AgroFresh Solutions, Inc. Second Quarter 2018 Updated August 15th (refer to the updated earnings release issued August 15 for more information)
Disclaimers In addition to historical information, this presentation contain forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that the Company expects or anticipates will or may occur in the future are forward-looking statements and are identified with, but not limited to, words such as anticipate, believe, expect, estimate, plan, outlook, and project and other similar expressions (or the negative versions of such words or expressions). Forward-looking statements include, without limitation, information concerning the Company s possible or assumed future results of operations, including all statements regarding financial guidance, anticipated future growth, business strategies, competitive position, industry environment, potential growth opportunities and the effects of regulation. These statements are based on management s current expectations and beliefs, as well as a number of assumptions concerning future events. Such forward- looking statements are subject to known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company s management s control that could cause actual results to differ materially from the results discussed in the forward-looking statements. These risks include, without limitation, the risk of increased competition and the ability of the business to grow and manage growth profitably; risks associated with acquisitions and investments, including that our proposed acquisition of Tecnidex may not yield the results expected; changes in applicable laws or regulations, and the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors. Some of these risks and uncertainties are identified and discussed in the Company s filings with the SEC, including the Annual Report on Form 10-K filed on March 22, 2018, available at the SEC s website at www.sec.gov. Any forward-looking statement made in this presentation is based only on information currently available to the Company and speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. This presentation contains the financial measure EBITDA, which is not presented in accordance with GAAP. This non-gaap financial measure is being presented because the Company believes it provides meaningful supplemental information that is used by the Company s management to evaluate the Company s performance. Management believes that this measure enhances a reader s understanding of the financial performance of the Company, is more indicative of operating performance of the Company, and facilitates a better comparison among fiscal periods, as it excludes items that are not considered core to the Company s operations. In particular, EBITDA is a key measure used by the Company to evaluate its performance. The Company does not intend for this non-gaap financial measure to be a substitute for any GAAP financial information. Readers of this presentation should use this non-gaap financial measure only in conjunction with the comparable GAAP financial measure. Reconciliations of the non-gaap financial measure to the most comparable GAAP measure are provided in this presentation. TM Trademark of AgroFresh 2
Solid Second Quarter and First Half Performance Progress Across Key Growth Strategies RipeLock agreement with Del Monte FreshCloud digital platform unveiled Continued Growth Revenue up 12% for the quarter Up 16% for the first half 2018 SmartFresh performed well despite 12% decline in Southern Hemisphere apple crop Tecnidex added $9 million of revenue H1 2017 H1 2018 3
Core SmartFresh Performance Revenue First half organic revenue flat despite challenging crop* SmartFresh pricing remains stable Lapping 5% growth in first half of 2017 Penetration Increased Southern Hemisphere apple penetration 7% Southern Hemisphere Highlights Argentina revenue up 3% driven by penetration and pricing Chile revenue up 6% driven by increase in penetration across apples, pears and plums Apple crop down 3% New Zealand had record breaking year Apple crop down 11% Revenue up 22% driven by crop and export demand Brazil/South Africa Drought in South Africa - crop down 30% Crop in Brazil down 22% *Excluding impact of ASC 606 4
Crop Penetration and Diversification Growth 76% New Registrations 22% Growth in limes, lemons, avocados across Latin America 2017 Europe, Middle East Apples Diversification Chile Plum Revenue up ~50% Argentina Pear Applications + 20% Other 37% Proportion of SmartFresh Revenue other than Apple H1 18 37% H1 17 22% 63% 2018 5
Harvista Revenue Revenue up nearly 50% in the first half of 2018 Success Expanding into Cherries Initial indications: > 10% increase in packout Strategic Value Increasingly playing an integral role in SmartFresh Quality System sales Has helped increase SmartFresh market share in Argentina Diversification Expect to move into other crops, such as blueberries Planning expansion further into Latin America, Europe 6
Tecnidex Making Broad-Based Contributions Revenue $9 million in the first half 2018 Integration Yielding Synergistic Benefits Technical expertise benefiting existing AgroFresh business Relationship with Major Agricultural Chemical Manufacturers Will see impact of new fungicides in Northern Hemisphere season Launches Planned Poland (2018) Chile (2018) US - California (future date) 7
RipeLock - Gathering Momentum Rolled out with Large U.S. Retailer Treated fruit started arriving in stores around July 4th Feedback from store managers positive Currently in ~ ⅔ of stores Full roll out later this summer Partnership with Del Monte Signed collaboration agreement in North America Looking forward to working together on innovative solutions beyond RipeLock 8
Introducing - FreshCloud Provides data and insights while addressing customer needs throughout the supply chain Field Storage Sorting/Packing Transport Distribution Center Ripening Retail Operates through three integrated insight-driven solutions 9
Developing Partnerships Opportunities It s Fresh! On-going commercial trials with 18 customers in Europe and Asia Working to develop synergistic opportunities for underserved crops LandSpring Distribution Agreement Signed TS&L to develop LandSpring market in California Similar agreements to address other parts of the world 10
Financials AgroFresh Solutions, Inc.
Financial Overview Second Quarter and First Half 2018 Second Quarter is seasonally slowest Impact of Tecnidex on consolidated margins less significant in second half Majority of annual SmartFresh sales historically occur in the second half of the year Performance Revenue growth of 16% in the first half Significant strides commercializing and advancing growth initiatives 12
Revenue Details Second Quarter and First Half Highlights Second quarter revenues up 12% First half revenues up 16% Tecnidex driving growth in both periods Total organic revenue essentially flat* in first half Harvista up 47% first half H1 2017 H1 2018 Q2 2017 Q2 2018 Diversification Continued crop diversification *Excluding impact of ASC 606 13
Margins Gross Margin Expected to decrease due to evolving business mix Gross Margin Bridge SmartFresh Margins SmartFresh margins flat Average Margins Higher average margins expected in the second half as proportion of SmartFresh revenue increases H1 2017 Gross Margin 80% Core Product Mix (Harvista) (2%) Tecnidex (5%) ASC 606 (2%) 2018 Gross Margin 71% 14
Expenses and Operating Income H1 2018 FY18 Q2 FY18 Q2 Operating Loss $18MM FY17 Q2 15% FY17 Q2 Operating Loss $14MM 16% 12% 5% Revenue Expenses Total operating expenses up 5% on 16% growth in revenue SG&A expenses down in the first half excluding Tecnidex 15
Interest Expense - Flat First Half First half down on lower accretion of Tax Receivable Agreement Second Quarter Second quarter up only slightly sequentially with first quarter as interest expense fluctuations have leveled out Interest Expense Q2 H1 2018 $9 $17 2017 $9 $19 16
EBITDA EBITDA Lower gain on currency and contingent consideration of $6 million compared to Q2 2017 Q2 EBITDA* H1 2018 2017 2018 2017 ($2) $5 $8 $16 *See Appendix for reconciliation 17
Balance Sheet Cash - First Half $10 million to satisfy Dow obligation $7 million FY17 interest expense paid in Q1 $5 million investment in inventory Verigo acquisition Second Quarter 06/30/18 Total AgroFresh Debt $ 415.7 Revolver $-0- Cash $ 41.8 Debt, Net of Cash $ 373.9 Debt Maturity Profile Cash - Second Half Historically see appreciable improvement in cash balances in second half due to relative weight of second half sales 2018 2019 2020 2021 18
Summary AgroFresh Solutions, Inc.
Concluding Remarks Solid Quarter Solid performance Prepared for FY18 second half Looking Forward Positive Northern Hemisphere selling season See stable crop in North America and Europe 20
Appendix AgroFresh Solutions, Inc.
Reg G Reconciliation GAAP Net Income / (Loss) to Non-GAAP EBITDA (1) 3 Months Ended June 30, 2018 3 Months Ended June 30, 2017 6 Months Ended June 30, 2018 6 Months Ended June 30, 2017 Net Income (Loss) ($18.4) $2.6 ($31.3) ($9.4) Provision for Income Taxes ($4.4) ($16.9) ($0.8) ($15.5) Interest Expense (1) $8.8 $8.6 $17.1 $18.9 Depreciation and Amortization $11.7 $11.1 $23.0 $22.0 Non-GAAP EBITDA ($2.3) $5.3 $8.0 $16.0 Interest on the term loan, inclusive of accretion for debt discounts, debt issuance costs and contingent consideration. 22