AGFS - Earnings call transcript Q1 2018

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Operator

Good morning, and welcome to the AgroFresh Solutions First Quarter 2018 Conference Call. All participants will be in a listen only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the conference call over to John Cassidy, Director M&A and Strategic Planning. ahead. go please Sir,

John Cassidy

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

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

Jordi Ferre

good and morning, you, Thank everyone.

the ago. range. at business crops As while Kathy Slide In was we a a X. serving I'm build performance XX% delivered quarter, from growth John this to up diversified core wider turn and year more Tecnidex Officer, Harper. the a Please mentioned, and here product multiple to Financial in our Revenue with continuing much morning first Chief solid

the which revenue believe market was XXXX, America, acquisitions, helping better as grew turn maintain XXXX, apple adoption Cash our a well Excluding discuss in expand managed for lower are same from the quarter. especially core the to share XXXX in our have diversify hemisphere, of if We and results organic the to as grew Kathy our new high the latest and through projections as spite indicates we we these that business, would revenue decrease been both Tecnidex, in over market new in as a in crops already strong to us In southern leading we in XX% operations such will our in policies, where quarter where accounting an Slide in core value, business marginally Latin minute. indicate revenue our QX, positive not our from further growth of the of generate in Please first new crop base. Tecnidex, which the X. period in into a apple XX%. as products creating

been franchise. able to growing increasing Latin our of American have and apple harvest We the expanding our crops smaller market, penetration into new Harvista overcome the by

Australia to retailers regulatory ongoing, a balance including increased in United the coatings major Europe In ahead South been strong and other our caused were southern sanitizers, grew foothold at plums main of has by strategic Africa U.S. in retailer. drought we in offset and All Please leader all quarter XX% gain the for application growth optimistic XX%. performance our penetration of shortly XX% to Slide America. point. and trials modest, recently of by a be Argentina, get new for in industry a instance, retail in and of we in the approval lineup Zealand. fungicides, and of strong cherries announced of for food stores States North on a in with Sales led For strong expect to proceeding quarter Argentina weakness of strong adoption. SmartFresh a Revenues RipeLock the with and And by previously we the and turn we the XXXX to turning plan of is We apples remain our Harvista remain growth task in pears. ready initiated first across the increased will prior rollout to X. waxes, volume New citrus, quarter, for integration our where with organic early in in compared RipeLock The Tecnidex, year. the pears with Brazil Chile, hemisphere, in the and expanded those

are have their sales and AgroFresh into the We structure. R&D, now marketing, reorganized they regulatory functions, global reporting so

to We European France Valencia cost. improve packaging to our are move reduce and working from efficiencies operations to

technology and pipeline internal in our We've are get to smartphones. Additionally, via re-launching That as investments to The proportion ventures. innovative we initiatives, joint Tecnidex broader revenue to made and collaboration crops Please than leverage the have quarter, apples to TERRA its X. in is secure improved year. these we long-established in how we will about innovative to their is behind research largest enhance citrus, strategies in flowers. the and on our participation of a X. [indiscernible] Please X agricultural quarter. pears, investment new information quarter, just first are the development as to of XX% their with great hemisphere turn Slide plums well turn to growers partnerships develop fruit Slide first in with northern technologies, the companies real-time to continued for as fungicides. examples strong capabilities. driver progress last supply well from compares a enable companies, This of by of the an through be and important as chemical looking It's increased the XX% other strategic new also In and led two we to the Fresh! both using all relationships portfolio AdvanStore. season, first agreements Diversification quarter

genetic genomic to growers going has are We during enables we predisposition market a have develop our disease a first a technology if program, that apples to to developed harvested test with their also specific be to the mapping in storage. crop determine

future innovation we expanding recently with center we Additionally, agreement new opportunities center through growth that produce growth to in conclusion, where will AgroFresh had the strong world's in largest lab new our the an a grew in Fresno, quarter, diversified in pipeline Pagoda footprint. to China market. solid create announced This invest and a innovation and expect continue In are opening California future we for open commercialization. a includes and our business

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

Kathy Harper

Jordi. morning, Good everyone. you, Thank

the of for quarter highlights first review financial the me Let XXXX.

of of Slide to the $XX Tecnidex in the XX% business compared the up million, for to Net X. Turning our sales revenue first $X.X million recognition. first were quarter quarter $XX the slightly. million of adopted In improvement, for XXX accounted organic ASC first XXXX, XXXX. core with growth quarter we up in

While would've the in quarter. quarter. sales are XX% to revenue first been of cause quarter. revenue nearly year-ago $X apples revenue up X%; of defer impact been the policy in recognized it that to the XX% the of new organic million of revenue growth was total XX% the been XXX, SmartFresh recognition from minor, have in would adoption revenue us ASC would Absent the about total did approximately compared have otherwise

not applied quarter apple in to apples stored the penetration, market as for treat growers saw previously also who an SmartFresh We first their improvement time. did this

the mix Margins Beyond to turn in XX%. Tecnidex. up core revenue to the business XX%, attributable reflecting the flowers. SmartFresh XX. from lower Please and the in was in revenue Slide apples, product quarter as primarily a were first as anticipated in Harvista plums well pears, growth shift margins was quarter

and account margins. change in points in just However, the revenue X expectations recognition, came for the shy into the Harvista of of adoption revenues. XXX about the impact Taking faster the of ASC in quarter shaved growth our in basis off Tecnidex margins

property slide expenses administrative as to general expenses Tecnidex increases intellectual and year litigation. productivity XX. improvements Turning a strategic from ongoing quarter offset down in as related were well initiatives the Selling, our Efficiency with and associated slightly ago. and

from Tecnidex Research efforts quarter. Cash development interest enhancements XX. a were consideration. for million The on reduce decrease was the recorded million on $X down $X a expense on integration as expense Please quarter, focused Interest year as the and in million to ago. well driven down year-over-year expect was slide efficiency in the costs further contingent turn and expense accretion quarters. quarter. at by We're gain $X for foreign was noncash quarter, costs exchange. driving expenses. We operating $XX the we coming lower to currency productivity million the down In

actually expenses, million quarter net including EBITDA of expenses million, revenue EBITDA year. million the first $X.X ASC EBITDA with agreement. deferral to as flat of totaling as in of the number contributed For compensation, of primarily million benefits, included quarter, attributable a than about onetime quarter, this the $X the In year-ago and first for severance $XX.X quarter in $X.X Dow to well is of more the XXXX to XXX. the changes due first other year Tecnidex ago stock onetime quarter. EBITDA the was

significant sheet flow last but quarter of strong, fourth XX. new SAP $XX accrued was payment infrastructure for by the balance cash more continues XXXX. XXXX March to a the and the along and first cash hand at was renegotiated from January XX, slide million. generate liabilities million first net million The in the first with spring, positive settle of in were for was cash operations a on in lab. quarter outstanding million of XXXX. March quarter Cash with expenditures to had term Dow, determined of loan liquidity. balance The than to with company of including quarter paid $X Turning agreement that also the R&D in $X Capital continued $XX been XX XXXX, spending used

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

Jordi Ferre

quarter acquired Kathy. growth well both for customers with delivering strength The anticipate the our fruit. well reputation innovation our as Thank our technical and mind reflects as to providing demonstrate XX. expected. harvest started slide provide revenue as first success. That to to and long-term has We for newly our as have extends the Results core roadmap reputation manage Tecnidex. expertise, growth commitment sustained Please a organic peace that as line we business their to relationships XXXX, Tecnidex, you, in markets continued a from in top and strong turn of culture growers in built

ongoing As seen the quarter, in of of some compression Tecnidex margin will XXXX. in the gross in and our was product mix first transition integration result the

strong cash performance we you beyond. Thank initiatives. deliver look will confidence. for We stabilize, your which improved to flow, also and expect should our We in use all of growth to lead support fund cost continued and operating which XXXX continuing to forward to to

Operator

[Operator Instructions] Citi. comes Our first Daniel from today Jester from question

Daniel Jester

you first you I footprint wondering, imports talk off, if expand the from signing on opportunity kind just that. on what back China, more China. try there. there's this expect? ultimate can secondly, tariffs customers of then what U.S. impact the bit wondering So hearing And was comment that? into just and you your a And on some is from kind Can about about little your commentary agreement I'm coming apple of in to there? you're U.S. What to Jordi, China,

Jordi Ferre

a retailers to agreement. Yes, is how found cities. I What and with there well build consumer, the came of to goes In X chain Tier has China the is that go Pagoda and with market. in supply expectation that the the ecommerce we China, from influence Chinese in obviously, especially the solutions lot back signed

their a is implement that's the partner, So the idea our together, as supply as case with why to chain this them in as that other retailer because volume reason well XX% type retailers. we imported. of Pagoda, immediately extend as went to their in develop of is solutions particular and fruit

a there'll we as So well China lot through. exports put that will of into at, solutions look be

we of there. are of but the how we're work dollars, be this some the look, of be, successful terms in that, It In able potential could that really obviously, to I the solutions to create numbers. millions depends going can if you give

in other potentially other of of other impact business your storage, be our about question way those terms anything still China, this will I have [Indiscernible] In apples not they'll tariffs markets. on apples the for than heard in that impact

as think negative. I [Indiscernible] So a [Indiscernible] solution, as that see from

Daniel Jester

you this change. gross But on then, there with adjust envision can And Okay. for margin quarter, how us in of recognition this issues granularity also obviously, in there's the you Tecnidex. onetime some revenue but you Obviously, proceeding? quarter, the sort gross XX% a revenue was little margin more recognition about you're if bit give that, item,

us be of sort of XXXX you So color XXXX help versus any helpful. would bridge can kind

Jordi Ferre

can take that, I yes.

the on that would the we to of is thing we're also consider southern that season. have gross say I to The like other middle in still margin hemisphere

So clear in if that percentage. be balance mix you million think that, our can get margin gross to We line about evolving not we we And solutions top incorporate grow in will a been a to I more company. finish goal other going think is better terms is sustain you because XXX over time, business. and the margins how the products, be, as is we'll become we've do put launch off of have, a to years. a profitable okay compression able Obviously, on But still to this half. there first when at but our percentage. margin go five have to terms we certain so will to grow I aim being that's that, of as better in other down And the actually and basically XX%, in

see [indiscernible] XX%. So is the a that it. way is there this margin Again, in compression quarter I

what line we the in in with that's given So have past.

Kathy Harper

here. thing more one And

SmartFresh a Just Tecnidex [indiscernible]. point sales expecting. sales business little it. portfolio [indiscernible] on core our [indiscernible] into The finer bit to Harvista put of [indiscernible] actually mix a and

little but far what so shy we it's expected. a off And of not

Jordi Ferre

[indiscernible] in no But what say pricing that to I [indiscernible]. be want there's clear decline

Daniel Jester

for to how probably one but the And talk I progressing northern last year? expectation sort season then, this early me. see any one of Great. apple know just you it, about from days hemisphere it's

Jordi Ferre

what here I think is feel. I

course, our are U.S. the Of and markets two Europe

me one start So let on with Europe. an easy

that by XX%. the event So we frost Europe, last reduced as communicated you about year. April remember, That volume not happen year did the this

recover be that hope of a will to normal it So up, to Europe that apples volume and is fair we the in to is volume. expect going

Pacific doesn't is of still how last But up from other year. no explained would year, Now In also optimistically yet North weather. America, that's going year. and season you weather how tells it things events talking the size, looking? crop demand to be about As I'm frost. had predictions other that would no apple which I into year looking because the of supply the penetration, was lot to say and down Michigan, a that. U.S., it I some hear last like crop have is situation events me that I be translate that a a the will that this to our may was severely variables effect business? that by Northwest, is say, change, last There and affected that in go back we

it, But here [indiscernible] expect now. going solutions Northwest. think me, vary. [indiscernible] Pacific even I in I I [indiscernible]. in but may right [indiscernible] going I've we are So Again, some think areas still [indiscernible] Michigan predictions develop we what to be like Experience [indiscernible] tells to those been numbers have since that

Operator

& from Please your Francesco go with Our question Instructions] Pellegrino from [Operator Company. Sidoti question. comes ahead next

Francesco Pellegrino

a So step quarter. small to I JVs? help capital more had in about day, over roadmap the you XX% I a of long-term nice off back at the be us I the we're just $XXX eventually coming Just you acquisitions. sales growth of about just going that to have is to this that where strategic joint towards annual where end to acquisitions, you this take and going return talk million. during outlined getting guys Can see of For It's example, of X-year talk coming do some know Harvista maybe maybe know the regards talking partnerships, to ventures, a from wanted from? it's little really understand growth on better growth because, of bit period? XX% a majority you see from base.

Jordi Ferre

I'm problem. to happy No to that. respond

get transactions to roadmap being will I we've $XXX been the million. XX% in $XXX is to In because five words, to get will that the vocal acquisitions, million landmark. one Tecnidex. engage The that have you're question from other also And plan still that that think come next is approximately more to up us we going came that first million, XX-XX. how we over $XXX years, approximately

In that as made organic, terms technology of consider question our organic. agreement any from -- of your about part or any rights we buy technologies we

technology a core a build So XX beyond mentioned have in organic months. launch would has include This past the that strong the the XX, next projected Harvista, my are XX, pipeline. pipeline include years technologies growth been one of X.X objectives would X-MCP. of number our presentation that strong we a key of during the we to RipeLock, to plus in is of I planning

You unravel, in provide terms a of And of lot can we more timings those and remain will that commercialization potential. confidential. understand to as these able color be initiatives

in So the is which been relaunch would one though, incorporate some I that we've thing signal on. working well the my of -- technology will of I AdvanStore, presentation as

think going now a I to a lot it to product be big then market, will to better be that's growers. service

I the So we relaunch we we color announcements. pipeline, you but give next hearing have that about what make in understand as will in and cannot the months be you

Francesco Pellegrino

expanding invested little it expanding you bit big regards certain business those I know about when when regards At I from think current potentially model R&D? just in in a that cringe contributor what market crops. I that's about to the But end they thinking uses specific I think formulations out the expense could more or might -- the when in of lot about day, been contribution. going it I investments, end R&D. that, investors pretty see if of maybe an could leveraging wondering generating earnings cutting know towards that company's are for a the on return to crops you just actually, to R&D on I'm R&D. capital acceleration Because in be back towards would increases and we But to think of your line. guys your formulations you've a be and acquiring hear then

Jordi Ferre

possible. We It's to remain and committed research very development.

we We are a ourselves. technology consider company,

of innovation with as last that down we're the to is, reorganizing now work. what we provide and I would that we around the things, industry is, is this -- to Francesco, a flat. us we're solutions. with technology. We What how to spend products make that used and We X-MCP and have people line create on before lot R&D. just we're to the are in some of disagree think we're you mean, of What and back X on quarter. cutting I reassigning looking new that's and money a and that the launch Fresno We're keeping resources at funds invested other you, return flat them guidance in the the readdress done less is In doing into future. areas in where of or and or we're we opening year. words, give other the China better cut doing some What's X-MCP happening more we've other is, the are the we we number going hear, that's past. budget on were a in it's forms to

on when would these we're technologies However, feel will some right? -- agree of see there's R&D may that that that, a and to going you increase I time, possible is as this we need I that to return cutting. be said, resources, be more not it's So an over always reevaluated,

We want company, of spend always that is R&D substantial, our at in refocusing think I I to explained. our so one -- quarter. and are you're we just expenditure -- it say looking we're refocus to resources not way, size I the our for keep already that technology, are projects that going to resources core or in necessarily related our except we this it's as

Francesco Pellegrino

a Okay, makes more sense. bit little that

would year, revenue X% though light. Where as revenue, percentage the for total percentage in maybe the bit see a of that as quarter next Maybe As a a little of a R&D over initiative really year? support the would full company, you that it do for company Because like see long for I technology to I is mean, think you to spend number term, really spend you'd thesis that R&D to you have is it where get a to where be? or technology significantly some investment that the sizable currently above this are. business

Jordi Ferre

easy to very said, above spending investments have I an our -- that the consistently for market. me We've number. in we it not we in our that's accelerate to it's easy ramp do answer. Francesco, will At we as this do be our proportion case, into possible grow And about initiatives, new revenue Well, we If get And expenditure to we of time, been XX% we explain and R&D. to point as it's of see will is to continue -- year. to of and some that, a as means this R&D we launch. a in change the that

Francesco Pellegrino

Got it.

I opportunities JVs, via That appreciate sense, up. your So lot around acquisitions, come a as more your that. makes you'll a the consider ramp

Operator

Instructions] no remarks. this [Operator to I'd any I'm session turn call to and question-and-answer gentlemen, for ladies end management and showing time, conference over like closing the And back the questions. at

Jordi Ferre

management just business. at always hard would and like Thank I that AgroFresh to the assure team make thank you. continue the better to the provide. you And for to everybody that whole to, a support rest work continue very just this again,

Operator

Ladies thank attending. and do call. conclude for does gentlemen, conference you today's We that

You may now disconnect your lines.

AgroFresh Solutions (AGFS) 10 May 182018 Q1 Earnings call transcript