Q4 2021 RiceBran Technologies Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the Rice Bran technologies fourth quarter and full year 2021 earnings call and webcast. At this time all participants have been placed on listen only mode and we will open the floor for your 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, everyone and welcome to the Reis brand technologies fourth quarter and full year 2021 financial results Conference call.
Hosting the call today are Peter Bradley <unk> Executive Chairman, and Todd Mitchell, Chief operating Officer, and Chief Financial Officer.
I want to remind 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 that is contained in the private Securities Litigation Reform Act of 1995.
Actual results may differ.
From results discussed today, and therefore, we refer you to a more detailed discussion of these risks and uncertainties, which is contained in the company's filings with the SEC.
In addition, any projections as to the company's future performance represented by management, including estimates.
As of today March 17, 22, 2022, and the company assumes no obligation to update these projections in the future as market conditions may change.
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 <unk> Dot com on the Investor Relations page.
So all that said I'd now like to turn the call over to Peter Peter The call is yours.
Thank you, Rob and good afternoon to everyone.
21 was the year unprecedented disruption that impacted every aspect to the food industry.
From raw material shortages and price escalation to the inability to run manufacturing operations successfully due to labor shortages and the challenge from logistics to both domestic and international supply chains.
Despite these conditions, we have successfully streamlined operations improved execution and eliminated drags on that business.
We have shifted our focus from commodity products addressing small lower growth markets to highly value added ingredients addressing broad and growing markets. The results can be seen in top line growth expanded margins and narrowed losses.
So certain these unprecedented disruption chairman's dose, especially in the areas of labor and freight.
But we navigated through these challenges and we exited the year with strong momentum as evidenced by positive EBITDAR in December.
Every one of our businesses.
For our company and a clear indication that we're on the right path and making tangible progress towards our goal of sustainable growth and positive cash flow.
Ironically, the disrupted environment helped to accelerate our transformation.
For many customers.
The year delivered structural terminal, while we sold modestly higher input prices.
Many ingredients used by our customers and sold materially higher inflation and in some cases was simply unavailable.
While logistics challenges delayed deliveries and raised cost for us.
Some customers sort of ingredients rotting on Cabo cargo ships.
<unk>.
The outside reports many companies need alternatives immediately.
And they needed domestic alternatives to overseas sources.
We were able to capitalize on this situation by offering a reasonably pouring styling quality domestically sole solution.
Suddenly the cost of re labeling for our rice based alternative ingredient wasn't sudden daunting and initiatives we have been pursuing for some time moved forward much more quickly.
And we've just started to see the benefits of this transition.
We are growing our existing relationships and we are attracting significantly more new business in new end markets than we've ever seen before as.
As a result.
We are meaningfully expanding our addressable market and we expect to see much more significant impact from this expansion in 2022.
We benefit from growth as it provides a solid the more sustainable revenue base.
Modestly higher revenue levels, we believe we can breakeven.
And as we continue to grow we should see operating leverage to expand our gross margin leading to sustainable profitability.
We've built a viable streamlined efficient platform.
Profitable growth.
During the past year, we've been introduced several new product lines in 2022 will introduce even more we.
Wed like spend.
Presence with a trusted provider to a trusted provider of high value added ingredients for large scale and more rapidly growing markets.
I'll give you some more detail on our progress on this front in a minute, but first let's have Todd revenue through the numbers for.
For the quarter in more detail.
Thank you Peter.
Good afternoon, everyone.
Before I review the numbers.
Want to make three points.
First.
All of our businesses are growing.
And some of them very rapid.
Second.
We've strengthened execution.
Everywhere sales production quality customer service logistics.
In 2021, the entire team leaned into it in a challenging environment and as a result, we generated significant year over year improvements in every key financial metric.
And we exited the year with strong momentum.
Finally.
We believe we can reach breakeven.
And that there is significant operating leverage in our business beyond that.
And we have the necessary capital to get there.
With that said, let's look at the numbers in a little greater detail.
Revenue.
Total revenue was $8 million in the fourth quarter.
Up.
Teen percent from $6 8 million a year ago.
Total revenue for the year was $31 million, a 19% increase from $26 million in 2020.
Revenue for the year was driven by over 30% growth in value added ingredient sales.
And strong year over year gains for both Golden Ridge and <unk>.
As I said.
We ended the year with positive momentum across all businesses as core SRV trends improved steadily over the fourth quarter aided by improved logistics, which set the stage for price increases late in the quarter and customer expansion in 2022.
Gross profit.
We generated a gross loss of 107000 in the fourth quarter, which compared to a gross loss of 47000 a year ago.
Fourth quarter gross loss was the result of higher input costs and a slow start to the quarter, which ran ahead of price and volume increases later in the quarter.
More importantly, though.
For the full year, we transitioned to a positive gross profit of 442008.
$2 9 million dollar improvement from a gross loss of $2 5 million in 2020.
This was driven by strong growth in our higher margin value added ingredients business.
And a significant reduction in gross losses from Golden Ridge.
SG&A.
SG&A rose, 20% in the fourth quarter to $1 6 million from $1 3 million a year ago.
This was primarily due to the reversal of an accrual for executive compensation in the prior year comparisons.
More importantly, SG&A for the year dropped 11% to $7 million from $8 million in 2020.
Absent these nonrecurring variances SG&A has stabilized in the range of $1 seven to $1 $8 million per quarter as expected and it should remain there in the foreseeable future.
Operating losses.
Operating losses in the fourth quarter were $5 6 million.
Up from $1 8 million a year ago no.
This includes a $3 $9 million non cash charge to write down our goodwill.
At year end, our market cap was less than our book equity necessitating this charge in accordance with generally accepted accounting principles.
Absent this charge operating losses for the quarter would have been about $1 7 million down from $1 8 million a year ago.
For the year, including this charge operating losses were $10 6 million down from operating losses of $11 3 million in 2020.
Absent the charge operating losses for the year would have been about $6 7 million supported by the transition to positive gross profit.
Net loss.
Net loss for the fourth quarter was five point.
$4 million or <unk> 10 per share compared to a net loss of 2 million or <unk> <unk> per share a year ago.
For the full year net loss has narrowed to just under $9 million or <unk> 19 per share from nearly $12 million or 29 per share in 2020.
Again.
Net income for both the fourth quarter and the full year was negatively impacted by the change in goodwill.
Which was offset in part by a $1 $8 million gain in the first quarter when our PPP loan was forgiven.
And a smaller gain of 338000 in the fourth quarter for revaluing of warrant liability.
Adjusted EBITDA.
Adjusted EBITDA loss was 438000 in the fourth quarter compared to a loss of 932000 a year ago.
Importantly at.
Adjusted EBITDA loss for the full year was $2 6 million.
A 66% declined from a loss of $7 6 million in 2020.
Let me illustrate this another way.
In 2021, we turned $4 9 million in incremental revenue into $5 1 million in incremental adjusted EBITDA.
And since 2019, we've turned $7 4 million in incremental revenue in the $7 7 million in incremental adjusted EBITDA.
In other words for two years in a row, we've taken over 100% of incremental revenue straight to the bottom line.
This reflects improved execution and validates our shift towards high value added ingredients.
Finally cash and liquidity.
We ended the year with $5 8 million in cash.
Up from $5 3 million at the end of 2020.
Cash burn for the year was about $4 2 million and.
And we offset that with about $3 6 million in equity funding and about $2 million in incremental debt.
With about half of it is coming from refinancing our term loan in the fourth quarter.
And the other half from an increase in borrowing under our factoring facility again, we believe we have sufficient liquidity to reach positive adjusted EBITDA.
Before I turn the call back to Peter I also want to mention that we received a 180 day extension from the NASDAQ to regain compliance with the minimum bid.
We believe our current valuation does not reflect the true value of our company.
Or the demonstrated ability to improve execution reduce losses, and expand our addressable market and a challenging environment.
As a result.
We remain optimistic.
That what we believe is a discount to fair value will be reduced with continued improvement in our operations and that we will be able to regain compliance organically.
With that I'll turn the call back to Peter for closing comments.
Okay.
Yeah.
Peter can you hear us.
Okay.
Yes.
Thanks Todd.
I'd like to before we have made tremendous progress in transport transforming <unk> to a hernia rebate value ingredient business.
We will provide us with accelerated revenue growth and better margins narrowing losses, and ultimately transitioning the company just positive cash flows, but we still have more to do.
We navigated significant disruption in 2021 relatively successfully but we emerge into 2022 with more opportunities and challenges.
With Russia, and Ukraine accounting for 28% of the global wheat, we take sports and Ukraine alone accounting for 30%, 13% of colon exports. The current tragedy unfolding in Ukraine will only add to book it disruption challenging commodity markets that further.
The strengthening demand for domestically sourced ingredients.
While <unk> another one for one replacement we talk on.
Relatively simple reformulation.
Can often be used to reduce the reliance on traditional ingredients from these feedstocks as well as other ingredients in short supply in the current environment, creating a significant growth opportunity for us.
With our expanded market reach and the health and wellness.
Cancer agree with our partnership with AEP.
And our new customer acquisition initiatives.
In the companion animal and equine categories, we see strong forward demand for <unk> and its derivatives.
From a strong foothold in that corn markets, we're expanding the addressable market for stabilized rice bran rapidly into commit companion animal and delete believe we will continue to move up the value chain.
Disruption in growing market awareness, coupled with our product development efforts will drive sustainable growth mode sustainable revenue and margin growth in 2022.
Beyond in.
In 2021, we learned how to survive in disrupted markets through this learning we will be able to thrive as chairman just turned into opportunities.
Our focus in transitioning to a higher relative value ingredient company is unwavering we have seen a glimpse.
What this might mean to shareholder value in the latter part of the fourth quarter.
And remain confident that 2022 will deliver positive EBITDA.
Pathway to long term growth.
With that.
We'll now be happy to answer any questions you may have.
Thank you ladies and gentlemen, the floor is open for questions. If you have any questions or comments. Please indicate so now by pressing star one pressing star too early move you from the queue should your question be answered and lastly, while posing your question. Please pickup your handset if listening on speaker phone to provide optimum sound quality. Please hold while we poll for <unk>.
<unk> once again Thats star one if you have a question or comment.
Okay. The first question is coming from Mark Smith from Lake Street Capital. Your line is live.
Hi, guys a couple of questions for me first one can you speak to the EBITDA trends in Q1. It sounds like you had a good end to the year in December any insight into how thats trended here in the last two and a half months.
Hi, Mark it's Scott.
I think that Q1 trends.
A follow on.
The latter half of the fourth quarter I wouldn't I wouldn't go I don't want to use our December which was kind of.
Very strong for us as a benchmark going forward.
But overall I think the trends remain positive and certainly.
We're well ahead in terms of revenue and EBITDA.
Vis vis some of the quarters, we saw it in mid year last year.
Okay.
And then as we've seen some volatility certainly in the commodity markets here pretty recently can you guys just talk about kind of what youre seeing out there for rice.
And then your ability to pass through pricing, whether it would be.
Purely out of Golden Ridge, but also in the derivative business.
I think we.
We have seen.
I think we're seeing less volatility in rice.
Then maybe we've seen perhaps in some of the.
The other commodities that we deal with in Gi.
I think we've gotten much better at the pass through on the price.
Particularly.
With the sourcing of some of the the SRP that we do.
We had.
Price increases quarter mid year that kind of settle down and I think that.
Where are we where we passed on price. We're nicely ahead of the parent right now.
Perfect and then the last question is just for me is just.
Can you talk about sales trends or quantify as we look at the derivative products, primarily the products coming out of Dillon.
And how the sales trends have moved for those products.
I think they continue to stay strong.
It was there.
Expo West Life's last week.
The level of interest in the derivatives is extremely strong.
The.
Alternative ingredients have seen much more inflation than we have seen.
And also does the recognition of what they can do for flavor improvement on the nutritional profile of our products.
So I remain very bullish about derivatives, particularly to help in wellness.
Perfect. Thank you.
Once again, if you have a question or a comment please indicate so now by pressing star one.
Okay. The next question.
Here is coming from.
One moment.
Dr. William Peters from <unk> investments.
One moment.
Okay. Dr. Your line is live okay, Great Hi, guys. Good numbers. Thank you for taking my call.
I just wanted to make a request simple request, if investor relations or public relations that are are <unk> employees.
Can keep investors more informed with news such as new product update or new customers and I think that will help retail investors stay more informed and I think that will help you fulfill your 180 day Grace period with more retail investors coming and buying.
Into rice bran, because they are more informed.
That being said usually we're waiting until earnings report that comes out and you know <unk> had a very good earnings report it will be nice throughout the whole year that we had a little bit more information. So we can.
No.
Feed off of that.
Thanks Carl.
I think it's a fair comment thank you.
One of our objectives for this year is just to be more proactive in our communication.
We spent 2021 dealing with.
Getting the operations to a level, but we recognize we need to.
Improve our communications, particularly with postings on the website press releases as well to keep everybody informed be then all stakeholders from <unk>.
Investors, but also into customers. So I appreciate your comment your sentiments Wilkes.
Okay. The next question is coming from.
Okay.
Roger Marris from each.
Each management your line is live.
Okay. Thank you.
Good afternoon, Peter and Todd.
Congratulations for the improvement, especially in.
In the fourth quarter.
Can you.
Thank God.
Sure.
The business to meet changing.
Sort of EBITDA breakeven is dependent upon further growth of the top line can you help us understand the revenue capacity.
The various businesses.
Of daily LNG Golden Ridge, and then deploys to our business.
US understand sort of help us frame how big these would be based on your current relationships.
George I think that.
I think it's difficult, particularly actually in this.
Boom.
Take it apart facility by facility or a product by product I think if I could.
If I could sort of speak to later.
From a larger perspective.
I think.
In terms of operating leverage and gross margin expansion.
Where we will see the most meaningful impact over the next year will come from.
Increased capacity utilization.
And stronger pricing.
In our core <unk> business.
Historically, we have operated.
And frankly, a subpar capacity utilization.
And there's a significant amount of operating leverage that can come through.
In a high tech slow variable cost business from increased.
<unk> utilization.
I think that that's that.
That's really like.
I would have you focus as the potential needle mover over the next year.
Yes.
Okay.
Think jodi youll start to see that.
They see some little movement in Q1, but I expect to see it up more in Q2 and Q3.
As we bring.
As we start to access new markets and in terms of.
I don't see.
Capacity overall capacity really being the growth the growth limited.
Yes, we have a lot of demand for our derivatives.
But we manage but I don't see it as a.
Major limiting factor, particularly through 2022.
Okay.
Great and let me just ask a follow up.
Investment perspective, or Capex perspective, what are your plans in 2022.
Both from that.
Our numbers point of view and sort of where would that cap.
Capital go.
I think that we expect capital expenditures in 2022.
<unk> significantly lower than in 2000.
'twenty one.
Now part of the Big dynamic there is that.
We had to remediate the Lake Charles facility last year, and we were reimbursed.
For insurance for a large part of that but I think the other parties that we've largely finished.
A bunch of projects that we wanted to do at Dillon.
And in and Golden Ridge.
So did the needs out there are not significant I think we we've been looking at in Gi.
And there is some stuff what we want to do there to leverage that facility.
But by and large.
<unk>.
I would be surprised if it was a seven figure number.
Okay.
Congrats looking forward to the year. Thank you very much. Thank you.
Okay. The next question is coming from David core private Investor David Your line is live.
Yes, Hi, Peter.
Since we took it on the AI DP.
<unk> four is have they made any sales yet.
And how much.
Not much yet you've got a sales cycle and the health and wellness area. So their ramp there.
We transferred some smaller accounts to them that they're obviously working.
But we've got plans in.
Again.
The development cycle for customers.
It doesn't happen overnight, so it's going to be over the next few quarters youll see that kicking in there.
Their initial efforts, though that theyre, making I am very pleased with.
It wouldn't.
Heard if we gave them extra incentive to make some sales like bonus.
Missions.
We're talking about all sorts of sales.
But.
Hey, even the most well compensated sales person.
Tom.
<unk> changed the way customer develops.
<unk> products.
Do they have any large contracts in the hopper if you will.
They have.
They have a lot of interest.
In the in the products.
So again I expect to see through this year.
Significant projects coming coming through.
Great Alright, thank you thank.
Thank you.
Okay I'd like to turn the floor back to you Peter Bradley for closing remarks.
Thanks, everyone and appreciate you taking the time to listening to our earnings call.
I think as.
As I mentioned, we're starting to move to a.
Profitable business with <unk>.
In the long term will generate positive cash flows, but I think just before I close I'd appreciate.
Just saying thanks to the team the employees who worked.
Tirelessly through a crazy environment and again, we always appreciate the support of our investors.
Thank you very much.
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.