American Vanguard : AVD Q4 2024 Earnings Call – March 14, 2025
AVD
Tra n scrip t of
Am e rica n Va n g u a rd Com p a n y
Fou rth Qu a rte r 20 24 Ea rn in g s Con fe re n ce Ca ll
Ma rch 14 , 20 25
P a rt ic ip a n t s
An th on y You n g - Dire ctor of In ve stor Re la tion s, Am e rica n Va n g u a rd Com p a n y Dou g la s Ka ye - Ch ie f Exe cu tive Office r, Am e rica n Va n g u a rd Com p a n y
Da vid Joh n son - Ch ie f Fin a n cia l Office r, Am e rica n Va n g u a rd Com p a n y
An a lys t s
Be n Klie ve - La ke Stre e t Ca p ita l Ma rke ts
Mike Ha rrison - Se a p ort Re se a rch P a rtn e rs
W a yn e P in se n t - Ga b e lli Fu n d s, LLC
P re s e n t a t io n
Op e ra t o r
Gre e tin g s, a n d w e lcom e to th e Am e rica n Va n g u a rd Fou rth Qu a rte r Ea rn in g s Re vie w
Con fe re n ce Ca ll. At
th is tim e ,
a ll p a rticip a n ts a re on a
liste n -on ly m od e , a n d
a
q u e stion -a n d -a n sw e r
se ssion
w ill
follow
th e
form a l
p re se n ta tion . [Op e ra tor
In stru ction s] P le a se n ote , th is con fe re n ce is b e in g re cord e d .
I w ill n ow tu rn th e con fe re n ce
ove r
to you r
h ost
Mr. An th on y You n g , Dire ctor
of
In ve stor Re la tion s. Sir, th e floor is you rs.
An t h o n y Yo u n g - Dire c t o r o f In ve s t o r Re la t io n s , Am e ric a n Va n g u a rd Co m p a n y
Th a n k you , op e ra tor. Good m orn in g , a n d w e lcom e to Am e rica n Va n g u a rd 's fou rth q u a rte r a n d fu ll ye a r 20 24 e a rn in g s re vie w . Ou r p re p a re d re m a rks w ill b e le d b y Da k
Ka ye , Ch ie f Exe cu tive Office r; a n d Da vid
Joh n son ,
Ch ie f Fin a n cia l Office r.
Tim
Don n e lly, CIO a n d Ge n e ra l Cou n se l is a lso
a va ila b le to
a n sw e r q u e stion s. W e
h a ve
p re p a re d p re se n ta tion slid e s w h ich w e w ill re fe re n ce d u rin g th is ca ll. Th e se slid e s a re p oste d on th e In ve stor Re la tion s se ction of th e Am e rica n Va n g u a rd w e b site .
Le t's b e g in th is ca ll w ith ou r forw a rd -lookin g ca u tion a ry re m in d e r. Du rin g th is ca ll,
w e m a y d iscu ss
forw a rd -lookin g in form a tion . All
forw a rd -lookin g
sta te m e n ts
a re
e stim a te s b y
th e
com p a n y's
m a n a g e m e n t
a n d
a re su b je ct to va riou s risks
a n d
u n ce rta in tie s
th a t m a y ca u se
a ctu a l re su lts
to d iffe r. Su ch fa ctors
in clu d e w e a th e r
con d ition s, ch a n g e s in re g u la tory p olicy a n d oth e r risks a s
d e ta ile d on th e com p a n y's
SEC re p orts a n d filin g s. All forw a rd -lookin g sta te m e n ts
re p re se n t th e com p a n y's
ju d g m e n t a s of th e d a te of th is re le a se a n d
su ch in form a tion w ill n ot n e ce ssa rily b e
u p d a te d b y th e com p a n y.
Be fore com m e n cin g w ith th e ca ll, I w ou ld
like to n ote th e n u m b e rs th a t a re b e in g
p re se n te d tod a y a re u n a u d ite d n u m b e rs. W e a n ticip a te th e re w ill b e a d e la y in filin g
Tra n scrip t P rovid e d b y
1
th e a u d ite d 10 -K a n d a re w orkin g close ly w ith ou r a u d itors to com p le te th e p roce ss a n d w e 'll look forw a rd to p rovid in g th e se a u d ite d fin a n cia l d ocu m e n ts sh ortly.
It is n ow m y p le a su re to tu rn th e ca ll ove r to CEO, Da k Ka ye .
Do u g la s Ka ye - Ch ie f Exe c u t ive Offic e r, Am e ric a n Va n g u a rd Co m p a n y
Th a n ks, An th on y. He llo, e ve ryon e , a n d w e lcom e . My n a m e is Dou g la s Ka ye , b u t th rou g h ou t m y life , m y fa m ily, frie n d s, a n d colle a g u e s h a ve re fe rre d to m e a s Da k. So p le a se fe e l fre e to ca ll m e , Da k, in th e fu tu re . Th is is m y first con fe re n ce ca ll a s CEO.
So b e fore d iscu ssin g ou r re su lts, I w ou ld like to ta ke a m om e n t to in trod u ce m yse lf
a n d
a n sw e r th e q u e stion
I h a ve re ce ive d m ost
fre q u e n tly d u rin g
m y 3 m on th s on
th e
job . W h y d id you join
Am e rica n Va n g u a rd ?
I've b e e n on th e
job a s CEO for 3
m on th s, b u t h a ve kn ow n , com p e te d , ye t, a n d a d m ire d Am e rica n Va n g u a rd for m a n y
ye a rs. I sta rte d
m y ca re e r
in fin a n ce , b u t
h a ve sp e n t th e
se con d
h a lf of m y ca re e r
m a n a g in g
a n d
g row in g la rg e sca le
crop
p rote ction b u sin e sse s. It
w a s
n ot a n e a sy
d e cision to
le a ve m y la st
role , b u t
I sa w
a tre m e n d ou s
op p ortu n ity
a t Am e rica n
Va n g u a rd to b u ild u p on a b u sin e ss th a t p rovid e s h ig h q u a lity, irre p la ce a b le p rod u cts th a t ou r cu stom e rs va lu e a n d n e e d e d b y g row e rs.
Th is com p a n y h a s a re silie n t re ve n u e b a se th a t w e ca n b u ild u p on , b u t w e m u st im p rove m a rg in s, rig h t -size th e b a la n ce sh e e t, a n d g e t b a ck to g row th . As Da vid w ill d iscu ss in a fe w m in u te s, th e on e -tim e ch a rg e s ta ke n d u rin g th is q u a rte r a re p a rt of
a b roa d e r stra te g y to im p rove th is b u sin e ss. Th e
m a g n itu d e of
th e
ch a rg e is
su b sta n tia l. Th e se ste p s a re n e ce ssa ry to re p osition
th e com p a n y
for
lon g -te rm
g row th a n d p rofita b ility.
W e h a ve a lot of g rou n d to cove r on th is ca ll. Bu t b e fore w e g e t sta rte d , I w a n te d to e m p h a size th a t I p la n on h a vin g a cu ltu re th a t stre sse s th e im p orta n ce of sa fe ty. En su rin g th e sa fe ty, h e a lth , a n d w e ll-b e in g of ou r e m p loye e s a n d th e e n viron m e n t is
a n
im p orta n t p a rt of m y role h e re ,
a n d on e of m y g oa ls
is to e n su re th a t ou r
e m p loye e s re tu rn h om e sa fe ly a fte r e ve ry d a y of w ork. From
th e a tta ch e d ch a rt, you
ca n
se e th a t ou r sa fe ty p e rform a n ce
h a s im p rove d ove r th e
la st 12 m on th s. On e of
m y g oa ls a s CEO is to e n su re th a t th is tre n d con tin u e s to im p rove . W h ile w e m a y n e ve r b e th e la rg e st a g ricu ltu ra l com p a n y, I w ill strive to m a ke th is on e of th e sa fe st .
Now , tu rn in g
to th e fu ll ye a r 20 24 re su lts, to b e a b le to com p a re ou r 20
24 re su lts
w ith p re viou s
p e riod s, I w ill re fe re n ce a d ju ste d n u m b e rs. Am e rica n
Va n g u a rd
g e n e ra te d a p p roxim a te ly $ 4 2 m illion of a d ju ste d EBITDA in 20 24 . W ith in
th e ra n g e
of, w e p re viou sly com m u n ica te d a $ 4 0 m illion to 50 m illion . Ad ju ste d re ve n u e w a s
a p p roxim a te ly $ 563 m illion , slig h tly b e low ou r ta rg e t of $ 565 m illion to $ 580 m illion .
W e a ckn ow le d g e th a t in th e p a st, Am e rica n Va n g u a rd h a s h a d a h istory of m issin g its ta rg e ts, b u t g oin g forw a rd , w e w a n t to b e a com p a n y th a t se ts a ch ie va b le g oa ls
a n d con siste n tly m e e ts
or e xce e d s th e se
b e n ch m a rks. Th a t is a
com m itm e n t
w e
w a n t to m a ke to ou r
sta ke h old e rs, ou r
cu stom e rs, re g u la tors,
e m p loye e s,
a n d
sh a re h old e rs, a n d a ll oth e r con stitu e n ts.
Tra n scrip t P rovid e d b y
2
W h ile w e a re p le a se d to h a ve a ch ie ve d ou r 20 24 EBITDA ta rg e t, th e re su lt is ju st th e
sta rtin g p oin t for w h a t is p ossib le a t th is com p a n y, in
m y op in ion . W ith
a n a d ju ste d
EBITDA m a rg in of 7.5% in
20 24 , w e w ou ld vie w th is
le ve l of p rofita b ility a s b e in g
a p p roxim a te ly h a lf of w h a t
ou r fu ll cycle e a rn in g s p ow e r ca n b e . On a
p e rce n ta g e
b a sis, w e b e lie ve th a t w e ca n a ch ie ve d ou b le -d ig it EBITDA g row th ove r th e n e xt 3 to 4 ye a rs a s w e SIMP LIFY, P RIORITIZE, a n d DELIVER.
Th is is a m a tte r th a t I h a ve b e e n re p e a tin g sin ce th e first d a y I join e d th e com p a n y a n d w ill con tin u e to re p e a t for th e fore se e a b le fu tu re . For a re la tive ly sm a ll b u sin e ss, I h a ve n otice d a sig n ifica n t a m ou n t of com p le xity a n d I b e lie ve th a t sim p lifyin g m a n y of th e th in g s w e d o w ill a llow u s to b e tte r u n d e rsta n d w h a t is im p orta n t a n d b e a b le to d e live r a g a in st th e h ig h e st p riority ta sk.
Th e
Boa rd
of Dire ctors h a s ta ke n th e rig h t in itia l ste p s to
fix th e
b u sin e ss ove r th e
p a st
7
to
8 m on th s. Exitin g SIMP AS, cu ttin g costs, a n d
lookin g
to in sta ll a n ERP
syste m
w e re th e rig h t in itia l ste p s to fix th e b u sin e ss. I h a d a d e e p u n d e rsta n d in g of
w h a t th e Boa rd w a s lookin g to a ccom p lish b e fore I join e d th e com p a n y, b u t I b e lie ve
th e tra n sform a tion
p la n
w a s a sta rtin g p oin t for w h a t is p ossib le , n ot th e
u ltim a te
d e stin a tion . I d on 't
th in k
a n yth in g re volu tion a ry is n e ce ssa ry to im p rove
u p on th e
b u sin e ss tra n sform a tion th a t is w e ll u n d e rw a y, b u t d e p loyin g m od e rn m a n a g e m e n t te ch n iq u e s th a t I h a ve im p le m e n te d in se ve ra l p rior p osition s sh ou ld b u ild u p on th e ta rg e ts th a t w e h a ve a lre a d y e sta b lish e d .
Be fore I tu rn th e ca ll ove r to Da vid , I ca n p rovid e som e d e ta ils on w h a t w e a re se e in g
in th e fa rm e con om y. Sin ce ta kin g th is role , I h a ve m e t w ith m a n y of ou r
la rg e st
cu stom e rs, w ith
w h om I h a ve
h a d lon g sta n d in g
re la tion sh ip s. Th e se cu stom e rs a re
in d ica tin g th a t
th e
slig h t im p rove m e n t in
th e
se n tim e n t
sin ce th e low
p oin ts
e xp e rie n ce d in
th e
su m m e r
of
20 24
h a s
cre a te d a m ore
p ositive e n viron m e n t
a m on g st g row e rs.
Bu t th e y re m a in con se rva tive
in
th e ir
b u yin g p a tte rn s a fte r
e n d u rin g th e
re ce n t
cyclica l d ow n tu rn a n d fa cin g th e u n ce rta in ty of con tin u in g h ig h costs of ca p ita l a n d
n ow th e sp e cte r of in cre a sin g
ta riffs. It se e m s th e
ch a n n e l is p u rch a sin g in se a son
in ste a d of a h e a d of th e
se a son
a s w e h a ve
se e n h istorica lly. It d oe s n ot a p p e a r th a t
cu stom e rs a re lookin g
to re b u ild in ve n torie s w h ich h a ve la rg e ly b e e n d e p le te d .
In ste a d , th e y a re b u yin g ju st
in
tim e for th e
se a son . I firm ly b e lie ve
th a t 20 25 w ill b e
b e tte r th a n 20 24 , b u t
th e
im p rove m e n t
w ill b e
g ra d u a l a n d
th e in te re st ra te
e n viron m e n t, cou p le d
w ith
th e u n ce rta in ty of p ote n tia l ta riffs, w ill le a d to fa rm e rs
re m a in in g ca u tiou s for som e tim e .
Ta kin g in to con sid e ra tion th e se fa ctors for 20 25, w e h a ve a n a d ju ste d EBITDA ta rg e t ra n g e of $ 4 5 m illion to $ 52 m illion a n d e xp e ct sa le s to fa ll in a ra n g e of $ 565 m illion to $ 58 5 m illion . W e e xp e ct Ca p Ex of a p p roxim a te ly $ 10 m illion for 20 25, so fre e ca sh flow sh ou ld b e m e a n in g fu l, w h ich w e w ill a lloca te tow a rd s th e p a y d ow n of d e b t . As w e con tin u e to tra n sform th is b u sin e ss, w e b e lie ve th a t fu tu re m a rg in s w ill con tin u e
Tra n scrip t P rovid e d b y
3
to im p rove , a n d w e b e lie ve th e re w ill b e fu rth e r m a rg in e n h a n ce m e n t in 20 26 a n d b e yon d .
Now , I'll tu rn th e ca ll ove r to Da vid to d iscu ss fin a n cia l re su lts b e fore re tu rn in g for m y closin g re m a rks.
Da vid J o h n s o n - Ch ie f Fin a n c ia l Offic e r, Am e ric a n Va n g u a rd Co m p a n y
Th a n k you , Da k. Good m orn in g , e ve ryon e . Tu rn in g to ou r fin a n cia l p e rform a n ce , I'd
like
to
re ite ra te
th a t
ou r com m e n ts
tod a y a re
b a se d on
u n a u d ite d
n u m b e rs. Ou r
fou rth
q u a rte r
re ve n u e s w e re a p p roxim a te ly
$ 169
m illion , a d e cre a se of
2% a s
com p a re d to
th e
fou rth
q u a rte r
of 20 23,
a n d
ou r
a d ju ste d
EBITDA w a s
a p p roxim a te ly $ 18 m illion , a
d e cre a se of 18% a s com p a re d
to
th e fou rth q u a rte r of
20 23.
Du rin g th e fou rth q u a rte r, w e w e re a b le to p a y d ow n $ 22
m illion in d e b t . In a d d ition ,
th e
com p a n y is focu se d on
im p rovin g its b a la n ce sh e e t
a n d
w e a re
p le a se d
to b e
a b le
to re p ort
th a t
in ve n tory h a s
e n d e d a t
a p p roxim a te ly
$ 18 0
m illion ,
w h ich
in clu d e d som e w rite -d ow n s for ob sole sce n ce a n d slow -m ovin g .
In 20 25, th e b u lk of th e fre e ca sh flow w e g e n e ra te w ill b e a lloca te d tow a rd s p a yin g
d ow n d e b t . For th e fu ll ye a r
20 24 , th e
com p a n y re cord e d a d ju ste d re ve n u e s of
a p p roxim a te ly $ 563 m illion , a
d e cre a se
of a p p roxim a te ly 3% a s com p a re d to 20 23.
Th is e xclu d e s th e cre d its w e re cord e d to w ith d ra w Da cth a l from th e m a rke t .
Ou r re p orte d re ve n u e s w ill b e a p p roxim a te ly $ 550 m illion . Ad ju ste d EBITDA w a s $ 4 2
m illion a s
com p a re d to
$ 53 m illion in
th e p rior p e riod .
W e con tin u e to m a ke
p rog re ss
in ou r e ffort
to
d rive d ow n
in ve n tory. Be fore
a sse t
w rite -d ow n s,
w e
d e cre a se d
ou r in ve n tory
b y a p p roxim a te ly $ 4 7 m illion d u rin g
th e
q u a rte r,
b u t
slig h tly m isse d ou r in ve n tory-to -sa le s ta rg e t of 34 %.
W h ile w e
h a d p re viou sly
ta rg e te d in ve n tory-to -sa le s, w e
a re n ow
a d ju stin g
th is
ta rg e t to in ve n tory tu rn s, a s w e b e lie ve th is m ore close ly a lig n s w ith th e g oa ls of th e b u sin e ss. Ou r a ve ra g e in ve n tory tu rn s for 20 24 e n d e d a t 1.67 on a n a d ju ste d b a sis a n d w e sh ou ld b e a b le to p u sh th is m e tric tow a rd s a b ou t 2 tu rn s b y ye a r e n d 20 25.
I w ou ld a lso like to m e n tion th a t w e re ce ive d a n a m e n d m e n t to ou r cre d it fa cility. For ove r 35 ye a rs, BMO a n d its p re d e ce ssors h a ve sh ow n con tin u e d su p p ort for ou r
b u sin e ss.
W e
a p p re cia te
th e vote
of
con fid e n ce th e y a re
sh ow in g
in
ou r
tra n sform a tion w ork. W ith
ou r cre d it
fa cility e xp irin g
in
Au g u st of 20 26, w e a im
to
a n n ou n ce a n e w fa cility in th e su m m e r of th is ye a r.
Le t's d iscu ss
th e
on e -tim e
ch a rg e s
th a t
im p a cte d
ou r
p e rform a n ce . In
tota l,
for
ca le n d a r
ye a r
20
24 , w e h a ve re cord e d $ 118
m illion
of n on -re cu rrin g ch a rg e s. Th e
m a g n itu d e of th e se
ch a rg e s h ig h lig h ts th e
a m ou n t
of w ork th a t
w a s n e ce ssa ry to
re p osition Am e rica n
Va n g u a rd . Th e on e -tim e ch a rg e s fa ll in to tw o ca te g orie s, a sse t
im p a irm e n ts a n d tra n sform a tion p roje cts.
Tra n scrip t P rovid e d b y
4
W e h a d a p p roxim a te ly $ 76 m illion in a sse t im p a irm e n ts d u rin g th e
fou rth q u a rte r,
con sistin g of th e SIMP AS w rite -d ow n , w h ich w a s a p p roxim a te ly
$ 22.4 m illion , a
g ood w ill w rite -d ow n , w h ich w a s a p p roxim a te ly $ 27 m illion , th e
w rite -d ow n of slow -
m ovin g a n d ob sole te in ve n torie s, w h ich
w a s a p p roxim a te ly $
20 m illion , a n d
th e
w rite -d ow n of a p re viou s in ve stm e n t a n d oth e r a sse ts.
W e h a d sm a lle r tra n sform a tion ch a rg e s
d u rin g th e fou rth
q u a rte r re la te d
to
ou r
tra n sform a tion con su lta n t, Ke a rn e y, a n d
ou r org a n iza tion ,
Re d e sig n [p h ].
Th e se
e xp e n se s a n d th e w rite -d ow n s a re su b sta n tia l, b u t th e y p osition Am e rica n Va n g u a rd for im p rove d p rofita b ility a n d g row th ove r th e com in g q u a rte rs. I w ou ld b e h a p p y to a n sw e r fu rth e r q u e stion s a b ou t th e se ch a rg e s in ou r Q&A.
Fin a lly, I w ou ld like to m e n tion th e d e la y in ou r fin a n cia l filin g w ith a n u m b e r of som e w h a t com p lica te d a sse ssm e n ts re q u ire d re la te d to th e w rite -d ow n s, e sp e cia lly g ood w ill, th a t w e h a ve a d d re sse d in th e fou rth q u a rte r. W e w ill e n d u p filin g ou r 10 -K a fte r th e sta tu tory d e a d lin e , a n d con se q u e n tly, w e w ill b e filin g a 12b -25 w ith th e SEC. W e a re w orkin g w ith ou r a u d itors in a n e ffort to com p le te th e op e n ite m s w ith a vie w to filin g th e 10 -K a s soon a s p ossib le .
W ith th a t, I w ou ld like to tu rn th e ca ll b a ck to Da k.
Do u g la s Ka ye - Ch ie f Exe c u t ive Offic e r, Am e ric a n Va n g u a rd Co m p a n y
Th a n k you , Da vid . Be fore w e w ra p th in g s u p , I w ou ld like to a ckn ow le d g e tw o n e w
m e m b e rs of ou r te a m
a n d on e p rom otion . W e h a ve re ce n tly h ire d Mike DiP a ola a s
Se n ior Vice P re sid e n t
of Stra te g y a n d R&D;
a n d Ja re d Sta n le y a s
Se n ior Vice
P re sid e n t of Op e ra tion s a n d Su p p ly Ch a in . W e
a lso re ce n tly p rom ote d
Nolte a n ou s
Gillia m to Se n ior Vice
P re sid e n t of Ma n u fa ctu rin g . Mike a n d Ja re d w e re h ire d to
b rin g a skill se t to Am e rica n Va n g u a rd th a t w a s m issin g , w h ile Nolte a n ou s is g e ttin g a w e ll-e a rn e d p rom otion from w ith in .
I a m e xcite d to h a ve a ll th re e re p ortin g
d ire ctly to m e , a n d
ove r tim e I look forw a rd
to in trod u cin g
th e m
to th e in ve stm e n t
com m u n ity, a n d
I a m su re you
w ill b e
a s
im p re sse d w ith
th e m
a s I a m . Lookin g
forw a rd to
20 25, a s w e sta te d
e a rlie r, th e
a g ricu ltu ra l e con om y is g ra d u a lly im p rovin g , a n d w e
a re
m a kin g ste a d y p rog re ss
w ith ou r b u sin e ss tra n sform a tion .
W e h a ve
a n a lyze d th e on g oin g
ta riff situ a tion
a n d
b e lie ve it w ill h a ve
a
n om in a l
im p a ct
on a ra w m a te ria l cost
w ith le ss th a n
$ 3 m illion
EBITDA im p a ct
if ta riffs
re m a in
in
p la ce for a fu ll ye a r. Give n th e flu id n a tu re
of th e situ a tion , it is too e a rly to
te ll h ow
th is m a y im p a ct g row e rs, b u t w e
a re
in
con sta n t con ta ct w ith
ou r
cu stom e rs a s w e g a u g e h ow th e y a re re a ctin g to th e se d e ve lop m e n ts. W e h a ve th e ca p a b ility to im p rove ou r p rofita b ility th rou g h ou r b u sin e ss tra n sform a tion , a n d w e look forw a rd to e ve n stron g e r re su lts in th e fu tu re p e riod s d rive n b y in itia tive s th a t a re w ith in ou r con trol.
Tra n scrip t P rovid e d b y
5
Be fore closin g th e ca ll, I w ou ld like to sa y th a t I a m m ore e xcite d to d a te th a n w h e n I orig in a lly join e d th e com p a n y. I h a ve se e n a lot of op p ortu n itie s to im p rove a n d m od e rn ize th e com p a n y to d rive im p rovin g re su lts.
As w e look
forw a rd
to
20 25,
ou r
g oa ls a re stra ig h tforw a rd , op e ra te
ou r
m a n u fa ctu rin g
fa cilitie s a s sa fe ly a n d a s su fficie n tly a s p ossib le , a ch ie ve th e
fin a n cia l
ta rg e ts w e h a ve p rovid e d , fu rth e r tra n sform
th is b u sin e ss in to a
com p a n y th a t ca n
con siste n tly g e n e ra te
fre e
ca sh
flow
to m a tch
th e re silie n t
re ve n u e
it
a lre a d y
g e n e ra te s, a n d
rig h t
size
a n d stre n g th e n
th e
b a la n ce sh e e t, w h ich
w ill
e n ta il
d e cre a sin g n e t w orkin g ca p ita l a n d p a yin g d ow n d e b t .
As w e a ch ie ve th e se n e a r-te rm b e n ch m a rks, w e w ill b e m ovin g tow a rd s ou r lon g e r-
te rm
g oa l
of
b e com in g
th e tru ste d
p rovid e r
of p rove n
a g ricu ltu ra l a n d
e n viron m e n ta l solu tion s.
W ith th a t, w e w ill op e n th e floor for q u e stion s. Op e ra tor?
Op e ra t o r
Th a n k
you . At
th is tim e , w e
w ill b e
con d u ctin g
ou r
q u e stion -a n d -a n sw e r se ssion .
[Op e ra tor In stru ction s] Th a n k you . Ou r first q u e stion is com in g from
Be n Klie ve w ith
La ke Stre e t Ca p ita l. You r lin e is live .
Q: All rig h t . Th a n ks for ta kin g m y q u e stion s. First q u e stion
a rou n d
th e
p re lim in a ry
n a tu re
of th e
e a rn in g s re le a se . You
n ote d
in th e
p re p a re d
re m a rks th a t
th is w ou ld
g e t d on e a s
soon a s p ossib le . I'm
w on d e rin g if
you
ca n , first
of
a ll, h e lp kin d of
ch a ra cte rize you r e xp e cta tion s for tim in g . An d th e n se con d of a ll, it sou n d e d like th e re a son in g b e h in d th is w a s p u re ly a fu n ction of ju st kin d of a m ore kin d of com p le x d yn a m ic a rou n d th e se rie s of w rite -d ow n s ra th e r th a n a n yth in g th a t w a s n e ce ssa rily su rp risin g or con ce rn in g . I ju st w a n t to con firm th a t th a t's th e ta ke a w a y th a t w e sh ou ld h a ve h e re for th e re a son b e h in d th e p re lim in a ry n a tu re ?
Da vid J o h n s o n - Ch ie f Fin a n c ia l Offic e r, Am e ric a n Va n g u a rd Co m p a n y
Ye a h , I th in k th a t's a fa ir a sse ssm e n t . It's a little d ifficu lt for m e to sa y e xa ctly w h e n in th e n e xt w e e k or so th a t w e 'll file , b u t w e 're w orkin g a s h a rd a s w e ca n w ith ou r a u d itors to fin ish off a ll th e p roce d u re s.
Da vid J o h n s o n - Ch ie f Fin a n c ia l Offic e r, Am e ric a n Va n g u a rd Co m p a n yOh , ce rta in ly, ye a h .
Q: Oka y. P e rfe ct . Ve ry g ood . Gre a t job on th e b a la n ce sh e e t h e re in th e se con d h a lf of
th e ye a r
a n d a p p re cia te d you r com m e n ts on in ve n tory tu rn ove r e xp e cta tion s
for
20 25. I'm
w on d e rin g if you ca n fu rth e r e la b ora te on h ow m u ch you th in k you cou ld
p ote n tia lly still g e t ou t
of w orkin g ca p ita l in
20 25 g ive n h ow m u ch p rog re ss
w a s
m a d e in
20 24 . Ou tsid e
of in ve n tory, d o
you
e xp e ct a n y oth e r w orkin g ca p ita l n e t
in flow s or d o you th in k th a t's g oin g to b e
kin d of a m ore sta tic n u m b e r in 20 25?
Tra n scrip t P rovid e d b y
6
Da vid J o h n s o n - Ch ie f Fin a n c ia l Offic e r, Am e ric a n Va n g u a rd Co m p a n y
In ve n tory is
ce rta in ly ou r h ig h focu s ite m . It's th e on e th a t w e se e a s
th e g re a te st
op p ortu n ity to
m ove
in w orkin g ca p ita l d ow n . So, ye a h , w e 're
h ig h ly focu se d
on it .
W e 've g ot
a
n e w ly
sort
of
re fre sh e d
ve rsion
of
ou r
SIOP
m od e l,
a n d a s
Da k
m e n tion e d
e a rlie r, w e 've
g ot
Ja re d h a s
join e d
a n d
h e 's
g oin g to b e
le a d in g
th a t
p roce ss. It's a focu s th a t w e h a ve n 't h a d b e fore .
Q: Ve ry g ood . Da k, a q u e stion for you . You n ote d th e com p le xity of th e org a n iza tion a n d som e h ow you 're lookin g to im p rove th a t d yn a m ic . Ca n you ta lk a b ou t kin d of th e ste p s th a t a re n e e d e d to im p rove th e com p le xity? How m u ch of th e com p le xity w ill b e a d d re sse d , d o you th in k, b y a m od e rn ize d ERP syste m ve rsu s la rg e r stru ctu ra l or org a n iza tion a l ch a n g e th a t n e e d s to ta ke p la ce ? Ye a h , I g u e ss th a t's m y first q u e stion .
Do u g la s Ka ye - Ch ie f Exe c u t ive Offic e r, Am e ric a n Va n g u a rd Co m p a n y
Th a n ks, Be n . Ye a h . So, it w a s e xtre m e ly com p le x w h e n I ca m e in . It w a s on th e p a th from a n org a n iza tion a l re stru ctu rin g w ith th e Ke a rn e y tra n sform a tion p la n . So, th e re
w a s a
lot of w ork d on e
th rou g h in 20 24 . W e fin a lize d th a t p la n , th a t org a n iza tion a l
p la n ,
w h ich
sim p lifie d
th e stru ctu re
so
th a t
w e
h a d
som e a ccou n ta b ility
a n d
re sp on sib ility
in th e fu n ction s. I th in k
th a t
w a s
th e
first
n e ce ssa ry ste p to g e t
th e
org a n iza tion a ccou n ta b le a n d a lso a t th e sa m e tim e re d u ce som e of th a t com p le xity in th e org a n iza tion to id e n tify w h o's re sp on sib le for w h a t .
Th e ERP
syste m
a b solu te ly
w ill
h e lp
u s
re d u ce
th e
com p le xity. Th e
flow
of
in form a tion w ill b e
a tre m e n d ou s im p rove m e n t ove r 20 25. So th e
ERP
syste m
w ill
g re a tly e n h a n ce
or
sim p lify, I
w ou ld sa y, th e tra n sfe r of in form a tion
a rou n d
th e
org a n iza tion . Th e
oth e r ite m s
I w ou ld
sa y
th e re on
th e
sim p lifyin g a s
th e SIOP
p roce ss
a lon g
w ith
th e ERP
syste m
im p le m e n ta tion of
th e
SIOP
or
re im p le m e n ta tion , I'd
sa y, th a t w ill g re a tly
im p rove
ou r
e fficie n cie s in
m a n a g in g
in ve n tory a n d p rocu re m e n t . So th e re 's a sim p lifica tion th e re .
An d I a lso w ou ld sa y, a s w e re focu s th e b u sin e ss on g row in g ou r p ortfolio org a n ica lly,
a sta g e
g a te p roce ss
of
m a n a g in g n e w
p rod u ct d e ve lop m e n t
w ill sim p lify th a t
p roce ss a s w e ll. So, th e re
a re
a lot of th in g s on g oin g in sid e th e b u sin e ss tod a y th a t
w ill cre a te th a t sim p lifica tion a n d p rioritiza tion a n d a llow u s to d e live r a s w e ll.
Q: Gre a t . W e 're
lookin g forw a rd to h e a rin g p rog re ss on
th a t th rou g h ou t
th is ye a r.
La st on e for m e
a n d
th e n I'll g e t b a ck in
q u e u e . You 've
fla g g e d
ta riffs in
m u ltip le
m a n n e rs. Ap p re cia te d
th a t th e im p a ct on
ra w m a te ria ls w ou ld b e
p re tty n e g lig ib le
a s w e u n d e rsta n d th e ta riff situ a tion to b e tod a y. Bu t I'm
cu riou s you r com m e n ts on
re ve n u e
g u id a n ce
a n d th e kin d of ca u tion a ry n ote you h a ve re g a rd in g ta riffs. How
a re you
se e in g fa rm e r b u yin g
p a tte rn s kin d of im p a cte d
b y th is u n ce rta in ty? Is it a
fu n ction
of th e m
ju st re a lly
w a n tin g to
h a ve a ju st in
tim e kin d of a p p roa ch to
b u yin g crop p rote ction p rod u cts? Are th e y re a lly con ce rn e d a b ou t kin d of th e tra d e d yn a m ics a s a fa llou t of th is a n d n ot h a vin g e n d b u ye rs for th e ir h a rve ste d g ra in ?
Tra n scrip t P rovid e d b y
7
W h a t re a lly
a re
fa rm e rs lookin g
a t in th e
con te xt of ta riffs rig h t n ow th a t
a re
im p a ctin g you r g u id a n ce ?
Do u g la s Ka ye - Ch ie f Exe c u t ive Offic e r, Am e ric a n Va n g u a rd Co m p a n y
Ab solu te ly. I m e a n , u n ce rta in ty in
a n y b u sin e ss cre a te s u n ce rta in ty. So th a t's w h a t
w e 're se e in g
a rou n d th e ta riffs rig h t n ow . As you m e n tion e d , I d on 't b e lie ve th a t th e
ta riff im p a ct
on ou r ra w m a te ria ls
is m a te ria l in
n a tu re a rou n d $ 3 m illion for 20 25.
W h e n w e 're ta lkin g to ou r cu stom e rs, w h o a re th e d istrib u tors of d istrib u tion in
th e
ch a n n e l, th e y're re la tive ly p ositive
a b ou t th e ch a n g e from
20 24
to 20 25 in th e
a g
in d u stry.
Bu t g row e rs
a re
b e in g ca u tiou s
a rou n d
th is,
b e ca u se
of th e
im p e n d in g ta riff
im p lica tion s, n ot
n e ce ssa rily on th e ir u n d e rlyin g
costs, b u t a s you m e n tion e d , th e
p ote n tia l on th e re cip roca l ta riffs on th e ir com m od ity p rod u cts. So th a t's th e con ce rn
th e re , b u t w e d o h a ve
a fe e l th a t th e 20 25 w ill b e
b e tte r th a n
20 24 . Th a t's a p re tty
p ositive in d ica tion in
th e m a rke tp la ce . If w e ca n
g e t th rou g h
th e se ta riff issu e s, I
th in k it w ill b e a ve ry g ood ye a r for 20 25.
Q: Ve ry g ood . W e ll, I a p p re cia te you g u ys ta kin g m y q u e stion s. Be st of lu ck h e re w ith a ll th e se on g oin g in itia tive s. I'll g e t b a ck in q u e u e .
Op e ra t o r
Th a n k you . Ou r n e xt q u e stion is com in g from Mike Ha rrison w ith Se a p ort Re se a rch P a rtn e rs. You r lin e is live .
Q: Hi, g ood m orn in g . Th a n ks for
ta kin g
m y
q u e stion s. W a s h op in g ju st kin d
of
p ig g yb a ckin g
off th e la st re sp on se
to th e
la st
q u e stion th e re . In te rm s of ch a n n e l
in ve n torie s in
th e m a rke tp la ce , ca n
you ta lk a
little b it a b ou t w h a t you 're se e in g
in
you r ke y re g ion s? Are th e re still a re a s w h e re d istrib u tors fe e l like th e y h a ve e le va te d
ch a n n e l in ve n tory a n d th e y're con tin u in g to
p u ll b a ck on p u rch a se s? Or h a ve you
se e n som e im p rove m e n ts e ith e r b roa d ly or in
sp e cific re g ion s?
Do u g la s Ka ye - Ch ie f Exe c u t ive Offic e r, Am e ric a n Va n g u a rd Co m p a n y
Ye a h , Mike , th is is Da k. Th a n ks for th e q u e stion . An d it's a g ood follow -u p q u e stion to fin ish u p on Be n 's q u e stion . Th e ch a n n e l in ve n torie s, w e d o se e th ose d ow n
con sid e ra b ly in th e U.S. a n d a rou n d th e w orld . Th e y a re d ow n a n d w e h e a r th a t from
ou r cu stom e rs. Th e issu e is th a t th e
cost of ca p ita l n ow , th e ch a n n e l se e m s to h a ve
g on e to ju st in tim e se rvicin g of th e
p rod u cts for th e g row e rs, so th a t w e se e ju st in
tim e
n ow . So, th e re 's n ot a re a l in d ica tion
of re stockin g
a s th e y w e re in p re viou s
ye a rs
b e fore th e
d ow n tu rn . So, it's m ore of th e
ch a n n e ls
h a ve d e stocke d , b u t th e
re stockin g
is n ot
g oin g
b a ck to le ve ls th a t
th e y w e re p re -20 23. Bu t, w e a re se e in g
fa vora b le
con d ition s in
th e m a rke tp la ce a s th e
g row e rs
a re a n d d istrib u tors a re
p u rch a sin g , b u t ju st in tim e for th e se a son .
EBITDA m a rg in th a t you d id for th e fu ll ye a r 20 24 b e in g
a b ou t h a lf of th e
e a rn in g s
p ote n tia l or th a t e a rn in g s p ow e r ove r th e cycle . Ca n you
ju st h e lp b rid g e
h ow you
Tra n scrip t P rovid e d b y
8
g u ys w ou ld e xp e ct to g e t to a m id -te e n s EBITDA m a rg in ? How m u ch of th a t is kin d of volu m e re cove ry a n d op e ra tin g le ve ra g e ? How m u ch is re la te d to th e on g oin g b u sin e ss tra n sform a tion ? An d , I g u e ss, a re th e re a n y oth e r ke y p ie ce s or ke y d rive rs of m a rg in im p rove m e n t ove r tim e ?
Do u g la s Ka ye - Ch ie f Exe c u t ive Offic e r, Am e ric a n Va n g u a rd Co m p a n y
Ye s, g ood q u e stion . An d th e w a y w e e n vision it, w e 'll h a ve th e tra n sform a tion p roce ss. So, w e 've g ot on g oin g w ith th e com m e rcia l a ctivitie s. Th a t's on e com p on e n t of it . An d I fig u re d th a t a rou n d 3%, w e ca n g o from 29% to, sa y, 32% g ross m a rg in s on p rod u cts on sa le s th a t w ill g ive u s a p ortion of th e w a y. Th e re st of th e w a y, rou g h ly, w e n e e d to com e d ow n from th a t Op Ex a s a p e rce n ta g e of sa le s of 26% to low -20 s to a rou n d 20 % is w h a t I w ou ld sa y. Som e kin d of m ix of th ose tw o . Th e Op Ex is b e in g a d d re sse d on g oin g w ith n ot on ly th e tra n sform a tion re org a n iza tion p roce ss, b u t a lso a d m in iste rin g cost cu ttin g stra te g ie s a s w e ll a n d in itia tive s a s w e ll. Bu t th e 7.5% p lu s th e g ross m a rg in , p lu s th e Op Ex re d u ction sh ou ld g e t u s in to th ose m id -te e n s fu ll cycle .
Q: All rig h t . Ve ry h e lp fu l. An d th e n ju st in te rm s of tryin g to u n d e rsta n d th e e a rn in g s
ca d e n ce for 20 25, a t th e
m id p oin t you r g u id a n ce
is, ca ll it, 8 .5%
EBITDA m a rg in .
You 're
com in g off th e Q4
w h e re
you
d id
close r to
10 .5%. So ju st
kin d of cu riou s,
sh ou ld
w e e xp e ct EBITDA m a rg in
to
kin d
of sta rt low e r in th e first h a lf a n d th e n
sh ow im p rove m e n ts a n d m om e n tu m , m a yb e e ve n g e ttin g fu rth e r in to th e d ou b led ig its in th e se con d h a lf. Ju st kin d of w h a t a re you r th ou g h ts on m a rg in a n d e a rn in g s ca d e n ce th is ye a r? Th a n k you .
Do u g la s Ka ye - Ch ie f Exe c u t ive Offic e r, Am e ric a n Va n g u a rd Co m p a n y
Gre a t q u e stion . Ye s, w e a re se e in g th e se con d h a lf of th e ye a r b e in g m ore p ositive in th e EBITDA m a rg in . So, w e a n ticip a te th e Q1 a n d Q2 b e in g low e r in th a t re sp e ct . An d th e Q4 h a s a lw a ys b e e n a stron g q u a rte r for u s a n d w e 've se e n th a t p roje ctin g th is for 20 25 a s w e ll. So H2, th e se con d h a lf of th e ye a r w ill b e m ore p ositive th a n th e first h a lf of th e ye a r.
Op e ra t o r
Th a n k you . Ou r n e xt q u e stion is com in g from W a yn e P in se n t w ith Ga b e lli Fu n d s. You r lin e is live .
Do u g la s Ka ye - Ch ie f Exe c u t ive Offic e r, Am e ric a n Va n g u a rd Co m p a n yTh a n k you , W a yn e .
Q: Ju st w a n te d to p ig g yb a ck on th a t q u e stion . Ju st g ive n e ve ryth in g th a t's g oin g on in th e in d u stry a n d sp e cifica lly a t th e com p a n y ove r th e p a st cou p le of ye a rs, ca n you ju st fu rth e r sp e a k to you r con fid e n ce in th e 20 25 g u id e a n d w h a t cou ld ta ke you to th e u p p e r a n d low e r e n d s of th e ra n g e ?
Tra n scrip t P rovid e d b y
9
Do u g la s Ka ye - Ch ie f Exe c u t ive Offic e r, Am e ric a n Va n g u a rd Co m p a n y
I th in k it's a g ood q u e stion , W a yn e . Th a n k you . Th e low e r ra n g e w ou ld b e som e th in g slow e r th a n in th e a g in d u stry slow e r th a n 20 24 a n d th e u p p e r e n d w ou ld b e a p ositive in flu e n ce on 20 25 in th e a g in d u stry. Th e re w ill b e la ck of - it w ou ld b e m ore
p ositive a n d from th e p u rch a sin g from
th e g row e rs, b u t w e a n ticip a te th a t th e low e r
e n d of th e ra n g e
w ou ld
b e
som e th in g n e g a tive ,
I w ou ld
sa y, in re fle ction , a s
com p a re d to 20 24 . So, w e a n ticip a te d oin g b e tte r th a n 20 24 in n e a rly a ll ca se s.
Q: Oka y. An d
th e n you m e n tion e d a
fe w of th e th in g s you 're
w orkin g on a n d
th e
tra n sform a tion p la n
b e in g
a
sta rtin g
p oin t . Is
th e re
a n yth in g
su b sta n tia l a n d
th a t
you 're g oin g
to b e
d oin g
in
20 24 ?
An d ca n
you
q u a n tify if th e re 's a n y
fu rth e r
su b sta n tia l tra n sform a tion costs in 20 25?
Do u g la s Ka ye - Ch ie f Exe c u t ive Offic e r, Am e ric a n Va n g u a rd Co m p a n y
Ye s. So from
th e tra n sform a tion costs w ill n ot b e
su b sta n tia l. W e 've g ot
th ose
p roje cte d a t a rou n d $ 5 m illion for 20 25. So, w a y d ow n from 20 24 . Th e la rg e st p icku p s
in 20 25 from
th e tra n sform a tion w ill b e a rou n d th e com m e rcia l a ctivitie s. W e e xp e ct
$ 4 m illion to
$ 5 m illion a rou n d
th ose . An d th e n a lso
in log istics a n d p rocu re m e n t,
a n oth e r $ 2 m illion to $ 3 m illion . An d th e n
th e re 's a lso som e org a n iza tion a l p icku p s
a s w e ll a rou n d $ 2 m illion . So
it g ive s
u s a rou n d
$ 8 m illion to $ 10 m illion of
tra n sform a tion b e n e fits in 20 25.
Op e ra t o r
Th a n k you . As w e h a ve n o fu rth e r q u e stion s on lin e a t th is tim e . I w ou ld like to h a n d it b a ck ove r to Mr. Ka ye for h is closin g re m a rks.
Do u g la s Ka ye - Ch ie f Exe c u t ive Offic e r, Am e ric a n Va n g u a rd Co m p a n y
Th a n k you , op e ra tor. I'd like to con clu d e b y
th a n kin g e ve ryon e for liste n in g
a n d
p a rticip a tin g in ou r ca ll tod a y. I look forw a rd
to
p rovid in g fu rth e r u p d a te s on
ou r
on g oin g in itia tive s a n d va lu e you r q u e stion s a n d
su p p ort a s w e strive for th e lon g -
te rm su cce ss a n d g row th of th e com p a n y. Th e se in te ra ction s g ive u s a n op p ortu n ity
to
th in k
in
a d iscip lin e d w a y a b ou t h ow
w e
a re
a sse ssin g ou r re ce n t
p a st
p e rform a n ce
a n d
ou r p rosp e cts, a n d
a lso
to
h e a r from
you a b ou t w h a t's on
you r
m in d a n d m a yb e
th e
g a p s in w h a t w e 've
e xp la in e d to you a n d h ow w e ca n b e tte r
re sp on d .
W e
a re
com m itte d
to m a in ta in in g
tra n sp a re n cy
a n d
op e n com m u n ica tion . So,
p le a se fe e l fre e to con ta ct u s if you h a ve a n y q u e stion s or n e e d fu rth e r in form a tion . I
h op e
to m e e t a n d
se e som e of you in -p e rson
in
th e n e a r fu tu re . I'll b e tra ve lin g to
Ne w
York
City n e xt w e e k to p a rticip a te in
th e
16th An n u a l
Sp e cia lty Ch e m ica l
Sym p osiu m
h oste d
b y Ga b e lli Fu n d s a n d , p e rh a p s, I w ill h a ve
th e ch a n ce to m e e t
som e of you th e re .
Tra n scrip t P rovid e d b y
10
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American Vanguard Corporation published this content on March 17, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on March 17, 2025 at 18:29:04.352.