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Operator
Hello and welcome to BIOS's Crop Solutions Fiscal Second Quarter 2023 Financial Results Conference call. My name is Drew and I'll be your operator today. If you would like to ask a question during today's call, please press star followed by one. If you change your mind, please press star followed by two. I would now like to turn the call over to Paula Savanti, Head of Investor Relations. Please go ahead.
Drew
Thank you. Good morning and welcome to everybody. Thank you for joining. Presenting today during the call will be Federico Trucco, our Chief Executive Officer, and Enrique Lopez Lecube, 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 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 Biocities Crop Solutions' Investor Relations website. At this time, I will turn the call over to our CEO, Federico Trucco. Thank you.
Enrique Lopez Lecube
Thank you, Paula, and good morning, everyone, and welcome to our second quarter's earnings call. Please turn to slide three from the deck for a quick overview of this period's business and financial highlights. As we have anticipated during our prior earnings call, our growth momentum has been momentarily interrupted by unusually severe drought conditions in Argentina. that extended throughout the entire planting window for summer crops. Although we are flat when compared to last year's revenue for the quarter, we are down by 7% year over year for the period on a pro forma basis after including pro farms operations. This circumstantial decline interrupts a run of seven consecutive quarters of top line growth and profitability expansion. which we expect to resume in the second half of the fiscal year as weather conditions have turned more favorable in our key commercial regions. On a less circumstantial and more permanent front, the severe drought conditions in Argentina have allowed us to put HB4 technology to the test like never before. And the performance of HB4 wheat has been outstanding in all fronts. In environments yielding less than two tons per hectare, HV4 weed has outperformed commercial materials by an average yield improvement of 43%. HV4 soil is on track despite unusually difficult planting conditions in Argentina. Half of the current seed multiplication area was planted with new generation varieties. which will help us quickly rotate the existing portfolio and improve performance compared to the earlier materials an important milestone on the hv4 soy front was the initiation of the multiplication program with farmers in brazil which we expect to give us enough seed for an initial 10 000 hectares in the upcoming season we have closed our previously announced acquisition of wheat breeding assets in Australia, where we expect to expand on the H3-4 opportunity after Latin America. We'll discuss all these highlights in greater detail throughout the presentation, but let us first better magnify the severity of the drought experienced in Argentina. And for that, please turn to the next slide. Drought in Argentina was of historical proportions due to two main factors. Its length, extending throughout the winter and past the entire summer crop planting window, and its reach, affecting a very large part of the agriculturally productive area of the country. Wheat output was slashed by 50% compared to the prior year. and the planting of summer crops displaced by 20 to 30 percent outside of the optimal planting window with an irreversible decline in total crop area and an expected production decline well above 20 percent compared to the year before. Enrique will now describe sort of the financial implications of these droughts, and then I will provide detailed information on HB4 performance, which obviously has experienced a unique year in terms of the severity of the weather event. Enrique.
Paula
Enrique Alonso- Thank you, Federico, and good morning to everyone on the call today. As Federico indicated, I'd like to dive further into our financial results and provide some insight on our expectations for the remainder of our 2023 fiscal year. As we have often mentioned in previous calls, geographic and portfolio diversification are cornerstones to our long-term strategy and ones that draw decisions like investing into a new facility in Brazil or even the merger with ProPharm, both initiatives that we expect to deliver substantial revenue growth. Yet, Argentina remains an important and profitable end market to us. And of course, the situation Federico just described presented a challenge for sales and profit of our baseline business in Argentina, as much as it offered a great opportunity to highlight the strong need of technologies like HP4 in a context of challenging weather conditions. Before diving into discussing our financial performance, we must note here that all numbers referenced in this presentation include pro-farm figures, and all year-over-year comparisons are made against pro-forma numbers, which include pro-farm historical figures. This for ease of comparison. As you can see on slide four, the first half of our fiscal year started strong, with a 26% increase in revenues. This performance is a contrast of two quarters. You will recall that we reported a 71% increase in revenues in the first quarter, which was driven by an outstanding performance of our crop protection and crop nutrition segments, in part as a result of our commercial teams locking in early sales in anticipation of what already looked like a dry season. While we anticipated drought conditions, the severity was beyond anyone's expectations, particularly in the most productive growing regions of Argentina. Our 7% decline in second quarter revenues reflected the slowdown in volumes as farmers minimized their investments due to the lack of rains in the planting season. An estimated $20 to $25 million of potential sales were lost because of the weather during the quarter. Approximately half of this total represents a permanent loss from products that would have been used in summer crops planting activities. such as seed treatment packs and fertilizers. Also, as I just pointed out, a portion of second quarter plant sales were realized in the first quarter of our fiscal year 23 in anticipation of challenging weather conditions. On slide five, we can see the segments most affected in the quarter and also the value of our diversification strategy that helped mitigate the revenue loss. Despite weather conditions during soybean planting being amongst the worst of the last two decades in Argentina, we recorded our first HB4 soybean revenues, and this supported the 7% growth in seed and integrated product segment. HB4 sales were partially offset by the decrease in seed treatment packs. Importantly, during the second quarter, we launched the HB4 Soy Program with growers in Brazil, which we expect to ramp up significantly in the coming two seasons, helping us further diversify weather risk through geographic expansion. Crop protection revenues declined by 5%, as dry weather led to less pest pressure and decreased demand for fungicides, insecticides, and adjuvants in Argentina. These product lines continued to deliver growth in other regions of Latin America, But the main contribution to partially offsetting the drop in Argentina was done by pro-farm product sales in the US through increased adoption of our biological seed protection products. Again, in terms of geographic diversification, it is comforting to see how all of this is playing out. Crop nutrition saw the largest sales decline at 16%, mostly driven by lower microbeaded fertilizer sales in Argentina. as farmers were reluctant to invest heavily on fertilizing crops that were planted beyond their optimal planting window and thus likely subject to lower yields. I would like to point out that improved rainfall during the month of January restored some soil moisture, which generates expectations of an end to the drought. Normalization of rainfall would foster the use of crop protection products, but more importantly could trigger a meaningful increase in winter crops acreage if farmers intend to recover profitability lost from soybeans and corn through newly planted wheat and barley. Both these dynamics, the resuming crop protection sales and higher winter crops acreage, would allow us to recover a portion of sales lost to drought in Argentina and provide a favorable scenario for the rollout of HB4 wheat putting us on track for our annual sales plans. Please turn to slide six. For the first half of the year, we delivered a 5% increase in gross profit, which was driven by first quarter performance mostly. In the second quarter, though, gross profit was down 28% due to a combination of price and product mix effects. Product mix played a role this quarter as sales contribution of higher margin products such as adjuvants and seed treatment packs fell relative to others. Both products are highly seasonal in the second quarter and were impacted by dry weather. In addition, there was some margin contraction across the portfolio in Argentina, particularly in the case of fertilizers as the pricing strategy was adjusted to accommodate for the drought conditions and mostly aimed at maintaining market share through customer proximity. For the full year, as rainfall in Argentina normalizes, we do expect our margins for sales in the country to trend back to normal and get us back on track with our annual goals. Please now refer to slide seven. Adjusted EBITDA for the second quarter was affected by the negative impact on sales and margins in Argentina. The corresponding decrease in gross profit was partially upset by lower operating expenses when excluding non-cash considerations and one-timers, such as DNA transaction expenses and share-based incentives. This reduction was driven by good performance in the execution of cost synergies derived from the merger with ProPharm. As we grow ProPharm revenues and complete the integration process, we continue to believe we are on path for this acquisition to be adjusted EBITDA neutral for the full year. We saw good progress toward this goal in the quarter. Importantly, despite a tough second quarter, adjusted EBITDA for the first half of the fiscal year 23 reached almost $35 million, which represents a 13% improvement compared with the first half of the previous fiscal year on a pro forma basis. Finally, let's please look at the summary of our financial position shown on slide eight. Our higher debt position and the corresponding higher interest expenses are mainly explained by the execution of the agreements in connection to the merger with ProPharm. The increase in short-term debt is explained in full by higher working capital position from incorporating ProPharm as well as progress in launching HB4. We remain at a very healthy run rate of interest expenses with an annualized average cost of debt of approximately 7%. Our cash position increased with a $50 million upfront payment from the Syngenta agreement and stood at roughly $87 million, leading to a net financial debt of $170 million on December 31st, 2022. Our net debt to adjusted EBITDA ratio was 3.13 times And although our target is to keep our leverage ratio below three terms, we are comfortable as the current metric is fully explained by a temporary drop in this quarter's EBITDA. More importantly, we have a strong cash position and our working capital is well above our short-term debt obligations. After quarter close, we completed a $26.6 million public offering of corporate bonds in the Argentine market to support our local business in that country. These bonds mature in February 2025 and February 2026 and pay annual rates of 1.5% and 3.9% correspondingly. All the proceeds will be used to pay down short-term debt, thus improving the composition of short and long-term financial debt. Let me wrap up by saying that although this quarter breaks a two-year streak of uninterrupted growth due to an exogenous weather shock, we are confident in the underlying fundamentals of our business. While weather may temporarily affect our quarterly results from time to time, our long-term growth trajectory remains robust. With that, I will hand the floor over to Federico. Federico?
Enrique Lopez Lecube
Thanks, Enrique. And please turn to the next slide so that we dive into the HPV4 results. When we talk about the HB4 targeted region as an area or as areas where yields are expected to be below the two tons per hectare mark, we may think of this as a limited opportunity in normal years when average yields are often above the three tons per hectare level. Now, in a crop year like the one we just experienced, over 30% or close to two million hectares nationwide were below this threshold. So to be able to improve yields consistently in these fields by more than 40%, as shown in multiple seasons, it's quite outstanding. We are no longer talking about field trials or limited number of fields. These are results from hundreds of growers, thousands of hectares, and multiple seasons. Indeed, very compelling. Let's go slightly more scientific in our analysis and look at the isolated effect of the HB4 gene as we turn to the next slide. What we did here in 20 different locations, or 34 locations if we look at the past three years, was to ask farmers to compare twins, or what we call near-isogenic lines. that are varieties otherwise genetically identical except for the presence or absence of the HB4 gene. This is important because, as you may well know by now, final performance of an HB4 variety is often confounded by its genetic background. So we talk about first generation materials, second generation materials, or even third generation materials like we do in soy. When we neutralize that background noise, what we see is that HB4 converted lines win in all environments, not just those with yields below two tons per hectare. HB4 is a true yield gene with win rates above 80 percent, ratifying the broad hectare opportunity resulting from this technology. As we improve background genetics and reduce the yield gap of the first generation materials in environments with yields above 4 tons per hectare, we can expand the HB4 opportunity to the entire wheat production area. And this is what we are showing in the next slide with a close to 15 percent yield improvement observed in the highest yielding environments during the last season when compared when comparing the data from last year from first-generation materials to what we observed with second-generation materials in the current year. The good news is that we should be able to cover up to one-third of next season's HB4 plantings with second-generation materials, allowing us to replace first-generation varieties almost fully by fiscal year 24. when we expect hv4 wheat to deliver between 15 to 20 million dollars in incremental evita now this technology is too important for it to be limited to latin america and our ambition is to bring hv4 wheat to farmers everywhere in the world where wheat is relevant and droughts are prevalent and the next stop in this road for us is australia so in line with this We have closed the previously announced deal with SNW Genetics, acquiring through our subsidiary, Trial Genetics, 80% ownership of their wheat breeding program. This is shown in the next slide. Australia will not become an immediate opportunity for HB4 wheat, since we have to still do regulatory work in country. We have been cleared from a food and feed perspective, but not yet from a production viewpoint. So that is expected to be done in the next two years while we consolidate the breeding efforts locally and start developing the adapted HB4 lines. We believe that HB4 in Australia will become meaningful in about five years, and that is beyond sort of our peak penetration in Latin America. So a good way to follow up on what we are currently doing in Argentina, Brazil, and the rest of the region. Finally, to close the earnings call, I'd like to provide a brief update on HB4 soy. HB4 soy seed multiplication hectares were kept steady despite very challenging planting conditions. as we commented earlier in the presentation. Importantly, half of the multiplication area was planted with the newest varieties, nine new third-generation materials that will allow us to quickly rotate the portfolio and improve performance for this crop. And inventory projections are on track to meet what we expect to do in fiscal 24. and meet the guidance that we provided for fiscal 25. As Enrique indicated, we are delighted to see HB4 advancing in Brazil with initial multiplications being done with farmers using two varieties derived from the DMG program and hopefully target about 10,000 hectares in the upcoming season. So with this, I think we can now open up the floor for a Q&A. So operator.
Operator
Thank you. We will now start today's Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. Our first question today comes from Ben Cliev from Lake Street Capital Markets. Your line is now open.
Ben Cliev
All right, thanks for taking my questions, and congratulations on a really solid first half despite the tough backdrop that you outlined. First question, Enrique, is for you. You noted a $20 million to $25 million revenue headwind in the period due to weather, and I confused myself a little bit kind of breaking this down, so I want to clarify this if possible. You suggested that half of it was a permanent loss, So was the other half pulled forward into Q1 or was the other half, you think, going to be pushed right into Q3?
Paula
Hi, Ben. Thanks for the question and good to have you on the call. So that is a good question. So the half that was permanently lost was mainly around fertilizers and seed treatment bags, both things that are heavily used on the planting window. and obviously those are tasks that don't go back. So that's the part that we believe that it's going to not come back. The remaining half, I would say, Ben, that has to do mostly with products that were pushed further down the road. So, for example, in the case of adjuvants, if there is more rain, then obviously that would explain more spraying, and more spraying resumes sort of like our sales of adjuvants in the country. So there's a big part of that even with fertilizers and that's why i highlighted the wheat acreage we might recover some of our annual estimated sales of fertilizers in wheat so what we lost in soy might be recovered in wheat and there's obviously a part of that that got pulled into the first quarter but mostly is what was lost to planting activities uh that explains that half that was lost and the remaining is something that we do believe that can be fully recovered through more adjuvant cells, maybe some insecticide cells, and most importantly, fertilizers for weed planting in the winter cross-planting season in late May, June.
Ben Cliev
Okay, very helpful. Thank you. On the HB4 soy, a lot of positive news here. Did you provide the revenue contribution for HB4 soy in the quarter? If so, I missed it. And then do you expect 100% of HB4 soy revenues this fiscal year to be in the second quarter? Or do you think any of that is going to get pushed into Q3 for some reason?
Paula
No, no. Obviously what happened in HB4 soy already happened. So that's in the second quarter. All of that happens in the second quarter. The contribution was at $2.2 million. And this is something that I believe that is also worth putting in context of the drought. I mean, obviously, farmers decide to spend less on technology as they see sort of like drought complications. And even though HB4 is a drought trade, it's not something that allows to surpass planting difficulties. So if you don't have enough soil moisture, obviously you're not going to be able to plant, and it's not something that can be sold through HB4. So I think that we were expecting probably to see a little bit higher sales, and this situation with drought was a little bit complicated on that. I don't know, Federico, if you want to add something on that front?
Enrique Lopez Lecube
No, the reality is that we were targeting twice that much. to be fully honest, and we lost many fields that were not planted. That probably doesn't explain 100% of the situation. What we prioritized then was the multiplication of the new varieties, so that got all planted. So all the inventory we had of third-generation materials, which are very relevant from an inventory ramp-up viewpoint, got done. The incremental revenues that come from second-generation materials or even there might be a first-generation material that we were targeting to meet that revenue threshold is what we compromised, if you will, because of the situation described by Enrique. So from a strategic viewpoint, our ability to rotate and have the inventory in place for the meaningful years, I think we're in good shape. even though we're below where we expect it to be coming into the quarter.
Ben Cliev
Got it. Got it. That makes sense. Yeah, very sensible. Okay, last one for me, and then I'll get back in queue. You noted that the cash contributions from the Syngenta agreement, now that operationally this is six weeks old, something like that, do you have any operational updates on how this agreement is proceeding here in the early days, or is it still too early to really make any comments there?
Enrique Lopez Lecube
No, I think we're making very good progress in terms of manning the agreement, having the people in place that can operate the sales that are required. So we are helping Syngenta on that front, and that has been fully accomplished, for instance, in Brazil, which is a very important geography for the objectives of the agreement. that we are targeting on average $23 million of profits coming from this agreement on an annual basis on top of the prepayment that we got that is reported here. So I think that is moving as good as it can go. We believe that this is in a way sort of the floor of the opportunity because we do see tremendous momentum for biological seed treatments globally and hope that Syngenta can help us capture that in a way that is more meaningful than what we would be able to do ourselves. And I think also like going back to what happened in the quarter with the drought in Argentina, to be able to have these 45 sources of revenues that are not dependent so much on weather or one particular geography, speaks to sort of a type of multifaceted strategy that we want to provide our investors to keep sort of a resilient business performance. Got it.
Ben Cliev
Okay, very helpful. I appreciate you taking my questions. I'm going to get back in queue.
Operator
Our next question comes from Bobby Balson from Canaccord. Your line is now open.
Bobby Balson
Thank you. Um, and thanks for taking my questions. I guess the first one is just, uh, can you elaborate a little bit on the pro farm impact? Uh, it's the top line. It sounds like you got some, you know, positive offsetting, um, benefit there for, you know, for revenue, but then also you're getting some integration synergies. So maybe carve that out a little bit, uh, for us. So we understand the magnitude.
Paula
Hi Bobby, this is Enrique. Good to have you on the call, and thanks for the question. Hi, how are you doing? Look, I mean, from a magnitude perspective, it's something that was obviously helped. It was not something huge, but it did help. So we saw the main category that explained the offsetting from pro-farming in the US has to do with the seed treatment biologicals. The Venerate product, that's the version of the 206 that will be replaced at some point with a 306. That mostly coming from two B2B partners. And we are glad to see that's trending in a very good direction. Even, I mean, we have this type of B2B agreements that provide some sort of like floor on sales. And we saw those floors being far surpassed by our partners. So good prospects on that end. But it was mostly around the seed treatment piece. We are still waiting to see how the whole situation in California rains will help us or not. We will see in the coming quarter with the rest of the portfolio that is foliar applications in cash crops. So that is one part. And that might have provided Bobby an additional $2 to $3 million of additional revenues compared to last year. I would say that on the cost front, this is also meaningful, as you might have seen in the EBITDA bridge. We had close to $2 million from cost synergies on a pro forma basis, and most of this is coming from synergies with pro forma. So we're tracking well to that regard. So I think that if we continue on this trend, seeing healthy growth on the top line, and if we continue sort of like keeping cost at the level that we planned for, we will see ProPharm turning into positive or neutral at the worst EBITDA for the full year when we look back in June 2023. Great.
Bobby Balson
Thank you. And my next question is just about the fertilizer opportunity in wheat that we should be looking out for kind of late May and into June. is that really dependent like our farmers basically at this point given what's happened so far this year um you know really focused on on making up for it uh with their wheat uh programs or you know is that kind of a done deal and it's just all about the weather at this point and so we should just be watching um you know this abatement of la nina and just hoping that the weather continues to be on this positive trend, and then the higher wheat plantings are just kind of a self-fulfilling prophecy at that point, or are there still decisions being made, do you think?
Enrique Lopez Lecube
Hi, Bobby. This is Federico. It's great to have you on the call.
Bobby Balson
Hey, Federico.
Enrique Lopez Lecube
I think it It's probably too early to tell, no? Because farmers are today 100% dedicated to making the most out of the current crops, the summer crops, which are the ones that are economically more meaningful to them. Now, as we indicated, there are losses in the summer crops that are non-reversible. So the expectation is for the overall crop to be 20% below a normal year. And this is happening after a very tough wheat campaign in the prior season. So revenues from wheat decline, revenues from summer crops will decline. So I think if the weather is acceptable and we have good moisture in the ground, there'll be a lot of wheat planted. And we don't anticipate wheat prices to sort of calm down, given sort of a shortage that not only Argentina and Latin America probably will see in other geographies around the globe. So I think it will be highly dependent on the weather situation. We don't need it to be perfect. We just need it to be moist enough so that farmers will go full force in trying to recover part of that lost revenue.
Bobby Balson
Okay, great. And then just one last one, and maybe this is for you also, Federico. The Corteva acquisition of Stoller and what that does to kind of the state of play in South America, does that create more of a sense of urgency for Syngenta to kind of target Brazil with Does this create bigger opportunities for bioseries in the area?
Enrique Lopez Lecube
Look, I think it's obviously evident by now that industry leaders have put a lot of energy and resources into trying to have a strategy around biologicals. Stoller is a well-known company, particularly in biostimulants. and particularly in Brazil, that's where they excelled. And there is, I think, a consensus view today that to be able to do the trick, you need specialized sales teams. So in part, what we are doing with Syngenta with the inoculant agreement is holding hands, sort of using our platform and our capabilities to help them execute of these more technical sales. So it's part of what Corteva is intending to do with Stoller. And it's reflective of broader M&A in the space. There are a number of other deals that have been announced recently. So I think to be an industry leader in a space that is turning hotter every minute is obviously nice to see because it does create alternatives for us And hopefully in the future we are at a position where we can materialize this leading position we're building today in ways that can vary depending on the scenarios. But I think there's a clear race to try to lead on the biological space and industry leaders are recognizing that the only way they can build these businesses internally is through M&A.
Bobby Balson
Great. Thanks, Federico. Thanks, Enrique.
Operator
Our next question comes from Brian Wright from Roth Capital Partners. Your line is now open.
Brian Wright
Thanks. Good morning. Just a real quick data follow-up. You said on the debt that you had just the $26.6 million.
Brian
Could you give us those interest rates again? It sounded like 1.5% to 3.9%, but I just wanted to make sure I got that correct.
Paula
Hi, Brian. This is Enrique. Thanks for joining and for the question. Yeah, so it was an issuance of $26.6 million, of which 21 were in the tranche of the 24 months maturity with 1.5% interest rate. And then there was about $5.5 million that were in the tranche that matures in 36 months. And that tranche of the bonds pays a coupon of 3.9%.
Brian
Sure come a long way. Congrats.
Paula
Thanks. I mean, it's like we will keep this as part of our financial strategy. I think that this goes hand by hand with our leverage ratio in keeping sort of like the short term of our debt well below sort of like current assets. That's what we're looking for as well as the strong cash position. So all of these three things go hand by hand. It was important to us to be able to bring down the short-term piece of our debt.
Brian
Great.
Brian Wright
Thank you.
Operator
Just to remind everyone, if you would like to ask a question today, please press Start followed by 1 on your telephone keypad. If you change your mind, please press Start followed by 2. Our next question comes from Camp Dolliver from Brookline Capital Markets. Please go ahead.
Kev
Great. Thank you and good morning. Just a couple of questions. First, there's reference to some transaction expenses in the quarter, which I think you mentioned related to MARNE, which closed in July. What were those expenses that they would show up after closing?
Paula
Hi, Kev. This is Enrique. Thanks again for joining and for the question. So those transaction expenses are related mostly to the two financial agreements that were finalized in connection with the merger with ProPharm right after the closing. So those transcended into the second quarter, as well as some other expenses that had not been accrued for in the first quarter that were related to the merger itself. And all of those amount to $800,000.
Kev
OK, super. And then my other question relates to the performance of the HB4 products. And I'm trying to put your current comments in context with what you had said say two years ago when you were mainly referencing what would have been field trial data and roughly we were looking at increases in crop production of I think generally in the teens, whether it's 13%, 16% or the like is probably less critical to the question. But when you step back from the data and look at it in aggregate, Is the current performance for the current generation of crops consistent with that, or is it a little bit better? How would you characterize it in that way?
Enrique Lopez Lecube
Hi, Kemp. This is Federico. Thanks for participating in the call, and thank you for the question. I think that it's kind of surprising, but the field data that we're collecting It's turning out to be better than what we anticipated in the product development process and the R&D trialing, if you will, that was done with the technology or the state where we were two years ago. Even though we still allude to HB4 wheat as being a 20% yield improvement, and that is because we're trying to expand sort of the targeted region to above the two tons per hectare and not just be limited to lowest yielding areas where we can get these 43% averages. What we are seeing in the field today and what farmers are seeing in the field, which is far more relevant than what we see ourselves, is better than that. So I think it's unusual because it usually goes the other way. When you take technology to the field, it tends to perform not as well as how it performs in controlled trials or even in greenhouse settings. So we were very pleased with the outcome, and obviously to have farmers generate this information themselves gives us a level of awareness that I think we can profit from in the upcoming season.
Kev
That's great. And just one related question, and that is, as a farmer, Do you really know in advance the likelihood of severe drought? I think this is one of the great uncertainties of being a farmer. And where I'm going with this is if you're able to deliver something in this range, that even if you generally have good experience, that there's an incentive to go ahead and use an HB4 product just because it gives you, say, somewhat higher level of certainty that you'll be able to have a decent harvest.
Enrique Lopez Lecube
Right. I think that's the right way to think about this, almost like an insurance policy. And one aspect of the technology that is critical in working that way is that we were able to uncouple, if you will, the benefit that is observed under drought with any kind of yield drag under otherwise normal conditions. And what we are even seeing is yield delivery in high-yielding environments, and that's part of what we try to present today in the calls. So obviously, like any other insurance policy, you don't want to use it. you'd rather have the high yields and then you don't care about the incremental cost of the seed. But if for whatever reason you're hit by a historical drought and you're hurting because of the significant decline, to be able to outperform by 40% compared to conventional varieties more than justifies the investment. So that is where we are today with wheat. I think this is one of the reasons why We think the technology can be adopted well beyond these drought-prone regions and become a true sort of broad-acre opportunity in Latin America and potentially in other geographies around the globe.
Kev
Great. Thank you.
Operator
Thank you. There are no further questions at this time. I will now hand you back over to Frederico Trucco, CEO for Closing Remarks.
Enrique Lopez Lecube
Well, thanks everyone for joining. Obviously, we much rather like to report quarters where we grow sales by 70% and double our profitability. So be assured that we are our worst critics and will identify ways by which we can improve. Even despite the historical drought conditions, there are always things that we can do to be slightly better. So this is in a way also a gentle warning to keep our business disciplined and control costs, particularly in geographies where we might have become a little bit more lenient because of the growth and expansion we've been observing over the last two years. So we like to win in everything we do everywhere and that attitude we would like to reiterate to investors in this call. I hope you're having a great week and we look forward to further communicating progress in our business in the months to come. Thank you very much. And I think he sends the call.
Operator
BioServe Crop Solutions Fiscal Second Quarter 2023 Financial Results Conference call has now concluded. You may now disconnect your line.
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