American Vanguard Corporation

continue to hold ladies and gentlemen your conference will begin momentarily please continue to hold thank you for your patience Thank you. Ladies and gentlemen please continue to hold your conference will begin in a few minutes apologies for the delay your conference will begin in a few minutes please continue to hold thank you for your patience We'll be right back. Thank you. Greetings. Welcome to the American Vanguard fourth quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Anthony Young, Director of Investor Relations. You may begin.

Thank you, operator. Good afternoon, and welcome to American Vanguard's full year 2025 earnings review. Our prepared remarks will be led by Dak Key, Chief Executive Officer, and David Johnson, Chief Financial Officer. After the prepared remarks, we will open up the call for questions. A copy of today's press release, along with supplemental slides, are available on our website. A replay of webcasts and a transcript from the event will be made available on our website shortly after the call. Before we begin our presentation, we would like to remind everyone that today's press release and certain comments on the call include non-GAAP figures and forward-looking statements, and actual results may differ materially from these forecasts. Please refer to the cautionary language included in our press release and slides and to the risk factors described in our SEC filings all of which are available on our website. It is now my pleasure to turn the call over to CEO Dak Kay.

Thank you, Anthony, and welcome, everyone, to our fourth quarter 2025 earnings conference call. While 2025 was a challenging year for the agricultural sector, I am pleased with the progress that has been made at American Vanguard. We have executed on our business, operational, digital, and organizational initiatives We have hired quality, experienced colleagues. We have improved our safety metrics across the board. We have focused our team on developing new products while reducing manufacturing and operating costs. These improvements have positively impacted 2025's results, but more importantly, we are positioning the company for long-term success. Additionally, for over a year now, the team has been focused on finding a capital structure that will allow us to pay down our expiring credit facility while providing the maximum amount of financial flexibility for future growth. We believe that we have found the right solution through two term loans, one from Centerbridge Partners and one from the existing BMO-led syndicate. The full details of these term loans can be found in our SEC filing. While we are paying a higher interest rate on average than our previous revolving credit facility, we now have a significant runway to further improve our operations and show the investment community that the higher earnings power that I believe are possible. Furthermore, the team is now solely focused on running the business and delivering the sales and margins we expect. As we look to position the company for the future, We have made the decision to rationalize the Los Angeles manufacturing facility. The LA plant is the company's oldest facility and is no longer competitive in the current environment. We thank the American Vanguard team members at this location for their outstanding service and dedication to running a safe facility over the years of operation. We plan to help many of them pursue the next steps in their careers But in order for the broader company to remain competitive, it was necessary to take this very difficult step. This rationalization will save the company at least $4 million annually. As we move additional volumes through our Access Alabama site, we expect to improve utilization there, which will also improve our cost absorption and ultimately our profitability. As we have previously announced, the company will be moving its global headquarters from Newport Beach to a smaller, more cost-effective space in Irvine, California. We estimate this move will save the company approximately a half a million dollars annually and will allow our corporate team to be in a more collaborative, modern office environment. We expect the rationalization of the LA facility and the headquarters relocation to both be complete by the end of the second quarter of this year. These are two significant milestones for us, but not the last, as we will continually work to improve the cost structure of the company. Turning to the 2025 results, the company generated $39.2 million of adjusted EBITDA, which was slightly better than we generated in the previous year. Sluggish sales in the fourth quarter prevented the company from achieving our adjusted EBITDA target of $40 to $44 million. That said, we were successful in cutting more costs than we initially estimated and completed a joint development agreement that partially offset the lower sales. The supply chain and logistics team that we hired last year continues to find ways to decrease our material costs and also has improved our warehousing and freight expenses. We attained these improvements even before the implementation of our new software systems that are expected to be fully rolled out later this year, which should allow us to further decrease our inventory and raw material costs. I expect our inventory turns to increase in 2026 and thereafter as we work to get inventory turns to a goal of two and a quarter. Not only will this have a positive impact on our gross profit, but I also expect that it will decrease the amount of working capital required to operate the business. Cost containment has been a top priority, but it is also important to highlight that there is a growth story at American Vanguard. As I've stated in previous conference calls, I was surprised where the development portfolio was when I joined the company. We have subsequently taken steps to improve in this area, while at the same time keeping a watchful eye on our R&D expenses. We have a chart included in our presentation that reflects the new focus on product development. We have already launched one new product in 2026, Duro LQ, and we expect to launch five new products in North America in total this year. We have a slate of new registrations internationally as well. As we expand the registration footprint and extend the lifetime of our products in multiple jurisdictions, we expect to register at least 25 new products in North America by 2031. New products typically have a higher margin contribution than the existing portfolio, so bringing these new products to market will have a positive impact on revenue and our margin profile. Bottom line, we estimate that we can generate at least an additional $100 million of annual revenue globally over the medium term from new products that are under various stages of development. In addition to new products, we also plan to be even more responsive to our customers' needs. I believe we can drive more volume through our factories by doing a better job of listening to our customers. This was part of the reason while we appointed a new chief commercial officer, Mike DiPaola. Mike brings 30 years of ag experience, enthusiasm, and aggressiveness to our commercial operation that has been missing. As we increase our factory utilization, we can spread our fixed costs over more units, improving our profitability. I will now address what we have been observing in the broader agricultural economy. The industry has yet to recover from a downturn that started in 2023. While agricultural commodities are recovering from the low levels that were experienced during the summer of 2025, they remain well below industry observers consider to be historically normal levels. The worst of the industry to stocking does appear to be in the past, but distributors have shown no inclination to restock their inventories. Farmer liquidity is a concern after several years of depressed commodity prices. Both cotton and corn acreage are forecasted to be slightly down, while soybean acreage is forecasted to increase. All in all, industry observers are forecasting a relatively stable year with respect to planted acreage. We would note that growers are making more last-minute crop decisions than ever before, and geopolitical issues are weighing heavily on those decisions. There are some green shoots as the farmer support payments seem to be rolling out. Higher oil prices tend to drive up demand for biofuels that utilize both corn and soybean. Further higher oil prices increased synthetic fabric costs, leading to greater demand for cotton. Before I provide our 2026 targets, I would like to highlight an issue that impacted our company's financial performance. Typically, American Vanguard collects a significant amount of cash in the fourth quarter from our customers. We have historically referred to this industry dynamic as prepay. This is an industry-wide strategy that most of our customers and our competitors utilize. Due to the financial strain that one of our competitors was under, the channel pulled back from prepaid programs across the market. This has led to an increase in our nominal debt levels year over year, as we typically allocate this capital to paying down debt at year end. David will have more on this in his prepared remarks. As we wait for an improvement in the agricultural economy, our business improvement plan should allow us to improve adjusted EBITDA as compared to 2025. We expect to generate adjusted EBITDA of 44 to 48 million in 2026 on sales of 530 to 550 million. We are excited about the prospect of better performance in the coming years as we continually launch new products. We believe future earnings power is substantially higher and will allow the company to pay down its debt and make investments in areas which will lead to long-term growth. I'll now turn the call over to our CFO, David Johnson.