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AV

AMERICAN VANGUARD CORP (AVD)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was weak relative to expectations: net sales fell 14% year over year to $115.8m, adjusted EBITDA declined to $3.0m, and EPS was $(0.30), driven by continued channel destocking, competitive pricing, and product exits .
  • Versus Wall Street consensus, AVD missed on revenue ($115.8m vs $127.0m*) and EPS (−$0.30 vs −$0.07*); adjusted EBITDA was also below consensus ($3.0m vs $8.8m*). Bold miss versus estimates reflects ongoing ag-cycle headwinds and program changes. Values retrieved from S&P Global.
  • Management cut FY 2025 guidance: revenue to $535–$545m (from $565–$585m) and adjusted EBITDA to $40–$44m (from $45–$52m), citing a gradual recovery and desire to avoid overly optimistic assumptions .
  • Balance sheet actions continued: total debt ended Q1 at $167m (down from $187m a year ago) and net working capital fell to $153m (from $238m), supporting future deleveraging as free cash flow improves .
  • Stock reaction catalysts: narrative centers on second-half seasonality and recovery as channel inventories reach historic lows; management expects improved order rates in H2 2025, with tariff impacts to COGS viewed as nominal (creating potential U.S.-sourcing advantage) .

What Went Well and What Went Wrong

What Went Well

  • Cost discipline and working capital: GAAP operating expenses down ~5% YoY (down ~14% excluding transformation and one-time items); net working capital down $85m YoY; total debt cut to $167m (from $187m) .
  • Product bright spots: Metam sales up 14% YoY; Diamond up 17%, supported by peanut acreage expansion .
  • Clear strategic focus and tone: “SIMPLIFY, PRIORITIZE and DELIVER” mantra; early supply chain analysis suggests tariff impact to COGS is nominal near term, potentially favoring U.S.-based footprint .

What Went Wrong

  • Top line pressure: net sales down 14% YoY to $115.8m; gross margin compressed to 26% from 31% on weaker pricing and volume; adjusted EBITDA fell to $3.0m from $15.5m .
  • Market and competitive dynamics: continued destocking through April; end-of-quarter discounting amid competitors’ programs; ongoing generic pressure in cotton defoliant (Folex) .
  • Specific product/region headwinds: absence of a voluntarily canceled herbicide (Dacthal), weakness in Mexican agave market, and drought in Australia .

Financial Results

Headline Metrics – YoY and Sequential

MetricQ1 2024 (Oldest)Q4 2024Q1 2025 (Newest)
Revenue ($USD Millions)$135.143 ~$169.0 $115.800
Adjusted EBITDA ($USD Millions)$15.516 ~$18.0 $2.973
Gross Margin (%)31% n/a26%
Diluted EPS ($)$0.06 n/a$(0.30)

Notes: Q4 2024 preliminary figures are “approximately” per company disclosure .

Actual vs Consensus – Q1 2025

MetricActualConsensusSurprise
Revenue ($USD Millions)$115.800 $127.000*Miss
EPS ($)$(0.30) $(0.07)*Miss
Adjusted EBITDA ($USD Millions)$2.973 $8.810*Miss

Values retrieved from S&P Global.

Segment Breakdown – Q1 2025 vs Q1 2024

SegmentQ1 2024 Revenue ($mm)Q1 2025 Revenue ($mm)Change ($mm)Change (%)
U.S. crop$67.257 $57.176 $(10.081) −15%
U.S. non-crop$17.768 $15.601 $(2.167) −12%
International$50.118 $43.023 $(7.095) −14%
Total$135.143 $115.800 $(19.343) −14%

KPIs and Cash Flow

KPIQ1 2024Q1 2025
Cash from Operations ($mm)$(36.107) $(20.576)
Capital Expenditure ($mm)$3.565 $0.431
Inventories ($mm)$179.292 $184.596
Total Debt ($mm)$187 (YoY reference) $167
Net Working Capital ($mm)$238 (YoY reference) $153
Gross Margin (%)31% 26%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($mm)FY 2025$565–$585 $535–$545 Lowered
Adjusted EBITDA ($mm)FY 2025$45–$52 $40–$44 Lowered
Capex ($mm)FY 2025~10 $8–$9 Lowered
Tariff impact (COGS/EBITDA)FY 2025<~$3m EBITDA impact Nominal to COGS; U.S. footprint may benefit Maintained/clarified
Free cash flow useFY 2025Debt paydown Debt paydown Maintained
Long-term EBITDA margin targetThrough cycle15% aspiration 15% aspiration Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Channel destockingDeep destocking; cautious pre-season buys Just-in-time purchasing; inventories down broadly Destocking continued through April; inventories at historic lows, replenishment starting in May/June Improving into H2 2025
Pricing/competitive programsGeneric pressure (Folex) and product mix headwinds H2 margin cadence; second-half stronger Unusual end-of-quarter discounting; competitive programs; generic pressure in Folex Still pressured near term
Product performanceAztec/Folex headwinds; Green Solutions strength Seasonality; strong Q4 historically Metam +14%, Diamond +17%; peanut acreage up; absence of canceled herbicide Mixed; selective strength
Tariffs/macroN/ATariffs estimated <~$3m EBITDA impact; farmer caution Tariff impact nominal to COGS; potential U.S.-sourcing advantage Clarity pending
Transformation/ERPRaising transformation benefit to $20m; procurement savings Cost cuts, inventory turns target (~2 by YE 2025); new leadership hires Opex down ~$5m; further cost-out initiatives planned Execution progressing
Regional trendsLatAm strength; Mexico agave weakness; Australia drought Broad destocking; JIT behavior Mexico agave weakness; Australia drought persisted Mixed
Regulatory/legal (Dacthal)Recall charge ($16.2m) Recall scope assessed; minimal expected further charges Prior-year absence ~$6m top-line; ~30.5% gross margin impact quantified Lapping in 2025

Management Commentary

  • CEO on market tone: “The environment is beginning to improve in the second quarter… we expect the second half of 2025 to be… stronger and to benefit from improving customer order rates.”
  • Cost and balance sheet: “We ended the quarter with total debt of $167 million… Net working capital decreased to $153 million versus $238 million a year ago.”
  • Strategy mantra: “SIMPLIFY, PRIORITIZE and DELIVER.”
  • Guidance recalibration: “We are decreasing our full-year adjusted EBITDA target range to $40–$44 million… and… revenue estimate to $535–$545 million.”
  • Tariffs: “We have analyzed our supply chain, and we believe the impact from any tariffs will be nominal to our cost of goods sold.”

Q&A Highlights

  • Destocking cadence and Dacthal quantification: Destocking persisted through April; Dacthal contributed ~$6m to prior Q1 revenue and carried ~30.5% gross margin; rest-of-portfolio ex Dacthal/Bromosil/Australia roughly flat YoY .
  • Seasonality and revenue cadence: Second half remains the strongest season due to soil fumigants; management expects the typical second-half skew in 2025 .
  • Pricing pressure and generics: End-of-quarter competitive discounting; Folex facing generic pressure, with expectation that U.S.-based production positioning improves forward .
  • Cash taxes: ~$4–$5m expected internationally for 2025, with complexities acknowledged .
  • Capital structure: Working with lenders ahead of 2026 maturity to secure flexible financing; expect higher rates; focus on ample working capital for operations and growth .

Estimates Context

  • Q1 2025 results vs consensus: Revenue $115.8m vs $127.0m*; EPS −$0.30 vs −$0.07*; adjusted EBITDA $3.0m vs $8.8m*. Bold miss across headline metrics suggests estimates likely need to move lower near term given pricing/program changes and late destocking. Values retrieved from S&P Global.
  • Prior quarter context: Q4 2024 revenue was near consensus (actual ~$165.6m* vs $169.0m*), but the company characterized the year’s profitability cadence as second-half weighted, aligning with historical seasonality . Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term setup: Q1 miss and guidance cut reset expectations; watch for sequential improvement in Q2 and a stronger H2 as inventories normalize and pricing stabilizes .
  • Cost/working capital execution is tangible and ongoing: Opex down, inventories tightly managed, net working capital and debt reduced; this supports deleveraging as free cash flow improves .
  • Product mix matters: Strength in Metam and Diamond offsets some headwinds; recovery in corn acreage and peanut acreage favors AVD’s portfolio; monitor Folex generic impacts .
  • Guidance now conservative: Revenue $535–$545m and adjusted EBITDA $40–$44m imply second-half recovery—delivery against this will be the key stock catalyst .
  • Tariff/COGS risk de minimis and may be a relative positive given U.S. footprint; macro uncertainty still influences grower purchasing cadence .
  • Watch execution milestones: ERP and SIOP process improvements, procurement/logistics savings, and commercial transformation benefits should aid margins over 2025–2026 .
  • Trading implication: After the reset, positive revisions likely require evidence of H2 order rate improvement and gross margin stabilization; any data showing faster-than-expected restocking or easing competitive discounting would be incrementally bullish .

Values retrieved from S&P Global.