Q4 2024 Oil-Dri Corp of America Earnings Call
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Good day, and thank you for standing by.
Speaker Change: Welcome to the oil drive Corporation of America, fourth quarter in fiscal year 2024, earnings discussion. At this time, all participants are in a listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand the conference over your speaker today, President and CEO, Dan Jeff, please go ahead.
Dan Jeff: Thank you, Daniel, and welcome everyone to our fiscal year end and best of teleconference. We are expanding today's to up to 45 minutes if we have questions. We want to give you extra time, and we're also going to cover the very exciting Ultra Pat Acquisition. With me on the call today, Susan Kreh, our CFO and CIO, Aaron Christiansen, our VP of Operations, Wade Robey, VP of Ag and President of Amlin International.
Dan Jeff: Chris Lamson, group VP of retail and wholesale, Laura Scheland, Chief Legal Officer and Vice President and General Manager of Consumer Products Division, Tony Parker, Vice President of Legal and Leslie Garber, Director of Investor Relations and Leslie, we take us through the safe harbor.
Leslie Garber: Yes, thank you, Dan. Welcome everyone. On today's call, comments may contain forward-looking statements regarding the company's performance in future periods.
Leslie Garber: Actual results in those periods may materially differ. In our press release and in our SEC filings, we highlight a number of important risk factors, trends and uncertainties that may affect our future performance.
Leslie Garber: We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in oil dry stock. Thank you for joining us.
Speaker Change: Thanks, Leslie, and before I turn over to Chris, just some general 50,000-foot comment.
Speaker Change: We were at our board meeting this week and it was very nice at the end. We always go around and we have all board members give their perspective on anything that they want to contribute and Commissioner Emeritus Bud Seale, who's been on our board since 1969.
Speaker Change: was remarking, you know, how...
Speaker Change: Amazed, both my father and my grandfather would be he knew both and he's been on our board since 69. I look back and we did $5,700,000 of sales the year Commissioner Seale joined our board. We went public in 71 with only 7.2 million in sales, which is sort of remarkable.
Speaker Change: It took us 51 years to get to 100 million, and then took us 15 more to get to 200 million in sales. Another 15 to get to 300 million in sales, and then it took us 2 years, fiscal 23 to get to 400 million.
Speaker Change: and you know the question is, where will we be in fiscal 25th?
Speaker Change: Nobody knows, we have our safe harbor, but I can tell you given the momentum and the business and what we see, we feel very bullish that this snowball is going to continue to roll, so it's pretty amazing.
Speaker Change: and what the team has accomplished.
Speaker Change: and as I told our team and you as investors are really investing in the people at oil drives.
Speaker Change: I told our team both at our senior retreat and at our global sales meeting. Look, I've been doing this for 30 years. So August 1st started my 30th fiscal year as president of Oil-Dri. The real difference the last three to five years is the team. It's the people you're hearing from today and then they raise the bar on the people that are underneath them. [inaudible] I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: So, pretty amazing humbling, and we're just, you know, we're very excited about the future, but we're proud of the year that we just delivered. Very excited about the acquisition of Ultra Pet, the biggest in the company's history, and led in large part by Chris Lamson, so Chris, please take it over.
Chris Lamson: Thanks, Dan, and good morning everybody. So yeah, a little update on our first full.
Chris Lamson: Porter of Ownership of UltraPat, which we've...
Chris Lamson: and then we're completed the sale at the end of Q4. Really pleased to share with you that even with acquisition accounting adjustment, the ultra-pet business was a creative learnings in the quarter.
Chris Lamson: When I wrap up Susan will follow here shortly and will provide some specifics on the acquisition accounting, but again, a creative even with that acquisition accounting in the first quarter that we owned it.
Chris Lamson: The reason I completed a cute...
Chris Lamson: Born.
Chris Lamson: really pleased to report that the acquisition, the post-acquisition, our initial distribution efforts, which candidly we hit hard, given that we were right in the middle of retailer decision-making season.
Chris Lamson: Um, have been met with really strong success. Not only do we gain new distribution on the ultra-brand.
Chris Lamson: But I think it can really only be described as a remarkable accomplishment. And only a few short months we created two new skews of micro crystals under the Cat's Pride branding. So in the fourth quarter of fiscal 24 we began to sell and then in early Q1 began to ship those new Cat's Pride micro crystals.
Chris Lamson: You can actually now find them already on the shelf at Wakeman's and they'll be hitting the shelf very soon at several other particularly East Coast retailers.
Chris Lamson: I'll share a few numbers that help demonstrate the distribution success I'm talking about here on both catspride and Ultra since the acquisition.
Chris Lamson: We've added, since the acquisition, we've added distribution of either Cat's Pride or Ultra at 16 new retail banners.
Chris Lamson: Mostly regional banners, and when we completed the acquisition, the Ultra Team had been focused on these coasts. So we really took what they were driving and helped them push some stuff over the finish line. So that's where we gained the most initial traction.
Chris Lamson: Across those 16 retailers, we've added over 5,700, that's 5,700 points of distribution.
Chris Lamson: You might ask what a point of distribution is, if you're not a familiar consumer goods company.
Chris Lamson: It's the number of item store combinations that's really best described probably in an example here. So if I took a fictional retailer, it was called Royal Retail, and they have 100 stores and we added three items of our cat's rights crystals or ultra crystals, that would be 300 new points of distribution.
Chris Lamson: So those 5700 points of distribution did come across both catspryde hitting the shells now, and the ultra-brands over the last four months, four or five months, with the majority actually being on the aforementioned new catpryde items that we developed in the fourth quarter.
Chris Lamson: For Perspectives, when we purchased the business, we had about 4,500 points of distribution on the Ultra Brand. So we've actually collectively more than doubled our points of distribution in a pretty short period of time.
Chris Lamson: We're really pleased with those results.
Chris Lamson: Do let me temper that doubling a little bit. Ultra also had a private label business, they had an e-con business, and of course those businesses are not counted in that doubling of distribution. But when you look at our brand of distribution, we've more than doubled it.
Chris Lamson: and the periods of the acquisition.
Chris Lamson: Now I'm going to move from the front office to the back office, if you will, I'm also happy to let you know that as of October 1st, we integrated the ultra-pet business on our oil-dry ERP system.
Chris Lamson: These conversions always have a head company too. I tell you ours were very minor and largely, you're not completely seamless to our customers. We're accepting all orders, we're pricing them right and we're getting them shipped out on time in the oil dry system.
Chris Lamson: I'd also like to take a quick moment to publicly recognize our South Carolina based ultra-up-pat teammates.
Chris Lamson: In the three days prior to the conversion as you're well aware, Hurricane Halene had a really tough impact in the Carolinas.
Chris Lamson: are ultra pet business and teammates mostly sit in the carolinas. Yet these teammates were really undone and getting through our conversion. I can tell you that they certainly lived, oil-dried less than learned around, those that say that it cannot be done should get out of the way of those that are doing it. Thank you to those teammates.
Chris Lamson: and South Carolina for getting it done in the face of parodages, body, internet and some real personal sacrifice.
Chris Lamson: Systems integration will now allow for us to work with our customers to combine ultra and legacy oil dry litter products on the same order and truck. We'll be working with them over the next few months to do that, which will really drive efficiencies for both oil, dry and our customers.
Chris Lamson: Finally, speaking of that efficiency, we're beginning to realize cost synergies as well. Most notably, we recently completed work to rationalize our sales broker network. Really, I had a schedule and driving savings through both a rate reduction with our existing brokers as we folded the ultra business into them and in housing a couple of larger accounts.
Speaker Change: All in all, we have plenty of work left to do, but we're pleased with our initial efforts and our initial result from the Christal's business. But that I'll turn it over to Susan who will provide some further perspective on overall Oil-Dri financial results and get a little deeper into the acquisition. This is comments, the strategic acquisition of Altrepet has been exciting for our team and for the team in Anderson as well.
Susan Kreh: From an accounting standpoint, Altrapet was acquired on May 1, 2024, which was the first day of our fiscal fourth quarter.
Susan Kreh: As detailed and note two to our financial statements, oil dry acquired off the issued and outstanding shares of the capital stock of Ultra Pat for 44.3 million net of cash acquired.
Susan Kreh: The financing of this acquisition was done to a combination of cash on hand, the issuance of notes and a draw on our credit facility. The financing was actually completed in both the third and fourth fiscal quarters.
Susan Kreh: The summarizing both from a timing and detail standpoint because we did crossover quarters.
Susan Kreh: Oiled right issued 10 million in aggregate principle amount of 6.47% series B senior notes due April 30, 23% pursuant to our shelf facility precision provisions of our note agreement with credential affiliates.
Susan Kreh: These notes were issued on April 30 making this a third quarter financing event.
Susan Kreh: The following day on May 1st, we drew 10 million on our 45 million revolving credit facility with BMO Bank.
Susan Kreh: This 10 million draw occurred during our fiscal fourth quarter.
Susan Kreh: Our drama's BMO is subject to a variable adjusted sofa-based rate, plus a margin that varies depending on our depth of earnings ratio.
Susan Kreh: At the date of draw, that rate was 5.3%.
Susan Kreh: being on the UltraPet Acquisition during our fiscal fourth quarter, we engaged a third party specialist to assist with the formal valuation of our acquisition of UltraPet.
Susan Kreh: As a result of that valuation and analysis.
Susan Kreh: The major categories of assets that we've booked as of July 31st, 2024, were as follows.
Susan Kreh: We booked working capital of 10.7 million.
Susan Kreh: Intangible assets of 25.6 million, the majority of which includes a customer list asset valued at just over 20 million that will be amortized over 18 years.
Susan Kreh: and we also booked goodwill of 11.8 million.
Speaker Change: Now switching to a performance standpoint, we are pleased as Chris mentions that the ultra-peda acquisition was accretive during the fourth quarter, including transaction costs.
Speaker Change: We've generated 4.0 million of net sales and 200,000 of pretext income.
Speaker Change: These results include a charge to cost of goods sold, a 449,000 for the inventory step-up associated with acquiring ultra-pet.
Speaker Change: These results also include 300,000 of general and administrative transaction-related expenses.
Speaker Change: We anticipate a similar level of cost in both of these categories during the first quarter of fiscal 25.
Speaker Change: Now let's switch from the purchasing of ultra pet to the integration of this acquisition, which Chris mentioned a little bit in his comments earlier, and which has been preceding well.
Speaker Change: As of October 1, we have migrated all to pet from their legacy systems to oil drives human resource information system and, as Chris mentioned, to oil drives integrated enterprise resource planning system.
Speaker Change: Both migrations have been accomplished successfully, and Altrupet is now fully immigrated into our applications environment.
Speaker Change: and we are very pleased with the success there.
Speaker Change: Now let's switch gears and talk about Oil-Dri as a whole. Taking a look at our financial success during 2024, our consolidated net sales for the fiscal year reached an all-time high of 437.6 million, reflecting a 6% increase over the prior year.
Speaker Change: Record revenues were achieved in both the retail and wholesale and business-to-business product groups.
Speaker Change: This top line growth was due to higher prices and improved product mix across both of the operating segments.
Speaker Change: Increased sales volume of fluid purification products, as well as the fourth quarter inclusion of incremental business for the acquisition of ultra pet, also bolstered our sales.
Speaker Change: Revenue from domestic capital that are excluding co-package items and revenue from fluid-spirification products increased by 8% and 19% respectively compared to the prior year.
Speaker Change: While annual revenues from animal health products remain flat, the company's commitment to this growth opportunity remains strong.
Speaker Change: We believe that the initiatives that were executed doing during 2024 to refosition the business will position us well going into fiscal 2025.
Speaker Change: On the flip side, market and customer impacts on demand in our agriculture and co-packaging course-liter businesses, declined by 17% and 4% respectively during fiscal year 2024.
Speaker Change: The fact that we had a record year despite these two challenges is reflective of the value of the diversity of oil drives portfolio of products.
Speaker Change: Our annual consolidated gross profit was a record 125 million, an increase of 21% over the prior year.
Speaker Change: With margins expanding at the gross margin level to 29% in fiscal year 2024 from 25% in fiscal year 2023.
Speaker Change: Despite the increase in our domestic cost of goods sold per ton of 6% compared to fiscal 2023 which was driven by higher labor, depreciation, and freight costs that were only partially offset by lower natural gas and packaging costs.
Speaker Change: Our improved pricing and profitable product mix helped achieve this record gross profit.
Speaker Change: Fiscal Year 2024's consolidated operating income, reached a record high of 51.6 million.
Speaker Change: reflecting a large 10.6 million or 26% increase over the prior year.
Speaker Change: This record result is inclusive of selling general and administrative expenses that were 18% higher in fiscal 2024 compared to the prior year.
Speaker Change: The 18% increase consists of both ongoing and one-time expenses.
Speaker Change: Significant expenditures reflect elevated compensation costs, resulting from increased performance based incentives, as well as a few key planned head count additions.
Speaker Change: In addition, we had increased advertising costs to promote cat's pride, lightweight litter.
Speaker Change: So we're expenses related to the ultra-ped acquisition, including transaction and integration costs, as well as the amortization of the intangible assets that I mentioned earlier.
Speaker Change: Now let's hit a couple other items of recent financial-related news.
Speaker Change: On October 9, the Board of Directors of Oil Dry approved a two-for-one stock split in the form of a stock dividend with the goal of increasing the float to improve the liquidity of the stock and reduce the share price per share to make it attractive to a potentially broader set of investors.
Speaker Change: The facts split is subject to stockholder approval, and an amendment to the company's certificate of incorporation to increase the number of authorized shares of common stock in order to accomplish this split.
Speaker Change: The company intends to seek stockholder approval for this amendment at our upcoming annual meeting on December 11, 2024.
Speaker Change: is the Certificate of Incorporation Amendment is approved by our stockholders. The company expects to file the amendment with the Secretary of State of the State of Delaware and to implement the stock split and authorize shared increase promptly following the annual meeting.
Speaker Change: Our plan is that following stockholder approval and the filing of the effectiveness of the certificate of incorporation amendment
Speaker Change: staff holders of record at the close of business on December 20, 2024, the record date of the stock split will receive one additional share of common stock for every share of common stock held on the record date.
Speaker Change: and one additional share of class B stock for every share of class B stock held on the record date.
Speaker Change: Oil Drikes, Backspeed Distinal Shares will be distributed after Market Close on January 3rd, 2025.
Speaker Change: Shears of oil drives common stock are expected to begin trading on a post split basis at market open on January 6th, 2020-25.
Speaker Change: Another recent development is an upcoming change to our SEC reporting status.
Speaker Change: Based on our position as of January 31st, 2024, it was determined that beginning with fiscal year 2025, Oil-Gri has grown to a size that no longer qualifies for SEC small reporting company status.
Speaker Change: As such investors can expect to see expanded disclosures in our 10 cues and 10 caves beginning with our fiscal year 2025 as ACC Firelings.
Speaker Change: So that's all that means.
Speaker Change: and in other news on September 30th, 2024, the company entered into the Ace of Menment to our credit agreement with BeMo Bang.
Speaker Change: The purpose is to emphasize our existing credit facility to create additional financial capacity for oil dry, should it be needed or desired in the future.
Speaker Change: This amendment increases the amount, the company may borrow on its revolving line of credit from the current level of up to $45 million to an increased level of up to $75 million, which provides oil dry with additional financial flexibility.
Speaker Change: This amendment also adds a new accordion facility, which will allow the company to increase the revolving line of credit by up to an additional $50 million for a total credit facility size of $125 million.
Speaker Change: In addition, the amendment extends the termination of this agreement to September 30, 2020, will the covenants remain unchanged.
Speaker Change: These changes are part of our ongoing efforts to provide financial flexibility that positions oil dry to be able to opportunistically invest in growth opportunities, such as we did with the ultra-ped acquisition when those opportunities arise.
Speaker Change: And with that, Dan, I'm going to turn it back over to you for comments and Q&A.
Dan Jeff: Great, thank you Susan and thank you Chris, very exciting and a great review. We are now going to turn it over to the Q&A section. We've gotten a bunch of good questions in from our shareholders and we'll do our best to answer as many of them as we can.
Speaker Change: and the time remaining. So, Leslie, walk us through our questions. Yeah, and for anyone who hasn't submitted any questions, please use the Ask A Question button on the webcast and click Submit.
Leslie Garber: So our first question comes from John Bear, from Ascend Wealth Advisors, and he says congrats on a strong finish and record here and I'm pleasantly surprised at the two-for-one stock
Leslie Garber: Split Proposal, agreed it would help improve trading liquidity.
Leslie Garber: His first question is, fluids purification products sales were up to solid 19% year over year. Is there any particular market that has been especially strong such as food oils or transportation fuels?
Speaker Change: and Bruce Patsey is not here today, but fortunately we have his answers and I'll do the best I can to represent Bruce. So Renewable Diesel has absolutely been driving the growth in our Fluid Spearification Division, a new plant's popping up all the time.
Speaker Change: Perfect.
Speaker Change: Next we have, we have a couple questions regarding Amlin, I'm going to combine them. What progress is Amlin making? What do you think it will take for the poultry and swine industries to adopt your product on a worldwide basis? And how are trials going with larger perspectives? Customers.
Speaker Change: and I'm gonna turn that over to you.
Speaker Change: Thank you, Leslie, and thank you for the question as well.
Speaker Change: So there's a couple of different aspects that we're asked in that question and I'll try to take them kind of one at a time first in terms of the use of our product or its adoption around the world we already see that in all world areas that we sell the types of products that we have in our portfolio and specifically the Amlin Oil-Dri technology is highly valued by our customers and we have a good adoption rates where we where we market [inaudible]
Speaker Change: Our markets as we mentioned previously on calls are in Asia Pacific and China in the Americas, including both Latin America, Mexico and in North America as well.
Speaker Change: In terms of progress with our customers, last year was frankly a difficult year in AG and really that has persisted for the last 12, 18 months. As we closed the year, we started to see recovery in the market across AG and especially in the food production side and we're closing the year with really good momentum. We have trials underway as we have previously in all world areas and are seeing success with our products as customers complete those and begin moving to buying decisions.
Speaker Change: In terms of a pivotal or an aha moment, we don't expect there to be a dramatic change, we just expect to see continued growth. As our products are evaluated by our customers and we have the opportunity to sell them into their rations. So just continue to strong growth in all the areas we're pursuing.
Speaker Change: Great, thanks, Wade. Our next question comes from Ethan Star, an individual investor. What opportunities do you see to expand distribution of silica gel, crystal cat litter via new customers, private label and in Europe?
Speaker Change: Chris, will you answer that please?
Chris: Yeah, even thanks for the thanks for the question and particularly glad you asked it because in my comments I really focused on the distribution growth relative to the branded side.
Chris: Just as we are on our base-play business, we're extremely focused on growing the private label piece of the crystal-liter business. The ultra-fokes had a good foundation with a couple of key private label customers and we're really looking to build on that. We believe that we can offer a significant value in the segment and continue to, and make a good margin.
Speaker Change: The one thing I would add there is there are a couple of pieces of evidence in the market.
Speaker Change: that the segment has expanded to the point where it can, in fact, support a private label business that retailers.
Speaker Change: in a really meaningful way. In other words, the velocities are out there that says
Speaker Change: The Crystal Liter segment is ready for a good value private label player. We are engaged with several of the national and super regional customers right now in conversations about developing private label Crystal Liter Products worth.
Speaker Change: So, we like the brands, we got the brand out there quickly, we will build on the ultra brand as well, we're appropriate.
Speaker Change: Europe, candidly is TBD. The ultra-photes were selling some product into Europe and were in the process.
Speaker Change: of assessing our market opportunity there. I think it will candidly be largely opportunistic for us.
Speaker Change: You know what we're really leveraging with the acquisition is our strong existing retailer relationships, our ability to help them manage their brands through private labels, through their private label business, and building out distribution in crystals with them.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Robert Smith from the Center for Performance Investing and he asks, Do you expect to maintain gross margins this year? Susan, will you take that one?
Susan Kreh: Sure. Although we don't get forward looking guidance, here's a couple things I would talk to this. First of all, we don't know for sure where costs will go, but what we can say is the markets have been rational and allowing us to take pricing when costs have increased.
Susan Kreh: The second thing I would say that the focus areas of our portfolio, including fluids, purification, and renewable diesel, the lightweight cat litter, and the animal health products.
Susan Kreh: are all higher value added products. So as we see growth in those product lines, we would expect to see the favorable impact on our growth margins.
Speaker Change: Okay, great, thank you. Next we have a question from Tyler Ventura. How has your views from Diamond Hill Capital? How has your vertically integrated business model contributed to your competitive advantage, particularly in terms of cost structure and product innovation?
Speaker Change: is purchasing a silica gel.
Speaker Change: Thanks!
Dan Jeff: Crystal Catler Alternative, an indication that Clay is losing its luster, so to speak, in the litter market. And I'm going to turn that over to Dan. Yep, thanks Tyler for your question. And I will say it's both vertical and horizontal because many of our competitors are vertically integrated, but they're not as horizontally integrated, meaning from the west to the east coast of the US. So we have plans. [inaudible]
Dan Jeff: All the way from California to Georgia and then plants in the middle. And that does give us a strategic competitive advantage. Freight is a big piece of the deliver cost of goods, of many of our product lines. And so being geographically situated that way has helped us provide high quality low cost products to our...
Speaker Change: Very demanding customers, so it's definitely been a source of competitive advantage for us. In terms of Silicon-based gel, you know, an indication of play losing its luster, I would just say it's a fast-growing segment. Play is still by far the dominant, has the dominant position in cat litter. But I think what it really shows is the consumers are more and more seeing their more legged furry friends as family members, and they're willing to spend more if they believe they get more performance either odor control, dust tracking, whatever the metrics are that they're looking for.
Speaker Change: So I think it's all positive, it's just the pie is growing and Christle's has taken a slice of that pie, but it's, I think it's over, Laura, you can tell me, it's over $3 billion now at retail.
Speaker Change: and the U.S., so the pie is growing, but Christle is definitely taking a bigger share of, but it's still a very small percentage of the overall mark.
Speaker Change: Great. Thank you.
Speaker Change: John Bear has another question, and we actually received two questions regarding this. Where does debt pay down fall in the capital allocation priority chain?
Speaker Change: You want to take that one? I'd love to, thanks Leslie.
Speaker Change: When we think about our capital allocation, we are committed to first and foremost reinvesting in our business to generate returns for you the investors. So that takes the form of both growth capital spending and capital spending in our aged infrastructure.
Speaker Change: and I saw a question later on so I'll insert it right here. There was a question about Will the CapX level be similar in 2025 as it was in 2024 and I would say, yes, we expect to spend at a similar level.
Speaker Change: After we invest in our business, we next prioritize the dividend for our shareholders as we know that there are shareholders out there who invest in us because of the predictability of that dividend.
Speaker Change: Following that, we also prioritize any M&A opportunities, which is why we try to keep a lot of dry powder, which is why I talked about the expansion of our revolving credit facility earlier.
Speaker Change: And then to the extent that the interest expense on our revolving credit facility, we're to exceed the interest income, we're making on our short-term cash investments. We would consider paying down that revolving credit facility since it's financially makes sense.
Speaker Change: So that's kind of the order of it and Leslie, back to you.
Leslie Garber: Alright, thank you!
Leslie Garber: Ethan Star has another question, do you expect sales growth of fluid purification products for a newable diesel to continue increasing at percentage of similar to fiscal 24?
Leslie Garber: and his oil dry selling fluid purification products into any of the international markets for renewable diesel such as Brazil and Indonesia and Dan.
Dan Jeff: We'll handle that question. Yeah, we do expect continued growth on F-25 at a similar rate as new plants come online, and in our bus market, which is North America, which is great. We do not sell in Indonesia today. However, we are active in Brazil. A significant portion of our fluids purification business is in North America and we do have customers in Europe , Latin America, and Asia. We do not sell in Indonesia today. We do not sell in Indonesia today.
Speaker Change: Great, thank you. Robert Smith has a question, are you hedging natural gas into calendar 2025, Aaron Christiansen, Daniel Jaffee?
Daniel Jaffee: Now Robert, thanks for the question. Happy to answer it. Obviously understand the natural gas is a key component of our cost structure and input cost. We're delivered about how we both consume and purchase. We like to avoid using the word hedge. Hedge implies that we can beat the market and ultimately purchase over time at a lower cost. That is not our objective. Yes, we do continue to make forward purchases of natural gas out a period of multiple years in layered revolving purchase strips that help allow us to predict and buffer volatility for a portion of our consumed natural gas.
Daniel Jaffee: and we will do so.
Daniel Jaffee: for the Forced Seable Future. Great.
Leslie Garber: Thank you. We have another question from Tyler Ventura, how is the ad spending looking in terms of being growth oriented, which should have a high ROI versus defensive ad spend, which is a lower ROI? Chris, can you answer that please?
Chris: Yeah, thanks Tyler. The, what I would tell you is, um,
Chris: We, we've, we've, we've, in the end, in the end.
Chris: Well, we refer to as up the funnel and that can be a little bit more brand or segment growth oriented.
Chris: A little more awareness oriented, and maybe a little less conversion or ultimate failure oriented. The shift we made about a year and a half ago was in that area within lightweight. We really started talking to the category message.
Chris: with Enlightenment, the broader consumer benefit of lightweight, where that really helps those dollars work harder for us is it not only lifts our brand of business, but we believe it lifts.
Chris: and our private label business as well. We toggle specifically a bit between defensive spending down the funnel, where we think we need to defend the business against, you know, competitors primarily and more of what I would call more aggressive spending. But what I can assure you, we look at
Chris: On a regular ongoing, basically constant basis is not just return on that investment, but we've got some less measure incremental return on that investment. We call them metric, Iroas, incremental return on advertising spend. And we have some pretty good tools that help us toggle, like I said in almost real time, between that more defensive spend and aggressive spend to drive the most incrementality possible.
Chris: Brains.
Speaker Change: Thank you. John there has a question regarding...
Speaker Change: Katliter, has your higher Katliter sales increase your overall market share percentage and if so, has it been at the expense of competitor, brand names, private label, or a combination.
Speaker Change: Great, thank you. Robert Smith has a question for Susan, what is your projected tax rate for fiscal year 25?
Speaker Change: and
Susan Kreh: Thanks, Leslie. Thanks for the question. Well, we don't give forward guidance on tax rates. What I would say is that
Susan Kreh: with the acquisition of UltraPact, the income that comes from the Crystal's Business.
Susan Kreh: Great, thank you!
Susan Kreh: The next question is from Tyler Ventura. How do you feel today about the strategic value and your future opportunities buried in your substantial clay reserves? Is that still a significant competitive advantage as you look out into the next five to ten years? Do you still see opportunities to buy more land and or reserve? Dan? Yep. And absolutely that is a huge strategic competitive advantage for us. Thank you very much for your time today. Thank you very much. Thank you very much.
Susan Kreh: There have been no real, new green field clay plants built in the U.S. that I can remember in the last 30 years, the regulation, getting the reserves, and then actually the capital too.
Susan Kreh: We build the plant. It's just prohibitive. So, you know, we're grandfathered in. We try and add on more clay than we use every year. If you look back, we were mining more clay 25 years ago than we are today. We used to sell over a million tons a year, which meant we were mining about two and a half million tons. [inaudible]
Susan Kreh: You know, this past fiscal year we sold a little over 800,000 tons, so maybe around 2 million tons of clay being mined and we make sure that we always have at least 40 years of reserves in all of our major product lines and then in total we have much more than that. So we always have opportunities to buy more land and reserves and we're in really, really good shape from that standpoint. Okay.
Susan Kreh: Ray.
Speaker Change: The next question, actually we have a couple questions about the status of antibacterial cat litter, our cat-pride antibacterial cat litter. And Tyler asks, how has the uptake been with the cat-pride antibacterial product, and are there any early success, oh sorry, just about that? Chris, can you please address that?
Chris: Sure. I think I saw a couple things on the message or in the question board about anti-back. So I'll tell you two things. In general, we're pleased with our uptake and it's continuing to grow. So our velocities are what I would refer to as solid. We did up until, gosh, I think it was the early part of last quarter, we lacked one state registration for the product, one state EPA registration for the product. We now have that. So that's enabled us to be more aggressive in two places, one with national retailers that otherwise carry it, but two include econ retailers.
Chris: is now what I would call it. It wasn't unavailable any con before, but it is now much more available. And that actually enables us to be.
Chris: more aggressive with our digital advertising investment in that item, and it doesn't take any new consumer behavior, but it takes a little bit of education to help people see that we have the only EPA registered antibacterial calendar on the market in the US. So we're now driving that message a little bit harder, the our digital media spend.
Speaker Change: Great, thank you. We have time for one last question, and this is from Bill Anderson, from Bard Associates, and he asks Wade, have you disclosed a total addressable market for your amlin' products?
Speaker Change: Yeah, thank you, Leslie, and thank you, Bill, for that question. I'm going to answer it kind of in two parts because, as Ameland goes to market for products that we sell into the poultry dairy swine, aqua industries, we're really targeting a couple of different segments. The first is the more traditional market that clay-based products have been utilized for in animal feeds, and that's for microtoxin mitigation. That market around the world fluctuates but has been estimated to be over a billion dollars of opportunity. Some of that is in Europe again, which is a market that we don't target today.
Speaker Change: The second part of the market that we target is products that are sold into really what I'll call gut health or products that are sold to improve the productivity of food production animals and that has been traditionally a market dominated by antibiotics.
Speaker Change: Antibiotic Studies, Subtheraputically, Principally, and Animal Rations, although over the last couple of decades, products that you'll be familiar with, like probiotics or grexadmicrobials, certain types of enzymes or neutersuiticles have also been substituted. That market is much larger, larger, harder to estimate, but certainly well over $8 or $9 billion in terms of opportunities. So the total market opportunity that we target is very large. Again, the micro toxin side, really, with our clay-based products. And then the other market I mentioned for gut health is a combination of our clay products, but also with formulated adjuvants that we use in our portfolio.
Speaker Change: Great, thank you Wade and before closing I just want to encourage everyone to vote.
Speaker Change: For the authorization of doubling our shares so that we can execute a two-for-one stock.
Speaker Change: David Anders Blitter, whatever we're calling it, but it's your practice will come out at the end of October.
Speaker Change: and the reason why it's so important for those of you on the call is because the boat goes by class, so the class B, which my family and I, you know, control, we're going to be voting for it.
Speaker Change: But our vote doesn't matter at all on the common side. And so if you see this as a value or benefit, we hope you'll vote for it. We think it's going to be positive. It'll, as Susan outlined, should increase the daily activity, the liquidity, reduce the average selling price in half if you do two for one. So mathematically, it's going to cut it in half on day one. And that should be more accessible to a wider, hopefully a wider range of investors. So please be on the lookout for your proxies and we would love you to vote for it.
Speaker Change: Thank you everybody and we will talk to you after the next quarter.
Speaker Change: This concludes today's conference call.
Speaker Change: Thank you for participating. You may now disconnect.
Speaker Change: The End
Speaker Change: Music