AVD

Good day. Welcome to the American Vanguard first quarter 2026 earnings conference call. At this time, all participants are placed 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, Robert Winters with Alpha IR. You may begin.

Thank you, operator. Good afternoon, and welcome to American Vanguard's 1st quarter 2026 earnings conference call review. Our prepared remarks will be led by Dak Kay, American Vanguard's Chief Executive Officer, and David Johnson, Chief Financial Officer. After their 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 the webcast and a transcript from this 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's now my pleasure to turn the call over to CEO Dak Kay.

Thank you, Robert, and welcome everyone to our first quarter 2026 earnings conference call. The year so far for American Vanguard has gotten off to a good start despite continued challenging market conditions, which I will speak to more in a few minutes. As I indicated during our last earnings call in mid-March, 2025 was a challenging year for the agricultural sector overall, but it was also quite a consequential year internally for American Vanguard. Important actions were taken on the commercial and operational fronts, we also made important investments in technology and systems while making key personnel changes across the organization, and we're not done. There's still plenty of work to put the company in a better position for growth opportunities that we see in front of us.

However, a lot has been accomplished in the last 12 months that lays the foundation for delivering value for our shareholders. Going forward, our progress will be measured in many areas, but 3 key metrics to focus on that can be tracked are sales growth, operating efficiency, and improvement in net trade working capital. Progress on these fronts will all be tied to accountability around key financial goals or metrics to deliver on our success. Importantly, I will also provide some near to medium-term goals that we will be focused on over the next 18-24 months. A little later in my prepared remarks, I'm going to provide a more expansive view of what has been accomplished so far beyond my comments from our fourth quarter 2025 earnings call.

I will also talk more about the key strategic areas of focus for us going forward and finally review the new capital structure put in place that positions us well to execute our strategy. Turning to the first quarter results, we are pleased to see net sales of $124 million for the quarter, an increase of approximately 7% versus the year ago period. The improvement in sales year-over-year was mostly driven by our domestic crop business, which saw sales increase by 17%, driven by strong demand from both our herbicide and our insecticide products, as well as a 6% growth in our specialty business driven by our OHP horticultural products. This growth was partially offset by weaker results from our international businesses, which saw revenue decline 7% year-over-year.

Higher sales in Central America, Mexico, and Australia were more than offset by lower sales in Brazil, mostly due to timing of deliveries in the previous year that created a tough comparable. We also saw weaker sales year-over-year in India that was mostly timing related. Adjusted EBITDA increased by 245% year-over-year to $10.3 million compared to $3 million in the first quarter of 2025. The strong improvement in Adjusted EBITDA was driven by increased sales of higher margin U.S. crop and specialty domestic products and improved gross margins, which increased by 500 basis points year-over-year. I am pleased with the progress we are making on the manufacturing front.

We have been streamlining our manufacturing footprint over the past year, transferring production from our now more focused L.A. facility to our operation in Axis, Alabama, driving further efficiency and cost savings. As a reminder, we expect the rationalization of the L.A. production facility to save us at least $4 million on an annualized basis going forward. Adjusted operating expenses, which exclude items such as transformation costs and asset impairment costs, were 26.7% of sales this quarter compared to 27.9% in the year ago period. Improvements in operating efficiency and tight cost controls drove the year-over-year improvement. Turning to what we are seeing in the agricultural economy, a lot of what I said in March when we reported our year-end results for 2025 still remains true.

The industry is yet to recover from a downturn that started in 2023, though we are seeing some improvement in 2026, at least in the U.S., relative to the environment across most of last year. As I said in March, while agricultural commodities are recovering from the low levels that we experienced during the summer of 2025, they remain well below what industry observers consider to be historically normal levels. The worst of the industry destocking appears to be in the past, but distributors have shown no inclination to restock their inventories. Farmer liquidity remains a top concern after several years of depressed commodity prices, and thus growers are making more last-minute crop decisions than ever before. Furthermore, global geopolitical developments this year have only added to the existing levels of uncertainty that was in place last year.

Turning briefly to the disruptions caused by recent events, mostly in the Middle East, like everyone, we are seeing higher oil prices, higher natural gas prices, and higher fertilizer prices. Higher fertilizer prices should not materially impact this season, as most farmers have already made those purchases for this season. The current situation, even if resolved relatively soon, will likely have some impact on next year's crop decision. As I've indicated in recent calls, while we wait for an improvement in the agricultural economy, we are focused on the things we can control and executing our strategic business improvement plan, which should allow us to improve adjusted EBITDA as compared to 2025. We continue to expect to generate adjusted EBITDA of $44 million-$48 million in 2026 on sales of $530 million-$550 million.

I'll now turn the call over to our CFO, David Johnson, who will briefly review our financial results for the quarter in greater detail.

Thanks, Dak. Good afternoon, everyone. Turning to our financial performance for the first quarter of 2026, the company generated sales of $124 million in the period as compared to $116 million in the same period of 2025, an increase of 7%. The U.S. crop business increased 17% due to strong herbicide and insecticide demand. Additionally, sales of soil fumigants and other products remained steady in the quarter. U.S. crop sales growth was offset by lower nematicide sales of COUNTER and cotton defoliant sales of Folex. Our specialty sales improved by 6%, driven primarily by a strong OHP performance and increased demand for biological product solutions. Sales in other specialty markets, including professional pest control, turf, and landscape, were relatively flat.

U.S. growth in the quarter was offset by sales in our international operations, which were down 7% due to Brazil, as Dak mentioned, which was the result of timing of deliveries in the previous year, as well as reduced sales in India due to timing delays in customer purchases. The decline was somewhat offset by improved sales in Central America, led by the launch of Mocap in Ecuador. Gross profit in the first quarter rose to 31% as compared to 26% in the same quarter of 2025 on increased volumes of higher-margin domestic products, reduced volumes of lower-margin international products, and a slightly improved factory efficiency performance. Adjusted EBITDA in the first quarter was $10.3 million, an increase of $7.3 million or approximately 245%. The EBITDA expansion was driven by higher sales, higher margins, and continued cost-cutting efforts.

Turning to the balance sheet, cash on hand at the end of the quarter was $71 million as compared to $12 million in the prior year period. The year-over-year increase reflects the term loan structure put in place following the refinancing, which replaced the revolving working capital facility. Total debt was $267 million at quarter end as compared to $166 million at the end of the first quarter of 2025. Given the impact of the change in the debt structure, we have focused on net debt, which was approximately $196 million as compared to $154 million a year ago. The increase is primarily related to the lower customer prepayments we received at the end of 2025.

Inventories were $175 million as compared to $185 million in Q1 last year. A $10 million improvement reflecting our supply chain discipline and our sales, inventory, and operations planning or SIOP process improvements that we put in place in 2025 that are gaining traction. I will turn the call back to Dak Kay for some final comments.

Thank you, David. Looking back to 2025, we took important steps to enhance the management team across the organization, bringing in experienced talent as well as elevating rising stars. I've highlighted before the addition of Mike DiPaola and his transition to Chief Commercial Officer as an important step that is already paying dividends. He is adding beneath him more talent, and at the same time, I am focused on hiring a Senior Vice President of Product Development and Marketing, which is the role that Mike originally held. We've also added or promoted people to key positions in commercial sales, operations, IT, and finance, all areas that needed building up and strengthening. As we've added and promoted people, we also focused on eliminating non-core expenses and prioritizing our resources.

As I reviewed during our March call and briefly discussed today, we moved to rationalize our L.A. operation to become a more focused facility and shifted synthesis production to our Alabama operation, building on its strengths in order to optimize our overall manufacturing footprint. We are relocating our headquarters this month. All these actions will reduce our operating costs and better align responsibilities and accountability across the company. Turning to the new capital structure we recently put in place, I think it is important to understand that the term loans replaced our existing revolver, which was really a working capital-focused credit line and therefore was not aligned to our long-term strategy. I believe it is also important to track net debt when considering the leverage ratio, as there is now substantial cash on the balance sheet at March 31 and should be there in the future.

The terms of the refinancing align with our strategic plans and objectives while maximizing our flexibility. While this new structure does come at a higher cost, we expected that trade-off because it provides the foundation we need to execute our plan without being overly constrained by quarterly and seasonal working capital swings. The combined facilities give us a stable base of capital and meaningful liquidity, providing excess cash that serves as a buffer or a cushion so we can continue to invest and execute our strategy while maintaining the flexibility to pay down debt as we grow. As we make progress and execute on our top line and bottom line growth initiatives, we also have the flexibility to pay down these loans on our schedule, and we have a game plan to achieve that over the next two to two and a half years and ultimately refinance.

Higher revenue, better manufacturing utilization, greater operating cost efficiency, and lower overhead costs are expected to drive higher gross profit margins and operating margins, leading to substantially higher EBITDA. Cash flow and free cash flow from this growth will be supplemented by reduced working capital levels going forward as we achieve greater capital efficiency. Underlying the growth opportunities for American Vanguard is the ability to drive significant volume growth in the future. This will come from a combination of new products and from our existing portfolio, but it will also be driven by a commercial strategy that prioritizes volume across market cycles. Notably, American Vanguard has a broad portfolio of products across agricultural markets in the U.S. and around the world. This portfolio is well known from a brand perspective and well-regarded by customers.

These are large markets, especially relative to American Vanguard's size and sales, thus we have the ability and opportunity to drive volume growth without always resorting to price. I want to talk for a few minutes about what it takes to execute and deliver on the financial goals we have set for ourselves. It starts with the people we have at American Vanguard and the culture we create. It's about building a culture of commercial and operational excellence, focusing on our customers' needs and solving their problems. These actions will drive volume growth across our product portfolio, leveraging the operational focus and the more concentrated asset base we are putting in place. To succeed, we have, as already mentioned, brought in leaders from the outside with deep industry experience to complement internal talent that we have retained or elevated.

We have also put in place new initiatives and programs to drive these results and help our employees succeed in their mission. Of course, we need to give them the tools and information to succeed, which has been another key focus area, our technology footprint, our systems and our system capabilities, as well as the ability for these tools to functionally and seamlessly connect with one another and to be responsive and useful to our people. This is another important area that needed attention at American Vanguard, and as such, we've made it a top priority. New product development is critical in my opinion, and this is yet another area that needed immediate attention upon my arrival, and it has gotten that. Innovation and new product development is a foundational component of our growth strategy going forward.

I've talked about our goal to have 50 new product launches over the next 5 years, driving $100 million in annualized revenue by 2030. We have put in place a new product process internally which will drive this effort. One of the key things to note about new product introductions and why they are important is that their success and the associated incremental revenue tied to them tends to be ag cycle agnostic. Because the company pursued non-core activities over the last 10 years, the company really found itself in a position over the past 2 to 3 years of not having new products to bring to the market. This is still impacting our business right now, We changed that in 2025 and have positioned the company to have a more regular and greater cadence of new products to bring to the market starting later this year.

We will not fully see the fruits of this until 2028. The last thing I want to talk about in terms of key strategic efforts and goals is accountability. We are focused on driving growth here at American Vanguard. As I previously talked about our Plan 2030, laying out priorities for today and tomorrow, I talked about improving manufacturing efficiency, implementing standard processes across the organization, and becoming a KPI-driven management team with a more flexible, dynamic organization. Accountability is also about results, and as a public company, those results come back to numbers. Here I want to provide more specifics about what some of those numbers are, those goals over the next 2 plus years.

Executing on these will position American Vanguard to be in a position by the end of 2028 to be able to consider refinancing our debt, presuming that markets and market rates provide an attractive and stable environment for doing so. From a revenue or top-line perspective, we expect to be north of $600 million in annualized revenue, which is approximately 20% above our 2025 level. This growth needs to be matched by even greater focus and improvement in our productivity, efficiency, and overall cost structure, driving margins significantly higher. I've indicated that over the long term, I believe the business should operate closer to 15% EBITDA margins across the cycle, and that is still the goal. In the short term, we need to move our EBITDA margins in the double-digit area as soon as possible, and that is a top priority.

Together, these should help us to generate solid free cash flow, which, along with lower net working capital, will enable us to drive net debt down over the next two years. This will position us well to refinance our debt. In summary, we've had a good start to 2026. There is still a lot of work for us to do, and we will continue to assume that the external environment will do us no favors. We have to control what we can control and execute. With a capital base in place that aligns with our strategic goals and objectives, it's time to play offense built on a culture of operational excellence and customer service, supported by new product development and tied to the financial goals that make us accountable. With that operator, you can open up the call for questions.

Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. The first question today is coming from Rosemarie Morbelli from Gabelli Funds. Rosemarie, your line is live.

Thank you. Good afternoon, everyone.

Good afternoon, Rosemarie.

Dak, congratulations on all the progress you have made so far, and thank you for all of the details you have given us. I have a few questions. Your top-line growth of 7%, I mean, I understand it was very strong in North America and not so much in Brazil and India. Could you separate the price and the volume?

Rosemarie, thank you for the question. Good question. We can, and one of the things that we're working on more diligently is better data, but I can tell you from the U.S. crop standpoint that the volume was the main driver for the U.S. increase in sales. The sales increase was mainly driven by volume in the U.S.

Okay. Can you bring us up to date, on, the generics impact? Is that continuing to affect, you know, pricing in addition to volume in other areas in the U.S.? If you could, if you could give us a better feel for any particular crops that, you know, triggered that 17% increase in the U.S. Is it that it was so bad last year, and I apologize for phrasing it this year, this way, that it is easy comps more than real demand?

Sure. I think let's answer the first question, the generics impact. You know, the generics are definitely coming into the marketplace fairly heavily. In the environment that we have here within the ag cycle, they are prevalent. Having said that, a majority of our products are fairly sticky in the marketplace with the brand reputation. We are seeing spotty, specifically I've talked about Folex in the past, generic pressure. That has not yet impacted 2026 sales because we haven't got into that cycle yet. We have a very strategic generic strategy to fight that.

We're actively engaged to fend off our market share and actually grow our market share in the U.S. in that segment of Folex. As far as crops, I can tell you that Impact and Aztec were the two large products that we have here that showed increases in sales. Was it related to 2025, or was it related I mean, Q1 of 2025 being poor, or was it related to Q4 of 2025 being poor, or just a switch in timing of the purchases by the market? It's hard to tell. We did see that, I can tell you that Impact and Aztec were down in Q4, and they were up in Q1 of this year.

Having said that, Metam was still flat or slightly down after being down in Q4 of 2025. I think a lot of it is a changing in the dynamics of the market and how they buy. We're just trying to feel that out. It's kind of a convoluted answer, but it's still something in motion at this point in time, Rosemarie. I can tell you that the one last thing I'd say about crops is that, you know, we're a small player in the grand scheme of things. We have a broad portfolio that works very well. The amount of acres that we're on in relation to the total amount of acres of corn and soybean, it doesn't really impact us that much in those two crops.

Where we would see more impact would be in the cotton and peanut acres.

Okay. That would be the impact in Brazil, on the cotton side, right? More than in the U.S.

Yes. I mean, the impact that we saw in Brazil in Q1 was a comparable issue between Q1 of 2025 and Q1 of 2026. We had some sales in Q1 of 2025 that leaked over from Q4 of 2024 in Brazil due to timing of shipments. It made it difficult from a comparable standpoint.

Sure. Just one quick one, if you don't mind. Corteva is expecting the ag market to grow low single-digit in 2026. Do you agree with that assessment, or do you have a different view because you are offering different product lines?

I think the ag industry is going to grow single digits for sure. I don't think it's going to be negative this year, it is going to grow. You know, it's still to be said, there's a lot of things in front of us with geopolitical aspects of it. One, commodity prices. Two, weather and pests. Those are all in front of us as a negative, but it does feel like there's a little bit of clean air in front of us now.

All right. Thank you very much.

Thank you, Rosemarie. Thanks for the questions.

Thank you. I will now hand the call to Dak for closing remarks.

Thank you. In summary, we had a good start to 2026, but there's still a lot of work for us to do, and we will continue to assume that the external environment will do us no favors. We have to control what we can control and execute. With a capital base in place that aligns with our strategic goals and objectives, it's time to play offense. Built on culture of operational excellence and customer service, supported by new product development and tied to financial goals that make us accountable. Thank you all for your time today.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Welcome to the American Vanguard Q4 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 Kaye III, 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 the webcast 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's now my pleasure to turn the call over to CEO, Dak Kaye.

Thank you, Anthony, and welcome everyone to our Q4 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 filings. 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 L.A. 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 Axis, 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 L.A. facility and the headquarters relocation to both be complete by the end of the Q2 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 Q4 prevented the company from achieving our adjusted EBITDA target of $40million-$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 cost. I expect our inventory turns to increase in 2026 and thereafter as we work to get inventory turns to a goal of 2/4. 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's 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 why 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 what industry observers consider to be historically normal levels. The worst of the industry destocking 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 increase 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 Q4 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 prepay 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 million-$48 million in 2026 on sales of $530 million-$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. David?

Thanks, Dak. Good afternoon, everyone. I would like to start by thanking the team for all the hard work that went into completing the debt refinancing. After looking at numerous structures and holding conversations with a broad cross-section of the financing sector, we selected a term loan structure that includes no equity dilution, provides stability in difficult industry conditions, and gives us the option to lower our debt as our results improve. On another positive note, I'm also very pleased to report that we have remediated all the material weaknesses that were identified at the time of the 2024 audit. A Herculean feat in light of the refinancing work as well as the normal audit work. This is a huge accomplishment in a very short time frame. We are pleased to report that our Form 10-K for 2025 will be filed today.

Now turning to our financial performance for 2025. The company generated sales of $515 million for 2025, compared to $547 million in the prior year, a decrease of 6%. This was slightly below our target range of $520 million-$535 million. Sales in our international operations were down 14% due to elevated channel inventories in Mexico and a persistent drought in Australia. While sales in our U.S. crop business were similar to sales in the year ago period. On a positive note for the U.S. crop business, it seems that the stocking has substantially abated and products on the ground are now approximately equal to our sales, indicating a low level of channel inventory in the domestic market.

However, customers have not yet shown an inclination to buy inventory and continue buying on a just-in-time basis. Our specialty sales improved by 10%, driven by securing a joint development agreement, our business-to-business sales, along with growth for our mosquito vector solutions. Our gross profit margin is trending in the right direction, with this metric increasing to 29% in 2025. At the same time, our OpEx as a percentage of sales slightly decreased to 27%. Given some of the initiatives that we are working on, we expect further improvements in 2026 and beyond for both metrics. For the full-year 2025, we generated $39.2 million of adjusted EBITDA as compared to $39.1 million in the prior year.

Our cost containment efforts were partially offset by a softer sales environment, but we helped ourselves by improving our manufacturing performance. Now turning to our balance sheet. Our single largest headwind at the end of 2025 was the difference in prepay as compared to 2024. The company collected approximately $50 million less in prepay in 2025, which resulted in slightly increased debt at year-end. We plan to further decrease our net working capital this year and continue work on this area going forward. I believe that we can operate this company more efficiently in the future as a result of the experienced supply chain leaders we have put in place in 2025, as well as through modern management techniques and software packages we are implementing that will allow us to react more quickly to industry conditions.

With respect to capital spending, we spent approximately $4 million in 2025. We will likely spend more than that in 2026, but will remain in the $5million-$10 million range. With that, I'll turn the call back to Dak.

Thank you, David. Before opening the call to questions, I would like to take a moment to reflect on what has been a challenging but transformational year for American Vanguard. As most of you know, 2025 was my first full-year at the company. The last slide of the presentation, titled Plan 2030, shows where American Vanguard was and where it is going. As we achieve these goals, I believe we will generate higher revenue, better EBITDA and more cash flow. In closing, I would like to thank the team for all their hard work that was accomplished in 2025, but I would also like to challenge everyone to do even more in 2026 as I believe we continue to have a bright future in front of us. With that, I'll open the call to questions. Operator?

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Once again, please press star one if you have a question or a comment. The first question comes from Mike Harrison with Seaport Research Partners. Please proceed.

Hi. Good afternoon.

Good afternoon.

Was hoping that maybe we could start just with Q4 and kind of coming in below expectations on the revenue line as well as the EBITDA line. It sounds like most of that was on the international side, but I was hoping you could just give a little bit more color on what dragged on revenue and you know, in terms of the margin performance, was that in line with expectations, and it was just a revenue shortfall that led to the EBITDA shortfall, or were there some issues on the cost side as well?

Okay. Thanks, Mike, for the question. Yes, I mean, it was both international and domestic. I would say that the domestic was primarily due to the U.S. crop related to metam sales going lower, potato acres and demand for those products, specifically metam soil insecticides were also down in the U.S.. We did have some positive improvements in our herbicide sales with the Xelo, so that was a big positive as well as impact in the Q4. Internationally, as David mentioned, is primarily related to the drought that we saw in Australia as well as channel inventory in Mexico that they've not gone through the destocking process to the extent that the U.S. has.

From a cost containment standpoint, I think we did a really good job in Q4, and our manufacturing expenses were also in good shape in Q4 as well. We continued to do improvement there, and I think that's controlling the things that we can control and controlling them well. We did see improvement in the cost controls and manufacturing efficiencies in the Q4.

All right. In terms of your long-term transformation plans, those have been in place for a while. I'm just kind of curious on how the L.A. closure and the headquarters relocation fit in. Were those kind of contemplated when you initially came out with this 15% EBITDA margin target? Or should we think of these as maybe accelerating the process of achieving that 15% target?

Good question. Yeah, when I first came on, those two were not directly part of the transformational plan. As we've transitioned the transformational plan into our business improvement plan or business improvement initiatives, the L.A. facility rationalization became more apparent as we started to analyze our capacity utilization across the board and started drawing up plans to move production from the L.A. site to the Axis site. That was not initially part of the initial transformation plan, nor was the moving of the office, the headquarters. Those have been initiatives that we've undertaken subsequent to the transformational plan.

The initial transformational plan did have some very good aspects around the digital transformation, co-commercialization, rationalization of product portfolio, and rationalization of changes in our go-to-market structure in different areas around the world, specifically in Brazil and some in Central America, as well as a growth strategy for our specialty, our non-crop business. Those are still ongoing along with various other initiatives that came out of that. Did I answer the question, Mike?

Yeah. That's perfect. I had kind of two questions related to cash flow and to the debt structure going forward. It is great to see that you guys have the new term loans in plan or in place. I'm curious, are there any cash proceeds associated with the closure of the Los Angeles facility or the headquarters migration?

Proceeds, you mean from the sale of it or from the?

Yeah. Are there assets or land or anything that you'll be able to sell?

No. We'll actually continue to operate the L.A. facility as a formulation and warehousing site going forward. It'll continue at a much lower scale of operations. There will be no sale, at least initially. There may be some sales of equipment long term as we get to that point. But at the moment, we're not planning to sell any equipment there. We could down the road. As far as the office space, it was a leased space, high rent, not very conducive to running a business, quite honestly, spread out. I'm really looking forward to moving in the new headquarters, which is more collaborative work, modern work environment for the team. It's down the road in Irvine. I'm looking forward to that.

There's no pickup in proceeds around that, except for the headquarters is a $500,000 a year savings from the lease. The savings on L.A. netted out is about $4 million annually going forward.

Right. Understood. Okay.

Then just in terms of cash flow, I understand the prepayments were unusually low in Q4, and that kind of dragged down what cash flow looked like in 2025. I'm curious, with the software that you're planning to roll out and your expectations around working capital for 2026, I'm just curious, is it possible that we get to free cash flow positive in 2026, given your expectations for CapEx in the $5million-$10 million range?

I believe so, Mike. I mean, I believe so, yes. I think when you look at our adjusted EBITDA projections, less our interest and CapEx, we should be in a favorable cash flow position for 2026.

All right. Well, that's great to hear. I will turn it back. Thanks very much.

The next question comes from Rosemarie Morbelli with Gabelli Funds. Please proceed.

Good afternoon, Rosemarie.

I was just wondering, Dak, when you talk about the $100 million of the midterm, you know, coming in from new products. When I look at your slides at the moment, you are only showing one example as the Bullhorn insecticide. Can you give us a little more details as to what you expect? I mean, is that going. Are your new products also coming from fungicide or herbicide? What is your definition of mid-term?

Great questions, Rosemary. There's more products coming, and they're, of course, there is. I mentioned that. They're coming from insecticides and herbicides primarily. Those are the main focus based upon the historical nature of the company. We're taking the assets that we have in hand and utilizing them going forward with new formulations and new products. That's where the new products are coming from. New products are classified or defined as less than five years from launch. That's how we're gonna define them.

Mm-hmm.

The second half of your question was?

Well, I was just wondering, you know, $100 million compared to your current revenues expectations of $540 million at the midpoint for next year, that is a big increase. I was wondering, first of all, how comfortable you are with that $100 million. What is the timing? You say midterm. Can you quantify midterm?

Yeah. I am confident on the $100 million. That has been sensitized somewhat based upon experiences that I have with products in bringing products to launch. I am comfortable with the $100 million. Midterm is defined from 2030 to around 2030 to 2031 is what we're talking about from that standpoint. Not around the corner. As I've expressed in previous calls, we got ourselves in a hole to launch or bring a new product to launch. Generally speaking, takes around three years minimum to go through the regulatory process to get it to a registered product that we can market and sell. That's three years from you know idea creation to registration.

We've got in a hole due to the focus that we had of an organization on the SIMPAS technology. We really only launched one product in 2025 in the U.S. otherwise, it's been pretty bare. That's the reason we're seeing an uptick in the new product sales starting in 2027, 2028, mostly in 2028, as we put these products into the portfolio for launching.

Okay, thank you. That is very helpful. You talked about the high future earning powers of the company. Currently, based on, you know, the midpoint of 2026 expectations, your EBITDA margin is about 8.5%. How high can it get, and what type of top-line growth do you need to get there in addition to all of the steps you are taking, you know, lowering cost?

Good question. We've had a stated goal of getting to 15% over the long term, and that's still a goal. That's still a goal. We have a lot of things to happen to come into fruition to make that happen. Not only driving sales up, you know, around 4%-6%. Dave, would you say we have in our plan 4%-6%?

Yep.

On compound annual growth rate, and as well as reducing our cost structure or maintaining our cost structure. I still think that 27% is considerably high or relatively high, especially for our organization, and where we sit in the model of the crop protection industry. We need to work on reducing that, either as a combination of increase in sales or reducing our cost. I think manufacturing efficiencies, we have an ability there, and we will continue to show improvement there just by the sheer focus of the team, from Nolteanous Gilliam's team in the manufacturing and Jared Straley's team in operations, focusing on controlling costs, better planning. Those going together will increase our profitability at the gross profit level.

Okay, thank you very much.

Thank you, Rosemarie.

If there are any remaining questions, please indicate so by pressing star one. Okay, we have no further questions in queue. I would like to turn the floor back to management for closing remarks.

Yes, I would like to finalize by saying, by taking the necessary steps to rationalize our manufacturing footprint, focusing on new product development, creating demand for our products by listening to our customers, and continually being mindful of our costs, we will generate greater sales, more profitability, and cash flow, creating a long-term value for our shareholders. With that, I'll thank you for your time today. Have a good day.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.