AGFS - Earnings call transcript Q4 2019

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Operator

Good afternoon, and welcome to the AgroFresh Solutions Fourth Quarter and Full Year 2019 Conference Call. At this time all participants are in a listen-only mode, after today’s presentation there will be an opportunity to ask question. Please also note today’s event is being recorded.

At this time, I’d like to turn the conference call over to Jeff Sonnek, Investor Relations at ICR. Sir, please go ahead.

Jeff Sonnek

you. Thank be Chief Ferre, Financial will and Executive by Miao, Graham Officer. led presentation Chief Jordi Officer; Today's

Comments during Harbor today's XXXX. forward-looking Private statements call Litigation and the the Securities of accompanying meaning the Act Safe Reform provisions the within of of presentation contain

statements as historical are known well future number assumptions statements. statements. statements as considered from management's current events. of based and discussed uncertainties actual risks the cause differ concerning statements unknown to statements a and are on than are Such expectations forward-looking other forward-looking the All could fact results These and subject in to forward-looking beliefs of that results materially

Some the to the the well our section non-GAAP which presentation the measures to financial of and for certain identified as be with this agrofresh.com, tables GAAP slides comparable and Relations measures. website press that also accompany Investor discussed in are of measures. found Please their directly release, most refer refer included non-GAAP company's financial the these in to in of as the can risks uncertainties filings SEC. We'll reconciliations

I'd turn now over call Jordi like the Ferre. to to

Jordi Ferre

Jeff, Please X. everyone. Thank good turn Slide to and you, afternoon,

our of American We adverse and European XXXX’s in financial that affected are pleased North performance business markets. weather with spite in events Eastern

resilience geographic a and reach, global oriented comes platform. from unique Our extensive registration service portfolio

disrupted entrance, positive our competitive brand's SmartFresh markets core previously service. and AgroFresh experienced were business value unmatched in we trends key XXXX speaks by reputation, to of During that which the in

as new grow sales Harvista global leverage products to diversify crops existing Tecnidex. such geographies into our continue and We and of platforms such to as reach,

efforts. novel planned of of are and element we believe diversification our encouraged culture some by we future the Innovation that support term will remains long an important introduction technologies our

translated full expenses a cost XX% and XXXX. continuous efforts optimization year selling, in for general Our reduction into administrative

trends, margin adjusted basis deliver results. The we and top expansion obstacles XXXX, despite are efficiencies which to currency of driving are created year points pleased for facing line related EBITDA tampered we've XXX full unfavorable our weather financial improvements and

October harvest November season As that past September become largest sales The and year, which an delayed due month a of through a reminder, in fall, fourth of we comparisons business. the weather experienced in revenue do harvest XXXX. to caused for this season. October to the a not Thus irregularities capture shift from northern extended into October for the the our fully hemisphere the quarter is anomaly normal the realities

that supported registration Turning to footprint. Slide business is platform resilient global portfolio, by service a and X, global oriented SmartFresh a is

During the northern by hemisphere season, trends Northwest, we was disrupted which entrance. business in our the Pacific SmartFresh previously experienced positive core in competitive

at of our brand that to share premium AgroFresh speaks to to competition geography the while a this ability marketplace. in the believe recapture value the in I pricing

unique understand value expertise customers of packhouse service of to and offer, help profitability. the yields, backed Our that customers decades and we by combination which maximize our is

impact and events weather in by to due winds Dorian. brought bullish of a quarter In drivers American season negative frost including Canada, hail Eastern growing high the large by the moderated about challenges States expectations Northwest, the SmartFresh the and were the North industry an shift, in fourth harvest of timing October terms of end regions for Pacific the extreme in and beyond early at for United the Hurricane

prior versus crops were and variables were Netherlands including faced well. The pear in negatively regions variety Italy smaller headwinds driven the in impacted comparatively weather of by a growing year. European and weather as

ActiMist SmartFresh and disease which fogging by ethylene offers blocking to simplified comment improved control our Finally, which fungicide service performance. on our compliments SmartFresh product, adding ActiMist platform. a enhances our proprietary fogging SmartFresh program. is our solutions ActiMist logistics system, platform

focus the is and XXXX in XX% grew us XXXX. sales ActiMist for in

offer additional expand we as into other expect active growth We markets. ingredients and continued

Slide to Turning X.

to In as business core beyond to product Australia. Harvista to continue broader a geographies new growth progress returned the crop well base. We as as and crops our approvals towards XXXX, apples in such diversifying of with goal make new regulatory

product American markets Morocco crop second double-digit Latin offset year. Tecnidex of in growth saw by line, in weaker Our the half the a in

XXXX, Europe as The as largely program, revenue which full-year reset sales For year was to year of was the was the crops our bananas. of crops focused full percentage for of apple due revenue weaker for apple pear total versus as a mix compared well prior XX% in XXXX. RipeLock previously on XX% to higher

crops within crop key a outside new team apples as markets diversification focuses to and have drive on Mexico. citrus mandate California such We and specific a that created penetration greater and

an are technologies we remains our novel customers. value long that important term on effort, our and culture while will and working support delivering introducing element diversification Innovation to a analytics of

markets growing Our for business are to new driver regulatory expanding is primary portfolio bananas. and continually and mangoes such crops and expertise new up the as address beyond leveraging our apples we

prominent as since Brazil. that most The our process. in lobbied expected the We for XX,XXX potential Brazil's Apple update Harvista came than to is local Harvista which we for the similar approval received Canada last as industry to authorities estimate regulatory is is and earlier the have markets approximately Chile. hectares, such This accelerate

also expanded product acquisition other have and know-how and as for of ProTabs regulatory two EthylBloc in for and peaches, fungicides, Equador. categories, France well for post-harvest of are markets approvals Argentina Italy obtained the SmartFresh and and approval sachets and as the have years, users’ Greece. nectarines our active in ingredient pyrimethanil to ornamentals recently we apricots, through as noteworthy recent Tecnidex, Spain as such In such the Other in extension past

those such countries. in as Harvista approvals period. Slide the the such apples started which still while tree, for and pears to U.S. enhancement and freshness Please an ripening following recent benefits, respiration and address cherries to other yield have process slow are on quality crops, for X. It significant Chile, helps we blueberries, other the provides high-value as regulatory turn in and also promoting and extended

sales year XXXX, Australia, including Harvista to compared regions, full year Africa. South America America, full with XX% grew across XXXX, and growth key For Latin North

performance if Harvista severe could substantial and been Eastern have weather not there from growth, double-digit achieved we in States crop hurricane events saw winds. the growers better damage even where United have hail been Canada, and While

received drove strong is regulatory We is the We year XXXX, that and by for revenue poised approval regulatory believe the XXXX ahead, in European Zealand in of And promising example generated lot looking a key that growth such good from use country. this the as in A product New of the the will Brazilian about Southern where authorities Harvista Australia, the driven a markets, news customer hemisphere in are for be targeting new good Union, during and Harvista this January after the trials. approvals of timing the longer-term of approval season. has interest we which new potential approvals.

Driving in goes exposure and the and United diversification drive blueberries helps are the crops, season. in in such United implementation other strategy. the beyond regional States XXXX this. the technology strategy also Harvista of cherries great beyond in apples the blueberries for Chile are pursuing as our approval we States, and regulatory Our of pears to high-volume And examples

that and total the global a penetrate with Slide of opportunity remains established of to an XXXX represents coatings crop approximately market the technology portfolio and X, significant acquired AgroFresh. citrus diversification citrus XX% to we Turning providing post-harvest fungicides, business, We via post-harvest December in and Tecnidex growth estimate AgroFresh waxes. for

which offset Tecnidex was XXXX, America flat versus basis. by full a currency which saw were Middle the was year, a of sales XX% on full Latin year. X.X% season XX% for strong the decreased the year prior down for constant poor in Africa, but and growth We East in

Our in by certain tree with yields that regions. largest and drop a difficult particularly market, low had Morocco, brought conditions were about poor year

such Turkey, Tecnidex service-oriented We additional South and as to as XXXX are in invest will return optimistic have in to continued approach Chile, Argentina, Brazil, Africa. we our growth U.S. resources support to in markets

is also to with the key fungicide suppliers a Tecnidex impact Apple of the geographies and sourcing scope by industry more Additionally, positive include contracts business expanding in our having crops.

to turn Slide X. Please

complex address redefined crop of just the During unique and and not XXXX, around strategy chain, RipeLock bananas. broadened each our to needs we supply

in adapted new solutions to sales. such in forward, than crop support Peru, our chains diversification of In more ethylene we Mexico and taking application in Going redeployed have markets are supply diversification crops. as strategy, deep implement we of this SmartFresh and expertise the technologies different management XXXX, to key that XX California, are drive SmartFresh resources to

to That which retailers, to life. introduced banana said estimated protocol minimum an that days bananas delivers we crops the new of remained one of extra a simplified two target, yellow continue of having

we successfully we fact, currently four trial ongoing. have and retailer others one In completed

a RipeLock a brand project atmosphere meantime, be bags. packaging any is to to the strictly In limited proprietary modified related will

in broadened we that put sales We new start XXXX. that are incremental a place foundation strategy generating through SmartFresh the strategic confident in will diversification

In with about turn and freshness making is life. connectivity, sensor Slide platform our enables product's decisions, chain projected customers return. supply FreshCloud unique more Internet data digital to insights disorder solution and and and shelf physiology powerful data to technology, screenings their with combination it provides of This AgroFresh includes Please decades monitoring. X. plant expertise, analytics, informed our digital better maximize provides that real-time

more the services improves FreshCloud the additional existing performance Chile, results consolidated by storage new of insight, the revenue the customer contributor United In driven is we in offerings. for insights model. and doubled a XXXX, platform by through States than The our which was our our traction to and with of launch FreshCloud year. will value digital was mainly growth and providing portfolio

to several offering. new our the We to ways plan continue investigate in And to of our benefit utilize we innovations XXXX, for introduce new on analytics customers. FreshCloud

near-harvest The fruit geared on will the the which still our insights enhance tree. Harvista, first product, is is while towards

discovery of quality yield packhouse. the tool And the Insights, from the the quality which Inspector, control third, orchard to increase tool assurance with to grower operations. FreshCloud improve a the and Second is of quality launch launch is data to and which optimize FreshCloud is

are FreshCloud evidence innovation journey, an evolutionary is of I discussed marketplace. we service-oriented bring just that solutions the the to an

out adding collected our valuable information to global will and as fresh FreshCloud's capabilities industry customer provide delivery an across actionable platform as the and produce improving base. by technical We the to to continue our well link insights build

let Graham speak now financial I'll the of highlights. Graham? to some

Graham Miao

Thank afternoon good everyone. to you, Jordi, and a

XX. Slide to turn Please

period. keep of the significant third As half consider shift we at investors nuance our Jordi quarter year why XXXX, The quarter due to please seasonal business revenue mind, example there from in timing outset, when quarter versus is harvest to prior our that performance emphasize quarters. in comparing fourth the an in should noted fourth is versus

Net XXXX million, to the as million the fourth compared $XX sales fourth XXXX. increased quarter XX.X% to in to of $XX.X quarter for of

America North which Revenue fourth to quarter by the currency XX.X%, harvest the to million exchange, and fourth late sales the which the compared apple XXXX. of Excluding Europe driven impact shifted quarter. of into by to compared in reduce $X foreign revenue increased a XXXX,

Net year year. sales in for $X.X The rates the exchange $XXX.X the impact, due million The million approximately million, Europe. foreign North revenue in of full sales primarily X.X% decrease decreased change to weather impact prior disruptions versus currency XXXX by to and America revenue this to the was in reduced XXXX X%. net excluding compared in $XXX.X decreased Eastern

or were in North Tecnidex associated Additionally, growth a Harvista growth year and basis FreshCloud. with America versus Latin Offsetting America SmartFresh revenue was Latin new X.X%, a in X.X% on constant period. in sales million, prior the these $XX.X and decreases currency America, decrease of of

$XX.X increased the gross points timing the across expenses. in to primarily profit to XXXX, turn basis northern quarter prior and The period, a compared margins to increase increased of discuss margin to million operating gross apple higher sales fourth $XX we'll Slide million year was in the and where XX.X%. In Please XXX of to harvest of the gross XX, the XX.X% hemisphere. related margin function the

reduction For related profit XXXX, to to XXXX, sales. remain relatively margin the the compared $XXX full the stable at Gross XX.X%. X.X% decreased in full million year year gross to

and Our strong in gross innovations. to post-harvest continue margin to us invest allows R&D

and From structure revenue create efficiency our business improve base. an greater our operating expense perspective, we better to cost our for to align our with structure continue

we savings to continue benefits to end began and these During realize initiatives of at XXXX, the we expect we XXXX. to the built upon XXXX, throughout generate

associated as administrative were administrative Fourth year quarter million million items compared the million that year XXXX, quarter quarter, in selling, the of costs expenses to fourth prior selling, and general XX.X% fourth expenses in Included general to in in prior decreased non-recurring and litigation period. and M&A, $X.X in million $XX.X $XX.X and included the $X.X the severance. of quarter with

company's Excluding ongoing period, items, decreased and these expenses the fourth general the the XX.X% cost selling quarter initiatives. administrative in reflects optimization prior which versus year

X.X% decreased as year items prior severance XX.X% such excluding M&A, expenses $XX.X full and when and periods. litigation the the For SG&A to versus year, million, in both decreased non-recurring by period,

the of costs versus the timing. XXXX, million Research up period to fourth due in $X.X were prior million and development $X.X quarter year

costs year to full million apples. drive R&D compared XXXX, million our strategy an the remains For in research the $XX.X to prior were continued of and important beyond diversification development year. $XX.X component

turn to of million, expense, XX. includes compared Please of $XX.X was in which quarter net included expense amortization of XXXX which $XX.X loss $XX amortization prior period. year million $X.X Slide Fourth loss million to net the million,

For loss the expenses, included of full compared expense. amortization was loss year net $XX.X $XX.X million million which amortization in of million included XXXX, XXXX net million, $XX.X to of $XX.X that

intangibles. $XX RipeLock million and of the the accelerated Please full was year impacted expense additional by negatively amortization note that net fourth for an of XXXX the in loss quarter

$XX.X fourth prior-year increased of XXXX $XX.X compared to to million the quarter in period. as EBITDA in $XX.X million the Adjusted million

year $XX.X EBITDA XXXX decreased for full work to slightly to prior our the which cost improved reflects optimizing to in million structure. adjusted compared full year basis the $XX.X hard the points XX%, margin our year. in EBITDA million For Adjusted XXX

particularly by capital better cash The by to a Slide management XXXX collection full XXXX. emphasis with operations increasing $X million primarily significant expenditures in for in million year-over-year increase cash on provided management, of driven a Turning full for XX, $XX.X working accounts operating of the receivables. while to the efforts flows million was improvement our compared $XX.X was cash year year an

XXXX, full-year Capital expenditure, the for XXXX. to million similar $X.X were

million. We XXXX. was our $XXX.X asset XX, December a expenditures term-loan July, as X% sheet $XX.X to with our consistent capital range maturity X% from with light million balance cash business of to model. Total annual expect in From sales a perspective, XXXX debt of was

undrawn December million XX, Our of XXXX. revolver as $XX.X was of

flow, recent The cash terminate and up continue but currently with to it obligations receivable top XX, we'll to specifics. done of comment ongoing it's to by alternatives cash agreement number growth lenders, generation the tax growth, received refinancing of on by Completing its is optimizing capital business priority, annual for frees as We a debt our it our corporate position on our agreement ahead, and base. remains best next while evaluating premature our We're June get Dow Looking strong. to XXXX. our focus delivering to cost a with of chapter deleveraging. of believe well was our AgroFresh view structure our incremental a

to the I'll turn Now his the for Q&A. call back to call Jordi closing opening remarks, before

Jordi Ferre

Thank XX. you, to Graham. turn Please Slide

resilience phase the with our our core affect pleased are in related are business part of and the industry We weather of of the that business. fluctuations

to of environment markets. with solutions. our to initiatives And growing SmartFresh post-harvest adapted new within portfolio are are have we our diversification share a of by key core regaining crops We competitive in franchise the results in expand encouraged regions into and our

to of meet the industry. Our respond quickly competitive to a to oriented changing provides service the with and approach us our proximity advantage customers needs

our directly minimum. In Coronavirus chain to the current is crisis to expected business and that supply China exposure affect our not is respect,

will of We in into temporary and feed more our food markets. customers storage a event stand slowdown in the export behind the

open expect Finally, the our drive in to our that, sheet months initiatives. announce Graham With stated, will future call as and Operator, the be please balance able we to questions. enhance a we that strategic plan for coming flexibility to improve

Operator

of Klieve with Our Instructions] from first [Operator line Securities. Please comes Ben question question. the your proceed National with

Ben Klieve

my Thanks right. All taking for question.

exposure the on China risks production you really the Can am have of material, what just kind you the understand of exposure First, Coronavirus. that kind is for? the you raw in that on supply I or elaborate Do nominal. is? either any bit to comments on really a that of I if can your chain you raw Jordi, you materials wondering, that made see that, guess any elaborate finished any I risk one goods context

Jordi Ferre

I any the same that don't our When That's that supply stated our in refer small is to chain, any say it's revenue is Thank what risks. chain. there to you, don't or China very meant is see we question. to disruption that to Ben, meant for China why my I supply explanation why, exactly direct in No, minimal, see I and being your our the I immaterial. on we implications impact no exposure very,

revenue is that, obviously So see not by everybody very, is revenue. we not a because and see, we negative our issue, do of China to directly affected our by disruptions supply any do on Coronavirus chain impact don't any small part but very see derived we

Ben Klieve

Perfect.

that When I'm of to you but the questions; hear. just at – point other no, kind kind cash to identify have Do all timeline? any that's litigation. may can to of even you comment timing that you – is be good you for Okay this too guessing sense of ongoing answer may broad of of the Couple it is expected when or is at nebulous this resolved? see really a on

Jordi Ferre

to a me, dates about it’s that, expect we're damages away. a that schedule we There will potential awarded company will post-trial a make premature continued. hitting the we to process have are see as after any, process too – proceedings additional I think choose some this the decision do follow sometime that. judge going the is that for I where and to going any after say

So everything comments is I further to don't moment. have any that's normal – again at this and going not

Ben Klieve

it. Got

in recall past. Yes, fair you that enough. the then And talking I Okay. guys much on about don't ActiMist,

questions I I have two here. So guess

that are storage complements First, your SmartFresh is this a post-harvest in you product facilities? really that –

be you that there think niche And the SmartFresh then is color overall you of customers with within is your interesting? that market, a about here? of – think opportunity just appropriate with all can any for talk this the kind would is product really potentially of a could you there placed kind current this mean, second, I be

Jordi Ferre

talk in launch we about some years. for Basically we a Ben, and Yes. XXXX made lot references did product ActiMist we in device a when past foggable fungicide. three is this it the

we explained other over reason the the and in fog basically for not can that, a you delivery with storage a with is the treatment. the inside And the together have method foggable because being, which you does and So case rooms. methods advantage fungicides that's methods other that foggable SmartFresh the room, it have do proprietary

treatment SmartFresh method a doing proprietary a fungicide too emphasis, do once foggy. on haven't time been storage same has And put actually can of much we you room the treatment have maybe and and a So product growing. at that but that the we

will actives to approval the launch and continue we active regulatory those We take fog other supply; secure is so grow one have or now method that the to we when we more XXXX, in the time actives. because thing you to use the is thing get foggable have and and some one

improved has used else program far storage fungicide delivering typically that dramatically a those anybody in does. because room the And now than don't that by superior the the we way more actually we’re basically So actives is what are industry. that believe have we

growth of oranges we a on I because continuous are part fungicides. think attributes. practicality a And those So this both deliver we apples of very see all important and of of niche, do of it’s actually how and that – the fungicides

Ben Klieve

Got it.

taking perfect. the Thanks guess appreciate my queue. color. Okay, back I'll the I for it Thanks. over turn I questions. to

Jordi Ferre

you, Ben. Thank

Operator

question. question is National a Klieve Ben proceed with Instructions] with [Operator next Please from Our your you. follow-up Thank Securities.

Ben Klieve

million don't to item I on this can yourself, I if chivalrous I the elaborate think and that torch, making the be caught But on the quarter? that. and apologize. you Graham, was line the repeat in was fourth I Alright, you here. I'm in impairment missed back I but comments what I'll trying jump might've pass $XX thanks.

Graham Miao

Thank $XX that It was question. and are investment as Ben. made you The Yes, ago. for investment million a referred of to an years the now. an right couple

every value. street, reevaluate year-end market so And out for of the year, the we bought fair

our just books. an adjustment to accounting that's So

Ben Klieve

it. Got

XXXX? can Good one or continued Well, you're back the on elaborate the modeling kind Or I'm I if really the Okay. to to going kind movement reduction question. first the completed the efforts, line going efforts here. to think line you at be guess the just see you at on do into and least point be to is those me, then the focused the of half wondering SG&A cost largely really initiative in the ongoing on on going focused year? see one that And into of of last half possibly this there's been extent for of movement year here the of that reduction and that have line-item the or end

Jordi Ferre

continue We and see to then And to Yes. for XXXX, we'll particularly improvement. speak ongoing. and with XXXX this lifting, year this that be in heavy XXXX see so to

Ben Klieve

for this back me. Alright. Okay. think does get I'll Very I good, beneficially time in it line.

Jordi Ferre

Thanks, Ben.

Graham Miao

Ben. you, Thank

Operator

Ladies I'm the you. time the closing to over and I'd questions. question-and-answer to remarks. further gentlemen, Thank back conference end turn like this no session for showing at and Ferre Jordi

Jordi Ferre

in Thank you and shown you update. the to support interest in Thank look attention quarterly company for everyone and seeing we'll very next to you’ve you. much our forward the

Operator

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

line. You may disconnect your

AgroFresh Solutions (AGFS) 12 Mar 202019 Q4 Earnings call transcript