Oil-Dri Corp of America (NYSE:ODC) released fourth-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below.
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Summary
Oil-Dri Corp of America reported record annual financial results with all-time high fourth quarter sales and historic cash generation, driven by strong performance across product segments.
The company achieved record full-year sales and net income, with fourth quarter revenue growth supported by a 4% rise in business-to-business sales and a 3% increase in retail and wholesale sales.
Despite challenges such as higher freight costs impacting gross margins, strategic cost reductions and price increases helped maintain a steady gross margin of 27.8%.
Cash and cash equivalents increased by 45% to $74 million, and the company generated $80 million in operating cash flow and $93 million in EBITDA, demonstrating strong cash generation.
Oil-Dri expanded its borrowing capacity significantly, enhancing financial flexibility to pursue growth opportunities, including strategic acquisitions and organic investments.
Amlan International had an exceptional Q4 driven by recovery in key markets and regulatory changes in Brazil, positioning it for future growth.
Fluid purification sales declined 5% year-over-year but showed improvement in Q4 due to positive variation in demand, with no loss of customer base.
Co-packaged cat litter experienced significant growth, and the company plans to continue investing in lightweight segment expansion.
The agricultural business saw consistent growth, driven by strong partnerships and high planting levels in key markets.
Management remains optimistic about future growth opportunities across all segments and continues to focus on strategic investments and disciplined financial management.
Full Transcript
OPERATOR
Good day, and thank you for standing by. Welcome to the Oil-Dri Corp of America fourth quarter fiscal year 2026 earnings discussion. 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 Jaffe, Chairman, President and CEO. Please go ahead.
Dan J., CEO
Thank you, and welcome, everybody, to the fourth quarter and fiscal year-end 2026 teleconference. Before we get started, Leslie, will you walk us through the safe harbor and also let everyone know who's on the call so they can ask questions?
Leslie Garber, Investor Relations
Yes, sure. Thank you, Dan. Welcome, everyone. Today on the call we have Susan Cray, Chief Financial Officer and Chief Information Officer. Erin Christensen, our VP of Operations. Chris Lamson, Group Vice President of Business to Business and Strategic Growth initiatives. Wade Roby, VP of Agriculture and President of Amlin International. Laura Sheiland, Vice President and General Manager of Consumer Products Division. John Blake, VP, Corporate Controller.
Tony Parker, VP, General Counsel and Secretary. Unfortunately, not in attendance today is Bruce Patzy, Vice President of Fluids Purification. But Dan Jaffe, our CEO, will be able to answer those questions. Right now, I'll read the safe harbor. 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 again for joining us. Dan, I'll turn it back over to you.
Dan J., CEO
Great. Thank you, Leslie. And before I turn it over to Susan, I'd like to make some general comments. You know, my grandpa Nick used to always say, don't debate, demonstrate. And I was wondering, how did he get this industry started? And my sister Karen's been digging through our archives, and if you don't follow me on LinkedIn, I hope you'll go look at it because we found some ads that he ran on the front page of newspapers that communicated the benefits of using Oil-Dri versus sawdust, which was very flammable, very strong, compelling advantage.
So it's interesting that started that, and then Bud Selig, who's been on our board since 1969, his father Ben used to always say, nothing is good or bad except by comparison. And if you look at our year, many of the indices are extremely positive. But you could, if you wanted to, you could look at some of the comparison numbers and say, okay, well that was sort of flat or that was slightly down, but any kind of perspective of 3, 4, 5 years and you see how great this team is performing and how well we're doing.
And then finally my dad always said earnings are an opinion, cash is a fact. And Susan will highlight this. But our cash generation has been fantastic and that's really what fuels the growth and the health of the business. And so we've never been more happy or positive with how the company is doing. And I would say the final thing is, you know, we did give some forward guidance back in the first quarter and second quarter. We said the first part of F26 was going to be a tough comparison, but that we fully expected to equal or more than make up the distance in the back half.
And you see the really great fourth quarter we had which allowed us to do just that. Pull ahead in many key indices, sales, net income, things like that, EBITDA, all were up for the fiscal year. So very proud of what the team has delivered and thank you for your questions. We'll spend most of the time answering them. But before we do, I'd love to turn it over to Susan so she can walk you through the results.
Susan Kreh, Chief Financial Officer & Chief Information Officer
Thank you, Dan. And cash is a fact, and I will get into that in a minute. So it's a pleasure to be here with all of you this morning, especially coming off the headline we released that states Oil-Dri delivers record annual financial results including all-time high fourth quarter sales and historic cash generation. Leslie Garber did a really nice job in the press release of highlighting the drivers of our performance. So therefore, like Dan said, I'll keep my comments brief to allow for more time for your questions in the Q&A session.
That being said, I would like to highlight that our continued strong performance has resulted in very strong financial position from which we're well positioned to grow. And key words there being strong performance and strong financial position. So from a performance perspective, fiscal 2026 demonstrated the strength of Oil-Dri's diversified product portfolio and efficient operating model. And we'll talk about cost reductions in a minute. As we stated at the onset of the fiscal year, and as Dan just reiterated in his opening comments, we knew the first half was going to be a challenge on a year-over-year comparative basis.
We noted that although in the first half we faced a very tough comparison, we expected to achieve meaningful growth during the second half of the year as we gained incremental business and launched new products. The focus team here at Oil Drive delivered on that forecast, achieving record full year sales and net income and closing the year with a record fourth quarter revenue. And that fourth quarter growth was broad based across both product groups with business to business sales rising 4% to a record 50 million and retail and wholesale increasing 3% to 79 million.
Improved product mix was the primary driver of the growth in the fourth quarter revenue, supported by strong growth in animal health sales, agricultural product sales and co packaged cat litter sales. As we had anticipated and while net sales grew nicely in the fourth quarter compared to the prior year, gross profit as a percent of sales or gross margin was under pressure and remained steady at 27.8% during the quarter. Our gross per ton domestic cost of goods sold increased 3% over the same quarter in the prior year, primarily due to higher freight and transportation expenses which were pressured by geopolitical impacts on diesel prices as well as reduced capacity in the trucking industry. This pressure was especially impactful in the retail and wholesale products group which experienced significantly higher costs to transport cat litter products, contributing to a 5% decline in segment operating income despite the higher sales. Depreciation and amortization, a noncash component of our expenses, was also up 6% in the quarter due to the ongoing strategic investments we're making in our business.
These increases were offset by the favorable mix and targeted price increases, some of which will get implemented on a lagged basis with some of our customers. In addition, cost reduction and expense management initiatives were a key to holding the margin steady at 27.8%. And while gross margins did remain steady, fourth quarter operating income increased by 17% over the same quarter in the prior year, demonstrating the resilience of the portfolio and our ability to manage through a challenging cost environment.
Now switching gears from strong performance to strong financial position and let's discuss cash and financial flexibility. The substantial cash generated as a result of the strong performance we just discussed enabled us to continue to invest in the business and return capital to our shareholders. Cash and cash equivalents reached an historic high of $74 million at year end, up from 51 million a year ago, marking a significant 45% increase. We generated operating cash flow of 80 million and EBITDA, our earnings before interest, taxes, depreciation and amortization, of 93 million, underscoring the growth and the cash generating power of our portfolio.
And back to Dan's opening comments, cash is a fact. EBITDA is a notable metric for us as we have made the strategic decision to reinvest significantly in our business, particularly in funding, infrastructure and growth opportunities in our manufacturing facilities as well as funding the building of enterprise-wide capabilities such as data analytics and business intelligence. While those investments are funded in cash as they are put into service, the noncash depreciation expense that they generate puts pressure on our gross margins and will continue to do so as we have been investing steadily at this rate for about four years now.
As a result of that impact on our margins, we do monitor EBITDA very closely to track the underlying performance of the business. Our cash position, together with our ability to access debt, provides strong liquidity and gives us flexibility to fund strategic priorities, manage through volatility and pursue attractive growth opportunities while maintaining a very disciplined balance sheet. And speaking of our ability to access debt capital markets, I'd like to highlight some very recent enhancements to our financial flexibility.
We have worked with two of our key financial partners to add more dry powder to our financing arsenal. We have extended our variable rate revolving credit facility and increased our borrowing capacity by 33% up to 100 million. In addition, that facility contains an accordion feature which we have increased by 150% up to 125 million. At the same time, we extended our fixed rate shelf facility and increased our borrowing capacity by 100% up to 150 million.
So in total, we have increased our ability to borrow under these two facilities from 200 million to 375 million, which is reflective of the continued strengthening of our financial position. Both of these were executed with favorable terms compared to our existing facilities, and both of these financing partners have been supporting Oil Drive literally for decades. Those relationships are another key aspect of supporting our financial flexibility and our ability to fund growth.
And as our financial position continues to strengthen, our capital priorities remain unchanged from what we have told you previously. First, we will continue to invest in our business, including the manufacturing and capabilities investments mentioned above, as well as investments in people and research and development to support our future growth. During fiscal 2026, we invested $34 million in capital expenditures to support infrastructure capabilities and long-term growth.
Second, we will continue to support our dividend. During fiscal 2026, we increased our dividend not once but twice and paid out over $10 million to our shareholders. Third, we will evaluate opportunities to achieve long-term profitable growth through the pursuit of strategic acquisitions. The combination of our cash position, our strong operating cash flow and our manageable debt profile, including our enhanced access to capital markets funding, provide meaningful financial flexibility to evaluate and pursue acquisition opportunities.
And as we evaluate acquisition opportunities, we will remain focused on our mission to create value from sorbent minerals, seeking businesses and capabilities that reinforce and extend that core purpose and offer a clear path to long-term value creation. And finally, we opportunistically evaluate potential value creation through share repurchases. And when it makes sense and generates long-term value, we will pursue that. And with that, Dan, I'll turn it back over to you and Leslie for the question and answer session.
I'm sure there will be a few.
Dan J., CEO
Yep. Well, thank you, Susan, and thank you for that recap. And, Leslie, will you highlight which questions we're answering first?
Leslie Garber, Investor Relations
Yes. And as a reminder, for those who are interested in asking questions, please submit your questions using the Ask a Question field on the webcast and click Submit. The first question we have comes from both Ethan Starr and Robert Smith. They have very similar questions. Was there a seasonal factor in Amlan's last quarter? Good numbers? What are the prospects for the run rate of $40 million being achieved in the current year? And what are the prospects for maintaining or increasing Amlan's record Q4 sales going forward?
Wade, can you handle that?
Wade Roby (VP of Agriculture and President of Amlin International)
Yes, absolutely, Leslie. And thank you Robert and Ethan both for those questions. We actually, as you see, had an exceptional quarter for Amlan in Q4 of this past year and it was driven by a couple of things which truly made it extraordinary. You may recall earlier in the year in previous webcasts we talked about the loss of a key account in Brazil and we also spoke to the impact that the tariff situation globally was having on our business and the impact specifically in a couple of key geographies like Brazil.
Those things combined early in the year to lower our sales to those regions and then we worked very hard over the course of the year to overcome that. You saw that in solid growth in Q3 and then now the exceptional growth we've seen in Q4. So obviously, logically, there was some rebound effect in the performance we saw over the course of the year. That being said, we're very bullish on the growth going forward for a couple of regions. One, we saw very strong growth consistently in Asia through the course of the year.
In Latin America we've seen not only recovery to a certain degree of that key account that we lost, but also additional growth in our business in Brazil to certain co-ops, gaining new customers and also new volume at existing customers. In addition, the regulatory agency in Brazil, MAPA, has made a number of changes which is improving our ability to register our products and make additional claims. They've also, as many of you may have seen, come out with new bans on certain antibiotics that are key and instrumental in the animal industry, including antibiotics like avoparcin, certain forms of bacitracin, and virginiamycin, which are all key antibiotics used in sub-therapeutic application in animal feeds. As those products are removed in Brazil, that's going to drive alternatives, and especially natural alternatives like we offer in our Amlan portfolio. Finally, in Brazil, I would note that we're expanding our sales with new distributors into the middle and northern states, including Mato Grosso, Mato Grosso do Sul, up into Bahia, and then also in the southern states down in Rio Grande do Sul. And that is expanding our business and building our base.
Finally, we're moving more aggressively into the ruminant market in Brazil. You may have heard me say earlier, we sell a lot of our products into the dairy industry today, which is a form of ruminant. Obviously in Brazil the focus has been on feedlot for beef cattle. We've completed significant research there over the course of this year and are seeing an opportunity for a lot of growth there. Finally, Robert and Ethan, we're also launching new products in North America over the last few months.
Those are starting to be utilized by some of the largest of the top 10 poultry customers in the integrated industry in North America. We're excited about that. That's a product very similar to Varium that we sell in Latin America where we have tremendous customer success and it also is a very strong component product in our portfolio in addition to our base clays. So for all of those reasons we're very bullish on the growth going forward. The fourth quarter was, again, exceptional.
That's a rate we probably can't maintain, but we should see very good growth year over year as we continue to expand our Amlan business.
Leslie Garber, Investor Relations
Great. Thank you so much. We had a couple of similar questions come in regarding fluids purification, some from Robert Smith and John Baer. So I am going to summarize and ask the question and Dan Jaffe will answer this. Fluids purification sales declined 5% for the full year, but delivered their strongest quarterly performance in the fourth quarter. What drove the improvement in Q4 compared to the rest of fiscal year 26? Dan?
Dan J., CEO
Yep, happy to answer the question. Bruce Pacey did supply me with a lot of the details, so I'm fairly confident I'm on target here. It's important to note that the 5% year over year decline largely reflects a difficult comparison with fiscal 25, when renewable diesel sales were increasing significantly as several new production facilities came online. Throughout fiscal 26, demand from both edible oil and renewable diesel customers remained solid, although volumes varied as changes in oil type and feedstock quality impacted customers' needs.
I think it's important to note that the decline in sales did not reflect customer losses. It was just variation in demand, which is what drove the positive fourth quarter — it was a positive variation in demand. So we're very happy that we're hanging on to our customer base. I think anytime a market is in its earliest stages, you're going to have more volatility than when the product line gets mature. So, you know, hang in there. But we're hanging on to our customers and we'll ride the ups and have to deal with the downs as they figure out their supply and demand equation.
Leslie Garber, Investor Relations
Thanks, Dan. The next question comes from Tyler Ventura from Diamond Hill Capital. He asks: Co-packaged cat litter grew 47% this year and 60% in Q4, which you've identified as your single biggest growth driver in the category. Walk us through the capacity and customer concentration dynamics. Specifically, how many customers drive this 47% growth? What's the gross margin profile of co-packaged relative to your domestic branded business? And is the expansion of your lightweight offering with this partner a multi-year ramp up or approaching maturity?
The reason I ask is because your domestic clay litter sales are actually declining despite Cat's Pride Antibacterial posting seven straight quarters of growth, which makes me wonder if co-packaged success is partially cannibalizing your own branded distribution or if that's a separate dynamic tied to competitive promotional intensity. A lot in there. Chris Lamson, if you could address that, that would be great.
Chris Lamson (Group Vice President of Business to Business and Strategic Growth initiatives)
Sure. Thanks, Leslie. And thanks, Tyler, for the question. Tyler, we are obligated under contracts with our co-man customers to not disclose a ton about the nature of those relationships. But with that being said, what I can share: we're obviously extremely pleased with the new business within lightweight and the growth that you reflected in the question. We're also — if you go back really through investor calls like this one and our annual shareholder meeting — we've been extremely consistent, be it me or Laura, over the last seven or eight years around how focused we are on growing the lightweight segment.
And we believe lightweight segment growth is good for Oil-Dri, period. With that being said, more tactically, I would say we have some very good analytical tools that would tell us that, particularly with the folks we're supporting with co-man relationships, there is not much, if any, real interaction with those businesses. But again, we like the large brands driving lightweight and having great lightweight product, and we believe that's good for the overall development of the lightweight category and for both our private label and branded business and litter.
Regarding capacity and capital specifically, I'd say it's a bit of a mixed bag. We were able to leverage existing capacity in many key areas within the supply chain, and where either the customer required specific product needs that called on additional capital investment, or pockets of further capital need maybe to address a bottleneck or two. Really the nature of our longer-term agreements in this area really help us feel very good about the capital that we did put in to support this ongoing relationship.
So thank you again for the question, and we're excited to have this business and to continue to grow with our customers in lightweight.
Leslie Garber, Investor Relations
Thank you. The next question is from Ethan Starr. Could you please discuss the challenges and opportunities you see in growing your branded cat litter distribution and sales? Will you take that? Sure.
Laura (Guest) Scheland, Vice President of Strategic Partnerships and General Counsel
Good morning and thanks for the question. We'll take the question in two parts. First, with respect to the challenges, some of the challenges we've seen in the past year for our branded cat litter distribution are increasing freighting costs, customer investment requirements, and other spend requirements that are rising faster than our pricing and inflation, but continue to try to stay in front of along with retail consolidation in the brick-and-mortar channel.
In addition, we continue to see some historically elevated spending from large brands and competition from a number of smaller brands and new entrants. However, turning to opportunities, all in, we remain very excited about the great opportunity for our brand. We remain the number four brand nationally in units and are dedicated to growing with innovation, expanded distribution, and focus. During F26 we're excited to launch a number of new items and continue to focus to do so in the coming years.
Another area of opportunity that we remain excited about is e-commerce. In the past year we've grown our product and offerings across different retailers and are seeing great growth and adoption from consumers. And then on the promotional spending level, while F26 was a time of heightened spend and we continue to see promotions be elevated, we're seeing indications that spending is starting to subside and set at the historically high level. So we remain diligent in managing our promotional spend in a strategic way to optimize our return on spend but also our consumer value on an everyday basis to be the best choice for our with our strategic customers.
So all in, balancing out the challenges and opportunities, we remain very excited about the future for both our branded and private label products and remain committed to growing across both e-com and brick-and-mortar channels.
Leslie Garber, Investor Relations
Thanks, Laura. We have another question for Wade, this time on the ag side of the business. The question is: the ag business has delivered year over year sales growth in each quarter of fiscal year 2026. What is structurally driving this growth? Wade?
Wade Roby (VP of Agriculture and President of Amlin International)
Yeah, thank you for that question, Leslie. There are a number of things that Really drive the growth in the types of businesses that we target with this division. Just to remind the audience, our two primary channels that we go to market are really one on the, what I'll call, the turf and ornamental side, which is more of engineered granules to higher-use applications for specialty products, and then more our standard carrier products which are targeted for what I'll call broadacre or row crop agricultural applications. And in both cases, we've seen good growth in that business.
We have been, I think, very fortunate and hopefully strategically smart in how we've aligned with certain leaders in those segments, working with some of the largest producers which, as they grow, has allowed our business to grow as well. Kind of some of the macro events underpinning that, we've had really large plantings. If you look at more of the broadacre or row crop side of our business, where, again, customers might blend on a herbicide or a pesticide or even a bio-Ag or other bioactive product onto our clay to put on, let's say, row crops.
Those plantings have been very high over the course of the last 12 to 18 months. We saw over 95 million acres of corn planted in the U.S. this past season, about 85 million of soy. So very high in the range of what we typically plant. That then drives, naturally, more tonnage of those products that need our clay as a functional carrier into that solution. So all of those things have kind of come together to help us grow our business again. We have a strong competitive position.
We're partnering with some of the leaders in those various sectors. And then we've seen just general growth in ag and in the plantings that year over year have helped drive the business. So all those things have come together to help our business grow.
Leslie Garber, Investor Relations
Thanks, Wade. The next question comes from Jan Verbrugge from Value Square Funds. He asks, with the expanded revolver and the removal of the $100 million acquisition cap, how should we think about the size and focus of acquisitions you're considering and what leverage would you be comfortable with? Also, if the number one capital allocation will be organic investment, should we expect CapEx to increase above the plus-minus $35 million per year of the last couple of years?
Any guidance on balance sheet and the usage of a bit of financial leverage would be helpful. Chris, I'm going to have you answer that and Susan, feel free to chime in too.
Chris Lamson (Group Vice President of Business to Business and Strategic Growth initiatives)
Sure. I'll really start out with the piece that is M&A oriented, and then if Susan would like to chime in on the ongoing capital spending, that's great. And really Susan alluded to this piece too. And I can tell you we're very disciplined around being mission-led, around value creation. And then we've really got some key strategic filters that we then run ourselves through before we engage. And then we're incredibly disciplined around remaining value-driven, and where we don't believe that we can drive value and return it to folks like you, we will remove ourselves from deals.
I would say, in thinking about M&A, we are certainly grateful to Susan's team for the additional dry powder—maybe spelled D-R-I, play on words—that they've provided us and obviously the cash that I think just came across in one of Tyler's questions that the business is generating for us. But we're going to be prudent here, and I think there's 85 years of history that shows we'll be prudent relative to the leverage coming from the balance sheet.
Susan Kreh, Chief Financial Officer & Chief Information Officer
Hi, this is Susan. I'll just add one more thing. Yes, I think it is lower risk to reinvest in our team and in our business because we actually know how to run this company and the operating team runs it well. So I definitely am pushing Aaron and his team to look for more opportunities that create long-term value for the shareholders and have the right returns, and to think bigger than they have in the past. So it is possible that you could see some bigger reinvestment in the business at levels higher than you've seen in the past.
Leslie Garber, Investor Relations
Great. Well, we are at time. Dan, I don't know if you have any closing remarks.
Dan J., CEO
Closing remarks. Yeah. Thank you, everybody, and we'll look forward to talking to you next quarter. This was a great quarter. And onward and upward from here.
OPERATOR
This concludes today's conference call. Thank you for participating. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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