AGFS - Earnings call transcript Q1 2020

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Operator

Good afternoon. And welcome to the AgroFresh Solutions First Quarter 2020 Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please also note today’s event is being recorded.

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

Jeff Sonnek

other good XXXX. Chief Safe of Litigation Graham forward-looking statements Thank facts by statements. Harbor call and The provisions and afternoon. the All historical presentation will today’s Act than presentation are Reform you, contain accompanying be comments Jordi statements during Ferre, Securities Chief meaning Executive the forward-looking Miao, and within statements Private the Officer; of of Financial Officer. Today’s led considered of the

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

Some in risks discussed are the SEC. identified company’s of and and the with these uncertainties filings

financial tables as slides please to directly in We’ll today, for most refer section measures the refer the Investor as measures. financial well accompany GAAP the to can that website, non-GAAP to release, Relations measures press certain be also reconciliations agrofresh.com, our comparable which their found the in this non-GAAP of included of presentation

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

Jordi Ferre

are channel needs industry retail their Thank to dealing pandemic chains shutdown home supply continued state I’d of food customers abrupt having difficult Slide afternoon, has our fresh and on within significant like with with in a industry intense to you, Jeff, fresh how shocks from The service is that stemming everyone. begin, AgroFresh orders. environment. the produce the COVID-XX and the to X. to effects To good Please turn the address and service the produce

crops. to a customers Producers them their can are are global maximize seeing is network that solutions resides organization uniquely help through seeking pressure and our to a with that in to close they positioned returns centric manage these help customers. on respect AgroFresh and customer proximity labor in periods markets with those affected service additional

swiftly a available staff as harvest continue all to and post able that being was fruit infrastructure applied transition corporate are I’ll workplace, our technical volume. solutions centers, to virtual our to a ensuring operating service from While operational

have able and support provide specific level We trust, guidance way come unprecedented and same customers period. the in have expect to been a to of during that technical just this different

We customers in energized these times. responses are the from challenging by

Our tomatoes. amount and of holding better, in product will we if inventory huge our most Mexico tomato our producer a managing for who selling fresh Road, With SmartFresh production. of season, not dumping this SmartFresh, be are

top continued have team the A Please citrus Valencia. message our to required are following oranges. grateful the provide how personnel producer share AgroFresh service our in to send with at protect Spain all to we that in you

more season Hemisphere chain. solutions ever preserve looking is Southern of customers noticing supply are the the the While help are find trusted to that than their to we products ongoing, along partners fresh quality to

success. for In deployed season to Hemisphere the customer to meantime, on the to a prepare upcoming commitment resources have we additional proactively demonstrate our wavering Northern

completion look business the versus Northern half to the our at seasons. both to continue capture We Hemisphere in and of quarters Southern

a delayed first impacted deals, Latin adverse as has weighted extent in year-over-year timing markets experienced growing the lesser performance. key in During a conditions. in have Southern revenue to our America resulted quarter, This and a which Hemisphere on harvest

global local were by currency devaluations the pandemic. results our by impacted caused Additionally,

and costs, on in first period expenses we events, administrative upon last quarter deliver during year quarter, generated below in initiatives. XXXX. X.X% We were non-recurring the excluding two a consequence a the savings same XXXX Thanks first As the of able improvement of to to our builds general a which XX% in selling, was optimization basis. reported these XX% cost revenue adverse the

generated versus streamline have the versus to quarter Combined margin point margins the for resulted actions efforts prior year adjusted performance, basis the have in EBITDA chain XXX period. basis of our of these points our X. process gross profile well quarter in which Additionally, enhance XXX improved in increased XXXX, profit ability improvement supply to has the meantime, been coming our business. additional our In refinance financial the information sharing to which forward look first months the before demonstrates the we and debt progressing of July our to

our Slide business solid. to of have fundamentals The SmartFresh X. remained Turning

a with all our We cover environment vigilant applications communicating in the their have been overcome provide and challenging customers cooperating to and to of necessary production.

and the I long-term these were weather crop delays related quality. in and drought sites, yields, impair mentioned and are Latin disruptions sizes earlier, warm some Example temperatures, exacerbated in Chile abnormally which conditions by experiencing particularly to America. of has As we are challenges that

be first Brazil the hail is some the facing that recover in delaying the entire average below harvest. which combination faced quarter. crops second Argentina’s and that precipitation, is of able for region quarter of to will well And their difficult the project season. growing we shortfall We production

However, the season than Latin that supply XX% in prior see could reduction a region versus more are expectations fruit for the American the year.

the caused these which XX% impacted agreements. provided the during we some As year-over-year first I Real as African customers quarter. service to South multi-year for in sharp growth currency difficult both mentioned, devalued order Rand the have points, our approximately our well revenue the temporary price times, exchange X support percentage movements, some Brazilian COVID-XX relief by during as In crisis approximately

with stay-at-home comment for medical those SmartFresh a solution care. Well, is a growth for in small our which for relatively ornamentals. equivalent and is a flowers cut global limitation was Its orders visitation this on and AgroFresh. category the EthylBloc, Finally, trajectory disrupted

the quarter, the in decreased same period year. EthylBloc prior first a in the approximately consequence XX% revenue As versus

business the first pandemic. period. XX% that X. in in pear impacting of due to was Slide conditions and largely revenue percentage the the apple a the Well, prior crops to versus revenue as mix the EthylBloc total Turning prior year Chile sales the high due is for was to quarter XX% end harvest year The the Tecnidex, contribution compared to our apple of of growing lower adverse impact of

focuses as team efforts. position different will California, us novel are crops expect the within and an organically to to the as years of and ahead. technologies produce markets that Last with I’m outlined adapt realignment and team’s crop culture, element novel our SmartFresh and the key such by supply for penetration important driven analytics we diversification the ways support long-term apples diversification Peru introducing Innovation in mandate of to as on remains our chains, that quarter, well fresh will Mexico. I this that greater drive a progress the beyond diversification encouraged creation citrus better introducing

with leading first were by adoption tomato Mexico developments for in the notable the and the is growing service of a in avocado quarter, that most supplier During a avocados SmartFresh the a engagement U.S. player tomatoes large in green Mexico.

the new Mexico to development Our iceless melons of Colombia pipeline related and the ready-to-eat for has business among others. projects broccoli, and avocado in year

crop inspection diversification the has Additionally, by solutions launch well that been team FreshCloud as will received FreshCloud the on Quality of customers. very such the focus

On the crops. expertise regulatory our new front, and we address continue to markets to and utilize new capabilities

with and on for quarter, we of during for potted blueberries the use in approval in of EthylBloc use the U.S. approval the first example, orchids Japan Harvista obtain For

up means ripening and allowing Harvista help time be customers slows to anticipating up Customers the XX Please flexibility shortages workforce to more especially optimum harvest potential can days Greater maturity. technology better on natural and color tree the control to size, and use can deployment. fruit pandemic the time harvest. window quality harvest labor that for X. to apples the days and and three predictability and the harvest develop their Harvista Harvista crews by flexibility turn efficiently, schedule process current more emergency. applied during adding expand to timing before Slide by can during

Harvista approval compared to was quarter prior XX% driven a XXXX XXX% in granted at season. of by following start the growth grew sales with the year. the the regulatory Growth remarkable of Australia first

South our disappointing partially this offset some sales. a double, Harvista than more brought incremental Argentina, which This quarter approval by in Africa challenges. Brazil season was and just where where sales faced

of focus implementation to started More we Hemisphere address harvest countries. labor in to our element via adding an as to aggressive and capabilities we campaign view by as as to relates yield initiative it for Northern Harvista. benefits provides and such the it customers have As broadly, benefits U.S. high-value advertising local we diversification such and as upcoming Harvista other significant following key improve started have FreshCloud crops, in on which the season, enhancement recent those our management cherries approvals a Chile, and blueberries, regulatory

as such needs fruit shelf objective are The regulatory demonstrate approval we of from year U.S., the key and into to use of a with Washington as hydration industry in address first we entry planning well this trials recent Harvista in Georgia, as our about. and we is reduce on blueberries which can the are customers life. longer the With excited this Michigan for

We are largest registration planning the which of U.S. producer is globally. extension second for our trials, to blueberries blueberries XXXX for based an Canadian on

growth We believe driven by its will for year longer-term approvals. XXXX potential Harvista in regulatory and poised be is additional strong

others are very years. now in forward the next United Brazil States in to apples about recent In for and and that to granted were excited fact, we looking blueberries two the approvals in come the

and Slide addresses X. an Tecnidex waxes. via to business diversification coatings established citrus with portfolio fungicides, harvest technology Turn and AgroFresh providing post crop the of

citrus were production adversely core impacted During by on close conditions. the favorable first in by quarter, a our two decrease markets weather significant of Tecnidex

Tecnidex As revenue a decreased XX.X% the period. result, during

quarter, business with was consistent this expectations. in the While our contracted performance the

of rain, Valencian industry Spanish losses low $XX hit Spanish pounds floating. projected estimated the the Gloria costs in Storm January, Gloria association In million Eastern and production the to decrease winds, this be citrus citrus temperatures, to season. heavy hail, Valencian of approximately bringing lost. snowfall, These The XXX,XXX XX.X% with costs farming citrus Spain, part

return is the XX% the Morocco. the heavier $X.X citrus an where by benefit that million Spain Despite we USDA decreased to which Tecnidex in extending and in in and these largest to tons, drought to in start to year, estimates growing the XXXX, fourth second quarter. new citrus regions Morocco, Southern capturing XXXX/XXXX In the the will which will have season remain of that market, we Moroccan season due growth key the the production metric optimistic is obstacles Morocco, our slow XXXX/XXXX Tecnidex of

our our customers, FreshCloud Slide maximize services informed freshness X. by to platform a and shelf we insights real are improves with that the chain better powerful of offerings. return. making life platform which through, their insights, the projected portfolio to is customer to digital is about digital more additional time and data supply produce also value provides enabling FreshCloud and turn decision Please of new providing existing launching

for to to of the to several new introduced recently new we’ve our benefit continue and ways We utilize customers investigate innovations platform. analytics our FreshCloud

tool to speed automated View, and and The called Harvest decision maturity assessment harvest which near-harvest increase fruit Harvista is the solution optimize making. an FreshCloud our first complements with of

tools excited season. are We northern be especially about the in these it will hemisphere place and upcoming for expect

Inspection, standardizes quality span second understanding entering This is current visualization rapid from The mobile which and new optimized and destroying capabilities quality access customer’s are produce we Quality the teams and the initial of inspection enhanced a we tool making. grower around FreshCloud deep quality for interest organization some that process is decision provide most with a by encouraged our we stability. of to address challenges as issues pressing called

evidence FreshCloud that is bring an we of and are marketplace. discussed innovations just solutions the oriented the journey service into evolutionary are

why discontinue the other not on our customers. solutions to we is always of predictive may for service get expecting. some hand, and the our This decided have response screening proposed module focus new the we are On

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

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

Graham Miao

Thank turn everyone. to afternoon and XX. you, good to Jordi, Slide Please

seasonal keep the harvest due please can noted, the first and to between our influence nuances Jordi quarters, outset, the our financials timing. second As at which in mind,

as result. to continue emphasize business a in half quarters versus should that We investors consider our

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

Excluding reduce Argentina conditions production. sales impacting of Revenue quarter the Australia. key adverse the harvest $X.X to of hemisphere Chile, decrease currency exchange, which first try million We compared markets, foreign revenue the as impact X.X%. and southern The Brazil, was by decreased result and in harvest timing experienced the primarily such XXXX. net of

a masked strong impacts Harvista, increased the Australia in which momentum and well these registration. as our to quarter, for the sales early Brazil XX% of in traction However, following as Africa, due positive in response new South

were to the prior Gross and increased Please Slide to million profit margin higher basis XX.X% year period. $XX.X was the $XX.X The continue turn profit we’ll put XX.X% it operations through place of first quarter and areas. versus expenses. supply and where of expect around And the the other million that for to to Gross we’re discuss warehousing the year XXXX in majority XXXX. at streamlining result in primarily the compared responsible our margin grade period. of try increase. packaging the gross include to in points balance chain XX, efficiencies end quarter we XXX margin the These of first margins was prior for among operating the actions

in of Research compared of period. quarter to in $XXX,XXX. first the In and non-recurring XXXX the we development $X.X first the quarter million prior of costs were $X.X incurred expenses XXXX, million year

be will cost business continue in to strategy. our as expenses, Excluding realized a fulfill important the And apples. the IND beyond we diversification provide of appropriate part remains support our IND of year, strategy continuous our to component will this savings initiatives. quarter these Fiber expect drive we that optimization non-recurring to of to majority first

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

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

XXXX XXXX with in and of in containment accelerated X.X% strategy savings. began cost SG&A Our

continue X% the to range balance our additional of XXXX, savings with in of we to Looking momentum XX%. the expect to

Please Slide to turn XX.

million in a of $X.X were and of was expenses of period. operating expense million. net $XX.X prior lower loss The million First loss quarter year XXXX improvement the that loss year-over-year compared $X.X net million drivers of in primary to $X.X lower interest the

in million period. of compared our and basis for XXX as year optimizing to Adjusted million our $XX.X work corporate improved EBITDA decreased the $X.X combination reflect to in the the margin Adjusted chain which cost EBITDA of supply hard quarter million $XX.X XXXX first quarter prior points, basis. the our

$X especially which XX, generate cost ended are Cash of to our and operating primarily million March during efforts, XXXX, compared in are the the the results with in operations for The the timing proactive leverage. control prior XX, XXXX. allowing provided pleased million $X.X operating by million March the were for which was We by months business to year. the tax same decrease period was year-over-year cash the interest payments, $X.X driven of three flows ended higher three months

Capital $X.X compared timing. XX, the million XXXX March in period to for were due the months year prior $X.X million ended three expenditures to

business with capital We range of to continue to light to expenditures expect from consistent sales annual X% X% our asset model. our

$XX.X a From a as of with balance XXXX. million. sheet perspective, March was million XX, $XXX.X debt cash term maturity XXXX in July, was loan Total

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

very and pleased the We chain, improving drive year. to the to supply support margin the efficiencies balance operations able were should in are we gross business. with continue of our of summary, for In which margin profile

allowing Additionally, and into in leverage our periods cost even of optimization carried XXXX lower us revenues. generate to efforts have are operating

top corporate vendors, We believe are the our priority. debt this resiliency in business is difficult by of is of understood very demonstrating refinancing well our a our the and completing environment a model

execute will structure We June the it that improves XXXX. have flexibility. a a before XX, capital position we way our increased provides and the on be to confidence in additional that In refinancing

forward investment reception community chapter the with achieve then its from a the to growth. next pleased in look putting position to are of business and the We

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

Jordi Ferre

Please are XX. of of pandemic our our the you, closing, economies light disruptions Slide employees to customers, for severe to all to service In turn Thank Graham. flexibility grateful tireless the we their is around causing that and global to world. in especially

maintain redoubled of known Over unmatched for. continuity that efforts is the our we month have AgroFresh half, to deliver the and and service past level

position is place assets in great with business the dynamic these Our in environment. a navigate right to

the become positioned that a our customers aligned regional servicing towards group local the limitations business more of are place, are common of the goal circumstances. the fortunate have that governments put committed national, employee, and individuals in well regardless has and with we complex While, of

With for please that, operator, call questions. open the

Operator

at will this [Operator you. we your time Capital. is Sweeney And Thank proceed from question-and-answer conducting be with question session. a Our question. first from Instructions] Gerry ROTH Please

Gerry Sweeney

my and taking Jordi afternoon, good Hey, for call. Graham. Thanks

Jordi Ferre

Gerry. you, Thank

Gerry Sweeney

on the side. start want I to revenue

lot which think bit Revenue EthylBloc Tecnidex, to weakness had some first also first EthylBloc… little QX and and of And these that a get XX% also in southern down we down moving you be – like the of So of QX. clarity. wanted XXXX. make had I sure, revenues then to a all from more half parts to Is of was then get in on about hemisphere would I that discussed parts was XXXX also half inclusive moving would

Jordi Ferre

that We America, not we or crop we not of below it’s going necessarily to revenues were happen overall going each which that didn’t fruit to sorry, in a going said what’s Jerry, volume one. we’re say XX%. – did What be the be to projection Latin to was XX%

Gerry Sweeney

Got impact how of much how is bucket the EthylBloc out to and you it. like are how in sort each much segments could of clarity revenue. have of on is so that little just mind, maybe a sort Tecnidex we bit those With can more going

Jordi Ferre

or are the the You first about breakdown decrease. quarter asking me

Gerry Sweeney

versus have year are parts. from moving be going How to what’s is those is last year? we to the or impact much Delta of going Well, Tecnidex Yes. several to down. those EthylBloc and on this going Because be each down

to pieces more of Tecnidex block we fruit down, be. couple out get of a EthylBloc have revenue I’m just have of down and what down, volume puzzle to trying have understand is the here to figure We going we

Jordi Ferre

would is this, of say the with be the as so in – the as about far business or then weaker impact, combination And weakness would of that. of that I more rest season of currency combination currency two-thirds impacted challenges combination America. So two-thirds that of in that some that’s actually have overall the and challenging in seen, two-thirds season well EthylBloc we Tecnidex is Latin less actually explain that and we

Gerry Sweeney

it. – And Got sorry. yes,

Graham Miao

I may Jordi. if Gerry,

part business. of is X%, for of So small X% your question our accounting business EthylBloc, EthylBloc our overall less X% – relatively than

Okay.

has to the Its starts start. And quarter. business that’s two season Tecnidex yet So main one. in fourth

we quarter first what in XXXX So the the and about quarter our the talked the first XXXX the season, for following year. business citrus fourth Tecnidex, quarter of the of mainly and spans that’s because

So to this still year yet is come.

So we’re for is to Latin And size the Jordi’s right, XX% like the crop XX%. America as year-over-year a for saying reemphasize, not specifics season. point just

Gerry Sweeney

looking some Harvista the have through at think Got to there it. then obviously, as the XXXX, see tomatoes. you’re obviously bigger just that looking are playing out, at That’s other Got field? labor for acceleration it. year you opportunities I COVID. a this with building and year other guess I and then and opportunity you Is opportunity an the What’s as helpful. harvest looking and avocados, have Harvista you’re some And biggest fruits,

Jordi Ferre

think provide talking be for a year benefits for it’s about one a the going to labor We of and to for is also, the product. good sense where remain We’ve these confident periods Harvista now in good and about year the Harvista of this we the we number is better environment very Harvista management. it’s that of that think Harvista a been

And a certain couple having We call, on on of by heard our FreshCloud, mentioned about it’s manage, labor more we a parts. manage threat caused message a around situation the of put through Harvista. resources. and that, better have lack emphasis the about It’s the the more COVID-XX, reporting and management ideal with we labor mentioned of execution so as you to very to have that. less believe we And putting

if product. you optimistic this that So year XX% I’d saw we’ll we with this first remain in to just like And increase remind array.

Gerry Sweeney

on Any comments that two Then just litigation you quick absolutely. on No, that more Yes. questions. the can front? finally, make

Jordi Ferre

would today, continuing say We working obviously continued. has I don’t that process updates only any the meaningful we’ve been but on have that.

Gerry Sweeney

meet gives you’re or an for of parties And discussions Graham in then a parties are mentioned to I What mean refinancing ability providing opportunity. just deadline you confidence? you with confidence increased to guess some multiple the and looking your I or there June that provide funding. XX finally, multiple

Just anything you front be would great that as can on you. provide well. Thank

Jordi Ferre

can Graham And that. add. take can I Yes,

and because prospects into I be confident think, I what us look we X, publicly before will right that now obviously Graham? confidence so details, go and we very done gives are July basically active that a yes, are go is but that in this to say good. cannot process

Graham Miao

also to business our advantage, you global we the services a our all continuous we our and and interest turn the structure the pandemic we even we Yes, by year this that requests gross needs. corporate provide lower to margin revenue and address full it And right, customers see superior very in at time of depth firms optimistic under high of are get encouraged can are as as to improvement very refinancing control, including indeed continue attractive, of for we amount and by business. our and a we’re quality costs and solid cost is performance the then very in this our from

Gerry Sweeney

helpful. I’ll jump very That’s it. back appreciate. thank and Got you. I

Operator

our question proceed H.C. And from Please from Dayal is question. Wainwright. next Amit with your

Amit Dayal

Thank you. Good guys. afternoon,

are speak for this gross allowed that could can and the we variances? improvements going efficiencies COVID in what expect improvements of you environment. this sustained some on, sort margin be Should supply where chain forward If margin

Jordi Ferre

yes, things, be can the things, different with hi, maintained, about can gross It’s of work the not I thing, be on pricing one different be cannot in – Jordi hard of external, thing, efficient part It’s whether think you margin contracts seen exact right. of a contractors. to to possible. here. It’s To gross what be saw different here. It’s you’ve a first moving a production details not the improving in that we internally combination your be lot it’s of a But question of just as some transfer it quarter. that, and things. the from intercompany will in improvement ballpark one of lot It Amit. margins as so this

Amit Dayal

potentially of you. to Southern harvest you’re then And Great, the sense how give quarter. or related move much on potentially some I you be rest conservative could thank delays salvage to and the Hemisphere in write salvaged of of we trying a year about view, from just trying a sort know off optimistic But of just be us it if should second point and could look at the basically?

Jordi Ferre

a of as of call is couple Well, one in quarter the represents season. sit reminders we half Amit, the one as

we’ll proper give So quarter, the works. season in June, second how balance of a

As will anticipate we at be first And my quarter in number we of explanation, what one. into – that we’ve parts seen I – two. my in second I the quarter, recovering least explaining number the

Hemisphere. come most revenues reminder, our Northern from a As of

the Hemisphere – Northern a could season honestly sure. in shortfall Amit. are towards And Southern can working So in that, Hemisphere compensate good for obviously a for we

close We in very working Hemisphere. sure the are and Northern best lot in details of very a we – that possible to season very, make to have very, we’re

Amit Dayal

guys. my I so the Great. offline. have I And questions would rest that’s Thank with follow-up all you of much.

Jordi Ferre

Amit. Thanks,

Operator

session. end the Ferre our Jordi closing And we have reached of question-and-answer I’ll to call remarks. [Operator turn over the Instructions] for now And any

Jordi Ferre

for to being we They more in And that our everybody time we’ll I that rise talk employees. our want interest thank future. you’re And showing able appreciate to occasion and you. and to thankful support this thank Thank to interests than I as company. like servicing than, the ever to continue customers. I our again the continuous before would in always,

Operator

disconnect this And your conference may this for participation. time. at your and lines you you concludes Thank today’s

AgroFresh Solutions (AGFS) 11 May 202020 Q1 Earnings call transcript