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 AJX@gatewayir.com by Friday, November 12, 2021, at
5:00 p.m. Eastern time.
Date: Monday, November 15, 2021Time: 11:00 a.m. Eastern time
(8:00 a.m. Pacific time)Toll-free dial-in number:
1-877-573-5992International dial-in number:
1-270-215-9903Conference 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 here and via the investor center section of the company’s
website at AgJunction.com.
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: 1-855-859-2056International replay
number: 1-404-537-3406Replay 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
contactus@kingsdaleadvisors.com.
For more information regarding the arrangement, please go to
www.agjunction.com/kubota-transaction.
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 AgJunction.com.
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
www.sedar.com. 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 press@agjunction.com
Investor RelationsGateway Investor
RelationsCody Slach or Cody Cree
1-949-574-3860AJX@gatewayir.com
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 |
) |
|
|
|
|
|
|
|
|
|