March 9, 2017 AgroFresh Solutions, Inc. Fourth Quarter & Full Year 2016
Safe Harbor 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; costs related to the Company s transaction with The Dow Chemical Company ( Dow ) consummated on July 31, 2015 (the Business Combination ) and/or related to operating AgroFresh as a stand-alone public company; 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 11, 2016, 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. As a result of the Business Combination, the Company was identified as the acquirer for accounting purposes, and the AgroFresh Business, which is the business conducted prior to the closing of the Business Combination by Dow through a combination of wholly-owned subsidiaries and operations of Dow, including through AgroFresh Inc. in the United States, is the acquiree and accounting Predecessor. The Company s financial statement presentation reflects the AgroFresh Business as the Predecessor for periods through July 31, 2015 (the Closing Date ). On the Closing Date, the Company, which was formerly named Boulevard Acquisition Corp., was re-named AgroFresh Solutions, Inc. and is the Successor for periods after the Closing Date, which includes consolidation of the AgroFresh Business subsequent to the Closing Date. The acquisition was accounted for as a business combination using the acquisition method of accounting, and the Successor financial statements reflect a new basis of accounting that is based on the fair value of net assets acquired. As a result of the application of the acquisition method of accounting as of the effective time of the Business Combination, the financial statements for the Predecessor period and for the Successor period are presented on different bases. The historical financial information of Boulevard Acquisition Corp. prior to the Business Combination has not been reflected in the Predecessor period financial statements as those amounts are not considered to be material. This presentation contains certain financial measures, in particular free cash flow, EBITDA and Adjusted EBITDA, which are not presented in accordance with GAAP. These non-gaap financial measures are being presented because the Company believes these non-gaap financial measures provide meaningful supplemental information that is used by the Company s management to evaluate the Company s performance. Management believes that these measures enhance a reader s understanding of the financial performance of the Company, are more indicative of operating performance of the Company, and facilitate a better comparison among fiscal periods, as the non-gaap measures exclude 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 any of the non-gaap financial measures contained in this presentation to be a substitute for any GAAP financial information. Readers of this presentation should use these non-gaap financial measures only in conjunction with the comparable GAAP financial measures. Reconciliations of non-gaap financial measures to the most comparable GAAP measures are provided in this presentation. TM Trademark of AgroFresh 2
Fourth Quarter and Full Year Highlights $ in millions 4Q 2016 4Q 2015 2016 2015 Reported Sales 52 51 160 164 Adjusted EBITDA 28 27 78 90 SG&A 12 19 62 48 Cash from Operations 36 36 30 13 Both Revenue and Adjusted EBITDA within Guidance provided during 3Q call Maintained market share with customers in North America In EMEA, increased penetration in all key markets despite crop challenges, and were able to grow revenue slightly excluding the impact of currency Strong growth in Harvista with +54 percent revenue increase 2016 vs. 2015 RipeLock modest revenue, but established foundation for growth in 2017 Solid progress developing new markets with double-digit revenue growth in Korea and Japan Full-year SG&A higher as a result of being a public company for 12 months versus 5 months in 2015 Cash from operations increased significantly, leading to $20 million higher ending cash balance 3
Operational Improvements Post-Harvest New Business Development Pre-Harvest Retail $160-165M Crop New Organizational structure introduced in December 2016 Enables focus on execution and operational excellence for Post-Harvest Splitting out New Business Development provides clear line of sight for Retail Completing separation from Dow IT systems and service agreements Implementing new ERP and CRM systems and upgrading processes for scalability 4
Business and Growth Strategy - Overview Pre-Harvest Post-Harvest Distribution Retail Consumption 2 3 Establish Partners 1 Strengthen Core Extend to Retail Develop & Acquire New Technologies 4 5
Apple Crop Trends EMEA WAPA USDA ABPM, ODEPA WAPA, PIPFRUIT, Government Sources NA LA APAC 2016 vs. 2015 5 Year Average vs. 2016-3.1% -4.1% -2.4% -2.2% -17.0% 16.4% 4.6% -1.1% -3.0% -0.5% APAC excludes China & India. 6
Strengthen the Core Post-Harvest Business Customer Needs Enhance Quality SmartFresh Quality System Customer Share of Wallet* ~30-50% Monitor Quality Technical Services 15 years of knowledge & experience Ensure Food Safety Product & Technical Solutions ~45-55% Expansion Opportunities: New Crops (Watermelons in Brazil) New Geographies *Source: Internal Analysis 7
SmartFresh Market Penetration % of 2016 AgroFresh Sales Addressable Market as % of Apple Crop SmartFresh Penetration of Addressable Market 2016 Highlights North America EMEA Latin America ANZ, Japan, Korea 35% 41% 15% 8% Increased penetration and maintained strategic customers against increasing competition Increased placements of AdvanStore and seeing the loyalty & value from room opening service Increased penetration to offset lower crops Generics competing in 11 countries and our technical and consulting services are creating loyalty. (75% of rooms sampled for storage recommendations AdvanStore 1.0) Increased share and penetration in Chile, Brazil, and in highly competitive Argentina market to offset lower crops Recovered several customer accounts due to strong technical knowledge and services Share gains in South Korea and increased penetration in Japan Lower crop in NZ but market penetration was maintained China & India <1% Growth opportunities in China & India which represent 24% of addressable apple storage market Source: USDA, WAPA, AMI, and internal analysis Pick/Pack & RA CA Storage Un-Treated SmartFresh 8
Evolve Pre-Harvest Strategy Crop Broad portfolio of 1-MCP patented technologies & application expertise for Pre-Harvest with LandSpring and Harvista Pivoting to partnering strategy Dedicated pre-harvest companies & dominant end users in certain crops Leverages our technology, expertise - our partner s go to market know how Gaining new customers 9
Development & Acquisition of New Technologies Re-focusing R&D on innovation initiatives beyond 1-MCP Participating in Terra accelerator provides exposure to early stage technology relevant to our strategies Minority interest in RipeLocker, which is developing a proprietary system for low-pressure vacuum containers has the potential to extend fruit shelf life and reduce decay Utilizing our global distribution network serving 3,000 direct customers to launch new complementary technologies that need market access 10
Retail Food Loss Opportunity The UN FAO estimates the retail value of global food waste at ~$1 Pre-Harvest Trillion 1 Post-Harvest Distribution Retail Consumption Developed economies 3-7% 3-7% 1-8% 12-19% Developing economies 7-12% 3-7% 3-9% 6-11% ~850 MT globally of fresh produce losses from harvest to consumer 1 4Q 2016 investment in RipeLocker low pressure vacuum containers 12 fruits & vegetables in USA represent ~$700 MM In retail shrink 2 Shoppers buy as many as they think they ll eat before they go bad Retailers closely monitor shrink and emphasize freshness with suppliers and consumers Limited offerings on market today to meet retailer needs for food loss prevention 1 FAO 2011 food balance data analysis 2 Calculated based on retail shrink volume from The Journal of Consumer Affairs research and FAO crop prices in US, 2014 11
RipeLock Gaining Traction Substantial Global Opportunity RipeLock is a breakthrough, proprietary solution delivering optimal pre- and post-ripening protection for bananas & other fruits/vegetables. Retail Losses from bananas are ~$300M to $350M opportunity 1 Patent protection to year 2030 in numerous countries High Efficacy Results in Customer Trials to date: 1. Initial trials show ~15% reduction in shrink and ~15% increase in consumer purchases of bananas in the convenience channel 2 2. A major grocer reduced retail losses over 30% during trials 2 3. ~10 of the largest retail players in US & EMEA are currently evaluating RipeLock Quality System for bananas 4 days after simulated delivery to retailer Traditional RipeLock 1 Calculated based on retail shrink volume from The Journal of Consumer Affairs research and FAO crop prices in US, 2014 2 AgroFresh customer trial data results 12
Fourth Quarter and FY 2016 Net Sales and Operating Profit $ in millions (except GP%) 4Q 2016 4Q 2015 2016 2015 Net sales 52 51 160 164 Operating gross profit % (1) 77% 77% 81% 82% Fourth Quarter Highlights: SmartFresh revenue was up about 1 percent; North America was up 4 percent, EMEA down less than 1 percent, and Japan grew to $0.4 million from just $30 thousand a year ago Margins in-line with seasonal norm Full-Year Highlights: Revenues were down 2.5 percent; SmartFresh was down 5 percent, with EMEA down less than 1 percent as increased penetration was offset by crop and currency headwinds Harvista was up 54 percent; North America was up 44 percent and Latin America generated $0.5 million in its first full year, exceeding expectations (1) Q4 and FY 2015 Cost of Goods Sold excludes $34.4 million and $73.1 million, respectively of amortization in inventory fair value adjustment; FY 2016 Cost of Goods Sold excludes $30.4 million amortization in inventory fair value adjustment. 13
Operating Cost Comparisons $ in millions 4Q 2016 4Q 2015 2016 2015 R&D Expenses 3.5 3.3 14.8 16.9 SG&A Expenses 12.4 18.6 61.8 48.1 Non-recurring and Other Items Included in SG&A: Non-recurring Costs in SG&A (1) 2.8 7.1 16.7 13.5 Severance & Other Costs Related to Separations (2) 0.2-4.3 - Stock Based Compensation & Other Adjustments (3) 0.4 0.3 1.5 1.4 Normalized SG&A Estimate on as Reported Basis 9.0 11.2 39.2 33.2 Full-year R&D down due to the discontinuance of certain projects following separation from Dow SG&A higher for the full-year 2016 versus 2015 due to being public for 12 months in 2016 compared to 5 months in 2015 SG&A Expected to be at the $11 million per quarter average run rate in 2017 (1) Professional fees associated with standing-up AgroFresh corporate governance and back office operation structure (2) Severance and other related costs associated with the separation of our former CEO, President, CFO and other personnel (3) Includes SG&A portion of share based compensation costs, franchise and state taxes, and stand-alone costs as shown in the Appendix to this presentation 14
Fourth Quarter GAAP Net Income - EBITDA $ in millions 4Q 2016 4Q 2015 2016 2015 Net Income / (Loss) (68.9) (0.4) (111.8) (28.5) EBITDA (1) (4.3) 44.6 31.1 96.2 Adjusted EBITDA (1) 27.6 27.1 77.5 89.9 The increase in net loss for the year is attributable to higher SG&A and interest expense associated with being a public company for the full year in 2016 along with impairments and other non-cash charges, partially offset by lower inventory step-up amortization and higher gains on contingent considerations The lower EBITDA in the fourth quarter of 2016 is the result of impairments and other non-cash charges, partially offset by higher gains on contingent considerations and lower SG&A costs The full-year decline in Adjusted EBITDA is driven by lower sales, lower operating gross profit margin, and higher on-going SG&A costs as a result of being a public company for a full year (1) See GAAP to Non-GAAP schedule in appendix of this presentation for detailed bridges 15
AgroFresh - Significant Cash Flow Generation $ in millions 4Q 2016 4Q 2015 2016 2015 Net Income / (Loss) (68.9) (0.4) (111.8) (28.5) Non-Cash Charges 83.8 21.6 143.1 71.7 Changes in Working Capital and Other Assets and Liabilities 20.7 14.7 (0.8) (30.0) Cash from Operating Activities 35.5 36.0 30.4 13.2 Capital Expenditures (0.5) (0.3) (5.9) (1.2) Free Cash Flow 35.1 35.7 24.5 12.0 Free cash flow (FCF) was $35 million in Q4 of 2016, in-line with prior year FCF was $24.5 million for the full-year 2016, significantly above prior year 16
Balance Sheet Strong cash flow supports current leverage Highlights ($ in millions) 12/31/16 Year end cash of $77 million, up $20 million in 12 months $25 million Revolver undrawn (except $0.9 million LCs) No meaningful maturities until 2021 annual 1% principal payment on term loan No financial maintenance covenants on term loan Term Loan (L+475, 7/31/2021) $408 Revolver $0 Debt, Net of Cash $331 Cash $77 Total Liquidity (Cash + Available Revolver) $102 17
Summary Stabilized Core Business Met guidance provided in Q3 Maintained market share and strong operating margins despite increased competition Moved quickly to strengthen operations, reduce unnecessary operating costs, and reorganize for growth Positioned for Growth Protecting our core post-harvest business Capturing retail growth opportunity Improving route to market for our pre-harvest technologies Stronger Balance Sheet & Improved Cash Flow Generated a significant increase in free cash Validates business model 18
Appendix Reg G Reconciliation of U.S. GAAP to non-gaap Financial Measures 19
Reg G Reconciliation EBTIDA and Adjusted EBITDA History March 31, 2014 June 30, 2014 Predecessor Predecessor Successor Successor September 30, 2014 December 31, 2014 Total 2014 March 31, 2015 June 30, 2015 One Month July 31, 2015 Two September 30, 2015 September 30, 2015 December 31, 2015 Total 2015 March 31, 2016 June 30, 2016 September 30, 2016 December 31, 2016 Total 2016 Net Income (Loss) $ 4,864 $ (6,841) $ 34,978 $ 36,255 $ 69,256 $ 2,480 $ (14,009) $ (2,528 ) $ (14,021) $ (16,549) $ (416 ) $ (28,494) $ (25,137) $ (25,164 ) $ 7,312 $ (68,854) $ (111,843) Provision for income taxes 7,096 4,985 (1,232) (4,591) (5,823) (14,641) (8,383) (15,289) (15,626) 4,676 39,259 13,020 Amortization of inventory step-up (1) 38,702 38,702 34,352 73,054 18,505 11,872 30,377 Interest expense (2) 9,313 9,313 13,889 23,202 15,008 14,316 14,526 14,389 58,239 Depreciation and amortization 7,732 7,581 7,485 7,513 30,311 7,522 7,391 2,466 7,969 10,435 11,465 36,813 10,059 10,130 10,269 10,866 41,324 Non-GAAP EBITDA $ 12,596 $ 740 $ 42,463 $ 43,768 $ 99,567 $ 17,098 $ (1,633 ) $ (1,294 ) $ 37,372 $ 36,078 $ 44,649 $ 96,192 $ 3,146 $ (4,472 ) $ 36,783 $ (4,340 ) $ 31,117 Transaction and acquisition related costs (3) 1,918 1,918 (105) 1,813 Share-based compensation 144 144 144 125 557 206 129 46 673 719 407 1,461 460 836 563 476 2,335 Share-based compensation related to severance (4) 610 739 1,349 Stand-alone costs (5) 121 3,510 3,631 (2,605) 1,026 144 96 137 71 448 Asset impairment including intangibles (6) 10,795 10,795 Goodwill impairment 62,373 62,373 Research & development cost synergies (7) 1,415 1,389 1,594 1,404 5,802 1,622 1,177 450 450 3,249 Severance related costs (4) 1,759 1,218 142 3,119 Other non-recurring costs (5) 689 689 383 442 442 9,418 10,243 6,482 3,261 3,529 2,632 15,904 Loss on foreign currency exchange (8) 264 264 123 387 (830 ) 1,072 (924 ) 3,956 3,274 Mark-to-market adjustments, net (9) 1,450 1,450 (25,142 ) (23,692 ) (3,100 ) (300 ) (1,569 ) (48,640 ) (53,609 ) Pro forma deferred revenue (10) (500 ) (500 ) (500 ) (500 ) (2,000 ) (500 ) (500 ) (167 ) (167 ) (1,167 ) Franchise and state taxes 371 371 319 176 (230 ) 135 400 Non-GAAP Adjusted EBITDA $ 13,655 $ 1,773 $ 43,701 $ 45,486 $ 104,61 5 $ 18,426 $ (444 ) $ (844 ) $ 45,629 $ 44,785 $ 27,116 $ 89,883 $ 8,990 $ 669 $ 40,246 $ 27,600 $ 77,505 (1) The amortization of inventory step-up related to the acquisition of AgroFresh is charged to income based on the pace of inventory usage (2) Interest on the term loan, inclusive of accretion for debt discounts, debt issuance costs and contingent consideration (3) Costs associated with the Business Combination incurred in the current period (4) Severance costs related to our former Chief Executive Officer, Chief Financial Officer, former President and other former personnel, including the net share-based compensation cost due to acceleration of vesting on restricted stock and forfeiture of stock options (5) Certain administrative, professional fees and other non-recurring fees associated with becoming a stand-alone public company (6) R&D savings related to two projects (Invinsa and IDC) (7) Loss on currency translation relates to net gains and losses resulting from the remeasurement of assets and liabilities denominated in foreign currencies (8) Non-cash adjustment to the fair value of contingent consideration (9) Deferred revenue associated with an agreement not included in the Business Combination 20