Q3 2021 RiceBran Technologies Earnings Call
Yeah.
Good afternoon, ladies and gentlemen, and welcome to the Rice Bran technology.
Okay.
At this time, all participants have been placed on them.
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Questions and comments after the presentation. It is now.
In my opinion.
It turns out.
Charles.
Sir the floor is yours.
Thank you operator, and good afternoon, and welcome to the Rice Bran technologies third quarter 2021 financial results Conference call.
Hosting the call today are Peter Bradley Executive Chairman, Todd Mitchell Chief Financial Officer.
I want to remind all participants 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 protection under the Safe Harbor for forward looking statements.
In the private Securities Litigation Act 1995.
Actual results may differ from results discussed today, and therefore, we refer you to more detailed discussion of these risks and uncertainties in the Companys filings with the SEC.
In addition, any projections as to the Companys future performance represented by management, including estimates as of today October 27, 2021, and the company assumes no obligation to update these projections in the future as market conditions change.
Webcast and certain financial information provided on the call, including reconciliations of non-GAAP financial measures to comparable GAAP financial measures are available at rates brand SaaS Dot com on the Investor Relations page at this time I would like to turn the call over to Peter Peter on the call is yours.
Thank you, Rob and good afternoon, everyone.
Over the past year, we have streamlined operations improved execution, eliminating most of the systemic challenges, we face and providing a solid base from which we can focus on developing higher margin clients added value ingredients.
Third quarter results demonstrate the importance of this strategy.
Implementing it.
We grew our revenue by 34% year over year in the quarter.
<unk> EBITDA losses materially one of the most challenging environments I have seen in my 35.
And the food and food ingredients industry.
Supply chain disruptions and labor shortages are impacting us and dealt with customers Todd will give you the details, but we yet estimate related issues cost us over $600000 in revenue in the third quarter.
Although most needed to get some upside in gross margin.
These challenges will not go away overnight, but we are executing better and taking specific actions to mitigate their impact where we can.
We're also pressing forward with new product development.
Important milestones in the third quarter.
I will give you some more detail on our progress.
On this front in a minute, but first lets up Todd run you through the quarter in more detail.
Okay.
Thank you Peter.
Good afternoon, everyone.
As Peter indicated we demonstrated meaningful progress in the third quarter towards our goal of reaching profitability.
With continued year over year improvements in every key financial metric.
Let's look at the third quarter's numbers in a little greater detail.
Revenue <unk>.
Total revenue grew 34% in the third quarter to $6 9 million from $5 2 million a year ago.
Year over year growth in the quarter was driven principally by higher revenue from Golden Ridge.
Total sales from our other businesses in aggregate relatively flat.
Sequentially total revenue was down by 665000 from $7 6 million in the second quarter.
The sequential drop in revenue can be attributed to key two key issues first logistics challenge and our core SMB business.
The inability to secure transportation cost us at least $400000 in revenue in the quarter.
And second we had over two weeks of unplanned downtime at <unk> Gi due to equipment failure that we were unable to remediate in a timely manner.
Again due to supply chain disruption this likely cost us another 200000 in revenue in the quarter.
For the nine months of the year for the first nine months of the year, though total revenue has grown 19% to $23 1 million from $19 4 million in the first nine months of 2020 with growth in all businesses, but particularly strong.
At Golden Ridge, and in the sale of SRV derivatives.
Gross profit.
After two quarters of gross profit we saw gross loss of 276000 in the third quarter, which compares to a gross loss of 795000 a year ago.
Year over year the reduction in gross loss was driven by improved results at Golden Ridge, and a higher contribution from SRV derivative sales. However, this was not enough to keep us in the red as core resulted in Gi and lower volumes and higher raw material and freight costs for our core <unk> business weighed on our results for this quarter.
We've seen upward pressure on raw material and freight costs, all year raw material cost jumped earlier in the year and team to actually be mitigating in the third quarter only to be replaced by a spike in freight cost accompanied by a shortage of available carriers.
We've been responding to the volatility and input costs by raising our own prices.
And we expect to benefit from a customer wide increase in the fourth quarter for our core SMB businesses. We're also working with our customers and our logistic partners to secure adequate freight capacity for the fourth quarter and beyond.
Year to date gross profit was 549000 compared to a gross loss of $2 4 million in the first nine months of 2020.
Driven principally by lower losses at Golden Ridge supplanted by year to date improvements in all of our other businesses.
Operating loss.
Operating loss narrowed to $2 1 million in the third quarter from $2 7 million a year ago.
This improvement was due to reduced gross loss.
SG&A was flat.
Not a lot to stay on this front other than our corporate cost have stabilized and our productivity is vastly enhance from a year ago.
I am very pleased with how the team is executing.
Year to date operating loss was $5 5 million compared to $6 6 million in the first nine months of 2020.
Net income and adjusted EBITDA.
Due to lower operating loss net loss was $2 2 million or <unk> <unk> per share in the third quarter compared to a net loss of $2 eight or 7% per share a year ago.
Year to date net loss was $3 5 million or <unk> <unk> per share compared to $9 8 million or <unk> 24 per share in the first nine months of 2020.
And adjusted EBITDA loss was $1 1 million in the third quarter compared to an adjusted EBITDA loss of $1 8 million a year ago year to date adjusted EBITDA loss was $2 1 million compared to a loss of $6 7 million in the first nine months of 2020.
Lastly, cash and liquidity.
We ended the third quarter was $6 2 million up from $4 million at the end of the second quarter due to a $3 6 million in gross equity financing completed in the third quarter.
As a result, we ended the quarter with $2 3 million in net cash compared to a net debt of 198000 at the end of the second quarter.
That concludes our remarks on financial results. So I'll turn the call back to Peter did you have got the key elements of our strategic shift to specialty ingredients.
Peter.
Thanks, Bill sorry, we have referred to our strategy of transitioning to higher margin specialty ingredient business.
Let me take a few minutes to provide more granularity of what this means in our key full reductions.
First we are growing our revenue in the here and now by enhancing and sales and distribution partnerships.
We are confident it will help us continue to grow sales for higher added value products in the supplement to wellness markets.
Both of these products are already up significantly from last year.
We believe they remain significantly under developed component with ABB IBP.
It allow us to better capitalize on this opportunity.
We have completed the sales training with the IBP team and already started to see prospects in the pipeline.
We expect supply side West, which is this week in Las Vegas to kick off a relationship.
Open other avenues of interests.
We're also working with our partner in whole speed.
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Kentucky Equine research Okay.
To enhance our positioning that quality nutrition.
Performance spec performance whole suite to well established market for our core F N b.
We believe.
We believe there is an opportunity to expand this market by introducing new <unk> products.
<unk> targeting specific I coined help applications.
Meeting in November to discuss this opportunity in new product development.
Second our new product development efforts remain on track and we remain confident in our ability.
To develop new higher relative <unk> ingredients and expand the addressable market is significant.
The stabilized Raj from we produce is a nutrient dense feedstock that contains many valuable compounds that enhanced nutrition and improve the functionality of other ingredients through our proprietary processes and technology, we can unlock the value of these components components enhancing the value of that.
In the third quarter, we successfully compete complete the plant scheduled trials with new enzyme technology that.
But we think we will deliver products with better flavor on that.
Nutritional profiles.
This was a major step forward in commercialization new higher added value.
<unk>, four <unk>, which will underpin our transition to a specialty ingredients business.
However, we are going to remain circumspect circumspect on commenting on these developments starting with.
Defendable competitive reasons.
I'll turn the call back to Todd to provide a view of our forward outlook for the company.
Thank you again Peter.
Our Dillon, Montana SRV derivative facility is currently offline for a couple of weeks to complete some capacity enhancements.
And I think it's safe to say that logistics are likely to remain challenging in the foreseeable future.
As such and against the tougher quarterly comparison.
We expect year over year growth in the fourth quarter to moderate from second and third quarter levels.
Nevertheless.
Underlying trends improved throughout the third quarter.
September was a far stronger than July or August and October looks to be shaping up to be a pretty solid month as well. If these trends remain in place and we can improve on our logistics execution fourth quarter results will be better than third quarter results. We are working with our customers to address logistic.
Challenges.
The proposition is relatively simple.
Give us a committed and steady order pattern and we can lock in carriers, we both de risk our business.
We also look to return to positive gross margins in the fourth quarter aided by better results from MDI and broad based increases in our core <unk> business.
And frankly, improving ever improving results from Golden Ridge, where we are now shipping SRV on a regular basis.
With SG&A expected to remain stable a return to gross profit will imply lower adjusted EBITDA losses in the fourth quarter than the third.
In the process of budgeting for 2022, and we'll be prepared to give greater details on our fourth quarter call. Thank.
Thank you.
Can you Peter Thanks.
Thanks Chuck.
We are operating in a challenging environment, but we have actions in place to mitigate the impact from the logistics and other supply chain disruptions. So that we can maintain focus on our transition to a profitable specialty ingredient company.
We're not there yet we have made major strides in achieving our longer term objectives.
I'd like to take the opportunity to thank our employees partners and investors for their support but now open the call up for questions operator.
Thank you ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please indicate so by pressing star one pressing star two of removing from the Q should your question to be answered lastly, while posing your question. Please pickup your handset testing on speaker phone to provide optimum sound quality. Please hold while we poll for.
<unk>.
Once again Thats Star one if you have a question or comment.
The first question is coming from Mark Smith from Lake Street Capital markets Mark Your line is live.
Hey, Thanks, guys.
Can you walk through Todd I think I missed a little bit in your commentary just results from each of the businesses, primarily MTI and and Golden Ridge, how they did maybe on a year over year or sequential basis.
We saw very very strong growth from Golden Ridge year over year, I think you're cognizant.
Cognizant of the challenges we faced last year in that business at this time.
And.
Sequentially.
Results were.
Relatively flat.
Is that business stabilizes.
For MDI.
I would say the results were flat year over year and down sequentially.
And that's pretty typical for a timing basis right Q2 to Q3 for MTI.
Built in there.
It's typical for the seasonality I think that we've been working hard to build a book of business to mitigate some of that seasonality.
And as I said in my comments the real issue at MTI was we had a key piece of machinery to go down.
Which normally we should be able to get a replacement part within 48 hours and it took the better part of two weeks.
Okay, and you said that impact from the <unk>.
Equipment failure, there was best estimate about 200000 from MTI.
Yes perfect.
And then I just wanted to check that the transportation cost.
Kind of issues that you faced in headwinds you feel like that cost you about 400000 and would that be primarily in the kind of SRP or derivatives business, where you feel like you lost sales and is that just not being able to get product from primary to California up to Dillon or walk us through kind of what the issues were.
With transportation, where it gotcha.
I commented that it.
Cost us at least 400000.
And it is primarily in our bulk.
Our core <unk> business.
And it is it is primarily coming out of all of the Delta.
Okay.
And then I just wanted to ask just.
And Peter you gave some updates on new products can you talk about kind of where we are.
Timeline for new product introductions anything that maybe it's out now or kind of expectations for launches on new products.
Well, we've got a couple of them.
[noise] varieties out now that will sell through.
So there are new we talked about those last quarter in terms of the development. We're doing now we will introduce.
New enzyme treats a derivative which will be Q.
Q4 of 2022.
Than you.
Flavor enhanced product so I'm looking at my plan is kind of the revenue for Q3 2022.
Okay great.
Great. Thank you.
Okay. We have an additional question coming from Charles Robinson from Dawson James Securities. Your line is live.
Hey, guys.
Could you give us a little bit more color on the AI DP partnership and what we could start to see that meaningful you fully.
Start to bear fruit.
I think the big launch, which is why my lines don't do a very good I apologize I'm a boy to Vegas.
The kickoff commercial kickoff.
That really comes tomorrow.
I would see that.
What we're seeing already in the pipeline.
Hopefully next.
Next quarter, a little bit and then really start to kick in in the first and second quarter next year.
The beauty with a supplement world.
The customer's evaluation time is much shorter than you would find in mobile food.
We know the propositions and the markets are very strong which is why we chose to stop that.
Yeah.
Sounds good.
One other question it seems like every quarter something comes up with maybe a supply chain or something that affects the business is there a way to permanently mitigate some of those issues that seem to invariably come up every single quarter.
I think operationally.
We've done a lot to mitigate the issues.
But to be honest this quarter and it will.
So following into the fourth quarter.
The supply chain issues.
This is not a growing from technologies issue.
This is a whole industry you literally trying to get a truck right.
Truly for certain.
Customers don't have labor to process them into products.
And as I mentioned in my comments.
I've never seen a situation like this.
<unk>.
When it will get resolved.
To mitigate it.
Yes, we're doing it.
Innovative things on the supply chain.
But you know our company along with some of these conflicts.
Nationwide or worldwide logistics structures.
Good enough. Thank you.
I'd now like to turn the floor back to Peter Bradley for closing remarks.
Well, thank you for everyone's attention.
It's been a tough environment as I said, the toughest large city, but I remain confident we're on the right track.
Moving towards something.
Profitable.
Specialty high margin specialty ingredient business, we thank you for your attention.
Goodbye.
Excuse me Peter do we have time for one more question.
We always have time for one more question.
Okay, just one moment, let me see if I can.
Alright, it looks like he left the conference.
Okay awesome.
E Mail, Thanks, Paul project yet.
That's great.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.
Yes.