AgroFresh Solutions, Inc. ("AgroFresh" or the "Company") (Nasdaq:
AGFS), a global leader in produce freshness solutions devoted to
fighting food loss and waste, today announced its financial results
for the third quarter ended September 30, 2021, which
corresponds to the first half of the Northern Hemisphere harvest
season.
Clint Lewis, Chief Executive Officer, commented,
"In the third quarter, which marks the start of the Northern
Hemisphere season, our customers were impacted by the well reported
weather-related challenges that negatively impacted fruit quality
and storage volumes, which in turn adversely impacted our
SmartFresh business. This includes the late frost in Europe
impacting the pear crop in key markets such as Italy and France and
the extreme heat wave in the Pacific Northwest apple growing region
where crop yield is now expected to be down 10% to 15% from last
year. In addition, our results were impacted by the timing of sales
recognition on a year over year basis with some expected customer
buying shifting to the fourth quarter versus what had occurred in
the third quarter of 2020. It is for this reason that we reiterate
it’s more appropriate to assess our performance on calendar year
halves in order to get a full seasonal view in each hemisphere.
Nonetheless, as we have previously communicated, we continue to
expect to generate growth in both net sales and adjusted EBITDA for
the full year 2021."
Mr. Lewis added, "Our diversification
initiatives remain on track and will continue to be the engine of
growth as we move ahead. I'm pleased with our ability to drive
growth in diversification revenue for the third consecutive
quarter, growing 14.6% on a last twelve month basis, which speaks
to the focus we are bringing to the organization. Our continued
success with our ‘Growth by Diversification’ strategy also helps to
build a natural hedge against certain known risks in agriculture
such as weather. Further, diversification across products,
platforms, crops, and geographies, reduces the adverse impact that
any one of these variables can have on our results.”
1Adjusted 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.
Financial Highlights for the Third
Quarter of 2021
Net sales for the third quarter of 2021, which
marks the first half of the Northern Hemisphere season, decreased
6.8%, to $49.2 million, compared to $52.8 million in the third
quarter of 2020. Excluding foreign currency translation impacts,
which increased revenue by $0.1 million as compared to the third
quarter of 2020, revenue decreased 7.1%. The majority of the net
sales decrease was driven by lower fruit volumes in storage
resulting from challenged growing conditions and weather impacts
that reduced fruit quality. This was particularly acute in the
North America region which saw an unprecedented heat wave that
impacted apple production, and was the primary driver behind the
12% decline in the SmartFresh for apple business. Additionally, a
late frost in key European growing areas had extreme effects on the
pear crop. The balance of the decrease was associated with harvest
timing, as compared to the prior year period, which was only
partially offset by growth in the Fungicides & Disinfectants
and Coatings categories.
Gross profit for the third quarter was $34.1
million, compared to $39.3 million in the prior year period. Gross
profit margin was 69.4% as compared to 74.4% in the prior year
period, with the variance due to product mix which was primarily
influenced by the decrease in SmartFresh for apple
revenue. The lower gross margin also reflects the
Company’s transition to a more diversified product portfolio.
Research and development costs were $3.3 million
in the third quarter of 2021, compared to $2.9 million in the prior
year period. This increase was driven primarily by the timing of
projects.
Selling, general and administrative expenses
decreased 9.0% to $12.3 million in the third quarter of 2021, as
compared to $13.5 million in the prior year period, due to a
continued focus on cost control.
Third quarter 2021 net income was $0.8 million,
compared to net loss of $29.7 million in the prior year period.
During 2020, the Company recorded 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 PSP investment which resulted in increased tax
provisions.
Adjusted EBITDA decreased by $4.5 million to
$20.5 million in the third quarter of 2021, compared to $25.0
million in the prior year period. Adjusted EBITDA margin was 41.6%
in the third quarter of 2021, versus 47.3% in the prior year
period.
As of September 30, 2021, cash and cash
equivalents were $43.3 million.
Financial Highlights for the First Nine
Months of 2021
Net sales for the nine months ended
September 30, 2021 were $110.1 million, an increase of 4.1%
versus the prior year period. The impacts of foreign currency
translation increased revenue by $1.3 million for the first nine
months of 2021; excluding this impact, revenue increased
approximately 2.9%. The net sales increase was primarily the result
of strength in the categories of Fungicides & Disinfectants,
and Other 1-MCP solutions, such as SmartFresh diversification and
Harvista, as well as Coatings. This was partially offset by lower
sales of SmartFresh for apples and pears due to the weather impacts
on the Northern Hemisphere crop.
Gross profit for the nine months ended
September 30, 2021 increased 0.5% to $77.6 million, as
compared to $77.3 million in the prior year period. Gross profit
margin was 70.5% as compared to 73.1% for the prior year
period. The lower gross margin reflects the Company’s
transition to a more diversified product portfolio.
Research and development expenses increased $1.7
million to $10.1 million in the nine months ended
September 30, 2021 versus the prior year period driven
primarily by the timing of projects.
Selling, general and administrative expenses
decreased 1.2% to $39.5 million for the nine months ended
September 30, 2021. There were non-recurring costs associated
with M&A, litigation, refinancing and severance in the amount
of $3.4 million in the first nine months of 2021 and $2.8 million
in the first nine months of 2020. Excluding these items, selling
general and administrative expenses decreased 2.8% as compared to
the same period last year.
Net loss was $8.3 million in the nine months
ended September 30, 2021, compared to net loss of $50.3
million in the prior year period. During 2020, the Company recorded
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 PSP investment
which resulted in increased tax provisions. During 2021, the
Company recognized $14.4 million income due to a litigation
settlement.
Adjusted EBITDA decreased by $0.8 million, or
2.2%, to $35.6 million in the nine months ended September 30,
2021, compared to $36.4 million in the prior year period. Adjusted
EBITDA margin was 32.3% in the nine months ended September 30,
2021, as compared to 34.4% in the prior year period.
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 10, 2021
through November 24, 2021. Listeners in the United States
may dial 844-512-2921 and international listeners may dial
412-317-6671. The passcode is 13724487.
Non-GAAP Financial Measures
This press release contains certain non-GAAP
financial measures, including EBITDA, Adjusted EBITDA and net sales
on a constant currency basis. 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 for incentive bonuses and 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 to
evaluate 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, as well as
constant currency net sales, to their most comparable GAAP measures
are provided in the table at the end of this press release.
About AgroFresh
AgroFresh (Nasdaq: AGFS) is an AgTech innovator
and global leader with a mission to reduce food loss/waste and
conserve the planet’s resources by providing a range of
science-based solutions, data-driven digital technologies and
high-touch customer services. AgroFresh supports growers, packers
and retailers with solutions across the food supply chain to
enhance the quality and extend the shelf life of fresh produce. The
AgroFresh organization has 40 years of post-harvest experience
across a broad range of crops, including revolutionizing the apple
industry with the SmartFresh™ Quality System for more than 20
years. This is powered by a comprehensive portfolio that includes
plant-based coatings, equipment and proprietary solutions that help
improve the freshness supply chain from harvest to the home. 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 the Company's
substantial level of indebtedness; 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.
Contact:For AgroFresh Solutions,
Inc.:ICR Inc.
Jeff Sonnek - Investor
RelationsJeff.Sonnek@icrinc.com646-277-1263
Michael Wolfe - Media
RelationsMichael.Wolfe@icrinc.com475-747-8015
AgroFresh
Solutions, Inc.UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS(In thousands) |
|
|
|
|
September 30, 2021 |
|
December 31, 2020 |
|
|
|
ASSETS |
|
|
Current Assets: |
|
|
Cash and cash equivalents |
$43,322 |
|
|
$50,030 |
|
Accounts receivable, net of allowance for doubtful accounts of
$2,205 and $2,061, respectively |
59,289 |
|
|
63,204 |
|
Inventories |
21,334 |
|
|
24,579 |
|
Other current assets |
23,431 |
|
|
17,219 |
|
Total Current Assets |
147,376 |
|
|
155,032 |
|
Property and equipment, net |
11,941 |
|
|
12,432 |
|
Goodwill |
6,569 |
|
|
6,925 |
|
Intangible assets, net |
557,386 |
|
|
589,201 |
|
Deferred income tax assets |
8,523 |
|
|
9,699 |
|
Other assets |
11,010 |
|
|
12,494 |
|
TOTAL ASSETS |
$742,805 |
|
|
$785,783 |
|
|
|
|
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’
EQUITY |
|
|
Current Liabilities: |
|
|
Accounts payable |
$14,255 |
|
|
$19,634 |
|
Current portion of long-term debt |
3,326 |
|
|
3,378 |
|
Income taxes payable |
3,259 |
|
|
3,471 |
|
Accrued expenses and other current liabilities |
28,270 |
|
|
25,976 |
|
Total Current Liabilities |
49,110 |
|
|
52,459 |
|
Long-term debt |
254,596 |
|
|
264,491 |
|
Other noncurrent liabilities |
6,443 |
|
|
6,432 |
|
Deferred income tax liabilities |
38,336 |
|
|
37,834 |
|
Total Liabilities |
348,485 |
|
|
361,216 |
|
|
|
|
Commitments and contingencies (see Note 21) |
|
|
Temporary Equity: |
|
|
Series B convertible preferred stock, par value $0.0001; 150 shares
authorized and designated and 145 shares outstanding at
September 30, 2021, and 150 shares authorized, designated and
outstanding at December 31, 2020 |
147,008 |
|
|
143,728 |
|
Redeemable non-controlling interest |
8,005 |
|
|
8,446 |
|
Stockholders’ Equity: |
|
|
Common stock, par value $0.0001; 400,000 shares authorized, 53,000
and 53,092 shares issued and 52,339 and 52,431 outstanding at
September 30, 2021 and December 31, 2020,
respectively |
5 |
|
|
5 |
|
Preferred stock, par value $0.0001; 0.001 share authorized and
outstanding at September 30, 2021 and December 31,
2020 |
— |
|
|
— |
|
Treasury stock, par value $0.0001; 661 shares at September 30,
2021 and December 31, 2020 |
(3,885 |
) |
|
(3,885 |
) |
Additional paid-in capital |
535,612 |
|
|
552,776 |
|
Accumulated deficit |
(252,188 |
) |
|
(244,836 |
) |
Accumulated other comprehensive loss |
(40,237 |
) |
|
(31,667 |
) |
Total Stockholders' Equity |
239,307 |
|
|
272,393 |
|
TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY |
$742,805 |
|
|
$785,783 |
|
AgroFresh Solutions, Inc.UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In
thousands, except per share data) |
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Net sales |
$49,178 |
|
|
$52,770 |
|
|
$110,094 |
|
|
$105,775 |
|
Cost of sales (excluding amortization of intangibles, shown
separately below) |
15,035 |
|
|
13,511 |
|
|
32,453 |
|
|
28,492 |
|
Gross profit |
34,143 |
|
|
39,259 |
|
|
77,641 |
|
|
77,283 |
|
Research and development expenses |
3,329 |
|
|
2,852 |
|
|
10,123 |
|
|
8,389 |
|
Selling, general, and administrative expenses |
12,282 |
|
|
13,494 |
|
|
39,453 |
|
|
39,925 |
|
Amortization of intangibles |
10,830 |
|
|
10,973 |
|
|
32,092 |
|
|
32,866 |
|
Grant income |
— |
|
|
— |
|
|
— |
|
|
(2,974 |
) |
Operating income (loss) |
7,702 |
|
|
11,940 |
|
|
(4,027 |
) |
|
(923 |
) |
Other (expense) income |
(299 |
) |
|
96 |
|
|
14,053 |
|
|
1,596 |
|
Debt modification and extinguishment expenses |
— |
|
|
(5,028 |
) |
|
— |
|
|
(5,028 |
) |
(Loss) gain on foreign currency exchange |
(918 |
) |
|
1,390 |
|
|
436 |
|
|
2,466 |
|
Interest expense, net |
(5,465 |
) |
|
(4,922 |
) |
|
(16,571 |
) |
|
(18,401 |
) |
Income (loss) before income taxes |
1,020 |
|
|
3,476 |
|
|
(6,109 |
) |
|
(20,290 |
) |
Income taxes expense |
208 |
|
|
33,214 |
|
|
2,175 |
|
|
30,013 |
|
Net income (loss) including non-controlling interest |
812 |
|
|
(29,738 |
) |
|
(8,284 |
) |
|
(50,303 |
) |
Less: Net (loss) income attributable to non-controlling
interest |
(182 |
) |
|
315 |
|
|
(441 |
) |
|
348 |
|
Net income (loss) attributable to AgroFresh Solutions, Inc. |
994 |
|
|
(30,053 |
) |
|
(7,843 |
) |
|
(50,651 |
) |
Less: Dividends on convertible preferred stock |
6,248 |
|
|
4,400 |
|
|
18,580 |
|
|
4,400 |
|
Net loss attributable to AgroFresh Solutions, Inc. common
stockholders |
($5,254 |
) |
|
($34,453 |
) |
|
($26,423 |
) |
|
($55,051 |
) |
|
|
|
|
|
|
Loss per share of common shares: |
|
|
|
|
|
Basic |
($0.10 |
) |
|
($0.68 |
) |
|
$(0.51 |
) |
|
$(1.08 |
) |
Diluted |
($0.10 |
) |
|
($0.68 |
) |
|
$(0.51 |
) |
|
$(1.08 |
) |
|
|
|
|
|
|
Weighted average shares of common stock
outstanding: |
|
|
|
|
|
Basic |
51,583 |
|
|
51,002 |
|
|
51,323 |
|
50,766 |
Diluted |
51,583 |
|
|
51,002 |
|
|
51,323 |
|
50,766 |
|
|
|
|
|
|
|
|
|
|
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 for
incentive bonuses and 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 including
non-controlling interest:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
(in thousands) |
2021 |
|
2020 |
|
2021 |
|
2020 |
GAAP net income (loss) including non-controlling
interest |
$812 |
|
|
($29,738 |
) |
|
($8,284 |
) |
|
($50,303 |
) |
Depreciation and amortization |
11,522 |
|
|
11,630 |
|
|
34,122 |
|
|
34,775 |
|
Interest expense (1) |
5,465 |
|
|
4,922 |
|
|
16,571 |
|
|
18,401 |
|
Income taxes expense |
208 |
|
|
33,214 |
|
|
2,175 |
|
|
30,013 |
|
Non-GAAP EBITDA |
$18,007 |
|
|
$20,028 |
|
|
$44,584 |
|
|
$32,886 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
976 |
|
|
943 |
|
|
2,147 |
|
|
2,705 |
|
Severance related costs (2) |
29 |
|
|
356 |
|
|
1,616 |
|
|
430 |
|
Other non-recurring costs (3) |
242 |
|
|
— |
|
|
1,762 |
|
|
2,383 |
|
Loss (gain) on foreign currency exchange (4) |
918 |
|
|
(1,390 |
) |
|
(436 |
) |
|
(2,466 |
) |
Debt modification and extinguishment costs |
— |
|
|
5,028 |
|
|
— |
|
|
5,028 |
|
Other expense (income) (5) |
301 |
|
|
— |
|
|
301 |
|
|
(2,974 |
) |
Litigation settlement |
— |
|
|
— |
|
|
(14,392 |
) |
|
(1,600 |
) |
Total Adjustments |
2,466 |
|
|
4,937 |
|
|
(9,002 |
) |
|
3,506 |
|
Non-GAAP Adjusted EBITDA |
$20,473 |
|
|
$24,965 |
|
|
$35,582 |
|
|
$36,392 |
|
(1) Interest on debt and accretion for debt
discounts. (2) Severance costs related to restructuring and cost
optimization initiatives.(3) Costs related to certain professional
and other infrequent or non-recurring fees, including those
associated with restructuring, litigation and M&A related
fees.(4) Loss (gain) on foreign currency exchange relates to net
gains and losses resulting from transactions denominated in a
currency other than the Company's functional currency.(5) Other
expense (income) relates primarily to grant income.
The following is a reconciliation between net
sales on a non-GAAP constant currency basis to GAAP net sales:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
(in thousands) |
2021 |
|
2020 |
|
2021 |
|
2020 |
GAAP net sales |
$49,178 |
|
|
$52,770 |
|
|
$110,094 |
|
|
$105,775 |
|
Impact from changes in foreign currency exchange rates |
(146 |
) |
|
— |
|
|
(1,289 |
) |
|
— |
|
Non-GAAP constant currency net sales
(1) |
$49,032 |
|
|
$52,770 |
|
|
$108,805 |
|
|
$105,775 |
|
(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.
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