- Full year 2018 net sales increased 9%
versus 2017 to $178.8 million
- Fourth quarter 2018 net sales were
$53.3 million, versus $54.1 million in the prior year fourth
quarter
- Crop Diversification strategy
continues, with 30% of sales coming from crops other than apples in
2018, versus 19% in the prior year period
- Net loss of $1.9 million for the fourth
quarter of 2018 and net loss of $30.2 million for the full year
2018, which included $45.9 million of amortization of
intangibles
- Adjusted EBITDA(1) of $24.4 million for
the fourth quarter of 2018 and $66.9 million for the full year
2018
AgroFresh Solutions, Inc. ("AgroFresh" or the "Company")
(NASDAQ: AGFS), a global leader in produce freshness solutions,
today announced its financial results for the fourth quarter and
full year ended December 31, 2018.
"2018 was a transitional year for the Company, complete with
leadership changes that have refocused the enterprise on
cost-efficient sustainable growth. Contributions from a broader and
more diversified product offering and broader crop reach are the
key underpinnings of our long-term strategy. Sales coming from
crops other than apples were 30% in 2018 versus 19% in 2017, and
revenues outside our core SmartFresh apple business grew in the
high single-digits for the full year 2018. The acquisition of
Tecnidex in December 2017 contributed decisively with revenue
growth of 9% in 2018, and the ongoing penetration within crops such
as pears continues to be a key source of growth for the Company on
a global basis. Sales outside North America represented
approximately 75% of the revenue mix in 2018, and Europe is now our
largest market representing over 40% of 2018 sales. Collectively,
these elements helped offset the negative impact of an earlier than
normal harvest in the Pacific Northwest region, which resulted in
lower yields and profits for our customers, and in-turn curtailed
the utilization of solutions such as Harvista across the
industry.
As we look to the future, we see our core business remaining
stable and our growth diversification initiatives becoming a
greater proportion of the business. We also expect the geographic
and customer diversification of the business to continue to
mitigate risk from local fluctuations in crop size. In fact, in
2018, we serviced approximately 3,900 customers globally, an
increase of approximately 200 versus 2017, and expanded our
geographic reach from over 45 countries in 2017 to over 50
countries in 2018. Finally, our newly refinanced revolver, the
implementation of our own SAP system and the stabilization of our
operations as a standalone public company should all contribute to
reduced operating costs in 2019. Overall for 2019, we expect
improved financial performance and further progress in our
diversification strategy as proof of the resilience of our
business,” commented Jordi Ferre, Chief Executive Officer.
Financial Highlights for the Fourth Quarter and Full Year of
2018
Net sales for the fourth quarter of 2018 decreased 1.5%, from
$54.1 million in the fourth quarter of 2017 to $53.3 million in the
fourth quarter of 2018, driven by softness in the Pacific Northwest
due to an earlier and smaller than normal apple harvest. This was
partially offset by a full quarter of Tecnidex, which contributed
$7.8 million in the fourth quarter of 2018. Net sales for the full
year 2018 increased 9% to $178.8 million versus $164.0 million in
the prior year. The increase was driven by the addition of
Tecnidex, which contributed growth of $18.1 million, and SmartFresh
growth in Europe, partially offset by SmartFresh declines in the
Pacific Northwest region of the United States where the business
was negatively impacted by a smaller than normal apple harvest. As
we continue to implement our diversification strategy, and with the
addition of Tecnidex, SmartFresh sales in the Pacific Northwest now
represent less than 10% of the Company’s overall revenues.
In the fourth quarter of 2018, gross profit decreased 7% to
$40.0 million compared to the prior year period. Gross margin was
75.0%, consistent with expectations as the Company executes its
strategy of diversifying revenue mix with a broader assortment of
product solutions such as Harvista™, RipeLock™ and the Tecnidex
range of products. For the full year 2018, gross profit increased
1% to $132.5 million compared to the full year 2017. Gross margin
for the full year 2018 was 74.1%, a decrease from 80.1% in the
prior year, due to the Company’s diversification initiatives,
strategic pricing in the Pacific Northwest and the impact of
ASC-606 deferred revenue.
Research and development costs were $3.6 million in the fourth
quarter of 2018, down slightly versus the prior year period, and
for the full year 2018 were $13.9 million compared to $13.8 million
in the prior year. Tecnidex added $1.2 million of research and
development cost for the full year. Excluding these costs, research
and development costs were down versus the prior year period,
reflecting more targeted research activities in 2018.
Selling, general and administrative expenses decreased 11% to
$15.6 million in the fourth quarter of 2018 as compared to $17.5
million in the prior year period. The decrease was primarily driven
by cost optimization initiatives, partially offset by Tecnidex
contributing a full quarter of expenses in 2018 versus one month in
2017. For the full year, selling, general and administrative
expenses including Tecnidex were $65.8 million, up 6% versus 2017.
Excluding Tecnidex, selling, general and administrative expenses
were $60.6 million, down 1% for the year, reflecting the impact of
cost optimization.
Fourth quarter 2018 net loss was $1.9 million, compared to net
income of $23.4 million in the prior year period, which included a
$24 million one-time benefit from tax related matters. For the full
year 2018, net loss was $30.2 million, compared to net income of
$23.5 million in 2017, which included $26.9 million of benefits
associated with tax related matters and contingent consideration
along with $13.3 million of gains on foreign currency
transactions.
Adjusted EBITDA was down $0.9 million to $24.4 million in the
fourth quarter of 2018 as compared to $25.3 million in the prior
year period. For the full year, adjusted EBITDA was essentially
flat at $66.9 million compared to $67.2 million in the prior
year.
As of December 31, 2018, cash and cash equivalents were
$34.9 million.
Conference Call
The Company will host a conference call and webcast where
members of the executive management team will discuss these results
with additional comments and details today, March 11,
2019 at 4:30 pm E.T. The conference call and supplemental earnings
presentation will be available live over the internet through the
“Events & Presentations” page of the Investor Relations section
of the Company’s website at www.agrofresh.com. To participate on the live call
listeners in the United States may dial 877-407-4018 and
international listeners may dial 201-689-8471.
A replay of the conference call will be archived on the
Company's website and telephonic playback will be available from
7:30 pm. ET, March 11, 2019 through March 25, 2019. Listeners
in the United States may dial 844-512-2921 and international
listeners may dial 412-317-6671. The passcode is 13686918.
Non-GAAP Financial
Measures
This press release contains the non-GAAP financial measures
EBITDA and Adjusted EBITDA. The Company believes these non-GAAP
financial measures provide meaningful supplemental information as
they are used by the Company's management to evaluate the Company's
performance, including incentive bonuses and for bank covenant
reporting. Management believes that these measures enhance a
reader's understanding of the operating and financial performance
of the Company and facilitate a better comparison between fiscal
periods. EBITDA excludes income taxes, interest expense and
depreciation and amortization, whereas Adjusted EBITDA further
excludes items that are non-cash, infrequent, or non-recurring,
such as share-based compensation, severance, litigation and M&A
related costs, to provide further meaningful information for
evaluation of the Company’s performance.
The Company does not intend for the non-GAAP financial measures
contained in this release to be a substitute for any GAAP financial
information. Readers of this press release should use these
non-GAAP financial measures only in conjunction with the comparable
GAAP financial measures. Reconciliations of the non-GAAP financial
measures EBITDA and Adjusted EBITDA to the most comparable GAAP
measure are provided in the table at the end of this press
release.
About AgroFresh
AgroFresh (Nasdaq:AGFS) is a leading global innovator and
provider of science-based solutions, data-driven technologies and
experience-backed services to enhance the quality and extend the
shelf life of fresh produce. For more than 20 years, AgroFresh has
been revolutionizing the apple industry and has launched new
innovative solutions in a variety of fresh produce categories from
bananas to cherries and citrus to pears. AgroFresh supports
growers, packers and retailers by supplying post-harvest solutions
across the industry that enhance crop values while conserving our
planet’s resources and reducing global food waste. Visit
agrofresh.com to learn more.
™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; risks associated with 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.
(1) Adjusted EBITDA is a non-GAAP financial measure. Please see
the information under “Non-GAAP Financial Measures” below for a
description of Adjusted EBITDA and the table at the end of this
press release for a reconciliation of this Non-GAAP financial
measure to GAAP results.
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands, except share and per share
data)
December 31, December 31,
2018 2017 ASSETS Current Assets: Cash
and cash equivalents $ 34,852 $ 64,533 Accounts receivable, net of
allowance for doubtful accounts of $2,336 and $1,907, respectively
67,942 71,509 Inventories 24,807 24,109 Other current assets
15,608 18,684 Total current assets 143,209
178,835 Property and equipment, net 13,289 12,200 Goodwill 6,670
9,402 Intangible assets, net 711,967 757,882 Deferred income tax
assets 7,332 8,198 Other assets 16,820 16,746
TOTAL ASSETS $ 899,287 $ 983,263
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
Liabilities: Accounts payable $ 7,530 $ 15,014 Current portion of
long-term debt 6,419 7,926 Income taxes payable 4,815 5,931 Accrued
expenses and other current liabilities 45,340
65,809 Total current liabilities 64,104 94,680 Long-term
debt 400,309 402,868 Other noncurrent liabilities 32,066 38,505
Deferred income tax liabilities 30,232 31,130
Total liabilities 526,711 567,183 Commitments and
contingencies (see Note 17) Stockholders’ equity: Common stock, par
value $0.0001; 400,000,000 shares authorized, 51,071,573 and
50,698,587 shares issued and 50,410,192 and 50,037,206 outstanding
at December 31, 2018 and December 31, 2017, respectively 5 5
Preferred stock, par value $0.0001; share authorized and
outstanding at December 31, 2018 and December 31, 2017,
respectively — — Treasury stock, par value $0.0001; 661,381 shares
at December 31, 2018 and December 31, 2017, respectively (3,885 )
(3,885 ) Additional paid-in capital 535,819 533,015 Accumulated
deficit (138,789 ) (108,729 ) Accumulated other comprehensive loss
(28,837 ) (12,769 ) Total AgroFresh stockholders’
equity 364,313 407,637 Non-controlling interest 8,263
8,443 Total equity 372,576
416,080 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $
899,287 $ 983,263
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(In thousands, except share and per share
data)
For the Three For the
Three Months Ended Months Ended Year Ended
Year Ended December 31, December 31,
December 31, December 31, 2018
2017 2018 2017 Net sales
$ 53,316 $ 54,135 $ 178,786 $ 164,026 Cost of sales (excluding
amortization, shown separately below) 13,361
11,290 46,271 32,655 Gross
profit 39,955 42,845 132,515 131,371 Research and development
expenses 3,580 3,676 13,873 13,779 Selling, general, and
administrative expenses 15,637 17,519 65,770 61,847 Amortization of
intangibles 11,604 10,575 45,946 41,910 Impairment of long lived
assets 2,600 — 2,600 — Change in fair value of contingent
consideration (3,561 ) (24,528 ) (3,018 )
(26,948 ) Operating income (loss) 10,095 35,603 7,344 40,783
Other income (loss) 10 651 429 611 (Loss) gain on foreign currency
exchange (2,194 ) 2,760 (1,722 ) 13,344 Interest expense, net
(8,201 ) (8,260 ) (34,451 ) (35,755 )
(Loss) income before income taxes (290 ) 30,754 (28,400 ) 18,983
Provision (benefit) for income taxes 1,626
7,316 1,840 (4,579 ) Net (loss) income
including non-controlling interests $ (1,916 ) $ 23,438 $ (30,240 )
$ 23,562 Less: Net loss (income) attributable to non-controlling
interests (262 ) (91 ) 180 (91 )
Net (loss) income attributable to AgroFresh Solutions, Inc $
(2,178 ) $ 23,347 $ (30,060 ) $ 23,471
Net (loss) income per share: Basic $ (0.04 ) $ 0.47 $
(0.60 ) $ 0.47 Diluted $ (0.04 ) $ 0.47 $ (0.60 ) $ 0.47 Weighted
average shares outstanding: Basic 49,977,686 49,679,292 49,883,739
49,808,600 Diluted 49,977,686 50,137,694 49,883,739 50,191,303
Non-GAAP Measures
The following table sets forth the non-GAAP financial measures
of EBITDA and Adjusted EBITDA. The Company believes these non-GAAP
financial measures provide meaningful supplemental information as
they are used by the Company’s management to evaluate the Company’s
performance (including incentive bonuses and for bank covenant
reporting), are more indicative of future operating performance of
the Company, and facilitate a better comparison among fiscal
periods. 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 and Adjusted EBITDA to its most directly
comparable GAAP financial measure, net (loss) income:
Three Months ended Three Months Ended
Year Ended Year Ended (in
thousands) December 31, 2018 December
31, 2017 December 31, 2018 December 31,
2017 GAAP net (loss) income including non-controlling
interests $ (1,916 ) $ 23,437 $ (30,240 )
$ 23,562 Provision (benefit) for income taxes
1,626 7,316 1,840 (4,579 ) Interest expense(1) 8,201 8,260 34,451
35,755 Depreciation and amortization 12,107
11,254 47,593 44,356
Non-GAAP
EBITDA $ 20,018 $ 50,267
$ 53,644 $ 99,094
Share-based compensation 809 909 2,897 2,616 Severance related
costs(2) (593 ) — 1,453 261 Other non-recurring costs(3) 2,903
1,406 7,558 5,486 Loss (gain) on foreign currency exchange(4) 2,194
(2,760 ) 1,722 (13,344 ) Mark-to-market adjustments, net(5) (3,561
) (24,516 ) (3,018 ) (26,948 ) Impairment of long lived assets
2,600 — 2,600 —
Non-GAAP Adjusted EBITDA $ 24,370
$ 25,306 $ 66,856
$ 67,165
________________________
(1) Interest on the term loan and accretion for debt
discounts, debt issuance costs and contingent consideration (2)
Severance costs related to former executives (3) Costs related to
certain professional and other infrequent or non-recurring fees,
including those associated with becoming a stand-alone public
company, litigation and M&A related fees (4) Loss (gain) on
foreign currency exchange relates to net losses and gains resulting
from transactions denominated in a currency other than the entity's
functional currency. (5) Non-cash adjustment to the fair value of
contingent consideration related to the Tax Receivable Agreement
and earnout.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190311005787/en/
For AgroFresh Solutions, Inc.Jeff Sonnek - Investor
RelationsICR Inc.Jeff.Sonnek@icrinc.com646-277-1263
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