Agrify Corp (AGFY)·Q4 2021 Earnings Summary

Executive Summary

• Record Q4 and FY results: Q4 revenue $25.3M (+481% YoY) and FY21 revenue $59.9M (+395% YoY); gross margin improved to 22.3% in Q4 from -6.7% a year ago, aided by extraction mix and a one-off higher-margin VFU sale .
• Bookings/backlog inflected: >$250M Q4 bookings; year-end backlog $837M (TTK backlog counted as first three years only), underpinning 2022 growth .
• 2022 outlook issued: revenue $140–$142M and Q1 2022 “over $25.5M”; management expects recurring SaaS/production fees to begin late Q3 2022 and ramp into 2023 .
• Strategy scaling: 3,729 VFUs under contract; TTK 10‑year agreements estimated at $837M cumulative revenue; extraction acquisitions broaden product and margin profile (Q4 extraction revenue ~$12.3M) .
• Catalysts: execution on TTK facility commissioning (Q3/Q4 2022 start for recurring), extraction TTK launch, and REIT/equipment financing to scale deployments; risks include licensing delays (e.g., IL) and near-term mid-teens gross margin mix before recurring streams ramp .

What Went Well and What Went Wrong

• What Went Well

  • Explosive top-line growth with margin inflection: Q4 revenue $25.3M (+481% YoY) and gross margin to 22.3% from -6.7% YoY, helped by extraction (~30% GM) and a one-time higher-margin VFU sale .
  • Strong demand signals: Q4 bookings >$250M and year-end backlog $837M; qualified pipeline ~$571M; 3,729 VFUs under contract with projected $76M annual recurring revenue potential when deployed .
  • Strategic platform build-out: four extraction acquisitions (Precision, Cascade, PurePressure, Lab Society) creating a comprehensive portfolio and expected 2022 extraction revenue of $62–$65M at ≥30% GM .

• What Went Wrong

  • Profitability still negative: Q4 net loss $(13.3)M and Adjusted EBITDA loss $(5.5)M; FY21 Adjusted EBITDA loss $(20.0)M; SG&A lifted by one-time acquisition and integration costs and reserves .
  • Gross margin sustainability caveat: management cautioned Q4’s 22% GM isn’t near-term run-rate; expect mid-teens GM until recurring SaaS/production fees materialize late 2022 .
  • Timing/permit headwinds: shipment of certain VFU cash deals in IL delayed 1–2 quarters due to social equity litigation; licensing/approval cycles cited as pacing items across projects .

Financial Results

Quarterly revenue and margin trend (FY21)

Q4 year-over-year P&L comparison

Non-GAAP profitability

Segment/Revenue mix (indicative)

KPIs and Bookings

Cash flow and balance sheet notes

• Q4 operating cash flow used: $(12.6)M; FY21 operating cash flow used $(30.2)M .
• Year-end cash and marketable securities: $56.6M (cash $12.0M; marketable securities $44.6M) .
• Post year-end capital: $27.3M private placement (Jan-22) and access to up to $135M debt facility (Mar-22), supporting TTK scaling .

Guidance Changes

Note: 2021 Q4 revenue had been guided to $26–$28M in Q3 call; actual came in at $25.3M .

Earnings Call Themes & Trends

Management Commentary

• “Revenue was $25.3 million in Q4… an increase of 481% YoY… gross margin improvements [were] primarily a result of a VFU sale of older models at above historical margins and the positive lift from extraction equipment revenue (~30% GM).” — CFO .
• “We currently have 3,729 VFUs under contract… expect customers to cumulatively produce ~130,000 pounds per year… creating $76M of high-margin recurring revenue annually for Agrify… estimated total cumulative revenue… ~$837M.” — CEO .
• “We expect to start generating high-margin recurring SaaS and production fees in the third quarter of this fiscal year… extraction-based TTK deals [are] close.” — CEO .
• “Near-term access to capital is critical… closed a $27.3M private placement and finalized a debt facility to access up to $135M.” — CFO .

Q&A Highlights

• Sequential/seasonality and IL delays: Q1 may be modest versus Q4 due to extraction seasonality and IL social equity litigation delaying shipments by 1–2 quarters; shipments to resume after clarification .
• Recurring revenue cadence: Initial recurring from legacy customer conversions in Q3’22 (~400 VFUs), with Bud & Mary’s commissioning by Q4’22 and revenue Q1’23; larger flow expected 2023 .
• Margin outlook: Q4’s 22% GM not sustainable near term; expect mid-teens GM driven by extraction mix until recurring revenue accrues in late 2022/2023 .
• Pipeline quality: ~$571M pipeline broken into ~$313M TTK, ~$44–45M extraction products, remainder non‑TTK VFUs; MSO interest strong .
• Capital allocation: Extraction M&A largely complete; 2022 focus on integration and TTK buildouts, leveraging REIT/equipment financing to scale .

Estimates Context

• Wall Street consensus (S&P Global) for AGFY’s Q4 2021 EPS and revenue was unavailable via our S&P Global feed at the time of analysis; as such, we could not present consensus comparisons and potential beat/miss statistics. Values were not retrievable from S&P Global due to missing mapping.

Key Takeaways for Investors

• Revenue and mix inflection: Q4 revenue accelerated to $25.3M with margins improving to 22.3% on extraction mix and pricing; near-term GM expected in mid-teens until recurring ramps, implying mix-driven volatility short term .
• Backlog creates multi-year visibility: $837M year-end backlog (TTK counted as first 3 years only) plus >$250M Q4 bookings and ~$571M pipeline indicate robust demand for both cultivation and extraction solutions .
• Recurring revenue flywheel starts in 2H22: Initial SaaS/production fees late Q3’22 from legacy conversions with broader ramp in 2023 (Bud & Mary’s, additional TTKs), a key margin and cash flow catalyst .
• Extraction portfolio derisks margins: Four acquisitions create a 30%+ GM business expected to contribute $62–$65M in 2022, supporting blended GM while cultivation transitions to recurring model .
• Funding runway improved: $27.3M private placement and access to up to $135M debt facility bolster capacity to fund TTK construction/VFU deployments; ongoing pursuit of REIT/equipment financing should reduce balance sheet intensity .
• Execution risks: Regulatory/licensing delays (e.g., IL) and supply/delivery cadence can shift revenue timing; management flagged Q4 GM as non-run-rate and guided to mid-teens near term .
• 2022 setup: Revenue guidance $140–$142M and Q1 >$25.5M anchor the year; the key narrative pivot is proving recurring revenue onset and sustaining extraction growth to support margins through the transition .