RiceBran Technologies: Reports Q3 2018 Financial Results

The Woodlands / TX. (11.08. / rbt) RiceBran Technologies, a global leader in the production and marketing of value added products derived from rice bran, announced the Company’s financial results for the third quarter ended September 30, 2018.

«Our third quarter saw progress on many fronts, including acquiring an option to purchase the assets of Golden Ridge Rice Mills and our successful support of customers despite supply disruptions from a key mill partner,» said Brent Rystrom, President and Chief Executive Officer. «We are well positioned and excited by our growth prospects as we are starting to realize important new customer wins, expect to soon acquire and integrate Golden Ridge into our operations, which should improve the reliability of our rice bran supply, continue to see an improved balance sheet, and successfully complete our certification efforts.»

Business Highlights

• Revenue in the third quarter totaled USD 3.5 million, up slightly from revenue of USD 3.4 million in the comparable period in 2017, and consistent with guidance of a modest sequential improvement from second quarter 2018 revenue of USD 3.2 million. Net loss of USD (1.6) million and adjusted Ebitda of USD (1.3) million in the third quarter of 2018 compared to net loss of USD (8.3) million from continuing operations and adjusted Ebitda of USD (0.9) million in the same period in the prior year. Also consistent with guidance, third quarter adjusted Ebitda showed improvement compared to second quarter 2018, as our Mermentau, LA facility restarted production during the quarter, helping to reduce the higher freight costs associated with shipping from our California facilities. Gross margins continued to be negatively impacted by higher freight costs, reduced production at our Dillon, MT facility due to a large capital expenditures project related to attaining plant certification that is expected to be completed late in the fourth quarter of this year, as well as an approximately 18 percent increase in raw bran prices.
• Our balance sheet continued to strengthen during the third quarter of 2018. We received USD 5.3 million in proceeds from warrant exercises during the quarter, which more than offset the cash burn from operations and helped to significantly increase shareholders’ equity. We ended the quarter with cash and cash equivalents of USD 10.3 million, up from USD 7.7 million in the second quarter of 2018, with debt of USD 13,000, and shareholders’ equity of USD 20.7 million.
• On November 5, 2018, we exercised our purchase option with Golden Ridge Rice Mills and entered into a definitive agreement to purchase the assets and operations of its milling facility in Wynne, AR. We expect to complete the closing of this transaction in the next 30 days. Total consideration for the Golden Ridge transaction is expected to be approximately USD 7 million to USD 8 million, comprised of newly issued shares of RiceBran Technologies for slightly more than half of the transaction value and the assumption of debt for the remainder, most of which we plan to pay off at the time of closing, subject to customary closing considerations and risks. We believe we are paying a mid-single digit multiple of Enterprise Value to Ebitda based on our current expectations for Golden Ridge’s operations. We estimate that Golden Ridge’s operations will add approximately USD 20 million in sales as well as meaningful Ebitda in 2019 with significant room for expansion of Stabilized Rice Bran (“SRB”) production. We expect this mill to be an important component of our SRB supply in the Arkansas region while providing us with a platform to develop new products derived from SRB to expand our growth opportunities.
• We have strengthened our sales team with the addition of two seasoned sales professionals and remain excited about the anticipated growth of our sales pipeline in 2019. In addition to securing supply of SRB from Golden Ridge, we continue to work to mitigate future supply chain disruptions through broadening our sourcing capabilities and increasing geographic inventory levels to meet that anticipated growth.
• Our certification efforts are moving forward in earnest including the recent addition of a highly respected professional to head up our ongoing compliance, regulatory, and external affairs team. In October, our operations in West Sacramento were certified, and our operations in Mermentau, Louisiana went through a favorable certification audit last week.

Highlights for the 2018 third quarter include

• Revenue of USD 3.5 million increased marginally from USD 3.4 million in the comparable period in 2017. Growth was constrained by the lingering effects of supply chain disruptions we experienced in Mermentau during part of the quarter.
• Gross profit margin declined 1,130 basis points to 21.8 percent, primarily due to the issues at our Mermentau plant for part of the quarter, reduced production at Dillon due to a large capital expenditures project related to certification, higher raw rice bran costs, and increased freight costs related to supplying Mermentau customers from California.
• SG+A decreased by 3 percent mainly due to a decrease in the corporate portion of SG+A, partially offset by increases in payroll costs related to strengthening our sales team, an increase in operations and quality assurance staff to meet SQF certification, and an increase in distribution center rent.
• Our financial condition improved during the quarter as a result of USD 5.3 million of cash received from warrant exercises more than offsetting our net losses. Our cash and cash equivalents and shareholders’ equity increased to USD 10.3 million and USD 20.7 million at September 30, 2018 compared to USD 7.7 million and USD 16.9 million, respectively, for those items at June 30, 2018.

«Our balance sheet has strengthened considerably thus far in 2018, with warrant exercises significantly increasing our cash position as well as shareholders’ equity,» said Dennis Dykes, Chief Financial Officer. «With a majority of our certification capital expenditures behind us and the expected addition of Golden Ridge’s operations in the fourth quarter, we believe we are in a solid financial position to execute our growth plan to build value for stockholders as we head into 2019.»

Guidance Updates

• Inclusive of Golden Ridge, RBT now sees 2018 annual revenue ranging from USD 14.5 million to USD 15.5 million, up from previous guidance of USD 14 million to USD 15 million, with fourth quarter adjusted Ebitda losses improving, compared to third quarter levels.
• RBT expects full year 2019 revenues from our combined operations to exceed USD 40.0 million with the Company achieving positive adjusted Ebitda by mid-2019.
• We continue to believe our balance sheet is sufficient to support our current growth plan through 2019.