Good afternoon ladies and gentlemen, and welcome to the RiceBran Technologies Third Quarter 2021 Earnings Call and Webcast. [Operator Instructions]. At this time, it is my pleasure to turn the floor over to your host, Rob Fink. Sir, the floor is yours..

Thank you, operator, and good afternoon everyone and welcome to the RiceBran Technologies third 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 all participants 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 that's contained in the Private Securities Litigation 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, October 27, 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 ricebrantech.com on the Investor Relations page. At this time, I'd like to turn the call over to Peter. Peter, the call is yours..

Thank you, Rob, and good afternoon, everyone. Over the past year, we have streamlined operation improved execution, eliminating most of the systemic challenges we have faced and providing a solid base from which we can focus on developing higher margin, higher added value ingredients.

The third quarter results demonstrate the importance of the strategy and accessing implementing it. We grew our revenue by 34% year-over-year in a quarter and narrowed EBITDA losses materially in one of the most challenging environments I have seen in my 35 year career in the food and food ingredient industry.

Supply chain disruptions and labor shortages are impacting us and our customers. Todd will give you the details, but we estimate related issues cost us over $600,000 in revenue in the third quarter, and almost nearly as much in gross margin.

These challenges will not go away overnight, but we are executing better and taking specific actions to mitigate their impact where we can. We are also pressing forward with new product development and achieved important milestones in the third quarter. I will give you some more detail on our progress on this front in a minute.

But first, let's have Todd run you through the quarter in more detail..

Thank you, Peter. Good afternoon, everyone. As Peter indicated, we demonstrated meaningful progress in the third quarter towards our goal of reaching profitability, with continued year-over-year improvements in every key financial metric. Let's look at the third quarter's numbers in a little greater detail. Revenue.

Total revenue grew 34% in the third quarter to $6.9 million from $5.2 million a year ago. Year-over-year growth in the quarter was driven principally by higher revenue from Golden Ridge with total sales from our other businesses in aggregate relatively flat. Sequentially, total revenue was down by 665,000 from $7.6 million in the second quarter.

The sequential drop in revenue can be attributed to two key issues. First, logistic challenge in our core SRB business. The inability to secure transportation costs us at least $400,000 in revenue in the quarter. And second, we had over two weeks of unplanned downtime at MGI due to equipment failure that we were unable to remediate in a timely manner.

Again, due to supply chain disruption. This likely cost us another 200,000 in revenue in the quarter. For the first nine months of the year though, total revenue has grown 19% to $23.1 million from $19.4 million in the first nine months of 2020. With growth in all businesses, but particularly strong at Golden Ridge and in the sale of SRB derivatives.

Gross profit. After two quarters of gross profits, we saw gross loss of 276,000 in the third quarter, which compares to a gross loss of 795,000 a year ago. Year-over-year, the reduction in gross loss was driven by improved results at Golden Ridge and a higher contribution from SRB derivative sales.

However, this was not enough to keep us in the red as for resulted MGI and lower volumes and higher raw material and freight costs for our core SRB business weighed on our results for this quarter. We've seen upward pressure on raw material and freight costs all year.

Raw material cost jumped earlier in the year and seemed to actually be mitigating in the third quarter, only to be replaced by a spike in freight cost accompanied by a shortage of available carriers. We've been responding to the volatility and input costs by raising our own prices.

And we expect to benefit from a customer wide increase in the fourth quarter for our core SRB business. We're also working with our customers and our logistic partners to secure adequate freight capacity for the fourth quarter and beyond. Year-to-date, gross profit was 549,000, compared to a gross loss of $2.4 million in the first nine months of 2020.

Driven principally by lower losses at Golden Ridge supplanted by year-to-date improvements in all of our other businesses. Operating loss. Operating loss narrowed to $2.1 million in the third quarter, or $2.7 million a year ago. This improvement was due to reduced gross loss as the SG&A was flat.

Not a lot to say on this front, other than our corporate cost have stabilized and our productivity is vastly enhanced from a year ago. I'm very pleased with how the team is executing. Year-to-date operating loss was $5.5 million compared to $6.6 million in the first nine months of 2020. Net income and adjusted EBITDA.

Due to lower operating loss, net loss was $2.2 million or $0.05 per share in the third quarter, compared to a net loss of $2.8 or $0.07 per share a year-ago. Year-to-date net loss was $3.5 million or $0.08 per share compared to $9.8 million or $0.24 per share in the first nine months of 2020.

And adjusted EBITDA loss was $1.1 million in the third quarter compared to an adjusted EBITDA loss of $1.8 million a year-ago. Year-to-date, adjusted EBITDA loss was $2.1 million compared to a loss of $6.7 million in the first nine months of 2020. Lastly, cash and liquidity.

Cash at the end of the third quarter were $6.2 million up from $4 million at the end of the second quarter due to a $3.6 million in gross equity financing completed in the third quarter. As a result, we ended the quarter with $2.3 million in net cash compared to net debt of $198,000 at the end of the second quarter.

That concludes the remarks on financial results. So I'll turn the call back to Peter to discuss the key elements of our strategic shift to specialty ingredients.

Peter?.

Thanks Todd, sorry. We have referred to our strategy of transitioning to a higher margin specialty ingredient business. But let me take a few minutes to provide more granularity on what this means and how key forward actions. First, we are growing our revenue in the here and now by enhancing on sales and distribution partnerships.

We're confident AIDP will helps us continue to grow sales for a higher added value SRB products in the supplement and wellness markets. Sales of these products are already up significantly from last year. But we believe they remain significantly underdeveloped. And partnering with AIDP should allow us to better capitalize on this opportunity.

We have completed the sales training with AIDP team and already started to see prospects in the pipeline. We expect SupplySide West, which is this week in Las Vegas to kick off our relationship and open other avenues of interests.

We're also working with our partner in horse speed in our Kentucky Equine Research or KER to enhance our position in equine nutrition's.

Performance horse speed to well established market for a core FOB, but we and KER believe there is an opportunity to expand this market by introducing new SRB based products targeting specific equine health applications. We'll be meeting in November to discuss this opportunity and new product development.

Second, our new product development efforts remain on track. And we remain confident that our ability to develop new higher [indiscernible] ingredients and expand the addressable market significant.

The stabilized RiceBran we produce is a nutrient dense feedstock that contains many valuable compounds that enhance nutrition and improve the functionality of other ingredients. Through our proprietary processes and technology, we can unlock the value of these components, enhancing the value of SRB.

In the first quarter, we successfully complete the plant scale trials with new enzyme technology that we think will deliver products with better flavor and better nutritional profiles. This is a major step forward in commercialization.

New higher added value ingredients for SRB, which will underpinned our transition to a specialty ingredients business. However, we're going to remain circumspect on commenting on these developments since this time for the young, the stand able competitive reasons.

I'll turn the call back to Todd to provide a view of the forward outlook for the company.

Todd?.

Thank you again, Peter. Our Dillon, Montana, SRB derivative facility is currently offline for a couple of weeks to complete some capacity enhancements. And I think it's safe to say that logistics are likely to remain challenging in the foreseeable future.

As such, and against a tougher quarterly comparison, we expect year-over-year growth in the fourth quarter to moderate from second and third quarter levels. Nevertheless, underlying true ends improved throughout the third quarter. September was a far stronger than July or August, and October looks to be shaping up to be a pretty solid month as well.

If these trends remain in place, and we can improve on our logistics execution, fourth quarter results will be better than third quarter results. We are working with our customers to address logistic challenges. The proposition is relatively simple, give us a committed and steady order pattern and we can lock in carriers. We both de-risk our business.

We also look to return to positive gross margins in the fourth quarter, aided by better results from MGI. And broad based increases in our core SRB business. And frankly improving - ever improving results from Golden Ridge where we're now shipping SRB on a regular basis.

With SG&A expected to remain stable our return to gross profit would imply lower adjusted EBITDA losses in the fourth quarter than the third. We're in the process of budgeting for 2022. And we'll be prepared to give greater details on our fourth quarter call. Thank you.

Back to you Peter?.

Thanks, Todd. We're operating in a challenging environment. But we have actions in place to mitigate the impact from a logistics and other supply chain disruptions, so that we can maintain focus on our transition to a profitable specialty ingredient company. We're not there yet. But we have made major strides in achieving our longer-term objectives.

And I'd like to take the opportunity to thank our employees, partners and investors for their support. And now open the call up for questions.

Operator?.

Thank you. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions]. The first question is coming from Mark Smith from Lake Street Capital Markets. Mark, your line is live..

Thanks, guys.

Can you walk through Todd I think I missed a little bit in your commentary just results from each of the businesses primarily MGI and Golden Ridge, how they did maybe on a year-over-year or sequential basis?.

We saw very, very strong growth from Golden Ridge year-over-year. I think you're cognizant of the challenges we faced last year in that business at this time and sequentially results were relatively flat, as that business stabilizes. For MGI, I would say that results were flat year-over-year and down sequentially..

And that's pretty typical for timing basis, right Q2 to Q3 for MGI, since it's already built in there?.

It's typical for the seasonality, I think that, we've been working hard to build the book of business to mitigate some of that seasonality.

And as I said, in my comments, the real issue at MGI was we had a key piece of machinery go down, which normally we should be able to get a replacement part within 48 hours, and it took the better part of two weeks..

Okay, and you said that impact from the equipment failure there was best estimate about $200,000 from MGI?.

Yes..

And then I just want to check the transportation kind of issues that you faced and headwinds, you feel like that cost you about $400,000 and would that be primarily in the kind of SRB or derivatives business where you feel like you lost sales and is that just not being able to get product from primary California up to Dillon, or walk us through kind of what the issues were with transportation and where it costs?.

I commented that it cost us at least $400,000. And it is primarily in our bulk or core SRB business. And it is primarily coming out of the Delta..

Okay and then I just wanted to just and Peter, you gave some updates on new products.

Can you talk about kind of where we are in a timeline for new product introductions, anything that that maybe is out now or kind of expectations for launches on new products?.

Well, we've got a couple of varieties out now that will sell through AIDP. So they're new, we talked about those last quarter. In terms of the developments we're doing now, we will introduce a new enzyme treated derivative, which will be Q4 of 2022 and then the new flavor enhanced products I'm looking, my plan is to have them ready for Q3 2022..

Okay, great. Thank you..

Okay. We have an additional question coming from Charles Robinson from Dawson James Securities. Your line is live..

Hey guys, could you give us a little bit more color on the AIDP partnership, and when we could start to see that meaningfully start to bear fruit?.

I think the big loans, which is why my line is not very good. I apologize. I'm on my way to Vegas for the kickoff, the commercial kickoff that really comes tomorrow. I would see that what we're seeing already in the pipeline. We're probably next quarter a little bit, and then really start to kick-in in the first and second quarter next year.

The beauty with the supplement world is that the customers evaluation time is much shorter than you would find in normal food. And we know the propositions in that markets are very strong, which is why we chose to start that..

Sounds good.

One other question, it seems like every quarter, something comes up with maybe a supply chain or something that affects the business, is there a way to permanently mitigate some of those issues that seem to invariably come up every single quarter?.

I think operationally we've done a lot to mitigate the issues.

But to be honest, this quarter and it will still follow in into the fourth quarter is that the supply chain issues, this is not a RiceBran Technologies issue, right? This is a whole industry, you literally cannot get a truck, right? You literally for certain customers don't have labor to process them into products.

And just as I mentioned in my comments, I never seen a situation like this. When it will get resolved, I don't know how to mitigate it. Yes, we're doing some innovative things on the supply chain. But, company of our size can't fix what is a nationwide or worldwide logistics crisis..

Good enough. Thank you..

I'd now like to turn the floor back to Peter Bradley for closing remarks..

Well, thank you for everyone's attention. It's been, it's a tough environment, as I said, the toughest I've seen, but I remain confident we're on the right track and moving towards having a profitable, special high margin, specialty ingredients business. We thank you for your attention. Goodbye..

Excuse me, Peter.

Do we have time for one more question?.

We always have time for one more question..

Okay, just one moment. Let me see if I can. It looks like he left the conference..

Okay. Thank you, operator..

I'll send you an email..

All right. That's great..

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