AGFS - Earnings call transcript Q2 2018

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Operator

Good morning, and welcome to the AgroFresh Solutions Second 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

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

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

Jordi Ferre

everyone. Thank you, John good morning, and

Slide Financial turn I'm with Chief Kathy Officer, Harper. X. this to morning mentioned, John here As Please our

digital results. past our RipeLock weeks, strategies. believe These make global our are developments to Monte, we will we produce agreement In now leader, help the our we progress exciting have During just across me our continued turn recent our FreshCloud quarter, of key unveiling to but the and Del platform. future, fresh that with let announced growth few the second

continued will of X impact grow more shortly. XX% revenues in X go relative now despite in up versus half, added Slide being during we year. of in go half double-digit our for spite and after crop SmartFresh to foremost, us to the where revenue year. XXX hemisphere overall through the of essentially flat the our business crop year. stable through the half all I SmartFresh well financial of with will apple performance the core XX% Kathy last First Tecnidex previous and ASC exciting the maintaining detail the to in first the up But of million being down first XX% quarter revenue for a the The turn weaker achieved. was the first adjusting growth. southern business pricing progress over performed resulting let while

half the South across As Zealand, mention volume we similar production. of revenues deliver X% XXXX southern to special we by Chile. a We in X%, on to fruit and apple reminder, penetration grew able increased with Africa New so first hemisphere the were smaller

season South half respectively spite first down in XX% an with and crop a of pears apples, X% size plums. performance challenging penetration Argentina, and decrease increase and had in in penetration in with of was decrease revenue across Africa increase a X% apple spite in apple each Some up apple include, the Chile, in driven the of and up hemisphere decreases by XX% driven by highlights our the in southern revenue crop crop, pricing. significant resulting Brazil where X% year-on-year. of XX% our revenue an

increased in Please crop driven to high turn Slide Zealand a by with a revenue increase Lastly, Europe. X. record-breaking to export we New had and year size in XX% demand

grew we our are starting with our Tecnidex we contribution. penetrating the and continue outside market fruit first pear to time. to [plum] new crops meaningful success SmartFresh franchise We the With diversification in increasing our see efforts Harvista and for SmartFresh

For of SmartFresh example, applications we penetration pears in South and Africa XX% all now increased XX%. Argentina pear in treated, were are up and our by market XX% about

was mentioned strength earlier, growth I in crops. of As our different in variety due Chile to a

business We are limes, melons and SmartFresh our also growing Latin avocado America. across

with With citrus, the than in to led just revenue to the year. first pears, half of the our That proportion crops last Tecnidex cherries half, addition in of of and other first by from XX% increased portfolio, the plums. product apples compares XX%

to Recently, a European work We [indiscernible] as our plums to received new in apples, a franchise. to on core countries. registrations on continue expand SmartFresh in of diligently SmartFresh pears, new for and means we registrations new number geographies continue tomatoes additional crops for

also We melons for peppers the and for registration in LandSpring cucumbers, America citrus Tecnidex Latin tomatoes, in East. a received registrations new Middle and

half be Please with year significant. experiencing also indicate Azerbaijan. in Harvista become a Harvista strategic Finally, could industry. Initial which for the led Harvista for cherries Harvista in is revenue we new that in obtained crop. value. a of in minimum to the where is are have this option first XX% increased cherry packout, nearly we of for growers also proving new results of United registration XX% transformational increase to factor turn in first gained sales apples of registration by States, the X, early on Harvista Slide our

revenue of leverage contributed in instance, X, especially They SmartFresh acquisition technical the crops, fungicides. the us synergistically, of an other integral enough Harvista areas as such in Latin blueberries almost expertise hemisphere. market such Harvista as integrated last regions our in opportunities up contribute helping has late diversification time believe not there in the for role as well Please the Because in to quickly to year, started the synergies to like $X and being have strongest are Southern closed was For first half. Europe. in million in played and share. America that and Argentina other Slide future Tecnidex increase We turn

hemisphere important year. market pipeline roll starting However, we developments to have a in this of out the northern

to in team. the US, secured have and Poland established Tecnidex agreements the visited the leadership through we launch to team and exciting the of in relationships past unlocking important driving launch this Tecnidex are In two which in Chile potential. developments integrated X, their believe Please citrus steps customers California addition, quarter, forward to turn Slide its are technologies. performance the of we RipeLock In explore commercial had

the technology the X. around First, of one largest stores retailers the with fruit rollout in treated in June, of July system RipeLock and arrived with started RipeLock US

far balance is stores a bananas frequently So visiting stores been ensure service seem centers and and to managers with date. team its RipeLock the the distribution very to the and two to RipeLock The has we in pleased sold now out implementation. store August. technical thirds are feedback be being to the rolled RipeLock of smooth results end of positive the by across the expect representing fully stores retailer's of be both volume,

collaboration but with June specified unique in prevent a RipeLock Del Monte does it AgroFresh retailers announced we co-market Monte Del to America. from arrangement in North is Second suppliers. banana across working to retailers not itself marketing The with with

from intelligent solution solutions forward through X, Monte officially look our turn we on innovative higher-quality data access customers an platform, waste. FreshCloud we to as July to services quality to existing introducing beyond to FreshCloud supply supply consumer. on has by delivery to proprietary Under chain. quality the to Please branded monitoring providing across many beyond platform enabling well existing chain the insight also base platform as cloud-based will customer fresh and make the AdvanStore RipeLock. for to launched collects information for as customers crops the and working and XX, our a driven insights with solutions sophisticated decisions via new produce that generates anytime, such that produce platform AgroFresh data-backed Slide the data together a is farm produce be Del reduce produce and more is target FreshCloud. enhancing thus under improve monitoring We FreshCloud as chain across of help interface anywhere supply applications insights

software that acquired through Internet of greater in initiative, less and of relative produce been and the Verigo’s proprietary and has Insights. profit. technology we environmental things and as end-to-end storage in recently logistics transit humidity management and visibility Verigo, waste this of and a to temperature The primarily start-up provides part pots]. hardware leading production, Transit As transportation such of [wireless enable FreshCloud quality monitoring reusable rebranded perishables factors the for

to as resulting enables decisions. to growers which genomics their FreshCloud genetic in technology a harvest for any during as Storage which storage screening room launch our relaunched FreshCloud the and sophisticated provide mobile first Insights, of AdvanStore announced we a for now informed new offers that have interface program, develop rebranded growers we quarter, Predictive mapping the disease we genomic packers It data. Additionally, real-time delivery apples In have test storage more disposition Screening.

see UK, We unit would to capabilities which XX investment innovative regarding with are with FreshCloud commercial evolve independent and Food in into Slide will and turn Fresh an involving their in our Europe trials operating an It’s Please ongoing platform, and the new to product partnership to continue we the Technology XX, add Freshness to they future. like Asia. customers the

It’s also team be combination working synergistic where know-how. R&D Fresh Our opportunities with technologies understand in is used can AgroFresh to application and and underserved crops, for it develop

market and innovative agreement the signed with work transplants a in leading on with our distribution to we strategy TS&L, consistent solutions, develop seedlings a of California. partners Finally, LandSpring with pre-harvest provider to

XX months conducting the success. We the and will regulatory be there will a trials be expect next interim launch during California demo within the TS&L in to ensure approval period,

of and quarter. Egypt, solid We In have negotiated or in the markets. for other similar Pakistan, had agreements negotiating conclusion AgroFresh a Mexico process

a second selling strategic number initiatives support launched We our key positive are to and growth. season the a future looking of we forward to in half

discussion. Now turn a detailed to call more financial Kathy for let over the me

Kathy Harper

on Thank you, turn XX. Slide Jordi. to Good morning call. to everyone Please the

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

a the I SmartFresh year revenue slowest the of six be less the of to quarter I second on impact margins Before bulk Tecnidex our last the in our of year. second is calendar note are and sales the half will significant that relative the the quarter, basis because in of months begin, like would seasonally the

the We performance several half first with our year and FreshCloud advancing are systems. of and of and growth the the strides quality SmartFresh over significant commercializing generally including initiatives, made RipeLock, our pleased

to $XX sales with by driven were for Tecnidex. net XX, up net million second ago. in a XX% The million, the beginning compared the of was Slide revenue quarter year XXXX Now increase $XX sales on

XX% driven by For the million, revenues XXXX, of $XX half also first were Tecnidex. up

a the six quarter In year-to-date for in ago. up was was the both first from currency the of Harvista XX% Adjusting year. revenue organic unchanged revenue the revenue The year on and addition, XXX, for basically was months of immaterial. impact ASC

year. Within total revenue effectively plums other with apples to SmartFresh and half comparable XX. XX% We comprising has sales first pears, core end-markets the including melons. from on last our our our versus the Please diversify continue in growth in to in of turn resulted business, period XX% strategy Slide diversification revenue crops

naturally As as the in SmartFresh margins. first both previously of lower we occur sales. of integrate expect Tecnidex experienced This lower be franchise impact we articulated, our margins where will Harvista have and year, magnified to carry lower we half the expand which we

In effect addition, margins of had the periods. reducing the has compared adoption ASC of XXX to prior

in half of second margins the a with were Margins the result, XXX were result first minus points, and X the a minus decrease bulk same to XX% as X due quarter of point. factors. ASC XX% Tecnidex the As for

from for a little SmartFresh were year-to-date changed the margins both quarter a and year ago. Importantly,

other from in the Tecnidex, revenue. a expenses operating as general the acquisition increase to of quarter development were flat. to Turning due total year well expenses Selling, XX% remained ago nonrecurring and XX% as up in increased on administrative and expenses primarily Research Slide expenses. and a legal XX,

loss gain quarter and general remain the year gains administrative from Efficiency the The selling, on the was million, last had operating half of lower productivity and priority. that expenses can improve the down first a operating up $XX Tecnidex, intangibles contingent Excluding and benefit $XX of million further consideration. of were Last for year. year. leverage for amortization

as Cash with sequentially that XX, was the out. $X interest million for expense first not with Slide quarter expenses quarter, the benefit primarily interest flat with basically up, Slide EBITDA. including results. leveled interest from year our year Moving ago to the million comparable down the associated to second the gains and turn long-term of $XX was debt the and approximately six XXXX and was had the for months contingent considerations of other currency XXXX Please quarter EBITDA in first fiscal income reflected Last more from hedge. we XX. essentially

in XX, operations $X to Turning Slide of used cash XXXX. half in was the million first

expenditures to million due Any of R&D in We spending was this business. invested connection Cash balance capital expected significant the an including expect were with of improvement including to SAP to June $X infrastructure Capital see sheet on our was XXXX immaterial in implementation in the second expenditures quarter further XX, year-to-date. appreciable and seasonality liquidity. The half million. are new at strong with our XXXX be year hand $XX the labs.

the half more the recruit in of for satisfy a $XX we to pay million the hemisphere the build inventory first $XX as than invest we Verigo year Dow, accrued with cash Over to liability, in year connection prepare used to in million to $X interest RipeLock, payments, harvest season last million and the northern liability reduce to acquisition. but to

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

Jordi Ferre

expand what continually in in our the to Thank be will XX. have franchise direct Please by outlined value customer turn ago, joining the core global two shortly and and AgroFresh Slide years network, world-class opportunities I development research you, the unlocking technology, organization. vast hidden Kathy. to Since

into the and We launch of of feel realize programs we our are adoption North and to strong root to hemisphere we RipeLock space. promise. a crop citrus northern continue expansion foundation FreshCloud we have leader in preservation are offer going we set see Thank the and the positive pipeline our them It examples. through Tecnidex, into acquisition The a of time, just initial stable to products vision waste accelerating grow takes take a new the into selling you. now reduction but few to and and the the of food AgroFresh that now Right initiatives seeing apple continue season. similar behind America in Europe and the

John Cassidy

questions. [Operator from And question now Operator go your Jester question. with from Citi. today Instructions] comes first we take ahead our will Please Daniel

Daniel Jester

Hi, good Yes. everyone. morning

bit know recently you little the just crop expectations I I've hemisphere a a some year-over-year. apple estimates it's you down talk northern stable. said that say seen State just maybe the Washington your going be So for crop. that think about to be might that bit

just can U.S. a anticipating was what the you're little you exactly and So wondering deeper Europe? dive I into bit in

Jordi Ferre

Daniel. you Thank Yes.

the Northwest I about a last output. some if areas remember but I'm you not had think U.S. like mistaken the X% indicate reports Pacific which may really at decrease U.S. crop as whole been that in Michigan severe year we apple potential as the there's the look in and frost affected

So we versus see it means all volumes of say this similar in when that stable we apple very-very all last. year

today of not think terms just some In Europe we I do came a as central official case last there's see today. and of well That that as the the frost affected Europe in was, by severe is Michigan. especially Europe was numbers year case

a the means XX% ago So year of are coming projections that coming currently versus that in increase are at about terms apples. that

the of still assess be. a is what impact looks We which continue to to little bit weeks in to the past It we that. there monitor a heat that have was way wave going

expectations refer we is we standard saw basically the that versus crop which it means the we this have year. when to drop within that stable that year last a So

Daniel Jester

on in you Okay. your you can affecting the looking impact to and to are how spending some thinking been in give their higher the any that that's for about into that. of U.S. talk How Thank some does that interest? that. insight the of Mexico place China by as put other what us and tariffs And is regions that the they're you and customers on business have as

Jordi Ferre

exports total there, happen a is there. bit and China you is a grow tariff our X% in We customers impact very X.X% year know Washington may as think I'll the just apple well well. where total effected exports is especially of it's some apples the impact you crop more the than what can over they numbers. so of to cherries the give apple on minimal in the estimate each which little that's is as terms and being of some apples as They're basically I that So cherries of

that know However, almost a same mean to China in going grow cherry XX% the the and I apples primary total it's object will crop. are impact as cherries total is cherry exports so there basically they that X% cherries of much the customers which is but I you greater which obviously actually are be our think of not and

And so we've cherries seen and a lot impact more in apples.

So they we on impact obviously won't indirectly see direct business a negatively financially our impacted. but customers be could our

don't want but we direct on because good not well, impact it's I do a to our again So customers business. see our

Daniel Jester

half your second You've business now Okay. you much more a half just talk just a year? wondering years bit grown the how second for the of in a And but for expectations then XXXX? little couple what expect do of can are harvest about the you boost

Jordi Ferre

see forecast I and that growth we very this vocal think prediction. been stay say we so to year we've our double-digit with

Daniel Jester

Okay.

Jordi Ferre

We are very bullish about harvest.

Daniel Jester

of your sense half in of look into then as that second mix could go and were any like terms XXXX? as apple, what of mentioned Okay in you your and to in the half crop not first year sales XX% we the the

Jordi Ferre

first it of we similar I you've will see the on that XXXX here be in half. the In XXXX apple well in terms will we've a trend dependence seen continue XXXX. well we that trend which as think that is that reducing seen in in expect the

So a apple. reduce we make on us and dependence it's for internally [indiscernible] the that to sure

so So to about next intend proportion around we to that. improve we and potentially would be far same the you've seen expect that year

Daniel Jester

very to year fund you and be expanded initiatives what out your Del should for lastly expectation growth about roll year? all next much. the just can this Thank this and spending also with those agreement just you initiatives then And the to announced Monte growth new RipeLock on with several talk and you

Jordi Ferre

at you we numbers is invested already technical today overhead RipeLock whole have actually RipeLock. look our team ahead if so in already there is support of there for sales, and we that already a Spending

in have today So captured P&L that to RipeLock that our growth. support already we in order

In more with a which make expenditure. in customers It represented going front more has terms require of the benefits resources will initiative for and in more is lot that it's of Monte basically of our it being is commercial product about to necessarily adding Monte one retailers. of Del the basically terms lot that of together clear be not a driven

help a have So rather it investment we than an do. be will to

In a looking we did now number at, we and for I initiative fund terms we right big the acquisition to an to of us also expertise our reach a already that expenses to support roster of out for think be able and of that. are it's but FreshCloud which added some our will

don't that been expenditure an we our our those necessarily in expenditure. reshuffled. things Again So announced really have we increase expect has that will have

see in probably won't certain we the are that have growth past You current initiatives our quo -- than probably a funded that today the in more numbers of were status business. we the investing where on of lot more rather in but we grew initiatives

Daniel Jester

Great. Thank much. you very

Jordi Ferre

welcome. are You

Operator

Instructions] question comes your Management. with OFS go Please from Freundlich Scott question. [Operator next ahead Our from

Scott Freundlich

related target Hello there. get I had your I size wanted where is that and in businesses on on acquisitions. maybe opportunities your terms the a that to to looking quick the pipeline stands at? potential future companies question just impression of

Jordi Ferre

not to Thank at program we I look that ended also our we and you. mean has continue very have M&A Well, clear opportunities. been

integration has that can organization of very I and this acquisition well. are more Tecnidex, well at it we to than the but as other on seen what potentially time Tecnidex we of front at that, will organization in something that quite ready on we take active in goes with done opportunities that point than bigger I think and but look and think I you've definitely be the

Scott Freundlich

there for Is just fund on Okay was is to and more more ever taking a acquisition? then appetite balance on the is there those? leverage, than there sheet then not larger if today on the debt

Jordi Ferre

other acquisitions such do able we can that at have to There's appetite. time. There we step no such to appetite. go do a actually also things no to and is one There's be

our increase that. to can appetite I leverage. no you tell there's So

Scott Freundlich

and of post-harvest the companies threats more AgroFresh on Okay. are And the some more notoriety gaining businesses. just emerging then a thought a environment what's and some had the emerging team getting that been vegetables press to of some there just focused related the out and transitioning competitive just team how little from smaller the thinks lately how question on fruit of bit you these didn't competitive life of preserving about know and the about

Jordi Ferre

as space that are that be in lot a in the a So a market right addressed. need and we we see lot of all still that issues that of the and of opportunities there's to validation

In terms before. startups of startups I've been the new and in involved myself

it's I PR. think noise when a lot new of a you important that are make you good have you and

things and the So to other be this through right. along people you out one solve in all to different customers chain, There's problems a but our also would issues are actually have we've there single chain. that address will they believe notice all proven all not of the need preserving the say saying I yet customers the you. tool box supply fruit interesting to that We we thing company a the really always crops that and have whole along some supply as solution believe been still

very need don't the that to etc. but other active thing of our and we're to ourselves there's I some in finally be people is the in technologies year. attract as also, to we that need to the long way a preparing we and understand for proven say also I be that those quiet. launch we doing and to the stay noticed attention want next We're So of investors, what said to pipeline means are their

Scott Freundlich

much. Thank Okay. All right. you very

Operator

I like remarks. closing conference for time over management to turn showing this the back at no gentlemen additional call am to I'd questions. and Ladies Instructions] [Operator any

Jordi Ferre

months. communicating will we great everybody you a Thank summer. Thank you. again be Have three in and

Operator

concluded. gentlemen We and now today's thank has presentation. the you conference Ladies do for attending

lines. your You may disconnect now

AgroFresh Solutions (AGFS) 9 Aug 182018 Q2 Earnings call transcript