Q4 2022 Bioceres Crop Solutions Corp Earnings Call

Hello, and welcome to the bio says crop solutions fiscal fourth quarter 2020 financial results Conference call. My name is Alex that'll be coordinates Nicole stay if you'd like to ask a question at the end of the presentation that you can press star one on your telephone keypad, if you'd like to withdraw. Your question you May press Star two.

I will now hand up till host head of Investor Relations Palo spend to Paolo. Please go ahead.

Thank you good morning, everyone and thank you for joining for something today during the call will be for the D quadruple our chief Executive Officer.

Good luck with nickel that our chief financial Officer, who will be available for the Q&A session. Before we proceed I would like to make the following safe Harbor statement today's call will contain forward looking statements and I refer you to the forward looking statements section of today's earning release and presentation as well as our recent filings with the SEC.

We assume no obligation to update or revise any forward looking statements to reflect new or changed circumstances. Also please note that for comparison purposes, and a better understanding of our company's underlying performance. We will discuss during our presentation at the reported results as well as comparable results, which exclude the impact.

Hyper inflationary accounting in Argentina additional information in connection with the application of the rule Ias 29 can be found in our earnings report. Finally this conference call is being webcast. The webcast link is available under the incentive.

Mr Relations web site at this time I will turn the call over to our CEO Federico Trucco. Thank you.

Thank you.

And good morning to everyone on the call.

Thank you for joining us today.

Please turn to slide three.

Overview of the main highlights for the quarter and the fiscal year.

Okay.

I would like to start by saying that we are extremely proud of the performance delivered by our team in the fourth quarter and full fiscal year 2022.

This last quarter was particularly challenging things, we are comparing to a record setting quarter in 2021, while we grew up close to 40% compared to the fourth quarter of fiscal policy bluntly.

Consequently, the 44% topline growth.

In the current quarter represents an amazing closing 219 years.

My name is Glenn 62% and revenue growth.

The 12 month period.

Adjusted EBITDA for the year ended at $61 9 million.

Excluding H before ramp up costs.

Although this number represents a 44% improvement over last year's metric it fails to capture the full magnitude of hour.

That expansion.

Yes, <unk> nine accounting rules artificially magnify some articles.

This will be explained in more detail by year.

During his part of the presentation.

Please go <unk> was not only an amazing year due to our financial performance.

Also in terms of achieving G E beam blade with equity.

Most importantly, fetal food approvals for each before lease in Brazil and <unk>.

These approvals leaves us in a very select.

A lot of companies.

Well, where for the first time reporting revenues associated to retreat for technology.

With $12 4 million recognized in the quarter for H before week, representing a 94% increase when compared to contributed growth reported for the HP <unk> program in the year ago period.

Period.

Finance.

And that's an important subsequent events to the quarter's end.

We have successfully culminated our merger with <unk> and <unk>.

<unk> integrated in.

The company invest in four months since announcing the transaction.

Like the recent loss of integration back in 2016, we believe this merger will be transformational for us.

I will provide a brief update on the integration process later in the presentation.

Please turn to slide four to better understand the growth acceleration that we had.

Currently experiencing.

For this purpose, we're going back to 2019, when we begin lease space.

Top line revenue growth has accelerated in the past fiscal year was that growth rate at 62% that is more than four times. The average of the last two years.

Similarly, our adjusted EBITDA growth has more than doubled the average growth of the last two years and more than triple that of last year.

And Lisa will explain the drivers behind the current performance, but I would like to highlight that what we're seeing today is the outcome of decisions that we took many years back.

Only modestly reflecting initially before sales and not accounting for.

For the growth, we expect from all of our recent merger and international expansion.

Likewise on slide five.

You can see the evolution of HB for revenues or contributed goods since we launched the <unk> hundred four program.

PHP four program was assigned two parallel drug development in terms of geographic targeting and performance validation for people.

We the inventory ramp up process.

<unk> 2022 revenues that contributed.

74% increase over the year before period with an overall gross margin expansion of 900 basis points.

You can see that almost all of the growth.

In fiscal 2002 was achieved in the governance report this quarter with HP for wheat, which is discussed in more detail in slide six.

Yes.

<unk> hundred four.

Revenues with revenues were generated with the HP <unk> program cap at a steady state.

Over 50000 hectares.

With initial sales to conventional shallow participants such as multiplayer from distributors something we can only do now after being brought the registration for the first like what videos.

Growing conditions are very challenging now in Argentina, with many regions being affected by a longstanding no nothing.

Although it is too early.

We can sell HP for variety fabled Saturday.

Saturday with gathering distress.

Look forward to report on their evolution in upcoming calls.

To minimize disruption in the commercial gain we continue to build our downstream channel for each before we'd that's shown on slide seven.

In the past quarter, we doubled the number of cluster stores on boarded now reaching a total of 45. We are currently working with 60, new processors to be awarded in the next few quarters.

Local property capacity stands at over 1 million tons, a number that far exceed H before great.

Our near term of AWS.

We're also working to take advantage of existing import approval and have recently finalized our first final export basically four flower to Brazil.

To leverage on the identity preserved capabilities develop 48 before program and expands our relationships with downstream players we have planted the first 300 hectares of good materials.

These are generic.

Connecticut and edited to meet consumer demands such as increased dietary fiber or reviewed looping.

Although these materials.

Yet being improved to perform competitively something that is currently ongoing.

Produce great will allow us and our partners to jointly develop consumer incentives in anticipation for a future technology launch.

Turning now to slide eight we have finished harvesting that sequence to HII for soy crop.

Moving forward to those two.

Of the varieties with selected multipliers on these figures in the upcoming season.

We have also redesigned the age before program will allow growers suggest a larger set of <unk> within the production regions and this will allow us to accelerate new variety validation and geographic positioning within tend to have more deals available for launch in the upcoming seasons.

We're also making good progress in Brazil, where we are advancing two varieties under the H before program approach to be ready for launch in the 'twenty three 'twenty four season.

Based on our ongoing conversations we also expect our leading licensees to be able to launch the first material during the 'twenty three 'twenty four since then.

And this is both for Argentina, as well for a while and the inverse of extent took.

Brazil.

Slide nine provides an overview of the progress we are.

Sorry, slide nine provides.

An overview of the progress we've made during the last fiscal year in terms of the regulatory clearances.

We are thrilled to see the evolution of approval for each before we see the initial green light Argentina back in 2021.

The ethanol in Brazil was particularly important since this was a prerequisite to be able to get horizon registered in Argentina, and consequently revenues booked.

We tend to see the government regulatory momentum in wheat and continue to submit applications.

Morten.

Each of our geographies such as those of Southeast Asia, We have already filed in the new shepherding.

We are looking forward to file in the upcoming months in Thailand, and Vietnam The Philippines.

Yes.

The approval of HB, Fortunately, China carries a similar implication for us.

In Brazil, as we now can register varieties have enabled conventional sales in Argentina.

Also China approval was a triggering event for our licensee.

Which are now free to launch in their respective geographies.

We expect to be able to recognize H before soy revenues in the upcoming seasons.

Right after the quarter status in less than four months in the announcements we have successfully merged <unk> and Dnb Marrone bio innovations.

A brief update of the integration process can be found in slide 10.

We have rebranded the company under the <unk> name and promoted.

Yes.

<unk> of the pro forma subsidiary as group President and managing director for these business units.

The <unk> business unit was not into the portfolio and pipeline of legacy my role globally and have general responsibility, you see North America and Europe .

Similarly, we select there will remain or the fact, the commercial channel in South America, and other rest of the world geographies.

On the cost synergies front, we're already at 60% of the $8 million target, we've set for ourselves and.

And I expect to be able to fully achieve this goal in the upcoming months.

Finally, I would like to thank former CEO karaoke live.

The <unk> board for their contributions to this successful integration process.

I would also like to welcome yogurt fanatical and keep Mcgovern of continuing board members as well as <unk> and haven't seen the agility.

We are facing EVP roles for the integration process at future operations.

Okay.

And thank you.

Thank you theoretical on good morning to everyone joining us today.

Before I dive into what has been an exceptional year from both an operational and financial perspective, I want to remind you that I will focus my comments on comparable revenues and comparable gross profit.

As you know our reported results are affected by the adoption of IAA upstream benign our Argentine subsidiaries.

Given the current local macroeconomic conditions in Argentina I asked 29. This year has resulted in revenues and costs that are overestimated for our local subsidiaries.

For margins that are underestimated.

As shown UBS differences in the release and on the slides, but I'll speak to a to a more relevant comparable metrics.

If you refer to slide 11 fourth quarter comparable revenue growth of 44% topped off an exceptional year in which all quarters delivered strong growth.

Full year comparable revenues were a record of almost $320 million or 62% year on year, gaining upgraded golf pointed out.

Importantly, these metrics not include pro forma numbers, which will begin to be consolidated in the first quarter of fiscal 2023.

Before I summed up both quarter on the year I would point to accelerated adoption of some of our main technologies, we increased volumes of micro beaded fertilizers by 64% for the full year, we expanded enough enough sales and an important target regional in Brazil, and we also reported HP for wheat revenues for the first time.

Which represented more than half of the seed <unk> integrated products revenues in the fourth quarter standing at $12 4 million.

We also benefited from our proactive steps reorganized commercial operations for third party product sales.

Throughout the year, we have some tailwind that.

So you wouldn't be adoption of our technologies, but we also faced disruptions in global logistics from some temporary cost pressure.

Overall, we were able to successfully weather the challenges of the year and leverage the commercial the strength of our commercial teams to capture value in an ever changing global environment for agriculture.

Slide 12 illustrates the breadth of our strength across all of our reporting segments.

Crop protection benefited from the reorganization of third party broad sales as I mentioned as well as from higher prices, which were driven by disruptions in global supply chain.

CPE sales represented almost half of overall sales in both the quarter on the full year.

Increased adoption of our microwave fertilizers in <unk> drove a 45% growth in the quarter and 77% growth for the European crop nutrition segment.

During a volatile time in the global fertilizer market, we nearly doubled sales of micro beaded fertilizers, adding 200, new clients are experiencing doubling of past purchases by existing customers.

Additionally, in Brazil, we saw particularly strong enough in a sale.

Brazil has been talking to your expansion region for our NII or long lightening up on technology because of the competitive advantage. It offers lowest in that country.

While a smaller contributor from a broader perspective. The addition of revenues from 18 four weeks, what's the most exciting development for the quarter under your in the seed <unk> integrated products segment.

First on revenues of $4 4 million.

Topping our prior estimate of 10% to $12 million in initial revenue.

This creates a strong base from which to continue to grow right through seed offerings.

Clearly our exceptional revenue growth in 2022.

We have set a new high watermark for the company and elevated the base from which we will grow.

While these years tremendous space will be very difficult to replicate we do see a path forward with continued growth in line with our historical strong annual growth rates. We now have the tools and the portfolio in place, which will allow us to consistently deliver revenue growth at multiples far above the industry average in the knee.

Near term, we are broadening our biological portfolio will be additional performed group.

<unk> global adoption of our products to our extensive and growing network of partners.

Capitalizing on our investments Gvhd for technology.

Let me now take a moment to recap comparable gross profit and gross margins more closely as shown for the fourth quarter on slide 13.

Our gross profit rose by 32% to 41 4 million <unk> integrated product increased by 270% from the sales of <unk> four weeks, while the relatively smaller gains in <unk> were mostly offset by the decline in crop protection gross profit.

The resulting gross margin was up 366 basis point decline, reflecting product mix and higher cost of goods sold.

Since the effects of Ias 19 cumulative throughout the year, it becomes particularly relevant in the fourth quarter.

While <unk> nine application expanded revenues above the comparable period, you would have the opposite effect on gross profit constricting, the reported metric by almost $5 million versus the comparable gross profit and therefore, reducing margins to 34, 5% on a reported metrics.

As shown on slide 14, each reporting segment contributed to the 45% increase in full year gross profit.

$136 $9 million.

From a gross margin perspective, the same factors that impacted margins in the fourth quarter were evident throughout the fiscal year. As a result margins were in the low 40% range rather than the high 40% range reported for last fiscal year.

At this point.

We expect our annual target for blended gross margin to be in the mid 40% range and we are well within reach.

Going forward, we anticipate that the addition of pro farm and <unk> sales will boost our margin profile and will help offset the margin headwinds, we experienced with manufacturing costs of our Argentine facility.

While the first half of the year has been challenging for PROQUAD due to persistent drought conditions around the world, particularly in the United States. We are looking forward to doing the revenues in the second half of the year, where they sell their seed and soil treatment, which is typically a stronger offering.

Year.

Please turn now to slide 15.

Adjusted EBITDA in the fourth quarter, excluding H before prelaunch costs was $17 7 million, 2% higher when compared with $74 million in the same quarter in 2021.

This number excludes $3 $2 million and costs associated with a pre launch ramp up of inventories for the entry for program as we continue to target revenues well above what was reported in the current quarter and the pizza.

Adjusted EBITDA growth was lower than top line growth even changes in the segment mix. The gross margin dynamics I, just mentioned and macro dynamics in Argentina that created trying to carry cost pressure in our local subsidiaries.

Consistent with our past practice, we do not use comparable figures in reporting adjusted EBITDA. However.

However, we have isolated the impact of Ias <unk> nine adjustment in this graph, we just reviewed.

To the tune of $4 $4 million for the quarter.

On slide 16, we highlight the 24% increase in full year adjusted of EBITDA. Excluding Q4, once again gross profit gains drove improvement to $61 $9 million with operational expenses offsetting some of that thing.

Importantly out of the almost $30 million increase in operating expenses only two thirds of these are costs associated with operational growth. The remaining increase is explained by H before program operating cost.

The main adjustments.

Operational growth was driven by higher video SG&A in line with our sales growth as well as higher logistic costs. As we took cautionary measures to ensure continued supply of our products.

One is the temporary cost pressures in Argentina, and you already mentioned.

The overall effect of Ias 39, accounting is very relevant when looking at full year results.

It reduces gains in adjusted EBITDA up by a non trivial amount of $18 5 million loss.

Let me take a few moments to close with a review of our balance sheet and cash position. If you would turn to slide 18.

As you know, we have proactively replacing more expensive sources of capital with newly issued debt instruments throughout the year. Additionally, we have lowered our total financial debt position over the course of at least kind of your yearly conversion of 75% of the 2019 convertible notes into common stock.

Spicy spending around our net financial debt stood at $127 three numbers.

Our net debt to LTM adjusted EBITDA ratio stood at 247 times.

Our CFO I'd like to be somewhat below this range, although we will see some uptick in the first two quarters, we reported debt associated with the pro forma acquisition.

In relation to the profile acquisition, we have executed subsequent to quarter close to announcing agreements and new secured convertible notes due in 2026 that provided us with $55 million in cash and the rollover of the remaining part of the 2019 convertible notes into a new note with no converted.

Convertibility feature into common stock.

As a high growth company and we are in a good position with the appropriate mix of short term debt and working capital further backed by a meaningful position all of our cash cash equivalents and short term investments stood at $38 million, but your ramp prior to incorporating the 55 million proceeds from.

The new convertible note on debt from pro forma.

In summary, 2022 has been a watershed year for <unk>.

The revenue growth and profitability from our base business plus the investments we have made for future growth will be catalysts for success in line with our historical CAGR.

We have greatly enhanced the diversity of our revenue sources broaden our market reach and acquired a new stream of exciting RMB projects, where.

We are even slightly in a solid financial position and how about the activity to invest in capital projects and other commercial and manufacturing improvements.

Everyone on the team has done a remarkable job of setting the stage and putting in place the resources that will transform the upset us in the coming years.

With that let me turn the call back from $30 million.

Thank you Andrea I think we can open up the floor now for Q&A operator.

Sure.

Thank you as a reminder, if you'd like to ask a question about star one.

On your telephone keypad.

It's a trivial question that that start to piece and show you Amit lengthy when asking your question.

Our first question for today comes from Ben <unk> of Lake Street Capital markets. Your line is now open.

Alright, thanks for taking my questions and congratulations on that.

Really successful year here.

First I have a couple of questions on the launch of Hp's for soy and Federico in particular, a comment you made in your prepared remarks about the licensing.

Model can you elaborate a bit more on on first of all kind of the degree to which is H before soy both in Argentina, and Brazil is expected to be kind of a straight licensing model versus the <unk> concept.

And then second of all can you characterize kind of crude these licensing.

Partners are.

If you can't name names you can kind of give a broad characterization of who these folks are.

Sure. So thanks Ben.

EMCORE for joining the call it's always great to hear you.

In terms of age before.

<unk>.

So this is the one crop where we probably have a greater gap in terms of genetics in for those of you that do not know anything wheat, we're partner with <unk>.

Breathing neither.

For Latam genetics, which is floating on the thread.

In soybeans as more of a standalone effort. So the label to be able to counteract that to some extent we have licensed the technology to leading participants.

There are tools that are publicly disclosed or that we have disclosed in the past such as the module.

Is the number one market share.

Play, earning Latin America and PMG.

Brazil.

Being company.

That is important for that country. So these two licensees that have outstanding genetics will be able to launch.

In the upcoming.

So much in the upcoming season, but in 'twenty three 'twenty four with the materials <unk> seen developing in the China was key to be able to enable this particular channel now.

We continue to pursue the equal seat counts have with ADHD for program and lead sales put all our own network and that is what youre likely to see.

In the upcoming season, bringing the lion's share of our revenues with two varieties that now can be commercialized outside uplift program structure, you've seen the more conventional approach he still.

Our IP have been efficient in areas of Argentina that together represents slightly less than one 5 million hectares. So obviously, we're not indicating that that set up the acreage we're likely to achieve but it is meaningful enough.

For us to be able to.

Do what we need to do this year, so that we can remain on track.

For the guidance we provided.

And the Chinese approval.

Yes.

Got it got it. Thank you that's all very helpful.

Another H before related question, maybe more for you I'm curious.

You do.

You know very helpfully break down kind of the core.

Costs associated with the H before ramp.

Historically I'm wondering what your expectations are for really fiscal 'twenty three in terms of costs associated with the ramp versus.

Versus EBITDA contribution and a commercial launch.

Extent do you think those kind of prelaunch costs are going to offset the profitability from the commercial launch of both Sweden soy.

Hi.

Thanks for joining the call.

For the question.

I think there's a divergence between the type of revenue ramp up but you can expect from H before him profitability reported profitability coming from H before and run rate.

The prelaunch costs.

You see reported in SG&A I mean, those are more associated to our identity preserved channels and when we lose generation H before asset program, where we work jointly with farmers, whereas a theoretical pointed out.

Revenues and profitability from each before will be coming from different sources not only test that so I think that we are currently.

Run rate or can be accessed expected for that.

And as we continue to multiply by Daiichi expand.

Yes, if we serve channel you might see that following that acreage rather than the total reported revenues and.

On profitability before each before so in that sense.

I don't think that those are going to offset however, bear in mind that we are still ramping up.

Ramping up the program, we are still ramping up to about AED saw surgical pointed out which is only the beginning for H before.

And I think that we will continue to see those costs to show up.

And then in the next fiscal year.

Let me add something to that okay.

Yeah.

Yeah.

Then for you to keep in mind I think of the ADP for program will be kept almost at that steady state, except maybe soy what we might increase it slightly.

They were at 60 healthy excess length since.

We're not expecting to increase that significantly and this is what we use in a way to battle the variety that in Asia, and pre marketing component and the inventory ramp up process. So.

They're more varieties, we get we can channel directly to farmers either within the ecosystem concept or.

As <unk> seen if you will through through conventional distributions.

More of those revenues will dilute the.

Sort of the ramp up cost associated to the program.

So I think they will become less significant.

Proportionally less significantly on a forward going basis.

Got it okay. That's all very helpful.

<unk>.

Plenty more to talk about I'll, just ask one more and then get back in queue.

A question kind of on a high level around the outlook on the fertilizer side I mean.

This business has just been.

It's been exceptional now for a long time.

And Enrique you commented on capacity expansion broadly I'm wondering how how youre looking at addressing.

Kind of long term growth.

From the micro beaded fertilizer.

Products specifically.

And kind of when you think youre going to have to make a decision about potentially making.

A real material capacity expansion from that product line specifically.

That's a great question, then that I mean.

A nice challenge that we faced throughout the year, because we reached almost double our capacity ahead of what we expected. So we have already been working on an expansion project for CBD in Latin America, and he is already on its way and so there will be some capex going into that to support.

Further growth in PBT that supplies, the Latin American market.

I don't think that its going to be of the sites.

The initial.

Investment loss.

But you can certainly expect that we will be investing in expanding that capacity to continue growing revenues for microwave fertilizers.

Got it got it very good.

Alright, well.

Thanks for taking my questions I'll get back in queue.

Thank you. Our next question comes from Jonathan from Brookline capital markets.

Your line is now open.

Great.

Thank you and good morning.

First question relates to the.

Performance.

<unk>.

Various HP for soy varieties.

Can you just talk a little bit about what you've learned with regard to cause and effect.

With regard to the performance of the different varieties and Hal.

How you are thinking about.

Future development.

The soy varieties.

Sure. So thanks for joining.

Patrick have you here.

I think that the key here is to understand that.

For us to be able to select the right materials, we need to partner up with farmers.

Identify what are these materials work and when do you need to be planted.

That is done concurrently with the inventory ramp up that we can have anticipated launches if we do it in the conventional way where all of this is done with the training within the drug development teams and then we take them each to farmers.

Slower so that is in a way what brings about some of the pumping if you will in our ability to move forward, we'd be smart deals now the good news is that we have too much video that we have been testing over the last two seasons.

Particularly one that's been tested I think for more than two <unk>, which is a 42 20, where we now feel fairly comfortable about performance.

Ability to.

To win over commercial sex in a particular region or in one of the face rubbing that accounts for a little less than 1 million, Texas and when we talked about leaning with dementia.

Conventional checks, we're not talking about agency for performance I mean, we're not talking about how <unk> works in the different backgrounds, we're talking about the competitiveness of the hard work and which we are incorporating that software at least as I indicated before it's been developed by us.

Coming from a market leader like.

Flooding moment, but in the case of fleet. So that is creating the challenge we're improving every year, obviously, we're not growing at the same pace, we're going with wheat.

Yes.

We do have the possibility of using licensees to.

Narrowed that gap, which is what I, what I recently to test that.

The.

Performance issues, one that has pass through related that has to do with the.

Genetics.

The mosquitoes, where you've seen.

And it's not in a way related to the performance of the team, which has been well validated not only by us, but also by by our technology partners.

Okay.

Okay. That's good so I mean, obviously there is trial and error involved in this process and.

Based on your last one your closing comment it sounds like you've identified say the commonality within these within the traits.

That are influencing the performance of.

The.

The ones that are on that.

<unk> identified to say loss versus when.

Is that pretty fair or is there still some.

So just you would need to do additional research to really understand the.

Differences in performance.

Yeah.

Yeah.

This is kind of gathering primary information to be able to.

Justify a non term making sure that the launch it's not erotic.

We're launching the Cdos that meets the standards that are required for the technology to perform.

Think that.

What we're doing here today is probably open kimono in many ways. This is not something company.

Normally disclose.

They don't tell me, how they get to that I'd say that launch we want to do this in a different way because we think it sort of safe Stein, even though.

It is.

Also showing.

When we sell not only where we win.

Now if we win in.

Eight out of 10.

Situations.

Impressive.

Brought them something that you will not see.

In our standard variety and that's the type of quality deals that we would like to launch.

Leading the program the one thing we have changed.

To be able to improve upon what we've been doing is to allow farmers to test a broader set of months. So in the past we would only give one variety for each farmer, we would have a lean enough for that particular field now we're getting three to four variety suites farmer, keeping Texas at the same level, we don't want to increase taxes et cetera.

Hum.

While we want to improve the quality of the data for targeting.

Launch Finalization process.

Yes.

I believe it will significantly accelerate our ability to bring new varieties in the conventional channel like we're doing today with 42 20 or <unk> 21.

That's great. Thank you.

And my last question or at least topic.

<unk> to the Australia, New Zealand market.

And I think also this ties into some context with Ukraine and.

Recently, there have been some reports.

Australia farmers are increasing there.

<unk> plans to export wheat.

And I'm sure others are to try to offset the loss of Ukrainian.

Passengers so.

Number one how are you thinking about advancing your process your business in Australia, and then also just hypothetically if your crane stabilizes and becomes a significant grower again.

Is that market ever an opportunity or is there just or do they just serve the anti GMO part of the world that would not.

Except.

These products. Thank you.

So.

That's a great question I think first on Australia, and New Zealand.

We have not included an update here.

Announced a.

A few months back.

Our intent to acquire genetics business in.

In country.

That is currently owned by its anomaly genetics.

Sure.

In fact, the breeding program that was.

Failing in the past and that is a process that's still ongoing.

I expect to be able to close before the year sense. This is something we're doing.

We JV synthetics, so that will give us a footprint in Australia and an initial set of materials some of which we can deploy.

<unk> technology, we have already said and materials that are going through the quarantine process.

Then the training in country and be able to get the elections here, we do have feet on foot clearance today.

We need the planting or <unk> to be able to launch in Australia and in season.

So that is a very meaningful market I can say that it's probably twice the opportunity that we are currently.

Pursuing in Latin America, and in terms of the Ukraine.

In other geographies I believe that's been more we.

We make.

Sure.

<unk> hundred 40 <unk>.

Sort of a status quo. If you will the more likely these geographies that have to be studied rejected gmos.

We'll accept the technology.

0.2 is sort of an interesting upsell.

Observe Asian, which is what happened in Brazil.

Approval of survey in Brazil.

That show that close to 70% of consumers had no concerns on GMO.

And that observations helped change the completion of key groups that historically would get rejected since <unk> seen the crop I mean were these were not saying that the job is done.

It's far from being done.

We are.

Much closer today.

Being able to deploy these technologies and geographies, where before we thought.

That would be very challenging Ukraine, being one of them who knows maybe one day, we have GMO, we can fronts.

I think that can be today more realistic about what it was a year ago.

But that's what I'm.

I don't know if you have any comments on this.

I think just to complement all of 30%.

Doug.

Ukraine situation through security has become a concern for everyone seems to be a consensus that technology. Any particular, GMO, you said meaningful parts of the clarity or answered that humanity needs to provide some security threat.

So I think that has been also a quantitative tailwind for us while the year pending regulatory approvals and gaining.

Exposure to processors, you can see that we guided 30 new processors.

As with many things.

Turning to fade away when there's a threat of having something that is important for you.

Thank you that's very helpful I'll get back in the queue.

Thank you. Our next question comes from Dmitry Silverstein from Watertown Research Dmitry. Your line is now open.

Tom.

Good morning, gentlemen, and thank you for taking my call.

I was wondering you posted a very strong revenue growth number obviously in a lot of it has to do with the launch of the H before.

But if you have to look at price and I think you mentioned that pricing was a little bit of a tailwind.

Foreign exchange translation.

Is that price and FX played in your revenue growth in the quarter.

Hi, Dmitry this is enrique.

On the call for the first time and thanks for your question.

So I have to say that FX place no role whatsoever, and increasing our revenues are comparable revenues as I mentioned, a very mind Dmitry that this company operates mainly in hard currency, so either U S dollars or euros with the exception of Brazil, It's a market that operates in local currency.

So there is practically no tailwind from FX whatsoever. There is some tailwind from coming from prices mainly in the CPE segment, so crop protection products <unk>.

See some increase in prices coming from the disruption in global supply chain, So raw materials that go into CP coming from China.

In the U S, Brazil, Argentina, Paraguay, Uruguay, the main act producing countries.

What's the correct throughout the year and that allow for price increases, which at the end of the day helped us in that particular segment now more important than that to me is the fact that these highlights a competitive advantage for biologicals, which we have significantly invested in with the pro forma acquisition biologicals.

Have you factored in country, you don't need to get raw materials from the other side of the world to be able to supply farmers inputs. So that wasn't there when CCP and the rest I would say that it was not a major tailwind.

Prices was more related to us expanding the business and having much greater adoption of our main technologies I would say that probably microwave for advertisers, where the star products for the year in that regard.

Got it got it thank you.

It can fall off on the crop protection question on crop protection area.

The gross margin there is what I would consider to be a little bit below what.

Kind of the industry averages if you will.

Which I think is north of 40%.

Clearly, it's going to improve as you as you integrate stuff.

Pro forma but can you talk about sort of what the drivers of the margin first of all are you looking to expand margins in this business in the short term and secondly, what would be the major drivers of that.

That's a very good question bearing in mind that in crop protection, we have some sales come from third party proxies. So this is.

Not strategic.

Product category for us, but rather something tactical.

Some countries like Brazil, Paraguay, Argentina, we collect from our retailers by getting proxy return.

And also we have become the partner of choice for some other companies would want to commercialize in Latin America.

The Rome product to us as a commercial partner so those two categories of products and are more tactical in nature, how lower margins have lower working capital requirements are now kind of like low hanging fruit for US now those products are rollout delivering gross margins the greenfields.

<unk>, 35% to 35% and Thats what at the end of the day drives down.

The overall segment.

The margin, we're trying to use I mean that segment should have.

Normal run rate.

Margin is closer to 40% when you compare that to other CPG companies bearing in mind. The Broncos CPG companies are selling products with their own brands and don't have as much of a weight as we have on this type of more tactical product categories.

I think that this will remain to be the lower margin.

<unk> segment within all of the segments.

We start to see and malone's.

Should say broke warm.

Ross becoming reported there.

Margins.

<unk> to 60%.

Gotcha.

Helpful. Yeah, I totally get the third party distribution margins would be lower.

We had another companies.

Participate in particular, the Latin America market.

You mentioned.

Plant cost issues with Argentina, playing.

Impacting your quarter, a little bit in terms of margin.

What's the situation there now.

Can we look for.

Cost of manufacturing facility to stabilize.

We get into 2023.

That's also a great question. Thanks for asking so first I will say that today, Argentina continues to be.

An important manufacturing hub for us so even though we've commercialized globally many of our at least sold their products.

Those are manufactured in Argentina, we are expanding our manufacturing capacity in Brazil to diversify for our.

Sources, but for these particular fiscal year 'twenty going into PD.

BDO.

And that continues to play an important supply angle.

Two things I would say there dmitry.

It's important to us and would we truck via evolution of the local inflation versus the depreciation of local currency against the U S border. So if inflation outpaces depreciation of the local currency that means that we will begin to see cost pressure out of local currency denominated costs being inflated.

We measured in U S dollars that applies as much to cost of goods sold as it applies to SG&A functions that are located in country.

Throughout the year I would say that probably in the fourth quarter. We saw these two macro radios local depletion and depreciation of local currency converging.

We're expecting but for.

For the previous 15 to 16 months inflation.

Depreciation of local currency, so theres kind of accumulation, there's a cumulative effect, but have yet not been fully corrected. So I would say that the bleeding has stopped.

In the fourth quarter and we expect these that at some point, we see why you would need to converge it has been always.

The case and when you look at the last four decades in Argentina, and when that happens the business will get back to the normal run rate and what I was saying about.

Gross margins being in the mid 40% range I cannot tell you when that will happen I would only point out that the upcoming.

Upcoming elections in Argentina in Q3.

That.

Has proven to be a catalyst many times for micro idea was to pull back in place.

Understood. Thank you that's very helpful. And then final question before I get into Q, the Latin American planting season is well underway now.

Can you provide any color as to how that's going what you're seeing that's maybe different from what you saw in 2022 23 season.

And just give us any color that you can.

What the current planting season in Latin America looks like for you.

Specifically.

So this is third equals breaches have using it in.

In the call in terms of Latin America that you indicated.

We're facing.

We can't drought.

Particularly for winter crops in Argentina. So.

These.

It's an evolving situation.

Brain required promptly.

Hey.

Double edge.

Components for us because that showcase H before technology. It allows us to make the technology more reachable to fibers, but on the other and adding that to have a consequence in terms of farmers income and.

And our ability to incorporate new technologies.

<unk>.

In the future so there.

Our ability to invest if they have a week drop at the end of the of the liens or so.

I think we're waiting for range. This is Bob.

Importantly, nuts and peanuts.

I feel really about ethics close because we.

<unk>.

<unk>.

A weak business there of relevance.

I don't know if you want to add anything to the Latin American, but yes, I would only point out dmitry to the fact that Lumpiness is probably the one decision that the farmer always wants to make.

Unless nature really poses restrictions.

So you ended up not being able to plan. So you will see that for the product categories of our portfolio that are designing towards planting we tend to see a higher resilience revenues, even though there might be drought windows does not work the same way for CPE products for example.

So what I would say the rollout we did have a good planting.

With planting season for winter crops in Argentina that most of the shows up in our Q4 results.

And what we are probably looking with a little bit more focus now or how range will evolve in light of the upcoming some across <unk> and see some unusually takes place by the end of Q1, beginning of Q2, our fiscal year Nothing America.

Understood. Thank you very much very helpful.

As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Lots of Australia. A question. Please press star two please ensure you Amit likely when asking your question.

Our next question comes from Brian Wong of Rosetta capsule, Brian Your line is now open.

Thanks, Good morning.

We're hoping to get an update on pro farm just maybe.

Are you in a position to provide an update on kind of what their QQ.

And it looks like.

Hi, Brian This is enrique thanks for joining the call.

That's going to be talking to you.

So as I mentioned to you.

<unk>.

Four of our fiscal year. So March through June was a draw.

Route quarter in the U S in particular and in California, even more so.

About half of the revenue stream from pro farm is coming from cash crop sales in California, we are happy stemming from row crops in the U S and Europe .

So what I would say that.

For for Pro farm has been a tough quarter.

We do expect and we are eager to see how the.

Second half of the calendar year.

For them.

Coming out of that so I would expect.

You will then Q4 and full fiscal year of pro farm revenues to be flat or slightly below the number that they reported in.

Do you see Europe , so 2021.

To us obviously.

I think that it is more important the benefit that we will be gaining from diversifying revenue sources, which I mentioned.

Sometimes California for example might be an offsetting factor.

If you can walk in March through June and hopefully, sometimes you will help us.

Sort of like offset other rare.

Revenue threats like the ones that we have in Latin America.

Drought for summer crops prevention.

So that's what I can say as of now we will be probably getting a little.

Bit more quarter on pro forma numbers in the upcoming earnings call, where we will be consolidating the results for the first time.

Great great.

Just awesome.

Just from a bigger picture.

Given the drought conditions in Argentina right now.

No.

Given.

Just broad weather conditions across the globe.

Isn't that conducive.

For the next selling season.

Far as H before or am I.

No.

Hi, Brian this is for equal rates without any Nicole, but I think obviously the current situation without becoming not R&D.

<unk>.

Notorious here in Latin America, but also in Asia. The situation in China is quite dramatic in Europe , we've seen coming out of the summer.

Yields have been hit by very significant drought.

Our high temperature conditions the.

The California situation that we are witnessing for cash crops. So all of this is creating sort of a need for the next generation of biotechnology solutions. So if you look at sort of what the industry delivered until now which was mostly crop protection focus I think that what we're seeing today also in light of climate change great.

It's up a perfect scenario for the type of solutions, we're bringing to market, but also other as being kind of our central.

Solution in terms of safe, but also the.

Illogical package that comes along with pro farm and we sell lot there where we can.

Improve crop health and <unk> health and improve the iron attrition. So that we are less demanding or less dependent on chemical nutrients. If you will for.

Crop nourishment itself.

I think this is obviously favorable for US you see these.

Reflected in the regulatory clearances and the speed at which we are obtaining.

Approvals in geographies that have been challenging in the past.

And so I think your observation as well.

Great Great I think I think tableau to it it's just some some.

Sure.

Okay. That's.

That's great. Thank you so much.

Thank you we have no further questions. So I'll hand, it back to Federico truckload for any closing remarks.

Okay. So thanks, everyone again for joining.

I said at the beginning this has been a terrific year.

One that we're very proud of so I want to congratulate the more than 700 people today that works in the broader set of solutions are you having patients for their hard work and impact.

In fact for them to keep on doing what they are doing so that we can continue to deliver the type of performance we are showing here today.

Hope you have a terrific rest of the week and look forward cleans that act and to follow up with those that are interested in learning more about our company and our technologies. Thank you.

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