Welcome to the Bioceres Crop Solutions Fiscal Third Quarter 2024 Financial Results Conference Call. My name is Carla, and I will be the operator for the call today. [Operator Instructions] I would like to hand you over to your host, Paula Savanti, Head of Investor Relations, to begin. Please go ahead, Paula.

Thank you, and good morning, and thank you everybody for joining our third quarter fiscal '24 earnings call for Bioceres Crop Solutions. Today's presentation will be led by our Chief Executive Officer, Federico Trucco; and our Chief Financial Officer, Enrique Lopez Lecube. Both of them will be available for the Q&A session following the presentation. 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 the 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. With this, I will now turn the call over to our CEO to start our call, Federico. Thank you.

Thanks, Paula, and good morning to everyone. Please turn to Slide number 3 to begin the report. I have to say that despite the anticipated drop in the year-over-year numbers for the quarter. And although we experienced some delayed sales for our bio-nutrition solutions in Argentina and in Brazil, which we now expect to realize in our fourth and last fiscal quarter. We are generally satisfied with the results we're reporting today. Total revenues in our third quarter were at $84 million, a 10% decrease compared to the same quarter of last year. Similarly, our net income for the period declined to $9.8 million and our adjusted EBITDA to $21.1 million. As Enrique will explain during his part of the presentation, these anticipated drops are entirely explained by the disproportional weight of the Syngenta distribution agreement in the third quarter of '23, whose contribution is now more evenly distributed throughout the year. From a qualitative point of view, we continue to see positive developments in Brazil, which we expect to translate into quantitative milestones in one or two seasons. One of these developments was the first regulatory approval for our inactivated Burkholderia bio-control solutions, which we announced last week. This approval creates an immediate opportunity in high value bio-insecticidal markets as well as in our Generation HB4 channel and in one or two seasons in a broader row-crop markets once our lowest rate formulations are included in the offering. Another positive development in Brazil comes from the performance of our first two HB4 soy varieties where we received favorable feedback from key farmers and expect to increase the current pace of growth. I will provide more information on these developments later in the presentation as well as discuss the outlook for our fourth and final quarter of fiscal '24. Before that, I will now pass the presentation over to Enrique for a more detailed discussion of our numbers.

Thank you, Federico, and good morning to everyone on the call. Thanks for joining us. Let's turn to Slide 4 to begin looking at our financials for the quarter. Like Federico mentioned, our total revenues in Q3 were $84 million, which fell a bit short of what we were hoping to achieve this quarter. Our ambition for the top line was to get as close as possible to the $93.6 million in revenues from last year's quarter, which included a $32.9 million accrual from the Syngenta compensatory payment. Here, let me remind you that from the $50 million we obtained from Syngenta upon signing the agreements, $32.9 million got booked in the third quarter of last year compared to only $15.7 million that got accrued in the quarter we are reporting today. An ambitious goal for the quarter was to offset this $17 million drop in sales with performance from the rest of the business, which was challenging to do in a seasonally low quarter. Well, we came halfway of that and exclusive of Syngenta compensatory payment, we grew our top line by $8 million. Although, we knew it was going to it was going to be very hard to fully compensate the drop from the Syngenta accrual in a quarter characterized for being low season in most of our target markets, we did have expectations of accomplishing more than what we did. We will get into the details for the different business segments as there are different realities for crop nutrition and production. But for the time being, let me just tell you that there is a portion of the sales that didn't happen this quarter that is related to market timing rather than our specific performance, and therefore, we have a reasonable level of expectations with regards to…

Thanks, Enrique, and please now turn to Slide number 9 for a brief update on HB4 soy. Soy harvest in Argentina has been delayed due to excessive rains during the last part of the crop cycle, so we are not yet able to report on performance or inventory conditions at this moment. Having said this, the improved weather of the last few weeks should allow for this situation to normalize by the end of the month. In Brazil, we have introduced the first two HB4 soy varieties with key farmers on a limited number of hectares, about 7,000 hectares, and we have received generally positive feedback up to now. Win rate compared to top commercial alternatives was greater than 60% with some locations showing double-digit improvements in yield. This is a promising beginning and a good step forward towards achieving our next season's ambition for this crop in this geography also and continue with encouraging developments in Brazil. In the next slides, we'll discuss our announcement of last week regarding the recent approval of the Bioceres' first bio-insecticidal solutions by Brazil's Ministry of Agriculture and Livestock. Please turn to Slide 10. This approval represents a significant regulatory milestone in the Brazilian market, marking the first endorsement of biological products formulated from fully inactivated microorganisms. To recap, our most advanced bio-control solutions leverage the metabolites of inactivated microorganisms resulting in products that demonstrate heightened effectiveness, precision, shelf life and formulation stability, as well as greater consistency in their mode of action compared to life formulations. Moreover, non-living bacteria-based products can be formulated with increased potency and at much lower cost, nearing cost parity to less favorable present-day chemical alternatives. The recently approved products are based on Burkholderia derived metabolites, which were first registered in the United States in 2014 and have…

Look, I think, of course, it's kind of like we would get to what is a historically high fourth quarter, but we do feel comfortable with what is lining up as a pretty nice market in Argentina for winter crops. We have seed availability. We have the only product that can deliver bio-technology in wheat, plus what seems to be a pretty active fertilizer campaign also in the fourth quarter. So, we feel that we are in good shape if the market is there to be able to hit our watermark and also with the level of visibility of the things that have been accomplished so far in the quarter with HB4 plus what I already mentioned of EBITDA falling from Q3 into Q4.

So, I think this is a good place where we can pause and open up the call for Q&A. So, operator?

[Operator Instructions] Our first question comes from Kristen Owen from Oppenheimer. Your line is now open.

I want to start with a little bit of an easy one, but just a modeling question for you around the Syngenta payment. Now that we're through those two big compensatory milestones, how should we think about that Syngenta revenue contributing to overall crop nutrition revenue going forward? Just remind us of the mechanics of that as we start to think about fiscal 2025 fiscal 2026?

As I think it's important to be able to sort of provide a level of visibility on how we think that this business with Syngenta is material for us is going to evolve. So, to put it in context, let me remind everyone what the $50 million compensatory payment was meant to do for business. For the first two years of the agreement, we are sharing with Syngenta part of what was a very profitable business to us, but they have still not been able to grow the business in a fashion that would make it economically advantageous to us. So, that's where the $50 million compensatory payment is coming from, in sort of like a way to compensate profit sharing in the stage in which Syngenta has yet not grown the business to a level that they can grow it. So, what I would expect, Kristen, is that next year around, when we don't have the $15.7 million compensatory payment accrual that we got this quarter that the business should be able to bring in profits in a tune that would make it be at least flat. So, in the first three years of the agreement, what we have in the agreement with Syngenta, what we have is a meaningful jump compared to the prior numbers to the agreement, and then year one, two, and three is just keeping up with that sort of like meaningful jump and then start growing again at double-digits in inoculants in year four, five, and onwards. So next year around, what you can expect is for the inoculants business led by Syngenta to fully compensate with operational performance. What this year we have accrued as a compensatory payment in the tune of $15.7 million, which was already lower than the $33 million that we accrued in the first year. So those are the dynamic dynamics. I don't know if that was clear. If not, let me know.

Maybe worth reminding, the nature of the agreement or whether it's a minimum profit sharing of $230 million on top of the $50 million that we're alluding to in terms of the payments are being booked in fees in third quarter of '23 now in the third quarter of '24. So, in addition to that, throughout the 10 years of the agreement, there are minimum payments totaling $230 million which initially as Syngenta was onboarding, the new geographies were smaller and they become more meaningful as we move forward in one year after another. So that I believe will compensate more what we are achieving today through this particular accrual. So, in total, it's $280 million of profitability guarantee by contract that we should be getting from the agreement with Syngenta.

Absolutely. And just for modeling purposes, I think, Kirsten, that what you will see is that, we are targeting, like Federico said, this to annually provide close to $30 million in profits. The first two years because we didn't have that from the business, we got the compensatory payment. And obviously, I think that one other thing worth reminding everyone is that this was the one product category in which we are market leaders. It was tougher for us to grow. Hence, comes the agreement with Syngenta to join forces and keep expanding our portfolio globally.

I'll ask one clarifying question. The past years one and two, the contribution of that revenue is more ratable versus these one-time compensatory payments.

Exactly right. You're very right.

So, then my second question is related to the new registrations in Brazil. Big milestone for you guys in that market. I think, Federico, you mentioned that has already been approved also in the U.S. So, my question is sort of a broad U.S. end market question around some of the more stringent adherence to things like the Endangered Species Act review, just getting tougher to register products in the United States unless they can get around either that EPA review or excuse me, ESA review, or they have some biological benefit. So, it's kind of a big picture question, but how you think about your pipeline, the progression of MBI-306 in the U.S. And sort of the broader regulatory environment and how that may be an opportunity for Bioceres in these broad acre applications?

Obviously, it's never easy to talk about regulations because they tend to be constantly evolving and that's a bit frustrating for the business in which we are. Having said this, the U.S. and Brazil tend to be walk in the park compared to Europe these days. So, I'm not going to complain. I just have to say that what we approved or what was approved in Brazil now has been already approved in the U.S. in the form of what was known as MBI-306. So, this is something we're currently commercializing in the U.S. and where we feel there's a market for in Brazil. In terms of the lower rate version of this technology, which we refer to as MBI-306. I think we're expecting the approval to come in the U.S. in the next few months. Hopefully, by the next call, we should have news on that. After kind of a back and forth from the EPA where there was initially an intention to do an extended review and then that got reverted, and we're now able to seek the labels for these lower rate formulations. And in the case of Brazil, the path forward is probably a different one since we are not talking about a different active ingredient and might be one where we can fairly quickly on board with this lower rate approach. Now, the lower rate approach is critical for the road growth market, where we need to be very cost competitive while retaining the level of effectiveness, in the control of the key tests. And that's why I think Brazil, it's very relevant because pest pressure obviously is very high. I was referring to how much we invest today in each bag of soybeans in bio-insecticides -- in insecticides, not bio-insecticides in Brazil, which is about $15 per bag. So about $22 per hectare. Imagine, if we would be able to replace that with our, bio-control solutions. That's probably more than what we make out of germplasm royalties today, way more than what we make out of germplasm royalties today. So, this is the opportunity we are trying to seize initially in the higher value markets and hopefully very shortly in the low-rate markets. In terms of the regulatory framework, obviously, Brazil tends to be faster than what we see in the U.S. in general and both countries much, much, much faster than, what can be done in Europe these days in terms of sort of probably the three main markets, regarding these products.

Our next question comes from Ben Klieve from Lake Street Capital Markets. Your line is now open.

I first want to start with a clarifying question as well. On the last slide of your presentation where you're laying out the looking ahead, I want to make sure I understand this right. So, with this slide, you are basically trying to indicate that between the EBITDA contributions that got pushed out from Q3 to Q4 plus HB4 contributions that you have -- that are already in the bag in the first six weeks of this quarter, your EBITDA is already at year-over-year levels. Is that correct? This is not -- yes, I just want to make sure I'm understanding that right.

What we are saying with this last graph is that, the improvement that we expect for the last fiscal quarter, so which are almost 21, little less than $21 million of EBITDA, is in part going to be delivered by what's slipping from the current quarter. So, there are about $4 million of EBITDA that we didn't realize in the third quarter that we are expecting to realize in the current quarter incremental to the EBITDA of last year, the $10 million that I got delivered last year. And then the remainder or a significant part of what's left will be explained by the incremental EBITDA that we guided towards for HB4 week, of which half of that is almost done already after, 45 days into the quarter. Is that clearer?

And I think you just answered my follow-up question, which is your expectations for HB4 wheat, either in the quarter specifically or in the full year in general, that $15 million EBITDA contribution at least that you've targeted for some time, it sounds like you're still comfortable with that $15 million number. Is that correct?

I mean, we're as comfortable as we can be. Obviously, I would much rather say we're already done in terms of, we're a month and a half into the quarter, that number is already in the books, but it's not. We're only halfway there, which is not insignificant, by the way. But, yes, as Enrique said at the beginning of his presentation, we're cautiously optimistic and feel that this is doable and that we start at a higher floor compared to where we were last year.

Just to compliment what Fede just said, I think what we want to communicate here is that there's about $10 million that we didn't have last year. So, anything coming from HB4 is something that we didn't have last year, plus the flow of about $4 million from Q3 into Q4 is something that shouldn't be counted towards the $10 million base that we had last year. So that already puts us at $20 million and I think that the $10 million remaining to get to 30 is something that the business with the underlying organic growth should be able to deliver. Like I mentioned, bio-stimulants have been delivering growth quarter-over-quarter and year-over-year plus a normalized sort of like market probably in Brazil, in bio-protection in the US. That alone should put us on track to accomplish what we have set our minds to.

On the fertilizer business, I understand there's a lot of just major kind of puts and takes going on here. I'm wondering on a high level, Enrique, if you can clarify the performance of the fertilizer business this quarter, as broken down by price versus volume changes on a year-over-year basis?

That's a good question, Ben. I think, it was all sort of like volume related year-over-year plus also the shortfall against what we were planning to solve volume driven, and that's what makes us feel a bit more comfortable with the performance this quarter, even though it was less than what we wanted it to be, because it seems to be responding to the dynamics that I just described. MAP and DAP prices have remained historically high, only surpassed by the sort of like months that follow the breakout of the war in the Black Sea, like I said. So that usually when you go back into historicals and check for farmers' behavior, what it usually does is that farmers postpone purchasing to the very last minute. So, we have good soil moisture, improving wheat prices, which at the end of the day improves the ratio of phosphate to our commodities, and that signals we should have a strong fertilizer season for the winter crop planting in Argentina particularly.

And our next question comes from Scott Fortune from ROTH MKM. Your line is now open.

Just want to follow-up. In your remarks, you called out continuing difficulties in Brazil kind of the Crop Protection market. Just wanted to get a sense, can you unpack that and where we are as that process plays out a little bit? And then similar on the U.S. side with the headwinds in the bio-protection market, just kind of a little more color on what you're seeing in kind of easing on those two markets from that standpoint?

Look, I think what everybody has anticipated would be a sharper recovery of the markets has been taking longer. We have been seeing an improvement. It's not like things have remained flat, but it's a little bit heavier than what everybody anticipated. And I probably think that there are kind of some nuances around what is happening in the U.S. and Brazil that are different in the U.S. at least in our business that is more leaning towards cash crops still. What we see is that there's a tighter inventory management from our distributors because of high interest rates. So, what usually used to be kind of like more of a flowed dynamic with them has gotten into almost just in time. So, it's not so much about inventory levels in the channel as it is about inventory management. And that's a meaningful sort of like difference between against what we saw last year where channels were tough and that made it tougher for sales people. In Brazil, I think that there was still some inventory channel issues that again the market anticipated that we're going to go away easier than what they did plus sort of like the low commodity prices that usually boast somewhat of a halt in farmer purchasing. Both of those things are sort of like slightly improving quarter-after-quarter and remember that we are still a small part of the market, of the Crop Protection market. This is not a market in which we operate directly as chemical companies do. So, we get some collateral damage, but are not in the eye of the storm. I don't know if you…

No. First, Scott, it's great to have you in the call, and welcome to the Bioscedes story. What I would add to this is, like, when we talk about headwinds in terms of our portfolio, it's a fraction of the magnitude of what's being discussed more broadly by industry participants. Remember that biologicals cannot be held in inventory forever because in some instances, microorganisms die even our inactivity microbial formulations cannot be stored forever. So, we have the luxury of perishable inventory and that mitigates in part, these inventory buildup situations, that are fairly frequent in the chemical space and sort of commodity fertilizer space. So, we're talking about, I would say, mostly single-digit drops or effects compared to the sort of 30% to 40% declines that have been experienced by other participants in the industry. To put just to put things into perspective, still a drop, but of much lesser magnitude than what is seen in the broader more generic ag input market.

You mentioned U.S. was kind of focused there. You provided good color on Argentina, Brazil, but kind of the ongoing expansion initiatives there, kind of where are you with the plannings in U.S. regarding HB4 programs? Can I move that to meaningful commercial scale, kind of timing on that? Just a little bit more color on the spring planning. And then follow-up with the pro forma and how that's tracking on the revenue side, expanding in California from kind of the margin and the cost side of that segment? Just kind of update on the U.S. and initiatives kind of moving forward there would be helpful.

Sure. So, on the HB4 front, the U.S. is coming behind Latin America in terms of product development. We have indicated in the past that we were working together with [indiscernible] in terms of some materials that we source from them to have better performing genetics for the soybean market in the U.S. as well as with other breeding companies. But this is not something we expect to kick in the next fiscal year. I think this is probably more fiscal year '26. And forward, in the case of wheat, we're still waiting for the USDA approval for in country production, which is long, long overdue. I mean, surprising that Brazil, Paraguay, Argentina have already approved and the U.S. being such a quick market in terms of GMO clearances has not yet delivered in country production even though we can export HB4 wheat for feed and food purposes to the U.S. So that's still a pending item, even though we are working with, local germplasm providers to develop varieties. So that prevents us from having visibility in wheat and in terms of soy, we believe this is, more of a fiscal year '26 than a fiscal year '25 event, all things HB4 considered. In terms of the ProFarm business, we continue to expand the margins on the existing products and obviously feel that we can significantly improve on what we have in terms of margins, but mostly in terms of art of use and general rate competitiveness once, MBI-306, formulations become approved. This will be initially very relevant in the seed treatment space, where we are today using the 206 formulation in a limited manner because of the amount of product that needs to be loaded into the seats. And I believe that will be the most meaningful aspect for near-term growth in the U.S. We continue to sort of do better on everything we're currently offering to U.S. farmers in the cash crop. As Enrique alluded to which is historical market of ProFarm or our own bio innovations and, more so in the row-crops mostly with key names, like Syngenta, for instance, in inoculants and Corteva in some of our other products. No. So a very important market for us is probably one that is coming behind, our efforts in Brazil in terms of seeds, and in parallel or even slightly ahead in terms of bio-control.

[Operator Instructions] Our next question comes from Kemp Dolliver from Brookline Capital Markets. Your line is now open.

So, a couple of questions on a few different topics. First, in your slide on HB4 soy, you have the performance information that shows the average for a relatively small number of different farms or plantations et cetera. But what does the median look like given that range of minus 5 I think to plus 27? Is the median much different from that average?

I think the median is probably slightly above the average. We had only two locations where performance was below par, minus 1% and minus 5%, which maybe bias the average towards 7%. And then in general, there were maybe three or four locations, where we had double-digit gains from 10% to 27%, and the rest were below the double-digit between similar to 9% yields. But I would say that the medium might be slightly different, but not too significantly off from that 7% improvement that is reported as the average number. It's still 7,000 hectares. Nine out of the 25 different farmers that have reported yields until today. So, it is what it is, but yes, that's the color.

Shifting gears to the approval of Venerate and Majestene, how quickly can you launch those in Brazil? And just to confirm, will this cannibalize anything that you're currently selling?

So, on the cannibalizing part, no, because we're not selling by insecticides today. So, this is great news. This is a new family of products for us in the Brazil market. We can deliver sales very quickly. I think we need to do the regional registrations that usually take three months after getting the MAPA approval on the master dossier, which we have already gotten. So, this is ready to go in terms of some applications, particularly in high value crops where these products are cost competitive, and we're considering including them also in the seed treatment of our Generation HB4 channel, which is proprietary. So that's almost internal use in terms of contractual arrangement, but a way to replace part of the insecticidal load we are today getting from third parties and improving on the environmental profile of the HB4 program in general. So, we we're going to do some substitution, probably not too significant the first year, because part of the soybean seeds already being manufactured. But more importantly, next year and hopefully once we get the lower rate approved, more broadly penetrate on the seed treatment part.

Just to compliment what Federico just mentioned. First, on the regional registrations, what we mean is state level registrations within Brazil, that usually, like, Federico that takes three months after the countrywide approval. And then I think that one other thing worth mentioning is that we have a sales force that has been long awaiting to replenish the portfolio of things that they can offer. Inoculants were a big part of our offering to our own distribution network in Brazil, and that's now within the Syngenta scope. So, this is something that comes to replenish the portfolio of offerings to our own distribution network. That's one. And the and the second, I think it is important to have an already operational business when you launch this type of products. It's not like we are going to be new in the market. It's bringing a new offering to an already existing network of relationships. Plus, like Federico mentioned, having the opportunity of deploying it also within the HB4 platform. So, we have three sort of like paths to market for these new products. One is our B2B relationships with Corteva with Syngenta, we'll see what is the best path on that one and then HB4 and then our own distribution network.

And your last question is there's been significant flooding in one of the key regions in Brazil and there's some commentary about how that's going to impact the harvest. And you may not see I'm assuming you won't necessarily see direct impact of that short-term, but how are you thinking about how that may influence your business as farmers go into the next planting season?

Obviously, it's not good news in terms of a group of our customers that live in the southern part of Brazil. Having said that, that is not a region that we're targeting for HB4 soy. So, in terms of our HB4 soy footprint, we're north of that in the [Cerro] region and to some extent in the Mato Grosso region. So, we are not affected by the flooding in the Parana and southern region of Brazil. It might affect some of our more generic business, if you will, the adjuvants that we sell into that part of the country, it is a severe incidence, in terms of total hectares, but probably not too significant on our overall revenue in Brazil because of lack of exposure or meaningful exposure to that particular geography or sub-geography within the country. It is having an effect on the soybean price, so that might help improve economics, which is also important.

What I would add as color of Kemp to that is you have probably three subregions within Brazil. Obviously, the southern states are an important agricultural market and one where we do have a sort of like sales. So, we'll see what's the impact we're monitoring that. But again, like Federico mentioned, I don't think that we have an overexposure there that would force us to sort of like come with very bad news at all. And the Brazilian market is so big that there's other pockets to compensate, if that's the case.

As we currently have no further questions, I will hand back over to Federico Trucco to conclude.

Thank you, and thanks everyone again for taking time to participating in our third quarter earnings call. We look forward to a good finish to fiscal year '24. I think we have done a lot of work to be in a position to continue to grow at double-digits and we have done so since the inception in the public markets. So that's something we take very, very seriously, and hope, we can follow up with you in the next few days if you need any additional color on what we discussed today. Have a great day and a great rest of the week.