AgroFresh Solutions, Inc. announced its financial results for the third quarter and nine months ended September 30, 2019.
Jordi Ferre, Chief Executive Officer commented, “This season we were met with a delayed apple harvest in both the United States and Europe, making it difficult to compare our third quarter results to the prior year period, where we experienced an early harvest. Third quarter results are not representative of our expectations for the 2019 northern hemisphere season, which extends through the fourth quarter. The shift in sales from September to October caused October to become the largest revenue month of the year. We project that our full year 2019 net sales will be stable to down in the low-single digit percentage versus 2018, excluding any currency impact, and expect an improvement in our adjusted EBITDA margin for full year 2019 versus 2018.
“While the business was temporarily challenged in the third quarter due to the unforeseen delays, our diversification initiatives that are geared towards growth products such as Tecnidex, Harvista and FreshCloud all achieved constant currency growth in the year-to-date period. We remain focused on the controllable aspects of our business and are succeeding in our efforts to optimize operating costs and improve the capital structure. As we mentioned in the previous quarter, we expect to see a reduction of non-recurring expenses moving forward with the completion of the MirTech litigation on October 11, 2019. To that end, we are pleased with the jury’s favorable verdict against Decco Post-Harvest, Inc. and Decco’s parent company, UPL Limited, and look forward to resolving this matter permanently.”
Financial Highlights for the Third Quarter and First Nine Months of 2019
Net sales for the third quarter of 2019 decreased 28.7%, to $49.0 million, compared to $68.7 million in the third quarter of 2018. Excluding the impact of foreign currency exchange, which reduced revenue by $1.2 million compared to the third quarter of 2018, revenue decreased 27%. The net sales decrease was primarily the result of the delay in apple harvest timing across the northern hemisphere versus the prior year third quarter which saw an earlier and shorter harvest. Year-to-date net sales decreased 13.1% and on a constant currency basis decreased 11.2% compared to the prior year period.
Gross profit for the third quarter was $35.1 million compared to $52.0 million in the prior year period, and gross profit margin was 71.6% versus 75.7% in the prior year period. The lower gross margin was primarily a function of sales mix shift. Year-to-date gross profit margin was 71.1%, compared to 73.8% in the prior year period.
Research and development costs were $2.6 million in the third quarter of 2019, compared to $3.5 million in the prior year period. This decrease was driven primarily by timing of projects. Year-to-date research and development expenses decreased $0.6 million to $9.7 million.
Selling, general and administrative expenses decreased 17.6%, to $15.0 million in the third quarter of 2019 as compared to $18.2 million in the prior year period. Included in selling, general and administrative expenses were $1.6 million in the current quarter and $3.7 million in the prior year quarter of costs associated with non-recurring items that included M&A, litigation and severance. Excluding these items, selling general and administrative expenses decreased approximately 7.7% in the third quarter versus the prior year period, which reflects the Company's ongoing cost optimization initiatives. On a year-to-date basis, selling, general and administrative expenses decreased by 6.2% and excluding non-recurring items by 7.5% versus the prior year period.
Third quarter of 2019 net income was $3.3 million, compared to net income of $3.5 million in the prior year period. Year-to-date net loss was $31.6 million, compared to net loss of $27.9 million in the prior year period.
Adjusted EBITDA(1) was $20.6 million in the third quarter of 2019, compared to $34.6 million in the prior year period. The decrease was driven by lower sales, partially offset by improved cost structure. Year-to-date adjusted EBITDA(1) decreased by $10.8 million, or 25.4%, to $31.7 million.
As of September 30, 2019, cash and cash equivalents were $18.7 million.