Lavoro Limited

Welcome to Livaro's first half 2023 earnings conference call. At this time, all participants are in listen-only mode. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference call is being recorded and a replay will be made available on the Company Investors Relations website at irlivaroagro.com. I will now turn the conference over to Jeff Sonic with Investor Relations at ICR. Thank you. You may begin.

Good afternoon, and thank you for joining us on Livoro's inaugural earnings call to discuss our fiscal 2023 first half results ended December 31st, 2022. On today's call, our Chief Executive Officer, Huy Huna, and Chief Strategy Officer, Gustavo Mondonesi. Before we begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future results and operations and financial position, industry and business trends, business strategy and market growth, among others. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual results or those described in these forward-looking statements. Please refer to the company's registration statement on Form F-1, filed with the SEC on March 23, 2023, or a report on Form 6-K for the period ended December 31, 2022, filed with the SEC today, and other reports filed from time to time with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note on today's call, management will refer to certain non-IFRS financial measures, including adjusted EBITDA, adjusted EBITDA margin, pro forma adjusted EBITDA, and pro forma adjusted EBITDA margin, among others. While the company believes these non-IFRS financial measures will provide useful information for investors, the presentation of this information is not intended to be considered in isolation or or as a substitute for financial information presented in accordance with IFRS. Please refer to today's release for reconciliation of non-IFRS financial measures to the most comparable measures prepared in accordance with IFRS. I'd now like to turn the call over to Wee Hoonah. Wee Hoonah Thank you, Jeff.

Good afternoon and thank you for joining us today. I'll begin with a review of our business for those that may be newer to the Lavorre story. And then pass the call to Gustavo for some financial remarks. I'm excited to kick off Lavoro's inaugural earnings address today as a public company following our business combination transaction on February 28, 2023. Lavoro is the first and only Latin America agriculture pure play listed on the U.S. stock exchanges. This has been an exciting journey with the support of our sponsor group led by Dave Friedberg at the production board. In the past month and a half since the closing the transaction, we've been putting the infrastructure in place to operate a US publicly traded company and meeting with our leadership team to ensure that our operating strategies are aligned towards our goal of delivering consistent profitable growth and value for our shareholders. Lavoro is the largest egg input retailer in Brazil, yet we believe we only have approximately 10% share of the Brazilian market, which represents a tremendous long-term opportunity that we intend to capitalize on. We offer farmers a comprehensive portfolio of products and services through our differentiated business model that blends our network of highly skilled technical sales reps or RTVs. With our unique ability to offer vertically integrated private label specialty crop input products via our crop care business, which includes our portfolio of proprietary biologics as well as digital tools that complement the third party products that we distribute. is to help our farmer clients succeed by providing omnichannel support throughout the crop cycle, generating value for farmers and, in turn, gaining their trust. By leveraging the direct agronomic service provided by our RTVs with our proprietary analytic tools, we believe that we can build an intimate understanding of our farmer clients and offer products and services tailored to their specific needs. The services and solutions that we provide are key enablers for our customers to better compete on the global stage. Consider that Brazil uses approximately the same amount of nitrogen fertilizers as US on a per hectare basis, yet Brazil's corn yields are about half of the US. While Brazilian farmers have readily adopted new seed technologies, they are only just beginning to utilize variable rate application equipment, and other digital agronomy technologies. With the help of Lavoro, we believe we're providing Latin American farmers with the ability to become more competitive through an accelerated use of crop protection specialties and biologics. As we create economic value for our clients through the organic growth for their crop production and enhanced profitability, we believe that we can drive simultaneous value for our shareholders. In terms of our footprint, we have a broad geographical presence that spans more than 72,000 customers operating in the key agricultural centers of Brazil and Colombia. Our customer base is focused on the small to mid-sized farmers whose operation is large enough to make growth investments and thus are keen to adopt technology, yet have been underserved by the lack of quality consultation and competitively priced solutions. These customers are serviced by our 215 retail locations and supported by our approximately 1,000 RTVs to help them plan, purchase the right inputs, and manage their farming operations to optimize outcomes. Our business is also diversified across geographies, clients, suppliers, and crop types and we expect this to only improve as we expand. Our geographic diversification mitigates operational risks, in particular concerning potential adverse weather events and the seasonality of specific crop types. We have a multi-product, multi-brand approach, which enables us to cater to a diverse set of producers across many regions that grow a variety of crops, including soybean, corn, potato, and rice. This wide-range sales network is reflected in our customer concentration where our top 100 clients accounted for only 16% of our fiscal year 2022 revenues. The strong fundamental backdrop that underpins our organic growth is reflected in the $38 billion target addressable market for agricultural inputs in Brazil, which has grown at a 16% compounded rate since 2017. Our strategy aims to build open debt foundation and further advance our scale through M&A consolidation and organic store openings. Our future growth plans include entry into other Latin American markets where we are currently holding conversations with potential targets. We have completed 24 acquisitions since 2017 and have memorandums of understanding with additional companies in our pipeline. M&A is a core competence of our organization, and our track record of successful integration is yet another level to drive our future organic growth post-close. In fact, Since fiscal 2018, our acquisitions have delivered an average revenue acceleration of over two times the legacy prior year growth rate before being acquired. This is a direct reflection of the strength, quality, and diversity of our product portfolio, which our RTVs can leverage upon shifting over to the Lavoro platform. Further supporting our growth profile is our vertically integrated crop care business, which represents significant upside potential as farmers' adoption increase throughout Latin America in key product segments such as biologics and specialty fertilizers. The crop care segment also produces significant gross margins. And when coupled with its growth trajectory, is expected to account for a greater share of our gross profit mix in time. Another pillar that supercharges our growth is the implementation of other services to clients. I would like to highlight our strategic partnership with Paterneg, which was commenced with an initial investment from our sponsor TPB. On October 21, 2022, we enter into a multi-year partnership with soil metagenomics and digital agronomy leader Pataneg to offer Brazilian farmers a groundbreaking service that can predict crop risks and nutrient deficiencies and other specific product recommendations through a personalized software experience. This strategic partnership expands Lavoro's portfolio of digital tools and services for Brazilian farmers, a key growth driver for the company. With Pataneg, we aim to offer clients a digital agronomy platform that will map their fields, analyze their agronomy data, leverage applied metagenomic sequencing and soil chemistry analysis, and provide specific product application recommendations to clients helping farmers improve yields while minimizing their costs, land, water, and carbon footprint. This service is expected to be launched by the end of the second half fiscal year 2023. In summary, we are very excited to embark on this journey. The financial profile of our business is compelling. driven by a combination of consistent organic growth that is supplemented by a proven M&A consolidation strategy. We believe that these high rates of growth, when coupled with the inherent margins advantage that we enjoy from our vertically integrated crop care solutions business and future penetration of other adjacent services, create an attractive recipe for significant margin expansion in the years ahead. Combined, we expect to compound adjusted EBITDA growth well over revenue rates. I will now turn the call over to Gustavo Modenese.