AGFS - Earnings call transcript Q4 2017

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Operator

Good morning and welcome to the AgroFresh Solutions Fourth Quarter 2017 Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I now would like to turn the call over to John Cassidy. Please go ahead.

John Cassidy

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

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

Jordi Ferre

Thank you everyone. and morning, good

in much fourth John After that was exceeded the quality strategic and with core here mentioned, up revenues consistent generate plan, with the morning initiatives Chief activity. full for motion. challenging system, although that to as Officer, with our financial year. progress, strengthening AgroFresh able As the business, And our enhancing Kathy were year for margins M&A strategy Results XXXX a in year XXXX. setting original such this X% of growth related to expenses we Financial demonstrate and of By increase returned a growth expanding to XXXX SmartFresh Harper. the the was our our were significant I'm quarter stabilizing years, and position few

EBITDA $XX was and in as efficiency to $XX due late the minute. $XX in to the strong of numbers new XXXX U.S. from gross margins $XX a well cash quarters. indicators are investment our while expect in our understand of Freshness operational up the $XX year of and for operations the financial clear million past XX% you was with why enhancements this in in you tax and to million cost will detail cash a despite and Coupled strategic beyond. in Food for many million which through outlays coming productivity laws about the reduce Tecnidex health. our the as stake million was take cash excited am million, for We majority of our and we with can we ended Kathy Bottom-line, Technologies year, more other year, $XX generating are year. in The accomplishments the million, I

and franchise core primarily our we the that broader Turn focus our in billion our stabilized X. have ethylene encompassing and million existing blockers the intend new fragmented, into on we is to that on and products growing of fruits more to Now Today, markets, business. diversified post-harvest bong and market the our citrus focused crops. Slide resources fungicides. market spending addresses of global the products total above post-harvest and is per product and food current that $X.X estimate market year as such for portfolio preservation We $XXX services

serve Tecnidex products. and and our market largest the sanitizers the similar with currently the have With we addressable coatings, acquisition, our of waxes, share have customers to capability

ourselves view objective. solutions achieve as to the with to through our a innovative qualified organic market We Our to well new expand to uniquely share and goal five is $XXX million through years. revenues the this increasing as acquisitions, over increase growth next as and see

position. The global to years base, intellectual XXXX customers supports relationships extensive solid Slide are science we turn rolling with Our strong property, a of commercial strategy company financial preservation X. now Please over has XX food this over and out experience, vision. a

Food strong diversified to sanitizers investment have XXXX, waxes, Tecnidex the and of Technologies realize Freshness coatings citrus of have a line-up with it acquisition our that both fungicides, a double-digit enabled portfolio. the and During in growth. leader Tecnidex in is

goal in penetrate markets technology leverage for customers. to and the line-up develop the U.S. the Our market is American our Tecnidex apple grow Latin similar products to a and of

removal investment agreement. includes Technologies Food sales We for development Our provide Freshness Fresh, $XX proprietary million the ingredient and It’s is active joint approximately ethylene commercial of filters, a whose award-winning crops can a complements cherries. powerful throughout avocadoes, as Fresh to and preservation for and berries, absorbing high-value such stone our RipeLock fruit, ethylene market we substance. market tomatoes the technology It’s XX% adds

the in and to strategic crops, partnerships free solid the organic. the emerging in It’s with a unaddressed X. providing we post-harvest SmartFresh half of planned we to It’s increase through previously and starts market objectives habits. quality is the plays believe provides new Tecnidex achieve market, opportunity liquidity, access With be size growth and we serving of start. trends segments consistent to by customer with can Tecnidex strong cash Fresh and expected believe financing, of about consumer While This our flow, established Slide The an acquisitions balance Fresh our our Turn growth system. to

by corresponding an a we provider capture their ActiMist, needs. and of introduced fungicide One the that of foggable sanitizers, waxes, a full-service share Tecnidex. addressing innovative objectives bigger expertise our of and a with and wallet fungicides is portfolio acquisition coatings, of becoming our is more of year, Last to customers’

that a U.S. solutions. double-digit of to of business take become solid announce match to Harvista XXXX. As excited cherries, contribute have growth. from registration provider, and to for cannot performer organic aim share expect and a in we choice year that our will Headed growth breadth competitors another we recently who we which the are full-service continued is RipeLock XXXX, are delivered provider our of received to we growth. key into Harvista’s also our retail

XXXX. of we the to are retailer working This implement now We have U.S. trials rollout a mentioned and in pilot one recently RipeLock last quarter. call their test completed major with was stores eighth on a the successful to a all

strategic The investment which other as added retail America. on strategically trials in and in strong all franchise. and is more focused Technologies, our retailers at Europe we feet few Freshness North Food a with RipeLock see remain ongoing have We our a

new almost coming proportion We the further. than of add diversify to crop sensitivity into citrus-related revenue that expect XXXX, of we on pears, also rise. anticipate to we crops. in $XX Consequently, from apple will our that proportion our persimmons our than million of apples over XXXX, increase, other In Tecnidex to from in The and is to with decrease even especially continue crops revenue. SmartFresh continues total and other flowers apples crops revenues XX%

frost In in headwinds, adding to our and a a to of strategic will European with XX% Please geographic further that believe addition market. XXXX commercial the put of the a in and apple penetration expansion. the continue plans increasing adverse turn penetration new versus decrease the through XX% actions, resulting customers contribute our of phase we work crops, to in impact weather. the experienced SmartFresh which Slide market products in In increase offsetting size are these taking resulted in in market growth we Europe XXXX place to crop compared Longer-term, we of our XXXX. we apple to historic X.

For and world. Incubator partnerships innovative we we around are a the exploring a example, are AgTech member Terra, leading of

increase addressable strategy. X-MCP. lead is SmartFresh our to well to A the our as ability generated current XXXX revenues majority Our the market compete central were as where generic markets market we of growth in with

strengthening in to to SmartFresh the While not significant in of proportion suite rise current the of system, full a foresee of markets turn and quality the revenue X. we further we XXXX, changes fungicides competitive Please Slide in SmartFresh dynamics. the introduction expect with competitive do of

to effectively on implement depends ability the strategy. attract success our develop to our and Our talent

a I Lead. Global Global Tilo Over and Vivot food the Monsanto, over to Director Business Narciso have has our Insight most and is past managers. Customer number RipeLock He new recently global management in he pleased Nselel businesses. ingredient our and research. Narciso roles commercializing from organization and leading team. years Paul is post-harvest team we commercial to our joining as Vice Manager, tasked senior been Development of our Global us of us operational lead our accomplished General of financial President year, where Director global was as Strategy Solutions am deepening welcome joining similarly XX is Retail served Gomez brings Tilo is in with at joined of finally, And experience accomplished having efforts. our Chiquita. and strengthening

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

Katherine Harper

morning Thank everyone. you, Jordi. Good

$XX to improvement, quarter. million, of flat. in quarter sales in the with financial the review XXXX. full up as for on beginning me XXXX revenues Let core drove fourth highlights Starting fourth the year $XX quarter fourth the were were the business X%, our Tecnidex Slide about XX, compared net and the quarter for million

were margins to cost XX% quarter, a lowered deliver to fourth that operational the reflecting XX%, pricing ago sales improvements year product Harvista. of stronger primarily more the mix, For European to favorable quarter, in compared and the

the a litigations. ago. other $X related Included expenses operating legal transaction, were in nearly well Food up and quarter expenses as and year non-recurring, as to administrative in Tecnidex ongoing quarter Our million in costs the from general Technologies Freshness and this were

spend to the million little rates $XX flat year As considerations. for quarter the of million the fourth driven out. leveled has the decrease improvements. XXXX. in the items. increasing due was which expense ago, lower $X the in quarter our items, progresses, our all in by the EBITDA XXXX, drive of $XX non-cash generated the Interest a on fourth EBITDA non-recurring $X.X a a quarter, of accretion laws U.S. million million Cash was to the and ongoing EBITDA in Research $XX was in year of which continued third was continuing to was We interest changed and $XXX,XXX as expense expect $X.X efficiency tax productivity of impact down unusual down ago. Tecnidex million R&D quarter rates. of was was Tecnidex from or Adjusted of we million the in expense for despite the excluding integration year-over-year contributed the new primarily XXXX, of value $X million The interest essentially non-recurring quarter, quarter. considerations. consolidated development expense was fourth for from Performance from quarter on

up of full a drove XXXX, crop outset growth the for this organic the $XXX trend-line. that $X the apple of accounted year frost for in from five-year below at and year’s average season million. budgeting Europe about XX, $X Slide increase year mind ago. million, revenues million Tecnidex our to was were in about $X the Turning and Keep X% the million

reflects of with So core as diversification performance revenue crop business we our success are and pleased mentioned. the fairly penetration it Jordi the

apple that SmartFresh the Europe, significant revenue, was XX%. of the approximately to the XX% we in saw primarily XX% also of to revenue market XXXX. total penetration, survive value For apple the in revenue apples in increase In crop. Harvista year, the growth was compared due a improvement

Beyond SmartFresh apples, as X% from XX%. and revenue a percentage a flowers. for American a in year North fell total the X%, revenue EMEA continue to and standpoint, Latin share about of to while revenue America up total largest geographic pears was markets From of ago

year, XX%, slightly year. XX% was margins For geographic prior from This the and were products due in down mix. to the

year, full selling, expenses administrative were the total general flat. For and

administrative in expenses expected fiscal reduction in We XXXX. a

Technologies offset achieved Freshness fees transactions primarily associated a with number including the one-time professional of costs the litigation. are did associated with associated down of a reflecting our Year-over-year recurring. we were charges There savings were foresee creation with and and the approximately of and number of migration that also Tecnidex in legal IT and However, Food Mirtech system development Dow do XXXX. million the our we XXXX off in expenses research infrastructure targeted activity expenses research and $X not miscellaneous our by

$XX rising interest $XX million, quarter reflect year, For variable for interest which future compared of to driven The year mitigate on million million, fourth expense $XX expense the total debt XXXX. fiscal contingent interest will decrease $XX accretion lower million rate by was rate. its XXXX, consideration. was exposure in had the Cash majority or the non-cash of was over expense down the in XXXX. to from AgroFresh

which $XXX all GAAP million nature XXXX, of we unusual For $XX income considerations ago. rate. by Full for or of EBITDA, the we newly change enacted to year EBITDA $XX $XX a tax $XX were million corporate items charges, for a in Slide ago a full lower of million from million. year of year loss XXXX, with the which contingent reported XXXX, million a $XX booked was we XX, year U.S. of GAAP totaling benefits in one-time the net due net to million, number $XX precipitated generated compared of non-recurring arising million was

is includes considerations. loss million impairment amortization million income net of currency inventory in goodwill, on a gain. XXXX of of expenses, a expense names was and $XX for other on which trade income, of by Included $XX million XXXX, $XX million $XX which million gain of offset $XX is contingent gains million of and contingent considerations For that other step-up and $XX

spending Tecnidex along was of continued and $XX pretax was to in new XXXX sheet December of the for approximately in investment year, booked a million. On labs are used determined an and deferred $X final flow fourth The with agreement continues expenditures million Year-end we Freshness significant to year, was renegotiated settle $XX for Technologies. million Food cash by balances million cash income on SAP including XX% we Slide income liabilities the strong R&D we million the Dow quarter tax year, U.S. XXXX. China. capital $XX be million cash also of million with to for California new with this on XXXX, In expenditures balance from the hand Cash generate were to an credit for January the million, the acquisition outstanding In XX, infrastructure While improvement GAAP laws $X nonetheless compared in company Pennsylvania, Capital liquidity. operations reflection the last mostly $XX XXXX. $XX of for IT and $XX net mainly million, at made allowance. strong expect our XX, spring. payment of a of tax tax valuation $X our

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

Jordi Ferre

Overall, establishing fluctuations a diversification, penetration, demonstrates Kathy. core to the in growth solid you, the is that foundation apple market support to the size reducing achieved sensitivity performance in initiatives. new progress product and introductions Thank our our and our crop of crop

Additionally, acquisition Tecnidex the accelerate will of recent diversification our strategy.

market. leading are focused global and consolidating on post-harvest We the existing

importantly, our to strategy can thereby as significantly technologies, growth market also the long-term Just and increase support which is our acquire new objectives.

robust as I Tecnidex in continue we definition very remains new XXXX, plan. results organically, improve our of our the performance expect and financial the will we undertake top-line market. also XXXX, made challenges as incumbent to implement pleased we am and progress Our with business building management our revenue our anticipate well acquisition. strengthening exciting with to team both the as In the we growth, from

will mentioned, compression the Tecnidex of mix in transition As margin we ongoing previously our product XXXX. gross including in some result

confidence. expect We look a delivering your you XXXX improved also free and lead operating continued and stabilize, should beyond. of all to flow. for performance cash cost Thank We to strong support which in forward to

Operator

from Instructions] [Indiscernible]. [Operator the question And comes first

Unidentified Analyst

Hi, know outside Jordi rollout your and to quarter and Kathy. Tecnidex end. I plans to Great year of this wanted year. what Europe are

Jordi Ferre

Good morning. your question. you for Thank

going Americas in America, concentrate mainly, to to be teams. two on going we the already have Latin integrated we are commercial things are We – the

introducing our to now. fungicides are their we customers So

hemisphere, is going with southern we be and potential rollout biggest going our think North be being onto we year in the a North over big next this some year. impact for testing However, America year in to are to products other America, customers next that

Unidentified Analyst

look this you follow-up, if last you year environment does competitive changes industry the in That’s was guys wondering the great. have a to time that how And the for I year? with imposed

Jordi Ferre

so a looks probably shake Tecnidex and obviously, it’s it’s little the to environment we going to the bit. what competitive that made move The industry similar been far on

industry that I some consolidation. think an requires this is

we starting continue this intend that to towards process So path. and we are

of definitely industry. this and are the disrupting dynamics changing we So,

Unidentified Analyst

much. so Thanks

Operator

the Markets. comes And BMO you. from Capital [Indiscernible] next Michael with Thank question

Unidentified Analyst

good Hi, morning.

here. couple Just are in in One, crop, a the from what down the hemisphere market comment dynamics can of quick of role southern you – from questions you cetera? terms of the competition, the terms outlook, there et seeing and

Jordi Ferre

the surprised Hemisphere, where far, the of market first time Southern the of has see say talk so change major obviously, anything but to us not in that, or anything we I do is. So dynamics not it’s far, about would and quarter that

So, we significant don’t Southern anything expect of Hemisphere? in impact any

Unidentified Analyst

Got you.

this in you rolled it RipeLock, guess, point of know and announced at some terms In Key had out the of I I stores. Food

an up RipeLock, beyond that’s comments retailer is this Your correct? Key there signed additional point around at Food,

Jordi Ferre

Yes.

So, we told in last we have major had, call investors’ eight technology. the the testing that you we retailers

had what them based a key reducing a store entire successful is it So had we of retailer today with on base. we Foods U.S. their across that Key in rollout than are and said They the one is, the to on shrink working that assess is those retailers test. those larger very results, national do impact

Unidentified Analyst

Terrific. from it Key in to Okay. Food, terms continues The positive of… feedback be

Jordi Ferre

It different that it and does fact, before. Yes, we this does. presentation that is think, quote is than the the used in one I

So they happy solution that, with continued to their is because respectable solution works. and be shows that the size great our it supporters and of we are

Unidentified Analyst

Great.

cherries, of some - announcement know? in with your of to how early Harvista that any still regarding on opportunity know, that is terms or an large is sense I In

Jordi Ferre

It’s to know. a early little

the good our look it the base. is with if it, with current goes thing However, that, cherries at customer you

to any So, be customers, same. cherry those customers the tend apple to it’s in more to and not resources growers require and going getting

selling a be providing be So, one was terms in base. the go that crop. we I said, we as as cherries is with as a to other product it high it’s own though color But be going to along customer our of milestone customer we big base. That more service going are And opportunity. goes value our to will

Unidentified Analyst

change additional what happen. kind may rate that thinking on G&A, guidance for in question, XXXX? G&A based great if Great. be That’s should of Any about understand activity, of obviously we transactions news. quick One terms is I M&A

Katherine Harper

– $XX in quarter runrate. will the be say, $XX I’d million probably million it to a

Unidentified Analyst

Thank great. you. That’s

Operator

the Thank as and as today’s as call. you. else [Operator well time, at this presentation. present answer the Instructions] Okay for conclude the you nothing does session attending is there question Thank

You may now disconnect your lines.

AgroFresh Solutions (AGFS) 14 Mar 182017 Q4 Earnings call transcript