American Vanguard Corporation

Ladies and gentlemen, and welcome to the American Vanguard Corporation first quarter 2022 conference call and webcast. All lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Bill Kuser, Director of Investor Relations. Sir, the floor is yours.

Well, thank you very much, Kat, and welcome, everyone, to American Vanguard's first quarter 2022 earnings review. Our speakers today will be Mr. Eric Wintermute, Chairman and CEO of American Vanguard, Mr. David Johnson, the company's Chief Financial Officer, and also to insist in answering your questions, Mr. Bob Tregell, the company's chief operating officer. Before beginning, let's take a moment for our usual cautionary reminder on slide two. In today's call, the company may discuss forward-looking information. Such information and statements are based on estimates and assumptions by the company's management and are subject to various risks and uncertainties that may cause actual results to differ from management's current expectations. Such factors can include weather conditions, changes in regulatory policy, competitive pressures, and various other risks as detailed in the company's SEC reports and filings. All forward-looking information represents the company's best judgment. As to the date of this call, such information will not necessarily be updated by the company. Now we'll go to slide three. There's a further comment to be made today regarding the pending proxy solicitation. Part of the information set forth in this presentation today refers to our annual meeting of shareholders, which is scheduled to occur on June 1st, 2022, using a virtual meeting format. As indicated in detail on slide three, you will see that stockholders may obtain information regarding the proxy by referring to the company's annual report, Form 10-K, which was filed with the SEC for the last fiscal year, and which that was filed, excuse me, on March 14th of this year. Or you can refer to the definitive proxy statement, which was filed with the SEC last Friday, April 29th. Any information Information updates that occur during the POPSI solicitation period will be filed with the SEC, and shareholders can find such information by referring to the SEC's website. So with all that said, I'll turn the call over to Eric.

Thank you, Bill. Advancing Part 4. Just I will begin with some opening remarks. We'll turn it over to David who will give further update on the quarter and the financial review. I'll come back and talk about our growth initiatives and then some concluding remarks after that. So moving on to slide five. These are the performance targets that we gave you on our last conference call. And what I'd like to do is just do our Q1 scorecard versus these performance targets. So first on revenue growth, we said 8% to 11%. In our Q1, we've actually increased by 29%, so well outpacing our target. Our gross profit margins we said would be somewhere in the 38% to 40% for the year, and we're actually running ahead of that at 41%. I'll comment a little bit more on that later, as will David. Operating expenses as a percent of sales, we try to move that down as we get more leverage and increase. We put a target of the 31% to 33%. We actually did come in at 31% of sales. Our interest expense, we said we expect to be similar to 21. Actually, we're running at 58% below for the first quarter. Our tax rate, we expect to wind up in the mid 20% range. We're actually at 31% for the first quarter, which is similar to what we did in first quarter last year. We are expecting overall to be somewhere in that 27% tax rate for the year. Our debt to EBITDA target was less than 0.1 at year end, 22 without acquisitions, less than 2.5 with acquisitions. Of course, that will vary depending on the size of the acquisitions during the course of the year. But right now, we're at 1.25 times our EBITDA. And we would expect... increase as we ramp up to service this calendar year. Net income, we had some lofty goals for the year of 60% to 70% increase. We're actually in the first quarter up 224%. So again, very well on our way. And what we didn't talk about last time was EBITDA. Last year, we just forecasted growth faster than revenue. And for the first quarter, we're actually at 65% increase over 21. So with that, let me switch over to slide six. I've hit this, topic hard at our Q3 and our Q4 year-end statement. I do think it's critical. I see the performance of a number of companies, and again, those companies that can perform well in these inflationary supply-restrained times are going to perform well. Those that don't are going to have difficulty, and I think we're seeing that. So five bullet points that we said that we're focusing on. One, adding new sources for critical raw materials. We've identified those raw materials that are the most challenging. We have picked up additional supply sources. And at this point, we appear to be covered for the balance of the year. We've seen little details of adjuvants bottles, caps, labels, all kinds of pieces. But one of the things that we talked about is placing orders well in advance. Just in time, ordering doesn't work anymore. We're placing orders through the balance of this year for what our factories are going to need and what we need for sales. We make adjustments as needed, but that's kind of a critical point to give our suppliers as much lead time as possible. forecasting our cost of goods on a rolling 12-month period. Yeah, this is working well. This is a transition for us. We had not done this kind of work on a monthly or sometimes even weekly basis to update our cost of goods by SKU. But with that, we have been able to communicate well to our global marketing team. And as such, they were able to kind of reflect price increases. We also had a freight surcharge in the U.S. at 2%. And overall, this is a key factor on how we were able not only to preserve margins, but to improve margins in our first quarter. And lastly, meeting with our factories on weekly or more basis. We have six factories in North America. Some are very... strained in supply. It's taking a lot of coordination. We are increasing factory output, which is great. Our team is working very, very hard, and we have a significant number of orders that are backordered, but we so far are able to stay ahead of the actual use periods, and it's taking coordination, but we're very, very pleased that we've been able to meet these extraordinary demands so far. Okay, so David, moving on to slide seven, you want an update on the finances.