Second Quarter 2021 Financial Summary vs. Second Quarter 2020
- Revenue was $3.4 million compared to $4.6 million
- Gross margin improved 490 basis points to 45.2% compared to 40.3%
- Operating expenses were $3.5 million compared to $3.2 million
- Net loss was $(2.0) million or $(0.02) per share, compared to a net loss of $(1.3) million or $(0.01) per share
- EBITDA was $(1.1) million compared to $(1.3) million
Management Commentary
“During the last few months, we announced multiple developments that are helping us pave the path forward and leading us to a future of long-term, sustainable growth,” said Dr. M. Brett McMickell, president and CEO of AgJunction. “As part of our mission to provide the most innovative agriculture solutions, we were awarded three groundbreaking patents during the quarter that cover important aspects of our newest offerings, as well as our legacy products. Additionally, we announced a collaboration with Bosch, in which we are integrating NEVONEX into our hardware modules, expanding our addressable market and providing our customers increased flexibility in efficiently managing their farms. Furthermore, we reached a final settlement in the patent infringement and breach of contract lawsuit we filed against Ag Leader Technology Inc. Finally, we were chosen by a leading equipment manufacturer, Komatsu, to provide sophisticated automation kits for construction workplaces.
“In our indirect channel, our modular product portfolio is proving to be very attractive to original equipment manufacturers (OEMs) and value-added resellers (VARs) across the globe, and we are working hard to onboard new customers as they gradually increase their development efforts back to pre-COVID levels. While this is taking longer than anticipated, we were encouraged by the recent expansion of the Komatsu partnership. This new contract with Komatsu is directly aligned with our strategic plan to expand the application of our automation modules to the broader off-road market. Focusing on automation modules rather than building our own autonomous vehicle allows us to address the needs of a much larger market and can bring autonomy to that market more quickly and less expensively.
“Our e-commerce site, Handsfreefarm.com, continues to gain momentum as more customers learn about our affordable solutions like the Wheelman Pro HP and Wheelman Flex HP, as well as our subscription services. We are excited by the expansion of this channel and are pleased to announce that the e-commerce site is now open for business in Australia. As this channel continues to grow, we are gaining valuable insights about our solutions directly from farmers, allowing us to use the feedback gathered to drive next-generation solutions in our indirect channel.
“Looking forward, we expect to see growth in our indirect channel as OEM’s move to production. We are also seeing progress with our recently restructured VAR ‘hub and spoke’ model, and our e-commerce site is gaining greater awareness. While we are experiencing the same supply chain challenges that many other companies are facing, our team is doing a great job adapting to the dynamic environment. We are continuing to hold higher levels of inventory than we have historically, and we recently started insourcing our products at our new warehouse in Tempe, Arizona. We are confident that the steps we are taking will drive growth and allow us to continue delivering best-in-class precision products for the off-road market.”
Second Quarter 2021 Financial Results
Total revenue in the second quarter of 2021 was $3.4 million compared to $4.6 million in the second quarter of 2020. The decrease is primarily due to the reduced volume from a North American VAR customer that allegedly breached a supply agreement with AgJunction and infringed certain of its patents, which has since been settled.
Gross profit in the second quarter of 2021 was $1.5 million compared to $1.9 million in the second quarter of 2020. Gross margin improved 490 basis points to 45.2% compared to 40.3% in the second quarter of 2020. The increase is primarily due to a negative one-time adjustment relating to inventory carrying charges in the second quarter of 2020.
Total operating expenses in the second quarter of 2021 were $3.5 million compared to $3.2 million in the second quarter of 2020. The increase was attributed to higher research and development costs for the amortization of prior year capitalized projects and higher sales and marketing expenses. Net loss in the second quarter of 2021 was $(2.0) million or $(0.02) per share, compared to a net loss of $(1.3) million or $(0.01) per share in the second quarter of 2020. The decline was primarily attributable to the aforementioned revenue decline.
EBITDA in the second quarter of 2021 was $(1.1) million compared to $(1.3) million in the second quarter of 2020. Cash and cash equivalents at June 30, 2021, totaled $5.8 million compared to $6.8 million at the end of 2020. Working capital was $11.0 million at June 30, 2021, as compared to $13.7 million at the end of 2020. The company operates with limited debt of $1.5 million from an outstanding paycheck protection program loan from June 30, 2021, and has an undrawn $3.5 million line of credit.
