Q1 2023 Bioceres Crop Solutions Corp Earnings Call
<unk> on your telephone keypad now.
I'll hand, the floor after the polar <unk> head of Investor Relations to begin Zappulla. Please go ahead when you're ready.
Thank you and good morning to everybody. Thank you for joining presenting today during the call.
Okay.
And they can look at <unk>, our chief financial Officer, both 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 earnings release and presentation.
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. This conference call is being webcast. The webcast link is available at the <unk> crop solutions Investor Relations website at this time I will turn the call over.
Our CEO political through call. Thank you.
Thank you Paolo.
Thanks to everyone for joining us today good morning, Peter.
Please turn to slide three.
We can start our earnings call.
Yeah.
The third quarter fiscal 'twenty three.
The quarter in multiple ways.
We have grown revenues by 71% and EBITDA.
After including pro forma historical revenues in the year over year comparison.
This revenue growth is critical.
With our adjusted EBITDA for the fourth quarter, and reaching $44 $5 million.
Our record quarterly number that is even more.
Typically we're now fully accounting for pro farm, which is.
Negative EBITDA contributor, which we intend to quickly turnaround is a positive contributor.
Yeah.
Olivia.
And as we discussed in our supplemental.
We haven't finalized the third party merger pointed out yourself.
The integration process during the reported quarter.
These are production figure of changes to U S dollars.
Sure Gary.
Main subsidiary.
Here with me.
We believe will help us better reflects the reality of this business.
Consolidated financials.
In retail we are expanding our leasing this part of the presentation.
Yes.
We will report a police report in a few minutes relates reports.
So everything's underway before the wheat harvest.
To start in the next few weeks.
Finally, we would like to use this presentation to discuss the loan agreement we have.
It will be released soon.
Take care.
To accelerate the expansion already dealt with them internationally.
That's why we did it.
The expected benefit what is included.
Not included in the agreement.
Before we move to the next slide to more deeply address.
Right.
I would like to point out that.
The completion of our share buyback program.
The program will slowdown in March of 2020.
We have seen for our.
Approximately 570000 shares with an average acquisition price of $8 77 patents.
We have a program opportunistically, where we observed significant dislocation in the market.
We continue to do so by pressing the railroad for another $5 million on a forward basis.
Please now turn to slide four.
This slide shows the year over year with growth of data in comparable revenues.
This quarter's growth reported in the current quarter.
It is obviously not the same to grow at a 71% rate if you're coming from last year.
When you are running at 62% growth rate from the fiscal year immediately before.
We are very proud of this quarter's performance and Enrico will further address.
As part of the presentation.
Moving to slide five.
We have already discussed.
We haven't completed the merger with pro farm.
And then my last quarter for future growth in biological AG inputs.
Positioning our company as a clear leader in sustainable solutions for agriculture in the future.
With the integration of profile we have.
Don't have an existing portfolio.
<unk> product line to replace or significantly reviews, the use of synthetic chemicals, most functions for which they are required in high productivity out of the closure.
We've got the most immediate substitution between the feature set of the industry.
We will describe shortly when we discussed the long term collaboration that will be in breach we one of the segment leaders Syngenta.
Before we do that let's review the status of AC four drops in the next three slides.
Severe drought conditions in Argentina, maybe pleasantly slowdown sale second quarter. The current quarter. However at the same time.
<unk> is creating a unique opportunity to showcase a strip or technology.
With a companywide wheat crop decline expected to be up to 40% level compared to last year's harvest.
As you know <unk>.
The product story as you know AC four crops that drove provenance.
Locks drought.
So we expect to lose some weather conditions have been too extreme.
These statements in front of us.
We think that 86% of appeals would be harvested a provides a good indication of the benefit of H B Fuller.
We believe also that we have enough inventories.
To stay on track to meet our fiscal year, two Ceos follicular positioning us to reach the guidance provided for fiscal year before.
The next slide you can see the significant difference.
Or one of our expected separation materials when compared to Isogenic non agency four 6 billion.
Which is absolutely at the top selling commercial variety.
Either.
We are looking forward to see this defensive translate into real benefits are reportedly in more detail.
Our next earnings call.
In the next slide is the delight of our brief.
H before soil.
Hello.
Okay.
Okay.
We're making good progress with a unit growth story of breeding and mitigation efforts with LLC planting well underway.
<unk> itself or the upcoming.
With multipliers next season.
Importantly, we have on boarded before new licensees or germplasm providers, covering genetics for Argentina and Brazil.
Based in South Africa, where we recently obtained <unk>.
Zero for both of US before we even started.
We're doing useful advice.
Operations for instance, we expect varieties for other group of our modules to become available to multiple.
And with layers next year in Argentina.
In the year in the United States.
Let me now move to the next slide to discuss the announced global game collaboration with Syngenta seed care.
Sure.
Take care.
This is a $45 billion SEC lending input market, which biologicals are currently at 30% of the second half.
With one third of our penetration, resulting from the documents.
That category, where we have achieved significant success in Argentina.
Are starting to reach internationally.
Biological for this segment are expected to reach $1 $6 billion by the end of a decade.
We believe we can be a clear leader in capturing that growth.
Turning to the next slide.
To release to be a clear leader, we partner with a segment leader Syngenta seed care.
We have been collaborating with Syngenta seed care for 20 years as Argentina, joining me achieved until the number one position for our documents by a bunch of sites.
The agenda molecules for a long time.
This new collaboration reached the right structure to expand the success internationally at an accelerated pace.
We expect the international revenues generated by already documents available to at least double in the next two years.
Once the agenda, we will cover working capital needs as well as sales and marketing activities. We have secure minimum profits that averaged $23 million on a per year basis over the life of the agreement and this is not including an upfront fee.
<unk> million dollars.
The exchange for the deferral rights granted for the collaboration.
On top of the annual minimum profits.
Receive between 60, and 30% of the incremental profits generated by our collaboration depending on the geography and the year.
The collaboration is not just designed to maximize our commercial reach.
It is also focused on accelerating our R&D efforts with syngenta covering 70% of the R&D investments required for at least I think products, our new products and we may opt to development within this framework.
Finally, turning to the next slide.
We have not solid already not pulling business with Syngenta. We have partnered with you just maybe speak to a far more relevant over the next 10 years.
Current agreement Thats lumpy profile portfolio.
It is retaining rights for us to use seed treatment solution.
Finally at the service channel our HPE portfolio.
And we are also making southern right non exclusivity in the United States for the over the top solutions.
The right hand side.
Agreements.
We were thinking under Peter's leadership for their trust and hard work to get to this point and reassure them of our commitment to the success of these joint endeavor.
Okay.
All yours.
Thank you Ricardo Thank you to everyone joining us today.
We are delighted to have kicked off the new fiscal year with such a strong performance.
In summary, we reported a buildup.
Build on top of outstanding growth achievements throughout the previous six quarters. So I would like to take this opportunity to congratulate and thank our sales and operational teams for doing a fantastic job again marketing already some products to market is relentless execution.
And we have just the drivers behind our quarterly financial performance in the next few slides.
<unk> nine <unk>.
Was predominantly a very important quarter from a strategy standpoint.
We started the fiscal year on a strong note by completing the merger with pro forma.
<unk> continues to make considerable progress on our integration efforts and synergy targets for the quarter.
Simultaneously executed on islands that agreement with Syngenta seed care.
P value on multiple fronts.
It provides a long term profitable growth path for enough for them.
It broadens the scope of our research and development activities around sequencing of biologic costs by having 70% of the investment.
We also strengthened our balance sheet by bringing in $50 million in a context of lower for a moment.
Which liquidity has become an increasingly important lever to how it happened.
Recent milestones with us in a unique strategic position to structurally benefit from the secular growth trends and high profitability profile for biological sample.
Before I dive further into the quarter results I would like to call your attention to a couple of important important changes we have introduced.
The most relevant aspects related to a switch in functional currency of our.
<unk> Argentine subsidiary, which is addressed on slide 12.
We're a merger with <unk> and the subsequent business integration triggered the need to adopt the U S border is the functional currency in our main operational subsidiaries Mercury cleanup starting in the first quarter of this fiscal year.
Despite starting out operations, mostly in the U S owners <unk> has historically used the Argentine peso as the functional currency.
<unk> financial statements were therefore subject to Ias 29, accounting adjustments that we need.
Distortions in our reported results.
Caused us to provide compounding metrics to better assess our underlying performance.
The merger with Northland has enabled this longstanding shift which now eliminates the need for Ias 19, ricciardi adjustments and as a result comparable to yours will no longer be presented except in reference to past quarters.
Long term debt.
Change will simplify our financial reporting and provide our shareholders with a much clearer picture of our products.
Or even not to allow a fair comparison of our organic top line growth year over year, we have taking the extra step to provide pro forma comparisons for fiscal year 2022 revenues and gross profit.
Two metrics that would otherwise benefit from the addition of pro farm and our fiscal 2022 results.
Pro forma for the final figures reflect the addition of pro farm with historical numbers.
Isolate any Ias 39, distortions, Scott Peters to favor Athena comparison of our results to past performance.
Otherwise as reported results from prior reporting periods will be used for other line items to the income statement and balance sheet, including adjusted EBITDA.
Recognizing there will be a bit of adjustments as we go through 2022 increases per year, but again, we believe this change more accurately reflects our evolution as a company.
Turning now to slide seven please.
Our first quarter is dominated by sales in the southern hemisphere growing season started.
Summer crop planting in Latin America, and became a source of revenues for us.
And the first half of our fiscal year <unk>.
An exceptional job at anticipating roughly.
71% of growth in the first quarter faced in Australia, particularly in Argentina.
As I mentioned revenues from pro farm are incorporated into our sales results, which keeps you a like for like comparison of our total business first quarter to first quarter.
By any measure a 71% increase in revenues has been a strong start and provides us with comfort on the outlook for the first half of the fiscal year, even as we navigate rough waters.
<unk> now been confirmed.
Stuart on the royalty of Argentina.
Let's please move to slide 14 for more details on the revenue breakout by segment.
Compensation was the main contributor to growth in the quarter. We saw continued strong adoption of our microwave fertilizers.
Titan costly fertilizer surprise you.
The expansion was driven by the winter season, and Pcs transformer sales in Latin America.
Net sales also expanded across multiple regions.
These gains were somewhat offset by lower sales pro formed by a few items on a comparison basis because of the timing of sales last year.
All of them by SBU and from the Pro farm portfolio are now included into our crop nutrition segment.
While all of the products that come from the legacy pro forma biocontrol portfolio have been incorporated into our crop protection segment.
Sales of our protection products increased by 54%, even a slower pace dry weather conditions in key Latin American markets and in the United States.
While the other regions in the Western United States continue to curtail specialty crop sales.
Lower sales of pro farm buyer protection product.
Underlying sales in Brazil, and Argentina also delivered solid performance with higher beta sites.
Finally sales of seed treatment packs head of planting were hired in both Latin America South Africa.
We anticipate drought conditions will likely come from the planting and growing sources of Nebraska.
But on the other hand, you have beyond the benefit of pro forma revenues, which we expect to rebound with you all as well.
For the fiscal year.
If you would turn to slide <unk>.
Revenue growth translated into a 52% increase in gross profit.
Also backed by a proposition segment, which delivered an impressive 85% growth in gross profit.
60% gross margin.
Growth in seed treatment packs was also achieved with a healthy 60% gross margin.
Overall gross margins of 45% were down roughly 500 basis points from the same period last year because of the mix of products sold in each segment dumping margins across the board.
The majority of our <unk>.
Price cost in the first quarter, which also played a role in putting pressure on margins of some products that we acquired <unk> international logistics such as arguments.
Adjusted EBITDA for the quarter reached a record high $4 $5 billion as shown on slide 16.
The increase in gross profit growth improvement and more than offset higher operating expenses, reflecting healthy operational leverage.
SG&A increase in the quarter was mainly driven by the addition of pro forma operating expenses and by transitory costs related to the integration efforts, such as severance and higher than esports related expenses.
Based on business operating expenses were also higher mainly explained by Friday of our SG&A costs on higher sales.
Even with these additional one timers.
G&A as a percent of sales after deducting the $2 8 million voters merger transaction expenses.
Roughly 33% in line with the first quarter of last year.
Despite our benefiting from a pro forma exercise some historical 2012.
Margin remained relatively stable at 19, 3% year over year.
Slide 17, you see a slightly different view of what royalty adjusted EBITDA improvement.
This call is hoping to see that our basement business was strong enough to absorb the net contribution from profile.
And still allow us to report an impressive $44 5 million Boe of resource.
It is also important to note that even in the first quarter, we made meaningful progress on achieving cost synergies from the merger, which also contributed to minimizing the negative impact on EBITDA from pro forma results.
Within the next two quarters, we expect to achieve the cost synergies we've targeted at the time of the merger.
We believe that by year end pro forma assets, we will have turned into positive EBITDA contributors.
It should be the basis on which we continue to build sales synergies in the next 12 to 18 months.
Simultaneously when describing sale, having achieved such an impressive EBITDA results in the first quarter gives us great comfort on the outlook of profitability for the first half of our fiscal 2023.
Yeah.
If you turn to slide 18 revenue ramp up by commenting briefly on the balance sheet.
Total financial debt increased to $228 million related to the execution of the two financing agreements in connection with the pro forma merger.
Part of the proceeds were allocated to pay more for existing profile financial obligations under.
And the remaining were used to reinforce working capital overall.
Our overall cash position.
Our net debt ratio remained relatively flat at 236 times LTM adjusted EBITDA with a healthy balance.
Currently a nonrecurring benefit.
Cash and equivalents rose to $51 $3 million at the end of the quarter, including cash used to fulfill our quite median dor share repurchase could be.
Subsequent to the close of the quarter, we received the <unk>.
Our core payments of Syngenta, which means our cash position to over $100 million.
Yeah.
And completion, we have had an exceptional start to the printer increases pressure and despite severe weather conditions in some key markets. Our strong first quarter results on the revenue diversification. We gained profile makes us confident about the growth outlook for the full fiscal year.
<unk> remained focused on executing our <unk> strategy, making pro forma assets EBITDA contributors before year end.
With that I would like to turn the call back over to critical.
Thank you and we can I don't want to take much longer, but I still want to finish.
With some looking forward remarks for the remainder of fiscal year 'twenty. Please return to the next slide.
I think we expect to see sustainable double digit growth in our core business year over year.
And this is despite coming out of that yet.
And also after the volatility that we might be experiencing due to the weather conditions back in America. So.
Highly confident on this continued growth trajectory for the company.
For the fiscal year 2003.
Obviously, the offline integration process is an important aspect.
For the fiscal year, where we expect to reduce that negative contribution to growth from the acquired.
And turn that into a positive number by the end of the year.
Also take advantage of the RMB capabilities that exist with the profile to make them available not only to other internal customers, but also external clients. So that we can utilize speeds in full.
We will fully launch H before reading Argentina.
We will have data coming out from the current harvest in the next earnings call.
Is that to validate.
Note the HP technology called IDEXX system.
And we continue to scale H before bringing them a duplicate shut in Argentina and Brazil.
Inventory levels set in place and the performance.
Achieved to meet our fiscal year 'twenty four five guidance seats, we have already provided and to recap on those we expect H before we'd to contribute between $15 million to $20 million.
In the next fiscal year as it started to move out to.
$20 million to $25 million level by fiscal year 'twenty five.
It is important that during fiscal year <unk>, we meet the mutual kpis that we set in place, but I think as the collaboration of scaled up our production.
RCD floor biologicals in Argentina, and also for adjuvant in the deal and hoping to finish the needs of CBD.
By the end of fiscal year and to have that fully operational in fiscal year 2004. So these are some of the.
Sort of expectations for the current fiscal year that we wanted to finish the call with.
We can now open up the floor for Q&A.
Okay.
Questions. Please press star one on your telephone keypad now.
Your question. Please ensure you have essentially plugged in and I would be likely that star followed by one on your telephone keypad.
And our first question today comes from.
Bobby Your line is open go ahead.
Yes, Thank you for taking my questions.
Not sure exactly what time it is for you guys, but I guess, it's still morning for you.
Obviously.
So I guess the first the first one is just.
If we think about <unk>.
Pro farm, formerly marron.
Had a nice growth pretty.
Pretty healthy gross margins, but they always seem to struggle a little bit with the opex.
And I know you guys are targeting reducing that negative EBITDA drag and then turning that positive.
So maybe just walk us through some of the low hanging fruit there that will help you kind of achieve that objective.
Clear.
Hey, Bob you see somebody.
Good to have you on the call 4% so.
Thanks for that.
The ability to ask questions.
It is still morning for us So you were right.
Not necessarily for you, but yes.
Lingered rights.
Sure.
[laughter].
Well Youre right on your comment I mean, that's right on spot.
Do you see.
I'm pleased that we had identified at the time of the merger and then what's mostly related to the spinoff.
This came up the company and Douglas will be achieved.
Not having the costs or the <unk>.
These added costs.
Listed companies with something up gave us.
In the beginning.
There were obviously some restructuring measures that we took that work a bit harder to you but.
We already accomplished those as well so we are growing today about 80% of the cost synergies that we have targeted we expect system and even the next couple of quarters, we will execute the remaining.
Plus.
No.
No it's coming from our sales team.
Yes.
In the next three quarters should allow us.
Pro farm.
And EBITDA positive contribution or the asset coming for <unk>.
Now bear in mind.
Later, we restructured the business something that we announced the bank of the merger, we will no longer be looking at procurement.
See the standing entity.
<unk> business units and this cross selling there so at some point this will begin to be sort of like a one company and when we want to do today is give you some sort of notion of how we are targeting trucking gross operating expenses synergies.
And then on top of that.
If we get to year end will be back on a trailing last 12 months basis.
<unk> has become a positive EBITDA entity that should set the basis for us to continue executing on that medium term synergies that were related to sales.
Remember that we target to between $5 million to $15 million from sales synergies.
That takes a bit longer to be executed mostly because it requires some work on the registration front, so ready for and some of the preferred products in geographies, where we have sales muscle.
A bit of a time, but.
That's what we're looking for a strong basis on which spent to add those synergies.
Great.
Very helpful.
And then just maybe just a quick follow up.
Slightly different.
Question I guess.
If we if we think about it.
All of the supply chain concerns and export issues for train out of.
Ukraine et cetera.
Obviously.
Over the past few years and it looks like it will continue to be so south America's becoming a major.
It's become a major export.
Source for.
<unk>.
In particular.
And I'm wondering with the GM seed and trade.
<unk> capability, you guys have developed with H before.
Is there an increasing acceptance maybe.
For GM.
Seeds.
We can produce.
In regions of the World that maybe we are.
She assistant to Jim.
Et cetera, but what are your thoughts on that.
<unk> and how it's maybe broadening the scope of your opportunity there for H before.
I agree with you, but still double digit sales go down.
The portfolio today.
I think that the trade show.
Perhaps.
David It shifted focus from sort of the way.
GM technologies may be perceived by some groups too.
Sort of promoting module focused on security.
All of our studies.
Sure.
See the importance of production.
Technology, I think helped us increase productivity, while preserving NAV.
Natural resources become.
Center stage.
Sort of.
But we used to achieve this type of solution. So for instance, we received nearly exception benicia.
HP four weeks for Cpus.
That is on top of Nigeria cabinet Semicon demand.
That's a high level of reluctance to GMO opdivo.
Heightened interest by the historical European position I'm, not saying that is that we are ready to fight crime.
H B fuller to mature, but today, we are much closer match much.
Everywhere.
Turning to get these technologies become accepted even by even more.
Instead of.
Skeptical on relapses and consumers.
This is an opportunity we're seeking.
And in Argentina, you saw how approvals cascaded in very meaningful Golar. Please read on slide we'd obviously, it's multiple challenge because we are the only company to name again.
And we have been historically towards human consumption, Unlike soya and corn.
Which way more dedicated to animal feeding appeals snow, but.
We're taking advantage of the situation I think the current Gulf of Mexico.
We'll make this even more relevant.
We expect to see many more approvals cascading down in the upcoming months.
Fantastic. Thanks for taking my questions congratulations on such a strong quarter.
Yeah.
Thanks, Bob.
The next question comes from Bentley from Lake Street Capital. Please go ahead. Your line is open.
Alright, Thanks for taking my questions and congratulations on just another exceptional quarter across the board here two quick ones for me and my first question is on the quarter itself.
And I'm wondering if you saw any any kind of lumpiness.
In the quarter either revenue getting pushed from Q4 into Q1, some revenue getting pulled from Q2 into Q1 or any kind of outsized orders or be successful is just kind of broad across the board.
Okay, then the inventory for joining us.
So a question.
Well I think that.
The way we tend to look at the performance in the fourth.
Quarter.
Together with the second quarter and do you think about it the first and the second quarter of our fiscal year are basically.
All of this summer crops.
<unk> take place in Latin America remains an important market philosophy of Argentina.
You like bottom line, so I would say.
Hey.
We are looking at this.
Part of the summer crop planting system that will go up with BP.
Of sales.
Transcend in some key crops.
Crops microwave <unk>, but thats not us.
Our Cds in terms of looking at the first half as a whole that's what I would say that's why I think it's so important.
We locked in this growth early in the season that makes us feel comfortable that we do.
And to the fiscal year growth outlook remains positive.
Even as we transition what basically twice as one of the most severe droughts.
Great.
So we see I think.
And.
Let me put in multiples.
Uh huh.
Got it that's helpful and that kind of helps helps a bit.
Second and last question here enough around the drought conditions that you guys have been very vocal about this business.
And.
Reports widespread around the terrible dynamic that argentinean farmers are facing.
A couple of years ago, there was a similar dynamic underway and I am wondering if you could help characterize.
Kind of your outlook here into the second quarter and the.
Chemical fertilizer application, that's coming that's coming.
Period relative to.
Similar conditions that around a couple of years ago are you looking for for as material of a headwind do you face two years ago. Do you think that's going to be offset by other variables help us kind of frame the outlook here for the next quarter relative to the experience a couple of years ago.
Okay.
Hi, Ryan.
Thank you for joining us once more and thanks for the question.
I think that we are better prepared and all of that while we were back then because we have a more diversified base today. So we will have.
Take care.
Thanks.
More meaningful contribution dropped 5% North America and Europe in the quarter.
In terms of the fertilizer impact.
That is mostly related to corn planting and that depends on the rain event that might happen in the upcoming days or weeks. So I think if those great events that occur in celebration of concession for corn.
Corn to layer, some corn, we might see a slowdown in the fertilizer sales.
I'd have to say that we are much better positioned than what we were.
Two years ago.
When we faced a similar situation and having had sort of the great start IC gives us and thats what the accretion.
The first half.
Revenue as a result that we expected to deliver for fiscal year 2013.
Got it got it okay very good.
Plenty more to talk about but I'll pass the baton here, congratulations on a great quarter and I'll get back in line. Thanks, guys.
Thanks.
Okay.
The next question comes from Brian <unk> of Roth Capital Partners. Brian . Please go ahead. Your line is open.
Thanks, Good morning first of all just Wow, that's all I got to say.
Commentary.
<unk>.
On the global minimum targets with Ascension currently agreement, where you said the average is $23 million on a yearly basis and for life is that over the first four years.
The 10 year period, and how to think about like maybe how that.
Our minimum target of kind of moves from the beginning to the end.
Okay.
Great to have you in the call and thank you.
So I'll comment.
We feel the same way.
So that $23 million of average is basically.
The $230 million.
Contractual life of minimum dropping for the life of the agreement divided by seven years now so initially.
Number and so what we are expecting initial year supply.
Pursuing some of the recent ourselves. So this is not about them all at once.
It's probably below that $23 million average basket.
In the later years, it's going to be above that $23 million of average so that's.
The guaranteed profitability under the agreement, obviously that take or pay type formats.
Bulk of that.
Sales from the collaboration that are key.
Base minimum targets.
We'll be sharing profit.
50% to 40% right.
On the geography and the year.
That is basically what we are reflecting that operators down there.
In terms of their teams and the collaboration.
Yeah.
Great. Thank you and then just a follow on if I if I could the.
Our cash position post the that that agreement.
I know you completed the 5 million share buyback there.
There seems to be room for potentially more interested in any kind of comment along those lines.
In terms of the.
The buyback you mean.
Correct.
Yes.
I think.
We would like to continue to do what we have done in the past, which is to take advantage of.
Dislocations in the market and Opportunistically exercise.
The buyback program, if we need to refresh.
On a monthly basis, because we are sort of.
Meeting the $5 million.
Every market.
That's called voice solution to do so.
But.
Yes.
Kind of a capital allocation decision.
<unk>.
Provide a level of return that is attractive compared to each other capital allocations that we might have.
In our business. So this is not something that we have.
Moving to support the price of the stock, which is an investment opportunity.
Well.
When the market gives us.
An opportunity to do so I don't know I think if you want to add anything to that.
<unk>.
Helps us.
Potentially 19 dilution coming from the convertible notes.
What are the notes that have a strike breaks on 18.
So in that way.
Positive about the outlook of the company to meet you might see that potential dilution.
Okay, great. Thank you so much.
The next question comes from capital Nova Brookline Capital markets. Please go ahead. Your line is open.
Yeah.
Great. Thank you.
Good morning.
So two questions first is where.
Do the seed multiplication efforts.
<unk> discussed in the presentation put you.
Relative to the fiscal 'twenty, four and 'twenty five EBITDA goals.
Essentially right.
We're thinking of it as a percentage of.
Our target.
Where will that put you.
Okay.
Hi, Kevin Thank you for joining us and thank you for the question.
I think.
Obviously, we're not halfway.
In terms of fiscal 2014.
The key here is to make sure we have enough inventory to reach those numbers.
Before I think that even though the yields will be lower because of the significant drought, we will without reducing the base in place.
Reality is top of mind aspect.
More progress in Argentina, So I don't think we'll have a new chip, placing those inventories.
Current year, so that we can reach that $15 million to $20 million next year.
10 nanometer viewpoint.
And the caveat if you will.
Is that we buy.
Half year, we might be.
More on the first generation, but yields compared to the second generation.
Which one of the materials that we were just starting to multiply each season.
So we have limited inventories and sort of the reduced yield drought.
In a way that will allow us to go full speed ahead with those.
This is not an issue and we're taking down because the procuring materials have shown terrific benefit.
But it is something we need to clean up.
We ramped up normal years or years, where yields are expected to be high. So that we avoid any kind of just level of drag in the overall deployment.
The only thing I would say we need to readjust.
In the gathering system.
Yes.
Not.
Not affecting what we need to be the 15% to $20 million guidance for fiscal 2020.
Thank you.
My second question is what is the status of the joint venture talks between <unk> and <unk> in Australia.
Yeah.
That's a great question. So we are moving forward with that.
Joint venture process.
Quite a licensee.
The agreements.
It took us a little longer.
We expect to need to have these close by the end of the year.
We're starting to coordinate.
The agreement with them.
Going into September already.
We have.
Not included this in the bag, but it continues to.
B.
The important aspect of the trigger.
Opportunity in Australia.
Yeah.
Very good thank you and I will ask a third question.
Is are you going to Miss doing the Ias 29 adjustments.
Yes.
That's great.
Great.
Question for you Kevin.
No, we're not and actually.
Even hard to initiate sources.
Not that I would expect.
I get to the one year.
I will not thank you.
Thanks.
Okay.
As a reminder, if you'd like to ask a question Thats star one on your telephone keypad.
The next question comes from Steven Ralston from Zacks. Steven. Please go ahead. Your line is open.
Good morning, and congratulations on a great quarter.
My first question concerns your collaboration with Syngenta.
Could you expand upon that and clarify some specifics.
Especially towards product lines as I understood. It it was a.
Very symbiotic relationship when Argentina.
Where you distributed Syngenta is.
Fungicides and insecticides, the Maxim family and the <unk> family of products, and then return Syngenta distributed arise at <unk> seed treatment products.
How is that changing I know, it's global and in some cases exclusive axing out the U S and could you also get into this.
Specific to the potential you see in China and Brazil.
Great. Thanks, a lot.
Steven for joining the call and for the Great question.
Regarding the seasonal dynamics.
So as you described in Argentina, we have.
<unk> <unk> and <unk>.
It sets the bar the leaders in the local indigenous announcing the biologic side.
Side of the business and the seed treatments.
<unk> has obtained in Argentina.
Nevertheless molecule penetration that is unmatched anywhere in the world.
You could see both China is already close to 40% to 60%. So that's something again that was not it was.
He was not able to replicate.
In other geographies for their active ingredients.
The question was how do we scale beef.
Internationally.
In a way that is attractive to both parties and that's why with what.
Yes.
Distribution collaboration that has an R&D component as well so the people that we have with Argentina, we don't have that footprint in Europe .
In the United States.
Let alone Asia, like China, Australia, so being able to build that ourselves organically will take a long time being able to use C. J.
Thank you.
EBIT for the opportunity to quickly penetrate those markets with a one.
Category, where we have done this jointly.
A very successful way. So we are initially, but we need volume and so that's a part of our seed treatment portfolio.
This is not saying that we're maintaining a BBB.
Gentex footprint for the buyer might be cycling that come.
Out of my own but that is not to the employees. So thats something that we may discuss.
Future, we may even consider other opportunities.
But this was kind of a starting point for us to really penetrate that $4 billion to $5 billion market, where biologics are already at the 20% level significant part of that because of the global leaders and where we believe we can be at $136 billion.
Market wide.
Your logic, putting together by the end of the decade so.
That's kind of the thesis behind us and get that collaboration.
We are not going into a blinded relationship with known each other for years.
The positive and negative so.
This is what we are set up now deciding to join me on a forward going basis.
Thank you.
Now turning to EBIT.
It seems like the major contributor was crop nutrition and Thats related to your micro beaded fertilizer plant and I've noticed.
Mark.
Last quarter and this quarter you have not given out the 12 month trailing.
Capacity utilization in your press release.
It must be very highest time can you share that now and.
What are your plans there in the future because you should be getting very close to maximum capacity.
Maybe if you can regain thinks we're enjoying corn thanks for question.
Yes, Youre right.
<unk> been ramping up they use of installed capacity we have.
You said the metric of LTM.
Use of installed capacity to basically acceleration on an asset that is poorly.
Absolutely, but its most industrial in nature of the rest of our broadband side.
On the industrial asset towards 90%.
Oh gosh.
That's the reason why we use a metric we have been doing THB, 80% you something you talked about.
We can see.
Additional 30%, but that requires conducting what you've got to go because this is a highly seasonal.
So we are already working on anything that we established on our last earnings.
Are they looking to expanding capacity in the plant.
We are thrilled about how these broadcasts rolled out of the market.
<unk>, Okay. So Brazil.
Brazil.
The opportunities may be in our markets and northern states of Brazil right now.
At some point.
Yes.
Some investment now its not the same to start from scratch again to add capacity in what we already have today to continue expanding in Latin America.
We are doing.
Investments to ramp.
For capacity as well.
You see that they're stable demand for the product.
Thank you and I right.
I wanted to congratulate you on that we our strategy there on that.
On that plant because basically it was a wasting asset with very low capacity utilization and through your strategies.
You've made it into a true <unk>.
Cash generator.
Thank you for taking my pleasure.
We know you've been tracking that closely.
So.
It's great to see.
We have great progress there and we're also very proud to see that happening.
Thank you.
We have no further questions so I'd like to pay the recurring for any concluding remarks.
Okay.
I want to thank everyone for joining us today.
Five.
Five a M.
In particular, thank you because it's very early.
We're really proud of the quarter, we just finished.
The progress that we're making and hope to continue to sort of bring these type of results.
Reported basis, it's going to be challenging because.
The bar is high.
Whether it's helping so maybe a little bit of greenlight is helping us in spine.
How important is for us so.
So my technology viewpoint.
But we are really happy to be where we are.
Please feel free to reach out.
Additional information or.
So up with any additional questions. Thank you.
Yes, you're right.
This concludes today's call. Thank you very much for your attendance you may now disconnect your lines.
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