Oil-Dri's Q1 2026 Earnings Call: Contradictions Emerge on Tariff Impact, Division Performance, and R&D Strategy

Date of Call: December 9, 2025

Financials Results

• Revenue: $120M for Q1 fiscal 2026, down sequentially from Q1 fiscal 2025 (best quarter ever) but up year-over-year for full year 2025 (record-breaking performance)
• EPS: $1.06 per diluted share for Q1 fiscal 2026, compared to $3.70 for full year fiscal 2025
• Gross Margin: 29.5% for Q1 fiscal 2026, consistent with full year fiscal 2025

Guidance:

• Expect a softer first half due to tough comparisons, with recovery anticipated in the second half.
• Have a realistic possibility of a profit gain for the full year if the company delivers on its plans.
• Continue to invest in manufacturing infrastructure and digital capabilities to support growth.
• Expect increased business in fluids purification from EPA rulings on biofuels and sustainable aviation fuel.
• Plan to execute opportunistic share repurchases when value makes sense.

Business Commentary:

• Record Financial Performance:
• Oil-Dri Corporation achieved record-breaking performance in fiscal 2025, with new records in net sales, gross profit, and net income.

• The strong financial results were driven by strategic initiatives such as the expansion of the renewable diesel business, successful integration of the Ultra Pet acquisition, and continued investments in manufacturing infrastructure.

• Dividend Growth and Shareholder Returns:

• The company raised its annual dividend increase from $0.04 per share to $0.10 per share, marking the 22nd consecutive year of dividend raises.

• This increase in shareholder returns was supported by strong cash generation and debt repayment, which improved the company's balance sheet strength.

• Manufacturing and Infrastructure Investments:

• Oil-Dri continued its commitment to investing in manufacturing facilities, with fiscal 2025 being the highest year of capital investment.

• Investments focused on enhancing operational efficiencies and capacity, such as improvements in rail infrastructure, compressed air systems, and modern robotics, which collectively improved cost structure and environmental compliance.

• Renewable Diesel and Fluids Purification Growth:

• The Fluids Purification division experienced significant growth, nearly 20% from fiscal 2024 to 2025, driven by new business in the renewable diesel sector and increased vegetable oil customers.

• The growth was supported by capital investments that strengthened capacity and technical support, positioning the company well for future business from increased domestic biofuel production mandates.

• Consumer Products and Lightweight Litter Strategy:

• The domestic cat litter business showed a 10% CAGR over the past five years, with the lightweight segment growing at a 5.2% CAGR, outpacing the overall cat litter category.
• The growth was fueled by strategic acquisitions, innovation in product offerings, and a strong focus on expanding distribution in key retail channels like Walmart, Amazon, and Chewy.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 'record-breaking performance' and 'lots of momentum heading into '26 and beyond.' They cited strong sales growth, improved profitability, and successful integration of acquisitions. Forward guidance expresses confidence in recovery and profit potential, supported by operational improvements and strategic investments.

Q&A:

• Question from Robert Smith: Back in early October on the last conference call, you previewed a softer first half. Are you now more or less confident of recovery in the second half? Do you have a realistic possibility of a profit gain for the year as a whole?
  Response: Management is confident; they were ahead of plan in Q1 and expect a recovery in the second half, giving them a realistic possibility of a full-year profit gain.

• Question from Ethan Star: Are Oil-Dri's clays currently being used to filter sustainable aviation fuel and to what extent is that a potential growth market for Oil-Dri?
  Response: Yes, sustainable aviation fuel is a growing market, and Oil-Dri's bleaching clay products are used in the process; increased sales are expected as the market grows.

• Question from Robert Smith: What are the headwinds for Amlan this year? And how will you overcome them?
  Response: Tariffs caused customer uncertainty and slowed orders in some markets like Brazil, but orders have now resumed, and the company is monitoring the situation closely.

• Question from Robert Smith: Will we see new products this year? What color can you give? And please touch on the overall R&D budget in areas of emphasis?
  Response: The company continues to invest in R&D, balancing base product improvements and new product development, with new crystal litter products highlighted as part of the strategy.

• Question from Robert Smith: The press release noted a record-breaking quarter for agricultural product sales. Can you please provide some color around the growth for that part of the business?
  Response: Growth was driven by a rebound in the Verge product sales, improved product mix, new and existing customer growth, and pricing actions to ensure profitability.

• Question from Robert Smith: What are the prospects for a rebound in fluids purification for the remainder of the year?
  Response: The business is performing well, above plan, with a strong back half of the year expected in both the renewable and vegetable oil segments.

• Question from Robert Smith: Last year at the annual meeting, you talked about service levels. Can you please provide an update on company-wide service levels? Have they remained the same, increase or decrease?
  Response: Service levels have improved slightly, with 12 consecutive quarters meeting fill rate (~99.8%) and on-time delivery (mid-90s%) goals, supported by cultural focus and capital reinvestment.

Contradiction Point 1

Tariff-Related Business Impact and Outlook

This is a substantial contradiction regarding a key operational headwind. The characterization of the tariff impact evolves from a clear, significant source of **"month-to-quarter volatility"** and **"customer hesitation"** to a resolved issue that has **"lessened"** with secured orders. This shift directly impacts the perceived risk and stability of the Amlan division's growth trajectory.

Animal Health and Nutrition quarterly revenue was flat YoY despite YTD growth. Was this driven by seasonal factors, customer order pattern shifts, or tariff-related hesitancy in international markets? What steps are needed to restore sales growth? - John Bair (Ascend Wealth Advisors / Private Investor)

2025Q3: The quarter's flat performance was due to tariff-related volatility and longer transit times impacting international deliveries. This has caused month-to-month and quarter-to-quarter volatility. - Wade Robey(Vice President, Agriculture & President, Amlan International)

What are Amlan’s headwinds this year, and how will you address them? - Robert Smith

20251209-2026 Q1: A key headwind is **tariff-related uncertainty**, which has caused some customers to delay orders... This situation has **lessened** and current orders for the remainder of the year have been secured. - Wade Robey(Vice President, Agriculture & President, Amlan International)

Contradiction Point 2

Performance and Outlook of the Fluids Purification Division

This represents a substantial discrepancy in the reported business performance and forward-looking statements. The narrative shifts from being **"above plan"** and expecting a **"good back half"** to a more tempered outlook focused on **"stable use"** and competitiveness. This change in tone and specific forward guidance is critical for assessing the division's growth prospects and market position.

What is the competitive landscape for fluid purification in the U.S. versus internationally? What are the key opportunities and risks over the next six months? - Robert Smith (Center for Performance Investing)

2025Q2: The outlook for the next six months is for stable use of absorbents, with growth expected as new plants come online. The competitive landscape is currently competitive. - Bruce Patsey(VP & General Manager)

What are the prospects for a rebound in Fluids Purification for the rest of the year? - Robert Smith

20251209-2026 Q1: The business is **above plan** for the year. The company expects to have a **good back half of the year** and looks to have a good year overall in both the renewable diesel and vegetable oil businesses. - Bruce Patsey(Vice President, Fluids Purification)

Contradiction Point 3

R&D Focus and New Product Development

This is a substantial contradiction in the description of the company's innovation pipeline. The Q1 response provides **specific detail on a concrete new product ("new and improved crystal solutions")**, directly answering an investor question about visibility. The Q4 response is abstract and **"balanced,"** offering no such specificity. This shift impacts investor understanding of the company's near-term growth drivers and strategic execution.

What motivated Dr. Mervyn de Souza to join Oil-Dri, and how do his R&D vision and goals align with the company's focus areas in agriculture, animal health, and industrial product development? - John Bair (Ascend Wealth Advisors)

2025Q4: The R&D team supports all divisions... with a flexible, entrepreneurial culture that allocates resources to the biggest opportunities. There is a **balanced focus across the company's markets.** - Mervyn de Souza(VP of R&D)

Will there be new product launches this year? What color options are available? Can you discuss the overall R&D budget and areas of focus? - Robert Smith

20251209-2026 Q1: R&D investment is balanced between base product improvements and new product development... Notable new product activity includes **'new and improved crystal solutions with stronger claims and low tracking'** developed in collaboration with the Consumer Products division. - Mervyn de Souza(VP of Research and Development)