Oil-Dri Corporation of America Q4 FY2025 earnings call

• Acknowledged the corporate accounting team for successfully filing the 10-Q without the SEC's smaller reporting company designation.
• Revenue growth was due to volume and product mix, with B2B products driving significant growth.
• Production facilities had planned outages for capital projects, IT network upgrades, and cybersecurity enhancements, with inventory used to maintain service levels.
• Net cash from operating activities was $80M, up 33% Y/Y; EBITDA was $90M, up 29% Y/Y.
• Capital allocation priorities include investing in the business for long-term sustainability, fixed assets, people/process/technology, debt servicing, M&A (e.g., Ultra Pet acquisition), dividends, and share buybacks.
• Depreciation is increasing as assets are replaced at higher costs than those being taken off the books.

In the fourth quarter, Oil-Dri saw revenue increase by 10% compared to the prior year's fourth quarter, driven primarily by volume and product mix improvements. B2B products had a remarkable 24% year-over-year revenue growth, which contributes to a more favorable product mix as these products have higher margins. For fiscal year 2025, net cash provided by operating activities was $80 million, a 33% increase from fiscal year 2024. Full year EBITDA was $90 million, up 29% from the $70 million in fiscal year 2024.

• Fiscal 2026 first half is expected to be challenging due to the strong performance in fiscal 2025, but the team expects to deliver a year that beats last year.
• The company has a plan in place and is optimistic about a successful fiscal 2026.

• Comments may contain forward-looking statements, and actual results may materially differ. Investors should review SEC filings for important risk factors, trends, and uncertainties that may affect future performance.

Q: Dr. Mervyn de Souza recently joined Oil-Dri to lead R&D efforts. What brought him to Oil-Dri? What are his vision and goals related to Oil-Dri R&D efforts and focus? And how do they align with Oil-Dri? Is there a particular R&D emphasis envisioned? Or is it balanced between agricultural, animal health and industrial product development?

A: Mervyn de Souza mentioned his vision aligns with delivering innovation and creating value from sorbent minerals. He joined for Dan's commitment to future growth, Oil-Dri's vertical integration, and the opportunity to work with the R&D team. R&D supports all divisions, leveraging diverse expertise, and follows a crawl, walk, run philosophy with AI consideration.

Q: In what ways the current soybean situation affecting your business?

A: The current administration's emphasis on tax benefits for renewable business with soybeans leads to more soybean crushing and oil going to renewable plants, driving sales in the fourth quarter and expected to continue in F '26.

Q: In what ways the current soybean situation affecting your business?

A: The current administration's emphasis on tax benefits for renewable business with soybeans leads to more soybean crushing and oil going to renewable plants, driving sales in the fourth quarter and expected to continue in F '26.

Q: In what ways the current soybean situation affecting your business?

A: The current administration's emphasis on tax benefits for renewable business with soybeans leads to more soybean crushing and oil going to renewable plants, driving sales in the fourth quarter and expected to continue in F '26.

Q: In what ways the current soybean situation affecting your business?

A: The current administration's emphasis on tax benefits for renewable business with soybeans leads to more soybean crushing and oil going to renewable plants, driving sales in the fourth quarter and expected to continue in F '26.

Q: Dr. Mervyn de Souza recently joined Oil-Dri to lead R&D efforts. What brought him to Oil-Dri? What are his vision and goals related to Oil-Dri R&D efforts and focus? And how do they align with Oil-Dri? Is there a particular R&D emphasis envisioned? Or is it balanced between agricultural, animal health and industrial product development?

A: Mervyn de Souza mentioned his vision aligns with delivering innovation and creating value from sorbent minerals. He joined for Dan's commitment to future growth, Oil-Dri's vertical integration, and the opportunity to work with the R&D team. R&D supports all divisions, leveraging diverse expertise, and follows a crawl, walk, run philosophy with AI consideration.

Q: Keenly interested in the prospect of using artificial intelligence in the innovation lab for R&D with respect to new product development. Can Dr. de Souza, please give us his thoughts about this?

A: Mervyn de Souza is excited about AI's potential but follows a crawl, walk, run approach. AI can increase R&D efficiency, with focus on balancing automation and human oversight, evaluating data quality first, and assessing AI applications across the business for efficiency, sustainability, and value creation.

Q: Agricultural sales surged 104% in Q4 to a record $11.9 million. You mentioned normalized purchasing patterns and one new key customer. Can you provide more color on the sustainability of this growth and the revenue contribution from the new customer versus normalized patterns?

A: Fiscal 2025 was a recovery year with legacy and new customers. Fiscal 2026 growth is expected to normalize to consistent and predictable growth, driven by market improvement, technological trends, and population increase, with ag seen as continuing to grow favorably.

Q: Update on the Ultra Pet business.

A: The Ultra Pet acquisition closed in May 2024, which has been a good fit. Leveraged relationships for distribution and synergies, exceeding estimates, and excited about future opportunities.