Balchem Corporation Reports First Quarter Sales of $228.9 Million, Net Earnings of $28.9 Million, GAAP EPS of $0.89, and Adjusted EPS of $1.03

NEW HAMPTON, N.Y., April 29, 2022 (GLOBE NEWSWIRE) -- Balchem Corporation (NASDAQ: BCPC) reported today first quarter net earnings of $28.9 million for 2022, compared to net earnings of $23.4 million for the first quarter 2021. Quarterly adjusted net earnings(a) were $33.4 million, compared to $28.4 million in the prior year quarter. Quarterly adjusted EBITDA(a) was $53.6 million, compared to $45.7 million in the prior year quarter.

First Quarter 2022 Financial Highlights:

• Record net sales of $228.9 million, an increase of 23.3% compared to the prior year quarter with quarterly double-digit sales growth in all three segments: Human Nutrition and Health, Animal Nutrition and Health, and Specialty Products.
• Record adjusted EBITDA was $53.6 million, an increase of 17.2% from the prior year.
• GAAP net earnings were $28.9 million, an increase of 23.6% from the prior year. These net earnings resulted in GAAP earnings per share of $0.89.
• Record adjusted net earnings of $33.4 million, an increase of 17.3% from the prior year, resulting in record adjusted earnings per share(a) of $1.03.
• The effective tax rate of 23.1% was 120 basis points higher than the prior year tax rate of 21.9%.
• Cash flows from operations were $7.0 million for the first quarter of 2022, with quarterly free cash flow(a) of $(2.8) million.

Recent Highlights:

• On April 22, we released our 2021 Sustainability Report, which captures the Company's commitment to managing our Environmental, Social and Governance (ESG) performance. Balchem’s sustainability initiatives are fully integrated into our business strategy and are critical to our vision of making the world a healthier place. We took meaningful steps toward advancing diversity, inclusion, and belonging at Balchem, and remain committed to fostering a diverse and inclusive culture in which everyone feels welcomed, valued, and appreciated, while inspiring our external stakeholders to share our vision. Our Sustainability Report demonstrates the Company's continuing promise to provide our employees, customers, shareholders and the communities within which we operate with information on Balchem’s sustainability initiatives and includes our progress on our 2030 goals and strategies for both emissions and water usage reduction by 25%.

Ted Harris, Chairman, CEO, and President of Balchem said, “We are very pleased to have continued the strong momentum from 2021 into 2022. In the first quarter of 2022 we delivered all-time record sales, adjusted net earnings, and adjusted EBITDA in a very difficult macro-economic and geo-political environment.”

Mr. Harris added, “The Balchem team once again delivered exceptional performance in a dynamic market environment. We continue to see strong demand for our products and services with double-digit sales growth in all three of our business segments versus the prior year's quarter, as well as sequential growth in all three segments.”

Results for Period Ended March 31, 2022 (unaudited)
(Dollars in thousands, except per share data)

Financial Results for the First Quarter of 2022:

The Human Nutrition & Health segment generated record quarterly sales of $122.4 million, an increase of $17.9 million or 17.2% compared to the prior year quarter. The increase was primarily driven by strong sales growth within food and beverage markets and higher sales of chelated minerals. Record quarterly earnings from operations for this segment of $20.3 million increased $0.6 million or 3.1% compared to $19.7 million in the prior year quarter, primarily due to the aforementioned higher sales and higher average selling prices, partially offset by higher manufacturing input costs and distribution costs, along with increased compensation-related costs within operating expenses. Excluding the effect of non-cash expense associated with amortization of acquired intangible assets of $4.0 million and $4.4 million for the first quarter of 2022 and 2021, respectively, adjusted earnings from operations(a) for this segment were $24.3 million, compared to $24.0 million in the prior year quarter.

The Animal Nutrition & Health segment generated record quarterly sales of $69.3 million, an increase of $18.2 million or 35.6% compared to the prior year quarter. The increase was primarily the result of higher sales in both the monogastric and ruminant species markets, partially offset by an unfavorable impact related to changes in foreign currency exchange rates. Record quarterly earnings from operations for this segment of $11.3 million increased $6.3 million or 123.9% compared to $5.1 million in the prior year quarter, primarily due to the aforementioned higher sales and higher average selling prices, partially offset by increases in manufacturing input costs and distribution costs, and higher compensation-related costs within operating expenses. Excluding the effect of non-cash expense associated with amortization of acquired intangible assets of $0.1 million and $0.2 million in the first quarters of 2022 and 2021, record adjusted earnings from operations for this segment were $11.5 million, compared to $5.2 million in the prior year quarter.

The Specialty Products segment generated sales of $33.3 million for the first quarter of 2022, an increase of $5.3 million or 19.0% compared to the prior year quarter. The increase was primarily due to higher sales of products in both the plant nutrition business and the medical device sterilization market, partially offset by an unfavorable impact related to changes in foreign currency exchange rates. First quarter earnings from operations for this segment were $7.8 million versus $7.2 million in the prior year comparable quarter, an increase of $0.6 million or 8.0%, primarily due to the aforementioned higher sales, partially offset by increases in manufacturing input costs and distribution costs and higher compensation-related costs within operating expenses. Excluding the effect of non-cash expense associated with amortization of acquired intangible assets for the first quarter of 2022 and 2021 of $1.1 million and $1.4 million, respectively, adjusted earnings from operations for this segment were $8.9 million compared to $8.6 million in the prior year quarter.

Record consolidated gross margin for the first quarter of 2022 of $71.5 million increased by $12.8 million or 21.8% compared to $58.7 million for the prior year comparable period. Gross margin as a percentage of sales was 31.2% as compared to 31.6% in the prior year period, a decrease of 39 basis points, primarily due to an increase in certain manufacturing input costs and distribution costs, partially offset by higher average selling prices. Operating expenses of $33.2 million for the quarter increased $5.0 million from the prior year comparable quarter, principally due to certain higher compensation-related costs and an increase in outside services. Excluding non-cash operating expenses associated with amortization of intangible assets of $5.6 million, operating expenses were $27.5 million or 12.0% of sales.

Interest expense was $0.5 million in the first quarter of 2022. Our effective tax rates for the three months ended March 31, 2022 and 2021 were 23.1% and 21.9%, respectively. The increase in the effective tax rate from the prior year was primarily due to a reduction in certain tax credits and increased international income subject to higher foreign tax rates.

For the quarter ended March 31, 2022, cash flows provided by operating activities were $7.0 million compared with $40.6 million in the prior year comparable period. The $196.3 million of net working capital on March 31, 2022 included a cash balance of $64.5 million, which reflects first quarter repurchases of common stock of $34.6 million, dividend payments of $20.7 million, and capital expenditures and intangible assets acquired of $10.3 million. The cash balance also reflects proceeds from the revolving loan of $20.0 million. The decrease in cash flows from operating activities was primarily driven by changes in working capital and the timing of increased sales, restocking of inventory, and payments to suppliers.

Ted Harris said, “Our first quarter 2022 results were excellent. We continued to show our resilience and ability to deliver strong results, even in challenging times, while also advancing our strategic priorities and further progressing our sustainability efforts. We are excited about our future and our ability to provide solutions for the health and nutritional needs of the world while acting as strong stewards of all of our stakeholders.”

Quarterly Conference Call

A quarterly conference call will be held on Friday, April 29, 2022, at 11:00 AM Eastern Time (ET) to review first quarter 2022 results. Ted Harris, Chairman of the Board, CEO and President, 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 two hours after the conclusion of the call through end of day Friday, May 13, 2022. To access the replay of the conference call, dial 1-877-660-6853 (local dial-in 1-201-612-7415), and use conference ID #13729002.

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, which reflect Balchem’s expectation or belief concerning future events that involve risks and uncertainties. Balchem can give no assurance that the expectations reflected in forward-looking statements will prove correct and various factors could cause results to differ materially from Balchem’s expectations, including risks and factors identified in Balchem’s annual report on Form 10-K for the year ended December 31, 2021. Forward-looking statements are qualified in their entirety by the above cautionary statement. Balchem assumes no duty to update its outlook or other forward-looking statements as of any future date.

Contact: Danielle Polanco, Balchem Corporation (Telephone: 845-326-5600)

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

Balchem Corporation
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(unaudited)

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 disclosed by the company exclude certain business combination accounting adjustments and certain other items related to acquisitions, certain unallocated equity compensation, and certain one-time or unusual transactions. 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. Management believes that these non-GAAP measures provide useful information about the Company's core operating results and thus are appropriate to enhance the overall understanding of the Company's past financial performance and its prospects for the future. 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. EBITDA is defined as earnings before interest, other expense/income, taxes, depreciation and amortization. Adjusted EBITDA is defined as earnings before interest, other expense/income, taxes, depreciation, amortization, stock-based compensation, transaction and integration costs, legal settlements, ERP implementation costs, and unallocated legal fees. Adjusted income tax expense is defined as income tax expense adjusted for the impact of ASU 2016-09. Free cash flow is defined as net cash provided by operating activities less capital expenditures and capitalized ERP implementation costs.

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)

The following table sets forth a reconciliation of Net Earnings calculated using amounts determined in accordance with GAAP to EBITDA and to Adjusted EBITDA for the three months ended March 31, 2022 and 2021.

Table 2
(unaudited)

The following table sets forth a reconciliation of our GAAP effective income tax rate to our non-GAAP effective income tax rate for the three months ended March 31, 2022 and 2021.

Table 3
(unaudited)

The following table sets forth a reconciliation of net cash provided by operating activities to free cash flow for the three months ended March 31, 2022 and 2021.

Table 4
(unaudited)