Q4 2020 RiceBran Technologies Earnings Call
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Good afternoon, ladies and gentlemen, and welcome to the Rice Bran technologies fourth quarter, and full year, 'twenty and 'twenty earnings call and webcast. At this time, all participants and placed on listen only mode and the floor will be opened for your questions and comments following the presentation and.
And now my pleasure to turn the floor of it to your home hosts Matt Chesler with F. N K IR, Sir the floor is yours.
Thank you Catherine and good afternoon, everyone and welcome again to the Rice Bran technologies fourth quarter of 2020 financial results Conference call.
With us today are Peter Bradley Executive Chairman, and Todd Mitchell Chief Financial Officer.
And remind listeners that during the call today management's prepared remarks may contain forward looking statements that are subject to risks and uncertainties management may also make additional forward looking statements in response to your questions today.
Therefore, the company claims protection under the Safe Harbor for forward looking statements contained in the private Securities Litigation Reform Act of 1995.
Actual results may differ from those discussed today and therefore, we refer you to a more detailed discussion of these results and uncertainties and the company's filings with the SEC.
In addition, any conjecture and debt to the company's future performance represented by management include estimates as of today February 25, 2021, and the company assumes no obligation to update these projections and the future as market conditions change as.
This webcast and certain financial information provided on the call today, including reconciliations of non-GAAP financial measures to comparable GAAP financial measures are available at Www Dot Rice Bran Tech Dot com and the Investor Relations page and this time I would like to turn the call over to Peter Peter. Please go ahead.
Thank you much and we welcome you and Rob synced to the rise from two.
Good afternoon, everyone. The.
The fourth quarter was the productive for widespread the notable improvements for the financial results on the school the meaningful transition within the company, which reinforces my confidence and our emerging strategy the transferred and rice bran into a high growth high margin specialty ingredient company.
For the past six months, we successfully and implemented what already referred to the stage one of this transition.
This required tackling the immediate the imperative to improve financial performance and initiating a broad the change in our mindset to become the value of the suppliers of specialty food ingredients.
And as we've discussed before Golden Ridge created the significant drag on that business through 'twenty and 'twenty.
And we have the towards the end of the third quarter, we installed new management at the mill and implemented the better structure for ROI sales and procurement and this drove significant improvements and the mills operating and financial performance and the fourth quarter.
And that's important and stuff.
How 'bout milling operations at Golden Ridge and the.
And Gi operate more effectively.
We also reinvigorated our special ingredient focus for <unk>.
<unk> core stabilized rice bran as we referred to it as I saw the.
And the S. L P derivatives businesses successfully accelerating growth and enhancing margins for these businesses and the fourth quarter and.
And this momentum will continue into 2021, and we believe bill.
So how do we achieve this simply put it is the mindset mindset transition to specialty ingredients the wood.
Specialty is often used and the food ingredients will.
But let me explain what it means in practical terms to accompany the like ROI spread.
Simply put.
It's the change event the emphasis to margin from volume.
The higher margins come from differentiated the ingredients the <unk>.
<unk> hi of value to customers.
We transitioned to this mindset of specialty ingredients and the fourth quarter by expanding the availability of of hard margin and.
And so I'll be derivatives green lighting, new hire other value product introductions and implementing a customer focused sales structure.
And what should buy of margin based incentive program.
And as I said it was this change of mindset, along with improved performance of both the milling operations, which drove the significant improvements and our financial performance and the fourth quarter.
And now with phase one of our turnaround complete we.
We've set the stage for the next phase, which will see us rolling out the series of initiatives to accelerate growth.
Tradition transition to profitability in 2021.
And we'll highlight some of our phase two initiatives and a minute.
First let me have taught revenue some running through the numbers in more detail.
Good afternoon, everybody and thank you for taking the time and join us.
Positive revenue trends and all of our businesses lower losses from Golden Ridge and.
And a structural reduction in SG&A came together to drive significantly improved financial results for us and the fourth quarter and.
Gordon Lee, we took significant steps towards transitioning to profitability.
<unk>, our adjusted EBITDA losses to 932000, and the fourth quarter.
That's down from losses of $1 $8 million, and the third quarter and $2 nine and the second quarter.
Looking at the numbers and a little bit of a greater detail.
Revenue.
Total revenue grew 17% and the fourth quarter to $6 8 million from $5 8 million a year ago.
For a 10% increase for the full year to $26 2 million.
And as Peter highlighted.
The refocus of sales and operations on our core SRV and SRV derivatives business paid off delivering another quarter of double digit revenue growth driven by FRB price increases and strong demand for higher asps and higher margin SRV derivatives.
We also turned around operations at Golden Ridge, installing a new management team that was able to deliver higher productivity and each month of the quarter with progressive improvement in onstream rate milling yield and hourly throughput.
And last but not least we saw M gi generate over 50% growth and the fourth quarter.
Gross losses grew.
Gross losses narrowed to 47000, and the fourth quarter from 600000, a year ago.
The gross losses for the year totaled $2 5 million up from 861002 hundred 19, So this drop and the fourth quarter with the significant reversal in trend.
This reversal happen because the losses it narrow rate at Golden Ridge narrowed in the fourth quarter to about half of what they were and the prior quarters of the year with progressive improvements in each month of the quarter almost hitting and in December this.
This increases our confidence that we will see positive gross margins going forward period.
Operating losses.
Operating losses narrowed to $1 8 million and the fourth quarter from $3 7 million a year ago. This was the second consecutive quarter of improvement supported by lower gross losses, and a reduction in SG&A and other items to one 8 million and the fourth quarter from $3 1 million and go.
We've been able to reduce SG&A by about 40% from 2019 levels through the actions taken throughout the.
2020 to eliminate corporate overhead and yet we've emerged a smaller but smarter organization for.
For the full year SG&A and other items were $8 8 million versus $13 7.002 million 19, as a result total operating losses, and 2020 were $11 6 million down from $14 6.002 million 19.
Net losses, and adjusted EBITDA net losses were just under $2 million or five cents per share and the quarter versus net losses of $3 seven or 11 cents per share a year ago and for the full year net losses were $11 7 million or 29 cents per share down from net losses of 14 million.
And or 40, <unk> per share and 2019 and.
And as I highlighted and real repeat adjusted EBITDA losses fell to 932000, and the fourth quarter down from $1 8 million and.
I'm, sorry, and the fourth quarter down from one $8 8 million and third quarter, and $2 9 million and the second quarter and for the year adjusted EBITDA losses were.
$7 6 million down from $10 $8 million and 2019.
Cash and liquidity.
We ended 2020 with $5 3 million and cash and cash equivalents of.
Operating and investing outflows of $8 6 million in 2020 were off offset by inflows of $5 7 million, which included $1 $8 million for a PPP loan $2 million for a term loan secured by a mortgage on the Golden Ridge and $2 three.
Million raised from the sale of shares under our ATM program in January the PPP loan was completely forgiven.
I'll turn the call back to Peter to discuss the key elements of our forward strategy.
Thanks towards the top part.
And this highlights of the financial impact of the successful information of the phase one.
And now to turn to our retention to phase two.
Before I take you through the key elements of wanted to come and on the critical piece of any strategy and that's execution the.
And the success of Phase one came down to the leadership team executing on both of the individual and collective goals with precision and the sense of urgency.
Maintaining this high level of accuracy.
Execution will be critical as we move forward.
And to support this we've implemented specific objectives for 2021.
For the company.
We've got to cheat with the achievement of being tied to both short and long term compensation.
The next phase, we're embarking on and focus on three.
Key areas.
First the accelerating margin growth for both of our expanding our differentiated product offering.
Secondly, and enhancing our sales efforts and go to market strategy.
And third building mutually beneficial partnerships throughout and the supply chain.
Regarding the first area.
We see significant opportunity to expand.
Tough for them and accelerate growth of S.
All of the U S L b derivatives, particularly.
Particularly and the dietary supplement.
We've already seen the strong uptick and consumer demand for Raj Salvi Bulls.
We believe there is an emerging demand for ROI for them.
Both deliver compelling nutritional and functional benefits and the range of applications and.
And we will continue in two weeks could increase capacity.
The demand for these products.
We also expect to launch new for variance of both S. L B and <unk> derivatives.
This will expand the potential applications for these products.
By enabling them to be more easily and incorporate them into a wider range of products, allowing the replacement of chemically derived ingredients to meet the consumer customer demand for reflective clean label products.
And on the go obviously and so a lot more detail for for competitive reasons.
We will also begin for pro.
And so the Golden Ridge, and commercial volumes, which will strengthen our road and supply chain for providing and into them all sorts of that's L. B.
Puzzles for the impact the profitability of the mill.
This is the initial stage of integrating our milling operations into a value add.
Of the degree the and strategy.
Over time, we will incorporate feedstock from both Golden Ridge, and the Ngls into and supply chain.
While the compounded by combining our milling expertise with our processing capabilities.
We can develop and exciting range of differentiated value added specialty ingredients.
And I'm really not only from rice, but also of the small of an ancient grains.
And regarding the secondary or enhancing our sales efforts.
We've implemented a new sales structure to ensure our primary focus is on putting the customer first.
The two new sales leaders will drive both the product and go to market strategy and.
And the test with margin growth for delivering.
And hence the value to of customers.
You will also see our go to market strategy and hence the complementary partnerships to deliver more complete and higher value added business solutions to our customers.
Third and no less important.
And to enhance our wood supply chain partnerships.
Price spreads business model is built from long standing manufacturing relationships with major rice mills and.
And we will seek to strengthen these relationships to deliver greater benefits not only to ourselves, but also for our partners.
We believe that money fracturing pumps and this could be more than just the players. When you think also be a source of new products and we will seek to deepen these relationships.
Through our enhanced supply chain.
I'll now turn the call back over to talk to give you a brief and while I know of.
What this should mean for the financial performance moving forward.
Thank you Peter.
Peter outlined with the successful completion of phase one of our turnaround plan. We're now implementing a series of initiatives to accelerate growth and enhance profitability.
By transitioning rice bran to the supplier of higher value.
Differentiated ingredients.
This transition will be and ongoing process over the next couple of years, but I want to give you a sense of where we see financial performance heading in 2021.
We expect revenue trends in 2021 to be strong for all businesses and in particular for Golden Ridge and M. G I.
The quarter growth is likely to the strongest and the second and third quarters and lowest and the first given the relative comparisons versus a year ago.
With the improved performance of Golden Ridge, we expect positive gross profit throughout the year.
As growth profit expand we'd look to leverage our lower SG&A and base and to generate the same sort of sequel and improvements in adjusted EBITDA and <unk> and beyond that we saw and the in the past two quarters and importantly, we expect to have positive adjusted EBITDA in 2021 for the entire year.
Sure.
Now back to Peter for some closing remarks.
My key message is that we're well on the weight of transforming the business and.
And to a supplier of highly differentiated the ingredients within the attractive financial profile.
We have successfully completed the first phase of the turnaround by fixing Golden Ridge restructuring and cutting our corporate overhead.
And revitalizing our S L B and S. L P derivatives businesses and.
And as you sold that results and significant improvements and financial performance and the fourth quarter.
Whoa that wasn't important first debt. It was just the first step there is so much more to accomplish.
And our focus now is building on the initial progress to accelerate growth agenda of rate sustainable profitability.
And as underscored by our financial guidance for 'twenty and 'twenty. One we are confident that we're on the right track to build the differentiator of the ingredients company that will generate significant shareholder value.
Lastly, I'd like to thank our employees of apartments or and investors for their support and no.
And.
Up the call for questions Catherine.
Ladies and gentlemen, the floor is now open for questions.
Have any questions or comments. Please press star one on your phone now we ask that will posing your question. Please pickup your handset at Lasalle and speaker phone to provide outcomes sound quality. Please hold them on the only poll for questions.
Your first question is coming from Mark Smith.
Our line of life.
Hi, guys first question for me is just looking at the price increases and I don't know if you guys can quantify it at all kind of of the price increases within the core SMB business or how impactful. It was for this quarter or if it really impacts of go forward more.
Hi, Mark.
We took price increases in the fourth quarter beginning in October. So there was some impact in the fourth quarter, but not I wouldn't I wouldn't say not the bulk of it most of them and it will come in and in January.
And we expect to also get further some price increases over the course of this year.
In terms of quantifying them.
For our largest customers.
They were in the double digit range.
Perfect.
And then and why.
And I, just talked about and I've got you on SG&A cuts.
You know as we look at this and dollars it sounds like there's some good leverage that you can get going forward and.
And as we look at absolute dollars is this 1718 level.
Pretty solid or are there more cuts or there are some places where you feel like you'll you'll need to invest back into the business. This year as far as operating expenses.
I think in 2020 SG&A for the whole year should run.
Let's call it eight sub eight may be.
I think we you know it'll be it'll probably pop up a little bit and <unk> from <unk>.
And by and large I think.
The number of the printed for 2000 and 'twenty I think was $8 nine will be below that in.
In 2021.
Okay.
And then you know.
And I want to look back for just the second before we look forward, but can you just walk through in any more detail kind of the steps that you guys have taken to avoid some of the rice supply and pricing issues that we saw really in Q3, and maybe a little bit into early Q4 and.
And primarily at Golden Ridge.
We have of Nu.
The professional heading up that group who has.
Several decades of experience.
In commodities purchasing and selling first of all and and second of all of you know I think the guiding principle is just managing of balanced position.
And wherever we're short where long both in terms of of of time and in and and in terms of scale. So the book is always balanced.
And therefore, you don't get into and.
The situation, where the commitment and you can honor.
Okay and.
And then the last one from me Peter I don't know if you want to take it I know the said yet, but there's not much else that you can or want to really talk about new products right now, but you know it's safe to assume that were very early first inning as far as kind of new product opportunities and is there any of that debt.
And is prepared and ready to go to market today.
Not all first innings and.
We've certainly got one product the so.
And we expect to roll out and the first quarter.
Which will open up the new applications for us.
But you will see this will be something you'll see constantly from us as we.
Increased our capability.
So.
It's now going through where we want to go we've got one which with ready to go one of those sort of come later in 'twenty and 'twenty one and in.
22 of them to you know as our capabilities out of supply chain gets better.
And the.
And our manufacturing capability. The one thing I will tell you a lot of those will be S. L b derivatives rather than commodities.
Okay. So safe to assume that most of these new products would be coming kind of out of the Dillon facility is or is there anything out of MDI potentially for for new product opportunities and the ROE of potentially out of.
And really that's an area of the little bit further down the line the <unk>.
And I'm not quite sure we're ready to talk about it any more detail of milk.
And that's great. That's fair. Thank you guys very much.
Thanks Mark.
Your next question is coming from Bill Peters.
Your line is live.
Hi, guys. Thank you for your of the call.
Now a lot of conference call you had mentioned you're might be doing a strategic review by years and.
Well, it's everything that you mentioned during this conference call and reference to the strategic review or was there is there anything else that should be mentioned.
Thank you.
I think of you.
And in terms of the strategic review and.
We look for the number of options I think but as I mentioned and my comments the.
You know the coal business here, if it's operated correctly with the right mindset is the solid business.
So you know the things we didn't we did need to fix we needed to get the cost base right.
And then looking at our supply chain.
And I think we've we've done most of the thought we'll continue to review our strategy and look whether all of the other opportunities.
But I think now as we move into 'twenty and 'twenty. One I think we've got the solve the plan with the solid base for forward growth.
Okay. Thank you.
There are no further questions from the lines at this time I would now like to turn the floor back to Peter for closing remarks.
Thank you everyone and I appreciate your attention.
We started down the path.
You've made some of the initial steps, we got some more steps to come and when.
We look forward to the opportunities you've been able to talk you through how we've what we've achieved and what we plan to do and the future. Thanks, everyone for their attention.
Thank you ladies and gentlemen, this does conclude today's call you may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.
For.