Online farm inputs retailer CommoditAg, Effingham, Ill., has been purchased by Farmers Edge Inc., a pure-play digital agriculture company based in Winnipeg, Man., according to an Aug. 12 announcement from Farmers Edge.
The purchase price was reported at US$4.6 million of cash on closing, normal closing adjustments, and an earn-out to a maximum of US$7.2 million of additional cash based upon the business meeting certain performance targets over the next three years. Under terms of the deal, CommoditAg will function as a wholly-owned subsidiary of Farmers Edge, led by the existing CommoditAg leadership team.
“We are thrilled to join a company that shares our vision and mission,” said John Demerly, CommoditAg CEO. “Farmers Edge brings together all parties in the supply chain to the digital ecosystem, so farmers get seamless, transparent, and secure connections to their vendors and trusted advisors. We look forward to growing together, bringing new digital capabilities to the market, and driving innovation that supports our customers’ success.”
Subscription-based Farmers Edge said the acquisition will allow it to expand and diversify its revenue, while also significantly expanding its roster of services to growers and advancing the company’s connected digital ecosystem strategy. At the company’s Aug. 13 earnings call, Board Chair R. William McFarland said the acquisition accelerates acre growth in the U.S. and will add new customers to the company’s Progressive Growers Program and capabilities to the FarmCommand digital platform.
“As a farmer myself, I know how important relationships with vendors are in the agriculture business,” said Wade Barnes, Farmers Edge CEO and Founder. “CommoditAg is a trusted marketplace that thousands of farmers rely on every day, and we are incredibly excited to welcome them to the Farmers Edge family. By combining its robust e-commerce solution with the FarmCommand platform, we can deliver a best-in-class omnichannel experience, bring more value to our customers, reach a wider footprint, and accelerate Farmers Edge growth.”
Farmers Edge was founded in 2005 as a digital agriculture company that uses connected field sensors, artificial intelligence, big data analytics, and agronomic expertise to provide growers with field-level analysis and predictive modeling on its FarmCommand digital platform.
The company launched an initial public offering in March, and continues to add Digital Agronomy acre subscriptions, mostly through its Progressive Grower Program, which does not add revenue until a one-year free period expires. Over the first six months of 2021, Farmers Edge said it added 2.4 million new Digital Agronomy acres in North America, 0.5 million new Digital Agronomy acres in Brazil, and 0.2 million in Australia.
Since its launch in December 2017 (GM Jan. 8, 2018) by founding partners The Equity in Effingham, Ill., and Sunrise Cooperative in Norwalk, Ohio, CommoditAg has grown its e-commerce platform to include 14 retail distribution partners with more than 500 locations in the U.S., servicing approximately 170,000 customers representing a 70-million-acre footprint.
CommoditAg’s digital platform offers a broad portfolio of more than 200 brand and products from more than 25 suppliers, including crop protection, seed, fertilizer, micronutrients/biologicals, agricultural lubricants, and animal nutrition. CommoditAg currently has more than 40 local fulfillment centers covering 13 states, with plans to expand its footprint to over 75 percent coverage of the U.S. business by the end of 2021.
Farmers Edge said it and the current owners of CommoditAg are concurrently entering into agreements committing the group of partnering cooperatives, on a best-efforts basis, to provide introductions to farmers with the goal of signing at least 14.5 million new Progressive Grower Program acres to the company’s FarmCommand platform by Dec. 31, 2023. Farmers Edge said the owners will be paid a commission incentivizing them to identify strategic farmers and for the conversion of such farmers to paid acres after the one-year free period.
Farmers Edge launched a Smart Carbon program in June in Canada, and it expects to have an equivalent program for U.S. customers operational in 2022.
“The launch of our Smart Carbon program has been a significant event for the company, positioning us as a leader of aggregating agricultural carbon offsets and supporting our digital platform subscriptions,” said Barnes. “The June launch has created a lot of interest which is evident from having 1.5 million acres under contract for Smart Carbon and we expect to sign up over 1 million more Smart Carbon acres in Canada over the next couple of months. Most growers will also have access to multiple years of carbon offsets to serialize, aggregate and sell in the coming months. This program will generate significant revenue while supporting the environment. It is a win-win as growers will get a new carbon revenue stream that may exceed the cost of our top subscription fertility products.”
Farmers Edge recently released second-quarter results, showing a net loss of C$10 million ($.024 per diluted share) on revenues of $6.15 million, compared to the year-ago loss of $19 million and $9.05 million, respectively. Adjusted gross profit was a positive $3.06 million, up from the year-ago loss of $2.8 million. EBITDA was a negative $9 million, an improvement over the year-ago negative $13.5 million.
The company reported a six-month net loss of $27.3 million ($0.86 per share) on revenues of $16 million, compared to a year-ago loss of $47.7 million ($4.84 per share) and $16.4 million, respectively. Adjusted gross profit was a positive $2.7 million, up from the year-ago negative $7.9 million. EBITDA was a negative $17.4 million, compared to the year-ago negative $30.2 million.