Operator: Good day, and thank you for standing by. Welcome to the Oil-Dri Corporation of America Q3 Fiscal 2026 Earnings Discussion via Webcast. . Please be advised that today's conference is being recorded. . I would now like to hand the conference over to your speaker today, Dan Jaffee, President and CEO.

Daniel Jaffee: Thank you, and welcome, everyone. Before we get started, I'd like to introduce who is here today to field questions. We have Susan Kreh, CFO and CIO; Aaron Christiansen, VP of Operations; Chris Lamson, Group Vice President of business-to-business and Strategic Growth Initiatives; Wade Robey, VP of Agriculture and President of Amlan International; Heath Wessels, VP of Sales for North America, Amlan International; Laura Scheland, Vice President and General Manager of the Consumer Products Division; Bruce Patsey, VP of Fluids Purification; Mervyn de Souza, VP of Research and Development; Jon Blake, VP and Corporate Controller; Tony Parker, VP, General Counsel and Secretary; and last but not least, Leslie Garber, our Director of Investor Relations, who will walk us through our safe harbor provisions.

Leslie Garber: Thank you, Dan, and welcome, everyone. On today's call, comments may contain forward-looking statements regarding the company's performance in future periods. Actual results in those periods may materially differ. In our press release and in our SEC filings, we highlight a number of important risk factors, trends and uncertainties that may affect our future performance. We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in Oil-Dri stock. Thank you for joining us. Back to you, Dan.

Daniel Jaffee: All right. Thank you, Leslie. Before I turn it over to Susan to walk us through the quarter, I'm going to cover some long-term macro trends that are developing for Oil-Dri, which are right in line with what we said. As you'll recall, if you followed us for this period of time, about 5 years ago, our operations team led by Aaron identified that we needed to dramatically improve our facilities if we're going to continue to give our customers the high quality and the service that they demand and deserve, frankly. And so I'm going to throw some numbers at you. If I lose you, you can always go back in the transcript later, and it will all be spelled out for you. But from fiscal '17 to fiscal '21, which is right before we announced this program, we averaged about $15 million in capital expense and about $13 million in depreciation. When COVID hit and the whole global supply chain got hammered, everything was costing twice as much to replace as what its historical cost was. So remember, $15 million in capital, $13 million in depreciation. These last 5 years, we have spent almost $32 million a year in capital, so double. But the depreciation because it's a lagging indicator has averaged $15.5 million. Now this year, if you project, you take the third quarter in the cash flow statement and then project it for 9 -- 12 months, you'll get about $22.5 million. So what you're seeing is our depreciation was $13 million. It's now running about $22 million, but we're still spending over $30 million. So it's a lagging indicator, and it's catching up. So why am I telling you all this? I'm telling you this because you're seeing pressure on our margins and as my dad always said, earnings are an opinion, cash is a fact, yet because our cash generation is super strong, and Susan will cover that. So as the depreciation catches up with the capital, which will happen over time, if your average useful life is 10 years, if we spend $30 million for 10 years, 5 years from now because we'll be 5 years into it, the depreciation will be about $30 million a year. So the margins are going to continue to get pressured because when we went to our customers, it wasn't about us expanding our margins. It was about them helping us invest in our business so that we could give them the quality and quantity they deserve. And that was played out beautifully during Winter Storm Fern. Winter Storm Fern caused all sorts of grief for a lot of our competitors. We were able to navigate that storm very well because our facilities are really in great shape. And in this last quarter, our fill rate was 99.9% that means for every 1,000 pallets shipped, there were 999 ordered and one of them didn't make it onto a truck out of 1,000, 99.9%. That's ridiculously high, and we are getting Supplier of the Year awards from many customers because of our fill rates and our on-time shipping. So I'm going to turn it over to Susan, but I want to thank our customers for their support. I want you guys to understand, yes, you're going to see some margin pressure, but zero in on the cash generation, and that's where you'll see what's going on here at Oil Product.

Susan Kreh: Yes. Thanks, Dan. As Dan highlighted last summer when we were moving into fiscal year 2026, our expectation was that the first half of the year would have a tough comparison to the very robust first half that we had in fiscal year 2025. We had also indicated that we expected to pick up year-over-year momentum in the second half of our fiscal year, and that is what happened during our third fiscal quarter. So my comments today will focus on several third quarter financial highlights as well as a financial challenge. So highlight number 1, our third quarter net sales of $126 million were 9% higher than net sales in the third quarter of fiscal year 2025. In our Retail and Wholesale Products Group, we experienced significant growth in cat litter sales, which were up 13% over the same quarter in the prior year, driven by higher demand in our coarse, lightweight, co-packaged and Crystal products. Notably, we expanded our co-packaged offering to include lightweight litter and our crystal cat litter volumes reached record high sales levels. So some really good tailwinds there. In our Business-to-Business Products Group, we experienced substantial demand-driven top line growth in our Agricultural and Animal Health businesses. Highlight number 2, our top line growth, combined with the year-over-year reduction in selling, general and administrative costs resulted in an increase in income from operations of 23% over the same quarter in the prior year. And that strong earnings growth performance led to highlight number 3, and Dan touched on this in his opening comments, where our strong earnings drove the generation of $25 million of net cash provided by operating activities during our fiscal third quarter. Very, very good cash generation. And this strong cash generation continues to enable us to make the investments needed to strengthen and grow our business, also as were highlighted in Dan's opening comments. Now on the flip side, we faced a challenge during the quarter in terms of cost pressure on our gross margin, which was unfavorably impacted by a 190 basis point reduction compared to the same quarter in the prior year. Our domestic cost per ton of goods sold was up 6% year-over-year, driven by increases in purchased materials, labor, packaging and transportation costs. So how are we addressing these cost challenges? We start by focusing on costs within our control. Our manufacturing and operations team, together with support from the rest of the organization, works to help offset these economic headwinds by focusing on and investing in productivity and cost reduction initiatives. At the same time, our sales teams partner with our customers to identify and deliver reductions in costs. And then finally, it is our responsibility to adjust our pricing to mitigate the negative impacts these costs have on our margins. We are working through this carefully as our product groups are impacted to different degrees by costs such as packaging, freight and transportation and purchase materials. So to conclude, we continue to work together to drive opportunities for profitable growth and to demonstrate our ability to generate cash flow, which is the lifeblood for funding our growth and for providing returns to our stakeholders. And our belief in the sustainability of that cash flow generation inspired us to announce last week that our Board of Directors raised our dividend to $0.225 per share of common stock payable on August 21, 2026. That represents a 10% increase over the most recent dividend paid. That increase is on top of the dividend increase that we announced in December of 2025. We understand the sustainability and predictability of our dividend, along with profitable growth is important to our long-term shareholders and to our customers. With that, I'll turn it back over to you.

Daniel Jaffee: Thank you, Susan. Before we open up for Q&A, I want to correct one thing I said. I got it a little bit -- I didn't even get a little bit backwards. I got it totally backwards. Our fill rate of 99.9% means we shipped 999 pallets for every 1,000 ordered and one pallet didn't make it. I think I said it in reverse. So now I've corrected it. And so now we can open up the Q&A line.

Leslie Garber: . The first question comes from John Bair from Ascend Wealth Advisors and he asks, what do you attribute the elevated cat litter demand to? Laura, can you please answer that for us?

Laura Scheland: Sure. And John, thank you for your question. Yes, very pleased with the 10% year-over-year increase in our domestic cat litter sales, excluding co-packaged products in the third quarter. The increase was driven by higher demand as well as a shift of orders from third quarter caused by the delays from Winter Storm Fern, but really excited about the continued higher increased demand for the litter products. Some of this is attributed to growth in the category with an increase in cat ownership as well as increased sales of our crystal, lightweight and coarse litter products. During the quarter, our Crystal cat litter reached record sales for us in the quarter. The growth was driven by both private label and branded crystal products. We leveraged established relationships with existing key clay customers to expand our private label Crystal business and really become a valued supplier for our customers. In addition, we continue to build the distribution of our branded crystal items in both brick-and-mortar and e-commerce and launched our new health monitoring Crystal products under Cat's Pride Ultra and private label brands, and we are very excited about our expanded Crystal litter portfolio. In addition, we saw increased sales in the lightweight and coarse segments with expanded distribution and new branded and private label lightweight and course items. In fiscal 2026, we've launched 2 new Cat's Pride pail items and Cat's Pride Max Power Pro, which is our e-com exclusive items as well as multiple private label clay items. We remain pleased and excited about the momentum of our cat litter business and the year to go.

Leslie Garber: Great. Thank you. We have 2 questions regarding the Amlan business. One comes from John Bair and the other one from Robert Smith, Center for Performance Investing. I'm going to combine -- I'm going to read the questions and then Wade Robey will answer them. John says, good to see Amlan International sales were up, helped by your reference to additional demand from new end user accounts. Are these new accounts likely to be repeat customers with potential to expand their purchase volumes? And then in addition, Robert Smith is interested in the state of the Amlan business for the next 12 to 18 months? And if there are any competitive constraints proving difficulty in moving the needle at Amlan. Wade, will you please address those?

Wade Robey: I will, and thank you, Leslie, and good morning, everybody. John and Robert, thank you for your question. I'll start with where we were in the first half of the year, and we reported this in a previous earnings call, where we had lost a key account in one of our world areas, which certainly impacted our business, and we reported against that. But the team has been 100% focused on 2 things. One, we're gaining our share at that key account, but also expanding our business by bringing on new customers, not only in that particular world area, but in all world areas that we serve. I'm happy to report in both cases, we've been successful. We haven't 100% regained that key account, but we've gotten a foothold in there again and are seeing that business grow. But what I'm truly excited about is in response to that, we've also grown our business base in each world area. So we've been expanding the accounts that we we serve as well as selling more of the accounts that have been existing customers. All those things contribute, I believe, to a strong outlook for the business. Now as we look forward, we're going to focus on what we actually have been doing over the previous 12 months, which is continue to build the relationships with our key distribution partners, but also with our end-user customers. In Amlan, we believe we truly have a differentiating value proposition, which makes us very competitive in this market. And that includes not only the value of our core mineral, but also the other things that really set Oil-Dri apart, and that's our vertical integration, our excellent manufacturing capability and the ability to control the quality and consistency of the value that we bring to our customers from the mine all the way to the feed mill where our customers formulate our products in their rations. All of those things, we believe, again, give us a competitive advantage, which will allow us to grow in the future. So very excited about the business. We're going to focus on what has helped us be successful to date, and those are those key elements of the strategy that I've mentioned.

Leslie Garber: Great. Thank you. The next question is from John Bair. He asks, the Middle East conflict has seriously constrained jet fuel and biofuel supply and inventories globally. A recent Wall Street Journal article highlighted how airlines are scrambling to secure sustainable aviation fuel. Has Oil-Dri seen a pickup in demand from its biofuel producing customers? Bruce, would you like to address that, please? Bruce Patsey Sure. Thanks for the question. There are 2 segments. You have the mineral oil that's being processed in the jet fuel. And we have seen an increase in business actually in that marketplace based on the war in the Middle East. Margins are running real high right now for these refineries. So they're producing more fuel, which is helping drive our sales. On the SAF front, the plants that we do sell today that produce SAF, they are seeing increased business, and we are seeing increased sales because of that. There are other plants that I think over the next 12 months, we will be adding SAF capacity which should help drive more sales in the future. But right now, the market still doesn't have enough capacity to meet all the demands on SAF. Okay. Next question comes from Robert Smith. R&D is the lifeblood of new products and growth. How are you adapting artificial intelligence in the innovation lab? Do you feel it will lead to faster introductions? Mervyn, can you please take that? Mervyn de Souza Sure, Leslie. Thanks for the question, Robert. As I've mentioned before, the R&D team is actively engaged with all of our Oil-Dri divisions and operations teams as we explore opportunities both to use our existing sorbent minerals in new applications and drive improvements with our existing products. AI has a lot of potential to accelerate growth and innovation in R&D. And at Oil-Dri, we continue to explore artificial intelligence and capabilities to increase efficiency and effectiveness through enhancing our ability to more rapidly technology and access market attractiveness. Wonderful. Thank you. Next question is from John Bair. Have your shipping costs for silica crystals from China [ region ] have been affected due to the conflict in the Middle East? If so, have you been able to recoup some or all of that impact through pricing adjustments? Laura, can you address that, please?

Laura Scheland: Sure. In the third quarter, the Middle East conflict didn't have a meaningful impact on the inbound ocean freight for silicon crystals from China and the lower tariff rate from approximately 49% to 39% offset the increases we saw in the third quarter. However, we are continuing to see increases in freight costs and are carefully evaluating pricing opportunities and cost synergies to mitigate these costs.

Leslie Garber: Wonderful. Okay. The next question, I'm actually going to combine 2 questions. Robert Smith asks, what is the state of the fluid purification sector for the next 12 to 18 months. But we also had a question regarding the press release, we said that in Q3, sales of fluid purification products were down slightly year-over-year by 1%. Can you provide more detail on the underlying performance of that business? Bruce? Bruce Patsey Sure. Thanks very much for the question. Our business actually for the quarter in North America was up. We had a real strong quarter. However, in some of our export business, we saw a decline -- a slight decline in sales due to the crop -- last year's crop, which came in, in October, the quality of the crop was very good. So it's a good quality crop, they use less clay to process it. So it wasn't due to loss of business. It was more around just the amount of clay needed to process the oil. As we look forward in our business, we see it's still going to see very good strong demand for our products in this market. There are a few new plants coming up in North America, both in the renewable and vegetable oil sectors that should help drive some more sales. And then just in general, the industry is healthy. And with the tax breaks that are out there for these companies to make renewable fuels, we think that's going to be a very stable market over the next 12 to 18 months. Great. Okay. We have another question regarding cat litter. Are you still experiencing increased competitor activity with higher trade spending levels in the cat litter category? If so, how are you navigating this situation? Laura?

Laura Scheland: Sure. Yes, we are continuing to see elevated promotional activity, trade spending and competitive pricing pressure in the cat litter category. We are working to navigate with strategic trade spend, price pack architecture to protect and expand our distribution. In addition, we are focused on strategic marketing and advertising. During the third quarter, we launched our Go Big or Go Home retail integration campaign with a goal to donate 1 million pounds of cat litter to shelters across the country. As part of the campaign, we partnered with the American Humane Society and our retail customers to help cats find their forever homes, which is a message that resonates with both our customers and our consumers. And it's exciting as it coincides with National Pet Month in May and includes social media influencers, retail offers and shopper marketing to drive both upper funnel awareness and all the way down through in-store presence and conversion. So to kind of summarize, we are doing strategic spending at the store levels with key customers and to protect and expand distribution as well as strategic advertising and marketing to really drive consumer decision at the point of sale and remain focused on driving the best performance and return for every dollar of spend.

Leslie Garber: Great. Thank you. The next question is from Tyler Ventura, Diamond Hill Capital. Given that you own 11,700 acres of proprietary mineral reserves and asset competitors must source externally, are you strategically using that advantage in your R&D to create projects in adjacent markets? Dan, did you want to talk about our unique mineral reserves?

Daniel Jaffee: Sure. Yes. I mean, thanks for the question. Listen, the vertical integration strategy was something my father embarked upon back in the early '60s when he recognized we would get squeezed out between the market and the suppliers and the customer. So year after year after year, we've continued to leverage that strategy. We are firmly committed to having 40 years reserves in all product lines. We have I think, over 100 years of reserves in total. But for any individual product line, we have 40. And what that enables us to do is to become very, very deeply invested in our mineral. So I've been saying this for years. If there's value in calcium bentonite, we're the company to invest in. If there isn't, then I run for the hills. But luckily, this is what we know. This is what we do. We invest every year in R&D. And again, I've said over the years, we're only limited by our own imagination. So we've gotten into product lines that we never would have thought of. I mean, Amlan is a perfect example. Even the fluids purification group, when my father first built that plant, it was to get into the gel clay business and our product didn't work well there, but it's like the posted notes. Sometimes you build something for one application, you find a different one. And just by understanding our mineral, we figured out that our Georgia clay was uniquely qualified to work in that fluids purification area. So I'm not really going to give you too much about the forward-looking stuff because I'm not a fan of yelling to the competition what plays we're going to run. That tends not to yield a lot of yardage. But I will tell you that this is where we're focused. This is what we want to be the global experts in, which is calcium bentonite. And we're going to continue to do everything we can to better understand our reserves so that we can, as you say, supply in adjacent markets or give existing customers better products that do more enhanced things for them as they buy from us. So you'll know if you've been following us, our mission is to create value from sorbent minerals and it's working. So we're actually selling less tonnage today than we did 25 years ago, which is sort of stunning given if you look at where the market cap of the company is going. So it shows that really what you want to chase is not tons, but value, and that's what we're doing. So does that...

Leslie Garber: Yes, that answers. Great. We have another question from Ethan Star. He's following up on Wade Robey's earlier comments. What are the prospects for significant sales growth for Amlan products? Wade?

Wade Robey: Yes. Thank you, Leslie, and thank you, Ethan, for that question. It gives me the opportunity to say just how excited I am about the prospects for the future. If you look at Amlan, a lot of the folks that have joined the organization joined Oil-Dri over the last couple of years have been people that are very experienced in the industry. We've done that because we believe in the technology of Oil-Dri Amlan and what kind of value that we can deliver to the market. As we look at the growth we're seeing in all world areas, we feel very good about that. We have strong partnerships, strong customers. And so the long-term outlook is very good for the organization.

Leslie Garber: Excellent. Ethan Star has another question. Given the uncertain economy, are you seeing any increase in consumers shifting to private label cat litter from branded cat litter? Laura?

Laura Scheland: Sure. At this point, with the heightened promotional environment, seeing limited shifting as branded products are heavily discounted. However, seeing some shifting. We monitor consumer sentiment closely and seeing it low back at kind of 2022 inflationary levels and expect that as sentiment continues to be low and promotional -- competitive promotional spending may level with some of the facing headwinds, expect that there could be additional shifting to private label.

Leslie Garber: Great. And our last question comes from Ethan Star, and he says, this is for Dan Jaffee. Why is the best still yet to come? And what opportunities are you most excited about over the next 1 to 3 years?

Daniel Jaffee: Ethan, thanks for the question. And again, I'm not a big fan of yelling out our place, so I'm not going to do that. But you can see we're investing heavily in the business. And other than to pay taxes or maybe to give some money away, my sisters and I are holding on to all of our shares. So we're either the dumbest people on the planet or we believe the best is yet to come. And my sisters are not dumb. I may be, but they are not. So you can understand from the major investors in this business, we are still very excited about the future. I will say it again, we are limited only by our own imagination. My grandfather would never have predicted what my dad did and my dad would never predicted what we're doing. So when I close, what I want to do is thank the Oil-Dri team because what you're seeing is a direct result of the cumulative incredible work and caring of 1,000 people globally, who are making this happen. I've been running it since '95. And if you look at the progression, it's really accelerated in the last 5 years, and it's not that I got a lot smarter. It's really that the team has gelled together. I mean -- and those of the people who report to me, who I get to hear from a lot, have all said, this is the most cohesive team they've ever been on. We have our issues, but it's always about the business. It's never about ego, and it's -- you never have to worry that you can't trust your fellow teammates. So that's really what's happening here. It's just a lot of positive momentum, a lot of great work done every single hour of every single day to make this happen. And I just want to thank the team for that. So I think we'll close it at that. Great questions. We'll be back at you in another quarter, and it will be our fiscal year-end. So it will be exciting. Josh, we are done.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.