Core Insights - Heartland Advisors' "Heartland Opportunistic Value Equity Strategy" reported a return of 0.65% in Q2 2025, underperforming the Russell 3000® Value Index which returned 3.84% [1] - Stock selection was negative in 7 out of 11 sectors, particularly impacted by the Industrials and Financials sectors [1] Company Highlights - Sensient Technologies Corporation (NYSE:SXT) experienced a one-month return of -14.75% but gained 21.36% over the last 52 weeks, closing at $96.72 per share with a market capitalization of $4.107 billion on September 25, 2025 [2] - Sensient Technologies was noted as a significant contributor among small-cap holdings for Heartland, driven by strong Q1 results and solid revenue growth in its natural color franchise [3] - Sensient Technologies' revenue for Q2 2025 was $414.2 million, an increase from $403.5 million in Q2 2024 [4]

Company Overview - Sensient Technologies Corporation (SXT) is positioned to benefit from regulatory changes aimed at banning synthetic dyes, particularly through Robert F. Kennedy Jr.'s Make America Healthy Again initiative [2] - The company's share price was $113.21 as of September 8th, with a trailing P/E of 35.60 [1] Market Opportunity - Sensient is the leading player in natural food colors, which currently account for approximately 60% of its colors segment, contributing to about half of its EBIT [2] - The U.S. market for natural colors has significant growth potential, with current penetration at 33% compared to around 80% in Europe [2] Financial Projections - The transition to natural colors is expected to significantly enhance revenue, as natural colors require up to 10 times more volume than synthetic alternatives and can command nearly double the pricing [3] - Earnings per share (EPS) are projected to increase from approximately $3.00 to $4.52 in 2025 and $5.78 in 2026, suggesting a fair value of around $144.5 per share at a 25x earnings multiple, indicating a 32% upside from current levels near $100 [3] Analyst Coverage and Strategic Positioning - Sensient Technologies remains underfollowed with limited analyst coverage and a concentrated European investor base, which may overlook U.S.-listed ingredient companies [4] - The flavors and extracts division, along with operations in China, supports the remaining 50% of EBIT, providing stability and diversification [4] - Sensient could also be a strategic acquisition target for larger European ingredient companies, presenting another potential growth catalyst [4]

PART I. FINANCIAL INFORMATION This section presents Sensient Technologies Corporation's unaudited consolidated financial statements and management's discussion and analysis [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents Sensient Technologies Corporation's unaudited consolidated financial statements and accompanying notes [Consolidated Statements of Earnings](index=3&type=section&id=Consolidated%20Statements%20of%20Earnings) This section presents the consolidated statements of earnings for the three and six months ended June 30, 2025 and 2024 **Consolidated Statements of Earnings (in thousands, except per share amounts):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Revenue | $414,230 | $403,525 | $806,555 | $788,195 | | Operating income | $57,706 | $49,657 | $111,236 | $99,063 | | Net earnings | $37,587 | $30,932 | $72,049 | $61,872 | | Basic EPS | $0.89 | $0.73 | $1.71 | $1.47 | | Diluted EPS | $0.88 | $0.73 | $1.69 | $1.46 | | Dividends declared per common share | $0.41 | $0.41 | $0.82 | $0.82 | [Consolidated Condensed Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Condensed%20Statements%20of%20Comprehensive%20Income) This section presents the consolidated condensed statements of comprehensive income for the three and six months ended June 30, 2025 and 2024 **Consolidated Condensed Statements of Comprehensive Income (in thousands):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Comprehensive income | $75,982 | $8,483 | $125,409 | $35,812 | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) This section presents the consolidated balance sheets as of June 30, 2025, and December 31, 2024 **Consolidated Balance Sheets (in thousands):** | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------------- | :-------------------- | | Cash and cash equivalents | $56,686 | $26,626 | | Total current assets | $1,066,082 | $961,886 | | Total assets | $2,204,561 | $2,023,794 | | Total current liabilities | $251,124 | $270,639 | | Long-term debt | $710,119 | $613,523 | | Total liabilities and shareholders' equity | $2,204,561 | $2,023,794 | | Total shareholders' equity | $1,157,121 | $1,060,986 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 **Consolidated Statements of Cash Flows (in thousands) for Six Months Ended June 30:** | Metric | 2025 | 2024 | | :-------------------------------- | :------- | :------- | | Net cash provided by operating activities | $39,304 | $58,946 | | Net cash used in investing activities | $(41,492) | $(22,890) | | Net cash provided by (used in) financing activities | $25,988 | $(26,083) | | Net increase in cash and cash equivalents | $30,060 | $1,405 | | Cash and cash equivalents at end of period | $56,686 | $30,339 | [Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) This section presents the consolidated statements of shareholders' equity for the three and six months ended June 30, 2025 and 2024 **Changes in Total Shareholders' Equity (in thousands):** | Period | Balance at Beginning | Net Earnings | Other Comprehensive Income (Loss) | Cash Dividends Paid | Share-based Compensation | Total Shareholders' Equity at End | | :-------------------------- | :------------------- | :----------- | :-------------------------------- | :------------------ | :----------------------- | :------------------------------ | | Three Months Ended June 30, 2025 | $1,095,034 | $37,587 | $38,395 | $(17,324) | $3,739 | $1,157,121 | | Three Months Ended June 30, 2024 | $1,063,936 | $30,932 | $(22,449) | $(17,373) | $2,916 | $1,057,775 | | Six Months Ended June 30, 2025 | $1,060,986 | $72,049 | $53,360 | $(34,700) | $6,639 | $1,157,121 | | Six Months Ended June 30, 2024 | $1,053,324 | $61,872 | $(26,060) | $(34,685) | $4,911 | $1,057,775 | [Notes to Consolidated Condensed Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Condensed%20Financial%20Statements) This section provides detailed notes on accounting policies, acquisitions, debt, segment information, and other financial disclosures [1. Accounting Policies](index=8&type=section&id=1.%20Accounting%20Policies) This section outlines the Company's accounting policies, including ASU 2023-07 adoption and evaluation of future ASUs - The Company adopted ASU No. 2023-07, Segment Reporting, in the fourth quarter of 2024 using a retrospective transition method, which did not have a material impact on the consolidated financial statements[22](index=22&type=chunk) - The Company is evaluating the potential impact of ASU No. 2023-09, Income Taxes, effective for fiscal years beginning after December 15, 2024 (Q4 2025 adoption), and ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures, effective for fiscal years beginning after December 15, 2026 (Q4 2027 adoption)[23](index=23&type=chunk)[24](index=24&type=chunk) [2. Acquisition](index=8&type=section&id=2.%20Acquisition) On February 14, 2025, the Company acquired Biolie SAS for **$4.9 million** in cash, allocating **$4.6 million** to goodwill - Acquired Biolie SAS, a natural color extraction business in France, on February 14, 2025[26](index=26&type=chunk) - Paid **$4.9 million** in cash for the acquisition, net of **$0.2 million** in assumed debt[26](index=26&type=chunk) - Allocated **$4.6 million** to goodwill; the business is part of the Color segment[26](index=26&type=chunk) [3. Portfolio Optimization Plan](index=9&type=section&id=3.%20Portfolio%20Optimization%20Plan) The Portfolio Optimization Plan aims to optimize facilities, with costs increasing to **$45 million** and expected annual savings of **$8-10 million** - Portfolio Optimization Plan approved in Q4 2023 to optimize production facilities and improve efficiencies[28](index=28&type=chunk) - Felinfach site (Flavors & Extracts segment) shut down in May 2025 and marketed for sale in June 2025[29](index=29&type=chunk) - Total expected cost increased to approximately **$45 million** (from **$40 million**), with **$40.7 million** incurred through June 30, 2025[30](index=30&type=chunk) - Anticipated annual operating cost reduction of approximately **$8 million to $10 million**, fully realized after 2025, with approximately **100** headcount reductions[30](index=30&type=chunk) **Portfolio Optimization Plan Expenses (in thousands):** | Period | Flavors & Extracts | Color | Corporate & Other | Consolidated | | :-------------------------- | :----------------- | :---- | :---------------- | :----------- | | Three Months Ended June 30, 2025 | $3,077 | $97 | $165 | $3,339 | | Six Months Ended June 30, 2025 | $5,928 | $110 | $165 | $6,203 | | Three Months Ended June 30, 2024 | $1,366 | $413 | $(27) | $1,752 | | Six Months Ended June 30, 2024 | $2,418 | $2,145 | $1 | $4,564 | [4. Trade Accounts Receivable](index=10&type=section&id=4

Core Insights - Sensient Technologies (NYSE: SXT) has been characterized as a stagnant manufacturer in the colors, flavors, and specialty ingredients sector, despite its historical ability to command premium valuations [1]. Company Overview - Sensient Technologies specializes in the manufacturing of colors, flavors, and specialty ingredients [1]. - The company has a relatively modest track record in terms of growth and innovation [1]. - Historically, Sensient has maintained premium valuations in the market, indicating investor confidence despite its stagnant performance [1].

Core Insights - Sensient Technologies reported Q2 2025 results showing strong margin improvement and profit growth despite modest revenue growth, with GAAP diluted earnings per share at $0.88 and revenue at $414.2 million, a 2.7% year-over-year increase [1][2] Financial Performance - GAAP diluted EPS was $0.88, matching market expectations, and increased by 20.5% from Q2 2024 [2][5] - Revenue reached $414.2 million, slightly below the anticipated $416.5 million, marking a 2.7% increase year-over-year [2][5] - Adjusted diluted EPS rose to $0.94, up 22.1% compared to Q2 2024 [2][5] - Adjusted operating income grew to $61.0 million, an 18.7% increase from the prior year [2][5] - Adjusted EBITDA was $80.0 million, reflecting a 15.4% increase year-over-year [2][5] Segment Performance - The Color Group experienced a revenue increase of 6.9% and operating income growth of 23.6%, driven by demand in food and pharmaceutical color solutions [6] - The Asia Pacific Group saw double-digit revenue growth of 10.8% and operating income increased by 13.5%, indicating strong performance across various geographies [7] - The Flavors & Extracts Group faced a revenue decline of 2.8% due to weaker volumes in natural ingredients, although operating income increased by 8.8% [8] Strategic Focus - Sensient is focusing on natural color innovation, diversification across industries, and geographic expansion, with a strong emphasis on adapting to regulatory changes [4] - The company is investing in research and development, employing over 770 staff in this area, and has incurred $3.3 million in restructuring costs related to its Portfolio Optimization Plan [9] Future Outlook - Management reaffirmed annual guidance, projecting mid-single-digit local-currency revenue growth and high single-digit growth for adjusted EBITDA [11] - Capital expenditure plans are set between $80 million and $90 million to support growth in the natural color market [11]

Financial Data and Key Metrics Changes - The company reported a revenue of $414.2 million in Q2 2025, compared to $403.5 million in Q2 2024, reflecting a growth in local currency [28] - Adjusted operating income increased to $61 million in Q2 2025 from $51.4 million in Q2 2024, marking a 16.9% increase in local currency [28] - Local currency adjusted EBITDA grew by 14% in Q2 2025, with cash flow from operations rising by 10.2% to $48 million [29][30] Business Line Data and Key Metrics Changes - The Color Group achieved a 6.6% local currency revenue growth and a 22.1% increase in local currency operating profit, with an adjusted EBITDA margin improvement to 25.1% from 22.2% [13] - The Flavors and Extracts Group experienced a 3.2% decline in local currency revenue but an 8.6% increase in local currency operating profit, with an adjusted EBITDA margin of 17.8% [14] - The Asia Pacific Group delivered a solid 7.6% local currency revenue growth and an 8% increase in local currency operating profit, with an adjusted EBITDA margin of 22.3% [16] Market Data and Key Metrics Changes - The U.S. market is seeing significant legislative activity regarding synthetic colors, with over half the states introducing bills, and West Virginia passing a law prohibiting synthetic colors effective January 2028 [19][20] - The company anticipates a substantial increase in natural color revenue beginning in 2027 as brands transition away from synthetic colors [26] Company Strategy and Development Direction - The company is focused on the conversion to natural colors, which is seen as the largest revenue opportunity in its history, with ongoing investments in production capabilities and supply chain resilience [9][10] - Capital expenditures are expected to rise to around $100 million for the year, primarily to support natural color production capacity [17][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth opportunities in natural colors and the overall business, despite challenges in the synthetic color regulatory landscape [26] - The company expects to maintain its guidance for mid-single-digit revenue growth and high single-digit adjusted EBITDA growth for the year [32] Other Important Information - The company is not currently planning share buybacks but is evaluating acquisition opportunities [18] - The impact of tariffs is expected to be slightly less than previously communicated, with price adjustments already made to offset initial tariff impacts [12] Q&A Session Summary Question: What is the current status of the supply chain for natural colors? - Management highlighted that supply chain is a critical factor for the conversion to natural colors, emphasizing the need for sufficient raw materials to meet demand [40][41] Question: What is the outlook for natural color revenue growth? - Management indicated that 2027 is expected to be a significant year for natural color revenue as regulations take effect, with current growth driven by new sales wins [43][44] Question: What is driving the improvement in gross margins? - The improvement in gross margins is attributed to volume growth and a favorable product mix, rather than pricing [46][48] Question: What is the timeline for the Natural Ingredients business to recover? - Management anticipates an inflection point for the Natural Ingredients business in late Q4 2025, with improved crop conditions expected to positively impact costs [67][106] Question: How does the company view the pricing dynamics between natural and synthetic colors? - Management noted that while the average conversion cost is around 10 times, there are variations, and efforts are ongoing to reduce these costs through improved supply chain and technology [86][88]

Financial Data and Key Metrics Changes - The company reported a revenue of $414.2 million for Q2 2025, compared to $403.5 million in Q2 2024, reflecting a year-over-year increase [29] - Adjusted operating income increased by 16.9% in local currency, reaching $61 million in Q2 2025, up from $51.4 million in the prior year [29] - Local currency adjusted EBITDA grew by 14% in Q2 2025, with cash flow from operations rising by 10.2% to $48 million [30][31] Business Line Data and Key Metrics Changes - The Color Group achieved 6.6% local currency revenue growth and 22.1% local currency operating profit growth, with an adjusted EBITDA margin improvement to 25.1% [13] - The Flavors and Extracts Group experienced a 3.2% decline in local currency revenue but an 8.6% increase in local currency operating profit, with an adjusted EBITDA margin of 17.8% [14] - The Asia Pacific Group delivered 7.6% local currency revenue growth and 8% local currency operating profit growth, maintaining a strong performance across regions [16] Market Data and Key Metrics Changes - The U.S. market is seeing significant legislative activity regarding synthetic colors, with over half the states introducing bills, indicating a shift towards natural colors [20][21] - The company anticipates a substantial increase in natural color revenue beginning in 2027, driven by regulatory changes [27] Company Strategy and Development Direction - The company is focused on capitalizing on the conversion from synthetic to natural colors, which is seen as the largest revenue opportunity in its history [8] - Continued investment in natural colors, including R&D and production capabilities, is a strategic priority to support customer transitions [9][10] - The company plans to maintain capital expenditures above $100 million in the coming years to support growth in natural colors and other business segments [19][32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth opportunities in natural colors and the overall business, despite challenges in the current operating environment [26][27] - The company expects to see a slight reduction in the impact of tariffs, with proactive pricing strategies in place [12][36] - The outlook for 2025 remains positive, with guidance for local currency revenue growth at mid-single digits and adjusted EBITDA growth raised to high single digits [17][33] Other Important Information - The company is not currently planning share buybacks but is evaluating acquisition opportunities [19] - The regulatory environment for synthetic colors is evolving, with significant implications for the company's product offerings [20][21] Q&A Session Summary Question: What is the current status of the supply chain for natural colors? - Management highlighted that supply chain is a critical factor for the conversion to natural colors, emphasizing the need for sufficient raw materials to meet demand [42][43] Question: When can we expect significant revenue growth from natural colors? - Management indicated that 2027 is expected to be a pivotal year for natural color revenue growth due to regulatory deadlines [45][46] Question: What is driving the improvement in gross margins? - The increase in gross margins is attributed to a favorable product mix and effective cost management across all business groups [49][50] Question: What is the outlook for the Natural Ingredients business? - Management anticipates an inflection point in revenue and cost profile for the Natural Ingredients business by late Q4 2025, with improved crop conditions expected [70][71] Question: How does the company plan to utilize increased capital expenditures? - The increased capital expenditures are primarily aimed at expanding natural color production capacity to meet anticipated demand [72][73] Question: What is the company's strategy regarding pricing for natural colors? - Management expects that as supply increases, the relative pricing of natural colors could improve, potentially reducing the cost ratio compared to synthetic colors [84][86]

Q2 2025 Financial Performance - Revenue increased to $414230 thousand, a 21% local currency growth[40] - Adjusted EBITDA Margin for the Color Group was 251% in Q2 2025, up 290 bps from Q2 2024[13] - Adjusted EBITDA Margin for the Flavors & Extracts Group was 178% in Q2 2025, up 160 bps from Q2 2024[18] - Adjusted EBITDA Margin for the Asia Pacific Group was 223% in Q2 2025, up 30 bps from Q2 2024[22] - Adjusted diluted earnings per share increased to $094, a 208% increase[40] 2025 Financial Outlook - The company anticipates a mid-single-digit growth rate for local currency revenue[23, 26] - The company anticipates a high single-digit growth rate for local currency adjusted EBITDA[24, 27] - The company anticipates a high single-digit to double-digit growth rate for local currency adjusted EPS[25] - Capital expenditures are expected to be approximately $100 million[43] Regulatory and Market Trends - Synthetic colors revenue for the food and pharmaceutical market in the U S and selectively throughout Latin America is approximately $110 million[31] - There are 58 active bills that affect food color and 6 active bills prohibiting additives including FD&C dyes in a state[34]

Company Announcement & Overview Sensient Technologies Corporation announced its Q2 2025 financial results, emphasizing strong performance driven by customer service and innovation [Introduction](index=1&type=section&id=Introduction) Sensient Technologies Corporation reported its financial results for the second quarter ended June 30, 2025, highlighting continued strong performance driven by customer service and innovation - Sensient Technologies Corporation (NYSE: SXT) is a leading provider of flavors and colors for the food, pharmaceutical, and personal care markets[2](index=2&type=chunk) - The company's Chairman, President, and CEO, Paul Manning, expressed confidence in the performance for **2025** and beyond, attributing results to a focus on customer service and innovation[4](index=4&type=chunk) Second Quarter Consolidated Results The company reported strong consolidated financial results for Q2 2025, with increases in revenue, operating income, and EPS [Consolidated Financial Highlights](index=1&type=section&id=Consolidated%20Financial%20Highlights) Sensient Technologies reported strong consolidated financial results for Q2 2025, with increases in reported revenue, operating income, and earnings per share, both on a GAAP and local currency adjusted basis Consolidated Financial Highlights | Metric | Q2 2025 (Reported) | Q2 2024 (Reported) | % Change | Local Currency % Change | | :-------------------------------- | :------------------- | :------------------- | :------- | :---------------------- | | Revenue | $414.2 million | $403.5 million | 2.7% | 2.1% | | Operating Income | $57.7 million | $49.7 million | 16.2% | 16.9% (Adjusted) | | Earnings Per Share | 88 cents | 73 cents | 20.5% | 20.8% (Adjusted Diluted) | - The company recorded **$3.3 million** in costs related to its Portfolio Optimization Plan in Q2 **2025**, an increase from **$1.8 million** in Q2 **2024**[5](index=5&type=chunk) Second Quarter Group Results by Segment Segment-wise performance for Q2 2025 showed varied results, with strong growth in Color and Asia Pacific, a slight decrease in Flavors & Extracts revenue, and increased corporate expenses [Flavors & Extracts Group Performance](index=2&type=section&id=Flavors%20%26%20Extracts) The Flavors & Extracts Group experienced a slight revenue decrease in Q2 2025, primarily due to lower volumes in natural ingredients, but managed to increase operating income through strong profitability in other product lines Flavors & Extracts Group Performance | Metric | Q2 2025 | Q2 2024 | Reported % Change | Local Currency % Change | | :---------------- | :---------- | :---------- | :---------------- | :---------------------- | | Revenue | $203.3 million | $209.2 million | (2.8%) | (3.2%) | | Operating Income | $28.5 million | $26.2 million | 8.8% | 8.6% | - Lower volumes in natural ingredients unfavorably impacted revenue, but this was partially offset by higher volumes in flavors, extracts, and flavor ingredients product lines[7](index=7&type=chunk) [Color Group Performance](index=2&type=section&id=Color) The Color Group demonstrated strong growth in Q2 2025, with significant increases in both revenue and operating income, driven by robust performance in the food and pharmaceutical product lines Color Group Performance | Metric | Q2 2025 | Q2 2024 | Reported % Change | Local Currency % Change | | :---------------- | :---------- | :---------- | :---------------- | :---------------------- | | Revenue | $179.3 million | $167.7 million | 6.9% | 6.6% | | Operating Income | $38.9 million | $31.5 million | 23.6% | 22.1% | - Revenue increase was primarily driven by strong growth in the food and pharmaceutical product lines[8](index=8&type=chunk) [Asia Pacific Group Performance](index=3&type=section&id=Asia%20Pacific) The Asia Pacific Group reported solid revenue growth across nearly all geographies in Q2 2025, leading to a notable increase in segment operating income Asia Pacific Group Performance | Metric | Q2 2025 | Q2 2024 | Reported % Change | Local Currency % Change | | :---------------- | :---------- | :---------- | :---------------- | :---------------------- | | Revenue | $42.7 million | $38.6 million | 10.8% | 7.6% | | Operating Income | $8.9 million | $7.9 million | 13.5% | 8.0% | - Revenue increased across nearly all geographies within the Asia Pacific Group[10](index=10&type=chunk) [Corporate & Other Expenses](index=3&type=section&id=Corporate%20%26%20Other) Corporate & Other operating expenses increased in Q2 2025, primarily due to higher costs associated with the Portfolio Optimization Plan and increased performance-based compensation Corporate & Other Operating Expenses | Metric | Q2 2025 | Q2 2024 | % Change | | :-------------------- | :---------- | :---------- | :------- | | Operating Expenses | $18.7 million | $15.9 million | 17.6% | - Higher operating expenses were primarily due to increased Portfolio Optimization Plan costs and higher performance-based compensation costs[11](index=11&type=chunk) 2025 Outlook The company maintained its revenue growth guidance and updated its EBITDA guidance for 2025 [Guidance for 2025](index=3&type=section&id=Guidance%20for%202025) Sensient Technologies maintained its mid-single-digit local currency revenue growth guidance and updated its local currency adjusted EBITDA guidance to high single-digit growth. Diluted EPS guidance remains unchanged, including approximately 20 cents of Portfolio Optimization Plan costs 2025 Financial Guidance | Metric | Current Guidance | Prior Guidance | | :-------------------------------- | :----------------------- | :------------------------------------ | | Local Currency Revenue | Mid-Single-Digit Growth | Mid-Single-Digit Growth | | Local Currency Adjusted EBITDA | High Single-Digit Growth | Mid-Single-Digit to High Single-Digit Growth | | Diluted EPS (GAAP) | Between $3.13 and $3.23* | Between $3.13 and $3.23 | | Local Currency Adjusted Diluted EPS | High Single-Digit to Double-Digit Growth | High Single-Digit to Double-Digit Growth | *Includes approximately **20 cents** of Portfolio Optimization Plan costs. - Foreign currency impact is expected to be a slight tailwind for the year based on current exchange rates[13](index=13&type=chunk) Use of Non-GAAP Financial Measures Non-GAAP financial measures are used to provide a clearer view of performance by excluding specific items [Purpose of Non-GAAP Measures](index=4&type=section&id=Purpose%20of%20Non-GAAP%20Measures) Sensient Technologies uses non-GAAP financial measures to provide a more comprehensive understanding of its performance by excluding specific items such as currency movements, depreciation, amortization, Portfolio Optimization Plan costs, and non-cash share-based compensation - Non-GAAP measures eliminate the impact of certain items to enhance the overall understanding of the Company's performance when viewed together with GAAP results[16](index=16&type=chunk) - These measures exclude currency movements, depreciation and amortization, Portfolio Optimization Plan costs, and non-cash share-based compensation[16](index=16&type=chunk) Conference Call Details Details for the Q2 2025 financial results conference call are provided, including access and replay information [Q2 2025 Conference Call](index=4&type=section&id=Q2%202025%20Conference%20Call) Sensient Technologies will host a conference call on Friday, July 25, 2025, at 8:30 a.m. CDT to discuss its second quarter financial results, with replay options available - The conference call to discuss Q2 **2025** financial results will be held on Friday, July **25**, **2025**, at **8:30 a.m. CDT**[18](index=18&type=chunk) - Participants can join by contacting Chorus Call Inc. or accessing the webcast link on the Investor Information section of the Company's website (www.sensient.com)[18](index=18&type=chunk) - A replay of the call will be available through August **1**, **2025**, via phone and an audio replay/written transcript will be posted online on or after July **29**, **2025**[19](index=19&type=chunk) Forward-Looking Statements and Risk Factors Forward-looking statements are subject to various known and unknown risks and uncertainties that could impact future performance [Risks and Uncertainties](index=5&type=section&id=Risks%20and%20Uncertainties) This section highlights that forward-looking statements are not guarantees of future performance and are subject to various known and unknown risks, including macroeconomic conditions, supply chain disruptions, regulatory changes, and competitive actions, which could materially affect the company's financial performance - Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, and other factors[21](index=21&type=chunk) - Important factors that could cause actual results to differ materially include general business, economic, and capital market conditions, macroeconomic and geopolitical volatility (inflation, supply chain disruptions, conflicts), industry and regulatory factors, labor and transportation costs, and the company's ability to adapt to changing consumer preferences and technologies[21](index=21&type=chunk) - Other risks include the outcome of productivity-improvement efforts, acquisition/divestiture activities, the Portfolio Optimization Plan, currency exchange rate fluctuations, and factors detailed in the Company's Annual Report on Form **10-K**[21](index=21&type=chunk) About Sensient Technologies Corporation Sensient Technologies Corporation is a global leader in specialty ingredients, serving diverse industries with advanced technological solutions [Company Profile](index=5&type=section&id=Company%20Profile) Sensient Technologies Corporation is a leading global manufacturer and marketer of colors, flavors, and other specialty ingredients, providing advanced technological solutions and robust supply chain capabilities to diverse industries worldwide - Sensient Technologies Corporation is a leading global manufacturer and marketer of colors, flavors, and other specialty ingredients[23](index=23&type=chunk) - The company uses advanced technologies and global supply chain capabilities to develop specialized solutions for food and beverages, pharmaceutical, nutraceutical, and personal care industries[23](index=23&type=chunk) - Sensient serves a wide range of customers, from small entrepreneurial businesses to major international manufacturers, and is headquartered in Milwaukee, Wisconsin[23](index=23&type=chunk) Consolidated Financial Statements (GAAP) GAAP financial statements detail the company's earnings, balance sheet, and cash flow performance for Q2 and YTD 2025 [Consolidated Statements of Earnings](index=6&type=section&id=Consolidated%20Statements%20of%20Earnings) The Consolidated Statements of Earnings show significant year-over-year growth in revenue, operating income, and net earnings for both the three and six months ended June 30, 2025, with diluted EPS also increasing Consolidated Statements of Earnings | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | | Revenue | $414,230 | $403,525 | 2.7% | | Operating income | $57,706 | $49,657 | 16.2% | | Net earnings | $37,587 | $30,932 | 21.5% | | Diluted EPS | $0.88 | $0.73 | 20.5% | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | | Revenue | $806,555 | $788,195 | 2.3% | | Operating income | $111,236 | $99,063 | 12.3% | | Net earnings | $72,049 | $61,872 | 16.4% | | Diluted EPS | $1.69 | $1.46 | 15.8% | [Consolidated Condensed Balance Sheets](index=7&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) The Consolidated Condensed Balance Sheets as of June 30, 2025, show an increase in total assets and shareholders' equity compared to December 31, 2024, with a notable rise in cash and cash equivalents Consolidated Condensed Balance Sheets | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $56,686 | $26,626 | | Total Current Assets | $1,066,082 | $961,886 | | Total Assets | $2,204,561 | $2,023,794 | | Total Current Liabilities | $251,124 | $270,639 | | Long-term debt | $710,119 | $613,523 | | Shareholders' Equity | $1,157,121 | $1,060,986 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities decreased, while net cash used in investing activities increased significantly, primarily due to higher acquisition of property, plant, and equipment and a new business acquisition. Financing activities shifted from net cash used to net cash provided Consolidated Statements of Cash Flows | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $39,304 | $58,946 | | Net cash used in investing activities | $(41,492) | $(22,890) | | Net cash provided by (used in) financing activities | $25,988 | $(26,083) | | Net increase in cash and cash equivalents | $30,060 | $1,405 | | Cash and cash equivalents at end of period | $56,686 | $30,339 | - Acquisition of property, plant, and equipment increased to **$38,035 thousand** in **2025** from **$22,850 thousand** in **2024**, and the company acquired a new business for **$4,867 thousand** in **2025**[26](index=26&type=chunk) Reconciliation of Non-GAAP Amounts Reconciliations provide adjusted financial metrics by excluding specific items like Portfolio Optimization Plan costs and foreign exchange impacts [Adjusted Operating Income, Net Earnings, and Diluted EPS](index=9&type=section&id=Adjusted%20Operating%20Income%2C%20Net%20Earnings%2C%20and%20Diluted%20EPS) Reconciliations show that excluding Portfolio Optimization Plan costs significantly increases operating income, net earnings, and diluted EPS, providing a clearer view of underlying operational performance Adjusted Operating Income, Net Earnings, and Diluted EPS | Metric | Q2 2025 (GAAP) | Q2 2025 (Adjusted) | % Change (Adjusted) | | :-------------------------- | :--------------- | :----------------- | :------------------ | | Operating income | $57,706 | $61,045 | 18.7% | | Net earnings | $37,587 | $40,111 | 23.5% | | Diluted EPS | $0.88 | $0.94 | 22.1% | | Metric | YTD 2025 (GAAP) | YTD 2025 (Adjusted) | % Change (Adjusted) | | :-------------------------- | :--------------- | :----------------- | :------------------ | | Operating income | $111,236 | $117,439 | 13.3% | | Net earnings | $72,049 | $76,735 | 16.5% | | Diluted EPS | $1.69 | $1.80 | 15.4% | - Portfolio Optimization Plan costs, before tax, were **$3,339 thousand** for Q2 **2025** and **$6,203 thousand** for YTD **2025**[28](index=28&type=chunk) [Segment Operating Income Adjustments](index=9&type=section&id=Segment%20Operating%20Income%20Adjustments) The Portfolio Optimization Plan costs primarily impacted the Corporate & Other segment, while the Flavors & Extracts, Color, and Asia Pacific segments showed no direct adjustments to their operating income Segment Operating Income Adjustments | Segment | Q2 2025 (GAAP) | Adjustments (2) | Q2 2025 (Adjusted) | | :---------------- | :--------------- | :---------------- | :----------------- | | Flavors & Extracts | $28,506 | $0 | $28,506 | | Color | $38,922 | $0 | $38,922 | | Asia Pacific | $8,943 | $0 | $8,943 | | Corporate & Other | $(18,665) | $3,339 | $(15,326) | | Consolidated | $57,706 | $3,339 | $61,045 | (2) Adjustments consist of Portfolio Optimization Plan costs. [Local Currency and Other Adjustments](index=10&type=section&id=Local%20Currency%20and%20Other%20Adjustments) This reconciliation details the impact of foreign exchange rates and Portfolio Optimization Plan costs on reported percentage changes, providing local currency adjusted growth rates for revenue, operating income, diluted EPS, and Adjusted EBITDA Local Currency and Other Adjustments | Metric (Q2 2025) | Total % Change | Foreign Exchange Rates | Local Currency Adjusted % Change | | :------------------------ | :------------- | :--------------------- | :------------------------------- | | Total Revenue | 2.7% | 0.6% | 2.1% | | Total Operating Income | 16.2% | 1.9% | 16.9% | | Diluted Earnings Per Share | 20.5% | 1.3% | 20.8% | | Adjusted EBITDA | 15.4% | 1.3% | 14.1% | | Metric (YTD 2025) | Total % Change | Foreign Exchange Rates | Local Currency Adjusted % Change | | :------------------------ | :------------- | :--------------------- | :------------------------------- | | Total Revenue | 2.3% | (0.8%) | 3.1% | | Total Operating Income | 12.3% | (0.3%) | 13.6% | | Diluted Earnings Per Share | 15.8% | 0.0% | 16.0% | | Adjusted EBITDA | 11.7% | (0.4%) | 12.1% | [Adjusted EBITDA and Credit Adjusted EBITDA Reconciliation](index=11&type=section&id=Adjusted%20EBITDA%20and%20Credit%20Adjusted%20EBITDA%20Reconciliation) The reconciliation from GAAP operating income to Adjusted EBITDA shows a 15.4% increase for Q2 2025 and 11.7% for YTD 2025. For the trailing twelve months, Credit Adjusted EBITDA increased, leading to an improved Net Debt to Credit Adjusted EBITDA ratio Adjusted EBITDA and Credit Adjusted EBITDA Reconciliation | Metric | Q2 2025 | Q2 2024 | % Change | | :-------------------------------- | :------ | :------ | :------- | | Operating income (GAAP) | $57,706 | $49,657 | 16.2% | | Depreciation and amortization | $15,260 | $15,016 | | | Share-based compensation expense | $3,739 | $2,916 | | | Portfolio Optimization Plan costs, before tax | $3,339 | $1,752 | | | Adjusted EBITDA | $80,044 | $69,341 | 15.4% | | Metric | YTD 2025 | YTD 2024 | % Change | | :-------------------------------- | :------- | :------- | :------- | | Operating income (GAAP) | $111,236 | $99,063 | 12.3% | | Depreciation and amortization | $30,334 | $29,725 | | | Share-based compensation expense | $6,639 | $4,911 | | | Portfolio Optimization Plan costs, before tax | $6,203 | $4,564 | | | Adjusted EBITDA | $154,412 | $138,263 | 11.7% | | Metric (Trailing Twelve Months) | June 30, 2025 | June 30, 2024 | | :------------------------------ | :------------ | :------------ | | Net Debt | $693,006 | $643,624 | | Credit Adjusted EBITDA | $283,956 | $251,223 | | Net Debt to Credit Adjusted EBITDA | 2.4x | 2.6x |

Revenue and Earnings - Revenue for the three months ended March 31, 2025, was $392.3 million, an increase of 2.0% compared to $384.7 million for the same period in 2024, with foreign exchange rates negatively impacting revenue by approximately 2%[52] - Net earnings for the three months ended March 31, 2025, were $34.5 million, an increase of 11.4% from $30.9 million in 2024[64] Margins and Income - Gross margin improved to 33.6% for the three months ended March 31, 2025, compared to 32.9% in 2024, despite Portfolio Optimization Plan costs reducing gross margin by 50 basis points[53] - Operating income increased by 8.3% to $53.5 million for the three months ended March 31, 2025, from $49.4 million in 2024, with operating margins rising to 13.6%[55] Segment Performance - The Flavors & Extracts segment reported revenue of $193.7 million for the three months ended March 31, 2025, a slight increase from $193.1 million in 2024, with operating income rising approximately 6%[71][72] - The Color segment's revenue increased by approximately 5% to $167.8 million for the three months ended March 31, 2025, with operating income up about 10%[73][74] - Asia Pacific segment revenue grew by approximately 4% to $41.9 million for the three months ended March 31, 2025, despite a 1% negative impact from foreign exchange rates[75] - Asia Pacific segment operating income increased by approximately 8% to $9.4 million for the three months ended March 31, 2025, compared to $8.8 million in 2024[76] Costs and Expenses - The Company incurred Portfolio Optimization Plan costs of $2.9 million for the three months ended March 31, 2025, compared to $2.8 million in 2024, impacting overall financial performance[61] - Corporate & Other operating expenses rose to $15.8 million in Q1 2025 from $14.7 million in Q1 2024, primarily due to higher performance-based executive compensation costs[77] Cash Flow and Investments - Net cash used in operating activities was $9.0 million in Q1 2025, a decrease from net cash provided of $15.1 million in Q1 2024, attributed to increased performance-based compensation payments[81] - Net cash used in investing activities increased to $21.3 million in Q1 2025 from $10.9 million in Q1 2024, with capital expenditures rising to $16.9 million[82] - The Company acquired Biolie SAS for $4.8 million on February 14, 2025, enhancing its capabilities in natural color extraction[58] - The Company acquired Biolie SAS for $4.3 million in Q1 2025 as part of its investment activities[82] Tax and Compliance - The effective income tax rate decreased to 25.4% for the three months ended March 31, 2025, down from 27.0% in 2024, influenced by changes in foreign tax estimates[57] - The Company remains in compliance with loan covenants and anticipates using cash flow from operations and existing debt capacity for future cash requirements[78] Dividends and Tariffs - Dividends paid during Q1 2025 were $17.4 million, consistent with $17.3 million in Q1 2024, with dividends per share remaining at $0.41[83] - The Company expects to manage the impact of increased tariff costs through pricing actions, although additional tariffs could materially affect revenue and profitability[80] Inflation Impact - The impact of inflation was not material to the Company's financial position for the three months ended March 31, 2025, despite increased costs for certain inputs[79]