Greetings, and welcome to the American Vanguard First Quarter 2024 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anthony Young, Director of Investor Relations. Thank you. You may begin.

Thank you, Jessie, and welcome, everyone, to American Vanguard's first quarter 2024 earnings review. Our speakers today will be our Chairman and CEO, Eric Wintemute; and our CFO, David Johnson. Also joining us to answer your questions will be our Chief Operating Officer, Bob Trogele; our Chief Information Officer, Tim Donnelly; and our Chief Transformation Officer, Don Gualdoni. Before beginning the presentation, let's take a moment for our cautionary reminder. The company from time to time may discuss forward-looking information. Except for the historical information contained in this release, all forward-looking statements are estimates by the company's management and are subject to various risks and uncertainties that may cause results to differ from management's current expectations. Such factors include weather conditions, changes in regulatory policy and other risks as detailed from time to time in the company's SEC reports and filings. All forward-looking statements, if any, in this release present the company's judgment as of the date of this release. With that, I will turn the call over to Eric.

Thank you, Anthony. Hello, everyone, and welcome to American Vanguard's first quarter 2024 earnings call. We appreciate your continued support and interest. As you will note from Slide 4, I will be covering 4 topics today. Our Q1 '24 financial performance, current market conditions, our '24 outlook and our transformation efforts. Moving to Slide 5 on Q1 performance. We recorded a 35% jump in adjusted EBITDA during the period. In addition, our operating income rose by 87%. This improvement in operating leverage is evidence that the cost control initiatives that we have started in the second half of '23 are having their desired effect. As I've mentioned in prior calls, our cross-functional teams remain focused on controlling expenses while maximizing operational efficiency. In that vein, we recorded lower operating expenses as a percent of net sales while increasing sales by 8%. Further, all 3 of our businesses grew during the quarter. Within our consolidated sales results, U.S. Crop was up 9%, U.S. Non-crop, 28% and International 2%. Now let's turn to our sales during Q1 as per Slide 6. In U.S. Crop, we experienced strong results across multiple crops. Sales of our granular soil insecticides rose, which is indicative of continued strong demand from corn growers. Further, we experienced strong sales of our liquid corn soil insecticide index. Similarly, herbicides rose during the period, due in part to Dacthal which was not available last year due to supply issues. Also, Thimet sales rose with demand driven by increased peanut acreage. These increases were partially offset by a drop in soil fumigant sales as wet conditions in the Northwest truncated the application window. Within U.S. Non-crop, our mosquito adulticide sales were up in anticipation of stronger-than-normal tropical storm activity. Also, our sales of pest strips were up significantly as consumer and technical markets recovered from the prior year. In addition, our ornamental and nursery business, OHP, recorded stronger sales led by its biorational and pre-emergent product lines. Our International business was up slightly at the top line led by Mexico, where most product lines grew and APAC aided by favorable weather conditions in Australia. Our LATAM business was about even for the quarter with the addition of sales from our recently acquired business in Ecuador, partially offset by generic pressure in Central America. All told then, all 3 of our businesses demonstrated improved performance and on a consolidated basis, we continue to grow. Before moving on to current market conditions and our '24 outlook and details on transformation, I would like to turn the call over to David for his financial analysis. David?

Thank you, Eric. I will begin my comments with a recap of our first quarter 2024 performance during the course of which I will present important metrics for the period and we'll close with comments on working capital. As you will see from Slide 8, our overall sales for the first 3 months of 2024 increased by about 8% from $125 million to $135 million for the reasons that Eric has already outlined. It is worth repeating here that all 3 of our businesses, U.S. Crop up 9%; U.S. Non-crop up 28%; and International up 2%, grew at the net sales line. Turning to Slide 9. While sales were up 8% overall, gross margin dollars improved by 10%, driven by stronger sales of some of our higher-margin insecticides and herbicides and the strong factory performance. Overall, price volume actions, mix of sales and factory performance resulted in gross margin that improved slightly from 30.8% to 31.4% of sales. As you can see on Slide 10, our operating expenses in the first quarter of 2024 edged up to $36.3 million from $35.3 million in the same period of 2023. This increase was driven primarily by our spending of $1.2 million on developing our digital and business transformation plans. We plan to spend more in the next few quarters to invest in the long-term future of our business by implementing initiatives to achieve substantial improvement in business performance. We will see some initial improvements in 2024 that are expected to be largely offset by transformation spending and then primarily benefiting 2025 earnings and beyond. In addition, we had increases in general and administrative expenses related to foreign exchange, audit costs, long-term and short-term incentive compensation and investments in initiatives to improve both our information technology systems and our human resources infrastructure. These…

Thank you, David. As per Slide 14, on news of an improving U.S. economy, the Fed seems to have shifted away from making interest rate hikes and is now debating whether to cut or hold those rates. In addition, the U.S. dollar has begun to strengthen over foreign currencies. While helping consumers with purchasing power over foreign-made goods, the strong dollar, when coupled with high grain inventory stocks has served to suppress commodity prices compared to 2023. Nevertheless, even as current corn and soybean prices at current levels, farming still remains a profitable business. Further, while still observing conservatism and buying crop inputs, our distribution partners have relaxed their stringent destocking approach from last year, at least with respect to our portfolio. In short, the farm economy is strong and we expect stable albeit more deliberate buying activity. The same is true of the non-crop market, where we are seeing further normalization of procurement patterns by retail and professional customers. Now let's turn to Slide 15 on our 2024 full year outlook. While market conditions remain stable, there's one factor involving our herbicide Dacthal that causes us to adjust our previous full year targets. In the course of routine registration review, US EPA has expressed concern over potential health issues of this product. Accordingly, out of abundance of caution, the company has voluntarily suspended sales of Dacthal and submitted a significantly narrow product label to the agency that we believe addresses their concerns. We have committed to maintaining that suspension of sales pending UPH review and potential approval of that new label. The outcome of the agency's review is uncertain at present, but we are factoring the loss of Dacthal sales into our '24 forecast numbers. Accordingly, our full year '24 targets are as follows: we expect next sales to…

[Operator Instructions] Our first question is coming from the line of Scott Fortune with ROTH MKM.

Just want to follow up regarding transformation strategy. Nice to see that that's starting to be implemented here. It looks like that will really come through for most of the year. But I heard you say in your comments that any cost savings for 2024 here will be offset by some of the expenses to that. So really kind of factoring in more of a 2025 to expect that that $15 million in efficiencies, '25, '26 going forward here. Just want a clarification on that from the operations standpoint?

Yes, Scott, that's true. So we do have cost to implement and go through this deep dive that we're going through an implementation right now. We hope to have -- we'll have some benefit certainly this year. But as I said, we're projecting that it will overshadow the amount of transformation. But as we go into '25, most of the heavy lifting will be done and we'll start seeing getting that $15 million of improved actual EBITDA.

Got it. That's helpful. And then just following up on your outlook. Obviously, bringing it down to the 6% to 9% from the 8% to 12% that sales side of it. Just kind of step us through, Dacthal was just getting back on the market from that standpoint. This kind of the size of that from a kind of a revenue standpoint that's driving that down a little bit? And are there other factors in that sales of 6% to 9% outside of Dacthal? And then just any color for timing from a historical standpoint kind of as you reregister this through the EPA, I know this is kind of unknown, but your sense of timing for Dacthal coming back on [indiscernible]?

So we submitted the revised label this week. It is a fairly restricted label. We expect EPA to respond fairly quickly. We've been in strong negotiations and discussions with EPA now for well over a year and we think we've kind of reached where we're going to be. And then we discussed pathways of additional information and data that would potentially let us get back at least some of the market that we're not going to have certainly in the short-term. So the timing of that, some pieces may be relatively quick, but others could be in that 1- to 3-year time line depending on the scope of the studies and then the timing for review. As far as scope, this is about a $15 million product. And we had about 1/3 of that in the first quarter. And so what we've done is we've just made the assumption we're not going to sell anything more for the balance of the year and we'll factor that -- we'll have a much clearer picture of what '25 is going to look like soon, certainly before we come up with '25 numbers. And if anything were to change for '24, we'd certainly adjust it. But at this point, we're not anticipating anything material here in the balance of the year. As far as...

Got it. Follow-up on that --

Sure.

-- as far as coming out of the registration process, does that position us even stronger to kind of be a bigger market for you? Or how do you look at that once you get through the process here for the competition and the opportunity for Dacthal?

Well, Dacthal was growing nicely for us. It's a very, very niche herbicide kind of for cold crops and onions. I don't think we see going back into the onion market with the cold crops. And so yes, we don't have any assurance that we're going to get back any significant amount of that. But we really have to kind of wait and see. Again, this has been a long process. We've been discussing with EPA, had a very good call this week, but we're waiting to hear back from them their assessment of what we just submitted.

Great. And then one last one for me. Any updates on kind of -- I know the growth kind of products for you, especially Green Solutions, we've seen a lot of generic pressure from China in that space, especially impacting Latin America. But the growth that you've seen for this year and expect in '24, can you kind of highlight the Green Solutions side and the ongoing product adoption from your standpoint?

Yes. So Green Solutions were up 14% this quarter. And most of the areas had growth. And so that seems to be going well. We have additional opportunities for product expansion as we continue to have companies coming to us and saying, "Hey, with your market access, would you kind of distribute this product and that product?" So a number of companies there. We did sign up on a precision plant, a protein called [ Herpen ] for the Chinese market. I'm not sure how big that will be. But this is a product that has been around for quite a while. I know had it at one time. But yes, we see nice growth in that segment as adoption for green products continues to build. So that's kind of the piece on Green Solutions.

Our next question is coming from the line of Chris Kapsch with Loop Capital Markets.

Yes. I have a couple. Just as a follow-up on the Dacthal discussion. Eric, if I remember correctly, was this the product that you mentioned you've been in discussions with the agency for over a year. If I remember correctly, that also manifested in disruption to your sourcing the AI for this particular product. And I thought that the outcome of that was that you came to a resolution. So it's a little surprising to hear this cautious stance in reregistration now. I'm just wondering what are the risks associated with getting this to a favorable outcome? And how are you managing that?

Yes. So 2 different issues. One was supply and we didn't have supply for a year. And so that we have resolved and we have actually 2 supply sources. So the supply side was certainly taken care of. On the reregistration process, a different path with EPA. And we're not necessarily in agreement on their assessment. But rather than push that further with them, we went as far as we think we can go for right now and we believe we've submitted a revised label that they should accept, but that will be certainly a reduction of the market that we've had. So as far as -- yes, the timing is kind of as I anticipated, we've got different stages of pieces that we would like to reinstate and first piece, as I mentioned, I think will be relatively short. The next 2 kind of run between 1 and 2 years and then maybe between 2 and 3. And I'm not sure that we're going to wind up doing all of it. We'll assess the market and as we get further information from EPA.

Got it. And the costs associated with these [indiscernible] studies and reregistrations, is that just sort of normal course of business and factored into your R&D spend, your normal R&D spend?

That's correct.

Got it. And then so just curious about this year's sort of the mood of the growers and the trends in the Midwest. And we came off of what was described related to another company I follow, as the most mild winter in like 25 years. And so sometimes when that happens, there's the infestation of the insects is greater. So I'm curious if you -- if there's any evidence that was the case for corn rootworm pressure this season? Are you seeing any indications that you could have an uptrend in demand for your [indiscernible] insecticides?

I'll let Bob add some color, but I'll just say in talking with my people, yes, there are wet conditions, particularly in -- so planting at this point is maybe in the 50% range with the south there, but there's large parts of the corn and soybean markets that have not been planted yet. So it is an extended period. But Bob, your color?

Yes. I would say, Chris, the mood has been very cautious by the growers in the Midwest in the U.S. I think there's been this past week, a little bit of a pickup in the July corn and soybean pricing, which people are locking into that and averaging out better if they're doing forward pricing and contracting. So the moves picked up. So I think there's more optimism out there. But you do have pockets right now where people were planting -- someone told me this morning, a grower told me, it was like April 16th, he had about 90% of his planting done. And since then, he hasn't been able to get back in the field because it's been wet. So 10% to go. That's a long window of not -- of stop and go. So it's a little bit of that, but that's novel for the ag markets, weather is weather.

With regard to the corn rootworm pressures. So Aztec, under some degree of counter in force, are primarily used in that heavier pressure corn rootworm area. We haven't really participated in the kind of mild to mid-corn rootworm pressure. But we have a new products that we put out a couple of years ago, but we just haven't had enough material. We make it internally, but demand has gone faster than we've been able to produce. But we had good production and sales in the first quarter up until -- I think we were up until April 17 to 18 or whatever we were selling product. And we're building inventory now for kind of the fourth quarter because we do have -- we did have a stronger demand than what we had supply. But we're thinking we can kind of dramatically increase. And this is, again, it's a liquid material. So it kind of competes with bifenthrin in that market. And so that's an upside for us going forward. Much more acreage covered are treated for a mild to medium corn rootworm pressure than heavy pressure.

All right. That's helpful. And then last question. So your herbicide impact is often used sort of to complement some of the workhorse broad-spectrum herbicides. And just curious like given what had happened with the global supply chain and the supply chains with glyphosate globally and the spike in those prices and sort of outside demand for alternative herbicides, I'm curious how that's played out now that sort of everything has kind of normalized in terms of pricing and availability and some of the cash from crop herbicides? And then how that affects your impact sales? And how does that play out in your guidance and expectations this year?

I mean, I think you recall that herbicides were kind of a [ glut ] that prices were high in '22 and came down in '23 and there was a high inventory and high price out there, seems to have improved. But if I look -- looking at larger peers, first quarter was not good for them. So I think there's probably still some hangover into that herbicide market. We don't have the kind of large bulk scale, although we do have impact with glufosinate as a product. And so yes, again, impact has been more a tank mix partner than a main horse. But it looks improved versus last year.

Is there any way to quantify that, the improvement? Like what's factored into your outlook on that particular product? And then I'll leave at that.

Yes. So we had -- we were up about -- yes, we were just about even to last year. I think we had good fourth quarter sales versus the prior year. It looks like we're about even in the first quarter. And then second quarter looks -- yes, second quarter looks considerably stronger than last year's second quarter.

[Operator Instructions] Our next question comes from the line of [ Andrew Lester ] with [ Harley Capital ].

If I'm reading it correctly, and forgive me if I'm off by this, 18 months ago or 24 months ago, you sounded very optimistic. You laid out some exciting time lines and information. And even in the last year or so again, you sounded very clear on ways to enhance value to board refreshers, all sorts of things that we are pointing to as milestones to lead to significantly better results. But when I listen to you today, you sound very tentative, equivocal and really uncertain and looking for really a more significant improvement without quantification for like a year from now. Is that a fair read? Have you become much more cautious about your prospects?

Well, I would say that we are pointing towards improvement with -- through the transformation process, but that has an expense of transforming now it's onetime expense. But yes, as we've mentioned before that we've grown through acquisitions of companies since 2017 and we did not get the benefit of incorporating those the way we wanted to and hampered certainly during COVID, but the process now is that we put underway is to get all the systems on the same page so that we can do better management and where we deploy working capital and improve the quality. And as I said, we're -- our target here, I think we're maybe 11.5% of EBITDA to sales. What we're looking through this transformation process is to improve that EBITDA margin to 15%.

If I look at things, this is a follow-up, on a sort of more mercenary basis as a shareholder, I'm probably down over 40% in the past year. How do you think or when do you expect things to translate into better equity performance?

Well, I think we're up a little over 14% so far this year. As we mentioned last year, we were hit with 2 supply issues that really hurt us. One was our biggest insecticide and the second was the supply of Dacthal that we mentioned. So we've improved the sourcing or the sourcing on both of those. We have ample material of Aztec going forward. And so that was really a hit to fourth quarter of '22 and certainly to the '23 and we were unable to meet demand. Supply-wise, we're in a different position and we're back to moving Aztec and now Index and Force and SmartChoice back up into the corn market. So I guess -- I mean, I look at what -- where our peers have been discussing. They forecasted downsides in Q1 and that turned out to be the case. We did have improvements in Q1. And so yes, we've made the forecast based upon the best that we can see at this point.

[Operator Instructions] Ladies and gentlemen, it appears we have no additional questions at this time. So I'd like to turn the floor back over to Mr. Wintemute for any additional closing remarks.

Okay. So thank you for -- all for listening in today. Slide updates as we have them, but I guess the next scheduled time would be our shareholders' meeting, which I believe is June 6 or 7. 6, yes. Okay. Thank you and have a good evening. Bye.

Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.