Good day. Thank you for standing by. Welcome to the Oil-Dri Corporation of America Q3 fiscal year 2023 teleconference. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Jaffee, President and Chief Executive Officer. Please go ahead. Thank you, and welcome everybody to our third quarter teleconference. I'd like to review a few of the people who are on. We are conducting this virtually, so we're not all in the same room, but we're all on and available to answer questions. Susan Kreh, CFO and CIO, Aaron Christiansen, Vice President of Operations, Wade Robey, VP of Ag and President of Amlan International, Chris Lamson, Group VP of Retail and Wholesale, Laura Scheland, VP of Strategic Partnerships and General Counsel, David Atkinson, VP Corporate Controller, and Leslie Garber, Manager of Investor Relations. Leslie, please walk us through the Safe Harbor. Thank you, Dan, and welcome everyone. On today's call, comments may contain forward-looking statements regarding the company's performance in future periods. Actual results in those periods may materially differ. In our press release and in our SEC filings, we highlight a number of important risk factors, trends, and uncertainties that may affect our future performance. We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in Oil-Dri stock. Thank you for joining us. Dan? Great. Yeah, I'd like to make some general remarks, and then I'll turn it over to Susan Kreh for some more detailed remarks. You know, what you're seeing is a great quarter, and it's the culmination of, you know, a team that is working very well together in every aspect of the business. Both our line team and our support team are pulling together to make this happen. I just wanna make sure I thank and recognize our team. It was a great quarter, and, you know, we believe, you know, even if the, I'm looking at, you know, what the stock price is doing and it's running up, and I'll let you guys do your own math, but whatever kind of EPS you want to apply for a year and any kind of multiple you wanna do, you can see that we should have a lot of upward pressure on the stock price. The board has authorized us to be opportunistic. We're generating a lot of cash and to, you know, restart our stock buyback program. We will be opportunistic with it. We will abide by all the trading rules that we need to do, but we see our stock as a good buy at this level. Susan, I'll turn it over to you for some of the details. Sure. Thank you, Dan. During our last two investor calls, we've talked about the positive momentum we are experiencing in the business as our entire team is focused on serving our customers and working to restore pre-pandemic margins. During the third quarter, Aaron Christiansen and the entire supply chain team achieved an all-time high in on-time shipments, thus providing outstanding service to our customers. Our sales teams have also been very successful in taking price to the market. While we have not yet recovered margins to our pre-pandemic levels, we made significant progress during the quarter in growing our gross profit margin to 26.1% from 22.6% during the prior quarter, while at the same time growing our net sales 23% over the third quarter in the prior year. Most of that growth resulted from pricing initiatives to recover cost increases and restore our margins. However, we also had meaningful volume growth of 25% within our business-to-business segment, which, on a consolidated basis, was offset by the purposeful shedding of some low profit volume within our retail and wholesale segment. During our fiscal third quarter, the Oil-Dri team achieved another major milestone. As of April 30, 2023, Oil-Dri's fully funded, defined benefit pension plan was terminated and all funds were dispersed. The accounting for this was a non-recurring, non-cash charge of $4,800,000 net of tax, resulting from the combination of recognizing the unrealized losses on our pension investments and the transfer of our surplus to our defined contribution 401(k) plan for the benefit of our participants. For those of you who are interested in more details, you can find them in Note 10, Pension and Other Post-Retirement Benefits in our 10-Q filing. As a reminder, the third quarter in the prior year also included a significant non-recurring, non-cash charge of $4,500,000 net of tax, related to the impairment of goodwill associated with our retail and wholesale segment. One final metric I would like to comment on is cash generation during the third quarter. For the first nine months of fiscal 2023, net cash provided by operating activities was $36,800,000, which compares to $5,500,000 in the prior fiscal year. Of the $36,800,000 in the current year, $21,900,000, or 60% of net cash provided by operating activities, was generated during this very strong fiscal third quarter. Our cash priorities continue to be investing and reinvesting in our business with a focus on future growth activities to opportunities to support our customers, while maintaining our existing asset base, supporting our dividend, which we just increased for the twentieth straight year, maintaining enough financial strength to support strategic M&A if targets become available, followed by, as Dan just discussed, opportunistically repurchasing shares of our stock when we believe the valuation justifies this, which we do now. With that, Dan, I'll turn it back over to you for any additional comments you might have and for Q&A. Great. Thank you, and thank you for your recap. Yeah, what I wanted to talk about, because you talked about I remember how you said it, but you said it very well, the purposeful shedding of some unprofitable business. I think most of the people on the call will have heard of the concept of Moneyball as it applied to Major League Baseball. At Oil-Dri, we play Moneyball, where we really try and get into the data and the details and make decisions, because we do have a nonrenewable resource, and we always want to live up to our mission of creating value from sorbent minerals. I thought it was interesting and I've mentioned a lot of these metrics before over the years, but in general, back, you know, around the turn of the century, from 1999 through 2004, we did over 1,000,000 tons a year, yet our average selling price was around $155 a ton. This year, these past years, we do a little over 800,000 tons. 22 years later, our volume is down 20%, but our average selling price in the quarter was $530-ish a ton. Therefore, then, you know, a lot of that is inflation and so forth and so on, so it didn't all go to the bottom line. We were making as low as $30, $28 a ton back in 2001 on those 1,000,000 tons, and in the quarter, we made $138 a ton gross profit. That's that 26% that Susan talked about. I always want the investors to be mindful, we do not grow for growth's sake, and anytime we're running out of capacity in a certain line, we look and see if there's some low margin business that's gumming it up, that we raise prices. If it sticks, great, that means the customer valued it. If it doesn't, it goes away, and we clear those runways for the newer, faster jets that we're selling, where we're really partnering with our customers to add real value. Part of that value is our quality and our service, and huge kudos to Aaron and his team, for setting our all-time record on on-time deliveries in the quarter, which is a fantastic job by the supply chain. We always talk about how our sales team gets the first order, but our supply team gets two through infinity, and support team. You know, every repeat order is because we have met or exceeded our customers' expectations, they reward us with a follow-up order. We try and re-earn their business every day. Leslie, I will turn it to you because we do have a number of good questions from our faithful shareholders, and we would like to cover as many of them as we can. Great. Thank you, Dan. I want to remind everyone to please submit your questions using the Ask a Question field on the webcast then click Submit. We already have a bunch of questions in the queue, I'll start right now. The first one is from Sarah Donnelly at Gabelli Funds, she asks: approximately how much clay is needed to filter 1 gallon of renewable diesel? I can actually answer that, it is the amount of absorbent clay is about 0.5%-1% of the weight of the oil being processed. The next question comes from Ethan Starr, a private investor, he asks: what feedback are you receiving from Amlan customers, both in the United States and internationally, regarding the efficacy and value of Amlan products? I'm going to turn that over to Wade Robey to answer. Thank you, Leslie, and Ethan, thank you for that question. As you know, we've been selling internationally with Amlan products for a number of years. Our presence in the U.S. market has really only been significant for about the last year and a half. A little different in the answer based on region. Internationally, we have a long history of performance, a long history of customer use and established efficacy. In the United States, we're building that, obviously, as we launch and penetrate the large vertically integrated industry that we serve in the poultry sector specifically, but also in swine. The feedback has been excellent so far. We've been working very hard to penetrate and begin to sell at all the largest integrators in the U.S. and the poultry market. We are already making substantial progress there in the short time we've been launched, and the feedback has been overwhelmingly positive, not only for our core technology, which is our mineral clay, but also as customers have tried our formulated products to get broader spectrum efficacy as they seek to improve animal performance and help their flocks, their herds reach optimum potential. Overall, extremely positive feedback and great momentum, both in the new North American market we're targeting, but continued momentum internationally. Okay, great. Thanks, Wade. The next question comes from Robert Smith for Center for Performance Investing, and I'm actually gonna combine his question with a question from Ethan Starr, so I'll read both of them. With respect to Amlan, we've been awaiting the landing of some big fish and assume you are further along this track. Last June, you shared a target for this year and wonder whether you're willing to give us a target for fiscal 2024. If not, would it be reasonable on my part to expect a figure of, say, $50,000,000, based on the probability of reeling in a big one? Then that's also in conjunction with Ethan Starr's question that says, on last quarter's webcast, Dan said that Amlan is pretty much a business of grand slams or strikeouts. While nothing is certain until you have a contractual purchase, does the Amlan team think that it's been getting closer to one or more of those grand slams? Wade, I'm gonna have you answer both of those. Again, thank you, Leslie, and thank you, Robert and Ethan, again, for those questions. Robert, I'm not going to give a specific number or target. I don't think I should do that. What I'll talk about is really the question I think both you and Ethan are asking, which is, are we closer to really transformational growth within the Amlan business? I would say, yeah, we're very, very encouraged by the momentum. The North American market, which we just launched in about a year and a half ago, is already our largest market in terms of tons sold. It is a highly concentrated, highly vertically integrated market, as you know. As we penetrate and are successful at these top producers in the United States, we tend to have very large stairsteps of growth. We expect that to happen, and we are actually seeing that in our commercial progress today. Internationally, the market tends to be a little bit more diffuse, more distributed. The growth tends to be, say, in LATAM or in Asia, more against the steady curve of compounded growth you might expect as you continue to launch new products and grow in these markets. Because of the North American significance to our overall market opportunity, our addressable market, we will see very significant growth in steps and expect that in the coming years. Great progress in the US this year. It's already our largest market in terms of tons, and we expect that to continue. Thanks, Wade. I'm gonna do the same thing again and combine two very similar questions, one from Robert Smith, one from Ethan Starr. First part of the question: With respect to Amlan in China and the change to a master distributor, what are the puts and takes to this change in marketing and your expectations for the coming year? The second part is: Could you please explain the reasoning behind the restructuring of Amlan's China business? How many employees does Amlan's Chinese subsidiary have? Are any former Amlan employees now employed by the new master distributor? Why do you think this change will lead to higher sales and profits in China? Wade? Okay, thank you, Leslie. Again, thank you, Robert and Ethan. You know, an excellent question or series of questions. There's a number of questions embedded in there, and I'll try to hit them all as I can, as I go through. Like a lot of multinationals that are trying to sell into China, Amlan Oil-Dri made the decision this year that rather than trying to go in directly and build a large infrastructure and really learn as we spend, as we try to penetrate that market, that we would take a step back and really focus on what has been our strongest distributor in that market to date, which is Zhongnong, that we announced in our press release. They're a very significant distributor within China. They have a large team and really service across China, across the species that we wanna target. An excellent partner for us to grow with, and we felt to make that move to a master distributor was really the best decision for the company and the most efficient use of our investment as we grow that market. China, as you probably know, is the largest swine market in the world. It's second in poultry, it's very significant to our business, and we didn't wanna step back. We simply wanted to make more efficient the way we went to market, the channels we chose, and how we invested for growth. The team in China is going to be small. We'll have a couple of representatives there that'll support Zhongnong from a technical and a business perspective. As Zhongnong has a significant team already on the ground, we don't need to build a large team going forward. We'll just support their efforts with training, with materials, with product and trial support. We can do that with a very efficient team, a very efficient spend. Again, we expect the China market to grow significantly. It will continue to be a significant part of our portfolio, a significant part of our sales globally, and we expect growth in that region over the next couple of years that will be reflective of the investments we make. Very excited about China, excited about these changes. Great. Thanks, Wade. Our next question comes from Eric Cinnamond from Palm Valley Capital, he asked: Can you provide an estimate on how much lower natural gas prices help gross margins during the quarter? Susan, will you take that one, please? Sure, thanks for the question. While we don't actually give component by component cost, what I would point you to is that even with the very substantial 27% decrease in the quarter, because costs like freight, which rose 19%, and the manufacturing, excluding fuel, rose 7%, we were up 12% in the quarter. We still continue to see prices increasing. Just to put a little more color on it, the manufacturing, excluding fuel, that's where you see costs like labor, which we've seen significant increases in, our contracted labor for mining. Depreciation is going up as we continue to reinvest at higher levels in our business. Our repairs, where the labor and the parts are more expensive year-over-year, those are all influencing that 17% year-over-year increase. Again, that's a bigger piece of the pie, and freight is a bigger piece of the pie than natural gas, so that's why you see the costs continue to increase. Great, thank you. The next question comes from John Bair at Ascend Wealth Advisors, first, he says, congrats on a fantastic quarter and results. Once again, patience wins out for long-term shareholders. Question is related to logistics issues, and if you are seeing relief in shipping costs and delivery times. Aaron Christiansen, will you please answer that? John, I'm happy to answer the question. I think you asked a similar question last quarter. I'll split the answer into two parts, to talk domestic freight and logistics and international freight and logistics separately. Domestic freight, both from a cost and a lead time or delivery time point of view, has stabilized to pre-pandemic and pre-supply chain levels. Our freight and logistics team has been very opportunistic, taking advantage of freight contracts that help stabilize those costs. Buried in our great service metrics that both Susan and Dan spoke to is, in fact, a freight market domestically that's returned to pretty pandemic levels. On the export side, we're much improved over the past two quarters, both from a cost and service perspective. The recovery has been slower. We're most certainly not back to where we would like to be from a lead time point of view, but dramatically improved from two quarters ago. Hopefully, that answers your question, John. Thanks, Aaron. Now I'm going to answer another question from Ethan Starr. Aside from a higher level of advertising concentrated in the fourth quarter, what else are you doing to really drive higher sales of lightweight litter, both in terms of increased distribution and retail sell-through? Chris Lamson, please answer that for Ethan. Sure. Good morning, everybody, and very much appreciate the good question, Ethan. I think I get a good one from you every quarter, or 2. Let me break that down into both our private label lightweight business and our branded business. Ethan, you broke it down, I think, perfectly, really between distribution and sell-through and/or velocity. Obviously, those two things work together, let me start with sell-through and velocity and then jump to distribution. You know, really, I think on both branded and private label, we have a very strong consumer value proposition, really comprised of a really good product. I think Dan and Aaron have both alluded to, you know, the quality at which we're producing that product, I think, continues to improve and become more and more consistent, and that's a lot of, you know, hard work in the trenches. I'd say we're very much in a place right now where we feel like we're at the right price. Good quality product at the right price. I saw your question, I wanted to give you some evidence of that being true from the marketplace and maybe, you know, one piece of data that we can point to. If you look at the private label Lightweight business, where we have a commanding share, and you look at the private label business in heavyweight, the share of private label, again, where we have a commanding share in Lightweight, is almost double that of the share that other private label providers have in heavyweight. We think that is perfect evidence of winning in the marketplace and that strong consumer value that we've got on private label, and I'd say branded similarly, you know, really no different. We're very pleased with our product, and we're very pleased with our price gaps. Tactically, I would say our price gaps, percentage-wise, are back to, you know, pricing has been an adventure in the marketplace and an adventure on shelf, and it's bounced around, stabilizing a little bit. We're stabilizing at gaps where we've seen, success and share growth in the marketplace historically, from a percentage basis. As prices have gone up, those price gaps from a dollar perspective are actually, a little bit bigger. Percentage, about the same, dollar-wise, a little bit bigger, and we think that's also working in our favor, and that's why we're seeing really modest share growth on the branded side and fairly significant share growth on the, on the private label side. Distribution's tied to that. If you're, if you're growing velocity and growing share, it's easier to put on distribution, obviously. We are putting on a fair amount of distribution on the private label side of the business, put on good distribution in the dollar channel, over the last 12, 18 months, for instance, and that's a channel that's winning. As you grow distribution there, you have a bit of a tailwind. On the branded side, I'd say we're probably holding serve from a distribution perspective. We're holding serve what we're most developed, and then this is strategic and purposeful and is years of good work. We're winning with, or we're doing the best with folks that are winning in the marketplace, that are retailers that are growing share. That's probably no coincidence. Those tend to be retailers that are sharp on value, and we have a value brand, and that's more important in the marketplace right now, with cost pressures on the consumer, probably as it's ever been. We're winning with the right folks on the branded side, and again, seeing some modest share growth as we build margins as a result. Great. Thanks, Chris. I'm going to turn it back to Wade, to answer a question from Ethan Starr. How are the various trials of Amlan products with potential customers going, and how long is it before a purchase decision is made? Yeah, thank you, Ethan. As I mentioned, a moment ago in one of my previous answers, the trials have been pretty much uniformly positive across the globe, as we've not only tested our existing products with new customer opportunities or our new products in the marketplace that we're launching. When you look at the typical cycle time from maybe first call trial to successful sale, it can differ pretty significantly depending upon the size of the company, whether they're vertically integrated or not. Typically, in a new trial situation, it may take six, nine months to work through a trial and then get to a successful sale. That may seem like a long time, but when you look at a lot of these large, again, vertically integrated companies, many of them are global in their business. Take example, in Asia, a company, maybe headquartered in Thailand, will have operations in the Philippines, in Indonesia and Vietnam. As we're successful with a regional trial, because of the vertical integration, the strong nutritional veterinary staffs that run the nutritional and medicated programs for these companies, we see the benefits cut across the company itself and actually have impact in all the regions where they do business. That cycle time or time to first sale from a trial, although can seem long, it can be multiplicative in its impact as these vertically integrated companies then roll out a program across their operations. Again, very successful trials. We've had very few circumstances where we haven't had very, very strong positive results, and those have led in almost all cases, to new business penetration in these large companies. Thanks, Wade. Next question is from John Bair. How active is Oil-Dri in utilizing non-yet developed and reclaimed mining properties to installing solar arrays or wind turbines? Does the company see opportunities there, both from an environmental and tax credit beneficial basis? Aaron, please answer that for John. Yeah, really excited to get to answer that question. First and foremost, Oil-Dri does have a three-quarter of a megawatt alternative power generation facility in our California plant. That's a combination of an operable solar array, as well as natural gas turbine generators that convert natural gas into electricity. Because of the utility rate structure, as well as the days per year in that we have full sun, the economics of that type of investment make the most sense in California. We have evaluated similar investments in the other facilities. For a variety of reasons, they're not as economically friendly. We do rent property near one of our other plants to an organization that manages a solar array on it, and we recover call it leasing rights. We're in the process of evaluating a similar arrangement in 1 or 2 of our other plants, where we partner with a company that actually installs, owns, and operates the solar array, whereby we gain the advantage of the land. I will go back to the California investment. We did receive very large, state, federal and state tax incentives associated with that investment. Very proud of how far out we've reached in that area, to be honest. Great. Thanks, Aaron. The next question is also from John Bair. It's a follow-up question. He asks: Are you continuing to partially hedge your natural gas purchases? Aaron, do you want to take that also? Yes. The short answer is yes. John, I think you asked the same thing last quarter, I can really just effectively give an update. We are now fully in the program. I think the way I responded a quarter ago was to say we don't like the word hedge. Hedge infers that you're attempting to beat the market. I like to think of it as dollar cost averaging. We are purchasing in a very algorithmic way, layered strip gas, that help us buffer against upside and downside in the market. We've purchased just a portion of our natural gas needs that are a bit different by facility that allow us to dollar cost average. The first of those became activated in the third quarter. We have 1 more 6-month cycle to really get us fully into the intended program. You know, we're now in a place where we've, we very much have buffered future potential headwinds in the area of natural gas, and really stepped into a, call it a modern purchase and usage strategy. Great, thank you. Sorry, one other follow-up, Leslie. I don't anticipate any changes in that routine for quite some time to come. Okay, thank you, Aaron. That concludes our Q&A session. Dan, do you want to comment on anything else? Oh, sure. Before we sign off? Yeah, we hit it perfectly. It's 10:30. I want to thank you guys for your patience and your long-term commitment to Oil-Dri. Thank you for your questions. I thought today's session was fantastic, and I think you saw the power of our team. I did very little, and that's because these guys are doing all the heavy lifting. Thank you, Oil-Dri team, and thank you, Oil-Dri stakeholders. We will talk to you again after the fourth quarter. That'll be the end of our fiscal year. Be safe, everybody. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.