AGFS - Earnings call transcript Q3 2017

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Operator

Good day. Welcome to the AgroFresh Solutions, Inc.

Third Quarter 2017 Results Conference Call and Webcast. All participants will in listen-only mode. After today's presentation, there will be an opportunity to ask questions. this being note, Please Instructions] event recorded. is [Operator turn over to would now conference to like I Mr. the Cassidy, John Director of Analysis and for Financial AgroFresh. Planning ahead, go Please sir.

John Cassidy

Act you, the and Harper, statements of the provisions Chief of concerning will considered results XXXX. actual Officer. other well forward-looking forward-looking and The the statements Today’s and forward-looking in These of materially Ferre, Thank meaning uncertainties today’s the as differ Executive management’s results statements. contain Financial and of call forward-looking to than during Securities discussed risks subject events. as by within future statements. and Chief on current the that Kathy Harbor historical led Litigation presentation statements the facts are could Jordi beliefs presentation and Officer, assumptions comments morning, are good are accompanying Safe known Reform be statements All based cause Private of welcome. from Such a number statements to expectations unknown

to to which the website the non-GAAP like section presentation, these financial I call found uncertainties most measures. Ferre. the Please filings refer slides measures are over company’s discussed the We’ll Jordi directly in SEC. tables the of this can with certain and of the turn be for Investor attached now to Relations would to non-GAAP in accompanying financial to to risks refer our identified reconciliations measures. of and comparable GAAP Some the also

Jordi Ferre

everyone. good morning, and you Thank

I'm Harper. our As Chief here John Financial with morning Kathy mentioned, this Officer,

initiatives. a grown flow of third and more report pleased XXXX strategic and of a controlling I progress, of morning’s have to in addition $XX year-to-date. have announcement but Tecnidex. financial strategy that consistent in that is not with a cash make be results have business stabilize by to the goal to of outstanding months, is progress to resources Revenue reflects up million, key to strong the we our over increase both we am health to as and to more discuss over XX will the available as AgroFresh a talk number the financial we agreement both our made than the we ago a that nine slightly This through for interest with from first flat and minute. to is course up morning in both pleased think our XXXX, report We achieved clearly only I that which an are position nine have year quarter acquire implementation fund strong last on the and have new for And accretive this a an the to in we primary we significant growth cash bit sign without Entering months this our core the exciting are demonstrate you earnings XXXX initiatives. the ability acquisitions the quarter and a of [ph]. that XXXX, measure the the quarter. little use first invest to was significant months of about over well

and drive expenses low as to were again million quarter cost continue We down year-to-date. operating this $X down

of second we income GAAP consecutive have quarter the for income positive $XX million. net addition, In with achieved net

in a in the strength States. EBITDA in have Europe severe of ended than the results $XX the of harvest late quarter, And million a United been We accomplished AgroFresh cash the XX% quarter the margin. the of better million. demonstrate also despite which franchise, of reported headwinds EBITDA $XX These we frost and with

frost to partially in our offering Europe. and from As the increase expected our expand any to I mentioned penetration strategy I last market service impact quarter, offset

is this step European year. from growth XX% [ph]. the our by more other well the to especially be crops increasing than it crop down up penetration payers that Our apples Consequently, well in team driving as estimated SmartFresh challenge, European as could

the have reduces you impact. this expect largely offset proactive taken introductions to penetration in late crop apple Harvista. additional by SmartFresh initiatives. on America, progress strategic of updates I achieved diversification, now North our a quarters apple market the mitigate in to crop. with the in progress product to sensitivity reduce this the third steps our that demonstrate like We growth across and partially new we starting harvest board size to provide performance quarter's would revenue Overall, fluctuations In some the

line smart growing franchise and up across our strengthening is services or dimensions. products Our to technologies, freshness many

where achieving on are by payers year-to-date period we growing the revenues in crop diversification XXXX. XX% let are comparable First,

Second, we penetration in particularly Europe. increasing market are

and number Third, the products in products ActiMist both U.S. adopting Harvista our this the increase SmartFresh. XXX% we are seeing AdvanStore new driving and introducing the of globally, our growth of technology particular, technology In existing the in immediate nearly of beyond success and rooms fungicide growth. and

drive will life [ph] prolong attract New help which We Food yellow being Metro, market the believe in retail in month, progress is is their of minimized Foods Co-Operative and began and bananas RipeLock RipeLock to the Stores have rolling which Quality we business, continued we potential. to their York. of believe Key Key main handling. also This reduce have sales, waste System XXX grocery customers, desired a our all out make shrink to billing our significant stores premium growth used

with Pagoda a to the sheet over are build North X,XXX penetrate to Pagoda for is represents signed a rapidly central also hard and study that work across specialty Additionally, eager currently the strategic will pleased consumer year this fruit key is Europe XXXX the stores major market running Wilson we will China demand to market. when transition fruit. to our partnership in eight test another This In from business. shift needs. relationship solutions world’s AgroFresh largest this freshness B the and into signed strategy growing China to the to a we interest has fruit are market market. and September, collaborative now test joint term Chinese post-harvest joins fruit extend regional we acquire significant [ph] a quality a leadership relevant and to co-develop which satisfy in in retailers China, become citrus to Today agreement a fruit largest European Chinese that store America. we XX-year controlling in an have with history in announce Tecnidex, I'm new to of

portfolio products and sanitizers substantive have the their fungicide new First, and strengthen franchise product it is our that fungicides, in immediately citrus newly be it crop potentially a provides of revenue diversification, can waxes provide strong range With XX% that of substantial over industry a of diversification. accretive. we our synergistic launched provide Egypt such And their base where market. development, and to Peru they with to as traditional Europe they have our launching in and limited have with Spain, technical markets presence our penetration. strong already Morocco, apple share which a is From strong extremely along currently in expertise. research commitment They

of will overall we We to be are very growth as active that of expect program an excited strategy. be our joining what AgroFresh, the part acquisition Tecnidex first

our stabilized. that The strategy first been XXXX demonstrate dividends. Revenues months of have to is nine pay beginning

a net income loss have prior versus the We EBITDA our year, in has net shown improved.

as and of which flow significant are We foundation are organization, solidifying a all we the serve future generating cash for growth. free

we’re gaining on Tecnidex initiatives franchise. of a growth to with organic are our the further the value supplementing While acquisitions strategic focused traction, as such growth means also organic enhance AgroFresh as

will Harper, over the let our me turn detail. who greater in results Kathy to call go CFO, the financial Now, through

Kathy Harper

Thank you, Jordi. call. Good the on morning to everyone

driven in where third penetration the for we revenue. to were of for flat and year highlights an XXXX the offset were harvest by lower for quarter nine had the earlier late expected million revenues year SmartFresh partially versus in months third the quarter review me North crop. Net be starting sales Let America with ago. gains first the it in Lower Europe $XX

Jordi revenues reflect small in double-digits once currency as to up mentioned, quarter. Additionally, benefits. also Harvista were Revenues the again

from nine of up by sales. XXXX were increases first Harvista the year months ago For driven in revenues marginally a

quarterly has margins slightly an as in There quarter was down year-to-date attributable and which expenses profile. minimal third primarily and proportion on incrementally quarter included legal margin were For were the M&A the cost. and in expenses quarter administrative pricing. in expected revenue from year an impact down the this ago increase general a and of in Harvista from were Operating year-to-date nearly non-recurring to margins lower $X million

from the expect quarter, Cash We expenses $X the long-term second coming with continue million non-cash accretion was quarter. expense interest in from $X on slightly lower by driven operating in somewhat debt consideration. and our decrease operating gains. from up down of quarters. to due quarter expense $XX XXXX $X.X the year flat We to the a contingent third was ago of three year Interest for last quarter million year down is million the quarters which and The currency generated from see was improvement by mix. in XX% in is million, Year-to-date to EBITDA EBITDA $XX costs of higher the revenues. rates. product is XX% to interest up the due EBITDA first million quarter in from the primarily shift ago a foreign driven lower

income. third The of second consecutive our quarter GAAP net was quarter

$XX indication first the flow expenditures quarters of generate XXXX. IT quarters still the $XXX from was of infrastructure. first model. $X income total continues $XXX,XXX XXXX. than flow million, mostly quarter million ago, the cash $X liquidity to $XX compared For The for the strong first and million year, on Capital nine three including we $XX net in XX, million XXXX is is expect reported significant of first months over the strong over million to from a of improvement the the operations of cash our the liquidity. the the year, approximately sheet first same like is of flow. a a and improvement compared million was balance expenditures asset also $XX $XX $X million good three Cash of believe The year XXXX, months We our characteristics cash attractive nine for which XXXX. be capital to more of both The million months hand at profitability a September were fundamental which to cash was million and we out of nine company new period

This will on is of you provide information is let before the deal all immediately financial Tecnidex acquisition. that Now me accretive be an close expected XXXX. to additional and the cash end some

retaining been bearing XX% has buyout the Tecnidex owner Tecnidex EURXX.X sole are mid-XX% essentially are for Tecnidex agreement support consulting in the owner obviously the million to that EBITDA roughly beyond, the Garcia-Portillo, to terms margins same generating There used of XXXX. the with From XXXX remaining services a perspective, on in in margins. and us Thinking through about the on initial approximately buying has will range gross have XX% overtime current continue providing evaluations range. of agreed mid-XX% for a XX% the some enable addition the at stake. and historical Manuel We $XX in purchase. AgroFresh and arrangements our growth operating and million financial and revenues the to

noted this is profile. We Tecnidex integrating with to several we find business and annually it unlikely acquisition to was years. positive could or produces consistently our However, expansion. last have double-digits its that flow forward drive the further into margin own has grown that an look the continuing year-after-year same and our revenues strong highly cash business we over better

outlook for Jordi the for Now, the I'll to Q&A. turn back a the our remainder to before discussion opening of the call of XXXX call

Jordi Ferre

Kathy. Thank you,

been course strengthening the we the XXXX, future franchise successful of Over growth. and operations in for stabilizing have AgroFresh

in geographies our products and largely gains expect to customers we on the We impact the have of with Harvista negative as crops revenue continue SmartFresh quarter. growth our fourth other European of the into the well offset and as which Fresh

full relatively to expect Beyond the improvement XXXX and compared we the XXXX continued increase year-end costs for year in in top-line, stable operating a cash. significant margins

the growing employees our like support. team all Tecnidex our in We family leverages the you for any tireless to a or working I welcome I strengths. Tecnidex food AgroFresh your for forward of hardworking efforts look and thank want other stronger demand respective build potential to our all dedicated also effectively continued to and waste and capitalize franchise for acquisitions Excluding to preservation together want new solutions. to to reduction thank to that preparing their investments. or on strategic

Now, the I to Q&A. would to open line like

Operator

Thank you.

[Operator Session. of Question-and-Answer first We will today's Citi. [ph] begin comes now go question the Daniel Instructions]. Please ahead. And from

Unidentified Analyst

Good morning, everyone.

the time? to cost you So, any that do quantified synergies or acquisition, should anticipate revenue at be this

Kathy Harper

[indiscernible]. and We certainly this synergies cost revenue made

not point. at we're those sharing this So, details

Jordi Ferre

be will that's that two, Tecnidex synergies world. at look there And one. considering is as around to number able we definitely we've the in commercial definitely subsidiaries based they'll combine portfolios be we're get to going Number Yeah, be, the that going the to can and Europe. fact synergies

actually acquisitions we're get look as the will it of this one was we I synergies will We that said, considerations review of looking and actually the at.

Unidentified Analyst

to the through that given walk quarter? important third year think the you of just fourth this obviously a And the business, markets Europe, the So Okay. discussed of think quarter, fourth Can us quarter U.S. how this in those some items back for is should your harvest the just in quarter maybe turning you regarding later and a year smaller different challenges very so Hemisphere challenges? was couple the about how out crop Northern a quarter I place and fourth you the

Jordi Ferre

see as into I fourth we third quarter in that same see in think the we quarter. call trend I volume the the said

the think but cetera I an the the that it’s have effect going able to to weather we've definitely us product this and business. to actions I help diversification as grow So, to said going launches et stabilize taken being commercially year,

said project I year would franchise. say third as year. our the affect have grow the there projections this you and in ability fourth you'll quarter those quarter obviously for and to would wise So, have look I you core weather that at

Unidentified Analyst

in value-added and on with how and your to And about of to that value most we making that how some go you sure the comments the of had receiving in SmartFresh customers you talked customer some customers you're are who to go focused service that. where in about the Can added, less sort you engagement, that how past, maybe customers talk make we're modifications tier market, you are did standpoint? process this the

Jordi Ferre

Harvista year progress clear lights. of being launched bright about this We really if footprint problem. we've you the store, increased is made no year fungicides, the it, in one think we Yeah, this because our apple the

we here process I of have forward. that through depending only moving We'll I results of focusing services, the services. apples would am not in really first forward think we're as strengthened important our you've our is on services also, I the SmartFresh, SmartFresh a year the I that beyond say our on very So, see think on the not this satisfied reinforcing a platform and to start market gone does we've the have that and This will only SmartFresh. be on because results. moving time was we'll more you and just can platform that But lot here put strategy this have more to with platform.

year process new year that and was a take change this will to an to the strategy shift So, important to different journey. start us to

went we the what the year, changing of satisfied very I'm before. changing accomplished So, we trend way actually this and market to

Unidentified Analyst

products on revenue going How up the actually these of into one cetera. what's at additional are much you the think And services pie market, et look and that last you be just of and if all then you me, XXXX for [ph] opportunity the putting do Harvista and XXXX? to that's from Thanks. in following Okay. one that

Jordi Ferre

It's a question. good

we think of there you I how is that, will report that percentage it's can I the about maybe tell XX%. much but that

we and because well continue that I and I help have in of U.S. be trend obviously will very the the one we'll X, years. market think they technologies introduce like that following services Acquisitions will think with and as will So, can products new moving detected up interesting the in them the which bring

forward management you'll believe certain here is and to that trend that's only very go. and see way to So, right the be the holding this a I that much into on moving going think

Unidentified Analyst

you much. Thank Okay. very

Operator

from Please And next Company. Francesco go question our ahead. of today comes Pellegrino Sidoti &

Francesco Pellegrino

morning, guys. Good

Jordi Ferre

Good morning.

Francesco Pellegrino

you first margins just acquisition. So, were that Did up on gross Katherine the say XX%?

Kathy Harper

in the XXs. Yes,

Francesco Pellegrino

Okay, the XXs. in

due application growth strong peer and when fungicides, as AgroFresh, the relatively just for add wondering more So waxes I and your sort that that's is a for margin of tangible as the other are is compared this of with provided how the strong the Tecnidex enjoy, wax more you a I biocides, your group provider, margin under guess strong the given service group biocide business, applications, service provider fungicide chemical at or of these that service or some I’m to look compared to to is companies profile peer company? there it’s margins

Jordi Ferre

post-harvest definitely you has And will customers. don’t are. over to definitely in in XX are you No definitely well. is business and stay space, service they are like into a provide provide years don’t commodities. a service, of take provider, years if the this service its you for service. grow I as that Tecnidex post-harvest, with than it XX service one. trade way, commodity, just is, don’t record trade you been an rather also we company outstanding They a double-digit

Francesco Pellegrino

is that said for paid you And million you that EURXX right? it,

Kathy Harper

We of closes share acquired true ownership EURXX.X approximately, a XX% it yes, than purchase closing there conditions bunch the EURXX.X when is million for for price ups, but, of share. million XX%

Francesco Pellegrino

is the I just anywhere come in between business are where regard to be this do acquiring R&D out five work to think of did when going about acquire. to know to into is like that when times four to EBITDA, that you come some place going to for going you I So, business, and background any the guys

portfolio lot that the I’m going to R&D wondering extend And concerned you’re of the paying, I’m going a the outside product maybe of of for already end into. there with about, you really if that opportunity multiple the not I because at So, is citrus any know day, is acquisition acquired. be to

Jordi Ferre

answer is yes. The

Francesco Pellegrino

on the us market of remind crops? end you some Can

Jordi Ferre

would increase we to they outside been years providing in sales using started and all our of strong the will launching as We fungicide me that many that we’re XX segment, a require fungicides position a strong has let their our conclude somebody registration. service only synergies for to citrus. in fungicides, and this having are areas year that's heritage sales position I Tecnidex definitely and first possible expand would imagine which as Well, be sales just most than taking programs. and own in that give and just you, where just

of expanded We and before to talked never they one Orange and Apple lot coatings part waxes. there, customers as know of Second, or have a that to we’re it’s have number look going about that coating do technology thing what, play that be possible. has in of And don’t definitely launching This think you excellent our an we a into Tecnidex, terms important of is in as I we potential that places markets. spend. to have many that

reach already add what in I’m geography and to accomplished. customers, they terms our have of going to So,

that As be to I we to want and able good more have facilities said, be investment use our aggressive people products. to they with R&D, just commercially

my I answer yes. in So, definitely you is the to as said beginning answer of

Francesco Pellegrino

the then played to or regard a that industry, addressing a So, into that previously industry you’ve hasn't an you new as since acquiring or market Apple just coating play addressable AgroFresh products. it Apple they that industry in in, its Do wasn't you in. theoretically an the legacy business coatings been competitor in since at look expanding

Jordi Ferre

markets competing number before what referring different especially stronger Mostly a the acquiring around do. broader be the commercial And that to about player complementary in mix I about synergies that of completely It’s that what to was asked new to that’s going see, we I us much has we already was same they’re a synergies, are, with is of I thus, making going a world space complementary in range. that's in be limitless. post-harvest

to going customers. add We’re more

technologies think, introduce another well that able have ventured have to in of been be accompany cost of really players has their to that to in team. more managed, and to the that that’s take they have going ranges and before, as not spread in maximize a their have markets places growing they value that technologies product to their not very how probably somebody the we do toward we double-digits of It’s also paying the to I is hand, us the a very and they on month. up that's have not We’re some market most expanded ability acquisition. potential acquired market are systematic lot outside that

and be So, at with to but a we say and to and I here way to I it are you, process bought I so, you make do I that it grow. look want to think, going are accelerate carefully make would the that, we sure we gem going that this

Francesco Pellegrino

percentage and we, any products products questions. for last are sales portfolio dates aware dates acquiring the are you for What be question made any of of of significant that then there expiration patent that And are two-part the me patent product we branded should that of? expiration for any

Jordi Ferre

There expiring. is in not terms be technology anything to patents be that of or No. would

Francesco Pellegrino

And sale a percent that of then are branded?

Jordi Ferre

I everything mean, I they what branded, you exactly branded. don’t is sell mean what by but know

Kathy Harper

Yes, have Tecnidex on is a co-developed themselves. or proprietary or that Registration lot on. of developed IPR they product

Jordi Ferre

being And well service well, represent as to invite brand the company website marketed. they well will branded. dimension their minded, own major players very go been there obviously, Definitely you that's has also industry and you managed in is everything see a minded, they sell their but to I in

Francesco Pellegrino

Perfect. Thanks much so questions. for taking my

Jordi Ferre

No problem.

Operator

Brian And from ahead. comes Please our of go Morgan. Nolan question next J.P.

Brian Nolan

Nolan J.P. Hi. from questions. Morgan, Its I had Brian two

like someone First, the around after are at Tecnidex, I million during it all that interest quarter didn’t cash looking the for guys out third any cash on balance or to even? pay in you payment the see sheet want looks payments principal in $XX we

Kathy Harper

of end way the a quarter, month fell, beginning the In the weekend. October we until payment because calendar of make on the was this didn’t the the interest

normal out and and then, it this, you just the calendar timing with So, payments. be mean the the cash figure will can yes of payment I for

Brian Nolan

any harvest harvest, later the to versus Got results? to on and European early impact kind the of next be a other I wanted ask Union it, the quarter there okay. part, And is U.S. quantify able late will from U.S. margin harvest will then be you

Jordi Ferre

No.

Brian Nolan

Okay.

Kathy Harper

terms the to margin hold the and puts We expect takes do in timing. of on

quarter were study all excuse movement me the think second the quarter the we in second and fourth I expect quarter, quarter there past. in movements in

as try year. we are stable indicate we to for Jordi So, think the

Brian Nolan

it that’s from me. guess I

Kathy Harper

thanks Great, Brian.

Operator

Tim Today's Instruction]. [ph] of Accenture. ahead. question Please next [Operator comes go from

Unidentified Analyst

more just Hi, I I I goes know of kind said planning the for that question I a you sort fits guess speak thanks XX-year dynamic? for around had harvest, the into to taking of you whether U.S. think broad the it maybe the question. of your and now average can sort European apple harvest that

Jordi Ferre

think think U.S. way, explained I in the not I its five XX-year. by it’s the I years

do going that we for are We prepare and continue next do to the year year. five we rolling to as

U.S. average is by where think I XX% as said in be so. my Europe about the five-year for -- around projection stable average the below to quite call, I flat, the which it’s standard is the

Unidentified Analyst

amount harvest QX get that the Okay, that a late I that helps. were thought the saying harvest similar don’t I I guess, then maybe it know are And if I you QX, was by lift, intuitively would effected but as but about you numbers are have apple I down I a QX QX guess, enough is guess you think in in probably what

Kathy Harper

That’s my crop changes get on for you the full year. Europe. side, get the U.S. and in – will in in will harvest relatively smaller the You words benefit the but offset

Unidentified Analyst

business dominated ballpark the and Anything sort you here U.S. and is what of in of these else? experienced Europe on sure and there similar in cash have then about okay, is I broadly it, thanks. sort the provide could citrus market of America opportunity a an flow it I on and seasonally completely have I'm is kind or question Got that not the the guys you in market earnings guys Latin then then on somebody the different share acquisition to helpful, guess is by is or did

Jordi Ferre

Tom?

Thomas Ermi

questions ones. few let apple coincide it the The end a and itself year. it longer there with of to the gets me season you Well, with last asked it gets doesn’t start

say and go the the the it longer and apple the through little season be with - fully so doesn’t Northern The season a basically end fall will season. actually more Hemisphere in the will let’s it’s So, coincide year. it just towards will apple orange the of summer

after So and in the International grow also synergies to you to presence the, in aftermarket, in to question they why this they of so timing. had Europe a help Their XXXX go that the well will Latin growing very company And crisis in asked about started in they’re say, and have that’s America, I terms so yes. double-digits. would going done

strategy of have other in their U.S. market the if terms Latin America the in projects growth. definitely in the been today in markets, a have of subsidiaries their we’re has America But is to they to going the there. yes, Argentina it’s to the don’t So, a Chile, presence going have one you citrus me except latest whether ask U.S. world today Peru, in they and and market in only they meant have anywhere presence other is Latin to projects help

in about your me got though have data there, share, me they a is across successfully. countries that please anticipate ongoing for playing two where now synergies is they you would strong already all all we countries. these to questions When been answered I have know market that presence that’s and the I they not I and missed position. don’t have I say if market if me indeed if their share anything. double-digits difficult asked citrus remind market also South definitely So Africa a Mediterranean which very obviously it’s have

Unidentified Analyst

it. for answers. Thanks Appreciate great. That’s No. the

Operator

today’s today’s presentation. And ladies session and and thank today’s and gentlemen all concludes for answer question this attending conference you call. We

and disconnect lines now your day. You a have wonderful may

AgroFresh Solutions (AGFS) 8 Nov 172017 Q3 Earnings call transcript