.3% compared to Q2 2023.

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