Q1 2022 RiceBran Technologies Earnings Call

Okay.

Good day, ladies and gentlemen, and welcome to the Rice Bran technologies first quarter 2022 earnings call and webcast. At this time all participants have been placed on a listen only mode and the floor will be opened 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, and good afternoon, and welcome to the <unk> technologies first quarter 2022 financial results Conference call.

Hosting the call today are Peter Bradley Executive Chairman and Todd Mitchell Rice, Bran, as 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.

Therefore, the company claims protection 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, we refer you to a more detailed discussion of these risks uncertainties and the company's filings with the SEC.

In addition, any projections as to the company's future performance represented by management.

Estimate as of today.

Also on May eight 2022, and the company assumes no obligations to update these projections in the future as market conditions change this webcast and certain financial information provided on this call, including reconciliations of non-GAAP financial measures to comparable GAAP financial measures are available at <unk> Dot com on the Investor Relations.

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At this time I'd like to call turn the call over to Peter Peter on the call is yours.

Thank you, Rob and good afternoon to everyone.

During 2021, we successfully developed and begun implementation of our strategy to put <unk> on the path to sustainable growth and profitability.

This strategy has shifted our focus to higher added value ingredients and takes advantage of our unique ability to utilize rice bran thats the healthy alternative to traditional ingredients.

We're aligned with secular healthy living catalysts in a day.

Mystic manufacturing capabilities.

This increase in your trying to during the periods of disruption to the global supply chain.

<unk> begun to see these benefits in the shift from.

As I mentioned results as revenues are growing.

Move towards positive adjusted EBITDA.

Our strong first quarter results reflect structural changes within the company.

Much progress, putting the mistakes of prior management behind us as we build the platform for profitable growth.

We have successfully increased the focus on value added products, including new product introductions and strengthening.

Reach with a distribution agreement with AIA DP.

We're driving volume growth and higher capacity utilization in the cold SLP business.

Strong inroads into the companion animal space.

As well as strengthening our logistics capabilities.

We have also made tremendous strides in driving strong growth and improved profitability.

Profitability.

Both NGL and Golden Ridge.

With these structural enhancements complete and confident.

<unk> thousand 22 will be a year of further progress as we accelerate this transition.

Fully aligning our real good monetization.

Focus on profitability and then so go to market strategy with it.

The partnerships.

We will invest in revenue streams, where we generate higher levels of profitability and deemphasize areas, where we do not.

We have a streamlined operation and address the issues that have hampered execution, so incremental revenue should continue to leverage.

Further improvements in profitability enabled us to transition to positive adjusted EBITDA as revenues.

<unk> continues to grow.

Mix, which shifts away from more of our commodity business.

With the company's transition well underway and I'll focus moving towards a value added ingredients that strategy. We've reached an inflection point, where the change in our governance makes sense today, we announced the gene.

And we will black will be joining our board of directors.

Gene is the founder of <unk> associates, a food industry consultancy that provides strategic moncton cancel to companies and trade associations involved in consumer food food ingredients in the tech sector and choose a spokesperson for the United Soybean Board.

<unk> retired from Dupont nutrition, <unk> biosciences up to the 33 year career and food ingredient melting, culminating in serving as global marketing lead so departments protein solutions business units.

Will brings over 35 years' experience in the global health and nutrition industry to our board.

He has served in sales and marketing leadership roles with Chromebooks Bioscience company focused on the <unk> Nutraceuticals.

And let's see.

<unk> natrium, a proprietary botanical ingredient company.

Will was also global head of marketing of human nutrition and health.

DSM nutritional products the leader in the development of nutraceutical ingredients on the world's largest manufacturer of lettered vitamins and then <unk> will also held senior roles at Dupont Nutrition and health.

Jean will bring <unk> significant consumer facing sales marketing and product development expertise.

Their expertise and relationships will provide will be invaluable as we develop and.

And go to market with value and value added ingredient offerings in the companion animal and equine and human markets.

Joining him will will be replacing a recurrence and Beth bronner, who have resigned from the board we'd like to think we'd like to thank already in best of the significant contributions during this transition.

Jean <unk> will join <unk> as the company is on the verge of a significant and positive financial transition, which is evidenced by our first quarter results.

This transition is being driven by strong sales initiatives higher capacity utilization and better operational.

Execution.

All of which translates into enhanced customer relations, which will serve to.

Which will continue to serve as a positive catalyst for growth and transition to.

Positive adjusted EBITDA.

I'll give you some more detail on our progress.

In a minute, but let's first half revenue through the quarter in more detail.

Thank you Peter good afternoon, everyone.

We had an encourage start to the new year.

We generated a record $10 $6 million in revenue.

We returned to positive gross profit margins.

As a result, adjusted EBITDA losses narrowed to 385000.

And crucially liquidity remained strong with $5 $9 million in cash on the balance sheet at the end of the quarter up modestly from year end.

That's not to say the quarter did not have its challenges we had some production and plant issues and the supply chain and logistics remains daunting to say the least but.

But we've put in place strategies to mitigate these issues and.

And we believe that first quarter results demonstrate that we're on the right path.

With that said, let's look at the quarter's numbers in a little bit greater detail.

Revenue.

Total revenue was $10 6 million in the first quarter.

23% from $8 6 million, a year ago, and 31% from $8 million in the fourth quarter.

<unk> growth in the quarter was driven by higher core SRV sales and strong results from both MDI and Golden Ridge, while value add SRV derivative sales declined modestly year over year really due to the timing of large customer orders and a real tough comparison year over year.

Gross profit we.

We generated a positive gross profit of 502000 in the first quarter, which compared to a gross profit of 670000 a year ago.

Recent price increases have offset higher input costs, which with higher volumes for our core <unk> business and the strong results from <unk> Gi and Golden Ridge in the first quarter supported a return to positive gross margins from losses in the latter half of 2021.

With lower value add SRV derivative sales and some unplanned downtime at <unk> Gi as well as higher freight costs held back results versus a year ago.

SG&A.

SG&A of $1 7 million in the first quarter declined modestly from a year ago, we're seeing some upward pressure on certain larger items, including compensation and insurance.

<unk> been able to offset these increases with lower expenses on outside consultants and legal buying.

By and large SG&A has stabilized in the range of $1 seven $1 $8 million per quarter and should remain there in the foreseeable future.

Operating losses operating losses in the first quarter were $1 2 million.

Slightly from $1 1 million.

In the same quarter, a year ago, but down meaningfully from about $1 7 million in the fourth quarter. If you exclude our goodwill write down in that quarter.

Net income.

Net loss for the first quarter was $1 5 million or <unk> <unk> per share.

<unk> to net income of 591000, or <unk> 10 per share a year ago remember net income in the first quarter of 2021 included a $1 $8 million benefit from the forgiveness of our PPP loan.

Adjusted EBITDA adjusted EBITDA loss was 385000 in the first quarter.

Compared to a loss of 158000 in the first quarter of 2021.

This decline reflected the year over year drop in gross profits, but again compares favorably to adjusted EBITDA losses of 806000 in the fourth quarter, Indeed, and compares favorably to every quarter in 2021, except for the first quarter.

Lastly, cash and liquidity, we ended the quarter with $5 9 million in cash up slightly from year end due to favorable working capital trends in the quarter with 190000 in cash flow from operations during the quarter.

With that I will turn the call back to Peter for closing comments.

Thanks.

<unk> has a clear strategy and pathway to positive EBITDA.

Focus on those products and markets, where the value we deliver is recognized which in turn drives higher margins.

The first business as derivative products and you have seen that strengthen our market reach with the IDB partnership. We've also expanded our feedstock supply and implement process improvements.

To increase capacity to meet growing demand.

The second business is our core S. L b.

Where we focus on expanding penetration into human food and companion animal applications.

This has included the launch of new S. L. B variants and you will see further additions to our product line through the rest of 2022 to deliver further value to capture.

And the increased share of this opportunity that exists to replace soy corn and use derived ingredients.

Linked to our continued focus on manufacturing and supply chain efficiencies, we expect the core <unk> business to deliver meaningful profitable growth.

Our third focus is on specialty milling business.

<unk> the demand for specialty Greens grades continues to be exceptionally strong.

We are completing loan growth do upgrades at the mill to increase capacity and efficiency.

And broaden the range of products offered.

Once these upgrades are completed <unk> will be able to consistently deliver high quality products.

You buy a car.

Good markets.

Three primary focus markets.

Which offer significant upside opportunity.

You will know type not following launch of license billing as part of our forward focus.

We have been pleased with our year over year improvement Golden Ridge facility.

It has become clear to us that Rollins building should not be a strategic focus for the company.

The results over the coming months, we will be exploring multiple options to optimize the financial and strategic impact from Golden Ridge.

Derivatives, <unk> and specialty building products provide our pathway to profitability with the strategic initiatives that I've outlined expectations.

To see each of these business delivered solid growth despite the challenges in supply chain.

<unk> is not immune to these challenges, but also work with <unk>.

Opportunity to grow our penetration in key applications.

With that we're happy now to answer any questions. Thank you operator.

Ladies and gentlemen, the floor is now opened for questions. If you have any questions or comments. Please press star one on your phone at this time.

We ask that while posing your question you. Please pickup your handset is listening on speaker phone to provide optimum sound quality. Please.

Please hold while we poll for questions.

We have a question and our first question is coming from Mark Smith.

Please announce your affiliation then pose your question.

Hi, guys Mark Smith of Lake Street, a couple of quick questions. First can you guys give us any additional data on on MG I know this is.

Typically a seasonally stronger quarter for that but how that business is trending.

And if you can quantify at all maybe year over year improvements at MTI that'd be great.

Mark This is Todd.

I think the improvements that we've seen at in Gi year over year are very material.

Very high double digits, both on the topline and.

And the bottom line.

I think thats come from.

There is a certain degree of an <unk>.

Price inflation in that business.

A lot of it's come from volume.

Productivity enhancements.

Okay.

Any of the strength here in Q1, any kind of pull forward and MTI any expectation that maybe Q2 wouldn't see the same trends.

No I think we will see the same trend in in.

In the second quarter that we saw in the first quarter.

And I think that we've done a lot.

With the the business leader, there and the team.

We're in fact, we'll probably be able to mitigate a lot of the historical seasonality <unk> seen in that business.

Perfect.

That kind of leads right into the next question.

Any update on trends that youre seeing.

Post quarter end and through Q2, especially as we look at some of this value add SRV.

Yes.

I think that our.

There's been very little variance and the trends from one to two Q.

Higher R. S. R R SRV derivatives business.

<unk> had a real tough quarter in the first quarter.

It's sort of trended with fourth quarter.

And I think we will see that business began to pick up just on looking at the pipeline and the and the order book there.

As we go into the second quarter in the latter half of the year.

Perfect and then last one for me any update on kind of outlook for EBITDA. When do you think maybe you could turn it turn positive positive EBITDA.

Sure.

We remain hopeful for this year.

Im going to leave it at that.

I think with where our revenue is trending.

Slight improvements in the mix.

Of the products.

We may be able to bridge that gap.

Perfect. Thank you guys.

Thank you.

Yes.

Our next question comes from Charles Robinson, who is with Dawson James.

Hey, guys.

Congratulations on the record quarter.

Thank you. Thank you.

And a quick question is there a correlation between the.

One 4 million shares sold by Continental grain your largest shareholder and the resignation of Ari can discern.

Can you shed some light on that.

And to be honest, it's not for roads to comment on continental <unk> investment strategy.

<unk>.

Already got.

Other things to do for the continental portfolio.

Installed our place to comment on that investment strategy.

Okay. I guess I was looking for is there a reason why he resigned from the board.

As a matter of how do you wanted to focus on.

Yes.

Okay. Okay.

I would look instead at the qualifications that are two new board members bring to us.

If you look at what we're doing with the shift in strategy towards specialty ingredients.

As opposed to being a larger green operation.

I think you can put two and two together there.

Fantastic.

Anything else Charles.

Nope Nope I'm all set.

Yeah.

I'm all set.

Thank you. Thank you.

Our next question comes from a George Johnson. Please state your affiliation and pose your question.

I'm a private investor.

And Peter.

Theater, and Todd I'd like to thank you I think in these challenging times here in the country in the hall that we had a very good quarter.

Hi, My first question. My first question has to do with M. D. I, a little bet Peter last year, you mentioned the possibility on our first quarter whats ended here of a pen.

Food, combining oats in rice, bran and any developments in that product.

There is still opportunities to do that.

A lot of our customers are using both boats and ROI spend in the formula what we've really focused on because of the strength in demand for the core products of Mg only ease up in volume.

What can we get more of MGR, you're right, though I think we will head down that route.

<unk> co proposition has been so strong.

When we go.

More business opportunity, we can undo just just on the products I can understand that and I'll, let the horse fee, which they always had this has never been made by RMB tailored by the customers.

And then one more MTI question unrelated to that is that at week magazine had an article and they talk about how the virus is really becoming.

Demand by pet food companies, 13% protein.

And.

That sounds very well with animals.

The increase in the virally after that protocol April yes.

The demand is there.

Alright.

What we're finding in the hole.

Pet food spaces.

There is strong interest not just in Bali, but also win.

<unk>.

Because that's a big it's got slightly owning a protein.

And some of the benefits so we see.

The whole companion animal space as a real opportunity for the business across the product line.

Yeah.

And then one more question.

You made last year, you'd just mentioned the possibility of doing.

Partnering with products with the India.

Corporation a ruler.

<unk>.

Rice mill in Indonesia, and Thailand, which are incentives organic brand.

I, just Wanna comment, having those new board members. It sounds like one of them might really help us out with there is there are under nutraceuticals.

In pharmaceuticals, food and all everything that we handle I think those new board members met the help there.

That's why we brought on more.

We go to the <unk>.

Specialty food ingredients business is very different from commodity grain markets and while obviously as you're probably well aware that smart background. When bumps of two board members that can add to our thinking so youre exactly the onshore they will be very helpful.

And we're very fortunate to have USA.

That's all I have.

Very nice.

Headquarter.

Our next question comes from Martin NEC.

Yes.

Hi, I've spoken to you at times in the past.

20 year, Investor and as you can imagine.

I look forward to each conference call, which is very positive on the future and I'm still waiting for us to quite to get there.

I noticed your response to one of the qualities on when you might expect to breakeven on EBITDA and the answer was a little fuzzy maybe it has to be but it said sometime this year you hoped we would see it can you just clarify that a bit closer.

Martin Im not going to do that.

I think if you look at the trend.

Theyre headed positively.

And I think it's incumbent upon us to deliver them for you.

So.

But let's let's not talk about the future, let's deliver the feature.

Very good in the past we have.

Over promised and under delivered since this new board has taken over in the main you have under promise and over deliver so it's certainly a good trend.

That's the question I have thank you.

Thank you.

Our next question comes from David core.

Hi, guys.

Congrats on the quarter record quarter I was curious.

Of that tenant.

600000 that revenue what percentage of that would be derivatives.

We don't.

We don't break out our businesses.

So I'm not going to speak to that because thats not something that we do.

Disclose.

But you know.

The derivatives business is within our overall mix is as a percentage, which if it continues to grow as they grew last year.

And continues to generate the margins that had generated last year.

Offers significant leverage to the bottom line.

Uh-huh has contributed.

Contributed to those sales yet.

Yes.

Significantly.

Our sales to a day IP I would be willing to say were meaningful in the quarter.

That's good news right keep up the good work guys.

Thank you.

There are currently no questions remaining in the queue, but a reminder, that if you have any final questions or comments. Please indicate so now by pressing star one.

We will wait a moment while.

The Q&A pulse.

Okay. Thank you.

We turn it over to Peter for closing thoughts.

Thank you everyone for room.

Listening to our earnings release, we value your continued support.

<unk> also declined due to the growing sprint team, who in difficult circumstances really helped us move the business forward.

We look forward to seeing the.

Fruits of their labors over the coming quarters. Thanks again.

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.