Agrify Announces Results for Second Quarter 2022
- Second Quarter Revenue Increased 63.5% Year-Over-Year to $19.3 Million
- Company Takes Actions to Mitigate Industry Challenges and Better Position Itself for Sustainable Growth
BILLERICA, Mass., Aug. 15, 2022 (GLOBE NEWSWIRE) — Agrify Corporation (Nasdaq:AGFY) (“Agrify” or the “Company”), a leading provider of innovative cultivation and extraction solutions for the cannabis industry, today announced financial results for the second quarter ended June 30, 2022.
The second quarter was challenging for the entire cannabis industry.
Raymond Chang, Chairman and Chief Executive Officer of Agrify
Despite this difficult business environment, which has impacted our recent performance and altered our outlook for the remainder of 2022, we are actively taking steps to adapt to the new market realities.
Mr. Chang continued, “We have adjusted our near-term strategy and priorities to focus on the most immediate and impactful revenue-generating opportunities, all without compromising our ability to capitalize on the expected long-term growth in the sector. In parallel, we are also in the process of restructuring our credit facility and reducing our operating expenses to strengthen our cash position. We remain steadfast on bringing new and innovative solutions to our customers and delivering value to our stakeholders.”
Second Quarter and Year-To-Date 2022 Financial Results
- Revenue was $19.3 million for the second quarter, an increase of 63.5% compared to $11.8 million for the prior year period. Revenue was $45.4 million for the year-to-date period, an increase of 140.8% versus $18.8 million for the prior year-to-date period.
- Gross profit for the second quarter totaled $1.6 million, or 8.3% of revenue, compared to $527 thousand, or 4.5% of revenue, in the prior year period. Gross profit for the year-to-date period was $5.8 million, or 12.7% of revenue, compared to $(13) thousand, or (0.1)% of revenue in the prior year-to-date period.
- Operating expenses totaled $93.1 million for the second quarter, compared to $6.0 million in the prior year period. Operating expenses were $107.1 million for the year-to-date period, compared to $11.9 million in the prior year-to-date period. The comparative 2022 increases in both our second quarter and year-to-date operating expenses are largely attributable to impairment charges of $69.9 million, increases to reserves associated with accounts receivable, loans receivable, inventory obsolescence, and warranty costs, increases in depreciation and amortization, and changes in contingent consideration related to the fair value estimates associated with ongoing acquisition-related earnout arrangements.
- Net loss for the second quarter was $93.4 million, or $3.51 per diluted share, compared to a net loss of $5.6 million, or $0.28 per diluted share, in the prior year period. Net loss totaled $102.3 million, or $4.00 per diluted share, for the year-to-date period, compared to a net loss of $9.4 million, or $0.57 per diluted share, in the prior year-to-date period.
- Cash flow used in operating activities was $23.4 million for the second quarter, compared to $6.6 million in the prior year period. Cash flow used in operating activities was $57.6 million for the year-to-date period, compared to $13.8 million in the prior year-to-date period.
- Adjusted EBITDA (a non-GAAP financial measure) was a loss of $19.4 million in the second quarter (see “Non-GAAP Financial Measures” below for further discussion of this non-GAAP term, including a reconciliation to the most comparable GAAP measure), compared to an Adjusted EBITDA loss of $4.5 million in the prior year period. Adjusted EBITDA was a loss of $25.5 million in the year-to-date period, compared to an Adjusted EBITDA loss of $8.7 million in the prior year-to-date period.
Recent Business Highlights
- On June 27, 2022, Agrify announced it signed a definitive agreement to supply Ora Pharm, a Waikato, New Zealand-based health and wellness company developing high-quality, sustainably-produced medicinal cannabis, with a full suite of end-to-end hardware and software products to be utilized at a 5,000-square-foot facility in Auckland, New Zealand. Ora Pharm, which is a licensed cultivator and distributor of medicinal cannabis, committed to purchase 20 Vertical Farming Units (“VFUs”) that will be used to grow cannabis, as well as several cutting-edge extraction technologies including a C1D1 Extraction Pod, a C-15 Centrifuge Extraction System, and the CannaBeast 13 Thin Film Distillation System. In addition, Agrify will provide access to the fully integrated Agrify Insights seed-to-sale automation software for five years in exchange for monthly recurring SaaS fees.
- On June 1, 2022, Agrify announced it expanded and strengthened its industry-leading portfolio of extraction processing solutions with the unveiling of its new short path, thin film distillation system: the CannaBeast 13. This short path, thin film distillation system offers cannabis operators unprecedented flexibility, ease of use, dependability, consistency, and quality when extracting cannabis oil.
Credit Facility
As previously announced, Agrify has reached an agreement in principle with its institutional lender to amend its existing credit facility to modify and eliminate certain financial covenants which, once complete, should give the Company additional flexibility to operate and meet its long-term strategic goals while also allowing it to responsibly adjust to the many challenges currently facing the cannabis industry. We expect that the restructuring will involve repayment of the existing note with a combination of cash on hand and through the issuance of a new note with a reduced principal amount, no amortization of monthly loan payment, and the flexibility of early re-payment. Agrify and the lender are continuing to finalize the specific terms of this agreement. The Company will provide a further update once the agreement has been finalized.
2022 Outlook
The Company is updating its revenue guidance for Fiscal Year 2022 due to the downturn in the cannabis industry. Agrify now expects to generate between $70 million and $75 million in total revenue for Fiscal Year 2022.
Conference Call and Webcast Information
Agrify will host a conference call and webcast today (Monday, August 15, 2022) at 8:30 a.m. Eastern Time (ET) to discuss its financial results for the second quarter ended June 30, 2022.
- WEBCAST (live and available for replay): https://ir.agrify.com/news-and-events/investor-calendar
- DIAL-IN (only for those who would like to ask a question during the live call): https://register.vevent.com/register/BIb8c61fe580584e14b7ad2a0c5faaf8d1
About Agrify (Nasdaq:AGFY)
Agrify is a leading provider of innovative cultivation and extraction solutions for the cannabis industry, bringing data, science, and technology to the forefront of the market. Our proprietary micro-environment-controlled Vertical Farming Units (VFUs) enable cultivators to produce the highest quality products with unmatched consistency, yield, and ROI at scale. Our comprehensive extraction product line, which includes hydrocarbon, ethanol, solventless, post-processing, and lab equipment, empowers producers to maximize the quantity and quality of extract required for premium concentrates. For more information, please visit Agrify at http://www.agrify.com.
Non-GAAP Financial Measures
To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, we use Adjusted EBITDA, which is a non-U.S. GAAP financial measure to clarify and enhance an understanding of past performance. We believe that the presentation of Adjusted EBITDA enhances an investor’s understanding of our financial performance. We further believe that Adjusted EBITDA is a useful financial metric to assess our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business. We use certain financial measures for business planning purposes, measuring our performance relative to that of our competitors and determining our compliance with certain debt instruments. We utilize Adjusted EBITDA as a key measure of our performance.
We calculate Adjusted EBITDA as net loss adjusted to exclude (i) tax provision and benefit; (ii) interest income and expense, net; (iii) other income and expense, net; (iv) depreciation and amortization, (v) stock-based compensation expense, (vi) acquisition-related expenses; (vii) investment banker termination fees; (viii) restructuring charges; (ix) gains and losses associated with the extinguishment of debt; (x) changes in derivative liabilities; (xi) changes in contingent consideration; (xii) gain associated with the forgiveness of PPP loans; (xiii) impairments to long-lived assets; (ix) legal settlement charges; and (x) other items affecting our results that we do not view as representative of our ongoing operations, including losses associated with write-offs.
We believe Adjusted EBITDA is a commonly used by investors to evaluate our performance and that of our competitors. However, our use of the term Adjusted EBITDA may vary from that of others in our industry. Adjusted EBITDA should not be considered as an alternative to net loss before taxes, net loss, loss per share or any other performance measures derived in accordance with U.S. GAAP as measures of performance.
Adjusted EBITDA has important limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of the limitations of Adjusted EBITDA include (i) Adjusted EBITDA does not properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures. Our public offering and acquisition-related expenses, including legal, accounting and other professional expenses, reflect cash expenditures and we expect such expenditures to recur from time-to-time. Our Adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner as we calculate the measure, limiting its usefulness as a comparative measure.
In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. Adjusted EBITDA should not be considered as an alternative to loss before benefit from income taxes, net loss, earnings per share, or any other performance measures derived in accordance with U.S. GAAP. When evaluating our performance, you should consider Adjusted EBITDA alongside other financial performance measures, including our net loss and other GAAP results.
The following table presents a reconciliation of Adjusted EBITDA from the most comparable GAAP measure, net loss, for the three- and six-month periods ended June 30, 2022 and 2021, respectively:
