- Closed comprehensive refinancing on July 27, 2020,
significantly reducing balance sheet leverage and enhancing
flexibility to pursue diversification and growth initiatives
- Second quarter net sales decreased 5.7% (increased 2.4% on a
constant currency basis) versus the prior year period due to
isolated impacts of the pandemic that included weakening of local
currencies.
- Gross profit margin increased 100 basis points to 71.7% for the
six months ended June 30, 2020 versus the prior year period
primarily due to supply chain efficiencies put in place at the end
of 2019.
- Selling, general and administrative expense decreased 17.5% to
$26.4 million for the six months ended June 30, 2020, and decreased
10.5% when excluding nonrecurring items related to litigation,
refinancing, M&A and severance, versus the prior year
period.
- Net loss of $16.8 million for the second quarter of 2020, as
compared to net loss of $22.4 million for the second quarter of
2019. Net loss of $20.6 million for the first half of 2020, as
compared to net loss of $34.9 million for the first half of
2019.
- Adjusted EBITDA(1) of $0.2 million for the second quarter of
2020, as compared to ($1.4) million in the second quarter of 2019.
Adjusted EBITDA(1) of $11.4 million for the first half of 2020, as
compared to $11.1 million for the first half of 2019.
AgroFresh Solutions, Inc. ("AgroFresh" or the "Company")
(Nasdaq: AGFS), a global leader in produce freshness solutions,
today announced its financial results for the second quarter ended
June 30, 2020.
"I’m pleased with our team’s resolve during the first half of
2020. We provided uninterrupted service to our southern hemisphere
customers amid a challenging environment due to the global
pandemic, which impacted our flower business as well as caused
softness in some key local currencies. The cost optimization
initiatives we launched last year helped insulate our business from
the pandemic’s broader effects and drove another strong quarter of
year-over-year improvement in selling, general and administrative
expense, which in turn generated operating leverage and adjusted
EBITDA growth during the second quarter of 2020 as compared to the
prior year period. For the first half of 2020, adjusted EBITDA
margin improved 310 basis points, despite the decline in revenues
during our southern hemisphere season due to the aforementioned
headwinds," commented Jordi Ferre, Chief Executive Officer. "We are
carefully managing the business through this uncertain environment
and with the closing of our comprehensive refinancing on July 27,
we have reduced our balance sheet leverage by approximately two
turns on a pro-forma basis as of June 30, 2020. This transaction
returns our business to a position of strength where we have the
available capital and flexibility to pursue our diversification and
growth initiatives. We are well positioned for the coming northern
hemisphere season during the second half of 2020, with the
resources in place to provide the necessary products and service to
help our customers navigate this dynamic environment and maximize
the value of their crops."
Financial Highlights for the Second Quarter of 2020
Net sales for the second quarter of 2020 decreased 5.7%, to
$20.0 million, compared to $21.2 million in the second quarter of
2019. Excluding foreign currency translation impacts, which reduced
revenue by $1.7 million as compared to the second quarter of 2019,
revenue increased 2.4%. The net sales increase on a constant
currency basis was primarily the result of growth of SmartFresh in
the Asia-Pacific region, as well as positive contributions from the
Company's SmartFresh diversification strategy.
Gross profit for the second quarter was $13.5 million compared
to $14.9 million in the prior year period. Gross profit margin
decreased 260 basis points to 67.7% versus 70.3% in the prior year
period. The lower gross margin was primarily the result of negative
fixed cost leverage on lower reported sales volumes, inventory
valuation reserves and revenue mix.
Research and development costs were $2.9 million in the second
quarter of 2020, compared to $3.3 million in the prior year period.
This decrease was driven primarily by the timing of projects.
Selling, general and administrative expenses decreased 21.2%, to
$12.7 million in the second quarter of 2020 as compared to $16.1
million in the prior year period. Included in selling, general and
administrative expenses were $0.7 million in the current quarter
and $2.0 million in the prior year quarter of costs associated with
non-recurring items that included M&A, litigation, refinancing
and severance. Excluding these items, selling general and
administrative expenses decreased approximately 15.0% in the second
quarter versus the prior year period, which reflects the Company's
ongoing cost optimization initiatives, as well as a temporary
decrease in travel and other miscellaneous expenses related to the
COVID pandemic.
Second quarter 2020 net loss was $16.8 million, compared to net
loss of $22.4 million in the prior year period.
Adjusted EBITDA(1) was $0.2 million in the second quarter of
2020, compared to ($1.4) million in the prior year period.
As of June 30, 2020, cash and cash equivalents were $35.6
million.
Financial Highlights for the First Half of 2020
Financial results for the first half of 2020 largely reflect the
completion and performance of the business for the southern
hemisphere season. Net sales for the first half of 2020 were $53.0
million, a decrease of 11.8% versus the prior year period. The
impacts of foreign currency translation reduced revenue by $3.8
million for the first half of 2020; excluding this impact, revenue
decreased approximately 5.5%. The net sales decrease on a constant
currency basis was primarily the result of adverse harvest
conditions experienced in key Southern hemisphere markets, such as
Brazil, Chile, Argentina and Australia which impacted harvest
timing and yields, along with change in demand patterns from
customers.
Gross profit margin was 71.7% for the year-to-date period, which
compares to 70.7% in the year-ago period, which was in line with
the Company’s expectation. The year over year change was a result
of the supply chain cost optimizations that were implemented at the
end of 2019 and are expected to carry through the balance of
2020.
Research and development expenses decreased $1.6 million to $5.5
million in the first half of 2020 driven primarily by the timing of
projects.
Selling, general and administrative expenses decreased 17.5% to
$26.4 million for the six months ended June 30, 2020. There were
non-recurring costs associated with M&A, litigation,
refinancing and severance in the amount of $2.5 million in the
current year and $5.2 million in the prior year period. Excluding
these items, selling general and administrative expenses decreased
approximately 10.5% versus the same period last year driven by
ongoing cost optimization initiatives, and to a lesser extent
reflect the temporary decrease in travel and other miscellaneous
expenses as a result of the COVID pandemic.
Net loss was $20.6 million in the first half of 2020, compared
to net loss of $34.9 million in the prior year period.
Adjusted EBITDA(1) improved by $0.4 million, or 3.2%, to $11.4
million in the first half of 2020 as compared to the prior year
period. Adjusted EBITDA margin improved 310 basis points to 21.6%
versus the prior year. The increase was driven by lower operating
expenses, after adjusting for non-recurring items.
(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.
Comprehensive Refinancing Completed
Subsequent to the end of the second quarter, on July 27, 2020
the Company announced the successful closing of its comprehensive
refinancing comprised of the previously-announced $150 million
convertible preferred equity investment by a fund affiliated with
Paine Schwartz Partners, LLC (“Paine Schwartz” or “PSP”) and the
amendment and extension of the Company’s senior secured credit
facilities.
AgroFresh entered into a revised credit agreement whereby the
Company’s term loan maturity has been extended to December 31,
2024. With the proceeds of the PSP convertible preferred equity
investment, the principal outstanding on AgroFresh’s term loan has
been reduced to $275 million, resulting in a decline in the
Company’s net debt-to-adjusted EBITDA ratio from approximately 5.5x
to 3.6x on a pro-forma basis for the twelve months ended June 30,
2020. In addition, the Company’s revolving credit facility was
doubled in size from $12.5 million to $25.0 million and its
maturity was extended to June 30, 2024.
Conference Call
The Company will host a conference call and webcast today at
4:30 p.m. ET where members of the executive management team will
discuss these results with additional comments and details. 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 p.m. ET, August 10, 2020 through August 24, 2020. Listeners in
the United States may dial 844-512-2921 and international listeners
may dial 412-317-6671. The passcode is 13707334.
Non-GAAP Financial
Measures
This press release contains non-GAAP financial measures,
including 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 www.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, conditions
in the global economy, including the effects of the coronavirus
outbreak, 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, 2020
December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents
$
35,619
$
29,288
Accounts receivable, net of allowance for
doubtful accounts of $2,005 and $2,232, respectively
38,418
68,634
Inventories
25,119
22,621
Other current assets
16,740
11,802
Total Current Assets
115,896
132,345
Property and equipment, net
12,890
13,177
Goodwill
6,351
6,323
Intangible assets, net
609,545
631,369
Deferred income tax assets
10,564
10,317
Other assets
12,191
12,161
TOTAL ASSETS
$
767,437
$
805,692
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable
$
15,182
$
15,105
Current portion of long-term debt
4,776
4,675
Income taxes payable
6,607
5,648
Accrued expenses and other current
liabilities
19,460
24,350
Total Current Liabilities
46,025
49,778
Long-term debt
397,898
398,064
Other noncurrent liabilities
6,565
7,246
Deferred income tax liabilities
11,677
16,574
Total Liabilities
462,165
471,662
Commitments and contingencies (see Note
19)
Stockholders’ Equity:
Common stock, par value $0.0001;
400,000,000 shares authorized, 52,875,089 and 51,839,527 shares
issued and 52,213,708 and 51,178,146 outstanding at June 30, 2020
and December 31, 2019, respectively
5
5
Preferred stock, par value $0.0001; 1
share authorized and outstanding at June 30, 2020 and December 31,
2019, respectively
—
—
Treasury stock, par value $0.0001; 661,381
shares at June 30, 2020 and December 31, 2019, respectively
(3,885)
(3,885)
Additional paid-in capital
562,584
561,006
Accumulated deficit
(219,823)
(199,621)
Accumulated other comprehensive loss
(40,831)
(31,060)
Total AgroFresh Stockholders’ Equity
298,050
326,445
Non-controlling interest
7,222
7,585
Total Equity
305,272
334,030
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
767,437
$
805,692
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In
thousands, except share and per share data)
Three Months Ended June
30, 2020
Three Months Ended June
30, 2019
Six Months Ended June
30, 2020
Six Months Ended June
30, 2019
Net sales
$
19,982
$
21,183
$
53,005
$
60,123
Cost of sales (excluding amortization of
intangibles, shown separately below)
6,453
6,289
14,981
17,624
Gross profit
13,529
14,894
38,024
42,499
Research and development expenses
2,895
3,257
5,537
7,154
Selling, general, and administrative
expenses
12,722
16,148
26,431
32,046
Amortization of intangibles
10,936
11,766
21,893
23,382
Impairment of long lived assets
—
992
—
992
Change in fair value of contingent
consideration
—
167
—
357
Grant income
(2,974)
—
(2,974)
—
Operating loss
(10,050)
(17,436)
(12,863)
(21,432)
Other (expense) income
(7)
(26)
1,500
(38)
Gain (loss) on foreign currency
exchange
449
(2,519)
1,076
(2,938)
Interest expense, net
(6,513)
(8,670)
(13,479)
(17,415)
Loss before income taxes
(16,121)
(28,651)
(23,766)
(41,823)
Income taxes expense (benefit)
630
(6,290)
(3,201)
(6,877)
Net loss including non-controlling
interests
(16,751)
(22,361)
(20,565)
(34,946)
Less: Net loss attributable to
non-controlling interests
(197)
(92)
(363)
(58)
Net loss attributable to AgroFresh
Solutions, Inc
$
(16,554)
$
(22,269)
$
(20,202)
$
(34,888)
Net loss per share:
Basic
$
(0.33)
$
(0.45)
$
(0.41)
$
(0.70)
Diluted
$
(0.33)
$
(0.45)
$
(0.41)
$
(0.70)
Weighted average shares outstanding:
Basic
50,758,273
50,146,513
50,646,522
50,094,822
Diluted
50,758,273
50,146,513
50,646,522
50,094,822
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 a reconciliation between the non-GAAP financial
measures of EBITDA and Adjusted EBITDA to their most directly
comparable GAAP financial measure, net loss:
(in thousands)
Three Months Ended June
30, 2020
Three Months Ended June
30, 2019
Six Months Ended June
30, 2020
Six Months Ended June
30, 2019
Twelve Months Ended
June 30, 2020
GAAP net loss including non-controlling
interests
$
(16,751)
$
(22,361)
$
(20,565)
$
(34,946)
$
(47,129)
Expense (benefit) for income taxes
630
(6,290)
(3,201)
(6,877)
(13,467)
Interest expense(1)
6,513
8,670
13,479
17,415
29,848
Depreciation and amortization
11,568
12,275
23,145
24,336
82,265
Non-GAAP EBITDA
$
1,960
$
(7,706)
$
12,858
$
(72)
$
51,517
Share-based compensation
974
595
1,762
1,152
3,323
Severance related costs(2)
74
207
74
696
464
Other non-recurring costs(3)
639
1,815
2,383
5,008
6,121
(Gain) loss on foreign currency
exchange(4)
(449)
2,519
(1,076)
2,938
114
Mark-to-market adjustments, net(5)
—
167
—
357
(687)
Impairment of intangible assets (6)
—
992
—
992
10,432
Grant income
(2,974)
—
(2,974)
—
(2,974)
Litigation recovery
—
—
(1,600)
—
(1,600)
Non-GAAP Adjusted EBITDA
$
224
$
(1,411)
$
11,427
$
11,071
$
66,710
Ratio of net debt to Adjusted
EBITDA
June 30, 2020
Pro Forma Adjustment
(7)
Pro Forma June 30,
2020
Gross debt
$
405,374
$
—
$
405,374
Less: available cash
(35,619)
(127,068)
(162,687)
Net debt
$
369,755
$
(127,068)
$
242,687
Net debt-to-Adjusted EBITDA
ratio
5.5
x
3.6
x
(1) Interest on the term loan and accretion for debt discounts,
debt issuance costs and contingent consideration.
(2) Severance costs related to ongoing cost optimization
initiatives.
(3) Costs related to certain professional and other infrequent
or non-recurring fees, including those associated with transition
service agreement, litigation and M&A related fees.
(4) (Gain) loss 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 Tecnidex acquisition.
(6) Impairment of intangible assets related to software and
trademarks.
(7) Represents proceeds from convertible preferred stock
investment from Paine Schwartz Partners, less expenses.
The following is a reconciliation between
net sales on a non-GAAP constant currency basis to GAAP net
sales:
(in thousands)
Three Months Ended June
30, 2020
Three Months Ended June
30, 2019
Six Months Ended June
30, 2020
Six Months Ended June
30, 2019
GAAP net sales
$
19,982
$
21,183
$
53,005
$
60,123
Impact from changes in foreign currency
exchange rates
1,719
—
3,801
—
Non-GAAP constant currency net sales
(1)
$
21,701
$
21,183
$
56,806
$
60,123
(1) The company provides net sales on a constant currency basis
to enhance investors’ understanding of underlying business trends
and operating performance, by removing the impact of foreign
currency exchange rate fluctuations. The impact from foreign
currency, calculated on a constant currency basis, is determined by
applying prior period average exchange rates to current year
results.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200810005678/en/
For AgroFresh Solutions, Inc. Jeff Sonnek - Investor Relations
ICR Inc. Jeff.Sonnek@icrinc.com 646-277-1263
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