U.S. Markets closed
  • S&P 500

    3,768.25
    -27.29 (-0.72%)
     
  • Dow 30

    30,814.26
    -177.26 (-0.57%)
     
  • Nasdaq

    12,998.50
    -114.14 (-0.87%)
     
  • Russell 2000

    2,123.20
    -32.15 (-1.49%)
     
  • Crude Oil

    52.04
    -1.53 (-2.86%)
     
  • Gold

    1,827.70
    -23.70 (-1.28%)
     
  • Silver

    24.83
    -0.97 (-3.77%)
     
  • EUR/USD

    1.2085
    -0.0079 (-0.6526%)
     
  • 10-Yr Bond

    1.0970
    -0.0320 (-2.83%)
     
  • Vix

    24.34
    +1.09 (+4.69%)
     
  • GBP/USD

    1.3583
    -0.0057 (-0.4143%)
     
  • USD/JPY

    103.8710
    +0.0290 (+0.0279%)
     
  • BTC-USD

    36,174.88
    -1,663.76 (-4.40%)
     
  • CMC Crypto 200

    692.41
    -42.73 (-5.81%)
     
  • FTSE 100

    6,735.71
    -66.25 (-0.97%)
     
  • Nikkei 225

    28,519.18
    -179.08 (-0.62%)
     

Edited Transcript of RIBT earnings conference call or presentation 5-May-20 8:30pm GMT

·19 min read

Q1 2020 RiceBran Technologies Earnings Call SCOTTSDALE May 26, 2020 (Thomson StreetEvents) -- Edited Transcript of RiceBran Technologies earnings conference call or presentation Tuesday, May 5, 2020 at 8:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Brent Robert Rystrom RiceBran Technologies - President, CEO & Director * Todd Travis Mitchell RiceBran Technologies - CFO & Secretary ================================================================================ Conference Call Participants ================================================================================ * Paul D. Sonz Paul D. Sonz Partners - President * Ryan Robert Meyers Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst * Richard Galterio Ascendant Partners, LLC - IR ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, ladies and gentlemen. And thank you for standing by. Welcome to the RiceBran Technologies First Quarter 2020 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to introduce our host, Mr. Richard Galterio of Ascendant Partners. Please go ahead, Mr. Galterio. -------------------------------------------------------------------------------- Richard Galterio, Ascendant Partners, LLC - IR [2] -------------------------------------------------------------------------------- Thank you, operator. Good afternoon, listeners. Welcome again to RiceBran Technologies First Quarter 2020 Financial Results Conference Call. With us today are Brent Rystrom, Chief Executive Officer and President of RiceBran Technologies; and Todd Mitchell, Chief Financial Officer. Before I turn the call over to Brent, I want to remind listeners that during the call, management's prepared remarks may contain forward-looking statements that are subject to risks and uncertainties. Management may make additional forward-looking statements in response to your questions today. 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 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, May 5, 2020. And the company assumes no obligation to update these projections in the future as market conditions change. This webcast and certain financial information provided in the call, including reconciliation of non-GAAP financial measures to comparable GAAP financial measures, are available at www.ricebrantech.com on the Investor Relations page. At this time, I would turn the call over to Brent Rystrom, CEO and President of RiceBran Technologies. Mr. Rystrom, please go ahead. -------------------------------------------------------------------------------- Brent Robert Rystrom, RiceBran Technologies - President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, Rich, and good afternoon, everyone, able to join us on the call. I hope this call finds you, your families and others in your life healthy and well. RiceBran Technologies continues to be fully functional and operating through the COVID-19 crisis. COVID-19 has created challenges for many parts of our business, but so far, we have been generally and successfully managing our way through. Fortunately, our facilities typically have large footprints, so our employees tend to be dispersed. We are watching daily for any issues and reacting quickly to any concerns. We are proud and thankful for how our employees are performing during this crisis. We realized significant improvements in RiceBran Technologies first quarter results as we continued to execute on our plan to drive the company to sharply higher sales and positive EBITDA. Our revenue grew 31% from the year earlier levels and 43% sequentially from the fourth quarter of 2019. And adjusted EBITDA losses are trending lower from a loss of $3.4 million in the third quarter of 2019 to a loss of $2.7 million in the fourth quarter of 2019 and now to a loss of $2 million in our first quarter of 2020. Revenue at Golden Ridge grew 81% sequentially in the first quarter of 2020, which followed 87% sequential growth in the fourth quarter of 2019. Both gains reflecting the benefits we are starting to realize from our debottlenecking efforts. We were also pleased with the results at MGI Grain, the oats and barley ingredients business we acquired in April of 2019. Todd will detail the key metrics in our financial performance. After that, I plan to give some further thoughts on where I see the business for the remainder of 2020 and beyond. Todd, please go ahead. -------------------------------------------------------------------------------- Todd Travis Mitchell, RiceBran Technologies - CFO & Secretary [4] -------------------------------------------------------------------------------- Thank you, Brent. The key points I would like the investors to take away from this call are, first, we hit an inflection point with regards to revenue for both Golden Ridge and MGI in the first quarter. As Brent mentioned and as we highlighted in our press release, in the first quarter, revenue from both businesses grew substantially from fourth quarter levels. Second, we're making strides to driving cost efficiencies across the entire company, most notably in a significant reduction in SG&A in the first quarter from fourth quarter levels as well as when compared to the first quarter of 2019. And finally, we've taken the steps we believe are necessary to protect our operations from the impact of coronavirus and to strengthen our balance sheet. As a result, not only are we well positioned to make it through this period, we believe we'll be able to grow and generate significant improvements in profitability in 2020. That being said, let's look at the results in the first quarter of 2020 in greater detail. Revenue. First quarter revenue was $8.3 million, up 31% from the first quarter of 2019 and 43% from the fourth quarter of 2019. Higher revenue was principally due to acceleration in revenue at both Golden Ridge and MGI. Golden Ridge revenues grew over 80% from fourth quarter levels and MGI revenues more than doubled from the fourth quarter with both businesses being driven by strong underlying demand, increases in capacity and improvements in execution. Gross margin. First quarter gross margin was negative 5% when compared to a positive 5% in the first quarter of 2019 and a negative 10% in the fourth quarter of 2019. A negative contribution margin from Golden Ridge was the source of the negative gross margin in the first quarter of 2020. Our debottlenecking project was longer than planned, causing us to fall behind schedule on sales contracts, which hurts gross margin as rough rice prices rose during the quarter. Progressively higher production volumes at the mill should allow us to catch up with contracted sales around the end of the current quarter. And now that Golden Ridge is running at higher volumes, we are putting in place processes to better align rough rice cost to contracted revenues. The addition of SRB production at Golden Ridge, which started in April of 2020, will also have a meaningful impact on improving gross margins. The negative gross profit margin at Golden Ridge was offset by higher gross profit margins in the first quarter for our legacy SRB businesses in California, Louisiana and Montana compared to both the first and the fourth quarters of 2019. And MGI Grain contributed its strongest quarter of gross profit since we acquired the business a year ago. We expect gross profit margins to recover throughout 2020, led by ongoing improvement at Golden Ridge. Three developments will be key to this dynamic: first, getting caught up on contracted sales; second, working through tight rough rice supplies this summer; and third, our expectations for a larger supply of rough rice at lower prices in the fall due to what appears to be a large U.S. rice crop in 2020. All of this should be complemented by improving absorption of higher production volumes. SG&A. SG&A was $2.5 million in the first quarter, which was down from $3.3 million in the first quarter of 2019 and from $3.1 million in the fourth quarter of 2019. As I mentioned last quarter, this is an area where we have found significant room for improvement. We started working on initiatives to cut SG&A in the fourth quarter of 2019, many of which took hold in the first quarter of 2020 resulting in a $550,000 sequential drop in SG&A in the quarter. And we won't be stopping there. We're committed to reducing SG&A for the year to well under $10 million. Net income. Net losses were $3 million in the first quarter of 2020 versus net losses of $3.2 million in the first quarter of 2019 and net losses of $3.7 million in the fourth quarter of 2019. Fully diluted and basic EPS losses from continuing operations were $0.08 compared to losses of $0.10 a year ago and losses of $0.11 in the fourth quarter of 2019. EBITDA and adjusted EBITDA. Adjusted EBITDA adds back stock comp and any onetime expenses associated with the acquisitions and equity finances to EBITDA. Adjusted EBITDA losses were $2 million in the first quarter of 2020 versus adjusted EBITDA losses of $1.9 million in the first quarter of 2019 and adjusted EBITDA losses of $2.7 million in the fourth quarter of 2019. Adjusted EBITDA losses also included $352,000 in add backs in the first quarter of 2020, down from $738,000 in the first quarter of 2019. As such, EBITDA losses were $2.4 million in the first quarter of 2020, down from losses of $2.6 million in the first quarter of 2019. We continue to look for sequential improvements in adjusted EBITDA and EBITDA throughout the year, and we continue to believe that we will transition to positive adjusted EBITDA before the end of the third quarter of 2020 and report positive EBITDA and adjusted EBITDA in the fourth quarter of 2020. Cash and liquidity. We ended the first quarter of 2020 with over $5.5 million in cash and $2.5 million in short-term borrowings from our working capital facility. Given the current uncertainty that surrounds us, we're committed to maintaining a strong balance sheet. That means we're closely shepherding our cash and utilizing our working capital facility. Our primary focus is continuing to supply the high demand for nonperishable consumer foods and ingredients we produce, improving profitability, keeping the Ricebran team members fully operational, healthy and safe during this period. Thank you. I'll turn it back to Brent for closing remarks. -------------------------------------------------------------------------------- Brent Robert Rystrom, RiceBran Technologies - President, CEO & Director [5] -------------------------------------------------------------------------------- Thanks, Todd. COVID-19 is impacting our business in several ways. Demand has been strong for nonperishable staples like our rice, rice co-products, oats and barley SKUs. Pantry hoarding is clearly impacting most of our business, and this has pushed pricing higher in the near term, helping our sales. Raw material costs are also higher, especially for paddy rice, which has an offsetting negative impact on our business. The elevated demand, pricing and cost for rice will influence our second and third quarter results. We have seen a few issues with customers that have had COVID-19 issues as well. In our experience, facilities with COVID-19 outbreaks are typically closed 10 to 14 days for deep cleaning. We have managed through these issues so far, but we remain watchful both in our facilities and with our suppliers and customers to manage as well as we can. We are focused on achieving 2 primary goals in 2020, generating significant revenue growth and attaining positive EBITDA by the fourth quarter. Golden Ridge will be a major part of that growth and the EBITDA improvement. As we scale that business, we continue to make further investments in modifications in our operations and equipment to keep expanding production capacity and reliability. And we started shipping stabilized rice brand from Golden Ridge at the end of April, which should favorably impact our profitability there and for RiceBran Technologies overall. We expect to catch up on Golden Ridge's rice sales contracts by July of 2020, and we are implementing strategies to better align sales, prices and rough rice costs. Negative gross profit margins at Golden Ridge troughed in the third quarter of 2019 and were sharply improved through the first quarter of 2020 as we are making progress on catching up on our sales and other initiatives. In the fourth quarter of 2020, we expect to have a meaningfully positive gross profit margin at Golden Ridge, and we expect this to happen on revenues that are roughly double the amount obtained in the just completed first quarter. We are also excited by the opportunities we have at MGI Grain. MGI's results in the first quarter of 2020 were the best we have attained in terms of revenue and gross profits since acquiring that business just over a year ago. Our logic for acquiring MGI Grain was primarily twofold, adding additional SKUs that were complementary to our assortment of rice and rice co-products and taking advantage of the low-capacity utilization at MGI Grain. We are seeing successful cross-selling of MGI's products and customers with the rest of those in RiceBran Technologies. The cross-selling and new customer additions are starting to cause better capacity utilization at MGI, which bodes well for higher absorption or better absorption going forward and improving EBITDA from that business. Looking at 2021 and beyond, we are focused on building a food and ingredient company with unique and differentiated products that sustain a high rate of growth, high margins and strong profits. Operator, we are ready for our question-and-answer session. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And we'll take -- the first question comes from Ryan Meyers from Lake Street Capital Markets. -------------------------------------------------------------------------------- Ryan Robert Meyers, Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst [2] -------------------------------------------------------------------------------- First one from me. So the sequential growth looks pretty good for Golden Ridge. What do you think the monthly revenue run rate could look like at the end of Q2 and potentially the end of the year? -------------------------------------------------------------------------------- Brent Robert Rystrom, RiceBran Technologies - President, CEO & Director [3] -------------------------------------------------------------------------------- Ryan, thank you for the question. This is Brent. I think from a simplistic perspective, kind of our midyear goal is to get the mill running at about a $2 million a month rate and considerably higher than that by the end of the year. -------------------------------------------------------------------------------- Ryan Robert Meyers, Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst [4] -------------------------------------------------------------------------------- Okay. That's helpful. And then can you just talk a little bit more about MGI and the potential to use the excess capacity through the rest of the year? -------------------------------------------------------------------------------- Brent Robert Rystrom, RiceBran Technologies - President, CEO & Director [5] -------------------------------------------------------------------------------- Sure. So MGI Grain is a oat and barley mill located in East Grand Forks, Minnesota. And the business has a seasonally strong period typically in January, February, March and April where we have 1 large customer who takes hulled barley for a special application. The rest of the year, we have fairly significant capacity -- additional capacity at that now. And even during that period, we have additional capacity. So we're focused really on a couple of areas this year to try to drive better utilization of that capacity. We're focused on adding base customers, particularly in our hulled barley and our pearl barley business, and then we're also focused on bringing in more organic products and organic product customers. Those will be the 2 major approach to try that -- to lever that business further. We have brought in some new customers over the last few months. We picked up some pretty significant business in the pearl barley area, and we're looking forward to adding more as the year goes on. -------------------------------------------------------------------------------- Ryan Robert Meyers, Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst [6] -------------------------------------------------------------------------------- Okay. That's helpful. And then last one from me. So food supply chain has been in the news a lot lately. Can you discuss any potential risks out there for you guys? And any opportunities you guys might see as other food companies are struggling? -------------------------------------------------------------------------------- Brent Robert Rystrom, RiceBran Technologies - President, CEO & Director [7] -------------------------------------------------------------------------------- Yes. Good question. When I think about the business and then the risk profile this summer, I think the biggest challenge we're going to face is cost of rice and then periodically, the availability of rice, particularly as we get cycling towards the end of the crop year. So when you look at crop years, typically the end on or about the first of September in any given year and the carryout inventory that goes into that. So the inventory that the industry is going to have left over at the end of the year, the carryout for the rice industry this year was going to be tight, and it's going to be a challenge to keep operating and keep in stock that probably is going to make the cost of rice also at minimum volatile and possibly higher than where we're at right now. That's probably the biggest challenge I see over the next, call it, 4 months. -------------------------------------------------------------------------------- Ryan Robert Meyers, Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst [8] -------------------------------------------------------------------------------- Okay. And then any opportunities you see as other food companies are struggling? -------------------------------------------------------------------------------- Brent Robert Rystrom, RiceBran Technologies - President, CEO & Director [9] -------------------------------------------------------------------------------- I think we have reasonable opportunities to pick up what I would call spot business. So as other companies periodically are having issues on supplies, we are getting interest and we are filling some orders with people we normally don't do business with. So that's probably the most likely alternative, and that is most clearly in the rice business. We're not seeing that in barley and oats. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- Our next question comes from Paul Sonz from Sonz Partners. -------------------------------------------------------------------------------- Paul D. Sonz, Paul D. Sonz Partners - President [11] -------------------------------------------------------------------------------- My question is, what's the next project, CapEx projects you have in March? -------------------------------------------------------------------------------- Brent Robert Rystrom, RiceBran Technologies - President, CEO & Director [12] -------------------------------------------------------------------------------- Paul, are you talking at the -- at Golden Ridge? -------------------------------------------------------------------------------- Paul D. Sonz, Paul D. Sonz Partners - President [13] -------------------------------------------------------------------------------- Yes. Yes. I'm sorry. Yes, at Golden Ridge. -------------------------------------------------------------------------------- Brent Robert Rystrom, RiceBran Technologies - President, CEO & Director [14] -------------------------------------------------------------------------------- Yes. So as far as larger pieces of equipment, there's a couple of things that I think we're still looking at, probably the most likely would be, what's called the color sorter. But we have been slowly adding additional pieces of equipment over the last couple of months. We put in a new paddy cleaner. We just recently purchased another sheller. And so as the business ramps and we get visibility for certain things, we have been selectively adding other pieces of equipment as well to push it to the next level. -------------------------------------------------------------------------------- Paul D. Sonz, Paul D. Sonz Partners - President [15] -------------------------------------------------------------------------------- Have you put in the covered loading dock? -------------------------------------------------------------------------------- Brent Robert Rystrom, RiceBran Technologies - President, CEO & Director [16] -------------------------------------------------------------------------------- You're talking for the stabilized rice brand? -------------------------------------------------------------------------------- Paul D. Sonz, Paul D. Sonz Partners - President [17] -------------------------------------------------------------------------------- Yes. Yes. -------------------------------------------------------------------------------- Brent Robert Rystrom, RiceBran Technologies - President, CEO & Director [18] -------------------------------------------------------------------------------- Yes. So we -- actually, we put in a covered and enclosed loading dock with concrete drive in and out of the facility, and that was completed probably about a month ago. That, particularly the concrete work required, the concrete to cure, and so 2 to 3 weeks of curing was completed around the 20th of April, and I believe we shipped our first load-out on the 21st of April. -------------------------------------------------------------------------------- Paul D. Sonz, Paul D. Sonz Partners - President [19] -------------------------------------------------------------------------------- So with that in place, now can you ship to Montana or California? -------------------------------------------------------------------------------- Brent Robert Rystrom, RiceBran Technologies - President, CEO & Director [20] -------------------------------------------------------------------------------- Yes. So we can supply pretty much wherever we want. The limitation we have, Paul, is that from that facility, all we can send is what's called bulk in 2 forms. It would be in what's called the hopper, which is the truck you typically would see hauling some sort of food product in bulk with the canvas top and usually, it's about 50,000 pounds per truck or we can ship in what's called totes or super sacks, which are about 2,000 pounds. Those go in a typical van and we can fit about 21 of those into a truck. Dillon could use that. We could use it in California. And I think over time, it's going to be a pretty substantial capability of ours to go to California. But at this point, it's mainly going to be used in the middle part of the United States. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- (Operator Instructions) We'll take our next question from [Tim Powers from Clancy Capital]. -------------------------------------------------------------------------------- Unidentified Analyst, [22] -------------------------------------------------------------------------------- I was just wondering, can you give us any color at all or an update on the planned extension that was originally scheduled to be sort of completed in June of 2020? I believe it's been a while since we've heard anything about that. -------------------------------------------------------------------------------- Brent Robert Rystrom, RiceBran Technologies - President, CEO & Director [23] -------------------------------------------------------------------------------- Yes. So we're kind of morphing what we're doing as far as expansion. We've been slowly -- every time we're upgrading something, we're putting it in an equipment that has much greater capacity. So the paddy cleaner that I was talking about that was asked in a previous question, the capacity of that paddy cleaner is probably 8x what our old paddy cleaner was able to do. The color sorter that I just was talking about that we're contemplating as the next piece of equipment, that capacity of the machine we're looking at is probably a factor of 6 to 7x what we're currently running. So we're kind of quietly putting in the pieces to do a larger expansion, but we're doing it in steps as we go forward. I think as we ramp that business and we look to do the big expansion there, and most importantly, the expansion of a fully built out stabilized rice brand facility, particularly to the higher end of the food market, I'm hopeful that's something that will start sometime late this year and certainly complete no later than sometime next year. But at present, that's kind of our thinking on that. The end of this year, I think we'll be running at weight that will be higher than what we expected for the facility without that full-fledged expansion, but not quite as high as what that expansion will bring to us, some place in between. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- It appears there are no further questions, and I'd like to turn the conference back over to you. Thank you. -------------------------------------------------------------------------------- Brent Robert Rystrom, RiceBran Technologies - President, CEO & Director [25] -------------------------------------------------------------------------------- Thank you very much. We are tentatively planning to report second quarter results on Thursday, July 30, after the market close. I would like to thank all of you who joined us today. Please keep safe and well. Have a good day. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- This concludes today's conference call. Thank you for your participation, you may now disconnect.