Core Viewpoint - American Vanguard (AVD) reported a quarterly loss of $0.69 per share, significantly worse than the Zacks Consensus Estimate of a loss of $0.10, marking an earnings surprise of -590% [1] - The company's revenues for the quarter were $118.31 million, missing the Zacks Consensus Estimate by 14.52% and down from $149.52 million a year ago [2] Financial Performance - Over the last four quarters, American Vanguard has only surpassed consensus EPS estimates once [2] - The company has not beaten consensus revenue estimates in the last four quarters [2] - Year-to-date, American Vanguard shares have declined by approximately 47.4%, contrasting with the S&P 500's gain of 25.7% [3] Future Outlook - The company's earnings outlook will be crucial for investors, particularly in light of management's commentary during the earnings call [4] - Current consensus EPS estimate for the upcoming quarter is $0.13 on revenues of $169.1 million, while for the current fiscal year, the estimate is -$0.34 on revenues of $570.9 million [7] Industry Context - The Chemical - Specialty industry, to which American Vanguard belongs, is currently ranked in the bottom 36% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact American Vanguard's stock performance [5][6]

Core Viewpoint - An investigation is underway regarding potential breaches of fiduciary duties by the Board of Directors of American Vanguard Corporation (AVD) in light of significant health risks associated with its subsidiary AMVAC Chemical Corporation's pesticide DCPA [1][4]. Group 1: Investigation Details - Berger Montague is advising AVD shareholders about the investigation into the Board of Directors for potential breaches of fiduciary duties [1]. - The investigation focuses on the failure to ensure product safety and the exposure of the company to significant litigation risks [4]. Group 2: Regulatory Actions - In August 2024, the U.S. Environmental Protection Agency (EPA) suspended all registrations of the pesticide DCPA manufactured by AMVAC due to significant health risks to unborn babies [2]. - This suspension marks the first use of the EPA's emergency suspension powers in 40 years, highlighting the urgency of the health risks posed by DCPA [2]. Group 3: Historical Context - The EPA had previously alerted AMVAC to potential health risks related to DCPA in 2013, but the company failed to provide necessary data for over ten years [3]. - AMVAC only submitted the required test results in November 2023, which confirmed the significant risks posed to pregnant mothers and their unborn children [3].

Core Viewpoint - American Vanguard Corporation (AVD) reported a significant increase in losses for Q2 2024, with a loss of 42 cents per share compared to a loss of 4 cents per share in the same quarter last year. Adjusted loss was wider than expectations, and revenues fell short of estimates due to unfavorable market conditions [1]. Financial Performance - AVD's revenues for the quarter were $128.2 million, down approximately 3% year over year, missing the Zacks Consensus Estimate of $134.2 million [1]. - The U.S. crop business revenues decreased by roughly 7% year over year to about $52.3 million, while the U.S. non-crop business saw a 13% increase to around $19 million [2]. - International revenues declined by around 5% year over year to approximately $56.9 million, primarily due to lower herbicide sales [2]. - The company ended the quarter with cash and cash equivalents of roughly $17.9 million, a sequential increase of about 31%, while long-term debt rose to around $211.3 million, up approximately 13% sequentially [3]. Outlook - AVD has revised its full-year 2024 guidance for adjusted EBITDA down to $40-$50 million from a previous estimate of $60-$70 million. The company now anticipates net sales to be down 2% to flat, compared to an earlier forecast of 6-9% growth [4]. Price Performance - AVD's shares have experienced a significant decline of 62.8% over the past year, contrasting with a 13.9% decline in the industry [5].

Financial Data and Key Metrics Changes - In Q2 2024, net sales decreased slightly to $128.2 million from $132.8 million in the same period last year, with adjusted EBITDA margin declining to 4.8% from 8.2% year-over-year [11][24] - For the first half of 2024, net sales increased by 2% on a consolidated basis, with non-crop sales up 20% and domestic total sales up 5% compared to the first half of 2023 [11][24] - Gross profit for the first half of the year was approximately equal to that of 2023, despite a decline in Q2 gross profit by about 12% [11][25] Business Line Data and Key Metrics Changes - US crop sales were down 7% in Q2 2024 compared to the same period in 2023, while US non-crop sales grew by 13% [24] - International business net sales declined by 2% year-over-year in Q2 2024 [24] - The Green Solutions portfolio recorded double-digit sales increases, driven by strong demand in Central America [11] Market Data and Key Metrics Changes - The agricultural economy is facing challenges due to low commodity prices, high crop input costs, and elevated interest rates, leading to a just-in-time procurement approach among distributors [10][30] - Net farm income is reported to have dropped by approximately 25% compared to the previous year, impacting farmers' purchasing behavior [40] Company Strategy and Development Direction - The company is undergoing a transformation to improve financial performance, focusing on cost reduction, liquidity improvement, and operational efficiency [12][19] - A new organizational structure is being implemented, consolidating into two global businesses: crop and non-crop, expected to be in place by early 2025 [19] - The company aims for a 15% EBITDA margin by 2026, despite current challenges, by improving efficiency and sales of higher-margin products [30][51] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the current results as unacceptable and emphasizes the need for decisive action to improve cost structure and liquidity [12] - The outlook for the second half of 2024 is cautious, with expectations of stable demand in the crop segment but awareness of various market risks [30] - The company has lowered its full-year 2024 targets for adjusted EBITDA and sales due to the challenging agricultural market conditions [30] Other Important Information - The EPA has issued an emergency suspension of the product Dacthal, which the company had already voluntarily suspended sales of in April 2024 [12] - The company is working with the EPA to ensure compliance with the suspension and has removed Dacthal sales from its 2024 forecast [12] Q&A Session Summary Question: What are the steps to accelerate cost savings and when will they reflect in financials? - Cost savings from procurement and logistics are expected to start in Q3 2024, with full savings realized by the end of 2025 [34] Question: What has changed in the North American ag market leading to lowered guidance? - The ag economy is facing challenges, with customers managing cash flow and moving towards just-in-time purchasing [38][40] Question: What is the status of Dacthal and potential litigation risks? - There is minimal product in the channel, and the company is not aware of any litigation risks at present [42][46] Question: How will the transformation impact the Green Solutions segment? - The transformation will allow for more focused strategies and resource allocation to accelerate growth in the Green Solutions portfolio [56][60] Question: What are the expectations for working capital reduction by year-end? - The company expects to reduce working capital by $70 million to $80 million over the remainder of the year [62]

Q2 2024 Earnings Call August 8, 2024 Corporate Representatives in Attendance 2 Tim Donnelly……………………………………….Acting Chief Executive Officer Mark Bassett …………………………………..……………………… Board Member David Johnson ……………………………...……………… Chief Financial Officer Mason Bennett…………………………..Vice President, North American Crop Anthony Young …………………………..………….. Director, Investor Relations Safe Harbor Statement During this presentation, the Company may discuss forward-looking information. Except for the historical information co ...

Financial Performance - In Q2 2024, American Vanguard Corp. reported net sales of $128.2 million, a decrease from $132.8 million in the same period last year, with an adjusted EBITDA margin of 4.8%, down from 8.2%[14]. - For the first half of 2024, net sales increased by 2%, with non-crop sales up 20% and domestic total sales up 5% compared to the first half of 2023[15]. - Overall revenue for the first half of 2024 was up about 3% compared to the same period in 2023, with US non-crop sales rising by 20%[30]. - Q2 2024 gross profit decreased by approximately 12%, with gross margins reducing to 29% from 32% of sales[31]. - For the first half of 2024, net sales increased by 2%, while gross profit margin declined slightly to 31% from 32%[32]. - Operating expenses for Q2 2024 rose by approximately 20% compared to the same period in 2023, primarily due to non-recurring transformation costs[32]. - Full year 2024 adjusted EBITDA target decreased to between $40 million and $50 million, down from $60 million to $70 million[37]. - Sales target for 2024 revised to a range of $565 million to $580 million, reflecting a decrease of 2% to flat compared to previous expectations of a 6% to 9% increase[37]. - The agricultural economy is facing challenges, with net farm incomes reportedly dropping by approximately 25% compared to last year[50]. - The company has experienced a series of earnings and EBITDA reductions, with no upward revisions in recent years, indicating ongoing challenges in the marketplace[90]. Cost Management and Savings - The company identified opportunities to trim about 4% of its global workforce, yielding annualized savings of approximately $3 million[24]. - Cost-saving initiatives across raw material and logistics purchasing, manufacturing efficiency, and SKU rationalization are expected to yield annualized savings in excess of $5 million[24]. - The company is focusing on cost synergies and savings, expecting to realize $50 million in savings by the end of 2025[42]. - The company anticipates a reduction in working capital by $70 million to $80 million by the end of the year, following typical seasonal trends[74]. Organizational Changes and Strategy - American Vanguard plans to implement a new organizational structure by early 2025, which is expected to improve clarity and profitability[23]. - The company is implementing a transformation strategy aimed at improving efficiency and resource allocation, which is expected to drive growth[63]. - The amended credit agreement includes a reset of the total leverage covenant and allows for higher non-recurring charges to support transformation projects[28]. Product and Market Focus - The company recorded double-digit sales increases in its Green Solutions portfolio, driven by strong demand in Central America[15]. - American Vanguard Corp. is focusing on enhancing its Green Solutions segment, which is one of the fastest-growing areas with good profit margins[72]. - The company is emphasizing the expansion of Green Solutions products as part of its growth strategy[53]. - The company is working on state registrations for bacteria-based fermented products to expand market reach, primarily for plant health[70]. - American Vanguard Corp. has been recognized as a top 10 supplier of biologicals in the US by CropLife, highlighting its success in the Green Solutions area[73]. Regulatory and Market Challenges - The EPA issued an emergency suspension of the product Dacthal, which the company had already removed from its 2024 forecast assumptions[17]. - The regulatory environment surrounding Dacthal is under scrutiny, but the company is not currently aware of any litigation risks[53]. - There is limited product remaining in the channel for Dacthal, which may impact future sales guidance[78]. - Distributor customers are expected to maintain a normal purchase pattern without overstocking, indicating a conservative approach due to previous overstocking issues[81]. - Farmers will continue to purchase crop inputs despite lower net farm income, as they need to grow and protect their crops[82]. Financial Restrictions and Future Outlook - The company is facing restrictions on dividends and buybacks imposed by lenders, which will impact the current annual dividend of $0.12, totaling $3 million annually[84][85]. - The amended agreement with lenders requires pre-approval for dividend payments, reflecting tighter financial covenants and increased lender risk[95]. - The company is committed to maximizing investor value and is focused on addressing current challenges to improve performance[99]. - Future financial targets set by the company are considered achievable and conservative, taking into account current market conditions and actual demand[92]. - American Vanguard Corp. expects EBITDA margin to improve to 15% by 2026, despite current guidance indicating a high 7% range for 2024[59]. - Sales of higher-margin products are expected to recover, contributing to improved EBITDA margins over time[60]. - The company is optimistic about the potential for secondary benefits from its transformation initiatives, which may not be fully quantifiable at this stage[64].

Financial Performance - Net sales for the three months ended June 30, 2024, were $128,209 thousand, a decrease of 3.9% compared to $132,790 thousand for the same period in 2023[15] - Gross profit for the three months ended June 30, 2024, was $37,763 thousand, down 12.1% from $42,909 thousand in the prior year[15] - Net loss for the three months ended June 30, 2024, was $(11,721) thousand, compared to a net loss of $(1,053) thousand for the same period in 2023[18] - Operating loss for the three months ended June 30, 2024, was $(9,232) thousand, a significant decline from operating income of $3,754 thousand in the same quarter last year[15] - Total net sales for the three months ended June 30, 2024, were $128,209 million, a decrease of 4.4% compared to $132,790 million for the same period in 2023[38] - The company recorded a net loss of $11,721 million for the three months ended June 30, 2024, compared to a net loss of $1,053 million for the same period in 2023[47] - The company recorded a net loss of $10,169 or ($0.36) per share for the first half of 2024, compared to a net income of $865 or $0.03 per share in the same period of 2023[97] Assets and Liabilities - Total current assets increased to $477,581 thousand as of June 30, 2024, from $432,021 thousand at December 31, 2023, reflecting a growth of 10.5%[21] - Total liabilities rose to $454,230 thousand as of June 30, 2024, compared to $397,538 thousand at the end of 2023, marking an increase of 14.3%[21] - Cash and cash equivalents increased to $17,949 thousand as of June 30, 2024, up from $11,416 thousand at December 31, 2023[21] - Total inventories increased to $244,935 million as of June 30, 2024, from $219,551 million as of December 31, 2023, reflecting a rise of 11.6%[43] - Long-term indebtedness from the revolving line of credit increased to $211,254 million as of June 30, 2024, compared to $138,900 million as of December 31, 2023[49] - As of June 30, 2024, the Company had long-term indebtedness of $210,218, an increase from $137,682 as of December 31, 2023[114] Sales Performance - U.S. crop sales for the three months ended June 30, 2024, were $52,289 million, down 6.8% from $56,212 million in the prior year[38] - International sales for the three months ended June 30, 2024, were $56,909 million, a decrease of 4.7% compared to $59,700 million in the same period last year[38] - U.S. crop net sales decreased by 7% to $52,289 in the second quarter of 2024, while U.S. non-crop sales increased by 13% to $19,011[83] - International net sales declined by 5% to $56,909, with herbicide sales down 27% due to competition from low-cost generics[85] Expenses - Research, product development, and regulatory expenses for the three months ended June 30, 2024, were $8,599 thousand, a decrease of 8.6% from $9,413 thousand in the same period last year[15] - Operating lease expenses for the three months ended June 30, 2024, were $1,955 thousand, an increase from $1,674 thousand in the same period of 2023[33] - Operating expenses increased by 20% to $46,995 for the three-month period ended June 30, 2024, primarily due to non-recurring charges related to business transformation[86] - Operating expenses increased by approximately 12% to $83,322, driven by one-time business transformation costs and other administrative expenses[96][101] Cash Flow and Financing - Operating activities utilized net cash of $56,452 during the six-month period ended June 30, 2024, a decrease of 41.6% from $96,602 in the same period of 2023[107] - Financing activities provided $70,285 during the six-month period ended June 30, 2024, compared to $98,086 in the same period of the prior year[112] - Cash used for investing activities was $6,398 for the six-month period ended June 30, 2024, compared to $7,172 in the same period of 2023[111] Taxation - The company recorded an income tax benefit of $1,553 for the three months ended June 30, 2024, compared to an income tax expense of $1,541 in the same period of 2023[82] - The effective income tax rate for the six months ended June 30, 2024, was 0.7%, a significant decrease from an income tax expense of $1,181 in the same period of 2023[105] Stock and Compensation - The weighted average shares outstanding for basic earnings per share were 28,024 thousand for the three months ended June 30, 2024, compared to 28,428 thousand for the same period in 2023[15] - The company recognized stock-based compensation of $2,752 thousand for the six months ended June 30, 2024[30] - For the three months ended June 30, 2024, stock-based compensation expense was $747, down from $1,067 in the same period of 2023, representing a decrease of approximately 30%[54] - The total unrecognized stock-based compensation expense related to RSUs outstanding was $5,989, expected to be recognized over a weighted-average period of 1.6 years[55] Regulatory and Legal Matters - The company recorded a liability related to a plea agreement with the Department of Justice, which includes a fine and a three-year probation period[59] - The company is currently evaluating the impact of adopting new accounting standards issued by the FASB, effective for fiscal years beginning after December 15, 2023[65][66] - The company has recorded a loss contingency related to a wage and hour violation lawsuit, with mediation scheduled for September 2024[60] - The USEPA issued an emergency suspension of DCPA products on August 6, 2024, prohibiting their distribution, sale, and use, which could adversely affect financial performance[128] - The Company is engaged in a registration review process with the USEPA that could impair the commercial viability of its products, particularly DCPA[128] Transformation Initiatives - The Company has invested in transformation initiatives aimed at improving efficiencies and operating leverage during Q4 2023 and the first two quarters of 2024, but there is no guarantee of achieving targeted results[129] - Transformation costs related to the company's digital and structural initiatives amounted to $7,345 during the three months ended June 30, 2024[88] - The Company is taking measures to ensure the success of its transformation initiatives, but the return on these initiatives may not exceed the investment[129]

Financial Performance - American Vanguard reported diluted earnings per share of -9 cents for Q2 2024, missing Wall Street's expectation of 12 cents per share and worse than the -4 cents per share reported in the same period last year [1][2] - The company's revenue for Q2 was $128.21 million, falling short of analysts' estimate of $133.6 million and down 3.5% year-over-year from $132.8 million [1][3] Management Commentary - Acting CEO Timothy Donnelly attributed the reduced profitability to non-recurring charges, including severance compensation for the former CEO and one-time costs related to business transformation activities, emphasizing that the results are not acceptable and the company is focused on urgent changes [2][3] Outlook and Market Reaction - American Vanguard has lowered its revenue outlook for 2024 to a range of $565 million to $580 million, which is below Wall Street's estimate of $596.75 million [3] - Following the earnings announcement and outlook cut, AVD stock experienced a decline of 28.1% [3]

Core Insights - American Vanguard (AVD) reported a quarterly loss of $0.09 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.01, marking an earnings surprise of -800% [1] - The company's revenues for the quarter ended June 2024 were $128.21 million, missing the Zacks Consensus Estimate by 4.46% and down from $132.79 million a year ago [1] - The stock has underperformed significantly, losing about 28.3% since the beginning of the year compared to the S&P 500's gain of 9% [2] Company Performance - Over the last four quarters, American Vanguard has surpassed consensus EPS estimates only once [1] - The current consensus EPS estimate for the upcoming quarter is $0.10 on revenues of $150 million, and for the current fiscal year, it is $0.32 on revenues of $605.5 million [4] - The estimate revisions trend for American Vanguard is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [4] Industry Context - The Chemical - Specialty industry, to which American Vanguard belongs, is currently in the top 43% of over 250 Zacks industries, suggesting a relatively strong industry performance [5] - The top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1, indicating potential for better performance within the industry [5] - Another company in the same industry, Flexible Solutions International Inc. (FSI), is expected to report quarterly earnings of $0.07 per share, with revenues projected at $10.34 million, reflecting a slight increase from the previous year [5]

Core Viewpoint - American Vanguard (AVD) is anticipated to report a year-over-year increase in earnings due to higher revenues, with the consensus outlook indicating a quarterly loss of $0.01 per share, reflecting a 75% improvement compared to the previous year [1][2]. Revenue Expectations - Revenues for the upcoming quarter are projected to be $134.2 million, which represents a 1.1% increase from the same quarter last year [2]. Estimate Revisions Trend - The consensus EPS estimate has been revised down by 9.09% over the last 30 days, indicating a reassessment by analysts of their initial estimates [3]. Earnings Whisper and ESP - The Zacks Earnings ESP (Expected Surprise Prediction) model shows that the Most Accurate Estimate aligns with the Zacks Consensus Estimate, resulting in an Earnings ESP of 0% for American Vanguard [4][6][7]. Zacks Rank and Predictive Power - American Vanguard currently holds a Zacks Rank of 4, which complicates the prediction of an earnings beat, as stocks with a negative Earnings ESP and lower Zacks Rank are less likely to outperform [5][7]. Historical Performance - In the last reported quarter, American Vanguard exceeded the consensus EPS estimate by 12.50%, but has only beaten estimates once in the past four quarters [8]. Conclusion - While American Vanguard is not positioned as a strong candidate for an earnings beat, investors should consider other factors influencing stock performance ahead of the earnings release [9].