AgJunction Reports Third Quarter 2021 Earnings Results
SCOTTSDALE, Ariz., Nov. 15, 2021 (GLOBE NEWSWIRE) -- AgJunction Inc. (TSX: AJX) ("AgJunction" or the "Company") is reporting financial results for the third quarter ended September 30, 2021. All currency amounts are expressed in U.S. dollars.
Third Quarter 2021 Financial Summary vs. Third Quarter 2020
- Revenue was $3.7 million compared to $3.8 million
- Gross margin increased to 50.9% compared to 49.7%
- Operating expenses increased to $4.2 million compared to $3.1 million
- $1.5 million one-time gain on Paycheck Protection Plan (“PPP”) loan forgiveness
- Net loss was $(0.9) million or $(0.01) per share, compared to a net loss of $(1.3) million or $(0.01) per share
- EBITDA was $0.1 million compared to $(0.6) million
Management Commentary
“Our team continued to work hard during the quarter maintaining strong relationships with our OEM and VAR partners and driving growth within our direct channel,” said Dr. M. Brett McMickell, president and CEO of AgJunction. “Over the past few quarters, I shared that we expected to see a gradual recovery of our indirect business, and while we have seen improvements, our OEM partners continue to delay orders due to the lingering effects of COVID and supply chain constraints. Despite these headwinds impacting our business and strategic plan, I am very proud of our team’s continued dedication to providing automation solutions to our customers.”
“Subsequent to the quarter and following a comprehensive review of the Company’s strategic alternatives, the AgJunction board of directors has determined the best alternative available to AgJunction is for the Company to be acquired by Kubota Corporation, a leading global manufacturer of agricultural equipment and industrial engines, in accordance with the terms and conditions of the previously announced arrangement agreement. The transaction will provide AgJunction shareholders with immediate liquidity and certainty of value as shareholders will be receiving a 60% premium to the closing price of AgJunction common shares on the day the transaction was announced.”
Third Quarter 2021 Financial Results
Total revenue in the third quarter of 2021 was $3.7 million compared to $3.8 million in the third quarter of 2020. The decrease is primarily due to reduced revenue volume from one major customer. The reduction is partially offset by the royalty revenue recognized from the settlement of a patent infringement lawsuit against Ag Leader Technology Inc. (the “Patent Infringement Settlement”), new customer acquisitions and non-recurring engineering project revenue.
Gross profit in the third quarter of 2021 was flat at $1.9 million compared to the third quarter of 2020. Gross margin was up to 50.9% compared to 49.7% in the third quarter of 2020. The increase is mainly attributed to a one-time benefit related to the increase in royalty revenue from the Patent Infringement Settlement.
Total operating expenses in the third quarter of 2021 were $4.2 million compared to $3.1 million in the third quarter of 2020. The increase is related to legal fees associated with the Patent Infringement Settlement, other legal and advisory costs relating to the KUBOTA Transaction and increased marketing costs to promote AgJunction’s e-commerce business that has now expanded to Australia.
Net loss in the third quarter of 2021 improved to $(0.9) million or $(0.01) per share, compared to a net loss of $(1.3) million or $(0.01) per share in the third quarter of 2020, however the improvement was primarily attributable to the PPP loan forgiveness.
EBITDA in the third quarter of 2021 was $0.1 million compared to $(0.6) million in the third quarter of 2020.
Cash and cash equivalents at September 30, 2021, totaled $6.2 million compared to $6.8 million at the end of 2020. Working capital was $10.0 million at September 30, 2021, as compared to $13.7 million at the end of 2020. The Company operates with no debt.
Conference Call
AgJunction will hold a conference call today at 11:00 a.m. Eastern time to discuss its third quarter 2021 results. Management will address selected questions during the discussion that were emailed to by Friday, November 12, 2021, at 5:00 p.m. Eastern time.
Date: Monday, November 15, 2021
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: 6499864
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.
The conference call will be broadcast live and available for replay and via the investor center section of the company’s website at .
A replay of the conference call will be available after 2:00 p.m. Eastern time on the same day through November 29, 2021.
Toll-free replay number: 1-855-859-2056
International replay number: 1-404-537-3406
Replay ID: 6499864
Transaction Update
On October 7, 2021, AgJunction announced that it entered into a definitive arrangement agreement (“arrangement”) to be acquired by KUBOTA Corporation (“Kubota”) in an all-cash transaction with a total equity value, on a fully diluted basis, of approximately CAD $91 million. Under the terms of the arrangement, Kubota will acquire AgJunction for CAD $0.75 per common share representing a premium of approximately 60% to the closing price of the common shares on the Toronto Stock Exchange on October 7, 2021, the last trading day prior to the announcement. A special meeting of common shareholders has been scheduled for 10:00 am (Scottsdale time) on November 24, 2021, at the offices of AgJunction at 9105 E Del Comino Drive, Suite 115, Scottsdale, Arizona, USA. The record date for the special meeting is set at the close of business on October 21, 2021 and AgJunction shareholders as of that date are reminded if voting by proxy to submit their votes by no later than 10:00 a.m. (Scottsdale time) on November 22, 2021. The AgJunction Board of Directors unanimously recommends that AgJunction shareholders vote their AgJunction shares in favor of the arrangement.
Shareholders who have questions regarding the arrangement or require assistance with voting may contact AgJunction’s proxy solicitation agent, Kingsdale Advisors, by telephone at 1-800-749-9890 (toll-free in North America) or at 416-867-2272 (for collect calls outside of North America) or by email at .
For more information regarding the arrangement, please go to .
About AgJunction
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 Ag 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® and is committed to advancing its vision by bringing affordable hands-free farming to every farm, regardless of terrain or size. 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 .
Non-IFRS Measures
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.
Forward-Looking Statements
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 plans, priorities and the arrangement with Kubota and related matters. 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; impact (and duration thereof) that the COVID-19 pandemic will have on the Company’s business, including on demand for the Company’s products; effects of regulation by governmental agencies; 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; the continuity of existing business relationships; that the arrangement will be completed on the terms contemplated by the arrangement agreement; the ability of the parties to receive, in a timely manner and on satisfactory terms, the necessary regulatory, court, shareholder, stock exchange and other third party approvals for the arrangement; the ability of the parties to satisfy, in a timely manner, the other conditions to the closing of the arrangement; and other expectations and assumptions concerning the arrangement.
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, the COVID-19 pandemic and its impacts on the Company including our products; our supply chain and our ability to receive products on a timely basis from our global suppliers; a prolonged economic downturn from the negative effects of COVID-19 pandemic may result in reduction of revenue, cashflows and negatively affect our profitability; 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; reduced demand for the Company's products; and completion of the arrangement is subject to a number of conditions which are typical for transactions of this nature, certain of which are outside the control of AgJunction, failure to satisfy any of these conditions, the emergence of a superior proposal or the failure to obtain approval of AgJunction's shareholders may result in the risk that the arrangement agreement is terminated. 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 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.
Contact:
Media
Investor Relations
Gateway Investor Relations
Cody Slach or Cody Cree
1-949-574-3860
| AgJunction Inc. | ||||||
| Consolidated Statements of Financial Position | ||||||
| (Expressed in U.S. thousand dollars) | ||||||
| September 30, | December 31, | |||||
| 2021 | 2020 | |||||
| (unaudited) | ||||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 6,184 | $ | 6,773 | ||
| Accounts receivable, net | 1,569 | 2,051 | ||||
| Current portion of notes receivable, net | 820 | 320 | ||||
| Inventories | 7,904 | 8,694 | ||||
| Contract assets, net | - | 7 | ||||
| Prepaid expenses and deposits | 502 | 781 | ||||
| Total current assets | 16,979 | 18,626 | ||||
| Notes receivable, less current portion, net | 1,300 | 1,002 | ||||
| Property, plant and equipment, net | 901 | 950 | ||||
| Right-of-use assets, net | 587 | 661 | ||||
| Intangible assets, net | 9,540 | 9,957 | ||||
| Goodwill | 143 | 143 | ||||
| Total assets | $ | 29,450 | $ | 31,339 | ||
| Liabilities and Shareholders’ Equity | ||||||
| Current liabilities: | ||||||
| Accounts payable and accrued liabilities | $ | 3,341 | $ | 2,901 | ||
| Provisions | 54 | 352 | ||||
| Current portion of lease liability | 372 | 368 | ||||
| Current portion of deferred revenue | 3,177 | 1,288 | ||||
| Total current liabilities | 6,944 | 4,909 | ||||
| Deferred revenue, less current portion | 3,630 | 2,425 | ||||
| Lease liability, net of current portion | 252 | 334 | ||||
| Total liabilities | 10,826 | 7,668 | ||||
| Shareholders’ equity: | ||||||
| Share capital | 23,495 | 23,495 | ||||
| Equity reserve | 5,340 | 5,103 | ||||
| Accumulated deficit | (10,211 | ) | (4,927 | ) | ||
| Total shareholders' equity | 18,624 | 23,671 | ||||
| Total liabilities and shareholders' equity | $ | 29,450 | $ | 31,339 | ||
| AgJunction Inc. | ||||||||||||
| Consolidated Statements of Profit or Loss | ||||||||||||
| Three and nine months ended September 30, 2021 and 2020 | ||||||||||||
| (Unaudited -expressed in U.S. thousand dollars) | ||||||||||||
| Three months ended | Nine months ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Revenue | $ | 3,744 | $ | 3,821 | $ | 9,556 | $ | 13,623 | ||||
| Cost of sales | 1,838 | 1,922 | 5,148 | 6,925 | ||||||||
| Gross profit | 1,906 | 1,899 | 4,408 | 6,698 | ||||||||
| 50.9 | % | 49.7 | % | 46.1 | % | 49.2 | % | |||||
| Expenses: | ||||||||||||
| Research and development | 1,146 | 1,250 | 3,684 | 3,414 | ||||||||
| Sales and marketing | 572 | 503 | 1,664 | 1,645 | ||||||||
| General and administrative | 2,507 | 1,360 | 5,806 | 4,719 | ||||||||
| Total operating expenses | 4,225 | 3,113 | 11,154 | 9,778 | ||||||||
| Operating loss | (2,319 | ) | (1,214 | ) | (6,746 | ) | (3,080 | ) | ||||
| Interest and other income | (1 | ) | (11 | ) | (8 | ) | (89 | ) | ||||
| Gain on loan forgiveness | (1,466 | ) | - | (1,466 | ) | - | ||||||
| Foreign exchange (gain) loss, net | (1 | ) | 54 | 12 | 86 | |||||||
| Total other (income) expenses | (1,468 | ) | 43 | (1,462 | ) | (3 | ) | |||||
| Income tax benefit | - | - | - | - | ||||||||
| Net loss | $ | (851 | ) | $ | (1,257 | ) | $ | (5,284 | ) | $ | (3,077 | ) |
| Loss per share | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.03 | ) |
| AgJunction Inc. | ||||||
| Condensed Consolidated Statements of Cash Flows | ||||||
| Three months ended September 30, 2021 and 2020 | ||||||
| (Unaudited - expressed in U.S. thousand dollars) | ||||||
| 2021 | 2020 | |||||
| Cash flows used in operating activities: | ||||||
| Net loss | (5,284 | ) | $ | (3,077 | ) | |
| Items not involving cash: | ||||||
| Depreciation | 508 | 540 | ||||
| Amortization | 2,105 | 1,450 | ||||
| Share-based payment transactions | 237 | 120 | ||||
| Allowance loss on trade receivables | - | 4 | ||||
| Recovery (write down) of reserve for slow moving and obsolete inventories | - | 7 | ||||
| Loss on disposal of property, plant and equipment | - | 68 | ||||
| Gain on loan forgiveness | (1,466 | ) | - | |||
| Change in operating working capital: | ||||||
| Accounts receivable | 482 | (372 | ) | |||
| Inventories | 790 | (3,991 | ) | |||
| Contract assets | 7 | - | ||||
| Prepaid expenses and deposits | 279 | 202 | ||||
| Accounts payable and accrued liabilities | 440 | (396 | ) | |||
| Provisions | (298 | ) | 24 | |||
| Deferred revenue | 3,094 | (281 | ) | |||
| Cash flows provided by (used in) operating activities: | 894 | (5,702 | ) | |||
| Cash flows provided by and used in financing activities: | ||||||
| Interest payments on lease liabilities | (24 | ) | (34 | ) | ||
| Principal payments on lease liabilities | (280 | ) | (306 | ) | ||
| Paycheck Protection Program Loan proceeds | 1,466 | 1,540 | ||||
| Paycheck Protection Program Loan repayment | - | (1,540 | ) | |||
| Cash flows provided by (used in) financing activities: | 1,162 | (340 | ) | |||
| Cash flows used in investing activities: | ||||||
| Increase in notes receivable, net of principal payments received | (798 | ) | 192 | |||
| Purchase of property, plant and equipment | (159 | ) | (79 | ) | ||
| Intangible asset addition, net | (1,688 | ) | (1,403 | ) | ||
| Cash flows used in investing activities: | (2,645 | ) | (1,290 | ) | ||
| Decrease in cash and cash equivalents | (589 | ) | (7,332 | ) | ||
| Cash and cash equivalents, beginning of period | 6,773 | 17,248 | ||||
| Cash and cash equivalents, end of period | $ | 6,184 | $ | 9,916 | ||
| AgJunction Inc. | ||||||||||||||
| Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Reconciliation | ||||||||||||||
| Three and Nine months ended September 30, 2021 and 2020 | ||||||||||||||
| (unaudited - expressed in U.S. thousand dollars) | ||||||||||||||
| Three months ended | Nine months ended | |||||||||||||
| September 30, | September 30, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||
| Net loss | $ | (851 | ) | $ | (1,257 | ) | $ | (5,284 | ) | $ | (3,077 | ) | ||
| Interest (income) | (1 | ) | (11 | ) | (8 | ) | (89 | ) | ||||||
| Depreciation & Amortization | 943 | 696 | 2,613 | 1,990 | ||||||||||
| EBITDA | $ | 91 | $ | (572 | ) | $ | (2,679 | ) | $ | (1,176 | ) | |||
