Bioceres Crop Solutions Corp.

Topline 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, that 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 Cementes. Additionally, 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 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 remainder 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 forma 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-edit 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 fertilizers as farmers dealt with getting planters into rock-solid fields. Despite these headwinds, we saw 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 a year ago. This is important for multiple reasons, but I would argue that resuming growth and being able to successfully navigate traumatic conditions in a key end market are amongst the most important. You might recall that at the time of our second quarter earnings call, we indicated that weather conditions had started to improve in Argentina. However, the transition from La Niña to El Niño was slower than what all forecasts had expected, and the months of February and March were still dry and unseasonably hot. This ruled out the possibility of pre-season sales of fertilizers in the third quarter. Now, the strategic agreement for our inoculants business with a market leader such as Syngenta is what allowed us to more than offset the impacts of this unanticipated scenario. We will get into a bit more detail in coming slides. Finally, looking at the year-to-date revenues, performance in the first and third quarters allowed us to offset the decline in the second quarter, our most important quarter in terms of sales, and still achieve a 28% increase compared with a pro forma nine-month period of 2022. With year-to-date revenues standing at $315 million, if the weather situation in Argentina finally improves in coming weeks, We believe we are in good shape to reach our target of 20% top-line growth for the full fiscal year from the roughly $359 million in revenues for fiscal 2022 on a pro forma basis. Now turning to slide five, let's take a look at this quarter's revenues in more detail. Revenues in crop nutrition doubled, driving most of the growth in the quarter, while seed and integrated products grew 65%, more than offsetting the decline in crop protection. The performance in crop nutrition was mainly driven by inoculant results from the agreement with Syngenta. To recap briefly, in September 2022, we announced a partnership with Syngenta Seed Care to accelerate and expand the international growth of our inoculant business. Under this agreement, Syngenta became the exclusive distributor of certain bioceticist biological sea treatment solutions, mainly inoculants, for a period of 10 years in geographies outside of Argentina. The agreement includes contractually stipulated minimum profit sharing targets that Syngenta must meet annually, as well as an upfront consideration to compensate for transition costs and profits shared with Syngenta over the initial 12 months of the agreement, a period during which Syngenta is expected to take over the commercial operation and prepare to achieve the agreed growth goals. In this quarter, we are recognizing both initial operational profits from the agreement, as well as $33 million from the upfront compensatory payment that corresponds to the countries in which profit sharing already began in January 2023. Although we expect operational profit sharing with Syngenta to continue flowing throughout the remainder of 2023, we do not expect any additional compensatory payments to be recognized until January 2024, when new countries will be incorporated to the profit sharing framework and an additional $17 million in compensatory payment are expected to be booked. The performance from the agreement with Syngenta is what drove the increase in revenues in our most relevant segment for the quarter and allowed us to successfully weather the storm under an unprecedented halt in demand of fertilizers in Argentina, which we estimate to have reduced sales by $10 million compared with the year-ago quarter. The inoculants agreement reflects the value of strategic actions taken a few months back that allowed us to monetize our extensive portfolio of technologies in alternative ways. Turning to crop protection, revenues declined 3% with lower insecticide, fungicide, and adjuvant sales in Argentina, a decline that was not fully offset by increased sales in other countries of Latin America. Pro-farm product sales in the U.S. also saw some softness, shaped by heavy rains in California, which prevented growers from accessing their fields and pushed demand of bio-insecticides into the fourth quarter. Seed and integrated products revenues increased 65%, driven by sales of seed treatment packs in Argentina, as well as increased sales in Europe. Let's now turn to slide six, please. Gross profit was up by 84% year over year, with an increase driven by the same dynamics I just described for revenues. Gross profit from the Syngenta Agreement, both from shared profits as well as the compensatory payment, largely offset the decline in micro-hydrofertilizer profits, and the fact that in the year-ago quarter, we had recognized 100% of the profit generated by inoculants, while in this year's quarter we began sharing profits with Syngenta. Although going forward we do not expect to maintain an 84% gross margin in crop nutrition, it does illustrate the outsized effect on margins that proceeds from the inoculant agreements can have. We expect these profits to be uneven at first, as revenue recognition will not be dictated by our own commercial efforts, but by how Syngenta channels to market. Going forward, we expect the profit sharing to become a stable and meaningful contributor to our financial results over the life of the agreement. Regarding the other two segments with a much stronger profitability profile, the gross profit increase brought by seed and integrated products almost doubled the decline of gross profit from lower margin crop protection products. Overall gross margin for the quarter stood at 61%. Now, considering that some of the profits we booked from Syngenta this quarter cover calendar 2023 in full, this margin level is not something we expect to repeat in the coming quarters, but rather continue targeting a range of 42% to 48%, depending on revenue composition. Turning to slide seven, adjusted EBITDA reached $35.8 million this quarter, which is traditionally our lowest due to revenue seasonality. As was the case with gross margin, this quarter's EBITDA received the full benefit of profits from Syngenta, some of which account for full calendar 2023. On a different note, a proactive control on costs implemented in Argentina during the quarter to offset headwinds from dry weather, as well as the realization of cost synergies in ProPharm, further contributed to the improvement of the adjusted EBITDA metric. The continued execution of cost synergies in ProPharm gives us confidence in our plan to be adjusted EBITDA neutral on these assets by the end of fiscal 2023, assuming we benefit from this year's rainfall in California. This quarter reminds us that our business sometimes does not lend itself to evenly balanced quarters and is usually best understood on an annual basis. For the last 12 months, adjusted EBITDA was $85.3 million, a 67% improvement compared with the same period of the previous year on a pro forma basis. Now, please turn to slide eight to wrap up with some brief remarks on our financial debt and cash position. Total financial debt as of March 31st was $250 million. The increase year over year is driven by the financing agreements linked to the merger with ProPharm, as well as new financing obtained during the last quarters to support working capital. As mentioned in our last earnings call, in February, we issued a $26.6 million public bond in the Argentine local market, of which roughly $21 million matured in February 2025 and the remaining amount in February 2026. All the proceeds were used to pay down short-term debt, thus extending our debt maturity profile and reducing the portion of current debt to 42% from 56% in the year-ago quarter. It is also important to note that our cash position and net working capital long exceed short-term debt. Importantly, all profits from Syngenta, operational and compensatory, flow from the top line to the bottom line of the P&L very efficiently and have a high conversion to cash. Along with our February issuance, this drove our cash balance to $71 million at the end of the quarter. a much desirable position to be in considering the growth nature of our business, the turmoil in the global markets and the headwinds from drought. Our leverage ratio was 2.1 times, a significant improvement compared to 3.06 at the end of the year-ago quarter and 3.13 times in the previous quarter. As we look ahead, we are cautiously optimistic about the fourth quarter. In South America, farmers in Argentina are still waiting for a couple of more rains to occur before feeling confident about winter crops plantings. If soil moisture gets close to normal levels, we see strong activity coming. Not only do we have a unique technology at a moment when farmers have a fresh memory of what climate change can do to their businesses, but we also have wheat seed availability, an input that could be in short supply if acreage returns to normal. Brazil is coming out of a bumper crop, which makes us feel confident about allocating capital to move HB4 soybeans forward as fast as biology allows. And finally, on the pro-farm front, we are well aligned with our cost target, and if weather supports demand for bioinsecticides in California, we are on track to achieve our EBITDA neutral target by fiscal year-end. Although last year's fourth quarter was a strong one, We are confident that with the right conditions, we will be able to deliver growth and improve on the $85 million in last 12 months EBITDA that we reported today. That concludes my remarks. I will hand the floor over to Federico now.

Thank you, Enrique. And please now... ...for number nine. Sorry. Brazil's full approval of HP4 wheat completes our regulatory process in this country, complementing the key approval received in 2021 for feed and food use of HP4 flour. 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 Cerrado region of Brazil. To be able to meet this target, we have established two important collaborations. With Embrapa, as previously announced, aimed at combining HB4 technology with Embrapa's tropical wheat genetics, currently utilized in 50% of the Cerrado wheat hectares, and with OR Cementes, a historical provider of top-performing wheat 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 HB4 seeds. But first, please turn to slide 10 for an update on our soybean efforts. We are very happy to show our initial results from 800 hectares planted in Brazil with an initial set of 16 generation HB4 farmers. Each farmer tested one or two HB4 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 six to 56 sites per region. It is important to note that drought was not significant in Brazil in the last season. So these results are derived from generally high yielding conditions. We are now doing off-season seed increases to be able to expand the program to 50 farmers in the upcoming cycle, covering a total area of approximately 10,000 hectares. In Argentina, 26% of the hectares with HB4 soy have been harvested already, and we expect all fields to be finalized by the end of the month. We'll report the performance of the current portfolio varieties once harvest is completed in our next earnings call. However, it is important to know that seed quality in fields harvested up to date is very poor, and this will affect seed availability in the next season. Seed quality for the next season is an industry-wide concern, and we're analyzing off-season strategies to try to minimize any inventory gaps. Regarding our commercial approach, in slide 11, you can find a summary describing our current proprietary and non-proprietary channels for both crops. In the case of wheat, we're significantly expanding access to multipliers and distributors in Argentina following Brazil's grain import approval. We have currently enabled 45 Bioceres Emigia seed multipliers who can now develop their own inventories for future direct-to-farmer certified seed sales. At the same time, we have enabled third parties such as PUCS Emigias to develop HB4 varieties with their own genetics, allowing us to address the needs of farmers more quickly in certain regions. Collectively, our proprietary and non-proprietary channels supply more than 40% of the conventional wheat genetics in Argentina. As discussed before, our Brazil collaborators currently provide genetics to 25% of that market. And although we are not clear yet for cultivation in Australia, our recently acquired assets in that country can provide a projected five to 10% footprint once approvals are in place in an initial phase. In the case of soy, We expect to initiate multiplier relationships in Argentina in the next campaign, although these may be initially limited by the seed availability due to quality considerations, as we just discussed. In Argentina, our existing collaborators provide genetics for 30% of the market, whereas in Brazil, they may cover up to 80%, giving us access to the genetics required to address our targeted expectations. Finally, turning to the next slide, we would like to take a few minutes to discuss our sustainability strategy. As described in our recently published sustainability report, in addition to our internal sustainability efforts, our portfolio of products, technologies, and contractual arrangements, such as those in Generation HP4 services contracts, promote efficient resource use and protect soil health and ecosystem biodiversity, while strengthening crops against weather conditions associated with climate change. We're encouraged to see that farmers' adoption of good agricultural practices can be independent of regulations when science and business models are used to align productivity incentives with positive externalities. This concept is at the heart of our all-around value proposition. Let me just provide some examples by showing you what happened in Generation H before wheat fields over the last two seasons. And please turn to the next slide for that. What you see here are the average improvements in utilized water or the reduction in CO2 emissions per tonne of grain produced under the HB4 program compared to the non-HB4 fields. And what you see in terms of water is a 5% reduction on a per ton basis or per kilo basis and a 30% reduction in carbon footprint on an equal unit. Also, and importantly, as we deploy our biological solutions like we do today with our Risolerma biofungicide, we can significantly reduce the environmental impact quotient of the seed treatments. So what you see there is is the environmental impact of a standard seed treatment with synthetic chemistries compared to the expected impact of a rhizoderma seed treatment that is six times less in terms of active ingredient exposure to the environment. These type of measurements will be significantly improved, particularly in markets where we are deploying or buying insecticidal solutions as well, like Risonema in Brazil that is coming up as a replacement of chemical nematicides and other insecticides, being able to discontinue neonics and avamectins that are often associated to toxic effects in bees. And these are products that have shown zero effect of toxicity in non-target organisms such as pollinators and bees. we will start to emphasize the biodiversity metrics on top of the water and carbon footprint metrics that we're showing here to be a pioneer in this important aspect of sustainability on a forward-going basis. So with that, I think we can close today's presentation and open up the floor for any questions that you may have.