Revenues up 15% in the quarter, 16% for the
first half of Fiscal 2018
Further progress in diversifying end markets,
introducing innovative new technologies, and leveraging our growing
global brand
- Net sales up 15% to $19 million for the
quarter and up 16% to $57 million for first half of 2018
- For the first half, 36% of revenue
generated from crops other than apple, up from 22% for the first
half of 2017
- Signed collaboration agreement with Del
Monte for RipeLock in retail, launched FreshCloud suite of storage
and transportation screening and diagnostic solutions, and acquired
Verigo which has strong IoT technology supporting FreshCloud
Transit for the monitoring of perishables during
transportation
- Net loss of $35 million in the first
half of 2018 compared to a net loss of $9 million in the first half
of 2017, with a majority of the change due to $15 million in tax
benefits and $12 million of gains on contingent consideration and
currency recorded in the first half of 2017
- First half EBITDA[1] of $3 million down
from prior year primarily due to the currency-related and
contingent consideration gains recorded last year
- Quarter end cash of $43 million
AgroFresh Solutions, Inc. ("AgroFresh" or the "Company")
(NASDAQ: AGFS), a global leader in produce freshness solutions,
announced preliminary financial results for the second quarter and
first half of fiscal 2018, ended June 30, 2018.
Jordi Ferre, Chief Executive Officer, commented, "It’s been an
exciting six months for AgroFresh with significant progress
achieved along many of our strategic initiatives. The core business
continues to perform well despite significantly lower apple crops
in key Southern Hemisphere countries, with SmartFresh maintaining
its pricing integrity while penetrating new markets, such as
citrus, pears, flowers and plums. The benefits of our strategic
acquisition program is also evident in our results. This was
another quarter of significant contribution from Tecnidex, which
continues to deliver value not only through its operations, but in
synergistically enhancing the AgroFresh SmartFresh Quality System.
Consequently, we recorded strong growth in both the quarter and the
half. Margins reflect the ongoing evolution of our operations,
primarily a shift in product mix, including Tecnidex, as well as
the impact from adopting ASC 606. And, excluding Tecnidex, overhead
during the first six months of this year was down compared to the
first half of last year.
(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.
“From a long-term perspective, we’ve had an extremely productive
first half advancing growth initiatives in new product development,
innovation and partnerships. We signed an exciting agreement with
Del Monte, a leader in the banana market, for our revolutionary
RipeLock product, signaling further progress and inroads into the
large and attractive retail segment. We also recently announced our
FreshCloud initiative, including our first acquisition in the
space, Verigo, which has an established Internet of Things (IoT)
technology for monitoring freshness throughout the supply chain.
This new technology is complementary to, and integrates with, the
core of our FreshCloud strategy, our established AdvanStore
capability and our genomic testing tools, which provide predictive
screening of our customers’ produce. FreshCloud provides us access
to large new markets where technology is quickly becoming an
enabler of food preservation and waste reduction.
“Heading into the second half of the year, we are well prepared,
with a strong product lineup backed by a strong balance sheet.
Based on our performance in the first half, we feel positive going
into the Northern Hemisphere season.”
Financial Highlights for the Second
Quarter and First Half of 2018
Net sales for the second quarter of 2018 were up 15% versus the
second quarter of 2017, driven by Tecnidex. Organic revenue was
down versus the year ago quarter driven by a significant year over
year decline in the Southern Hemisphere apple crop and the impact
of the implementation of ASC 606, which reduced revenue by $0.2
million. Revenues over the first half of fiscal 2018 were up 16%,
reflecting essentially the same factors that impacted the
quarter.
Consistent with the Company’s expectations, margins for the
quarter were 68% compared to 76% in the second quarter of 2017.
SmartFresh margins were little changed from a year ago. The year
over year change in margins was anticipated, and primarily reflects
the evolving nature of the Company’s operations, which are now
comprised of a larger proportion of revenues generated by Tecnidex
and Harvista, both of which have a lower margin profile. The
implementation of ASC 606 also required the Company to defer
revenue that would have otherwise been recognized in the quarter,
which accounted for 1 point of margin compression. Margins for the
first half of fiscal 2018 were 71%, down from 80% in the first half
of fiscal 2017, essentially reflecting the same factors that
affected the second quarter, with ASC 606 reducing margins 2
points.
Research and development costs were unchanged in the quarter at
$3.7 million. Compared to a year ago, selling, general and
administrative expenses were down on a relative basis measured as a
percentage of total revenues, due to the effective integration of
Tecnidex. Selling, general and administrative expenses were $15.6
million compared to $13.4 million in the year ago quarter,
primarily due to Tecnidex costs as well as approximately $1 million
of non-recurring legal and other. Selling, general and
administrative expenses for the first half of fiscal 2018 were up
approximately 7% from the prior year period, although on a
like-for-like basis, excluding Tecnidex, total selling, general and
administrative cost for the first half of 2018, including
non-recurring expenses, were down approximately $1 million.
Interest expense of $8.7 million was flat with the second
quarter of 2017.
Net loss of $35 million in the first half of 2018 compares to a
net loss of $9 million in the first half of 2017. In the second
quarter of 2017, the Company recorded an $8 million gain
on currency and a $15 million tax benefit within the
provision for income taxes. In the second quarter of 2018 there was
approximately $1 million of other expense, primarily currency
related.
Balance Sheet and Cash
Flow
The balance sheet at June 30, 2018, was strong, including
significant liquidity. Cash on hand was $43 million. During the
first half of 2018, cash has been used to satisfy a $10 million
liability to Dow, to pay $16 million in interest payments, $3
million more than last year due to timing, to increase inventory as
we prepare for the season and invest in RipeLock, to facilitate a
reduction in our accrued liabilities, and to pay for the Verigo
acquisition.
Katherine Harper, CFO, said, “Financial performance over the
first half of the year has been consistent with our expectations,
with strong top line growth and the moderation in margins
anticipated with the evolving nature of our operations. The second
quarter is also our seasonally slowest, and this tends to magnify
any anomalies, such as the ASC 606 impact on margins. We remain
focused on efficiency and productivity improvements to help drive
down costs, and this quarter revenues grew faster than overhead
expenses leading to better operating leverage. Compared to a year
ago, over the first six months of this year, expenses for the core
business, which excludes Tecnidex, are actually down as our
productivity and efficiency initiatives gain traction. Cash remains
strong, although down from recent highs primarily due to the
paydown of our term loan, scheduled payments to Dow and changes in
working capital. We expect to see an appreciable improvement in
cash in the second half of 2018 due to the seasonality of our
business. More importantly, our growth initiatives are generating
results, with the acquisition of Verigo and the introduction of
FreshCloud, the integration with Tecnidex and the agreement with
Del Monte all expected to contribute over the second half of this
year. Consequently, we feel well positioned to achieve our
objectives and accelerate growth both organically and inorganically
to continue to strengthen the AgroFresh franchise.”
Conference Call
The Company will conduct a conference call to discuss its second
quarter 2018 results at 8:30 a.m. Eastern Time
on August 9, 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 8530687. The call will also be available as a
live webcast with an accompanying slide presentation, which will be
accessible via the "Events & Presentations" 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, August 23, 2018. The replay
I.D. number is 10121906.
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. (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 range of integrated solutions
designed to help growers, packers and retailers improve produce
freshness and quality, and reduce waste. AgroFresh's solutions
range from pre-harvest with Harvista™ and LandSpring™ to
its marquee SmartFresh™ Quality System, which includes
SmartFresh, AdvanStore™ and ActiMist™, working together to
maintain the quality of stored produce. AgroFresh also has a
controlling interest in Tecnidex, a leading provider of
post-harvest fungicides, waxes, coatings and biocides for the
citrus market, including Textar™ and Teycer™. Additionally,
the Company's initial retail solution, RipeLock™, 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.
™Trademark of AgroFresh Inc.
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; the ability of the business to grow and
manage growth profitably; costs related to operating AgroFresh as a
stand-alone public company; 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)
June 30,2018
December 31,2017
ASSETS Current Assets: Cash and cash equivalents $
43,465 $ 64,533 Accounts receivable, net of allowance for doubtful
accounts of $1,627 and $1,550, respectively 43,994 71,509
Inventories 29,208 24,109 Other current assets
28,445 18,684 Total current assets
145,112 178,835 Property and equipment, net 13,560 12,200 Goodwill
5,748 9,402 Intangible assets, net 737,205 757,882 Deferred income
tax assets 7,378 8,198 Other assets 17,334
16,746 TOTAL ASSETS
$ 926,337 $ 983,263
LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities:
Accounts payable $ 10,181 $ 15,014 Current portion of long-term
debt 7,035 7,926 Income taxes payable 5,622 5,931 Accrued expenses
and other current liabilities 51,450
65,809 Total current liabilities 74,288 94,680
Long-term debt 401,485 402,868 Other noncurrent liabilities 37,774
38,505 Deferred income tax liabilities 29,091
31,130 Total liabilities 542,638
567,183 Commitments and contingencies (see Note 17)
Stockholders’ equity:
Common stock, par value $0.0001;
400,000,000 shares authorized, 51,148,343 and51,002,234 shares
issued and 50,486,962 and 50,340,853 shares outstanding at June
30,2018 and December 31, 2017, respectively
5 5
Preferred stock; par value $0.0001, 1
share authorized and outstanding at June 30, 2018and December 31,
2017
— Treasury stock; par value $0.0001, 661,381 shares at June 30,
2018 and December 31, 2017 (3,885 ) (3,885 ) Additional paid-in
capital 534,755 533,015 Accumulated deficit (143,644 ) (108,729 )
Accumulated other comprehensive loss (12,048 )
(12,769 ) Total AgroFresh stockholders’ equity
375,183 407,637 Non-controlling interest 8,516
8,443 Total stockholders' equity
383,699 416,080 TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY $ 926,337
$ 983,263
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(In thousands, except share and per share
data)
Three Months EndedJune
30, 2018 Three Months EndedJune 30,
2017 Six Months EndedJune 30, 2018
Six Months EndedJune 30, 2017 Net sales $ 18,840 $
16,389 $ 57,191 $ 49,119 Cost of sales (excluding amortization,
shown separately below) 6,018
3,906 16,864 9,745
Gross profit 12,822 12,483 40,327 39,374 Research and
development expenses 3,721 3,735 6,790 7,032 Selling, general, and
administrative expenses 15,567 13,435 31,878 29,866 Amortization of
intangibles 11,393 10,445 22,332 20,890 Change in fair value of
contingent consideration 97
(1,211 ) 235 (996 )
Operating loss (17,956 ) (13,921 ) (20,908 ) (17,418 ) Other income
545 215 615 255 (Loss) gain on foreign currency exchange (1,872 )
7,968 59 11,071 Interest expense, net (8,745 )
(8,564 ) (17,100 )
(18,857 ) Loss before income taxes (28,028 ) (14,302 ) (37,334 )
(24,949 ) Benefit for income taxes (6,062 )
(16,909 ) (2,492 )
(15,527 ) Net (loss) income including non-controlling interests $
(21,966 ) $ 2,607 $ (34,842 ) $ (9,422 ) Less: Net (loss) income
attributable to non-controlling interests (18
) — 73 —
Net (loss) income attributable to AgroFresh Solutions, Inc
$ (21,948 ) $ 2,607
$ (34,915 ) $ (9,422 ) Net
(loss) income per share: Basic $ (0.44 ) $ 0.05 $ (0.70 ) $ (0.19 )
Diluted $ (0.44 ) $ 0.05 $ (0.70 ) $ (0.19 ) Weighted average
shares outstanding: Basic 49,864,822 49,670,621 49,814,744
49,941,993 Diluted 49,864,822 50,035,343 49,814,744 49,941,993
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS
(Unaudited)
(in thousands) Six Months
EndedJune 30, 2018 Six Months
EndedJune 30, 2017 Cash flows from operating
activities: Net loss
$
(34,842 )
$
(9,422 ) Adjustments to reconcile net loss to net cash provided by
operating activities: Depreciation and amortization 22,981 22,046
Provision for bad debts 182 789 Stock-based compensation 1,740 806
Pension expense 64 153 Amortization of deferred financing costs
1,133 1,166 Accretion of contingent consideration 2,043 5,515
Increase (decrease) in fair value of contingent consideration 235
(996 ) Deferred income taxes (1,219 ) (19,726 ) Loss on sales of
property — 80 Provision for inventory obsolescence — 89 Other (43 )
43 Changes in operating assets and liabilities: Accounts receivable
24,096 37,232 Inventories (5,082 ) (2,758 ) Prepaid expenses and
other current assets (9,761 ) 198 Accounts payable (1,414 ) (19,864
) Accrued expenses and other liabilities (6,801 ) (1,987 ) Income
taxes payable (309 ) 2,581 Other assets and liabilities
1,707 205 Net cash (used
in) provided by operating activities (5,290 )
16,150
Cash flows from investing
activities: Cash paid for property and equipment (2,301 )
(2,835 ) Proceeds from sale of property — 9 Asset Acquisition
(1,587 ) Other investments —
(1,050 ) Net cash used in investing activities
(3,888 ) (3,876 )
Cash flows from financing
activities: Payment of Dow liabilities settlement (10,000 )
(10,000 ) Repayment of long term debt (3,330 )
(2,125 ) Net cash used in financing activities
(13,330 ) (12,125 ) Effect of exchange
rate changes on cash and cash equivalents
1,440 1,131 Net (decrease) increase in
cash and cash equivalents (21,068 ) 1,280 Cash and cash
equivalents, beginning of period $ 64,533
77,312 Cash and cash equivalents, end
of period $ 43,465 $
78,592
Supplemental disclosures of cash flow
information: Cash paid for: Cash paid for interest $
15,777 $ 12,309 Cash paid for income taxes $ 4,245 $ 1,291
Supplemental schedule of non-cash investing and financing
activities: Accrued purchases of property and equipment $ — $
254 Settlement of Dow liabilities not resulting from cash payment,
net of deferred income taxes $ — $ 55,089
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 income (loss):
(in thousands) Three Months
EndedJune 30, 2018 Three Months
EndedJune 30, 2017 Six Months EndedJune 30,
2018 Six Months EndedJune 30, 2017
GAAP net income (loss) $ (21,966 ) $ 2,607 $ (34,842 ) $
(9,422 ) Provision (benefit) for income taxes (6,062 ) (16,909 )
(2,492 ) (15,527 ) Interest expense(1) 8,745 8,564 17,100 18,857
Depreciation and amortization 11,708
11,068 22,981
22,046
Non-GAAP EBITDA $
(7,575 ) $ 5,330 $ 2,747
$ 15,954
_____________________________________________________
(1) Interest on the term loan and accretion for debt
discounts, debt issuance costs and contingent consideration.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180809005177/en/
For AgroFresh Solutions, Inc.Joe Hassett,
610-228-2110joeh@gregoryfca.com
AgroFresh Solutions (NASDAQ:AGFS)
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