American Vanguard reports Q2 2024 financial results, showing a slight decline in net sales to $128.2 million from $132.8 million in Q2 2023

American Vanguard Corporation (NYSE: AVD) announced financial results for the second quarter ending June 30, 2024.

Second Quarter 2024 Financial Highlights – versus Second Quarter 2023:

• Net sales of $128.2 million v. $132.8 million

• Adjusted EBITDA¹ of $6.2 million v. $10.7 million

• Earnings per share of $(0.42) v. $(0.04)

First Half of 2024 Financial Highlights – versus First Half of 2023:

• Net sales of $263.4 million v. $257.7 million

• Adjusted EBITDA of $21.7 million v. $22.2 million

• Earnings per diluted share of $(0.36) v. $0.03

″In the face of adverse market conditions, quarterly net sales were slightly below, and first half net sales were slightly above, those of the comparable periods last year. We did record double-digit increases in net sales of our domestic non-crop business and Green Solutions products, driven by strong demand in Central America. However, our profitability was reduced largely due to non-recurring charges, including severance compensation for the former CEO and other one-time costs including various expenses in support of our business transformation activity. That said, the company does not find these results to be acceptable and is focused on changing direction with urgency,″ stated Timothy Donnelly, Acting CEO of American Vanguard.

Mr. Donnelly continued, ″We have taken immediate steps to enhance liquidity and improve our cost structure. On August 8, 2024, the company entered into an amended credit facility with our senior lenders to relax our EBITDA-based covenant through Q3 of 2025, while significantly upsizing the amount of non-recurring charges that we can exclude from our adjusted EBITDA calculation. These measures will improve our borrowing capacity in light of trailing four-quarter performance. The amended agreement includes an increase in interest rates at the highest leverage ratios and adds a requirement for lender consent in connection with share repurchases, dividends, and acquisitions. We thank the lender group for moving quickly and for their continued support.″

Mr. Donnelly continued, ″In addition, after a detailed review, we have recently trimmed our workforce by about 4% and set in motion multiple initiatives to maximize cash while managing inventory downward, including selling out select non-strategic inventory positions to generate cash, building to demand and controlling the accounts receivable/accounts payable cycle. Further, we have redoubled our effort to reduce controllable expenses over the second half, including selling expenses, travel, and entertainment and use of contractors.″

Mr. Donnelly added, ″With respect to recent developments affecting our product, Dacthal, as reported widely by the press earlier in the week, the EPA has issued an emergency suspension of that product which prevents its sale, distribution, and use. As you may recall, we had voluntarily suspended sales of Dacthal last April and submitted a mitigated label in an effort to meet the agency’s concerns. In light of our cessation of sales at that time, we removed Dacthal sales from our 2024 forecast assumptions. We are, of course, working in good faith with both EPA and our customers to ensure compliance with the suspension order and will have more to report on this in the near term.″

Mark Basset, board member on special assignment with the Company’s Office of the CEO, stated, ″We’ve done a lot of hard work laying the foundation for a successful business transformation that touches every aspect of the company from a new organizational design, to new commercial strategies, to more cost-effective operations. Now is the time to begin to implement those plans with a sense of urgency and purpose.″

Dr. Basset continued, ″Accordingly, in the interest of allocating capital prudently, we are seeking a partner within the precision application space to take over the broader commercialization and funding of SIMPAS. In addition, working with our consultant Kearney, we are pursuing multiple paths toward improving operating leverage, including material procurement, manufacturing efficiency, SKU rationalization, customer and pricing strategies, and structural reorganization, which, we believe, will meaningfully improve our cost structure, in an effort to push our adjusted EBITDA margins to 15% on a fully-realized basis in 2026.″

Mr. Donnelly concluded, ″In light of the current state of the market and forecasted demand, which we expect to be stable, we are lowering our full year 2024 targets to adjusted EBITDA of $40 - $50 million (compared to our previous estimate of $60 - $70 million) and net sales to be down 2%-to-flat (compared to our previous estimate of sales up 6% to 9%) or $565 million to $580 million. On a related note, we continue to make progress in our effort to hire a CEO. However, during the pendency of the search, the Office of the CEO has a mandate to improve liquidity and change the company for the better and to do so with a sense of urgency. Please join us on our earnings call for more details.″

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.