American Vanguard Reports Fourth Quarter & Full Year 2023 Results

Rhea-AI Summary

American Vanguard Corporation (AVD) reports a strong financial performance for the fourth quarter and full year 2023, with net sales of $172.2 million and $579 million, respectively. Adjusted EBITDA for Q4 was $21 million, showing a significant increase from $12 million in 2022. The company aims for a transformation target of $15 million additional adjusted EBITDA by 2026 through various business initiatives.

Positive

• Strong financial results for Q4 and full year 2023
• Net sales of $172.2 million in Q4 and $579 million for the full year
• Adjusted EBITDA of $21 million in Q4, up from $12 million in 2022
• Targeting 8 to 12% revenue growth in 2024 with a focus on increasing adjusted EBITDA by $15 million by 2026

Negative

• None.

Insights

Financial Analyst

Examining American Vanguard Corporation's recent financial results reveals a mixed picture. On one hand, the sharp rebound in Q4 is noteworthy, with net sales and net income showing significant improvement over the same quarter of the previous year. This suggests a resilient performance in the face of challenges such as global destocking and competition from Chinese generic products. On the other hand, the full year comparison indicates a decline in net sales and a substantial drop in net income.

Investors should be aware that while the Q4 results are promising, the full year figures raise questions about the company's ability to sustain growth and profitability. The CEO's statement about improved demand and solid manufacturing operations in Q4 provides some optimism, but the decline in annual net income from $27.4 million to $7.5 million cannot be overlooked.

Furthermore, the adjusted EBITDA target set for 2024, implying a significant increase, suggests that management is confident about their business transformation initiative. However, investors should consider the execution risks associated with such strategic changes, especially since the full benefits are only expected by 2026.

Market Research Analyst

From a market perspective, American Vanguard's performance and strategic initiatives need to be contextualized within the broader agricultural chemicals industry. The company's experience with supply chain issues and the oversupply from Chinese competitors speaks to larger industry trends impacting many players. The company's targeted 8 to 12% revenue growth for the upcoming year is ambitious, considering the full year net sales decline in 2023.

Their focus on maintaining strong profit margins and managing operating expenses is a sound strategy, but it remains to be seen how well they can execute this amidst ongoing global economic uncertainties and industry-specific challenges. Investors should monitor how American Vanguard's brand value and operational efficiencies compare to industry peers, as these factors will be critical in achieving their adjusted EBITDA goals.

Supply Chain Expert

Supply chain resilience has clearly been a major factor for American Vanguard as indicated by their Q4 recovery. The company's ability to navigate the unavailability of their most profitable products due to supply chain disruptions is commendable. However, the reliance on supply chain optimization as a significant component of their transformation initiative suggests that there may be further challenges ahead.

Investors should consider the company's plans for digital sub-initiatives and operational improvements as part of their transformation strategy. These areas can be critical levers for improving supply chain efficiency and reducing costs. However, the effectiveness of these initiatives will depend on successful implementation and adaptation to the rapidly changing global supply chain environment.

Sets $15MM Adjusted EBITDA Gain as Transformation Target

NEWPORT BEACH, Calif.--(BUSINESS WIRE)-- American Vanguard Corporation (NYSE: AVD) today announced financial results for the fourth quarter and full year ended December 31, 2023.

Fiscal 2023 Fourth Quarter Financial Highlights – versus Fiscal 2022 Fourth Quarter:

• Net sales were $172.2 million in 2023, compared to $159.5 million in 2022
• Net income was $7.0 million in 2023, compared to $3.9 million in 2022
• Earnings per diluted share of $0.25 in 2023, compared to $0.13 in 2022
• Adjusted EBITDA¹ of $21 million in 2023, compared to $12 million in 2022

Fiscal 2023 Full Year Financial Highlights – versus Fiscal 2022 Full Year:

• Net sales were $579 million in 2023, compared to $610 million in 2022
• Net income was $7.5 million in 2023, compared to $27.4 million in 2022
• Earnings per diluted share of $0.26 in 2023, compared to $0.92 in 2022
• Adjusted EBITDA¹ of $55 million in 2023, compared to $73 million in 2022

Eric Wintemute, Chairman and CEO of American Vanguard, stated: “We rebounded sharply in Q4 after having weathered the effect of global destocking within the distribution channel, the oversupply of Chinese generic products into multiple regions, and the unavailability of our most profitable products due to supply chain issues. Increased demand during Q4 provided evidence that destocking activity continues to subside and that, even while showing greater discipline, procurement within the distribution channel is following more normal patterns. During the quarter, we achieved predicted revenue growth, maintained solid manufacturing operations, sustained strong profit margins by bolstering brand value and strengthened our balance sheet.”

Mr. Wintemute concluded: “Looking forward, we believe that our company is situated well in both domestic and international markets and are targeting 8 to 12% revenue growth resulting in a full year adjusted EBITDA range of $70 to $80 million in 2024. We expect gross profit margins to remain strong, operating expenses to be tightly managed, and factory performance to be efficient. In addition, with the assistance of our consultant Kearney, through our business transformation initiative, we are targeting growth of adjusted EBITDA to 15% of net sales or an additional $15 million or more of adjusted EBITDA on a full year basis. The full benefit of the transformation will be realized by 2026 through a combination of operational, commercial, digital, and general and administrative sub-initiatives. We look forward to giving you a detailed presentation during our upcoming earnings call.”

Conference Call

Eric Wintemute, Chairman & CEO, Bob Trogele, EVP & COO and David T. Johnson, VP & CFO, will conduct a conference call focusing on the financial results and strategic themes at 5:00 pm ET on March 13, 2023. Interested parties may participate in the call by dialing 201-493-6744. Please call in 10 minutes before the scheduled start time and ask for the American Vanguard call. The conference call will also be webcast live via the News and Media section of the Company’s web site at www.american-vanguard.com. To listen to the live webcast, go to the web site at least 15 minutes early to register, download and install any necessary audio software. If you are unable to listen live, the conference call will be archived on the Company’s web site.

About American Vanguard

American Vanguard Corporation is a diversified specialty and agricultural products company that develops and markets products for crop protection and management, turf and ornamentals management and public and animal health. American Vanguard is included on the Russell 2000® and Russell 3000® Indexes. To learn more about American Vanguard, please reference the Company’s web site at www.american-vanguard.com.

The Company, from time to time, may discuss forward-looking information. Except for the historical information contained in this release, all forward-looking statements are estimates by the Company’s management and are subject to various risks and uncertainties that may cause results to differ from management’s current expectations. Such factors include weather conditions, changes in regulatory policy and other risks as detailed from time-to-time in the Company’s SEC reports and filings. All forward-looking statements, if any, in this release represent the Company’s judgment as of the date of this release.

CONSOLIDATED BALANCE SHEETS December 31, 2023 and 2022 (In thousands, except share data) (Unaudited)
		2023				2022
Assets
Current assets:
Cash and cash equivalents		$	11,416			$	20,328
Receivables:
Trade, net of allowance for credit losses of $7,107 and $5,136, respectively			182,613				156,492
Other			8,356				9,816
Total receivables, net			190,969				166,308
Inventories			219,551				184,190
Prepaid expenses			6,261				15,850
Income taxes receivable			3,824				1,891
Total current assets			432,021				388,567
Property, plant and equipment, net			74,560				70,912
Operating lease right-of-use assets, net			22,417				24,250
Intangible assets, net of amortization			172,508				184,664
Goodwill			51,199				47,010
Deferred income tax assets			2,849				141
Other assets			11,994				10,769
Total assets		$	767,548			$	726,313
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	68,833			$	69,000
Customer prepayments			65,560				110,597
Accrued program costs			68,076				60,743
Accrued expenses and other payables			16,354				20,982
Operating lease liabilities, current			6,081				5,279
Income taxes payable			5,591				—
Total current liabilities			230,495				266,601
Long-term debt			138,900				51,477
Operating lease liabilities, long-term			17,113				19,492
Deferred income tax liabilities			7,892				14,597
Other liabilities			3,138				4,167
Total liabilities			397,538				356,334
Commitments and contingent liabilities
Stockholders’ equity:
Preferred stock, $0.10 par value per share; authorized 400,000 shares; none issued			—				—
Common stock, $0.10 par value per share; authorized 40,000,000 shares; issued 34,676,787 shares in 2023 and 34,446,194 shares in 2022			3,467				3,444
Additional paid-in capital			110,810				105,634
Accumulated other comprehensive loss			(5,963	)			(12,182	)
Retained earnings			332,897				328,745
			441,211				425,641
Less treasury stock at cost, 5,915,182 shares in 2023 and 5,029,892 in 2022			(71,201	)			(55,662	)
Total stockholders’ equity			370,010				369,979
Total liabilities and stockholders’ equity		$	767,548			$	726,313

CONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 31, 2023, 2022 and 2021 (In thousands, except per share data) (Unaudited)
		2023				2022				2021
Net sales		$	579,371			$	609,615			$	557,676
Cost of sales			(400,207	)			(417,227	)			(386,953	)
Gross profit			179,164				192,388				170,723
Operating expenses
Selling, general and administrative			(117,844	)			(119,921	)			(111,093	)
Research, product and regulatory			(38,025	)			(31,816	)			(28,855	)
Total operating expenses			(155,869	)			(151,737	)			(139,948	)
Bargain purchase gain on business acquisition			—				—				171
Operating income			23,295				40,651				30,946
Change in fair value of equity investments, net			(359	)			(732	)			(790	)
Other income			—				—				672
Interest expense, net			(12,639	)			(3,954	)			(3,687	)
Income before provision for income taxes and loss on equity method investment			10,297				35,965				27,141
Provision for income taxes			(2,778	)			(8,561	)			(8,166	)
Income before loss on equity method investment			7,519				27,404				18,975
Loss from equity method investment			—				—				(388	)
Net income		$	7,519			$	27,404			$	18,587
Earnings per common share—basic		$	0.27			$	0.94			$	0.62
Earnings per common share—assuming dilution		$	0.26			$	0.92			$	0.61
Weighted average shares outstanding—basic			28,128				29,234				29,811
Weighted average shares outstanding—assuming dilution			28,533				29,872				30,410

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES ANALYSIS OF SALES For the years and quarters ended December 31, 2023 and 2022 (Unaudited)
	For the quarters ended December 31,								For the years ended December 31,
	2023				2022				2023				2022
Net sales:
U.S. crop	$	83,406			$	68,231			$	269,229			$	288,624
U.S. non-crop		25,246				22,865				75,287				76,709
Total U.S.		108,652				91,096				344,516				365,333
International		63,528				68,366				234,855				244,282
Total net sales	$	172,180			$	159,462			$	579,371			$	609,615
Total cost of sales	$	(117,545	)		$	(117,529	)		$	(400,207	)		$	(417,227	)
Total gross profit		54,635				41,933				179,164				192,388
Total gross margin		32	%			26	%			31	%			32	%

CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2023, 2022 and 2021 (In thousands) (Unaudited)
		2023				2022				2021
Cash flows from operating activities:
Net income		$	7,519			$	27,404			$	18,587
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization of property, plant and equipment and intangible assets			21,780				22,138				22,229
Amortization of other long-term assets			1,754				3,573				3,943
Amortization and accretion of deferred loan fees and discounted liabilities			254				289				359
Loss on disposal of property, plant and equipment			—				268				194
Provision for bad debts			1,935				1,171				649
Provision for inventory obsolescence			517				340				1,034
Loan principal and interest forgiveness			—				—				(672	)
Fair value adjustment of contingent consideration			—				610				758
Decrease in environmental liability			—				—				(167	)
Stock-based compensation			6,138				5,684				6,880
Deferred income taxes			(9,710	)			(5,278	)			(2,090	)
Changes in liabilities for uncertain tax positions or unrecognized tax benefits			(508	)			(1,441	)			(1,783	)
Change in equity investment fair value			359				732				790
Loss from equity method investment			—				—				388
Bargain purchase gain			—				—				(171	)
Non-cash lease expense			256				68				286
Foreign currency transaction gains			(581	)			(29	)			(225	)
Changes in assets and liabilities associated with operations, net of business combinations:
Increase in net receivables			(20,278	)			(6,447	)			(24,347	)
(Increase) decrease in inventories			(27,832	)			(29,560	)			8,323
(Increase) decrease in income tax receivable, net			3,568				(4,910	)			6,051
(Increase) decrease in prepaid expenses and other assets			1,269				(3,082	)			(4,581	)
Increase (decrease) in accounts payable			(2,287	)			1,704				8,783
(Decrease) Increase in deferred revenue			(45,079	)			47,551				19,280
Increase (decrease) in accrued program costs			7,244				(2,449	)			17,877
Increase (decrease) in other payables and accrued expenses			(5,066	)			90				3,986
Decrease in contingent consideration			—				(1,321	)			—
Net cash (used in) provided by operating activities			(58,748	)			57,105				86,361
Cash flows from investing activities:
Capital expenditures			(11,878	)			(13,261	)			(9,518	)
Proceeds from disposal of property, plant and equipment			242				84				—
Acquisitions of business and product line			(5,195	)			—				(10,000	)
Intangible assets			(186	)			(1,293	)			(524	)
Net cash used in investing activities			(17,017	)			(14,470	)			(20,042	)
Cash flows from financing activities:
Payments under line of credit agreement			(172,500	)			(254,000	)			(186,569	)
Borrowings under line of credit agreement			259,100				253,000				131,000
Payment of contingent consideration			—				(68	)			(1,301	)
Net receipt from the issuance of common stock under ESPP			981				837				743
Net receipt from the exercise of stock options			46				827				172
Net payment from common stock purchased for tax withholding			(1,967	)			(2,067	)			(2,955	)
Repurchase of common stock			(15,539	)			(34,002	)			(4,579	)
Payment of cash dividends			(3,384	)			(2,787	)			(2,382	)
Net cash provided by (used in) financing activities			66,737				(38,260	)			(65,871	)
Net (decrease) increase in cash and cash equivalents			(9,028	)			4,375				448
Effect of exchange rate changes on cash and cash equivalents			116				(332	)			(86	)
Cash and cash equivalents at beginning of year			20,328				16,285				15,923
Cash and cash equivalents at end of year		$	11,416			$	20,328			$	16,285

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES RECONCILIATION OF NET INCOME TO EBITDA For the years and quarters ended December 31, 2023 and 2022 (Unaudited)
	For the years ended December 31,
	2023				2022
Net income	$	7,519			$	27,404
Provision for income taxes		2,778				8,561
Interest expense, net		12,639				3,954
Proxy costs		541				1,785
Depreciation and amortization		23,534				25,711
Stock compensation expense		6,138				5,684
Transformation costs		957				-
Adjusted EBITDA2	$	54,106			$	73,099

	For the quarters ended December 31,
	2023				2022
Net income	$	6,979			$	3,898
Provision (benefit) for income taxes		712				(1,626	)
Interest expense, net		4,357				1,698
Depreciation and amortization		5,684				6,406
Stock compensation expense		1,881				1,288
Transformation costs		957				—
Adjusted EBITDA2	$	20,570			$	11,664

^{______________________________
1} Earnings before interest, taxes, depreciation, and amortization. Adjusted EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income (loss), operating income (loss) or any other financial measure so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. The items excluded from adjusted EBITDA are detailed in the reconciliation attached to this news release. Other companies (including the Company’s competitors) may define adjusted EBITDA differently.
² Earnings before interest, taxes, depreciation, and amortization. Adjusted EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income (loss), operating income (loss) or any other financial measure so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. The items excluded from adjusted EBITDA are detailed in the reconciliation attached to this news release. Other companies (including the Company’s competitors) may define adjusted EBITDA differently.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240314306132/en/

Company Contact:

American Vanguard Corporation

William A. Kuser, Director of Investor Relations

(949) 260-1200

williamk@amvac-chemical.com

Investor Representative

the Equity Group Inc.

www.theequitygroup.com

Lena Cati

Lcati@equityny.com

Source: American Vanguard Corporation

FAQ

What were American Vanguard Corporation's (AVD) net sales for the fourth quarter of 2023?

American Vanguard Corporation reported net sales of $172.2 million for the fourth quarter of 2023.

What was the adjusted EBITDA for American Vanguard Corporation in the fourth quarter of 2023?

The adjusted EBITDA for American Vanguard Corporation in the fourth quarter of 2023 was $21 million.

What is the company's target for adjusted EBITDA by 2026?

American Vanguard Corporation aims to achieve an additional $15 million or more of adjusted EBITDA by 2026 through various business transformation initiatives.

Who will be conducting the conference call to discuss the financial results?

Eric Wintemute, Chairman & CEO, Bob Trogele, EVP & COO, and David T. Johnson, VP & CFO, will conduct the conference call to discuss the financial results.