- Third quarter net sales increased 7.8% (5.6% on a constant
currency basis) versus the prior year period.
- Gross profit margin increased 200 basis points to 73.1% for the
nine months ended September 30, 2020 versus the prior year period
primarily due to continued supply chain improvement.
- Selling, general and administrative expense decreased 15.1% to
$39.9 million for the nine months ended September 30, 2020, and
decreased 7.6% versus the prior year period when excluding
nonrecurring items related to litigation, refinancing, M&A and
severance.
- Net loss of $22.4 million for the third quarter of 2020, as
compared to net income of $3.0 million for the third quarter of
2019. Net loss of $42.9 million for the first nine months of 2020,
as compared to net loss of $31.9 million for the first nine months
of 2019. The increase in net loss was due to the incremental tax
valuation allowance of $24.7 million recorded during the three
months ended September 30, 2020 against carryforwards of cumulative
net operating losses related to the change of control for federal
income tax purposes associated with the recent PSP investment.
- Adjusted EBITDA1 increased 21.0% to $25.0 million for the third
quarter of 2020, as compared to $20.6 million in the third quarter
of 2019. Adjusted EBITDA was $36.4 million for the first nine
months of 2020, an increase of 14.8% compared to $31.7 million for
the first nine months 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 third quarter ended
September 30, 2020.
Jordi Ferre, Chief Executive Officer, commented, "Our northern
hemisphere apple season saw a return to a normal seasonal pattern
in Europe causing revenues in that region to increase 26.4% in the
third quarter versus the prior year period. We faced some
challenges in the U.S. that caused revenues to come in below our
expectations, including COVID-19 related uncertainty that lowered
the propensity for customers to utilize quality enhancing solutions
such as Harvista, which was compounded by better than expected
labor availability in North America. Having said that, Harvista
still generated growth of 7.9% for the quarter and through our
strengthened operations and cost optimization strategy, we were
able to deliver 21.0% adjusted EBITDA growth for the third
quarter."
Mr. Ferre concluded, "As the original innovator and global
leader in the near- and post-harvest industry, our platform is
solutions-based and service-oriented. Not unexpectedly, competitors
have targeted AgroFresh given our leadership position in the
market, but as we've seen time and again, their low-price low-touch
approach is not sustainable with customers that expect the quality
and service that AgroFresh has provided to the marketplace for
decades. Our organization is driving towards a
technologically-enabled future for our industry and participating
as an AgTech innovator utilizing our FreshCloud capabilities as the
foundation. We aim to deliver novel and highly customized,
confidence-inspiring solutions tailored to unique customer needs
that are based on our unmatched depth of agricultural experience,
product expertise and data-driven insights."
Financial Highlights for the Third Quarter of 2020
Net sales for the third quarter of 2020 increased 7.8%, to $52.8
million, compared to $49.0 million in the third quarter of 2019.
Excluding foreign currency translation impacts, which increased
revenue by $1.1 million as compared to the third quarter of 2019,
revenue increased 5.6%. The net sales increase was primarily the
result of SmartFresh growth in Europe due in part to the
normalization of harvest seasonality versus the prior year period,
increased traction with Harvista in European markets, and positive
contributions from Tecnidex.
Gross profit for the third quarter was $39.3 million, compared
to $35.1 million in the prior year period. Gross profit margin
increased 280 basis points to 74.4% versus 71.6% in the prior year
period. The higher gross margin was primarily the result of the
Company's supply chain efficiencies and further supported by price
discipline.
Research and development costs were $2.9 million in the third
quarter of 2020, compared to $2.6 million in the prior year period.
This increase was driven primarily by the timing of projects.
Selling, general and administrative expenses decreased 10.0%, to
$13.5 million, in the third quarter of 2020 as compared to $15.0
million in the prior year period. Included in selling, general and
administrative expenses were $0.4 million in the current quarter
and $1.6 million in the prior year quarter of costs associated with
non-recurring items that included litigation, M&A and
severance. Excluding these items, selling, general and
administrative expenses decreased approximately 1.6% in the third
quarter versus the prior year period, which reflects the Company's
ongoing cost optimization initiatives.
Third quarter 2020 net loss was $22.4 million, compared to net
income of $3.0 million in the prior year period. Tax expense
increased by $31.5 million compared to the prior year period
primarily due to the Company recording a $24.7 million valuation
allowance against carryforwards of cumulative net operating losses
related to the change of control for federal income tax purposes
associated with the recent PSP investment.
Adjusted EBITDA1 improved by $4.3 million, or 21.0%, to $25.0
million in the third quarter of 2020, compared to $20.6 million in
the prior year period.
As of September 30, 2020, cash and cash equivalents were $25.1
million.
Financial Highlights for the First Nine Months of
2020
Net sales for the first nine months of 2020 were $105.8 million,
a decrease of 3.0% versus the prior year period. The impacts of
foreign currency translation reduced revenue by $2.7 million for
the first nine months of 2020; excluding this impact, revenue
decreased approximately 0.5%. Our core SmartFresh business on a
constant currency basis grew 1.3%. The slight decrease in net sales
on a constant currency basis was primarily the result of geographic
mix, where the relative strength of the Company's business in the
EMEA and APAC regions were more than offset by relative weakness in
the North America and Latin America regions.
Gross profit margin was 73.1% for the year-to-date period, which
compares to 71.1% in the year-ago period, an improvement of 200
basis points. The year over year improvement 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 $1.3 million, to
$8.4 million, in the first nine months of 2020 compared to the
prior year period, driven primarily by the timing of projects.
Selling, general and administrative expenses decreased 15.1%, to
$39.9 million, for the nine months ended September 30, 2020
compared to the prior year period. There were non-recurring costs
associated with M&A, litigation, refinancing and severance in
the amount of $2.8 million in the current year period and $6.9
million in the prior year period. Excluding these items, selling
general and administrative expenses decreased approximately 7.6%
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 $42.9 million in the first nine months of 2020,
compared to net loss of $31.9 million in the prior year period. Tax
expense increased by $35.2 million compared to the prior year
period primarily due to the Company recording a $24.7 million
valuation allowance against carryforwards of cumulative net
operating losses related to the change of control for federal
income tax purposes associated with the recent PSP investment.
Adjusted EBITDA improved by $4.7 million, or 14.8%, to $36.4
million in the first nine months of 2020 as compared to the prior
year period. Adjusted EBITDA margin improved 530 basis points to
34.4% 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.
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, November 5, 2020 through November 19, 2020. Listeners
in the United States may dial 844-512-2921 and international
listeners may dial 412-317-6671. The passcode is 13710418.
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)
September 30, 2020
December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents
$
25,149
$
29,288
Accounts receivable, net of allowance for
doubtful accounts of $2,025 and $2,232, respectively
69,580
68,634
Inventories
24,444
22,621
Other current assets
17,265
11,802
Total Current Assets
136,438
132,345
Property and equipment, net
13,275
13,177
Goodwill
6,605
6,323
Intangible assets, net
599,236
631,369
Deferred income tax assets
10,502
10,317
Other assets
11,449
12,161
TOTAL ASSETS
$
777,505
$
805,692
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Accounts payable
$
13,784
$
15,105
Current portion of long-term debt
3,316
4,675
Income taxes payable
7,629
5,648
Accrued expenses and other current
liabilities
26,665
24,350
Total Current Liabilities
51,394
49,778
Long-term debt
264,850
398,064
Other noncurrent liabilities
5,989
7,246
Deferred income tax liabilities
35,577
16,574
Total Liabilities
357,810
471,662
Commitments and contingencies (see Note
19)
Series B convertible preferred stock, par
value $0.0001; 150,000 shares authorized, 150,000 and 0 shares
designated and outstanding at September 30, 2020 and December 31,
2019, respectively
140,684
—
Stockholders’ Equity:
Common stock, par value $0.0001;
400,000,000 shares authorized, 53,054,960 and 51,839,527 shares
issued and 52,393,579 and 51,178,146 shares outstanding at
September 30, 2020 and December 31, 2019, respectively
5
5
Preferred stock, par value $0.0001; 1
share authorized and outstanding at September 30, 2020 and December
31, 2019, respectively
—
—
Treasury stock, par value $0.0001; 661,381
shares at September 30, 2020 and December 31, 2019,
respectively
(3,885
)
(3,885
)
Additional paid-in capital
559,037
561,006
Accumulated deficit
(241,710
)
(199,621
)
Accumulated other comprehensive loss
(41,164
)
(31,060
)
Total AgroFresh Stockholders’ Equity
272,283
326,445
Non-controlling interest
6,728
7,585
Total Stockholders' Equity
279,011
334,030
TOTAL LIABILITIES, CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY
$
777,505
$
805,692
AgroFresh Solutions,
Inc.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and
per share data)
Three Months Ended
September 30, 2020
Three Months Ended
September 30, 2019
Nine Months Ended
September 30, 2020
Nine Months Ended
September 30, 2019
Net sales
$
52,770
$
48,972
$
105,775
$
109,095
Cost of sales (excluding amortization of
intangibles, shown separately below)
13,511
13,892
28,492
31,516
Gross profit
39,259
35,080
77,283
77,579
Research and development expenses
2,852
2,566
8,389
9,720
Selling, general, and administrative
expenses
13,494
14,998
39,925
47,044
Amortization of intangibles
10,973
11,754
32,866
35,136
Impairment of long lived assets
—
—
—
992
Change in fair value of contingent
consideration
—
(229
)
—
128
Grant income
—
—
(2,974
)
—
Operating income (loss)
11,940
5,991
(923
)
(15,441
)
Other income (expense)
96
(81
)
1,596
(119
)
Debt modification and extinguishment
expenses
(5,028
)
—
(5,028
)
—
Gain (loss) on foreign currency
exchange
1,390
54
2,466
(2,884
)
Interest expense, net
(4,922
)
(8,606
)
(18,401
)
(26,021
)
Gain (loss) before income taxes
3,476
(2,642
)
(20,290
)
(44,465
)
Income taxes expense (benefit)
25,857
(5,653
)
22,656
(12,530
)
Net (loss) income including
non-controlling interests
(22,381
)
3,011
(42,946
)
(31,935
)
Less: Net loss attributable to
non-controlling interests
(494
)
(278
)
(857
)
(336
)
Net (loss) income attributable to
AgroFresh Solutions, Inc
$
(21,887
)
$
3,289
$
(42,089
)
$
(31,599
)
Less: Dividends on convertible preferred
stock
4,400
—
4,400
—
(Loss) income attributable to AgroFresh
Solutions, Inc. common stockholders
(26,287
)
3,289
(46,489
)
(31,599
)
Net (loss) income per share:
Basic
$
(0.52
)
$
0.06
$
(0.92
)
$
(0.64
)
Diluted
$
(0.52
)
$
0.06
$
(0.92
)
$
(0.64
)
Weighted average shares outstanding:
Basic
51,001,852
50,227,590
50,765,829
50,138,835
Diluted
51,001,852
50,288,304
50,765,829
50,138,835
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
September 30, 2020
Three Months Ended
September 30, 2019
Nine Months Ended
September 30, 2020
Nine Months Ended
September 30, 2019
GAAP net (loss) income including
non-controlling interests
$
(22,381
)
$
3,011
$
(42,946
)
$
(31,935
)
Expense (benefit) for income taxes
25,857
(5,653
)
22,656
(12,530
)
Interest expense (1)
4,922
8,606
18,401
26,021
Depreciation and amortization
11,630
12,356
34,775
36,692
Non-GAAP EBITDA
$
20,028
$
18,320
$
32,886
$
18,248
Share-based compensation
943
959
2,705
2,111
Severance related costs (2)
356
344
430
1,040
Other non-recurring costs (3)
—
1,297
2,383
6,305
(Gain) loss on foreign currency exchange
(4)
(1,390
)
(54
)
(2,466
)
2,884
Debt modification and extinguishment
costs
5,028
—
5,028
—
Mark-to-market adjustments, net (5)
—
(229
)
—
128
Impairment of intangible assets (6)
—
—
—
992
Grant income
—
—
(2,974
)
—
Litigation recovery
—
—
(1,600
)
—
Non-GAAP Adjusted EBITDA
$
24,965
$
20,637
$
36,392
$
31,708
(1)
Interest on debt, 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, including the TRA and contingent payment
related to the Tecnidex acquisition.
(6)
Impairment of intangible assets related to
software.
The following is a reconciliation between net sales on a
non-GAAP constant currency basis to GAAP net sales:
(in thousands)
Three Months Ended
September 30, 2020
Three Months Ended
September 30, 2019
Nine Months Ended
September 30, 2020
Nine Months Ended
September 30, 2019
GAAP net sales
$
52,770
$
48,972
$
105,775
$
109,095
Impact from changes in foreign currency
exchange rates
(1,064
)
—
2,738
—
Non-GAAP constant currency net sales
(1)
$
51,706
$
48,972
$
108,513
$
109,095
(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/20201105006111/en/
For AgroFresh Solutions, Inc. Jeff Sonnek - Investor Relations
ICR Inc. Jeff.Sonnek@icrinc.com 646-277-1263
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