Greetings. And welcome to the American Vanguard Corporation's Second Quarter 2021 Conference Call. At this time, all participants have been placed on a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Bill Kuser, Director of Investor Relations. Please go ahead.

Thank you very much, Brock. And welcome everyone to American Vanguard's Second Quarter and Midyear Earnings Review. Our speakers today will be Mr. Eric Wintemute, Chairman and CEO of American Vanguard, Mr. David Johnson, the company's Chief Financial Officer and assisting in answering your questions, Mr. Bob Trogele, company's Chief Operating Officer. Before beginning, let's take a moment to review our cautionary reminders. In today's call, the company may discuss forward-looking information. Such information and statements are based on estimates and assumptions by the company's management and are subject to various risks and uncertainties that may cause actual results to differ from management's current expectations. Such factors can include weather conditions, changes in regulatory policy, competitive pressures and various other risks that are detailed in the company's SEC reports and filings. All forward-looking statements represent the company's best judgment as of the date of this call, and such information will not necessarily be updated by the company. With that said, let me turn the call over to Eric.

Thank you, Bill. And thank you, everyone on the phone and webcast for joining us today. I'd like to talk a little bit about the 2021 forecast that we've given and kind of update where we are at the half. So I think in the March forecast outlook, we gave the top six items as an outlook. And then in 2020, in May, we added that net income would grow at a faster rate than revenue. So what I'd like to do is kind of show where we said we would be and where we round up for the first half. So with regards to revenue, we said that we would be low-double digit increase and at the half now we're looking at a 25% increase in our revenue. We're setting gross profit margins, we were forecasting to be similar to recent years and at the half we're right at the same 39%. Operating expenses, some increases driven by our growth initiatives. And as a percent of sales up, for net as a percent of sales were down 1%. Interest expense, we felt we'd be similar to 2020, but in fact, our interest is down by 30%. Our tax rate, we expect for the year to end up at the mid-20s range percent. We're actually at 31% versus 23%, but we are still thinking we will wind up as we have some tax benefits that we'll see coming for us in fourth quarter. Debt-to-EBITDA ratio, we were saying we're targeting 2 to 2.5 times as we were preparing building inventories for this season. We are at that 2.5 times level. But in the second half, we expect to move that down and short of acquisition, we probably expect to maybe even be below that 2 number. And then our net…

Thank you, Eric. With regard to our public filing, we intend to file our form 10-Q today. And as we have noted in previous calls, the company is fortunate to participate in industries that are considered part of critical infrastructure in all countries in which we operate. As a result throughout 2020 and now during the first half of 2021, our customers and suppliers and our employees and operations have all continued more or less without disruption during the pandemic. With regard to our sales performance for the second quarter of 2021, the company's net sales increased by 29% to $135 million as compared to net sales of $105 million this time last year. Within that overall improvement, our U.S. sales increased by 44% to $84 million, and our international sales increased by 10% to $51 million. International sales accounted for 38% of total net sales, as compared to 44% of net sales this time last year. With regard to gross profit performance, or U.S. Crop business recorded improved absolute gross profit and increased sales, which were up about approximately 40%. Offsetting the strong sales growth performance, our factory performance was impacted by short term challenges, including the delayed startup of a production cell in our LA facility and some mechanical integrity testing at our Axis plant. These issues were substantially behind us. Overall gross margin percentage to net sales remained strong at 43%. Our non-crop absolute gross margin increased by 39% on sales that increased by 55% as compared to the same quarter of the prior year. Within this change, we had sales of both our U.S. Dibrom products and our pest strips. On the other hand, while we have substantially higher and technology licensed income in the first half of 2021, we recorded lower licensed comm during the…

Thank you, David. What I'd like to do now is go back to November 20 at our third quarter conference call, we gave some 3 to 5-year forecasts as far as where are we expected to wind up in '23 and '25. And you remember there were kind of three major trenches. Within our core business we also have had 3. And the target with our existing products was going from 468 to 507 at '23, to 527 in '25. So this reflects of just a kind of standard, 2.5% increase on an annual basis of our existing products. The second area was with regard to our new product pipeline by new product. This is not the acquisitions, these are products that we come together with our team, and talk about the ability for us to differentiate our products by adding maybe 2 molecules or even 3 molecules together to create kind of some unique properties. And with that, we looked at growing that adding 37, and 3 years and $109 million over the 5 year. And then finally, acquisitions we've kind of basically looked at, we've been averaging a little over 40 a year. But I think what we're looking at was starting at a smaller level than that, but overall, climbing that to about $100 million over a flat 5-year period. So again, at this point, no reason to differentiate with our initial forecast for our existing product line. But we are seeing a kind of a reset with our new products. So what we've done is, we - they meet quarterly and take a look at the projects. There are projects that that get cancelled, there are new projects that come on. And so with this, we're running about a year behind on our schedule. So looking…

Yes, sir. At this time, we'll be conducting a question-and-answer session. Our first question today is from Gerry Sweeney of ROTH Capital Partners. Please proceed with your question.

Hey, good afternoon. Thanks for taking my call. Just had a couple questions. We want to start on maybe the green business, the buyer side. And I believe you mentioned your 80 products go into 100 products, and you mentioned series of field tests going on. As you're looking at that expansion of products, is there anything sticking out that gets you excited - further excited about the business? Any maybe breakthrough products or anything like that? Just curious on that front.

Sure. So again, the greenhouse products, just with 150 patents around them is very exciting. We're getting - we got one customer that was generally ordered about half a truckload already this year, he's ordered several truckloads. And I think it's great. So we're getting some very nice feedback on the greenhouse products. There were some projects that has been started with some of the major companies that kind of lost focus during the bankruptcy. But as soon as we brought this on, then the bells came on. And I said, okay, we need to kind of move forward. So, companies are looking, and you'll see Syngenta made a big acquisition. But, all of the majors are looking at that growth and saying, hey, we've got to step into this and grow with that. And so we're starting off with a very, very nice portfolio. I will say also, what we've - where we're at with Envance, and as you know, we've got products that were into the consumer market with Procter & Gamble. But we're very enthused by a non-selective herbicide that we've created also potentially, for the lawn and garden and commercial use, that is very fast acting. So it's a matter of hours, you'll see the effect. And by the next day the weeds are gone, or vegetation whatever it is. And particularly in light of their decision to exit that market with -

Round out.

Yeah. So this is a product that we can move straight into the market with. It does not require EPA registration. There are state registrations that generally are very, very quick. But just like with our zero product line that Procter & Gamble has launched, this is a quick replacement. So we think in this upcoming year, we'll do a lot of market work and be in a position for a launch in 2023.

Got you. And then shifting gears obviously SIMPAS is another big growth opportunity for you. It did sound like maybe the timing, I don't want to use the word push back a little bit, but maybe a little bit elongated as some of your partners move into multiple different crops, I think in the next season or two. But do you have everything in place around the intellectual property side? Do you need to build out any pieces of that product a little bit further, either internally or externally to help the growth side?

Yeah, I mean, the intellectual property, we feel very, very good about. We've added some other pieces, which is seed synchronization, and actually being able to paint to see that at time of plant. So those are kind of additional pieces that will not part of our projection that you've seen there. But those are pieces that we think will add quite a bit to the success of the product, the equipment itself. But yeah, the equipment, the software, all the IP around that, we've secured that well. And so we're fine there. So I think what we're doing now we do as I focused on building that product offering, the SaaS products so that we can get a greater utilization across multiple products. And I should say too. I mean, again, this does not include international. And of course, we have systems for Mexico, Ukraine, Australia and Brazil that we're working with this year to try to build that market. And so our international team is kind of looking at kind of - I mean, they've got a number, but they really want to hold off until they see kind of how things unfold here in the U.S. Because they'll be trailing by 1 to 2 years what we do here in the U.S. And so shortly, probably by the end of the year, we'll probably give - at year-end we'll probably give an update on that as well.

And then maybe just say, quick question with David. Operating expenses up a little bit. Some of it obviously comes with growth, but I was curious if any of it would be transitionary. Some of the freight - excuse me, freight or logistics or anything like that? Was curious if some of this may roll off and we see a little bit incremental improvement.

I think the freight costs are pretty much straight in line with sales, apart from the present temporary - hopefully temporary increase in freight from Asia. And I don't actually know how long that's going to last.

Yeah. I don't know that we're going to go back to the rates we were. I think they're talking about kind of a year maybe before. I mean, things might move start moving down, but we're really looking maybe a year before it hits a new norm. But if you look at fuel costs and inflation, you're better at forecasting those sort of things. But, where does cost of oil go over the next couple of years -

If I knew that I wouldn't be on the call. I got you I understand. But that's helpful. I appreciate it. Thank you.

There are no additional questions at this time. I'd like to turn a call back to Eric Wintemute for closing remarks.

Okay. Thank you, Brock. And thank you, each of you for listening in. We found it informative. And again, we'll keep you updated with our growth initiatives and everything else within the company as we move forward. So after a great start here in the first half, things at this point look very solid for the second half, but things are lining up well for '22 certainly, as well. So thank you and appreciate you attending. And have a good evening.

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