Marrone Bio Innovations, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Maroon BIO Innovations second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and if you would like to ask a question during that time, simply press star 1 on your telephone keypad. If anyone should require assistance during the conference, please press star 0. I would now like to turn the conference over to Ms. Linda Moore,

general counsel please go ahead good afternoon everyone and thank you for joining our call welcome to the 2021 second quarter earnings conference call for maroon bio innovations our presenters today are ceo kevin helash and cfo sue chung and they will be joined for the q a by kevin hamill chief manufacturing officer maddie tianan senior vice president of international sales and Amit Vasavada, Chief Technology Officer and Senior Vice President of Research and Development. If you would please refer to slide two, I would like to remind you that this conference call may contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding management's future expectations, plans, projections, forecasts, and prospects. Certain material assumptions were applied in reaching these conclusions and making these statements. Therefore, actual results could differ materially from those contained in our forward-looking information. Important factors that could cause differences are contained in the reports filed by the company with the Securities and Exchange Commission, including under the heading Risk Factors, MD&A, and elsewhere in the company's annual report, quarterly report, and other filings. The company expressly disclaims any obligation to revise or update any guidance or other forward-looking statements to reflect events or circumstances that may arise after the date of this call. After our remarks, we will hold a question and answer session. I will now turn the call over to our CEO, Kevin Helash. Kevin?

Thank you, Linda, and thanks to everyone joining us on the call today. If you would turn to slide three, when I joined the company 12 months ago, I outlined what we believe to be a clear path to profitability. Core to this were three themes. One, accelerating our top line growth with brand extensions and global expansion. Two, leveraging our pipeline to bring novel, efficacious products to the market that create the greatest returns for all stakeholders, and three, being brilliant at the basics of running a company with a keen eye on operating expenses and cash flow. I'm proud to say that the team has made significant strides on all three objectives. The discipline, focus, and strategic mindset that permeates the MBI culture has allowed us to proactively manage challenges we face in the second quarter while staying the course for our long-term success. Agriculture is never smooth sailing. and our job is to ensure we ride out rough waves by being dynamic and flexible, ready to adjust course, while remaining committed to staying on track to deliver on our targets. The second quarter was a test of our ability to manage the unexpected and control our controllables. If you would refer to slide four, our revenues grew 3% in the second quarter. but were down versus our expectations due to several external headwinds. The widespread drought in the western United States, combined with supply chain and COVID-related challenges in Europe and Latin America, brought more pressure to bear on our sales growth than we had originally anticipated. Despite these challenges, we once again delivered strong gross margins and prudently managed our operating expenses. Our ending cash was up, and our adjusted EBITDA improved significantly. The end result is we've managed our business to hold the line on the bottom line. We are highly confident in our platform. We're in the right markets with the right partners, delivering the right products to meet our customers' needs. I'd note several recent proof points. First, as we show on slide five, we continue to benefit from diversification of our portfolio and our strategic emphasis on row crops in particular. Strong global demand for corn and soybeans have depleted inventories in the distribution channels in key growing areas. As a result, the outlook for the 2022 growing season is strong, particularly for our seed treatments. Underlying the near-term demand is a longer-term shift to more sustainable, high-performing products, which is the heart of the MBI portfolio. Second, as shown on slide six, we have forged partnerships with many of the most influential players in agriculture. We supply the top distributors in North America and have excellent relationships with leading distributors in Europe, including Corteva. We also recently announced an expanded agreement with Rhizobacter, one of the largest distributors in South America, to represent our biological seed treatment for nematodes, and soil-dwelling insects in Brazil. This provides us with an excellent opportunity to participate in the billion-dollar Brazilian seed treatment market by 2024. Third, our four new product launches are progressing on track, as we show on slide seven. In the United States, we are very pleased with our first-year sales of Pacesetter and expect to be on 250,000 acres of corn and soybeans this year. This is a fantastic start and a great platform from which to build upon. In Europe, we're seeing strong demand from our channel partners for Optima, Takla, and Impact. We expect these three products to quickly become material revenue and profit contributors. We've also highlighted our bioherbicide platform on this slide. We believe the market demand for a bioherbicide is phenomenal. and we remain committed to bringing a viable solution to our customers in the near term. I'm pleased to say that we have had some exciting breakthroughs over the past year that have the potential to materially advance our herbicide program. At the same time, we've made fantastic progress with MBI 306, our next generation seed and soil treatment for insects and nematodes. As we move this project toward regulatory submission, It frees up research and development dollars and resources to be redeployed to other projects, like our bioherbicides. This is great news on multiple levels, and we hope to provide updates on both platforms in the coming quarters. Also on the R&D front, we announced a new collaboration with Terramera earlier today. Terramera's novel technology platforms will combine with our powerful screening and bioprocessing capabilities to enhance our product performance and accelerate time to market. This is a model partnership for us and part of our ongoing effort to tap into new advancements that will complement our strong R&D pipeline. Finally, if you would turn to slide eight, our Michigan manufacturing expansion project is progressing on budget and on time. We passed a major milestone in July by successfully producing our venerate product at the facility for the first time. The quality of the product is excellent, and our capacity utilization is ramping up in anticipation of growing demand for this product. By the start of the year, we will be switching to a 24-7 production schedule to meet the demand of our products. This is a testament both to the value we create for growers and to the expanded capabilities of the manufacturing teams. The first half of the year is behind us now, and we can't replace all of the lost revenue in the second half. However, we are in this game for the long haul, and I firmly believe our first half revenue does not reflect the momentum we're building, nor is it indicative of our ability to grow the business through the remainder of 2021. Looking forward, I continue to foresee that we'll be on track to deliver historical top-line growth in the second half of 2021. while maintaining our strong gross margins and delivering upon our commitment to continuously improve our bottom line quarter over quarter, year over year. Slide nine illustrates how we will bridge revenues for the year. Sales into the U.S. specialty crops are expected to contribute 45 percent of the second half growth. We expect a normal progression as product moves into position in the distribution channel as we complete the second half of the year. Another 25% will come from seed treatment sales in the United States. Again, following a typical pattern so that product is ready for use for the upcoming 2022 growing season. One quarter of the growth will come from seed treatment sales internationally. In Europe, disruptions in the supply chain and distribution channel delayed sales originally forecast for the second quarter. By year end, we expect to recover much of those sales. In Latin America, we anticipate some easing of COVID-related restrictions that have slowed outreach to growers. We anticipate this, along with strong commodity prices and low channel inventories, will translate to increased demand going into the 2022 growing season. The final 5% comes from growth in our Central America sales for specialty crops. As in the first half, we are seeing good response to our products in this world area, and this is a good contributor to our international growth in specialty markets. A disciplined approach to operating expense management remains key for this company, and we have a relentless focus upon running a highly effective and efficient organization at all levels. The end result is that we are able to reduce our operating expenses without jeopardizing our ability to invest in our key growth initiatives. As you would expect, we are carefully managing our use of cash in light of our revenue expectations this year. Our objective is to achieve adjusted EBITDA breakeven through new product launches, global expansion, and broader distribution backed by a robust R&D pipeline. As we have demonstrated through the second quarter, We can effectively manage near-term disruptions, maintain our momentum, and advance our long-term strategic advantages. With that, I'd like to turn the call over to Sue.