Q4 2023 American Vanguard Corp Earnings Call
[music].
Hello, and welcome to the American Vanguard announced this preliminary 2023 results and 2024 outlook conference call and webcast. If anyone should require operator assistance. Please press star zero on your telephone keypad.
A question and answer session will follow the formal presentation.
We placed our question queue at any time by pressing star one on your telephone keypad.
As a reminder, this conference is being recorded.
It's now my pleasure to turn the call over to director of Investor Relations Bill Cruiser. Please go ahead Sir.
Yeah.
Thank you very much Kevin and welcome everyone to American Vanguard's preliminary launching 23 financial performance review.
Our speakers today will be Mr. Eric Wintermute, Chairman and CEO of American Vanguard.
Mr. Don go Dani the.
Give me the chief financial excuse me, the Chief transformation Officer of the company, Mr. Tim Donnelly, our chief administrative officer and to assist with your questions. Mr. David Johnson, the Companys Chief Financial Officer.
Before beginning let's take a moment for our usual cautionary reminder, 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 result.
To differ from management's current expectations such factors include weather conditions changes in regulatory policy competitive pressures and a variety of other risks that are detailed in the company's SEC reports and filings all forward looking statements.
They represent the Companys best judgment as of the date of this call and such information will not necessarily the updated by the company with that said, we turn the call over to Eric.
Thank you Bill.
Hello, everyone and welcome to the American Vanguard January 24 financial update today, we want to hold a brief call to give you our impressions of Q4 and full year 2023 ahead of our foremost 10-K issuance.
As well as to revisit our 24 outlook.
We presented slide four in our tier 323 earnings call to show our financial expectations.
Bottom line, while we have not completed the full part of the cycle. We are broadly on track to meet our previously forecasted 23 numbers further we remain pause position to meet our 'twenty four targets in short our outlook is unchanged.
With respect to 'twenty three in our last call we outlined that we had secured.
I have two important high valued products, namely Aztec and ductile.
Both of which experienced availability constraints in early 'twenty three.
Due to supply chain issues.
During the fourth quarter, we were able to produce volumes of these products are sufficient to meet growing needs.
Sequentially or quarter over quarter sales were up by about 8% and 23 as compared to 22.
Further we made up some of the ground that we had lost early in 'twenty three such that our full year net sales declined by only 5% compared to the prior year.
During 'twenty history gross margins hold up as we predicted as I had predicted and while it's still subject to completion, Nevada also appear to be in line with our forecasted range.
Same can be said for our adjusted EBITDA.
Let's turn to working capital, which we have captured on slide number five with improved sales inventory management and robust prepay elections, we generated enough cash and EBITDA to reduce debt, so about $139 million and inventory to about $220 million, while increasing our <unk>.
Growing capacity to about 100 and.
In other words, we deleveraged, our balance sheet significantly such that based upon initial numbers.
We're able to achieve our debt to EBITDA target ratio of 275 times.
As you May recall, our lenders had loosened covenants during Q4 to give us sufficient room to meet working capital needs. This.
This relief included an uptick in interest rates.
If we are able to maintain our current trajectory, we should be able to return to lower rates and reduce interest expense.
We will of course provide greater detail on Q4 and full year 'twenty three financial performance and our March earnings call and within our Form 10-K.
Before turning to our full year 'twenty four outlook I want to report on our transformation efforts.
With me today is John Goldoni.
Now I'm going to I'm sorry.
Our chief transformation Officer, who will cover our plans to improve operating profit through cost margin and revenue initiatives also with me is Tim Donnelly, our chief administrative officer, who is spearheading our digital transformation effort.
At this point, let me turn the call over to Don and Tim After which I'll return with my thoughts on the 20th forward here Don Thanks.
Eric It's a pleasure to be here with all of you on my two month anniversary at Ambac as you'll see from slide six our robust and sustainable transformation has three core elements.
First it's multifaceted not limited to a single area of the company or a single profitability lever.
Our sustainable transformation is about accountability, which requires transparency and.
And lastly transformation done right changes the DNA of the company and that pays dividends well after the formal process completes.
So where are we in this pursuit.
We are drafting and implementing key performance indicators that will serve both as internal targets and as a set of vital signs for senior management and the board.
These will include factors such as sales performance against plan and compared to the prior year.
Raw material costs gross margin.
Production to plan inventory DSO.
Forecast accuracy and the like.
By driving these key performance indicators or kpis into the organization will be driving profitability and measuring it as we go.
Beyond Kpis, we will take a deeper dive into our cost and capital structure.
Measuring fully burden margins of our product lines return on capital for our businesses freight costs selling expenses and the use of cash across multiple entities. The.
The structural transformation should enable us to realize material improvement in our operating leverage and yield a lean platform for growth.
As is typical in these types of transformation.
We will also define a specific target for additional profitability on a year by year basis, we anticipate that during our next earnings call. In early March we will have set the target for improved operating leverage for the balance of 2024 and full year 2025.
I'm excited to be working with my Ambac colleagues to set our course deliver our plans and see the results flow through into our financials, we will be reporting to you on our progress quarterly.
I will now turn it over to Tim to update you on our digital transformation progress. Thanks.
Thanks, Don Let me start first by answering the question why are you doing a digital transformation.
Short answer is so that we can grow and remain competitive.
Let's look back for a second following the points on slide number seven as many of you know we have grown and diversified over the past 10 years or so largely through acquisition.
When I started here nearly 20 years ago, we had maybe half dozen businesses.
Today, we have 33 businesses throughout the world.
With that growth has come increased complexity and we find ourselves at a stage in our growth cycle. When it is necessary to step back look at how we work and ensure that our processes are standardized and theyre information as current customer.
And easily accessible.
That in a nutshell is what we have been doing with business consultant Carney and our enterprise resource planning or ERP vendor Q E D.
We are convinced the owners of our major business processes sales forecasting inventory planning and to finance <unk>.
And to define how we work today, how we would like to work in the future and how we can work on the same ERP system globally.
I just signed the services and subscription contract with QAD last Friday.
And we are now poised to move into the implementation phase of this effort.
Over the next 18 months or so Q, a D and our internal team will do two things first bring our users up on Qad's latest adaptive ERP system and second implement standard processes for these functions processes that our people have themselves fashions.
Through this process, we will be able to provide senior management in fact, all users with a single source of truth through warehouse to data that is gathered and rolled up in a fully automated manner.
In this way and management will have a top down view of business metrics in real time. This in turn will enable us to make the best decisions and the shortest response time.
These days external factors seemingly change with the wind and we cannot control them. We can however, give our business leaders the tools to operate effectively in the face of change and in the process provide a platform for growth.
In order to take the next step in our evolution digital transformation is essential with that I turn the call back to Eric.
Thank you Tim.
Turning now to our full year of 2024 outputs on slide eight.
Our assessment is unchanged versus our previous issued targets that is we're still expecting revenue to rise by 8% to 12% and adjusted EBITDA to increase by 25% to 35%.
One of the primary reasons for the improvement is that we do not anticipate any material supply chain snags as we had experienced last year.
On a relative.
Many of you have heard of the shipping them impediments caused by military activity and the Red Sea.
Well it may have an economic impact beyond the middle East this activity does not directly affect shipping lanes that we use for either supplier delivery.
We continue to monitor developments closely but at least for the present have not been adversely affected.
Fundamentals look encouraging for 2000 and for commodity prices, which are globally driven have been relatively stable.
Interestingly, while Brazil had record crops in corn and soybean.
And 23, the AG Chem industry fell by 33% within that country. By contrast, our sales in Brazil were down only 4% year over year with adverse weather, Brazil crop numbers are forecasted by some to fall slightly in 2024.
This may continue to affect some in this industry, we do not expect a material effect on our global results.
With Brazil turned them down the U S farm economy should trend up or at least remain stable.
We do expect some drag on herbicide sales for 2024 as the presence of low priced generic herbicides within the U S and international markets will remain with us.
We have taken this into account in our outlook.
Our ex U S crop businesses should generate good results.
In mind that we have a diverse portfolio in many regions. This breath tends to blunt the effect of product specific market challenges.
On the non crop side, we expect the shift in procurement that occurred in 'twenty three.
That is our customers shifting from building four to six months worth of inventory to maintain and 40% to 60 days worth of inventory.
We will stabilize in 2004.
Even though retailers may buy smaller lots with greater frequency, assuming unchanged demand the retailers will eventually biosimilar bond with growth on an annual basis.
In other words, we took a hit in 2023.
Due to a shift in timing on orders, but that timing it should even out in this current year.
That said, let me now connect up our outlook with the transformation discussion that John and Tim had covered earlier.
First our targets for 'twenty four.
We will make a host of changes.
That should generate $15 million in operating profit on an annualized basis.
These include manufacturing optimization reduced raw material costs, lower selling expenses and reduced rate and interest expense.
We have assigned these initiatives through our business leaders and our measuring them regularly in.
In the short term however, we have to cover additional costs for example relating to the transformation and implementation.
That will reduce the full year impact of these efforts in 2000 and for Deere.
Idea here, however is to improve operating efficiencies. So that we have stronger operating leverage in 2025 and beyond.
At the same time working with our human resource head of human resources <unk> Dawn is leading the charge in defining and implementing key performance indicators that will serve to keep our team focused on the things that matter most to maintaining profit, while giving me and the board are monthly health checks.
In addition, Don will establish targets for transformation transformative benefit. This is called sizing. The prize we should have that enhance this march.
While not intended as a solution for improving operating leverage our digital transformation as an accelerant to growth and increased speed of decision making.
As chairman pointed out we are a complex midsize operating company in many regions on many platforms as markets and conditions shift we need the most comprehensive accurate and current data to make the best decisions.
This is important to note that our entire team is committed to these transformation efforts. They can see the benefit from having more efficient systems and better real time data.
Further these changes will make us leaner faster supplier in the eyes of our customers.
Finally, we are confident that we can conduct our business profitably and efficiently, even while improving our cost and digital structures.
In summary, we are on track to achieve target performance for Q4 and full year 'twenty three subject to the completion of the audit.
Our keeping our 2024 outlook unchanged and are positioning ourselves for maximize growth and profitability through transformation.
With that I ask our operator, Kevin to poll listeners for any questions.
Kevin.
Thank you, we'll now be conducting a question answer session, if you'd like to be placed in the question queue. Please press star one at this time one moment, please while we poll for questions.
First question is coming from Scott Fortune from Roth MTM. Your line is now live.
Yes, good morning or good.
Afternoon. Thanks for the question.
And a big take share just wanted to know if you can provide.
A little more color on the inventories and the different geographies and channels now that were in through January here and kind of the ongoing destocking process, we're still seeing that destocking, taking longer again in Brazil, but just kind of a sense of where we're at in that process as it run its course and are you starting to see.
Yes.
Ramp up to normalized inventories.
From that perspective, just kind of a big picture view of that that'd be great.
Yes, I mean with regards to our specific inventories.
We don't see that we've got any any areas, where we're where we're way over inventory I would say the only only.
It is a little bit on the on the.
Herbicide line.
Maybe more on the impact that might have a little bit.
Over what might be a normal inventory, but we've been.
Pretty pretty careful not to to push in this last year.
Yes, it would have been difficult to.
To try to push people anyway, because as said there.
Do stocking so.
<unk>.
Outside of the United States, We know that there are there are different products that have had.
Have higher inventory, but we're not we're not seeing it with our inventory.
So we think we I mean, if we look at demand I mean demand was relatively stable.
Operator: Hello, and welcome to the American Vanguard Announces preliminary 2023 results and 2020 Outlook conference call webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may add questions to the question queue at any time by pressing star 1 on your telephone keypad.
There was an effort by everybody to try to reduce their inventory so I don't know.
Part of your question.
We're not Scott.
Yes, that's good.
Great and just kind of a follow up with you in our building supply and inventory and as tech and Dot Hill.
It's kind of you know obviously you had supply issues last year, but kind of where are we in in that process to get back to those normalized levels. As you were before for those teeth.
Operator: As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Director of Investor Relations, Bill Kruiser. Thank you very much, Kevin, and welcome everyone to American Vanguard's Preliminary 2023 Financial Performance Review. Our speakers today will be Mr. Eric Wintemute, Chairman and CEO of American Vanguard, Mr. Don Godony, the Chief Transformation Officer of the company, Mr. Tim Donnelly, our Chief Administrative Officer, and to assist with your questions, Mr. David Johnson, the company's Chief Financial Officer.
I mean, we started production on Aztec.
<unk>.
In September.
We completed the Aztec run in <unk>.
In December.
With that at all.
We started the production in November.
We still are.
Christian <unk>, although I think.
Produced I think at this point enough to get us.
Get us into may, but we'll be going into another production run.
In April so I think we feel good about about the supply chain of those two products.
Bill Kruiser: Before beginning, let's take a moment for our usual cautionary reminder. In today's call, the company may discuss forward-looking information. Such information and statements are based on estimates and assumptions by the company's management and are subject to various risks and uncertainties that may cause actual results to differ from management's current expectations. Such factors include weather conditions, changes in regulatory policy, competitive pressures, and a variety of other risks that are detailed in the company's SEC reports and filings. All forward-looking statements represent the company's best judgment as of the date of this call, and such information will not necessarily be updated by the company. With that said, I turn the call over to Eric. Thank you, Bill.
Okay and the other.
Big Picture question is kind of the Chinese generic as we thought.
Pressure is more of the Latin American markets and down south, but just kind of a sense of.
Yeah.
Supply coming out of China.
The generic side and.
Is that kind of run its course.
Yeah, the impact on pricing and margins have been hit from that you can have a little more color on where the Chinese generics are ending up here.
I think if we track.
The import prices of the Chinese products.
And as you noted.
Cells fairly dramatically.
And the 23 year.
We saw uptick on some of them such as the glyphosate classmate sorry moved back up some of the products have have flattened out some trail down even a little bit further.
Eric Wintemute: Hello, everyone, and welcome to the American Vanguard January 24 Financial Update. Today, we want to hold a brief call to give you our impressions of Q4 and full year 2023 ahead of our formal 10K issuance, as well as to revisit our 24 outlooks. We presented slide 4 in our Q3-23 earnings call to show our financial expectations. Bottom line, while we have not completed the full audit cycle, we are broadly on track to meet our previously forecasted 23 numbers. In addition, we remain positioned to meet our 24 targets. In short, our outlook is unchanged. With respect to 23, in our last call, we outlined that we had secured a supply of two important high-value products, namely Aztec and Dactyl, both of which experienced availability constraints in early 23, due to supply chain issues.
But.
I mean, there is pressure certainly on the Chinese producers given the Chinese economy to export everything they can.
But then as far as what's in and channel.
We don't see a lot of of of generics.
We do have we do have other maybe with central America might be might be where we have more.
But were relatively flat year over year.
Maybe.
Maybe three or four binding for four 5% I think Tim.
Central America.
So again, our emphasis is on our products that we manufacture it where we did our best margins Thats, where thats, where our focus of our of our global team is.
So not that we are unaffected certainly for sure bye bye and lowered abundance of Chinese products.
Eric Wintemute: During the fourth quarter, we were able to produce volumes of these products sufficient to meet grower needs. Consequently, our quarter-over-quarter sales were up by about 8% in 2023 as compared to 2022. Furthermore, we made up some of the ground that we had lost early in 2023, such that our full-year net sales declined by only 5% compared to the prior year.
But it's not certainly not saying that's core to us.
I appreciate the color and then one last one for me just kind of looking at your 2020 for guidance.
And can you you know you are you looking to really drive growth in your syntax and the green solution kind of segments there.
I know you have you've had lofty targets there for the next couple of years, obviously, that's probably been revised down, but just kind of put in perspective.
Eric Wintemute: During fiscal 23, gross margins held up as we predicted, as I predicted, and while still subject to completion of the audit, also appeared to be in line with our forecasted range. The same can be said for our adjusted EBITDA. Let's turn to working capital, which we have captured on slide number five, with Improved Sales, Inventory Management, and Robust Prepaid Collections. We generated enough cash and EBITDA to reduce debt to about $139 million and inventory to about $220 million, while increasing our borrowing capacity to about $100 million. In other words, we leverage the balance sheet significantly such that, based upon initial numbers, we were able to achieve our debt-to-EBITDA target ratio of 2.75 times. As you may recall, our lenders had loosened covenants during Q4 to give us sufficient room to meet working capital needs.
We're thin pass and Green solutions fit.
Fit and driving that growth in 2024, and any indication of kind of the expectations for those two.
Segments over the next couple of years here.
Yeah. So so both of them are again technologies for we've got intellectual property that we're that we're excited about.
I would say green solutions.
Yes sure.
So it didn't hit the expectations for growth that we were hoping.
Certainly and neither did the Sim pass but.
But we did have we did have.
Growth in both.
But I think as people.
Were kind of dialing back investments.
That certainly had a position.
But now going forward.
Okay.
Eric Wintemute: This relief included an uptick in interest rates. If we are able to maintain our current trajectory, we should be able to return to lower rates and reduce interest expense. We will, of course, provide greater detail on Q4 and full year 23 financial performance in our March earnings call and within our Forum 10-K. Before turning to our full year 24 outlook, I want to report on our transformation effort. With me today is John Goldoni.
Emissions are sound.
From from the farm gate economy.
That may have been down, but things, where we're kind of near record high. So there is plenty of Av.
Profit there.
So I mean, it will be us moving out and.
Showing the return on investments.
That can be there with our green solution products I think the demand continues to increase four four.
For Green solutions as part of soil health.
Eric Wintemute: Don Goldwing, our Chief Transformation Officer, who will cover our plans to improve operating profit through cost, margin, and revenue initiatives. Also with me is Tim Donnelly, our Chief Administrative Officer, who is spearheading our digital transformation effort. At this point, let me turn the call over to Don and Tim, after which I will return with my thoughts on the 24 year old.
Our efficient uptake of nutrients.
Within some passenger we continue to add to our portfolio of products. So we're adding several products here for this year and plan on more than for the 25 year. So.
So as we add more products. It just builds the demand for multiple products being applied at time of plant.
Don Goldwing: Thank you, Eric. It's a pleasure to be here with all of you on my two-month anniversary at AmVac. As you will see from slide six, a robust and sustainable transformation has three core elements. First, it's multifaceted, not limited to a single area of the company or a single profitability lever. Second, a sustainable transformation is about accountability, which requires transparency. And lastly, transformation done right changes the DNA of the company, and that pays dividends well after the formal process is complete. So where are we in this pursuit?
Great. That's it for me I'll jump back in the queue. Thanks.
Yeah.
Thank you. Your next question is coming from Chris Katz from Loop capital markets. Your line is now live.
Hey, good afternoon, I'll just pick up from that last question I guess on the.
The growth platforms.
Just curious if what you're what you're saying just now are kids is or do you think that growth objectives and trajectory for.
These platforms is still valid.
Or are you going to have to adjust that the timeline.
For which you might achieve those targets and then.
Don Goldwing: We are drafting and implementing key performance indicators that will serve both as internal targets and as a set of vital signs for senior management on the board. These will include factors such as sales performance against plan and compared to the prior year, raw material costs, Gross Margin, Production to Plan, Inventory DSO, forecast accuracy, and the like.
Peeling that back a little bit what which of the platforms are you.
Based on.
The momentum or the commercial traction that you have which are the growth platforms. Do you feel most confident about in terms of the growth targets that you conveyed and which ones do you feel like maybe we're setback because of this supply chain craziness and so forth.
Yes, so I mean, the growth that we're showing in that 8% to 12% as is.
Don Goldwing: By driving these Key Performance Indicators, or KPIs, into the organization, we'll be driving profitability and measuring it as we go. Beyond KPIs, we will take a deeper dive into our cost and capital structure, measuring fully burdened margins for our product lines, return on capital for our businesses, freight costs, selling expenses, and the use of cash across multiple entities. The structural transformation should enable us to realize a material improvement in our operating leverage and yield a lean platform for growth. As is typical in these types of transformations, we will also define a specific target for additional profitability on a year-by-year basis. We anticipate that during our next earnings call in early March, we will have set the target for improved operating leverage for the balance of 2024 and full year 2025. I'm excited to be working with my AMVAC colleagues to set our course, deliver our plans, and see the results flow through into our financials.
Combination of all three targets.
Yes.
We'll have the March.
Kind of a reset or our targets over over the 25 and 26 year that we have previously given yes, we obviously took a step backwards.
'twenty three.
And I think we would like to go another another month or so to kind of see how things unfold. So we could give maybe a little bit a little bit better update as to how we're going to look.
Our growth on all three platforms over the next coming three years.
Okay, well said.
Right on that but speaking to the March it sounds I think you said that you would use that.
That event to sort of <unk>.
Quantify some of the expected <unk>.
<unk> targets in terms of.
<unk> the prize and just the overall transformation program, but I'm just curious based on your initial guidance that you're reaffirming for 24 how much.
Tim Donnelly: We will be reporting to you on our progress quarterly. I will now turn it over to Tim to update you on our digital transformation progress. Thanks, Don. Let me start first by answering the question, why are you doing a digital transformation?
Benefit.
Are you expecting just from the initial.
Tim Donnelly: The short answer is so that we can grow and remain competitive. Let's look back for a second, following the points on slide number 7. As many of you know, we have grown and diversified over the past 10 years or so, largely through acquisition. When I started here nearly 20 years ago, we had maybe half a dozen businesses.
You know.
Our transformation efforts at <unk> that are going to be in place this year.
Yes, so I mean, the initial piece that we've kind of identified the $15 million that we did that really was not related to the transformation targets that we're looking to accomplish so there were.
Certainly.
Tim Donnelly: Today, we have 33 businesses throughout the world. With that growth, there has come increased complexity. And we find ourselves at a stage in our growth cycle when it is necessary to step back, look at how we work, and ensure that our processes are standardized, and our information is current, complete, and easily accessible. That, in a nutshell, is what we have been doing with Business Consultant Carney and our Enterprise Resource Planning, or ERP, vendor, QAD. We have identified the owners of our major business processes, sales, forecasting, inventory, planning, and finance, and defined how we work today, how we would like to work in the future, and how we can work on the same ERP system globally. I just signed the services and subscription contract with QAD last Friday.
When you're looking at how to.
And how to how to improve operating margin and costs and that sort of thing those were those referenced that we did.
Without what we are now implementing so that's that would be something that we would look at okay and how much of this is going to occur in 'twenty four.
And then what's more annualized gone 20 526 going forward. So that's what we're we're in the process of pulling together now I mentioned before I mean as far as improvements in freight raw materials.
Interest.
And then also manufacturing optimization.
Those those are part of those will certainly.
These things that are going to be measured as part of the transformation process and the kpis, but those are efforts that we began.
Tim Donnelly: And we are now poised to move into the implementation phase of this effort. Over the next 18 months or so, QAD and our internal team will do two things. First, bring our users up to date on QAD's latest adaptive ERP system, and second, implement standard processes for these functions, processes that our people have themselves fashioned. Through this process, we will be able to provide senior management, in fact, all users, with a single source of truth through warehoused data that is gathered and rolled up in a fully automated manner. In this way, management will have a top-down view of business metrics in real time.
Earlier in 2003 so.
So those are ever so I think we.
We think that's great.
We think we've made good improvements in.
In Q4, obviously mentioned earlier about.
About the banks waiting to see an increase in interest so of course driving interest down is something that is.
Is key for us.
We.
Yeah.
Her job.
Collecting cash pools.
220 on our inventory, we'd like to get that down.
Maybe in that 200 or below at the end of the year.
Our debt to equity ratio down of course.
Eric Wintemute: This, in turn, will enable us to make the best decisions in the shortest response time. These days, external factors seemingly change with the wind, and we cannot control them. We can, however, give our business leaders the tools to operate effectively in the face of change and, in the process, provide a platform for growth. With that, I turn the call back to Eric.
That just lowers our interest rates with bank. So those are I would say we still have.
We still have I think to report what I mean.
And we did we've met with currently several times and I meet with them once a week, but our teams meeting with some kind of daily here.
And they've kind of laid out some initial targets, but we need to be kind of baked those a little bit.
So how much benefit we're going to get from.
From from the system itself and have been more clear data.
Eric Wintemute: Thank you, Tim. Turning now to our full year 2024 output on slide eight. Our assessment is unchanged versus our previously issued targets. That is, we're still expecting revenue to rise by 8-12% and adjusted EBITDA to increase by 25-35%. One of the primary reasons for the improvement is that we do not anticipate any material supply chain snags, as we experienced last year. On a related note, many of you have heard of the shipping impediments caused by military activity in the Red Sea.
<unk> given us some targets.
We are looking at now.
We'll do some tests do checks on those in several years.
Just to kind of give you some guidance.
Guidance.
Yes.
Just to make sure I understand so your.
Those opportunities.
That should.
Manifest through the transformation process, that's separate than the $15 million initial target that you referred to I am just curious about how much of that 15 might be expected to contribute to the bridge from call. It 58 and 50.
<unk> $58 million EBITDA to $75 million and EBITDA based on your guidance does that that bridge is 17 little over $17 million. So some of that is just business recovery, but it sounds like some portion of it is from cost.
Eric Wintemute: While it may have an economic impact beyond the Middle East, this activity does not directly affect shipping lines that we use for either supply or delivery. We continue to monitor developments closely, but, at least for the present, have not been adversely affected. Fundamentals look encouraging for 2024. Commodity prices, which are globally driven, have been relatively stable. Interestingly, while Brazil had record crops in corn and soybeans in 23, the Ag-Chem industry fell by 33% within that country.
You know taking out costs as well.
Just trying to.
You know.
Right.
<unk>, yeah, yeah, and that 15 million and again there were a number of pieces that we touched on.
Having having us all rowing the boat the same direction with the same information.
We'll make better.
Better decisions.
Yes, I mean, our sales team spends a lot of time.
Information in.
We expect to be able to free up some of their time by having the systems automated so that should result in.
And more sales because we're having.
Little bit more time, with which to focus on on customer interaction. So that that would be an example of something that we've not put in play that.
Eric Wintemute: By contrast, our sales in Brazil were down only 4% year over year. With adverse weather, Brazil's crop numbers are forecasted by some to fall slightly in 2024. While this may continue to affect some in this industry, we do not expect a material effect on our global results. With Brazil trending down, the U.S. farm economy should trend up or at least remain stable. We do expect some drag on herbicide sales for 2024 as the presence of low-priced generic herbicides within the U.S. and international markets will remain with us. We have taken this into account in our outlook. Our ex-U.S. crop businesses should generate good results. Bear in mind that we have a diverse portfolio in many regions. This breath tends to blunt the effect of product-specific market challenges.
Quantify and then and then.
So going back to part of what we are doing let's say with optimizing manufacturing.
How will our yields are.
Raw material reductions.
Those are those are pieces that we have baked into that 15, but.
But we don't have things like I mentioned.
Of sales.
Yeah.
And having better visibility, let's say of our margins in real time.
So that so that we're not we're not.
It's it's visible to the marketing team, Here's where we are I think I mentioned also that.
We're baking in baking freight into.
And to the cost of goods.
But getting to.
But getting to.
Getting back.
Bailable in real time to any of our any of our people.
Eric Wintemute: On the non-crop side, we expect the shift in procurement that occurred in 2023, that is, our customers shifting from building four to six months' worth of inventory to maintaining 40 to 60 days' worth of inventory, will stabilize in 2024. Even though retailers may buy smaller lots with greater frequency, assuming unchanged demand, they will eventually buy a similar volume of goods on an annual basis.
But you guys took a valuable tool as we look to optimize our margins globally.
Okay.
If I could just.
I'll go back to two more one is on the comments about the generic pressure from China, and particularly in <unk>.
In broad spectrum herbicides.
Glyphosate will fascinate. So you mentioned it doesn't really affect you directly Jim I'm. Just wondering if there is an indirect effect on that particularly in your Central America Latin American operations is that.
Eric Wintemute: In other words, we took a hit in 2023 due to a shift in timing on orders, but that timing should even out in this current year. That said, let me now connect our outlook to the transformation discussion that John and Tim covered earlier. First, our targets for 24 include making a host of changes that should generate $15 million in operating profit on an annualized basis. These include manufacturing optimization, reduced raw material costs, lower selling expenses, and reduced freight and interest expense. We have assigned these initiatives to our business leaders and are measuring them regularly.
That.
Aggressive <unk>.
Exportation from China is it affecting just the the pricing overall, because you mentioned that your margins had been maintained.
But you also mentioned that you know that this is a dynamic that's influencing the market. So I'm just one wanted to reconcile that thanks.
Yes.
Such an impact which is an adjunct.
Yes.
Like to stay.
Stinker right, it's a little bit of.
Cover for four <unk>.
Hard to hard to kill weeds for glyphosate Phosphonate.
But we have broadened that.
Eric Wintemute: In the short term, however, we have to cover additional costs, for example, relating to the transformation and implementation that will reduce the full year impact of these efforts over the 24-year. The idea here, however, is to improve operating efficiencies so that we have stronger operating leverage in 2025 and beyond. At the same time, working with our Head of Human Resources, Srin Koshravi, Don is leading the charge in defining and implementing key performance indicators that will serve to keep our team focused on the things that matter most to maintaining profit, while giving me and the board a monthly health check. In addition, Don will establish targets for transformative benefit. This is called sizing the prize.
Two offering.
The impact.
<unk> grew phosphonate combination.
Atrazine combination of Cedar for combination.
When we broaden the spectrum of what we can do with that with that molecule.
But as I said there were there was a lot of Av.
Brian.
Yes, Rob.
Broad coverage herbicides that where the price came down and that was probably I would say the biggest biggest effect.
Those.
On pricing so it's.
I mean.
We certainly have some have some effect on the overall.
We're down.
Again to 5% for the year.
And we had two key products that we werent able to provide.
Susan.
And so I.
We're not quite in the same realm is people that are more reliant on generic products.
Okay, that's helpful and the last one.
Just sort of taking a step back I mean, if you look at the share price has been halved over the last year.
Eric Wintemute: We should have that in hand by March. While not intended as a solution for improving operating leverage, our digital transformation is an accelerant for growth and increased speed of decision making. As Tim pointed out, we are a complex, mid-sized operating company in many regions, on many platforms. As markets and conditions shift, we need the most comprehensive, accurate, and current data to make the best decisions. It's important to note that our entire team is committed to these transformation efforts because they can see the benefit from having more efficient systems and better real-time data.
Yeah.
And what you've conveyed today, you're saying.
My interpretation right that okay. There was obviously some industry issues and then some idiosyncratic issues that have affected American vanguard's performance, but.
You know that.
Fourth quarter should restore some confidence your guidance if you hit it sort of suggests like okay. This business isn't broken we just navigating some challenges now as you come through this you have if you come out at two seven times Levered with that.
Eric Wintemute: Furthermore, these changes will make us a leaner, faster supplier in the eyes of our customers. Finally, we are confident that we can conduct our business profitably and efficiently, even while improving our cost and digital structure. In summary, we are on track to achieve target performance for Q4 and full year 23, subject to the completion of the audit, are keeping our 2024 outlook unchanged, and are positioning ourselves for maximized growth and profitability through transformation. With that, I ask our operator, Kevin, to poll listeners for any questions. Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 at this time.
Proving EBITDA trajectory.
One could say by the end of this year 24, there'll be overcapitalized, if that EBITDA levels hit your roughly.
<unk> math here the company's fair valued at six three times, which is pretty attractive considering where these assets typically trades. So the question is as you know.
Does this lead to an opportunity.
For American Vanguard to put some capital to work in buying back stock.
At these beleaguered levels.
What's your view on that what's the right.
Our leverage level for the company to operate as you go through this transformation and navigating these issues. Thank you.
Operator: One moment, please, while we poll for questions. Our first question is coming from Scott Fortune from Roth NKM. Your line is now live. Yeah, good morning or good afternoon.
Yes.
Ed.
Youre, making the call that the stock is under undervalued and we certainly would agree with that.
Now as far as stock repurchase.
Scott Fortune: Thanks for the questions. Kind of big picture, just want to know if you can provide a little more color on the inventories and the different geographies and channels now that we're through January here and kind of the ongoing de-stocking process. You know, we're still seeing that de-stocking taking longer down in Brazil, but just kind of a sense of where we're at in that process as it runs its course and are you starting to see, you know, the ramp up to normalized inventories from that perspective? Just kind of a big picture view of that, that'd be great.
We did participate.
A greater level.
<unk>.
With the leverage that we've been in that kind of a temporary suspension with our bank from an acquired but we but.
We are in a position that we can we can choose.
Choose to come out of that of that covenant.
We do so then we would be in a position.
Should the board agreed that we.
We can be back in the market purchasing stock.
That being said we're obviously.
Looking at what's the best.
Return on the money that we have we obviously mentioned, we've got a little bit more runway now with $100 million to work with.
And we want to make sure that we.
Deliver on our numbers because frankly, we deliver deliberate on the numbers then.
Eric Wintemute: I mean, with regard to our specific inventories. We don't see that we've got any areas where we're way over inventory. I would say the only area is a little bit on the herbicide line, maybe more on the impacts that might have a little bit over what might be a normal inventory. But we've been pretty careful not to push. And this last year, it would have been difficult to try to push people anyway because they said they were de-stocking.
Right.
But at these levels.
Stock is very attractive.
Okay.
That's it for me thank you.
As a reminder, that star one to be placed in the question queue.
Our next question is coming from Jeff Project from Cove Street Capital. Your line is now live.
Eric Wintemute: So outside of the United States, yeah, we know that there are different products that have higher inventories, but we're not seeing that with our inventory. So we think, I mean, if we look at demand, demand was relatively stable, but there was an effort by everybody to try to reduce their inventory. So part of your question, or non-Scots.
Good afternoon, everybody Hi, Eric.
So.
Let's presume.
It's extremely doable within the core of your confidence to reproduce Youtube products to see normal supply chain reversion and get inventories down as they have in the past and et cetera, but.
Here's what I'm missing as someone who's followed the company for a very long time.
I don't I don't see anything different.
Eric Wintemute: Yeah, that's great. And just kind of a follow-up with building supply and inventory in Aztec and Doctal kind of, you know, obviously, you had supply issues last year, but kind of where are we in that process to get back to those normalized levels as you were before for those two? I mean, we started production on Aztec in September, and we completed the Aztec run in December. With Dactyl, we started production in November, and we still are. Kirsten Jackdahl, although I think we've produced enough at this point to get us into May, but we'll be going into another production run in April.
In other words, yes, a year 18 months from now being a better organization and doing things today that maybe should have been done five years ago, Okay, better but for example is this.
Process and three new board members that came on.
Is there a complete review of why this company exists as an independent company.
They review on daily why are we still devoting time effort and attention in Sim pass, which I get I would argue has been.
It's just never going to happen.
<unk>.
Is there going to be an announcement of some sort of new strategic division or a vision for the next five to seven years, which I would argue the company had 15 years ago and sort of <unk>.
Eric Wintemute: So I think we feel good about the supply chain for those two products. Okay. And the other big picture question is kind of the Chinese generics, as we saw pressure hit more Latin American markets and down south, but just kind of the sense of the supply coming out of China on the generic side, and is that starting to run its course as the impact on pricing and margins has been hit from that, just kind of a little more color on where the Chinese generics are ending up here. I think if we track the import prices of Chinese products, and as you noted, they fell fairly dramatically in the 23 years.
Andrew It over the last 15 years.
What I joked here, let's everyone on this call I think can assume you guys can mean revert back over and over the next 18 months it would be back where you work, but then what and how does the company and its stock.
<unk> been in the teens unquote for 15 years get better.
So.
We've outlined our plans that has gone from what we say our core business, which has been largely responsible for our growth.
For a number of years.
Going from.
The market cap of less than $10 million.
Eric Wintemute: We saw a pick on some of them, such as glyphosate and glucosinate, start to move back up. However, some of the products have flattened out, and some have trailed down even a little bit further. I mean, there is certainly pressure on the Chinese producers, given the Chinese economy, to export everything they can. But then, as far as what's in the channel, we don't deal in a lot of generics. We do have probably maybe Central America might be where we have more, but we were relatively flat year over year, down maybe three or four, I think four or five percent, I think, in Central America.
Yes, we've gone through through our down cycles on that front, but our core business has been.
Acquiring products and growing those products that.
The longer.
Sure sure.
The combination of acquisition.
Consolidations they've got.
Excess portfolio, so that part is still robust for us.
Our peers.
Rationalization every three to five years, so that that continues but.
What we've what we've done is we've grown from being a U S company to being a global company, we've acquired businesses as part of our core piece that would allow us to expand our our strengths and leverage our manufacturing assets.
Eric Wintemute: So again, our emphasis is on the products that we manufacture. It's where we get our best margins. It's where the focus of our global team is. So not that we are unaffected, certainly for sure, by a lower abundance of Chinese products, but it's certainly not anything that's poor for us. I appreciate it, Dakota.
Okay.
The group agreement solutions happens to be.
One of the two.
Biggest growth areas for our industry.
Which is something that we have seen strong investments in big investments from our bigger peers have put into getting into that space we've had relatively.
Scott Fortune: And then one last one for me, just kind of looking at your 2024 guidance, and can you, you know, you're looking to really drive growth in your SimPath and the green solutions kind of segments there? I know you have, you've had lofty targets there for the next couple years. Obviously, that's probably been revised down, but just kind of put in perspective where SimPath and green solutions fit in driving that growth in 2024 and any indications of kind of expectations for those two segments over the next couple years here? Yeah, so both of them are again technologies.
Frugal investments to acquire.
Have in position.
Pharmacy.
Patents as well so that's a.
Growth cycle that we and the board think is great and with regard to some past.
Yes.
The technology for precision against other big growth area for for the for the industry. So we have we have three growth platforms that are interrelated and as the board has reviewed and looked at it.
Eric Wintemute: We've got intellectual property that we're excited about. You know, I would say green solutions didn't hit the expectations for growth that we were hoping, certainly neither did CEMPAS, but we did have growth in both. But I think as people were kind of dialing back investments, that certainly had a position. But yeah, going forward, yeah, the conditions are sound. Again, from the farm gate economy, I think I may have been down, but things were kind of near record high.
The consensus is we need to we need to to <unk>.
Implement these growth patterns and feed upon them and grow them. So.
Yeah, that's that's where the board is now and as far as looking at.
Acquisitions mergers divestments as a board.
We're always looking at the best opportunities to improve shareholder value. So.
I mean, that's that's the position we're open to.
Alignments with other companies and we have done so in the past, but we've got.
Eric Wintemute: So, I mean, it will be us moving out and, you know, showing the return on investments that can be there with our green solution products. I think the demand continues to increase for green solutions as part of soil health and more efficient uptake of nutrients.
We've got a unique position here in the industry and we think we're in a good position to exploit and execute on it.
Eric I appreciate your time.
Okay.
Thank you we reshape of our question and answer session I'd like to turn the floor back over to management for any further for closing comments.
Well look forward to.
And so we're talking about.
So.
Providing additional color, but we felt it was important that we give you.
Eric Wintemute: Within CEMPAS, you know, we continue to add to our portfolio of products. So I think we're adding several products here for this year and plan on more again for the 25th year. So as we add more products, it just builds the demand for multiple products being applied at the time of plant. Great. That's it for me. I'll jump back in the queue.
An update of where we believe we are we believe we are at this point rather than waiting until <unk>.
Until early March period, So again, we will.
Such with you shortly and I appreciate the questions and the time that people spend on the call.
Have a good evening thank.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.
Yeah.
Chris Capps: Thank you. The next question is coming from Chris Capps from Loop Capital Markets. Your line is now live. Hey, good afternoon.
Eric Wintemute: I'll just pick up from that last question, I guess, on the growth platforms. Just curious if what you're saying just now, Eric, is, do you think that the growth objectives and trajectory for these platforms are still valid? And are you going to have to adjust the timeline, you know, over which you might achieve those targets? And then, within, you know, peeling that back a little bit, which of the platforms are you, you know, based on the momentum or the commercial traction that you have, which of the growth platforms do you feel most confident about in terms of the growth targets that you've communicated? And which ones do you feel like maybe were set back because of this supply chain craziness and so forth?
Eric Wintemute: Yeah, so I mean, the growth that we're showing in that 8% to 12% is, is, is, you know, a combination of all three targets. Yeah, we will, in March, kind of reset our targets over the 25 and 26 years that we have previously given. Yeah, we obviously took a step backwards and 23 and I think we would like to go another month or so to kind of see how things unfold. So we can give maybe a little bit, a little bit better update as to how we're going to look in our growth on all three platforms over the next three years. Okay, well, we'll sit tight on that.
Eric Wintemute: But speaking of the marches, I think you said that you would use that event to sort of quantify some of the expected transformation targets in terms of, you know, sizing the prize and just the overall transformation program. But I'm just curious, based on your initial guidance that you're reaffirming for 24, how much benefit will there be? Are you expecting just from the, you know, initial, you know, transformation efforts that are going to be in place this year? And so, I mean, the initial piece that we kind of identified, the 15 million that we did, that really was not related to the transformation targets that we were looking to accomplish.
Eric Wintemute: So, there were certainly, when you're looking at how to improve operating margin and costs and that sort of thing, those were efforts that we did without what we are now implementing. So that would be something that we would look at, okay, and how much of this is going to occur in 24, and then what's more annualized on 25 and then 26 going forward. So that's what we're in the process of pulling together. Now, as I mentioned before, I mean, as far as improvements in freight, raw materials, interest, and I'll say manufacturing optimization, those are part of, I mean, those will certainly be things that are going to be measured as part of the transformation process and the KPIs, but those are efforts that we began, you know, early in 23.
Eric Wintemute: So those are efforts, and I think, you know, we think that freight, we think we made good improvements on in Q4, obviously, as mentioned earlier about the bank lenience, and the increase in interest. So, of course, driving interest down is something that is key for us, their job of collecting cash on our inventory, we'd like to get that down to maybe in that 200 or below at the end of the year. And getting our debt to equity ratio down, of course, that just lowers our interest rates with the bank. So those are the things we still have to report. We've met with Karni several times and meet with them once a week, but our team meets with them kind of daily here.
Eric Wintemute: And they've kind of laid out some initial targets, but we need to kind of bake those a little bit as to how much benefit we're going to get from the system itself and having more clear data. But they have given us some targets that we are looking at now. We'll do some testing checks on those and be in a position to kind of give you some guidance. Just to make sure I understand so you're those opportunities that should manifest through the transformation process. That's separate than the 15 million initial target that you referred to. I'm just curious about how much of the 15 might be expected to contribute to the bridge from call it 58 million in EBITDA to 75 million in EBITDA based on your guide, is that that bridge is 17, a little over 17 million. So some of that is business recovery, but it sounds like some portion of it is from cost, you know, taking out costs as well. So I'm just trying to.
Eric Wintemute: Right, so yeah, in that 15 minute again, there were a number of pieces that we have us all rowing the boat in the same direction with the same information, being able to make better decisions. I mean, our sales team spends a lot of time putting information in. We expect to be able to free up some of their time by having the systems automated.
Eric Wintemute: So that should result in more sales because we're and I have a little bit more time with which to focus on customer interaction. So that would be an example of something that we've not put in place that we could quantify and then report back. So going back to part of what we're doing, let's say, with optimizing manufacturing, how well our yields are, raw material reductions, those are pieces that we have baked into that 15. But we don't have things like I mentioned, benefits of sales, and having better visibility, let's say, of our margins in real time so that we're not, I mean, it's visible to the marketing team.
Eric Wintemute: Here's where we are. I think I also mentioned that we're baking freight into the cost of goods. But getting that available in real time to any of our people will be, I think, a valuable tool as we look to optimize our margins globally. Okay, so I could just circle back to two more. One is about the generic pressure from China on, you know, the broad-spectrum herbicides. So, glyphosate, luphosamate.
Eric Wintemute: So, you mentioned it doesn't really affect you directly. I'm just wondering if there's an indirect effect on that, particularly in your Central America or Latin American operations. Is that... that aggressive for the day? I mentioned impact, which, you know, is an adjunct. Thank you, like a steroid, it's, you know, it's a little bit of cover for hard-to-kill weeds like glyphosate and glufosinate.
Eric Wintemute: But we have broadened that to offer, you know, an impact glufosinate combination, an atrazine combination, an acetylchlor combination. So we've broadened the spectrum of what we can do with that molecule. But as I said, there were a lot of broad coverage herbicides where the price came down.
Eric Wintemute: And that was probably, I would say, the biggest effect on pricing. So I mean, we certainly have some effect. But I mean, overall, we're down, again, 5% for the year. And we had two key products that we weren't able to provide in the season. And so I just, we're not quite in the same realm as people that are more reliant on generic products.
Chris Capps: Okay, that's helpful. And the last one is, you know, just sort of taking a step back. I mean, if you look at the share price, it's been halved over the last year. In what you've conveyed today, you're saying, my interpretation, right, that, okay, there were obviously some industry issues and then some idiosyncratic issues that have affected American Vanguard's performance. But, you know, the fourth quarter should restore some confidence.
Eric Wintemute: Your guidance, if you hit it, sort of suggests like, okay, this business isn't broken. We're just navigating some challenges. Now, as you come through this, you have, if you come out at 2.7 times levered with that, you know, improving EBITDA trajectory, you, one could say you, you know, by the end of this year, 24 you'll be overcapitalized. If that EBITDA level is hit, you're, you know, roughly, you know, rough math here, the company's sort of valued at 6.3 times, which So the question is, is this going to lead to an opportunity for American Vanguard to put some capital to work and buy back stock at these beleaguered levels? Just what's your view on that? What's the right thing to do?
Chris Capps: leverage level for the company to operate as you go through this transformation and navigating these issues. Thank you. I mean, you're making the call that the stock is under undervalued, and we certainly would agree with that. Now, as far as stop your purchase, we, you know, we did, we did participate at a greater level previously, with, with the leverage that we hit, we've, we've been in a, we're kind of in a temporary suspension with our bank from acquiring, but we, but you know, we, we are in a position that we can, we can choose to come out of that, of that covenant, and if we do so, then we would be in a position, should, should the board agree that we could be back in the market purchasing stock.
Chris Capps: That being said, you know, we're obviously looking at what's the best return on the money that we have. We obviously mentioned we've got a little bit more runway now with 100 million to work with, and we want to make sure that we deliver on our numbers because, frankly, if we deliver on the numbers, then, But at these levels, yeah, the stock's very attractive. That's it for me, thank you. Thank you. As a reminder, that's star number one to be placed in the question.
Operator: Our next question is coming from Jeff Bronchik from Coe Street Capital. Your line is now: Good afternoon, everybody. Hi, Eric.
Jeff Bronchik: Let's presume. It's extremely doable and within the core of your competence to, you know, reproduce YouTube products, to, you know, see normal supply chain reversion, and get inventories down as they have in the past and etc. Here's what I'm missing, as someone who's followed the company for a very long time. Um, I don't, I don't see anything different.
Eric Wintemute: In other words, yes, a year, 18 months from now, being a better organization and doing things today that maybe should have been done five years ago, okay, better. But, for example, is this process, and the three new board members that came on board, a complete review of why this company exists as an independent company? Is there a review of really why are we still devoting time, effort, and attention to Sympath, which I, again, I would argue has been, is just never going to happen? Is there going to be an announcement of some sort of new strategic division or a vision for the next five to seven years, which I would argue the company had 15 years ago and sort of meandered over the last 15 years? That's what I don't hear.
Eric Wintemute: Everyone on this call, I think, can assume you guys can mean revert back over the next 18 months and be back where you were. But then what? And how does a company and a stock that's, you know, whatever, been in the teens, unquote, for 15 years, get better? So we've outlined a plan that has gone from, what we say, our core business, which has been largely responsible for our growth for a number of years, and gone from a market cap of less than $10 million to more than $30 million. And yes, we've gone through our down cycles in that process. But our core business has been acquiring products and growing those products that, of Georgia to our peers, or through their combination of actors, and or rationalization every three to five years. So, I hope that that continues.
Eric Wintemute: But what we've done is we've grown from being a U.S. company to being a global company; we've acquired businesses as part of our core business that would allow us to expand our strengths and leverage our manufacturing assets in other countries. Green Solutions happens to be one of the two biggest growth areas for our industry, which is something that we've seen strong investments and big investments from our bigger peers put into getting into that space. We've had relatively frugal investments to acquire and have in place over a hundred products and a great deal of patents as well. So that's a growth cycle that we on the board think is great. And with regard to SimPass, yeah, the technology for precision is another big growth area for the industry.
Eric Wintemute: So we have three growth platforms that are interrelated, and as the board has reviewed and looked at them, the consensus is that we need to implement these growth patterns and feed upon them and grow them. So yeah, that's where the board is now. And as far as looking at acquisitions, mergers, and divestments as a board, obviously, we're always looking at the best opportunities to improve shareholder value. So I mean, that's the position we're open to alignments with other companies, and we have done so in the past, but we've got a unique position here in the industry, and we think we're in a good position to exploit and execute on it.
Eric Wintemute: Eric, I appreciate your... Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further or closing comments. Well, I look forward to talking about it, and providing additional color, but we felt it was important that we give you an update of where we believe we are at this point rather than wait until the early March period. So again, we'll be with you shortly and appreciate the questions and the time that you people spent on the call. Have a good evening. Thank you for your participation.