Robert Labick

Robert Labick asked about the drivers behind the stronger-than-expected international currency growth, its sustainability, and its impact on the 10-15 new Micro-optics wins target. He also sought an update on a previously mentioned security-only contract win with a Latin American country and future security-only opportunities.

Answer

CEO Aaron Saak identified increased counterfeiting, growth in emerging economies, and accelerating redesign times as durable trends driving international currency growth, expecting to remain in the 10-15 wins range. He could not yet announce the Latin American country but emphasized its significance as a reference customer and highlighted a strong pipeline for security-only features.

Robert Labick from CJS asked about the drivers behind the stronger-than-expected international currency growth, its sustainability, and how it impacts the annual target of 10-15 new Micro-optics wins. He also sought an update on the previously mentioned international currency security-only contract win with a Latin American country and the potential for more such opportunities.

Answer

CEO Aaron Saak identified three key drivers for international currency overperformance: increased counterfeiting, growth in emerging economies coupled with inflation, and accelerating currency redesign times, all seen as durable trends. He expects to maintain the 10-15 annual Micro-optics wins target, noting 2025 exceeded this. Regarding the Latin American contract, Aaron Saak stated they cannot disclose the country but confirmed it's a significant step, and the pipeline for security-only opportunities, focused on high-margin micro-optic features, is robust, leading to investments in design and engineering.

Robert Labick followed up on the specialty film business, seeking more details on the specific products and applications, potential for follow-on orders beyond the large energy contract, and long-term progression. He also requested an update on the M&A environment, including any impact from tariffs and the company's current focus on acquisition opportunities.

Answer

President and CEO Jeffrey Niew explained that specialty film focuses on pulse power applications, storing and rapidly releasing energy for new applications like defibs, railguns, radiotherapy, and emerging downhole technologies. He emphasized that these are new applications, not market share gains, leveraging Knowles' unique technology and U.S. manufacturing. Regarding M&A, Mr. Niew stated a continued focus on synergistic acquisitions, aiming for 'one plus one equals three' scenarios, while being disciplined in selection. SVP and CFO John Anderson added that the M&A environment has improved with more assets and lower interest rate expectations, and the company maintains a good pipeline.

Robert Labick followed up on specialty film products, asking about specific applications, potential for follow-on orders, new emerging applications like downhole, and requested an update on the M&A environment and the company's focus.

Answer

Jeffrey Niew, President and CEO, explained that specialty film focuses on pulse power applications such as defibs, railguns, radiotherapy, and emerging downhole applications, emphasizing new applications rather than market share capture. John Anderson, SVP and CFO, and Jeffrey Niew also discussed the M&A environment, noting an improved pipeline but a disciplined approach to ensure synergistic acquisitions.

Robert James Labick asked about the drivers behind the accelerated growth in Balchem's food ingredients and solutions business, particularly in the context of 'better-for-you' trends, and the outlook for its subsegments in 2026. He also inquired about the current stage of market penetration for key nutrient minerals like choline, K2, MSM, and magnesium, and the remaining runway for growth and awareness.

Answer

Chairman, President, and CEO Ted Harris explained that the Human Nutrition and Health segment performed strongly, with the nutrient portfolio growing 30% and food ingredients up almost 7%. He attributed the food business's growth to 'better-for-you' trends, citing examples like high-protein snacks (meat sticks, ZCRISPs), high-fiber nutritional beverages addressing GLP-1 drug side effects, and less processed foods. He expects these trends to continue driving higher growth. Regarding nutrient minerals, Mr. Harris stated there's a significant runway for growth, as most of their portfolio is not well-known, with market opportunities estimated at 3-4x current size. He sees strong double-digit growth continuing through two vectors: replacing less bioavailable minerals and driving new users.

Robert Labick asked CEO Scott Uzzell about his experience in revitalizing leading brands that have experienced slowing growth or market share loss, inquiring about the necessary steps and biggest challenges to restoring growth. He then asked CFO Brian Grass about the optimal leverage and capital structure for the business, as well as expectations regarding discussions with lenders for potential covenant relief.

Answer

CEO Scott Uzzell emphasized obsessing over consumer insights, driving innovation, and streamlining the operating model for faster decision-making. He highlighted the importance of management philosophy, discipline, and role modeling, praising the team's recent efforts to bring resources closer to the marketplace and consumers. CFO Brian Grass stated an optimal leverage target closer to two times. He expressed confidence in ongoing supportive and constructive discussions with banking partners, anticipating covenant relief with associated amendment fees but no major structural changes to interest costs.

Robert Labick asked Scott Uzzell (CEO) about the strategies and challenges involved in revitalizing leading brands that have experienced slower growth or market share declines. He also questioned Brian Grass (CFO) on the optimal leverage and capital structure for the business, and expectations regarding discussions with lenders about credit agreement covenants.

Answer

Scott Uzzell (CEO) highlighted the importance of consumer obsession, innovation, and streamlining decision-making processes, emphasizing management philosophy and discipline. Brian Grass (CFO) stated an optimal leverage target closer to two times, expressed confidence in ongoing supportive discussions with banking partners for covenant flexibility, anticipating a 'holiday' with associated fees but no major structural changes to interest costs.