HIAWATHA, Kan. — AgJunction Inc. (TSX: AJX) a manufacturer of automated steering and machine control technology for precision agriculture, reported financial results for the fourth quarter and full year ended Dec. 31, 2016.

On Oct. 15, 2015, AgJunction (AJXGF) successfully completed a merger with Novariant Inc. ("Novariant"), strengthening its position within the original equipment manufacturer (OEM) precision guidance and machine control markets. AgJunction's consolidated fourth quarter and full year 2016 results are presented as a combined entity. However, the comparative fourth quarter of 2015 includes only partial contribution from Novariant's operations.

Fourth Quarter 2016 Financial Summary vs. Fourth Quarter 2015

• Total sales were $8.2 million compared to $11.6 million
• Gross margin increased to 35.1% compared to 23.7%
• Net loss was $(2.9) million or $(0.02) per share, compared to $(9.9) million or $(0.09) per share
• Adjusted EBITDA was $(2.4) million compared to $(4.5) million

Full Year 2016 Financial Summary vs. Full Year 2015

• Total sales were $42.3 million compared to $39.0 million
• Gross margin increased to 39.1% compared to 38.0%
• Net loss was $(18.2) million or $(0.15) per share, compared to $(9.1) million or $(0.11) per share
• Adjusted EBITDA was $(4.9) million compared to $(2.9) million

Management Commentary

“Our fourth quarter and full year results reflect the weakness in the global agriculture industry,” said Dave Vaughn, president and CEO of AgJunction. “We are using this slow-down as an opportunity to reconfigure the company to best serve the needs of our global customer base so that we are ready with the right products when the market inevitably recovers. In fact, we have assembled a dedicated team to answer the demand from global platform producers for vehicle- specific, AgJunction-engineered aftermarket retrofit kits, and this effort is showing early success with several OEM prospects.

“Our partners continued to integrate our technology 'behind-the-scenes' in the fourth quarter. For example, one of our top OEM customers adopted our new terminal hardware and integrated our latest innovative software functionality on an assortment of their automatic steering systems. Adoption of this software functionality allows both our customers and AgJunction to expand into emerging markets.

“Looking to 2017, we will continue to focus on delivering products and technology that best suit our clients’ needs in both today’s market and in the long-term. We will also continue to utilize our strong patent portfolio to drive creative new business opportunities as we have done with our recent agreement with Reichhardt GmbH. Given our deep industry experience, innovative product development and strong IP, all supported by our strong balance sheet, we believe we are well-positioned to help our customers both today and into the future.”

Fourth Quarter 2016 Financial Results

Total sales in the fourth quarter decreased to $8.2 million compared to $11.6 million in the fourth quarter of 2015 due to continued softening in the agriculture market.

Gross profit in the fourth quarter increased slightly to $2.9 million compared to $2.8 million in the fourth quarter of 2015. Gross margin increased to 35.1% compared to 23.7% in the fourth quarter of 2015. The fourth quarter of 2015 included one-time reserves of $0.7 million relating to inventory designated for early market removal, as well as $0.6 million in additional expenses related to fair value increases of Novariant inventory.

Total operating expenses declined 27% to $5.7 million compared to $7.8 million in the fourth quarter of 2015 due to the rationalization of the company’s workforce since the Novariant acquisition. As a percentage of sales, operating expenses were 69.3% compared to 66.6% in the fourth quarter of 2015.

Net loss in the fourth quarter of 2016 was $(2.9) million, or $(0.02) per diluted share, compared to a net loss of ($9.9) million, or ($0.09) per diluted share, in the fourth quarter of 2015.

Adjusted EBITDA in the fourth quarter was $(2.4) million compared to $(4.5) million in the fourth quarter of 2015.

Cash and cash equivalents at the end of the fourth quarter totaled $12.9 million compared to $13 million at the end of 2015. The company continues to carry no debt. Working capital was $22.4 million, down slightly from $26.7 million at the end of 2015.

Full Year 2016 Financial Results

Total sales in 2016 increased 8% to $42.3 million compared to $39 million in 2015. The increase was primarily driven by the acquisition of Novariant.

Gross profit was $16.5 million compared to $14.8 million in 2015. Gross margin was 39.1% compared to 38% in 2015. The increase in margin was primarily due to fewer overall inventory write-downs on a year-over-year basis and an inventory step-up in 2015 associated with the acquisition of Novariant.

Total operating expenses in 2016 increased to $23.4 million compared to $20.6 million in 2015 due to the full year impact of Novariant's operations in 2016. As a percentage of sales, operating expenses increased to 55.4% compared to 52.7% in 2015 due primarily to sales and marketing costs associated with regional expansion and additions to the global customer care team.

Net loss in 2016 was $(18.2) million, or $(0.15) per diluted share, compared to a net loss of ($9.1) million, or ($0.11) per diluted share in 2015. Net loss in 2016 included an $11.3 million goodwill impairment. Excluding this non-cash charge, net loss in 2016 was $(6.9) million or $(0.06) per share.

Adjusted EBITDA in 2016 was $(4.9) million compared to $(2.9) million in 2015.