Good day, ladies and gentlemen, and welcome to the RiceBran Technologies First Quarter 2022 Earnings Call and Webcast. At this time, all participants have been placed on a listen-only mode and the floor will be open for 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, and good afternoon, and welcome to the RiceBran Technologies first quarter 2022 financial results conference call. Hosting the call today are Peter Bradley, Executive Chairman; and Todd Mitchell, RiceBran's 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 safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those 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's estimates as of today, April 28, 2022, 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 at 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 to everyone. During 2021, we successfully developed and began implementation of a strategy to put RiceBran on a path to sustainable growth and profitability.

This strategy shifted our focus to higher added value ingredients and takes advantage of our unique ability to utilize RiceBran as a healthy alternative to traditional ingredients.

We are aligned with secular healthy living catalysts, and our domestic manufacturing capabilities make us increasingly attractive during a period of disruption to the global supply chain. You have begun to see these benefits in the shift in our financial results as revenues are growing, and we move towards positive adjusted EBITDA.

Our strong first quarter results reflect structural changes within the Company and much progress, putting the mistakes of prior management behind us as we build the platform for profitable growth.

We have successfully increased the focus on value-added products, including new product introductions and strengthening our market reach with our distribution agreement with AIDP.

We're driving volume growth and higher capacity utilization in our core SRB business and making strong inroads into the companion animal space and -- as well as strengthening our logistics capabilities. We have also made tremendous strides in driving strong growth and improved profitability at both MGI and Golden Ridge.

With these structural enhancements complete, I am confident 2022 will be a year of further progress as we accelerate this transition, fully aligning our organization and focus on profitability and enhance our go-to-market strategy with further partnerships.

We will invest in revenue streams where we generate higher levels of profitability and deemphasize areas where we do not.

We have a streamlined operation and addressed the issues that have hampered execution, so incremental revenue should continue to leverage as further improvements in profitability enable us to transition to positive adjusted EBITDA as revenues continue to grow and our product mix which shifts away from more of our commodity business.

With the Company's transition well underway and our focus moving towards a value-added ingredient strategy, we have reached an inflection point where a change in our governance makes sense. Today, we announced that Jean Heggie and Will Black will be joining our Board of Directors.

Jean is the Founder of Heggie & Associates, a food industry consultancy that provides strategic marketing counsel to companies and trade associations involved in consumer food, food ingredient and the ag-tech sectors. And she is a spokesperson for the United Soybean Board.

Jean retired from DuPont Nutrition & Biosciences after a 33-year career in food ingredient marketing, culminating and serving as Global Marketing Lead for DuPont's Protein Solutions business unit. Will brings over 35 years of experience in the global health and nutrition industry to our Board.

He has served in sales and marketing leadership roles with ChromaDex, a bioscience company focused on healthy aging nutraceuticals; and as COO of Natreon, a proprietary botanical ingredient company.

Will was also Global Head of Marketing of Human Nutrition and Health for DSM Nutritional Products, a leader in the development of new nutraceutical ingredients and the world's largest manufacturer of letter vitamins and Omega-3 fatty acids. Will also held senior roles at DuPont Nutrition and Health.

Jean and Will will bring RiceBran significant consumer-facing sales, marketing and product development expertise. Their expertise and relationships will provide -- will be invaluable as we develop and go to market with value-added ingredient offerings in the companion animal, equine and human market.

Jean and Will will be replacing Ari Gendason and Beth Bronner, who have resigned from the Board. We like to think -- we like to thank Ari and Beth for their significant contributions during this transition. Jean and Will join as the Company is on the verge of a significant and positive financial transition which is evident by our first quarter result.

This transition is being driven by stronger sales initiatives, higher capacity utilization and better operational and logistic execution, all of which translates into enhanced customer relations, which will serve to -- which will continue to serve as a positive catalyst for growth and transition to positive adjusted EBITDA.

I'll give you some more detail on our progress in a minute, but let's first have Todd run you through the quarter in more detail..

Thank you, Peter. Good afternoon, everyone. We had an encouraged start to the new year. We generated a record $10.6 million in revenue. We returned to positive gross profit margins. As a result, adjusted EBITDA losses narrowed to $385,000.

And crucially, liquidity remained strong with $5.9 million in cash on the balance sheet at the end of the quarter, up modestly from year-end. That's not to say the quarter did not have its challenges. We had some production and plant issues, and the supply chain and logistics remains daunting, to say the least.

But we've put in place strategies to mitigate these issues, and we believe the first quarter results demonstrate that we're on the right path. With that said, let's look at the quarter's numbers in a little bit of greater detail. Revenue.

Total revenue was $10.6 million in the first quarter, up 23% from $8.6 million a year ago and 31% from $8 million in the fourth quarter.

Strong growth in the quarter was driven by higher core SRB sales and strong results from both MGI and Golden Ridge, while value-add SRB derivative sales declined modestly year-over-year really due to the timing of large customer orders and a real tough comparison year-over-year. Gross profit.

We generated a positive gross profit of $502,000 in the first quarter, which compared to a gross profit of $670,000 a year ago. Recent price increases have offset higher input costs, which was higher volumes for our core SRB business.

And the strong results from MGI and Golden Ridge in the first quarter supported a return to positive gross margins from losses in the latter half of 2021. The lower value-add SRB derivative sales and some unplanned downtime at MGI as well as higher freight costs held back results versus a year ago. SG&A.

SG&A of $1.7 million in the first quarter declined modestly from a year ago. We're seeing some upward pressure on certain larger items, including compensation and insurance, but we've been able to offset these increases with lower expenses on outside consultants and legal.

By and large, SG&A has stabilized in the range of $1.7 million, $1.8 million per quarter and should remain there in the foreseeable future. Operating losses.

Operating losses in the first quarter were $1.2 million, up slightly from $1.1 million in the same quarter a year ago but down meaningfully from about $1.7 million in the fourth quarter, if you exclude our goodwill write-down in that quarter. Net income.

Net loss for the first quarter was $1.5 million or $0.03 per share compared to net income of $591,000 or $0.01 per share a year ago. Remember, net income in the first quarter of 2021 included a $1.8 million benefit from the forgiveness of our PPP loan. Adjusted EBITDA.

Adjusted EBITDA loss was $385,000 in the first quarter compared to a loss of $158,000 in the first quarter of 2021. This decline reflected the year-over-year drop in gross profit but again compares favorably to adjusted EBITDA losses of $806,000 in the fourth quarter.

Indeed, it compares favorably to every quarter in 2021, except for the first quarter. Lastly, cash and liquidity. We ended the quarter with $5.9 million in cash, up slightly from year-end due to favorable working capital trends in the quarter with $190,000 in cash flow from operations during the quarter.

With that, I'll turn the call back to Peter for closing comments..

Thanks, Todd. RiceBran now has a clear strategy and pathway to positive EBITDA. Our focus on those products and markets where the value we deliver is recognized, which, in turn, drives higher margin. The first business is derivative product, and you have seen us strengthen our market reach with the AIDP partnership.

We've also expanded our feedstock supply and implemented process improvement to increase capacity to meet growing demand. The second business is our core SRB product, where we focused on expanding penetration into human food and companion animal applications.

This has included the launch of new SRB variants, and you will see further additions to our product line through the rest of 2022 to deliver further value to capture an increased share of this opportunity that exists to replace soy, corn and rice-derived ingredients.

Linked to our continued focus on manufacturing supply chain efficiencies, we expect the core SRB business to deliver meaningful profitable growth. Our third focus is on our specialty milling business.

At MGI, the demand for specialty grains continues to be exceptionally strong, and we are completing long overdue upgrades at the mill to increase capacity and efficiency and broaden the range of products offered.

Once these upgrades are completed, MGI will be able to consistently deliver high-quality products valued by our target market, three primary focus market which offers significant upside opportunity. You will note I have not highlighted rice milling as part of our forward focus.

While we have been pleased with our year-over-year improvement in our Golden Ridge facility, it has become clear to us that rice milling should not be a strategic focus for the Company. As a result, over the coming months, we will be exploring multiple options to optimize the financial and strategic impact from Golden Ridge.

Derivatives core SRB and specialty milling products provide our pathway to profitability. With the strategic initiatives I've outlined, our expectations are to see each of these business deliver solid growth despite the challenges in the supply chain.

RiceBran is not immune to these challenges but also offers an opportunity to grow our penetration in key applications. With that, we're happy now to answer any questions. Thank you, operator..

[Operator Instructions] And our first question is coming from Mark Smith..

Mark Smith at Lake Street. A couple of quick questions. First, can you guys give us any additional data on MGI? I know this is typically a seasonally stronger quarter for that. But how that business is trending and if you can quantify at all maybe year-over-year improvement at MGI, that would be great..

Mark, this is Todd. I think our -- the improvements that we've seen at MGI year-over-year are very material, very high double digits, both on the top line and the bottom line. I think that's come from -- there's a certain degree of price inflation in that business, but a lot of it has come from volume and productivity enhancement..

Okay.

And any of the strength during Q1, any kind of pull forward in MGI, any expectation that maybe Q2 wouldn't see the same trends?.

No. I think we'll see the same trends in the second quarter that we saw in the first quarter. And I think that we've done a lot with the business leader there and the team where, in fact, we'll probably be able to mitigate a lot of the historical seasonality you've seen in that business..

Perfect. And that kind of leads right into the next question. The update on trends that you're seeing post quarter end and through Q2, especially as we look at some of this value-add SRB..

I think that our -- there's been very little variance in the trends from Q1 to Q2. Our SRB derivatives business had a real tough quarter in the first quarter. It sort of trended with fourth quarter.

And I think we'll see that business begin to pick up, just on looking at the pipeline and the order book there as we go into the second quarter and the latter half of the year..

Perfect. And then last one for me.

Any update on kind of outlook for EBITDA, when you think maybe you could turn to positive EBITDA?.

We remain hopeful for this year. I'm going to leave it at that. I think with where our revenue is trending, slight improvements in the mix of the product, and we may be able to bridge that gap..

Our next question comes from Charles Robinson, who is with Dawson James..

Congratulations on the record quarter..

Thank you..

Thank you..

And a quick question.

Is there a correlation between the 1.4 million shares sold by Continental Grain, your largest shareholder, and the resignation of Ari Gendason? Can you shed some light on that?.

To be honest, it's not for us to comment on Continental Grain's investment strategy, and Ari got other things to do for the Continental portfolio. But I think it's not our place to comment on that, on their investment strategy..

Okay.

I guess I was looking for is there a reason why he resigned from the Board?.

It's a matter of what he wanted to focus on..

Yes..

Okay..

I would look instead at the qualifications that our two new Board members bring to us. I think if you look at what we are doing with the shift in strategy towards specialty ingredients as opposed to being a larger grain operation, I think you can put two and two together there.

Anything else, Charles?.

No, no, I'm all set..

Our next question comes from a [George Johnson]..

I'm a private investor. And Peter and Todd, I'd like to thank you. I think in these challenging times here in the country as a whole, we had a very good quarter. My first question has to do with MGI a little bit that, Peter, last year, you've mentioned the possibility on our first quarter, which ended here, of a pet food combining oats and rice bran.

Are there any developments in that product?.

There are still opportunities to do that. A lot of our customers are using both oats and rice bran in the formula. What we've really focused on because of the strength in demand for the core products of MGI is upping their volume, right? What can we get more out of MGI? You're right, though.

I think we will head down that route, but MGI's core proposition has been so strong. At the moment, we've got more business opportunity that we can handle just a standard product..

I can understand that.

And with the horse feed, which you always had, it's never been made by RBT or by their customers, so -- and then one more MGI question related to that is that Agweek magazine had an article, and they talked about how the barley is really becoming a demand by pet food companies, 13% protein, and if it sits very well with the animals.

Have you noticed any increase in the barley after that article, April 4?.

Yes. Well, the demand is all fair, I think. And what we're finding in that whole pet food space is that there is strong interest, not just in barley, but also in standard SRB because standard SRB has got even slightly higher protein and has some other benefits.

So we see the whole companion animal space as a real opportunity for the business across the product line..

And then one more question of a comment you made last year. You just mentioned the possibility of doing -- partnering with products with the big India corporation, Narula, who owns the rice mill in Indonesia -- or in Thailand, which has been selling organic brand.

I just want a comment, having those new Board members, it sounds like one of them might really help us out with their -- if they're into nutraceuticals and pharmaceuticals, food and all, everything that we handle. I think those new Board members might be a big help there..

And that's why we brought them on. As we go to the specialty food ingredients business, it's very different from commodity grain market. And while obviously, as you're very well aware, that's my background. We wanted to have Board members that can add to our thinking. So you're exactly right. I'm sure they will be very helpful..

And we're very fortunate to have you as CEO, too. That's all I have. Thank you for a great quarter..

Very nice of you to say that..

Our next question comes from [Martin Matt]..

I've spoken to you at times in the past. I'm a 20-year investor. And as you can imagine, I look forward to each conference call, which is very positive on the future, and I'm still waiting for us to quite to get there.

I noticed your response to one of the callers on when you might expect to break even on EBITDA, and the answer was a little fuzzy that maybe it has to be. But it said sometime this year, you hoped we would see it.

Can you just clarify that a bit closer?.

Martin, I'm not going to do that. I think if you look at the trends, they're headed positively, and I think it's incumbent upon us to deliver them for you. So -- but let's not talk about the future. Let's deliver the future..

Very good. In the past, we have overpromised and underdelivered. Since this new Board has taken over, in the main, you have under promised and overdelivered, so it's certainly a good trend. And that's all of the question I have..

Our next question comes from [David Core]..

Congrats on the quarter, record quarter. I was curious.

Of that $10.6 million of revenue, what percentage of that would be derivatives?.

We don't break out our businesses, so I'm not going to speak to that because that's not something that we disclose. But the derivatives business is within our overall mix is a percentage which if it continues to grow as it grew last year and continues to generate the margins that it generated last year offers significant leverage to the bottom line..

Has AIDP contributed to those sales yet?.

Yes..

Significantly?.

Sales to AIDP, I would be willing to say were meaningful in the quarter..

That's good news. All right. Keep up the good work, guys..

Thank you..

Thank you..

There are currently no questions remaining in the queue. [Operator Instructions] Okay. Thank you. And now we turn it over to Peter for closing comments..

Thank you, everyone, for listening to our earnings release. We value your continued support and also a big thanks to the RiceBran team who in difficult circumstances have really helped us move the business forward. We look forward to seeing the fruits of their labors over the coming quarters. Thanks again..

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..