Q3 2022 Benson Hill Inc Earnings Call

[music].

Good morning. Thank you for attending <unk> first quarter two earnings call. My name is Clayton and not be a motivator all eyes on mute for the presentation portion of the call. It's all opportunity for questions and answer the end.

If you would like to ask a question. Please press star one to ask we'll keep it.

I would now like to pass the conference over to your host Ruben Miele.

Senior director Investor Relations with pension Hugh.

Please go ahead.

Thank you and good morning, we appreciate you joining us to review, our third quarter financial results and outlook.

With me today are Matt, Chris Vincent <unk>, Chief Executive Officer, and Dean Freeman, our Chief Financial Officer.

Earlier. This morning, we filed our earnings release and form 8-K. These documents as well as an investor presentation. We will reference during the prepared remarks are available on the investors section of the Benson Hill website.

We filed a universal shelf S. Three registration statement that includes a $100 million at the market equity facility subject to SEC effectiveness, which we will discuss later in this presentation.

Separately, we also took a housekeeping staff and filed a consolidating industry that simply combined previous S. One registration statements we had on file.

Comments today from management will contain forward looking statements, including Benson hills expectations of future financial and business performance the industry outlook as well as current guidance about 2020 to annual results, our plans and goals for 2023, and our 2025 financial targets.

Forward looking statements are inherently subject to risks uncertainties and assumptions and are not guarantees 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, and 10-Q filings press release Investor presentation, and other filings with the SEC.

Also during this presentation, we will be discussing certain non-GAAP financial measures a reconciliation to GAAP is available on our earnings release and presentation.

Earnings presentation begins with an overview of what Madden Dean will discuss today related to our financial results the outlook for the remainder of the year liquidity and activities underway for 2023.

I'll now turn the call over to Matt.

Thanks, Ruben and good morning, everyone. Our third quarter results continue to build on the momentum we've seen throughout the year driven by favorable market conditions for both proprietary and non proprietary ingredient products.

Proprietary revenues in our ingredients segment increased 300% to $26 million on a year over year basis, representing a doubling of proprietary revenues generated in the second quarter. This.

This is consistent with our expectations for increased shipments in the second half of 2022 from last year's crop.

We are off to a solid start in the fourth quarter and maintain our guidance to end the year with proprietary revenues in the range of $70 million to $80 million.

We believe demand for our proprietary soy portfolio remains highly underpinned by the need for more nutritious affordable and accessible plant based foods, which today is exacerbated by intensifying food inflation supply chain challenges in the growing food driven health crisis, we are able to serve multiple markets <unk>.

<unk> alternative meat and dairy products meet extension bakery in snacks, as well as edible oils and agriculture.

Even during these challenging times, we continue to see strong interest in our products from customers and partners due to the numerous value propositions that the combination of our technological and business model innovations can offer our proprietary products are domestically sourced and grown by U S farmers traceable across the supply chain often grown.

With regenerative agriculture practices and are designed to be more nutrient tons less processed better tasting and significantly more sustainably produce than many competing products. Furthermore, because we are growing ingredients made better from the beginning our products also have the ability to be produced with fewer processing steps for similar.

Less cost than competing products base.

Based on what we know today, we believe the current market dynamics will remain <unk> for the ongoing growth and commercial success of our proprietary soy portfolio.

Our annual planning process is well underway I will review key activities that will inform our outlook and then take a moment to reflect on the one year anniversary of Benson he'll becoming a public company.

While the U S. Soy planting began later than usual this season, the harvest of our proprietary 2022 crop is more than 90% complete across our farmer partners. This is in line with national averages and our expectations.

Each year, we test protein levels in the field prior to harvest to provide us visibility into the performance of the crop or.

Our sampling activities are on track and are also nearly complete and we are delivering against the enhanced and world leading protein content levels, we expected.

Furthermore, crop yields have been strong and validated our cleaning expectations together. These results set us up well to deliver on another high growth year of results in 2023.

Last quarter, we shared with you the significance of the strategic partnership with ADM to commercialize Benson Hills Ultra high protein soy ingredients for the human nutrition market in North America.

This first of its kind collaboration represents a new frontier in food innovation, starting with a better seed means both companies can align with consumer demands through bespoke ingredients and fast growing protein markets for human food.

By enabling a vertically integrated approach. We can also offer new revenue opportunities for farmers, who want to be a part of this novel seed to fork approach.

With the foundation of the relationship between Benson Hill and ADM now in place we are actively collaborating to scale multiple new and innovative product categories. While also unlocking capacity with existing products all of which are powered by bensenville genetics we.

We are excited about the opportunity to collaborate with Adm's farmer base ingredient manufacturing and sales organizations.

We are now coordinating with ADM to process a portion of our 2022 ultra high protein soy crop with plans for more significant volumes from the 2023 crop.

Joint Farmer partner recruitment program for 2023 planting season is underway in the vicinity of Aam's Decatur, Illinois facility.

We also launched 2023 former partner programs to support our Creston, Iowa in Seymour, Indiana facilities.

Broadly speaking awareness events and hill in our program has increased among the grower community with an emphasis across the ice states.

Current pharma requests for acre contract proposals have already exceeded all total contract acres in 2022 and to date existing Benson <unk> former partners have pledged to increase their acreage commitments on average by well over 25%.

Last month marked the one year anniversary of Benson who'll, becoming a public company.

Since announcing the path to the public markets in May of 2021, we've announced six quarters of results meeting or exceeding our financial and operational targets over that time.

We've increased financial guidance several times since the publication of our outlook in early 2021.

We've achieved several key strategic and commercial milestones and we've significantly enhanced the capabilities of the crop Oss platform and in particular, our digital twin technology to further accelerate and deepen our innovative product development pipeline.

All of these accomplishments validate our strategy and fortify the foundation for continued growth and overall demonstrate execution to date beyond our expectations.

We are grateful for the support of our farmer partners customers and commercial partners team members and investors. Many of you share our vision to advance the food system and have collaborated with us to ensure we are advancing the business and not only delivering on the growth targets that we've outlined but positioning Benson helped to further leverage the natural genetic diver.

<unk> of plants to achieve our mission to drive the pace of innovation in food.

We are optimistic that 2023 will be a year to further advance our strategic and financial objectives anchored by our technology powered by data and enabled through an integrated approach across the agro food value chain connecting the farmer with the consumer.

While it's early in our planning cycle for of the goals that we have for 2023 or one increased contract closed loop acres by at least 50% as well as add substantial acres for ADM in both cases, leveraging our closed loop and crapo loss, where our industry, leading datasets are enabling us to optimize manage.

<unk> practices by variety for protein and yield.

Collectively our goal is to more than double the acreage footprint in the field next year.

Two increased proprietary ingredient revenue by at least 50% driven by continued strong traction in the Aqua culture edible oils and protein ingredient markets the unique carbon and water reduction advantages of our ultra high protein soy meal has joined considerable interest across multiple target markets and in particular.

Aqua culture, which has the potential to be an attractive growth market for us next year.

Sorry.

Further expand gross margin by shifting to more proprietary ingredient production realizing product mix improvements within the proprietary portfolio and realizing efficiency gains and operating logistics and across our supply chain and.

And four we plan to share some exciting advancements in the innovation pipeline at our 2023 Investor Day, which we will host at our St. Louis headquarters on March 29.

I will now turn the call over to Dean for his perspective about our third quarter performance and upward revisions to our 2022 guidance.

He will also cover the steps we've taken that are intended to fully fund the business, which we believe will further enable us to execute our strategy and achieved positive EBITDA and positive free cash flow in 2025.

Thanks, Matt and good morning, everyone I'll begin with comments regarding our quarterly results and our full year outlook.

Third quarter revenues for the ingredient segment grew 429% to $122 million, which included the proprietary revenue growth Matt mentioned earlier.

The primary driver of our results was the better than expected non proprietary revenue growth due to favorable pricing and the execution of our operations to achieve consistent high throughput at both the crest and see more facilities in fact last quarter, we achieved record setting production rates at both of our soil facilities.

The results also include a small amount of revenue in the quarter as a result of the Atms strategic partnership.

As a result of the strong performance, we now expect to deliver full year ingredient segment revenues between $370 million and $390 million above the previously increased range of 275 million to $325 million provided on our second quarter call.

Revenues for the fresh segment decreased 11% to $7 $9 million due largely to adverse weather in both Georgia, and Florida throughout the quarter, including commercial disruption caused by Hurricane Ian.

As we've discussed throughout the year the sharp rise in soy commodity prices during the first quarter resulted in $8 2 million of unrealized mark to market losses related to timing differences between hedge contracts and the physical sale of the underlying assets.

As expected, we realized gains of those contracts in the second and third quarters of $5 2 million to $1 4 million respectively.

We have another $1 6 million of losses remaining which we forecast to largely unwind by the end of the year.

Consolidated gross profit in the quarter was $4 4 million, an increase of $4 million inclusive of $1 $4 million gain related to the mark to market timing differences.

Reported gross profit from the ingredients segment was $5 9 million compared to a gross profit of $800000 in the prior year period.

Drivers of these results included a closed loop proprietary and non proprietary revenue growth the impact of high margin partnership and licensing revenue and progress by our operations team to drive improved production utilization and cost efficiencies.

The increase in gross profit from the ingredient segment was partially offset by a gross loss of $1 6 million in the fresh segment due largely to adverse weather conditions, which required us to incur higher cost per contract purchases of fresh produce to be contract obligations.

As a result of the strong execution in the ingredient segment and outlook for the fourth quarter. We are increasing annual gross profit guidance to 14 million to $17 million from the original guidance of $9 million to $13 million. The guidance includes the third quarter and expected fourth quarter revenue and gross profit contributions from the ADM strategic.

Partnership, which should more than offset the approximately $3 million of unexpected negative impacts from the fresh segment year to date.

Adjusted EBITDA in the quarter was a loss of $17 5 million.

For the full year, we expect an improvement in the adjusted EBITDA loss to now be $75 million to $80 million from previous guidance of a loss of 80 million to $85 million. Furthermore, we expect free cash flow for the year to now be negative $95 million to $105 million an improvement over prior year guidance of negative 120 to one.

$130 million.

Turning to liquidity, we continue to maintain a strong cash position with $193 million on hand as of September 30, We stated on the second quarter call that we would explore additional options to further support our future liquidity demands. We believe we now have in place the mechanisms to fully fund the business inclusive of debt repayments to achieving our objective.

A positive EBITDA and free cash flow in 2025 the.

The foundation to effectively manage our cash needs as and the execution of our strategic plan for profitable growth disciplined capital deployment and cost management.

We further added to our cash position by first receiving the first in a series of annual technology and licensing payments from ADM, which was included in the September 30 cash balance.

Meeting the performance milestones with our primary lender to extend the interest only period by 12 months, which will postpone principal payments to the beginning of 2024 third filing a shelf registration statement today that includes an ATM facility of up to $100 million.

Once effective the ATM facilities designed to supplement Benson Hill's cash position over the next two to three years we.

We like our shareholders are sensitive to dilution and intend to opportunistically consider reasonable non dilutive alternative sources of liquidity in the future where we have done is proactively create a portfolio of optionality to extend the liquidity runway and further support the balance sheet.

Last quarter, we shared with you that the fresh business was under strategic review process has led to negotiations with interested parties to acquire the business and related assets, which is ongoing.

If we are able to enter into a transaction to divest the business, we would likely take a noncash write off of up to approximately 50% of the book value of the business. This is obviously dependent on a number of factors, including the structure timing and scope of the divested business.

If a transaction or transactions were to occur, which we cannot guarantee we would expect to use the net proceeds to further supplement our cash position.

As Matt mentioned, we've accomplished a great deal over the past year to validate our strategy and demonstrate considerable progress towards our 2025 financial objectives. The annual budget and planning process is underway during a dynamic time in our industry, which we continue to believe will provide net tailwind next year.

We plan to provide 2023 guidance during our fourth quarter earnings call in March.

That concludes the prepared remarks, we will now take your questions.

Okay.

Thank you and good luck to ask a question. Please press star followed by one telephone keypad.

If for any reason you would like to remove that question. Please press star followed by two.

Again to ask a question please press star one.

Our first question is from Cody Ross from UBS. Your line is now open.

Good morning, Thank you for taking our question.

I want to start on just the sales.

Pete a straight revenue by about $45 million in the quarter and you raised your sales outlook by over $70 million.

All driven by our non proprietary portion of your ingredient segment, what's driving the growth right now and how sustainable do you think this is.

Yes, So hey, Cody this is dean thanks for thanks for the question.

Look I think as we've talked about there's a couple of things going on in the broader backdrop.

In the.

In the broader market for non proprietary products continues to be really strong.

There's a very strong cost basis or price basis, I should say that continues to persist and.

And the production utilization.

Performance of the operations performance continues to perform at a level that candidly you didnt anticipated put a little bit of math around that about 30.

Q3 production utilization.

Crush rate performance was about 30% better than the third quarter than it was all of the first half of the year.

The function of the fact, we.

Recently acquired these assets, we're still building up the capability, we're building up the logistics chain.

The entire sort of synchronization of the production and the supply chain that happens over time.

As operations continue to to execute continue to optimize and we expect that performance to persistence of the fourth quarter.

Thank you for that and if I could just weigh in to one more here you raised your outlook for gross profit and EBITDA for the full year, implying a meaningful ramp in fourth quarter why does your margin improved in the fourth quarter relative to the third quarter and understanding how this flows to cash.

Cash flow in your free cash flow outlook, what are the drivers of the improved improvement in free cash flow in the fourth quarter. Thank you.

Yes, let me start with with the cash flow the cash flow is obviously a function. It's clearly a couple of things.

A function of the performance of the margins as we've expanded the gross profit and obviously the EBITDA.

That is true margin cash margin performance continuing to really optimize the working capital cycle. I think we took a reasonably conservative view given the dynamics of the markets given the performance of operations and as now we've seen their ability to perform we.

We see much less stress on working capital overall, and then just the broader shipment performance, we expect in the fourth quarter.

Should these stress net working capital so we get the benefit of that but the key driver really is the performance of the other margins and I think it's a great question, it's kind of three things really happening there.

From a non proprietary perspective, we're actually seeing much better margin contribution margin performance, both as a function of crush rate margin performance, but also in our non proprietary LLP business continues to perform very well operationally and from a margin perspective, secondly from a proprietary perspective.

We're seeing again the benefit of the broader pricing backdrop.

The board crush margin backdrop.

The effects of the improved volumes in the mix.

Really delivering stronger contribution margin.

And then lastly, I would say that the operations performance continues to drive production utilization rates to a point, where we're actually to a certain extent offsetting some of the persistent inflationary and supply chain logistics headwinds we saw in the first half of the year with an improved production utilization and I'll. Just say lastly, there is some of the partnership licensing hi.

Margin processing licensing margin performance that we anticipate.

In the fourth quarter I'll, just make one last point to that question. We also.

The fresh business was a tailwind a headwind I should say in the third quarter storm related that is much more I'll call. It open market purchases to satisfy contracts at a much higher cost.

We anticipated that to abate into going into the fourth quarter and the fresh business actually contributing margin.

I will say the storm knows that.

Obviously, we're watching very closely could potentially impact that but it wouldn't be material to the overall guidance for the year.

Thank you for that and then just one last high level.

Strategic question, how has your partnership with ADM chain share discussion with <unk>.

Specter of customers and partners has that increased the amount of conversations you have provided credibility to your business model has there been any impact at all thank you and I'll pass it on.

Yeah. Thanks, Thanks for that question Cody This is Matt.

Certainly I think validated.

Value proposition that we felt strongly was built around the ultra high protein portfolio for certain applications in the human food ingredient markets and so.

As you can of course imagine.

Sales infrastructure and manufacturing of the structure behind ADM as the market leader is is at a scale that previously was.

An attainable and so it's done a couple of the points that you mentioned I mean, one obviously solidified surety.

And credibility even more than I think we are in our early stages of developing.

But it's also given US a storyline to speak with a broader set of customers and perspective partners around other target markets and so when we validate the value proposition of ultra high protein soy for in particular, the scope of this partnership that's obviously a really nice achieved.

Matt.

A fantastic milestone, one, which we expect to deliver a terrific amount of value relative to our licensing and partnership metrics over the near and medium term.

But beyond that.

Communicated too.

Folks.

Evolution of our business too.

Satisfy the capacity that we have in step two of our previously published model and move more business into a broader licensing construct what we call step three is of course, something that we're always evaluating and so that that.

That validation that credibility that that market expansion.

And the trends that we expect to see realized is something that I think folks in different verticals are also looking across some guidance. There is ways for us to expand these types of opportunities in other target markets and collaboration with Benson Hill, as well and so I'd say, it's both within and outside of the construct of the existing partnership providing.

Providing significant benefit.

In the market.

Thank you best of luck the rest of the year.

Thanks Kurt.

Okay.

Thank you.

Our next question comes from Adam Samuelson from Goldman Sachs. Adam Your line is now open.

Thank you good morning, everyone.

Good morning, good morning.

Good morning.

So I guess the first question.

A clarification as.

As we think about the the.

The technology payments.

From ADM that you said there was some in the quarter.

Dana I thought I heard you say just now that there would be some additional in the fourth quarter.

Any way to just quantify that.

Thank you.

In the second quarter.

On the outlook you'd said minimal contribution from ADM at the time and so just to clarify does the guidance in August I assume that those levels of technology payments and associated gross profit.

That you are kind of realizing in the second half.

Or is that part of the step up in the in the outlook.

Yes look I mean, I think and we've obviously looked at this very closely.

The guidance the guidance step up is largely as a function of the performance of the business as I mentioned earlier the factors around the production performance.

The factors surrounding the margin improvement both on a proprietary and on the non proprietary side.

The ADM payments in the revenue.

Help us pop up.

The guidance, but it's not material to the overall guidance performance.

Got it okay alright.

Alright.

That's helpful and then so.

I know, you're not giving 2023 guidance now, but you've given a couple of markers to help think about some of the value added contributions to expect for 2023 and I wanted to hone in a little bit on the.

Proprietary ingredients revenue growth.

Set up at least 50, so it's over.

<unk> hundred 10, and I'm, just trying to think about kind of the gross profit contribution of that and how that.

How that will track relative to the overall 2025 goals.

For both total revenues, but also consolidated gross profit margins of 25% plus and if you could help us think about.

Kind of the gross margin trajectory.

That had an improvement that would come from that kind of step up in proprietary ingredients revenue and what the puts and takes around the magnitude of that improvement would be really helpful.

Sure.

Yes.

Yes, So let me just talk about.

Want to be careful obviously, we're still very much in our planning cycle and there's a there's any number of inputs.

We are benefiting from a pricing backdrop are broadly speaking that gives us.

Optimism around the continued.

Performance of contribution margin for proprietary.

We should be largely again on track and kind of how we've thought about.

Our margin performance in 2023 is a function of the additional margin growth.

I think all things being equal.

We expect to have.

Very solid margin improvement in proprietary both as a function of the volume, but also as a function of the improved.

Higher margin.

Profit mix it will come from those from those additional volumes.

Got it.

As we think about that.

Both the experience with the 2022 crop, which drives that revenue next year as well as the as well as the target markets for where that where those product what types of products and who they are going to.

Is there new categories, and new customers that form a meaningful part of that of that volume and revenue increment.

Yes, I can comment on that of that so we did far more comprehensive planning and the 2022 planting than we've done in prior years I'd like to say, sometimes we're transitioning and the current near term period from more of a push to a pull model. So we've gained more end market visibility to what the demand.

Syed desires and various of these target markets.

I'd point to one area Adam that I did mentioned in my prepared remarks of Aqua culture, where we are seeing a degree of firmness thats, probably greater than the expectations that we had moving into the into the current period.

And Thats a good problem for us to have simply because there is.

Fair amount of versatility and how we can deploy the crop varieties into that target market, particularly for the northern European agriculture market.

The demand side, there is being driven in part by EU standards around sustainable sourcing.

And given the roughly 80% to 90% reduction in Cotwo and greater than 70% reduction in water that we can supply into that market as an SPC replacement for the UHD soy.

That's become overwhelmingly attractive to some of these larger end market customers. So that's one area, where I'd say.

We're getting really nice demand signal and I expect that we will meet or exceed what we previously expected.

Have to disrupt any of the a variety mix from a crop production standpoint.

Lee speaking and this gets also to your last question.

<unk> addressed is that in respect of how we.

<unk> gross margin escalation for 2023, it's very much in line with the plan.

That we previously guided towards and provided a bridge for at our Investor day that leads us cash flow positive and an EBITDA positive 2025 targets. So I do want to affirm that.

We are tracking against a number of the positively towards the number of the variables that we provided a pretty detailed guidelines around during during our April meeting together as well.

That's all really helpful I'll pass it on thanks.

Thank you Adam.

Thank you.

We have our next question comes from Christian <unk> from Oppenheimer Christian Your line is now open.

Great. Thanks, so much good morning, everyone. Congratulations on the nice quarter session format.

I wanted.

I wanted to dig in a little bit.

You mentioned some of these metrics, but I wanted to know if you could expand a little bit more on <unk>.

Just the performance improvements at San Juan question Anthony.

It is kpis, what's moving in the right direction.

Help us parse out how much help we're getting kind of from the macro broader crush margin backdrop versus your own improve efficiency gains.

Yes. It is.

Question, I mean to kind of go hand in hand to the extent that we continue to see strong persistent demand.

And to the extent that we.

Certainly more work to be done, but certainly firing on all cylinders from an operational perspective with regard to the production velocity improvements the crush rate improvements. The overall capacity utilization in those are having I would say meaningful impacts on.

On the overall margin expansion that we're seeing the pricing in the crush margin improvement is certainly also.

Assistant benefit.

But largely as we continue to drive the proprietary <unk>.

Revenue through the plants and as we talked about the back end of the year being much stronger proprietary revenue mix we are seeing.

Some very solid margin enhancements as a function of that as Matt talked about Aqua.

As a meaningful part of that overall mix and the margin improvement. So the two go hand in hand.

You sort of had to push me I would say, it's sort of an equal parts between the performance of the of the shops the operations the production utilization.

The broader market pricing.

Volume shipment of value added products.

That's super helpful. Dan because I think one of the things that we.

We're trying to understand is what sticks in 2023, and so on the top line it sounds like more progression toward proprietary ingredients, which will certainly be beneficial to margin.

Even if we were to see some of the broader soybean market dynamics cede a little bit that there would be some makeup for that both as a reflection of the increased percentage of proprietary ingredients and what that means from a margin perspective.

Thinking about that the right way.

Yes, Chris This is Matt and thanks for your comments I think yes, you are thinking about that correctly theres a transition over the near term that we have.

That we've talked about moving a larger proportion of the capacity over to proprietary and it's a balancing game frankly, I mean to your question about this.

Does the volume and pricing dynamics in the non proprietary arena persist through 2023, I mean, I could I could answer that in one way and say well, it's anyone's guess because from a commodity pricing perspective, but certainly imagine that theres probably more.

Downside than upside from a non proprietary commodity perspective. So we don't plan of course for proprietary I'm sorry non proprietary.

Unit cost.

Net prices to continue to increase because that would be making a long that on the commodity markets and we just don't speculate in that regard, but what as it reflects to your question of consolidated revenue. We're in the midst of transition between non proprietary over to proprietary but I would say that the ceiling that we previously thought.

We had say a year ago as higher and it's higher because of this.

Frankly, the team and the remarkable work that they've done to execute.

The operational goals far beyond our expectations.

Which will provide overall greater capacity for close to those plants over time and so while this year, we've spoken about on minority of the capacity.

At Creston and see more being proprietary and we are talking about a 50% year over year growth in the proprietary arena.

Still will not constitute.

Overwhelming component of the capacity that will take two to three years to transition over so it's a long way of answering your question, but what I'm trying to explain is that you are thinking about it correctly and there's this balancing act of shifting proprietary and create a greater proportion of the product mix, obviously thats the number.

One driver of our margin accretion that we're very focused on.

But the degree to which there is a balance of continued high commodity prices, which are propping up the non proprietary performance in the meantime, as a bit of a TBD.

I appreciate that color, Matt if I could sneak one last one in.

About the flywheel benefit of the 50%.

Brian Carey acreage growth next year, just how we should be thinking about that contribution to the overall impact on the crop and I'll leave it there. Thank you.

No for sure and just to remind.

You and everyone that.

When we talk about the acreage growth that led into 2022, that's translating into my commentary around 50% proprietary revenue growth in 2023, Theres very little year to year variance the crop from this year, principally as the revenue and the proprietary arena from next year, So when I talk about.

<unk> proprietary acreage growth and goals of greater than 50%.

On the proprietary closed loop side and doubling on an overall basis the way to think about that as how does it translate then into 2020 for revenue.

Outcomes and certainly that year will be the first year, where we feel like we've got.

A much more meaningful contribution.

Moving in from the licensing side, which is an even higher margin profile, but certainly at that point in time.

Expect to see a more significant proportion of our plant capacity being absorbed with the proprietary flows.

Thank you.

Thank you.

We have our next question comes from Ben <unk>.

Barclays Bank. Your line is now open.

Perfect. Thank you very much good morning, congrats on the results.

Just along these lines.

If you could talk a little bit because we've talked about planting piece, but.

Ill talk more about on your customer side, where do you see.

Strong demand and coming into 2023, England potential might be on that.

Now.

Next year I spoke about in the use of 24.

Which area are shifting.

Focusing on more.

<unk> taken a look deeper into it isn't on the agricultural side is it.

Within the <unk> piece.

Just in general.

Alternative protein sector weightings.

Where do you see the strongest demand drivers within the next call. It one to two years.

Yes for sure Thanks Ben.

I think we're seeing as I mentioned earlier really nice demand signals on the agriculture Arena. That's certainly one there is still a great deal of demand that we talked about earlier in the year are the highest low Linda Lennox non GMO soy oil that we've that we're producing.

I would say Furthermore.

Spoken about the human food ingredient markets.

The edible oils markets and the Aqua culture markets and as you saw in the presentation.

Real estate has continued to be three pillars of distinct investment we haven't talked a lot about things like pet food as an example, and that is something that we're going to begin to look at.

More closely in 2023, because there is the.

A similar value propositions that we can offer to some of these markets that we've already begun to translate and validate and scale and the human food side of that so.

It's an example, then.

It's too soon to say, if and how that begins to constitute an impact to the P&L. The other area not market specific.

Market specific by geography specific as we are growing our business.

In Europe on the back of our agriculture.

Investments there.

And we are always looking at opportunities as we continue to grow in the United States to look beyond the United States.

And the other destination markets and that's an area again, along with pet food that we haven't spoken a lot about but we're going to be taking a closer look at.

In 2023.

Got it understood.

One question maybe for Dean.

You've talked about.

The driver of the free cash flow and obviously clear that with a lot of that comes from the margin piece.

Another part of it.

But the better working capital.

Or should we where should we think about it whereas the benefit coming struggled with Dolby.

Sure.

Slightly below on the inventory side, where do you have most opportunity to actually improve and remediate release, a little bit of that working capital investment.

Sure.

Yes, that's a great question, so its still a couple of things.

Largely a function of the inventory.

And sort of having much more efficiency in the inventory turns that we're seeing that's both a function of the.

Having better.

Better.

A better handle on sort of demand signals and then having much better synchronization in terms of supply chain and production. So that's the key one we put a lot more focused just on working capital in general So where we're seeing.

Improvements in our collection performance as we deliver product.

Just our overall capital discipline continues to perform well and certainly gives us comfort that at least from a working capital perspective.

We are continuing to see opportunities to improve our cash.

Okay. Thanks for that Congress again.

Thank you Ben Thank you.

Our next question comes from Keith Thank.

Thanks, Craig capital market.

Your line is now open.

Alright, Thanks for taking my questions and congratulations on a nice quarter here.

A couple from me first of all a follow up to the question that was just asked Matt when you discuss geographic expansion in Europe , specifically I am curious if you see that.

Generally attributable to an expansion of the de Novo agreement or if you see that coming.

From other agreements or <unk> or.

Other end markets.

Sure Good question.

It's a great reminder, I mean to note.

As a terrific partner for us based in Norway.

And that is the principal.

Partnership that's helping drive some of the demand side interest, but it doesn't mean that we've handed off the relationship that we're intending to also foster with our end customers. There. So it's a collaboration that's one where we see opportunities for expansion and possible future export.

Of beans, and not just finished product for that for that end market.

But it's being done in tandem with a team on the ground.

That are having direct conversations with customers and I would point out interestingly hearing from customers some of the additional value propositions that they desire for the next generations of products.

Alluded to this in my prepared remarks, but it's something that we intend to speak a little bit more about when we convene in person at our Investor day at the end of the first quarter because as we as we predicted and I think this has certainly come to light not just an awkward but in other end markets, we're gaining visibility by being verticalizing the chain from.

Our customers and our customers' customers for.

For what what other ways can we make their ingredient solutions better from the beginning how else wise can we use the natural genetic diversity of plants to provide benefit that helps reduce costs increase sustainability.

And provides oftentimes less process solution. So.

It's a little bit of a digression, there, but I hope that it also provides some rationale for why we continue to feel that it's important for us to maintain touch points with some of these end customers and even in the destination markets.

Got it that's helpful. Thank you.

One more question and I'll get back in line and I apologize I had to jump for a couple of minutes. So if you've answered this I apologize on the <unk>.

<unk> itself you noted processing facilities were.

Really, especially when you also have some pricing.

Benefits throughout the quarter regarding the efficiency in particular were there any kind of kind of one off items that really improve the efficiency in the period.

How sustainable do you think the.

Sure.

That performance is going forward is this something that you think really can drive <unk>.

Material excuse me are the variables that led to the processing.

Efficiencies in Q3.

To drive continued success into 2023 or were there kind of one off items that really led to that.

I wouldn't call. These one off items I would say that there is just overall better performance.

If you were to point at some areas, where there was a distinct.

Delta between our expectations and the results.

I might point out a couple of points in time in the year. When we planned for some downtime in the plant and we ultimately didn't have to have that downtime.

And again, that's a testament to.

The remarkable team of folks that we've got running these facilities I mentioned this before and I think Dean may have alluded to it in some of his comments as well but.

We've set for multiple months already this year.

Historical records for capacity utilization.

And output and when I say historical I don't mean since we bought the facilities in September and December I mean ever like over over a combined more than 50 years of operation. So again, a testament to the team of the discipline.

That has been applied to putting these facilities.

<unk>.

And in a place that yes, we will continue to perform at a high level of operational excellence moving into 2023, but to answer the other part of your question.

You'll get to a point, where you really are at the ceiling of output and then it's our job to run the plants in a safe and disciplined manner on an ongoing basis.

May have missed this as you dropped off but what I commented on to one of the other questions is we are in some respects to raise the ceiling of that from what we previously expected to be able to run through these facilities, but over time remember, we're moving more and more proprietary flows through them and so there's degrees of additional logistics.

Optimization.

In supply chain optimization that.

Going into and out of the plants will be required in order for us to realize that.

Full margin potential that we believe exists within the facilities that we that we currently have.

Got it got it very good.

Well, thank you for that and congratulations again to all of you on a great quarter here and I'll get back in line.

Thank you.

Okay.

Thank you.

A reminder, ladies and gentlemen, if you would.

I'd like to ask a question. Please press star followed by one on tap on key pad.

We have no more further questions on the line I will now hand, the floor back to Ruben.

I'll go ahead and hand, it over to Matt for his closing remarks.

Thank you and thanks, everyone for your time and engagement this morning.

We remain very focused on execution and achieving our near term strategic objectives.

We're pleased with our 2022 results to date and how the year is wrapping up and we're also optimistic about the year to come.

The strengthened demand for our ingredient products as further validating that genomics is a proven lever for innovation and that this in combination with our go to market approach can enable us to help customers deliver more nutritious affordable and sustainable food choices at scale.

It is a truly exciting time for Benson helped to advance our mission to set the pace of innovation across the food system with our current proprietary portfolio and to press our competitive advantages through future innovations in our product pipeline.

Thank you. Thank you again for joining us have a great rest of the week.

Okay.

Thank you.

Ladies and gentlemen that concludes the Benson HIMSS conference call. You may now disconnect your lines and exit the webcast.