Good afternoon, ladies and gentlemen and welcome to the RiceBran Technologies Fourth-Quarter and full-year 2021 Earnings Call and Webcast. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host, Rob Fink. Sir, the floor is yours. Thank you, operator. .

Good afternoon, everyone, and welcome to the RiceBran Technologies, fourth quarter and full-year 2021, financial results conference call. Hosting the call today are Peter Bradley, Executive Chairman, and Todd Mitchell., Chief Operating Officer and Chief Financial Officer.

I want to remind 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 is 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, which is contained in the company's filings with the SEC. In addition, any projections as to the company's future performance represented by management, including estimates as of today, March 17, 2022.

And the company assumes no obligation to update these projections in the future as market conditions may 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 at ricebrantech.com on the Investor Relations page.

With all that said, I'd now like to turn the call over to Peter. Peter, the call is yours..

Thank you, Rob. And good afternoon to everyone. 2021 was a year where unprecedented disruption had impacted every aspect of the food industry.

From raw material shortages and price escalation to the inability to run manufacturing operations successfully due to labor shortages, and the challenge from logistics to both domestic and international supply chains. Despite these conditions, we have successfully streamlined operations, improved execution, and eliminated drags on our business.

We have shifted our focus from commodity products addressing small lower growth markets to high value-add ingredients, addressing broad and growing markets. The results can be seen in top-line growth, expanded margins, and narrowed losses. So certainly unprecedented disruption challenged us especially in the areas of labor and freight.

But we navigated through these challenges and we exited the year with strong momentum as evidenced by positive EBITDA in December from every one of our businesses, a first for our company. And a clear indication that we're on the right path and making tangible progress towards our goal of sustainable growth and positive cash flow.

Ironically, the disrupted environment helped to accelerate our transformation. For many customers, the year delivered structural turmoil. While we saw modestly higher import prices, many ingredients used by our customers sold materially higher inflation and in some cases was simply unavailable.

While logistics challenges delayed deliveries and raised cost for us, some customers saw ingredients rotting on cargo ships stuck on the outside of ports. Many companies need alternatives immediately and they needed domestic alternatives to oversee sources.

We were able to capitalize on this situation by offering a reasonably priced tranquility domestically source solution.

Suddenly the cost of relabeling for a Rice-based alternative ingredient wasn't so daunting and initiatives we have been pursuing for some time moved forward much more quickly, and we just started to see the benefits of this transition.

We're growing our existing relationships, and we're attracting significantly more new business in new end markets than we've ever seen before. As a result, we are meaningfully expanding our addressable market and we expect to see much more significant impact from this expansion in 2022.

We benefit from growth as it provides a solid of more sustainable revenue base. Modestly higher revenue levels we believe we can breakeven. And as we continue to grow, we should see operating leverage, expand our gross margin, leading to sustainable profitability. We've built a viable, streamlined, efficient platform for profitable growth.

During the past year, we've been introduced several new product lines. In 2022 we'll introduce even more. We'll extend our presence with a trusted provider -- as a trusted provider of high value-added ingredients for large-scale and more rapidly growing markets. I'll give you some more detail on our progress on this front in a minute.

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

Thank you, Peter. Good afternoon, everyone. Before I review the numbers, I want to make three points. First, all of our businesses are growing and some of them very rapid. Second, we've strengthened execution everywhere. Sales, production, quality, customer service, logistics.

In 2021, the entire team leaned into -- in a challenging environment, and as a result, we generated significant year-over-year improvements in every key financial metric, and we exited the year with strong momentum. Finally, we believe we can reach break-even, and that there is significant operating leverage in our business beyond that.

And that we have the necessary capital to get there. With that said, let's look at the numbers in a little greater detail. Revenue. Total revenue was $8 million in the fourth quarter, up 18% from $6.8 million a year ago. Total revenue for the year was $31 million, a 19% increase from $26 million in 2020.

Revenue for the year was driven by over 30% growth in value-add ingredient sales. And strong year-over-year gains for board Golden Ridge and MGI. As I said, we ended the year with positive momentum across all businesses.

As core SRB trends improved steadily over the fourth quarter, aided by improved logistics, which set the stage for price increases late in the quarter, and customer expansions in 2022. Gross profit. We generated a gross loss of a $107,000 in the fourth quarter, which compared to a gross loss of $47,000 a year ago.

Fourth quarter gross loss was the result of higher input costs and a slow start to the quarter, which ran ahead of price and volume increases later in the quarter. More importantly though, for the full year, we transitioned to a positive gross profit of $442,000, a $2.9 million improvement from a gross loss of $2.5 million in 2020.

This was driven by strong growth in our higher-margin value-add ingredients business, and a significant reduction in gross losses from Golden Ridge. SG&A. SG&A rose 20% in the fourth quarter to $1.6 million from $1.3 million a year ago. This was primarily due to the reversal of an accrual for executive compensation in the prior year comparison.

More importantly, SG&A for the year dropped 11%, $7 million from $8 million in 2020. Absent these non-recurring variances, SG&A has stabilized in the range of $1.7 million to $1.8 million per quarter as expected, and it should remain there in the foreseeable future. Operating losses.

Operating losses in the fourth quarter were $5.6 million, up from $1.8 million a year ago. No, this includes a $3.9 million non-cash charge to write-down our goodwill. At year-end, our market cap was less than our book equity, necessitating this charge in accordance with Generally Accepted Accounting Principles.

Absent this charge, operating losses for the quarter would have been about $1.7 million down from $1.8 million a year ago. For the year, including this charge, operating losses were $10.6 million down from operating losses of $11.3 million in 2020.

Absent the charge, operating losses for the year would have been about $6.7 million supported by the transition to positive gross profit. Net loss. Net loss for the fourth quarter was $5.4 million or $0.10 per share compared to a net loss of $2 million or $0.05 per share a year ago.

For the full year, net losses narrowed to just under $9 million or $0.19 per share from nearly $12 million or $0.29 per share in 2020.

Again, net income for both the fourth quarter and the full year was negatively impacted by the change in goodwill, which was offset in part by a $1.8 million gain in the first quarter when our PPP loan was forgiven and a smaller gain of 330,000 in the fourth quarter for revaluing a warrant liability. Adjusted EBITDA.

Adjusted EBITDA loss was 438,000 in the fourth quarter compared to a loss of 932,000 a year ago. Importantly, adjusted EBITDA loss for the full-year was $2.6 million. A 66% decline from a loss of $7.6 million in 2020. Let me illustrate this another way.

In 2021, we turned $4.9 million in incremental revenue into $5.1 million in incremental adjusted EBITDA. And since 2019, we've turned $7.4 million in incremental revenue into $7.7 million in incremental adjusted EBITDA. In other words, for 2 years in a row, we've taken over 100% of incremental revenue straight to the bottom line.

This reflects improved execution and validates our shift towards high value add ingredients. Finally, cash and liquidity. We ended the year with $5.8 million in cash, up from $5.3 million at the end of 2020.

Cash burn for the year was about $4.2 million, and we offset that with about $3.6 million in equity funding, and about $2 million in incremental debt. With about half of this coming from refinancing our term loan in the fourth quarter, and the other half from an increase in borrowing under our factoring facilities.

Again, we believe we have sufficient liquidity to reach positive adjusted EBITDA. Before I turn the call back to Peter, I also want to mention that we received 180-day extension from the Nasdaq to regain compliance with the minimum bid rules.

We believe our current valuation does not reflect the true value of our company, or the demonstrated ability to improve execution, reduce losses, and expand our addressable market in a challenging environment.

As a result, we remain optimistic that what we believe is a discount to fair value will be reduced with continued improvement in our operations, and that we will be able to regain compliance organically. With that, I'll turn the call back to Peter for closing comments.

Peter, can you hear us?.

Thanks, Todd. As I highlighted before, we have made tremendous progress in transforming RiceBran to a higher rapid value ingredient business that will provide us with accelerated revenue growth and better margins, narrowing losses and ultimately transitioning the company through positive cash flows. But we still have more to do.

We navigated significant disruption in 2021 relatively successfully but we emerge into 2022 with more opportunities than challenges.

With Russia and Ukraine accounting for 25% of the global week exports, and Ukraine alone accounting for 13% of corn exports, the current tragedy unfolding in Ukraine will only add to market disruption challenging commodity markets, and further strengthening demand for our domestically-sourced ingredients.

While RiceBran is not a one-for-one replacement to wheat or corn, through relatively simple reformulation it can often be used to reduce the reliance on traditional ingredients from these feedstocks, as well as other ingredients in short supply in the current environment, creating significant growth opportunity for us.

With our expanded market reach in the health and wellness category with our partnership with AIDP and our new customer acquisition initiatives in the companion animal and equine categories, we see strong forward demand for SRB and its derivatives.

From our strong foothold in equine markets, were expanding the addressable market, the stabilized RiceBran rapidly into companion animal, and we believe we will continue to move it up the value chain.

Disruption and growing market awareness coupled with our product development efforts will drive sustainable growth and merge sustainable revenue and margin growth in 2022 and beyond. In 2021, we learned how to survive in disruptive markets, through this learning, we will be able to thrive as challenges turn into opportunities.

Our focus in transitioning to a higher routed value ingredient company is unwavering, we have seen a glimpse of what this might mean to shareholder value in the latter part of the fourth quarter, and remain confident that 2022 will deliver positive EBITDA and a pathway to long-term growth.

With that, we'll now be happy to answer any questions you may have..

Thank you, ladies and gentlemen. The floor is open for questions. [Operator Instructions]. Okay. The first question is coming from Mark Smith from Lake Street Capital. Your line is live..

Hi guys. A couple of questions from me. First one, can you speak to the EBITDA trends in Q1. It sounds like you had a good end to the year in December.

Any insight into how that's trended here the last 2.5 months?.

Hi Mark, it's Todd. I think, that Q1's trends follow on the latter half of the fourth quarter. I wouldn't go -- I don't want to use our December which was very strong for us as a benchmark going forward.

But overall, I think, the trends remain positive and certainly, we're well ahead in terms of revenue and EBITDA vis -a - vis some of the quarters we saw in midyear last year..

Okay. And then as we've seen, some volatility, certainly in the commodity markets here pretty recently. Can you guys just talk about what you're seeing out there for rice. And then your ability to pass through pricing, whether it be purely out of Golden Ridge, but also in the derivative business..

I think we have seen -- I think we're seeing less volatility in rice than maybe we've seen perhaps in some of the other commodities that we deal with with MGI. I think we're -- we've gotten much better as a pass-through on the price, particularly with the sourcing of some of the SRB that we do.

We had -- price increases, got a mid-year that has kind of settled down and I think that where we pass on price, we are nicely ahead of the curve right now..

Perfect. And then the last question is, for me, is just can you talk about sales trends or quantify as we look at the derivative products, primarily to the products coming out of dealing and how the sales trends have moved for those products..

I think they continue to say strong. I think -- I was to explore [Indiscernible] last week and the level of interest in the derivative is extremely strong. The alternative ingredients seeing much more inflation than we have seen. And also, there is a recognition of what they can do for flavor improvement and the nutritional profile of products.

So I remain very bullish about derivatives, particularly into health and wellness..

Perfect. Thank you..

[Operator Instructions] Okay, the next question is coming from, one moment, Dr. William Peters from CAS investments. One moment. Okay Doctor, your line is live..

Okay, great. Hi, guys. Good numbers. Thank you for taking my call. I just want to make a request. Simple request. If Investor Relations or public relations, that our IBT employees can keep investors more informed with news such as new product update or new customers? And I think that will help retail investors stay more informed.

And I think, that will help you fulfill your 180 day grace period with more retail investors coming and buying into RiceBran because they are more informed.

That being said, usually we're waiting until earnings report that comes out and you've had a very good earnings report, it will be nice throughout the whole year that we had a little bit more information so we can feed off of that..

I think it's a fair comment..

Thank you..

It's one of our objectives for this year, is just to be more productive in our communication. We spent 2021, dealing with getting the operations to a level, but we recognize we need to improve our communications, particularly with postings on the website and press releases.

The well to keep everybody informed, then, all stakeholders from investors, but also into customers. So appreciate your comment, your sentiment's well taken..

Next question is coming from George Melas from MKH Management. Your line is live..

Okay. Thank you. Good afternoon, Peter and Todd, and congratulations for the improvement, especially in the fourth quarter. Can you -- I think that the business reaching EBITDA breakeven is dependent upon further growth of the top line.

Can you help us understand the revenue capacity of the various businesses of Dillon MGI, Golden Ridge, and then the core SRB business. Help us frame how big these could be based on your current relationships..

George, I think it's difficult, particularly in this forum to take it apart facility by facility or product by product.

I think if I could speak to it from a larger perspective, I think in terms of operating leverage and gross margin expansion, where we will see the most meaningful impact over the next year will come from increased capacity utilization and stronger pricing in our core SRB business.

Historically, we have operated at frankly a subpar capacity utilization, and there's a significant amount of operating leverage that can come through from -- in a high techs, low-variable cost business, from increased capacity utilization. And I think that's really where I would have you focus as the potential needle mover over the next year..

And I think, George, you'll start to see that and may see some little movement in Q1, but I expect to see that more in Q2 and Q3. As we bring -- as we start to access new markets in there. In terms of -- I don't see overall capacity really being the growth limiter.

Yes, we have a lot of demand for our derivatives that we manage, but I don't see it as a major limiting factor, particularly through 2022..

Okay. Great. And let me just ask a follow up.

From an investment perspective, a CapEx perspective, what are your plans in 2022, both from a numbers point of view and where would that capital go?.

I think that we expect capital expenditures in 2022 to be significantly lower than in 2021. Now, part of the big dynamic there is that we had to remediate the Lake Charles facility last year and we were reimbursed for insurance for a large part of that.

But I think the other part is that we've largely finished a bunch of projects that we wanted to do at Dillon and in Golden Ridge. So did the needs out there are not significant? I think we've been looking at MGI and there's some stuff that we want to do there to leverage that facility.

But buying and large, I would be surprised if it was a seven-figure number..

Okay. Congrats. Looking forward to the year. Thank you very much..

Thank you..

Okay. The next question is coming from David Core, Private Investor. David, your line is live..

Hi Peter.

Since me took it on the AIDP sales force, have they made any sales yet? And how much?.

Not much. You got a sales cycle in the health and wellness area. So they're ramp there. We transferred some smaller accounts to them that they're obviously, working. But we've got plans in there. But again, the development cycles for customers, it doesn't happen overnight. It's going to be over the next few quarters you'll see that kicking in.

Their initial effort though that they're making, I'm very pleased with..

It wouldn't hurt if we gave them an extra incentive to make some sales like bonus commissions?.

We're talking about all source of sales. But they -- even the most well compensated sales person can't change the way a customer develops and evaluates products..

Do they have many large contracts in the hopper, if you will?.

They have, but they have a lot of interest in the products. And so again, I expect to see through this year significant projects coming through..

Great. All right. Thank you..

Thank you..

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

Thanks, everyone and appreciate you taking the time to listen to our earnings call. I think as I mentioned we're starting to move to a profitable business with -- in long-term will generate positive cash flows. I think just before I close, I'd appreciate just saying thanks to the team, the employees who worked tirelessly through a crazy environment.

And again, we also appreciate the support of our investors. Thank you very much..

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..