Q2 2021 RiceBran Technologies Earnings Call
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Good day, ladies and gentlemen, and welcome to your Rice Bran Technologies' second quarter, 2021 and our earnings call and webcast. All lines have been placed in a listen only mode and the floor will be opened for your questions and comments. Following the presentation. As a reminder, today's call is being recorded if you should require assistance throughout the conference.
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Thank you and good afternoon listeners and welcome again to Rice Bran Technologies' second quarter 2021 financial results conference call with US today are Peter Bradley Executive Chairman and Todd Mitchell Chief Financial Officer.
And I want to remind listeners that 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 the protection of the under Safe Harbor for forward looking statements contained in the private Securities Litigation Reform Act of 1995.
Actual results may differ from results discussed today, and therefore, you're for you to a more detailed discussion of these risks and uncertainties and the company's filings with the SEC. In addition, any projections as to the Companys future performance represented by management include include estimates as of today August 3.2021, and the company assumes.
No obligation to update update these projections in the future as market conditions change this.
This webcast and certain financial information provided on the call, including reconciliations of non-GAAP financial measures to comparable GAAP financial measures are available at Www Dot Rice Bran Tech Dot com on the Investor Relations page at this time I would like to turn the call over to Peter Peter.
Peter go ahead.
Thank you, Jeff and good afternoon, everyone. The.
The second quarter was further confirmation that the major progress we have made and stabilizing the business and eliminating some of the systemic challenges we face revenues were up 28% year over year and adjusted EBITDAR improved by 71% for.
Evidence of this progress.
This improved performance was due to continued growth at R. S there'll be derivatives product lines better operational execution that our milling facilities and continued reductions in SG&A.
These results clearly demonstrate that business and there wasn't the right Paris, and while we're not immune to challenges.
And the macro environment from Covid, whether remote get forces.
The business name has a significantly higher and more stable flow.
And this gives us the opportunity to focus now on raising the ceiling.
So at this point.
Increasingly excited about the progress we have made and our execution evolution into a specialty ingredients business.
And this transition will significantly expand our addressable market and meaningfully increase our margin profile racing and ceiling.
And this and creating significant shareholder value.
Most notably today we.
We announced a new distribution relationship with a I D. P..1 of the leading suppliers of specialty ingredients and the supplement and nutraceutical markets.
This milestone agreement, our first major sales and distribution arrangement for our specialty ingredients will significantly increase our sales coverage and the fast growing and wellness sector.
With stabilized operations and expanded sales organization. We also launched 2 new product lines and the second quarter for us.
We launched new versions of stabilized rice bran for use in powder beverages tablets and capsules to complement our existing law and the S. L. P derivatives for these applications.
Secondly, we introduced the law and that Mike and I as rice, those she uses and natural flow agent emulsifier.
We have also intensified our product development.
Efforts to provide a pipeline of differentiated value ingredients to fuel future growth.
We have robust.
And capacity and established that the thing is giving us a solid footing to introduce new products into the specialty ingredient market.
Additionally, we've moved to a customer centric structure with increased responsibility for our tea sales leaders to drive a more responsive organization to capture the opportunity that no doubt exists for our current and future product lines.
Well I have for predominantly focused on and specialty royster derived ingredients.
And 2 milling.
Operations continue to evolve as critical elements of our growth strategy.
Our focus on operational improvement has provided the platform to further develop these operations into specialty building businesses.
And rich we commenced commercial production and that that's a b and it.
Currently completing installation and meat packing capabilities.
And then N G I.
The facility has commenced milling of specialty poly varieties as.
As we expand demand through and your sales organization and extend our supply with new product introductions. These operations will play an increasingly important role and our overall growth potential.
I will provide some.
And the thoughts and our future strategy for first lets up toward run us through the second quarter numbers in more detail.
Thank you Peter.
Good afternoon, everyone.
The second quarter was another quarter of strong financial advancement for Rice Bran technologies.
We generated significant year over year improvements in every key financial metric.
Driven by higher sales and improved margin contributions for every 1 of our major business lines.
We experienced some seasonal pressures and saw some volatility and raw material price, which prompted us to put our foot.
Pull our foot off the gas a bit and the second half for the quarter. We've made the necessary adjustments and we are well positioned for stronger results and the second half of the year.
Let's look at the second quarter's number and a little greater detail.
Revenue total revenue grew 28% and the second quarter to $7.6 million from $5.9 million a year ago.
Sales for all businesses were up year over year and growth in the quarter was principally driven by higher sales of SRP derivatives, which were up over 30% year over year, and a 50% plus increase and year over year revenue from both Golden Ridge and MTI.
Sequentially total revenue was down by about $1 million from $8.6 million and in the first quarter of 2020.1.
The sequential drop in revenue can be attributed to a seasonal slowdown at both Golden Ridge and MTI as we moved into the tail end of this year's harvest and begin to look at.
New year's crop.
For the first half of the year total revenues grew 14% to $16.1 million from $14.2 million and the first half of 2020 again underpinned by strong growth and that's our beta and that is it and year over year gains and mill grades.
We look for continued strong year over year increases in revenue and the second half of the year and day in the year with growth firmly in the double digits.
Gross profit gross profits were 153000, and the second quarter compared to a gross losses of $1.2 million a year ago.
This improvement in gross profit was driven by lower losses at Golden Ridge.
Improved profitability for our SRV business, both core SRP, and SRV derivatives and revenue growth and margin expansion and M. G I.
Gross profits declined sequentially from the first quarter levels due to lower revenues and higher raw material costs. Some of this was due to market volatility early in the quarter and sound from a seasonal narrowing of spreads and milled grades. Some of this is also due to new supply contracts, which we expect to pay dividends.
Down the road.
Gross profit was 825000 and the first half of 2021 compared to a gross loss.
1.6 million and the first half of 2020 again, driven principally by growth lower losses at Golden Ridge, but with improvements in all of our business lines.
We look for positive gross profits and the second half of the year and we expect our overall gross margin to trend upward from second quarter levels, and the third and fourth quarters.
Operation operating losses.
Operating losses narrowed to $1.8 million and the first quarter from $3.9 million a year ago.
Sorry, and the second quarter. This improvement is due to the transition to positive gross profit and a 26% reduction and SG&A to 1.9 million from $2.9 million a year ago caveat.
SG&A last year included about 308000 and asset disposal charges, which we've only recently started breaking out excluding these charges SG&A was down about 16% year over year and this was despite some hefty increases and large items during the quarter, most notably double digit increases in insurance.
Premiums across all types of insurance.
Operating losses for that first half for the year were $2.9 million compared to $6.8 million last year.
And with our expectations for gross margin expansion and stable SG&A expenses, we look for continued year over year reductions and operating losses and the second half of the year.
Net losses and adjusted EBITDA.
Due to lower operating losses, net losses were $1.9 million or for cents, a share and the second quarter compared to net losses of $3.9 or 10 cents a share a year ago.
And net losses dropped to $1.3 million or 3 cents a share and the first half of the year from $7 million or 17 cents per share and the first half of 2020 due to the reduction in operating losses, and Bruce both the first and second quarters, and the $1.8 million benefit from the extinguishment of the P. B.
P loan and the first quarter.
Importantly.
Adjusted EBITDA losses narrowed to 828000, and the second quarter compared to adjusted EBITDA losses of $2.8 million a year ago.
And adjusted EBITDA losses were just under 1 million for the first half of 2021 compared to adjusted EBITDA losses of $4.9 million and the first half of 2020.
We expect adjusted EBITDA losses to improve from second quarter levels, and the third and fourth quarters.
However, achieving our girls quarterly positive adjusted EBITA before the end of 2021 may prove challenging.
Cash and liquidity cash at the end of the second quarter was $4 million.
Cash dropped from $5.4 million at the end of the first quarter principally due to.
Higher operating losses.
Lower factored borrowing capacity and a reduction and our commodity payable balance due to seasonality and Golden Ridge, and MTI and outflows to pay for repairs for hurricane damage at Lake Charles and the second quarter versus inflows from insurance and dances.
And the first quarter.
And we look for a reversal and seasonal momentum to have a more favorable impact on working capital and the second half of the year and believe we have sufficient capital reserves to get us to positive cash flow.
I'll turn the call back to Peter to discuss the chemo and <unk>.
Forward strategy.
Thanks Todd.
Rice and in particular rice Bran is the most underutilized feedstock for other bound and you ingredients, despite being nutrient dense non allergenic and GMO free.
The full percentage of bold brand needs for the process for food and feed applications.
Through our unique processing and fractionation and technologies, we can create a broad range of ingredients that meet the nutritional and.
Functional needs with Bob and day foods and seeds.
As I mentioned, we introduced 2 new products and the second quarter, but even with these introductions, we're only scratching the surface and the overall commercial potential for these types of products that no doubt exists as manufacturers increasingly embrace rice price solutions or the traditional less self built.
Turning to the demand for additional products will grow.
With the challenges being faced with other feedstocks niches believes soya and corn, which has seen significant price inflation because of increased demand.
And the new low yields as a result for the impacts of climate change the opportunity for rice and other Asia rains.
Never been higher.
Do you want access disturbing this potential vote rice from technologies and to change its focus and tradition to be and transition to being a specialty ingredient business and <unk>.
Focus on the added value capabilities.
We're seeing the initial impact of this with the dramatic growth and the rest of that will be derivatives.
And the past you have heard me refer to the power of partnerships, our new relationship with AI and D P and their extensive sales and.
Technical support capabilities.
Exponentially increase our market reach and the health and wellness category.
We are building up our existing partnerships and we'll announce other new relationships, which together will strengthen our supply chain.
And hence our manufacturing.
Capacity and provide access to other markets.
Specifically, we strengthened.
Relationship with FRC largest rice cooperative and California, with a new long term supply agreement for its all day and Mr.
Further commitment to develop numerous I'll be there.
The variance to access new markets and application.
We are expanding our organic S. L. P supply chain to support the S. L. P derivatives by increasing capacity with existing supplier and that being a new manufacturing partner.
Yes.
And we continue to explore distribution relationships for the pet food and feed applications to improve our access to these important opportunities.
For perspective, just 12 months ago, we were a business with numerous operational challenges and declining financial L. T.
Tell you we have a specialty ingredients gross platform focused on volume potential growth markets driving added value product innovation supported by manufacturing and supply chain.
To support this expansion.
Quarterly net losses narrowed.
More than 2.
$2 million.
And we have line of sight, and reaching breakeven with significant upside.
And as these higher margin specialty products growth.
In conclusion I'd like to thank our employees partners and investors for their support and now the call up for questions operator.
Thank you the floor is now open for questions. If you do have a question. Please press Star then 1 on your telephone keypad to join the queue. If youre using a speakerphone. Please pick up your handset to provide the best sound quality.
Ladies and gentlemen, if you do have a question or comment. Please press Star then 1 on your telephone keypad at this time.
And first we go to the line of Ryan Meyers with Lake Street Capital. Please go ahead.
Hi, guys. Thanks for taking my questions first 1 for me can you give us some additional color on the gross profit contribution from Goldman bridge. It looks like the results for a little bit lower than kind of what we were expecting I'm wondering if this is all just from a lower revenue base or if there was something else going on there that would you'd be aware of.
No I don't think so I, you know I think that the.
Contribution from Golden Ridge.
Yes.
Neutral to slightly negative still we managed to cut the losses, there pretty significantly, but when the trail down and the volume.
And then we saw sort of in June.
We didn't quite cover Opex, there on a on a GAAP basis.
Okay. That's helpful and then when we look at the outlook for adjusted EBITDA, What's the big change here because last quarter. You know you guys were guiding to positive adjusted EBITDA exiting the year just wondering what some of those headwinds are and what would cause you guys change your mind there.
I think that.
No.
We saw a fair amount of volatility in our raw market raw materials pricing this quarter, which gave us a little bit of pause. It is at its it's calmed down significantly and I think it's on trend actually to stabilize lower although we haven't seen that yet.
But we've sort of factored that into our outlook.
Our forward look and then we also saw sort of a narrowing of the demand and some of our mills.
And our meals grains business as well, so we sort of factored in a little bit of that.
We're taking a conservative outlook here.
But I think that's the best way to look at it right now.
Okay, and then some of the new supply contracts that you guys called out and the press release, just wondering if you can give us a little bit more detail on what those are or how its going to exactly and impact the manufacturing footprint.
Well I think that's.
Good.
You know the S F O C. Our.
And the existing.
Provider of M S.
That's all for you for us.
So we're going to expand the volume and the focus and real.
And we concentrate our and so I'll be sourcing from California.
And 2 where phosphate.
And we don't see it'll make a major change to our.
Relationships and the Delta.
So we will have 2 primary.
And this woman and California, you wanted and the Delta and then we'll have will be relatively small.
And this all the conventional S L b.
Production coming out of the Golden Ridge.
Okay and this is.
Kind of a follow up to that what what's your current capacity right now to make the SMB products and then would you need any additional capital spend and they kind of launch new products or sort of increase the capacity there.
Well, increasing S. L P capacity no.
And we have plenty of capacity because as I said in my prepared remarks, so little of the brand.
And is actually.
Converted into other products.
So so now we can we can run and simple.
She difficultly and Hollywood volume tourists L b.
From the.
Derivatives perspective.
We still go.
$50.75 per cent headroom to go.
Before where rent due to major capital. So you know the net net is.
As we can.
Basically doubled the size of the business without major Capex, how do you what do you have anything to add.
Yeah, I mean I the only thing I would add there is I think that what we're focusing and is driving the business upmarket right and so looking at these agreements and focusing in on net FRC part of that strategy is you know.
The best Rice comes from California, The best Rice Bran comes from from California.
We're increasingly focused on the quality of our product as a means for for differentiating it and and and you know also using organic as a means for differentiating it and so you know.
That's what we're doing with these partnerships is not necessarily looking for raw capacity. So I'm not just looking to partner with the best.
Alright, that's it for me thanks, guys.
Thank you, ladies and gentlemen, I apologize, ladies and gentlemen, if you do have a question or comment. Please press Star then 1 and we will pause briefly to assemble the queue. If there are any other questioners.
At this time there are no further signals, we turn back to management for closing remarks.
Well. Thank you everyone for your attention my closing remark is we're on the right track.
We've got significant upside over the next 2 to 3 years to deliver some real.
A real change and the value of this company. Thank.
Thank you very much for your attention.
Ladies and gentlemen. This concludes today's conference. We thank you for your participation you may disconnect. Your lines at this time have a great day.
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