AGI Announces Plan for AGI Digital Reorganization

After a comprehensive review, Ag Growth International Inc. (“AGI”, the “Company”, "we", or "our") (TSX: AFN) today announced a revised strategic plan to reorganize and reposition the AGI Digital business segment for operational excellence and future profitability.

The strategic plan will focus on core markets and products, reduce operating costs, and improve AGI Digital financial performance. Beginning in the first quarter of 2023, the reorganization will impact approximately 3% of our total workforce and result in an anticipated $8 million severance charge being recorded in AGI’s financial statements for the fourth quarter of 2022. As part of the AGI Digital reorganization plan, the Company is also expecting an impairment charge on goodwill and intangible assets in the range of $65 to $80 million to be recorded in the fourth quarter of 2022. The impairment is a non-cash charge that will be adjusted, as necessary, and finalized in the first half of 2023.

"We continue to be committed to AGI Digital and are excited about the role it plays as a strategic differentiator for AGI," said Paul Householder, President and CEO of AGI. “Our customers value the ability to collect data from their equipment and to use it to improve the safety, efficiency, and profitability of their operations. Focusing on our core Digital products will accelerate our ability to bring these valued services to market, driving greater customer adoption and overall business performance. These decisions will ensure that AGI Digital is on a path to becoming a sustainable positive contributor to AGI’s overall results. I would like to express my sincere appreciation to the employees across the entire AGI Digital team.”

Today’s announcement does not impact or change the Company’s previously disclosed full year 2022 Adjusted EBITDA guidance of at least $228 million1.

AGI Company Profile

AGI is a provider of solutions for global food infrastructure including seed, fertilizer, grain, feed, and food processing systems. AGI has manufacturing facilities in Canada, the United States, Brazil, India, France, and Italy and distributes its product globally.

NON-IFRS FINANCIAL MEASURES

This press release makes reference to “adjusted earnings before interest, taxes, depreciation, and amortization" ("Adjusted EBITDA") (historical and forward-looking), which is a non-IFRS financial measure. Non-IFRS financial measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Accordingly, Adjusted EBITDA should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. Adjusted EBITDA's most directly comparable financial measure that is disclosed in our consolidated financial statements is profit (loss) before income taxes. Management cautions investors that Adjusted EBITDA should not replace profit or loss as indicators of performance, or cash flows from operating, investing, and financing activities as a measure of the Company’s liquidity and cash flows. For an explanation of the composition of Adjusted EBITDA (historical and forward-looking), an explanation of how Adjusted EBITDA provides useful information to an investor, and an explanation of the additional purposes for which management uses Adjusted EBITDA, see the information under the heading "Non-IFRS and Other Financial Measures" in our management's discussion and analysis for the three and nine month periods ended September 30, 2022 (the "Q3 MD&A"), which information is incorporated by reference herein. The Q3 MD&A is available on SEDAR at www.sedar.com. The following table reconciles profit (loss) before income taxes to Adjusted EBITDA for the years ended December 31, 2021 and 2020:

1. See “Share of associate's net loss (gain)” in our management's discussion and analysis and consolidated financial statements for the year ended December 31, 2021 (“2021 Statements”).
2. See “Note 25 [e] - Other expenses (income)” in our 2021 Statements.
3. The Company’s share-based compensation expense pertains to our equity incentive award plan and directors’ deferred compensation plan. See “Note 24 – Share-based compensation plans” in our 2021 Statements.
4. See “Equity swap” in our 2021 Statements.
5. Transaction costs associated with completed and ongoing mergers and acquisitions activities.
6. The result of a change in management estimate on variable considerations for a one-time sales concessions related to previous sales contracts.
7. Includes restructuring and other acquisition related transition costs, as well as the accretion and other movement in contingent consideration and amounts due to vendors.
8. See “Remediation costs and equipment rework” in our 2021 Statements.
9. Impairment charge is a result of a write-down in property, plant and equipment ($1,558) and intangible assets ($3,516). See “Note 12 - Property, plant and equipment” and “Note 15 – Intangible assets” in our 2021 Statements.

Adjusted EBITDA guidance is a forward-looking non-IFRS financial measure. We do not provide a reconciliation of such forward-looking measure to the most directly comparable financial measure calculated and presented in accordance with IFRS due to unknown variables and the uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value that may be inherently difficult to determine without unreasonable efforts.

FORWARD-LOOKING INFORMATION

This press release contains forward-looking statements and information (collectively, "forward-looking information") within the meaning of applicable securities laws that reflect our expectations regarding the future growth, results of operations, performance, business prospects, and opportunities of the Company. All information and statements contained herein that are not clearly historical in nature constitute forward-looking information. Forward-looking information involves known or unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. Undue reliance should not be placed on forward-looking information, as there can be no assurance that the plans, intentions or expectations upon which it is based will occur. In particular, the forward-looking information in this press release includes information relating to: our intention to implement a revised strategic plan to reorganize and reposition the AGI Digital business segment for operational excellence and future profitability; all elements of the strategic plan, including our expectation that it will focus on core markets and products, reduce operating costs, and improve AGI Digital business segment financial performance; our expectation that beginning in the first quarter of 2023, the reorganization will impact approximately 3% of our total workforce and the amount of the resulting severance charge that we anticipate will be recorded in our consolidated financial statements for the fourth quarter of 2022; AGI's expectation that it will record an impairment charge on goodwill and intangible assets in the fourth quarter of 2022 as part of the AGI Digital business segment reorganization plan, our expectation of the amount of the charge that will be recorded, and our expectation that this charge will be adjusted as necessary and finalized in the first half of 2023; AGI's continued commitment to AGI Digital; our expectation that focusing on core AGI Digital products will accelerate our ability to bring these valued services to market, driving greater customer adoption and overall business performance; our belief that our revised strategic plan will ensure that AGI Digital is on a path to becoming a sustainable positive contributor to AGI’s overall results; our intention over the course of 2023 to continue to refine the revised strategic plan and evaluate opportunities to enhance product positioning within the AGI Digital business segment; and our full year 2022 Adjusted EBITDA guidance. Such forward-looking information reflects our current beliefs and is based on information currently available to us, including certain key expectations and assumptions concerning: that we implement our revised strategic plan for the Digital business segment substantially as described; the benefits that AGI will realize from the implementation of the revised strategic plan; the percentage of our total workforce that will be affected and the amount of severance charge that AGI will incur; the value of the goodwill and intangible assets associated with our Digital business segment; and that our operational and financial results for the remainder of 2022 are consistent with our forecasts. Forward-looking information involves significant risks and uncertainties. A number of factors could cause actual results to differ materially from results discussed in the forward-looking information, including: that management is unable to or determines not to execute the revised strategic plan for the Digital business segment as described, that if executed the benefits anticipated to be derived therefrom do not materialize, or that the strategic plan is further revised; that AGI's estimates of the percentage of our total workforce that will be affected and/or the amount of the severance charge that AGI will record and/or the amount of the impairment charge that AGI will record on goodwill and intangible assets are preliminary estimates only based on unaudited financial results for the fourth quarter of 2022 and fiscal 2022 to date and that the actual amounts recorded in our audited financial statements for fiscal 2022 may vary from the estimates disclosed herein and such variances may be material; that AGI fails to achieve its 2022 Adjusted EBITDA guidance, whether due to fourth quarter financial and operational results not meeting AGI's expectations or otherwise. Readers are further cautioned that the preliminary calculations of the anticipated severance charge and impairment charge on goodwill and intangible assets described herein require management to make certain judgments, estimates and assumptions. These judgments, estimates and assumptions may change as further information becomes available and as the economic environment and our plans change. Therefore, our preliminary calculations are based on management's judgments, estimates and assumptions at the current date and are subject to revision in the future as further information becomes available to AGI. These and other risks and uncertainties are described under “Risks and Uncertainties” in our MD&A and in our most recently filed Annual Information Form, all of which are available under the Company's profile on SEDAR (www.sedar.com). These factors should be considered carefully, and readers should not place undue reliance on the Company’s forward-looking information. We cannot assure readers that actual results will be consistent with this forward-looking information. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. The forward-looking information included in this press release is made as of the date of this press release and AGI undertakes no obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.

FINANCIAL OUTLOOK

Included in this press release are estimates of: the amount of the severance charge that will be recorded in AGI's consolidated financial statements for the fourth quarter of 2022; the amount that AGI expects to record in the fourth quarter of 2022 as an impairment charge on goodwill and intangible assets; and AGI's 2022 Adjusted EBITDA; which are based on, among other things, the various assumptions disclosed in this news release including under "Forward-Looking Information" and including our assumptions regarding (i) the number of employees that are terminated and the amount of severance that AGI will pay to them, (ii) the range of the impairment charge that AGI will incur on goodwill and intangible assets as a result of the reorganization of the Digital business segment, (iii) the Adjusted EBITDA contribution that AGI will receive in 2022 from Eastern Fabricators, which was acquired by AGI on January 4, 2022, and (iv) the Adjusted EBITDA contribution that AGI will receive from revenue growth in 2022 in part from the year over year increase in AGI's backlogs. To the extent such estimates constitute a financial outlook, it was approved by management on December 29, 2022 and is included to provide readers with an understanding of AGI's estimated severance charge and goodwill and intangible asset impairment charge associated with the reorganization of the Digital business segment and AGI's 2022 Adjusted EBITDA based on the assumptions described herein and readers are cautioned that the information may not be appropriate for other purposes.

1 This is a non-IFRS financial measure. See the "Non-IFRS Financial Measures" section of this press release for additional disclosures, including for a reconciliation of Adjusted EBITDA to profit (loss) before income taxes for the years ended December 31, 2021 and 2020. Adjusted EBITDA for the year ended December 31, 2021 was $176.3 million.

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