RiceBran Technologies

Good day, everyone, and welcome to the Rice Brand Technologies second quarter 2022 financial results call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session. You may register to ask a question by pressing star and 1 on your touchtone phone. It is now my pleasure to turn today's program over to Robert Fink, FNK. Please go ahead.

Thank you, Operator. Good afternoon. Welcome. to the Rice Brand Technologies Second Quarter 2022 Financial Results Conference Call. Hosting the call today are Peter Bradley, Executive Chairman, Todd Mitchell, Rice Brand Chief Operating Officer, and Chief Financial Officer. I want to remind everyone that during today's call, management prepared remarks may contain forward-looking statements that are subject to risk and uncertainty. Management may also make additional forward-looking statements in response to your questions today. Therefore, the company claims its protection under the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed on today's conference call, and therefore, we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC. In addition, any projections as to the company's future performance represented by management include estimates as of today, August 11, 2022, and the company assumes no obligation to update these projections in the future as market conditions change. This webcast and certain financial information provided on the call, including reconciliations of non-GAAP financial measures to comparable GAAP financial measures, are available at ricebrands.com on the investor relations page. At this time, I'd like to turn the call over to Peter. Peter, the call is yours.

Thank you, Robin. Good afternoon, everyone. We had a very strong quarter for our core SLB and milling businesses that was otherwise marred by issues in production at our value-added SLB derivatives business, resulting in unmet demand and unexpected losses. With this issue now behind us, we expect to rebound quickly and to generate substantially better performance in the second half of the year. Let's start with the core. Our core SL business is experiencing double-digit sales growth, not seen in years, and we expect the recent addition of new customers to accelerate this growth further. Importantly, this month, we added a significant new customer in the pet food business. This is an important win for us, representing a breakthrough in into a higher added value, higher volume segment of the companion animal market where we see an opportunity ultimately for the business to be much larger than our core equine sector. It is also important because it should drive increased sales, improve capacity utilization, and expanded operating leverage in the second half, which should allow us to turn which should in turn support stronger overall financial results. Having worked hard over the past year to improve operations at MGI and Golden Ridge, I'm very pleased to report that both facilities rose to the occasion in the second quarter by meeting strong demands for high-quality domestic resource grains, generating mid-double-digit revenue growth and improved contribution to gross margins. In particular, MGI generated solid year-over-year improvement, even while working through operational challenges due to capital improvements executed in the quarter. Now nearly completed, these improvements have significantly expanded capacity and should allow the mill to continue to grow off a much larger revenue base. That being said, I indicated last quarter that I believed it was in the company's best interest to exit the primary rice milling business. And while we're not ready to announce anything specific as yet, I can assure you we have made significant progress to move in towards that goal. With our core SLB and milling businesses firing on all cylinders, gross losses in the second quarter can be attributed entirely to our value-add SLB derivatives business, where production issues resulted in significant business disruption. To be more specific, variances in our organic feedstock and a forced raw material change came together in a perfect storm. Efforts to adjust our production techniques to address these issues were overwhelming. were unsuccessful on multiple occasions, resulting in a significant amount of product that did not meet our standards for our customers. As a result, we lost nearly six weeks' worth of sales and were forced to take significant product write downs during the quarter. While unexpected and disappointing, this can happen occasionally when applying a complex production process to a variable agricultural feedstock. Most importantly, we believe these issues have been resolved. We have gotten our organic suppliers to make changes to the feedstock they were providing us, and we have completed testing this feedstock with the other raw materials we were forced to change. As a result, we are now producing and shipping organic SRB derivatives that meet our standards. With this episode now past us, the team is working hard to catch up, and I'm pleased to say that our customers are delighted to finally see their orders fulfilled. Importantly, this isolated challenge we saw in our value-add derivatives business during the quarter does not diminish our optimism and confidence that we have built a platform for profitable growth. strong growth in our core SLB business and MGI in the second half of the year, supported by new customer wins and largely completed capacity expansion, a return to normal operations for a value-add derivatives business, and the potential for a strategic solution to Golden Ridge should drive significant improvement in our financial results in the second half, producing us with further improvements in 2022, 2023, and beyond. Now let me turn the call over to Todd to review the quarter in more detail.