Q1 2024 American Vanguard Corp Earnings Call

May 9, 2024

Greetings and welcome to the American Vanguard first quarter 2024 earnings conference call and webcast. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Operator: Greetings and welcome to the American Vanguard first quarter 2024 earnings conference call and webcast. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anthony Young, Director of Investor Relations. Thank you; you may begin.

Operator: As a reminder, this conference is being recorded it is now my pleasure to introduce your host Anthony Young director of Investor Relations. Thank you you may begin.

Anthony Young: Thank you Jessie and welcome everyone to American Vanguard's first quarter 2024 earnings review.

Anthony Young: Thank you, Jesse, and welcome everyone to American Vanguard's First Quarter 2024 Earnings Review. Our speakers today will be our chairman and CEO, Eric Wintemute, and our CFO, David Johnson. Also joining us to answer your questions will be our Chief Operating Officer, Bob Trogele, our Chief Information Officer, Tim Donnelly, and our Chief Transformation Officer, Don Gualdoni. Before beginning the presentation, I'd like to take a moment for a cautionary reminder.

Anthony Young: Our speakers today will be our chairman and CEO, Eric went to me and our CFO David Johnson.

Anthony Young: Also joining us to answer your questions will be our chief operating officer, Bob <unk>, Our Chief Information Officer, Tim Donnelly, and our Chief transformation Officer, Don called Arnie.

Anthony Young: Before beginning the presentation, let's take a moment for our cautionary reminder.

Anthony Young: The company, from time to time, may discuss forward-looking information. Except for the historical information contained in this release, all forward-looking statements are estimates by the company's management and are subject to various risks and uncertainties that may cause results to differ from management's current expectations. Such factors include weather conditions, changes in regulatory policy, and other risks as detailed from time to time in the company's SEC reports and filings. All four forward-looking statements, if any, in this release present the company's judgment as of the date of this release. With that, I will turn the call over to Eric. Thank you, Anthony.

Anthony Young: The company from time to time May discuss forward looking information except for the historical information contained in this release all forward looking statements are estimates by the Companys management and are subject to various risks and uncertainties that may cause results to differ from management's current expectations and.

Anthony Young: Such factors include weather conditions changes in regulatory policy and other risks as detailed from time to time in the company's SEC reports and filings.

Eric: All forward looking statements, if any and its release present, the company's judgment as of the date of this release.

Anthony Young: With that I will turn the call over to Eric Thank you and Hello.

Eric G. Wintemute: Thank you, Anthony. Hello, everyone, and welcome to American Vanguard's first quarter 2024 earnings call. We appreciate your continued support and interest. As you will note from slide four, I will be covering four topics today: our Q1-24 Financial Performance, the current market condition, our 24-month Outlook, and our Transformation Outlook. Moving to slide 5 on Q1 performance, we recorded a 35% jump in adjusted EBITDA during the period. In addition, our operating income rose by 87%.

Eric: Hello, everyone and welcome to American Vanguard's first quarter 'twenty to 'twenty four earnings call. We appreciate your continued support and interest.

Eric G. Wintemute: As you will note from slide four I'll be covering four topics today, our Q1 'twenty four financial performance.

Eric G. Wintemute: Current market conditions are 24 outlook.

Eric G. Wintemute: Our transformation efforts.

Eric G. Wintemute: Okay.

Eric G. Wintemute: Moving to slide five.

Eric G. Wintemute: Q1 performance, we recorded a 20 or 35% jump in adjusted EBITDA during the period.

Eric G. Wintemute: In addition, our operating income rose by 87%.

Eric G. Wintemute: This improvement in operating leverage is evidence that the cost control initiatives that we started in the second half of 2023 are having their desired effects. As I've mentioned in prior calls, our cross-functional teams remain focused on controlling expenses while maximizing operational efficiency.

Eric G. Wintemute: This improvement in operating leverage as evidenced that the cost control initiatives that were started in the second half of 'twenty three are having their desired effect.

Eric G. Wintemute: As I've mentioned in prior calls our cross functional teams remain focused on controlling expenses, while maximizing operational efficiency.

Eric G. Wintemute: In that vein, we recorded lower operating expenses as a percent of net sales while increasing sales by 8%. Further, all three of our businesses grew during the quarter within our consolidated sales results. U.S. crop was up 9%, U.S. non-crop 28%, and international 2%. Now, let's turn to our sales during Q1, as shown on slide 6.

Eric G. Wintemute: In that vein, we recorded lower operating expenses as a percent of net sales, while increasing sales by 8%.

Eric G. Wintemute: Further all three of our businesses grew during the quarter.

Eric G. Wintemute: Within our consolidated sales results.

Eric G. Wintemute: U S crop was up 9% U S non crop, 28% and international 2%.

Eric G. Wintemute: Okay.

Eric G. Wintemute: Now, let's turn to our sales during Q1 as per slide six.

Eric G. Wintemute: And U S crop, we experienced strong results across multiple crops sales of our granular soil insecticides rose, which is indicative of continued strong demand from corn growers further we experienced strong sales of our liquid corn soil insecticides index.

Eric G. Wintemute: In the U.S. crop, we experienced strong results across multiple crops. Sales of our granular soil insecticides rose, which is indicative of continued strong demand from corn growers. Further, we experienced strong sales of our Liquid Corn Soil Insecticide Index. Similarly, herbicides rose during the period, due in part to Dactyl, which was not available last year due to supply issues. Also, IMET sales rose, with demand driven by increased penetration. However, these increases were partially offset by a drop in soil fumigant sales as wet conditions in the northwest truncated the application window.

Eric G. Wintemute: Totally herbicides rose during the period due in part to that goal, which was not available last year due to supply issues.

Eric G. Wintemute: Also I met sales rose with demand driven by increased peanut.

Eric G. Wintemute: Acreage.

Eric G. Wintemute: These increases were partially offset by a drop in soil fumigant sales as wet conditions in the northwest truncated the application window.

Eric G. Wintemute: But then U S. Non crop our mosquito adult besides sales were up in anticipation of stronger than normal tropical storm activity.

Eric G. Wintemute: Within U.S. non-crop, our mosquito adulticide sales were up in anticipation of stronger-than-normal tropical storm activity. Also, our sales of pest strips were up significantly as consumer and technical markets recovered from the prior year. In addition, our ornamental nursery business, OHP, recorded stronger sales led by its biorational and pre-emergent product lines. Our international business was up slightly at the top line, led by Mexico, where most product lines grew, and APAC, aided by favorable weather conditions in Australia.

Eric G. Wintemute: Also our sales of pest strips were up significantly as consumer Tech technical markets recovered from the prior year.

Eric G. Wintemute: In addition, our ornamental nursery business Oh H P recorded stronger sales led by its bio rational and pre immersion products lines.

Eric G. Wintemute: Our international business was up slightly at the top line led by Mexico, where most product lines grew in APAC aided by favorable weather conditions in Australia.

Eric G. Wintemute: Our LATAM business was about even for the quarter, with the addition of sales from our recently acquired business in Ecuador partially offset by generic pressure in Central America. All told, then, all three of our businesses demonstrated improved performance, and on a consolidated basis, we continue to grow. Before moving on to current market conditions and our 24 Outlook and details on transformation, I'd like to turn the call over to David for his financial analysis. David? Thanks, Jim.

Eric G. Wintemute: Our Latam business was about even for the quarter with the addition of sales from our recently acquired business in Ecuador, partially offset by generic pressure on Central America.

David: All told that.

David: All three of our businesses demonstrated improved performance and on a consolidated basis, we continue to grow.

Eric G. Wintemute: Before moving on to current market conditions, and our 24 outlook and details on transformation I would like to turn the call over to David for his financial analysis David.

Eric G. Wintemute: Eric.

David T. Johnson: I will begin my comments with a recap of our first quarter 2024 performance, during the course of which I will present important metrics for the period and will close with comments on working capital. As you will see from slide eight, our overall sales for the first three months of 2024 increased by about 8% from $125 million to $135 million for the reasons that Eric has already outlined. It is worth repeating here that all three of our businesses, U.S.

David: I will begin my comments with a recap of our first quarter 2020 full performance during the course of which I will present important metrics for the period and little place with come at some working capital.

David T. Johnson: As you will see from slide eight our overall sales for the first three months of 2024 increased by about 8% from 125 million to $135 million for the reasons that Eric has already outlined.

David T. Johnson: It is worth repeating here that all three of our businesses U S crop up 9% U S known crop up 28% and international up 2% grew at the net sales line.

David T. Johnson: Turning to slide nine while sales were up 8% overall grid.

David T. Johnson: Crop, up 9%. U.S. non-crop, up 28% and international, up 2% grew at the net sales line. Turning to slide nine, while sales were up 8% overall, Gross Margin dollars improved by 10%, driven by stronger sales of some of our higher-margin insecticides and herbicides, and Strong Factory Performance. Overall, price volume actions, mix of sales, and factory performance resulted in a gross margin that improved slightly from 30.8% to 31.4% of sales. As you will see on slide 10.

David T. Johnson: Gross margin dollars improved by 10% driven.

David T. Johnson: Driven by stronger sales of some of our higher margin insecticides and herbicides.

David T. Johnson: And the strong factory performance.

David T. Johnson: Overall price volume actions mix of sales and factory performance resulted in gross margin that improved slightly from 38%.

David T. Johnson: That's 1.4% of sales.

David T. Johnson: As you can see on slide 10.

David T. Johnson: Our operating expenses in the first quarter of 2024 edged up to $36.3 million from $35.3 million in the same period of 2023. This increase was driven primarily by our spending of $1.2 million on developing our digital and business transformation plan. We plan to spend more in the next few quarters to invest in the long-term future of our business by implementing initiatives to achieve substantial improvement in business performance. We will see some initial improvements in 2024 that are expected to be largely offset by transformation spending and then primarily benefiting 2025 earnings and beyond.

David T. Johnson: Our operating expenses in the first quarter of 2024 edged up to $36.3 million.

David T. Johnson: $35 $3 million in the same period of 2023.

David T. Johnson: This increase was driven primarily by a spending of $1.2 million on developing digital and business transformation plans.

David T. Johnson: We plan to spend more in the next few quarters to invest in the long term future of our business by implementing initiatives to achieve substantial improvement in business performance.

David T. Johnson: We will see some initial improvements in 2024 that are expected to be largely offset by transformation spending and then primarily benefiting 'twenty 25 earnings and beyond.

David T. Johnson: In addition, we had increases in general and administrative expenses related to foreign exchange audit costs long term and short term incentive compensation and investments and initiatives to improve both our information technology systems and human resources infrastructure.

David T. Johnson: In addition, we had increases in general and administrative expenses related to foreign exchange, audit costs, long-term and short-term incentive compensation, and investments in initiatives to improve both our information technology systems and our human resources infrastructure. These cost increases were offset by cost control efforts in selling, regulatory, product development, and R&D.

David T. Johnson: These cost increases were offset by cost control efforts and selling regulatory product development and dollar and D.

David T. Johnson: With respect to cash flow.

David T. Johnson: With respect to cash flow, as per slide 11, the company has a pronounced annual cycle of building inventory at the start of the calendar year in order to fuel global sales, particularly during the second and third quarters. It is usual for working capital to expand in the first quarter, and Q1 2024 is pretty much in line with the same period of the prior year. We use our revolver debt to fund working capital expansion at the start of the year and pay it down as swiftly as possible.

David T. Johnson: Slide 11.

David T. Johnson: The company has a pronounced annual cycle of building inventory at the start of the calendar year in order to fuel global sales, particularly joined the second and third quarters.

David T. Johnson: It is usual to working capital to expand in the first quarter and Q1 'twenty 'twenty four is pretty much in line with the same period of the prior year.

David T. Johnson: We use our revolver debt to fund working capital expansion at the start of the year and pay down as swiftly as possible as the cash cycle completes usually later in the year.

David T. Johnson: The Cash Cycle Completes, usually later in the year. We have been carefully managing the inventory build as we monitor industry demand trends. At the end of the quarter, we had $13.7 million in cash, as compared to $19.6 million this time last year.

David T. Johnson: We have been carefully managing the inventory build as we monitor and industry demand trends.

David T. Johnson: At the end of the quarter, we had $13 $7 million in cash as compared to $19 $6 million. This time last year.

David T. Johnson: This improvement in the reduced amounts of cash held in order to pay down debt is the result of a significant effort at the end of the quarter to pull cash back to the corporate center to reduce debt and interest expenses as much as possible. Looking at our statement of operations on slide 12, you will note that our sales grew by 10.8%, our gross profit increased by 10%, and our operating expenses increased by only 3%.

David T. Johnson: This improvement and reduced amounts of cash held in order to pay down debt is the result of significant effort at the end of the quarter to pull cash back to the corporate center to reduce debt and interest expenses as much as possible.

David T. Johnson: Looking at our statement of operations on Slide 12, you will note that our sales grew by 10, 8% our gross profit increased by 10% and our operating expenses increased by only 3%.

David T. Johnson: These factors together generated significant improvement in operating leverage with operating income up 87% over the same period of 2023.

David T. Johnson: These factors together generated a significant improvement in operating leverage with operating income up 87% over the same period of 2023. Furthermore, the fair value of our equity instrument improved during the quarter. As a result, profit before interest and tax improved by 107%.

David T. Johnson: Furthermore, the fair value of our equity instrument and print during the quarter.

David T. Johnson: As a result profit before interest and tax improved by 107%.

David T. Johnson: Our interest rates increase from $6, 8% last year to eight 3% this year primarily related to movements in the fed rate, but also as a result of the current modifications we have without bankers.

David T. Johnson: Our interest rate increased from 6.8% last year to 8.3% this year, primarily related to movements in the Fed rate, but also as a result of the current modifications we have with our bankers, that include more flexibility on leverage and fixed charge coverage ratios, but adds about half a percent of interest rate. At the same time, our borrowings are up as a result of our current investment in working capital. As I just mentioned, our business cycle is such that we will normally see working capital and, consequently, debt increase during Q1.

David T. Johnson: That includes more flexibility on leverage and fixed charge coverage ratios, but adds about half a percent in interest rate.

David T. Johnson: At the same time, our borrowings are up as a result of our current investments in working capital.

David T. Johnson: Just mentioned our business cycle is such that we will normally see working capital and consequently that increasing during Q1 and.

David T. Johnson: Q2, possibly leveling off to slightly higher in Q3 and then a significant reduction in Q4 as the growing cycle for our major markets completes its own annual cycle. Our tax rate is higher this quarter primarily as a result of the fact that our entities in Brazil made losses in the first quarter of 2024. Because of Brazil's past business performance, US GAAP does not currently permit us to take the benefit on tax expense that would normally be available.

David T. Johnson: In Q2, possibly leveling to slightly up in Q3, and then significantly.

David T. Johnson: Inefficient reduction in Q4 as the drilling cycle for our major markets completes its own annual cycle.

David T. Johnson: Our tax rate is higher this quarter, primarily as a result of the fact that our entities in Brazil made losses in the first quarter 'twenty 'twenty four.

David T. Johnson: Because of visit Brazil's past business performance U S. GAAP does not currently permitted us to take the benefit on tax expense that would normally be available.

David T. Johnson: As a result of the increased interest expense and the changes in year over year tax expense on net income is down slightly even though our operating performance and consequently, adjusted EBITDA was up significantly.

David T. Johnson: As a result of the increased interest expense and the changes in year-over-year tax expense, our net income is down slightly even though our operating performance and, consequently, adjusted EBITDA were up significantly. Turning now to working capital, on slide 13, you will see our inventory trends on a quarterly basis for the last several quarters. Well, inventory grew on an absolute basis in Q1 2024, but as compared to Q1 2023, you can see that the increase since 12-31-23 is actually lower in 2024 than in 2023.

David T. Johnson: Turning now to working capital on Slide 13, you will see our end inventory trends on a quarterly basis for the last several quarters.

David T. Johnson: Inventory grew on an absolute basis in Q1 2024.

David T. Johnson: As compared to Q1 2023, you can see that the increase since 12 31 'twenty three is actually lower than in 2024, then in 2023.

David T. Johnson: Further at 39% of net sales our investment in inventory similar to the level at this time last year and then we would like to see this balance come down more quickly is something we need to manage carefully down ensuring that we have the right balance of products in inventory to meet customer needs in a timely manner joined the 'twenty 'twenty four.

David T. Johnson: Further, at 39% of net sales, our investment in inventory is similar to the level at this time last year. And though we would like to see this balance come down more quickly, it is something we need to manage carefully, ensuring that we have the right balance of products in inventory to meet customer needs in a timely manner during the 2024 season. During the latter part of the year, we plan to move inventory levels down with the intention of reaching a 2024 year-end target of around 34% of net sales. That sums up my detailed comments.

David T. Johnson: Full season.

David T. Johnson: Joining the later parts of the year, we plan to move inventory levels down with the intention of reaching a 2024 year end target of around 34% of net sales.

David T. Johnson: That sums up my detailed comments on the whole the first quarter of 2024 showed improvement in comparison to the same period of 2023 in terms of both operating income and adjusted EBITDA. The company has embarked on an exciting phase of transformation and he is managing to invest in our major initiatives and still return.

David T. Johnson: On the whole, the first quarter of 2024 showed improvement in comparison to the same period of 2023 in terms of both operating income and adjusted EBITDA. The company has embarked on an exciting phase of transformation and is managing to invest in a major initiative and still return a profitable result. And as such, I'm quite pleased with the progress we're making in this regard. This initiative will be critically important to the business in the latter part of 2024 and into 2025 and beyond.

David T. Johnson: A profitable result, and as such I'm quite pleased with the progress we're making in this regard.

David T. Johnson: This initiative will be critically important to the business in the latter part of 'twenty 'twenty, four and into 2025 and beyond.

Eric G. Wintemute: With that, I turn the call back to Eric. Eric? Thank you, David.

David T. Johnson: With that I turn the call back to Eric Eric.

Eric: Thank you David.

Eric G. Wintemute: As per slide 14, on news of an improving U.S. economy, the Fed seems to have shifted away from making interest rate hikes and is now debating whether to cut or hold those rates. In addition, the U.S. dollar has begun to strengthen over foreign currencies. By helping consumers with purchasing power over foreign-made goods, the strong dollar, when coupled with high grain inventory stocks, has served to suppress commodity prices compared to 2023. Nevertheless, even at current corn and soybean prices, at current levels, farming still remains a profitable business. Further, while still observing conservatism and buying crop inputs.

Eric: As for Slide 14 on news of an improving U S economy. The fed seems to have shifted away from making interest rate hikes and is now debating whether to cut or hold those rates and.

Eric G. Wintemute: In addition, U S dollar has begun to strengthen over foreign currencies will.

Eric G. Wintemute: While helping consumers with purchasing power or foreign made goods.

Eric G. Wintemute: <unk> dollar when coupled with hi crush.

Eric G. Wintemute: Inventory stocks has served to suppressed commodity prices compared to 2023.

Eric G. Wintemute: Nevertheless, even at current corn and soybean prices.

Eric G. Wintemute: Current levels farming still remains a profitable business.

Eric G. Wintemute: Further while still absorbing conservatism and buying crop inputs, our distribution partners have relaxed their stringent talking approach from last year at least with respect to our portfolio.

Eric G. Wintemute: Our distribution partners have relaxed their stringent deep talking approach from last year, at least with respect to our public portfolio. In short, the farm economy is strong, and we expect stable, albeit more deliberate, buying activity. The same is true of the non-crop market, where we are seeing further normalization of procurement patterns by retail and professional customers.

Eric G. Wintemute: In short the farm economy is strong and we expect stable, albeit more deliberate buying activity.

Eric G. Wintemute: The same is true of the non crop partner, where we are seeing further normalization of procurement patterns by retail and professional.

Eric G. Wintemute: Customers.

Eric G. Wintemute: Now, let's turn to slide 15.

Eric G. Wintemute: On our 'twenty 'twenty four for your outlook.

Eric G. Wintemute: Now let's turn to slide 15, on our 2024 Fool Year Outlook. While market conditions remain stable, there is one factor involving our herbicide Dactyl that causes us to adjust our previous full year target. In the course of a routine registration review, the U.S. EPA has expressed concern over potential health issues with this product. Accordingly, out of an abundance of caution, the company has voluntarily suspended sales of Dactyl and submitted a significantly narrower product label to the agency that we believe addresses their concerns.

Eric G. Wintemute: Market conditions remained stable, there's one factor involving our herbicide doctor all that causes us to adjust our previous full year targets.

Eric G. Wintemute: In the course of routine registration review U S. EPA has expressed concern over potential health issues of this product.

Eric G. Wintemute: We have committed to maintaining that suspension of sales pending EPA's review and potential approval of that new label. The outcome of the agency's review is uncertain at present, but we are factoring the loss of Dachdel sales into our 24 forecast numbers. Accordingly, our full year 24 targets are as follows. We expect next sales to increase between 6% and 9% as compared to 23%, while adjusted EBITDA will be within the range of 60 to 70 million. The midpoint of this range would be a 19% increase over 23-adjusted DBDAIs.

Eric G. Wintemute: Accordingly out of abundance of caution.

Eric G. Wintemute: The company has voluntarily suspended sales of Dassault and submitted a significantly narrow product label to the agency that we believe addresses their concerns.

Eric G. Wintemute: We are committed to maintaining that suspension of sales pending Epa's review.

Eric G. Wintemute: And potential approval of that new label.

Eric G. Wintemute: The outcome of the agency's review is uncertain at present, but.

Eric G. Wintemute: But we are factoring the loss of dactyl sales into our 24 forecast numbers.

Eric G. Wintemute: Accordingly, our full year 2004 targets are as follows.

Eric G. Wintemute: Expect net sales to increase between six and 9% as compared to 23, while adjusted EBITDA will be within the range of $60 million to $70 million.

Eric G. Wintemute: The midpoint of this range.

Eric G. Wintemute: It would be a 16% I'm, sorry, and a 19% increase over 23 adjusted EBITDA.

Eric G. Wintemute: Further, at that midpoint, our stock is currently trading at a discount of nearly 50%, assuming a standard valuation metric of 10 times EBITDA. Now, let me turn next to our transformation initiatives, as shown on slide 16. On the digital slide, we are working with QAD not only to upgrade to their current adaptive global ERP system but also to standardize our business process. At the end of this initiative, then, all segments will be following the same processes, using the same set of tools, and drawing from one source of truth.

Eric G. Wintemute: Further at that midpoint, our stock is currently trading at a discount of nearly 50% assuming a standard valuation metric of 10 times EBITDA.

Eric G. Wintemute: Let me turn next to our transformation initiatives as per slide 16.

Eric G. Wintemute: Yeah.

Eric G. Wintemute: On the digital slide we are working with QAD not only to upgrade their current their current adaptive global ERP system, but also to standardize our business processes.

Eric G. Wintemute: At the end of this initiative then all segments will be following the same processes using the same set of tools and drawing from one source of truth.

Eric G. Wintemute: This will give senior management, a clear granular view into our business operations and both increase our ability to make real time decisions and to plan and forecast with greater accuracy.

Eric G. Wintemute: This will give senior management a clear granular view into our business operations and both increase our ability to make real-time decisions and to plan and forecast with greater accuracy. On the structural transformation side, we are moving quickly with what we call Project Accelerator. Working with Carney's team, over the next 16 weeks, we'll be doing deep-level analysis and several sub-initiatives in parallel. Within the commercial realm, we will focus on our sales and marketing strategies, pricing, and product.

Eric G. Wintemute: On the structural transformation side, we are moving quickly.

Eric G. Wintemute: With what we call project accelerator.

Eric G. Wintemute: Working with Carnival team over the next 16 weeks, we'll be doing deep level analysis and several sub initiatives unparallel.

Eric G. Wintemute: Within the commercial realm, we will focus on our sales and marketing strategy.

Eric G. Wintemute: Soon and product mix.

Eric G. Wintemute: Within Operations, we will do deep dives into material sourcing, logistics, and manufacturing productivity. Within GNA, we will select and refine an organization design that best supports our future business plan, as well as ensure that these many efforts are managed through a properly resourced transformation office. This broad initiative will generate EBITDA benefits through a range of results, including reduced costs, improved efficiencies, emphasis on higher-margin products, and better defined roles and responsibilities.

Eric G. Wintemute: It was an operation we will do deep dives into material sourcing logistics and manufacturing productivity.

Eric G. Wintemute: Within G&A, we will select and refine an organization design that is best supports our future business plan as well as ensure that these many efforts are managed through a properly resource transformation office.

Eric G. Wintemute: This broad initiatives will generate EBITDA benefits through a range of results, including reduce cost improve efficiencies emphasis on higher margin products and better defined roles and responsibilities.

Eric G. Wintemute: As I stated in our last call, we are confident that we will gain at least $15 million of annualized adjusted EBITDA by 2026 through this investment. In closing, during the quarter, we navigating our business through complex markets while improving operating efficiencies and growing sales. Further, the 24 market conditions are stable and, I would argue, stronger than 2023. These conditions will serve to generate demand for our products and enable us to improve our inventory and working capital positions.

Eric G. Wintemute: As I stated in our last call. We are confident that we will gain at least $15 million of annualized adjusted EBITDA by 2026 through this investment.

Eric G. Wintemute: Yeah.

Eric G. Wintemute: In closing during the quarter, we navigated our business through complex markets, while improving operating efficiencies and growing sales.

Eric G. Wintemute: Further the 24 market conditions are stable and I would argue stronger than 2023.

Eric G. Wintemute: These conditions will serve to generate demand for our products and enable us to improve our inventory and working capital.

Eric G. Wintemute: <unk>.

Eric G. Wintemute: In addition, having begun transformation initiatives in earnest, we are poised to generate even greater operating leverage. In short, we see promising opportunities for growth and are taking strong measures to ensure that we are positioned to capitalize upon them. So with that, I'll turn that back to you, Jesse. Thank you.

Eric G. Wintemute: In addition, having begun transformation initiatives in earnest, we are poised to generate even greater operating leverage.

Eric G. Wintemute: In short, we see promising opportunities for growth and are taking strong measures to ensure that we are positioned to capitalize upon.

Jesse: So with that I'll turn the back to your adjusted.

Jesse: Thank you, ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Operator: Thank you. Ladies and gentlemen, we will now be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is coming from the line of Scott Fortune with Roth MKM. Please proceed with your question.

Scott Thomas Fortune: Information tumbler indicate that your line is in the question queue.

Operator: Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Operator: Our first question is coming from the line of Scott Fortune with Roth M. P. M. Please proceed with your question.

Scott Thomas Fortune: Yeah, good afternoon, and thanks for the question. I just want to follow up on the transformation strategy.

Scott Thomas Fortune: Yes, good afternoon, and thanks for the question.

Scott Thomas Fortune: Just wanted to follow up regarding transformation strategy is nice to see that that's starting to be implemented here.

Eric G. Wintemute: It's nice to see that that's starting to be implemented here. It looks like that will really come through for most of the year. But I heard you say in your comments that any cost savings for 2024 here will be offset by some of the expenses associated with that. So I'm really kind of factoring in more of a 2025 to expect that 15 million in efficiencies, 2025, 2026 going forward here. Just want clarification on that from the operations standpoint.

Eric G. Wintemute: Looks like that will really come through for most of the year and I heard you say in your comments that any cost savings for 2024 here will be offset by some of the expenses to that so.

Eric G. Wintemute: Kind of factoring in more of a 2025 to expect that that $15 million of inefficiencies 'twenty five 'twenty six going forward here just want a clarification on that from the operation standpoint.

Speaker Change: Yes, Scott that that's true.

Eric G. Wintemute: Yeah, Scott, that's true. So we do have a cost to implement and go through this deep dive that we're going through implementation right now. You know, we hope to have, we'll have some benefits certainly this year. But as I said, we were projecting that it'll overshadow the amount of. Transcribed by https://otter.ai, That's 15 million of improved actual.

Eric G. Wintemute: So we are we do have a cost to implement and go through this deep dives, we're going through implementation right now.

Eric G. Wintemute: Yeah, we hope to have what we will have some benefit certainly this year, but as I said, we were projecting that it will.

Eric G. Wintemute: Okay.

Eric G. Wintemute: Well overshadows the amount of money.

Eric G. Wintemute: The transformation and as we go into 'twenty five.

Eric G. Wintemute: Most of the heavy lifting will be done and we will start soon.

Eric G. Wintemute: Did I get them.

Eric G. Wintemute: $15 million of improved actual EBITDA.

Speaker Change: Got it that's helpful. And then just following up on your outlook.

Eric G. Wintemute: Yeah, that's helpful. So and then just following up on your outlook, obviously, bringing it down to 6 to 9% from 8 to 12% on the sales side of it, just kind step us through, you know, Dactyl was just getting back on the market from that standpoint, but it's the size of that from a kind of revenue standpoint that's driving that down a little bit. And are there other factors in that sales of 6 to 9% outside of Dactyl? And then just any color on timing from a historical standpoint, kind of as you re-register this through the EPA? I know it's kind of unknown, but what is your sense of timing for Dactyl coming back on potentially?

Eric G. Wintemute: With the bringing it down to 6% to 9% from 8% to 12% that sales side of it.

Eric G. Wintemute: Just kind of step us through you know Doctor was just getting back on the market.

Eric G. Wintemute: Standpoint, this kind of.

Eric G. Wintemute: The size of that from a from a revenue standpoint, that's driving that down a little bit and are there other factors in that that sales, 69% outside of that cell and then just any color from timing from a historical standpoint kind of as you re registered is through the EPA I know it.

Eric G. Wintemute: This is kind of I know, but.

Eric G. Wintemute: Your sense of timing for exact I'll come back on to take time.

Eric G. Wintemute: Okay.

Eric G. Wintemute: So we submitted the revised label this week. It is a fairly restrictive label.

Eric G. Wintemute: So we submitted the revised label this week it is a.

Eric G. Wintemute: Fairly restricted label.

Eric G. Wintemute: We've.

Eric G. Wintemute: We expect EPA to respond fairly quickly. We've been in strong negotiations and discussions with EPA now for well over a year. And we think we've kind of reached where we're going to be. And then we discussed pathways of additional information and data that would potentially let us get back at least some of the market that we're not going to have, and certainly in the short term. So the timing of that, some pieces, may be relatively quick, but others could be in that one to three-year timeline, depending on the scope of the studies and then the timing for review.

Eric G. Wintemute: Expect EPA to respond fairly quickly we've been strong negotiations and discussions with EPA now for for well over a year.

Eric G. Wintemute: We've got to kind of reach where we're going to be and then and then we discussed.

Eric G. Wintemute: Waves of <unk>.

Eric G. Wintemute: Additional information and data that would.

Eric G. Wintemute: Essentially let us get back at least some of the of the market that we're not.

Eric G. Wintemute: I'm not going to have sort of a short term.

Eric G. Wintemute: So the timing of that.

Eric G. Wintemute: Yes some.

Eric G. Wintemute: Some pieces.

Eric G. Wintemute: May be relatively quick, but others could be in that one to three year timeline, depending on the scope of the studies and then the timing for a review.

Eric G. Wintemute: As far as scope. This is this is about a 15 million dollar product.

Eric G. Wintemute: As far as scope is concerned, this is about a $15 million product, and we had about a third of that in the first quarter, and so what we've done is we've just made the assumption that we're not going to sell anything more for the balance of the year, and we'll factor that in. We'll have a much clearer picture of what 25 is going to look like soon, certainly before we come up with the 25 numbers, and if anything were to change for 24, we'd certainly adjust it, but at this point, we're not anticipating anything material here in the balance of the year.

Eric G. Wintemute:

Eric G. Wintemute: And we had about a <unk>.

Eric G. Wintemute: A third of that in the first quarter.

Eric G. Wintemute:

Eric G. Wintemute: And so what we've done is we've just made the assumption, we're not going to sell anything more for the balance of the year and we'll factor that will have a much clearer picture of what 25 is going to look like Oh.

Eric G. Wintemute: Soon certainly before we come up with 25 numbers.

Eric G. Wintemute: And if anything were to change for 'twenty forward certainly it certainly adjust it but at this point, we're not anticipating.

Eric G. Wintemute: Anything material here are the balance of the year.

Eric G. Wintemute: We'll follow up on that as far as, you know, coming out of the registration process, is that position even stronger to kind of be a bigger market for you, or how do you look at that once you get through the process here for the competition and the opportunity for DACA?

Speaker Change: Hello, Paul.

Eric G. Wintemute: A follow up on that as far as.

Eric G. Wintemute: Coming out of their registration process is that position is even stronger to kind of be a bigger market for you or how do you look at that once the once you get through the process here for the competition and the opportunity for tactile.

Eric G. Wintemute: Well, Dactyl was growing nicely for us. It's a very, very niche herbicide, kind of for cole crops and onions.

Eric G. Wintemute: Well that all was.

Eric G. Wintemute: <unk> was growing.

Eric G. Wintemute: Isolate for us, it's a very very niche herbicide.

Eric G. Wintemute: Got it for a coal crops in.

Eric G. Wintemute: I don't think we see going back into the onion market, but the KOL crops.

Eric G. Wintemute: I don't think we're going to see a return to the onion market, but the cole crops. And so, yeah, we don't have any assurance that we're going to get back, you know, any significant amount of that. But we really have to kind of wait and see. Again, this has been a long process. We've been discussing with EPA, had a very good call this week, but we're waiting to hear back from them on their assessment of what we just submitted.

Eric G. Wintemute: And and so.

Eric G. Wintemute: Yeah, we don't we don't have any assurance that we're going to we're going to get back.

Eric G. Wintemute: And a significant amount of that but we really have to kind of wait and see again. This has been a long process, we've been discussing with upa.

Scott Thomas Fortune: Great. And then there is one last one for me.

Scott Thomas Fortune: <unk> had a very good call this week.

Scott Thomas Fortune: But we're waiting to hear back from them.

Scott Thomas Fortune: Assessment of what we just.

Scott Thomas Fortune: Just submitted.

Scott Thomas Fortune: Great and then one last one for me.

Scott Thomas Fortune: You know, any updates on kind of, I know the growth kind of products for you, especially the green solutions. We've seen a lot of generic pressure from China in that space, especially impacting Latin America. But the growth that you've seen for this year, can you kind of highlight the green solution side and the ongoing product adoption from your standpoint?

Scott Thomas Fortune: Any updates on kind.

Scott Thomas Fortune: I know the growth products for you, especially the Green solutions.

Scott Thomas Fortune: We've seen a lot of generic pressure from China.

Scott Thomas Fortune: In that state, especially impacting Latin America, but the growth that you've seen for the sharing sector 24 can you kind of.

Scott Thomas Fortune: And highlight the green solution side and the ongoing product.

Scott Thomas Fortune: Adoption from from your standpoint.

Eric G. Wintemute: Yeah, so green solutions were up 14% this quarter, and most of the areas had growth. And so that seems to be going well.

Speaker Change: Yeah, So so grand solutions were up.

Eric G. Wintemute: 14% this quarter.

Eric G. Wintemute: And most of our grocery I mean, most most of the areas had had growth.

Eric G. Wintemute: And so that that seems to be going well, we have additional opportunities.

Eric G. Wintemute: We have additional opportunities for product expansion as we continue to have companies coming to us and saying, hey, with your market access, would you kind of distribute this product and that product? A number of companies there. We did sign up for a precision plant, a protein called Harpen, for the Chinese market. Not sure how big that'll be, but this is a product that's worked, it's been around for quite a while.

Eric G. Wintemute: Opportunities for product expansion as we continue to have companies coming to us and saying Hey, what your market access would you kind of distribute this product and that product.

Eric G. Wintemute: So a number of companies there we did we did sign up on our.

Eric G. Wintemute: And with precision flat.

Eric G. Wintemute:

Eric G. Wintemute: Protein called Harpoon for the Chinese market not sure how big that will be but this is a product that's been around for quite a while monsanto had at one time, but yeah. We're seeing we see nice growth in that segment as adoption for marine products continues to.

Eric G. Wintemute: Monsanto had it at one time. Yeah, we see nice growth in that segment as adoption for green products continues to build. So that's kind of the piece on green solutions.

Eric G. Wintemute: Bill.

Eric G. Wintemute: So that's kind of the.

Eric G. Wintemute: The <unk> brand solutions.

Speaker Change: I appreciate it thanks for all the color and I'll jump back in the queue.

Scott Thomas Fortune: I appreciate it. Thanks for all the pleasure, and I'll jump back in the queue.

Scott Thomas Fortune: Thank you. Our next question is coming from the line of Chris Capps with loop capital markets. Please proceed with your question.

Operator: Thank you. Our next question is coming from the line of Chris Kapsch with Luce Capital Markets. Please proceed with your question.

Christopher John Kapsch: Yeah, good afternoon. I have a couple.

Christopher John Kapsch: Yeah. Good afternoon, I have a couple just as a follow up on the <unk> discussion Erik if I remember correctly. It was just the product.

Christopher John Kapsch: Just as a follow-up on the doctoral discussion, Eric, if I remember correctly, was this the product that you mentioned you've been in discussions with the agency for over a year? If I remember correctly, that also manifested in disruption to your sourcing of the AI for this particular product, and I thought that the outcome of that was that you, you know, came to a resolution, so it's a little surprising to hear this cautious stance and re-registration now, and I just wondered what the risks associated with, you know, getting this to a favorable outcome are, and how are you managing that?

Christopher John Kapsch: You mentioned you've been in discussions with the agency for broker year, if I remember correctly that also manifested in disruptions here.

Christopher John Kapsch: To your sourcing the AI for this particular product.

Christopher John Kapsch: And I thought that that the outcome of that was that.

Christopher John Kapsch: You came to resolution so it's a little surprising to hear this cautious stance and re registration now Im just wondering what are the risks associated with getting this to a favorable outcome and how are you managing that.

Eric G. Wintemute: Yeah, so the two different issues, one was supply, and we didn't have supply for a year. And so that we have resolved, and we have actually two supply sources. So the supply side was certainly taken care of.

Speaker Change: Yeah. So so the two different issues one of my supply and we didn't have supply for a year.

Eric G. Wintemute: And so that we have resolved and we have.

Eric G. Wintemute: Actually true true supply sources, so the supply side was certain taken care of on.

Eric G. Wintemute: On the re-registration process, they had a different path with the EPA and were not necessarily in agreement with their assessment. But rather than push that further with them, we went as far as we think we can go for right now, and we believe we've submitted a revised label that they should accept. But that will certainly be a reduction of the market that we've had. So as far as the timing is kind of as I anticipated, we've got different stages of pieces that we would like to reinstate. Scott

Eric G. Wintemute: On the re registration process different paths with with with the EPA.

Scott: And we're not.

Eric G. Wintemute: Necessarily an agreement on on their assessment.

Eric G. Wintemute: <unk> rather than <unk>.

Eric G. Wintemute:

Eric G. Wintemute: Push that further with them we went as far as we think we can go for right now and we believe we submitted a revised label that.

Eric G. Wintemute: Should accept but that will be.

Eric G. Wintemute: Certainly a reduction of the market that we've had.

Eric G. Wintemute: So as far as the timing is kind of as I anticipated, we've got different stages of pieces that we would like to reinstate.

Eric G. Wintemute: And.

Eric G. Wintemute: First first piece as I mentioned.

Speaker Change: <unk> will be relatively short.

Speaker Change: The the.

Scott: Next to kind of run them.

Eric G. Wintemute: Between one and two years and then maybe between two and three.

Scott: And not sure that we haven't been that we're going to wind up doing all of it will assess the market.

Eric G. Wintemute: As we get further information from NPI.

Scott: Got it and the cost associated with this.

Christopher John Kapsch: And the costs associated with this, these sorts of studies and re-registrations, is that just sort of a normal course of business and factored into your R&D spend, your normal R&D spend? That's correct.

Christopher John Kapsch: Parts of studies and re registrations is that just sort of normal course of business and factored into your R&D spend your normal R&D spend.

Scott: That's correct.

Scott: Got it and then some.

Christopher John Kapsch: And then, so just curious about this year's, you know, sort of the mood of the growers and the trends in the Midwest, and we came off of what was described by another company I follow as the most mild winter in like 25 years. And so sometimes when that happens, there's, you know, the infestation of insects is greater. So I'm curious if you have any evidence that this was the case for corn rootworm pressure this season? Are you seeing any indications that you could have an uptrend in demand for your soil applied insecticides?

Christopher John Kapsch: Okay.

Christopher John Kapsch: I'm curious about this year is sort of the mood of the growers and the trends.

Christopher John Kapsch: The Midwest and we came off of what was described related to another company I follow.

Christopher John Kapsch: The most mild winter in my 25 years, and so sometimes when that happens. There is you know the infestation in Texas Greater so I'm curious if you. If there is any evidence that was the case for corn root worm pressure. This season are you seeing any indications that you can have an uptrend in demand.

Christopher John Kapsch: Soil insecticides.

Eric G. Wintemute: I'll let Bob add some color, but I'll just say I'm talking with my people. Yeah, there are wet conditions, particularly in the South. So, planting at this point is maybe in the 50% range with the South there. But there are large parts of the corn and soybean market that have not been planted yet. So it is an extended period.

Speaker Change: I'll, let Bob add some color, but I'll, just say I'm talking with my people.

Bob: Yes, there are wet conditions, particularly in.

Eric G. Wintemute: So planting at this point.

Eric G. Wintemute: Maybe in the 50% range with the south there but.

Eric G. Wintemute: As large parts of <unk>.

Eric G. Wintemute: Corn and soybean markets that have not been planted yet so it is an extended and extended period, but Bob your color Yeah, I would say Christy the mood has been you know.

Ulrich G. Trogele: But Bob, your color?

Ulrich G. Trogele: Yeah, I would say, Chris, the mood has been, you know, very cautious by the growers in the Midwest in the U.S. I think there's been a little bit of a pickup in July corn and soybean prices this past week, so people are locking into that and averaging out better if they're doing forward pricing and contracting. So the mood's picked up, so I think there's more optimism out there. But you do have pockets right now where people are planting. Someone told me this morning, a grower told me it was like April 16th, he had about 90% of his planting done, and since then he hasn't been able to get back in the field because it's been wet. At www.americanvanguard.com. You know, weather is weather. Now, with regard

Ulrich G. Trogele: Very cautious by the growers in the Midwest of the U S. I think there's been.

Ulrich G. Trogele: This past week, a little bit of a pick up in the July corn, and soybean pricing, which people are locking into that.

Ulrich G. Trogele: And averaging out better.

Ulrich G. Trogele: If theyre doing forward pricing and contracting so the booths picked up so I think there's more optimism out there, but you do have pockets right now where people were planting.

Ulrich G. Trogele: Someone told me. This morning are grow it told me. It was April 16th he had about 90% of us planting done and since then he hasn't been able to get back in the field because it's been wet.

Ulrich G. Trogele: So 10% to go that's a long that's a long window of not stop ago. So there's a little bit of that but that's normal for the AG markets.

Ulrich G. Trogele: Weather is weather.

Christopher John Kapsch: That's helpful. And then there is the last question.

Ulrich G. Trogele: With regard to the corn roof arm pressure, so Aztec, and sales in the first quarter, up until I think we were up until April 17th, 18th, or whatever we were selling product. And we're building inventory now for kind of the fourth quarter because we did have stronger demand than what we had supply, but we're thinking we can kind of dramatically increase it. And this is, again, a liquid material. So it kind of competes with bifenthrin in that market. And so that's an upside for us going forward. Much more acreage covered or treated for mild to medium corn rootworm pressure than heavy pressure.

Ulrich G. Trogele: With regard to corn root worm pressure.

Ulrich G. Trogele: Aztec and to some degree counter in force.

Ulrich G. Trogele: Our.

Ulrich G. Trogele: Primarily used in that heavier pressure corn root worm area.

Speaker Change: Haven't we haven't really participated.

Ulrich G. Trogele: And the and the kind of mild to mid corn root worm pressure.

Speaker Change: Well, we havent.

Ulrich G. Trogele: <unk>.

Ulrich G. Trogele: A couple of years ago, but we just havent had enough material, we're making internally, but demand is has gone faster than we can than we've been able to produce but we had we had good production.

Ulrich G. Trogele: Hum.

Ulrich G. Trogele: Sales in the first quarter up until now I think we were up until April.

Ulrich G. Trogele: 17th 18th or wherever we were selling product.

Ulrich G. Trogele: And where we're building inventory now for <unk>.

Ulrich G. Trogele: For the.

Ulrich G. Trogele: The fourth quarter, because we do we do have we did have a stronger demand than what we had supply but we're we're thinking we can kind of dramatically increase and this is this is again, it's a liquid material. So it kind of competes with <unk>.

Ulrich G. Trogele: Boyfriend threatened.

Ulrich G. Trogele: Market.

Ulrich G. Trogele: And so that's an upside for us going forward much much more acreage covered are treated for for mild to medium corn rootworm pressure than the heavy pressure.

Ulrich G. Trogele: Yeah.

Speaker Change: Okay. That's helpful and then last question.

Christopher John Kapsch: So your herbicide impact is often used sort of to complement some of the workhorse broad-spectrum herbicides. And just curious, like, you know, given what happened with the global supply chain and the supply chain this was with glyphosate globally and the spike in those prices and sort of outside demand for alternative herbicides. I'm curious how that's played out now that sort of everything's kind of normalized in terms of pricing and availability and some of the cash-from-crop herbicides. Thanks, and then how that affects your impact sales and how that plays out in your guidance and expectations this year. Thank you.

Ulrich G. Trogele: Your herbicide impact is often used to complement some of the workforce.

Christopher John Kapsch: Broad spectrum herbicides, and just curious given what had happened with that.

Speaker Change: Well the supply chain and it.

Christopher John Kapsch: The supply chain with them.

Christopher John Kapsch: <unk>.

Christopher John Kapsch: With quite good globally in this low commodity prices.

Christopher John Kapsch: Sort of outside demand for alternative herbicide I'm curious how that's played out now that everything is kind of normalized in terms of pricing and availability and some of that.

Christopher John Kapsch: The cash burn crop herbicides. Thanks.

Christopher John Kapsch: And then how that effects here.

Christopher John Kapsch: And how does that play out in your in your guidance and expectations. This year. Thank you.

Eric G. Wintemute: I mean, I think you recall that herbicides were kind of a glut, that prices were high in 22 and came down in 23, and there was a high inventory and high price out there. Seems to have improved, but if I look at larger peers, the first quarter was not good for them. So I think there's probably still some hangover from that herbicide market. We don't have the kind of large bulk scale, although we do have Impact with Glufosinate as a product. And so, yeah, again, Impact has been more of a TankMix partner than, you know, a main horse, but it looks improved versus last year.

Christopher John Kapsch: Yeah.

Speaker Change: You recall that.

Eric G. Wintemute: The herbicides.

Eric G. Wintemute: We're kind of a glut that prices were high in 'twenty, two and came down in 'twenty three.

Eric G. Wintemute: There was a high inventory and high price out there.

Eric G. Wintemute: Seems to of.

Eric G. Wintemute: Have improved but if I look at looking at larger peers first first quarter was not good.

Eric G. Wintemute: Good.

Eric G. Wintemute: Them, So I think theres, probably still some hangover into that herbicide market.

Eric G. Wintemute: <unk>.

Eric G. Wintemute: We don't have the kind of large scale, although we do have impact, which will fascinate as a product.

Eric G. Wintemute: And so.

Eric G. Wintemute: Again.

Eric G. Wintemute: Impact has been more mixed partner.

Eric G. Wintemute: I mean, a main course.

Eric G. Wintemute: But.

Eric G. Wintemute: It looks improved versus last year.

Speaker Change: Is there any way to quantify that.

Christopher John Kapsch: Is there any way to quantify that improvement? Like, what's factored into your outlook on that? product, and I'll leave it at that. Thanks.

Christopher John Kapsch: Like what's what factored into your outlook on that particular product and I'll leave at that.

Christopher John Kapsch: Thanks.

Christopher John Kapsch: Yeah.

Christopher John Kapsch: Sure.

Christopher John Kapsch: So we had we were up about.

Eric G. Wintemute: Yeah. Yeah. Yeah. So we were up about, Yeah, we were just about even last year. I think we had good fourth quarter sales versus the prior year. It looks like we're about even in the first quarter, and then second quarter looks considerably stronger than last year's second quarter.

Eric G. Wintemute: Yeah, we were just about even to last year I think we had we had good fourth quarter sales versus the prior year.

Eric G. Wintemute: It looks like we were about even in the first quarter.

Eric G. Wintemute: And then.

Eric G. Wintemute: Second quarter looks.

Eric G. Wintemute: Second quarter looks considerably stronger.

Eric G. Wintemute: And.

Eric G. Wintemute: Then.

Eric G. Wintemute: Last year's second quarter.

Speaker Change: Thank you.

Eric G. Wintemute: Thank you as a reminder, ladies and gentlemen, if you would like to ask a question at this time. Please press star one on your telephone keypad. Our next question comes from the line of Andrew Luster with Arlo Capital. Please proceed with your question.

Christopher John Kapsch: Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question at this time, please press star 1 on your telephone keypad. Our next question comes from the line of Andrew Lester with Harla Capital. Please proceed with your question.

Andrew Lester: Hi, Thank you for taking my question.

Andrew Lester: Hi, thank you for taking the question. If I'm reading it correctly, and forgive me if I'm off by this, 18 months ago, 24 months ago, you sounded very optimistic. You laid out some exciting timelines and information. And even, you know, in the last year or so, you sounded very clear on ways to enhance value, do board refreshes, do all sorts of things that we were pointing to as milestones to lead to significantly better results.

Andrew Lester: Reading it correctly and forgive me if I'm off by this.

Andrew Lester: A few months ago 24 months ago, you sounded very optimistic you laid out some exciting timelines and information and even in the last year or so again, you sounded very clear on ways to enhance value do would refreshes youll all sorts of things. Thank you.

Andrew Lester: <unk> milestones to lead to significantly better results.

Andrew Lester: But when I listen to you today, you sound very tentative, equivocal, and really uncertain and looking for a really more significant improvement without quantification for like a year from now. Is that a fair assessment? Have you become much more cautious about your prospects?

Andrew Lester: Today, you said, Jerry and could you.

Andrew Lester: <unk> and really uncertain and looking for really a more significant improvement with that quantification.

Andrew Lester: A year from now.

Speaker Change: That a fair read.

Andrew Lester: Have you become much more cautious about your prospects.

Eric G. Wintemute: Well, I would say that we are pointing towards improvement through the transformation process, but that that has an expense of transferring now; it's a one-time expense. But yeah, we've, as we've mentioned before, grown through acquisitions of companies since 2017. And we did not get the benefit of incorporating those the way we wanted to, and it was hampered certainly during COVID.

Andrew Lester: Well I would say that we are pointing towards improvement with <unk>.

Eric G. Wintemute: Through the transformation process, but that that has an expense of transferring know it's onetime expense.

Eric G. Wintemute: But yes.

Eric G. Wintemute: We've mentioned before that we've grown.

Eric G. Wintemute: Through acquisitions of companies.

Eric G. Wintemute: Since 2017.

Eric G. Wintemute: And we did not.

Eric G. Wintemute: Get the benefit of of <unk>.

Eric G. Wintemute: Incorporating those the way we wanted to.

Eric G. Wintemute: And hampered certainly during COVID-19, but the process now is that we've put underway as get all all of the systems on the same page. So that we can do better management, and where we deploy working capital and improve the quality and as I said, we're our target here.

Eric G. Wintemute: But the process now that we have put underway is to get all the systems on the same page so that we can do better management and where we deploy working capital and improve quality. And as I said, we're on target here. I think we're maybe 11 and a half percent of EBITDA to sales. What we're looking to do through this transformation process is to improve that EBITDA margin to 15%.

Eric G. Wintemute: I think we're maybe at 11, 5% of EBITDA to sales. We're looking through this transformation process is to improve that that EBITDA margin to 15%.

Andrew Lester: If I look at things as a follow-up, on a sort of more mercenary basis, as a shareholder, I'm probably down over 40% in the past year. How do you think or when do you expect things to translate into better equity performance?

Eric G. Wintemute: And if I, if I look at things and just a follow up on this sort of more mercenary basis as a shareholder.

Speaker Change: Probably down over 40% in the past year.

Andrew Lester: How do you think when do you expect things to translate into better performance.

Speaker Change: Well I think we're up a little over 14% so far this year.

Eric G. Wintemute: I think we're up a little over 14% so far this year. As we mentioned last year, we were hit with two supply issues that really hurt us. One was our biggest insecticide, and the second was the supply of Dactyl that we mentioned. So we've improved the sourcing on both of those. We have ample material of Aztec going forward. And so that was really a hit in the fourth quarter of 22, and certainly in the 23.

Eric G. Wintemute: As we mentioned last year, we were hit with two supply issues that that really hurt us one was our biggest insecticide.

Eric G. Wintemute: And the second was the supply of backhaul that we mentioned.

Speaker Change: So we will.

Eric G. Wintemute: We've improved the sourcing or the sourcing on both of those.

Eric G. Wintemute: We have ample material in Aztec going forward.

Eric G. Wintemute: And some of that.

Eric G. Wintemute: That was really a hit the fourth quarter of 'twenty, two and certainly to the 'twenty three and we were unable to undergo to meet demand.

Eric G. Wintemute: And we were unable to meet demand. But supply-wise, we're in a different position. And we're back to moving Aztec and now Index and Force and Smart Choice back into the corn market. So I guess, I guess, I mean, I look at what our peers have been discussing. They forecasted downsides in Q1, and that turned out to be the case. We did have improvements in Q1, and so, yeah, we've made the forecast based upon the best that we can see at this point.

Eric G. Wintemute: Supply wise, we're in a different position and we're back to moving Aztec.

Eric G. Wintemute: Our index and for some smart choice.

Eric G. Wintemute: Back up into the corn market.

Eric G. Wintemute: I guess I guess I mean, I look at I look at.

Eric G. Wintemute: What where our peers have been discussing.

Eric G. Wintemute: They forecasted downsides in Q1 and that turned out.

Eric G. Wintemute: Case.

Eric G. Wintemute: We had did have improvements in.

Eric G. Wintemute: In Q1.

Eric G. Wintemute: So yeah, we were.

Eric G. Wintemute: We've made the forecast based upon the best that we can see at this point.

Andrew Lester: Thank you for your time. Thank you.

Speaker Change: Okay. Thank you for your time.

Speaker Change: Thank you once again, ladies and gentlemen, if you would like to ask a question at this time. Please press star one on your telephone keypad. Please hold will be Paul for additional questions.

Eric G. Wintemute: Thank you. Once again, ladies and gentlemen, if you would like to ask a question at this time, please press star 1 on your telephone keypad. Please hold while we check for additional questions. Ladies and gentlemen, it appears we have no additional questions at this time, so I'd like to turn the floor back over to Mr. Wintemute for an additional closing remark.

Eric G. Wintemute: Ladies and gentlemen, it appears we have noticed no questions at this time, so I'd like to turn the floor back over to Mr. Wintermute for any additional closing remarks.

Eric G. Wintemute: Okay, so thank you all for listening in today. I'll update you as we have them. But I guess the next scheduled time would be our shareholders meeting, which I believe is June six or seven. Six. Yeah. Okay, thank you and have a good day. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your line.

Eric G. Wintemute: Okay. So thank you for offered.

Eric G. Wintemute: One of them today.

Eric G. Wintemute: I'd updates as we have them.

Eric G. Wintemute: But I guess the next scheduled time would be our shareholders' meeting, which I believe is June six or seven.

Eric G. Wintemute: Yeah.

Eric G. Wintemute: Okay. Thank you and have a good evening.

Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.

Operator: Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time.

Operator: Okay.

Unknown Attendee: Unknown Attendee, James Thompson, Don Gualdoni, Don Gualdoni, Don Gualdoni, [inaudible]

Operator: Uh-huh.

Unknown Attendee: Hum.

Unknown Attendee: Okay.

Unknown Attendee: Mhm.