AgJunction Reports Fourth Quarter and Full Year 2019 Earnings Results
SCOTTSDALE, AZ, March 23, 2020
AgJunction Inc. (TSX: AJX) ("AgJunction" or the "Company") is reporting financial results for the fourth quarter and full year ended December 31, 2019. All currency amounts are expressed in U.S. dollars.
Fourth Quarter 2019 Financial Summary vs. Fourth Quarter 2018
Revenue was $3.3 million versus $17.1 million; the fourth quarter of 2018 included revenue of $14.3 million related to the bulk purchase order (BPO)
Gross margin increased significantly to 45.9% compared to 30.9% reflected our more normalized margin expectation as our mix did not include the lower margin bulk order referenced above
Operating expenses were $4.7 million compared to $4.4 million reflecting onetime restructuring costs
Net loss was $3.1 million or $(0.03) per share, versus net income of $3.1 million or $0.03 per share
EBITDA was $(2.3) million versus $3.7 million
Full Year 2019 Financial Summary vs. Full Year 2018
Revenue was $39.2 million versus $64.5 million; this decline in revenue is driven by the sale of businesses in 2018 and the completion of shipments made under the BPO
Gross margin increased 50 basis points to 37.4% compared to 36.9%
Operating expenses decreased to $21.1 million from $25.7 million reflecting an annual benefit of the sales of businesses
Net loss was $6.2 million or $(0.05) per share, versus net income of $1.5 million or $0.01 per share
EBITDA was $(3.6) million versus $3.4 million
“Our financial results, particularly the decline in revenue and the increase in margins, reflect the sale of businesses in 2018 and the completion of shipments under the BPO,” said Dr. M. Brett McMickell, president and CEO of AgJunction. “During the year, AgJunction continued to make strides in developing innovative automation technology that provides significant benefits to farmers, despite 2019 being a difficult year for the agriculture market as a whole. We completed several important initiatives over the course of the year that we anticipate will set us up for success going forward, including right-sizing our organization and consolidating all facilities to our corporate headquarters in Scottsdale, AZ.
“As previously announced after an extensive evaluation of the business over the past several months, our new team has implemented a refined strategy that we believe best suits the evolving needs of manufacturers and suppliers within our industry. With a robust intellectual property portfolio already in place, we are going to focus on further developing our products to support customer flexibility by delivering modular components of our software and hardware that can integrate seamlessly into our customers’ systems. We are also going to be extending our unique technology beyond autosteering into more areas of automation where we have strong IP, including obstacle detection, implement steering, task control, and many others.
“As we move forward, we expect to grow sales in each of our existing geographical regions through offering adaptable components to current partners, along with new manufacturers and suppliers that are looking for flexible modules rather than a full steering solution. We also remain committed to investing in research and development to continue growing our industry-leading IP portfolio and offering the most innovative components in the industry. Overall, we believe we are well-positioned to execute on these initiatives with a reinvigorated team ready to deploy our unique technology and capabilities to an evolving market.
“There is significant uncertainty as to the likely effects of COVID-19 which may, among other things, impact our supply chain and may negatively impact the global agriculture market. While we have not experienced any delays in production at the current time, we are unable to quantify the potential impact this pandemic may have on our future financial statements.”
Fourth Quarter 2019 Financial Results
Total revenue in the fourth quarter of 2019 was $3.3 million compared to $17.1 million in the fourth quarter of 2018. The decline was primarily driven by the prior year period including revenue generated from the bulk purchase order (BPO). The Company completed the final shipments of the BPO in the third quarter of 2019.
Gross profit in the fourth quarter of 2019 was $1.5 million compared to $5.3 million in the fourth quarter of 2018. Gross margin increased significantly to 45.9% compared to 30.9% in the fourth quarter of 2018. The lower margins in Q4 2018 were a direct result of the BPO while Q4 2019 higher margins were driven by sales to our existing original equipment manufacturers and value-added reseller customers.
Total operating expenses in the fourth quarter of 2019 were $4.7 million compared to $4.4 million in the fourth quarter of 2018. The increase was primarily driven by site closure costs, partially offset by lower compensation, consultant and recruitment costs.
Net loss in the fourth quarter of 2019 was $3.1 million or $(0.03) per share, compared to net income of $3.1 million or $0.03 per share in the fourth quarter of 2018. The decline was primarily driven by the aforementioned decrease in revenue related to the BPO.
EBITDA in the fourth quarter of 2019 was $(2.3) million compared to $3.7 million in the fourth quarter of 2018.
Full Year 2019 Financial Result
Total revenue in 2019 was $39.2 million compared to $64.5 million in 2018. The revenue decline was primarily due to the completion of the BPO.
Gross profit in 2019 was $14.7 million compared to $23.8 million in 2018. Gross margin increased 50 basis points to 37.4% compared to 36.9% in 2018.
Total operating expenses in 2019 declined to $21.1 million compared to $25.7 million in 2018, primarily driven by a reduction in research and development and sales and marketing costs.
Net loss in 2019 was $6.2 million or $(0.05) per share, compared to net income of $1.5 million or $0.01 per share in 2018. The decline was primarily driven by the aforementioned decrease in revenue related to the BPO.
EBITDA in 2019 was $(3.6) million compared to $3.4 million in 2018.
Cash and cash equivalents at the end of 2019 totaled $17.2 million compared to $21.4 million at the end of 2018. Working capital was $19.2 million compared to $26.7 million at the end of 2018. The Company continues to operate debt free and has access to an unutilized $3.0 million line of credit.
AgJunction will hold a conference call tomorrow at 11:00 a.m. Eastern time to discuss its fourth quarter and full year 2019 results, followed by a question-and-answer session.
Date: Tuesday, March 24, 2020 Time: 11:00 a.m. Eastern time (8:00 a.m. Pacific time) Toll-free dial-in number: 1-877-573-5992 International dial-in number: 1-270-215-9903 Conference ID: 4385373
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 1-949-574-3860.
A replay of the conference call will be available after 2:00 p.m. Eastern time on the same day through April 7, 2020.
Toll-free replay number: 1-855-859-2056
International replay number: 1-404-537-3406
Replay ID: 4385373
AgJunction Inc. is a global leader of advanced guidance and autosteering solutions for precision agriculture applications. Its technologies are critical components in over 30 of the world’s leading precision agriculture manufacturers and solution providers and it holds over 200 patents and patents pending. AgJunction markets its solutions under leading brand names including Novariant®, Wheelman®, Whirl™ and Handsfreefarm®. AgJunction is headquartered in Scottsdale, Arizona, and is listed on the Toronto Stock Exchange (TSX) under the symbol “AJX.” For more information, please go to AgJunction.com.
This press release uses EBITDA, which is a financial measure that does not have any standardized meaning prescribed under International Financial Reporting Standards ("IFRS"). EBITDA is defined as net income before interest, income tax, depreciation and amortization. The Company believes that this non-IFRS measure provides useful information to both management and investors in measuring financial performance. As this measure, does not have a standard meaning prescribed by IFRS, it may not be comparable to similarly titled measures presented by other publicly traded companies, and should not be construed as an alternative to other financial measures determined in accordance with IFRS. This non-IFRS measure is provided as additional information to complement IFRS measures by providing further understanding of operations from management’s perspective. Accordingly, non-IFRS measures should never be considered in isolation nor as a substitute to using net income as a measure of profitability or as an alternative to the IFRS consolidated statements of income or other IFRS statements. See "Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Reconciliation" herein for additional information.
This press release contains forward-looking information and forward-looking statements (collectively, "forward-looking information") within the meaning of applicable securities laws and is based on the expectations, estimates and projections of management of AgJunction as of the date of this news release, unless otherwise stated. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information. These statements are only predictions and actual events or results may differ materially. Although the Company’s management believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, performance or achievement since such expectations are inherently subject to significant business, economic, competitive and political uncertainties and contingencies. In particular, forward-looking statements in this press release include, but are not limited to statements with respect to: the Company’s vision with respect to autosteering for farmers and the expectation that regular updates will be pushed out to the app ensuring farmers can always operate their Wheelman products with the most up-to-date technology. Accordingly, readers should not place undue reliance on such forward-looking information contained in this press release.
In respect of the forward-looking information, AgJunction has provided such information in reliance on certain assumptions that it believes are reasonable at this time, including, but not limited to, the sufficiency of budgeted capital expenditures in carrying out planned activities; that AgJunction's future results of operations will be consistent with management expectations in relation thereto; availability of key supplies, components, services, networks and developments; the impact of increasing competition; conditions in general economic, agricultural and financial markets; demand for the Company's products; and the continuity of existing business relationships.
Since forward-looking information addresses future events and conditions, such information by its very nature involves inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks associated with the industries in which AgJunction operates; competition; inability to introduce new technology and new products in a timely manner; legal claims for the infringement of intellectual property and other claims; negative conditions in general economic, agricultural and financial markets; and reduced demand for the Company's products. Readers are cautioned that the foregoing list of factors is not exhaustive.
Additional information on other factors that could affect the Company's operations or financial results, are included in reports of AgJunction on file with applicable securities regulatory authorities, including but not limited to, AgJunction's Annual Information Form which may be accessed on its SEDAR profile at www.sedar.com. The forward-looking information contained in this press release is made as of the date hereof and AgJunction undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Gateway Investor Relations
Cody Slach, Managing Director