Net Sales growth of 17%, reduced dependence on
apple crop and progress in building a more diversified
portfolio
- Net sales of $38 million, up 17 percent
versus the first quarter of 2017
- Excluding Tecnidex, revenue up
marginally from a strong first quarter of 2017, net of an
approximately $0.8 million revenue deferral as a result of the
adoption of ASC 606
- First quarter 2018 net loss was $13
million compared to a net loss of $12 million for the first quarter
of 2017
- First quarter EBITDA[1] of $10 million,
essentially flat compared to the year earlier period
- $3 million of cash generated by
operations for the first quarter of 2018
- Quarter end cash of $57 million after
disbursing approximately $10 million in payments related to
obligations owed to Dow
- Percentage of sales from apple
applications reduced from 77 percent in the first quarter of 2017
to 61 percent in the first quarter of 2018
AgroFresh Solutions, Inc. ("AgroFresh" or the "Company")
(NASDAQ: AGFS), a global leader in produce freshness solutions,
today announced financial results for the first quarter of fiscal
2018, ended March 31, 2018.
Jordi Ferre, Chief Executive Officer, commented, "Fiscal 2018 is
off to a solid start. Revenue continues to grow driven by the
expansion of the AgroFresh franchise and the acquisition of
Tecnidex. I am particularly pleased that we were able to achieve
organic revenue growth despite this year’s weak apple harvest in
Latin America and a year ago first quarter that benefitted from an
early harvest. Tecnidex also had a solid quarter, with double digit
revenue growth versus the first quarter of 2017 in Spain and
Africa/Middle East. We are making significant progress with the
Tecnidex integration and remain on pace to achieve the synergies
contemplated in this acquisition. The expansion of our franchise
continues as we penetrate new markets and broaden the services we
provide our customers.
“We were able to compensate for an overall weaker apple crop
size across the Southern Hemisphere by increasing penetration of
SmartFresh and further diversifying into other crops, such as
pears, plums, melons and avocados. Growers are confident we will
provide them with crop protection solutions and new technologies
that enable them to improve crop management. One of these is our
Harvista solution that has helped us grow share in a very
competitive market environment in Argentina. Another is our
RipeLock offering, which we are preparing to roll out across the
entire store system of a major US retailer, representing what we
expect will be a turning point in the trajectory of this product
line.”
(1) EBITDA is a non-GAAP financial measure. Please see the
information under “Non-GAAP Financial Measures” below for a
description of EBITDA and the tables at the end of this press
release for a reconciliation of this Non-GAAP financial measure to
GAAP results.
Financial Highlights for the First
Quarter
Net sales for the first quarter of 2017 were $38 million, up 17
percent versus the first quarter of 2017, primarily due to the
contribution from Tecnidex as well as increased SmartFresh
penetration in traditional and new crops. The Company adopted a new
accounting standard, ASC 606, in the first quarter of 2018,
resulting in approximately $0.8 million of revenue being deferred
that would otherwise have been recognized in the quarter if we had
utilized the same accounting conventions utilized in the first
quarter a year ago. For the quarter, Tecnidex revenues were almost
$6 million.
Consolidated gross margins in the quarter were 72 percent.
Margins in the quarter reflect a shift in our core product mix, the
effect of a full quarter of Tecnidex, as well as the impact of the
deferral of revenue under ASC 606.
Research and development costs of $3 million were down slightly
versus the first quarter of 2017.
Selling, general and administrative expenses of $16 million were
down slightly from a year ago as the addition of the SG&A from
Tecnidex was offset by a reduction in operating expenses in the
core business. Expenses also continue to include elevated legal and
related expenses arising from both ongoing litigation and
acquisition activity.
Interest expense of $8 million was down approximately $2 million
from the first quarter of 2017, primarily due to lower accretion of
contingent consideration.
Balance Sheet and Cash
Flow
The company continues to generate strong cash flow, with cash
from operations of $3 million in the quarter. At March 31, 2018,
the company had cash on hand of $57 million. In the first quarter,
the Company used cash of $10 million to make a contractual payment
to Dow and $15 million in cash interest expense with 2 payments
falling in the quarter.
Katherine Harper, Chief Financial Officer, said, “Results for
the first quarter demonstrate that our investment in strengthening
the SmartFresh Quality System and in complementary acquisitions is
generating attractive returns. We adopted ASC 606 this quarter,
deferring approximately $0.8 million of revenue that would have
been recognized in the quarter under our previous revenue
recognition policies, with the concomitant impact on revenue and
profitability metrics. The effect was to reduce organic revenues by
about 3% and gross margins by about 300 basis points. Driving down
operating expenses remains a priority. Though cash at quarter end
was down from previous quarters, our model is asset-light and we
expect strong operating cash flow for the year, providing us with
the liquidity and financial resources to fund both our internal and
other growth initiatives. Global demand for better stewardship of
limited resources is leading to rapid development of the highly
fragmented food preservation and waste reduction space. This
provides multiple growth opportunities, including organic growth in
existing markets, the creation of new markets through new product
innovation, and strategic acquisitions, partnerships and other
creative arrangements that can accelerate our growth trajectory,
all of which are important elements of our long-term growth
strategy.”
Conference Call
The Company will conduct a conference call to discuss its first
quarter 2018 results at 8:30 a.m. Eastern Time on May 10,
2018. To access the call, please dial 877-883-0383 from the U.S. or
412-902-6506 from outside the U.S. The conference call I.D. number
is 8752918. The call will also be available as a live webcast with
an accompanying slide presentation, which will be accessible via
the "Events & Presentation" page of the Investor Relations
section of the Company's website at www.agrofresh.com. All
participants should call or access the website approximately 10
minutes before the conference call begins.
A telephone replay of the conference call will be available by
dialing 877-344-7529 (US) and 412-317-0088 (International) until
Thursday, May 24, 2018. The replay I.D. number is 10119751.
Non-GAAP Financial
Measures
This press release contains the non-GAAP financial measure
EBITDA. The Company believes this non-GAAP financial measure
provides meaningful supplemental information as it is used by the
Company's management to evaluate the Company's performance.
Management believes that this measure enhances a reader's
understanding of the financial performance of the Company, is more
indicative of operating performance of the Company, and facilitates
a better comparison between fiscal periods, as the non-GAAP measure
excludes items that are not considered core to the Company's
operations.
The Company does not intend for the non-GAAP financial measure
contained in this release to be a substitute for any GAAP financial
information. Readers of this press release should use this non-GAAP
financial measure only in conjunction with the comparable GAAP
financial measure. Reconciliations of the non-GAAP financial
measure EBITDA to the most comparable GAAP measure are provided in
the table at the end of this press release.
About AgroFresh
AgroFresh Solutions, Inc. (NASDAQ: AGFS) is a global leader
in delivering innovative food preservation and waste reduction
solutions for fresh produce. The company is empowering the food
industry with Smarter Freshness™, a new range of integrated
solutions designed to help growers, packers and retailers improve
produce freshness and quality, reducing waste. AgroFresh’s
solutions range from pre-harvest with HarvistaTM and
LandSpringTM to its marquee SmartFresh QualityTM System,
which includes SmartFreshTM, AdvanStoreTM and ActiMistTM,
working together to maintain the quality of stored produce.
AgroFresh has a controlling interest in Tecnidex, a leading
provider of post-harvest fungicides, waxes and biocides for the
citrus market. Additionally, the company’s initial retail solution,
RipeLockTM, optimizes banana ripening for the benefit of retailers
and consumers. AgroFresh has key products registered in over 45
countries, with approximately 3,700 direct customers and services
over 25,000 storage rooms globally. For more information, please
visit www.agrofresh.com
Forward-Looking Statements
In addition to historical information, this release may contain
"forward-looking statements" within the meaning of the "safe
harbor" provisions of the United States Private Securities
Litigation Reform Act of 1995. All statements, other than
statements of historical facts, included in this release that
address activities, events or developments that the Company expects
or anticipates will or may occur in the future are forward-looking
statements and are identified with, but not limited to, words such
as "anticipate", "believe", "expect", "estimate", "plan",
"outlook", and "project" and other similar expressions (or the
negative versions of such words or expressions). Forward-looking
statements include, without limitation, information concerning the
Company's possible or assumed future results of operations,
including all statements regarding financial guidance, anticipated
future growth, business strategies, competitive position, industry
environment, potential growth opportunities and the effects of
regulation. These statements are based on management's current
expectations and beliefs, as well as a number of assumptions
concerning future events. Such forward-looking statements are
subject to known and unknown risks, uncertainties, assumptions and
other important factors, many of which are outside the Company's
management's control that could cause actual results to differ
materially from the results discussed in the forward-looking
statements. These risks include, without limitation, the risk of
increased competition; risks relating to the Company’s relationship
with its employees; risks relating to portfolio concentration; the
ability of the business to grow and manage growth profitably; risks
relating to acquisitions and investments; changes in applicable
laws or regulations, and the possibility that the Company may be
adversely affected by other economic, business, and/or competitive
factors. Additional risks and uncertainties are identified and
discussed in the Company's filings with the SEC, which are
available at the SEC's website at www.sec.gov.
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands, except share and per share
data)
March 31, 2018
December 31,
2017
ASSETS Current Assets: Cash and cash equivalents $
56,962 $ 64,533 Accounts receivable, net of allowance for doubtful
accounts of $1,463 and $1,550, respectively 65,766 71,509
Inventories 20,612 24,109 Other current assets
21,840 18,684 Total current
assets 165,180 178,835 Property and equipment, net 13,737 12,200
Goodwill 5,748 9,402 Intangible assets, net 746,977 757,882
Deferred income tax assets 6,606 8,198 Other assets
11,308 16,746 TOTAL
ASSETS $ 949,556 $ 983,263
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
Liabilities: Accounts payable $ 7,337 $ 15,014 Current portion of
long-term debt 7,700 7,926 Income taxes payable 7,689 5,931 Accrued
expenses and other current liabilities 43,391
65,809 Total current liabilities
66,117 94,680 Long-term debt 402,209 402,868 Other noncurrent
liabilities 39,193 38,505 Deferred income tax liabilities
33,168 31,130
Total liabilities 540,687 567,183 Commitments and
contingencies (see Note 17) Stockholders’ equity: Common stock, par
value $0.0001; 400,000,000 shares authorized, 51,055,747 and
51,002,234 shares issued and 50,394,366 and 50,340,853 shares
outstanding at March 31, 2018 and December 31, 2017, respectively 5
5 Preferred stock; par value $0.0001, 1 share authorized and
outstanding at March 31, 2018 and December 31, 2017 — — Treasury
stock; par value $0.0001, 661,381 shares at March 31, 2018 and
December 31, 2017 (3,885 ) (3,885 ) Additional paid-in capital
533,524 533,015 Accumulated deficit (121,696 ) (108,729 )
Accumulated other comprehensive loss (7,613 )
(12,769 ) Total AgroFresh stockholders’ equity
400,335 407,637 Non-controlling Interest 8,534
8,443 Total stockholders' equity
408,869 416,080
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $
949,556 $ 983,263
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(In thousands, except share and per share
data)
Three Months
EndedMarch 31, 2018 Three Months
EndedMarch 31, 2017 Net sales $ 38,351
$ 32,730 Cost of sales (excluding amortization, shown
separately below) 10,846
5,839 Gross profit 27,505 26,891 Research and
development expenses 3,069 3,297 Selling, general, and
administrative expenses 16,311 16,431 Amortization of intangibles
10,939 10,445 Change in fair value of contingent consideration
138 215
Operating loss (2,952 ) (3,497 ) Other income 70 40 Gain on foreign
currency exchange 1,931 3,103 Interest expense, net
(8,355 ) (10,293 ) Loss before income
taxes (9,306 ) (10,647 ) Provision for income taxes
3,570 1,382 Net loss
including non-controlling interests $ (12,876 ) $ (12,029 ) Less:
Net income attributable to non-controlling interests
91 — Net loss
attributable to AgroFresh Solutions, Inc $ (12,967 )
$ — Net loss per share: Basic $ (0.26 )
$ (0.24 ) Diluted $ (0.26 ) $ (0.24 ) Weighted average shares
outstanding: Basic 49,741,593 49,661,469 Diluted 49,741,593
49,661,469
See accompanying notes to condensed
consolidated financial statements.
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS
(Unaudited)
(in thousands) Three Months
EndedMarch 31, 2018 Three Months
EndedMarch 31, 2017 Cash flows from operating
activities: Net loss $ (12,876 ) $
(12,029 ) Adjustments to reconcile net loss to net cash provided by
operating activities: Depreciation and amortization 11,273 10,978
Provision for bad debts 52 180 Stock-based compensation 609 216
Pension expense 347 49 Unrealized gain on derivative instrument — —
Amortization of deferred financing costs 601 579 Accretion of
contingent consideration — 3,704 Increase in fair value of
contingent consideration 138 215 Deferred income taxes 3,630 232
Loss on sales of property — 81 Other 43 Changes in operating assets
and liabilities: Accounts receivable 5,818 9,148 Inventories 3,497
(637 ) Prepaid expenses and other current assets (430 ) 407
Accounts payable (7,853 ) (5,013 ) Accrued expenses and other
liabilities (9,426 ) (716 ) Income taxes payable 1,758 (9 ) Other
assets and liabilities 6,279
1,408 Net cash provided by operating
activities 3,417
8,836
Cash flows from investing activities: Cash paid
for property and equipment (1,905 ) (1,014 ) Other investments
— (350 ) Net cash
used in investing activities (1,905 )
(1,364 )
Cash flows from financing activities:
Payment of Dow liabilities settlement (10,000 ) — Repayment of long
term debt (1,407 ) (1,063
) Net cash used in financing activities
(11,407 ) (1,063 ) Effect of exchange rate
changes on cash and cash equivalents 2,324
1,137 Net (decrease) increase in
cash and cash equivalents (7,571 ) 7,546 Cash and cash equivalents,
beginning of period $ 64,533
77,312 Cash and cash equivalents, end of period
$ 56,962 $ 84,858
Supplemental disclosures of cash flow information: Cash
paid for: Cash paid for interest $ 14,979 $ 6,085 Cash paid for
income taxes $ 156 $ 679
Supplemental schedule of non-cash
investing and financing activities: Accrued purchases of
property and equipment $ — $ 578
See accompanying notes to condensed
consolidated financial statements.
Non-GAAP Measure
The following table sets forth the non-GAAP financial measure of
EBITDA. The Company believes this non-GAAP financial measure
provides meaningful supplemental information as it is used by the
Company’s management to evaluate the Company’s performance, is more
indicative of future operating performance of the Company, and
facilitates a better comparison among fiscal periods, as the
non-GAAP measure excludes items that are not considered core to the
Company’s operations. These non-GAAP results are presented for
supplemental informational purposes only and should not be
considered a substitute for the financial information presented in
accordance with GAAP.
The following is reconciliation between the non-GAAP financial
measure of EBITDA to its most directly comparable GAAP financial
measure, net loss:
(in thousands)
Three Months EndedMarch 31, 2018
Three Months EndedMarch 31, 2017 GAAP net loss
$ (12,876 ) $ (12,029 ) Provision for income taxes 3,570 1,382
Interest expense(1) 8,355 10,293 Depreciation and amortization
11,273 10,978
Non-GAAP
EBITDA $ 10,322 $ 10,624
(1) Interest on the term loan and
accretion for debt discounts, debt issuance costs and contingent
consideration.
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version on businesswire.com: https://www.businesswire.com/news/home/20180510005672/en/
AgroFresh Solutions, Inc.Katherine Harper, CFOinvestorrelations@AgroFresh.com
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