Earnings Call Transcript - ODC Q4 2024

Operator, Operator

Good day, and thank you for standing by. Welcome to the Oil-Dri Corporation of America Fourth Quarter and Fiscal Year 2024 Earnings Discussion. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, President and CEO, Dan Jaffee. Please go ahead.

Dan Jaffee, President and CEO

Thank you, Daniel, and welcome everyone to our fiscal year-end investor teleconference. We are expanding today to up to 45 minutes. If we have questions, we want to give you extra time. And we're also going to cover the very exciting Ultra Pet acquisition. With me on the call today is Susan Kreh, our CFO and CIO; Aaron Christiansen, our VP of Operations; Wade Robey, VP of Ag and President of Amlan International; Chris Lamson, Group VP of Retail and Wholesale; Laura Scheland, Chief Legal Officer and Vice President and General Manager of Consumer Products Division; Tony Parker, Vice President of Legal; and Leslie Garber, Director of Investor Relations. And Leslie, will you take us through the safe harbor?

Leslie Garber, Director of Investor Relations

Yes. Thank you, Dan. 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?

Dan Jaffee, President and CEO

Great. Thanks, Leslie. Before I pass it over to Chris, I want to share a quick overall observation. We had our Board meeting this week, and at the end, we went around for all Board members to share their thoughts. Commissioner Emeritus Bud Selig, who has been on our Board since 1969, mentioned how amazed both my father and grandfather would be. He knew both of them and has been with us since '69. I reflected on how we had $5.7 million in sales the year Commissioner Selig joined our Board. We went public in '71 with just $7.2 million in sales, which is remarkable. It took us 51 years to reach $100 million, then 15 more years to hit $200 million, another 15 years to get to $300 million, and just two years, in fiscal '23, to achieve $400 million. As for where we will be in fiscal '25, we can't say for sure, but given the current momentum, we feel optimistic that our growth will continue. The accomplishments of our team are truly impressive. I shared with them, and with you as investors, that you're investing in the people at Oil-Dri. I've been at this for 30 years now, starting my 30th fiscal year as President of Oil-Dri. The significant change in the last three to five years has been the team you’re hearing from today, who have elevated those under them. It's amazing and humbling. We're excited about the future and proud of the year we've just had. We're particularly thrilled about the acquisition of Ultra Pet, the largest in the company's history, largely led by Chris Lamson. Chris, over to you.

Chris Lamson, Group VP of Retail and Wholesale

Thanks, Dan, and good morning, everyone. I want to provide a brief update on our first full quarter of ownership of Ultra Pet, which we finalized at the end of Q4. I’m pleased to report that despite accounting adjustments related to the acquisition, the Ultra Pet business contributed positively to our earnings for the quarter. Susan will follow shortly with more specifics on the accounting aspects. I'm also glad to mention that our distribution efforts for Ultra Pet have been very successful. Not only did we expand distribution for the Ultra brand, but we also launched two new skews of Micro Crystals under the Cat's Pride brand within a few months. We started selling these in fiscal Q4 and began shipping them in early Q1, and they are now available on shelves at Wegmans, with more retailers on the way, particularly on the East Coast. Since the acquisition, we’ve successfully added distribution for either Cat's Pride or Ultra at 16 new retail banners, primarily regional ones. The Ultra team was already focused on the East Coast, so we built on their momentum and pushed to finalize deals. Across these 16 retailers, we've increased our distribution by over 5,700 points. To clarify, a point of distribution refers to the number of item-store combinations; for example, if a retailer has 100 stores and we added three of our products, that equals 300 points. This growth includes both the new Cat's Pride products and the Ultra brands over the past few months, with most of the increase attributed to the new Cat's Pride items developed in the last quarter. When we purchased the business, we had around 4,500 points of distribution for the Ultra brand, so we have effectively more than doubled our distribution in a short timeframe, which is fantastic. However, it's important to note that Ultra also had private label and e-commerce businesses, which are not included in that increase. In terms of branded distribution, we have indeed more than doubled since the acquisition. Now, shifting gears, I’m pleased to share that as of October 1st, we integrated Ultra Pet onto our Oil-Dri ERP system. Such conversions often come with challenges, but ours were minimal and largely seamless for our customers. We're processing all orders correctly and shipping them on time within the Oil-Dri system. I want to take a moment to acknowledge our Ultra Pet teammates in South Carolina. They managed to complete the conversion process despite the challenges posed by Hurricane Helene, which impacted the region just days before the transition. Their dedication was commendable, as they navigated power outages and internet disruptions. The systems integration will enable us to combine Ultra and legacy Oil-Dri litter products in a single order and delivery, enhancing efficiencies for both us and our customers. On the efficiency front, we are beginning to achieve cost synergies. We recently restructured our sales broker network ahead of schedule, leading to savings through reduced rates with existing brokers and in-housing a few larger accounts. Overall, while we have more work to do, we are pleased with our initial efforts and results in the crystals business. Now, I’ll turn it over to Susan for further insights into Oil-Dri’s overall financial performance and deeper details on the acquisition accounting of Ultra Pet.

Susan Kreh, CFO and CIO

Yes. Thank you, Chris. And as you can tell from Chris' comments, the strategic acquisition of Ultra Pet has been exciting for our team and for the team in Anderson as well. From an accounting standpoint, Ultra Pet was acquired on May 1st, 2024, which was the first day of our fiscal fourth quarter. As detailed in Note 2 to our financial statements, Oil-Dri acquired all the issued and outstanding shares of the capital stock of Ultra Pet for $44.3 million net of cash acquired. The financing of this acquisition was done through a combination of cash on hand, the issuance of notes, and a draw on our credit facility. The financing was actually completed in both the third and fourth fiscal quarters. So, summarizing both from a timing and detail standpoint, because we did crossover quarters, Oil-Dri issued $10 million in aggregate principal amount of 6.47% Series D Senior Notes due April 30, 2033, pursuant to our shelf facility provisions of our Note Agreement with Prudential affiliates. These notes were issued on April 30, making this a third-quarter financing event. The following day, on May 1st, we drew $10 million on our $45 million revolving credit facility with BMO Bank. This $10 million draw occurred during our fiscal fourth quarter. Our draw with BMO is subject to a variable adjusted SOFR-based rate, plus a margin that varies depending on our debt-to-earnings ratio. At the date of draw, that rate was 5.3%. Being on the Ultra Pet acquisition, during our fiscal fourth quarter, we engaged a third-party specialist to assist with the formal valuation of our acquisition of Ultra Pet. As a result of that valuation and analysis, the major categories of assets that we booked as of July 31st, 2024, were as follows. We booked working capital of $10.7 million, intangible assets of $25.6 million, the majority of which includes a customer list asset valued at just over $20 million that will be amortized over 18 years, and we also booked goodwill of $11.8 million. Now switching to a performance standpoint, we are pleased, as Chris mentioned, that the Ultra Pet acquisition was accretive during the fourth quarter, including transaction costs. It generated $4 million of net sales and $200,000 of pre-tax income. These results include a charge to cost of goods sold of $449,000 for the inventory step-up associated with acquiring Ultra Pet. These results also include $300,000 of general and administrative transaction-related expenses. We anticipate a similar level of cost in both of these categories during the first quarter of fiscal '25. Now let's switch from the purchasing of Ultra Pet to the integration of this acquisition, which Chris mentioned a little bit in his comments earlier and which has been proceeding well. As of October 1, we have migrated Ultra Pet from their legacy systems to Oil-Dri's Human Resource Information System and as Chris mentioned, to Oil-Dri's integrated Enterprise Resource Planning system. Both migrations have been accomplished successfully, and Ultra Pet is now fully integrated into our applications environment, and we are very pleased with the success there. Now let's switch gears and talk about Oil-Dri as a whole. Taking a look at our financial success during 2024, our consolidated net sales for the fiscal year reached an all-time high of $437.6 million, reflecting a 6% increase over the prior year. Record revenues were achieved in both the Retail and Wholesale and Business to Business product groups. This top-line growth was due to higher prices and improved product mix across both of the operating segments. Increased sales volume of fluid purification products as well as the fourth quarter inclusion of incremental business from the acquisition of Ultra Pet also bolstered our sales. Revenue from domestic cat litter, excluding co-packaged items, and revenue from fluids purification products increased by 8% and 19%, respectively, compared to the prior year. While annual revenues from animal health products remained flat, the company's commitment to this growth opportunity remains strong. We believe that the initiatives that were executed during 2024 to reposition the business will position us well going into fiscal 2025. On the flip side, market and customer impacts on demand in our agricultural and co-packaged coarse litter businesses declined by 17% and 4% respectively during fiscal year 2024. The fact that we had a record year despite these two challenges is reflective of the value of the diversity of Oil-Dri's portfolio of products. Our annual consolidated gross profit was a record $125 million, an increase of 21% over the prior year, with margins expanding at the gross margin level to 29% in fiscal year 2024 from 25% in fiscal year 2023. Despite the increase in our domestic cost of goods sold per ton of 6% compared to fiscal 2023, which was driven by higher labor, depreciation, and freight costs that were only partially offset by lower natural gas and packaging costs, our improved pricing and profitable product mix helped achieve this record gross profit. Fiscal year 2024's consolidated operating income reached a record high of $51.6 million, reflecting a large $10.6 million, or 26% increase over the prior year. This record result is inclusive of selling, general and administrative expenses that were 18% higher in fiscal 2024 compared to the prior year. This 18% increase consists of both ongoing and one-time expenses. Significant expenditures reflect elevated compensation costs resulting from increased performance-based incentives as well as a few key planned headcount additions. In addition, we had increased advertising costs to promote Cat's Pride lightweight litter. There were expenses related to the Ultra Pet acquisition, including transaction and integration costs, as well as the amortization of the intangible asset that I mentioned earlier. Now let's hit a couple of other items of recent financially related news. On October 9th, the Board of Directors of Oil-Dri approved a two-for-one stock split in the form of a stock dividend with the goal of increasing the float to improve the liquidity of the stock and to reduce the share price per share to make it attractive to a potentially broader set of investors. The stock split is subject to stockholder approval of an amendment to the company's Certificate of Incorporation to increase the number of authorized shares of common stock in order to accomplish this split. The company intends to seek stockholder approval for this amendment at our upcoming Annual Meeting on December 11, 2024. If the Certificate of Incorporation Amendment is approved by our stockholders, the company expects to file the amendment with the Secretary of State of the State of Delaware and to implement the stock split and authorize share increase promptly following the Annual Meeting. Our plan is that following stockholder approval and the filing of the effectiveness of the Certificate of Incorporation amendment, stockholders of record at the close of business on December 20, 2024, the record date of the stock split, will receive one additional share of common stock for every share of common stock held on the record date and one additional share of Class B stock for every share of Class B stock held on the record date. Oil-Dri expects the additional shares will be distributed after market close on January 3rd, 2025. Shares of Oil-Dri's common stock are expected to begin trading on a post-split basis at market open on January 6th, 2025. Another recent development is an upcoming change to our SEC reporting status. Based on our position as of January 31st, 2024, it was determined that beginning with fiscal year 2025, Oil-Dri has grown to a size that no longer qualifies for SEC smaller reporting company status. As such, investors can expect to see expanded disclosures in our 10-Qs and 10-Ks beginning with our fiscal year 2025 SEC filings. So that's all good news. And in other news, on September 30, 2024, the company entered into the Eighth Amendment to our credit agreement with BMO Bank. The purpose is to upsize our existing credit facility to create additional financial capacity for Oil-Dri should it be needed or desired in the future. This amendment increases the amount the company may borrow on its revolving line of credit from the current level of up to $45 million to an increased level of up to $75 million, which provides Oil-Dri with additional financial flexibility. This amendment also adds a new accordion facility, which will allow the company to increase the revolving line of credit by up to an additional $50 million for a total credit facility size of $125 million. In addition, the amendment extends the termination of this agreement to September 30, 2029, while the covenants remain unchanged. These changes are part of our ongoing efforts to provide financial flexibility that positions Oil-Dri to be able to opportunistically invest in growth opportunities, such as we did with the Ultra Pet acquisition when those opportunities arise. And with that, Dan, I'm going to turn it back over to you for comments and Q&A.

Dan Jaffee, President and CEO

Great. Thank you, Susan, and thank you Chris. Very exciting and a great review. We are now going to turn it over to the Q&A section. We've gotten a bunch of good questions in from our shareholders and we'll do our best to answer as many of them as we can in the time remaining. So Leslie, walk us through our questions.

Leslie Garber, Director of Investor Relations

Our first question comes from John Bair from Ascend Wealth Advisors. He congratulates us on a strong finish and record year, and he is pleasantly surprised by the two-for-one stock split proposal, agreeing it would help improve trading liquidity. His first question is that fluids purification product sales were up a solid 19% year-over-year. He asks if there is any particular market that has been especially strong, such as food oils or transportation fuel. Dan, I'm turning it over to you.

Dan Jaffee, President and CEO

Yes. Bruce Patsey is not here today, but fortunately, we have his answers, and I will do my best to represent Bruce. Renewable diesel has definitely been driving the growth in our fluids purification division, with new plants emerging all the time.

Leslie Garber, Director of Investor Relations

Perfect. Next, we have a couple questions regarding Amlan. I'm going to combine them. What progress is Amlan making? What do you think it will take for the poultry and swine industries to adopt your product on a worldwide basis? And how are trials going with larger prospective customers? Wade, I'm going to turn that over to you.

Wade Robey, VP of Ag and President of Amlan International

Yes. Thank you, Leslie, and thank you for the question as well. So there's a couple of different aspects that were asked in that question, and I'll try to take them kind of one at a time. First, in terms of the use of our product or its adoption around the world, we already see that in all world areas that we sell the types of products that we have in our portfolio, and specifically the Amlan-Oil-Dri technology is highly valued by our customers and we have a good adoption rates where we market. Our markets, as we mentioned previously on calls, are in Asia Pacific and China, in the Americas, including both Latin America, Mexico, and in North America as well. In terms of progress with our customers, last year was, frankly, a difficult year in Ag. And really, that has persisted for the last 12 to 18 months. As we closed the year, we started to see recovery in the market across Ag and especially in the food production side. And we're closing the year with really good momentum. We have trials underway, as we have previously in all world areas, and are seeing success with our products as customers complete those and begin moving to buying decisions. In terms of a pivotal or an aha moment, we don't expect there to be a dramatic change. We just expect to see continued growth as our products are evaluated by our customers and we have the opportunity to sell them into their rations. So just continued strong growth in all the areas we're pursuing.

Leslie Garber, Director of Investor Relations

Great. Thanks, Wade. Our next question comes from Ethan Starr, an individual investor. What opportunities do you see to expand distribution of silica gel crystal cat litter via new customers, private label, and in Europe? Chris, will you answer that please?

Chris Lamson, Group VP of Retail and Wholesale

Yes, Ethan, thank you for the question. I'm glad you brought it up because my comments were focused on the growth of distribution compared to the branded side. Just like our core clay business, we are very focused on expanding the private label segment of the crystal litter business. The Ultra team has established a solid foundation with key private-label customers, and we aim to build on that. We believe we can deliver significant value in this segment while maintaining a good margin. Additionally, there is evidence in the market that indicates the segment has expanded enough to support private label business at retailers in a meaningful way. The sales velocities suggest that the crystal litter segment is ready for a competitive private label player. We are currently in discussions with several national and super-regional customers to develop private-label crystal litter products for them. We are pleased with our brand's presence and will continue to promote the Ultra brand where it makes sense. Regarding Europe, we are still assessing our market opportunities there. The Ultra team has been selling some products in Europe, and our approach will largely be opportunistic. The acquisition allows us to leverage our strong existing retailer relationships, helping them manage their brands through private label, and expanding distribution of crystals with them.

Leslie Garber, Director of Investor Relations

Great. Thank you. Our next question comes from Robert Smith from the Center for Performance Investing. And he asks, do you expect to maintain gross margins this year? Susan, will you take that one?

Susan Kreh, CFO and CIO

Sure. Although we don't give forward-looking guidance, here's a couple of things I would talk to this. First of all, we don't know for sure where costs will go, but what we can say is the markets have been rational in allowing us to take pricing when costs have increased. The second thing I would say that the focus areas of our portfolio, including fluids purification and renewable diesel, the lightweight cat litter and the animal health products are all higher value-added products. So as we see growth in those product lines, we would expect to see the favorable impact on our gross margins.

Leslie Garber, Director of Investor Relations

Thank you for the question, Tyler Ventura from Diamond Hill Capital. How has your vertically integrated business model helped create a competitive advantage, especially regarding cost structure and product innovation? Does the introduction of a silica gel-based crystal cat litter alternative suggest that clay is becoming less popular in the litter market? I'll hand it over to Dan now.

Dan Jaffee, President and CEO

Thank you, Tyler, for your question. I would say our competitive advantage is both vertical and horizontal. Many of our competitors have a vertical integration but lack horizontal integration, meaning they don't have coverage from the West to the East Coast of the U.S. We have facilities from California to Georgia, with additional locations in between, which gives us a strategic edge. Freight is a significant part of the delivered cost of many of our products, and our geographic positioning has allowed us to offer high-quality, cost-effective products to our demanding customers. This has definitely been a competitive strength for us. Regarding silica-based gel, while clay remains the dominant choice in cat litter, it's clear that consumers are increasingly viewing their pets as family members and are willing to spend more for improved performance, whether it's odor control or reduced dust. This trend is positive, and the market is expanding. Crystals have captured a share of that market, and I believe the retail market for this segment is now over $3 billion.

Laura Scheland, Chief Legal Officer and Vice President

Yes.

Dan Jaffee, President and CEO

Yes, in the U.S. So the pie is growing, but crystals are definitely taking a bigger share, but it's still a very small percentage of the overall market.

Leslie Garber, Director of Investor Relations

Great. Thank you. John Bair has another question and we actually received two questions regarding this. Where does debt paydown fall in the capital allocation priority chain? Susan, do you want to take that one?

Susan Kreh, CFO and CIO

I'd love to. Thanks, Leslie. When we think about our capital allocation, we are committed to, first and foremost, reinvesting in our business to generate returns for you, the investors. So that takes the form of both growth capital spending and capital spending on our aged infrastructure. And I saw a question later on, so I'll insert it right here. There was a question about will the CapEx level be similar in 2025 as it was in 2024. And I would say, yes, we expect to spend at a similar level. After we invest in our business, we next prioritize the dividend for our shareholders as we know that there are shareholders out there who invest in us because of the predictability of that dividend. Following that, we also prioritize any M&A opportunities, which is why we try to keep a lot of dry powder, which is why I talked about the expansion of our revolving credit facility earlier. And then to the extent that the interest expense on our revolving credit facility were to exceed the interest income we're making on our short-term cash investments. We would consider paying down that revolving credit facility since it financially makes sense. So that's kind of the order of it. And Leslie, back to you.

Leslie Garber, Director of Investor Relations

Thank you. Ethan Starr has another question. Do you expect sales growth of fluid purification products for renewable diesel to continue increasing at similar rates as fiscal '24? Is Oil-Dri selling fluid purification products in any international markets for renewable diesel, such as Brazil and Indonesia? Dan will address that question.

Dan Jaffee, President and CEO

Yes. We do expect continued growth in F '25 at a similar rate as new plants come online and in our best market, which is North America, which is great. We do not sell into Indonesia today. However, we are active in Brazil. A significant portion of our fluids purification business is in North America, and we do have customers in Europe, Latin America and Asia.

Leslie Garber, Director of Investor Relations

Great. Thank you. Robert Smith has a question. Are you hedging natural gas into calendar 2025? Aaron Christiansen will answer that.

Aaron Christiansen, VP of Operations

Robert, thanks for the question. Happy to answer it. Obviously, understanding that natural gas is a key component of our cost structure and input costs. We're deliberate about how we both consume and purchase. We like to avoid using the word hedge. Hedge implies that we can beat the market and ultimately purchase over time at a lower cost. That is not our objective. Yes, we do continue to make forward purchases of natural gas out a period of multiple years in layered revolving purchase strips that will help allow us to predict and buffer volatility for a portion of our consumed natural gas, and we will do so for the foreseeable future.

Leslie Garber, Director of Investor Relations

Great. Thank you. We have another question from Tyler Ventura. How is the ad spending looking in terms of being growth-oriented, which should have a high ROI versus defensive ad spend which is a lower ROI? Chris, can you answer that please?

Chris Lamson, Group VP of Retail and Wholesale

Yes. Thanks, Tyler. What I would tell you is we spent - what we refer to as up the funnel, and that can be a little bit more brand or segment growth-oriented, a little more awareness-oriented and maybe a little less conversion or ultimate fail-oriented. The shift we made about 1.5 years ago was in that area within lightweight. We really started talking to the category message within lightweight and the broader consumer benefit of lightweight. Where that really helps those dollars work harder for us is it not only lists our branded business, but we believe it lifts our private label business as well. We toggle specifically a bit between defensive spending down the funnel, where we think we need to defend the business against competitors primarily and more what I would call more aggressive spending. But what I can assure you is that we look at on an ongoing basis not just return on that investment, but we've got some ways to measure incremental return on that investment. We call the metric IROAS, incremental return on advertising spend. And we have some pretty good tools that help us toggle between that more defensive spend and aggressive spend to drive the most incrementality possible.

Leslie Garber, Director of Investor Relations

Thank you. John Baer has a question regarding cat litter. Has your higher cat litter sales increased your overall market share percentage? And if so, has it been at the expense of competitors, brand names, private label, or a combination? Chris?

Chris Lamson, Group VP of Retail and Wholesale

Back to me. Thanks, John. In the most recent period, our share was up modestly. It's challenging without spending a bunch of money with our syndicated provider to know exactly where that share is sourced from. With that being said, what we really like is that our areas of focus for growth are really both lightweight and crystals when you look at how the category has performed over the last several years. They're growing significantly faster than the category. So those specific pies back to Dan's previous answer, those specific pies where we're focused are growing. And that, in turn, helps drive our share growth.

Leslie Garber, Director of Investor Relations

Great. Thank you. Robert Smith has a question for Susan. What is your projected tax rate for fiscal year '25?

Susan Kreh, CFO and CIO

Thanks, Leslie, and thanks for the question. While we don't give forward guidance on tax rates, what I would say is that with the acquisition of Ultra Pet, the income that comes from the Crystals business does not have the depletion deduction available to it that the rest of our business does. So said differently, as that becomes a bigger part of our portfolio and a more profitable part of our portfolio, it will come with a slightly higher tax rate.

Leslie Garber, Director of Investor Relations

Great. Thank you. The next question is from Tyler Ventura. How do you feel today about the strategic value and your future opportunities buried in your substantial clay reserves? Is that still a significant competitive advantage as you look out into the next five to 10 years? Do you still see opportunities to buy more land and/or reserves? Dan?

Dan Jaffee, President and CEO

Yes. And absolutely, that is a huge strategic competitive advantage for us. And there have been no real new greenfield clay plants built in the U.S. that I can remember in the last 30 years. The regulation, getting the reserves, and then actually the capital to build the plant is just prohibitive. So we're grandfathered in. We try and add on more clay than we use every year. If you look back, we were mining more clay 25 years ago than we are today. We used to sell over 1 million tons a year, which meant we were mining about 2.5 million tons. This past fiscal year, we sold a little over 800,000 tons, so maybe around 2 million tons of clay being mined. And we make sure that we always have at least 40 years of reserves in all of our major product lines. And then in total, we have much more than that. So we always have opportunities to buy more land and reserves, and we're in really, really good shape from that standpoint.

Leslie Garber, Director of Investor Relations

Okay. Great. The next question - actually, we have a couple of questions about the status of antibacterial cat litter, our Cat's Pride antibac. And Tyler asks, how has the uptake been with the Cat's Pride antibacterial product? And are there any early success - sorry, just that. Chris, can you please address that?

Chris Lamson, Group VP of Retail and Wholesale

Sure. I think I saw a couple of things on the message or in the question board about antibac. So I'll tell you two things. In general, we're pleased with our uptake and it's continuing to grow. So our velocities are what I would refer to as solid. We did up until - gosh, I think it was at the early part of the last quarter, we lacked one state registration for the product, one state EPA registration for the product. We now have that. So that's enabled us to be more aggressive, really in two places. One, with national retailers that otherwise carry it. But two, to include e-com retailers. So the product is now what I would call it wasn't unavailable on e-com before, but it's now much more available. And that actually enables us to be more aggressive with our digital advertising investment in that item. And it does take - it certainly doesn't take any new consumer behavior, but it takes a little bit of education to help people see that we have the only EPA-registered antibacterial cat litter on the market in the U.S. So we're now driving that message a little bit harder via our digital media spend.

Leslie Garber, Director of Investor Relations

Great. Thank you. We have time for one last question, and this is from Bill Anderson from Baird Associates. He asks Wade if you have disclosed a total addressable market for your Amlan products?

Wade Robey, VP of Ag and President of Amlan International

Yes. Thank you, Leslie, and thank you, Bill, for that question. I'm going to answer it kind of in two parts because as Amlan goes to market for products that we sell into the poultry, dairy, swine, aqua industries, we're really targeting a couple of different segments. The first is the more traditional market that clay-based products have been utilized for in animal feeds, and that's for mycotoxin mitigation. That market around the world fluctuates, but has been estimated to be over $1 billion of opportunity. Some of that is in Europe, again, which is a market that we don't target today. The second part of the market that we target is products that are sold into really what I'll call gut health or products that are sold to improve the productivity of food production animals. And that has been traditionally a market dominated by antibiotics, antibiotics that sub-therapeutically, principally in animal rations although over the last couple of decades, products that you'll be familiar with like probiotics or direct-fed microbials certain types of enzymes or nutraceuticals have also been substituted. That market is much larger, harder to estimate, but certainly well over $8 billion or $9 billion in terms of opportunities. So the total market opportunity that we target is very large. Again, the mycotoxin side, really with our clay-based products and then the other market I mentioned for gut health is a combination of our clay products but also with formulated adjuvants that we use in our portfolio.

Dan Jaffee, President and CEO

Great. Thank you, Wade. And before closing, I just want to encourage everyone to vote for the authorization of doubling our shares so that we can execute a 2-for-1 stock dividend or split or whatever we're calling it. But it's - your proxies will come out at the end of October. And the reason why it's so important for those of you on the call is because the vote goes by class. So the Class B, which my family and I control, we're going to be voting for it. But our vote doesn't matter at all on the common side. And so if you see this as a value or benefit, we hope you'll vote for it. We think it's going to be positive. It will - as Susan outlined, should increase the daily activity, the liquidity, reduce the average selling price in half if you do 2-for-1. So mathematically, it's going to cut it in half on day one. And that should be more accessible to a wider - hopefully, a wider range of investors. So please be on the lookout for your proxies, and we would love you to vote for. Thank you, everybody, and we will talk to you after the next quarter.

Operator, Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.