AgroFresh Solutions, Inc. ("AgroFresh" or the "Company"), a global leader in produce freshness solutions, today announced its financial results for the third quarter and first nine months of fiscal 2018, ended September 30, 2018.
Jordi Ferre, Chief Executive Officer, commented, "We are pleased to report 13% growth, including 6% organic growth, in the third quarter of 2018 compared to the prior year period, and believe this is indicative of the strength of our core business. We saw growth in SmartFresh driven by our European business as well as continued progress in diversification to other crops such as pears. Our efforts continue to be focused on advancing our growth initiatives in new product development, innovation and partnerships. During the third quarter, we started the roll-out of RipeLock across a major United States retailer and launched our FreshCloud platform, which adds knowledge-based solutions to fresh produce supply chains from the field to the retail store. This platform provides us access to large new potential markets where technology is quickly becoming an enabler of food preservation and waste reduction, while helping our partners leverage AgroFresh's more than 20 years of hands-on knowledge of their business to maximize returns."
"As we look to the future, we remain encouraged by the strong macro fundamentals that support the need for food preservation technologies and believe that our ability to deliver differentiated solutions alongside a high-touch service offering is the cornerstone of our competitive strengths. While we have seen a modest decline in gross margin due to our strategic initiative to diversify our sales, we remain focused on productivity improvements as our operations scale and we seek to increase shareholder value over the long-term."
Financial Highlights for the Third Quarter of 2018
Net sales for the third quarter of 2018 increased 13%, from $60.8 million to $68.7 million, compared to the third quarter of 2017, driven by organic growth and our acquisition of Tecnidex in December 2017, which contributed $4.0 million of the increase. Organic revenue growth was led by SmartFresh, which grew in Europe due to increased penetration and crop size.
Gross profit increased 6%, to $52.0 million, in the third quarter of 2018 compared to the prior year period. Gross margin of 75.7% was consistent with expectations and in line with the Company's strategy of diversifying its revenue mix with newer product solutions such as Tecnidex, Harvista and RipeLock.
Research and development costs were $3.5 million in the third quarter of 2018, up slightly versus the prior year period, driven by the addition of Tecnidex.
Selling, general and administrative expenses were $18.2 million in the third quarter of 2018 as compared to $14.5 million in the prior year period. The increase was primarily driven by the addition of Tecnidex, costs associated with personnel changes and other non-recurring costs, including litigation.
Third quarter of 2018 net income of $3.5 million includes a loss on foreign currency exchange of $4.7 million, compared to net income of $9.5 million in the prior year period. Adjusted EBITDA was up 1% in the third quarter of 2018 versus the prior year period, to $34.6 million.
As of September 30, 2018, cash and cash equivalents were $26.0 million.