AgroFresh Solutions, Inc.

Greetings and welcome to AgRefresh Solutions' second quarter 2022 earnings conference call. At this time, all participants are on a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jeff Sonick, with ICR. Thank you. You may begin.

Thank you, and good afternoon. Good afternoon. Today's presentation will be led by Clint Lewis, Chief Executive Officer, and Graham Mio, Chief Financial Officer. Comments during today's call and the accompanying presentation contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are considered forward-looking statements. 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 and uncertainties that could cause actual results to differ materially from the results discussed in the forward-looking statements. All of these risks and uncertainties are identified and discussed in the company's filings with the SEC. We'll also refer to certain non-GAAP financial measures today. Please refer to the tables included in the slides that accompany this presentation, as well as the press release, which can be found in the investor relations section of our website agrefresh.com, for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. With that, I'd now like to turn the call over to Clint Lewis.

Thank you, Jeff, and welcome to everyone on the call. The second quarter marks the completion of the Southern Hemisphere growing season, and I'm proud of our global team for their continued execution of our growth strategy. Net sales for the second quarter of 2022 increased 17.5% 25.8 million. And adjusted EBITDA increased 1.5 million to 2.4 million compared to the second quarter of 2021, despite significant foreign currency headwinds. And on a constant currency basis, net sales grew 23.9%. Our diversification strategy continues to drive results, as evidenced by a 21% increase in our diversification revenue in the first half of the year compared to the prior year period, with double-digit growth in each of our diversification product solution categories. As we look ahead to the second half and the northern hemisphere growing season, we are planning to continue to meet our goal of driving growth in both net sales and adjusted EBITDA through continued execution of our diversification strategy. I'd like to review the business drivers for the quarter and the first half of this year, which covers the entire southern hemisphere season. And to further assist your understanding of our business and monitor the progress of our strategy to grow through diversification, we are providing you with additional disclosures on both a geographical and product solutions basis. The details can be found in our supplemental earning deck in our investor relations website. Diversification revenues grew 12% and represented 44.1% of consolidated revenue. for the trailing 12 months ended June 30th, 2022, versus 40.6% in the trailing 12 months ending June 30th, 2021. This marks our sixth consecutive quarter of double-digit diversification category revenue growth. Remember, we define our diversification category as the components of our business excluding SmartFresh for Apple, which covers all of the crops, solutions, and technologies. While we continue to defend our legacy SmartFresh Apple business, our continued growth will be fueled by an ongoing diversification strategy. In addition to being our engine to drive incremental growth, success in diversification also helps to build a natural hedge against many of the well-known risks in agriculture, such as weather, which is visible in our second quarter results as we generated growth on a consolidated basis despite encountering weather headwinds in key markets such as Brazil. Thus, diversification across products, platforms, crops, geographies, and customers minimizes the adverse impact that any one of those variables can have on our results. From a geographical perspective, looking at the combined first half performance for the entire season, our Europe, Middle East, and Africa region generated 17.9% growth or an increase of $3.4 million versus the prior year period. Our Asia Pacific region also supported growth, increasing 8.5%. And while small on a relative basis at this stage in the year, North America grew 25.5% due to strong demand stemming from continued recovery of the flower market. Latin America, which represents our largest and most diversified region during our southern hemisphere season, decreased slightly by 1.3% versus the first half of 2021. but on a constant currency basis grew 3.1%. I'd note that given the currency headwinds, we've selectively implemented some pricing measures to help protect our margin. Lower sales of SmartFresh for apples and Arvista in Brazil, where the industry was met with severe weather that reduced volumes, were nearly offset by strength in other markets, such as Chile and Peru. From a product solutions perspective, Once again, looking at the six-month southern hemisphere season, we achieved double-digit growth across each of our diversification categories. In terms of dollar contribution, we had meaningful distribution across all our key diversification categories. Our fungicide and disinfectant category grew 25.5% in the first half and contributed $1.9 million of growth versus the prior year period. Growth was driven by antimicrobial market penetration and product expansion in North Africa and Middle East markets, such as Morocco and Turkey. Our other one MCP category, which represents our continued focus on leveraging our SmartFresh franchise beyond apples and into other crops and geographies, and includes key solutions such as Harvista and Epiblock, grew 10.4% versus the first half of 2021, and contributed $1.6 million of growth. Harvista performed well in South Africa, which experienced an early harvest season and a larger crop size, resulting in an increased need for storage and freshener solutions. Harvista also drove greater market penetration in New Zealand following last year's market entry. Our Ethelblock solution was also notable, helping to drive growth in our North American region as the flour industry experienced continued recovery. Our coatings category grew 37.4% and contributed $1.1 million of growth. Taser was the main driver of growth in the coatings product line, led by penetration of new markets such as Egypt, South Africa, and Brazil, all of which generated significant growth versus the prior year period. Our plant-based coatings product, VitaFresh Botanic Group, nearly doubled with strong traction in Spain, Peru, and Brazil, and first-time sales in new markets such as Egypt, Netherlands, and Chile. Rounding out our diversification categories is the other category, which includes our control tech equipment solutions and our FreshCloud digital platform. We have previously discussed the strategic value of FreshCloud, both in its ability to generate direct revenue as well as to support the rest of our portfolios. While we're still at an early entry point in our journey, we were recently able to leverage FreshCloud as an opportunity to enter the table-grade sector with a new customer. While small on a relative basis, the other category more than tripled and contributed $0.9 million of growth during the first half, mainly driven by growth in Spain and Chile. These gains versus the prior year period were partially offset by our SmartFresh for Apple category, which decreased 2.4% in the first half versus the prior year period, primarily due to foreign exchange impact and extreme weather in Brazil that reduced Apple production there by 30% compared to 2021, according to the World Apple and Pear Association estimates. On a constant currency basis, our SmartFresh for Apple category grew 0.2%. Recently, we've communicated several new developments that we are especially excited about, each of which demonstrates our efforts to advance our business, leverage our research and development and regulatory capabilities, and provide new services and innovative solutions to meet customer needs. In June, we entered into a strategic collaboration agreement with Novozymes that will explore co-development of biological-based solutions to control fungal pathogens in fruits, vegetables, and flowers. We anticipate that this agreement will accelerate the development of novel biologic solutions for post-harvest use through the combination of Novozyme's advanced biotechnologies with our deep scientific and formulation expertise, global commercial footprint, and comprehensive portfolio of integrated solutions. Agrofresh and Novozyme share very similar missions around sustainability and the introduction of differentiated technologies to address unmet needs across the food chain. We are excited to partner with Novozymes to pioneer the use of biological solutions in the post-harvest sector to help our customers provide a consistent supply of high-quality fresh fruit and produce and reduce food loss and waste, while alleviating the challenges that impact quality and quantity given supply chain issues. Further to the advancement of our portfolio and product registration capabilities, In July, we gained approval for our SmartFresh Inbox solution in California for a wider range of crops, which now includes apples, pears, avocados, kiwi, and stone fruits. California is the largest and most diverse fruit growing region in the U.S., and our customers frequently tell us that they're in need of more flexible application methods and products to help preserve and protect their crops, especially while in transit. SmartFresh Inbox offers the powerful protection of our pioneer 1MCP technology and a small, portable sachet, expanding the availability of SmartFresh technology for growers, packers, and retailers who either don't have storage room infrastructure, require more convenient options, or face transit complexities. In addition to California, we are also pursuing similar registrations for SmartFresh Inbox in Europe and other key global markets. And last week, we achieved European organic certification for our VitaFresh Botanicals Life Select solution. In addition to our full coatings product line that leverages natural and plant-based ingredients, we now have an organic option that helps meet the increased demand for these types of solutions. This organic certification signifies the focus we are bringing to the coatings category, which is the largest and fastest growing category in the post-harvest industry. Today, this category is defined by older, conventional, and more commoditized offerings generally competing on price and often bundled with application equipment. However, we expect that growth in the coatings category moving forward will be driven by more natural, plant-based, organic solutions with applications tailored to higher-value crops such as avocados, and increasing utilization of coatings in underpenetrated geographies such as Latin America. and Asia. Currently, AgriFresh is relatively underrepresented in the coatings category. However, we are strategically focused on effectively competing in the higher value growth segments of the category by expanding the penetration of our VitaFresh botanicals portfolio and leveraging our internal R&D and external innovation teams to continue to innovate in this important category. We see an opportunity to differentiate our offerings through the creation of a suite of products that are natural, plant-based, or organic. We also plan to strengthen our presence in the retail sector, especially in key markets like the U.S. and Europe, where there is increasing interest and demand for newer coating solutions by retailers looking to address food loss and waste while responding to the evolving desire of their consumers to have more natural, organic options. And finally, We recently opened our new innovation and service center in Rancagua, Chile, marking our seventh strategic global center in operation, further expanding our worldwide footprint in key production regions around the globe. The new center advances our leadership position in Latin America, which is our fastest growing and most diverse region from a product and crop standpoint. This new center will support our operations and customers in Chile and serve as a center of excellence for the entire Latin America region. Chile has been at the forefront of adopting new innovations and crop production practices and was the first country to successfully commercialize SmartFresh more than 20 years ago. My leadership team and I traveled to Chile to mark the opening of this new innovation and service center, and it provided us with an opportunity to meet with many of our customers and other industry stakeholders during our visit. We saw firsthand how our various post-harvest solutions and technical service are being utilized for the benefit of our customers. The time spent in Chile reinforces and validates the important mission we have at AgriFresh and inspires my team and me to continue working hard to support the efforts of our customers globally as they strive to produce an abundant supply of fresh, high-quality fruit and produce. In summary, our southern hemisphere season was a success. We accomplish this in the face of macroeconomic, geopolitical, and ever-present weather challenges, which continues to demonstrate the importance of what we do and the durability and the resilience of our business. Through consistent execution of our diversification strategy and a focus on financial discipline, we are in excellent position to achieve our goals for the full year, and that is to generate continued growth in revenue and adjusted EBITDA. Our team is continuing to pursue new innovations and engage in new collaborations with other industry leaders to advance produce freshness while leveraging our existing commercial capabilities and global footprint. We look to build on the momentum we generated in the southern hemisphere season to deliver continued performance as we transition into the northern hemisphere growing season. I'll now pass the call to Graham to speak to some of the financial highlights.