American Vanguard Reports Third Quarter 2024 Results

Rhea-AI Summary

American Vanguard reported Q3 2024 financial results with net sales of $118.3 million ($130.7 million excluding Dacthal recall impact) compared to $149.5 million in Q3 2023. The company maintained its full-year 2024 Adjusted EBITDA guidance of $40-50 million despite reporting Q3 Adjusted EBITDA of $1.8 million vs $11.4 million year-over-year. Non-crop revenues grew 17% and Green Solutions revenues increased 18%. The company reduced debt by $32.5 million to $179 million and raised expected transformation benefits to $20 million from $15 million. Q3 EPS was $(0.92) compared to $(0.01) in Q3 2023.

Positive

• Debt reduction of $32.5 million from $211.3 million to $179 million
• Non-crop business revenue growth of 17% year-over-year
• Green Solutions portfolio growth of 18% year-over-year
• Increased expected transformation benefits to $20 million from $15 million
• Operating expenses decreased in both Q3 and nine-month period

Negative

• Net sales declined to $118.3 million from $149.5 million year-over-year
• Q3 Adjusted EBITDA dropped to $1.8 million from $11.4 million year-over-year
• EPS declined to $(0.92) from $(0.01) in Q3 2023
• $16.2 million charge for Dacthal recall and disposal
• $8.1 million transformation charge in Q3

Insights

Financial Analyst

The Q3 2024 results reveal significant challenges and transformation efforts at American Vanguard. Net sales declined to $118.3 million from $149.5 million year-over-year, while Adjusted EBITDA dropped to $1.8 million from $11.4 million. Key positives include debt reduction of $32.5 million and growth in non-crop (17%) and green solutions (18%) segments.

The company faces significant one-time charges, including $8.1 million for transformation costs and $16.2 million for Dacthal recall. Despite these headwinds, management maintains full-year 2024 Adjusted EBITDA guidance of $40-50 million and has increased expected transformation benefits to $20 million. The focus on inventory reduction to 34% of sales and continued deleveraging suggests a strategic pivot towards improving operational efficiency.

Business Transformation Expert

The ongoing business transformation at American Vanguard shows promising signs despite current challenges. The increased target for transformation benefits from $15 million to $20 million indicates potentially deeper cost-saving opportunities identified during implementation. The company's strategic focus on achieving 15% adjusted-EBITDA margin across the ag-cycle demonstrates a clear long-term vision.

The reduction in operating expenses and significant debt paydown suggest effective execution of the transformation plan. However, the search for a new CEO during this critical phase adds uncertainty to the transformation trajectory. The emphasis on inventory management and cash flow generation aligns with best practices in agricultural business transformation, though near-term profitability remains pressured.

Reiterating full-year 2024 Adj. EBITDA guidance

Non-Crop Revenues Grew 17%; Green Solutions Revenues Grew 18% Y/o/Y

Business transformation continues to accelerate, raising expected annual benefit to $20 million

Company reduced debt by $32.5 million

NEWPORT BEACH, Calif.--(BUSINESS WIRE)-- American Vanguard^® Company, a diversified specialty and agricultural products company that develops, manufactures, and markets solutions for crop protection and nutrition, turf and ornamental management and commercial pest control, today reported financial results for the third quarter ended September 30, 2024.

Third Quarter 2024 Financial and Operational Highlights – versus Third Quarter 2023:

• Net sales of $118.3 million ($130.7 million when excluding Dacthal product recall impact) v. $149.5 million;
• Adjusted EBITDA¹ of $1.8 million v. $11.4 million;
• Maintaining full-year 2024 Adjusted EBITDA guidance of $40 million to $50 million
• EPS of $(0.92) v. ($0.01)
• Decreased debt by $32.5 million from $211.3 million in the previous quarter

First nine months 2024 Financial and Operational Highlights – versus first nine months 2023:

• Net sales of $381.7 million ($394.1 million when excluding Dacthal product recall impact) v. $407.2 million;
• Adjusted EBITDA of $23.3 million v. $33.5 million;
• EPS of $(1.28) v. $0.02

Other Highlights:

• Raising expected full-year transformation related benefits to $20 million from $15 million
• The Board is actively engaged in recruiting a CEO to build upon the transformation momentum

Timothy J. Donnelly, Acting CEO of American Vanguard, stated “We remain focused on transforming our Company into an efficient, reliable and profitable supplier to the Ag industry. We are pleased with the results that we are beginning to see from our business transformation. While we continue to manage through macroeconomic headwinds, we are seeing pockets of strength. For example, our non-crop business grew 17% as compared to the year ago period, and our green solutions portfolio grew 18% as compared to the year ago period. The growth in these areas was offset by pressure from generics, but the single biggest factor was a significant drop in Aztec sales year over year. Sales in 2023 were unusually high as a result of a previous supply shortage.”

Mr. Donnelly continued, “As we transform the business, we are incurring one-time charges associated with positioning American Vanguard for longer-term growth. During the quarter we incurred a $8.1 million transformation charge. Additionally, during the quarter we recorded a $16.2 million charge associated with the collection and disposal of Dacthal. The Company benefitted from this profitable product for many years, and we are now taking the necessary steps to safely recall and dispose of it.”

David T. Johnson, Vice President, CFO and Treasurer, stated “Despite the macro headwinds, the Company remains steadfast in its transformation roadmap, which presents a clear path towards achieving a 15% adjusted-EBITDA margin across the ag-cycle. We are pleased to have been able to pay down a material amount of debt during the quarter, decreasing our long-term debt to $179 million from $211 million at the end of the previous quarter. We expect to further improve our liquidity as we decrease our inventory in our seasonally strong 4^th quarter. We remain optimistic that we can decrease inventory to 34% of sales by year end, down $25 million versus last year. We are pleased with the hard work of our employees in pursuing the business transformation projects. Furthermore, through their hard work we were able to reduce operating expenses, excluding transformation costs, for both the three month and nine month periods ended September 30, 2024, as compared to the prior year period.”

Mark Bassett, a board member who is temporarily working with the Company’s Office of the CEO commented, “Within our transformation, we are encouraged by the initial progress that we have made and see an opportunity for even greater benefits than we had originally calculated. We now expect to achieve $20 million in transformation related benefits instead of our previous estimate of $15 million.”

Dr. Bassett concluded, “I want to reiterate our full year 2024 revenue (down 2% to flat, excluding the product recall charge) and adjusted EBITDA ($40 - $50 million) targets. I view this achievement as a testament to the resiliency of this Company, especially in the wake of the current market conditions. We are focused on returning American Vanguard to a position of consistent free cash flow generation, which in the near-term will be allocated towards further deleveraging, but over the medium to long-term we expect to be able to apply these cash flows to growth opportunities.”

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. Over the past 20 years, through product and business acquisitions, the Company has expanded its operations into 21 countries and now has more than 1,000 product registrations in 56 nations worldwide. Its strategy rests on two growth initiatives – i) Core Business through innovation of conventional products and ii) Green Solutions with more than 120 biorational products – including fertilizers, microbials, nutritionals and non-conventional products. American Vanguard is included on the Russell 2000® and Russell 3000® Indexes. To learn more about the Company, please reference 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.

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
ASSETS		September 30, 2024				December 31, 2023
Current assets:
Cash		$	11,880			$	11,416
Receivables:
Trade, net of allowance for credit losses of $8,661 and $7,107, respectively			146,145				182,613
Other			5,852				8,356
Total receivables, net			151,997				190,969
Inventories			246,037				219,551
Prepaid expenses			7,501				6,261
Income taxes receivable			7,690				3,824
Total current assets			425,105				432,021
Property, plant and equipment, net			73,494				74,560
Operating lease right-of-use assets, net			21,448				22,417
Intangible assets, net of amortization			164,480				172,508
Goodwill			48,012				51,199
Deferred income tax assets			12,218				2,849
Other assets			14,701				11,994
Total assets		$	759,458			$	767,548
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	73,557			$	68,833
Customer prepayments			27,183				65,560
Accrued program costs			85,665				68,076
Accrued expenses and other payables			29,066				16,354
Operating lease liabilities, current			6,604				6,081
Income taxes payable			3,229				5,591
Total current liabilities			225,304				230,495
Long-term debt			178,749				138,900
Operating lease liabilities, long term			15,574				17,113
Deferred income tax liabilities			9,167				7,892
Other liabilities			2,756				3,138
Total liabilities			431,550				397,538
Commitments and contingent liabilities (Note 12)
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 34,525,983 shares at September 30, 2024 and 34,676,787 shares at December 31, 2023			3,452				3,467
Additional paid-in capital			114,196				110,810
Accumulated other comprehensive loss			(13,849	)			(5,963	)
Retained earnings			295,310				332,897
Less treasury stock at cost, 5,915,182 shares at September 30, 2024 and December 31, 2023			(71,201	)			(71,201	)
Total stockholders’ equity			327,908				370,010
Total liabilities and stockholders’ equity		$	759,458			$	767,548

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2024				2023				2024				2023
Net sales		$	118,307			$	149,516			$	381,659			$	407,191
Cost of sales			(101,014	)			(106,432	)			(284,185	)			(282,662	)
Gross profit			17,293				43,084				97,474				124,529
Operating expenses
Selling, general and administrative			(26,365	)			(29,813	)			(86,885	)			(85,954	)
Research, product development and regulatory			(11,177	)			(9,080	)			(25,482	)			(27,363	)
Transformation			(8,139	)			—				(16,636	)			—
Operating (loss) income			(28,388	)			4,191				(31,529	)			11,212
Change in fair value of equity investment			—				(247	)			513				(324	)
Interest expense, net			(4,378	)			(3,384	)			(11,988	)			(8,282	)
(Loss) income before income tax benefit (expense)			(32,766	)			560				(43,004	)			2,606
Income tax benefit (expense)			7,024				(885	)			7,093				(2,066	)
Net (loss) income		$	(25,742	)		$	(325	)		$	(35,911	)		$	540
Net (loss) income per common share—basic		$	(0.92	)		$	(0.01	)		$	(1.28	)		$	0.02
Net (loss) income per common share—assuming dilution		$	(0.92	)		$	(0.01	)		$	(1.28	)		$	0.02
Weighted average shares outstanding—basic			28,009				27,919				28,015				28,236
Weighted average shares outstanding—assuming dilution			28,009				27,919				28,015				28,656

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
ANALYSIS OF SALES
(In thousands), (Unaudited)
		For the three months ended September 30,
		2024				2023				Change				% Change
Net sales:
U.S. crop		$	35,533			$	67,749			$	(32,216	)			-48	%
U.S. non-crop			22,454				19,250				3,204				17	%
U.S. total			57,987				86,999				(29,012	)			-33	%
International			60,320				62,517				(2,197	)			-4	%
Total net sales		$	118,307			$	149,516			$	(31,209	)			-21	%
Total cost of sales		$	(101,014	)		$	(106,432	)		$	5,418				-5	%
Total gross profit		$	17,293			$	43,084			$	(25,791	)			-60	%
Gross margin			15	%			29	%
		Impact of Dacthal Recall
		2024				2023				Change
Net sales:
U.S. crop		$	(11,783	)		$	—			$	(11,783	)
U.S. non-crop			—				—				—
Total U.S.			(11,783	)			—				(11,783	)
International			(620	)			—				(620	)
Total net sales		$	(12,403	)		$	—			$	(12,403	)
Total cost of sales			(3,788	)			—				(3,788	)
Total gross profit		$	(16,191	)		$	—			$	(16,191	)
		For the nine months ended September 30,
		2024				2023				Change				% Change
Net sales:
U.S. crop		$	155,075			$	185,823			$	(30,748	)			-17	%
U.S. non-crop			59,241				50,041				9,200				18	%
U.S. total			214,316				235,864				(21,548	)			-9	%
International			167,343				171,327				(3,984	)			-2	%
Total net sales		$	381,659			$	407,191			$	(25,532	)			-6	%
Total cost of sales		$	(284,185	)		$	(282,662	)		$	(1,523	)			1	%
Total gross profit		$	97,474			$	124,529			$	(27,055	)			-22	%
			26	%			31	%
		Impact of Dacthal Recall
		2024				2023				Change
Net sales:
U.S. crop		$	(11,783	)		$	—			$	(11,783	)
U.S. non-crop			—				—				—
Total U.S.			(11,783	)			—				(11,783	)
International			(620	)			—				(620	)
Total net sales		$	(12,403	)		$	—			$	(12,403	)
Total cost of sales			(3,788	)			—				(3,788	)
Total gross profit		$	(16,191	)		$	—			$	(16,191	)

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
		For the Nine Months Ended September 30,
		2024				2023
Cash flows from operating activities:
Net (loss) income		$	(35,911	)		$	540
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation of property, plant and equipment			6,655				6,396
Amortization of intangibles assets			9,947				10,009
Amortization of other long-term assets			199				1,445
Amortization of deferred loan fees			342				174
Provision for bad debts			1,278				952
Stock-based compensation			3,887				4,257
Change in deferred income taxes			(9,110	)			(977	)
Changes in liabilities for uncertain tax positions or unrecognized tax benefits			106				467
Change in equity investment fair value			(513	)			324
Other			110				7
Foreign currency transaction losses			121				199
Changes in assets and liabilities associated with operations:
Decrease (increase) in net receivables			33,475				(29,055	)
Increase in inventories			(29,429	)			(58,163	)
Increase in prepaid expenses and other assets			(4,107	)			(633	)
Change in income tax receivable/payable, net			(6,216	)			(4,046	)
Increase (decrease) in net operating lease liability			(48	)			227
Increase in accounts payable			6,141				1,240
Decrease in customer prepayments			(38,375	)			(104,590	)
Increase in accrued program costs			17,721				29,779
Increase (decrease) in other payables and accrued expenses			13,878				(4,406	)
Net cash used in operating activities			(29,849	)			(145,854	)
Cash flows from investing activities:
Capital expenditures			(6,106	)			(8,589	)
Proceeds from disposal of property, plant and equipment			66				200
Intangible assets			(341	)			(759	)
Net cash used in investing activities			(6,381	)			(9,148	)
Cash flows from financing activities:
Payments under line of credit agreement			(168,188	)			(62,800	)
Borrowings under line of credit agreement			208,037				228,500
Receipt from the issuance of common stock under ESPP			901				980
Net receipt from the exercise of stock options			—				46
Net payment for tax withholding on stock-based compensation awards			(1,416	)			(1,957	)
Repurchase of common stock			—				(15,539	)
Payment of cash dividends			(2,510	)			(2,550	)
Net cash provided by financing activities			36,824				146,680
Net increase (decrease) in cash and cash equivalents			594				(8,322	)
Effect of exchange rate changes on cash and cash equivalents			(130	)			(477	)
Cash and cash equivalents at beginning of period			11,416				20,328
Cash and cash equivalents at end of period		$	11,880			$	11,529

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2024				2023				2024				2023
Net (loss) income		$	(25,742	)		$	(325	)		$	(35,911	)		$	540
Income tax (benefit) expense			(7,024	)			885				(7,093	)			2,066
Interest expense, net			4,378				3,384				11,988				8,282
Depreciation and amortization			5,703				5,704				16,801				17,850
Stock-based compensation			1,135				1,716				3,887				4,257
Transformation costs & legal reserves			7,159				—				17,402				—
Dacthal returns			16,191				—				16,191				—
Proxy contest activities			—				—				—				541
Adjusted EBITDA2		$	1,800			$	11,364			$	23,265			$	33,536

______________________________
¹ Adjusted 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 Adjusted 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/20241111947698/en/

American Vanguard Corporation

Anthony Young, Director of Investor Relations

anthonyy@amvac.com

(949) 221-6119

Investor Representative

Alpha IR Group

Robert Winters

Robert.winters@alpha-ir.com

(929) 266-6315

Source: American Vanguard Corporation

FAQ

What was American Vanguard's (AVD) Q3 2024 revenue?

American Vanguard's Q3 2024 revenue was $118.3 million, or $130.7 million when excluding the Dacthal product recall impact, compared to $149.5 million in Q3 2023.

How much debt did American Vanguard (AVD) reduce in Q3 2024?

American Vanguard reduced its debt by $32.5 million in Q3 2024, from $211.3 million to $179 million.

What is American Vanguard's (AVD) full-year 2024 Adjusted EBITDA guidance?

American Vanguard maintains its full-year 2024 Adjusted EBITDA guidance of $40 million to $50 million.

What was the growth rate of AVD's Green Solutions portfolio in Q3 2024?

American Vanguard's Green Solutions portfolio grew 18% compared to the same period in 2023.