Greetings, and welcome to the Balchem Corporation First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Martin Bengtsson, Chief Financial Officer for Balchem Corporation. Thank you, sir. 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 March 31, 2024. 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. This morning, we reported strong first quarter financial results. With record sales and adjusted EBITDA and strong margins driven by a favorable product mix. I am particularly pleased with the excellent results within our Human Nutrition & Health segment, which once again delivered strong growth and record sales and earnings. Our consolidated revenues of $240 million were higher by 3.1% versus the prior year. Gross margin grew 11.4%, and we expanded our gross margin percentage by 255 basis points to 34%. Earnings from operations of $42 million were higher by 21.1% versus the prior year quarter. and we delivered record quarterly adjusted EBITDA of $61 million, an increase of 8% with an adjusted EBITDA margin of 25.4% of sales, up 113 basis points from the prior year. Our first quarter net income of $29 million, an increase of 27.6% resulted in earnings per share of $0.89 on a GAAP basis. On an adjusted basis, our first quarter non-GAAP net earnings of $34 million, an increase of 9.8% resulted in earnings per share of $1.03 on a non-GAAP basis. Cash flows from operations were $33 million for the first quarter of 2024 with quarterly free cash flow of $27 million. Overall, a strong quarter for Balchem with performance that highlights the strength and resilience of our business model. Before passing the call back to Martin to cover the financial results in more detail, I would like to make a few comments about the overall market environment, provide a brief update on our progress around sustainability as disclosed in our recently published 2023 sustainability report and share some progress we are making on the marketing front to drive increased awareness for VitaCholine, Balchem's market-leading brand of the essential nutrient Choline. The current market environment continues to be dynamic and circumstances vary greatly across our portfolio. As discussed on earlier calls, we experienced destocking in the early part of 2023, with customers adjusting their inventory levels down as supply chains become more reliable and the demand outlook became more uncertain. Since then, we have seen a gradual stabilization of demand patterns and customers returning to more normalized order patterns. When we look across our portfolio of businesses, we are seeing excellent performance in our Human Nutrition & Health segment, led by our Minerals and nutrients business, where we are seeing very strong end consumer demand for our unique portfolio of minerals, nutrients and vitamins. Our Human Food Solutions businesses returned to more normalized order patterns also contributed nicely to the overall growth of the HNH segment. Our Animal Nutrition & Health segment is going through a challenging time from a market perspective. We have discussed earlier how our European feed-grade choline business has been negatively impacted by low-cost product flooding the market, and we expect this to continue for some time. We are looking into this unfair pricing behavior in an effort to understand if there could be potential for antidumping or other tariff relief. Also, the dairy economics impacting our animal ruminant business is going through a tougher cycle with reducing the still elevated feed costs and low milk protein prices. While this is currently having a negative impact, we believe this to be more short term in nature, and we expect this market to recover gradually. For our Specialty Products segment, the primary business is our Performance gases business, which continues to perform well in a stable market. From an overall Balchem perspective, I am pleased with how we have managed through this dynamic environment. Our market positions and value propositions in the various markets we serve have enabled us to maneuver through these volatile times and it has highlighted the strength of our overall portfolio mix and our ability to drive above-market growth over time. As we continue to drive growth, we are guided by our core values and our vision of making the world a healthier place. Supporting this is our dedication to corporate social responsibility. Last month, on Earth Day, we published our 2023 sustainability report, and I'm very pleased with the progress Balchem continues to make in advancing our sustainability efforts. In 2023, Balchem exceeded our 2030 greenhouse gas absolute emissions reduction goal of 25% as we achieved a 32% improvement over our 2020 baseline, and we remain on track to achieve our commitment to reduce water usage by 25%. In 2023, Balchem reduced its water withdrawal by 8% compared to our 2020 baseline. In this latest report, we also disclosed our Scope 3 emissions for the first time and shared our internal assessment that determined that more than 70% of our product line revenues directly support 3 out of the 17 United Nations Sustainable Development Goals or SDGs. SDG 2, 0 hunger; SDG 3, good health and well-being and SGG12 responsible consumption and production. Our performance towards our 2030 goals and our broad progress on all of our other initiatives shows our commitment to our 2 main objectives

Thank you, Ted. As Ted mentioned, overall, the first quarter was a strong quarter for Balchem with record sales, adjusted EBITDA and strong margin performance. Our first quarter net sales of $240 million were 3.1% higher than prior year, driven primarily by strong growth in our Human Nutrition & Health segment. Our first quarter gross margin dollars of $82 million were up 11.4% compared to the prior year. Our gross margin percent was 34% of sales, up 255 basis points compared to 31.5% in the prior year. The increase was primarily due to a favorable mix and decreases in certain manufacturing input costs. Consolidated operating expenses for the first quarter were $40 million as compared to $39 million in the prior year. The increase was primarily due to higher compensation-related expenses and the impact of a gain on sale of fixed assets recognized in the prior year, partially offset by lower transaction and integration-related expenses. GAAP earnings from operations for the first quarter were $42 million, an increase of 21.1% compared to the prior year quarter. On an adjusted basis, as detailed in our earnings release this morning, non-GAAP earnings from operations of $49 million were up 7.8% compared to the prior year. Adjusted EBITDA of $61 million grew 8% compared to the prior year, with an adjusted EBITDA margin rate of 25.4%. Interest expense for the first quarter was $5 million, a decrease of $0.2 million compared to the prior year. This decrease in interest expense was due to lower outstanding borrowings, partially offset by higher interest rates. We continue to use our solid cash flows to pay down debt, and we reduced our debt by $8 million in the first quarter and ended the quarter with net debt of $241 million with an overall leverage ratio on a net debt basis of 1.0. The effective tax rates for the first quarters of 2024 and 2023 were 21.3% and 22%, respectively. The decrease in the effective tax rate from the prior year was primarily due to higher tax benefits from stock-based compensation and certain lower foreign taxes. Consolidated net income closed the quarter at $29 million, up 27.6% from the prior year. This quarterly net income translated into diluted net earnings per share of $0.89, an increase of $0.19 compared to the prior year. On an adjusted basis, our first quarter adjusted net earnings were $34 million, an increase of 9.8% from the prior year, which translated to $1.03 per diluted share. Cash flows from operations were $33 million, with free cash flow of $27 million, and we closed out the quarter with $60 million of cash on the balance sheet. As we look at the first quarter from a segment perspective, for the first quarter, our Human Nutrition & Health segment generated record sales of $153 million an increase of 15.1% from the prior year, driven primarily by higher sales within the Minerals and nutrients business. Our Human Nutrition & Health segment delivered record quarterly earnings from operations of $33 million, an increase of 80.4% compared to the prior year. This was driven by the aforementioned higher sales and lower manufacturing input costs. First quarter adjusted earnings from operations for this segment were a record $39 million, an increase of 43.3%. We were very pleased with the overall performance of our Human Nutrition & Health segment, delivering record sales and earnings from operations. We saw strong demand growth of our minerals and nutrients, and the overall demand picture continues to improve in the food and beverage markets. Our Animal Nutrition & Health segment generated quarterly sales of $54 million, a decrease of 16.9% compared to the prior year. The decrease was driven by lower sales in both the monogastric and ruminant species markets. Animal Nutrition & Health delivered earnings from operations of $2 million, a decrease of 78.3% from the prior year. The decrease was primarily due to the aforementioned lower sales, partially offset by lower manufacturing input costs. First quarter adjusted earnings from operations for this segment were $2 million, a decrease of 75.8%. Similar to what we discussed in our Q4 earnings call, our Animal Nutrition & Health segment is experiencing challenging market conditions, particularly in Europe, but also in the North American dairy market. The European animal feed market continues to show relatively soft market demand and continued competition from low-cost imports flooding the market. And the North American dairy market is still experiencing low U.S. milk and milk protein prices, impacting demand for our rumen-protected encapsulated nutrients in North America. While Animal Nutrition & Health is clearly going through a tough time at the moment, we continue to believe the animal nutrition markets provide a growth opportunity for Balchem over the longer term, and we expect this segment to gradually improve as market dynamics become more supportive. Our Specialty Products segment delivered quarterly sales of $32 million. A decrease of 1.9% compared to the prior year due to lower sales in the plant nutrition business, partially offset by higher sales in the Performance Gases business. Specialty Products delivered earnings from operations of $8 million, an increase of 3.2% versus the prior year, primarily driven by lower manufacturing input costs, partially offset by higher operating expenses. First quarter adjusted earnings from operations for this segment were $9 million, an increase of 3.1%. We were pleased with the performance of Specialty Products in the first quarter as improved margins delivered good earnings growth. So overall, the first quarter was another strong quarter for Balchem and a great start to 2024. I'm now going to turn the call back over to Ted for some closing remarks.

Thanks, Martin. We are very pleased with the strong financial results reported earlier this morning, with record sales and adjusted EBITDA for the quarter, particularly in light of the continued economic and geopolitical uncertainties we are facing in the marketplace. At a consolidated level, we continue to show an ability to deliver results in a variety of market conditions, given our strong market positions, and we remain confident in the long-term growth outlook for the company. I will now hand the call back over to Martin, who will open up the call for questions. Martin?

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

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

Congratulations to Martin on his expanded role. Absolutely. So great quarter, obviously, a nice recap there for us. Maybe we could dig a little more into the significant margin upside on the human side. What drove the record margins? Is it -- and like is it mix, raw materials? Are there onetime benefits? Is it sustainable? How should we think about the margin profile going forward?

So yes, maybe I'll take a first stab at that, and then Martin can chime in. So just sort of simply say there were no onetime items of note. It really was driven by primarily mix and the strength of the minerals, nutrients and vitamins business. We saw significant year-over-year growth in that business, and that really was the primary driver. We have, as you know, over the last 3 or 4 quarters continue to see margin improvement as raw material input cost ease. So that played a more minor role, but it was primarily mix and just an indication of the significant growth we saw in the Minerals & Nutrients business, which, of course, has a fairly measurable higher margin profile than the rest of the food business.

Okay. Great. Yes. And maybe obviously, over the last couple of years, gone through a lot in terms of inventory corrections, demand issues, the acquisitions you've made. Maybe we could take a step -- a half a step back and just break down the kind of key subsegments, choline, K2 and MSM that you're referring to, chelated minerals and encapsulation and the flavors and powders or however you want. And the I guess, the outlook for each of those subsegments within the human side would be great right now.

Yes. Again, I'll try to tackle that one as well. Long term, as we have said for quite some time, obviously, the period of time during the pandemic confused the markets a little bit, but we really believe that the organic growth potential of our Human Nutrition & Health business is mid-single digits. And we have achieved that. Historically, we believe that, that will be the case going forward. And that is a multiple plus of the overall inherent market growth. What we're seeing today is that the food markets have at least returned to growth, albeit very low single digits, but at least return to growth after this very volatile period of time. The supplements market, which is the primary end market for our minerals nutrients and vitamins has returned to more healthy growth, let's say, higher mid-single type growth. But when you peel that onion back and look at the vitamins, minerals and nutrients that we sell, several of them are seeing much more significant growth than the market as a whole. And I think it is a result of increased science around these nutrients, for example, vitamin K2, increased awareness around these products as well. And so we see particular significant double-digit type growth in our vitamin K2 business in various minerals within our Minerals portfolio, high single-digit growth. You mentioned MSM with the MSM product line. And so it does have to do somewhat with the overall market returning to growth, which is always great to see. But then specifically the products that are part of our portfolio and that was invested over time are indeed growing significantly faster than the market as a whole. And so we are very excited about that. And obviously, something that we talk a lot about is the potential for that significant growth, which is going to be driven by increased awareness, increased science and ultimately increase market penetration. And I think we're seeing some of that here over the last 2 or 3 quarters. And our investments in additional science, our investments in marketing, like the Jets partnership that we announced are all parts of our plan to drive that awareness and further penetrate the market.

Okay. Great. And maybe I'll just jump to that question because it's pretty exciting as Jeff and over here to hear about that partnership. But what do you hope to get or how will you measure, I guess, maybe a better way? How do you measure the success of the partnership with the Jets?

So I'm glad to hear that you're a Jets fan, we're chanting now. It's part of our mantra eJet here at Balchem, and I apologize for all the path sands out there. But we're excited about this partnership. And it's very interesting as an American sitting in the New York City area, obviously, we know the jets very well. But our European and international colleagues have a very different perspective and the NSL is growing in popularity, but they see the jet says representing New York City and one of the most dynamic cities in the world. And we think of the Jets as another kind of NFL team. And so we're excited about this internationally as well. And like all marketing efforts, it is a little bit hard to measure the success. But we really believe there's going to be an ROI of this investment. Obviously, we're going to be looking at sales of these nutrients, specifically VitaCholine relative to this campaign. And are we seeing an unusual uplift in sales. We will be able to look at that on a regional basis, even though the Jets appeal may be more national and even international in scope, we think there will be a regional element to look at from a sales perspective. But it gets even more granular than that. We're looking at success and so you talk about how do you measure the success. One thing is, obviously, we want to drive more sales. We're going to be doing -- continuing to do focus group studies around awareness of VitaCholine, so we hope to see those numbers tick up as VitaCholine is prominently displayed at various jets games. But we're also granularly looking at our customers who are those that manufacture the supplements and the nutritional beverages and so forth, their interest, and this is what I alluded to, we're excited about our customers' early kind of reception to this idea because we're getting increased interest and willingness and desire to co-brand our products. And we love to get VitaCholine our brand of choline on the back of a specific supplement product or nutritional beverage. And our customers, this is resonating with them, and they're seeing how this could potentially drive awareness and market penetration. So one way we're measuring success is by kind of measuring the number of co-branded products that we have out in the marketplace. And we already have some early wins relative to our customers, not initially having co-branding on their products, but now doing just that. So it will be multifaceted how we measure this. But of course, at the end of the day, we need to drive higher sales and that will be the end resulting metric that we'll be really focused on.

Okay. That's really exciting, as I said. Okay. Last question, and I'll get back in queue. And just jumping over to the Animal Nutrition & Health. You alluded to it a little bit, maybe what actions can be taken in Europe to kind of improve the market potentially? And have you seen anything like this in the past? And how has it resolved last time if there was any dumping or anything like that?

Yes. So absolutely, there are actions that we can be taking. We're -- this is not just sit on our hands and wait for the market to turn around. Obviously, there is a market element to this, but there are things that we can be doing. But maybe I'll address the latter part of your question first. We have seen situations like this over time. I would suggest it hasn't been this challenging in the past. But low-cost imports into Europe have come and gone over the years. And I would say in my 10 years here, I've seen it come and go probably 3x and for various reasons. And so they're flooding in right now, and it's impacting our business. But there are things that we can do. One is simply continue to protect our business, maintain our volume because we do think that ultimately, this market can turn around as well. We can look at taking costs out of our system, and we're working hard on that. And we can investigate the possibility of kind of defending these unfair practices and potentially look into the possibility of antidumping tariffs or other types of tariffs. I mean there are well-established processes through the governments to try to address these kinds of unfair practices. And so we're certainly going to explore that as well. So -- and you alluded to Martin's expanded roles and having new leadership on the task as well, will undoubtedly help accelerate the turnaround as well. Bottom line is, it is very challenging. But long term, we continue to feel like the animal nutrition markets are attractive and will ultimately return to a healthier situation.

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

Congrats on continued strong operating performance. Just first of all, maybe you could give us a sense of what you expect to execute on this year, specifically in the U.S. market with regard to marketing and promotional activities, specifically around MSM, vitamin K2 and VitaCholine? And to what extent those marketing and promotional activities might be different from what you have done historically? And as an adjunct to that, if you could perhaps comment on the extent to which you envision the Jets partnership, among other things, potentially extending beyond the VitaCholine brand into other areas like K2 Vital, for example, which my understanding is also important for, among other things, boosting athletic performance.

Yes, Ram, first of all, thanks for joining, and thank you for your comments. And we are really excited about this. You've been covering us for a long time, and I would proudly say at our heart. And so we are a technology company, new product development company, a science-based company, and a manufacturing company, but we haven't invested in marketing to a great extent over the years, and we're doing that now. And we're starting to see some fruits of that labor. But making an investment like this investment in the Jets partnership, which again, is not that expensive. It's not a significant portion of our selling and marketing budget. But it's still a lot of money, and we need a return on it is certainly something we're viewing as a pilot case, if you will, a test case. And our expectation at this point in time is that we are going to see a nice return on investment of that, and we will want to add products like absolutely K2, Vital Delta might be the very next product that we put on this kind of program. So it's a little bit because this type of marketing spend is a bit new to us, but it's also, I think, prudent to -- let's use this as a test case. But our expectation is we will be successful and that we will start rolling this out more broadly. And as far as goals, I spoke to them a little bit in answering Bob's question, but we do expect as a result of this to start to see increased awareness of our products and our brands, which we can measure through these studies that we do. We do expect to increase the amount of co-branding that we have in our portfolio, and we know what that is today, and we can measure successive it going forward. And we do expect to meaningfully be able to impact the growth profile of our revenues. And there's certainly other metrics that I'm sure our marketing teams will be looking at, but those are some of the most important ones. And this is not all about the Jets partnership. We are excited about that. But we are doing other investments from a marketing perspective. That may be a little bit less visible from revamping our brand image, revamping our website. Part of the Jets campaign was to actually establish a new VitaCholine consumer-facing website because our hope is that people are starting to see this partnership be announced and start to google VitaCholine and what is that? And we want not a -- and I'll disparage us a little bit, not a traditional Balchem website page to be their landing page, but a much more consumer-centric page for them to land on. So it's those kinds of things. I'll highlight one other program that I'm very excited about. I think it highlights that heritage that I talked about of being a science-based manufacturing company, but we're calling at various things across different product lines, but one of the product lines we're calling our true quality program. And it's looking at -- it's actually testing consumer products that are on the marketplace and testing whether or not they contain what they say they contain. And this is an issue in the nutritional supplement space. There's sometimes a bit of a cloud hanging over are these claims real and true and do these products have what they say they have in them. And I won't necessarily talk about the specific product, but we've done this analysis for one of the products that we sell in the marketplace, and we took something like 50 consumer products that contain this nutrient. And we analyze them and 70% of them did not have what they claim to have in the products. A 100% of the products that had our ingredient and had what they claim. And so we can use these studies, this analysis and go to kind of consumer marketers, the Amazons of the world and so forth, share these data with them and this information. And it's resulting in real change and real movement and differential sales for our customers' products that include our products in them. And so we're quite excited about this. We've done this with a couple of our product lines, and we think it's ripe for some of the other products. And then lastly, maybe I'll get off my soapbox here. But I think our social media activity is significantly escalating. And I think there's, of course, consumers today are buying in a different way and using TikTok and other social media platforms to get their information and to help them make decisions. And so we are dramatically ramping up our efforts in that space. And I can't say enough for our strong new marketing team and really excited about this added capability. We're not stepping away from that manufacturing heritage in that science-based heritage, but augmenting it with the strong marketing program. Hopefully, that helps.

Very helpful. Just following on from that, I wanted to see if -- now that we are not anywhere near a scorchingly hot an inflationary environment as has been the case, for example, in the first half of 2023 or the back half of 2022, maybe you can comment on the degree to which your pricing strategy has evolved and may continue to evolve as we all, I think, hope inflation continues to come down. But certainly, we are seeing multiple product lines that continue to be very demand in Elastic. And that means that even in this more modulated inflationary environment, there may be greater pricing flexibility. So I just wanted to see whether that also applies to specific product lines at Balchem, particularly within the H&H segment? And then also with respect to H&H relative to Animal Health and Nutrition, how do you think strategically having these 2 business units within Balchem is synergistic and beneficial? Or do you anticipate that it might be plausible to entertain a scenario in which Balchem focuses incrementally more and more on the H&H segment as opposed to the Animal Health segment.

Okay. There's a lot in there, and I'll try to capture it. I'll remind me if I don't get to at all. And maybe I'll just hit the last one first and then get back to pricing and so forth. Obviously, the Animal Nutrition Health business is going through a difficult time right now, but we are confident that our positions in the markets and our technology is solid, and we'll get through this period of time and return to growth. So we are not spending any time at this point, thinking about separation and not being in the animal nutrition and health space. Our brand is really well respected and well known in the animal nutrition and health space. And some of our technology and even the technology we're working on and hopefully, we'll be launching in the marketplace over the course of the next year or so is very exciting. And I think the market needs some of this innovation to address some of the challenges it's facing. And there are synergies, choline, metabolism of choline in a cat versus a chicken versus a cat. And even on the human space, of course, all species are different. But there is commonality there. And the way we manufacture the product, of course, is similar to. And I would say that's true about our minerals business as well. So we do think from a kind of a science perspective, there's quite a bit of synergy despite the fact that the customers are different and the market is different. But hopefully, that addresses your latter comment. Relative to pricing, again, if I go way back, we were incredibly happy with our ability to raise prices in the extreme inflationary environment we're in. Can we certainly always said that we were able to raise prices dollar for dollar for cost, and that shows I think the strength of our position, the differentiation we have and the pricing power that we have. We lost margin. We have since regained that as inflation stopped. And now that we are seeing some deflation, we are giving a portion of that back. And as you would suspect, where we're doing more of that tends to be on the more mature product lines, product lines that have a little less competitive advantage than the others. But certainly, we have many products that we're not having to give that back, and we are seeing some margin expansion. And I think net-net, we believe that, that will result in a modest margin benefit for the company overall. But probably the most meaningful margin opportunity we have is just what we saw in H&H in this quarter was accelerated growth of our higher-margin product lines and really getting that kick from the mix benefit rather than anything else.

Great. And then just very quickly, 2 quick questions for Martin. Firstly, I always ask this question. Martin, how are you thinking about effective tax rate evolving going forward? And do you think that the company may be able to maintain that below the 22% level? Or do you expect it to tick up over the course of the remainder of this year? And then secondly, what's the company's current positioning with respect to share buybacks? And how do you expect this to evolve? What might be some of the inputs that you take into consideration as you evaluate how to move forward most appropriately on that front?

Ram, on the tax rate, it was a little bit lower here in the first quarter. I do expect it to tick up as we go through the year. It benefited a little bit from a little bit higher of exercising of options and so on and stock comp expenses in the first quarter that pushed down the rate a little bit. So I do expect that to tick higher as we go forward. So as a planning rate, I would not use '22. I would use more '23 as the planning rate for modeling here going forward. With regards to share buyback, it's been a few years now since we did that. As we've said in the past, it's part of our capital allocation, but it's sort of after we have first invested in our organic growth and continue to pay and increase our dividend and pay down our debt. And that's when we've sort of used it in lieu of any active M&A where that needs the money. As we sit here today, obviously, the leverage ratio is becoming lower. So net debt leverage right now being 1.0 is getting down there to lower rates. So I think the sort of thought process of could it come into play becomes more relevant to have that discussion. At the same time, the -- we continuously evaluate acquisitions and opportunities to accelerate some of our strategic growth initiatives. So it may be that something happens along those lines here over the next year or so. So it really depends a little bit on that. If we do another acquisition, then share buybacks is not really part of it. But for any reason, that does not come into play, then we'll give that more serious consideration.

Our next question comes from the line of Kyle May with Sidoti & Company.

Ted I wanted to follow up on one of the last couple of questions. You mentioned gross margin. In this quarter, overall percentage of sales was 34%, came in better than we were expecting. And it sounded like there's the potential for that to maybe improve a little bit going forward. Can you maybe touch on that and talk about some of the puts and takes that we should be looking for?

I think that we were really obviously pleased with 34%. It kind of marks a bit of a high point for us. part of my comments around the mix elements and success in the Minerals & Nutrients business or in the, I would say, ruminant business in Animal Nutrition & Health is going to ultimately give us a tailwind relative to margin going forward. So as we grow those growth businesses that are higher-margin business at accelerated rates, we're going to see some margin expansion. But I would just kind of caution you a little bit in that the 34% was really an excellent rate for the quarter. There wasn't anything unusual in that number. But as our Animal Nutrition business, for example, picks back up again, you're going to see some natural mix dilution there. Part of the benefit in this quarter was, of course, the growth in the Minerals & Nutrients business, but also the decline in the Animal Nutrition & Health business. So you have to weigh that into the picture as well.

Got it. Okay. That's helpful. And then also in the Animal Nutrition & Health, I was wondering if maybe you or Martin could expand on kind of the sequential change from what we saw in the fourth quarter to 1Q. And I appreciate the commentary of kind of the big picture, but just maybe wondering what was more impactful in the first quarter.

Yes. On an H&H perspective, the first quarter, if you compare it to the fourth quarter, it was down a couple of million on sales of top line. And that was actually particularly driven on the ruminant side. So U.S. dairy, the monogastric piece was a little bit more stable sequentially, while the ruminant came down a little bit, which also has a negative mix impact on margins for H&H. And that's driven primarily by this, I wouldn't call it an all-time low, but exceptionally low milk protein prices right now. So that's having a negative impact on the value proposition on some of our key products, and therefore, it's driven a little bit of a sequential decline. As we look forward, it's hard to predict exactly how prices will evolve and market pricing and so on, but one would have to assume that this will normalize over some period of time here and whether it will start normalizing next quarter or the quarter after that or the quarter after that, I can't guarantee. But our assumption based on history is that it will sort of cycle back and improve. And with that, our sales will come back in more normalized levels, so to speak.

Got it. And maybe following on with that, I understand that prices are one of the leading dictators. But in the meantime, is there anything the company can do to maybe boost sales of that category, whether it's other marketing or product placement or anything like that?

We're certainly trying so to speak, and looking at what the options are to do as well as we can in what is a very tough market. We have been successful on the choline side with our reassure our flagship product, where both new science and expanded science together with refreshed marketing materials and how to bring this message out into the marketplace has helped. So if we look at our Reassure product compared to some of our other products, that one has held up much better as a result of that in this market. So we're looking across the portfolio of how we can do similar things also for our other products and get the message out there around the value propositions. So we're certainly trying to do that at the moment, and hopefully, we'll get some success there going soon.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Harris for any final comments.

Thank you, Melissa. And once again, thank you all for being with us today. We really appreciate your time, and we look forward to reporting out our Q2 2024 results in July. In the meantime, we will be participating in a few investor conferences, the BMO Farm to Market Conference in New York City on May 16, the Deutsche Bank Global Consumer Conference Consumer Conference all in Paris on June 4 and the Wells Fargo Industrials Conference in Chicago on June 12. So hopefully, we'll see some of you at one or more of those events over the course of the next month or so. So thanks again for joining. Have a great day.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.