Winnipeg, MB, May 11, 2021 – Ag Growth International Inc. (TSX: AFN) (“AGI”, the “Company”, “we” or “our”) today announced its financial results for the three-months ended March 31, 2021.
First quarter 2021 results include strong contributions from all segments of the business with consolidated trade sales and adjusted EBITDA up 12% and 52% YOY, respectively. Consolidated adjusted EBITDA margins of 15.3% expanded from 11.2% YOY with product and segment mix, total sales volume, slightly reduced SG&A from lower travel and related expenses, as well as continued progress on capturing operational efficiencies all contributing to the increase. Exiting the quarter, consolidated backlogs continued to remain strong, up 40% YOY, with broad-based strength across all segments and geographies.
“I am proud of the team and our strong first quarter results,” noted Tim Close, President & CEO of AGI. “Our efforts to invest in new geographies and business lines over the last few years is paying off with a much more diversified and resilient business model. Strong backlogs across AGI provide solid visibility for sales growth across many of our platforms and geographies in 2021. Supply chain constraints, particularly steel cost and availability, will create some margin pressure over the remainder of the year but this will be mitigated by disciplined activity in pricing and cost management.”
Farm segment trade sales and adjusted EBITDA for Q1 2021 grew 14% and 41% YOY, respectively, as strong demand for both portable and permanent handling from our Farm customers continued from Q4 2020. Amid an unprecedented period of steel price increases, among increases for other key inputs, demand for Farm segment equipment has been very robust as customers focus on securing critical products in advance of what is widely expected to be a strong growing season. Farm backlog as of March 31, 2021 is up 75% over prior year.
Commercial segment trade sales and adjusted EBTIDA for Q1 2021 grew 8% and 66% YOY, respectively, with strength in the U.S., EMEA, and Asia Pacific markets offsetting ongoing softness in the Canadian market as well as South America. In the U.S., we are seeing the resumption of more normalized customer behaviour as pandemic-related delays have begun to wane. This contrasts with the Canadian Commercial segment where some customers continue to hold-off on projects due to COVID-related uncertainties. The Food Platform continues to be a strong contributor with sales up 30% YOY and notable strength in the U.S. market, up 72% YOY. Commercial Platform and Food Platform backlogs as of March 31, 2021 were up as 16% and 18%, respectively, over prior year.
In our Technology segment, we continued to trial various sales models and go-to-market strategies throughout the quarter as we seek to better understand aggregate customer preferences and priorities. Changes implemented in the first quarter included a focus on building our dealer networks to create more scalable and sustainable sales channels that are capable of reaching more customers. In addition, we are working through new product and service bundling options. As part of our strategy to accelerate our growth in the Technology segment, we also engaged a consulting firm to complete a broad mandate focused on optimizing our product, our production, and to bring significant expertise to our sales channel development. This comprehensive effort will lower costs, increase the features and reliability of our products, and ease customer installations.
The work with the third party is extensive and we have spent $1.9M in the first quarter. This one-time expense is included in our adjusted EBITDA at the corporate level. The engagement and expense will continue into the second quarter as we further position our platform for accelerated growth.
Our “as reported” Technology segment sales increased 50% YOY as compared to Q1 2020. However, during the quarter, we limited our hardware subscription program as we refine this offering. Consequently, Technology segment sales, on a retail equivalent basis, declined by 36% in the quarter. We expect this performance to revert to robust growth as we implement revised sales programs and leverage our expanded sales channels. We continue to expect substantial growth over 2020 for the full year.
OUTLOOK [see “Basis of Presentation”]
Farm backlog as of March 31, 2021 is up 75% over prior year. The substantial increase over prior year levels is largely driven by AGI dealers moving to replenish inventories ahead of steel price increases and in anticipation of a busy year as planting intentions, particularly in the U.S., appear strong as compared to 2020.
In the near-term, the rise of steel, component, packaging, and freight costs may pressure the segment margins. While cost increases can be passed onto customers in many instances, this will be a closely monitored area throughout 2021.
Commercial Platform backlog as of March 31, 2021 is up 16% over prior year. A steady flow of maintenance and smaller projects in the U.S. and momentum in EMEA as well as Asia Pacific offset an ongoing slowdown in in Canada. However, given the increase in quoting activity in the Canadian Commercial Platform, management believes that the impact of COVID-19 is temporary and investment in commercial infrastructure in Canada will begin to increase in the back half of 2021.
Similar to the Farm segment, near-term increases in key raw material costs could impact segment margins, though Commercial Platform contracts frequently outline provisions to pass along some or all key raw material costs increases.
Food Platform backlog as of March 31, 2021 is up 18% over prior year. This was driven by a combination of repeat business from existing customers and acquisition of new accounts. The team remains focused on nurturing ongoing strategic relationships as our customers expand, retrofit, upgrade, and maintain their global operations.
The Technology segment has several initiatives underway to position the business for continued growth throughout 2021. As discussed above, we are focused on accelerating key commercial and product-related initiatives. To expedite these initiatives, we have engaged with an external consultant for further support and expertise.
The pause in sales growth will be temporary and more than offset through substantially expanded sales channels going forward, supporting our expectation for robust growth for the full year.
AGI's financial statements and management’s discussion and analysis (the “MD&A”) for the three-months ended March 31, 2021 can be obtained at https://www.newswire.ca/news-releases/ and will also be available electronically on SEDAR (http://www.sedar.com) and on AGI's website (http://www.aggrowth.com).
AGI management will hold a conference call on Wednesday, May 12, 2021, at 8:00am EDT to discuss its results for the three months ended March 31, 2021. To participate in the conference call, please dial 1-888-390-0546 or for local access dial 1-416-764-8688. An audio replay of the call will be available for seven days. To access the audio replay, please dial 1-888-390-0541 or for local access dial 1-416-764-8677. Please quote passcode 280400# for the audio replay.
AGI is a leading provider of equipment solutions for agriculture bulk commodities including seed, fertilizer, grain, feed and food processing systems. AGI has manufacturing facilities in Canada, the United States, the United Kingdom, Brazil, France, Italy and India, and distributes its product globally.
Further information can be found in the disclosure documents filed by AGI with the securities regulatory authorities, available at www.sedar.com and on AGI's website www.aggrowth.com.
For More Information Contact:
Farm, Commercial and Technology are AGI’s three operating segments. In this press release, we have also included product groups in order to provide additional information that may be useful to the reader. Specifically, our Commercial segment includes the Commercial platform and Food platform.
In analyzing our results, we supplement our use of financial measures that are calculated and presented in accordance with International Financial Reporting Standards (“IFRS”) with a number of non-IFRS financial measures including “trade sales”, “EBITDA”, “adjusted EBITDA”, “adjusted EBITDA margin”, “gross margin”, “funds from operations”, “payout ratio”, “adjusted profit”, and “diluted adjusted profit per share”. A non-IFRS financial measure is a numerical measure of a company's historical performance, financial position or cash flow that excludes [includes] amounts, or is subject to adjustments that have the effect of excluding [including] amounts, that are included [excluded] in the most directly comparable measures calculated and presented in accordance with IFRS. Non-IFRS financial measures are not standardized; therefore, it may not be possible to compare these financial measures with other companies' non-IFRS financial measures having the same or similar businesses. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
We use these non-IFRS financial measures in addition to, and in conjunction with, results presented in accordance with IFRS. These non-IFRS financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our IFRS results and the accompanying reconciliations to corresponding IFRS financial measures, may provide a more complete understanding of factors and trends affecting our business.
In this press release, we discuss the non-IFRS financial measures, including the reasons that we believe that these measures provide useful information regarding our financial condition, results of operations, cash flows and financial position, as applicable, and, to the extent material, the additional purposes, if any, for which these measures are used. Reconciliations of non-IFRS financial measures to the most directly comparable IFRS financial measures are contained in our MD&A.
Management believes that the Company's financial results may provide a more complete understanding of factors and trends affecting our business and be more meaningful to management, investors, analysts and other interested parties when certain aspects of our financial results are adjusted for the gain (loss) on foreign exchange and other operating expenses and income. These measurements are non-IFRS measurements. Management uses the non-IFRS adjusted financial results and non-IFRS financial measures to measure and evaluate the performance of the business and when discussing results with the Board of Directors, analysts, investors, banks and other interested parties.
References to “EBITDA” are to profit before income taxes, finance costs, depreciation, amortization and share of associate’s net loss. References to “adjusted EBITDA” are to EBITDA before the gain or loss on foreign exchange, non-cash share based compensation expenses, gain or loss on financial instruments, M&A expenses, other transaction and transitional costs, gain or loss on the sale of property, plant & equipment, gain on settlement of leases, equipment rework costs, fair value of inventory from acquisitions and non-cash asset impairment charge. References to “adjusted EBITDA margin” are to adjusted EBITDA as a percentage of trade sales. Management believes that, in addition to profit or loss, EBITDA and adjusted EBITDA are useful supplemental measures in evaluating the Company’s performance. Management cautions investors that EBITDA and adjusted EBITDA should not replace profit or loss as indicators of performance, or cash flows from operating, investing, and financing activities as a measure of the Company’s liquidity and cash flows. See “OPERATING RESULTS – EBITDA and Adjusted EBITDA” in our MD&A for the reconciliation of EBITDA and Adjusted EBITDA to profit before income taxes.
References to “trade sales” are to sales net of the gain or loss on foreign exchange. Management cautions investors that trade sales should not replace sales as an indicator of performance. See "OPERATING RESULTS - Trade Sales" in our MD&A for the reconciliation of trade sales to sales.
References to “gross margin” are to trade sales less cost of inventories, and thereby exclude depreciation, amortization, fair value of inventory from acquisitions and equipment rework from cost of sales. Management believes that gross margin provides a useful supplemental measure in evaluating its performance. See "OPERATING RESULTS – Gross Margin" in our MD&A for the calculation of gross margin.
References to “funds from operations” are to adjusted EBITDA less interest expense, non-cash interest, cash taxes and maintenance capital expenditures. Management believes that, in addition to cash provided by (used in) operating activities, funds from operations provide a useful supplemental measure in evaluating its performance. References to “payout ratio” are to dividends declared as a percentage of funds from operations. See "FUNDS FROM OPERATIONS AND PAYOUT RATIO" in our MD&A for the calculation of funds from operations and payout ratio.
References to “adjusted profit” and “diluted adjusted profit per share” are to profit for the period and diluted profit per share for the period adjusted for the gain or loss on foreign exchange, fair value of inventory from acquisitions, M&A expenses or recoveries, other transaction and transitional costs, gain or loss on financial instruments, gain or loss on sale of property, plant and equipment, cost of equipment rework, share of associate’s net loss and non-cash asset impairment charge. See "OPERATING RESULTS - Diluted profit (loss) per share and diluted adjusted profit per share” in our MD&A for the reconciliation of diluted profit per share and diluted adjusted profit per share to profit.
References to “technology retail equivalent sales” are to subscription-based technology sales adjusted for the retail value of the IoT Hardware, fair value of the annual data subscription and the fair value of other annual services.
This press release contains forward-looking statements and information [collectively, "forward-looking information"] within the meaning of applicable securities laws that reflect our expectations regarding the future growth, results of operations, performance, business prospects, and opportunities of the Company. All information and statements contained herein that are not clearly historical in nature constitute forward-looking information, and the words “anticipate”, “estimate”, “believe”, “continue”, “could”, “expects”, “intend”, “plans”, “will”, “may” or similar expressions suggesting future conditions or events or the negative of these terms are generally intended to identify forward-looking information. Forward-looking information involves known or unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. In addition, this press release may contain forward-looking information attributed to third party industry sources. Undue reliance should not be placed on forward-looking information, as there can be no assurance that the plans, intentions or expectations upon which it is based will occur. In particular, the forward-looking information in this press release includes information relating to our business and strategy, including our outlook for our financial and operating performance including our expectations for our future financial results, industry demand and market conditions, the anticipated ongoing impacts of the COVID-19 outbreak on our business, operations and financial results; the estimated costs to the Company that may result from the remediation work, including the costs of remediation, and the availability of insurance coverage to offset such costs; the sufficiency of our liquidity; long term fundamentals and growth drivers of our business; future payment of dividends and the amount thereof; and with respect to our ability to achieve the expected benefits of recent acquisitions and the contribution therefrom. Such forward-looking information reflects our current beliefs and is based on information currently available to us, including certain key expectations and assumptions concerning: the anticipated impacts of the COVID-19 outbreak on our business, operations and financial results; future debt levels; anticipated grain production in our market areas; financial performance; the financial and operating attributes of recently acquired businesses and the anticipated future performance thereof and contributions therefrom; business prospects; strategies; product and input pricing; regulatory developments; tax laws; the sufficiency of budgeted capital expenditures in carrying out planned activities; political events; currency exchange and interest rates; the cost of materials; labour and services; the value of businesses and assets and liabilities assumed pursuant to recent acquisitions; the impact of competition; the general stability of the economic and regulatory environment in which the Company operates; the timely receipt of any required regulatory and third party approvals; the ability of the Company to obtain and retain qualified staff and services in a timely and cost efficient manner; the timing and payment of dividends; the ability of the Company to obtain financing on acceptable terms; the regulatory framework in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its products and services. Forward-looking information involves significant risks and uncertainties. A number of factors could cause actual results to differ materially from results discussed in the forward-looking information, including the effects of global outbreaks of pandemics or contagious diseases or the fear of such outbreaks, such as the recent COVID-19 pandemic, including the effects on the Company's operations, personnel, and supply chain, the demand for its products and services, its ability to expand and produce in new geographic markets or the timing of such expansion efforts, and on overall economic conditions and customer confidence and spending levels, changes in international, national and local macroeconomic and business conditions, as well as sociopolitical conditions in certain local or regional markets, weather patterns, crop planting, crop yields, crop conditions, the timing of harvest and conditions during harvest, the ability of management to execute the Company’s business plan, seasonality, industry cyclicality, volatility of production costs, agricultural commodity prices, the cost and availability of capital, currency exchange and interest rates, the availability of credit for customers, competition, AGI’s failure to achieve the expected benefits of recent acquisitions including to realize anticipated synergies and margin improvements; changes in trade relations between the countries in which the Company does business including between Canada and the United States; cyber security risks; the risk that the assumptions and estimates underlying the provision for remediation related thereto and insurance coverage for the Incident will prove to be incorrect as further information becomes available to the Company . These risks and uncertainties are described under “Risks and Uncertainties” in our MD&A and in our most recently filed Annual Information
Form, all of which are available under the Company's profile on SEDAR [www.sedar.com]. These factors should be considered carefully, and readers should not place undue reliance on the Company’s forward-looking information. We cannot assure readers that actual results will be consistent with this forward-looking information. Readers are further cautioned that the preparation of financial statements in accordance with IFRS requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. These estimates may change, having either a negative or positive effect on profit, as further information becomes available and as the economic environment changes. Without limitation of the foregoing, the provision for remediation related to the remediation work required significant estimates and judgments about the scope, nature, timing and cost of work that will be required. It is based on management’s assumptions and estimates at the current date and is subject to revision in the future as further information becomes available to the Company. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. The forward-looking information included in this press release is made as of the date of this press release and AGI undertakes no obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.