Q3 2020 RiceBran Technologies Earnings Call
Our commodity exposure installed new leadership and were able to reinvigorate the operations at Golden Rich mitigating losses from the mill right at the end of the third quarter.
Fourth I believe we are on a pathway to generate positive EBITDA or in the foreseeable future.
Despite the continuing drag on profitability from Golden Ridge, adjusted EBITDA losses declined to $1.8 million from 2.9 million in the second quarter, reflecting lower gross losses for operations and the reductions in SDMA.
With our EPS DNA now running.
At less than two.
$2 million per quarter on the results. The Golden would you expect it to improve adjusted EBITDA losses should narrow even further in the fourth quarter and we remain on target to achieve positive adjusted EBITDA in Twentytwenty wrong.
Finally, we continue to explore strategic.
Options for the business and while I can't announce anything specific on this call I will indicate that we were primarily focused on further development of our food ingredient business and.
Utilizing existing assets and capabilities to provide added value solutions derived from prime regret games crane.
Expectation is it will be in a position to provide further details of the pathway forward early and Twentytwenty one.
I'm not going to pass the call over to Todd for some more details on the financial results Tom.
Thank you Peter.
Well don't reach continue to weigh on the overall results in the third quarter. There were several positive developments worth highlighting.
Most notably.
Growth in our profitable core rice bran and in G.I. businesses.
Reductions in SGN a.
And improved cash management.
Due to these factors adjusted EBITDA losses declined to 1.8 million in the quarter compared to 2.9 million in the second quarter and $3.4 million a year ago.
And with expectations for further improvement from Golden or large we think adjusted EBITDA losses should narrow still further in the fourth quarter.
Moreover.
We're in the midst of a rigorous budgeting process and while we're not going to discuss our 2021 outlook on this call I'm confident in our ability to maintain sufficient liquidity and to transition the company to positive adjusted EBITDA in 2021.
Let's look at the Threeq numbers in a little bit more detail.
Revenue rose.
Revenues of 5.2 million in Threeq, you 20 decreased 3% from.
5.3 million in Threeq you 19.
The year over year decline included a 50% drop in revenue is from Golden Ridge in the quarter.
Which was only partially offset by the combination of mid single digit growth in our core rice bran business and mid double digit growth in JPY.
Golden ridges decline was due to high levels of downtime as we cannot acquire rough rice to know economically for much of the quarter.
Rice bran revenue growth on the other hand was driven by strong demand for our high ASP high margin SRB derivatives product.
And our organic SRB derivatives in particular.
And EMG eyes, 50% year or near 50% year over year growth reflected our strong successful sell out of an increased capacity production.
At the mill.
Year to date revenues grew 8% to $19.4 million from 17.9 million in 2019.
Gross losses.
Gross losses were 795003 320 compared to gross losses of 359000 in Threeq you 19.
The increase in gross losses was primarily attributed to gold and rich.
Due to the unusually high rough rice prices.
Okay support in sales teams and we've materially reduced our expenses for outside consultants legal and accounting service and short would become a leaner more flexible and more productive organization.
As a result of these actions year to date SG&A has dropped 34% to $7 million from $10.4 million in the same period in 2019.
And we're confident that in 2021, SG&A will be approximately 50 per cent of 2019 levels.
Net income and adjusted EBITDA.
Despite the lower than expected revenue net losses narrowed to 2.8 million in third quarter from $3.3 million a year ago.
Due to a 50% reduction in SG&A.
Year to date net losses were 9.8 million compared to 10.2 million in the comparable period.
Net losses in the quarter included.
About 96000 in interest another.
And about 865000 and D N, a and non cash dot com.
Net losses year to date included about 284000 in interest another and 2.8 million D N a and nonstop cash dot com as a result, adjusted EBITDA losses for 1.8 million and three 220 compared to adjusted EBITDA losses of 3.4 million and three Q 19.
<unk>.
Wow and year to date, adjusted EBITDA losses for $6 8 million compared to 8.1 million in the comparable period of 2019.
As we've said several times on this call we expect to transition to positive adjusted EBITDA in 2021.
Liquidity.
We ended three Q 20, with $3.9 million in cash and an incremental 1 million available borrowing capacity.
During the quarter, we drew down about $1 million in term loan funding and we raised about 700000 through our a T M.
We're intensely focused on maintaining adequate liquidity bye.
Reducing operating losses.
Exercising strong cash management practices and utilizing our term loan and ATM facilities is necessary.
And through these means we believe we can fund operations until such time as we transition to positive adjusted EBITDA.
That is our prepared remarks.
<unk> that's open the call for questions.
Thank you if you would like to register a question. Please press the wonderful a metaphor on your telephone.
<unk> three times, Tom Technology request.
Your question has been answered and you would like to withdraw your registration. Please press the one.
Three.
One moment please for the first question.
Our first question comes right.
Brian Meyers Lake.
Lake Street capital markets.
The question.
Hi, guys. Thanks for taking my questions. Just wondering if you can give us a little more color on the improvements at M. G I, especially the capacity expansion.
We made some rather modest capital investments in M. G. I at the beginning of the year, which will it essentially enable us to run.
Both sides of the mill at the same time.
And.
As a result.
We were able to.
Significantly increased capacity with basically the same sort of staffing structure and what we did in the second half of the year was basically we we were able to fill out that capacity.
And.
That's where we're getting the growth year over year.
Okay. So that's helpful. And then what are the opportunities to crossover customers different products from different segments similar to what happened with the MJ customer this quarter.
That go ahead.
Sorry.
Oh, no I was just gonna say the opportunities to cross sell the significant.
Across old appropriate lines and.
You know enjoy customers, we've been able to so.
Right two of Goldman rich or the secure for the volume so.
Somebody that is either a key part of our focus but.
One major customer of sponsor glare enjoy that is actually now byproducts shrimp.
Three operate three of your operation come companies stabilized garage Brown.
M a G I products and products from Goldman Ridge.
Okay. That's helpful.
And then one of the production rate looking like quarter to date at Goldman Ridge did you guys see any lack to supply issues carrying look fourthquarter here.
No I mean.
With new crop coming in at the beginning of the September we or.
Any completely sort of different position.
In terms of the supply dynamics for rough rice.
We've been able to.
Significantly limit or commodity risk there.
Uhm work down prior commitments that we had to work through and now we're operating with a balanced book, both long and short.
Going forward and we've.
We've had improvements in the yield and at this point.
We're operating at a firmly double digit Patti margin for the meal.
Okay. That's helpful. That's all I got thanks, guys.
Thanks. Thanks.
Thank you.
As a reminder to register for a question that's the one.
And your telephone.
Our next question.
Caroline Smart.
Okay.
Akane Vestment management.
A good a good evening gentlemen, how are you Todd I just had a question about.
Is there anything on the horizon talking about.
Divestitures manage strategic planning that was talked about on your last call.
<unk> as I mentioned in my comments as the.
We're not in the.
Physician those.
Nothing very close and it'll be towards the end of the year when will rely on the strategic plan and if.
So.
Things are changing the asset base, so there's not much more I can.
I'm sorry.
Oh, not a problem just wanted to check thank you.
Thanks.
Yeah. Our next question comes from the line.
Okay.
Especially with your question.
Could you list Nielsen lifting.
Okay. Good good that sounds good guys and maybe a second question may be related to the sales.
And specifically to I think more along the lines of the derivatives I've heard I think the last call it even a little bit more of this call that it seems like some more sales are being driven from.
Maybe you're more you know.
I guess value added products, such as you rise valuables or fibers your organic ingredients.
Does that look currently as far as like the sales that are coming in is that something that.
That you expect to continue with the current customers that are driving that business and is there a plan of action may be from a sales site.
Really drive the increase in sales on those higher margin ingredients, specifically to soluble fiber.
And the organic products.
Yeah, we don't have any questionnaire to keep focused and I was.
We all.
Gross.
Over in the in the short term is coming from existing customers.
On the yoga.
We have been some what.
Capacity constrained by availability of raw material. Okay. We've done we've done a lot of work to ensure that.
We now have we've actually triple a availability of the feedstock.
And you know, we don't demand to sell the house.
Certainly we're very focused on the.
Yeah, the supplement health food site and we're.
And where we've got so good reach and that's our available the news to improve we remain very confident that we can easily sell out any increased in volume.
We got a lot of pent up demand.
Okay. Good good that's good to hear and then I think just one final question to kind of tell it and tell and off on that on the sell side.
Obviously covid, it's been a challenge here since February of 2020 moving forward with.
Guys getting out there and seeing customers and actually you driving the pipeline to develop.
New M P D, our new product development.
Did you guys see it like a turn on that are you still guys getting out and seeing customers. You know has the pipeline look for like new New P. D.
I I I think my sense of of Lubbock, Lubbock customers Ah Ah still restricting access onto the site.
Sure I've done so I don't expect that to change I think what's happened though.
Over the last six months is that.
Customers of work time to way of working remotely.
We started to be able to work remotely you know.
Every one of our sales people on technical people live on the version of teams zoom.
Sure or whichever take note that you usually go out the rest of us up.
And I think customers are recognizing they count spelt.
Development or they'll have nothing for 2020 bones. So we're starting to see a pick up in activity. It's just that we're doing a lot of that.
[noise] remotely and virtually so we aren't seeing activities, but just in a different way.
Okay. That's good.
And why I actually had the sales.
Alright, just thought I would add I, just actually hadn't sales guy talked the other day and he came to US and he said you know I did for sales calls today, there's no way I could have done for sales calls.
In a single day before being remote.
Sure I think people are just not being quicker goldfish.
Yep, Yeah exactly.
I take just one more quick question more and more macro kind of looking at you know pet companion.
An animal versus human nutrition, right now do you guys kind of C N.
So Dan.
Hello, Dan Smith your line is open.
Our next question comes from the line of George Melas with M. P. H management. Please proceed with your question.
Thank you.
Good afternoon.
Hi, [laughter].
Which means.
The rough prices turning into more of the higher priced components.
And Thats generating.
A solid.
Double digit Patti margin.
Bryce was not available right at the end of the third quarter.
Subsequent me as well we've made some.
Management changes, which when you get the right process in place Money's Bond Iraq people you know we were expecting to see a steady improvement in both the Shreveport, and then yield to the fourth quarter.
Okay.
And so.
What is the chest to get me to a level of efficiency.
Oh, no I mean, other plant capacity utilization estimate say, 75% or higher.
<unk>.
Is it a matter of sort of ramping up sort of in a progressive way just get.
Get success after success and getting.
Sort of.
Increasing capacity or is there a specific external hurdle.
In place, that's working better and then and that's it it's simple blocking and tackling.
Okay, and you have the feedstock then to sort of.
Support.
Talking brought him.
Yes, yes, we we do.
Okay, Great and then.
Quick question on Dylan Dylan seems to be sort of one of the sort of the pearls of the company.
On the on the Hill shall we did operating.
I think that that facility's operating very well.
Yeah, I'm a great.
Okay great.
My question.
Georgia anything in general all of our facilities are operating very well.
So I think the overall businesses.
As in good shape and I think it will.
You will see again, the soups sequential improvement since we moved into 2021.
Thank you.
Okay.
There are no further questions at this time I'll I'll turn the call back to him.