AgroFresh Solutions Reports Results for Second Quarter and First Half of 2021

  • Second quarter 2021 net sales increased 9.7% to $21.9 million (4.7% on a constant currency basis) versus the prior year period. First half 2021 net sales increased 14.9% (12.8% on a constant currency basis).
  • Diversification revenue (i.e. excluding sales of SmartFresh™ for apples) grew 23% for the trailing twelve month period ended June 30, 2021 versus the twelve months ended June 30, 2020, and represented 40.6% of consolidated revenues during this period.
  • Net loss of $17.3 million for the second quarter of 2021, as compared to net loss of $16.8 million for the second quarter of 2020. First half 2021 net loss of $9.1 million versus a net loss of $20.6 million in the prior year period.
  • Adjusted EBITDA1 of $1.0 million for the second quarter of 2021, compared to $0.2 million in the prior year period. First half 2021 adjusted EBITDA increased 32.2% to $15.1 million versus $11.4 million in the prior year period.
  • Announced new senior leadership appointments in Commercial, R&D, Marketing and Business Development — adding new capabilities and strengthening core competencies in support of the Company's diversification and growth strategies.

PHILADELPHIA, Aug. 10, 2021 (GLOBE NEWSWIRE) --  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, 2021.

Clint Lewis, Chief Executive Officer commented, “We made further progress with our diversification strategy in the second quarter, generating 36% growth over the prior year period in our product solution categories focused on diversification — Other 1-MCP Solutions, Fungicides & Disinfectants, Coatings, and Other. This performance built upon the growth we generated in the first quarter and was led by our EMEA region in particular. We had a strong finish to our first half Southern Hemisphere season, producing consolidated 13% constant currency net sales growth and a 32% increase in adjusted EBITDA. Looking ahead to the second half Northern Hemisphere season, we are in a great position and anticipate generating net sales and adjusted EBITDA growth."

Mr. Lewis added, "I continue to be energized by our team's customer centric focus. With the new leadership we announced today, I'm confident that we have the elements in place to strengthen our core competencies, while adding additional capabilities to further our diversification strategy and propel the post-harvest industry forward with future innovations. We are building a new mindset and establishing new disciplines that we believe will lead to consistent profitable long-term growth.”

Financial Highlights for the Second Quarter of 2021

Net sales for the second quarter of 2021 increased 9.7%, to $21.9 million, compared to $20.0 million in the second quarter of 2020. Excluding foreign currency translation impacts, which increased revenue by $1.0 million as compared to the second quarter of 2020, revenue increased 4.7%. The net sales increase was driven by diversification product categories beyond SmartFresh for apples, with an emphasis on expanding our 1-MCP solutions, including SmartFresh, to other crops. This was partially offset by a slight decrease in sales of SmartFresh for apples, which was largely due to the timing of the Southern Hemisphere harvest season, which was earlier than in 2020.

Gross profit for the second quarter was $14.8 million, compared to $13.5 million in the prior year period. Gross profit margin was essentially flat versus the prior year at 67.6%.

Research and development costs were $3.5 million in the second 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 were $13.6 million in the second quarter of 2021 as compared to $12.7 million in the prior year period, due primarily to an increase in non-recurring expenses including restructuring costs and severance.

Second quarter 2021 net loss was $17.3 million, compared to net loss of $16.8 million in the prior year period, which included $3.0 million of grant income.

Adjusted EBITDA improved by $0.8 million to $1.0 million in the second quarter of 2021, compared to $0.2 million in the prior year period. Adjusted EBITDA margin increased 320 basis points to 4.4% in the second quarter of 2021, versus 1.1% in the prior year period.

As of June 30, 2021, cash and cash equivalents were $56.7 million.

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 First Half of 2021

Financial results for the first half of 2021 largely reflect the completion and performance of the business for the Southern hemisphere season. Net sales for the first half of 2021 were $60.9 million, an increase of 14.9% versus the prior year period. The impacts of foreign currency translation increased revenue by $1.1 million for the first half of 2021; excluding this impact, revenue increased approximately 12.8%. The net sales increase was primarily the result of strength in Other 1-MCP solutions, such as SmartFresh diversification and Harvista, as well as strong growth in the Fungicides & Disinfectants and Coatings categories. Sales of SmartFresh for apple crops realized modest growth for the period.

Gross profit for the first half increased 14.4% to $43.5 million, as compared to $38.0 million in the prior year period. Gross profit margin was stable versus the prior year period at 71.4% for the year-to-date period.

Research and development expenses increased $1.3 million to $6.8 million in the first half of 2021 versus the prior year period driven primarily by the timing of projects.

Selling, general and administrative expenses increased 2.8% to $27.2 million for the six months ended June 30, 2021. There were non-recurring costs associated with M&A, litigation, refinancing and severance in the amount of $3.1 million in the first half of the current year and $2.5 million in the first half of 2020. Excluding these items, selling general and administrative expenses was stable versus the same period last year.

Net loss was $9.1 million in the first half of 2021, compared to net loss of $20.6 million in the prior year period. The year-over-year change in net loss was due to higher gross profit and litigation settlement proceeds.

Adjusted EBITDA improved by $3.7 million, or 32.2%, to $15.1 million in the first half of 2021, compared to $11.4 million in the prior year period. Adjusted EBITDA margin increased 320 basis points to 24.8% in the first half of 2021, as compared to 21.6% 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 855-327-6837 and international listeners may dial 631-891-4304.

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, 2021 through August 24, 2021. Listeners in the United States may dial 844-512-2921 and international listeners may dial 412- 317-6671. The passcode is 10015941.

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.
Jeff Sonnek - Investor Relations
ICR Inc.
Jeff.Sonnek@icrinc.com
646-277-1263

AgroFresh Solutions, Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

 June 30, 2021December 31, 2020
   
ASSETS  
Current Assets:  
Cash and cash equivalents$56,694 $50,030 
Accounts receivable, net of allowance for doubtful accounts of $2,108 and $2,061, respectively 33,469  63,204 
Inventories 23,773  24,579 
Other current assets 20,308  17,219 
Total Current Assets 134,244  155,032 
Property and equipment, net 11,623  12,432 
Goodwill 6,715  6,925 
Intangible assets, net 568,055  589,201 
Deferred income tax assets 7,057  9,699 
Other assets 11,189  12,494 
TOTAL ASSETS$738,883 $785,783 
   
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY  
Current Liabilities:  
Accounts payable$12,909 $19,634 
Current portion of long-term debt 3,470  3,378 
Income taxes payable 3,667  3,471 
Accrued expenses and other current liabilities 22,110  25,976 
Total Current Liabilities 42,156  52,459 
Long-term debt 254,871  264,491 
Other noncurrent liabilities 5,691  6,432 
Deferred income tax liabilities 37,266  37,834 
Total Liabilities 339,984  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 June 30, 2021, and 150 shares authorized, designated and outstanding at December 31, 2020 144,666  143,728 
Redeemable non-controlling interest 8,187  8,446 
Stockholders’ Equity:  
Common stock, par value $0.0001; 400,000 shares authorized, 52,806 and 53,092 shares issued and 52,145 and 52,431 outstanding at June 30, 2021 and December 31, 2020, respectively 5  5 
Preferred stock, par value $0.0001; 0.001 share authorized and outstanding at June 30, 2021 and December 31, 2020    
Treasury stock, par value $0.0001; 661 shares at June 30, 2021 and December 31, 2020 (3,885)  (3,885) 
Additional paid-in capital 541,185  552,776 
Accumulated deficit (253,435)  (244,836) 
Accumulated other comprehensive loss (37,824)  (31,667) 
Total Stockholders' Equity 246,046  272,393 
TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY$738,883 $785,783 


AgroFresh Solutions, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

 Three Months Ended June 30, Six Months Ended June 30,
 June 30, 2021June 30, 2020 June 30, 2021June 30, 2020
Net sales$21,924 $19,982  $60,916 $53,005 
Cost of sales (excluding amortization of intangibles, shown separately below) 7,104  6,453   17,418  14,981 
Gross profit 14,820  13,529   43,498  38,024 
Research and development expenses 3,496  2,895   6,794  5,537 
Selling, general, and administrative expenses 13,620  12,722   27,171  26,431 
Amortization of intangibles 10,499  10,936   21,262  21,893 
Grant income   (2,974)     (2,974) 
Operating loss (12,795)  (10,050)   (11,729)  (12,863) 
Other (expense) income (46)  (7)   14,352  1,500 
Gain on foreign currency exchange 921  449   1,354  1,076 
Interest expense, net (5,216)  (6,513)   (11,106)  (13,479) 
Loss before income taxes (17,136)  (16,121)   (7,129)  (23,766) 
Income taxes expense (benefit) 144  630   1,967  (3,201) 
Net loss including non-controlling interest (17,280)  (16,751)   (9,096)  (20,565) 
Less: Net (loss) income attributable to non-controlling interest (20)  130   (259)  33 
Net loss attributable to AgroFresh Solutions, Inc. (17,260)  (16,881)   (8,837)  (20,598) 
Less: Dividends on convertible preferred stock 6,327     12,332   
Net loss attributable to AgroFresh Solutions, Inc. common stockholders($23,587) ($16,881)  ($21,169) ($20,598) 
      
Loss per share of common shares:     
Basic($0.46) ($0.33)  $(0.41) $(0.41) 
Diluted($0.46) ($0.33)  $(0.41) $(0.41) 
      
Weighted average shares of common stock outstanding:     
Basic 51,348
  50,758
   51,191
  50,647
 
Diluted 51,348
  50,758
   51,191
  50,647
 
              

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 June 30, Six Months Ended June 30,
(in thousands)June 30, 2021June 30, 2020 June 30, 2021June 30, 2020
GAAP net loss including non-controlling interest($17,280) ($16,751)  ($9,096) ($20,565) 
Depreciation and amortization 11,178  11,568   22,600  23,145 
Interest expense (1) 5,216  6,513   11,106  13,479 
Income taxes expense (benefit) 144  630   1,967  (3,201) 
Non-GAAP EBITDA($742) $1,960  $26,577 $12,858 
Adjustments:     
Share-based compensation 280  974   1,171  1,762 
Severance related costs (2) 1,587  74   1,587  74 
Other non-recurring costs (3) 754  639   1,520  2,383 
Gain on foreign currency exchange (4) (921)  (449)   (1,354)  (1,076) 
Grant income   (2,974)     (2,974) 
Litigation settlement      (14,392)  (1,600) 
Total Adjustments 1,700  (1,736)   (11,468)  (1,431) 
Non-GAAP Adjusted EBITDA$958 $224  $15,109 $11,427 

(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) 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.


The following is a reconciliation between net sales on a non-GAAP constant currency basis to GAAP net sales:

 Three Months Ended June 30, Six Months Ended June 30,
(in thousands)June 30, 2021June 30, 2020 June 30, 2021June 30, 2020
GAAP net sales$21,924 $19,982 $60,916 $53,005
Impact from changes in foreign currency exchange rates (1,000)    (1,143)  
Non-GAAP constant currency net sales (1)$20,924 $19,982 $59,773 $53,005

(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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