Q4 2021 Benson Hill Inc Earnings Call
Uncertainties and assumptions and are not guarantee of performance.
We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward looking statements. Such factors include those referenced in the cautionary note included in our Form 10-K filing press release and other filings with the SEC.
Also during this presentation, we will be discussing certain non-GAAP financial measures a reconciliation to GAAP can be found in our earnings release and presentation with that I will turn the call over to Matt.
Thank you Ruben and good morning, everyone I'd like to begin by expressing our sincere. Thanks on behalf of the <unk> team to <unk> for her terrific work as our CFO .
We alert her out of retirement, while serving as a member of our board of directors. She was indispensable and leading our efforts last year to become a public company.
Dan is not getting away from us as she returns to retirement, while remaining on our board.
I'm also pleased to officially welcome team as our new CFO .
He has settled and quickly after a transition period over the last two months Youll hear from Dana in a few minutes.
As I reflect on 2022, it's amazing what the team at <unk> has accomplished our strong performance was driven by our commitment to execution as well as favorable markets and strengthening macro tailwind as you can see mentioned on slide three.
The fruits of those accomplishments were 47% year over year revenue growth to $147 million, excluding our barley business, we divested in 2020.
We are poised to build off of that momentum in 2022.
As we mentioned on our third quarter call in November our focus is on capturing market share with our proprietary non GMO soy portfolio through our recently launched <unk> portfolio of human food ingredients or bright day feed ingredients, namely for the agriculture market.
And our very brand high oleic low analytic cooking oil.
As shown on slide four from technology to farmer engagement to commercial we are continuing to solidify the right foundation across each area of execution.
We believe our financial results and outlook reflect this progress and we further believe that achievements like those listed here are helping to deepen and widen our competitive mode.
There is a significant window of opportunity open to us now and for the foreseeable future due to favorable market conditions and ongoing supply constraints for high value saw ingredients, namely white flake texturize flowers and concentrates let's review these important milestones starting with technology on slide five.
As a food Tech company, we are always innovating and helping enable that innovation is high quality proprietary data underlying our technology platform proper loss in.
In 2021, we significantly expanded our crop Oss platform with the largest data acquisition effort today, including new data layers generated from our most expansive on farm data collection effort ever as well as incorporation of food sensory data.
Our teams also brought online digital twin technology, which uses simulation to model and assess billions of possible product opportunities prior to executing any biological prototyping.
Supporting the data expansion effort was the launch of our collaboration with crop track shown on slide six.
Which connects Benson Hill with the farmer for field level data and sustainability metrics. The system worked extremely well during harvest last fall, creating a robust database for us to work with CPG and others to a test to the use of regenerative agriculture practices on farm.
Eventually we expect crop track to help expand our sustainability practices, including setting qualifications for carbon credit programs.
We commissioned our crop accelerator last October which is a flagship state of the art 47000 square foot facility you can see on slide seven.
It is now fully operational and we are executing crop and ingredient prototyping and breeding activities that allow us to drastically accelerate the early and mid stages of soybean and yellow Pea product development.
With this facility now online we can essentially parallelize, the seed and ingredient product development.
And the datasets, we create from these processes are uploaded to crop OS, enabling further validation and refinement of our predictive analysis and simulation capabilities.
Turning now to slide eight.
R&D team reached a critical milestone late last year, when we achieved an important product specification for our first proprietary yellow pea protein concentrate ingredient.
These results came from a successful 2021 testing and represent a validated protein level in the PPC between 61% and 65% which is suitable for <unk> of the ingredient for products for plant based food markets.
This validation paves the way for us to initiate our first commercial plantings of our proprietary yellow pea varieties in 2024 and to commence commercialization of the resulting pea protein concentrate in 2025.
Turning now to farmer engagement on slide nine.
We exceeded our 2021 contracting acre goal by 33% for our proprietary non GMO flavor Ids, including Ultra high protein.
And then last fall, we harvested those 70000 acres with protein content, achieving and in some cases exceeding our expectations.
We now have an inventory of traceable nutrient dense soybeans as raw material for our ingredient product offerings that we believe supports our guidance for our 2022 revenues.
In 2021, we also deepened our relationships with farmers by launching the food system innovators program for Ssi, which is a former partner network to help define data use standards on farm.
That group also helped us define the plans for protein program for our 2022 contracting season, which we believe will change the rules of engagement are compensating farmers for protein content as well as yield performance and identity preservation.
We launched our 2022 farmer contracting effort before labor day last year.
Our teams have done a fantastic job working with farmers, which has led to early achievement of our goal for contracting proprietary soy acres we.
We saw an extremely high return rate from our farmer partners, whose acreage commitments on average increased by more than 20%.
We also saw strong response from new pharma partners, which has led to more than doubling the size of our growing network year over year.
The strong response for this growing season is we believe a testament to the experienced farmers are having with Benson Hill and the value we are mutually creating on farm, especially during a time of highly volatile commodity markets.
On the commercial side, we Havent ingredients leadership team with nearly 200 years of combined experience in soy based protein products.
I've chosen to come to Benson Hill to execute an aggressive strategy with a unique and attractive value proposition.
We recently launched the <unk> ingredients portfolio shown on slide 10 with high protein content in less processed flour textured flower flake and soy protein concentrates.
This broad portfolio opens additional and large market opportunities for our solutions beyond plant based alternatives such as in baked goods snacks cereals and meet extension.
In addition, we completed lifecycle analyses across our products with the <unk> and <unk> portfolios, which has helped us quantify the benefits of disintermediation certain expenses and environmentally intensive steps typically required for commodity soy ingredient manufacturing.
Those studies demonstrate up to a 70% reduction in water usage and up to a 50% reduction in carbon emissions compared to commodity soy protein concentrates.
In addition to this breadth of opportunities in the human food ingredient space Agriculture, which is currently the largest user globally of soy protein concentrate is another terrific opportunity for our high protein soy.
On slide 11, you can see that the agriculture market is large and growing rapidly. In fact this is the fastest growing segment of animal based protein in the world.
Our ultra high protein soybeans provide a less process high protein and lower anti nutrient feed solution for this market, namely for trout and salmon.
Recently, we announced a new partnership with <unk>, the North American agriculture leader in trout farming.
For this market our solutions can result in up to an 83% reduction in water usage and up to an 89% reduction in carbon emissions compared to Brazilian so sourced SPC when accounting for the impact of deforestation.
Interest is high for our ingredients that are non GMO sustainable traceable and domestically sourced that is why our ultra high protein innovations and what we are doing in yellow Pea is garnering attention from a broad range of commercial customers as well as possible licensing partners during a time of unprecedented market tailwind.
And supply constraints.
On slide 12, we outline some of the current macro trends.
Some believe that these are headwinds for events and no because we are a technology company. It is important to note that we are an integrated technology business as such we are uniquely positioned to offer solutions that can simplify the supply chain and source, 100% of what we sell domestically, which has become more important to cpg's and other.
<unk> in the industry, who are seeking more simple local and sustainable supply chain.
When it comes to food inflation currently running around 7% with animal products at more than twice that.
We're using technology to bear inherently deflationary solutions by reducing the cost structure of the food value chain.
Innovative ingredient solutions like those we are in market with now are compelling for customers seeking to preserve and expand margins as well as meet their sustainability commitments and the increasing demands of consumers for traceable and less processed foods.
Enabling the production of our ingredient products are our creston and see more facilities, which were acquired over the last several months the strategic importance of the Crescent acquisition shown on slide 13 cannot be overstated, we accelerated the ability to provide produce soy white flake by at least a year, which reduces.
Tolling costs as well as near term capex to add white flake capabilities at <unk> as we originally planned.
The capacity at both facilities gives us the ability to scale, our soy portfolio within our integrated business model to the range of a quarter that was 5 million acres.
This is a point of critical mass that we believe demonstrates our ability to drive adoption and gained share in the market that helps also catalyzed our licensing and partnership model now.
Now turning to our growth drivers on slide 14.
We are confident that we have the innovations and the go to market approach to execute our strategy for meaningful market expansion and shareholder value creation ahead.
Ahead of completing the <unk> transaction last year, we had intended to bring in over $600 million in gross proceeds, but because redemptions were so high for us as with many companies that the spec during that time, we raised less than $300 million in net proceeds.
While we didn't need the full $600 million to fully fund our plan, we needed more than $300 million. We felt it was prudent to strengthen our balance sheet now to help us achieve our priority of market share growth.
After considering various financial past and holding discussions with numerous investors. We recently chose to enter into a definitive agreement for a pipe offering which has delivered $85 million in gross proceeds we saw terrific interest from a broad group of investors that led to an oversubscribed outcome.
<unk> included existing Benson Hill owners, but long time holders and others from our pipe executed last year as part of our D spec transaction as well as new investors, who appreciate how we can win by advancing the food system for farmers consumers and the planet.
We believe this raise puts us on solid financial footing to execute on our planned high priority growth efforts and the ingredients segment and continue our trajectory of revenue growth and margin expansion.
This infusion of capital will also help support our objective to be EBITDA and free cash flow positive in 2025.
To meet our growth objectives, we will continue to invest in market share capture through scaling our proprietary product portfolio.
By delivering our proprietary products directly through our integrated channel. We believe we are being rewarded with a more diverse customer base, who are drawn not only to the value proposition of our innovative products, but the fact that the capacity and the market remains significantly constrained and we are a software at <unk>.
This degree of diversification across markets and products is something we are embracing as it provides additional upside exposure in commercial opportunity, but it also reduces our risk profile and supports our efforts in operational excellence.
Furthermore, we continue to believe that a higher margin partnership and licensing approach is an important part of maximizing the reach and impact of our innovative solutions. We are currently in active partnership and licensing discussions with numerous industry players that have an interest across both our soy Andy LLP.
Leos and we remain optimistic about leveraging this extension of our model to achieve yet another level of growth and margin expansion in the medium and long term.
I will conclude my remarks by saying that we have positioned ourselves with a right to win.
As detailed on slide 15.
First we have a significant time advantage as new entrants must work within the constraints of biology, we possess genetics that have been bred for nutrition density for more than 20 years and we are investing in a robust R&D program designed to expand our lead.
Second few if anyone have done protein testing as we are doing for soy and yellow Pea, we successfully demonstrated our ability to use AI and machine learning to stimulate product outcomes and significantly accelerate traditional breeding and product development.
Third we have invested aggressively to establish a distinct and sustainable proprietary data advantage across a spectrum of synergistic data layers to deliver improved product specifications with each new commercial generation.
Fourth we have built an integrated go to market business model that allows us to move beyond the farm gate with or seen innovations and meet the customer where they are that is not easy to replicate and it's taken us years to stand it up.
Finally, we are approaching contracting 200000 cumulative soy acres. It has taken significant time and investment to build the relationships with our pharma partners and we consider our engaged and growing network to be yet another strategic advantage in.
In combination these factors give us confidence that been some he'll enjoys a 6% to 10 year advantage, which we will use to advance the market new generations of product innovations with that I will turn the call over to Dean.
Thanks, Matt and good morning, everyone I'll review, our 2021 financial results.
About our guidance for 'twenty, two and provide some insights on how we think about 'twenty two and beyond.
Let's start on slide 16, with our revenue for 2021.
Looking at the revenue growth in 2021, our teams delivered solid growth results in the ingredients segment with revenue of $91 million.
An increase of 55% year over year, and 104% increase excluding $14 million of revenue from the divested <unk> business in 2020.
The favorable performance reflects volume growth with the introduction of our high protein soy meal.
<unk> cooking oil products as well as favorable pass through pricing for conventional <unk> sales.
These positive dynamics, specifically in soy rather than in the fourth quarter, along with revenue contribution from processing non proprietary soybeans to efficiently utilize capacity and to see more facilities.
In the fresh segment the market for fresh produce and southeast U S was under pressure throughout 2021, including the fourth quarter with higher than expected crop yields both domestically and imported.
Preventative Hill this negatively impacted average selling prices, which nearly offset increased volumes for the year.
As a result for our segment revenues increased 2% to $56 million.
Consolidated gross profit was a loss of just under $1 million a decline of $12 9 million compared to 2020.
Principal factors driving the margin performance, the lower market pricing and the fresh segment.
Higher growth related commercialization cost to introduce proprietary soy ingredients.
Startup costs at our <unk> facility to acquiring with the soybean crushing assets in the third quarter.
We had two nonrecurring items that impacted the year over year gross profit comparison.
First gross profit in 2020 included a $2 2 million contribution from the divested <unk> business.
Second we incurred $2 $8 million and higher freight costs in the first quarter of 2021 to transport.
Soybean feedstock from South America.
Gross profit on an adjusted basis was $1 9 million with a margin of one 3%.
As Matt mentioned, we believe the current macro trends in the global supply chain and food inflation can be tailwind for bensenville.
However, it doesn't mean, we're immune to the inflationary pressures on our business.
Typically we did see cost increases in 2021 for fuel storage and freight which mostly impacted our fresh produce business.
Turning to operating expenses.
100 $122 million in operating expense for 2021 $39 million of our consisted of both noncash nonrecurring cash items, including depreciation and amortization.
Stock compensation.
Back merger transaction costs and public company readiness costs.
We continue to make investments to build out our capabilities specifically in the ingredients business commercial team.
And investments in R&D to expand our capabilities for current and future innovations in soy and Youll op.
Adjusted EBITDA was a loss of $80 million in 2021 as a result of the factors I just described.
Capex was $31 million in 2021. This is about 50% below our earlier guidance is the Crescent facility acquisition allowed us to avoid planned investments achievable.
We ended 2021 with $183 million of cash and marketable securities on the balance sheet, which included $17 million to fund the Crescent acquisition.
With the $85 million in gross proceeds from the pipe raised you are in a strong position to continue to execute our strategy and become EBITDA and free cash flow positive in 2025.
Turning to the outlook for 2022 on slide 17.
We expect to build on the momentum in 2021.
The catalyst for growth will be the ingredient segment, where we expect revenues to be in the range of $250 million to $275 million.
A key driver of growth is the increase in proprietary soy revenues driven by higher contracted acreage for proprietary sorry.
And the engagement of our commercial teams offering a wider range of high demand ingredient products.
As a result, the proprietary revenue stream should nearly doubled to $70 million to $80 million and approached 30% of the total ingredients revenue mix.
The non proprietary revenue stream should be in the range of $180 million to $195 million, including 90% to $100 million of legacy revenues from request some facility.
We expect revenues from the fresh segment.
To be $65 million to $75 million, which reflects a modest recovery from the market challenges we saw in 2021.
Overall on a consolidated basis, we expect 2022 revenue to be in the range of $350 million to $350 million.
Last year, we developed and communicated a plan to condition the market to adopt our soy ingredient products and deliver expanding gross profit margins over time.
We expect to see this expansion begin in 2022 as gross margins are expected to be in the range of 9 million to $13 million or 3% to 4% gross margin.
That includes traditionally low double digit contribution margins from non proprietary revenue at both facilities we.
We do however expect to see improvement in contribution margins within the proprietary portfolio, primarily from a reduction in third party tolling costs for white flake ingredients.
In the near term, we will continue to use price discounts as a lever to promote product adoption and share capture specifically in the introductory year of our ultra high protein derived products marketed under the <unk> brand.
We expect relatively stable pricing in the fresh segment, but below historical levels. So we expect gross margins will be high single digits. Instead of mid teens that we saw back in 2020.
This was a carryover from the oversupply situations. When it's 21 represents a meaningful reset impacting gross margins this year.
For 2022 operating expenses are expected to be in the range of $135 million to $140 million.
This includes approximately $36 million and noncash items, primarily depreciation and amortization and stock compensation.
<unk> and R&D will remain flat with last year as we continue to invest in research and development with new generations of proprietary sorry.
<unk> based products.
We expect adjusted EBITDA to be in the loss in the range of $80 million to $85 million, which is slightly larger loss than in prior year.
If you turn to slide 18, I'll explain a little bit more about our revenue and margin mix over time.
The projected scaling of our proprietary portfolio through the closed loop system will support the objective to become EBITDA and free cash flow positive in 2025.
We expect to expand the revenue contribution from the proprietary closed loop portfolio from about 30% in 2022.
Approximately 80% in the 2025% to 2027 timeframe.
We also expect to see meaningful revenue contribution from partnerships and licensing agreements as we continue with the active discussions as Matt mentioned earlier.
You can see the expected contribution margin in 2022 and the expansion we expect in the coming years as we scale, our soy portfolio, we plan to expand our product portfolio optimize our pricing strategies and reduce operations logistics and other supply chain costs.
As shown on slide 19.
Our plan is to expand contribution margins from our proprietary sorry portfolio in three ways.
First we expect to improve performance on farm to our predictive capabilities and Crapo Pos as.
As we increased protein output on farm, we can lower costs through greater nutritional density per acre.
We can plan fewer acres and reduce or eliminate a high cost inputs, such as soy isolate which sometimes it needs to be used for spiking to participate in the higher end of the text drives protein ingredients markets.
In fact, we expect to realize a portion of this benefit this year, which is one reason why our 2022 ingredients contribution margin is higher than previously guided.
Second.
As an innovation company will continue to introduce new seed varieties and next generation product innovations as we scale, our ingredients offerings to higher margin segments.
Specifically for plant based food ingredients in the agricultural markets.
Finally, we plan to scale back introductory discounts and improve our price mix through differentiated value offerings.
And with that I'll turn it over to Emily for questions.
Thank you if you'd like to ask a question. Please press star followed by one on your telephone keypad. If any reason you would like to <unk> that question. Please press star followed by Kane again to ask a question. Please press Sharon one as a reminder, if you are using a speaker phone. Please remember to pick up your handset before.
Asking your question.
We will post a briefly ask questions you registered.
Our first question today comes from the line of Christian <unk> from Oppenheimer, Hi, Christian Your line is open.
Great. Thank you so much good morning, everyone.
I wanted to ask about a couple of questions related to synergies from the Creston facility.
You came with a set of customers that came from that business, but beyond that.
The conversation with proprietary ingredient customers changed since you've made that project.
Yes, thanks for that question, Chris So.
One big element, our one significant element in the decision criteria for a lot of our customers, particularly those that.
<unk>.
It will require a high degree of integrity and their supply chain is to go and look at these facilities to rfps facilities to ensure that indeed, we're able to produce.
Consistent leased food grade spec material and so having that facility in house has I'd say changed the dynamic of the conversation from what was previously.
Slightly loosely held value chain not completely in our control to one that now we do control and so there is there is a lot more assurance on the part of our customers and our.
And pending partners that we indeed can deliver finished goods on a consistent basis.
And then as we think about sort of that that I think about that as sort of the product advantage.
Can you talk about the data advantage, how does that contribute to the data feedback loop that's embedded in the crapo at platform.
Sure and just to clarify your question there Chris do you mean that in respect of the Crescent acquisition in particular.
Yes, specifically that acquisition and the new ingredients that that brings into the portfolio.
For sure so one of the.
One of the very interesting features of this acquisition is it brought onboard a wider breadth of product offerings.
And the data that come not just from what we might have previously articulated to be the most premium texturize soy protein concentrate equivalents can also now be generated for a variety of other product categories like flowers texturize flowers.
Market categories, like bakery, and meat extension and so we've already just in the last several weeks undertaken internal digitization efforts to quantify and to loop back into crop OS functional characteristics that are attributable to this wider body of of <unk>.
<unk> opportunities in the portfolio now marketed under the <unk> brand and so thats added some additional validation, but has really opened up a range of new opportunities at the data level because again, we're not talking about as narrow band of our commercialization opportunities. We're talking about are more expensive.
The end of a product and an ultimate end markets from which we can collect data and provide feedback to the system.
That's super helpful. Matt if I could squeeze in just one more.
I appreciate you calling out the aqua feed opportunity.
Beyond that sustainability differentiation can you speak to any sort of unique feed conversion benefits that might further the competitiveness competitiveness of your products and of that 245 billion Tam that you called out on the slides here how much of that do you think Benson can capture over the next three to five years I'll leave it there. Thank you.
Sure sure glad you're asking about that it's a very very attractive market and there's a lot of excitement that's built around it. It's a very centered market in Europe of about half of the global production of Salmon is produced set of Norway by itself.
When we talk about the competitive advantage I would say that of course, you're you're you're doing feed studies.
In species like trout, and salmon to understand the conversion ratio and the health of the.
The fish we market. This is as good or better the data would suggest that there are some features of feed conversion that that are slightly better than even the incumbent products that are more expensive and far less sustainable, but we market.
It more as a as a same.
The degree of product specification.
And so I think there is an opportunity, though and we will talk a little bit more about this during our investor day on April 5th to further expand the profiles of.
Healthiness, specifically by.
Further reducing the anti nutrient profiles and further enhancing the protein profile.
Of the of this ultra high protein soy based bright day product.
That disintermediation, the SPC step and then to the latter part of your question in terms of capture.
When we think when we described on this slide immediate market opportunity think about this really is a serviceable addressable market.
So it's not representing the Tam, which would probably be referred to or just above that in the slide and of that what do we believe we have the right to win I think.
Time will tell but we need to demonstrate this and what is quite consolidated market.
Not a whole lot of players that produce salmon and the target category that we're describing right now and so.
It could happen scaling in this category could happen quickly, but it will require in the next couple of years us establishing more strategic relationships with one or more of these large players.
Thank you for your question. Our next question comes from Ben Theurer from Barclays. Your.
Your line is open.
Perfect. Thank you very much and good morning methane Congress on the results.
First question just wanted to understand a little bit.
The leverage server into 'twenty five onwards period.
Creston facility I mean, obviously you pointed out it's still going to be some legacy revenue of around about $100 million in 2022, but how should we think about that legacy contribution going forward and any plans of how youre going to convert the facility to really only process. What is then ultimately your proprietary.
Ingredient piece, because if I just look into it feels like this is going to take a much more relevant share, but how should we think about the cadence from here to 2025, which then ultimately should bring you to that EBITDA and free cash flow positive business on that would be my first question.
Mhm well.
When you look at the legacy business and this facility there are certainly customers that.
Are excited and we'll be eager to take on.
Product opportunities that are delivered from our proprietary solutions, but that doesn't mean that they all will.
And so over time.
We will as you point out move from a minority of the capacity of the facility being dedicated to our proprietary ingredient solutions.
A significant majority and ultimately we'd like to see nearly all of that takeover the capacity of the facility, but it probably does lead to some <unk>.
Our reorganization over time of the customer mix as we move into various of these premium markets.
Namely to the extent that as you see on this margin bridge.
Namely the when we began adding.
Capabilities that solidify our position to supply for instance, texturize products and eliminate the remaining small amount of tooling that we have to execute.
I think it further allows us to sell up into a market that is highly desirous of our solution like we're bringing to the table.
And of course, there is a range of margin opportunities involved there some of which will be lower than.
The 30% to 40% range, we previously discussed, but some of which continue to be higher and the mix.
Supplies are very attractive ultimate contribution margin that we've outlined there. So hopefully that helps and then when it comes to mix of customers and how we kind of view the evolution of how that facility will service our customer base.
Okay, perfect and then I would like to understand how I mean.
You've made those announcements about carbon capture and working to go with farmers and basically.
Kind of getting that sort of thought to further leverage data availability so to speak into that.
Can be an additional revenue stream for your farmers how should we think about is within the concept of Benson how relevant or not is this going to be.
Just leveraging the data you have to ultimately get the certification or do you think this is going to be on.
Additional <unk>.
<unk> caf asset within the broader offering you have for the farmers and then ultimately as well as the closed loop potentially selling those credits to your customers to help them.
Offset some of the carbon footprint help us understand how would you build around crop Oss.
We're going to work together on the carbon piece.
Mhm.
Yes.
First I'd say that because of the integrated approach that we employ.
We're enjoying three tiers I'll call it a opportunity to look at environmental impact. The first is of course on farm.
I think is relevant to some of the comments I made today in respective crowd track and the ability to look at regenerative agriculture practices.
I personally have a fairly bullish attitude about where the carbon markets will go in time it won't happen overnight.
But that there will be and there is some evidence to suggest there will be some organization to this and when things are made consistent and the United States, we could see that.
Blossom as a monetization opportunity. We currently don't account for it though we don't assume and our financial projections that there will be a monetization opportunity there.
The most important thing is that we are using our presence.
On farm with our pharma partners to help them ultimately enable this market and how it might manifest itself and monetize mobile opportunities that transcend two <unk>.
Ultimate customer base via the CPG as to the consumers. The second category is really the disintermediation of processing and that's principally where we're seeing the most significant water and carbon reductions and the independent.
Analyses lifecycle analyses that.
That have been conducted.
And that again is an area that could theoretically be monetize able over and above our current product offering at a base level, it's not today.
There is not a green premium associated with it in fact because of its innovative nature, it's actually deflationary.
In nature, and we can offer our products at a discount.
Call It green discount.
Other than a green premium.
So again, we don't account currently in our financial modeling.
<unk>.
For that to be monetize its really a feature of benefit that we're offering and then thirdly of course is the product level benefit.
And from an environmental perspective, you can look at.
There is.
Data out there, suggesting of course, a significant reduction by disintermediation. The animal for instance in the plant based alternatives market and we think that are more affordable more sustainable ingredients solutions helped fueled that category and ultimately realize a greater degree of market potential because he.
You really need to make these products more inclusive for the consumer in order to realize the full benefit.
Of what this category could provide so it's a long way Ben of saying that while we think that there is multiple points of opportunity.
Over time, possibly to monetize these carbon benefits that innovative products like ours are bringing to the table. We don't we don't financially account for those yet we feel strongly that it's important to invest in the infrastructure because it's a core part of our purpose and our mission as a company.
And it certainly provides a degree of differentiation that we're finding CPG is viewed to be attractive.
Some of which will be table stakes, and some which won't in the future.
Okay Perfect and then my last question is more around the financing. So thanks for all the details about.
The pipe offering in the $85 million, if I remember right. When you close the deal for the crushing facility on the financing side. There was some option to add on to that.
That piece of the financing is that now not needed anymore. Just given the fact that you took the 85 or would you still consider that maybe if if if needed.
Whatever capex or may be an opportunity to invest into something you would you would draw that debt capital as well.
Yeah, Hey, Ben that's a great question, thanks for asking.
If you're referring to is the term loan that had an option.
Let us draw an additional $20 million against the facility.
Certainly remains an option moving forward.
I think the way, we're thinking about it between that.
And other non dilutive financing options that we have we will assess whether we.
Need that or not or whether there'll be other opportunities to forego the.
But clearly as we sort of broadly think about our capital needs moving forward of the Optionality.
This pipe raise has not given us.
We will assess that when we get to the time.
On the opportunity.
Okay.
Right.
Our next question comes from the line of Adam Samuelson from Goldman Sachs. Your line is open.
<unk>.
Yes, thanks, and good morning, everyone.
Good morning, Adam.
Good morning.
I guess, that's my first question is thinking about the long term framing on revenue mix and contribution margin that you laid out I guess this is slide 18 here.
I'm just trying to think about that relative to how you framed things kind of initially at the time of the.
Spak announcement and it would seem like the anticipated mix of partnership and licensing revenue has gone down.
And then I just.
I wanted to make sure that that's correct and B. If it did kind of maybe describe how youre thinking on that opportunity has has changed.
Thank you.
In conjunction with that how should we think about.
Kind of what your proprietary planted acres can be in that 25 to 2007 period to get to.
Of that size.
Sure.
Your assumption is correct I would I would characterize the.
The change in partnership and licensing in the medium term.
More or less having shifted slightly.
And I think that that shift is due in part of course too.
I was wanting to find the right partners to scale the business in a really meaningful way that provides the target margin profiles.
We believe the business deserves and that our shareholders deserve.
But then the other factor that plays into this is the advent of the Crescent acquisition really pulling forward actually some additional capacity that we can control and it's enhancing our ability to execute against the integrated closed loop model.
<unk> and scale that more aggressively such that in the nearer term we feel like we can we can convert.
Those non proprietary footprint that non proprietary footprint in the closed loop system to a proprietary footprint in the closed loop and so I'd say, what youre really seeing is a little bit of a shift.
Bringing forward.
More capacity and growth in the proprietary closed loop and shifting out slightly.
The partnership and licensing.
But long term long term and beyond the period of viewed here I think your expectations and ours are aligned that.
To reach maximum share an impact, we'll see that proportion continue to evolve.
Okay and should we be thinking about maybe pushing are seeing more opportunity in the near term around that proprietary integrated.
Model.
How should we think about.
I believe you had said free cash flow positive in 2025 of things what I heard.
How should we think about kind of.
The working capital kind of needed over the next few years as you scale the business.
How does the thinking kind of evolve there.
Yes, so maybe just a couple of things about that first our working habits I do want to point out our working capital does have a natural seasonality to it certainly as we've now started to sort of built out the processing and manufacturing infrastructure.
About 60% of our working capital our cash is consumed in the first and in the fourth quarter and Thats consistent with sort of the broader AG industry, because you can imagine.
<unk>.
While we certainly haven't given specific guidance on this I think if you look at the margin bridge you start to think about.
40% of the margin expansion is related to optimization cost.
Improvements supply chain and logistics.
Optimization working capital should follow with that.
Pretty closely as you think about continuing to optimize the processing footprint in the water infrastructure. The working capital will take on much more of an optimal profile.
But clearly as we as we grow the business certainly as we we saw it in our guidance and as we saw in 2021 working capital will play prominently in our refund.
In terms of the use of cash for the company.
But we're obviously working diligently to ensure that we've got a disciplined approach to managing that over time.
Okay, and if I could just squeeze one more in.
A lot of discussion about a variety of different end markets and applications.
Prepared remarks today, so again, maybe thinking into that five year kind of time horizon, how should we think about the mix your mix by application in terms of just Dan will feed versus aqua versus some of the food applications in both flower versus texture eyes.
Protein concentrate I'm just trying to think about.
Where where you see the opportunities that you see where you see the biggest near term kind of the growth potentials that there'll be material at the enterprise level.
Sure I'd say, we've got in the near term validated value propositions around multiple of those applications, but.
But we anticipate differing degrees of uptake in markets.
It remains that the plant based alternatives category is the fastest growing of all of these target markets, but as we appreciate its relative relatively small compared to some of these more established categories that are there when we think about the Aqua culture market is another example, it's growing.
At a pretty rapid clip.
And there is a significant demand, but you obviously are talking about are far more concentrated customer base. So as we put together our expectations for product mix over the course of the next three to five years, what I'd offer is that we are.
Executing against the lift and all of these categories, it's not as though we're intending to reduce or eliminate one relative to another.
And I'd also say, it's an estimate right I mean, we're doing we're seeing and planning for medium term product mix opportunities the way that the market appears today and we're doing our best to to anticipate where the puck is going there, but the beauty of this frankly and especially again at crest.
<unk> acquisition as it provides us provides us the optionality to flex up or down in various of these product categories and even markets and so we're seeing.
Give you. This is just a quick example for a moment.
In respect of.
The situation in Ukraine.
A war broke out and there is a disruption in the food supply chain, that's materially impacting the availability.
Non GMO, Ohio Lake oil for which Europe is the largest global consumer and for which Ukraine is one of the largest if not the largest producer.
We can look at our acreage footprint and begin to think about how in the next one to two or more seasons, we might flex up our production of acres that may associate some of what we might think of as impending demand. The same thing goes for the food market. While there is a one to two year effective <unk>.
Planning cycle because of the seasonality of producing the inventory.
We're transitioning now.
From what I would call more of a push model of past to a pull model of the future such that we can react and move our product mix to meet some of these market market demands and opportunities.
So I know I can't specifically answer.
Adam the question of what is the ratio of market or product level, but I'd just offer that.
Quite diversified.
In the next year, but also in the next five years and and we probably haven't accounted for some of the opportunities that we're yet to see.
To see blossom in this space.
Okay, Alright, all of that is as helpful. I'll pass it on thank you.
Our next question comes from Brian Wright from Roth Capital Partners.
Brian Your line is open.
Thanks, Good morning, I apologize if I missed it but.
You had mentioned that you are.
We're ahead of target on the acreage for 2022, but I didn't see your eye.
May have missed it the acreage number.
Frequently Tony tool for planning.
No you didn't miss it Brian .
We haven't published the <unk>.
<unk> 2022 acreage start we did have a proprietary contracted acreage target.
Constitutes as you would expect given the revenue mix outlined a minority of the total capacity that will move through in acres from which will draw.
Suffice it to say, it's a meaningful uptick from last year.
But one thing Thats happened.
Especially coming off of 2021 harvest.
That we've been able to predictably model quite successfully thanks to the efforts of our of our of our R&D team.
More meaningful concentration is deemed put a nutrition density per acre and so we actually in order to meet our production goals for 2022 don't anticipate needing to produce quite as many acres as we might have thought we needed six to 10 months ago.
And so.
I know thats not fully answering your question here, but what we're doing now is we're really looking at that mix of acres and what we need to meet the demands on the on the on the pole side as I described a minute ago and adjusting accordingly, and so it doesn't mean that we might not continue to pursue some acreage but we.
Had a goal that was to meet essentially our 2023 ingredient revenue needs that are forecasted we backed into the acreage mix that would be required to satiate that demand and and we're really thrilled that our team was able to execute so well against that target and.
Actually complete the contracting by the end of February whereas for context last year, we were contracting acres well into may.
For 'twenty, one for 2021 crop.
If I can follow up on that a couple of things.
Does that mean that the team is still what would push to.
Get more as you can or it's about managing kind of all the.
Resource contribution kind of analysis or.
I'll start with that and then I've got one more follow up if that's okay.
Well you are correct I think the balance I mean, we need to balance.
What we believe the demand side to look like what we believe the working capital needs to be and what ultimate risk we would bring on.
I think we've taken a view that we want to have confidence in being able to sell up and sell out of the products that we have put into the market.
And we've executed on plans accordingly, but as I use. This example, a moment ago.
When you have.
Geopolitical events that occur in wars breakout in supply chain are disrupted.
There may be.
The need for us to go and look at some additional acreage.
And contracting that.
What I would say late in the season.
Our late in the contracting cycle so.
We'll continue to be open of course to those kinds of opportunities, but to your point, it's very much a balance that we need to weigh the risk and reward against.
Great. Thank you and just to follow up on the increase.
Concentration.
Yes.
Nutritional density per acre is that driven by yield or is it more like it's instead of 65%.
Concentration.
Its a higher concentration level within the.
Within the plant.
I might think about it as three main levers and I'll keep it at that level. One of course is yield so bushels per acre.
The second would be protein density.
Per unit, so just percentage of protein in the bean itself.
Or being composition and then the third would be agronomic practices and underneath the umbrella of agronomic practices I would tell you that.
Where the acre is as important a soil conditions the planting day.
A variety of ways that the farmer might farm that.
That acre.
These are all contributors as well too to ultimate protein production output.
Okay, great and if I can just sneak one more and sorry about that.
Just wondering could.
Could you provide the kind of percentage of of DFS creston that was going to be internal.
Rob on the revenues.
On this slide I don't have it in front of me I'm, sorry, Brian , but on the crest and slide I believe its slide 13 actually.
We do we give you a qualitative view in 2022 that breaks out them and he'll proprietary soy and the yellow versus the legacy revenue of Creston, which we estimate in 2022 to constitute between 90 and $100 million of our guidance.
But that is proportional theres no like.
The spreadsheet they used to make the chart wasn't like.
Numbers that were just.
Randomly thrown then you could use a ruler basically.
I would say that this is a pretty good estimate.
Yes.
Alright.
Great. Thank you.
Mhm.
Thanks for all the questions we have on the lines I'll hand back to Robyn to take your online questions.
Thanks Emily.
We will conclude with some questions we received from retail investors through our partnerships with say technologies.
So I'll start with you Matt.
One retail investor asks what are some concerns that you might have about your business.
Sure. So so Benson Hill is an execution story and I often have said that execution is synonymous with team.
And we have a very talented team and a team of very passionate professed professionals.
Dedicated to our purpose and to executing across the vans that I described earlier from technology to grow our engagement to commercialization.
And so when we think about what are the risks.
In the business I would say that there is a band of execution from <unk>.
Developing the best possible seed to contracting with the best pharma partners to producing.
And our identity preserved supply chain of high integrity and delivering.
<unk> that meet specifications consistently to our customers and if you click across those four areas.
Those are the things that we think about day in and day out and how we can not just be operationally excellent excellent, but maintain a mindset of innovation and drive the purpose of Benson hill into the market.
So theres a lot to do to deliver on that strategy.
We are continuously learning and maintaining a growth mindset to find ways to improve and we're thinking about the stakeholders across the food and agricultural value chain as our partners and lifting it up and advancing it.
Another question due to fluctuations in the oil markets affect your business and if yes, how do you best manage this.
So the fluctuations in the oil markets have a relatively small impact on <unk> of course.
There is a proportion of the soybean that produces oil some of that for Benson Hill as a commodity soy oil and some of that is are very brand.
<unk> oil.
So we see of pricing fluctuations on the basis of that market, but the primary area, where we might see impact.
And the cost elements of our P&L is in the fuel and the transportation costs and as I think Dan mentioned earlier thats, principally affecting our fresh business at this time, Jeff with double digit increase year over year related to fuel and transportation.
One more question is innovation and expansion throughout the company in the past couple of months affected your bottom line.
Sure so.
I would say that the innovation and again across those bands of execution I described earlier technology farmer engagement.
In commercial.
Has positioned us really for growth.
For significant growth and I couldnt be prouder of the way that the team has come together to accomplish.
Stones as outlined there and then others that have really set us up.
On a growth trajectory that we think is highly attractive and meaningful in the aggregate category.
We're expecting not just continued revenue growth and share capture but improved gross margins in 2022 and beyond as Jim has outlined.
And importantly, I would add that over the last.
Last couple of months we've solidified.
Improvements in our balance sheet that put us on a really solid financial footing to execute this strategy.
And to achieve these expectations as outlined to be EBITDA and cash flow positive in 2025. So.
The the way that the company has come together to execute the achievements not just in the past couple of months, but I'd say in the past year.
Have been very very meaningful.
And I'll, just reiterate I'm really proud of the way the team has been together grown.
And executed as an organization I think if you go to slide 19.
The prepared remarks presentation.
We met the buildup of the margin.
Expansion every single element of that has a technology dimension to it.
And I think.
It's not just technology for technology's sake, it's clearly a function of the execution of the team, but every single one of those margin expansion opportunities as well.
Upon our ability to execute on our technology platform.
Great. Thanks, Dan and thanks for the retail investors those questions kind of captured the list we have so.
Respond more to retail investors later, but I'll turn it over to Matt for <unk>.
Including remarks and the call.
Super Thanks, Robin and thanks Emily.
So we have done some he'll have a great foundation from which to accelerate momentum and capture market share with our proprietary ingredients portfolio.
Market conditions are very favorable and the unique value propositions, we offer across our silly ingredients feed in oil solutions as well as innovations in yellow Pea continue to garner attention from customers and partners alike. We are now better positioned than ever with the right technology the right team.
The right products and the right purpose to execute our growth plans and drive towards EBITDA and free cash flow positive in 2025.
But it's really a milestone to a much larger mission, we have to lead the pace of innovation in food and to help transform the food system is the picks and shovels of the plant based food Revolution.
We appreciate everyone's time and engagement this morning, and we look forward to hosting investors at our headquarters here in St. Louis on our Investor Day April 5th.
Please contact Ruben if you wish to attend in person. Thank you very much have a great day.
That concludes the Benson Ho conference call. Thank you for your participation you may now disconnect your lines.
Yes.