Greetings, and welcome to the Balchem Corporation First Quarter 2022 Financial Results 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, Martin Bengtsson, Chief Financial Officer of Balchem. Thank you. You may begin..

Thank you, Melissa, and good morning, everyone. And just for clarity, this is the first quarter conference call and not the fourth quarter. So thank you, everyone for joining our conference call this morning to discuss the results of Balchem Corporation for the quarter ending March 31, 2022.

My name is Martin Bengtsson, Chief Financial Officer; and hosting this call with me is Ted Harris, our Chairman, CEO and President. Following the advice of our counsel, auditors and the SEC, at this time I would like to read our forward-looking statement.

This release does contain or likely will contain forward-looking statements, which reflect Balchem’s expectation or belief concerning future events that involve risks and uncertainties.

We 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 our expectations, including risks and factors identified in Balchem’s Form 10-K. Forward-looking statements are qualified in their entirety by this cautionary statement.

I will now turn the call over to Ted Harris our Chairman, CEO and President..

Thanks, Martin. Good morning, and welcome to our conference call. This morning, we reported very strong first quarter results with strong revenue and earnings growth. Our revenues of $228.9 million were up 23.3%. And our adjusted earnings from operations were $44.6 million, up 19.4% versus the prior year quarter.

Our first quarter net income of $28.9 million an increase of 23.6% resulted in earnings per share of $0.89 on a GAAP basis. On an adjusted basis, our first quarter non-GAAP net earnings were $33.4 million or $1.03 per share an increase of 17.3%. Cash from operations was $7 million for the first quarter of 2022.

Overall, a great start to 2022 with performance that highlights the strength and resilience of our business model, particularly given the inflationary and supply chain challenges, the markets have been facing.

The demand for our products remains strong and servicing this demand through these macroeconomic and geopolitical challenges is a top priority.

Before passing the call back to Martin to cover the detailed financial results by segment, I would like to spend some additional time talking about the extraordinary inflationary and supply chain challenges our company is currently facing and some of the actions we have been taking to address the challenges.

The macroeconomic and geopolitical environment that we are working within today is truly unprecedented. We are experiencing significant supply chain disruptions in the form of raw material shortages, logistics delays, long lead times on parts and equipment and of course, significant inflationary pressures on most if not all of our input costs.

In the first quarter of 2022, we experienced year-over-year inflation of approximately $28 million and subsequently from the fourth quarter of last year, another $9 million of inflationary headwinds.

While it is obviously very difficult to predict what will transpire moving forward, given all of the current market volatility, we expect inflationary headwinds to continue at least through the next few quarters.

We are pleased with the pricing actions we have taken thus far and believe ultimately that we will be able to recapture the majority of these higher costs over time.

In many areas, we have moved from annual or quarterly pricing actions to taking monthly and even weekly in some cases pricing actions to add increased flexibility for us to respond to changes in our input costs. This is a dynamic environment and we have needed increased pricing flexibility to respond accordingly.

And we were pleased to have realized margin improvement in Q1 of 2022 sequentially versus Q4 of 2021 based on our pricing actions. We have yet to see material demand destruction as a result of the cost increases that we have passed on to date. Our customers are in turn raising prices.

We are working closely with our customers to together combat these inflationary challenges and we will continue to do so while watching demand indicators closely.

While price is a critical response lever to offset the inflationary pressures we are facing, we are also working hard throughout our supply chain to address the broader supply chain challenges.

As you know, our company is primarily a North American focused company with approximately 78% of our revenues coming from products sold in North America with the overwhelming majority near 90% of those North American sales coming from products manufactured in North America with raw materials sourced in North America.

While we aspire to become more international over time, this aspect to our business has been and will continue to be helpful as we manage these global supply chain challenges. When and where possible, we are actively working to build inventories of both finished goods and raw materials to build buffer.

Qualifying alternate suppliers to expand sources of key raw materials, partnering with third-party logistics providers to ensure dedicated service for certain routes and adding new production capacity like we have done for our plant nutrition and food encapsulation businesses to add both needed capacity, but also supply chain redundancy.

We are pleased with our response to these challenges to date, and certainly the performance of the company in this environment. But it is a challenging operating environment and we remain prudently cautious about our outlook for the coming quarters from a supply chain disruption and inflationary pressure perspective.

Once again, the demand for our products remains strong and servicing this demand through these macroeconomic and geopolitical challenges is a top priority.

And before I hand the call back over to Martin, I would like to let you know that last week on Earth Day, we released our 2021 sustainability report, which captures the company’s commitment to managing our environmental, social and governance performance.

Balchem’s sustainability initiatives are fully integrated into our business strategies and are critical to our vision of making the world a healthier place.

We have taken 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 sustainability initiatives, and includes our progress on our 2030 goals and strategies for both emissions and water usage reduction by 25%.

I would encourage you to go to balchem.com to read the report to get a broader perspective on all of great work we are doing. And with that, I will now turn the call back over to Martin to go through the detailed results for each of our segments..

Thank you, Ted. We delivered overall strong financial results in a challenging environment. Our first quarter net sales of $228.9 million were 23.3% higher than the prior year comparable quarter. We delivered double-digit sales growth in all three segments, Human Nutrition & Health, Animal Nutrition & Health and Specialty Products.

The growth was driven both by increased volumes and increased average selling prices, as we continue to recapture higher input costs by rising prices in this inflationary environment. Our first quarter consolidated gross margin dollars of $71.5 million were up $12.8 million or 21.8% compared to the prior year.

Gross margin percent was 31.2% of sales, down 39 basis points, compared to 31.6% in the first quarter of 2021 and up 110 basis points sequentially versus the fourth quarter of 2021. Input cost inflation continues to be significant.

While we started to see signs of slowing inflationary pressures in the later part of Q4 last year, we have since seen a further acceleration of rising input costs in the first quarter of 2022, compared to the fourth quarter of 2021. Do at least in part to the geopolitical environment.

We’ve been fairly successful so far in raising average selling prices to help offset the inflationary pressures, but it continues to have a dilutive impact on margins. Consolidated operating expenses for the first quarter of 2022 were $33.2 million as compared with $28.2 million in the prior year.

The increase was principally due to a certain higher compensation related costs and an increase in outside services. GAAP earnings from operations for the first quarter were $38.3 million, an increase of 25.4% compared to the prior year quarter.

On an adjusted basis, as detailed in our earnings release this morning, non-GAAP earnings from operations of $44.6 million were up 19.4% compared to the prior year. Record adjusted EBITDA of $53.6 million was $7.9 million or 17.2% above the first quarter of 2021.

Interest expense for the first quarter of 2022 was $0.5 million and our net debt was $64.1 million with an overall leverage ratio on a net debt basis of 0.3. The company’s effective tax rates for the first quarter of 2022 and 2021 were 23.1% and 21.9% respectively.

The increase in the effective tax rate was primarily due to reduction in certain tax credits and increased international income subject to higher foreign tax rates. Consolidated net income closed the quarter at $28.9 million, up 23.6% from the prior year.

This quarterly net income translated into diluted net earnings per share of $0.89 for the current year, an increase of $0.17 or 24.3% from last year’s comparable quarter. On an adjusted basis, our first quarter adjusted net earnings were $33.4 million or $1.03 per diluted share, up 17.3% compared with a prior year quarter.

Cash flows from operations were $7 million for the first quarter of 2022, compared with $40.6 million in the prior year comparable period. The decrease in cash flows from operations was primarily driven by changes in working capital and the timing of increased sales, restocking of inventory and payments to suppliers.

We expect these timing impacts to be less impactful on a full year basis, and we expect to continue to generate strong cash flows overall. As we look at it from a segment perspective, for the quarter, our Human Nutrition and Health segment generated record quarterly sales of $122.4 million, an increase of 17.2% from the prior year.

The increase was primarily driven by strong sales growth within food and beverage markets and higher sales of chelated minerals, as a result of both higher volumes and higher selling prices.

Our Human Nutrition and Health segment also delivered record quarterly earnings from operations of $20.3 million, an increase of $0.6 million or 3.1% compared to the prior year, primarily due to the aforementioned higher sales 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 million. Adjusted earnings from operations for this segment for $24.3 million, an increase of 1% compared to the prior year quarter.

Our Animal Nutrition and Health segment generated record quarterly sales of $69.3 million, an increase of 35.6% compared to the prior year.

The increase in sales 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 negatively impacting growth by $1.1 million or 2.2%.

These higher sales were driven both by higher volumes, primarily of feed grade choline, reassure or encapsulated choline product, AminoShure XM or encapsulated methionine product and offerings for the companion animal market and higher average selling prices across most of our product offerings.

Animal Nutrition and Health deliver record earnings from operations of $11.3 million, an increase of 123.9% from the prior year quarter, primarily due to the aforementioned higher sales partially offset by increased manufacturing input costs and distribution costs due to inflation and higher compensation related costs within operating expenses.

Excluding the effect of non-cash expenses associated with amortization of acquired intangible assets of $0.1 million, adjusted earnings from operations for this segment were $11.5 million, an increase of 119.8% compared to the prior year quarter.

Our Specialty Products segment delivered quarterly sales of $33.3 million, an increase of 19% 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, negatively impacting the growth by 1.8%.

These higher sales were driven by both volume growth, particularly with our plant nutrition business and higher selling prices. The Specialty Products segment had first quarter earnings from operations of $7.8 million, an increase of 8% compared to the prior year.

The increase was primarily due to 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 expenses associated with that authorization of intangible assets of $1.1 million.

First quarter adjusted earnings from operations for this segment were $8.9 million, an increase of 3%. Now I’m going to turn the call back over to Ted for some closing remarks..

Thanks, Martin. We are extremely pleased with Balchem\s financial results reported earlier this morning and a strong start to 2022. We delivered all time record revenues with revenue growth in all three of our business segments, not only versus the prior year’s quarter, but also sequentially versus the fourth quarter 2021.

We also delivered strong earnings growth, despite the extraordinary inflationary environment we are operating within, showing the resilience of our business and our ability to recover the cost increases through pricing.

That being said, the markets continue to be very volatile and disruptions to global supply chains continue to make it extremely difficult to operate effectively and efficiently. Our employees continue to do an exemplary job in finding creative solutions to challenges never seen before.

I would like to once again, take this opportunity to thank all of our employees for the incredible work they do for our company, our customers, and our key stakeholders. I would now like to 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. At this point, we will open up the conference call for questions..

Thank you. [Operator Instructions] Our first question comes from the line of Bob Labick with CJS Securities. Please proceed with your question..

Good morning. Thanks for taking the question..

Hey, Bob..

Hi. So obviously your operating well through a ton of macro volatility and you outlined that very well. Congratulations on making it look easy.

I wanted to maybe just shift the focus a little and see and just ask what are the biggest areas that you’re focused on that are under your control when you’re not blocking and tackling and like reworking the business to get through this volatility.

What do you have your eyes set on for the biggest kind of internal goals for 2022?.

So Bob, thank you for the comments and the comments specifically around making it look easy. I just want to make it clear that it really isn’t easy. It’s pretty tough out there with all these supply chain challenges and inflationary challenges, but I do feel good about how the company has responded and how we’re managing through it.

I think that the things that we can control by and large are our strategic growth initiatives. And so we continue set our eyes on achieving those milestones.

And when I think about our business segment and H&H, it’s about driving awareness of the benefits of choline and building science around that, building our marketing programs that we’ve talked about in the past. Those are all largely within our control.

And now that, again, I don’t think we can officially say that the pandemic is behind us, but we’re back investing in doing the scientific studies that we took a bit of a pause from early in 2022, early in the pandemic.

And we’re back making those happen, and those are the types of actions that will ultimately drive the prolific growth in our minerals and nutrients business that we believe is there. And so that’s within our control and we continue to drive those action.

Focusing on building our R&D pipeline of products, whether it’s in human nutrition or animal nutrition health or even plant nutrition, where I would say, very much back on track relative to all of those kind kinds of investments. And those are within air control. The cure mark delivery system.

We continue to work on our manufacturing preparedness for ultimately, and hopefully the launch of that product. So we’re working hard there that’s within our control and feel good about that.

If I think about animal nutrition health, there’s still a significant opportunity for us to drive penetration of our flagship product ReaShure room and protected or encapsulated choline and trying to drive the increased penetration of not only the U.S.

cal population, but the European further penetration of the market with our AminoShure XM product, I think is clearly in our control and something that largely we can continue to focus on. And then plant nutrition, it’s similar, we’ve been driving very strong, double digit growth in that business for some years. And Q1 was a continuation of that.

And launching new products there, driving geographic expansion and driving adoption of our products in a broader group of crops is again, all within our control. And so we really do believe that the growth initiatives that we’ve talked about as a company for quite some time are still available to us, still largely within our control.

And that’s where we focus much of our resources and you bring up a really good point, how do you not get completely 100% distracted by all of the macroeconomic and geopolitical challenges that are out there? And I feel like we’re doing a pretty good job of that.

We’re obviously having to dedicate significant resources to dealing with all those challenges. But as we said in the press release, and I’ll say it now, I feel really good about our Q1 results particularly in light of the challenges that we face from a financial perspective, but also from a progress on our strategic initiatives perspective.

So we do continue to make progress in those areas we can control. Little bit of a long winded answer your question, but very, very relevant for everything that, that the company’s facing and certainly we’re not alone there..

Yes, no super answering, thank you for all of that. So appreciated. And then shifting to the balance sheet, maybe give us – I noticed that maybe a little acceleration of the repurchase in the quarter, talk about capital allocation. I know you’ve always look for acquisitions.

It’s been tough of late given the volatility of the market and then valuations and things like that. So maybe an update on kind of expectations for capital allocation given the strength of the balance sheet..

Yes. Absolutely, Bob. This is Martin. The fundamentally nothing has changed in our capital allocation strategy in terms of focusing primarily on our organic growth first, right, R&D and so on so forth. And paying our dividend as you’ve seen over the last decade in us, sort of committing to that one and continuing to grow that one.

And we’ve been paying down debt to your comment of whether we’ve accelerated our repurchases of shares. I would say, as we’ve said in the past, when we repurchase share, it’s really for anti-dilutive purposes of equity programs just to try to keep the share count relatively flat over time.

And that we’re not necessarily venturing off on any larger share repurchases programs as a strategy and that is still our strategy. In this case, that happened a little bit earlier in the year than some other years, but fundamentally. it’s just kind of to offset the dilutive impacts on of other programs to our share counts.

And that’s really what you’ve seen out there. From an M&A perspective, it continues to be very active. We have been active despite the fact that nothing has closed over the last two years, as you’ve noticed we have been participating in a lot of processes and then evaluating targets. And we continue to do that.

And it is very active at the moment as well. It’s just very hard to predict whether you’re going to close on any transactions or not.

We keep participating and identifying the right targets, but you also want to make sure that you’re very disciplined in your evaluation of purchase price and risks so that you don’t make any mistakes that you regret later. And we keep continue you to maintain that discipline..

Okay. Super. Thank you so much..

Thanks, Bob..

Thank you. Our next question comes from the line of Ram Selvaraju with H.C. Wainwright. Please proceed with your question..

Thanks very much for taking my questions and congrats on solid performance under challenging conditions as always.

Firstly, I was wondering if you could talk a little bit about where you think the tipping point might lie with respect to seeing some kind of price elasticity of demand given the current inflationary environment and the fact that those pressures don’t appear likely to abate anytime soon.

Is there a tipping point and if so, where might you expect to see it both from a temporal perspective and with regard to actual percentage increases in pricing?.

Yes. Obviously, again, a very relevant question given what we’re facing and in the prepared comments, you heard me say that we have not seen any demand destruction of materiality yet.

And that’s absolutely the case, but given furthering of inflationary pressures and a continuation of inflationary pressures, we need to obviously be cognizant of getting to a point, where you might see some demand destruction. But again, just to be clear, we have not seen that to-date.

The area that we feel is an area maybe that we’ll see it first and maybe we’ve seen some signs of it would be – I think in the our ruminant business within animal nutrition.

So the dairy industry where our products are not necessarily designated as essential nutrients, they have a clear value proposition of return on investment that very much holds true today relative to return on investment, but can be taken out at the discretion of the dairy farmer.

And so if a dairy prices come down and margins of the dairy farmers get squeezed heavily and overall inflationary pressures continue. We think that that would be one area that we would see some demand destruction. I think from a positivity perspective there, the value proposition is real.

And so we do feel that that would be temporary demand destruction, but that is probably the first area that we have concern about. And so we’re watching that carefully.

And if we peel the onion back a little bit on the margins of our portfolio of products, we’ve seen more margin deterioration in that business, because we’ve benefit cautious about that. And it’s quite different than the rest of our animal nutrition business, where choline, our primary product is designated as an essential nutrient.

So we don’t feel as though today choline would be taken out of companion animal or pet food formulations, because it is an essential nutrient and our customers and those spaces are by and large raising prices.

Do we think that there is some point at some time, where consumers may start buying less pet food or treats or things like that that could possibly happen or certainly transition to lower cost products. But again, we’re not there. It’s very, very hard to judge at what point you would get there.

But our primary concern is really around the ruminant business, which again is a relatively modest part of our overall portfolio. We have not seen any signs of demand destruction in our minerals and nutrients business, but at some point, does the consumer start to respond by taking fewer supplements that that could possibly happen.

But again, we’re not seeing that. And it’s really difficult to tell at what point we get there. And again, as I said in the prepared remarks, we’re working closely with our customers. We’re watching market indicators to see early signs of those types of things. And we’re not there yet. But we need to watch it closely..

That’s very helpful. Two other quick areas of interest for me, one is when we look at the overall geopolitical environment and potential interest reemerging in boosting domestic oil production.

Do you think that this might signal down the road, return to fracking rates of years gone by and potentially increased demand, industrial demand for choline use? And then also I was wondering if within Human Nutrition & Health, you’re thinking about the possibility of moving into higher margin areas such as medical foods to compliment your existing ingredients business..

So let me tackle the oil and gas question first, first of all, in Q2 – Q1 of this year, so the current quarter that we’re talking about, our oil and gas volume was up 62%. So we are seeing growth in that business. Now quickly it’s important to say that’s from a very low base and the overall contribution of that, that business is still quite small.

But we are seeing logical growth in that business based on the increased rig count that that we are seeing there, but the overall rig count still is a fraction of what it once was at its peak. We believe that that fracking activity will methodically, continue to grow and likely we will see a continuing tailwind in that business throughout the year.

We do think that things have fundamentally changed in that business, that, that our business will never grow back to the $100 hundred million business that it was in 2014. But could it double from where it is today? We do think that that that’s possible because choline does bring an important benefit to certain fracking fluids.

And we believe that, that we will see some growth, but again there have been fundamental changes, there’s increased recycling of fluids in the process that already have chlorides, and there’s a bit of a less need for choline.

So we really don’t think it’s the same market today, but we’re going to continue to see some nice tailwind albeit pretty small from that business with increased fracking in this country. So that’s the answer to the oil and gas.

And in Human Nutrition & Health, I think this is a very interesting comment and we just had our strategic plan session with our Board a few weeks ago and spent some time talking about this very topic, Ram, around medical foods and maybe higher margin applications.

And we really do, if you can kind of think of three joining circles and you have the food business, you have the nutrition business, and then you have an emerging opportunity in pharmaceutical that certainly CureMark is part of, but we have some other opportunities as well. And there are some very interesting overlapping areas.

So you have the fortified food space where we really do have interesting technology both from a nutrition perspective and a food perspective where we can take advantage of those fortified food opportunities, nutritional beverage opportunities. We are seeing nice gains there and opportunities.

It’s not – what we would like it to be yet, there’s a significant addressable market that, that we have to go after, but there’s also that same overlap between the nutrition circle, if you have that, that thought in your head and that, that pharmaceutical area, which is really more medical foods.

And we do believe also we have some unique capabilities there to take advantage of that and see that as the trends move more toward personalized nutrition that that will be a growing space and an opportunity that we can focus on.

We did make that investment a couple years ago and S&P, which is really a DNA diagnostic company that is focused on identifying essentially DNA errors in people around that impact their absorption and metabolism of certain nutrients. That ultimately will lead to an individualized medical food or supplement regimen.

And we really feel like being part of that investment and kind of on the ground floor there, I think is an important growth opportunity for us to go after just that market that you highlight. So yes, we do feel like there’s an opportunity. We don’t have a whole lot of business there today, but we’ve got capabilities and we’re focused on it..

And then lastly, just for Martin, I was just wondering if you could give us some guidance regarding expectations around effective tax rate, and if that 23.1% rate is what we should be expecting for the remainder of this year. Thank you..

Yes. I think that’s a not a bad estimate. It’ll maybe a little bit higher, a little bit below, but it’s a good estimate it to use for the full year as well..

Thank you..

Thanks, Ram..

Thank you. Our next question comes from Mitra Ramgopal with Sidoti. Please proceed with your question..

Yes. Hi, good morning, and thanks for taking the questions. First, congrats on the nice job you’ve done in terms of being able to combat this environment and the success you’ve had with implementing price increases.

I was just curious if you have more flexibility on that front as the year progresses, or just if things do get worse, you probably have to kind of eat some of that..

So thanks, Mitra for your comments. Yes, we feel like at this point in time, we have restructured how we do pricing to provide us the flexibility that, that we need as they talked about, even in some cases it’s not a significant part of our portfolio we moved to weekly pricing, which is just a long way from anywhere we’ve ever been.

And we’ve gone from kind of a norm, maybe not even a contractual situation, but a normal operating situation of annual pricing increases to monthly price increases, which was a huge shift. So I feel really good about the flexibility that we now have to be able to respond monthly in most cases to weekly in some cases.

And maybe the longest we really have is quarterly. So I think that we’re well-positioned from a pricing perspective to kind of recover the costs as needed. And obviously what we really need is a slowing of the inflationary pressures as the increased rate of cost diminishes will start to catch up and that’s what we’re looking forward to..

Yes, no, that’s great. And then just on the Specialty Products segment, I know you had highlighted the plant nutrition business seemed like based on what we saw in 4Q versus this quarter, it’s obviously had a nice uptick.

So just curious what might be driving that?.

So plant nutrition really it has been a business now for the last 2.5 years, I want to say, we have been growing that business at 20% to 30% annually, which we feel really, really good about, and it has been a combination of introducing new products to the market, geographic expansion, and just expanding the number of crops and types of crops that, that we’ve been on.

And we’ve accomplished that through some additional investments in agronomists selling our products as well as some marketing expertise. So part of it is certainly us executing our strategic plan to add those agronomists to target those geographies to invest in new product development to launch those products and so forth.

We really feel like we’ve got a very good product line that is differentiated, that works well. And it’s a matter of driving the market penetration. For the last few years, we’ve had a better weather conditions. I would say then we did in the previous three years, while certainly California is not out of the drought the winter snow has helped.

And so that hasn’t been a as big of a negative on that business, in the last few years is maybe it was prior to that.

But I think by and large, it really has been the actions that we have taken that have driven that significant double-digit growth and we’re excited about it’s still a very small product line across our company, but we’re excited about the growth potential of it..

Okay. No, that’s great. And then finally just curious in terms of SG&A leverage, I know one thing you’ve talked about in the past is ideally liking return back to the office, so to speak and wondering if you start to incur some incremental expenses as a result of that’s starting to happen more and more..

Yes, Mitra, [indiscernible] We are starting to see that if we look at our OpEx as a percentage of sales is still very low as we’re obviously growing the sales a lot. So the percentage can maybe be a little bit misleading. If you look at the actual spend, it’s gone up a little bit really driven by two things.

It’s primarily actually compensation driven as we’ve made further investments into our sales and marketing and R&D capabilities and hire people to enable us to drive that growth. That’s the bigger chunk of it.

But we are seeing the discretionary spend gradually coming back in, in terms of increased traveling, going out there to see the customers also the outside spend as some of the research trials that have been on hold are now kicking in again and starting up together with universities, et cetera, and also a little bit more the typical sales conferences, trade shows, et cetera, that we see sort of gradually coming back in.

So it’s – I would say when we look at the spend today, it does feel that we’re emerging into sort of the post pandemic kind of spend level again as opposed to the pandemic reduced spend level..

Okay. That’s great. Thanks again for taking the questions..

Thanks, Mitra..

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

Thanks, Melissa. Once again, thank you very much for joining our call today. We really appreciate your support as well as your time today, and we look forward to reporting out our Q2 2022 results in July. In the meantime, we will be presenting at the H.C.

Wainwright Conference on May 23, as well as the Sidoti Conference on June 16 and potentially some others. So stay tuned for press releases about those. But thank you again for joining us today. We really appreciate it..

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