PYYX - Earnings call 3 2022 | Pyxus International, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to today's Pyxus International, Inc. Fiscal Year 2022 Third Quarter Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Tomas Grigera, Treasurer. Mr. Grigera, you may begin your conference.

Tomas Grigera

Keith. you, Thank evening and this Sikkel, President our With Landsberg, are our CEO; Flavia CFO. and me Pieter

Before we begin to discussing our financial results, few cover I points. a would like

these express course You uncertainties as well that statements. risks events and are forward-looking These actual this during involve hear fact. that expectation and the may historical differ are may call intention cause statements those materially that results and statements a not as a belief, or of from of to forward-looking number

These in the detail, Form or circumstances based. any statements and our change risks on undertake described with along assumptions made conference on in in which change recent these statements not this and uncertainties any our in are call to management's other risks forward-looking reflect are or update XX-K. most SEC, expectations uncertainties We do with any filings including to

amortization, including accepted EBITDA should to financial measurements. interest, measures considered Included in taxes, discussion be of are generally that of in non-GAAP of United States and the alternative referred principles not today as be not results our U.S. operations earnings before may an adjusted EBITDA, commonly under measurements, accounting GAAP to call depreciation and and as

XX-K the XXXX, disclosures qualified a connection our be in report start not measures, and reporting, And website with periods Chapter preemergence for including with the regarding at fresh Form start the of Table, Pyxus to and is in filed of post-emergence reconciliation case other XX www.pyxus.com. In non-GAAP these available on recent detailed emergence from comparable. fresh the the reporting, as most our due SEC. application may

Pyxus that an its other and of aware reproduction unauthorized The be should replay provided reproduction contents. replay, prohibited. this been authorized call, accurate or not as has may reflection any call conference not rebroadcast, than be International, Investors transcript the of conference is strictly this other by of

Pieter. over Now, the to call I'll hand

J. Sikkel

this for evening. everyone, joining thank Hello, us and Tomas. Thanks, you

pleased continued of are company's and a forecasted to that gross margin than And We volume, XX, to was inventory as XX% customers the operations specific December more on revenue improve demand. basis. to near-term meet XXXX, our committed leaf year-to-date of

In inventory targeted $XX to the the and year-end. and range of is $XXX fiscal our near of end low year, uncommitted range prior is addition, target through decreased end million near low remain expected compared our of our between million the to

the export the We remain our proactive to to lack vessel customers COVID-related with accelerate in container and utilize and while expedite delayed particularly working logistical to certain product shipments for ports efforts by continue processes. availability challenges, of additional

however, do, fourth linger inventory for XXXX. We expect into will the delay of shipments committed fiscal the these our challenges of the which year, quarter XXXX of to first half of remainder fiscal fiscal from

be and revenue fiscal $XXX billion billion, $X.X adjusted As to between between and estimate EBITDA XXXX a our we our million to million. and be result, $X.XX $XXX

facility. focus the on liquidity prior position the $XX.X ABL evidenced of availability million, by maintain the increase of million our credit We an $XX.X year, to period, of $XXX.X million compared and during under the cash

$XXX extends in rate credit existing PNC a interest ABL credit million credit maturities February has it $XX replace Bank compared our upcoming capital address The that in we replaced. ABL credit entered our into lower maturity proactively to to million To new structure, ABL facility. XXXX, PNC a facility and facility with facility ABL the the

flow-negative of we term the January sale prepayment completed pay XX, we strategic delayed-draw operations. addition, cannabinoid began our Pleased FIGR effectively of concludes XXXX, of million the XXXX. the a In loan that Norfolk down the $XX.X December to assets in exit Inc., with cash on which

or XX.X% our of the Due activities, to the SG&A cannabis Canadian $XX.X the sell to period any in of completion With the our compared no million company same or restructuring the subsidiaries prior capacity. sale, expenses of produce year. decreased

We items enforcement In foreign the delays SG&A potential $XXX.X we and XXXX, of nonrecurring revenues, through adjusted Humble million, for continue future Co., in which between offset EBITDA interest with excluding year resulted in e-liquids be Juice million in on to industry, activities November and associated in Humble. have fiscal revenue SG&A continued our currency by third royalties for EBITDA adjusted partially reducing changes of lower-than-anticipated expense exchange lower-than-anticipated and $XXX quarter. disposed expect LLC, exchange our further to the rates. In the expenses

manner. unveiled social December and commitment governance we to a further our operating our environmental, demonstrating in framework, responsible XXXX, business our

coordinated standard the of Additionally, global our recognized address the were climate security and for environmental to deforestation. reporting, by efforts we CDP, water change,

ESG team achieve I'll the a the to and strategy, a energized as purpose turn together over better implementation that, of by financial is update. our of work we our business to world. With of strengthening Our Flavia growing provide our to it Flavia?

Flavia Landsberg

for Thank X $XXX.X was XXXX, prior XX% the our million, you, compared December ended With quarter Pieter. regards results, other increase to third the months revenues and year. sales operating XX, a to

was pandemic of This instructions in $XX.X customer volumes of that leaf and increase shipments due Africa in shipping in Africa and were timing fiscal shipments. year larger from an sizes current increase into from delayed million the crop XXXX XX.X% to quarter, by COVID-XX

in fourth a the byproducts decrease product from the a concentration South average fiscal This mix, X.X% in price, deconsolidation by cannabis was in quarter by Canadian of leaf and of sales America increase XXXX. subsidiaries higher having partially the a offset driven decrease of

sales, product for the due were increase the ended sales and a and to the XX, increase revenues. Gross of million, expenses, the concentration were the in other months X the services XX.X% partially December year. prior due decrease X% and green XX.X% to to lower XX.X% SG&A kilo. SG&A were and compared year. was This months to the in prices fluctuations. This mainly XX, XX.X% XX.X% byproducts, to revenues, currency months $XX.X a a XXXX, per for compared offset costs to as sales, XXXX, goods ending These as a Cost conversion foreign deconsolidation the the of to of in increased to decreased was profit, decreases decreased decrease year. mix percent by for compared higher operating XXXX, increase prior the X compared $XXX.X a percent of X savings of fourth was and million, sales the of mainly sold decrease having prior year. tobacco December in prior This restructuring higher from subsidiaries to XX, initiatives. quarter December cannabis other operating XXXX due Canadian the the ended expenses

mix, tobacco affected costs. crop legal The including size various company's by interest prices, currency quality foreign professional and crop and factors, customer seasonality, requirements and and are rates, liquidity green

credit As XX, available $XXX.X $XXX.X lines. credit the totaled of under XXXX, million, including available December company's cash lines of foreign million seasonal and

excited the our about We the business. And future that, please on open Keith, line for are of questions.

Operator

Intermarket. Instructions] [Operator with first We'll Bari take Yasir question from our

Yasir Bari

first think And you what see your so the on end seeing on just or based with what picture far theme. we're quarter? can do the it. mean, of are a of give visibility, I I that the -- in been halfway higher What seeing delays? So a lower end shipment can I you you up did you'll recurring terms us in guess, you're then of you in QX guidance But question, know range? comment you QX? it's into

J. Sikkel

X first increasing throughout America. quarters. delays X bit odd a quarter had actually South we been the unexpected shipping of totality, the In year mix through course, out volumes fiscal in But the little was because we've of

quarter quarter quarter So quarter This X, X. a X, year, lot more those it's normally in X. of X was ships, a we South see so that America where should in through quarter come event,

quarter Africa seeing to heavy $XXX early delayed and quarter shipment U.S. shipments through X is be of fiscal as into us, always For of the period. X, what But we is a that part next million progress year. expecting approximately we're we're

still still And that that, but along. from flows, seeing origins we're the we're -- -- rolling general, every certain than in moving rolling week -- shipments other steadily seeing

So bit delaying same an odd fulfillment we've it's We're delays, growing. the and fiscal year. got time, plan these year. kind a our it's at But of of within the of the

Yasir Bari

said. know if not worth think that, end visibility. the curious take I'm of And before to you $XXX XX? your how March I into get million do that's that? do you you delays going know do know next just how And what there's you place How we see. year? think that, that's as I how of you to

J. Sikkel

got the product. It's we've packed. Well,

One of inventory got committed the quarter, we've this to compared things that nice level high -- a of years. most very

final So in is product shipping instructions waiting some but It's companies. the containers allocations the shipping of the by and of we're the for place, ready.

to be There take those still with believe not fully And in just there shipments. to some also order we some products get just, that to to that is sufficient those certain customers needs time now, place up. there are -- right procedures complete done is

it's done. of the a going, procedures where it's and timing product. So we have We simply those to know get matter

Yasir Bari

have -- have -- then go comment there this, that you and doesn't but converted good balances but when because mind, for And on like should are your delays, haven't into to up I my you mean, I Okay. feel in why? shipment that don't cash, seem I happened. answer inventory a Can

J. Sikkel

Yes.

inventory, level of not the you're moment. inventory seeing levels higher uncommitted significantly what a think partly we I have of the -- low such at because

So at we many been for the our many, where of range, haven't years. end bottom we're many, right

very is committed of percentage the So high.

it's balance within secured that's our able Now, third-party supply supply sheet. And ventures is as we not also from to that order our additional inventory joint or commitment. well. on our have be to in It's

Yasir Bari

Is JV inventory that inventory? sheet the balance up quarter-over-quarter,

J. Sikkel

a it's get Certainly, we is a all we inventory the for we're of containers. and very and cycle trying globe. have number around there vast really is require, majority the don't the various committed, and for it but that that, confident just here of so JVs out matter and exists, to I the vessels waiting you have that

Operator

Northeast our question with Investors. Bruce Monrad We'll take next from

Bruce Monrad

questions. A couple of

level. curious on So I'm your customer

So on demand do they about delayed inventories, shipments since is what are now you if there other demand say destroyed? down what drawing that getting years, Or surviving? X -- they're at but not end? not they're Or point, some the how -- at if

J. Sikkel

let's it's an to inventory. our our it months -- work, XX XX of carry, months depends on somewhat, size customers That's of as excellent But normally, well. and with the how start customer generally that a inventories over bit But little question. customer

they of although to in product, basically, during depleted they to to the So they amount somewhat entire COVID, terms increased happened utilize through can inventory were be caused years. What of go consumption those blend that that expectations, preferred and year, in months an inventories their relative and holding.

So of inventory in year. situation reductions, we're into obviously, those strong we the where and the new do a demand, moving new sitting crops as because have, we're

-- of got the there ship -- to We've matter clearly, that's delay. are actually it, the lot pent-up availability of rather when customers it And the it's move it's got pack interest containers requirements. a customers you the and demand of the yes, the and that really product creating is than but a pent-up ordering a of

Bruce Monrad

Okay. to booking normalize fiscal And don't worth customers of be product for like and of know of said I I times weeks be 'XX, know, XXXX, that that on lead you thing? of if that. mean were became are sell year X would weeks your to Does X ease what But one weeks, your fiscal competitors -- the months' would able X would to in that base mathematics. don't sort that in year out XX

J. Sikkel

sitting its is, almost a think behind I I that. stage, compress mean, of areas I looking as simple again. this already really And some like We've are cycle answer got lot other will that schedule. Brazil said, a normal quarter at is the

we'll And the get issues that some we the of and spring-back to more in other of and start cycle moment. chain COVID that to back when Omicron see supply various these at stage, some then at reverse yes, normalization, we're and

Bruce Monrad

was and And hand XQ? to others, guidance, much was in it how Qualitatively, it much in of XQ? of the off. Two it Okay. revision how the I'll

Flavia Landsberg

from be the shipments QX combination. restatement delay's happened Well, QX. major QX the the delayed our ], it's delayed of It's and on guidance. will for The some a is Africa, South is What of that part U.S. a and right? on got that America into heaviness us [ force of combination shipments in actually

Bruce Monrad

tax one, what tell Okay. your should on expense does income All that Can work the me curious. line? in right. you just but I versus And line, expenditure? know was expense last goes at how I just that this, on

Flavia Landsberg

great a question. that's Yes,

and to due methodology, since for previous accounting is, changes happened now we what in the actuals. some So estimations, in quarters, do the we did

changes an Our actually in is estimates cash okay? quarter accounting tax $XX true-up year-to-date, year a expenses There no between movement. with $XX This was was for it's for So million. this our taxes. million the and of aligned

Operator

We'll take Capital. White our next question with Nut from Tree Andrew

Andrew White

still, and stated guidance look be revenue the implied you that, the know as updated that demand pretty a to to said the But is this seem answer think, Now mean, at choke the the availability I question. that by on I is say you ships, not fair would really -- the that this it point whole, from light I year? your customers. by of or EBITDA to you your and

to I make back, holding this? sure but question. be look seems like first is would that want mean, is what's you it imply you So that. to of lack my I that at just understand I how And yes, shipping

J. Sikkel

the pleased Andrew, these had, would the expecting expect see not shipments always We We've shipping certainly be our two. actually that continuing. and additional as expected light due or as last the very over not Yes. delays from demand year. got we're we fast that growing it an and looking forward interest we our quarter that been we've I product think a customers to quarters, out rolling X as with product. to in -- to we We're the

definitely side. yes, it's on the So light

Andrew White

this you're like better, -- -- it -- Okay. what -- Do shipping I in of, about a is regions to you forwarders? it just, experiencing. typically of do curiosity, specific then in shipping, is little like just, use place? -- it geographically availability a and sort your Or to concentrated sort secure Or like shipping? how any procure talk of I of, you -- just like do understand lack That's helpful. you how guess, you And unavailability when is

J. Sikkel

rates. generally, happens, they with own And their certainly larger they Well, have what our freight shipping global globally with customers, companies. agreements agreed have

us, when getting they to end a what we instruction up So happens, from shipping come them.

we in maybe order the what to So freight. company, the Maersk, bookings to basically, whoever coordinate move get it And and containers maybe CMA, with but shipping vessel. you they on a is product, that be, we it's want that happens get pay maybe might

have international generally delays for spot that the the that or customer containers or in in Now particular come globally there's rate from that, gap big the doesn't freight freight line the a has agreed rate fact between the -- either situ particular port that shipping market. country that and

be normally containers and then we customers correctly. documentation And then themselves. just happens stuff than with containers get and in book order is, able out. getting end to actually what them we vessel would, up And shipments certain those we that fewer on get and coordinate we containers And in to a the fumigate vessels have with order to load

their then entirely So it's in hand.

Andrew White

Actually, let a my There's of topical. will last -- more, me this one. squeeze obviously in inflation very be and one is lot

really talked inflation. not just there's inflation, that's about transportation your inflation, You There's inflation. problem. sounds energy It like there's material labor

ability have about? it's do sort margin to there so seeing, is you're end something you Or to the where anywhere so or compression concerned your think mean, not that sufficient to up and you're inflation I customer, you inflation? do cost worried pass you in business about seeing whatever due of

J. Sikkel

Yes.

cost I what crops significant we in there significantly inventory basically crops you see we significant in think the increases and into in we're up has XXX%. pricing from year. What farmers. And we're increased, as and 'XX end purchases certain considerable packing the what well. to fuel crop increases are we're -- inflate-ory of effects the as procuring going at the expecting is said, have we're now countries. Obviously, on as Fertilizer for the XXXX, going the

forward. now, grow customers is as to procure Now obviously and price those crop that to our inflationary the business, -- what on we job increases will it pass go be our and

in be of years, of So increases X part crops. will upcoming but major kind inflationary the the we're year's between

Operator

presenters and question-and-answer this or Ladies this the to your conference for back today's gentlemen, concludes At any turn I'd like additional closing session. time, remarks. to

Tomas Grigera

on through Tuesday, you evening. X:XX available conference our participating call interested our for person call. p.m. for Again, this in will joining Thank call thank for you The XX. any remain February for playback

Operator

conference. this participation. gentlemen, today's We and appreciate Ladies concludes your

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Pyxus International (PYYX) 10 Feb 222022 Q3 Earnings call transcript