Q1 2021 RiceBran Technologies Earnings Call
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Good day, ladies and gentlemen, and welcome to the Rice Bran technologies first quarter of 2021 earnings call and webcast. At this time, all participants have been placed on listen only mode and the <unk>.
There will be open for questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host Rob Fink.
Sir the floor is yours.
Thank you operator.
Good afternoon, and thank you for joining us today welcome to the Reis brand technologies first quarter 2021 financial results Conference call.
Hosting the call today are Peter Bradley Executive Chairman, and Todd Mitchell Chief Financial Officer.
I want to remind everyone listening today during the call 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 1095.
Actual results may differ from those discussed today and therefore, we refer you to more detailed discussion of these risks and uncertainties uncertainties in the Companys filings with the SEC.
In addition, any projection as to the Companys future performance represented by management include estimates as of today April 28, 2021, and the company assumes no obligation to update these projections in the future as market conditions change.
This webcast and <unk>.
Certain financial information provided on the call, including reconciliations of non-GAAP financial measures to comparable GAAP financial measures for available on the Companys website for.
The rice Bran tech on.
On the Investor Relations page, but all of that said I'd now like to turn the call over to Peter Bradley Peter of the call is yours.
Thank you, Rob and good afternoon, everyone.
The first quarter provides evidence the word on the right price.
As discussed in our prior earnings calls and strategies to move the business towards specialty ingredients.
We will do the stock spending of it.
That's all the derivatives business and introducing new added value high margin the ingredients derived from rice.
Other small, but they should guidance well lots of nice optimizing moving assets to support this business with the superior cost structure.
Phase one of the I'll transition to the strategy was the turnaround operations of Golden Ridge, and deliver improved financial performance and we made significant progress in the first quarter on both fronts, which Tom will address in greater detail in the moment.
Sales two of our transition to shift our focus to being the company that delivers differentiated colleague the army wide specialty ingredients.
And underneath of the improved financials in the first quarter operating and sales trends. The other day to day initial steps steps of the second.
Yes.
Quite simply Regan Reorienting the sales focus we drove a 40% year over year increase you know core itself the ingredients business with sales of <unk> derivatives. How are you sort of your ingredient.
The 200 per cent.
The progress we have achieved in this transition in the last two quarters gives me confidence the 2021 will be a year of most financial improvement from rice bran.
And the strategy aligns us with healthy living trends of <unk>.
So compelling and all of it.
On the significantly underperform there.
The market potential.
In the coming quarters, you will see us grow these products and introduce new ones transforming rice bran into a high growth high margin specialty company.
I will provide more thoughts on how we're going to execute this transition the first let's call it run needs for it in the first quarter numbers in more detail.
Thank you Peter.
Good afternoon, everyone.
This past quarter was the third quarter in a row of sequential improvements in financial results.
Progress is evident in revenue growth.
Our transition to positive gross margin.
And a reduction in adjusted EBITDA losses to close to breakeven.
Results were driven by growth in SMB and SRV derivative sales.
<unk> improvement at Golden Ridge, and the 32% reduction in SG&A from a year ago.
Wow.
Positive working capital trends allowed for a modest increase in cash without the use of our ATM.
We also had our $1 8 million PPP loan completely for given in January.
Strengthening our balance sheet by transitioning us two of net cash position from a net debt position.
Looking at these numbers in a little greater detail revenue.
Total revenue grew 3% in the first quarter to $8 6 million from $8 3 million a year ago.
As Peter highlighted this growth was driven by a 40% year over year increase in <unk> related sales.
Offsetting by double digit year over year declines in our milling business.
Notably Golden Ridge revenue was off about 25% year over year, principally due to weather related downtime in February.
<unk> sales were also off in the double digits.
This was due to customers deliveries getting pushed into the second quarter.
Considering the changes, though in our strategy and our senior leadership in the second half of last year.
It's probably a better indication of the state of our business to compare the first quarter to the fourth quarter of last year sequentially total revenue was up 26% in the first quarter from $6 9 million in the fourth quarter and it's worth noting that the sequential growth rates were consistent across all of our businesses.
Gross profit.
We generated 672000 in gross profit in the first quarter compared to gross losses of 405000, a year ago and narrowed gross losses of 47000 in the fourth quarter.
This was the first quarter of positive gross profit in seven quarters.
This transition was underpinned by improved results at Golden Ridge was the turnaround in operation continues to progress.
In the fourth quarter.
We reset our commodity position.
Diversified our customer base and dramatically improve milling yields.
In the first quarter absent the weather related downtime.
We accelerated the pace of operations and achieved our targets for increases in hourly throughput and onstream rates.
With further improvement in operations and commercial SRV projection expected in the second half of 2021.
Golden Ridge should have an increasingly positive impact on overall results.
Which with continuation of current trends in our <unk> business should support further gross margin expansion over the course of the year.
Operating losses.
<unk> losses narrowed to $1 1 million in the first quarter from $3 million, a year ago, and $1 8 million in the fourth quarter.
The sequential improvement was largely due to the transition to gross profit.
While the year over year improvement was driven by both the transition to gross profit and a 32% of reduction in SG&A to $1 7 million from $2 $6 million of go a year ago.
We will likely see some upward pressure on SG&A.
But one eight to $1 9 million per quarter should be sustainable for the remainder of the year. So.
Higher gross profit should support further reductions in operating losses.
Net income and adjusted EBITDA.
Due to the lower operating losses, and a $1 $6 million gain on having our PPP loan forgiven net income was a positive 591000 or $1 10 per share in the first quarter compared to net losses of $3 million or <unk> <unk> per share a year ago.
Absent this onetime gain net of losses would've been about $1 2 million.
Importantly.
Adjusted EBITDA losses, which do not include this gain of 159000 in the first quarter.
Compared to adjusted EBITDA losses of $2 million a year ago.
And adjusted EBITDA losses of 921000 in the fourth quarter.
Cash and liquidity.
Cash at the end of the quarter.
First quarter was.
$5 4 million compared to $5 3 million at the end of 2020.
Underpinning this increase in cash was our ability to generate neutral cash flow from operations. This was due to strong working capital management and an increase of factored borrowing which was supported by the 26% sequential increase in quarterly revenue.
And in January as I mentioned.
Our $1 8 million PPP loan was completely forgiven strengthening our balance sheet and transitioning as two of net cash position of $1 1 million at the end of the first quarter compared to net debt of 327 at the end of 2020.
I will turn the call back to Peter to discuss the key elements of our forward strategy.
Thanks Todd.
With the successful execution of spokeswoman turnaround strategy seeks to really starting to guidance thing.
I believe rice bran is well positioned to generate further improvement in financial results in the coming quarters.
While the accelerating this transition to a specialty ingredient business.
It is clear there is the significant unmet market demand for SRP derivatives across the range of human.
Food applications, we've seen strong demand from existing and new customers in the health and wellness supplement kind of kind of.
Categories.
Proving the value of the screens, but.
Ingredients.
However, given the sheer scale of the bulk of the compelling nature of our products on the wide range of.
Applications. It is absolutely clear, we've barely scratched the surface of the overall opportunity.
That's all being of the derivatives, we produce from the Saudi provides both the nutritional nutritional and functional benefits, particularly in the production of plant based and vegan products.
From the nutritional perspective, given the complementary immuno acid the profile.
And hence the protein quality in the lives of meager six in the middle of nine with well known health benefits as well as bio active micro nutrients uptick.
Particularly around the original.
Which had a positive impact on the immune system, which is why it came the consumers seeking LP alternatives are gravitating toward rice space solutions for knees and cold based alternatives.
From a functional perspective, that's up in the derivatives we produce.
Improved flavour of mouthfeel when added to increasingly.
Popular plant based and Beacon Greens and vegetable protein.
Powders.
Most of the Logmein.
Lulu and the screen the versus the Grittiness normally associated with such products.
Which will improve both the taste of make it easy of the formulations of these products.
The versus other alternatives.
In the coming months, we will continue with the Hum.
So of capacity to produce the S. L. B derivative products, we will launch in the U S. L B Serbian specifically the volume to supplement the applications.
This will be supported by initiatives for the fruit.
Customer communications support include.
Including the development of consumer ready talks of products major brand the outreach program.
Day to the research on the clinical efficacy of <unk> of its derivatives.
We believe these initiatives will help grow our customer base.
But from the.
The accelerate sales with our initial focus on the $50 billion supplement bulk of it.
Bulks two important steward.
Ultimately addressable market, that's EBIT margin.
This is just the beginning of a specialty in grid the ingredients expansion from.
From the initial acceleration in the conventional and organic rice soluble products, which we've already seen.
We look to grow sales of in the near term for a right balance product.
Dietary fiber.
Public for White, Saliba, which the delivers both soluble.
Soluble dietary fiber.
Both of which are a major of the deficiency in the American Donuts.
But over the long term, we believe there is an opportunity to further the fractionate <unk> b into still only a zone of your ingredients.
And to use the fractionation capabilities with other small and ancient grains.
Our Dillon, Montana facility is a key asset for the company.
The coal and the scope of the strategy.
We're working hard to optimize this facility, where we still have untapped capacity.
However, if our plans for sales expansion play out as we believe they can.
It is highly likely that over the next 24 to 36 months, we will look to expand.
Boats in terms of capacity in the range of capabilities, which will lead to further enhancements.
The supply of partnership.
Would support.
We say significant but the fundamental expansion of this business.
Golden Ridge of Ngls are also key to our specialty ingredients strategy we.
We will use these assets the strategic and cost efficient sources of feedstock for specialty ingredients.
We will orient them to milling two of special customer base for the rest of the Apple.
Whether that the organically grown grains or specialty varieties, such as high as probably the grade although the moisture products.
With this focus they will be valuable contributors to sustainable growth.
Both revenue and profitability.
In summary, the first quarter was one of significant to continue the progress both of the operating and financial performance and in strategy development and execution.
And I believe we are on track to deliver significant improvements over the next 24 36 months.
This really will be the special business once the start to choose fully implemented with positive long term growth trajectory and.
Potential upside returns for those investors.
Stay the course with with us.
The closing I'd like to thank our employees partners and investors for that supports the net.
The call for questions operator.
Certainly the ladies and gentlemen of the floor is now open for questions.
Have any questions or comments. Please press star one on your phone at this time.
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And we do have a question coming from Mark Smith from Lake Street Capital markets Mark Your line of lives.
Hi, guys.
Right job on the quarter nice to see the improvements there for.
First question for me is just looking at Golden Ridge can you quantify at all the the weather impact and how much of that hurt you in this quarter.
Sure.
This is Todd.
We were we were offline because of weather for 11 days in February and so.
Would put debt at easily half of million, maybe a little bit more.
Uh huh.
Perfect.
And then looking at the sales initiatives and the growth that you guys have had in S. R. B.
Two parts can you talk about kind of have you added new salespeople or has it just been kind of having a more efficient sales process and looking at the right customers and then second on that.
How much of the the growth has come from new customers versus maybe growth in existing customers.
I think in terms of the growth of the split we have brought some new customers on board.
But the.
Our existing <unk> customers are also using more.
In terms of your first question.
We haven't added sales resources, we just.
Proved out sales process and focused on the right opportunities.
Excellent and then.
Dylan, it's obviously an important asset as you said.
Talking about the operations and how things ran in dealing with maybe higher volume is running during the quarter.
The biggest.
The biggest issue, which we are very grateful to our supply partners was to get to organic growth material isn't there.
So the having the feedstock obviously hope she co produce without raw material. So we have the feedstock and then also the team the.
Done the great job in terms of balancing out what we produce.
Fractionate.
Any product you end up with.
Most of them Walden stream. So they just got better in terms of optimizing both.
The Wi solvable stream on.
For the right side the strength, that's really what's driven the operational improvements.
We're not finished.
I think it was in other states to go.
But certainly day.
Some of the great Joe.
Okay.
And then.
As we look at the SG&A, great job on reducing that I've got it sounds like you feel like this is pretty sustainable I think did you I just wanted to confirm did you say kind of this 181 9 million maybe quarterly as you feel like as the sustainable level on SG&A.
I would think that this was a pretty good quarter for what we're going to spend money on in terms of SG&A I do think the one eight to $1 90 as of <unk>.
Bit better number than the 107, we did this quarter.
And I would.
I put that up to big increases in a couple of big items, most notably insurance.
But yes, I think this is sustainable certainly for for the for.
Foreseeable future.
Okay excellent and then the last one for me just.
You've done a good job driving positive gross profit getting closer to positive EBITDA any updated thoughts on capital that you may need as you look to expand capacity for ISR be any capital needs.
Stain this growth as we look over the next 12 plus months or do you feel pretty good now as you've moved to this kind of a net cash position.
But I think our plant.
Yes.
One of them or the other kind of us.
[laughter] the plan the plan.
The first.
Is the is to operate this year.
And at a sort of the cash flow neutral, except for our capital expenditures and hold capital expenditures out of sort of a very reasonable level. This year, so to be kind of fully funded.
I think we are identifying parts of the business where the.
Of the return on investment would be very high.
But certainly there is no need for capital to fund operations.
The only would be to fund opportunities.
Just to add to that I think over the next 12 months.
The capex will be relatively modest.
As we head into 2022 towards the end of the 2022 into 'twenty three if this if we start to tap into this opportunity.
Then it will be the.
We will need more capital for this top rightly pointed out we are of.
While not capital rules the significant.
Okay excellent. Thank you guys.
Okay.
Thank you. Thank you and there were no other questions from the lines at this time.
Would you like to make any closing remarks.
Well, thank you everybody for joining us.
Peter and I look forward to reporting to you guys next quarter and.
We have a very positive outlook for this year and hope that you will continue to support us.
We thank you for your attention and the.
Youll support for the business.
Thank you ladies and gentlemen, this does conclude today's conference call and webcast. You may disconnect. At this time of have a wonderful day. Thank you for your participation.
Okay.