Q3 2022 RiceBran Technologies Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the <unk> Technologies' third 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 Yahoo.
Mr. Rob Fink, Rob the floor is yours.
Thank you operator, and good afternoon, and welcome to the Rice Bran technologies third quarter 2022 financial results Conference call.
Hosting the call today are Peter Bradley Executive Chairman, and Todd Mitchell, Chief operating Officer, and Chief Financial Officer.
I want to remind participants that during this 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 95.
Actual results may differ from results discussed today, and therefore, we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC.
In addition, any projections as to the company's future performance represented by management include estimates as of today November three 2022, and the company assumes no obligation to update these projections in the future as market conditions change.
This webcast and certain financial information provided on the call, including reconciliation of non-GAAP financial measures to comparable GAAP financial measures are available at <unk> com on the Investor Relations page.
That said I would now like to turn the call over to Peter Peter The call is yours.
Thank you, Rob and good afternoon to everyone.
<unk> continues to see strong demand for our products.
As a.
As a result, we were able to deliver another $10 million revenue quarter with year over year revenue up 48%.
Specialty milling businesses are running very well and capitalizing on strong demand for high quality domestically source grains that we sold double digit growth in our core restaurant sales for the third quarter in a row.
We are pushing hard to get our core S. L b.
Get to our core F N b growth targets.
And reaccelerate our value add business.
But both are underperforming the levels, we would like them to be.
To be clear all of the initiatives, we are undertaking and which we discussed last quarter necessary to get the company to profitability continued to move forward.
Taking a little longer than we expected.
Of note significant progress was made in the third quarter at both our milling businesses.
Golden Ridge, we signed an agreement in September the full thing selling in the day to day operations of the mill in the hands of a local agent.
<unk> is very well run mill down the road.
This extensive network of local farmers to buy create grading from.
The ability to drive even further operating efficiencies.
Pet segment sales book, we believe he will be able to generate significantly better spread than we've been able to achieve on our own.
And importantly, our agreement will give.
With him is for him to be compensated and common stock on a performance basis aligning and directly with shareholders.
We look for this to begin at Golden Rich in the fourth quarter with greater impact going into the first quarter of 23.
And we expect a very similar dynamic for enjoying without capacity expansion lunches you already booked through 2023.
Elsewhere, we continued to push forward with the initiative related to a cold or I saw the value that solved the derivatives business or.
Be it a bit slower pace than we'd expected.
At our car chorus L. B business, we began shipping to a new pet food customer in the third quarter.
So that should be highlighted in the press release overall volumes with full fourth quarter will hold short of our expectations.
This is due to a technical issue the both politics and you have to be resolved what me entered into this agreement, which it turns out needs to be resolved sooner rather than later.
And the entire value but.
S. B derivatives business production issues are being fixed and we are rebuilding saleswomen to them without gold customers.
But sales to a distribution partner fell short of expectations for the third quarter, and we're still having issues with imported feedstock.
We addressing both issues that both of weighing on our sales and contribution margin.
Notably problems with obtaining imported feedstock could delay the initial ramp or unused SK use which we had expected in the fourth quarter.
These factors 10 per hour knit.
The outlook for sales and profitability for both these business, although we continue to expect to generate cells in the book.
Quarter that are on par with private quarters of 2022.
And we look for incremental improvement in overall profitability as evidence of real movement forward.
All of our initiatives to achieve profitability.
Let me now turn the call over to Todd for review of the culture in more detail.
[noise]. Thank you Peter good afternoon, everyone.
To reiterate the point Peter made there's very strong demand for our products delivered another quarter of revenue in excess of $10 million with year over year growth.
48%.
Golden Raging N G I R executing very well and generating strong top line growth and we saw double digit growth in core SRV sales for the third quarter in a row.
We also continue to move the ball down the field on all of our initiatives, which will get the company to profitability.
And while it's taking longer than expected we remain confident that goal is achievable.
With that let's look at the third quarter's numbers in greater detail.
Revenue.
Total revenue was $10.3 million in the third quarter up 48% from $6.9 million a year ago.
As I mentioned strong growth in the corner was underpinned by Golden Raging M. G I as well as the third quarter in a row of double digit growth in core SRV sales.
Gross losses.
Gross losses were 697000 in the third quarter compared to gross loss of 276000, a year ago [noise].
We fell short on this metric for two reasons first after several quarters of progressive improvement Golden reached swung hard in the other direction and was responsible for a significant portion of gross losses in the third quarter.
In short we ran the mail hard in the quarter to prove that we could execute on the sort of volumes are new operating partner is looking for <unk>.
But we did it at a pretty narrow Patty margin.
And we spent a significant amount to address and deferred maintenance issues in order to get the meal in top shape before handling it off to our new operating partner.
We feel pretty good about this relationship and.
From where we're sitting we think it will be transformative to this part of our business.
Second or value add ESRB derivatives business, while resolving the production issues, we saw in the second quarter and beginning to catch up on its sales backlog.
Generated another quarter of negative contribution margin for the reasons teeth are highlighted in his remarks.
This is a business we know well.
And one which we think will be transformative to the company once it's back up and running strong and we can fully execute on our plans for new product introductions.
SG&A.
SG&A with $1.8 million in the third quarter down 2% from a year ago.
We are running lean in corporate and the team continues to find efficiencies.
We're seeing inflationary pressures on virtually everything, but we're holding our own through careful expense management.
Notably during the quarter or Nonexecutive directors took an overall reduction in compensation and shifted the.
<unk> of their compensation to all stop mitigating cash outlay.
We were also finally able to execute a sublet of our corporate headquarters, which will also have a materially positive impact on both expenses in cash out lights going forward.
These are just two items out of a number of things we've been doing to increase our efficiencies and watch our costs.
Operating losses.
Operating losses grew 19% in the third quarter to $2.5 million from operating losses of $2.1 million a year ago.
The increase in operating losses in the quarter was a result of the increase in gross losses.
Net losses.
Net losses for the third quarter, where $2 million or 38 cents per share.
Compared to net losses of $2.2 million.47 per share a year ago.
Net losses in the <unk> in in the second quarter included a 600000 non cash benefits from the revaluation of a warrant liability.
Adjusted EBITDA.
Adjusted EBITDA losses were $1.4 million in the third quarter compared to adjusted EBITDA losses of $1.1 million a year ago.
This decline reflected the increase in gross losses due to the negative contributions from Golden Ridge, and our value added SRV derivatives business during the quarter.
Cash and liquidity.
Total cash was $4.4 million at the end of the third quarter down from $5.1 million at the end of the second quarter.
Cash reserves were three 6 million, while total borrowing excluding are factoring agreement was $4.3 million <unk>.
Cash reserves in total borrowing included 900000 in liquidity that was provided in advance of a restructuring of our term loan under Golden Rich, which should be completed this month.
After the end of the quarter we.
We raised net proceeds of $1.3 million from the issuance of common stock and warrants an indirect placement manage by HC Wainwright.
With these two items, we believe we've created the security of a liquidity bridged profitability and an increasingly insecure capital market environment.
With that I'll turn the call back to Peter some closing comments.
Thanks towards.
We continue to believe we have is we.
We have successfully put the company on the pathway to sustainable success.
Progress is taking longer than we anticipated.
But all the pieces are in place and we are moving forward.
Demand for our products are strong and in the past two years, we have nearly doubled revenue organically by better.
By operating better bolstering ourselves turn those channels for <unk>.
Been alone Cole.
Tenuous improvements in operations, the completion of comfortable upgrades and most notably the installation of the new operating pump for Golden Ridge, who connects.
<unk> primary book of business Shipton these businesses collectively into a solid source of adjusted EBITDA.
That was envisage when there were required.
And while we have faced setbacks.
We have been successful in the opening new markets for both core recipe from value of derivatives and we are progressing with the introduction of new Royce derived products, which will expand value other business.
Right of shift to a higher value.
Specialty ingredient company.
We're continuing to be optimistic about the future and we appreciate your patience and your support.
With that we will be happy to answer your questions.
Thank you very much Peter ladies and gents.
On the floor is now open for questions. If you have any questions or comments. Please pass.
One on you'll find at this time, we ask that while painting. Your question you. Please pick up your handset speak.
Speak assigned to provide all sound quantity.
Pulse of questions.
Okay. Our first question is coming from.
[noise].
J racing.
Capital capital J.
Yeah.
Yeah, Hi, good afternoon.
I'm listening to the conference cool I'm.
Daily.
You know I I'm basically calling the company from <unk> and a half.
The.
Shareholders, I believe I'm not sleeping well at night.
With directors I, you know I really.
We appreciate the fact that you put them on.
A snack only based compensation, but somehow the compensation compared to how the company's doing earnings wise and that sales wise they seem to be turning around and hopefully the past 20 years.
<unk> promises promises and then after everything you've said or done the rug gets pulled out and we do a heavily diluted diluted offering to raise 1.2 million something is.
Finally, what's going on here I mean, it looks very strange to me.
This is Todd.
We hear your comments, we appreciate your concerns.
You.
I think that we have been marching forward with this transition to this company.
And in the Ark of the last three years or sell when it's been under the current management.
We've made progress.
I think we've had some setbacks here in the last couple of quarters.
And you know.
But we wanted to complete what we've started and I think we felt that there was a need to have sort of liquidity bridge.
To ensure that we could complete what we've started and yet through to the next phase of <unk> of this at this company you know I think that.
Given where.
The capital market is gone.
Decisions were made that.
Was costly but gives us the security to complete what we've started.
Thank you very much towards your next question is coming from David.
David to your line is nice.
Yeah I saw it in the theater.
Question, a couple of questions for you. This Mister Ferguson has taken over Golden Rich when did it start.
And has he broken even since he started [laughter] Mister Ferguson agreement.
Agreement began at the end of the September .
He has.
Become very much engaged.
I would tell you, though that it's going to take a couple of months to fully transfer.
As complex of a book as.
<unk> you know.
You have extended arrangements with people that you buy from an extended arrangements that yourself from so that has to be transition.
But I can tell you from where I said that he's engaged in both addressing better ways to buy and better ways to sell right and <unk>.
So better ways to operate the mill.
And I feel very positive about that and I think we will see a transition and.
An improvement in the coming months and certainly in the coming quarters.
Is he going to be milling at non-profits.
Is he going to be milling at nonprofit.
Margins to I mean, what's to stop them from just smelling, it's not his pocket.
It is his pocket.
<unk>. The one thing here was this compensation is tied to the borough too you know a big issue with Golden Ridgewood.
You know tub first growing bowl.
Re R. Three issues, but the first issue is within her at all for a a bill.
Second issue was we didn't know what to buy rush effectively when the third issue, which we did not the sole rocks effectively which is not a recipe for success.
What we've done and done is fixed.
Operating the mill.
And then we brought this agreement in place really.
To accentuate further but also to cover the two issues.
The World is compensated which is just through stock.
It's all about.
Jim So we'll we'll we'll be.
Middling negative Belgians.
It's not about volume, it's about turning the site into profitability.
While these only Boone J Ts I mean really been involved sort of months I'd.
I'd been personally impress was.
Supposed to be his level of engagement.
Insensitive urgency to make that happen.
So he's got a book that he can buy cheaper than he is going to sell after it smelled that's the understanding here.
Yeah. So.
Yes.
Two things.
The.
First of all his his incentive is tied to adjusted EBITDA for Golden Rich as we measure. It. So he is only going to be compensated. If there is positive adjusted EBITDA and he will be considered compensated as a percentage of that so it's not only increasing the commodities.
Spread between buying and selling it's covering all of his operating expense underneath it as well.
But he's running another mill, what's to stop him from like given us the bad contracts and hadn't taken the better ones for his mill.
The.
Agreement is there's there's a strong reason why two smaller mills would want to get together and operate as a bigger entity. There is significant advantages to scale to both parties.
And the way it is structured.
Is such that he already operates a very good meal.
He he he's not going to give us the bad business and take the good business [laughter]. What he is going to do is use the scale of both meals to get better business for both of them.
Okay and next question.
If you'll allow me the.
The rideshare importing for the derivatives.
I guess, that's coming from Thailand, or India or something this is <unk>.
Specialty rice, you're not able to.
By a cheaper.
Then you're selling it.
Currently.
The issue there that.
That we've had is that we've had.
Frankly.
Highland had a drought.
And the rice that we're getting.
Does not produce products.
That is acceptable from our perspective to sell to our customers any any it comes down to the fact that the <unk>.
The crop with stressed so it's not being processed as as we would like it and then as we highlighted that.
You know that was exacerbated by the fact that.
What we're doing with it is fraction eating at in an enzyme process and we had to swap out and find a new enzyme at the same time.
We have a large illness quarter, what's different this quarter were still important in the same bed rice.
We are we are working with this <unk>.
Some of our new skews.
And we're finding that.
We're having sort of similar feedstock issues as a result of that it's not.
A billing our production process.
But it's causing us to pause.
Before we get aggressive in terms of taking it to market.
Is there no.
<unk> as well as the clock change in Thailand.
We can't change the climatic conditions in Thailand or anywhere else.
We will.
They will start processing, we don't buy runs from that we finally, you <unk> I felt that.
They will stop moving to new crop and so we will see the new crop come through.
Probably in because of shipping.
Transit turns probably in the first quarter so at the moment.
We've learned how to use what we can and a very bad crop year, and then we'll get back to more historic known since we moved into the first quarter.
Is there any way that just buy it domestically. So we can taste it before we buy it.
There isn't enough.
Rice available in all guarding so I'll be available to support our facility.
I wished the walls, but there isn't too.
Uh-huh, but we're not an animal the rice before we buy it from Thailand, that's the problem.
We have implemented.
Pretty shipment I'm pretty shipment sample program.
To make sure we can touch them, but obviously the delay the the shipping time remember this is apply rebuilt with for over a decade.
And.
This is the first time, we've had a.
A major issue, but we're we're coming to the end of the space switch over to new crop, but you are we are put.
Three shipments samples now it's not just a question of taste here. It's a question of how it works or a front generation process of Dillon.
It's difficult so difficult to predict.
So most of the losses came from this bad rice derivative, you're getting from Thailand and from.
Golden Rich.
In the quarter.
Yes, most of the losses were isolated to those two facilities. So we can look forward to this quarter to breaking even with Golden rich with this guy Ferguson running it I would.
I'd imagine is that what you expect.
I would expect significantly better results.
Okay, well thanks, guys.
Okay. There appears to be no set of questions in the queue.
The management to any kind of thing remarks.
Well, thank you again and I just want to reiterate we're on the pathway forward.
Moving this business towards.
The positive performance.
Get some bumps in the road.
Along the way, but I think with Golden Ridge.
He hopes for the new agreement, but I think we're getting our hands around the operating.
Issues of raw material feedstock issues, we've had that Dillon so I.
We continue to be on the password forward to success.
Thank you everyone.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect you'll find lines at this time and have a wonderful day.
Participation.
Yeah.