American Vanguard, based in Newport Beach, California, is a specialty chemical and specialty and agricultural products company that develops, manufactures, and markets solutions for crop protection and nutrition, turf, and ornamentals management, and commercial and consumer pest control. Its products are sold globally and include insecticides, fungicides, herbicides, as well as formulations for soil health and plant nutrition that come in liquid, powder, and granular forms. The company primarily synthesizes, formulates, and distributes its own proprietary products or custom manufactures, formulates, and distributes for others. American Vanguard has around 29 million shares outstanding, closed yesterday around $5 for a $145 million market cap, net debt of also $145 million for a $290 million enterprise value. Joining us is new CEO, Dak Rice. Dak joined American Vanguard just a few months ago in December, following the board's institution of a new transformation plan and search for a new CEO.
Dak has extensive experience in the agriculture industry, joining from Adama, a top 10 global crop protection company, where he last served as president of North America operations. Dak is also on the executive board of the industry group CropLife America. With that, I'll welcome up Dak to give us an overview of American Vanguard.
Thank you, Wayne. Thank you, Rosemarie, and thank you for the opportunity to follow BASF in the presentation. Good morning, everyone. I'm Dak Rice, this new CEO of American Vanguard, the proven, the trusted provider of proven agricultural and environmental solutions. Which one?
green button?
Oh, green button. Sorry. A little housekeeping before we get started. I know most of you know this, but we do have a Safe Harbor statement where we've got some forward-looking comments in the presentation. This is available on our website as well if you would like to see it in more detail. American Vanguard started its business in 1969 as a manufacturer in Los Angeles, California. Today, we have six manufacturing facilities across North America producing crop protection products, turf and ornamental, and commercial pest control. The company provides a wide variety of solutions there in those markets that we see that we have here. Sorry, here. This is a I've known the company for many years being in the industry. I saw this as a unique and tremendous opportunity to grow shareholder value in the business.
It's got a resilient core business that has been stable over the last four to five years in comparison to the market dynamics that we've had in the agricultural industry. We also have a biological, a green solutions portfolio that make up roughly 10% of our sales today. We see double-digit growth in our biological platform, green solutions, over the next three to four years. The company has recently gone through a transformation process beginning in 2024, where we have a stated goal of a 15% EBITDA margin. We plan to attain double-digit growth in EBITDA over the next several years as well. If you look at our revenue stream in the top right box, you can see it's been fairly stable over the last several years in light of the market dynamics.
What's happened is the company's had several self-inflicted missteps that have generated a negative impact on EBITDA margins as well as gross profit margins. That is, when I came into the company, I saw that it could easily be fixed with management execution. Looking at our overall sales portfolio, roughly 60% is domestic and 40% is international sales. We're highly invested in the U.S. marketplace. If you look at our domestic footprint, manufacturing footprint, we have six manufacturing sites across North America, five of them in the U.S., one in Mexico. We think we are uniquely positioned to take advantage of potential tariffs into the marketplace. We expect that it'll only have minimal impact on our COGS, roughly $3 million. In previous tariff situations back in the teens, we were able to pass, as an industry, pass along tariff implications onto the customer.
We feel that our domestic footprint will give us a benefit going into the next into these tariffs. If you look at the global industry, the industry itself has been growing over time. It is up to over $60 billion as a market. We anticipate it growing 2-3% a year going forward. Our industry crop protection is made up of herbicides, insecticides, and fungicides. We do anticipate consistent growth in the biological platform being growing faster than the traditional products in the marketplace. Looking at the next slide, you can see that the farmer net income in relation to its expenses, as farmer net income has increased, are going up and down. The bottom line there with the green, with crop protection inputs, we have seen that stabilize or grow over that period of time.
We feel our portfolio of products and crop protection as an industry is fairly stable and growing in contrast sometimes to the up and down of the farm net income. Looking at the green solution space, our biological space, which we have, like I said, 10% of our sales in the biological space, green solutions. This market will be growing. We estimate it'll double in the next seven years at 11% CAGR growth, going from $14 billion up to $30 billion in sales as a market where we are one of the top 10 U.S. biological suppliers, as communicated by CropLife. Looking at our financial performance, we've had a history of not delivering on what we said we were going to do. One of the reasons I'm here today is to commit to delivering on what we say we're going to do.
One of the positives that we had coming out of 2024, we did execute on our 2024 guidance, which was in the $42 million-$50 million range. We did complete that coming into $42 million, slightly under on our top line sales of $563 million and our EBITDA margin 7.5%. This was down from last year largely due to oversupply in the marketplace in 2023. We do feel that this will be stabilized in 2025 as we get forward into the next slide on forward-looking projections. What we've done in Q4 is pretty tremendous, reducing debt $22 million, at the same time reducing $47 million worth of inventory. We did have a large write-off in 2024 in Q4 of $118 million. Some of that was related to Goodwill and our SIMPAS technology, which we're no longer focusing on, in addition to some inventory, slow-moving inventory write-off.
The $47 million decrease here we're presenting does not include any additional write-offs. It is a reduction in inventory through the business. What you'll see is our inventory and our debt runs in parallel. As we are able to reduce our inventories going forward, we'll be able to reduce our debt going forward as well. Looking at our 2025 targets, EBITDA of $45-$52 million is our target, revenue of $565-$585 million, which will be a nice increase, a positive increase over last year. Goals for 2025, strengthen the balance sheet is the number one goal coming into the year. We had some really good progress on our inventory. We have a seasonal impact in Q1 where we traditionally see an increase in inventory and increase of debt. Management of net trade working capital is highly important.
The number one goal for 2025 is strengthen the balance sheet, reducing the complexity of the company and focusing on our high-priority business, our higher priority task, I should say, executing on the transformation process, achieving the financial goals that we've provided, and utilizing a resilient revenue that we have, our product portfolio, we have to grow additionally, and expansion of EBITDA margin to 15% over time. My mantra has been simplify, prioritize, and deliver. With that, I'll take questions.
Great. Thank you, Dak. Thanks for that overview. We really appreciate you having just joined in December. I know you did a fireside chat about a month ago, but this is one of your first investor events, so we really appreciate having you here.
Thank you.
We'll open it up for Q&A. I'll start off, but if there's any questions from the audience, please feel free to raise your hand and we'll get you a mic. To start off, the obvious question, you just joined in December. What attracted you most about American Vanguard? You've known the company for a long time, but what attracted you most about coming to this position and this new opportunity?
Yeah, great question. Yes. I've known American Vanguard for many years as I've been in the industry. It's been a great competitor of mine. It's got a very solid core portfolio of products and is resilient to the ups and downs in the marketplace. I felt that it was a tremendous opportunity as I saw that the portfolio was strong, but we had made some self-inflicted missteps in the last several years that created that impact on gross margins and EBITDA margin. I felt it was a great opportunity to come in as management and have an impact on an organization to create value.
Great. Now you're just over 90 days in. The board put in the transformation plan before you joined, but you came in, you've seen it in place. How do you view the progress and maybe what are three main areas where you think more needs to be done and progress needs to be made?
Absolutely. The transformation process was initiated by the board. We brought in Kearney to do the evaluation. In my perception coming in, I think there was a lot of low-hanging fruit on one side of the tree that was taken, but it wasn't really looked all around the tree. There's some low-hanging fruit on the other side. What I would say there is from a manufacturing efficiency and production standpoint, there's a lot of benefits that we can gain there, a lot of things from an S&OP process that we can implement into that to increase the overall efficiencies of the plant utilization. The second would be evaluating our R&D expend. It's a substantial amount relative to our business, making sure we're prioritizing what we're spending our money on to get the best value creation out of the R&D to increase our revenue for the long term.
Third is going back to my mantra, simplifying and prioritizing and delivering. The third aspect there being that the organization was overly complicated with processes that I think we can simplify and streamline the business and execute on as a management.
I think we have a question in the back.
What area of the first of all, good morning.
Hey, Charlie.
What area of the crop protection science industry would you like to see the company increase its exposure to? Is it in herbicides or insecticides or fungicides? What area is there that you would like to see a more elevated representation? Now that you're seeing BASF is going to monetize their business, how does that play out in distinguishing yourself without being a seed player? There are other companies that do not have seeds, so you do not have to have seeds to succeed. What areas of science could you pursue that would facilitate an elevation of value that has not been pursued because they pursued SIMPAS, they pursued crazy stuff? Now that you are more you are the crop guy. Where in the crop area would you like to see this?
The second part of the derivative of that is these businesses are scale businesses. They rely on scale. Are there scalable opportunities organically or inorganically that could make sense longer term because these industries get their margin from size? What are your thoughts on both of those issues, Dak?
Thank you. Thank you for the question, Charlie. You know, historically, American Vanguard has been a company that has bought products from the larger companies like BASF that have gone through a rationalization process and been able to extend out the life of those products into cash cow, generate cash for a much longer time period than they would have inside of a larger organization. The focus has been there on that from a historical standpoint. From a portfolio standpoint, we are largely, or not large, our largest section of products is around insecticides. Then herbicides, and the last one would be fungicides. As we grow our business, to get more sustainability in that crop business, focusing more on the herbicide and fungicides would be of benefit to stabilize, to grow more in conjunction with the marketplace.
Having said that, we do have significant AIs, active ingredients or products in insecticides that I think we can leverage going forward. I think the opportunity for growth where we can fit or we have value is our strong portfolio of biologicals and our research and around biologicals as well and how we can bring those together with synthetics to mitigate the exposure on the crop acre that's being demanded today by the consumer. The lower amount of synthetic chemicals on the acre is an opportunity there to combine mixtures. I think mixtures in general, new mixtures as an opportunity for us as well. We have a very developed R&D laboratory and formulation process to develop new mixtures to bring to the marketplace with our existing active ingredients. As far as utilization, I guess, or economies of the scale, I think that was the question.
The second question around that, I think as you look at our manufacturing footprint, we are largely synthesis capability. It is underutilized today. That's clear. To run a synthesis plant, you need to be 90% capacity utilization. We're much lower than that. That's the reason I mentioned that one of the opportunities for us as American Vanguard is to increase our throughput into those manufacturing efficiencies and manufacturing plants. I think that is a real opportunity, and that's where we get the economies of scale on our current footprint. There could be some rationalization there as well that we're looking at as well to maximize our capacity utilization.
Got a couple more questions in the back.
Yep. Thank you. Maybe not today's problem, but with chemicals being a major cost input for the farmer and the machinery manufacturers with Precision Ag looking to maybe reduce the consumption of herbicides, fungicides, pesticides by 60-70% with next-generation technology, how much of this are you as a management thinking about relative to maybe this being a 5, 10, 15-year secular headwind for the industry?
Yes. You know, we're adapting. For one, our portfolio products are largely pre or early post. In that situation, they're not as subjected to that seed and spray technology. That's one thing that we're going to we have to continue to look at it. I mean, we've looked at I've been in the industry quite a long time. And 10, 15 years ago, the big discussion was around the impact on biologicals on our industry. We've adapted to that. And as you can see, American Vanguard has a good solution for that going forward. The technology around seed and spray is something we have to continue to watch. I think it's still out there. I actually had the opportunity to visit John Deere's See & Spray technology because it's based in Ames.
I was more nervous before I went to that testing than after that testing. I will say that. I mean, they're only anticipating 10% of their equipment, new equipment sales to be seed and spray technology by 2030. It is something that we watch and we acknowledge and we work for. I think some of the formulations that we can create, our higher concentration formulations will benefit that technology as well.
Dak, given your embedded knowledge, can you give us a quick one-on-one on the size of the herbicides, insecticides, fungicides? What's the addressable market in the United States for one year and then the rest of the world? Where are your products sold right now? Which of these categories and which of the markets? Obviously, we'll talk about the Department of Agriculture.
Okay.
Yeah, I know.
A lot of questions.
Good luck on the last one.
Yeah. The total market globally is over $60 billion in the U.S. It's fluctuated over the last couple of years due to the commodity prices and the supply and demand of 2021, 2022, 2023. We have seen fluctuation there. The consumer or the farm gate pricing, as we like to talk about, is around $16 billion in the U.S. at that level where we play. It's a lower level. There is some distribution in there as well. Predominantly, the larger portion of the market is herbicides, then fungicides, and then insecticides. That is kind of played out. Our products today are sold, like I said, 55%-60% in the U.S., and then internationally, another 40%. We are stronger. In the U.S., it is both non-crop and crop there, differential between the two. Internationally, we are a supplier product to the distribution channel in the U.S.
We sell to the main customers, the main six customers in the U.S. and ag market. In our international markets, more broadly spread out, I would say, no, I'm sorry, it's concentrated more in Central America where we have a strong distribution footprint, where we distribute our own products as well as third-party products. We've done a really nice job in that marketplace in Central America with the green solution portfolio, the biological portfolio, not only distributing our products down there, those biologicals, but also third-party products, Japanese technology as well from Certis and Valent, for example. We've got a good footprint in Central America. Brazil, a reorganized Brazil, just we reorganized Brazil first part of this year to focus on our own portfolio. That market is the largest market in the world. It's highly competitive.
We were distributing products in Brazil like we are in Central America. That market's just not able to handle an extra mouth to feed in the channel. We are focusing on our own portfolio in Brazil today.
Great. You touched on some of the changes. We had the big write-downs in Q4. Adjusted EBITDA margin came in, though you mentioned before at 7.5% for the year. There's a goal that was mentioned before you joined and reiterated by you to double that over the full cycle. Just with the actions that are taking, can you describe the bridge to that 15% EBITDA margin and how soon do you think it's plausible?
Sure. It is the goal. It's a stated goal of the company from the board standpoint, and it's a stated goal for the management as well. When I look at it and show the chart, the change in margin, gross profit margin from where it was previously to where it is now, and OpEx where it was and where it is, I think there's opportunity. To answer your question, we're at 29% gross profit margin today. I think we need to be upwards to 32-33%. That is one component of it. On the other side of it, OpEx is relatively high, in my opinion, compared to our competitors at 26%. We should be more down towards 20%. The combination of those two components will drive that EBITDA margin percentage closer to 15% or at 15% over the full cycle. It's a goal.
It's a stated goal. When we will get there, we feel it will get there in the foreseeable future. I put a number on, there's a lot of things. I'm new to the company. I think there's a lot of levers to be pulled to get us there faster, quicker. We will have to do some fine-tuning on the long term.
Great. Charlie mentioned, and you mentioned with those write-downs in the quarter, one big one was SIMPAS and the decision to de-emphasize SIMPAS and not continue to invest in that project. How much cash does that free up for the core business, and what are you looking to do with those assets?
Good question. I mean, SIMPAS was a focus of the company for the last few years. It's a business I don't think we should have been in. I don't think the board today thinks we should not have been in. That's the reason we're exiting that or deprioritizing, I should say, or exiting that business. The board executed on that in 2024. The cost or the cash flow allocated to SIMPAS in 2024 was reduced quite a bit. If we're looking at 2024 versus 2025, we're probably talking a million or two savings there. SIMPAS in good years or in bad years, let's say, was a $9 million cash outlay. It should have probably been the $5-6 million on a normal year. They reduced it in 2024. We're going to reduce it some more in 2025.
We're down to almost essentially just maintenance of ongoing customers, which is fairly minimal. We are going to find a home for it. It's not available to us as a business or as a technology, but I'm sure it's valuable to somebody out there.
Okay, great. With that, we are bumping up on time, but I really appreciate you joining for one of your first investor events with us. AVD is my best idea for 2025, so I'm wishing you all the success.
Thank you. Thank you, Wayne. Thank you.