Good day, ladies and gentlemen, and welcome to the RiceBran Technologies First Quarter 2021 Earnings Call and Webcast. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Rob Fink. Sir, the floor is yours..

Thank you, operator, and good afternoon. Thank you for joining us today. Welcome to the RiceBran Technologies First Quarter 2021 Financial Results Conference Call. Hosting the call today are Peter Bradley, Executive Chairman; and Todd Mitchell, Chief Financial Officer.

I want to remind everyone listening today that during the 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 1995. Actual results may differ from those discussed today, and therefore, we refer you to a more detailed discussion of these risks and uncertainties and in the company's filings with the SEC.

In addition, any projection as to the company's future performance represented by management include estimates as of today, April 28, 2021, 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 reconciliations of non-GAAP financial measures to comparable GAAP financial measures are available on the company's website at RiceBran Tech on the Investor Relations page. With all that said, I'd now like to turn the call over to Peter Bradley. Peter, the call is yours..

Thank you, Rob, and good afternoon, everyone. The first quarter provides evidence that we're on the right path. As discussed in our prior earnings calls and strategies to move the business towards specialty ingredients.

We will do this by expanding our SRB derivatives business and introducing new high added value, high-margin ingredients derived from rice and other small and ancient grains, while optimizing our milling assets to support this business with a superior cost structure.

Phase 1 of our transition to this strategy was the turnaround operations at Golden Ridge, and deliver improved financial performance, and we made significant progress in the first quarter on both fronts, which Todd will address in greater detail in a moment.

Phase 2 of our transition to shift our focus to being a company that delivers differentiated, high value-add specialty ingredients. And underneath the improved financials in the first quarter operating and sales trends validated the initial steps of the second phase.

By simply reorientating our sales focus, we drove a 40% year-over-year increase in our core SRB ingredients business with sales of SRB derivatives, our highest value ingredient, up over 200%.

The progress we have achieved in this transition in the last 2 quarters gives me confidence that 2021 will be a year of marked financial improvement for RiceBran. Our strategy aligns us with healthy living trends, our products are compelling, and I believe, significantly underperform their market potential.

In the coming quarters, you will see us grow these products and introduce new ones transforming RiceBran into a high growth, high-margin specialty company. I will provide more thoughts on how we're going to execute this transition. But first, let's have Todd run you through in the first quarter numbers in more detail..

Thank you, Peter. Good afternoon, everyone. This past quarter was the third quarter in a row of sequential improvements in financial results. Progress is evident in revenue growth. Our transition to positive gross margins and a reduction in adjusted EBITDA losses to close to breakeven.

Results were driven by growth in SRB and SRB derivative sales, continuing improvement at Golden Ridge, and a 32% reduction in SG&A from a year ago. While positive working capital trends allowed for a modest increase in cash without the use of our ATM.

We also had our $1.8 million PPP loan completely forgiven in January, strengthening our balance sheet by transitioning us to a net cash position from a net debt position. Looking at these numbers in a little greater detail. Revenue. Total revenue grew 3% in the first quarter to $8.6 million from $8.3 million a year ago.

As Peter highlighted, this growth was driven by a 40% year-over-year increase in SRB and SRB derivative sales, offset by double-digit year-over-year declines in our milling business. Notably, Golden Ridge revenue was off about 25% year-over-year, principally due to weather-related downtime in February.

While MGI sales were also off in the double-digit this was due to customers' deliveries getting pushed into the second quarter.

Considering the changes, though, in our strategy and our senior leadership in the second half of last year, it's probably a better indication of the state of our business to compare the first quarter to the fourth quarter of last year. Sequentially, total revenue was up 26% in the first quarter from $6.9 million in the fourth quarter.

And it's worth noting that the sequential growth rates were consistent across all of our businesses. Gross profit. We generated $672,000 in gross profits in the first quarter compared to gross losses of $405,000 a year ago and narrowed gross losses of $47,000 in the fourth quarter. This was the first quarter of positive gross profit in 7 quarters.

This transition was underpinned by improved results at Golden Ridge, where the turnaround in operation continues to progress. In the fourth quarter, we reset our commodity position, diversified our customer base and dramatically improve milling yields.

In the first quarter, absent the weather-related downtime, we accelerated the pace of operations and achieved our targets for increases in hourly throughput and on stream rates.

With further improvement in operations and commercial SRB projection expected in the second half of 2021, Golden Ridge should have an increasingly positive impact on overall results, which with continuation of current trends in our SRB business should support further gross margin expansion over the course of the year. Operating losses.

Operating losses narrowed to $1.1 million in the first quarter from $3 million a year ago and $1.8 million in the fourth quarter. The sequential improvement was largely due to the transition to gross profits.

While the year-over-year improvement was driven by both the transition to gross profit and a 32% reduction in SG&A to $1.7 million from $2.6 million a year ago. We'll likely see some upward pressure on SG&A, but $1.8 to $1.9 million per quarter should be sustainable for the remainder of the year.

So higher gross profits, should support further reductions in operating losses. Net income and adjusted EBITDA. Due to the lower operating losses and a $1.6 million gain on having our PPP loan forgiven, net income was a positive $591,000 or $0.01 per share in the first quarter compared to net losses of $3 million or $0.08 per share a year ago.

Absent this onetime gain, net losses would have been about $1.2 million. Importantly, adjusted EBITDA losses, which do not include this gain, were $159,000 in the first quarter. Compared to adjusted EBITDA losses of $2 million a year ago and adjusted EBITDA losses of $921,000 in the fourth quarter. Cash and liquidity.

Cash at the end of the quarter, first quarter was $5.4 million compared to $5.3 million at the end of 2020. Underpinning this increase in cash was our ability to generate neutral cash flow from operations.

This was due to strong working capital management and an increase in factor borrowing, which was supported by the 26% sequential increase in quarterly revenue.

And in January, as I mentioned, our $1.8 million PPP loan was completely forgiven, strengthening our balance sheet and transitioning us to a net cash position of $1.1 million at the end of the first quarter compared to net debt of $327,000 at the end of 2020. I'll turn the call back to Peter to discuss the key elements of our forward strategy..

Thanks, Todd. With the successful execution of Phase 1 in our turnaround strategy, Phase 2 was really starting to gather steam. I believe RiceBran is well positioned to generate further improvement in financial results in the coming quarters while accelerating this transition to a specialty ingredient business.

It is clear there is a significant unmet market demand for SRB derivatives across a range of human food applications. We see strong demand from existing and new customers in the health and wellness and supplement categories, proving the value of these ingredients.

However, given the sheer scale of this market, the compelling nature of our products and the wide range of applications, it is absolutely clear, we have barely scratched the surface of the overall opportunity.

SRB and the derivatives we produce from SRB provide both nutritional and functional benefits, particularly in the production of plant-based and vegan products.

From a nutritional perspective, given the complementary immuno acid profile, SRB enhances protein quality and delivers Omega 6 and the Omega 9 with well-known health benefits as well as bioactive micronutrients, particularly around oregano, which have positive impact on the immune system, which is why consumers seeking healthy alternatives, are gravitating toward rice-based solutions from [indiscernible] and corn-based alternatives.

From a functional perspective, SRB and the derivatives we produce improved flavor and now feel when added to increasingly popular plant-based and vegan greens and vegetable protein powders.

By now feel, I mean, it's smoother and it's creamier versus the grittiness normally associated with such products, which will improve both the taste and make it easier for formulators of these products versus other alternatives.

In the coming months, we will continue to enhance our capacity to produce SRB derivative products, and we will launch a new SRB variant specifically designed for supplement applications.

This will be supported by initiatives for improved customer communication and support, including the development of consumer ready concept products, major brand outreach program, an updated research on the clinical efficacy of SRB and its derivatives.

We believe these initiatives will help grow our customer base, and accelerate sales with our initial focus on the $50 billion supplement market and points to an ultimately addressable market as even larger. This is just the beginning of our specialty ingredients expansion.

From the initial acceleration in our conventional and organic rice soluble products, which we've already seen, we look to grow sales in the near-term for our right balance product and our dietary fiber, product rice fiber, which delivers both soluble and insoluble dietary fiber. Both of which are major deficiency in the American diet.

And over the long term, we believe there is an opportunity to further fractionate SRB into still higher value ingredients. And to use our fractionation capabilities with other small and ancient grains. Our Dillon, Montana facility is a key asset for the company and at the cornerstone of the strategy.

We're working hard to optimize this facility where we still have untapped capacity.

However, if our plans for sales expansion play out as we believe they can, it is highly likely that over the next 24 to 36 months, we will look to expand both in terms of capacity and range of capabilities, which will lead to further enhancements in our supplier partnership, which was supported -- we say significant, but a fundamental expansion of this business.

Golden Ridge and MGI are also key to our specialty ingredient strategy. We will use these assets as strategic and cost-efficient sources of feedstock for specialty ingredients.

And we will orient them to milling to a special customer base for the rest of their outlook, whether that be organically grown grains or specialty varieties such as high-fiber grain or low moisture products. With this focus, they will be valuable contributors to sustainable growth in both revenue and profitability.

In summary, the first quarter was one of significant and continued progress, both in operating and financial performance and in strategy development and execution. And I believe we are on track to deliver significant improvements over the next 24 to 36 months. This really will be a special business once the strategy is fully implemented.

With positive long-term growth trajectory and potential upside returns for those investors to stay the course with us. In closing, I'd like to thank our employees, our partners and investors for their support and now open up the call for questions.

Operator?.

[Operator Instructions] And we do have a question coming from Mark Smith from Lake Street Capital Markets..

Great job on the quarter, nice to see the improvements there.

First question for me is just looking at Golden Ridge, can you quantify at all the weather impact and how much that hurts you in this quarter?.

This is Todd. We were offline because of weather for 11 days in February. And so I would put that at easily $0.5 million, maybe a little bit more..

Okay. Perfect. And then looking at the sales initiatives and the growth that you guys have had in SRB, 2 parts.

Can you talk about kind of -- have you added new salespeople? Or has it just been kind of having a more efficient sales process and looking at the right customers? And then second on that, how much of the growth has come from new customers versus maybe growth in existing customers?.

I think in terms of the growth as a split, we have brought some new customers on board, but our existing customers are also using more. In terms of your first question, no, we haven't added sales resources. We just improved our sales process. And focused on the right opportunities..

Excellent.

And then Dillon is obviously an important asset, as you said, talk about the operations and how things ran in Dillon with maybe higher volumes running during the quarter?.

Yes. The biggest issue, which is we are very grateful to our supply partners was to get organic raw material in there. So the -- having the feedstock obviously helps. You can't produce without raw material. So we have the feedstock. And then also, the team up there has done a great job in terms of balancing out what we produce.

When you fractionate any product you end up with more than one stream. So they just got better in terms of optimizing both the rice soluble stream and the rice fiber stream. And that's really what's driven operational improvements. We're not finished. I think there's another stage to go. But certainly, Dave, that team up there has done a great job..

Okay. Perfect. And then as we look at the SG&A, great job on reducing that. Todd, it sounds like you feel like this is pretty sustainable.

I think did you -- I just want to confirm, did you say kind of this $1.8 million, $1.9 million maybe quarterly as you feel like it's a sustainable level on SG&A?.

I would think that this was a pretty good quarter for what we're going to spend money on in terms of SG&A. I do think the $1.8 million to $1.9 million is a little bit better number than the $1.7 million we did this quarter. And I would -- I'd put that up to big increases in a couple of big items, most notably insurance.

But yes, I think this is sustainable certainly for the foreseeable future..

Okay. Excellent. And then the last one for me. Just -- you've done a good job driving positive gross profit, getting closer to positive EBITDA.

Any updated thoughts on capital that you may need as you look to expand capacity for SRB, any capital needs to sustain this growth as we look over the next 12 plus months? Or do you feel pretty good now as you move to this kind of net cash position?.

I think our -- yes, one over the other of us. The plan, first is to operate this year at sort of a cash flow neutral, except for our capital expenditures and hold capital expenditures at a sort of a very reasonable level this year. So to be kind of fully funded.

That being said, I think we are identifying parts of the business where the return on investment would be very high. But certainly, there is no need for capital to fund operations. It only would be to fund opportunities..

Just to add to that, I think over the next 12 months, CapEx will be relatively modest as we head into 2022 towards the end of 2022 into '23, if this -- if we start to tap into this opportunity, then it will be -- we will need more capital. But as Todd rightly pointed out, the ROI on that capital will be significant..

And there are no other questions from the lines at this time.

Would you like to make any closing remarks?.

Thank you, everybody, for joining us. Peter and I look forward to reporting to you guys next quarter. And we have a very positive outlook for this year and hope that you will continue to support us..

We thank you for your attention and your support for the business..

Thank you, ladies and gentlemen. This does conclude today's conference call and webcast. You may disconnect at this time, and have a wonderful day. Thank you for your participation..