Q3 2020 Marrone Bio Innovations Inc Earnings Call
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Good day and welcome to the Muslim Bio innovations third quarter 2020 earnings Conference call. Today's conference is being recorded I just don't like to turn the conference over to Linda Moore General Counsel. Please go ahead ma'am.
Good afternoon, everyone and thank you for joining our call welcome to the Twentytwenty third quarter earnings conference call hormone bio innovation.
On the call today are CEO, Kevin He lash, CFO, Jim Boyd and Chief Commercial Officer, Kevin Hamill.
If you would please refer to slide two I would like to remind you that this conference call may contain statements regarding managements future expectations plans projections forecasts and prospects.
Certain material assumptions were applied in reaching these conclusions and making these statements.
Therefore actual results could differ materially from those contained in our forward looking information import.
Important factors that could cause differences are contained in the reports filed by the company with the Securities and Exchange Commission, including under the heading risk factors Mdna and elsewhere in the Companys Annual report quarterly reports and other filings the.
The company expressly disclaims any obligation to revise or update any guidance or other forward looking statements to reflect events or circumstances that may arise. After the date of this call.
After our remarks, we will hold a question and answer session I will now turn the call over to our CEO, Kevin He lashed Kevin.
Thank you Linda and thanks to everyone, who is joining us on the call today.
If you refer to slide three it's been an exciting for three months with Morone bio Permian.
The store by recognizing the unwavering commitment of everyone in the company to meeting our customers' needs and contributing to their success I've.
I've seen as demonstrated in every aspect of the business and our results this quarter and year to date reflect his passion.
Before we dive into the numbers I want to revisit threed commitments, we made to you our shareholders in our last earnings discussion.
One we said we would continue to grow our base business and we have.
Two we said we would closely manage our operating expenses and we are and will continue to do so.
And three we said we would continue to bring novel Efficacious AG biological products to the market.
Products that deliver industry, leading value to our shareholders stakeholders and we're on track to deliver on this commitment and will go into more detail on all three during this call.
Overall I believe the company is on the right path to continue to deliver double digit revenue growth have become profitable in the near term, which is borne out in our numbers.
Third quarter results were in line with our expectations and we delivered our ninth consecutive quarter of revenue growth.
As shown here revenues increased 27% quarter over quarter with gross margins of 56.7%.
Looking ahead, our year to date results keep us on track to achieve full year revenue growth in the range of our historical levels and margins in line with her annual target in the mid 50% range.
The team has delivered on two of our immediate growth objectives and our results are a direct function of their success.
First we expanded our international business with the successful launches in Latin America.
Or plant health products are now in the hands of our channel partners and ready for application in the current growing season.
Second we're accelerating our presence in the seed treatment market.
The North America product is currently moving into the channel as seed companies begin applying treatments for corn and soybeans distributors and growers continue to see the benefit from our biological products for insect nematode control, which is reflected in the demand we witness in our third quarter sales in a few minutes Kevin Hamilton.
Discuss the outlook for the remainder of the year and into 2021 and the benefits of what we see as a positive shift in our product mix.
If you would turn to slide four a key focus area for us has been our R&D pipeline.
The team has undertaken an in depth review to recast the pipeline that delivers the maximum value for all key stakeholders, including our GOR customers, our distribution channel partners and our shareholders.
As outlined in the Blue box on the right side of the timeline, we have a robust suite of products, we intend to bring to the market between now and 2025.
These launches will serve to further strengthen our portfolio and drive the expansion of our business.
Slide five gives you a closer look at our near term launches.
We've identified seven projects that have a high probability of reaching the market in 2021 and 2022.
All are well understood in our pipeline and commercial portfolio with clear lines of sight into addressable markets crops and customer value propositions take.
Taken together their revenues five years from launch could equal half of our revenue in 2019.
Slide six provides a longer term view.
As shown here, we have products in development across the spectrum of AG biologicals.
We believe our pipeline uniquely positions morone bio as a clear leader in the research development and commercialization of products within this rapidly growing sector of agriculture.
Finally, slide seven takes us one step further showing the impact in projects that can come to the marketplace through 2030.
We are focused on a truly robust set of options across the entire sector and especially in the C treatment market in.
In addition, we have significant opportunity to build upon our leadership position in bio protection products, while making further in roads into the major row crops globally.
The end result is powerful we.
We have a refreshed pipeline that could add approximately $50 million and incremental revenues in the 2026 timeframe.
More than $100 million and incremental revenues by 2030.
These updates or a different and more detailed view of our pipeline than what we have shown in prior years.
As you can see some priorities have shifted and we were fortunate to be able to add a number of new projects from our recent acquisitions.
We believe this revamps R&D program is highly responsive to customer needs, while making the most efficient use of available resources to provide the greatest returns on investment.
In summary, if you would turn to slide eight the third quarter is a bellwether for what we believe is to come.
One we delivered further diversification of the portfolio and the benefits of that mix effect.
Two we extended geographically with both our current product line and new product offerings and three we solidified our obsession with being brilliant at the basics delivering operationally with spending that is appropriate for our growth while maintaining a tight focus on investing in areas that clearly match customer needs.
As Jim will discuss in more detail. We believe we can hold the line on operating expenses, while still being able to adequately fund our growth ambitions.
Before I ask Jim to discuss our financial results in detail.
I'd like to thank him.
You know Jim has announced his intention to retire and is working with us through the transition during the search for his successor.
Jim has shepherded the company through its growth as a market leader in the biological space and his contributions as CFO leader and mentor are numerous.
I speak for myself, the board and our employees want to express our gratitude and congratulations Jim.
Jim I'll now turn the call over to you with our thanks.
Thank you Kevin It has been a privilege to be part of them round buyout and I look forward to watching the company continued to succeed and girl.
Speaking of which well.
While we anticipated a smaller revenue contribution in the second half of this year as compared with the first half the team continued to deliver significant positive growth for the third quarter and the year to date.
As you'll see on slide nine third quarter revenues rose, 27% to $8.8 million for the quarter and rose, 35% to $30.7 million year to date.
With another quarter of sales still to come we already have surpassed our full year revenues for 2019.
Gross margins increased in the third quarter by 520 basis points to 56.7%.
By 400 basis points year to date to 58.6%.
We are now into our ninth consecutive quarter of revenue growth year over year, and our eighth consecutive quarter of gross margins above 50%.
From both a revenue and margin perspective, we are benefiting from our greater global reach with a more diversified mix of products that deliver on performance value and sustainability.
If you would turn to slide 10.
We're making progress on managing operating expenses relative to growth of our revenues and gross profit.
On a comparative basis, there were pluses and minuses in operating expenses for the quarter and the year to date.
Some are ongoing keeping in mind that we now have additional operating expenses from the acquisition that profile.
Some items are specific to the year to date comparison.
These include M&A and litigation expenses in the third quarter of 2019.
And the benefit of the P.P.T. loan in the second quarter of 2020.
Taking all these into account we are moving in a positive direction with operating expenses that are flattening quarter to quarter and year to year.
Looking forward, we don't anticipate any major creep in our ongoing operating expenses well.
I will speak more specifically to our outlook for 2021 in our year end earnings call.
But as a team we are targeting to maintain operating expenses in line with 2020 levels plus inflation.
We believe this is a level of operating expenses that will support our continued strong growth and.
And that we believe will accelerate our path to profitability by essentially flattening the curve.
If you would turn to slide 11.
Managing our cash position has been one of the most significant parts of my tenure as CFO we.
We have worked hard to balance expense management, while investing in our product portfolio pipeline and channels to market.
We believe we are managing our cash usage to deliver a leading biologicals company with strong growth potential and returns that benefit all of our stakeholders.
This quarter cash from operations was a use of $900000 as compared with the use of $5.7 million in the third quarter of 2019.
Year to date also improved with a use of cash of $8.6 million down 48% as compared with the first three quarters of 2019.
Our recent warrant restructuring was designed to provide for our growth.
The schedule of warrant expiration dates in 2020, and 2021 was carefully plan to anticipate our cash needs.
Given that our first half is larger from a revenue perspective than our second half we have plan for an influx of cash in the fourth quarters of both years.
I would add that the warrant restructuring reduced overall dilution and overhang.
By the end of 2020 warrants outstanding will be reduced by 79% as compared with the start of the year and by 99% by the end of 2020 ones.
We believe the warrant restructuring significantly cleaned up our balance sheet and reduce dilution in a cost effective manner, while providing for the growth that will benefit all shareholders in the future.
Therefore significantly de risk the company's capital structure.
As we approach year end 2020, I would like to Echo Kevin's field.
We continue to expect the second half of 2020 will be smaller than the first half.
Uncertainties from the coated 1910 down there are still a lingering concern.
And we are keeping a close watch on expenses as our customers need shift that's consumer demands.
That said.
Our story is still one of strong growth in a unique sustainable space in agriculture.
We remain on track to significantly outpace the single digit growth on the commercial AG business as well as the projected mid teens growth for them biological sector.
We have the funding to support our commercial growth as well as support a refocus R&D pipeline.
Our prospects are as exciting as it passed and it has been my privilege to be a part of this growth story.
I'd like to turn the call over to Kevin Hamel now to give you more color on our commercial outlook.
Yes.
Thanks, Jim and thank you for being a strong supporter of the commercial team.
We thank you for your contributions and leadership and wish you all the best in retirement.
Kevin He lashed alluded to some of the factors shaping the AG economy.
Let me start by providing a bit more color.
First.
The entire world continues to deal with the cold at 19, and then again.
We anticipate the need to be prepared to operate with this virus at least to the first half a 2021.
While we believe we have managed quite well so far.
Plans are being made to ensure we have the ability to continue to manufacture and deliver our products to the market in 2021.
Well it certainly will be a challenge challenge.
I do not see a material impact on the growth projections next year as a result of the cold virus.
Second weather conditions in the western United States have led to decreased fungicide and insecticide applications.
However, I am pleased to say that year to date September we grew our share in insecticides and fungicides.
Looking forward, we are forecasting a return to a normal year in 2021.
We'll be well prepared to serve the market.
Third.
Turning to see treatments.
We anticipate that stronger prices for row crops will <unk> will provide tailwinds for demand overseas treatments in all markets.
We've been in discussions with all of our customers and have already started moving product to them. They pair for the upcoming planting season.
All of this as a backdrop to our plans as we complete the 2020 season and prepare for 2021.
The most important trend for growth however.
The diversification of our portfolio and the corresponding positive mix effect.
I'd like to address our diversification in three categories.
The products we sell.
Crops, we serve mid.
And the geographies we reach.
Slide 12, adjusted sales by product category.
Our historical base has been in the crop protection Arena.
Bio based products to protect crops against fungus insects nematodes.
These are either sprayed on the liza plants and trees at various points in the growing season.
Or use as a C or saw the base treatment of planting.
This is the heart of our portfolio one that we continue to grow.
The seat and so treatment side of our business has carried a significant change in the product mix.
We would expect heat insulin treatment to grow to 40% to 45% of our portfolio over the next three years.
She treatments provide insurance for growers.
As they proactively respond to stress is that a person at the time of planning based on experience and known growing conditions.
Performance, you see trade price into probability all come into the buying decision.
All else being equal.
We believe distributors see companies and growers will opt for biological treatments.
New partnerships.
Like the one we announced last quarter with BYD.
Well allow us to expand our buyers unite offerings into the plant health market.
Our acquisition of toll from also accelerated expansion into plant health.
And we are forecasting that this segment will make up 14% of our sales and 2023.
As we mentioned in our second quarter call.
We are starting our commercial launch of our new pay center product for plant health.
In our mistake positioning it for use in corn and soybeans.
On the term he.
He said it potentially could be combined with pro formas emergent older product for plant health.
The near term pipeline that Kevin he last shared earlier.
Underscores the value that crop health products have in our portfolio.
Half of our products slated to be launching 2021 or 2022 are in this category.
The shift in mix plays itself out when you segment our sales by crop.
Shown on slide 13.
Again.
Especially crops have been been the foundation never sales and it is speed and so treatments that drive our growth in the major roll crops.
Today the.
The largest woke up market for us it's soybeans, but.
But our pipeline shows continued expansion <unk> corn need in other oilseeds.
Finally, we're seeing the benefits of the relationships, we've built with partners and key growing regions outside the United States.
If you would refer to slide 14.
We are becoming a far less less centric company.
But potential to expand significantly in the large growing regions in Latin America, and the European Union.
2023, yeah.
We expect our sales shouldn't be roughly equal between North America, and the rest of the world.
In summary.
We have created the platform for the next wave and the continued evolution of the company.
Our results will vary quarter to quarter, but the full year results will be the same.
We expect to outpace our industry peers in terms of revenue growth and to benefit from the types of margins associated with products that deliver exceptional customer value.
Success requires the right product performance price and partners plus a heavy dose of patients to build that presence.
We were delivering on our commitments to expand internationally.
Diversify into row crops, untapped, new market segments, and plant health and seed and so treatments.
We can never say a work is done but we are confident that we have the building blocks and the pipeline pipeline the place to succeed.
At this point, we'd like to turn the call over to the operator to begin or two in a session operator.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to let us know treat try equipment again press star one to ask a question.
And we'll take our first question today from Ben Klieve with National Securities.
All right. Thanks for taking my questions here. So first I want to turn to the R&D pipeline that you laid out on slide flipside insects on I don't see 'em <unk> 014 on here am I missing something or what was it wasn't me I'd given was that product given a name that I'm not aware of where is that at the time.
On here.
Hi, Ben Kevin He last year, Yeah, Ben So it's a great question.
As I mentioned in my opening remarks, we've gone back to the drawing board in terms of our R&D pipeline and really taking a hard look at what products.
Should we be focusing on it to bring to the market to provide the highest value to us and our shareholders were specifically regard to old one for we have elected to move on to all one five.
Which is a much more I would say, what we would call generation two product in that category. So you see it there as well one five.
And we're going to go straight to what we think is the clear winner in this category for us and it's going to take us a bit more time to bring it to market, Kevin or how will you get you have anything to add to my comment.
No I agree is that one of the things. We are fortunate to have is the pro formas acquisition to add in their product pipeline. So we could reevaluate refreshingly set up pipeline and we're very excited about the pipeline and we're actually in good shape to watch your near term products in 21 22.
But specifically today a one for one five as Kevin mentioned, we transition to Olin side and I believe we mentioned this in a.
Two to three earnings call prior.
And it lifted a new launch a focus I know one five and you can expect is going to take a little bit time too.
Optimize the vinyl formulation field testing in the marketplace and we get the final registration of the products. So it's I'm still in there. We're still excited about it you know where I'm very focused on getting this product to market.
Perfect and I got to two clarifying questions here.
Remind me that the distinction from old, Florida on five of them one of them a targeted for organic and the other conventional if I remember correctly and then also on slide six the own five Washington, 2027, as annotated with a c. what does what does that mean.
Yeah, Kevin can you you can continue please thanks, Okay. No problem. Yeah, we did have an oh, one for but the one five is is that product will be going forward with this product can be built using their organic and conventional we just as good.
They did they all went five to make sure that we have the conventional logo in there, but this product. The C stands for conventional but this product will also be el Dorado into organic so we have transitioned away from no one for two completely to the old one five.
Got it okay. That's that's helpful. Thank you on a perfect now turning to the quarter on you talked about kind of the timing of the pro form acquisition with regards to Opex, but I didn't I didn't catch a a revenue number so for us. It can you break down the revenue contribution that was a that we saw in the third quarter that was there.
From the acquisition versus what was organic in nature.
Oh.
Yeah, Ben Hi, it's Kevin he last year again, so Ben we don't segment out pro form.
Or our products for that matter.
But what I can tell you and I'll ask Jim to chime in here in a second.
Is that we remain extremely happy with our pro farm acquisition. It has contributed a material amount to the company in the relatively short time that it's been here.
And we foresee you know their pipeline continue to add value for us moving forward, but in terms of a bit more color on pro farm I'll hand, it over to Jim.
Yeah, well I'll just echo what you said, Kevin but add that pro time is contributed in every quarter. It is contributing now as their seed treatments are rolling out a poor Europe.
And we think long term that there will be a very significant a contributor to the company.
I I might add that we expect them to be accretive on a net earnings and a cash flow basis for the year.
Got it okay. Thank you and last one for me and I'll jump back in queue here, but I Wonder if you could touch base on the press release that came out I don't know I got a couple of months ago now on the distribution agreement with riser backed or on <unk> can you just kinda talk a bit about a sort of the the structure of the disagreement on.
And and talk about although timing is it doesn't agreement that's pretty well developed such that you're expecting revenues. That's the growing season in South America or you know do you need a couple of years the field testing and educating the sales force things of that nature that would make that not not really material here for a couple of years.
Yeah, Ben Thanks, its Kevin he will actually again, so great question and I'm glad you brought it up we're very excited about our new relationship with regional Baxter and the great part about it is it expands our footprint into the southern cone of Latin America at.
And we do expect it to start generating more you know immediately basically but Kevin Hamel was a instrumental in getting that deal across for us with his team and I'll, let him expand on that further.
Yeah, I just want to echo what I'm, Kevin He lives said that when you bought pro form we saw the attractiveness of expanding in Latin America, and expanding into row crops and this agreement with visa back to achieve both of those schools and what it is it's it's yet.
The folder plant health news of the pro from product and what it does is it's helping control a biotic stress.
In crops exciting the main regions, Argentina, Uruguay, Peru, Paraguay and Bolivia.
And what the grower. We showed you see at the end is at a higher yield by helping out control. Some of this I abiotic stress.
In terms of your direct question, yes were seeing revenues in both third quarter and fourth quarter as a result of disagreement.
Got it very good alright, I think that does it for me. Thank you all for taking my questions and I'll get back in queue.
Thanks, Brett.
Next we'll hear from Bobby Burleson with Canaccord.
Hi, Thanks for taking my questions.
So just curious you've talked you've touched on diversification of products, especially as we look out a few years curious you know with a row crop traction what kind of synergies you see across the portfolio are there opportunities to really boost what you're doing in a row crops outside of the season and as well.
Yes.
Yeah, Hey, Bobby it's Kevin he lives so that.
That is one of the great parts about our portfolio is that we do see lots of overlap or offer.
Opportunities to combine and as Kevin.
Hamill can articulate we have three ways that were looking at the market, whether its bio unite biofocus and Terra connect.
So yeah. We we're just getting started in our view in terms of Ah fleshing out all the opportunities of permutations and combinations of our products not only with with themselves, but with other products that are in the market Kevin I'll pass it over to you.
Yeah, So as I mentioned earlier the acquisition the pro from just makes our tech our pipeline that much more robust and we definitely do see synergies in there and a couple of different ways. One is the sales synergies in terms of the sales forces in the field development people in both companies.
But specifically to your question Bobby on a product synergies, we actually see synergies and all segments of the business. We count currently has been developed in one of our pipeline products is a combination.
One of our bio protection products with a the crop health product from pro from that we see is able to go into the seed treatment business.
And then the full year side of things, we talked about quite a bit about a product called pacesetter. So we did actually a lot of 'em testing. This summer that in GDP crop health product into a pay set upon it.
And what we've seen is another step wise change from and to pay center to the goal was fungicide naive, adding you do p. today I would like to Pacesetter plus the goes fungicide, we continue to see stepwise changes as we put these products together.
So all in all you see a lot of synergies not only from the sales force, but also on the product pipeline by combining these products together.
And go to market as we go to market.
Okay, Great. That's helpful. So another one for me you guys have laid out a pretty detailed ER product pipeline extensive launch schedule et cetera.
I'm just wondering are there any metrics that you can flush out a little bit in terms of how you came up with the expected revenue contribution at or what are you doing there to try to be conservative.
Oh.
Hey, Bobby 70 last year again so.
That was one of the first things that we dug into when I came on board in August.
It's basically taken us until now.
To go through all the work product by product looking at every aspect of what it would take to bring it to market from the bench to field trials to regulatory customer acceptance price point formulation you name It and then we've taken.
Every single step along the way and risk adjusted it so.
So it's a it's a long and lengthy process with many many many hours of work that's gone into it.
And I'd certainly like to.
<unk> give a big shout out to the team for diving into it.
But I think what we have now is a very realistic pipeline.
We're very focused now in terms of what we're going to work on and I'd say equally important what we're going to put on the shelf for now.
And we believe we've come out with a a revenue stream that you know is deliverable you know when we're we're all committed to a you know putting her hand in the fire and and are going to work to to make it happen. So Kevin you were leading the pipeline or you know from the commercial side with yours.
<unk>, what what else can you.
Yeah, and I agree with you, 100% Kevin is that when we looked over the pipeline. It's just said, we're so fortunate to have such a great pipeline, a very robust pipeline and opportunity to combine a proud of synergistically, but when we look at the risk factor. We did a couple of things first of all Kevin Nash.
I mentioned this is Dan.
The risk adjustment. So we went across the across the whole product line and looked at it from a risk from a regulatory from my product development side of things and also from a commercial launch side of things the risk adjusted that to come up with these.
Forecast in terms of sales and by year.
The other thing we did is looked at how the risk was the new launch. These so we are fortunate that it's for those products that we're playing in launch over the next two to three years, we really had done the heavy lifting so far so we're really ready for the launch of the new products and how we prepare.
Most of that is that we have a fortune to have an experienced team in place no I really understands the market and has helped us to articulate this opportunities based on different regions in the world.
We have done extensive field testing to ensure the product of forms delivers on our commitment and also allows us our customers to experience and worked with the products prior to sale.
And finally, we have the distribution in place, but those are products that have been established for six of the seven products. You have the distribution plays we are active in discussions for the remaining offer in the near term pipeline with a partner. So overall you risk adjust the sales to adjust for.
Some risks from native regulatory development and sale and sales and we have taken precautions to make sure that were heavy lifting is done before we launch or near term pipeline.
Great. That's very helpful and if I could just squeeze one more in <unk> I'm wondering just with the Gen is on the verge of retiring here.
You know what let's see effect on you know the ability to.
You all with push back on Opex reduction I know theres always some kind of <unk>.
Pushed back in certain areas everybody's project is the most important engine has institutional bid or domain expertise to really.
You'll be able to kind of decipher all that is there any good.
Jim how deep is your bench in terms of yeah.
Being able to deal with that type of complexity when when you're pursuing when the firm's pursuing additional opex controls yet beyond your tenure.
Hey, Bobby it's Kevin He louche again, so really good question. So let me make two comments before I hand, it over to Jim.
First of all.
Jim has been professional and gracious enough to commit to staying with us until we find his successor.
That has allowed us to really take our time to conduct an extensive and thorough search.
I can tell you that we're being very picky in terms of looking for Jim successor, So he's not going anywhere well.
Well [laughter] until we find his replacement so thank you Jim for that.
And then I would say also in terms of our Opex.
The two entire team built our budget. So this was not a Kevin he lives or Jim.
Mandated you know dollar Shelby I mean, we really looked at our business.
And challenged ourselves to say, what do we need to run it effectively and efficiently and we all collectively came up with.
The basis of 2020 is our runway. We think we've got is a sufficient amount of amount of resources to us to do what we need to do to fund fund. The company you know of course with inflation.
You know Jim in terms of you know your team and the bench Oh I'll hand that over to you. In addition, any other comments you want to make.
Yeah, Thanks, Kevin or I guess, I'd like to say that as Kevin.
Indicated.
We've got it.
Cost control and expense control as part of the culture of the company, we've gotten some really hard times and we've always been stretched for cash.
Yes, facing a tremendous opportunity so what to invest in and what to manage in terms of our operating expenses has always been sort of central to the company and as Kevin said, it's a it's a companywide effort. We've got lots of good people throughout the company and they are.
Oh, very conscious of about expense management, and and and wanting to succeed in wanting to launch as many projects pot products as we can.
With regard to the bench I am so fortunate.
To have.
So many good people. So many direct reports to me or I I won't embarrassing by name and their names, but the corporate controller or head of planning and budgeting or the head of supply chain or our manufacturing manager out in Michigan.
They're all really solid very capable professionals and I honestly think that that you know several of them could be the CFO. So I think we're we're in really good hands. It was one of the reasons that went into my retirement decision that.
I felt the company was fundamentally strong and almost every aspect of its operations now and it was very capable and it was it was time for me to.
Spend some time with my family.
Okay, well. Thank you for those answers and enjoy your time with your family, Jim and I'll go ahead and jump back in the queue. Thanks.
As a reminder press star one if you have a question well now hear from Amit Dayal with H.C. Wainwright.
Thank you good afternoon, everyone.
So view is just beginning the.
When she little can you guys any chance you Buck the trend the suit.
Oh, sorry, I mean, it's Kevin he last year can you repeat your question. Please.
Yeah. So the fourth quarter is typically you know sequentially lower Hugh.
Yeah, any chance you make a buck that trend this year.
Yep got it for me thank you.
So in terms of our outlook for the fourth quarter I'll make a few comments and then hand it over to Jim.
So in terms of.
How we see the second half of the year. It is typically been the smaller half revenue wise.
We continue to see that going forward.
I would say that as we're looking to Q3 Q4 together if you think about what our historical split has been between one H to age.
We don't see any move off of that trend this year and probably not going forward for some time. We are we are definitely looking to expand in the southern hemisphere, which will provide some more weight to our second half.
At least for 2020 and 2021 I would expect and we do expect to see similar splits between first half and second half Jim.
Yeah, I I guess I'd add.
As Kevin said you know the first half is stronger for US Alex has been a lot. This year. We expect you know the first half second half to be sort of in the same race, though as it was in and 2019. However, you know there there has been an impact a coded although.
You know we've been very successful in the face of it and so I I I I think fourth quarter is going to be interesting I think we're going to end the year very strongly.
Yeah, and if you want I can just add a little color into the marketplace, what's happening there if you wish.
Yeah, Kevin I think so yeah, and so to me when I kind of see when I look at the fourth quarter is that.
In the U.S. domestic specialty market I see US you know the crops have been harvested in most of the U.S. and now we just have some application starting up and they like the South East South West of where they are starting to plan some of their crops. So the seasonality.
In Latin America were seeing some are for your applications for crops have been already planted or a month or two ago, but a core market is preparing for the U.S.C. treatment market, where we're ramping up.
Corn seed that was harvested and is being treated now for planting and 2021. So I'd say, we're kind of winding down the most the especially the business with exception for southeast and southwest in the U.S., finishing up some pull their applications in Latin America, but really.
Certainty on build onto a C to the business in the U.S.
Mr., Andrew for that or you'd appreciate it I'm just maybe one more for me you.
You know with respect to sort of the refurbished right. Glenn if you will is there anything in the library that could cannibalize current learnings.
Hi, I mean, its Kevin again, Kevin here Raj.
So.
The way, we think about our entire portfolio is evolving let's say.
So as we are moving from what I call or we call generation, one two generation to we see opportunities to expand.
Our footprint both with the customers that we have on the crops that we're currently on moving into new crops moving to new geography. So when we show our pipeline revenue as we have today.
That is all incremental valuation to the company.
We certainly have taken into account for example, if we create a generation two product I guess, it will probably face out a generation one.
But what you've seen today is the net effect of that so the short answer is yes to some degree but the good news is the one plus one generation one plus generation two is is bigger than a the generation one standalone if that makes sense.
Kevin what I'd rather than a.
Yes, so Kevin I agree with Jane and kind of how I'm looking at the.
The I plan to look at a couple of different ways, one that we outlined in slide six but there's also another one that you alluded to meet was.
Break down of I break it down by second generation of products.
Stepwise changes, but there by United program novel modes of action.
So if you look at that second generation of products. This is both for the crop protection and the crop health part of a portfolio. So both from the legacy products of them around and so far we have second third generation products, there that will make us even more competitive.
They had them in the marketplace from reduced usage rates increase performance lower cost of goods. So we're helping this second generation of products, it's going to drive higher sales and margins and that's as cabin U.S. mentioned this is all incremental.
To our current pipeline then the second part of how I look at the pipeline is these.
Stepwise changes and bio unite program. So that's introducing a product combination of our biology chemistry.
And there's a couple of different great options. There. We're looking at is one of them is where we're providing I mentioned this earlier on we're mixing our chemistry or SAR biology, with pro firms biology, and mixing that but can she and she treatment Americas. We expect significant positive results for this by United program and the third part of our pipe.
Mine is the new model novel modes of action the herbicide that we talked about earlier on so overall, yes, there'll be some second or third generation products, but we believe that's going to help us increase our sales and margin as we go forward.
Yes sounds like you know with this new Jersey original offerings, though.
Turning to the full customer stickiness also goes up.
Yeah, Kevin you want to comment there.
Oh I'm sorry, my reception was little bit off there and maybe could you just repeat that question for me. Please let me just maybe the other with the second generation products second and third generation products the.
The customer stickiness attributes are real products also increase.
Yes, we saw the second generation the products can be anywhere from.
You lower usage rates and they perform better or and increase having a better net new components, there's the gay priests yield.
Or better performance efficacy on a fungus or a past so there's various different benefits in the <unk> built into the second generation products. In addition to 'em, we believe that a lot of them. They can get lower cost of goods at the end of them too.
Thank you guys Thats all I appreciate it.
Okay and.
That will conclude today's question and answer session I will now turn the conference over to Kevin. He you asked for any additional closing remarks.
Thank you operator.
And thank you to everyone for your time and interest today.
You provided a lot of new information on how we view the business from the expansion of our commercial ports are two needs to the focus of our R&D pipeline.
And from the management of our operating expenses to our ability to fund our operations going forward.
All are significant positives and a continued evolution and growth of the company.
We'll be providing some expanded investor information on our website over the next few weeks and I invite you to look.
For additional investor information on the company.
We expect to deliver on our growth commitments, while being brilliant at the basics and I will take both to reach our goals to become profitable and further reward our shareholders.
Thank you again for your time and attention today, and we look forward to speaking with you in the near future.
That will conclude today's conference. Thank you for your participation you may now disconnect.
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