Q3 2025 Oil-Dri Corp of America Earnings Call
[music].
Operator: [music] Good day and thank you for standing by.
Okay.
Speaker Change: Good day, and thank you for standing by and welcome to the oil drive third quarter fiscal 2025 earnings discussion via webcast. Please be advised today's conference is being recorded I would now like to turn the conference over to your speaker today, Dan Jaffee, President and CEO of old dry. Please go ahead.
Operator: Welcome to the Oil Drive 3rd Quarter Fiscal 2025 Earnings Discussion via Webcam. Please be advised that today's conference is being recorded.
Daniel Jaffee: I would now like to hand the conference over to your speaker today, Dan Jaffee, President and CEO of Oil-Dry. Please go ahead. Thank you, and welcome everybody.
Speaker Change: Thank you and welcome everybody before we get started like to introduce all the people that are on the call with US today, Susan Craig our CFO and CIO, Aaron Christiansen, Vice President of operations, Chris Lamson Group VP of retail and wholesale Wade Robbie Vice President of Agriculture, and president of bandwidth International.
Daniel Jaffee: Before we get started, I'd like to introduce all the people that are on the call with us today.
Leslie Garber: Susan Kreh, our CFO and CIO, Aaron Christiansen, Vice President of Operations, Chris Lamson, Group VP of Retail and Wholesale, Wade Robey, Vice President of Agriculture and President of Amlin International, Laura Scheland, Vice President and General Manager of the Consumer Products Division, Bruce Patsey, Vice President of our Fluids Purification Division, Tony Parker, Vice President, General Counsel and Secretary, and of course, Leslie Garber, our Director of Investor Relations, who will walk us through the safe harbor. Thank you, Dan, and welcome everyone. On today's call, comments may contain forward-looking statements regarding the company's performance in future periods. Actual results in those periods may materially differ.
Speaker Change: Lower Sheelen, Vice President and general manager of the consumer products Division, Bruce <unk>, Vice President of our fluids Purification Division, Tony Parker, Vice President General Counsel, and Secretary and of course, Leslie Garber, our director of Investor Relations, who will walk us through the safe Harbor.
Speaker Change: Dan and welcome everyone.
Today's call comments may contain forward looking statements regarding the company's performance in future periods 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. We ask that you review and consider those.
Leslie Garber: 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. We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in oil-dry stock.
Speaker Change: Factors in evaluating the company's comments and in evaluating any investment in oil dry stock. Thank you for joining us turning it back over to you Dan great. Thanks, William before Susan walks us through some of the quantitative highlights I just wanted to give some qualitative and theres going to be some quantum here as well those of you who know me well know I keep my spreadsheets.
Leslie Garber: Thank you for joining us. Great. Thanks, Leslie.
Daniel Jaffee: And before Susan walks us through some of the quantitative highlights, I just want to give some qualitative, and there's going to be some quant in here as well. Those of you who know me well know I keep my spreadsheets going back to the beginning of time, and on an apples-to-apples basis, this quarter was a really big apple. It was a really big apple. We made $11,644,000 of net income. We've had 85 fiscal years, so 84 previous. And that $11,600,000 was greater than all but eight of our 84 prior fiscal years. And then through nine months...
Going back to the beginning of time.
And on an apples to apples basis. This quarter was a really big Apple.
A really big Apple.
Speaker Change: Made $11 million $644000 of net income we've had 85 fiscal years, so 84 previous and that $11 million six was greater than all but eight of our 84 prior fiscal years.
Speaker Change: And then through nine months.
Daniel Jaffee: We are now ahead of all 84 of our past fiscal year. So we are playing with the House's money in the fourth quarter. So it feels really, really good. But most importantly about all this is we've been reinvesting it in our business as we told our customers we would. So I want to make sure I thank our customer partners for embracing our capital replacement program. It was costing us twice as much to replace the capital as it was when we put it into service and were depreciating it. So to give you some metrics around that, we're probably going to spend around $32 million this year in capital and probably spend another $32 million next year.
Speaker Change: We are now ahead of all 84 of our past fiscal year. So we are playing with the house's money in the fourth quarter. So it feels really really good but most importantly about all this is we've been reinvesting in our business as we told our customers. We would so I wanted to make sure I think our customer partners for embracing our cap.
Speaker Change: Little replacement program. It was costing us twice as much to replace the capital as it was when we put it into service and we're depreciating. It so to give you some metrics around that we're probably going to spend around $32 million. This year in capital and probably spend another $32 million next year. So if you look at the five year.
Daniel Jaffee: So if you look at the five-year period from F-22 to F-26, which will end a year from this July, we will spend close to $143 million on capital. And if you look at the five prior fiscal years, so F-17 to F-21, we only spent $78 million. So we've spent an extra $65 million or almost, you know, $14 million, $13 million, it's 13, yep, 13 million more a year to plow back in our business so that we can continue to give our customers the quality and the quantity that they expect and, frankly, that they deserve. So it's going very well, and thank you for supporting that.
Period from F 22 to <unk> 26, which will end a year from this July we will spend close to $143 million on capital and if you look at the five prior fiscal years. So F 17 to F. 'twenty. One we only spent $78 million. So we've spent an extra 65 million.
Speaker Change: Our fifth almost $14 million $13 million for 13 up $13 million more a year.
Plowed back in our business. So that we can continue to give our customers the quality and the quantity that they expect and frankly that they deserve so it's going very well and thank you for supporting that we had our board meeting this week and I think you saw that the board raised the dividend 16%.
Daniel Jaffee: We had our board meeting this week, and I think you saw that the board raised the dividend 16%. And you have them to thank for that.
And you have them to thank for that.
Daniel Jaffee: And we always go and finish with a roundtable. And so happy that, you know, Bud Selig is still on our board. He joined our board in 1969. He was just really shouting out what a great team we are, and he knows all about teamwork. And I love his quote that what's going on here at OilDry is remarkable, but not surprising. And he talks about how he knew my grandfather, Grandpa Nick, who started the business in 1941. And, in fact, the first baseball game Bud ever went to in Comiskey Park was with my dad and my grandfather, and he has great stories to tell about that, but I won't digress.
And we always go and finish with a round table and so happy that <unk> is still on our board. He joined our board of $19 69.
Speaker Change: Just really shouting out with a great team, we are and he knows all about teamwork and I love is that what's going on here at oil dry is remarkable but not surprising and he talks about how he knew my grandfather, Grandpa, Nick who started the business of $19 41, and in fact, the first baseball game, but ever went to an <unk>.
Patrick was with my Dad, and my grandfather, and he has great stories to tell about that but I won't digress, but he also was very close friends and my father. So he joined our board of $19 69, when our annual sales were $4 $9 million for the year.
Daniel Jaffee: But he also was very close friends with my father. So he joined our board in 1969 when our annual sales were $4.9 million for the year. We now do... $9 million a week, if you count it as a five-day work week. So that means every 2.7 days we're doing the sales we were doing when he joined the board. The year he joined the board, we made $365,000 in net income. So now, if you take our nine months and annualize it, we make about $1,000 a week in net income. And so that's every 1.8 days, which is just ridiculous.
We now do.
$9 million a week.
Speaker Change: If you counted as a five day workweek. So that means every two seven days, we're doing the sales we were doing when he joined the board the year. He joined the board we made $365000 in net income.
Speaker Change: So now if you take our nine months and annualize it we make about $1000 a week in net income and so thats every one eight days.
It's just ridiculous.
Daniel Jaffee: And I'm sad that my father and my grandfather can't see this, but maybe they are, but they are through Bud. And so I just wanted to thank Bud for continuing to agree to stay on our board and being such a great mentor to me.
And.
Speaker Change: Just to add that my father, and my grandfather can't see this but maybe they are but they are through Bud and so I just wanted to thank Bob for continuing to agreed to stay on our board and being such a great mentor to me, so I'm going to turn it over to Susan <unk> CFO of the year and the city of Chicago and Susan take it over.
Susan Kreh: So I'm going to turn it over to Susan Kreh, CFO of the Year in the city of Chicago. And Susan, take it over. exams. and then address any of your other questions in the Q&A portion of the call. As Dan highlighted in his opening remarks, coming off another quarter of strong and record financial performance, our board of directors and our management team feel confident about our strong financial position and about Oil-Dri's Net confidence has been reflected in the announcement of a significant double-digit increase to our quarterly dividends. As a team, we continue to work together to strengthen our balance sheet and to demonstrate our ability to generate cash flow, which is the lifeblood for funding our growth and providing returns to our stakeholders.
Susan: Thank you Dan.
Susan: <unk>.
Speaker Change: For question I'll highlight a few financial matters and then address any of your other question in the Q&A portion.
Susan: Okay.
Speaker Change: As Dan highlighted in his opening remarks.
Speaker Change: Coming off another quarter, a strong and record financial performance, our board of directors and our management team feel confident about our strong financial position and about oil tracts future.
Speaker Change: And that confidence has been reflected in the announcement of a significant double digit increase to our quarterly dividend.
Susan: As a team we continue to work together to strengthen our balance sheet and demonstrate our ability to generate cash flow, which is the lifeblood for funding our ground and providing returns to our stakeholders.
Susan Kreh: Year-to-date, as of April 30th, Oil-Dri's net cash provided by operating activities was $55 million, which was an increase of 49% compared to the net cash provided by operating activities during the first nine months of fiscal year 2024. Our belief in the sustainability of that cash flow generation inspired us to raise the dividend 16 percent, an increase much larger than our normal annual increase. We understand that the sustainability and predictability of our dividend is important to our long-term shareholders, and that was reflected in the increase.
Susan: Year to date as of April 30.
Susan: Boy I'll drive net cash provided by operating activities was $55 million, which was an increase of 49% compared to the net cash provided by operating activities. During the first nine months of fiscal year 2024.
Susan: Our belief in the sustainability of that cash flow generation inspired us to raise the dividend, 16% an increase much larger than our normal annual increase.
Susan: We understand that the sustainability and predictability of our dividend is important to our long term shareholders and that was reflected in the increase.
Susan Kreh: Going forward, we will continue to take a long-term, disciplined approach to capital deployment to balance shareholder returns with reinvestment in the business and potential M&A opportunities. We continue to assess our capital allocation in the following order of priority. First of all, investment in our business for long-term sustainability. We have a fixed asset intensive business model that requires significant capital investment in our manufacturing facilities, along with investment in expensive mobile equipment in our mining operations. You see this in the Cash Flows from Investing Activities section of our Consolidated Statement of Cash Flows, indicating that year-to-date we've invested $24.5 million in these types of assets.
Susan: Going forward, we will continue to take a long term disciplined approach to capital deployment to balance shareholder returns with reinvestment in the business and potential M&A opportunities.
Susan: We continue to assess our capital allocation in the following order of priority.
Susan: First of all investment in our business for long term sustainability.
Susan: We have a fixed asset intensive business model that requires significant capital investment in our manufacturing facilities, along with investment and expensive mobile equipment in our mining operations.
Susan: You see this in the cash flows from investing activities section of our consolidated statement of cash flows indicating.
Susan: Indicating that year to date, we've invested $24 5 million and these types of assets.
Susan Kreh: We've also invested in enhancing maintenance, which flows through our cost of goods sold, to improve uptime in our facilities. This not only leverages the investment in capital equipment in our manufacturing and mining operations, but the increased uptime also helps to improve service levels and responsiveness that's important for our customers. Additionally, we invest in people, process, and technology to support our growth strategy. One example of this type of investment is the funding we've provided during this fiscal year to stand up a centralized data analytics function. And there are other examples as well.
Susan: We've also invested in enhancing maintenance, which flows through our cost of goods sold to improve uptime and our facilities.
Susan: This not only leverages the investment in capital equipment in our manufacturing and mining operation but.
Susan: The increased uptime also helps to improve service levels and responsiveness, that's important for our customers.
Susan: Additionally, we invest in people process and technology to support our growth strategies.
Susan: One example of this type of investment is the funding we've provided during this fiscal year to stand up a centralized data analytics assumption and there are other examples as well.
Susan Kreh: Second, when we're thinking about our capital allocation, we continue to explore and evaluate M&A opportunities to expand our businesses and support our growth strategy. Our Ultrapet acquisition, which hit its one-year anniversary as being part of the Oil-Dri portfolio on May 1st, is a great example. That acquisition has performed well, it has hit our internal financial benchmarks, and most importantly, has been viewed by our customers very favorably as a value-added product expansion to our portfolio. We initially funded this acquisition with approximately $24 million in cash, $10 million in short-term financing, and $10 million in long-term financing.
Susan: Second when we're thinking about our capital allocation.
Susan: We continue to explore and evaluate M&A opportunities to expand our businesses and support our growth strategy.
Susan: Our ultra pet acquisition, which hit its one year anniversary as being part of the oil drive portfolio on May <unk> is a great example.
Susan: That acquisition has performed well it does hit our internal financial benchmarks and most importantly has been viewed by our customers very favorably as a value added product expansion to our portfolio.
Susan: We initially funded this acquisition with approximately $24 million in cash.
Susan: $10 million in short term financing and $10 million in long term financing.
Susan Kreh: Because of our strong cash generation during this current fiscal year, we've paid off the $10 million in short-term financing, thus leaving Oil-Dri with more dry powder to fund future opportunities. The third priority when we're thinking about capital allocation is our dividend, our goal to provide a predictable and sustainable dividend to our shareholders. The announcement of the 16% dividend increase marks the 22nd consecutive year of providing increased dividends to our shareholders, and that is a track record that we are proud of.
Susan: Because of our strong cash generation. During this current fiscal year, we paid off the $10 million in short term financing, thus, leaving oil dry with more dry powder to fund future opportunities.
Susan: Our third priority when we're thinking about capital allocation is our dividend our goal to provide a predictable and sustainable dividend to our shareholders.
Susan: The announcement of the 16% dividend increase marks the 20 <unk> consecutive year and providing increased dividends to our shareholders and that is a track record that we are proud of.
Susan Kreh: And finally, Sherry Purchases. We buy back shares to offset the dilution associated with restricted stock program for our teammates, and we opportunistically repurchase shares when we believe they're undervalued by the market. Year-to-date, we have not made any open market purchases, but we have bought back shares turned in by our teammates to pay taxes when they're restricted shares vestibule.
Susan: And finally share repurchases.
Susan: We buy back shares to offset the dilution associated with restricted stock program for our teammates and we opportunistically repurchase shares when we believe they are undervalued by the market.
Susan: Year to date, we have not made any open market purchases, but we have bought back shares turned in by our teammates to pay taxes, when they're restricted shares vesting.
Susan Kreh: So that's the way we think about the cash allocation and the capital allocation.
Susan: So those are the that's the way, we think about the cash allocation and the capital allocation.
Susan Kreh: But prior to turning this back over to Dan for questions, I'd like to provide a little color on our effective tax rate. For the third quarter of fiscal year 2025, we used an estimated effective tax rate of 18% compared to 23% for the rate for the third quarter of fiscal year 2024, so a 500 basis point difference. Our process for determining this rate involves preparing our fiscal year's tax return during the third quarter, for the prior year. So after we've prepared that, we've got a view of what our final tax rate looks like for that prior year.
Susan: Prior to turning this back over to Dan for questions I'd like to provide a little color on our effective tax rate.
For the third quarter of fiscal year 2025, we used an estimated effective tax rate of 18% compared to 23% for the rate for the third quarter of fiscal year 2024, So a 500 basis point difference.
Susan: Our process for determining this rate involve preparing our fiscal year's tax return during the third corner. So after for the prior year. So after we prepare that we've got a view of what our.
Susan: Final tax rate looks like for that prior year.
Susan Kreh: We make the tax adjustments that are necessary and book them. Then we take a look at expected annual taxable income for the upcoming year and include any tax adjustments that we're aware of, including the depletion deduction and any other discrete items. While this analysis resulted in year-over-year results in the quarter having a meaningful variation in the quarterly effective tax rates, when we look at that on a full-year basis, we still estimate the full-year effective tax rate to be about 19% compared to a full-year effective tax rate last year of 20.5%. During the current year, we did benefit from a one-time tax credit related to solar investments in our Taft, California facility, which really makes up the difference in why the rate this year is slightly less than the full year effective tax rate that we used last year.
Susan: And we make the tax adjustments that are necessary and book them.
Susan: Then we take a look at expected annual taxable income.
Susan: The upcoming year.
Susan: And include any tax adjustments that were aware of including the depletion deduction and any other discrete items.
Susan: While this analysis resulted in year over year results in the quarter, having a meaningful variation in the quarterly effective tax rates. When we look at that on a full year basis, we still estimate our full year effective tax rate to be about 19%.
Susan: <unk> to our full year effective tax rate last year of 25%.
Susan Kreh: During the current year, we did benefit from a onetime tax credit related to solar investments and our Taft, California facility, which really makes up the difference and why the rate. This year is slightly less than the full year effective tax rate that we used last year.
Susan Kreh: So hopefully that provides a little bit of what's going on in the quarter. I would just recommend that looking at the full year is probably the way to think about it when you're thinking about the future of the business.
Susan: So hopefully that provides a little bit what's going on in the quarter I would just recommend that looking at the full year, it's probably the way to think about it when you're thinking about the future of the business.
Daniel Jaffee: And with that, Sam, I'll turn it back over to you. All right, thank you. And for our investors, thank you for the effective tax rate thing, but if you're ever suffering from insomnia, just ask Susan to walk you through our international taxes. And I guarantee you, I'm just teasing you, Susan, but you know I love international tax.
Dan Jaffee: And with that Dan I'll turn it back over to you.
Dan Jaffee: Alright, Thank you and for investors if you ever. Thank you for the effective tax rate thing, but if you ever suffering from insomnia, just ask Susan to walk you through our international taxes.
Speaker Change: I guarantee if im just teasing you Susan but you know I love International tax I'm going to turn it over.
Christopher Lamson: I'm going to turn it over to Chris Lamson for an Ultrapet acquisition. Great. Thanks, Dan. So, hey, at the end of Q3, we've now completed our first year of ownership of Ultrapet, which made it seem like a good time. I think it was last, it was at the end of Q1, but we thought this would be another good time to share an update regarding the acquisition. As Susan mentioned, we're right on our acquisition economics. pleased with that. That is, we're right on the model we use to value the business. We're experiencing stronger than expected cost synergies primarily in the logistics and administrative areas.
Dan Jaffee: Im going to turn it over to Chris Lamson for an ultra pet acquisition.
Susan: Update.
Speaker Change: Thanks, Dan.
Susan: So hey at the end of Q3, we have now completed our first year of ownership of Ultra Pat.
Susan: Which made it seem like a good time I think it was last.
Susan: At the end of Q1, but we thought this would be another good time to share an update regarding the acquisition as Susan mentioned, we're right on our acquisition economics were obviously very pleased with that.
Susan: That is we're right on the model we use the value of the business, we're experiencing stronger than expected cost synergies, primarily in the logistics and administrative areas.
Christopher Lamson: One example, we've been able to close what were pretty expensive third-party warehouses and roll these into our existing oil drive facilities from a distribution perspective faster and more efficiently than expected. It's a, Susan again alluded to this, it's a win-win as customers are enjoying the efficiencies of what are fairly light crystals riding on the same trucks as our heavier clay litters. Conversely, the ultra legacy business, the existing retailers we got as part of the business, been a little softer from a top-line perspective, but then partially offsetting that has been the distribution drive that we made right after buying the business.
Susan: One example, we have been able to close.
Susan: We're pretty expensive third party warehouses and roll these into our existing oil drive facilities from a distribution perspective faster and more efficiently than expected.
Susan: Susan again alluded to this a win win as customers are enjoying the efficiencies of what are fairly light crystals riding on the same trucks as our heavier <unk>.
Susan: Conversely, the ultra legacy business the existing retailers, we got as part of the business, but a little softer from a topline perspective, but then partially offsetting that has been the distribution drive that we made right after buying.
Susan: Buying the business. It was really successful and also in line with our acquisition model.
Christopher Lamson: It was really successful and also in line with our acquisition model. We've gotten a few questions back through Leslie over time as to the tariff situation. Silica gel comes out of China, so I thought I'd provide a little update on that. I think first though, setting context, As much as crystals are a focus, given the growth opportunities we see, they only represent about 10% of our total litter business and less than 5% of Oil-Dry's total business from a top-line perspective. So important to realize that overall exposure here is limited in the crystals business and then as was talked about earlier, is a bit limited overall, or is limited overall.
Susan: Got a few questions back through lastly over time as to the tariff situation silica gel comes out it comes out of China. So I thought I'd provide a little update on that thank first though setting context.
Susan: As much as crystals are a focus given the growth opportunities we see they only represent about 10% of our total litter business and less than 5% of oil drives total.
Susan: Business from a topline perspective, so important to realize that overall exposure here is.
Susan: Is limited and the crystals business and then as was talked about earlier is a bit limited overall as there is limited overall as a company.
Christopher Lamson: So as we're thinking about it, you know, we really start with consumer value, and as is the case always with Oil-Dri, you know, the tortoise being our mascot, we think about the business for the long term. The value player in the category, that means we really need to pay attention to price gaps, just like we do in our base clay business. Our Caps, Pride, and Ultra brands, and of course Private Label, have to offer a solid value versus the premium branded players. So we look up at those branded players, but in crystals, we also have to look down at the clay business as we really compete with them from a value perspective, or compete with the clay segment from a value perspective as well.
Susan: So as we're thinking about it we really start with consumer value.
Susan: And as the case always with oil dry.
Susan: The tortoise being our mascot, we think about the business for the long term the value player in the category that means we really need to pay attention to price gaps just like we do on our base clay business.
Susan: Our cat's pride and ultra brands and of course private label have to offer a solid solid value versus the premium branded players. So we look up at those branded players but in crystals. We also have to look down at the clay business.
Susan: As we really compete with them from a value perspective or completely compete with the <unk> segment from a value perspective as well so as of now we're not really seeing any movement on crystals and clay now the flip to that is especially with our tighter margins versus the premium players, we really must manage the P&L.
Christopher Lamson: So as of now, we're not really seeing any movement on crystals and clay. Now, the flip to that is, especially with our tighter margins versus the premium players, we really must manage the P&L and the tariff push on our margins. Where they have to an unreasonably low level, we've got to pass along a little bit of surgical pricing, but only to the extent necessary and with a focus on maximizing that value. Fortunately, per my prior comments, we really have generated significant cost savings via synergies which we can use to offset the near-term impact of tariffs along with that surgical pricing and ultimately maintain good value equations.
Susan: And the tariffs push on our margins and where they have to at unreasonably low level, we've got to pass along a little bit of surgical pricing, but only to the extent necessary with a focus on maximizing that value like we talked about.
Susan: Fortunately for my prior comments, we really have generated significant cost savings via synergies, which we can use to offset the near term impact of tariffs along with that surgical pricing.
Susan: Ultimately maintain good value equation. So ultimately, it's it's really a balance.
Christopher Lamson: So ultimately, it's really a balance. that we're that we're leveraging to get through what is what is a bit of volatile time. So, it's kind of easy to become myopically focused on managing tariffs and the margin structure. I'm really pleased that we remain focused on growing the crystals business. I've shared in this forum before the selling cycle, where we really began to leverage our strong capabilities built into our lightweight private label business by partnering with retailers to develop private label offerings in the crystal segment. While we never share our retail lever plans, we remain really optimistic that part of our investment thesis around building out the private label business is very much on track.
Susan:
Susan: That we're that we're leveraging to get through.
Susan: But it is a bit of volatile times.
Susan: It's kind of an easy to become Myopically focused on managing tariffs and the margin structure I'm really pleased that we remain focused on growing the crystals business.
Susan: I have shared in this forum before the selling cycle.
Susan: <unk>.
Susan: Where we really began to leverage our strong capabilities built into our lightweight private label business by partnering with retailers to develop private label offerings and the Crystal segment well.
Susan: We never share our retail lever plans.
Susan: We remain really optimistic that.
Susan: Part of our investment thesis around building out the private label business.
Susan: Is very much on track recall that the momentum that we created out of the gate in terms of driving distribution was really on the ultra brand and bringing cat's pride into crystals.
Christopher Lamson: Recall that the momentum that we created out of the gate in terms of driving distribution was really on the ultra brand and bringing cat's pride into crystals. As we go forward into this next selling cycle, we're optimistic that we'll begin to drive penetration on the private label. So, pleased with where we are and pleased with growth prospects ahead and teams head down on.
Susan: As we go forward into this next selling cycle, we're optimistic that we'll begin to drive penetration on the private label business as well. So pleased with where we are im pleased with with gross growth prospects ahead and teams have down on growing the business.
Leslie Garber: So that, we'll turn it over to Leslie, who I think is going to kick off. Thanks Chris. I just want to remind everyone to please submit your questions using the ask a question field on the webcast and click submit.
Susan: I will turn it over.
Susan: Over to Leslie who I think is going to kick off taking your questions.
Leslie: Thanks, Chris I, just wanted to remind everyone to please submit your questions using the ask a question field on the webcast and click submit.
Leslie Garber: So our first question comes from John Baer from Ascend Wealth Advisors. He and Ethan Starr, a private investor, are both interested in AMLIN.
Leslie: So our first question comes from John Bair from ascend wealth advisors, and Ethan Star private Investor are both interested in analytics.
Wade Robey: And so I'm going to read the first question. Although animal health and nutrition revenues for the nine months year-over-year were up this past quarter, they were flat year-over-year, as stated in the press release. Was this quarter's result due to seasonality or changes in customer order patterns? Any hesitation by customers outside the U.S. due to tariff controversy? And what will it take to get sales back on the growth trajectory?
Leslie: And so I'm going to read the first question, although animal health and nutrition revenues for the nine months year over year were up this past quarter. They were flat year over year as stated in the press release was this quarter's result, due to seasonality or changes in customer order patterns any hesitation by customers outside the U S. Due to tariff controversy.
Leslie: And what will it take to get sales back on the growth trajectory.
Wade Robey: So, Wade, I'm going to turn that over. Yeah, thank you, Leslie. And thank you, John, for the question.
Wade: So Wade I am going to turn that over to you. Please.
Wade: Yes, Thank you Leslie and thank you John for the question and good morning, everyone.
Wade Robey: And good morning, everyone. As you as you know, the performance for the third quarter was flat as we compare it to the previous year. But actually, as we look at the year to date, we're on very good growth and meeting our expectations and targets that we've that we've set for the year. So why is that? As you note, we have quite a bit of volatility currently being caused by the tariff situation. This really exacerbates a previous situation we had where because of the some of the challenges we were seeing on logistics and delivering to our international markets, we were seeing longer transit times.
Wade Robey: As you as you note.
Susan: <unk> performance for the third quarter was flat as we compare it to the previous year, but actually as we look at the year to date, we're on a very good growth and meeting our expectations with targets that we've that we've set for the year. So why is that as you note we have quite a bit of volatility currently being caused by the tariff situation.
Susan: This really exacerbates our previous situation, we had where because of the some of the challenges we were seeing on logistics and delivering to our international markets. We are seeing longer transit times. So the combination of those has caused increased volatility volatility as we look month over month or as we compare.
Wade Robey: So the combination of those has caused increased volatility, volatility as we look month over month, or as we compare on a quarter basis. So that we expect to work its way out. It actually has caused us or allowed us to work even more closely with our distribution partners, forming stronger relationships, helping them manage their inventory so we don't have product shortages and that we meet our customer needs for our products. So overall, we're very pleased with the performance year to date and expecting to finish the year on track, but it has caused, as you note, some month-to-month or quarter volatility that was unexpected.
Susan: On a quarter basis.
Susan: So that we expect to work its way out it actually has cost us or allowed us to work even more closely with our distribution partners, forming stronger relationships, helping them manage their inventory. So we don't have product shortages and that we meet our customer needs for our for our products. So overall, we're very pleased with the performance year to date and expecting.
Susan: To finish the year on track, but it has caused us some month to month or quarter volatility that was unexpected.
Susan: Great. Thank you.
Wade Robey: Thank you, Wade.
Bruce Patsey: The next question comes from Robert Smith from the Center for Performance Investing. He asks... The U.S. renewable diesel production was down 12% in the first quarter of calendar 2025, yet you were up 13%. While not fully comparable in fiscal year months, it was significant outperformance.
Susan: Next question comes from Robert Smith from Center for performance investing he asks.
Robert Smith: U S. Renewable diesel production was down 12% in the first quarter of calendar 2025, you were up 13%, while not fully comparable in fiscal year months. It was significant.
Susan: Performance please explain.
Bruce Patsey: I'm going to turn that over to Bruce. Thanks for the question. And yes, the market was down slightly in the first quarter of this year, but in Fiscal 25, new plants came online in the renewable diesel sector, and Oil-Dri was able to secure a lot of that new business that we didn't have the prior year. So, even though the whole market was down slightly in the first quarter, we saw a gain in our business as we had new business and working with new plants. In addition, we saw an increase in some of our vegetable oil business as we picked up a few new customers in that segment as well.
Bruce: Turn that over to Bruce <unk>.
Speaker Change: Yes, Robert Thanks for the question and yes, the market was down slightly in the first quarter of this year, but in fiscal 'twenty five.
Speaker Change: New plants came online in the renewable diesel sector NOL driver was able to secure a lot of that new business that we didn't have the prior year, so even though the coal market was down slightly.
Speaker Change: In the first quarter, we saw a gain in our business as we add new business.
Speaker Change: And with new plants. In addition, we saw an increase in some of our vegetable business as we picked up a few new customers in that segment as well. So overall, we are very strong and we're looking forward to a good fourth quarter coming up.
Bruce Patsey: So, overall, we're very strong and we're looking forward to the next quarter. Thank you.
Speaker Change: Sure.
Speaker Change: Thank you. Our next question comes from Ethan Starr. He asks noting that you recently lost what appears to be a significant private label claim cat litter account what are the prospects for growing private label Clay cat litter distribution and sales.
Laura Scheland: Our next question comes from Ethan Starr. He asks, noting that you recently lost what appears to be a significant private label clay cat litter account, what are the prospects for growing private label clay cat litter distribution and sales?
Laura Scheland: I'm going to have Laura Scheland answer that. Hey, good morning, Ethan. Thanks for the question. We're continuing to see a lot of momentum in the private label clay cat litter, particularly for lightweight litter. And despite the loss of an account, we continue to have commanding share of private label lightweight. As we've mentioned during past calls and the staff holder meetings, our strategy has been to grow the lightweight segment, and we're very pleased to see that these efforts are paying off, and the lightweight segment is growing more than the litter category. This poisons us for long-term success as the lightweight litter pie grows.
Sheila: Sure Sheila and answer that.
Sheila: Hey, good morning, Ethan Thanks for the question.
Sheila: We're continuing to see a lot of momentum in the private label cat litter, particularly for lightweight litter.
Speaker Change: Despite the loss of an account we continue to have a commanding share of private label lightweight.
Speaker Change: As we've mentioned during past calls a stockholder meetings our strategy has been to grow the lightweight segment and we're very pleased to see that these efforts are paying off and the lightweight segment is growing more than the litter category, which places us for long term success as the lightweight litter pie grows.
Speaker Change: As well as more consumers move to the lightweight litter segment the opportunity for private label lightweight is growing.
Laura Scheland: As more consumers move to the lightweight litter segment, the opportunity for privately billed lightweight We've made great progress on private label lightweight accounts over recent years, but still have about four to five national retailers who don't carry us that we are targeting. We are leveraging existing relationships and are in active conversations with a couple of them and are very excited about that. In addition, we've continued to develop the best performing products to offer consumers the best value and have evidence of the superior performance and quality of our products versus other private label lightweight offerings, and are actively using this evidence and data in our selling.
Speaker Change: We've made great progress on private label lightweight accounts over recent years, but still have about four to five national retailers, who do don't carry us that we are targeting.
Speaker Change: We are leveraging existing relationships and a very active conversations with a couple of them.
Speaker Change: Are very excited about the prospects in.
Speaker Change: In addition, we've continued to develop the best performing products offer consumers the best value and have evidence of the superior performance and quality of our product versus other private label lightweight offerings and are actively using this evidence and data in our selling efforts with customers.
Laura Scheland: So net-net, we remain very optimistic and excited about the momentum of the growing lightweight litter segment and our prospects to grow the private label lightweight business along.
Speaker Change: So net net we remain very optimistic and excited about the momentum of the growing lightweight litter segment and our prospects to grow the private label lightweight.
Speaker Change: Along with that as well.
Daniel Jaffee: Great answer, Laura. I just want to add, you know, because lightweight is so near and dear to my heart, that my belief is if it's a great lightweight litter, then it conforms to our patents, and if it doesn't conform to our patents, it's not a great lightweight litter, because that's what we did. When we invented this category and we launched lightweight litter, we pretty much patented everything we thought that would make an effective lightweight litter. So what you're seeing, we're not going to get into the details, but we can see what customers are saying about this product that they replaced us with, and the reviews are not friendly, and I would guess that their sales are declining.
Speaker Change: Great answer Laura and I, just wanted to add because lightweight is so near and Dear to my heart that.
Speaker Change: My belief is.
Speaker Change: If it's a great lightweight litter then it conforms to our patents and if it doesn't conform to our patent so it's not a great lightweight litter because thats, what we did when we invented this category and we launched lightweight litter or are we pretty much patented everything we thought that would make an effective lightweight litter. So what youre seeing were not going to get into the details, but we can see what customers are saying about this.
Speaker Change: Product that they were placed us with and.
Speaker Change: The reviews are not friendly.
Speaker Change: And I would just that their sales are declining so we're going to play the long game like we always did.
Daniel Jaffee: So we're going to play the long game, like we always did. Sometimes when something's too good to be true, it's because it really isn't, and they obviously got a lower price, but I'm confident that over time, the consumers will get to vote, and my bet is we'll be back in. But we'll see, and sometimes you've got to take a step back to go two steps forward.
Speaker Change: Sometimes when something is too good to be true because it really isn't in there obviously got a lower price, but I'm confident that over time consumers will get to vote and my bet is we'll be back in but we'll see and sometimes you got to take a step back to go two steps forward.
Speaker Change: Okay. Thanks.
Daniel Jaffee: We have another question from John Bear, he asks, natural gas is a key production input cost. We know you partially lock in forward supply contracts for those needs. Natural gas prices are widely considered to be headed higher in the second half of 2025 and in 2026 due to increased demand for LNG exports, summer cooling demands, and data center power demand.
Speaker Change: We have another question from John Bair.
Speaker Change: He asks natural gas is a key production input cost we know you're partially locking forward supply contracts for those needs natural gas prices are widely considered to be headed higher in the second half of 2025 and in 2026 due to increased demand for LNG exports summer cooling demand in data center power demand.
Daniel Jaffee: Are there any alternatives available to oil drives? Power Your Kilns or Otherwise Reduce Your Operating Costs at the Plant Level. John, that's a great question. I'm happy to answer it. I'll take it in a number of different ways. First, as you stated in your question, a reminder that we make partial purchases to secure a chunk of our natural gas needs. In a rising market, it helps sort of prove the value of long-term dollar-cost averaging of the natural gas we purchase. Taking the question another way, in the past, we have explored alternative fuels, fuel oil, and even coal.
Speaker Change: Are there any alternatives available to oil dry.
Speaker Change: To power your kilns or otherwise reduce your operating cost at the plant level I'm going to turn this over to Aaron Christiansen.
John: John That's a great question I'm happy to answer it I'll take it in a number of different ways.
John: First as you stated in your question a reminder, that we make partial purchases.
John: To secure a chunk of our natural gas needs in a rising market. It helps to improve the value long term dollar cost averaging is again natural gas we purchase.
John: Taking the question another way in the past, we have explored alternative fuels to oil and even coal.
Daniel Jaffee: At present, liquid natural gas is still the most cost-effective and efficient fuel source. Taking the question another way, Oil-Dry has explored alternative drying technologies, different types of dryers, and even completely different alternatives like microwave technology that are available. Unfortunately, at present, most alternatives to traditional drying technology come with other pitfalls. High cost of capital, maintenance cost, rate and reliability issues, potentially, all come with pitfalls. At present, we've been unsuccessful finding an alternative that we really believe in. Now, that being said, our job every day is to get better than we were yesterday. We're constantly looking at ways to optimize fuel consumption, improve moisture control and management, some unique ways to manage optimal combustion on our dryers.
John: And president liquid natural gas is still the most cost effective and efficient fuel source.
John: The question another way will dry has explored alternative drawing technologies different types of dryers and even completely different alternatives like microwave technology there are available.
John: Unfortunately, our president most alternatives to traditional drying technology come with other pitfalls high cost of capital maintenance cost.
John: Right and reliability issues potentially all come with pitfalls at present, we have been.
John: Unsuccessful, finding an alternative that we really believe in now.
John: Now that being said our job every day is to get better than we were yesterday and we're constantly looking at ways to optimize fuel consumption.
John: Proved moisture control and management unique ways to manage optimal combustion on our dryers.
Daniel Jaffee: I'm continually looking at creative ways to get better, including even pre-drying.
John: Continually looking at creative ways to get better, including even pre drawing.
Daniel Jaffee: And then I'll close with taking an opportunity to just, not within your question, but maybe to remind the audience, Oil-Dry has shifted more than half of our warehouse forklift fleet to the use of electric away from propane or natural gas powered forklifts. And that has been, for several reasons, has really been a highly beneficial shift in our I hope I've answered your question, John.
John: And then I'll close with taken an opportunity to just not within your question, but maybe to remind the audience well dry has shifted more than half of our warehouse forklift fleet to the use of electric away from propane or natural gas.
John: Howard.
John: And that has been for several reasons.
John: It really been a highly beneficial shift in approach.
John: I Hope I've answered your question John.
Christopher Lamson: Okay, we'll take another question from Ethan Starr. Are you gaining new distribution of the Ultra Pet Crystal Cat Litter? If so, how many doors are they in and how is retail selling?
Speaker Change: Okay, well take another question from Ethan Star are you gaining new distribution of the ultra pack Crystal cat litter. If so how many doors are they in and how is retail sell through Chris lamps that I'm going to turn that over to you.
Christopher Lamson: Chris Lampson. I'm going to turn the Thanks, Wesley. And thanks, Ethan.
Speaker Change: Thanks, Leslie and thanks Ethan.
Christopher Lamson: I answered this partially in my earlier comment, so I'll be a little brief here. In short, we're up significantly in terms of what we call points of distribution year over year, which is number of doors, to your point, Ethan, times number of items. In fact, year over year, from a brick and mortar branded perspective, we added more points of distribution than we had when we acquired the business. Now recall Ultra Pet also had a sizable online business and a private label business, but branded year over year between Cat's Pride and Ultra Pet, we added more points of distribution than we already had.
Chris lamps: I answered this partially in my in my earlier comments, so I'll be a little brief here in short we're up significantly in terms of.
Chris lamps: What we call points of distribution year over year, which is number of doors to your point Ethan times number of items in fact.
Chris lamps: Year over year from a brick and mortar branded perspective, we.
Speaker Change: <unk> added more points of distribution than we than we had when we acquired the business now recall Ultra Penn also had a sizable online business and our private label business, but branded year over year between Cat's Pride military pets, we added more points of distribution than we already had.
Christopher Lamson: We went right into selling season. It's been quiet since we built that distribution. We're back into selling season. I outlined our plans to sell more branded business, but also now add private label points of distribution going into this next selling season, which really culminates with some customers and shipments in the fall and some customers with shipments in the early winter. We'll be back with results as that stuff starts shipping and tell you about the progress we've been able to make then. Thank you. Great, thanks Chris.
Speaker Change: We went right into selling season.
Speaker Change: Been quiet since we built that distribution, we're back into selling season, and I outlined our plans to sell more branded business, but also now add.
Speaker Change: Private label points of distribution going into this next selling season, which really culminates with some customers and shipments in the fall and some customers with shipments in the in the early winter. So it will be back with results.
Speaker Change: As that stuff starts shipping.
Speaker Change: And tell you about the progress we've been able to make them. Thank you.
Speaker Change: Okay.
Speaker Change: Great. Thanks, Chris.
Susan Kreh: Our next question is from Robert Smith. He asks, is artificial intelligence playing any role yet in controlling expenses or in targeting advertisers?
Speaker Change: Our next question is from Robert Smith.
Robert Smith: <unk> is artificial intelligence, playing any role yet and controlling expenses or in targeting advertising.
Susan Kreh: I'm going to have Susan Kreh address us. Yeah, thanks for the question. This is one that's near and dear to my heart. We do have a five-year roadmap with artificial intelligence on it. I would say today we're at the beginning of this journey. Today we use it primarily to supplement our teammates and provide technology that makes them more efficient. So, think about applications in customer service and in accounts payable. But we definitely do have items on the roadmap, to get to your point here, Robert, where we will be taking a look at using them to control expenses.
Speaker Change: I'm going to have Susan Cray address that.
Susan Cray: Yeah. Thanks for the question. This is a this is one that's near and Dear to my heart.
Speaker Change: We do have a five year road map with artificial intelligence on it I would say today, we are at the beginning of this journey today, we use that primarily to supplement our teammates and provide technology that makes them more efficient so think about applications and custom.
Speaker Change: Service and in accounts payable.
Robert Smith: But we definitely do have items on the roadmap to get to your point here, Robert where we will be taking a look at using them to control expenses and.
Susan Kreh: And hopefully my boss will find that more exciting than international taxing strategies. But, yeah. I will. It's a low bar. Well, thank you.
Speaker Change: Hopefully hopefully my boss will find that more exciting than internet national taxing strategies yeah.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: It's a low bar.
Speaker Change: Well. Thank you we're running out of time and we did have one more question that actually is a great dovetail into my closing comments and so Samuel Yake I Hope I pronounce your name right, but he said wall Street, often gets caught up in short term performance. It will be nice to hear your thoughts on what oil dry will look like in 10 years and the reason why that's such a great question.
Daniel Jaffee: You know, we're running out of time, and we did have one more question that actually is a great dovetail into my closing comments. And so Samuel Yake, I hope I pronounced your name right, but he said, Wall Street often gets caught up in short-term performance.
Daniel Jaffee: It would be nice to hear your thought on what oil dry will look like in 10 years. And the reason why that's such a great question, Samuel, is because we do believe we have the best hybrid capital structure. We're both a public company, so you get total transparency, and a lot of people have made a lot of money, you know, betting on and holding oil dry shares over the years. As Susan said, we've raised our dividend 22 years in a row, a big increase this year of 16%. Lately, you've seen a great run-up in the value of the company, rightly so, as we have created more earnings and grown the top line.
Speaker Change: I mean, it was because we do believe we have the best hybrid capital structure, where both are public companies you get total transparency and a lot of people have made a lot of money.
Speaker Change: Betting on and holding oil drive shares over the years as Susan said, we've raised our dividend 22 years in a row with big increase this year of 16% lately, it's been a great run up in the value of the company rightly so.
Speaker Change: As we have created more earnings and grown the topline, but we always have played for the long haul and Chris mentioned that our MAU.
Daniel Jaffee: But we always have played for the long haul. When Chris mentioned that our mascot is the tortoise, it is because the tortoise always wins the race. And I have to remind investors, because sometimes they get a little frustrated, they're like, well, what do you mean a tortoise? Tortoises grow slow.
Speaker Change: <unk> is the tortoise it is because the tortoise always wins the race and I have to remind investors because sometimes they get a little frustrated like will mirror toward stewardesses go slow and my.
Daniel Jaffee: And my... take on that, is the tortoise went as fast as he could go without jeopardizing the future. He wasn't going to do anything in the short run to jeopardize his future outcome. He just had stubby little legs and a shell, but he wasn't lazy. He wasn't going slow because he was lazy. We are not lazy. We will go as fast as an organization as we can without doing anything to jeopardize, intentionally jeopardize the future.
Speaker Change: Take on that is the shortest one as fast as he could go without jeopardizing the future. He wasn't going to do anything in the short run to jeopardizes future outcome, we just add that there'll be little eggs in a shell, but he wasn't lays it wasn't going slow because he was lazy we are not lazy. We will go as fast as an organization as we can without doing anything.
Daniel Jaffee: Thing two jeopardize intentionally.
Daniel Jaffee: We're obviously human and we will make mistakes.
Speaker Change: It's the future, we're obviously human and we will make mistakes so im not going to answer your question in specificity I would just tell you that we are benefiting today because of investments and decisions. We made 2468 10 years ago, even longer when we started and acquisition strategy.
Daniel Jaffee: So I'm not going to answer your question in specificity. I will just tell you that we are benefiting today because of investments and decisions we made two, four, six, eight, ten years ago, even longer when we started an acquisition strategy and started to bring in new products and new minds and new materials. So and then invested more in R&D, invested more in capital. These are long-term investments. So all I can tell you is we really have an internal commitment to having at least 40 years reserves in every single product line, and that's our window. We have over, I think, 100 years of reserves and proven and inferred if you take all of our materials.
Speaker Change: And started to.
Daniel Jaffee: Bring in new products, and new mines, and new materials. So and then invested more in R&D invested more in capital. These are long term investments. So all I can tell you is we really have an internal commitment to having at least 40 years reserves in every single product line and that's our window, we have over I think one one.
Speaker Change: <unk> of reserves and proven an inferred if you take all of our materials, but we make sure that for every product line. We have at least 40 years. So I would very much appreciate your <unk>.
Daniel Jaffee: But we make sure that for every product line, we have at least 40 years. So I very much appreciate your support, your loyalty, and we've been rewarding it in the short run. I hope we're rewarding it forever.
Speaker Change: Support your loyalty.
Daniel Jaffee: And we've been rewarding it in the short run I hope, we're rewarding it forever, but it's a long game and so let's deliver in the next quarter. So thank you we'll be talking to you again, when we close fiscal 'twenty five.
Daniel Jaffee: But, you know, it's a long game, and so let's deliver in the next quarter. So thank you.
Operator: We'll be talking to you again when we close fiscal 25.
Operator: Hope everyone has a great, happy, and healthy summer. Thank you.
Speaker Change: I hope everyone has a great happy and healthy summer.
Operator: Ladies and gentlemen, this concludes today's presentation. We thank you for your participation. You may all disconnect and have a wonderful day.
Speaker Change: Thank you ladies and gentlemen, this does conclude today's presentation. We thank you for your participation you may all disconnect and have a wonderful day.
Speaker Change: Okay.
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