Oil-Dri Corporation Of America

Good morning, and welcome to Oil Dry Corporation of America's 2024 Annual Meeting of Stockholders. My name is Leslie Garber, and I am the Director of Investor Relations at Oil Dry. Similar to last year, we are conducting this meeting virtually via live webcast, a format which enables U.S. stockholders to attend and participate fully and equally, improves efficiency, and increases our ability to communicate effectively and engage with our stockholders, and overall reduces costs. On your screen under meeting materials, you will find the meeting agenda, rules of conduct, the list of stockholders of record, oil drives proxy materials, and annual report. During the meeting today, we will be covering the election of directors and two other proposals, followed by business presentations and a financial review, and lastly, time for Q&A. We ask that you submit your questions online under the ask a question field on your screen. Only stockholders of record are able to ask questions during the meeting. Stockholders will also be able to vote online by clicking on the Vote Here button on your screen. Now it is my pleasure to introduce Anthony W. Parker, our Vice President, General Counsel, and Secretary. He will conduct the formal portion of today's meeting.

Good morning, ladies and gentlemen. I now call to order the 2024 Annual Meeting of Stockholders of Oil Dry Corporation of America to conduct the formal business set forth in the Notice of Meeting and Proxy Statement. Commencing on October 29th, 2024, a notice regarding the availability of proxy materials or a copy of the proxy materials was mailed to all Oil Dry stockholders of record as of the close of business on October 14th, 2024, which is the record date fixed by Oil Dry's Board of Directors for the determination of stockholders entitled to notice of and to vote at this meeting. Broadridge Financial Solutions, Inc. has delivered an affidavit confirming the foregoing. Oil Dry has appointed Richard Kretz of Hagberg Associates LLC to serve as the inspector of election for this meeting. He is present on the webcast and has taken the oath of office. As of October 14th, 2024, the record date for this meeting, there were 5,134,478 shares of Oil Dry's common stock and 2,155,000 407 shares of oil dries class B stock outstanding holders of our common stock are entitled to one vote per share and holders of our class B stock are entitled to ten votes per share and generally vote together without regard to class with the exception of proposal number three the approval of an amendment to the certificate of incorporation to increase the number of authorized shares of common stock in which in addition to the general voting practice Holders of our common stock will vote separately as a class as required by oil dry certificate of incorporation. A quorum is present at this meeting if holders of a majority of our capital stock outstanding are present in person or represented by proxy. Thus, the number of votes necessary to constitute a quorum at this meeting is 13,344,275 votes. Mr. Kretz has informed me that there are more than such number of votes represented at this meeting. Therefore, I declare this a quorum present for the purposes of transacting business. Now I will present the matters to be voted upon, each of which is described in the proxy statement. If any stockholder would like to make a comment regarding any of the proposals, please submit your comment through the Ask a Question field in the web portal, and we will review any comments on the proposals themselves. after all proposals have been presented. The first item of business is the election of nine directors. The proxy statement listed Oil Dry's nominees for director, each of whom currently serves as a director of the company. Those nominees are Daniel S. Jaffe, Alan Blair Chubb, Paul M. Hinesley, Michael A. Nemeroff, George C. Roth, Amy L. Ryan, Patricia J. Shmita, Alan H. Selig, and Lawrence E. Wachow. The second item of business is the ratification of the appointment of Grant Thornton as OilDry's independent auditor for the fiscal year ending July 31st, 2025. The audit committee of the Board of Directors of OilDry has appointed Grant Thornton to serve as the company's independent auditor for fiscal year 2025 and has directed that the appointment be submitted for ratification by the stockholders at this meeting. The third item of business is the approval of an amendment to our Certificate of Incorporation to increase the number of authorized shares of common stock from 15 million to 30 million in order to implement a two-for-one stock split of our common stock and Class B stock in the form of a stock dividend. At this time, we will check for review of any comments on the proposals that have been submitted. It looks like no comments have been received, so we will proceed with opening the polls. It is 9.35 a.m. on December 11, 2024, and the polls are now open. Any stockholder who hasn't yet voted or who wishes to change their vote may do so by clicking on the Vote Here button on your screen. Stockholders who have sent in proxies or voted via telephone or internet and who do not want to change their vote do not need to take any further action. While we allow time for stockholders who haven't already done so to complete their voting, I'd like to remind you that the business presentations and any other commentary by any of Oil Dry's employees, who we refer to as teammates, today may contain forward-looking statements of expected future performance. Any such forward-looking statements are subject to certain risks, uncertainties, and assumptions that could cause actual results to differ materially. We highlight a number of important risk factors that may affect our future performance and our SEC filings, including our annual report for the fiscal year ended July 31st, 2024. We urge you to review and consider those risk factors carefully in evaluating the company's comments and evaluating any investment in oil dry stock. Copies of our SEC filings are available through the company or online. All right, one last pause to finish voting. Okay, at this point, the polls are closed, and I will now report the preliminary results of the voting provided by the Inspector of Election. We will be reporting the final vote results in a Form 8-K to be filed within four business days. As described in the proxy, a director may only be elected by a plurality of votes cast. The nine nominees who receive the largest number of votes will be elected. We have been informed by the Inspector of Election that the preliminary vote report shows that the nine candidates nominated by Oil Dry, received the largest number of votes. Regarding the second item of business, an affirmative majority of the votes represented at this meeting is necessary for ratification of the appointment of Grant Thornton as Oil Dry's independent auditor for the fiscal year ending July 31st, 2025. We have been informed by the Inspector of Election that the preliminary vote reports that such ratification received more than a majority of the votes represented at this meeting. Regarding the third item of business, the approval of a majority of the votes entitled to be cast by the holders of our outstanding common stock voting separately as a class in addition to the approval of a majority of the votes entitled to be cast by the holders of our outstanding common stock and class B stock voting together as a single class is necessary to approve the amendment to our certificate of incorporation to increase the number of authorized shares of common stock. We have been informed by the inspector of election that the preliminary vote report shows that such proposal received approval of more than a majority of the votes entitled to be cast by the holders of our outstanding common stock voting separately as a class in addition to approval of more than a majority of the votes entitled to be cast by the holders of our outstanding common stock and Class B stock voting together as a single class. This concludes the business to be conducted at this meeting. There being no further business to come before the meeting, the 2024 Annual Meeting of Stockholders of Oil Dry Corporation of America is now adjourned. I am now happy to introduce Dan Jaffe, our President and Chief Executive Officer for our business presentation and financial review.

Thank you, Tony, and welcome, everybody, to the presentation portion of our annual meeting. You'll be hearing from several teammates, and then also we'll be happy to respond to questions of things we don't cover in the formal presentations. As always, I'm always happy to emphasize that an investment in oil dry is very much an investment in our people. and obviously our strategies. And so I like to cover new vice presidents and senior leadership promotions that happened since the last annual meeting and put them in alphabetical order. So we'll start with Tom Adeo. Tom is our vice president of consumer division, product development and commercial. He joined us with the UltraPet acquisition. You can see he's only been with us seven months as that deal closed May 1st, but 18 years with UltraPet. Twenty-six years with Kroger, Target, and Bilo, he comes with a wealth of consumer package experience and received his undergraduate degree from Georgia. So, Tom, welcome to the team. We're very happy to have you be part of our senior leadership team. Also during the year, Don McAllister joined us. He is our Vice President of Sales for the Consumer Grocery Division. He oversees all of our grocery, pet, club channels, and then internal business planning strategy and integration. He spent 23 years with the Clorox Company, most recently a Senior Director for Sales Capabilities, but he's been involved in club, channel, supply chain. He also spent three years with Walmart, and you can see his educational experience has been with the University of Arkansas, both undergrad and MBA, and we're very happy to have Don on the team. Tony Parker, you heard from Tony, and he was promoted during the year. to become our general counsel, vice president, general counsel, and secretary. He has oversight of all of our legal affairs in the company. He's been with Oil Dry six years. Education, he received his law degree from Northern Illinois, undergrad from Wisconsin-Madison, and love to know he was an Evans Scholar recipient as part of their caddy program, which is very cool, and I encourage everyone to take a look at that program. They do a lot of good things. I've become a donor. Next, Deems Southard, VP and General Manager, Industrial Automotive and Sports Division. He's been with us 24 years. He's worked his way up from regional sales manager to national sales manager and was being groomed for when Curtis Wellburn, our longtime VP and GM, retired. Deems stepped in and took over the baton. He's doing a great job. He's got his BA from North Carolina Charlotte. And he has had promotions underneath him, and the team has really rallied around and is doing great things. And last but not least, Jose Torres. He has oversight of all of our treasury and financial planning and analysis. He's been with us a year. He spent 24 years with AT&T and DirecTV Latin America. And you can see six years with Quintana and Lewis, two years with Arthur Anderson, and and a degree from Baylor University in accounting. He's a CPA and a chartered financial analyst. And we're very happy to have Jose leading our treasury and FP&A functions. So those are the teammates who moved into senior roles during the year. I would now like to turn it over to Susan Cray, our chief financial officer and chief information officer. And this came through in one of the comments, but I'd like to highlight it here. She is also the CFO of the year. for Chicago for MidCap Public Companies. It was a very exciting event, and as she always says, it's a recognition of the whole team and her leadership there. But we are very proud to have Susan be that recipient and be our leader. So Susan, you're up.

Thanks, Dan. And it is the whole team, and these financial results also reflect the strategy execution and the efforts of the whole team. So, and Dan, feel free to jump in and add color. I'm going to just go over a few highlights, and then we'll go through a bunch of bar charts that show a really nice trajectory as we continue to benefit from the execution of the strategies that we've laid out for you. So the highlights include, you know, continuing to set records in terms of net sales, gross profit, net income. We did so in fiscal 2023. We did so in fiscal 2024, and the first quarter of Fiscal 2025, which we released after the close of market on Monday, continues to show strong results. We also, during fiscal 2024, completed the largest acquisition in oil drive history with the acquisition of Ultra Pet Company. And you'll get to hear some more about that when Chris Lampson goes through the business update. It's been very exciting. And speaking of other exciting business initiatives, Bruce Pacey will walk us through the significant growth in fluids purification, where we definitely have a tailwind from the renewable diesel business. And part of all the success is sharing it with you as the shareholders. So we did double our dividend increase from $0.04 per share to $0.08 per share, and that's prior to the stock split. And we'll talk about the stock split a little later. And in order to keep some capacity in case there were any other opportunistic acquisitions for us, we actually upsized our revolving credit facility from $45 million to $75 million to make sure that if something comes up, we are ready to go. We also integrated the Ultra Pet acquisition into our ERP during the quarter. We made that cutover on October 1st. And the integration is going very, very well. So lots of good news coming out of oil dry. Now, if we take a look at some of our principal products, we'll start here with the retail and wholesale. You can see the growth in the catheter business. You see a nice trend there. And if we take a look over at fluids or at the B2B side, I do want to point out the growth in fluids purification, because one of the things you may have noticed in the first quarter was the strong gross profit performance. Well, this is a high value-added business, so as this becomes a bigger part of our portfolio, we see the upswing in gross profit, and that is certainly part of the strategy, and Bruce and his team are executing well. The other thing I would point out on this slide because it also helped to drive first quarter performance, is in agriculture and horticultural products. You see that the growth has been... You see that last year... How do I say this? Our customers built inventory two years ago, and they still had some to work through last year. So you see the movement. from 22 to 23 up significantly and a little drawback in fiscal 24. And as we moved into the first quarter of fiscal 25, it seems they have worked through those inventories and that business is back and it's strong and it's growing and it is also a high value added business. So also contributing to the performance improvement in gross profit in the first quarter.

Hey Susan, go back. I would add one thing on the animal health side, which was a year ago in the first quarter, fiscal 23 we made the decision to no longer be a direct entity into China but work through a distributor and we transferred all that inventory over to that party they're doing great and they're working it out but that transfer occurred a year ago in the first quarter and it really had nothing to do with the first quarter per se maybe a quarter of it did but not the whole thing and so I can just tell you that the animal health and nutrition division did the way I look at it, like same store sales like they do in retail, had a very strong first quarter, which was great.

Absolutely. All right, so there you see the nice five-year trend. And as we continue on, you see the strong net sales, record net sales here in the first quarter of fiscal 25. And you'll get to hear more about those stories when Chris and Bruce share their business updates. What was driving it? Well, You see the pricing, but there's also significant in that. So actually volume was down a bit, and this is the year-over-year from 23 to 24, and we pointed to the agricultural a minute ago. And then you see the uptick from the successful acquisition of UltraPet, which occurred on May 1st. So we don't have a full year in fiscal 24, but we will have that in fiscal 25, and that continues to do well. This is one of my favorite slides to talk about, and it's the tons sold. And you can see that they peaked in the last five years in fiscal 2022. And that's in line with when we really started talking about something inside oil dry called Moneyball. So it's Moneyball for a mining company, and really focusing on products that add value and actually peeling some of the things out of the portfolio that are not profitable. So you see the volumes moving down, but you saw the results, right? So tons sold going down over that period of time, and net sales per ton going up. So that's the focus on improving the mix, and you see that that continues into fiscal 25, where our net sales per ton have risen to $594 per ton. And again, that's being influenced not only by the focus on, we talked a minute ago about the strong first quarter in agricultural products and the strong first quarter in fluids purification, but also the focus over in the cat litter business as well. So lots of good stories, and they've all been part of the strategies that we've been sharing with you. And you see that falling through to gross profit per ton, doing very, very well, not only the improvement in mix, the additional sales in our high-value added products, but we also had a strong, and we'll bring in the first quarter, we also had a very strong quarter here in Q1 because the volumes were very high in our plants, and then we end up realizing production efficiencies based on those high volumes. So a lot of things going very well for oil dry during the first quarter, which then you see the improvements in the gross margin.

Hey, and Susan, dovetailing on that, I hope everyone got the chance to read my president's letter in the annual report. If not, I encourage you to do so because I highlight exactly what Susan was talking about, which is our supply chain, which really helped us deliver. You know, we sell a daily reusable. So when we put on an account, if we do it well, if the product's in spec, on time, and invoiced correctly, the quality is there, service is there, they reward us with another order. And you can see they're continually rewarding us because we take that part of our business very seriously, so much so that our global sales meeting where we have almost 200 teammates there, only about 40 of them are direct salespeople who have direct customer contact, but the other 160 are in the supply chain. And we actually give out sales awards to our supply chain because these people helped us get those repeat orders. So we always say the first order is the sales team, but two through infinity is the supply chain. And they're really working well together. So hats off to the entire team there.

Yeah, great. So we see the benefit flowing through to net income. I like this chart, the earnings before interest taxes, depreciation, and amortization. tells a really good story for oil drag coming out of the time period when we've really been focusing on Miney Ball. And you see another strong measure here for the first quarter. This is a non-GAAP measure, so for those of you who love the details, we've put the reconciliation back to the GAAP financial statement measurements in the appendix for you. And earnings per common share, you see the continued growth and strong performance there as well.

And I do want to make a comment that I've made, go back, you know, publicly before, but it's very important for the investment community. Look, I have been at the president, this is now my 30th year, which is ridiculous. So I was the president in 20 and 21 and 22 when things were going south and happened to be the president too when 23 and 24 came. The big difference is the team. It really is. I haven't changed that much. But we've implemented SNOP. We have integrated business planning. We have forecasting. The team works together very well to make sure that we meet or exceed our customers' expectations. And you're seeing it in the numbers. So this is just my time to thank the team and let the investors know that's really what's driving the results here. It's our global team of almost 1,000 people pulling together and playing miney ball and delivering value every day.

We definitely are seeing the benefit of that, and so are the shareholders, speaking of benefit, and we continue to focus on our dividends.

And 21 years in a row of increases. Did I steal your thunder?

No, no. I love it when you do the color. All right, good. Another look at the business, and this is really the capital allocation and how do we think about it. Note that in fiscal 24, there was a significant investment, as we've mentioned, in an acquisition. that we funded partially in cash, partially in debt that had a variable rate, and partially in debt that had a fixed rate. And we'll talk about that in just a minute. So you see the debt going up, and yes, we took on $20 million in debt to help fund that, and the rest had come out of cash. And here's a good story. Our first quarter was very, very strong, as we've talked about, and we were able to pay down $5 million of the variable rate debt that we used to fund that acquisition. That was one of our uses of cash here in the first quarter. And so we can take a look at net debt. And free cash flow, these are all related, but still very, very strong. And we have a lot of ability to fund our capital. I believe Aaron has a slide in his deck, teeing him up a little bit, that shows that as our business has grown, we continue to use cash to support that growth and replace aged infrastructure. And obviously with the performance of the business, we can do that easily here. Share price, this one's already outdated, right? the share price was I think about $80 at the close of March. $84.49 right now. Good market acceptance of our first quarter results. And part that comes with that is we are no longer considered a small reporting company for SEC purposes, which means you will see more disclosures in our filings going forward. Both our our 10Qs, our 10Ks, and our proxy. So that's a good one. And then I'll just close with a few things here. You guys can read, but we do continue to invest in our manufacturing infrastructure, as well as make investments to help improve cost and operational efficiencies. We are seeing the synergies that we expected begin to unlock with the UltraPET acquisition. And Dan mentioned earlier, and Tony, of course, read that vote, we will implement a two-for-one stock split. The record date will be December 20th, and we will trade on a post-split basis beginning January 6th.

And thank your shareholders for supporting that, because as we mentioned, the B side, we all voted for that was going to happen. The common side voted independently, and it came in. overwhelmingly in favor of the split. So thank you for supporting that initiative.

And with that, I'm going to turn it over to Aaron Christensen, our Vice President of Operations.

Thank you, Susan. That is going to be a very tough act to follow. And thank you, Dan, for some kind words of recognition in advance. I am Aaron Christensen, the VP of Operations here at LoveDry. I have the pleasure of getting to lead our supply chain and operations functions. Today, I'm going to spend some time discussing our strong service results here at AllDrive, as well as revisiting our ongoing capital investments in our infrastructure. At AllDrive, our mindset regarding customer service is stated very clearly in our lessons learned doctrine. Great customer service leads to customer loyalty. Strong service results, or what I would consider world-class service results and performance, has become a part of who we are and what we all strive for every day. is the foundation for everything that we do in the supply chain, and often is the motivating factor to drive operating performance improvement. But what does strong service mean? How do we measure service results? I will reference two primary common industry metrics, those being case fill rate percentage and on-time arrival percentage. Case fill rate is a measure of pallet shift relative to pallet's order. Order on time is a measure of percent of orders that arrive on time. We commonly have a 24 to 48-hour window for orders to arrive. Being early, late, or missed entirely will negatively impact this measure. So how does oil dry measure up against industry, and what do our customers expect?

Let's see.

Over the past 10 quarters, oil dry has exceeded the highest customer expectation of 98% for fill rate, and we are now regularly performing at 99.7%. And aside here, that high-level fill rate brings freight cost compression, improves cost structure with customers, and as Dan alluded to, puts us in a strong position to get repeat business with customers and consumers. That means that across the many thousands of items that we sell, we miss only one in every 300 pallets ordered. For on-time percentage, Oil Dry is now operating above 90% for seven quarters in a row, exceeding our most demanding customer requirements consistently. Industry averages vary by category, but are commonly reported to be in the high 80s. Oil Dry has consistently performed above market as we have risen out of the post-pandemic global supply chain challenges.

Many of you may be asking, how has this been achieved and can it be sustained?

Strong service performance is a result of careful planning and execution. It is not an accident. I'll reference some things that both Dan and Susan talked to earlier. It starts with a strong forecast and planning approach. Dan alluded to investment in SNOP, our modernized ERP tool many years ago. I need to give credit to our commercial organizations that are committed to delivering improved forecasting which allows the supply chain to have a better and more consistent plan to execute against. Earlier, Susan referenced the use of cash over the past few years and the addition of working capital. Deliberate and thoughtful application of inventory of finished goods and materials is also a piece of the puzzle. The right inventory at the right time supports our service results. Strategic deployment of CapEx to improve operating performance and improve reliability also contribute to these results. Possibly most importantly, the right attitude of our team makes all the difference. Let's pivot and spend a few minutes revisiting capital expenses that Susan presented earlier. A reminder that OilDry is committed to a sustained approach to reinvest back into our infrastructure. Fiscal 24 continued that commitment, and we expect to stay diligent in Fiscal 25 and beyond.

These investments are very broad in nature.

Savings, capacity, flexibility, infrastructure, safety, and environmental. I'll share a few examples here shortly. Our facilities and our mines are our past, present, and future. We are committed to treating them as such. Our outlook for the future is always our priority. I'll quickly revisit an investment I've spoken about for several years. The timing of this could not possibly be more freakish. We are starting up at 10 a.m. Central Standard Time on this investment, literally right now. My watch says 10 o'clock. That's what was reported to me this morning. Kind of fun to get to talk to that live with our investors about. This investment has been in planning for several years. and provides flexibility and capacity for our traditional AgZord products, which serve as carriers sold through business-to-business channels. This also serves as a major overhaul and modernization of one of our most complex mill operations, providing for a modern work environment for our teammates. I plan to get a live update later today as we have a team of engineers and operating professionals who have been hard at work and planning for several years and in major construction over the last several weeks. In a brief minute, you will hear from Bruce Patsy, the general manager of our fluids purification business. Earlier, Susan showed you the multi-year both sales and that income trajectory for Bruce's business. Over the past several years, we've completed a series of investments to address constraints in the operation and supports Bruce's piece of commercial business. This round of work was completed this past summer and is now fully operational. It is important to take a moment to remind the audience that not everything we spend capital on is exciting. Several of our plants are in the midst of major overhaul of our power distribution infrastructure. Stable power in a plant is analogous to a healthy heart for the human body. When the heart is healthy, the body is healthy. I'll close with taking a moment to thank and recognize the 700 oil dry supply chain teammates that serve our customers every day. And as Dan mentioned earlier, Our job is to deliver order two through infinity. I'm lucky enough to get to represent them here today, and for that, I'm grateful. With that, I will hand it over to Mr. Patsy.

Thank you for your time.

Thanks, Aaron. You and your team have done an incredible job for our flues purification team.

With that, I'd like to talk a little bit about our business. We have three major areas that we focus on, our team does, and one is in vegetable oil processing. We sell several products that are used to purify vegetable oil so that it stays stable on the shelf and in your homes. We also provide adsorbents for jet fuel processing. These products help remove things like metals and surfactants and moisture. to improve the stability of the jet fuel that goes into the airplane. And lastly, where we're getting a lot of growth, as Susan had talked about, we're into the biofuels, which is the renewable diesel and biodiesel market. And we had a few products that we introduced a few years back that are also helping grow our business. As you look at our business, you can see that we've had really nice growth over the last five years. We had a record year last year with $92 million in sales. And this has continued as you look into the first quarter of F25. We're really on a record pace. We expect this to continue through the year and in the future, hopefully have continued growth. I want to talk a little bit about renewable diesel and SAF. These are areas that are really kind of driving our business today. Renewable diesel is a drop-in fuel that's used for diesel trucks. One of the benefits of it is a low-carbon burn. And if you take a look at the picture on the slide, you can see that renewable diesel fuel burns much cleaner than petroleum diesel. This fuel can be put in 100%, so basically they're taking things like vegetable oil, reused oils, tallow, and they're converting them into diesel fuel. So it's a very interesting market. There's a lot of construction and new plants that have come on board. And you can transfer this fuel over the same pipelines as you can regular diesel fuel. Sustainable aviation fuel, SAF, is kind of new. It's starting to get more and more traction. And here you can mix in 50% of this renewable fuel in with traditional mineral jet fuel. And this is also helping reduce carbon burn. And a lot of the airlines are very focused on this to become more environmentally friendly. Also driving this industry are government regulations that are put or federal programs that have been put in place. So there's the Renewable Fuel Standards Act, which is helping replace some of the fossil fuel in transportation and heating and jet fuel. You have the Blender's tax credit, again, another federal policy trying to get biomass-based diesel into the marketplace. And then lastly, the California Low Carbon Fuel Standard, which is a state program which helps promote the use of low carbon fuel. And you'll see there's been a lot of construction and new plants coming into California to service this market. As I mentioned earlier, we had two products we introduced a few years back that really focus on the renewable diesel market. And they have really interesting properties to help improve the characteristic of the vegetable oil and the animal fat that's used to convert into renewable diesel. These products are really engineered to absorb trace metals, phosphorus, and other compounds that can affect and and hurt downstream processes like catalyst beds that do the actual change of the fuel to diesel. We grind these products and we size them to allow for exceptional filtration. And what that means is when these plants are running, they're mixing the clay, which is a powder, into the oil, and then they remove it in a filter press. And the oil has to be able to move through the filter press and the clay without a lot of resistance, and our product really helps these plants maximize their production. Understanding the needs of our customers is really paramount to how we've been growing our business. We've been investing in our supply chain, and we've done a great job with our transportation team. We have transload sites to get close to the customer to help service them better. We produce a very consistent and high active adsorbent. Aaron talked about all the improvements at our plant. Their team does a fantastic job in this. And over the years that I've been with Oil Dry, which is close to 40 now, we've always produced one of the most consistent adsorbents in this marketplace. Creating value from technical support, that's an area that we really thrive at. We go into the plants and we help work with the customers to help them improve their process and actually reduce the amount of absorbance so that they can run a more profitable operation. We've been very successful in doing this, and this is how we get long-term relationships with our customers. And then just general customer support. Our sales team is very experienced. We have great inside sales support and customer service help. Our plants and transportation team are fantastic. and our customers value this, and this is why our business is growing. As we look at another tool that helps us grow our business, it's our Innovation Center. This lab is located out in Vernon Hills, Illinois, and Victor Vega is just one of the many team members out there that help our business grow. They look at trying to improve our products, and at the same time, They help do technical service requests for our customers. So our customers will send us oil, we'll analyze it, and we can come back with a recommendation to help them improve their process, or maybe we offer another adsorbent that might be more effective in their process.

New renewable diesel plants are expected to come online in 2025.

Really, we see our business growing in the future. A lot of these plants are going to be in what we call our blue zone or in North America, which is where we're most competitive. So we have a great opportunity to gain new business as we move forward into 2025 and 2026. Our processing team is dedicated to continuous improvement. So I've been down at our plant several times, and you can see all the new things that are going on down there. And again, we're trying to be more efficient and make better products on a daily basis in our Georgia facility where these products are made. Our investment in transportation has been paramount to our growth. Again, we've leased many rail cars so that we can service these very large renewable customers. And we're very focused on our vegetable oil customers. This is our core of our business, and we've done a great job supplying them and giving them technical support as well. And then, again, strong technical support is how we're going to continue to grow our business and to help service our customer, which is the focus of our team. But, again, I look forward to a very strong 25 and beyond, and I'm real excited about the opportunities here at Oil Dry. With that, I'd like to move over and pass it along to Chris Lamson, who is our group vice president, retail and wholesale group. So, Chris, take it away.

Thanks, Bruce, and good morning, everybody. I think Aaron used the same term, tough act to follow. I called Bruce, Bruce Almighty. That's his internal and certainly his almighty business last year, Susan CFO of the year. But you know your strengths, right? So, I've got videos of cute kittens. That's what I'm going to rely on today, but you're going to have to wait a few slides for it. For those of you that are kind of frequent flyers with our annual meeting, you might recognize the first half of the title slide, the exact same one as last year, and I actually believe a year ago, the year prior to that. So a three-peat, if you will. So are we being, or am I being lazy or boring here? No, really not at all. Our focus here is really about strategic consistency and the enormous opportunity for oil dry to make lightweight as mainstream in the market as well, you know, traditional heavyweight litters. But just to ensure that, you know, we do have some new material folks have alluded to, Susan and Dan talked about. The Ultra Pet Acquisition, the last half of the presentation will be focusing on that. I did that a bit in our last earnings release too, but we bring you up to date on the progress that we're making. Overall, we share these charts every year. This gives you a picture of our overall growth on our domestic litter business. You can see that the CAGR over the five-year period is running in double digits, which is fantastic. We feel good about it. That's really a combination of overall growth in the category in litter, the lightweight segment growth that I'm going to talk about in the slide, And then oil dry share growth over the long term, both in our branded and, importantly, in our private label business, which covers both the lightweight segment and the coarse segment within the broader litter category. The next slide, as I mentioned, shows lightweight. You see that 10% CAGR jump up to 17%. We like to think that this reflects our strategic focus, and again, the title of of really what we're talking about for the majority of the rest of my presentation. Now, the next slide, I'd like to slow down here for a moment and spend a little bit of time. What do you think we would prefer to do if we could only do one, grow share as the left side reflects, the chart on the left reflects, or contribute to segment growth as the chart on the right reflects? If we were on a live line, I hope I would get a resounding grow the lightweight segment Chris That's really what we want to do and I'm going to tell you why We are already the unit share leader in Lightweight litter between our private label business and our branded business We've got a solid slice of the pie as you can see on the chart on the left that pie got bigger over the last few years, and I want to quantify it for you. That 12.7 moved to 13, the chart on the right, was worth in that short period of time, in retail dollars, 100 million bucks. Now, what I like to call our true north in terms of a goal, all we have to do is look north, look across the border to Canada, where the lightweight business actually represents more than, and we can only track branded, so that's my little caveat, But the lightweight business is greater than 50% of the total segment. So that 13% down here looks like 50% up here, up there. Clearly a long-term goal, right? Lots of oars in the water in terms of moving in that direction. But that represents to the segment, to the lightweight segment, if you saw that shift, a billion-dollar shift in a very large category in the Midwest. So that's really why we're focused more on the chart on the right and thus the title of the presentation this morning. So how are we doing that? How are we focused on that in the long term? These are the exact same three pillars as we shared last year, and we'll bring them to life over the next couple of slides with some examples. So first, we believe we need to bring innovation to the segment, both close-in innovation, we'll talk about a couple examples of those, and breakthrough innovation that removes any barriers in terms of coming up to the level of heavyweight performance and consumer value. We really want to share the overall benefits of lightweight in our consumer messaging, so really more of a category or segment orientation to lightweight, really speaking to the ease and convenience of lightweight litter, which, as we say in our consumer material, lightens your life and also reflects the strong performance of our product. And then lastly, partner with retailers to draw up distribution, aka availability, and do that in winning channels and retailers. And we're going to give you some examples of some neat progress we've made this year as well. So from an innovation perspective, the slide really reflects closer in innovation. I will tell you we continue to focus on removing those barriers to heavyweight performance and driving value in the segment as well. But close in last year, when we got together, we had just talked to the launch of our antibacterial litter product, which is one of our fully lightweight products. And what's special about this item is it's got a real moat built around it. We got EPA approval, and we're the only antibacterial cat litter approved by the EPA, which means we're the only ones in a category focused on odor control that can say we kill 99% 99.9% of odor-causing bacteria. Over the last year, since we were together, we've gained distribution on this item on Amazon.com, on Chewy. We've expanded distribution in Walmart Brick and Mortar, and you can see that our sales velocities have taken nice increases as well. There's a term in consumer goods, love it and leave it, in terms of the new product launch. We think we've got something special here, and we're certainly not We're loving it, but we're certainly not leaving it. The next slide goes into really the second pillar, and there's a reason why I depicted it this way. I get a lot of questions from this group, it seems like every quarter, around the efficiency of our spin. So the funnel that starts awareness at the top and moves through loyalty and advocacy at the bottom helps us depict what we do efficiency-wise. In a moment, we're gonna share some of our consumer messaging, video consumer messaging, top of the funnel, those cute kittens, but it also gets to those overall lightweight messages. In the middle, we're particularly proud of a plus five year relationship with Kitten Lady. It's very authentic. She's an authentic lover of felines, kittens and otherwise, but she's also a huge lover of the Cat's Pride brand, Our product efficacy. She's a lover of lightweight. She's she's also a lover of our litter for good social good program Down at the bottom you see activities more around conversion Ecom search etc. What I would tell you here is not only are we optimizing on a very regular basis the level that we're spending within that funnel and But in line items like that, when we're out buying search terms, for instance, whether we're on an e-com platform or on a broader internet search platform, we're optimizing that literally on a daily basis. So I know I get that question a lot. Hopefully this slide brings that to life for you. But now the kittens, and Nick, I think if you could go ahead and play the video, that would be great. you you So a couple things to share on the back end of that. I'd love to brag for just a quick moment on our marketing team, and it's not vast, maybe just our two marketing teammates, Lisa and Leah, and our strong agency partners who actually I know are on the call because they sent us a note yesterday on a strong quarter, two by four. We became partners with them about two years ago, and they've been fantastic, as I'm sure you just got a sense of. That first ad was specific to the Olympics, as you probably gathered, and actually was recognized by Ad Age in their hotspots as one of the most creative campaigns during the entire Olympics. I can tell you that teammates kind of near and far of Oil Drive, when they were seeing it, got really excited about that spot, and you can see why. That particular write-up in Ad Age We actually shared the headline with Pepsi and Capital One. We made the big time. Maybe more tangibly and more to what this group tends to ask about and be focused on efficiency-wise, the content there may or may not have been lost on you. People put a lot of cute stuff about their animals online. 2x4 actually grabs a lot of online content, call it user-generated content, and we essentially buy that. So it makes our production costs to shoot really relevant or to air really relevant fun stuff like that very, very low and very efficient. So hopefully none of our competitors are on because I think 2x4 has got a real advantage for us going with that user-generated content. Moving on now. To the last pillar, which is partnering to grow in growth channels and with growth customers, we've gotten this question in the past. Hey, you were on Chewy at one point. Now you're not. Well, we're back. We look fantastic, and the business is doing quite well, both on the Cat's Pride brand and on the Johnny Catliner business as well. I've also mentioned in the past that we really like, from a growth perspective and a brand fit perspective, the Farm and Fleet channel. There's a couple large players in that channel and a series of regional players. We've gained distribution in that channel with both private label and branded over the last year. We feel very good about our business there. As you saw in the video, We've also, and this kind of sits at the intersection of partnering and innovation, we've launched larger sizes in stand-up bags. The economics of the category make it tough when you go into pails as you upsize, make it tough to actually express a consumer value when we're a value brand. So really, we lack a leading value size to go along with our value brand. Bags here enable it. And as you can see on the next slide, we've really gotten some good traction, particularly where Cat's Pride is the strongest on the East Coast with customers. You can see that in the chart with store selling. It's also, back to e-commerce, essential to driving our profitability and loyalty on e-commerce. The simplest way to explain that is whether I'm selling an $11 jug or a $16 bag, about the same cost for our e-comm partners to move that product through their system. So clearly, what would you rather sell, that $16 item or that $11 item? Fags really enable us helping our retailer partners drive profitability and be good partners. So on really the Clay side of the business, we're focused on growing our segment share. We see $100 million in segment growth over the past three years, but we really look north to Canada to see the enormous long-term opportunity ahead of us. And we do it by continuing to innovate, by putting ease and convenience of lightweight at the core of our consumer message, which benefits both our brand and private label, and driving partnership, as I exemplified with Chewy and the Farber Fleet Channel with winning customers.

So a quick pause and shift.

deep breath and shift to our crystals business. I want to start out by quickly reviewing why we made this acquisition, what appealed to us, and then shift to really how we're capitalizing and have created, super proud of our team in terms of creating a lot of momentum behind this business right out of the gate. We obviously completed the acquisition on May 1st, but what made us want to engage, really it's that segment growth is the headline. Over that five-year period, you saw the business grow by about five times in terms of overall category growth. That's significant growth. We think it's really based a lot on the efficacy of crystals and the convenience of crystals. The second why is we're clearly a value leader on the clay side, and we really believe there's enormous opportunity to drive value in the crystal segment, and I'm going to prove that to you, I hope, over the next few slides. Finally, it's really a great fit. I just mentioned value, so there's a great fit there. There's a great fit culturally with the team in Anderson. They're fit in hand and glove with us, but there's a fit on lightweight crystals. We drive lightweight clay, and crystals are even lighter than our lightweight clay. Our theme, when we got together and started showing up with the trade at industry events like SuperZoo, a trade show in August, and just as we're working with retailers, has been better together. And really, we wanted to get together quickly, for lack of a better term. Susan mentioned that we've integrated our systems. We're integrating our supply chain, like our shipping points, really customer by customer. We have a couple major customers that we share that will be moving to take product through our distribution centers on the same trucks at the beginning of January and more to follow behind that. We've already launched, obviously, Cat's Pride Crystals. I talked about that in the last call. We did that with a lot of speed and agility, and you can see that we're starting to drive some marketing. And we've fully integrated our sales and operating teams, really one team out there selling crystals and clay. So the sales folks that we inherited from UltraPet are selling our clay products to the customers they were closest to, and certainly vice versa, and we feel very good about the people side that's in May side of the integration the You know kind of again along the lines of better together and starting to speak to I think the the enormous private label opportunity which lies ahead of us We are from a volume perspective and in track channels what we can see in Nielsen We're the number one player overall in unit share in private label capital stop and What that really means, and we have a high-performing group that works under Laura that drives this, is that the biggest retailers in the U.S. trust us to manage their brands, and Aaron's came to deliver the absolutely superior service that they do on that business. We do a great job of it. So, boy, if you're going to pick a partner to go into private label crystals with, why wouldn't it be oil dry? Not to mention our fantastic footprint that you see depicted on the right and the efficiencies and synergies that customers get by throwing a couple pallets of crystals on a full truck of clay product. So talking to really both how we're selling this, this is kind of a, it reflects why we wanted to buy this business and one of the exciting things about the private label and value opportunity. also is a snapshot of what we're outselling in the trade right now in terms of these couple charts. So is the segment ready for private label is what this slide really intends to depict. One interesting tidbit, the first bullet that isn't depicted in a chart is Kroger was actually in the private label business of crystals pre-pandemic, so some time ago, and actually saw superior velocities as it relates to the rest of their litter category. They got out of the business because, candidly, they didn't have a supplier they could rely on through the pandemic. That's kind of evidence point number one. Evidence point number two, those that know the pet industry know that the pet super centers, the Pet Smarts and Petcos of the world, tend to drive consumer behavior and lead in consumer behavior. These pet supers are carrying private label and you can see have almost a 40 share within their walls. Private label represents almost a 40 share within their walls. And then lastly, what the chart on the left really tells you is if you're in private label as a retailer, your category does fantastic. If you're not, your category doesn't do as well. So you can absolutely take to the bank that are fantastic. I think it's eight. teammates that are out selling to retail are armed with these couple charts and more to depict that story for our retail partners. So we did act fast here. When we acquired the business, it was sell-in season, if you will. I talked about this at length in our last call, I know. I think, Ethan, you had a couple questions around this. You can see the banners that we've added on the cast price side and the banners that we've added just since May 1st, some 15-plus retailers. And our points of distribution will grow significantly versus where we were prior to the acquisition. So we're very pleased with the distribution progress on the branded side. So lastly, just bringing it all together, the pillars we're focused on here are very similar to the pillars that we're focused on in the clay business, which speaks to, I think, the fit. We'll really bring innovation and value to crystals. Talked about that. We do have a little question mark, a little intrigue up there. If you look to the top right-hand corner, we think we've got some technologies that we use on clay that are going to translate really nicely to crystals. We're excited about that. We'll be talking about that probably this time next year. Lightweight convenience and consumer messaging, we think that Crystal's message around lightweight and convenience dovetails nicely off of the message that we're already sharing on our lightweight business. And then, as you can see, enormous confidence in our sales team to continue to drive distribution with those winning partners that you saw on the previous slide. We're excited about the business and excited to answer your questions. So with that, we'll turn it back over to Leslie.

Thank you. For listening to our presentation, I will now open up the floor to questions. Please submit your questions using the Ask a Question field on the webcast. Questions or remarks must be relevant to the meeting and pertinent to the matters brought before the meeting. Before we begin, I would also like to introduce two others on the call today who will be participating in the Q&A session. First, we have Wade Robey, Vice President of Agriculture for Oil Dry Corporation of America and President of Amlin International. And we also have Laura Sheelan, Vice President and General Manager of the Consumer Products Division. I will now read the first question. We actually have two very similar questions, so I'm going to combine them. One from Ethan Starr and the other from Robert Smith. This is in regards to Amlin. It seems like you're hitting lots of singles, and I'm wondering if you're making any progress in trials at large potential customers that could result in a home run down the road. Also, do you expect continued sales growth in Latin America and North America? And then the related question is, with successful trials, why is it taking so long to see more robust growth from Amlin? Wade, do you want to take that?

Yes, thank you, Leslie, and thank you, Ethan, and thank you, Robert, for those respective questions. I'm going to answer it with a couple of elements here real quick. First, as Susan alluded to in her presentation, we, over the last 12, 18 months, did see a pretty significant downturn in the ag markets, which resulted from a couple of different factors, certainly the high inflationary pressures, cost of energy, cost of ag commodities. and the general depression in the animal food production industry. All those factors kind of came together, which slowed us down a little bit last year, to be honest with you. We held our own, very proud of the team, maintaining the business. A lot of the companies that we compete with in the sector weren't able to do that. So the last year, last 12, 18 months was challenging, to be frank. In terms of our success, we do continue to see very positive results in the field and growth. Growth is not consistent in all world areas. Certainly there's differential rates when we look at Asia Pacific, North America, and South America. All are steady, but we're seeing our largest growth at the moment in North America and in Latin America. This is reflective of our very strong value proposition and the way we position our products in the market. So we expect to continue to see excellent growth going forward. The second element I'll just mention quickly is what Dan Jaffe, our CEO, mentioned in his comments, and that's that we continue to make some structural changes in the Amlin business. One of those last year was the change in how we go to market in China and the switch master distributor rather than being directly in the market selling to customers in that fashion. That resulted in a significant transfer of our inventory that we held in China and That confounds the numbers a little bit when you look year over year. And when you pull that out and normalize that across the year, we actually had really good growth in the first quarter of the current fiscal year when we compare backwards. So we're very bullish. We feel like we've got the right team, the right structure, the right approach, and are seeing consistent growth.

Great. Thank you, Wade. Next, we have a question from John Bear. But first, he gives us a compliment. He congratulates the entire Oil Dry team for an outstanding year. A shout-out to Susan Cray for her recent CFO of the Year Award and for the company being recognized once again as a top workplace in Chicagoland by the Chicago Tribune. And I'm going to add one more. We ranked on Forbes' 2025 list of America's most successful small-cap companies for the second consecutive year. So congratulations. We're all very happy with all those accolades. So John's question is, are you seeing any change in customer order trends from the standpoint of building inventory of ODC product in anticipation of future price increases? Secondly, what is the company's anticipation of needing to increase prices to offset inflationary pressures? And Chris Lampson will take that question.

Yeah, thanks, John. So I think we've got, I think we took one question regional increase in Q1 in our, in Wade's business, one of Wade's businesses. We have a publicly announced price increase that we're beginning to execute in our industrial business now. I'm glad you asked the question, because I was with our Division I team, our industrial team, last week in Atlanta at a sales meeting. We actually spent a fair amount of time on a discipline that we have in the company in general to make sure that retailers or other customers, depending on what division you're talking about, don't do that or do that to a very little extent to which it would be immaterial. So we have some disciplines in terms of watching order patterns come in and where they go off pattern. Our sales team works back with them candidly to not allow for that degree of loading. So we work closely to prevent it, or work carefully to prevent it. I would say on the other question, it's certainly case by case. We have a sharp eye to the marketplace. We have a sharp eye to our costs. We have a sharp eye to the value that we're bringing. The days, I think, of... extraordinary price increases that you were seeing, you know, coming out of the inflationary times back into the pandemic are clearly gone. But we do continue to experience cost pressures in our business and we'll be very focused, as we've been here for a long time, on, you know, recovering against those and ensuring we get value for our product.

Yeah, Chris, I would just add, I mean, we've talked about it before, but the physical realities of the mining business is pretty much your costs go up every year. You go further and deeper from the plants. It's the only way to mine. I can't remember the last time regulations were taken off the books. They seem to just keep adding them on, so you basically are at best a break-even, but more likely every year things get more and more difficult, which is good. It's all about air quality and emissions and so forth and so on, but they're all the costs of doing business. So just generally our costs go up every single year, no matter how well we perform, because of those physical realities.

The next question is from Robert Smith. He asks, what role do you see for artificial intelligence in the company to foster its growth and efficiency? Are you pursuing it at present? Susan?

Yeah, great question. And the short answer is we are. Our strong financial performance has enabled us to invest in artificial intelligence and build out data analytics. We are in a more traditional phase part of the artificial intelligence journey right now, that being the automation of transaction processing. So think about areas like accounts payable inside accounting. There's several applications inside customer service. And so then looking forward, where we'll be looking for opportunities next is inside the operations.

Okay, question from Ethan Star. opportunities for oil dry in the renewable diesel markets in Brazil and Indonesia?

Hi, Ethan. Thanks for the question. This is Bruce Patsy. Yes, there's opportunities. You know, Latin America is a little bit behind North America in terms of the renewable diesel facilities. We do expect there will be some growth down in that region, and that will more likely be in calendar year 26 and 27 that some of these plants will come on and we do have an opportunity to compete for that business. I don't know of any plants today in Indonesia, so I can't really talk to that, but we do expect some growth in Latin America specifically and in Brazil down the road.

Thank you. Next question is from John Bear. Given the nice share price increase recently, would OilDry consider using stock as currency for any future acquisitions instead of cash?

Thank you. Thanks, John. Thanks for the question. I would say we always consider using stock as a currency in an acquisition. Debt, equity, cash, you know, a lot of times it depends on the tax structure or what the buyer wants. But, yes, it would absolutely be part of the thought process going forward.

Another question from John Bear. Can the residual metal X, metal Z filtrate be recycled and the impurities extracted for additional use? Bruce?

Today, they're not being extracted, but there are some people pulling the oil out of the spent clay and then looking at trying to reuse that oil to make more renewable diesel. The spent clay is still going into landfills. There are some other applications people are looking at for the spent clay in these operations. But today, to try to get reuse out of that mineral is very difficult and costly.

Great, and thank you, everybody. We're out of questions, which is good. We appreciate the Q&A, and hopefully you benefited from the presentations. A lot of momentum heading into the second quarter, so we'll be back to you in about 90 days-ish. In between, the stock will split, and the team will continue to focus on creating value from sorbent minerals. So thank you very much.