American Vanguard (AVD) 31 Jan 242023 Q4 Earnings call transcript

Hello, and welcome to the American Vanguard Announces Preliminary 2023 Results and 2024 Outlook Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to the Director of Investor Relations, Bill Kuser. Please go ahead, sir.

Thank you very much, Kevin, and welcome, everyone, to American Vanguard's Preliminary 2023 Financial Performance Review.

be will today speakers Mr. Our and Eric American Mr. of Wintemute, Chairman Vanguard; CEO Officer the company; Gualdoni, Chief of Don Transformation the Mr. Tim Donnelly, your with to and our Chief questions, Administrative Mr. Officer; assist Officer. David Johnson, Chief Financial the company's

our to risks date policy, Before With and represent company's are usual results the beginning, Eric. cause management from this are statements call reports may information. that information based and such changes company. competitive statements forward-looking in and subject current may expectations. necessarily call, risks information company's discuss a actual over assumptions on the let's filings. moment estimates to company cautionary other In and variety and the uncertainties that company's today's management's regulatory updated and take in SEC that of reminder. the differ factors by call, and not pressures, are the the various will weather said, include a Such best forward-looking to for of be by turn the judgment All we Such detailed of conditions, as

constraints supply important we early Aztec last not in targets. issues. had respect in everyone, QX Hello, is XXXX positioned of products, Bill. to that brief we forecasted availability to 'XX, 'XX, American a to impressions track In to welcome of meet financial year update. you, Thank to XX-K both our XX previously Today, remain secured show numbers. are 'XX outlined namely our which financial Vanguard presented to January due Further, chain want on your as broadly of pilot give formal call experienced we and supply hold our the X the our outlook our to issuance, outlook. we full earnings unchanged. short, a and our of we to as cycle, while call to 'XX and expectations. have revisit ahead We full Dacthal, QX we 'XX our completed With high-value call, well Slide meet line, our 'XX X in Bottom

quarter, 'XX prior our of to were our in sales were fourth about that by net early Further, meet of by we we compared X% that Consequently, ground lost declined full-year such up 'XX. the only up to we some quarter-over-quarter to in During products to as these sales the produce grower X% sufficient made able needs. 'XX compared the had volumes year.

line also 'XX, as while predicted be to held in said gross forecasted range. for subject The can same appear up have I with and of completion still adjusted margins our audit During to EBITDA. our be

$XXX target X.XXx. words, do capacity million, the $XXX our achieve such increasing we debt-to-EBITDA leverage to $XXX our working initial while to about on turn to capital, and we to improved and EBITDA Slide sales, prepaid to to collections, and about were we balance borrowing #X. reduce about inventory million. which debt that we able numbers, ratio have generated captured management, In cash significantly, upon enough Let's based of other With inventory robust million sheet

interest to current to sufficient If rates. you in lenders are our and This meet us return during to room we As to covenants rates may able recall, lower uptick interest included expense. relief be QX boom maintain had an to we capital needs. working our should able reduce give trajectory,

performance QX earnings 'XX greater full and our will, Form our financial in and call year course, of XX-K. detail on We provide March within

operating over call this plans Chief Tim our point, margin, our to transformation the spearheading At Tim, want through on Officer, year report to return turning our year. effort. With to thoughts who profit today Don who with Before I 'XX Also revenue our to will outlook, on and is is efforts. digital me initiatives. Transformation cost, Don? which, full Gualdoni, I turn Administrative our transformation and 'XX our improve Chief Officer, is Donnelly, let Don my with will the me after cover me

to my a all X-month It's of here Eric. AMVAC. be on at you pleasure anniversary with you, Thank

see transformation X, Slide a As robust from has you'll core X sustainable and elements.

not a company First, single the area profitability it's single of or multifaceted, lever. limited to a

Second, formal a that DNA after done lastly, And process accountability, sustainable company, changes well completes. is which and transformation about requires the dividends the the right pays transformation transparency. of

the plan indicators margin, management drafting like. and a DSO, are raw KPIs and as where costs, will targets pursuit? performance So factors signs as performance for the the will key organization, be in of forecast These such and we'll Board. By and these this go. we driving performance senior accuracy, to year, sales the prior inventory and profitability that measuring both or material driving production gross to it as include indicators serve implementing compared plan, we are and set as We key internal into vital against

costs, into deeper yield and for we dive expenses, measuring should transformation enable our structural of fully a lines, realize capital The our multiple margins use for a entities. capital Beyond businesses, improvement across KPIs, cost leverage lean in take the our our will freight selling growth. on burdened platform operating and us product of and structure, material to return cash

the I'm through and the be operating XXXX. financials. results balance our my improved that set in our XXXX colleagues will in our with to on also year of have year-by-year target working for for and additional define types a full will next of March, our for profitability AMVAC the into early typical plans, set anticipate We leverage target flow basis. we earnings deliver we As to a excited during see is these transformation, specific course, call

reporting now our on our turn progress I it to to update be will you over Tim to digital will quarterly. We progress. on transformation you

Don. Thanks,

doing first grow the so answering short and transformation? by we digital Let that why question, is you me The competitive. answer start are a can remain

#X. on for point Slide look back a the Let's second, following

we and started QAD here major ago, you I world. a When we today, resource Friday, that work how years through the and XX effort. can and complexity, we dozen work With just Consultant, businesses. had nutshell and increased and signed inventory, are past to so, future, half ERP now have and XX what to we have information standardized defined the maybe move know, into the a vendor, contract how and work businesses it nearly at we our at of we is easily many growth our last I stage system like to in the work, to look our cycle when would throughout growth planning, globally. in subscription largely our have in enterprise years ensure and we and been step over processes processes, services sales, of current, we complete, Business on how acquisition. convened diversified we planning same with doing come ourselves are is poised back, is forecasting, with how of we necessary Today, the their or and grown That ERP implementation Carney the this As business XX has that the find finance, accessible. owners or QAD.We phase have and

in seemingly view wind, X the in or that order our things: enable Over functions, make able fashioned. them. latest all be we turn management with growth. tools change and of give warehouse will change implement system; business that call in processes our our have QAD Through shortest team with so, standard will face leaders second, to in days, the we next to evolution, the XX and process, I of truth people This, us single to and the a a users top-down is is themselves metrics cannot and adaptive QAD's provide take effectively source that, months data to business decisions turn, transformation in control senior processes have factors in operate In provide rolled do a on fact, essential. fully platform back automated process users Eric. will the of way, With real-time. for management, in the can, gathered manner. will through the first, In step a ERP up the this in the up external for next digital and These time. We bring response our internal however, to these our this best

Thank you, Tim.

full-year Turning XXXX X. Slide our outlook on now to

revenue Our expecting by assessment adjusted EBITDA are to is unchanged XX%. to versus and XX% we to our previously still rise targets. That issued by increase is, XX% X% to

we as we One of military have in not impediments the of last heard the any the year. relative supply note, Sea. had primary improvement for snags many anticipate chain activity experienced by caused Red On is the material a you shipping reasons that of do

use we Middle may not East, delivery. lines economic does have that or for shipping an While the directly this either beyond it affect activity supply impact

prices, the in weather, down fall forecasted have adverse We corn and are not sales Brazil for year-over-year. to developments Brazil contrast, stable. but in 'XX, X% slightly were industry have fell are Chem Fundamentals encouraging crops at numbers closely XXXX. 'XX. country. been record had least present, soybean XX% been affected. By relatively while our adversely in by that within continue by With Ag Brazil only Commodity crop in some globally which look driven, Interestingly, monitor to the for

should some drag of turning this sales do with farm in or on industry, and on down, markets least presence trend effect stable. While material Brazil our the may remain generic will we global at expect With affect for international herbicide within low-priced We a U.S. some expect do up not to as economy continue herbicides this the results. U.S. remain XXXX us. the

account in We our have outlook. into this taken

market should regions. of diverse in tends crop Bear businesses many portfolio good that Our product-specific have blend ex-U.S. breadth effect to challenges. the in we generate results. a This mind

XX due goods words, in expect X we discussion days' timing of that annual transformation stabilize orders, said, with year. unchanged may Don though but in timing with basis. In and That had buy me that a our the buy lots covered took on inventory that volume X the will a similar On that from customers on this smaller even our shift outlook in of an side, will current to eventually we 'XX. in hit in 'XX, XX is out to should shifting a connect other retailers demand, earlier. of in to the up XXXX building assuming now retailers frequency, Tim noncrop to let shift maintaining inventory, Even procurement months' worth greater the occurred worth

profit a of lower These changes First, should and $XX will for 'XX our we costs, expenses. reduced targets operating host manufacturing material expenses, freight generate million selling that optimization, and reduced make in basis. interest raw on annualized an that include

reduce are business We the regularly. and At monthly operating to full-year to keep measuring however, have team 'XX efficiencies charge of these here, costs, health stronger to matter will Shirin the The term, things is the improve these Head them implementing to operating and indicators in so me example, on we have to profit, year. working however, will and leading with have check. and of short defining that cover our assigned our relating the serve into XXXX same the impact leaders implementation most Khosravi, time, initiatives we leverage additional that idea but giving the performance Human efforts Don the and to In transformation that for key the that a beyond. Resources, our focused in maintaining is Board,

benefit, sizing March. We that for in Don targets prize. this should this will establish hand transformative the addition, is called have In

to digital decision-making. our accelerant While speed for leverage, intended operating a not transformation is and of an as solution growth improving increased

company on As many many are we platforms. Tim operating complex in pointed midsized a out, regions

will As a to entire decisions. to and efficient best our benefit the team important and better need data can to It's from of that we more committed having see the us these systems these in comprehensive, data. Further, leaner, eyes supplier changes current accurate, our markets shift, transformation customers. faster conditions the They efforts. make and real-time is most note the make

year and keeping the are Finally, questions. 'XX, ask structures. and we through our growth on target we XXXX for to confident to while and any and we and ourselves our QX In summary, our profitably conduct completion audit, performance of track maximize for are positioned to outlook that improving business subject digital are With that, operator, are unchanged, cost full transformation. pull Kevin? to Kevin, profitability achieve can our I efficiently even listeners

Our MKM. [Operator first ROTH from Fortune coming Scott Instructions] from is question

and the a down it as Big picture, that, can taking on more sense and and see just channels Just that in inventories its great. know we're through from destocking you if you that provide would color little runs the where view be a that January inventories starting geographies of in a here the just ongoing that at to that longer we're still to the want seeing But Brazil. perspective? in we're of course? different process, destocking process ramp-up big-picture And to normalized are now

a have might be Yes. would that to say because don't impacts more see regards on our they were over with a a difficult specific to inventory. inventories, this we've might said last I line, got pretty to destocking. have But over area the bit I little any normal year, that inventory. it the mean is herbicide they where we're would bit on little areas not to the what careful anyway try been push. we been push we've maybe people way only And

have that our was to demand, If we're the So higher I mean, there everybody by we effort United an their was inventory. not at relatively look that but stable, with it but demand try inventory, products different outside we States, there to yes, inventory. of seeing reduce know are

if I or question part So of don't Scott. know not, that's your

Yes, to and that's supply we process Dacthal, back levels great. in get you normalized a X? for obviously, where those And in as building with last but were just before that supply year, are issues Aztec and follow-up to those inventory

another into be production although get started we still completed we'll in produced, think, mean, enough run I December. this into started in but going With September. we Aztec the I think in run are production the I April. in production on Dacthal, Dacthal, in we at point and November We we've us to May, Aztec

So good the supply X I those products. we think about of feel chain

just a the And markets coming the other we sense American pricing to as been big course here. more is on where that color side. the Chinese generic China supply and little picture generics impact hit Okay. as question ending its the margins But up from of more of the is out in down Chinese have run the Just And are pressure the Latin saw south. and on on starting that? generics

products. to noted, some the we in such glyphosate move And Chinese as as they track mean year. I import uptick saw ] 'XX We the the back on dramatically of start [ of prices fell them, fairly you up.

have products flattened Some of the out.

down they Chinese channel, But have a down a don't even we're to certainly to X% bit the maybe probably export economy, deal mean, in America there X on we generics. as Central lot as be or Some what's America. have is of given then trailed I think, But where We more, little pressure do further. producers, X%, might on everything the Chinese have the in we but maybe can. relatively far Central flat I X year-over-year, in

is products focus emphasis the we team So global the again, It's best where It's where our we margins. on is. manufacture. our our of did that

So lowered not unaffected it's Chinese not a are that for certainly sure, products, but we certainly, anything by core to us. abundance that's of

last color. one me. one the And for Appreciate then

your had looking to targets Solutions And down. and here? where revised that's guidance. indications XXXX Solutions right of lofty your driving Green perspective expectations you've And couple over growth really next next SIMPAS it of for you're in I just been SIMPAS fit drive segments But for the in years put of those in the XXXX? segments X that couple any there. Obviously, the probably years. at know Green looking and Just there growth in

Yes.

property But have we're certainly, Green of again, did them both that got growth that were didn't are, hit the I neither technologies growth would in we for we we've where intellectual about. Solutions certainly from going did farm say expectations position. SIMPAS. the were both. are So things excited record but been yes, But think people gate were down, I forward, have back as may that investments, Again, commissions think a I sound. economy, had the near high. that dialing hoping, But

So plenty there's of profit there.

will it the showing there our be Solution investments I can products. out mean moving that be return and So with us Green on

soil Solutions of within add part of to our health, we products. I as to for think Green increase continue to demand of efficient uptake more the SIMPAS, continues portfolio nutrients

year. for several 'XX more and the So products this on we're plan year I than think adding for here

that time applied So more just for products of plan. the demand add as we being the at builds multiple products

from Capital Markets. question coming next Your Chris is from Loop Kapsch

the question, up just guess, growth I'll from platforms. on pick I last the

platforms that what those if then is peeling that a targets? you're within bit, have of Eric, that confident are set that now, and were momentum over you growth like -- saying traction so the for and maybe of objectives back which most terms conveyed platforms might the do just commercial feel ones supply trajectory the the which curious these still are think to platforms growth Just this valid? achieve little you you craziness on about chain the you you have, Or do going growth you to of based targets which you and are adjust is which or And forth? the back the because you feel timeline in

Yes.

to 'XX. can to a So of showing that so and to that do think better little things And update we growth over at given. year XX% over month 'XX bit in on so targets the a targets. we all all next step in is previously to our like we X% will, X a years. maybe platforms or combination to the that X see look have we'd 'XX reset another Yes, we're obviously took we I go X mean, growth unfold in how I how we're Yes, the coming backward March our going as

targets benefit in transformation initial I But prize the reaffirming your that on of I'm the just speaking from just event quantify terms the you and March, expecting think the But just on you're place to of of you 'XX, how based the sizing efforts initial guidance in transformation you for program. that are much Okay. transformation be this that that would going to are use overall said year? We'll sit tight some expected that. curious,

Yes.

So to million the accomplish. the not really I targets that related looking was we mean were that the transformation initial to identified $XX piece we did that that we

did were -- that costs when and thing. were we there how are So at of operating how you're implementing. what Those sort to margin we and efforts that looking improve now to without

and more we then be how this 'XX and of that to would on So annualized something 'XX much look that what's forward. in going at, is going would occur okay, and 'XX

So that's the in of process we're pulling what together.

I freight, raw transformation as manufacturing X. mean, as process materials, far I'll in are but be improvements mentioned and -- KPIs, part began the the and are part of early of interest we those will as that that mean, in I be certainly things say, are measured going to optimization, 'XX. Now those those I efforts

we about mentioned the think QX. we interest. in increase I bank good made regency So Obviously, earlier in improvements

doing So of something XXX we'd the the our inventory, our key cash of rates lowers on that bank. of below better end interest a million course, that And interest We're to debt-to-equity year. for the at driving like getting job course, ratio is our or with down us. down, down collecting of globally in that maybe to is $XXX step that just

they've the targets, with see give get us going a itself would a initial are we're now. I from at we we week, the team benefit but some to system we those we test our on have, to times, and daily call. given much some say, meeting here. report But and is little We'll to guidance and once they've you and need we've met targets how data. laid think, I to that March still more being currently to looking to check a So I clear bake do -- them those them And position out with some with having in meet as in but still several have bit

understand. sure Just to I make

in of little curious the So to? to that how those initial bridge guidance. expected $XX to million $XX $XX on be through about to much million. than target call manifest opportunities EBITDA XX should the a over might process. EBITDA based bridge the $XX in transformation that is from, contribute you I'm that Is separate That it, referred just million the your million

costs that just some like some well. So cost, but recovery, is of is it taking from business sounds of portion as out it

I'm trying So to... just

having of spends same that in. in better were $XX our mean decisions. same million, able in on, time being a putting Yes, information, boat the rowing again, I a we that there team the sales information make us the pieces to lot number direction all of touched with

of We the their expect to having systems time automated. be able to free some by up

result little So have because time to customer on in which a with sales focus that bit should more interaction. we more

an something of and that be would example play then in we've that. that we not So that can report put quantify

benefits have part yields into that we say, have things to and of back are our to I -- well of baked visibility, our material margins mentioned, how optimizing say, the I sales with going not of we're let's so that better don't team. doing, that manufacturing, reductions, in visible what raw having we're like So marketing those are, real-time pieces it's XX%. But we mean

we are. where Here's

are we the real-time available of that also getting mentioned a back tool I we them to think, be, I think look of will our as cost But optimize globally. goods. any people making freight margins in our valuable I to into

the in One on -- could the generic comments to pressure I [indiscernible]. If and is circle so particularly about broad China X back Okay. herbicides post from just more. spectrum

really directly. So you mentioned you it affect doesn't

just influencing if from America, Because pricing but Latin affecting indirect mentioned So I'm been there's is that's just dynamic you that is effect Central overall? on particularly American the your also China, Is you margins the aggressive in it operations. a have mentioned that wondering that, market. your exportation an that this maintained,

So reconcile wanted I just to that.

steroid. It's cedar an But impact-like to ]. and hard-timed of little that mentioned a for combination at impact, mean -- is adjunct glufosinate combination a Yes. offering glyphosate we have an cover to I broadened I atrazine [ which combination. bit like into

there we effect And would the was I where on came broadened can we've what pricing. biggest a that as coverage with was the of I down. that probably, lot broad the say, that spectrum So price do said, herbicides molecule. of But

I I we and for key in X mean some But certainly provide down, year, they effect. have to had mean were overall, able So again, season. the weren't we we the X% products that

so quite are products. generic the realm we're reliant people And more same as not in that on

helpful. price halved is at the one the look a been year. the share mean, what That's taking has you've And last conveyed Okay. over back. you step last just I In if today, industry you're saying -- there some Vanguard's issues obviously then my that should was fourth confidence. some okay, affected interpretation, issues performance. quarter the restore some and that, But have idiosyncratic American

Your guidance, if okay, business you broken, some like, hit it, isn't challenges. suggests navigating this just we're

come be which as Now this, X.Xx, through the EBITDA level you EBITDA is levered pretty 'XX, assets rough that typically one is overcapitalized. X.Xx this they'll come is improving If at at year, trade. considering company these of math the here, that say you valued attractive, trajectory, with if hit, where could out end by

at and is right levels? lead these the So back capital some view to operate Leger stock this to your What's the go the what's for on and question does these an transformation for work this you as issues? through to leverage navigating Just American to opportunity buying level that? company put Vanguard

stock the and certainly would making you're with undervalued, mean I that call the that. agree we is

participate far repurchase, as previously. we greater at stock a level as did Now

then a make Board position would best deliver That on obviously we And out a these we choose we that acquiring, We levels, in could we're is to With we that in attractive. deliver with the should what's $XXX on said, we in return do at [indiscernible] of have. that at a temporary so, the the a back to we come from more mentioned work agree are our that the be we on we're we hit, very covenant. leverage got be position can And million looking numbers if being obviously in numbers runway but with market our stock frankly, stock. purchasing to money now we that little that with. we we've suspension bit want because, sure but the the bank

Cove Bronchick is question next Our Capital. Instructions] Jeff from from [Operator coming

presume new going meander in vision over hear. SIMPAS, how still And here's let's your years, had where and mean were. I I they "for" XX I does and maybe last extremely what? back which to Everyone next core as for be argue guys why ago, would over think, Is other XX announcement for better? what normal really time, ago in don't products reversion I the months get on a years? on and this past a company within anything your or a Is who's been strategic over So yes, and process and very down time. of long missing chain being there reproduce But years followed and doable board confidence mean year, for the it's a I'm is the That's I effort, there get stock see on, cetera. XX XX again, back some review you X were the X see have then never be an it'd don't exists revert attention have and next X inventories okay, can organization company the came this devoting can to is to company supply years there I and et are teens months, of different. the assume the which been to that's as division you someone this we what would is the just the the that of things better done members a company? should and complete better. X But words, example, in company an that doing as independent review why today XX now from new a But in years argue going happen. to whatever call, X

got has cap to million for market or So an core of -- responsible yes, $XX we've our that from business, we've been cycles and our our to the and peers excess a gone longer years less going front. growth down products of combination say, products our and portfolio. than gone which of core in from a outlined the acquiring no what those for growing our they've plan acquisition, number has through that been that largely we or through consolidations, But business has

that So for still us. is part robust

order X peers Our to years. rationalization every X

have to we've leverage So global core that other U.S. of countries. what frugal company of is areas a space. our a Green the well. strengths acquired industry, patents and had continues. put biggest deal allow from We've expand be a which XXX to from strong position have to us that businesses being our piece for X peers acquire being would getting that But investments Solutions and we've our line and relatively that done we've manufacturing assets is seen to our X as something into investments bigger investments as big grown over happens growth our company. that part in into We've into

that's growth cycle for area for big is precision that the think with to the yes, the a again, growth the regard And industry. and So board SIMPAS, great. we technology is other

So has and X implement at platforms growth them, we consensus upon Board reviewed we grow these and to and it, interrelated. need them. have feed the are And is, patterns as growth that looked the

at improve the as where at as obviously, looking a Board, yes, Board as opportunities to looking far is shareholder value. divestments, best And So that's the we're now. always acquisitions, mergers,

position exploit we've the other think position. the with got companies, have that's we're in unique a position and alignments good mean, I we on to so But We're execute to in and we past. done in So the and it. a here open industry,

session. like I'd or the further the back management to turn over for of any our reached question-and-answer comments. closing floor end to We

we it guess point update providing early March important additional until I rather this talking we waiting are of where felt period. that the about color, we're you we we Well, give believe than was an at but

appreciate shortly questions the call. you a sat that and good with evening. touch you the Have people we'll and again, on time the So

today's does That and you. teleconference conclude Thank webcast.

disconnect We this a day. your You today. may for and time, line your at have wonderful you participation thank