NYSE:AVD American Vanguard Q1 2025 Earnings Report $4.95 +0.09 (+1.85%) Closing price 06/6/2025 03:59 PM EasternExtended Trading$4.90 -0.04 (-0.91%) As of 06/6/2025 08:00 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast American Vanguard EPS ResultsActual EPS-$0.24Consensus EPS -$0.03Beat/MissMissed by -$0.21One Year Ago EPS$0.06American Vanguard Revenue ResultsActual Revenue$127.00 millionExpected Revenue$127.00 millionBeat/MissMet ExpectationsYoY Revenue GrowthN/AAmerican Vanguard Announcement DetailsQuarterQ1 2025Date6/6/2025TimeBefore Market OpensConference Call DateFriday, June 6, 2025Conference Call Time9:00AM ETUpcoming EarningsAmerican Vanguard's Q2 2025 earnings is scheduled for Wednesday, August 6, 2025, with a conference call scheduled on Thursday, August 7, 2025 at 12:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by American Vanguard Q1 2025 Earnings Call TranscriptProvided by QuartrJune 6, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Greetings, and welcome to the American Vanguard First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are on a listen only mode and a question and answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Anthony Young. Sir, you may begin. Anthony YoungDirector - IR at American Vanguard Corp00:00:33Thank you, Ollie. Good afternoon, and welcome to American Vanguard's first quarter twenty twenty five earnings review. Our prepared remarks will be led by Datt Kay, Chief Executive Officer and David Johnson, Chief Financial Officer. We have prepared presentation slides which are posted on the Investor Relations section of the American Vanguard website. Let's begin this call with our forward looking cautionary reminder. Anthony YoungDirector - IR at American Vanguard Corp00:00:59During this call, we may discuss forward looking information. All forward looking statements are estimates by the company's management and are subject to various risks and uncertainties that may cause actual results to differ. Such factors include weather conditions, changes in regulatory policy and other risks as detailed in the company's SEC reports and filings. All forward looking statements represent the company's judgment as of the date of this release and such information will not necessarily be updated by the company. It's now my pleasure to turn the call over to CEO, Dak Kaye. Douglas KayeCEO at American Vanguard Corp00:01:37Thank you, Anthony, and welcome everyone to our first quarter twenty twenty five earnings conference call. Let me start with a view from 10,000 feet. The year 2024 was one of great change at American Vanguard and was then capped off by a prolonged financial close and audit that delayed our form 10 ks and consequently the 10 q, which David will cover shortly. However, our final audited numbers were substantially similar to the unaudited results we published in March. In spite of tough market conditions, I'm happy to report that we were able to drive improvement in the areas that are within our control. Douglas KayeCEO at American Vanguard Corp00:02:20For example, during Q1, our operating expenses dropped by $5,000,000 and net trade working capital was reduced $86,000,000 both in comparison to last year. We are beginning to see the benefits of our transformation efforts. Further channel inventories in The US are at historic lows. While customers were able to hold down their working capital during the first quarter, we can see they are starting to replenish their stocks now. Indeed based upon orders to date we are seeing a stronger second quarter and expect the remainder of 2025 will be solid. Douglas KayeCEO at American Vanguard Corp00:02:59We are well positioned to respond to rising market trends while continuing to improve our operating leverage. Now turning to our first quarter of twenty twenty five financial results. The company generated net sales of $116,000,000 as compared to $135,000,000 in the year ago period and reported $3,000,000 of adjusted EBITDA as compared to $15,500,000 in the year ago period. There were some specific items in the first quarter of twenty twenty four that positively impacted that period, which we will address later. The first quarter of twenty twenty five was somewhat weaker than we had initially anticipated. Douglas KayeCEO at American Vanguard Corp00:03:42This was based upon the opinion formed at the end of twenty twenty four that pretty much all of these stocking had finished. Industry data indicates that our product is being applied in the field, but our customers did not replenish their stocks as quickly as our product was being consumed. Thus the trend of destocking continued in the first '3 months of '20 '20 '5. We also made decisions to adjust our program strategy to keep up with programs that our competitors were deploying at the end of the first quarter. Top line revenue and gross profit were impacted by these developments. Douglas KayeCEO at American Vanguard Corp00:04:20In addition to this dynamic, we did not have access to a previously canceled product. We saw weakness in the Mexican agave market and drought conditions in Australia. I would also like to highlight two bright spots in our portfolio. Metem sales were up 14% in the quarter versus last year. This is our largest single product and continues to be well respected in the market. Douglas KayeCEO at American Vanguard Corp00:04:47Diamond sales were also up 17% and this could be attributed to the increase in peanut acreage that was planted this year. I must admit we have faced several challenges in my first five months, but I continue to be impressed with the team at American Vanguard. The opportunity to transform this business largely stands in front of us. We have taken some initial steps to improve the business, but the ongoing weakness of the current cycle has prevented this progress from being fully realized when considering our recent financial results. We expect this hard work should begin to materialize in the upcoming quarters. Douglas KayeCEO at American Vanguard Corp00:05:28Two areas of improvement that I would like to highlight are our focus on cost containment and our improvement in our net working capital accounts. First in the area of cost containment, I have advised the team to continuously evaluate where we can take cost out of the business. Overall, OpEx is down $5,000,000 in the first quarter as compared to a year ago period. We expect to continue to bring further costs out of the business as part of our transformation plan, but this was a strong start to this effort. The team has also done an admirable job of managing net working capital, showing an improvement of $86,000,000 as compared to this time last year. Douglas KayeCEO at American Vanguard Corp00:06:13Our SIOP process allowed us to limit our inventory build, while our management of accounts receivable and accounts payable allowed us to limit the amount of debt that was necessary to operate the business. I was surprised by how much working capital was consumed by the company before I arrived, and we plan to operate this business in a leaner fashion going forward, which will allow the business to generate higher returns over the long term. Before I turn the call over to David, I did want to address our 2025 revenue and EBITDA guidance. We have analyzed our supply chain and we believe the impact from any tariffs will be nominal to our cost of goods sold. In fact, given our US based footprint, any long term tariffs may create opportunities for American Vanguard. Douglas KayeCEO at American Vanguard Corp00:07:01But given our weak first quarter and a market that is only beginning to recover, we are decreasing our full year adjusted EBITDA target range to $40,000,000 to $44,000,000 from $45,000,000 to $52,000,000 and we are adjusting our revenue estimate to $5.35 to $545,000,000. While we are beginning to see early stages of our recovery, we do not want to forecast an overly optimistic outlook at this juncture. I'll return after David provides his remarks to give some additional industry commentary covering the short term trends and expectations. I'll now turn the call over to David, our CFO. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:07:46Thank you, Deck. Good afternoon, everybody. Before discussing our financial performance for the quarter, I would like to address the late 10 k and 10 q filings. We are pleased to have filed both documents with the SEC, but many participants on this call are aware, these documents were filed after their SEC deadline. The company accomplished a great deal during the financial close, including performing a detailed review and an impairment assessment of the company's major assets. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:08:15At the same time, the company identified several internal control matters of the company's relatively small Australian subsidiary due to insufficient staffing. The company also had to work through a number of matters related to customer programs. In an unrelated situation, the company has talked a lot about our efforts to implement one standard ERP platform across all of our entities. These efforts resulted in a number of implementation matters the company had to address. All these matters when taken together resulted in the corporate finance team being unable to meet the SEC deadline for filing the 10 k, which ultimately resulted in our assessment of related material weaknesses in the company's internal control. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:08:57The company is working on a remediation plan to resolve those material weaknesses. These matters related to the filing of the 2024 financial statements also led to a corresponding delay in the filing of the first quarter financials for 2025. Having said all that, as you may recall, we had published unaudited year end financial information in March. Now that we have filed our financials, we have been able to report only minor changes from our prior announcement. First, adjusted EBITDA for 2024 decreased to $40,000,000 as compared to the $42,000,000 unaudited figure, while net sales were $547,000,000 as compared to the unaudited $50,000,000 previously indicated. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:09:44The main reason for the adjustment was related to customer prepayment programs where the company identified an adjustment after the initial release. Further, debt ended $9,000,000 lower than initially indicated due to final adjustments related to debt and accounts payable. Turning to financial performance. Our first quarter twenty twenty five revenue was $116,000,000 a decrease of 14% as compared to the first quarter of twenty twenty four. The primary reasons for the decrease were first, as Dak just mentioned, destocking continued in the quarter secondly, the absence of a voluntarily canceled herbicide from our product portfolio third, weakness in the Mexican agave market And finally, a drought in parts of Australia impacting sales of certain products. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:10:41Further, market related factors also dampened our first quarter performance. For instance, in response to aggressive competition in the challenging first quarter market, we implemented increased incentive programs. Gross profit margin declined to 26% during the quarter, as compared to 31% last year. This decline in gross profit margin was primarily related to a weaker pricing environment, and to a lesser degree, lower volume. Our operating costs were well controlled and were down approximately $5,000,000 excluding transformation expenses and a one time benefit recorded in the first quarter of twenty twenty four related to the settlement for long time data compensation. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:11:27We made substantial improvements in our working capital accounts. As I have mentioned in previous conference calls, our business cycle typically leads to an inventory build during the first two quarters of the year as we prepare to meet the needs of our customers in the second half. However, this year, our inventory only increased by approximately 3% since the year end of twenty twenty four, and has decreased 20% as compared to this time last year, resulting in improved inventory turns. We are pleased with this progress, and believe further improvements is possible. We are highly focused on managing net trading working capital, and were successful in the first quarter, ending with working capital $86,000,000 lower than this time last year. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:12:13Along with a better control of working capital, we ended the quarter with debt approximately $20,000,000 or 14% lower than this time last year. It is likely that debt will trend higher during the second quarter, which is normal for the company's annual cycle. Our focus on controlling our working capital levels going forward should help to minimize the debt we need to run the business. Ultimately, expect this focus will help to create higher returns for shareholders. With regard to debt, because our current credit agreement matures in the third quarter of twenty twenty six, we have already begun to work with our lenders to put in place a longer term capital structure. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:12:55We are looking at a wide range of options to replace the current credit agreement. Because the current interest rate environment is quite challenging, we expect that new interest rates will likely be higher than our current credit agreement. Our focus is to obtain flexible financing that will give the company ample working capital both to operate and grow, which is one of the highest priority initiatives at the company at this time. Looking forward to the balance of 2025, we expect that CapEx will fall in the $8,000,000 to $9,000,000 range. Thus, we expect to generate reasonably strong free cash flow this year. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:13:35As we said in our last quarterly call, we expect virtually all free cash flow to be allocated towards debt pay down as we look to further strengthen our balance sheet. In summary, the financial performance of the first quarter was weaker than a year ago period, but we believe that we managed well in the areas that were under our direct control: operating expenses, inventory, accounts payable and debt levels. Levels. While the broader agricultural market is in the very early innings of a recovery, if we continue to execute against our transformation plan, we will be well positioned for a cyclical upturn. With that, I'll turn the call back to Dak. Douglas KayeCEO at American Vanguard Corp00:14:22Thank you, David. Before we close, I thought I would provide some thoughts on what we are seeing in the agricultural economy. I don't want to sound too optimistic as the level of economic uncertainty remains extremely high. But based upon what I have seen during my more than fifteen years as an executive in the crop protection industry, inventory levels have been drawn down to a point where any recovery in buying patterns is going to lead directly to an increase in demand, which will lead to higher volumes or pricing and possibly both higher volumes and pricing. That is the nature of operating in cyclical industry like ours. Douglas KayeCEO at American Vanguard Corp00:15:05We have included a chart in the slide deck which shows that inventory levels at our distributors are down by nearly 23% as compared to a year ago period. We should note the industry has already been involved in eighteen to twenty four months of destocking. While inventories have been drawn down, industry data indicates that corn plantings are at a historically high level. In fact corn acreage is forecast to be at its highest level since the twenty thirteen-twenty fourteen season, which was a reasonably strong period for crop protection companies. As I stated previously, based upon industry data we can see that our product is being applied in the field and we are not losing market share. Douglas KayeCEO at American Vanguard Corp00:15:51Thus we believe our portfolio is well positioned should the season go as forecasted by the USDA. Cotton acreage is looking incrementally softer than last year, but growers are switching to peanuts, which is also an area of strength for us, with thiamat being one of our most popular products which is used in peanuts. We can see a recovery beginning where we will need to achieve clarity on tariffs and gain further confidence in agricultural commodity pricing before a cyclical upswing can commence. Important agreements have been reached by some global trading partners, but based upon our conversation with customers, a high level of uncertainty remains in the market on how the global trade landscape will adjust to the additional barriers that may be forthcoming. While we wait for this recovery, we will execute on our business transformation, which should lead to improved financial results. Douglas KayeCEO at American Vanguard Corp00:16:48We'll look to take further costs out of the business, continue to improve our net working capital position, and importantly, smart investments that improve the positioning of our product portfolio. As I stated in the last conference call, one of the reasons that I took this job was that I believe American Vanguard is a business that can be fixed. I've just highlighted a few fixes that I've implemented in my first few months here, but there is much more that can be accomplished. We continue to execute against the playbook we developed with our consultants, but the team also continues to find additional areas where we can take cost out of the business. As we chip away at the cost structure our long term goal of achieving a 15% adjusted EBITDA margin through the cycle appears more achievable but it will take a few years to get there. Douglas KayeCEO at American Vanguard Corp00:17:41While we have gone through some challenges, I remain extremely excited about the future and our goals remain the same, to position this company to be the trusted provider of proven agricultural and environmental solutions. With that, open the call for questions. Operator? Operator00:18:00Thank you. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. And you may press 2 if you would like to remove your question from the queue. Operator00:18:33Our first question is coming from Ben Klieve with Lake Street Capital. Your line is live. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:18:41All right. Thanks for taking my questions. First one, Zach, for you. I'm curious if you can elaborate a bit on kind of the cadence of the year over year top line performance here on a year to date basis. Basically, the fourth quarter call in mid March, you kind of suggested that the destocking period was kind of neutralized, which is which today it sounds like is the case now, but maybe wasn't necessarily the case at the very beginning of the year. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:19:13Can you talk about the kind of year over year performance January through where we are in early June? Have things been progressing favorably throughout the year? How bad was it in January relative to how good it may be in June now? Douglas KayeCEO at American Vanguard Corp00:19:33Yes. Thanks, Ben. Excuse me. Thanks, Ben for the question. Appreciate it. Douglas KayeCEO at American Vanguard Corp00:19:38From a year over year basis, I mean, there's you have to consider the Dactyl, the product that we removed from the market. That was a fairly sizable year over year amount that came out in first quarter of this year. So that's the biggest change in top line sales from the previous quarter. Then we had the agave Bromacil product in Mexico. That's the next biggest change that we had down in Mexico. Douglas KayeCEO at American Vanguard Corp00:20:10And then the next one was the drought in Australia. Those are the three biggest changes in the top line. We did have some positives with the METAM, sodium and the Thymet that offset some of the others, but those are the primary changes year over year in the top line sales. Addressing your destocking, the levels that we saw at the beginning of the year in the channel suggested that the inventories had been destocked. But it just continued through all the way to April from our last standpoint to a level that in the channels what we see in the inventory at a level that is historical lows is what we see. Douglas KayeCEO at American Vanguard Corp00:20:53We get this information from data services and that's the reason we have confidence in it. But it appears to be at historical low and that's and it just continued through the first quarter. And then as we see now, we do see positive trends in May and June related to our sales. So that's the demand seems to be being replenished. I don't know if there we can't tell at the moment if they're going to build inventory. Douglas KayeCEO at American Vanguard Corp00:21:22That's the uncertainty part of it about it, but the destocking appears to have bottomed out, but that's to be determined. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:21:32Okay. Helpful. So I guess David, let me ask you a question and then, Deck, I've got a follow-up to this. I definitely understand that I think everybody expected that the year over year headwinds from Dactol. Can you isolate the first quarter EBITDA and revenue contributions from Dactol? Douglas KayeCEO at American Vanguard Corp00:21:52Yeah. I've got that right. It's top line 6,000,000 and margin 3.5. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:22:0013 point five percent. That margin was on a gross margin basis or operating margin? Douglas KayeCEO at American Vanguard Corp00:22:06Gross margin. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:22:07Okay. Very good. So the then if you back out, DACH, this dynamic with Daxol and Bromacil, kind of the balance of your portfolio, was that it seems to be effectively flat year over year. The Australia Bromacil, Dactyl, those were the headwinds. The balance of your portfolio was effectively flat. Is that a fair characterization? Douglas KayeCEO at American Vanguard Corp00:22:38I'd say that it's effectively flat with the highlights being on the other side, METHEM, SODUM and ThyMET. METHEM, SODUM is our largest product and it continues to be a strong core product in our portfolio. It's resilient, it's stable. So we did see an uptick in sales in the first quarter of mid temp sodium. In the Thymet, that demand was directly associated with the increase in peanut acres that we've seen offsetting the cotton acres primarily on the Southeast. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:23:14Okay, very good. A few other questions from me. First of all, I know seasonality in this era is really difficult to forecast, but I'm wondering if you can help us understand kind of what your top line seasonality expectations throughout 2025. I mean, quarter relative to the midpoint of your guidance, the first quarter numbers look to be about 20% of your overall revenue for the full year basis. Can you help us kind of look to the Q2, Q3, Q4, outlooks as a percentage of revenue? Douglas KayeCEO at American Vanguard Corp00:23:55Don't have the percentages right at my hand on the by quarter by quarter basis, but overwhelmingly the second half of the year is our strong season with the soil fumigants, metam sodium being one of those driving the top line sales in that period. So the second half of the year is always the strongest for us. And based upon what we see in the destocking, I don't have no eye, no nothing comes to mind that would prevent that being continuing in 2025. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:24:32Okay. So still a second half, a sharp second half SKU. Very good. A couple other sort of ones from me. Dak, can you educate us on the implications here in corn acreage shifting from soy to cotton on a basis, the level of crop protection products applied on an acre of corn versus an acre of soy? Douglas KayeCEO at American Vanguard Corp00:24:56Yes. So the USDA has projecting an increase in corn acres over soybean acres that shift and then it normally runs around 90,000,000 acres each over the history. It has shifted to this year to corn acres. It was shifted last year too, but it shifted more since 9585 kind of arrangement. Our portfolio does lend itself to corn acres with our corn soil insecticides. Douglas KayeCEO at American Vanguard Corp00:25:28So, so we should we are seeing a greater usage in that area on the corn soil and in the corn acres and our sales of corn soils are slightly up this year. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:25:42Okay. Very good. And then David, one last one for you and I'll get back in queue. Good to hear your conviction regarding free cash flow this year. Can you educate us on your expectations for cash taxes this year given operating losses that you're coming off of in 2024? David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:26:03Yes, we've got some cash taxes to be paid internationally. So I think we're in the $4,000,000 or $5,000,000 range. So, yeah, the tax situation is kind of difficult at the moment. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:26:22Okay. That's directionally helpful. Very good. All right. Well, I appreciate you guys taking my questions. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:26:28Best of luck here running out Q2. I'll get back in queue. Douglas KayeCEO at American Vanguard Corp00:26:32Thanks, Ben. Operator00:26:35Thank you. Our next question is coming from Wayne Pinsent with Gabelli Funds. Your line is live. Wayne PinsentDirector of Research at Gabelli Funds00:26:51Hi, Jack. Thanks guys for taking my question. Jack, you mentioned with inventories at historically low levels, any potential snapback or drop back down to the bottom line? And also confidence in the 15% margin target. Just wanted to see if you had any thoughts on the cadence of that over the next few years and in 2026? Douglas KayeCEO at American Vanguard Corp00:27:20Thanks Wayne. I appreciate the question. Yes, I mean, there's nothing changed in my outlook of the company and the goal of 15% EBITDA margin over the long term. The fact that the decrease in sales is directly related to the destocking that we saw and specifically in The U. S. Douglas KayeCEO at American Vanguard Corp00:27:44Market. Does it tells me that the sales on ground or the product on ground is still going out at the same level. If you look at the change in our destocking versus the change in our sales variance in the first quarter, they're pretty much aligned. So it tells me that the product still going We just got to get to a normalized level where of inventories in the channel. Douglas KayeCEO at American Vanguard Corp00:28:11So overall perception hasn't changed there on the long term potential for the company for EBITDA of 15% margin. Wayne PinsentDirector of Research at Gabelli Funds00:28:25Okay. So any thoughts on improvements specifically in 2026, if you start to see a return to maybe normalize going from flat now on the rest of the product portfolio to low single digit normal top line growth? Douglas KayeCEO at American Vanguard Corp00:28:44We are projecting growth in 2026 and our five year plan that is it's better than the industry average of course, is what we're projecting as we right size and go through the transformation process on our commercial activities, specifically in The U. S. And we have seen some real positive signs on the transformation process and the commercial activities in Brazil specifically. That transformation process, it was executed the first of this year. Sales are slightly down, but the contribution margin is up from Brazil. Douglas KayeCEO at American Vanguard Corp00:29:21So we see execution there in the commercial activities and we will see we'll continue to work towards that in 2026 in The US market. The US market has been kind of complicated with the transformation process in 2025 due to the destocking and the pressures that we've seen by all the competitors in the marketplace. Wayne PinsentDirector of Research at Gabelli Funds00:29:45All right. Thanks, Zach, and look forward to following up soon. Douglas KayeCEO at American Vanguard Corp00:29:49Thank you, Wayne. Operator00:29:53Thank you. Our next question is coming from Rosemarie Morbelli with Gabelli Funds. Your line is live. Rosemarie MorbelliPortfolio Manager at Gabelli Funds00:30:03Thank you. Good morning, everyone. I just would like to add a couple of questions to Wayne's comments. You mentioned that you have lowered pricing due to the competitive environment. Could you give us a little more details as to which categories Are you seeing more generics and is that the main issue or is it any particular categories, fungicide, herbicide, insecticide, etcetera? Rosemarie MorbelliPortfolio Manager at Gabelli Funds00:30:36If you could help us understand what is happening and whether you see that actually reversing in the second half, for example, when demand increases with the seasonality. Douglas KayeCEO at American Vanguard Corp00:30:53Great question, Rosemarie. Thank you for that. Yes. It was a very specific, very unusual situation in Q1 with our competitors. There were some very unusual activity that took place that's not normal for end of quarter type situation. Douglas KayeCEO at American Vanguard Corp00:31:15I think that's because all of the market was down. And it was really around I'd say it's twofold. It was really around competing for our customers space and net trade working capital, their inventory headroom, not necessarily competition on specific product basis, but it was more related to how much they were willing to take on an inventory at the end of the quarter. They just were not willing to take on much. And so there was a lot of competition and a lot of discounting that took place at the end of the quarter around that. Now, I will say that we did have competitive pricing and Folexes that continued to see a generic pressure. Douglas KayeCEO at American Vanguard Corp00:32:02But I believe looking forward, we're going to be in a very good position in Folex going forward because of our U. S. Based production. Our competitor in the marketplace is not from The U. S. Douglas KayeCEO at American Vanguard Corp00:32:16And their supply was leftover from last year. So I think that's to work its way out and we see improvement there long term. Rosemarie MorbelliPortfolio Manager at Gabelli Funds00:32:27Thank you. Operator00:32:33Thank you. As we have no further questions in the queue at this time, I would like to hand it back over to Mr. Kay for any closing remarks. Douglas KayeCEO at American Vanguard Corp00:32:44Yes. Thank you again today for your time and for your continued interest in American Vanguard. The first quarter of twenty twenty five was a challenge for us and the entire agricultural chemical industry. But as I indicated, we believe that the customer activity levels are beginning to pick up and will continue to do so as channel inventory levels have been worked down to very low levels. We're also happy to have caught up in our financial filings and appreciate the patience of our investors have shown during this time. Douglas KayeCEO at American Vanguard Corp00:33:16In closing, our focus remains clear to improve our cost structure, streamline the balance sheet and be laser focused on providing the products our customers desire. We greatly appreciate your ongoing support and engagement during this period. And as always, we remain committed to transparency and open communication. So please do not hesitate to reach out with any further questions. Thank you for joining us today, and have a great day. Operator00:33:47Thank you. Ladies and gentlemen, this does conclude today's conference, and you may disconnect your lines at this time. And we thank you for your participation.Read moreParticipantsExecutivesAnthony YoungDirector - IRDouglas KayeCEODavid JohnsonVP, CFO & TreasurerAnalystsBen KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLCWayne PinsentDirector of Research at Gabelli FundsRosemarie MorbelliPortfolio Manager at Gabelli FundsPowered by Key Takeaways American Vanguard reported first-quarter net sales of $116 million, down 14% year-over-year, and adjusted EBITDA of $3 million versus $15.5 million, driven by ongoing channel destocking and market challenges. The company lowered its full-year 2025 guidance, trimming adjusted EBITDA to $40–44 million (from $45–52 million) and revenue to $535–545 million amid a slower-than-expected recovery. Operating expenses were reduced by $5 million and net trade working capital improved by $86 million year-over-year, marking early progress in cost-containment and transformation initiatives. Portfolio highlights include a 14% increase in Metam sales and a 17% rise in Diamond (thiamethoxam) sales, supported by field applications and higher peanut acreage. Distributor inventories are at historic lows following extended destocking, and management expects a cyclical upswing in the second half if buying patterns normalize. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallAmerican Vanguard Q1 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) American Vanguard Earnings HeadlinesAmerican Vanguard’s Looming Credit Deadline: Navigating Financial Challenges AheadJune 7 at 2:24 AM | tipranks.comAmerican Vanguard Corporation Reports Challenging Q1 2025June 7 at 12:13 AM | tipranks.comThe DOJ Just Paved the Way for Account SeizuresWashington is running out of money…And guess where they'll look next? When governments go broke, they take from the people. It's happened before, and it's happening again. The Department of Justice just admitted that cash isn't legally YOUR property.June 7, 2025 | Priority Gold (Ad)American Vanguard Corporation (AVD) Q1 2025 Earnings Call TranscriptJune 6 at 1:19 PM | seekingalpha.comAmerican Vanguard (AVD) Shares Fall by 5.8% | AVD Stock NewsJune 6 at 10:52 AM | gurufocus.comAmerican Vanguard (AVD) Shares Decline 7.2% to $4.51 | AVD Stock NewsJune 6 at 10:52 AM | gurufocus.comSee More American Vanguard Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like American Vanguard? Sign up for Earnings360's daily newsletter to receive timely earnings updates on American Vanguard and other key companies, straight to your email. Email Address About American VanguardAmerican Vanguard (NYSE:AVD), through its subsidiaries, develops, manufactures, and markets specialty chemicals for agricultural, commercial, and consumer uses in the United States and internationally. It manufactures and formulates chemicals, including insecticides, fungicides, herbicides, soil health, plant nutrition, molluscicides, growth regulators, soil fumigants, and biorationals in liquid, powder, and granular forms for crops, turf and ornamental plants, and human and animal health protection. The company also markets, sells, and distributes end-use chemical and biological products for crop applications; and distributes chemicals for turf and ornamental markets. It distributes its products through national distribution companies, and buying groups or co-operatives; and through sales offices, sales force executives, sales agents, and wholly owned distributors. American Vanguard Corporation was incorporated in 1969 and is headquartered in Newport Beach, California.View American Vanguard ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Broadcom Slides on Solid Earnings, AI Outlook Still StrongRed Robin's Comeback: Q1 Earnings Spark Investor HopesOllie’s Q1 Earnings: The Good, the Bad, and What’s NextBroadcom Earnings Preview: AVGO Stock Near Record HighsUlta’s Beautiful Q1 Earnings Report Points to More Gains Aheade.l.f. 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PresentationSkip to Participants Operator00:00:00Greetings, and welcome to the American Vanguard First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are on a listen only mode and a question and answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Anthony Young. Sir, you may begin. Anthony YoungDirector - IR at American Vanguard Corp00:00:33Thank you, Ollie. Good afternoon, and welcome to American Vanguard's first quarter twenty twenty five earnings review. Our prepared remarks will be led by Datt Kay, Chief Executive Officer and David Johnson, Chief Financial Officer. We have prepared presentation slides which are posted on the Investor Relations section of the American Vanguard website. Let's begin this call with our forward looking cautionary reminder. Anthony YoungDirector - IR at American Vanguard Corp00:00:59During this call, we may discuss forward looking information. All forward looking statements are estimates by the company's management and are subject to various risks and uncertainties that may cause actual results to differ. Such factors include weather conditions, changes in regulatory policy and other risks as detailed in the company's SEC reports and filings. All forward looking statements represent the company's judgment as of the date of this release and such information will not necessarily be updated by the company. It's now my pleasure to turn the call over to CEO, Dak Kaye. Douglas KayeCEO at American Vanguard Corp00:01:37Thank you, Anthony, and welcome everyone to our first quarter twenty twenty five earnings conference call. Let me start with a view from 10,000 feet. The year 2024 was one of great change at American Vanguard and was then capped off by a prolonged financial close and audit that delayed our form 10 ks and consequently the 10 q, which David will cover shortly. However, our final audited numbers were substantially similar to the unaudited results we published in March. In spite of tough market conditions, I'm happy to report that we were able to drive improvement in the areas that are within our control. Douglas KayeCEO at American Vanguard Corp00:02:20For example, during Q1, our operating expenses dropped by $5,000,000 and net trade working capital was reduced $86,000,000 both in comparison to last year. We are beginning to see the benefits of our transformation efforts. Further channel inventories in The US are at historic lows. While customers were able to hold down their working capital during the first quarter, we can see they are starting to replenish their stocks now. Indeed based upon orders to date we are seeing a stronger second quarter and expect the remainder of 2025 will be solid. Douglas KayeCEO at American Vanguard Corp00:02:59We are well positioned to respond to rising market trends while continuing to improve our operating leverage. Now turning to our first quarter of twenty twenty five financial results. The company generated net sales of $116,000,000 as compared to $135,000,000 in the year ago period and reported $3,000,000 of adjusted EBITDA as compared to $15,500,000 in the year ago period. There were some specific items in the first quarter of twenty twenty four that positively impacted that period, which we will address later. The first quarter of twenty twenty five was somewhat weaker than we had initially anticipated. Douglas KayeCEO at American Vanguard Corp00:03:42This was based upon the opinion formed at the end of twenty twenty four that pretty much all of these stocking had finished. Industry data indicates that our product is being applied in the field, but our customers did not replenish their stocks as quickly as our product was being consumed. Thus the trend of destocking continued in the first '3 months of '20 '20 '5. We also made decisions to adjust our program strategy to keep up with programs that our competitors were deploying at the end of the first quarter. Top line revenue and gross profit were impacted by these developments. Douglas KayeCEO at American Vanguard Corp00:04:20In addition to this dynamic, we did not have access to a previously canceled product. We saw weakness in the Mexican agave market and drought conditions in Australia. I would also like to highlight two bright spots in our portfolio. Metem sales were up 14% in the quarter versus last year. This is our largest single product and continues to be well respected in the market. Douglas KayeCEO at American Vanguard Corp00:04:47Diamond sales were also up 17% and this could be attributed to the increase in peanut acreage that was planted this year. I must admit we have faced several challenges in my first five months, but I continue to be impressed with the team at American Vanguard. The opportunity to transform this business largely stands in front of us. We have taken some initial steps to improve the business, but the ongoing weakness of the current cycle has prevented this progress from being fully realized when considering our recent financial results. We expect this hard work should begin to materialize in the upcoming quarters. Douglas KayeCEO at American Vanguard Corp00:05:28Two areas of improvement that I would like to highlight are our focus on cost containment and our improvement in our net working capital accounts. First in the area of cost containment, I have advised the team to continuously evaluate where we can take cost out of the business. Overall, OpEx is down $5,000,000 in the first quarter as compared to a year ago period. We expect to continue to bring further costs out of the business as part of our transformation plan, but this was a strong start to this effort. The team has also done an admirable job of managing net working capital, showing an improvement of $86,000,000 as compared to this time last year. Douglas KayeCEO at American Vanguard Corp00:06:13Our SIOP process allowed us to limit our inventory build, while our management of accounts receivable and accounts payable allowed us to limit the amount of debt that was necessary to operate the business. I was surprised by how much working capital was consumed by the company before I arrived, and we plan to operate this business in a leaner fashion going forward, which will allow the business to generate higher returns over the long term. Before I turn the call over to David, I did want to address our 2025 revenue and EBITDA guidance. We have analyzed our supply chain and we believe the impact from any tariffs will be nominal to our cost of goods sold. In fact, given our US based footprint, any long term tariffs may create opportunities for American Vanguard. Douglas KayeCEO at American Vanguard Corp00:07:01But given our weak first quarter and a market that is only beginning to recover, we are decreasing our full year adjusted EBITDA target range to $40,000,000 to $44,000,000 from $45,000,000 to $52,000,000 and we are adjusting our revenue estimate to $5.35 to $545,000,000. While we are beginning to see early stages of our recovery, we do not want to forecast an overly optimistic outlook at this juncture. I'll return after David provides his remarks to give some additional industry commentary covering the short term trends and expectations. I'll now turn the call over to David, our CFO. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:07:46Thank you, Deck. Good afternoon, everybody. Before discussing our financial performance for the quarter, I would like to address the late 10 k and 10 q filings. We are pleased to have filed both documents with the SEC, but many participants on this call are aware, these documents were filed after their SEC deadline. The company accomplished a great deal during the financial close, including performing a detailed review and an impairment assessment of the company's major assets. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:08:15At the same time, the company identified several internal control matters of the company's relatively small Australian subsidiary due to insufficient staffing. The company also had to work through a number of matters related to customer programs. In an unrelated situation, the company has talked a lot about our efforts to implement one standard ERP platform across all of our entities. These efforts resulted in a number of implementation matters the company had to address. All these matters when taken together resulted in the corporate finance team being unable to meet the SEC deadline for filing the 10 k, which ultimately resulted in our assessment of related material weaknesses in the company's internal control. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:08:57The company is working on a remediation plan to resolve those material weaknesses. These matters related to the filing of the 2024 financial statements also led to a corresponding delay in the filing of the first quarter financials for 2025. Having said all that, as you may recall, we had published unaudited year end financial information in March. Now that we have filed our financials, we have been able to report only minor changes from our prior announcement. First, adjusted EBITDA for 2024 decreased to $40,000,000 as compared to the $42,000,000 unaudited figure, while net sales were $547,000,000 as compared to the unaudited $50,000,000 previously indicated. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:09:44The main reason for the adjustment was related to customer prepayment programs where the company identified an adjustment after the initial release. Further, debt ended $9,000,000 lower than initially indicated due to final adjustments related to debt and accounts payable. Turning to financial performance. Our first quarter twenty twenty five revenue was $116,000,000 a decrease of 14% as compared to the first quarter of twenty twenty four. The primary reasons for the decrease were first, as Dak just mentioned, destocking continued in the quarter secondly, the absence of a voluntarily canceled herbicide from our product portfolio third, weakness in the Mexican agave market And finally, a drought in parts of Australia impacting sales of certain products. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:10:41Further, market related factors also dampened our first quarter performance. For instance, in response to aggressive competition in the challenging first quarter market, we implemented increased incentive programs. Gross profit margin declined to 26% during the quarter, as compared to 31% last year. This decline in gross profit margin was primarily related to a weaker pricing environment, and to a lesser degree, lower volume. Our operating costs were well controlled and were down approximately $5,000,000 excluding transformation expenses and a one time benefit recorded in the first quarter of twenty twenty four related to the settlement for long time data compensation. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:11:27We made substantial improvements in our working capital accounts. As I have mentioned in previous conference calls, our business cycle typically leads to an inventory build during the first two quarters of the year as we prepare to meet the needs of our customers in the second half. However, this year, our inventory only increased by approximately 3% since the year end of twenty twenty four, and has decreased 20% as compared to this time last year, resulting in improved inventory turns. We are pleased with this progress, and believe further improvements is possible. We are highly focused on managing net trading working capital, and were successful in the first quarter, ending with working capital $86,000,000 lower than this time last year. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:12:13Along with a better control of working capital, we ended the quarter with debt approximately $20,000,000 or 14% lower than this time last year. It is likely that debt will trend higher during the second quarter, which is normal for the company's annual cycle. Our focus on controlling our working capital levels going forward should help to minimize the debt we need to run the business. Ultimately, expect this focus will help to create higher returns for shareholders. With regard to debt, because our current credit agreement matures in the third quarter of twenty twenty six, we have already begun to work with our lenders to put in place a longer term capital structure. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:12:55We are looking at a wide range of options to replace the current credit agreement. Because the current interest rate environment is quite challenging, we expect that new interest rates will likely be higher than our current credit agreement. Our focus is to obtain flexible financing that will give the company ample working capital both to operate and grow, which is one of the highest priority initiatives at the company at this time. Looking forward to the balance of 2025, we expect that CapEx will fall in the $8,000,000 to $9,000,000 range. Thus, we expect to generate reasonably strong free cash flow this year. David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:13:35As we said in our last quarterly call, we expect virtually all free cash flow to be allocated towards debt pay down as we look to further strengthen our balance sheet. In summary, the financial performance of the first quarter was weaker than a year ago period, but we believe that we managed well in the areas that were under our direct control: operating expenses, inventory, accounts payable and debt levels. Levels. While the broader agricultural market is in the very early innings of a recovery, if we continue to execute against our transformation plan, we will be well positioned for a cyclical upturn. With that, I'll turn the call back to Dak. Douglas KayeCEO at American Vanguard Corp00:14:22Thank you, David. Before we close, I thought I would provide some thoughts on what we are seeing in the agricultural economy. I don't want to sound too optimistic as the level of economic uncertainty remains extremely high. But based upon what I have seen during my more than fifteen years as an executive in the crop protection industry, inventory levels have been drawn down to a point where any recovery in buying patterns is going to lead directly to an increase in demand, which will lead to higher volumes or pricing and possibly both higher volumes and pricing. That is the nature of operating in cyclical industry like ours. Douglas KayeCEO at American Vanguard Corp00:15:05We have included a chart in the slide deck which shows that inventory levels at our distributors are down by nearly 23% as compared to a year ago period. We should note the industry has already been involved in eighteen to twenty four months of destocking. While inventories have been drawn down, industry data indicates that corn plantings are at a historically high level. In fact corn acreage is forecast to be at its highest level since the twenty thirteen-twenty fourteen season, which was a reasonably strong period for crop protection companies. As I stated previously, based upon industry data we can see that our product is being applied in the field and we are not losing market share. Douglas KayeCEO at American Vanguard Corp00:15:51Thus we believe our portfolio is well positioned should the season go as forecasted by the USDA. Cotton acreage is looking incrementally softer than last year, but growers are switching to peanuts, which is also an area of strength for us, with thiamat being one of our most popular products which is used in peanuts. We can see a recovery beginning where we will need to achieve clarity on tariffs and gain further confidence in agricultural commodity pricing before a cyclical upswing can commence. Important agreements have been reached by some global trading partners, but based upon our conversation with customers, a high level of uncertainty remains in the market on how the global trade landscape will adjust to the additional barriers that may be forthcoming. While we wait for this recovery, we will execute on our business transformation, which should lead to improved financial results. Douglas KayeCEO at American Vanguard Corp00:16:48We'll look to take further costs out of the business, continue to improve our net working capital position, and importantly, smart investments that improve the positioning of our product portfolio. As I stated in the last conference call, one of the reasons that I took this job was that I believe American Vanguard is a business that can be fixed. I've just highlighted a few fixes that I've implemented in my first few months here, but there is much more that can be accomplished. We continue to execute against the playbook we developed with our consultants, but the team also continues to find additional areas where we can take cost out of the business. As we chip away at the cost structure our long term goal of achieving a 15% adjusted EBITDA margin through the cycle appears more achievable but it will take a few years to get there. Douglas KayeCEO at American Vanguard Corp00:17:41While we have gone through some challenges, I remain extremely excited about the future and our goals remain the same, to position this company to be the trusted provider of proven agricultural and environmental solutions. With that, open the call for questions. Operator? Operator00:18:00Thank you. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. And you may press 2 if you would like to remove your question from the queue. Operator00:18:33Our first question is coming from Ben Klieve with Lake Street Capital. Your line is live. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:18:41All right. Thanks for taking my questions. First one, Zach, for you. I'm curious if you can elaborate a bit on kind of the cadence of the year over year top line performance here on a year to date basis. Basically, the fourth quarter call in mid March, you kind of suggested that the destocking period was kind of neutralized, which is which today it sounds like is the case now, but maybe wasn't necessarily the case at the very beginning of the year. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:19:13Can you talk about the kind of year over year performance January through where we are in early June? Have things been progressing favorably throughout the year? How bad was it in January relative to how good it may be in June now? Douglas KayeCEO at American Vanguard Corp00:19:33Yes. Thanks, Ben. Excuse me. Thanks, Ben for the question. Appreciate it. Douglas KayeCEO at American Vanguard Corp00:19:38From a year over year basis, I mean, there's you have to consider the Dactyl, the product that we removed from the market. That was a fairly sizable year over year amount that came out in first quarter of this year. So that's the biggest change in top line sales from the previous quarter. Then we had the agave Bromacil product in Mexico. That's the next biggest change that we had down in Mexico. Douglas KayeCEO at American Vanguard Corp00:20:10And then the next one was the drought in Australia. Those are the three biggest changes in the top line. We did have some positives with the METAM, sodium and the Thymet that offset some of the others, but those are the primary changes year over year in the top line sales. Addressing your destocking, the levels that we saw at the beginning of the year in the channel suggested that the inventories had been destocked. But it just continued through all the way to April from our last standpoint to a level that in the channels what we see in the inventory at a level that is historical lows is what we see. Douglas KayeCEO at American Vanguard Corp00:20:53We get this information from data services and that's the reason we have confidence in it. But it appears to be at historical low and that's and it just continued through the first quarter. And then as we see now, we do see positive trends in May and June related to our sales. So that's the demand seems to be being replenished. I don't know if there we can't tell at the moment if they're going to build inventory. Douglas KayeCEO at American Vanguard Corp00:21:22That's the uncertainty part of it about it, but the destocking appears to have bottomed out, but that's to be determined. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:21:32Okay. Helpful. So I guess David, let me ask you a question and then, Deck, I've got a follow-up to this. I definitely understand that I think everybody expected that the year over year headwinds from Dactol. Can you isolate the first quarter EBITDA and revenue contributions from Dactol? Douglas KayeCEO at American Vanguard Corp00:21:52Yeah. I've got that right. It's top line 6,000,000 and margin 3.5. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:22:0013 point five percent. That margin was on a gross margin basis or operating margin? Douglas KayeCEO at American Vanguard Corp00:22:06Gross margin. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:22:07Okay. Very good. So the then if you back out, DACH, this dynamic with Daxol and Bromacil, kind of the balance of your portfolio, was that it seems to be effectively flat year over year. The Australia Bromacil, Dactyl, those were the headwinds. The balance of your portfolio was effectively flat. Is that a fair characterization? Douglas KayeCEO at American Vanguard Corp00:22:38I'd say that it's effectively flat with the highlights being on the other side, METHEM, SODUM and ThyMET. METHEM, SODUM is our largest product and it continues to be a strong core product in our portfolio. It's resilient, it's stable. So we did see an uptick in sales in the first quarter of mid temp sodium. In the Thymet, that demand was directly associated with the increase in peanut acres that we've seen offsetting the cotton acres primarily on the Southeast. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:23:14Okay, very good. A few other questions from me. First of all, I know seasonality in this era is really difficult to forecast, but I'm wondering if you can help us understand kind of what your top line seasonality expectations throughout 2025. I mean, quarter relative to the midpoint of your guidance, the first quarter numbers look to be about 20% of your overall revenue for the full year basis. Can you help us kind of look to the Q2, Q3, Q4, outlooks as a percentage of revenue? Douglas KayeCEO at American Vanguard Corp00:23:55Don't have the percentages right at my hand on the by quarter by quarter basis, but overwhelmingly the second half of the year is our strong season with the soil fumigants, metam sodium being one of those driving the top line sales in that period. So the second half of the year is always the strongest for us. And based upon what we see in the destocking, I don't have no eye, no nothing comes to mind that would prevent that being continuing in 2025. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:24:32Okay. So still a second half, a sharp second half SKU. Very good. A couple other sort of ones from me. Dak, can you educate us on the implications here in corn acreage shifting from soy to cotton on a basis, the level of crop protection products applied on an acre of corn versus an acre of soy? Douglas KayeCEO at American Vanguard Corp00:24:56Yes. So the USDA has projecting an increase in corn acres over soybean acres that shift and then it normally runs around 90,000,000 acres each over the history. It has shifted to this year to corn acres. It was shifted last year too, but it shifted more since 9585 kind of arrangement. Our portfolio does lend itself to corn acres with our corn soil insecticides. Douglas KayeCEO at American Vanguard Corp00:25:28So, so we should we are seeing a greater usage in that area on the corn soil and in the corn acres and our sales of corn soils are slightly up this year. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:25:42Okay. Very good. And then David, one last one for you and I'll get back in queue. Good to hear your conviction regarding free cash flow this year. Can you educate us on your expectations for cash taxes this year given operating losses that you're coming off of in 2024? David JohnsonVP, CFO & Treasurer at American Vanguard Corp00:26:03Yes, we've got some cash taxes to be paid internationally. So I think we're in the $4,000,000 or $5,000,000 range. So, yeah, the tax situation is kind of difficult at the moment. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:26:22Okay. That's directionally helpful. Very good. All right. Well, I appreciate you guys taking my questions. Ben KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLC00:26:28Best of luck here running out Q2. I'll get back in queue. Douglas KayeCEO at American Vanguard Corp00:26:32Thanks, Ben. Operator00:26:35Thank you. Our next question is coming from Wayne Pinsent with Gabelli Funds. Your line is live. Wayne PinsentDirector of Research at Gabelli Funds00:26:51Hi, Jack. Thanks guys for taking my question. Jack, you mentioned with inventories at historically low levels, any potential snapback or drop back down to the bottom line? And also confidence in the 15% margin target. Just wanted to see if you had any thoughts on the cadence of that over the next few years and in 2026? Douglas KayeCEO at American Vanguard Corp00:27:20Thanks Wayne. I appreciate the question. Yes, I mean, there's nothing changed in my outlook of the company and the goal of 15% EBITDA margin over the long term. The fact that the decrease in sales is directly related to the destocking that we saw and specifically in The U. S. Douglas KayeCEO at American Vanguard Corp00:27:44Market. Does it tells me that the sales on ground or the product on ground is still going out at the same level. If you look at the change in our destocking versus the change in our sales variance in the first quarter, they're pretty much aligned. So it tells me that the product still going We just got to get to a normalized level where of inventories in the channel. Douglas KayeCEO at American Vanguard Corp00:28:11So overall perception hasn't changed there on the long term potential for the company for EBITDA of 15% margin. Wayne PinsentDirector of Research at Gabelli Funds00:28:25Okay. So any thoughts on improvements specifically in 2026, if you start to see a return to maybe normalize going from flat now on the rest of the product portfolio to low single digit normal top line growth? Douglas KayeCEO at American Vanguard Corp00:28:44We are projecting growth in 2026 and our five year plan that is it's better than the industry average of course, is what we're projecting as we right size and go through the transformation process on our commercial activities, specifically in The U. S. And we have seen some real positive signs on the transformation process and the commercial activities in Brazil specifically. That transformation process, it was executed the first of this year. Sales are slightly down, but the contribution margin is up from Brazil. Douglas KayeCEO at American Vanguard Corp00:29:21So we see execution there in the commercial activities and we will see we'll continue to work towards that in 2026 in The US market. The US market has been kind of complicated with the transformation process in 2025 due to the destocking and the pressures that we've seen by all the competitors in the marketplace. Wayne PinsentDirector of Research at Gabelli Funds00:29:45All right. Thanks, Zach, and look forward to following up soon. Douglas KayeCEO at American Vanguard Corp00:29:49Thank you, Wayne. Operator00:29:53Thank you. Our next question is coming from Rosemarie Morbelli with Gabelli Funds. Your line is live. Rosemarie MorbelliPortfolio Manager at Gabelli Funds00:30:03Thank you. Good morning, everyone. I just would like to add a couple of questions to Wayne's comments. You mentioned that you have lowered pricing due to the competitive environment. Could you give us a little more details as to which categories Are you seeing more generics and is that the main issue or is it any particular categories, fungicide, herbicide, insecticide, etcetera? Rosemarie MorbelliPortfolio Manager at Gabelli Funds00:30:36If you could help us understand what is happening and whether you see that actually reversing in the second half, for example, when demand increases with the seasonality. Douglas KayeCEO at American Vanguard Corp00:30:53Great question, Rosemarie. Thank you for that. Yes. It was a very specific, very unusual situation in Q1 with our competitors. There were some very unusual activity that took place that's not normal for end of quarter type situation. Douglas KayeCEO at American Vanguard Corp00:31:15I think that's because all of the market was down. And it was really around I'd say it's twofold. It was really around competing for our customers space and net trade working capital, their inventory headroom, not necessarily competition on specific product basis, but it was more related to how much they were willing to take on an inventory at the end of the quarter. They just were not willing to take on much. And so there was a lot of competition and a lot of discounting that took place at the end of the quarter around that. Now, I will say that we did have competitive pricing and Folexes that continued to see a generic pressure. Douglas KayeCEO at American Vanguard Corp00:32:02But I believe looking forward, we're going to be in a very good position in Folex going forward because of our U. S. Based production. Our competitor in the marketplace is not from The U. S. Douglas KayeCEO at American Vanguard Corp00:32:16And their supply was leftover from last year. So I think that's to work its way out and we see improvement there long term. Rosemarie MorbelliPortfolio Manager at Gabelli Funds00:32:27Thank you. Operator00:32:33Thank you. As we have no further questions in the queue at this time, I would like to hand it back over to Mr. Kay for any closing remarks. Douglas KayeCEO at American Vanguard Corp00:32:44Yes. Thank you again today for your time and for your continued interest in American Vanguard. The first quarter of twenty twenty five was a challenge for us and the entire agricultural chemical industry. But as I indicated, we believe that the customer activity levels are beginning to pick up and will continue to do so as channel inventory levels have been worked down to very low levels. We're also happy to have caught up in our financial filings and appreciate the patience of our investors have shown during this time. Douglas KayeCEO at American Vanguard Corp00:33:16In closing, our focus remains clear to improve our cost structure, streamline the balance sheet and be laser focused on providing the products our customers desire. We greatly appreciate your ongoing support and engagement during this period. And as always, we remain committed to transparency and open communication. So please do not hesitate to reach out with any further questions. Thank you for joining us today, and have a great day. Operator00:33:47Thank you. Ladies and gentlemen, this does conclude today's conference, and you may disconnect your lines at this time. And we thank you for your participation.Read moreParticipantsExecutivesAnthony YoungDirector - IRDouglas KayeCEODavid JohnsonVP, CFO & TreasurerAnalystsBen KlieveSenior Equity Research Analyst at Lake Street Capital Markets, LLCWayne PinsentDirector of Research at Gabelli FundsRosemarie MorbelliPortfolio Manager at Gabelli FundsPowered by