American Vanguard Corporation
Q1 2022 Earnings Call Transcript

Published: 7 May 2022

[Operator:]

Good day, ladies and gentlemen. And welcome to the American Vanguard Corporation First Quarter 2022 Conference Call and Webcast. At this time, it is my pleasure to the floor over to your host, Bill Kuser, Director of Investor Relations. Sir, the floor is yours.

[Bill Kuser:]

Well, thank you very much, Katz. Welcome, everyone to American Vanguard's first quarter 2022 earnings review. Our speakers on today will bel, Mr. Eric Wintemute, the Chairman and CEO of American Vanguard; Mr. David Johnson, the Company's Chief Financial Officer. And also to assist in answering your questions, Mr. Mr. Bob Trogele, the company's Chief Operating Officer. Before beginning, let's take a moment for our usual cautionary reminder on slide 2. 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. Such factors can include weather conditions, changes in regulatory policy, competitive pressures, and various other risks as detailed in the company's SEC reports and filings. All forward-looking information represents the company's best judgment as to the date of this call, such information will not necessarily be updated by the company. Now we'll go to slide 3. There's a further comment to be made today regarding the pending proxy solicitation. Part of the information set forth in this presentation today refers to our annual meeting of shareholders, which is scheduled to occur on June 1, 2022 using a virtual meeting format, as indicated in detail on slide 3, you will see that stockholders may obtain information regarding the proxy by referring to the company's annual report Form 10-K, which was filed with the SEC for the last fiscal year, and which was filed on March 14 of this year. Or you can refer to the definitive proxy statement, which was filed with the SEC last Friday, April 29. Any information updates that occur during the proxy solicitation period will be filed with the SEC. And shareholders can find such information by referring to the SEC website. So with all that said, I'll turn the call over to Eric.

[Eric Wintemute:]

Thank you, Bill. Advancing to slide 4, just I will begin with some opening remarks. We'll turn it over, David, who will give a further update on the quarter and the financial review. I'll come back and talk about our growth initiatives. And then some concluding remarks after that. So moving on to slide 5, most of the performance targets that we gave you on our last conference call. And what I'd like to do is just do our Q1 scorecard versus these performance targets. So first on revenue growth, we said 8% to 11% in Q1, we've actually increased by 29%. So well outpacing our target, our gross profit margins, we said would be somewhere in the 38% to 40% for the year. And we're actually running ahead of that at 41%. I'll comment a little bit more on that later as well, David, operating expenses as a percent of sales. We try to move that down as we get more leverage and increase. We put a target of 31% to 33%. We actually did come in at 31% of sales. Our interest expense we said expect to be similar to ‘21. Actually we're running at 58% below for the first quarter. Our tax rate we expect to be lined up in the mid 20% range. We're actually at 31% for the first quarter which is similar to what we did in first quarter last year, we are expecting overall to be somewhere in that 27% tax rate for year. Our debt to EBITDA target was less than 0.1 at year end ‘22 without acquisitions point, less than 0.25 with acquisitions, of course, that'll vary depending on the size of acquisitions during the course of the year. But right now, we're at 1.25x our EBITDA and we would expect, increase as we ramp up to service this calendar year. Net income, we had some lofty goals for the year of 60% to 70% increase, we're actually in the first quarter of 224%. So again, very well on our way. And what we didn't talk about last time was EBITDA, last year, we just forecasted growth faster than revenue. And for the first quarter, we're actually at 65%, increase over ‘21. So with that, let me switch over to slide 6. I've hit this topic hard in our Q3 and Q4 yearend statement. I do think it's critical, I see the performance of a number of companies. And again, those companies can perform well in these inflationary supply restrained times are going to perform well, those that don't are going to have difficulty. And I think we're seeing that. So five bullet points that we said that we're focusing on one adding new sources for critical raw materials, we've identified those raw materials that are the most challenging, we have picked up an additional set of supply sources. And at this point, we appear to be covered for the balance of the year. We've seen low details, adjuvants, bottles, caps, labels, all kinds of cases. But one of the things that we talked about is placing orders, well in advance, just in time ordering doesn't work anymore. We're placing orders through the balance of this year for what our factories are going to need and what we need for sales. We make adjustments as needed. But that's kind of a critical point to give our suppliers as much lead time as possible. Forecasting our cost of goods on a rolling 12-month period. Yes, this is working well. This is a transition for us, we had not done this kind of work on a monthly or sometimes even weekly basis, to update our cost of goods by SKU. But with that, we have been able to communicate well to our marketing team. And as such, they were able to kind of reflect price increases. We also had a freight surcharge in the US at 2%. And overall, this is a key factor on how we were able not only to preserve margins, but to improve margins in our first quarter. And lastly, meeting with our factories on weekly or more basis. We have six factories in North America, some are various strains in supply, it's taking a lot of coordination, and we are increasing factory output, which is great. Our team is working very, very hard. And we have a significant number of orders that are backordered. But we're so far are able to stay ahead of the actual use periods. And it is taken coordination, but we're very, very pleased that we've been able to meet these extraordinary demands so far. Okay, so, David, moving on to slide 7, you want to do an update on the finance.

[David Johnson:]

Thank you, Eric. With regard to our public filing, we had filed our Form 10-Q, just after the close of market today. Move on to slide 8. The company has started 2022 with a very strong sales performance as we forecasted at the last call. Note here on slide 8 that sales ended at $149 million, which is up 29% as compared to the first quarter of 2021 powered by a 61% increase in our US Crop business. Those sales were driven by growing demand for our yield enhancing row crop products that are used, for example, on corn in the Midwest. We were also successful during the quarter in collecting freight surcharges to defray the additional expenses that we are incurring on both in and outbound freight as the global logistics challenges continue. Our Non-crop sales were down as forecasted, as compared to the first three months of 2021 when we benefited from a $3 million upfront license fee from our Envance business. Our international business recorded solid increases in sales driven by a strong sales growth at our operations in Mexico and Central America. Move on to slide 9, as you will note, in slide 9 gross margins for the first quarter of 2022, improved from 39% in 2021 to 41% this quarter. Included in that performance gross margin for our US Crop business increased from 39% to 46% driven by both a strong mix of sales, focused on our premium corn and soybean products, and timely price increases. The reduction in gross margins for our non-crop sales from 54% to 45% in 2022, is attributed to the absence in the current year of the upfront license fee I just mentioned. The slight decline internationally from 33% to 31%, reflects a mix of stable sales of the company's off patent branded products, and strong growth from third party products that we sell through our market access regional distribution businesses. Move on to slide 10. We're pleased with operating expense performance during the first quarter of 2022. As you can see from slide 10, these costs were up 12% quarter-over-quarter, but that was on sales that increased by 29%. This result represents a significant improvement in operating leverage, as operating expenses represented 31% of sales in Q1 2022 as compared to 36% of sales this time last year. In absolute terms, the quarter-over-quarter increase amounted to $5 million. The main driver related to outbound freight, which was up $2.1 million, accounting for 42% of the total increase. When considering the trend of improvement in operating efficiency, if you look back at our previous filings, you will find that in 2020, we reported operating costs of 34% of sales. And in 2021, we reported costs amounting to 33% of sales. This strong start to 2022 puts us on a good track to again achieve our strategic target of improving operating leverage of 1% plus of sales each year. Move on to slide 11. In summary, when looking at slide 11 for the first quarter of 2022, our net sales improved by about $33 million, or 29% as compared to the same period of 2021. Our gross margin performance improved from 39% to 41% of sales, despite significant general inflationary pressure, particularly related to inbound logistics. Our operating costs which for the company include outbound freight and logistics have increased, but at less than half the rate of our sales increased generating a significant improvement in operating leverage. We've maintained a strong balance sheet for the quarter with significantly lower average debt and lower interest expense was down 58% as compared to the same three month period of 2021. Finally, our effective tax rate is basically flat with the same period of the prior year. Our net income at $9.9 million is up 224% and EPS is at $0.33 per diluted share as compared to $0.10 this time last year. Move on to slide 12. Historically speaking, the first quarter of each year is a period when the company expands working capital to manage customer demands for the rest of the growing season. As you can see on slide 12, in the first quarter of 2022 before working capital, we generated $19 million from our operating activities as compared to $10.5 million in the same period of the prior year, an increase of 81%. You can also see from the slide that we're very consistent and expanding working capital at the start of the new year. And despite the very strong increase in sales, we believe working capital expansion has been contained well. Furthermore, our use of cash in investing activities has been modest. Last time we talked, we indicated that we plan to start repurchasing our stock in the market. During the quarter we purchased approximately 332,000 shares as part of a program to purchase up to 1 million shares of our stock over the course of the next several months. Slide 13. The graph on slide 13 shows our performance of consistently driving inventory down compared to sales, even as our business grows. The blue highlighted columns are at the same point in the company's annual cycle. Inventory is a critical focus area for the company, we hold a monthly meeting devoted to the subject attended by key stakeholders from across the global business. This graph shows that as our business grows, we are achieving significant and sustained improvements in manufacturing and operational efficiency. For example, in March 2022, our inventory on hand stands at 112% of quarterly sales. This time last year inventory amounted to 154% of quarterly sales. Moving on slide 14, debt at the end of the first quarter of 2022, has reduced by about 31% since this time last year, we have a business with a strong annual cycle, which tends to increase debt in the first two quarters and brings that down at the end of the year. If you look at the blue columns of the graph, on slide 14, you see the position, the Q1 positions for 2020, 2021 and 2022. It shows that we are achieving consistent debt reduction over the period. In fact, debt is down by $70 million since March 31, 2020. At the same time, with regard to liquidity, we have a stronger first quarter of 2022 as compared to the first quarter of 2021. This is resulting in an improvement in the rolling four quarter adjusted EBITDA for the purchase of covenant compliance. The last four quarter adjusted EBITDA for our covenant calculation amounted to $76 million as compared to $56 million this time last year, an improvement of 36%. As a result of reporting debt down 31% and a 36% improvement in our rolling four quarter adjusted EBITDA, availability under the company's credit facility has significantly improved from $51 million, this time last year to $166 million at March 31, 2022. Move on slide 15, we have captured the essence of our first quarter performance on slide 15, which in summary is as follows. Sales and gross margin are up, operating expenses, which include outbound freight have increased at a lower rate than sales, and as a result improved to 31% of sales as compared to 36% this time last year, average debt has reduced and as a result, interest expense has dropped by 58%. Net income is up 224% compared to this time last year, and EPS is at $0.33 cents per diluted share as compared to $0.10 per share last year. As far as the balance sheet is concerned, inventories are lower than this time last year. Our customers continue to pay on a timely basis causing no change in our overall credit risk profile. Our accounts receivable have increased as a result of strong first quarter sales. Debt is down significantly compared to this time last year and availability under the credit line has improved more than three times. With that I will hand back to Eric.

[Eric Wintemute:]

Excellent. David. Thank you. Move on to slide 16. I just want to touch on our growth initiatives. First, our green solutions update for Q1. Our product revenue sales are up 42% quarter-over-quarter, strong performance virtually everywhere. LATAM, China, Mexico, Brazil, India, Australia, Ukraine being the one that we're not expecting to hit our targets there. They do have, it's not a significant but it is $1.5 million we had going to about a $2.5 million. They are projecting both from a crop standpoint, and from our sales standpoint that there'll be about two thirds of target. They, the team is obviously, under a lot of stress. But at this point, I just wish them our best. And we hope that they all stay safe. For US, we're having strong year again, US growers seem to be much more open to kind of Green Solutions product portfolio that we have. So we're up 143% in the first quarter versus last year, our full year budget is $52 million, which is a 30% increase over ‘21. And as I said, right now we're at $42 million so we're exceeding that so far. Gross margins are at 42%, which includes third party distribution products, which are not at margins of our proprietary products. SIMPAS, slide 17. Moving on now to slide 18. On our last call, we talked about our 2022 commercial success, or commercial of SIMPAS system sales. We were targeting to get to 70 systems up from 50 that we had mentioned before, pleased to report that we're now at 80 systems. We've had some delays which of implanting which have allowed us to get more system set up in into -- in particularly into the Midwest area. And sales have outpaced our supply for ‘22. We do have back orders. We've added more resources to meet the increased demand not only for this year, but going forward. We've added people in technical support, in installation in Rodman's 0

[Operator:]

And our first question comes from Gerard Sweeney from ROTH Capital.

[Gerard Sweeney:]

Good afternoon, Eric and team, thanks for taking my call. Obviously, well, congratulations, nice solid results. Wanted to just discuss maybe really strong start to the year, any chance that this could pull forward future demand that spending’s up, farmers have a little bit more cash in the pocket and are buying up a little extra fertilizer or materials and stocking them whether it just be because of supply chain or what or how do we look at this?

[Eric Wintemute:]

Yes, I think we're optimistic that what we're putting out there is going on the ground. We've seen our investment in a number of herbicides both in building out impact with three additional combo products with the soybean, sugar and herbicides that we've acquired rice herbicides, herbicides have been tight and so we're not only pleased that we've been able to fill these orders, but we think that if we can have a more permanent market shift to some of our niche herbicides so at present, we're pretty bullish that this is going on the ground, looking at corn soil insecticides. Again, I mentioned that growers are looking to maximize yields. The kind of more delayed in timing here I think bodes well for getting products out there and at time of plant, we will be watching cautiously. We've already forecasted in our numbers, a potential upswing in inventory that could and have had brought down our 2022 fourth quarter. But as we get into our next conference call, we can make an assessment whether inventories are not above normal channels, in which case then we'll make that call at Q2. So I think right now we're cautiously optimistic that what we're selling is going to get on the ground.

[Gerard Sweeney:]

Got you. Thanks for that. And SIMPAS, obviously, that is rolling out that sounds like pretty well if you get it, I believe you set a target of 55 and 70. Now you're targeting 80 and then 125 for next year. That means the trajectory of where SIMPAS is going this year kind of imply that maybe even next year could be late. One, is that an accurate assessment? And then two, could you comment maybe even on rollout? This is I think it's just been targeting the US. What's the opportunity maybe internationally? And when does that come into play? Thank you.

[Eric Wintemute:]

So yes, we're pleased with where we are and looking at that 125 target. We'll have more systems available in August, we'll start shipping out in September. It will give us more time. I mean, basically, we started chipping systems out in January this year, and we limped along to get into where we are now. We did have some restraints on semiconductor microchips. And that did impede how many systems we could get out there. But we're expecting to have that supply position back in August, as I mentioned. But so as we get into that next conference call, yes, we will provide an update on that 125. With regard to international, we did send our team down to Brazil. And we see some good opportunities, particularly for what we call our SIMPAS Solo, which is a single product, but it's the SIMPAS system and can be applied prescriptively, particularly with counter which is our -- are really, it's the standard for nematodes. We have on a number of crops, and we're expecting to be on soybeans later this year. So that's got really considerable upside. So our people seem pretty charged about that. I'm not sure whether we'll have a projection going forward by our next conference call, but I have talked to them about trying to pull that together. If not, we'll probably give better guidance on our Q3 conference call. But yes, this is keeping in mind the numbers that we've shown our four crops, corn, peanuts, cotton and soybeans in United States alone. So yes, we've got upside to look out there as we look global.

[Gerard Sweeney:]

Got it. And obviously the role is going very well on SIMPAS. Can you describe what the process, how you've been out there marketing it and driving interest and demand.

[Gerard Sweeney:]

So it's a partnership with Trimble and with our progressive Ag retailers. Those Ag retailers were kind of identified, we did a number of, I think seven basic demonstrations and trade shows that we've brought in the most progressive growers and retailers to kind of see the system created demand there, linked growers and retailers and Trimble dealerships together, we had a very, very nice iPad system that has all of the detail information on it, that we were able to get programmed into all of our salesman's hands so that they could walk through step by step what's involved and answer all the questions. It's when you're in it. And as long as we've been in it, it looks fairly straightforward. But I can tell you, when people look at this the first time they've got a lot of questions to get answered. So it is more detailed to sale than your conventional products that we bring on, particularly if there are products that are have already been in the marketplace. So our team has been up to it. We did a lot of training with them. Training with Trimble, training with the retailers. And as I said, we're staffing up people to expand that penetration. So I don't know if that answered.

[Operator:]

And our next question comes from Chris Kapsch from Loop Capital.

[Chris Kapsch:]

Yes, good afternoon. So I'll ask a couple on the core business, the growth platform and I guess I'll maybe take a stab at a couple on the activist situation. Sure. But first on just to strengthen your domestic business the US Crop business that you said was up 61% in the first quarter, I mean, so FMC obviously a big competitor a bit of a bellwether. They acknowledged that it was even tied in their second quarter guidance that they -- there was definitely pull forward demand reflecting concerns on behalf of growers, and I guess the channel about getting their hands on enough of the inputs necessary to drive their yields this year. So, can you just let us know if you -- are you seeing that? The other question about that growth number was I was just wondering, can you distinguish between volumes and pricing? Obviously, where the whole industry is getting pricing to cover costs and to take advantage of the stronger environment. So just curious if you could distinguish between volume and pricing in you US business.

[Eric Wintemute:]

So I think pricing overall was up about 8% to 10% in the US, I think demand is the stronger piece, and I will tell you that we ended Q1 with considerable back orders. And we're still trying to manage our way through that production wise. So Q2 looks very strong. And so we're not seeing that the only the only piece that we'll see is if at the end of this season, as we get into kind of the July, August, we'll see if it's a normal track of return products. We went into the year, low with inventory. And we, if we're low with inventory, going into ‘23, given what we see of the market and what we anticipate ‘23 to look like then we'll have an adjustment we need to make but right now we're kind of sticking to what we've given as guidance. So yes, not seeing any pull from Q2. But we managed to be seen if there's channel inventory at the end of the season.

[Chris Kapsch:]

Okay, just a follow up on that, Eric, because after the sort of mini boom bust that happened after the drought, I think it was 2012, 2013 when corn hit eight, you didn't have the visibility as much. And then you subsequently implemented the EDI system that sort of monitor real time. So just curious if you're leaning into that at all to kind of get some insights into how the product is flowing through the channel right now? Or is it -- is that informing your commentary at all, at this point? Or is it just really too early to see how this business cadence plays out?

[Eric Wintemute:]

Yes, again, you're correct. EDI is helping us out. We've also -- we've got basically what we think is sitting in every major retailer. So we've got good visibility of that. And we'll have, again, those returns will start happening in July. We won't have a complete picture by the first week of August, but we're going to have a pretty good understanding when we hit that time if there's any carryover into the 2023 season. So yes, I think we've, we learned our lesson from that time. And so we'll have our distribution channels because they were caught flat footed as well. So I think the industry is much better poised to understand if there is channel inventory that’s leftover at grower or retail level.

[Chris Kapsch:]

Okay. The follow up I had on it was on the SIMPAS was probably because over the years, I've heard this talked about sort of a lot of meetings and I know, it's an exciting opportunity, but in terms of the commercialization that you referenced, now, the up to 80 systems, my impression was that we're still in sort of proof of concept and that what you're seeding the farmers with today, we're still trying to validate that it's going to deliver the yield benefit, and that once that's proven with a bigger data set, then a broader commercialization strategy then ensues. So where are we in terms of with that as context, is that accurate? And then or how do you see that playing out?

[Eric Wintemute:]

Again, we're, one is to make sure that each grower has a very positive experience with SIMPAS SIM and so the systems that we've got out there, we're pleased that we've been able to go out and make sure they're all functioning well prior to planting. Yes, we will have a much broader data set from the ‘22 season, as far as what products delivered, what kind of yields, and we've seen in the early stages last year and the year before some nematode counter yields that were pushing 30 bushels. And that were prescriptively applied. And so we just need a broader base of that, I think. But overall as growers look at this, I mean, they – the progressive growers have got to understand that this is the future prescriptively applying crop inputs versus treating the whole field or not treating for a problem at all. This is really the future. And so I think you don't necessarily have to have all the answers you go into a field. Just as today, you make your best guesses as to where your -- what your problems are, and does it warrant treating for a nutrient deficiency or the disease pressure or a nematode problem, insect pressure, those decisions get made, but it's an easier decision now when you can do it prescriptively. So as we build our toolbox, and offer more and more products, and give the growers and the agronomist much more freedom to operate, and to fix the problems that are addressing, most fields that are out there. Yes, the returns are to me, and our in our team are pretty obvious. But having, as you said, I mean, having the real live data to say, hey, okay, here's these kinds of results that people are seeing, but it just kind of builds on each other. So the people that have used the system so far are very thrilled with it, and are continuing to go forward. And so we expect to build momentum, as we get more and more systems out there.

[Chris Kapsch:]

And just one last follow up on SIMPAS. I mean so Precision Planting, Precision Ag, and big data that's been talked about I mean, probably more than a decade. But I'm sort of thinking as a watershed moment is when Monsanto paid a $1 billion for Climate Corp. But I'm just curious about like the competitive landscape that you have or what the role in the solution that you see SIMPAS addressing. And just maybe if you could refresh us on the patent suite that you have, that you think enables your solution to garner a share of what presumably will be a growing market as more and more precision Ag is adopted by the farmers.

[David Johnson:]

And again, we're in a space of that precision Ag that doesn't have much in the way of competition where the prescriptive application of crop inputs and we're not doing, we can envision doing herbicides, but the skill concept is not what we're doing. So we've got a space of applying at three ounces or less per 1,000 lineal feet that we've patented on and we've got some 20 patents plus another 30 that are pending, that not only covered this impasse system, and we think it does a very, very broad way of applying prescriptively multiple crop inputs. But in addition, of course then we have our system around Ultimus which really is leads into kind of the ability to bring down your crop nutrients and nitrogen and phosphorus and other carbon issues by improving the ability for plants to uptake, nitrogen and other nutrients in a more efficient way. So you see that Union Pacific is kind of forcing farmers to cut back on their fertilizer. That's just kind of one piece of the transportation issues but overall, nutrition is expensive and if they can utilize some of our biological products and others and SIMPAS to help improve the performance of the nutrition that they put in the soil so much the better. And if they get paid carbon credits at the same time through the ultimate system that will measure, validate and record. Again, so much the better.

[Chris Kapsch:]

Fair enough. And then, so I'll ask just one. Well, maybe one multifaceted question about the activist situation, I'm going to be just try to pose it as impartially as possible. And I guess the crux of the contention of your investor who's involved in the proxy contests now is that the company basically has grown its top line, but the profitability and therefore, the value, derivation of the company hasn't really kept pace with the growth of the top line. Again, that's one way to kind of frame maybe just the crux of the contention, I guess, the question is that as you said, you've had conversations now for a while, just wondering if, your thoughts on the merits of that view? And then if you could just comment on any sort of discussions that you can share that about addressing maybe finding common ground about addressing driving the operating performance or enhancing value to the extent that you're willing to acknowledge some of that. So that's my effort at maybe bringing addressing publicly here what anything that you willing to say, notwithstanding your comments about not really talking about this in great detail. Thanks.

[Eric Wintemute:]

So what I think people that understand the agricultural business understand that there are cycles to it. And we've just came through a down an eight year down cycle, which is the longest one I've been involved in the 40 years that I've been in the business. And as we went through this, what we did is, we expanded our portfolio in 13, US corn was 41% of our business, and having that kind of dependency makes you vulnerable. And so we have kind of traded other markets, not just in the US, where we've expanded into soybeans and expanded I mean, our fruit and vegetable businesses has been core for us, certainly, for a long time. We've taken combination products that we put through our IRC program, and the acquisitions still remain strong. But what Bob brought in with him from FMC is, we need better market access globally, if we're going to balance, so we acquired six businesses. And businesses aren't always just a strict bolt-on, particularly if you're buying distribution businesses that might be in 25% margin range. But if we're going to move our products into bigger geographical areas, it's kind of a core investment that we need to make. So we made those investments during the down cycle. At the same time, we've built our green solutions platform, and of course, SIMPAS, we've driven now to where we are hitting, starting to hit the sweet spot. So we come out of this cycle, we had a good performance in ’21, ‘22 looks even much better. And we don't see any breaks coming on in the near future. So I think we positioned ourselves very well during that period of time. Our earnings are moving well, I think our EBITDA target that we've thrown out at $155 million, if we hit that then I think shareholders will be very, very pleased with the investment they've made in our company. And even where we are today versus, when we were -- when we first started talking to the activists is considerably improved from shareholder return. So I don't know if that answers your question, but I don't know if you have a follow up from there but –

[Chris Kapsch:]

Yes, sure, I'll follow up just, I appreciate some of the historic context but again getting at the crux of the acquisition that added to the sales level there, I mean, look, you can pick a spot and time and you can kind of use the data to make your argument, I guess I'm on both sides of this, but one could say that you can look at a company's EBITDA at one point in time and then subsequently after those five or six acquisitions that might have added, like $25 million to $30 million in EBITDA that the company's EBITDA finishing 2021 is comparable to where it was before this acquisition. So, therefore, it implies some compression of margin or some EBITDA that sort of went away. And it wasn't just the cycle because of when you can pick and choose the first data points, so I'm just wondering if you acknowledge that there's some merit to that, and or if you talked with the investor about sort of some potential solutions to remedy that, if you think that's has merit. Thank you, Eric.

[Eric Wintemute:]

So again, I think with our performance targets that we've laid out there, as we come into the upside of the cycle, we've laid a great foundation with these tailwinds. And we're seeing that right now. We're executing the plan that our directors leadership and along with management have envisioned, and it's coming to fruition right now. And I think the targets are real, we're updating on a quarterly basis. And so we're not seeing that we don't have the talent inside or with our board to execute on that plan. And I think we do that we're kind of in the top level in our industry.

[Operator:]

At this time, I'd like to turn it back to management for any closing remarks.

[Eric Wintemute:]

Okay, well, again, we’ve great start to our first quarter. I mean to our 2022 year. We feel bullish about the year. And as we move forward with our ’23, ’24, ‘25 game plan. We look forward to giving you further guidance in our next call and appreciate your support. So thank you till then.

[Operator:]

Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time. And have a wonderful day.