AgJunction Reports Fourth Quarter and Full Year 2017 Earnings Results

HIAWATHA, KS, March 21, 2018 /CNW/ - AgJunction Inc. (TSX: AJX) ("AgJunction" or the "Company"), a leading provider of innovative hardware and software solutions for precision agriculture worldwide, is reporting financial results for the fourth quarter and full year ended December 31, 2017. All currency amounts are expressed in U.S. dollars.

Fourth Quarter 2017 Financial Summary vs. Fourth Quarter 2016

• Revenue up 20% to $9.9 million versus $8.2 million.
• Gross margin increased 380 basis points to 38.9% compared to 35.1%.
• Net loss improved to $2.7 million or $(0.02) per share, versus a loss of $2.9 million or $(0.02) per share.
• Adjusted EBITDA was $(2.5) million versus $(2.4) million.
• Cash at December 31, 2017 increased to $13.9 million versus $12.9 million.

Full Year 2017 Financial Summary vs. Full Year 2016

• Revenue up 11% to $46.8 million versus $42.3 million.
• Gross margin increased 240 basis points to 41.5% compared to 39.1%.
• Net loss improved to $2.7 million or $(0.02) per share, versus a loss of $18.2 million or $(0.15) per share, which included an $11.3 million goodwill impairment charge.
• Adjusted EBITDA improved to $(1.0) million versus $(4.9) million.

Management Commentary

"AgJunction closed 2017 on a strong note, reporting its third consecutive quarter of double-digit revenue growth in a year that was ahead of our operating plan," said Dave Vaughn, president and CEO of AgJunction. "This was driven by continued strong OEM demand in the U.S., Germany and France, as customers continue to adopt precision agriculture products like ours to drive yield and profit improvements.

"We believe there is also untapped demand for alternative products from a large segment of the market that has been mostly neglected. This forms the basis of our Hands-Free Farm mission. Introduced in January 2018, Hands-Free Farm makes autosteering more affordable, easier to use, and more accessible for every farmer.

"The first step in the trajectory of the Hands-Free Farm movement is REBEL™ from Outback Guidance—the only low-cost, hassle-free autosteering solution that is made to fit any farm and any farmer. This solution is grounded in our innovative, patented technology portfolio, and is supported by a distribution model that is efficient and transparent. We began shipping orders earlier this month and early customer feedback has been strong.

"The remainder of 2018 will be focused not only on driving adoption across our suite of products, but also furthering the Hands-Free Farm mission by addressing the needs of the small farmer—an attractive segment of the market that has been largely neglected."

Fourth Quarter 2017 Financial Results

Total revenue in the fourth quarter of 2017 increased 20% to $9.9 million compared to $8.2 million in the fourth quarter of 2016. This was driven by strong OEM business growth in the Europe, Middle East and Africa (EMEA) and Americas regions.

Gross profit in the fourth quarter of 2017 increased 33% to $3.9 million compared to $2.9 million in the fourth quarter of 2016. Gross margin increased 380 basis points to 38.9% compared to 35.1% in the fourth quarter of 2016. The increase was primarily due to a favorable mix of higher margin products and the absorption of fixed costs over the higher revenue volume.

Total operating expenses increased to $6.8 million compared to $5.7 million in the fourth quarter of 2016 primarily due to higher R&D costs associated with new corporate initiatives. As a percentage of revenue, operating expenses declined to 69.2% compared to 69.3% in the fourth quarter of 2016.

Net loss in the fourth quarter improved to $2.7 million or $(0.02) per share, compared to a net loss of $2.9 million or $(0.02) per share in the fourth quarter of 2016.

Adjusted EBITDA in the fourth quarter of 2017 was $(2.5) million compared to $(2.4) million in the fourth quarter of 2016.

Cash and cash equivalents at the end of the fourth quarter of 2017 totaled $13.9 million compared to $12.9 million at the end of 2016. Working capital was $20.3 million at the end of 2017 compared to $22.4 million at the end of 2016. The Company continues to carry no debt and has access to its full $3.0 million line of credit.

Full Year 2017 Financial Results

Total revenue in 2017 increased 11% to $46.8 million compared to $42.3 million in 2016. The increase was driven by 36% revenue growth in the EMEA region and 8% growth in the Americas.

Gross profit increased 18% to $19.4 million compared to $16.5 million in 2016. Gross margin increased 240 basis points to 41.5% compared to 39.1% in 2016. The increase in margin was primarily driven by a favorable product mix.

Total operating expenses in 2017 increased to $25.4 million compared to $23.4 million in 2016 due to heightened demand for the company's products and new corporate initiatives. As a percentage of revenue, operating expenses in 2017 were 54.2% compared to 55.4% in 2016.

Net loss in 2017 was $2.7 million or $(0.02) per diluted share, compared to a net loss of $18.2 million or ($0.15) per diluted share in 2016, which included an $11.3 million goodwill impairment charge.

Adjusted EBITDA in 2017 improved to $(1.0) million compared to $(4.9) million in 2016.

Conference Call

AgJunction will hold a conference call tomorrow at 11:00 a.m. Eastern time to discuss its fourth quarter and full year results, followed by a question-and-answer session.

Date: Thursday, March 22, 2018
Time: 11:00 a.m. Eastern time (8:00 a.m. Pacific time)
Toll-free dial-in number: 1-888-231-8191
International dial-in number: 1-647-427-7450
Conference ID: 2987808

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios at 1-949-574-3860.

The conference call will be broadcast live and available for replay via the investor center section of the company's website at www.corp.agjunction.com.

A replay of the conference call will be available after 2:00 p.m. Eastern time on the same day through April 5, 2018.

Toll-free replay number: 1-855-859-2056
International replay number: 1-416-849-0833
Replay ID: 2987808

About AgJunction

AgJunction provides innovative hardware and software applications for precision agriculture worldwide. The Company holds more than 185 patents and patent applications and markets its products and services under leading brand names including Novariant, Outback Guidance® and Satloc®. The Company is headquartered in Hiawatha, Kansas, with facilities in Silicon Valley, California, Scottsdale, Arizona, Winnipeg, Manitoba and Queensland, Australia. AgJunction is listed on the Toronto Stock Exchange (TSX) under the symbol "AJX." For more information, please go to www.agjunction.com and www.handsfreefarm.com

Non-IFRS Measures

This press release uses adjusted EBITDA, which is a financial measure that does not have any standardized meaning prescribed under International Financial Reporting Standards ("IFRS"). Adjusted EBITDA is defined as net income before interest, income tax, depreciation, amortization and goodwill write off. The Company believes that this non-IFRS measure provides useful information to both management and investors in measuring financial performance. As this measure, does not have a standard meaning prescribed by IFRS, it may not be comparable to similarly titled measures presented by other publicly traded companies, and should not be construed as an alternative to other financial measures determined in accordance with IFRS. This non-IFRS measure is provided as additional information to complement IFRS measures by providing further understanding of operations from management's perspective. Accordingly, non-IFRS measures should never be considered in isolation nor as a substitute to using net income as a measure of profitability or as an alternative to the IFRS consolidated statements of income or other IFRS statements. See "Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Reconciliation" herein for additional information.

Forward-Looking Statements

This press release contains forward-looking information and forward-looking statements (collectively, "forward-looking information") within the meaning of applicable securities laws and is based on the expectations, estimates and projections of management of AgJunction as of the date of this news release, unless otherwise stated. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information. Such forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to its current and future operations. Investors are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Accordingly, readers should not place undue reliance on such forward-looking information contained in this press release.

In respect of the forward-looking information, AgJunction has provided such information in reliance on certain assumptions that it believes are reasonable at this time, including, but not limited to, the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labor and services; that AgJunction's future results of operations will be consistent with management expectations in relation thereto; the continued availability of capital at attractive prices to fund future capital requirements relating to existing and future assets and projects; future operating costs; that counterparties to material agreements will continue to perform in a timely manner; that there are no unforeseen events preventing the performance of contracts; availability of key supplies, components, services, networks and developments; the impact of increasing competition; conditions in general economic, agricultural and financial markets; demand for the Company's products; and the continuity of existing business relationships.

Since forward-looking information addresses future events and conditions, such information by its very nature involves inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks associated with the industries in which AgJunction operates; ability to access sufficient capital from internal and external sources; changes in legislation; departure of key personnel or consultants; competition; inability to introduce new technology and new products in a timely manner; legal claims for the infringement of intellectual property and other claims; fluctuation in foreign exchange or interest rates; uncertainties in the global economy; negative conditions in general economic, agricultural and financial markets; availability of key supplies and components; product liability; reduced demand for the Company's products; and changes in the Global Navigation Satellite System and other systems outside of our control. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the Company's operations or financial results, are included in reports of AgJunction on file with applicable securities regulatory authorities, including but not limited to, AgJunction's Annual Information Form which may be accessed on its SEDAR profile at www.sedar.com.

The forward-looking information contained in this press release is made as of the date hereof and each of AgJunction undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

AgJunction Inc.
Consolidated Statements of Financial Position
(Expressed in U.S. dollars)
		December 31,		December 31,
(000s)		2017		2016
Assets
Current assets:
	Cash and cash equivalents	$	13,893	$	12,863
	Accounts receivable, net	4,185		4,776
	Inventories	7,627		8,226
	Prepaid expenses and deposits	990		974
		26,695		26,839
Property, plant and equipment, net		2,899		3,176
Intangible assets, net		9,856		11,123
Goodwill		143		143
		$	39,593	$	41,281
Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable and accrued liabilities	$	5,649	$	3,680
	Provisions	629		545
	Current portion of deferred revenue	149		206
		6,427		4,431
Deferred revenue, less current portion		100		158
Total liabilities		6,527		4,589
Shareholders' equity:
	Share capital	146,896		148,391
	Equity reserve	5,805		5,265
Accumulated deficit		(119,635)		(116,964)
		33,066		36,692
		$	39,593	$	41,281

AgJunction Inc.
Consolidated Statements of Profit or Loss
Three and twelve months ended December 31, 2017 and 2016
(Expressed in U.S. dollars)
		Three months ended				Twelve months ended
		December 31,				December 31,
(000s)		2017		2016		2017		2016
Sales		$	9,889	$	8,224	$	46,781	$	42,264
Cost of sales		6,039		5,340		27,360		25,736
Gross profit		3,850		2,884		19,421		16,528
Expenses:
	Research and development	2,514		2,003		8,210		7,736
	Sales and marketing	1,796		1,641		7,776		6,937
	General and administrative	2,529		2,055		9,391		8,755
		6,839		5,699		25,377		23,428
Operating (loss)		(2,989)		(2,815)		(5,956)		(6,900)
Goodwill impairment		–		–		–		11,301
Foreign exchange (gain) loss, net		(13)		(3)		4		(32)
Interest and other income		–		–		(18)		(61)
Other income		–		–		(3,000)		–
Loss (gain) on sale of property, plant and equipment		–		86		19		111
		(13)		83		(2,995)		11,319
Net (loss) income before income tax		(2,976)		(2,898)		(2,961)		(18,219)
Income tax benfit		(309)		–		(290)		–
Net (loss)		$	(2,667)	$	(2,898)	$	(2,671)	$	(18,219)
Earnings per share:
	Basic and diluted (loss) per share	$	(0.02)	$	(0.02)	$	(0.02)	$	(0.15)

AgJunction Inc.
Consolidated Statements of Cash Flows
Years ended December 31, 2017 and 2016
(Expressed in U.S. dollars)
(000s)			2017		2016
Cash flows from operating activities:
	Net (loss)		$	(2,671)	$	(18,219)
	Items not involving cash:
		Depreciation	681		707
		Amortization	1,267		1,272
		Share-based payment transactions	812		970
		Allowance on trade receivables	172		5
		Write down of inventory to net realizable value	601		1,044
		Loss on disposal of property, plant and equipment	19		111
		Goodwill impairment	–		11,301
	Change in non-cash operating working capital:
		Accounts receivable	419		3,443
		Inventories	(2)		2,531
		Prepaid expenses and deposits	(16)		1
		Accounts payable and accrued liabilities	1,969		(2,290)
		Provisions	84		(452)
		Deferred revenue	(115)		(182)
Cash flows from operating activities			3,220		242
Cash flows from (used in) financing activities:
		Payment of finance lease liability	–		(1)
		Purchase and cancellation of common shares	(1,767)		–
		Interest received (paid), net	–		(1)
		Issue of common shares	–		87
Cash flows from (used in) financing activities			(1,767)		85
Cash flows used in investing activities:
		Proceeds from the sale of property, plant, and equipment	1		13
		Purchase of property, plant and equipment	(424)		(522)
		Intangible asset addition	–		(3)
Cash flows used in investing activities			(423)		(512)
Increase (decrease) in cash position			1,030		(185)
Cash and cash equivalents, beginning of year			12,863		13,048
Cash and cash equivalents, end of period			$	13,893	$	12,863

AgJunction Inc.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Reconciliation
Three and twelve months ended December 31, 2017 and 2016
(Expressed in U.S. dollars)
		Three months ended				Twelve months ended
		December 31,				December 31,
(000s)		2017		2016		2017		2016
Net income (loss)		$	(2,667)	$	(2,898)	$	(2,671)	$	(18,219)
	Interest income	–		(1)		–		(1)
	Income tax benefit, net	(309)		–		(290)		–
	Depreciation	173		168		681		707
	Amortization	318		322		1,267		1,272
	Goodwill impairment	–		–		–		11,301
Adjusted EBITDA		$	(2,485)	$	(2,409)	$	(1,013)	$	(4,940)

SOURCE Agjunction Inc.

AgJunction: Michael Manning, CFO, 1-785-742-5149, [email protected]; Investor Relations: Liolios, Cody Slach, Managing Director, 1-949-574-3860, [email protected]