EX-99.1 2 agfs93018q3exhibit991.htm EXHIBIT 99.1 Exhibit


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AgroFresh Solutions Reports Results for Third Quarter and First Nine Months of 2018

Generated third quarter organic growth of 6%

Further progress on diversification growth strategy; FreshCloud advancements announced

•
Net sales increased 13% to $68.7 million for the third quarter and increased 14% to $125.5 million for the first nine months of 2018 versus the prior year periods; organic sales up 6% and 2%, respectively
•
Further diversification with 70% of net sales related to apples in the first nine months of 2018 compared to 80% in the prior year period
•
Net income of $3.5 million for the third quarter of 2018; net loss of $27.9 million for the first nine months of 2018 compares to net income of $0.1 million in the first nine months of 2017, which included a one-time tax benefit and a gain on foreign currency exchange, together totaling $26 million
•
Adjusted EBITDA[1] increased 1% to $34.6 million for the third quarter of 2018; increased 1% to $42.5 million for the first nine months of 2018

PHILADELPHIA, November 7, 2018 -- AgroFresh Solutions, Inc. ("AgroFresh" or the "Company") (NASDAQ: AGFS), a global leader in produce freshness solutions, today announced its financial results for the third quarter and first nine months of fiscal 2018, ended September 30, 2018.

Jordi Ferre, Chief Executive Officer, commented, "We are pleased to report 13% growth, including 6% organic growth, in the third quarter of 2018 compared to the prior year period, and believe this is indicative of the strength of our core business. We saw growth in SmartFresh driven by our European business as well as continued progress in diversification to other crops such as pears. Our efforts continue to be focused on advancing our growth initiatives in new product development, innovation and partnerships. During the third quarter, we started the roll-out of RipeLock across a major United States retailer and launched our FreshCloud platform, which adds knowledge-based solutions to fresh produce supply chains from the field to the retail store. This platform provides us access to large new potential markets where technology is quickly becoming an enabler of food preservation and waste reduction, while helping our partners leverage AgroFresh’s more than 20 years of hands-on knowledge of their business to maximize returns."
“As we look to the future, we remain encouraged by the strong macro fundamentals that support the need for food preservation technologies and believe that our ability to deliver differentiated solutions alongside a high-touch service offering is the cornerstone of our competitive strengths. While we have seen a modest decline in gross margin due to our strategic initiative to diversify our sales, we remain focused on productivity improvements as our operations scale and we seek to increase shareholder value over the long-term.”
Financial Highlights for the Third Quarter of 2018
Net sales for the third quarter of 2018 increased 13%, from $60.8 million to $68.7 million, compared to the third quarter of 2017, driven by organic growth and our acquisition of Tecnidex in December 2017, which contributed $4.0 million of the increase. Organic revenue growth was led by SmartFresh, which grew in Europe due to increased penetration and crop size.
Gross profit increased 6%, to $52.0 million, in the third quarter of 2018 compared to the prior year period. Gross margin of 75.7% was consistent with expectations and in line with the Company’s strategy of diversifying its revenue mix with newer product solutions such as Tecnidex, Harvista and RipeLock.





Research and development costs were $3.5 million in the third quarter of 2018, up slightly versus the prior year period, driven by the addition of Tecnidex.
Selling, general and administrative expenses were $18.2 million in the third quarter of 2018 as compared to $14.5 million in the prior year period. The increase was primarily driven by the addition of Tecnidex, costs associated with personnel changes and other non-recurring costs, including litigation.
Third quarter of 2018 net income of $3.5 million includes a loss on foreign currency exchange of $4.7 million, compared to net income of $9.5 million in the prior year period. Adjusted EBITDA was up 1% in the third quarter of 2018 versus the prior year period, to $34.6 million.
As of September 30, 2018, cash and cash equivalents were $26.0 million.
Footnote:
(1) Adjusted EBITDA is a non-GAAP financial measure. Please see the information under “Non-GAAP Financial Measures” below for a description of Adjusted EBITDA and the tables at the end of this press release for a reconciliation of this Non-GAAP financial measure to GAAP results.

Conference Call

The Company will host a conference call and webcast where members of the executive management team will discuss these results with additional comments and details today, November 7, 2018 at 4:30 pm E.T. The conference call and supplemental earnings presentation will be available live over the internet through the “Events & Presentations” page of the Investor Relations section of the Company’s website at www.agrofresh.com. To participate on the live call listeners in the United States may dial 855-327-6837 and international listeners may dial 631-891-4304.

A replay of the conference call will be archived on the Company's website and telephonic playback will be available from 7:30 pm. ET, November 7, 2018 through November 21, 2018. Listeners in the United States may dial 844-512-2921 and international listeners may dial 412-317-6671. The passcode is 10005724.

Non-GAAP Financial Measures
This press release contains the non-GAAP financial measures EBITDA and Adjusted EBITDA. The Company believes these non-GAAP financial measures provide meaningful supplemental information as they are used by the Company's management to evaluate the Company's performance, including incentive bonuses and for bank covenant reporting. Management believes that these measures enhance a reader's understanding of the operating and financial performance of the Company and facilitate a better comparison between fiscal periods. EBITDA excludes income taxes, interest expense and depreciation and amortization, whereas Adjusted EBITDA further excludes items that are non-cash, infrequent, or non-recurring, such as share-based compensation, severance, litigation and M&A related costs, to provide further meaningful information for evaluation of the Company’s performance.
The Company does not intend for the non-GAAP financial measures contained in this release to be a substitute for any GAAP financial information. Readers of this press release should use these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures. Reconciliations of the non-GAAP financial measures EBITDA and Adjusted EBITDA to the most comparable GAAP measure are provided in the table at the end of this press release.

About AgroFresh
AgroFresh Solutions, Inc. (Nasdaq: AGFS) is a global leader in delivering innovative food preservation and waste reduction solutions for fresh produce. The Company is empowering the food industry with Smarter Freshness, a range of integrated solutions designed to help growers, packers and retailers improve produce freshness and quality, reducing waste. AgroFresh's solutions range from pre-harvest with Harvista™ and LandSpring™ to its marquee SmartFresh™ Quality System, which includes SmartFresh™, AdvanStore™ and ActiMist™, working together to maintain the quality of stored produce. AgroFresh has a controlling interest in Tecnidex, a leading provider of post-harvest fungicides, waxes, coatings and biocides for the citrus market. Additionally, the Company's initial retail solution, RipeLock™, optimizes banana ripening for the benefit of retailers and consumers. AgroFresh has key products registered in over 45 countries, with approximately 3,700 direct customers and services over 25,000 storage rooms globally. For more information, please visit www.agrofresh.com.
™Trademark of AgroFresh Inc.



Forward-Looking Statements
In addition to historical information, this release may contain "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this release that address activities, events or developments that the Company expects or anticipates will or may occur in the future are forward-looking statements and are identified with, but not limited to, words such as "anticipate", "believe", "expect", "estimate", "plan", "outlook", and "project" and other similar expressions (or the negative versions of such words or expressions). Forward-looking statements include, without limitation, information concerning the Company's possible or assumed future results of operations, including all statements regarding financial guidance, anticipated future growth, business strategies, competitive position, industry environment, potential growth opportunities and the effects of regulation. These statements are based on management's current expectations and beliefs, as well as a number of assumptions concerning future events. Such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company's management's control that could cause actual results to differ materially from the results discussed in the forward-looking statements. These risks include, without limitation, the risk of increased competition; the ability of the business to grow and manage growth profitably; risks associated with acquisitions and investments, including that the Company’s acquisition of Tecnidex may not yield the results expected; changes in applicable laws or regulations, and the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors. Additional risks and uncertainties are identified and discussed in the Company's filings with the SEC, which are available at the SEC's website at www.sec.gov.

Contact:
For AgroFresh Solutions, Inc.
Jeff Sonnek - Investor Relations
ICR Inc.
Jeff.Sonnek@icrinc.com
646-277-1263





AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
 
September 30,
2018
December 31, 2017
 
 
 
ASSETS
 

 

Current Assets:
 
 
Cash and cash equivalents
$
26,022

$
64,533

Accounts receivable, net of allowance for doubtful accounts of $1,907 and $1,550, respectively
96,477

71,509

Inventories
18,307

24,109

Other current assets
19,247

18,684

Total current assets
160,053

178,835

Property and equipment, net
13,929

12,200

Goodwill
6,528

9,402

Intangible assets, net
725,653

757,882

Deferred income tax assets
7,020

8,198

Other assets
16,857

16,746

TOTAL ASSETS
$
930,040

$
983,263

 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 

Current Liabilities:
 
 
Accounts payable
$
14,916

$
15,014

Current portion of long-term debt
8,717

7,926

Income taxes payable
5,753

5,931

Accrued expenses and other current liabilities
62,200

65,809

Total current liabilities
91,586

94,680

Long-term debt
399,960

402,868

Other noncurrent liabilities
38,518

38,505

Deferred income tax liabilities
30,806

31,130

Total liabilities
560,870

567,183

 
 
 
Commitments and contingencies (see Note 17)
 
 
Stockholders’ equity:
 

 

Common stock, par value $0.0001; 400,000,000 shares authorized, 51,100,591 and 51,002,234 shares issued and 50,439,210 and 50,340,853 shares outstanding at September 30, 2018 and December 31, 2017, respectively
5

5

Preferred stock; par value $0.0001, 1 share authorized and outstanding at September 30, 2018 and December 31, 2017
—

—

Treasury stock; par value $0.0001, 661,381 shares at September 30, 2018 and December 31, 2017
(3,885
)
(3,885
)
Additional paid-in capital
535,043

533,015

Accumulated deficit
(136,611
)
(108,729
)
Accumulated other comprehensive loss
(33,383
)
(12,769
)
Total AgroFresh stockholders’ equity
361,169

407,637

Non-controlling interest
8,001

8,443

Total stockholders' equity
369,170

416,080

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
930,040

$
983,263





AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)

 
Three Months Ended
September 30, 2018
Three Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2018
Nine Months Ended
September 30, 2017
Net sales
$
68,698

$
60,772

 
$
125,470

$
109,891

Cost of sales (excluding amortization, shown separately below)
16,662

11,620

 
32,910

21,365

Gross profit
52,036

49,152

 
92,560

88,526

Research and development expenses
3,491

3,071

 
10,293

10,103

Selling, general, and administrative expenses
18,212

14,462

 
50,133

44,328

Amortization of intangibles
12,002

10,445

 
34,342

31,335

Change in fair value of contingent consideration
307

(1,424
)
 
543

(2,420
)
Operating income (loss)
18,024

22,598

 
(2,751
)
5,180

Other (loss) income
(189
)
(295
)
 
419

(40
)
(Loss) gain on foreign currency exchange
(4,731
)
(487
)
 
472

10,584

Interest expense, net
(9,132
)
(8,638
)
 
(26,250
)
(27,495
)
Income (loss) before income taxes
3,972

13,178

 
(28,110
)
(11,771
)
Income tax expense (benefit)
1,018

3,632

 
214

(11,895
)
Net income (loss) including non-controlling interests
$
2,954

$
9,546

 
$
(28,324
)
$
124

Less: Net loss attributable to non-controlling interests
(516
)
—

 
(442
)
—

Net income (loss) attributable to AgroFresh Solutions, Inc
$
3,470

$
9,546

 
$
(27,882
)
$
124

 
 
 
 
 
 
Net income (loss) per share:
 
 
 
 
 
Basic
$
0.06

$
0.19

 
$
(0.57
)
$
—

Diluted
$
0.06

$
0.19

 
$
(0.57
)
$
—

Weighted average shares outstanding:
 

 

 
 

 
Basic
49,853,181

49,676,923

 
49,671,648

49,852,337

Diluted
50,309,979

50,169,434

 
49,671,648

50,134,591



 




Non-GAAP Measure

The following table sets forth the non-GAAP financial measures of EBITDA and Adjusted EBITDA. The Company believes these non-GAAP financial measures provide meaningful supplemental information as they are used by the Company’s management to evaluate the Company’s performance (including incentive bonuses and for bank covenant reporting), are more indicative of future operating performance of the Company, and facilitate a better comparison among fiscal periods. These non-GAAP results are presented for supplemental informational purposes only and should not be considered a substitute for the financial information presented in accordance with GAAP.
 
The following is reconciliation between the non-GAAP financial measure of EBITDA and Adjusted EBITDA to its most directly comparable GAAP financial measure, net income (loss):
(in thousands)
Three Months Ended
September 30, 2018
Three Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2018
Nine Months Ended
September 30, 2017
GAAP net income (loss) including non-controlling interests
$
2,954

$
9,546

 
$
(28,324
)
$
124

Provision (benefit) for income taxes
1,018

3,632

 
214

(11,895
)
Interest expense(1)
9,132

8,638

 
26,250

27,495

Depreciation and amortization
12,533

11,056

 
35,486

33,102

Non-GAAP EBITDA
$
25,637

$
32,872

 
$
33,626

$
48,826

Share-based compensation
188

340

 
2,088

1,708

Severance related costs(2)
1,711

221

 
2,046

261

Other non-recurring costs(3)
2,035

1,783

 
4,655

4,080

Loss (gain) on foreign currency exchange(4)
4,731

487

 
(472
)
(10,584
)
Mark-to-market adjustments, net(5)
307

(1,428
)
 
543

(2,426
)
Non-GAAP Adjusted EBITDA
$
34,609

$
34,275

 
$
42,486

$
41,865


——————————————————————————————————————————————————————
(1)    Interest on the term loan and accretion for debt discounts, debt issuance costs and contingent consideration
(2)     Severance costs related to former executives
(3)    Costs related to certain professional and other infrequent or non-recurring fees, including those associated with becoming a     stand-alone public company, litigation and M&A related fees
(4)    Loss (gain) on foreign currency exchange relates to net losses and gains resulting from transactions denominated in a currency     other than the entity's functional currency.
(5)     Non-cash adjustment to the fair value of contingent consideration related to the Tax Receivable Agreement and earnout.