AgroFresh Solutions Reports Results for Fourth Quarter and 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 December31, 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 | ||||||||||||||
|
________________________ |
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| (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. |
|
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