Fred Sommer - Investor Relations, Ascendant Partners Robert Smith - Chief Executive Officer & President Brent Rystrom - Chief Financial Officer Michael Goose - President of Ingredient Sales & Marketing.

Bruce Galloway - Granite Lake Capital.

Good day, ladies and gentlemen and thank you for standing by. Welcome to the RiceBran Technologies’ 2016 Full Year Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce our host, Mr. Fred Sommer of Ascendant Partners. Please go ahead, Mr. Sommer..

Thank you, operator. Good afternoon listeners. Welcome to the RiceBran Technologies’ full year 2016 financial results conference call. With us today are Dr. Robert Smith, Chief Executive Officer and President of RiceBran Technologies; Brent Rystrom, Chief Financial Officer; and Michael Goose, President of Ingredient Sales & Marketing.

Before I turn the call over to Robert, I want to remind listeners that during the call management’s prepared remarks may contain forward-looking statements that are subject to risk and uncertainties. Management may make additional forward-looking statements in your response to your question today.

Therefore, the company claims protection under the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from the 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, March 23, 2017, 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 this call, including reconciliations of non-GAAP financial measures as comparable to GAAP financial measures are available at www.ricebrantech.com on the Investor Relations page. At this time, I would like to turn the call over to Dr. Robert Smith, CEO and President of RiceBran Technologies.

Dr. Smith, please go ahead..

Thanks Fred and thanks to our listeners for joining us today. 2016 was a year of great change and challenges at RiceBran Technologies that help set the stage for achieving a number of important goals, including our ultimate goal of generating substantial shareholder value.

As many of you are aware, the second half of 2016 brought about significant changes in our company, beginning with a reconstitution of the Board of Directors, the addition of Michael Goose to head of our Ingredient Sales efforts and my being named CEO.

And with the recent addition of Brent Rystrom as our new CFO, our team now brings together a wealth of industry and operational experience. Management is working hard to implement a comprehensive strategic plan designed to significantly reduce cost, while capitalizing on the vast market opportunities for our proprietary ingredients.

Our company is technology rich and has extensive experience in transforming a marginal value byproduct of the rice milling into high value nutritional ingredients for the food and feed markets.

Our products meet increasing consumer demands for minimally processed sustainable, nutritious, and clean label ingredients and have the additional benefits of providing specific functionalities for various food applications.

I will briefly highlight some important accomplishments that have taken place towards the end of last year and early 2017 that I believe will have a positive impact on our future performance.

First, we implement that a series of stream-lining initiatives, including the employee headcount reductions and supply chain adjustments, to remove unnecessary cost and improve operational efficiencies.

We expect to see our initial efforts become evident in our first quarter financials and we will be implementing further steps to streamline our operations throughout the year.

Second, we started repositioning our marketing efforts in the fourth quarter of 2016 to target large scale opportunities and food and feed markets focusing on marketing our products to meet the growing demand for clean label ingredients. Mike Goose will further elaborate on those efforts later.

Third, we remain committed to our strategy of not deploying additional capital in our Brazil operations for the foreseeable future. We should add that our minority partner has infused additional capital into the Brazil operation, leading to the resumption of rice bran oil production and an improved fourth quarter for the Brazil segment.

RBC remains committed to this strategy for the foreseeable future and we see those operations having minimal impact on our cash flow this year. Fourth, we completed an $8 million financing and debt restructuring in February of this year that will lower cash interest expenses by about $0.5 million.

The combination of debt and preferred equity financing lowers the effective interest rate on all our debt and preferred service, extends the maturity of the subordinated debt, and provides us with greater financial flexibility to drive revenue growth, upgrade our facilities to service customers, and continue our streamlining efforts.

We are confident that these first steps along with the additional measures throughout 2017 will lead to additional cost savings, while driving higher quality revenue growth in the coming years to build lasting value for its stockholders.

At this time, I would like to turn the call over to Brent Rystrom, the newest member of our executive team, to discuss our numbers in greater detail. Brent joined us as CFO earlier this month. Brent..

Thank you, Robert and good afternoon everyone. I would like to start off by saying how excited I am to work with the Robert and Michael and the rest of the RiceBran Technology team.

I have spent most of my professional life working in the investment banking world as an equity research analyst, as well as managing the research institutional sales and trading components of the firm. During that time I was mainly focused on consumer and agro business companies.

My coverage included Bunge, the Anderson’s, Green Plains, [indiscernible] machinery, all names in the food, farming, grain related areas. I am also an active investor and owner of green and soybean farms in the Midwest, giving me skills and awareness of the green business that few other financial professionals have.

Over the years, I’ve covered some great companies like DollarTree, Michaels Stores and Tractor Supply that made outsized investment returns. I’ve also been involved in some highly successful metro capital investments like lifetime fitness where we realize 60 times return on our investment in less than 20 years.

I had mentioned these companies because the great success they achieved was generally due to a few simple reasons. First, they typically developed a niche market and dominated that niche.

On top of this, the best performing companies had a relentless focus on building and maintaining a highly profitable model in driving growth to average cost and expenses. Finally, they had high returns on investment. I joined RiceBran Technologies because I see the opportunity for similar success. Why? I think there are several reasons.

First, we have highly proprietary healthy rice based ingredients that provide major benefits and value to participants in the food, feed, and specialty and premium markets. We have lots of runway.

Second, our customer portfolio opportunity is broad indeed with large CPG’s, small CPG's, feed producers in equine, livestock, and companion animal markets and exports all abundant. Third, margins on our products are good. Scale and operational consolidation will deliver many favorable benefits.

The combination of these should make RiceBran Technologies a bigger and more profitable company. We plan to also significantly improve the financial literacy and culture of the company. We want every employee to understand EBITDA, CapEx, Return on Invested Capital, cash flows, and enterprise value.

When you accomplish this, we will be able to create a powerfully more profitable company and successful stock. As we implement our plans and achieve success, we plan to expand our outreach efforts to both the sell side and buy side.

Thank you for letting me take this time to introduce myself and I look forward to working with the team to build value for our shareholders. I would now like to briefly highlight the fourth quarter performance at our USA segment and follow-up with discussion of the full year 2016 financials.

Fourth quarter USA segment revenue was up nearly 25% to $7.9 million in the quarter. Although we are early in the process of building the stronger growth profile, we were pleased with the pickup.

Gross profit for the quarter was $2 million, compared with $2.2 million last year with the decline mainly related to two things, reserves for excess inventory and higher cost associated with the initial processing of our new organic premium products.

Operating expenses of $3.7 million were up $3.2 million, mainly on items like legal fees related to debt, renegotiations, and severance expenses. Net loss of $1.4 million in the quarter was essentially flat with the earlier result.

We expect the cost cutting measures implemented in the fourth quarter to become evident in our financial comparisons beginning in the first quarter of 2017. Consolidated revenue for the 2016 year totaled $39.4 million, compared to $ 39.9 million in 2015.

Our full-year 2016 USA segment revenues increased by $9.3 million or 40% to reach $32.7 million, and growth in this segment was diversified across our food and feed customers. This was largely offset by declines in Brazil. Brazil’s operational results did improve in the fourth quarter, sequentially.

Gross profit of $8 million in 2016 was down slightly from $8.1 million in 2015, while margin rate was flat. USA segment gross profit increased by 30% to reach $9.6 million in 2016, compared to $7.4 million in 2015.

USA segment rate of 29.5% declined 230 basis points, mainly due to three reasons, a brand supply disruption in Louisiana the last of 13 weeks, increased contract manufacturing cost that were not fully passed on to customers for the entire year, and the previously mentioned inventory reserves.

Brazil operated at negative gross margins in 2016 with negative gross of $1.7 million, compared to gross profit of $700,000 in 2015.

Operating expenses for 2016 of $19.1 million included a $3 million impairment charge to goodwill related to the company's [indiscernible] operations, a $1.1 million expense related to the 2016 proxy contest, and $700,000 in severance expense. Operating expenses would have been roughly flat in 2016, compared to 2015, when excluding these items.

Our consolidated operations resulted in a net loss attributable to RiceBran of $9.1 million or $0.97 per share compared to a net loss of $8.3 million or $0.90 last year. Our core USA incorporate segment achieved adjusted EBITDA of positive $789,000 in 2016, compared to a loss of $67,000 in 2015.

We recorded a 2016 consolidated adjusted EBITDA loss of $2 million compared to an adjusted EBITDA loss of $1.2 million in 2015 as a result of the poor performance from our Brazil segment. We ended 2016 with $451,000 in consolidated cash and cash equivalents, compared to $1.1 million at the end of 2015.

We raised $6 million of new debt and $2 million of preferred equity to reposition our balance sheet in February of this year. This allowed us to eliminate $4 million of higher cost debt and sharply reduce our interest payments as Robert referred to. I will now turn the call over to Michael Goose to discuss our sales and marketing strategies..

One, growing our current customer base; two, bringing in new business; and three, focusing on return on investment. Even though we are still early in the implementation of this strategy, we are already beginning to see some great results.

For example, seven of our top 10 customers delivered positive growth in the fourth quarter with four of the seven delivering double-digit growth. We are seeing growth in our feeds ingredient business, mainly by securing rice bran in a cost effective way that helps to raise our service levels and opens up new feed ingredient market opportunities.

Our operations team has done a great job in improving the productivity of our feed facilities, which helps us seek new business more confidently. Our team is starting to leverage our feeds success in each line into the companion animal industry.

We believe that rice bran is an ideal pet’s ingredient and we have already gained traction with the highly visible new pet food customer, more to come in future calls. We have many strategies to grow incremental business opportunities.

We were pleased with our attendance at the natural products expo in Anaheim earlier this month, which was attended by 75,000 industry professionals. Demand for on trend, non-GMO vegan balanced nutrition with both protein and fiber and gluten-free products where key themes.

And numerous key decision makers were in attendance and introduced to rice bran as an ingredient. Our team showed these influencers, three compelling reason to consider using rice bran. Cost savings compared to other ingredients, nutritional benefits, and value creation.

Our sales team did an excellent job in communicating that rice bran offers a sales proposition that provides clean label ingredients which are rich in micronutrients. We left Anaheim with numerous new projects that we will work to convert to profitable repeatable business in the future.

We are improving our focus on marketing, spend to drive more growth. We have reduced marketing expenses where possible. For example, we have reduced our tradeshow participation to focus on the most productive shows. We are using some of these savings to fund development projects to show future customers how our ingredients can benefit their business.

This approach is improving our rate of face-to-face meetings with prospects. Finally, we are building an impressive network of brokers and distributors to help us market rice bran and penetrate the PPG work.

To recap, we are beginning to see initial success from our new sales and marketing strategies through increased sales of some of our largest churn customers and we expect that momentum to continue in 2017. We also have numerous large-scale opportunities that we believe could pay big dividends in time.

Please remember that our biggest growth opportunities do come with the longest sales cycle. Lastly, I would like to emphasize why I am so excited about rice bran and how on trend this innovative nutritious super ingredient is.

As consumers continue to change eating habits and the trend of eating better for you continues to grow, so does the opportunity that is rice bran. It means most current trends driving the growth in the natural food space, including non-GMO, clean label, balanced nutrition both in protein and fiber, gluten-free, allergen-free, and vegan.

As these trends continue to grow so does the opportunity of rice bran as a future ingredient. I will now turn the call back to Robert for his concluding remarks..

Thank you, Michael. As we head into 2017, our whole team shares a uniform set of goals to leveraged our strong technology base and become the leading producer of rice bran ingredients. We are focused on efficiency, scalability, and quality.

That means working to secure consistent brand supplies in regions where we operate and achieving the higher standards of quality and food safety and cost-effective manner to build ever increasing value for our shareholders.

Our strategic initiatives and cost cutting measures have already begun to take hold and we are continuing to implement additional changes to make us more efficient, including the closing of our Scottsdale, Arizona headquarters at the end of this month.

We are relocating our headquarters to the Sacramento Valley, which offers a number of benefits to RBT, including proximity to major rice mills and to our West Coast customers, and access to world class scientist and technologies that you see daily.

Additionally, we continue discussions with the major mills in California and in the mid-South to secure additional sources of bran to support our future growth. From a near-term financial perspective, we expect to see continued year-over-year growth in our ingredients business.

We also anticipate a marked improvement in our USA segment bottom line in the first quarter as cost-cutting measures are starting to improve our margins. We are excited about the future of RiceBran Technologies and we believe that we are gaining momentum as we move through this year.

We are confident that applying sound financial principles to an aggressive growth strategy will create a significantly more profitable company and drive better stock performance. We are committed to delivering value to our stockholders. And thank you for allocating some of your capital to RiceBran Technology.

We look forward to updating shareholders on our progress again in May as we refer to our first quarter results. I would also like to thank the whole management team. I would like to thank our employees for all of these transitioned efforts. That concludes our prepared remarks comments. Operator, at this time, please open the call for questions.

Please note that we plan to limit callers to one initial question and one follow-up..

Thank you. [Operator Instructions] Our first question comes from the line of Bruce Galloway with Granite Lake Capital. Please proceed with your question..

Hi guys, how are you doing? Can you give us a number on what the total cost cuts are and what those savings are going to be in 2017? And also could you give us, you just reiterate over to Brazil, you didn't even really talk about Brazil.

I see you lost a little money in the quarter, when do you think that’s going to return to profitability, and what’s the prognosis going forward for Brazil, is it going to be a discontinued operation, are you going to try to nurse it back to health or are you just going to hand it over to your minority partner?.

Hi Bruce, this is Robert, thank you for calling, always great to have you on these calls. I will answer about Brazil, but I’m going to turn over your first part of the question over to Brent Rystrom..

Hi, Bruce. We were not delivering really or making public specifically the cost cuts, but from a simplistic perspective there were a number of areas that efforts went into.

So, there were headcount reductions there is going to be facility consolidations, there is going to be skew reductions, and a number of other things that will combine to significantly improve our margins..

Alright. Let me add to your question on Brazil Bruce. In Brazil, as we have stated before, we are not planning to do any further investments down in that operations and that still is true today. Having said that, our minority partner has invested further capital into the business that has allowed the business to restart its operations.

They are currently receiving bran from a number of mills in the area, probably averaging about 200 metric tons on average per day of process bran. So that’s working well. One of the difficulties we are having down there is offloading some of the defatted bran because that gets into a competitive environment with other feed ingredients.

And as you may be aware, there is very high production of soybean this year and other ingredients that compete with the defatted. Brent I think you --..

So Bruce in Brazil this year you are going to have about 110 million metric ton crop of soybeans, which is a record crop and so the process soybean meal would be a competitive product for this and that’s probably going to put some pressures on that part of the business. .

So just to summarize real quickly on Brazil, look it’s doing a whole lot better than it was towards the end of last year, but there remain some uncertainties down in Brazil. And so we are not going to predict on how it’s going to go going forward, but that’s where it is today. .

Is it is still the same equity split as it was prior with the minority partners, since they put the additional capital in?.

It’s about one-third, two-thirds. It hasn't really changed much..

Alright, well, good luck..

Thank you..

Thank you. [Operator Instructions] There are no further questions at this time. I’d like to turn the floor back to management for closing comments..

Thank you, operator. At this time, I would like to thank everybody on the call today. We look forward to our next call in May where we will be reporting on our first quarter reports. Thank you, operator..

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation..