Oil-Dri Corporation of America (ODC) 7 Jun 242024 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the third fiscal '24 earnings discussion. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speakers today, Dan Jaffee, President and CEO. Please go ahead.

Great. everybody. welcome, and you, Thank Purification Wade With of me to Susan different due Chris of variety CFO President Garber, Ag of Amlan Wholesale; in Scheland, miracle of a Chief Patsey, International; Operations; VP and the of the Christiansen, of Manager Division; have and Laura Group walk Legal Bruce CIO; of President VP modern of she and Leslie and and us VP safe Consumer places of VP Group; Lamson, Investor Relations, Fluid through Aaron our today Robey, General Retail science, Director harbor Officer Kreh, we and and Products will Vice provision. the

statements factors, in company's Actual performance. review in regarding may future of periods. Thank investment release periods our we that those trends in evaluating in important the call, uncertainties a any Dan. those consider you, everyone. forward-looking Oil-Dri comments On and ask performance results highlight We Welcome, the and materially SEC factors in in risk number filings, and today's press company's and evaluating differ. future may our that In stock. contain our comments affect may you

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interesting an value and to And the ongoing Pet, monitoring available. become the opportunities and as business the that strategic basis, acquisition assessing you acquisition be Ultra we've we've asked our It's we're we've the of Oil-Dri. case prepared about been some morning, of various to stated made On Thank today market calls, you, acquisition aligned really several core previous to vis-a-vis is the this of our the an we Dan, alignment with share been details exciting acquisition execute our of with price On the of for good financially and that to strategies. paid, business. acquisitions, in everyone. of strategic Ultra our they and appetite investor and here Pet consistently very

highlight will acquisition press release. in Pet first, our of our I touch brief read points fiscal have on third financial Ultra I'll most knowing of the you quarter, few But that a more couple a from minutes.

have session remarks. that reported them follow my our ask do will Chris questions free question-and-answer If you results any on following comments, Lamson's our feel during please to

For internally focus In products, $XXX.X prior renewable volumes. million, year, the calls, were under the Dan offset year-over-year Moneyball. products, consolidated such the reached producing of a of fiscal product consecutive improved refer sales Higher prior net by higher-value miny as quarter, X% initiative ball, third and sales over company growth. and our prices quarter we XXth this version or increase ] diesel partially our has making to lower on discussed as our [ that mining mix selling

this Our products fiscal litter ] including experienced value benefited co-packaged [ higher of sales quarter elevated purification from and items. cat we third ongoing as focus fluids

fiscal higher improved third the increase The quarter gross in was profit from I of as mentioned multiple XX% driven consolidated Gross to mix. $XX.X was in well minute million, a increase fiscal XXXX prior year. the year. the the selling same margins The the prior as quarter product by ago during quarter XXXX over a XX% prices across third XX% products expanded

prior ended natural costs XX, partially ton Lower the in offset and cost and costs packaging X%, costs, of were X repair those cost year. gas months cost by the increases freight categories. domestic April by depreciation driven increases increased During per and compared to former goods labor, sold the

a as head count transaction performance-based includes Pet Company, well of by $XX costs expenses to quarter an Ultra advertising as reflects during in acquisition compared million during in increase Inc. our costs administrative This compensation planned million million additions. as the -- year. well key quarter higher last Selling, to increase increased as expenses were compensation, first The $XX.X driven the few $X.X and related incentives third general were

third to quarter, as took expenses than issue. be were of the does for quarter XXXX fiscal in Oil-Dri full costs fiscal place expect compared last expenditures year higher the timing the the same significantly that's Advertising year during year higher majority of a fourth to so the prior advertising year's period the XXXX.

incurred Pet be quarter fiscal Ultra to the as and fourth of Additional we XXXX. integration during taper fiscal related expenses XXXX enter then the off to are expected of

$XX cash cash. Pet cash that the third up $XX talk acquisition at at million fiscal to cover $XX.X of Year-over-year, quarter details in fiscal of Of million to the relates hit when million the from related of that the let's third were of are XXXX. points XXXX financing. million and moment Now and increase, on that for end of support end I quarter the about a Ultra $XX.X issuance more I'll the of to a to issued the payable equivalents notes funding acquisition, couple substantially

notes our in in -- deal invest on million and prominent Ultra our to our in facilities The cash ensuring capabilities $XX Pet compared key acquisition As expenditures to capabilities benefits to high of a gel-based the provide the privately occurred we've and continue million and in on of goals Anderson, Oil-Dri we completed those shift occurred actually prior our our million financed order million Carolina. the that during the this that's replace fourth with shares Pet. $XX aged Ultra fourth and of purchase with discussed silica our of infrastructure builds invested stock stock to capital service modern a of acquisition structure our hand, capital see of our the reliable aggregate quarter allocation. If was production I successfully Oil-Dri fiscal for This manufacturing May a of of inventory previous which issuance X, the $XX $XX and service Company, investment We litter combination remain of quarter. The calls, the our the in amount to to South a targeted crystal of XXXX, Year-to-date, Ultra during of of purchase historically acquiring $XX Inc., tangible $XX on gears issued during quarter. in held agreement, to under million levels credit $XX million year, our and third supporting based advance all growth, Pet, acquisition of and occurred was the supplier we million outstanding reliable existing principal customers. customers. cat capital the

pursuant Agreement notes Prudential the fixed wholly-owned credit notes the will the the flexible are Pet with issued So that cat facility fourth America detailed accretive as X.XX% one producers payable drew D $XX fiscal a this financing at helps to as at XXXX of at We XXXX. From only litter mentioned costs Bank. level $XX day quarters then similar entry this largest credit strengthens and capacity. $X the issued acquisition. At in for day, Oil-Dri's Pet leaving a of financing acquisition inclusive transaction acquisition of XXXX with fast-track facility the revolving we -- of closing, million BMO This become this XX, with Then These costs million we costs. point X timing costs a transaction-related rate earlier, were and of Included following be $XX we North in I the of during each provisions results Ultra Dri. these became and on XXXX. This ample to Ultra tranches anticipate and the growing we litter rapidly million a of Series our that tapering position on a off quarter into Note subsidiary on April in crossed from million of the enter draw our senior notes standpoint, shelf segment. $XXX,XXX. quarter in us We a X affiliates. our financing time, third is will Ultra anticipate facility crystal that of significant in

to fourth draw of when subsequent year. million occurred results our in this October in we [ and $XX This our our file fiscal quarter be ] financials third quarter will

sulfur-based rate to debt-to-earnings on BMO a with draw that subject variable a depending our Our varies is margin ratio. adjusted plus

the rate. provide the April to as XX, SOFR-based some would of XXXX, X.XX% for variable adjusted So have transparency been rate

same Our one affiliates Bank, contained credit which X aligned and and agreements, Harris both covenants, financial the its both BMO with are agreements. Prudential across the

fully based covenants. covenants, financing only in but the with Following finance situation to in Ultra these on current remaining our significant the we of we have acquisition, Pet financial compliance the not the calculation draws are capacity

couple a target million. of other to comments ongoing million on of operational $XX wrap-up basis, needs we an On Just $XX on-hand the in cash. range cash

ongoing for operations on of million would I to access draw like revolving strength future available. to $XX to while dividend, we following which our to supporting that as financial our years if credit maintaining to The we we've the of which they the fund reinvesting we need business Oil-Dri priorities, cash on away $XX our acquisition outlined, and our million cash growth positioned than And thing continue have targets as growth take increased key more to Ultra were Pet, with become in base. They XX still ample support listeners facility, well opportunities. financial is it. remains our to the With in our include and got a were have additional asset be for M&A, investing opportunities just strategic plenty maintaining focus straight to I existing enough capacity invest

repurchases our share opportunistically have made occasionally by stock. we though, shares that repurchase restricted teammates Finally, ] program. only taxes we the repurchase our returned have Year-to-date, under our to shares of been shares pay [

market. in We open the have not repurchased any shares

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heavy lighter guys, our control. as and heavyweight In the fraction around fact, about efficacy, than lightweight yet extraordinary clay as odor XX% litters a they're with particularly

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we to in truckloads entered and should growth, and primary a some see focus customers. do category. us we co-load especially this While products efficiency acquisition which our see to We that should benefit customers, synergies reduce with common important freight-intensive opportunity both on the further drive

leverage expenses. to also We expect selling and marketing

we will strong the really that see category However, of it's want I retailers I provided and with majority for. brand our the the hope opportunity and the that with do were drive to emphasize penetration fit growth this answers and presence you category that looking that that and value deal. I to combining your questions the of

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first the is of asks, any there last switching of given evidence more comes from litter? label inflation The investor. question consumers Ethan the couple He that private to individual are cat years, Star,

you answer please? Chris, that, can

Ethan. of private the yes. other manufacturer. answer, is, greatest showing Really, any litter answer The category, short it's a is across Yes. good gains label the The share

products due Okay. asks, sales domestically Great. Wealth from your And of animal flu elsewhere? comes outbreaks the Advisors. The John Ascend to are ongoing avian question adoption headwinds Bair any he or next you or of experiencing health of from

answer please? can you Wade, that,

that AI that Neither specifically, really it's which influenza, your the conditions was there just has you, question, as African which well, what A I a Excellent but avian called virus, Leslie, swine case not of been markets which of actually for part fever is of John. our is globally. products Thank one swine also is treatment ones address Yes. you, predominantly than are question, impacted and and Type other those thank no specifically would depopulation. in know the

So performance. of and of productivity animals bottom no, products adoption, product other our generally improved improve in terms than the line

side a opportunity, really So direct. but not

terms visit difficult In customer of a more customer And farms. depopulation animal to little it caused in made about company sales, AI, locations, Biosecurity of domestically it obviously does has farms. it which industry. sometimes headwinds million very XX is to outbreaks, important production with birds, like have already of the restrict our access

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Bruce?

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growth drive new So our business. help should and it about industry, the we're in excited

you. Great. Thank

competitors? was unfold? is the Bair. deal again catalyst for versus Next How of What question John from Ultra larger the family your join did the Oil-Dri any to Pet them

Chris, that, can please? you answer

Yes, the for us really John, a think good because bet. tell. you actually to I'm you asked story question it's excited I

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them I value ], list. and shines fit [ of our think through. saw the So proud on we all appreciated They -- top the way we rose of the of

The with making? from of progress potential Thank customers Amlan next is Amlan is question Great. How products are you. Star. trials What Ethan going?

that turn one Wade, I'm going to to over you.

months, kind even over I we've challenging last like the interest ag Thanks had Ethan, Leslie. again, products say customers and as we've of question. NutraPath XX seen of and bringing AmSure the Phylox markets for in our well. products, certainly, that out internationally, slowdown especially that we're Thanks, that Yes. though the would not new

all high in cycle world we've of is seen It's sales get the And field, customer continuing customers' the and takes activity. then products been commercial have of longer currently And trials what's on what good adoption each going interest. trials Animal degree time part with the to areas. in have customers, Health. generally we're entered We in of use It those positive response. to with excited we've that

John of Great. other competitors Are crystal The Are this -- Bair. type crystal litter product? next question there developing is manufacturers? from larger other

Chris?

Yes. John. Thanks, again,

subscription I give And with there. their independent rough model, a years, litter, with has really Fresh an PrettyLitter, was really if a on direct-to-consumer decade. will you Clorox fire. segment an which company brand crystal been So take, don't lit the a for over of that few mind kind online number in candidly started you Step or actually give a

think about they ago, growth consumer was interaction with X really digital a push big lit. lot see starting a reflected of lot what you years or with I that X a of and

that with is private growth, both label segment, And that to our And with growth. like, the a also unique is want the efficacy [ see Ralston much and with Tidy positioning segment. with Pride. branded like a which the ] has in perspective perspective, we value Cat great fantastic segment, the entered a Candidly, from lightweight Cat price brand aligned

the fuel big like the the are playing and growth guys guys of big the playing, we segment. So helping

Great.

is Our ROIC won't not, or cash this If if we is please discuss provide was evaluate the successful What the return if deal? expected McMahon. for acquisition? recent flow hurdle acquisition IRR EBITDA ROI rate, expectation next the estimates? we management should question from from Can how Sean this the

can Susan, you on comment that?

Actually, But Leslie, this. take Susan, me up with teed to details. Susan some I think I'm -- the of going

expect weighted few We're news our that make there one is equal the very responses we yes, X positive And a under is that side. existing in an excess already. X more basically customer X I in major are target cost number. put a of capital of from cost what average were model. lot synergies we what a So that opinion market we Crystals. this but one seeing And just our have the meets investment. And an XX% the And really, capital than of would to base, of criteria. seeing when is say on The in plus good is fact, always X%. It's IRR that's we

got well. has their but Ultra they the chain established kind of had some customers pretty And Pride supply very there, distribution They've so that combination in weak, out of where brands are very I Pet think powerful network they they're and some Cat strong. the holes been know and and we

thought more But are And it actually. a I should safe we to so But together, would harbor. from well be than doing pretty market have would well always pleased and receptivity. I work very anything, we if it say, the caution

balance Star. sheet much goodwill Ultra intangibles the from to The next were acquisition? is Ethan the question Great. with How Pet or added Oil-Dri

right? that, take to me want you Leslie, So

Yes.

you Sorry. take that? Can

we Absolutely. question. for it Thanks Ethan just acquired this Well, quarter.

of will -- do asking for So go process why asset an intensive through to is go But accounting. a engaged the question, have We've we valuations business the acquisition you're that's party -- we third Ethan. us. the the probably the through

this purchase not be until a we through a giving the I'm go number. good price amount expect But valuations, goodwill. to of We comfortable really definitive

that we when So our in in we next October. our more call, where are process call can we on update have

Thanks, Great. Susan.

bonuses Next Ultra McMahon. expectations? much from Pet's could based meeting of financial Sean How be management's on question is

that Dan, you one? I'll have answer

fiscal X/XX, for ends Sure, you. say Good would Sean. none And I question. 'XX, whatsoever. which Thank

But be this with are against out. plan. one the in day it all our it tracking synergies of market start will original the year. but We're side from team this budget would all X. on F in and immediately the planning expected cost is side, while numbers. We it 'XX And bonus the minor on the major really And accretive, keeping won't benefit get the fully

order ourselves the bonus it, have will good we accountable to confident Directors or hold in And exceed feeling so of to will Compensation 'XX. And those about we're we of will fiscal as but Board the Committee in achieve sure. a for meet

Okay.

are in no there the queue. other So questions

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the you So all have want close it questions to do answered. been out? Dan,

have August Pet optimistic. be And going Ultra -- to to passionate in not diesel. truly see I'm strongly And in. then the our always we're next X team best in all renewable doing very going come. sincerely in yet growth moving to I'm time, fiscal to is are about We've the I we believe the growth We're continued going we'll and the start business, Sure. The but see businesses This I'm believe optimistic. acquisition business, continue would core to there. health our year, animal well. and falsely

minerals, on. which a future raise $X.XX for investment creating we've focus sorbent and we quarter, be you year. increase years. dividend, a We that example minerals. And I've a in done over focus we our is, year, that we I this XX what in larger is straight run raised year, of a every we're and to June, to $X.XX business. a gave if it's the the confidence commitment usually the a usual $X.XX there times value it good quarter because it we that's $X.XX the because on. than as the in share time an hope what for further of the years, great there's actually our all for great for And you that's said XX If value no years. now from saw sorbent But should So numerous

feeling we're X acquisition we in cash. finance were good, we half to happy it able of equity were and So and the over with

a will Susan powder, And as in. it we again, disciplined. be hard look said, dry have But we the will hope deal certainly bring right still comes if a and it we of to along, and lot so give

next So look forward you to guys thank We'll talking the quarter. to soon you. after

participation today's your program. Thank you in conclude for does conference. the This

now great disconnect. day. may have a You Everyone,