Pyxus Intl Inc New

Good day, ladies and gentlemen, and welcome to today's PIXUS International Incorporated Fiscal Year 2022 Third Quarter Results Conference Call. At this time, all participants are in a listen-only mode. If anyone should require assistance during the conference, please press star zero on your touch-tone pad at any time. Thank you. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Tomas Gregera. Treasurer, Mr. Gregera, you may begin your conference.

Thank you, Keith. With me this evening are Peter Sickle, our President and CEO, and Flavia Landsberg, our CFO. Before we begin discussing our financial results, I would like to cover a few points. You may hear statements during the course of this call that express a belief, expectation, or intention, as well as those that are not historical fact. These statements are forward-looking and involve a number of risks and uncertainties that may cause actual events and results to differ materially from these forward-looking statements. These risks and uncertainties are described in detail along with other risks and uncertainties in our filings with the SEC, including our most recent Form 10-K. We do not undertake to update any forward-looking statements made on this conference call to reflect any change in management expectations or any change in assumptions or circumstances on which these statements are based. Included in our call today may be discussion of non-GAAP financial measurements, including earnings before interest, taxes, depreciation, and amortization, commonly referred to as EBITDA and adjusted EBITDA. that are not measures of results of operations under generally accepted accounting principles in the United States and should not be considered as an alternative to U.S. GAAP measurements. Table including a reconciliation of and other disclosures regarding these non-GAAP measures is available on our website at www.PIXIS.com. In connection with the emergence from the Chapter 11 case in 2020, PICS has qualified for fresh start reporting as detailed in our most recent Form 10-K report filed with the SEC. And due to the application of fresh start reporting, the pre-emergence and post-emergence periods may not be comparable. The replay, rebroadcast, transcript, or other reproduction of these conference calls, other than the replay as provided by PICS International, has not been authorized and is strictly prohibited. Investors should be aware that any unauthorized reproduction of this conference call may not be an accurate reflection of its contents. Now I'll hand the call over to Peter. Thanks, Tomas. Hello, everyone, and thank you for joining us this evening. We are pleased that our LEAF operations volume, revenue, and gross margin continue to improve on a year-to-date basis. And as of December 31, 2021, more than 90% of the company's inventory was committed to specific customers to meet near-term forecasted demand. In addition, our uncommitted inventory decreased compared to the prior year, is near the low end of our target range of between $50 and $150 million, and is expected to remain near the low end of our targeted range through fiscal year-end. remain proactive in our efforts to accelerate shipments delayed by coded related logistical challenges particularly the lack of vessel and container availability and continue to utilize additional ports for product export while working with the customers to expedite certain processes we do however expect these challenges to linger for the remainder of our fiscal year which will delay shipments of committed inventory from the fourth quarter of fiscal 2022 into the first half of fiscal 2023. As a result, we estimate our fiscal 2022 revenue to be between $1.55 billion and $1.7 billion, and our adjusted EBITDA to be between $125 million and $145 million. We maintain focus on liquidity during the period, evidenced by a cash position of $146.1 million, an increase of $22.9 million compared to the prior year, and the availability of $22.5 million under the ABL credit facility. To proactively address upcoming maturities in our capital structure, in February 2022, we entered into a new $100 million ABL credit facility with PNC Bank to replace our existing $75 million ABL credit facility. The PNC ABL credit facility extends the maturity and has a lower interest rate compared to the ABL credit facility that it replaced. In addition, we began to pay down the delayed draw term loan in December 2021. Pleased that on January 28, 2022, we completed the sale of the assets of Figure Norfolk Inc., which effectively concludes our strategic exit of the cash flow-negative cannabinoid operations. With the completion of the sale, no subsidiaries of the company produce or sell Canadian cannabis in any capacity. Due to our restructuring activities, our SG&A expenses decreased 43.5 million, or 29.1%, compared to the same period of the prior year. Continue to expect our SG&A expense to be between $140 million and $145.5 million, excluding non-recurring items and potential changes in foreign currency exchange rates. In the electric industry, continued delays of enforcement activities have resulted in lower than anticipated revenue in adjusted EBITDA through the third quarter. In November 2021, we disposed of our interest in Humble Juice Co., LLC, in exchange for royalties on future revenues, which partially offset lower than anticipated adjusted EBITDA for the fiscal year by reducing further SG&A expenses associated with Humble. December 2021, we unveiled our environmental, social and governance framework, further demonstrating our commitment to operating our business in a responsible manner. Additionally, we were recognised by the CDP, the Global Standard of Environmental Reporting, for our coordinated efforts to address climate change, water security and deforestation. Our team is energized by the strengthening of our business and the implementation of our ESG strategy as we work together to achieve our purpose of growing a better world. With that, I'll turn it over to Flavia to provide a financial update. Flavia?

Thank you, Peter. With regards to our third quarter results, sales and other operating revenues for the three months ended December 31, 2021, with $428.9 million, a 13% increase compared to the prior year. This increase was due to an 18.7% increase in grief volume from 17.5 million of shipments in Africa that were delayed by COVID-19 pandemic and customer shipping instructions from fiscal year 2021 into the current quarter, larger clock sizes in Africa, and timing of shipments. This increase was partially offset by a 3.4% decrease in lead average sales price driven by a product mix having a higher concentration of byproducts in South America and a decrease from the deconsolidation of the Canadian cannabis subsidiaries in the fourth quarter of fiscal 2021. Cost of goods and service sold for the three months ended December 31, 2021 was $363.7 million. a 14.7% increase compared to the prior year. This increase was mainly due to the increase in sales and other operating revenues. Gross profit as a percent of the sales decreased to 15.2% for the three months ending December 31, 2021, compared to 16.6% in the prior year. This decrease was due to the product mix having a higher concentration of byproducts, higher green tobacco prices, and foreign currency fluctuations. This decrease was partially offset by lower conversion costs per kilo. SG&E expenses was $34.2 million, a 25.5% decrease compared to the prior year. SG&A expenses as a percent of sales decreased to 8% for the three months and the December 31st, 2021, compared to 12.1% in the prior year. These decreases were mainly due to increased sales and other operating revenues, the deconsolidation of the Canadian cannabis subsidiaries in the fourth quarter of 2021, and savings from restructuring initiatives. The company's liquidity requirements are affected by various factors, including crop seasonality, borrowing currency, and interest rates, real tobacco prices, customer mix, crop size, and quality, and legal and professional costs. As of December 31st, 2021, the company's available credit lines and cash total $407.8 million, including $235.2 million available under foreign seasonal credit lines. We are excited about the future of our business, and on that, Chief, please open the line for questions.