Hello and welcome today’s Bioceres Crop Solutions Fiscal Third Quarter 2023 Financial Results Conference Call. My name is Bailey, and I'll be your operator today. [Operator Instructions] I would now like to pass the conference over to our host Paula Savanti, Head of Investor Relations. Paula, please go ahead.

Good morning, thank you and welcome to everybody for joining our call. Presenting today will be Federico Trucco, our Chief Executive Officer, Enrique Lopez Lecube, our Chief Financial Officer. Both of them 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 statement section of today's earnings release and presentation, as well as the 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 and the webcast link is available at Bioceres Crop Solutions Investor Relations website. At this time, I will turn the call over to our CEO, Federico Trucco. Thank you.

Thank you, Paula, and welcome everyone to our fiscal third quarter earnings call. We're delighted to resume our growth trajectory with solid numbers being reported in this quarter, despite the historical drought in Argentina, which continued to affect our sales in these important markets. Please turn to slide two for our key business and financial highlights. Our outstanding performance in this quarter results from the combination of strategic actions we have taken over the last year, to diversify the product and geographic exposure of our business. Total revenues were up by 33% when compared to the pro forma numbers for the third quarter of last year, which are inclusive of historical revenues from Pro Farm. Top line growth was primarily driven by revenues in the crop nutrition segment, resulting from the initial proceeds generated by the strategic partnership with Syngenta, which more than offset the negative impact of the extended drought in Argentina. Adjusted EBITDA was $35.8 million in the quarter, mainly benefited from proceeds from the Syngenta agreement that were recognized in this period. On an LTM basis, adjusted EBITDA stood at $85.3 million, and Enrique will discuss our financial performance in greater depth during his part of the presentation. We are also making great strides internationally on the HB4 front. Brazil's recent full commercialization and cultivation approval for HB4 wheat consolidated our collaboration with local institutions and seed developers, such as EMBRAPA and/or Sementes. Additionally, the approval of HB4 the approval of HB4 grain importation by Brazil adding to the prior approval for flour importation, allows us to further diversify our go-to-market strategy in Argentina, as I will discuss later in today's call. Also in Brazil, our HB4 Soybean program is steadily advancing with an initial set of varieties tested by farmers in five states, with at least one variety consistently outperforming the top commercial alternatives. I will provide an update on the current soy harvest in Argentina and more information about next steps later in the call. Finally, during this quarter, we have published our inaugural sustainability report, and I will briefly discuss some key aspects of key aspects of our sustainability strategy towards the end of today's call. Now, let's pass over the presentation to Enrique.

Thank you, Federico, and good morning to everyone on the call today. I'd like to dive further into our financial performance and expectations for the reminder of the year. Before we start, let me remind everyone that, as on the previous two earnings calls, all yearly comparisons in this presentation are made on a pro forma basis, meaning that they include Pro Farm numbers for fiscal year 2022. So, let's jump to slide four, which provides some context on the evolution of the fiscal year-to-date. As you might recall, we started the fiscal year with an outstanding first quarter in which revenues increased by 71% year-over-year and EBITDA almost doubled, continuing the growth momentum from previous quarters. This was partly a result of early sales that our commercial teams locked in ahead of what looked like a challenging summer crop season in one of our primary end markets, Argentina. During the second quarter, an impressive streak of continuous quarterly growth that spanned across more than two years was interrupted by a severe drought in Argentina, with overall revenues declining 7% year-over-year. This climatic event had a particularly negative impact on our micro-beaded fertilizers business, which had been previously delivering outstanding growth and, of course, also reduced the need for some of our crop protection products. It was not surprising to see that demand for insecticides and fungicides was substantially weaker, along with a pullback in demand for fertilisers as farmers dealt with getting planters into rock solid fields. Despite these headwinds, we saw our revenues decline only 7% on the back of geographic diversification and commercial savviness, which brings us to the third quarter, a period for which, as Federico mentioned, we are delighted to report a 33% increase in the top line compared with the pro forma numbers from…

Thank you, Enrique. And please now -- number nine sorry. Brazil's full approval of HB4 Wheat completes our regulatory process in this country, complementing the key approval received in 2021 for feed and food use of HP4 flower. This regulatory milestone has two important implications. It adds a 3.2-million-hectare market to our current 6.5-million-hectare market in Argentina, which is a 50% increase in our current available market opportunity, which translates to an incremental target of 1.1 million HB4 hectares, two thirds of which we expect to result from the survival region of Brazil. To be able to meet this target, we have established two important collaborations with EMBRAPA, as previously announced aim at combining HB4 technology with EMBRAPA’s tropical wheat genetics, currently utilized in 50%, of [indiscernible] wheat hectares. And with all our Sementes a historical provider of top performing with genetics utilized in 20% of Brazil's wheat area. A second aspect derived from this approval is the clearance for HP4 grain importation, which is very important in terms of further diversifying our commercial strategy in Argentina, with low level presence of HP4 grain no longer being a matter of regulatory concern. In just a moment, I will try to summarize where we stand in terms of go-to-market channels for HP4 seeds. But first, please turn to slide 10. For an update on our soybean efforts. We're very happy to show our initial results from 800 hectares planted in Brazil with an initial set of 16 generation HP4 farmers. Each farmer tested one or two HP4 varieties against several top performing commercial controls. And what you see in the chart is the win rate of the top performing material in each of eight regions, with 6 to 56 sites per region. It is important to note that drought was not…

Thank you. [Operator Instructions]. Our first question today comes from the line of Ben Klieve from Lake Street Capital Markets. Please go ahead. Your line is now open.

All right. Excuse me. All right. Thanks everybody for taking my questions. A few for me first. I'll start with HB4. Federico, I appreciated your comments on all the various initiatives under both wheat and soy. All that considered, I'm wondering if you can comment on how, if at all, your expectations have changed for your prior targets for both of these. You had previously targeted 15 million of EBITDA in wheat in ‘24 and 20 million of EBITDA for soy by ‘25. I'm just wondering, given all of these dynamics, are you still confident in those estimates or do you think there's going to be some downside pressure given especially weather conditions?

Hi, Ben. Thank you for your questions. Great to have you in the call. I don't think we can adjust any of our guidance. In wheat, we feel fairly confident in terms of where we stand today. And as Enrique indicated, rains have resumed and with a couple more rains, I think we're going to have a very strong wheat season in Argentina. We have all the inventory that is required. We have the performance. There's the sort of top of mind aspect of drought in our customers' heads today. So, I think we're going to have a very good season and one that will put us in place to meet that guidance in the upcoming fiscal year. In soy, we're only 25% done, so we don't know how much inventory we'll have for the upcoming season in Argentina. The good news is that Brazil is moving at a faster pace than what we expected. So, I think there might be some compensatory effect there that might allow us to keep the current target. But today's probably too early to tell on the soy front.

Got it, very fair and great to hear your confidence on the wheat side in the face of this, in the face of these weather conditions. Turning to the Syngenta agreement, again, a lot to unpack here. I'm wondering if you guys can help us understand the degree to which the upfront $50 million was a function of effectively replacing profit that now is shared with Syngenta versus upfront payments that Syngenta is making for the agreement itself. How much of that $50 million is effectively just shifting profit from just Bioceres to the joint initiative versus a royalty payment, if you will?

Sure, Ben. So let me tell you how I think about this, and maybe Enrique can then jump in. But essentially the Syngenta agreement has a guarantee profitability to us of $280 million over 10 years now. Now, that is not $28 million every year. So, the initial years, whether it's a transition, or not as efficient as the second and third and fourth year on a forward going basis. So, part of the initial payment we received compensates in year one and in year two, for the onboarding of new geographies and the inefficiencies that may result from passing the business over to Syngenta. But I think and to be clear on this is that whatever we are reporting today on an adjusted EBITDA basis, is where we expect to deliver growth on top of in future quarters and future years. So, it's not like we believe this represents a new base on top of which we will be able to deliver strong growth and, and perhaps slightly overloaded in the first quarter where or the calendar year ‘23, where maybe, ideally, it should have been spread over all of calendar year ‘23. But I will let Enrique, add his comments to this aspect.

Hey, Ben, we're having a call. Look, I think that what Federico just said is absolutely correct. This is not a plug and play. I mean, this agreement with Syngenta in our view is a fantastic agreement for the company. And requires some hand holding at the beginning. And what we probably need to sort of like emphasize is that this is not an automatic agreement, is taking a lot of joint work between the two companies. Not only on the R&D front, like looking ahead on what else we can build together but also on transferring the commercial operation to them. So, the compensatory payment offsets part of that. And as Federico said, it might be a little bit front loaded on this first calendar quarter. But at the end of the day, we are sort of like setting our minds to build on top of this, there might be some lumpiness, but this is what we're thinking to build on.

Got it. Very helpful. There's plenty of dynamics going on. I appreciate all those comments. There's a lot more to discuss. I guess I'll leave it with one question on HB4 soy and your expansion initiatives in the United States, can you comment on initiatives that you're taking with spring planting season now well underway in the US with HB4 soy, specifically to get this through the -- to get this to commercial scale?

Sure, Ben. So, in the US, we are probably a year behind or maybe a year and a half behind where we are in Brazil. So, we will be at the 800-hectare level probably next year, we're now developing varieties with the genetics of two providers. One, which we announced, which is Madrone. Another one that has not been announced, but it's a top provider for US soil genetics, and we expect those to be in place at depending on what we get in the current, in the upcoming cycle for the fiscal for ’24, ‘25 season, if you will. So, that's what you should think of the US as one coming a year behind Brazil.

Got it? Got a very helpful. Alright, there's plenty more to discuss, but I'll leave it there. Thanks for taking my questions, and I'll get back in line.

Thank you. The next question today comes from the line of Brian Wright from ROTH MKM. Please go ahead. Your line is now open.

Thanks. Good morning. Just wanted to dig in a little bit on the soy program in Brazil on that chart. I think it was slide nine or 10 depending on whether you’re using the PDF or the -- anyway on, it looks like area 304 had 100% success rates. And I know there was only six location data points, but that wasn't chosen for the targeted region. And so, I was just curious as to why that one was excluded?

So, it's not shown I think but it is a targeted region. So, 304 is a targeted region. The only reason that we're only six sites there is mostly due to logistics and our ability to have a greater number of sites. But yeah, it's where we got the best performance. So, we’re definitely going to pursue 304.

Yeah. I was just wondering because you had made a comment about dry the seed quality issues. And so, I didn't know if there was something linkage there --

Seed quality is only an Argentine issue, not a Brazil issue. In Brazil, we are doing off season, but just to have a seed purity guarantee, which you don't get out of the farmer's fields, it has to be done in a special way. And that's probably generating a little bit of confusion there.

Okay, thanks. Thanks for that clarification. And then I just wanted to follow-up a little bit. On the slide on the sustainability factors for HP4 wheat inventories. I just want to make sure I interpreted what you said correctly. And so those benefits from a sustainability perspective, were a function of the seed treatment cat packs, and how that does savings. There's no incremental benefit in this analysis for just the higher yields that you get, on average, given diverse climate conditions. Is that?

No. So, there are two elements. So, there are two aspects that we want to address with sustainability. One is climate change. And the other one is biodiversity protection, the shift away from synthetic chemistries. So, in terms of climate change, basically, there's a carbon footprint metric, and there's a water footprint metric that are associated to the incremental grain, sorry, incremental yield of an HP4 crop under this particular condition. So, there, in terms of both of these indicators, what you see is that we're using 5% less water on a per kilo basis or per ton basis. And there's 30% less CO2 emissions on a per ton or per kilo basis of HB4 grain being produced compared to non-HB4 grain produced by non-HB4 before seeds. On the second aspect, which is okay, to achieve that work, what chemicals were utilized. At the seed treatment level, we have replaced the bio fungicides that are normally used with a biological alternative. And by doing that we reduce six times the active ingredient or toxicity, if you will, of the active ingredient load to the soil environment. I don't know if that is clear or still confusing to you.

Yeah, no, that's true. It's two different aspects. And in that first aspect with the water reduction and the carbon footprint, it does include the relative yield and tax is part of the driver of that. Okay. Thank you so much.

Thank you. The next question today comes from the line of Bobby Burleson from Canaccord. Please go ahead. Your line is now open.

Thanks for taking my questions. So, maybe just switching gears a little bit, back to the weather, outlook for Argentina, maybe help us understand what you're seeing regionally in different areas. And I believe that there's more progress being made in terms of moisture levels in certain regions.

Hi, Bobby, it's great to have you on the call. Yes, I think we were still cautious now because last time we connected in our second quarter earnings call, we felt that we were almost done. And then it didn't rain anymore, and it got worse instead of better. And that in part affected, affected our third quarter results as Enrique just described. Rains have significantly resumed in many areas of Argentina. Still, they haven't replenished the underground water to the extent that would be required for a record harvest. I think with maybe two rain events away from that to be simplistic in sort of my comment, but forecasts are looking good. And I think when we look at the monthly dynamics in our [indiscernible] business, we're liking what we see. So, we're cautiously optimistic about the weather front. And we believe that farmers will want to recover part of the lost income of the dual last harvest in the upcoming winter season if conditions aligned, and we hope for that.

Great, thanks. And then that may be in terms of -- help us understand what you're seeing in terms of some international suppliers of crop protection and other products in Argentina in the current inflationary environment. Are there difficulties for some of your competitors in terms of importing into the country? And how does that position Bioceres to maybe benefit?

Well as this is -- obviously, public knowledge, Argentina doesn't have a wealth of dollars in the central bank to be able to import in unrestricted terms. So, for those providers that are heavily reliant on imported active ingredients, except for China, that's probably an exception to what I'm saying. And but in general, it's becoming tougher for those that rely on Central Bank dollars to perform their general importations. Now, these may be sort of transitory benefit to us, because we do not rely on that. I mean, we for the micro-beaded fertilizer business, if you will, we have the inventories. And the access to the raw material that is required to fully supply our existing customer base and be able to catch up on our lost sales of the second and third quarter. So, it might be a transitory advantage to maybe some other entities that are dependent on importations for similar type products. I don't know Enrique, if you want to add anything to that, or?

No, I think that's fine. And obviously, that's a structural advantage, probably to biologicals, you're just ramping up bacteria. So, I think that structurally speaking, that is -- this is an example of why biologicals not only makes sense from a sustainability perspective, from a biodiversity perspective, but also from a logistics perspective. I mean, with global supply chains, having been disrupted more than a few times in the last five years, having the ability to manufacture locally, I think has become more important than it probably was in the past.

Great. Well, congratulations on the strong results. And I'll hop back into the queue.

Thank you. The next question today comes from the line of Kemp Dolliver from Brookline Capital Markets. Please go ahead. Your line is now open.

Hi, thank you. And good morning. I want to be sure I understand the payments in the context of the profit guarantee. So, in October, you received the $50 million upfront payment. And it looks like you will recognize that when you recognize $33 million of it. In the quarter just reported, you will recognize the balance in the third quarter, fiscal third quarter of 2024. So, the first question will be is that correct? And then the related question is, is this 50 million part of the $280 million profit guarantee? Or is it separate? Thank you.

Hi, Kemp. Thank you for participating in the call. And you got it right. I think you got it right. These are part of the 280. So, but they were not evenly spread on an annual basis. So that's why the upfront payment compensated in part for probably slow start of the profit sharing. And so that we can -- as new geographies are delivered to Syngenta. So, we can get to a steady state level of a 280 on an annual basis. So, there's 33 in this quarter, they'll be 17 in the same quarter of next year on top of whatever we are generating with the different geographies at the time. So, this will tend to normalize over the 10 years. And remember that 280 are the base. Now that's the minimum profit guarantee. On top of that we get to share at the 50% level in Brazil and between 35% and 45% of the profitability in the rest of the world, excluding Argentina where we have retained full rights.

Excellent, thank you. And the other question, which is pretty straightforward is what's the definition of win rate that you show on slide 10?

The win rate is essentially how many times was our variety, the number one variety compared to the rest of commercial variety? So, the control variety, so win rate of 100% means that we won in every single instance, in the six sites, we were the number one. 80% would say we won in eight sites out of 10 sites.

Right, is there a minimum threshold or performance say it has to be 10% better, or 15%? Better, or is it just any --

So, anything above 50% means that your genetics are at par with the top performing materials for that particular region. Remember, this is not under drought. So, what we want here is to have genetics that have no penalty so that the farmer if there's a good year, the odds of being at par with any of the other alternatives should be 50-50, almost random. Above 50 is great below 50 means we need to improve the genetics to be able to not penalize the farmer on a good year. But this is not looking at the drought effect. This is looking at the genetic background of these materials so that they can be competitive under all conditions.

Great, thank you.

Thank you. [Operator Instructions] Our next question today comes from the line of Kristen Owen from Oppenheimer. Please go ahead. Your line is now open.

Great, thank you. Good morning, and appreciate you taking the question. Enrique, you started to mention this in some of your prepared remarks. But I'm wondering if you can give it a bit more of a detailed update on where we stand with Pro Farm. First in terms of the demand outlook, given some of the weather conditions that you discussed in California. But then also, if you could expand on the update around breakeven profitability for that business? Thank you.

Hi, Kristen, good to have you on the call. And thanks for the question. Sure, look, in terms of Pro Farm, I think that we are, we're confident about the cost piece, because that's something that is not dependent on any exogenous factors. So, there we are tracking well, both in terms of the synergy costs, and also sort of like streamlining the R&D work in such a way that we don't jeopardize long term value, but that we make that efficient. At least, under what we consider to be efficient out of the 20 years of R&D experience that Bioceres has. On the revenue side, what we saw is that California got too much water now. So, farmers were not able to get on the field to spray, which at the end of the day should push demand into the fourth quarter. So, if that happens, and we are well aligned with our plans for revenues, in the in the fiscal year, we should be able even to beat the evident neutrality because what we're seeing in Pro Farm is better margins than the historical margins. So, good on the margin side, check on the cost side. Now what we need is the market to be there. And by the way, I'm saying that from a very short-term framework. We're not expecting demand to be there. The factor that will be driving revenues up there's a lot of work that we can do in the midterm with Pro Farm to continue expanding the market, but in the short term, it is what it is. What Pro Farm had accomplished in terms of commercial expansion is what it was. And we're working to expand that market penetration. In the short term, we are still dependent on whatever was built in the past, to be there for us in terms of demand. So, if those things happen, I think that we are in very, very good shape to have Pro Farm be contributing to our EBITDA. And as I said, we hope to sort of like a build on top of the $85 million of EBITDA that we are reporting today on an LTM basis.

Okay, that's super helpful. Thank you for that update. And then I wanted to ask you a question around the incremental HP4 grain opportunity the additional 3.4 million hectares. So, you talked about some of the seed inventory efforts now underway, but just help us understand or contextualize, given some of the other comments that you've made about whether how quickly you can move to serve that additional acreage opportunity. And how we can think about quantifying that growth opportunity in the model? Thank you.

So, hi, Kristen. This is Federico in terms of the 3.2 million hectares of Brazil. Obviously, the genetics that we have in Argentina are not applicable to Brazil. So, that's why we partner with EMBRAPA and OR Sementes to develop locally adapted varieties. These will take a few years before we can be at the stage where we are today in Argentina. And also, I think this is not something that will result will impact the guidance that we provided. So, the guidance that we provided for fiscal ‘24 in wheat will be 100% met with Argentine acreage, these will build built on top of that, as these 3.2 million hectares become on boarded. Now, Brazil wants to be self-sufficient in wheat. And to be able to do that. They need the productivity and the acreage in the survival region to materialize. And that can be done today with a combination of HB4 technology with tropical genetics that is unique to us and EMBRAPA collaboration. So, it may take us a few years to be there. But I think it can become a very meaningful market for us bringing incremental growth to the guidance we provided for fiscal ‘24.

Yeah, and complementing on what Federico said, Kristen I think the only reason why we're not still putting an EBITDA number behind the target market is because we want to figure out how long it's going to take us to get there in terms of the variety development that Federico just mentioned. Now, once we have a little bit more visibility on that we will provide some guidance because we think this is for sure, a very clear opportunity for HP4 probably a much clearer opportunity in Argentina, that is an already existing market where you need to make yourself some room. Despite having a unique technology here, we're talking about sort of like shaping the landscapes, shaping the market and changing the supply and demand dynamics for Brazil. So, we're probably working with some partners that might help us do that faster. When we have more visibility, we will throw some numbers into this.

Okay. Thank you very much. That's extremely helpful for contextualizing that announcement. Last one, if I could just squeeze it in, given some of the return to normal seasonality, some of the unusual things that were going on 4Q last year, just for modelling purposes, help us understand, how you're thinking about working capital needs for this fourth quarter, and how that could compare to last year's fourth quarter? And I'll leave it there. Thank you.

Yeah, I mean, look, I think that we touched upon this on the last earnings call. We do expect working capital to still be on the current levels, for the foreseeable future, probably the next two quarters. And this is a higher working capital position than what we would like to have. But coming out of sort of like the dry weather situation in Argentina, where we want to stand by our distributors, that's one thing and obviously ramping up HP4 those two things are probably the biggest drivers for our working capital position. I wouldn't expect it to go any higher in terms of proportionality to sales, but rather, we're going to keep an eye on trying to streamline our working capital position that might take us two or three additional quarters. But don't expect this to continue going up on a proportion to sales, but rather going back to what was in the last couple of years.

And I think an important element to what Enrique is saying is the fact that we're now enabling, for instance, in the HP4 Wheat business multipliers. So, now the burden of the working capital for incremental inventories is not in our shoulders. For the multipliers that are producing seeds for future sales. It's in their shoulders and having that network become available, I think takes part of the working capital pressure off from the seed side of the business.

Right, thank you.

Thank you. There are no additional questions waiting at this time. So, I'd like to pass the conference over to Federico Trucco for any closing remarks. Please go ahead.

I want to thank everyone again, for joining the call. I think we had a great quarter. And one that in a way helps us better illustrates the value of some of the strategic agreements with the last year in moments when we need them the most. Because we had a historical drought in Argentina, which still remains a very important market for us. So, we hope that in the future, we can do more of these types of fields. I think we have a portfolio with multiple technologies and technology families that can give us incremental diversification, incremental profitability, and more diversified go-to-market approach. We're actively working on that. We were going to close a good fiscal year we believe. And please do feel free to reach out if you want to follow-up on any of the different aspects we discussed today. Have a great day and looking forward to connecting in the future.

This concludes today’s conference call. Thank you for your participation. You may now disconnect your line.