Q1 2022 American Vanguard Corp Earnings Call
Ladies and gentlemen, thank you for your patience. Please remain on the line. Your conference will begin momentarily again, we do appreciate your patience. Please remain on the line your conference will begin shortly thank you.
[music].
Good day, ladies and gentlemen, and welcome to the American Vanguard Corporation first quarter 2022 conference call and webcast. All lines have been placed on a listen only mode and the floor will be open for questions and comments following the presentation.
If you should require assistance throughout the conference. Please press star zero on your telephone keypad to reach a live operator at this time. It is my pleasure to turn the floor over to your host Bill KUSA, Our director of Investor Relations, Sir the floor is yours.
Well, thank you very much cats and welcome everyone to American Vanguard's first quarter 2022 earnings review our speakers today will be Mr. Eric went to mute chairman and CEO of American Vanguard, Mr. David Johnson, the Companys Chief Financial Officer.
And also to assist in answering your questions Mr. Bob <unk>, the company's Chief operating officer.
Before beginning let's take a moment for our usual cautionary reminder, on slide two.
In today's call. The company May discuss forward looking information such information and statements are based on estimates and assumptions by the Companys management and are subject to various risks and uncertainties that may cause actual results to differ from management's current expectations.
Factors can include weather conditions changes in regulatory policy competitive pressures and various other risks as detailed in the company's SEC reports and filings.
All forward looking information represents the company's best judgment.
As to the date of this call such information will not necessarily the updated by the company.
Now we'll go to slide three there is a further comment to be made today regarding the pending prop proxy solicitation.
Part of the information set forth in this presentation today refers to our annual meeting of shareholders, which is scheduled to occur on June one 2022 using a virtual meeting format.
As indicated in detail on slide three you will see that stockholders may obtain information regarding the proxy by referring to the Companys annual report Form 10-K, which was filed with the SEC for the last fiscal year.
And which was filed excuse me on March 14th of this year or you can refer to the definitive proxy statement, which was filed with the SEC last Friday April 29.
Any information updates that occur during the policy solicitation period will be filed with the SEC and shareholders can find such information.
Turing to the SEC's website.
So with all that said I will turn the call over to Eric Thank.
Thank you Bill.
Awesome.
Four.
Just I will I will begin with some opening remarks.
Well.
David who will give a further update on the quarter and the financial review I'll come back and talk about our growth initiatives and then including remarks after that.
So moving on to slide five.
Move to the performance targets that we gave you on our last conference call what I'd like to do is just through our Q1 scorecard.
Versus performance targets.
So.
First on revenue growth, we said, 8% to 11%.
Our Q.
We've actually increased by 29% so well outpacing.
R R.
Our gross profit margins, we said, we'd be somewhere in the 30% to 40% for the year.
We're running ahead of that or 41% will comment a little bit more on that later as well David.
Operating expenses as a percent of sales we try to move that down as we get more leverage and increase.
We put a target of 31 to 33.
It actually did come in a 31% of sales.
Our interest expense, we said, we expect to be similar to 2001 actually we're running at 58% below for the first quarter.
Our tax rate.
To be wound up in the mid <unk>.
20% range, we're actually a 31% for the first quarter, which is similar to what we did in first quarter of last year, we are expecting overall to be somewhere in the 27% tax rate.
Our debt to EBITDA target.
Less than one at year end.
Two without acquisitions.
Less than two five.
With acquisitions of course that will vary depending on the size of the acquisitions during the course of the year.
But right now were at 1.25 times.
Our EBITDA.
And we would expect.
Increase as we ramp up to service this calendar year net income.
We had some lofty goals for.
For the year of 60% to 70% increase we're actually in the first quarter up 224%, So again very well on our way.
And but we didn't talk about last time was EBITDA last last year, we just forecasted growth faster than revenue for the first quarter, we're actually at 65.
To increase over 21.
So with that let me, let me switch over to slide six.
Sure.
I've hit this topic.
Our Q3, and our Q4 year end statement.
I do.
I do think it's a critical issue.
The performance of a number of companies.
Those companies that can perform well.
As inflationary.
Fly restrained times are going to perform well both that are going to have difficulty and I think we're seeing that so five bullet points that we said, we're focusing on one adding new sources for critical raw materials. We've identified those raw materials that are the most challenging.
We have.
Picked up an additional <unk>.
Supply sources and at this point, we appear to be covered for the balance of the year.
<unk> seen little details of adjuvant.
Bottles caps labels all kinds of cases, but one of the things that we've talked about is placing orders.
In advance.
Just in time ordering doesn't work anymore.
Placing orders through the balance of this year for what we're our factories are going to need and what we need for sales.
We can make adjustments as needed.
But.
That's kind of a critical point to give our suppliers as much lead time as possible.
Forecasting our cost of goods on a rolling 12 month period.
Yes. This is working well this is a transition for us.
<unk> not.
Done this kind of work on AR.
On a monthly or sometimes even a weekly basis to update our cost of goods by SKU, but with that we have been able to communicate well to our R. R.
Getting team.
As such.
They were able to kind of reflect price increases we also had a freight surcharge.
A 2% and overall this is a key factor on how we were able not only to preserve margins, but to improve margins in our first quarter in.
And lastly meeting with our factories on replete or more basis.
We have six factories in North America.
Some of our various.
Constrained in supply it's taken a lot of coordination we are increasing factory output, which is which is great. Our team is working very very hard.
And we have a significant.
Number of orders that are back ordered but we're so far are able to stay ahead of the actual use periods.
It's taken coordination, but we're very very pleased that we've been able to meet these extraordinary demand so far.
Okay, So David moving on to slide seven.
As an update on the finance.
Eric with regards to our public filings, we have filed our Form 10-Q, just after the close of market today.
Move on to slide eight.
Okay.
The company has started 2022 with a very strong sales performance as we forecasted at the last call.
Here on slide eight sales ended at $149 million, which is up 29% as compared to the first quarter of 2021 powered by a 61% increase in our U S crop business.
Those sales were driven by growing demand for our yield enhancing row crop products that are used for example on coal in the Midwest.
We were also successful during the quarter and collecting freight surcharges to defray the additional expenses that we're incurring on both inbound and outbound freight as the global logistics challenges continue.
Our non crop sales were down as forecasted as compared to the first three months of 2021, when we benefited from a $3 million upfront license fee from our <unk> business.
Our international business recorded solid increases in sales driven by our strong sales growth at our operations in Mexico and Central America.
Moving on to slide nine.
As Youll note in slide nine gross margin for the first quarter of 2022 improved from 39% in 2021% to 41% this quarter.
Included in that performance gross margin for our U S crop business increased from 39% to 46% driven by both the strong mix of sales.
Focused on our premium corn, and soybean products and timely price increases.
The reduction in gross margins for our non crop sales from 54% to 45% in 2022 is attributed to the absence in the current year of the upfront license fee I just mentioned.
The slight decline internationally from 33% to 31% reflects a mix of stable sales of the company's off patent branded products.
Strong growth from third party products that we sell through our market access regional distribution businesses.
Onto slide 10.
We are pleased with our operating expense to full lease during the first quarter of 2022 as you can see from slide 10. These costs were up 12% quarter over quarter, but that was on sales has increased by 29%. This result represents a significant improvement in operating leverage as our.
<unk> expenses represented 31% of sales in Q1, 2022 as compared to 36% of sales at this time last year.
In absolute terms the quarter over quarter increase amounted to $5 million.
The main driver related to outbound freight, which was up $2 1 million accounting for 42% of the <unk>.
It'll increase.
When considering the trend of improvement in operating efficiency. If you look back at our previous filings you will find that in 2020, we reported operating cost of 34% of sales and in 2021, we reported costs amounting to 33% of sales. This strong start to 2022.
On a good track doing again achieve our strategic target of improving operating leverage.
One 1% plus of sales each year.
Move on to slide 11.
In summary, when looking at slide 11 for the first quarter of 2022.
Net sales increased by about $33 million or 29% as compared to the same period of 2021.
Gross margin performance improved from 39% to 41% of sales despite significant general inflationary pressure, particularly related to inbound logistics.
Our operating costs, which for the company include outbound freight and logistics have increased but at less than half the rate of our sales.
Increase generating a significant improvement in operating leverage.
We have maintained a strong balance sheet for the quarter with significantly lower average debt and lower interest expense.
Down 58% as compared to the same three month period of 2021.
Finally, our effective tax rate is basically flat with the same period of the prior year.
Net income at $9 $9 million is up 224% and EPS is at 33 <unk>.
<unk> per diluted share as compared to <unk>.
At this time last year.
Move on to slide 12.
Okay.
Historically speaking the first quarter of each year is a period when the company expands working capital to manage customer demands for the rest of the growing season.
As you can see on slide 12 in the first quarter of 2022 before working capital, we generated $19 million from our operating activities as compared to $10 5 million in the same period of the prior year, an increase of 81%.
You can also see from the slides that were very consistent to the expanding working capital at the start of the new year and despite the very strong increase in sales. We believe working capital expansion has been contained well.
Furthermore, our use of cash in investing activities has been modest.
Last time, we talked we indicated that we plan to start repurchasing stock in the market during the quarter. We purchased approximately 332000 shares as part of a program to purchase up to 1 million shares of our stock over the course of the next several months.
Slide 13.
The graph on slide 13 shows outperformance of consistently driving inventory down compared to sales even as our business grows.
The Blue highlighted columns are at the same point in the company's annual cycle inventory is a critical focus area for the company. We held a monthly meeting devoted to the subject to tended by key stakeholders from across the global business.
This graph shows that as our business grows we are achieving significant and sustained improvements in manufacturing and operational efficiency.
For example in March 2022, our inventory in hand stands at 112%.
Sales.
At this time last year inventory amounted to 154% of quarterly sales.
Moving on slide 14.
Debt at the end of the first quarter of 2022 has reduced by about 31% since this time last year.
We have a business with a strong annual cycle, which tends to increase debt in the first two quarters and bringing that down at the end of the year. If you look at the blue columns of the graph on slide 14, you see the positioning.
The Q1 positions for 2000, 22021 and 2022 it shows that we are achieving consistent debt reduction over the period.
In fact that is down by $70 million since March 31 2020.
At the same time with regard to liquidity, we have a stronger first quarter of 2022 as compared to the first quarter of 2021. This is resulting in an improvement in the rolling four quarter adjusted EBITDA for the purchase of Covenant.
Clients.
The last full quarter adjusted EBITDA for our covenant calculation amounted to $76 million as compared to $56 million. This time last year, an improvement of 36%.
As a result of reporting that down 31% and a 36% improvement in our rolling four quarter adjusted EBITDA availability under the company's credit facility has significantly improved from $51 million. This time last year to $166 million.
March 31 2022.
On slide 15.
We have captured the essence of our first quarter performance on slide 15, which in summary is as follows.
Sales and gross margin are up operating expenses, which include outbound freight have increased at a lower rate than sales and as a result improved to 31% of sales as compared to 36%. This time last year.
Average debt is reduced and as a result interest expenses dropped by 58%.
Net income is up 224% compared to this time last year and EPS is at 33, 33%.
Diluted share as compared to <unk>.
Per share last year.
As far as the balance sheet is concerned inventories are lower than this time last year, our customers continue to pay on a timely basis closing no change in our overall credit risk profile.
Our accounts receivables have increased as a result of the strong first quarter sales.
That is down significantly compared to this time last year and availability under the credit line has improved more than three times with that I will hand back to Eric excellent David Thank you.
Move on to slide 16.
Wanted to touch on on our growth initiatives.
First our green solutions update for Q1.
Our product revenue sales are up 42% quarter.
Quarter over quarter.
Strong performance virtually everywhere, Latam, China, Mexico, Brazil, India, Australia.
New crane being the one that.
We're not expecting to hit our targets there.
They do have.
It's not significant but its a million and a half we had go into about two and a half.
They are.
Projecting both from a crop standpoint.
Our sales standpoint that there'll be about two thirds of target.
The team is.
Obviously.
Under a lot of stress.
But.
At this point.
With some of our best and we hope.
But they all stay safe.
For U S.
Having a strong year.
Again U S growers seem to be much more open to kind.
Bringing solutions product portfolio that we have and so we're up 143% in the first quarter versus last year.
Our full year budget is 52 million, which is a 30% increase over 2001 and as I said right now we're at 42, so we're exceeding that so far.
Gross margins are at 42%.
<unk>.
Includes third party disc.
Distribution products, which are not.
Margins of our proprietary products.
Same pass.
<unk> number.
2017.
Moving on now to slide Slide 18.
Our last call, we talked about our 2022 commercial success, our commercial some past system sales, we were targeting to get to 70 systems up from 50 that we had mentioned before pleased to report that we're now at 80 systems.
We've had some delays which have.
Planting which have allowed us to get more systems setup into.
Particularly into the Midwest area.
Sales of <unk>.
Outpaced our supply for 'twenty two we do have we do have back orders.
We've added more resources to meet increased demand not only for this year, but going forward.
We've added people and technical support.
And installation.
<unk> training.
So as we ramp up for the 23 season, we're putting the resources involved to make this happen. So our 2023 target of 125 system seems on track.
We've got again a backlog.
Both.
Strong interest in <unk>.
Orders of about 80 systems.
So we will give further guidance on that 125 systems as we get into our Q2 conference call in August .
With adding to the toolbox for products to go through some past we announced.
Three new products that we'd be going into the system 22.
Also just recently added BSF and ocular for soybean called riser flow, which we're very pleased.
Have great expectations for it.
Just a little bit on U S. AG. This is slide number 19.
Farm income was expected to be about 110 billion, which is certainly very healthy now projected to hit 120 billion, which I think only has surpassed by 2012 to 124.
The rain delays.
Our good for Midwest inputs.
Year to date corn.
At 14% planted versus 42% this time last year.
So this bodes well for.
Herbicides for insecticides for.
Disease control for an amount of sides.
We are seeing more cotton.
As some of the acreage there are shifting from corn to cotton.
<unk> in the South overall, we think corn will be about 89% to 90 million acres soybeans 91 to 92 million acres harvested.
Harvested cotton and we think we'll be at about nine five to 10 million acres.
That's an important crop for us as well.
But the bottom line here is that farmers are investing.
An app plant inputs and the whole driver for them is to maximize yield and Thats what thats. What we think is the mantra going going into this.
And in 'twenty two.
I'd also say that our.
Look for 'twenty three so far is also looking very good because it does not seem that demand is going to.
Period.
Shifting to slide 20.
Talking about again, our strategic growth targets here.
We're obviously off to a great start in 'twenty two.
As we get into our second quarter, we'll have a better vision of any material that might be in the channel.
Updating.
This number for 'twenty, two and targets that we have.
<unk>.
Looking at the Green.
Green initiatives.
We have.
<unk> 52, which is about.
30% increase we're forecasting about a 35% increase for for next year and then 40%.
In 'twenty four 'twenty five to meet the targets that we've got in at this point.
We don't have any reason to believe that we won't hit those targets.
And I mentioned with some paths.
Things are looking very strong there.
We will provide additional color at our next conference call.
But the one thing I want to add to the slide we were asked by a couple of our key shareholders about okay. If you hit your performance targets of about 950 by 2025, what kind of EBITDA might we expect.
So kind of our performance targets for 2025 would be in the range of 155 million EBITDA.
Okay.
Okay moving on to slide 21.
I have got.
Some remarks to make.
As many of you probably have heard.
We are the target of a contested proxy solicitation by hedge fund known as cruiser capital.
They are seeking to replace three of our directors at this year's annual meeting of shareholders, which is scheduled for June one.
Okay.
We're not going to talk a lot about the proxy contest on this call, but I do want to acknowledge the circumstances and pointed out a few things.
First we are not soliciting proxies on this call.
We filed a definitive proxy statement with the SEC last Friday April 29.
You should review that statement and other SEC filings for more information related to this contest, but as they contain important information.
Those filings are available on the SEC's Edgar website as well as on our Investor Relations section on our website at Www Dot American Vanguard Dot com.
Moving on to slide 22.
This illustrates that American Vanguard has delivered attractive returns and strong performance relative to the Russell 2000 over the last seven years.
Yes.
On slide 23.
Those that are CAGR growth.
Since the AD industry peak in 2012 is at four 8% versus industry.
At one 3%.
Moving on to slide 24.
This shows a consistent valuation premium.
Over one five and seven years versus our peers of greater than one times EBITDA.
On slide 25, this depicts our dividend history, which targets.
10% of earnings and payments.
And see that this year, we have increased our first dividend of $2 five per share, which reflects our 2022 earnings target.
On slide 26, I would like to point out that your board and management team are committed to driving long term value creation for all American Vanguard shareholders.
As part of this effort, we participate in ongoing dialogue with our stockholders and we appreciate constructive input that advances that goal.
With respect to our board nominees were confident that the nine highly qualified directors nominated by the company possess the right combination of relevant industry experience and expertise.
In fact, this quarter's exceptional performance is only possible because your board and management team executed a well thought out strategy.
<unk> from years of experience and understanding of the complexities and opportunities in our industry.
With respect to cruisers nominees, it's worth noting that we have had multiple discussions with cruiser over the past year and our entire board willingly and enthusiastically and interviewed cruisers proposed candidates.
Following extensive interviews and discussions are board found that cruiser nominees do not possess the experience expertise or in some cases the desire to serve in a way that would be additive to the board.
Nor did they present any concrete recommendations or specific proposals to help the company execute its strategic growth plans.
With that let me wrap up on slide 27, with a few bullet points.
American Vanguard has delivered strong performance over the long term.
Second attractive returns over a sustained period.
Total shareholder return of 77% versus the Russell index at 68% since May of 2015 15.
We've got clear and persistent value premium greater than one times EBITDA from other agricultural producers.
We've had meaningful top line growth and consistent different in payments over the last decade, despite prolonged agricultural down cycle.
We've got a prudent balance sheet management and capital allocation with ample headroom to pursue value accretive M&A.
We've improved cost structure with further scope for refinement.
And we're targeting as David mentioned.
A 1% reduction in operating expenses.
Each year.
So we get to 25%.
ABB is optimally positioned for future with a compelling investors thesis.
So with that.
Yes, I will.
Slide 28, and we can.
Entertain any questions.
Alright, thank you.
Thank you the floor is now open for questions. If you do have a question you May press star one on your telephone keypad at this time, if you call your.
Question has been answered you could remove yourself from the queue by pressing one.
And our first question comes from Gerry Sweeney from Roth Capital go ahead.
Hi, good afternoon, Eric and team Thanks for taking my call.
Thank you.
Obviously well congratulations.
Solid results.
Wanted to just discuss baby.
Really strong start to the to the year.
Any chance that this could pull forward future demand.
That spending.
<unk> spending is up.
Farmers have put more cash in our pocket or a tender buying up a little extra fertilizer or materials.
Dotcom, whether it just be.
The supply chain of what or how do we look at this.
Yes, I think I think we're.
We're optimistic that what we're putting out there is going on the ground.
We've seen our investment in a number of herbicides both in building out impact with three additional combo products.
With the soybean.
Sure.
In.
And besides that that we've acquired rice herbicides.
Herbicides have been tight and.
And so we're not only pleased that we've been able to fulfill these orders, but we think we can we can have a more permanent market shift to some of our niche herbicide. So.
At present, we're pretty bullish that this is going on the ground.
Looking at corn soil insecticides.
Again, I mentioned that growers are looking to maximize yields.
The kind of more delayed timing here I think bodes well for for getting.
<unk> products out there at time of plant.
We will be watching what watching cautiously.
Already forecasted in our numbers.
A potential upswing in inventory.
<unk>.
It brought down our our 2022 fourth quarter.
But as we get into our next conference call. We can make an assessment whether inventories are not.
Sure.
Above.
Normal channels in which case, then we'll make that call.
Q2.
I think I think.
Right now we're cautiously optimistic that what we're selling is going to get on the ground.
Gotcha. Thanks.
Thanks for that alright, surpass obviously that is rolling out it sounds like pretty well I forget it I believe you set a target of 55% to 70 now you're targeting 80 and then.
125 for next year.
That.
The trajectory of where it's been passed was going this year kind of implies that maybe even next year could be light.
One is that.
And accurate assessment and then two could you comment maybe even on a.
Rollout I think it's just been targeting in the U S. What's the opportunity maybe internationally.
When does that come into play.
So yes, we're pleased with where we are and looking at that 125 target.
We will have we'll have more systems available in August we will start shipping out and.
September .
It will give us more time and basically we started shipping.
Systems out in January of this year.
Limped along to get it.
And to where we are now.
We did have some restraints on.
On.
Semiconductor micro chips and that did did impede how many systems, we could get out there.
But we're expecting to have that supply position.
Back in August as I mentioned.
So as we get to as we go.
And to the next conference call, we'll provide an update on that $1 25.
With regard to international.
Yes, we did send our team down to Brazil.
And we.
We see some good.
Good opportunities.
Particularly for what we call our <unk> solar which is a single product, but it's the same pass system and convert.
It can be.
Applied prescriptive way, particularly with counter which is R. R.
Its the standard for nematodes.
We have on a number of crops and we're expecting to be on soybeans.
Later this year.
So that's got really considerable upside so our people seem pretty charged about that.
I'm not sure whether we will have.
Projection going forward by by our next conference call, but I have talked to them about trying to pull that together if not we'll probably give better guidance on our Q3 conference call, but yes. This is keeping in mind the numbers that we've shown our four crops corn peanuts cotton and soybean.
So its alone so yes.
Yes, we've got upside to look out there as we look global.
Got it.
Obviously, the role, it's going very very well and surpass.
Can you describe.
What the process, how you have been out there marketing it.
And driving interest in demand.
Yes, so it's a partnership with Trimble and with our our Progressive AG retailers.
Those AG retailers were kind of identified we did have we did have.
Number of I think we were seven 7 million.
Basic demonstrations and trade shows that we brought in most progressive growers.
And retailers to kind of see the system.
Created demand there linked linked growers and retailers and Trimble.
All our ships together.
Had a very.
<unk>.
IPad system that has all of the detail information on it that we were able to get programmed into all of our salesman and so that they could walk through step by step what's involved and answer all the questions.
It's.
When you're in it and as long as we've been at it looks fairly straightforward, but I can tell you when people look at this the first time, they've got a lot of questions get answered. So it is it is more detailed to sale them.
Conventional products.
Bring on particularly with their products that have already been in the marketplace.
So our team has been up to it we did a lot of training with them training was tremble training with the with the retailers and as I said, we're staffing up.
People to expand that that penetration.
<unk>.
So I don't know if that answered.
That's helpful. Yes.
I appreciate it thanks for your time and I'll jump back in line. Thank you okay, great. Thanks Gerry.
Thank you and our next question comes from Chris <unk> from Loop Capital go ahead, Chris.
Yes. Good afternoon, so I'll ask a couple on the core business the growth platform and I guess so.
Take a stab at a couple on the.
Accurate situation.
Sure.
But first on.
Just the strength in your domestic business.
US crop business that you.
Ted was up 61% in the first quarter I mean, so so FMC, obviously, a big competitor a bit of a bellwether. They acknowledged that it was even higher in the second quarter guidance that.
There was definitely pull forward of demand, reflecting concerns on behalf of growers and I guess the channel about getting their hands with the inputs necessary to drive their yields. This year. So can you just.
Let us know.
<unk> seen that the other question about that that.
Growth number was I was just wondering can you distinguish between volumes and pricing, obviously, where the whole industry is getting pricing to cover costs and to take advantage of the stronger environment. So just curious if you could distinguish between volume and pricing in your in your U S business.
So I think I think pricing overall was up about 8% to 10%.
And in the U S.
I think demand is the stronger piece and I will tell you that we ended.
Q.
Q1 with considerable back orders.
And we're still trying to manage our way through.
Through that production wise.
So Q2 looks very strong.
And so we're not we're not seeing that the only the only piece that will see us at the end of this season as we get into kind of a July August .
We'll see if it's a normal track of return products.
We went into the year low with inventory.
And.
If we're low with inventory.
Going into 'twenty three given the what we see of the market and what we anticipate 23 to look like and then we'll have we'll have an adjustment we made that we need to make but right now.
We're kind of sticking to what we've given as guidance. So yes, not seen not seen any any pulled from Q2.
But to be seen if there is channel inventory at the end of <unk>.
At the end of the season.
Okay, and then just a follow up on that Eric because.
After that.
Sort of mini boom bust it happened after that.
Drought I think it was 2012 2013, when corn hit eight.
You didn't have the visibility as much and then you subsequently implemented the evi system sort of monitor real time. So just curious if if if.
You are leaning into that at all to kind of.
Get some insights into how the product's going to the channel right now or is that informing your commentary at all at this point or is it just too really too early to see how this business cadence plays out.
Yes, again Youre correct Adi is helping us out we've also.
We've got basically what we think is sitting at.
At every.
Major retailer so we've got good visibility to that.
And we will have again those returns will start happening in July .
We won't have a complete picture by the first week of August , but we're going to have a pretty good understanding when we hit that time.
If there is any.
Carryover to the 20 <unk>.
<unk> thousand three season so.
So, yes I think.
We learned our lesson from from that time.
And so have our of our distribution channel because they were caught flat footed as well so.
Think I think the industry is much better to understand if there if there is channel inventory that's left over at slower quarter retail level.
Okay.
The follow up I had was on the same pads was.
Because over the years that I've heard that talked about a lot of meetings and I know.
Exciting opportunity but.
In terms of the commercialization that you reference now up to 80 systems. My impression was that we're still in sort of proof of concept in that what you're seeding.
Farmers with today, and we're still trying to validate that it's going to deliver the yield benefit and that once that is proven with a bigger data set.
Yes.
Broader commercialization strategy than <unk>.
Yeah.
So Ken.
Where are we in terms of with that as context is that accurate and then.
How do you see that playing out.
Again, where one is to make sure that each grower has a very positive experience with Sim pass and so.
The systems that we've got out there we're pleased that we've been able to go out and.
Make sure Theyre, all functioning well prior to planting.
Yes.
We will have a much broader data set.
From the 'twenty two season as far as what products delivered what kind of yields and we have seen.
In the early stages last year and the year before.
Some nematode.
<unk> yields that were pushing 30 bushels.
And that were prescriptive applied and so we just need a broader base of that I think but overall.
Yes.
As growers look at this I mean.
Sure.
Progressive growers about I understand that this is this is the future Proscriptive Lee applying.
<unk> inputs.
Versus treating the whole field are not trading for a problem at all.
This is this is really the future and so I think.
Don't necessarily have to have all of the answers you go into the field.
Just as today you make your best guess as to where you are what your problems are and does it doesn't warrant trading for a nutrient deficiency or.
The.
Disease pressure or.
Nematode problem insect pressure.
Those decisions get made but its an easier decision now when you can when you can do a prescriptive.
So as we build our toolbox.
Offer more and more products and give the growers and agronomists much more.
Freedom to operate and to fix the problems that are addressing.
Fields that are out there.
The returns are to me.
And our team are pretty obvious, but but having as you said I mean, having the real life data to just say hey, okay. Here's here's these kind of results that people are saying, but it just kind of builds on each other so the people that have used the system. So far are very thrilled with it and are continuing to go forward.
So we expect to build on.
Minimum.
As we get more and more systems out there.
And just one last follow up on <unk>.
So precision planting precision AG.
Big data that's been talked about gosh for.
Probably more than a decade.
Sort of thinking is a watershed moment is when monsanto paid $1 billion quarter for.
Climate Corp, but.
Okay.
Yes.
I'm just curious about like the competitive landscape that you have.
Sure.
The roll and the solution that you would see its impact addressing unmet.
Maybe if you could refresh us on the patent suite that you have that you think enables.
Your solution to garner.
Sure of what presumably will be a growing market is as more and more precision AG is adopted by the farmers.
Yes, and again we.
We're in a space of that precision AG.
Doesn't have.
Much in the way of competition, where the prescriptive application of crop inputs and we're not doing.
We can envision doing herbicides, but they're square retail concept does not is not what we're what.
What we're doing.
So.
We've got a space of applying at three ounces or less per thousand lineal feet that we've patented on and we've got some 20 patents plus another 30 that are pending that not only cover the Sim pass system.
And we think does it very very broad way of Klein.
Proscriptive Lee multiple crop inputs.
But in addition of course, then we have our system around ultimate which really is.
Leads into.
The.
Ability to to bring down your crop nutrients.
In nitrogen and phosphorous.
Other carbon carbon issues.
Bye.
Proving the ability for plants to uptake.
Nitrogen and other nutrients and a more efficient way so.
You can see that.
Union Pacific is kind of forcing.
Farmers to cut back on their fertilizer.
That's just kind of one piece of the transportation issues, but overall.
Nutrition is expensive.
And if they can utilize.
Some of our biological products and others.
As in past to help improve.
The performance of the of the nutrition that they put in the soil. So much the better and if they get paid carbon credits at the same time through the ultimate system.
We will measure validate and record.
Again, so much the better.
Fair enough and then.
So I'll ask just one well.
Well, maybe one multifaceted.
The question about the Actavis situation I'm going to be just try to pose it in partially as possible.
Sure.
I guess the crux of the.
Contention of your invest there.
Involved in the proxy.
Contests now is that.
The company basically has grown its top line, but.
The.
Profitability of that.
And therefore, the value derivation of the company hasn't really kept pace with.
The growth of the top line again, that's one way to kind of frame, maybe just the crux of the contention I guess the question is is that.
You said you've had conversations now for a while just wondering if your thoughts on the merits of that view and then.
If you could just comment on any any sort of.
The discussions that you can share about addressing maybe finding common ground about addressing.
Driving the operating performance are enhancing value to the extent that you.
Youre willing to acknowledge some of that.
Yes.
That's my effort at.
Maybe bring in addressing.
Publicly here.
Anything that you're willing to say notwithstanding your comments about not really talking about this in great detail. Thanks.
Sure.
So.
What what I think people that understand the.
The agricultural business understand that there are there are cycles to it and.
Just came through.
Down in eight year down cycle, which is the longest one I've been involved in in the 40 years that I've been in the business.
And and.
As we went through this.
What we did is we expanded.
Our portfolio.
In 2014 U S corn was 41% of our business and having that kind of dependency.
Makes makes you vulnerable and so we have penetrated other markets.
Not just in the U S. We've expanded into.
So soybeans and expanded our I mean, our fruit and vegetable businesses theres been core for us certainly for a long time.
We've taken combination products that we put through our IRC program.
The acquisition still remains strong.
But what what.
<unk> brought in with him from FMC is we need we need better market access globally, if we're going to balance so we acquired <unk>.
<unk> businesses.
Businesses aren't always just a strict bolt on.
Typically if youre buying distribution businesses that might be in 25% margin range, but if we're going to move our products into.
<unk>.
Two bigger geographical areas, it's kind of a.
Our core investment that we need to make.
So we made those investments.
During the down cycle at the same time, we've rebuilt our green solutions platform and of course, some past, we've driven now to where we are hitting the starting to hit the sweet spot. So we come out of this cycle. We had good performance in 'twenty, one 'twenty two looks.
They have been much better.
We don't see any breaks coming on in the near future. So I think we positioned ourselves very well during that period of time.
Our earnings are moving well I think our EBITDA.
EBITDA target that we've thrown out of $1 55.
Ed.
Then I think.
Shareholders will be very very pleased with the investments they've made in our company and even even where we are today.
When.
Where we were when we first started talking to the Actavis has considerably improved shareholder return so.
I don't know if that answers your question, but.
Yes, I don't know if you have a follow up from there.
Sure I'll follow up.
We shape that it's in a historic context, but the.
Then getting at the crux.
The acquisitions that added to the sales level.
Look you can you can pick a spot in time and you can kind of you know.
Use the data to make your argument I guess.
On both sides of this but but.
One could say that.
You could look at the company's EBITDA at one point in time and then subsequently after those five or six acquisitions that might have added like $25 million to $30 million in EBITDA that the company's EBITDA, finishing 2021 is comparable to where it was before the acquisition. So therefore, it implies some compression of.
And your some EBITDA that that sort of went away and it wasn't just the cycle.
When you can pick and choose that.
First data points I'm, just wondering if you.
Knowledge.
There is some merit to that.
<unk> you.
<unk> talked with investors about sort of.
Some potential solutions to remedy that.
You think Thats has merit thank you Eric.
So again I think with our performance targets that we've laid out there.
As we come into the into the upside of the cycle. We've laid a great Foundation for these tailwind and we're seeing that right now we're executing the plan that are our directors leadership, along with management have envisioned.
Coming to fruition right now.
And I think the targets are real we're updating on a quarterly basis.
And so we're not.
We're not saying that we don't have the talent inside or with our board to execute under that plan and I think we do that work.
Kind of in the top level in our industry.
I appreciate you letting me ask a few questions there. Thank you.
Okay.
At this time I would like to turn it back to management for any closing remarks.
Okay, well again.
Great start to our first quarter and into our 2022 year.
We feel bullish about the year.
And as we move forward with our our 'twenty three 'twenty four 'twenty five game plan.
Look forward to giving you further guidance.
Our next call.
And appreciate your support.
Thank you till then.
Okay.
Thank you. This does conclude today's conference. We thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
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