This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk02: Good morning. Thank you for attending Benson Hill's second quarter 2023 earnings call. My name is Chach and I'll be your moderator. All lines are on mute for the presentation portion of the call with an opportunity for questions and answers at the end. If you want to ask a question, please press star one on your telephone keypad. I want to pass the conference to your host, Ruben Meyer, Senior Director of Investor Relations with Benson Hill. Ruben, please go ahead.
spk04: Thank you and good morning. We appreciate you joining us to review our second quarter 2023 financial results and outlook. As a reminder, Benson Hill will host a virtual annual shareholder meeting on August 11th at 11 a.m. Eastern time. With me today are Deanie Elsner, Benson Hill's interim chief executive officer, and Dean Freeman, our chief financial officer. Earlier this morning, we filed our earnings release in Form 8-K. These documents and an investor presentation we will reference during the prepared remarks are available in the investor section of the Benson Hill website. Comments today from management will contain forward-looking statements, including Benson Hill's expectations of future financial and business performance, industry outlook, and current guidance for 2023. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions and are not guarantees of performance. We caution you to consider the risk factors that could materially cause results to differ from those in the forward-looking statements. Such factors include those referenced in the cautionary notes included in our Form 10-K, Form 10-Q, press release and investor presentation, and other filings with the SEC. Also during this presentation, we will discuss specific non-GAAP financial measures, a reconciliation of the GAAP is available, and our earnings release and presentation. I will now turn the call over to Dini.
spk03: Thanks, Ruben, and good morning, everyone. It's a privilege to be with you today. As most of you know, I transitioned from my role on the Benson Hill board to also serving as interim CEO almost two months ago. During this time, I've worked with the team to dig into the company's capabilities, challenges, and unique opportunities as we work to disrupt an entrenched industry with innovative breakthrough technology. This is happening during a time when we face more challenging global market conditions. I want to take this opportunity to highlight three key observations and the actions we're taking. The first point I want to highlight, the Benson Hill team is driven to deliver. As you've seen for consecutive quarters since going public, we are reporting another quarter of solid results. And as Dean will discuss in a few minutes, we remain committed to achieving our full year 2023 guidance. Benson Hill has attracted multidisciplinary experts from every vertical across the agri-food value chain with enormous commitment, knowledge, versatility, and conviction. The differentiating aspect that makes this team so compelling is how they uniquely leverage the intersection of data science, plant science, and food science to address challenges and opportunities in today's commodity system. The Benson Hill team is experienced, smart, and agile, and they're committed to the mission. That leads me to my second point, the Benson Hill competitive advantage. Our cross-disciplinary mindset from seed to farm to ingredients to food and feed formulation permeates all assets and capabilities of the company. It reveals opportunities for innovation that have not been contemplated before, and we have not yet come close to fully tapping our potential. This approach is the Benson Hill competitive advantage which is a powerful enabler for our business and our partners. At our core, Benson Hill is a food technology company with an advanced plant breeding platform to innovate advantage ingredients for specific food and feed and markets. We apply our technology at every stage of the value chain, harnessing the speed of data, science, and AI to rethink how we make ingredients, as we say, better from the beginning. Our crop OS engine and our system for product development have been honed to accelerate innovation. We have established a robust competitive moat, including our industry-leading high-protein germplasm, multidimensional strategic data layers, and intellectual property, which gives us an enduring first-mover advantage. We have a wave of game-changing next-generation products that will take our proprietary portfolio and to a new level of value-added solutions in the next two to three years. These products are already advanced enough to be largely de-risked in our R&D pipeline and should position us to increase our share in existing markets as well as enable us to enter new markets. But as impactful as these advancements are, they represent what I consider an introductory approach to the value we can create And this leads me to the last and I think the most critical observation I want to highlight, the opportunity to explore a broad range of strategic alternatives to leverage the full power of our CropOS platform to create cost efficiencies within Benson Hill. Our growth playbook has consistently highlighted the importance of partnerships and licensing agreements to shift the scope and use of our assets and scale our proprietary ingredients. Our partnership with ADM is a good example of this. By leveraging ADM's manufacturing capacity and commercial network to scale the use of our ultra-high protein soy varieties, we are working to forge an exciting new frontier of ingredient innovation for the North American food market. Yet, this represents just one partnership model in one market and leverages only a portion of our capabilities. We established our closed-loop business model to translate the power of our seed technology into tangible ingredients that demonstrate the nutrition, sustainability, and efficiency benefits through our CropOS platform. Since going public, we have primed the market by establishing multiple food and aquaculture feed customers who recognize our value as a food system innovator. The next step in our evolution will include more robust partnership models to leverage the full power of our platform, pipeline, capabilities, and intellectual property in existing markets, as well as in new large market adjacencies. Two areas of particular interest are the large acre livestock feed and international markets. The feed efficiency and sustainability benefit of high-protein, low-antinutrient soybeans can potentially transform segments of the livestock feed industry. This market represents the vast majority of soybean acres globally, but has had little innovation on output traits such as nutrient density. We have products in our portfolio today and products in our pipeline being integrated with the Enlist herbicide tolerance trait that leverages perhaps the most extensive data library in the industry focused on soy enrichment. These products can set a new standard of expectation for livestock feed markets. Similarly, our portfolio and pipeline attributes offer unique advantages for diverse international markets, whether sustainability opportunities in Europe, meat extension opportunities in Latin America, or greater nutrition security to meet the explosive population growth in India, Asia, and Africa. We believe partnerships that penetrate these and other markets at scale can bring unique advantages to every vertical of the agri-food value chain. I'm encouraged by discussions with different organizations interested in exploring alternative models that maximize synergies of our assets and capabilities with their products and processes as a strategic lever of value creation for their businesses. For example, Our plant and food scientists and animal nutritionists work directly with end market food and feed formulators to look around the corner to develop future seed to ingredient attributes that can create novel value in their portfolio. Second, our manufacturing facilities are well positioned to produce high value ingredients and can easily traverse pilot and commercial scale to effectively validate our technology while increasing speed to market. And finally, the licensing of our platform enables technologies and product development processes to advance other crops beyond soy and yellow pea. We believe there will be excellent value creation and cost optimization opportunities for our company by exploring alternative models. This step in our evolution comes at a critical time given the increased volatility in the agri-food markets. As we have said several times, We are not immune to the pressures caused by food inflation, logistics costs, macroeconomic conditions, and competition from other ingredient providers. Earlier this year, we shared that persistent high soy commodity prices required us to pay higher than expected farmer premiums to secure acres for the 2023 proprietary crop. This led to our decision to focus on profitability with our highest margin products. We are now assessing an emerging industry-wide supply and demand imbalance caused by an increased supply of soy-based ingredients and specialty oils from international competitors. This is causing downward pricing pressure, and we're assessing a possible impact on our proprietary products in 2024. At Benson Hill, we've always approached challenges and opportunities boldly and proactively. Our response to these market conditions is the same. We will control what we can control. As part of that, building on the actions already underway, we are taking steps to further reduce operating expenses by an additional $10 million annually in 2024. In addition, we are taking proactive steps today from a position of proven performance and solid financial standing to create the most value for our shareholders and best positioning the business to capture what we believe are the enormous opportunities that lie ahead. Specifically, the board has retained Lazard to explore a broad range of strategic alternatives. We're going into this process with an open mind, and everything will be on the table, including joint venture opportunities, partnerships with strategic and financial investors, and licensing opportunities. I can assure you that I will continue to leverage my experience adapting and evolving different businesses to identify the most effective ways to build total value behind our technology platform and innovation pipeline as we unlock the company's full potential and focus on shareholder value. Having sat in the CPG customer seat for many years, I clearly understand the advantages Benson Hill can create for different end markets. I'm excited about the opportunities in front of us and our ability to successfully navigate a more challenging market landscape while continuing to meet our strategic objectives. I look forward to sharing more with you as we progress. I will now turn the call over to Dean for an update on our liquidity improvement plan, second quarter results, and the outlook for the year. Dean?
spk05: Thanks, Dini, and good morning, everybody. To reinforce some of the comments Dini just made, it's important to reflect on the milestones we have achieved since becoming a public company and how we've adapted in response to unprecedented market dynamics to meet or exceed our targeted financial results and advance our strategic objectives. We're meeting the latest challenges head-on and will continue to be adaptable in our approach to increasing long-term shareholder value. Before I review the financial results, I'd like to update you on the progress in executing our previously disclosed liquidity improvement plan. We continue to assess our strategic options for the Seymour, Indiana, Soy Crush assets, And we are actively discussing the possibilities with a few interested parties, but I can't provide specific timetables we expect to reach a decision on our strategic review in the coming months. Our efforts to reduce operating expenses and optimize working capital have yielded positive results. Danny mentioned that we plan to reduce operating expenses by another $10 million which will increase the annualized run rate operating expense reduction versus our original guidance to $33 million in 2024. We will additionally reduce our run rate capital expense by an additional $5 million compared to our original guidance. As we further reduce costs, we will continue to be mindful of the criticality of our investments in research and development and will not compromise the most commercially viable next generation products. The additional reduction in OPEX is expected to increase total cash savings from the liquidity improvement plan to a range of $65 million to $85 million. Our working capital improvement efforts will largely come from the outcome of the options we are exploring with C-more. We are also realizing total working capital cycle improvements in inventory balancing and other areas of operating cash management improvements. Lastly, we continue to assess timing and options in accessing capital markets to support overall liquidity objectives, including the early retirement of our existing high cost debt facility with a more conventional lower cost structure. This is a critical priority in our overall capital deployment strategy. With scheduled debt repayments starting in the next 12 months, we have determined that it was appropriate to acknowledge an increased risk for going concern in our financial statements. We are executing our liquidity improvement plan and further exploring multiple options to secure the liquidity necessary to significantly reduce and ultimately mitigate this risk. Let's turn to our financial results compared to the prior year, which for this discussion excludes open mark-to-market timing differences. We delivered solid results with a 22 percent revenue increase to $109 million during the quarter. Gross profit increased by approximately $6 million to a positive $6 million in the quarter. Crushed margins were favorable as we locked in rates from the first quarter, better than expected grain sales and continued strong performance for commodity LOP products helped deliver a 17% increase in non-proprietary sales to $91 million. Proprietary revenues increased 55% to approximately $19 million. Revenues were slightly below our target for the quarter, largely due to the timing of agriculture sales shifting into the second half of the year. Operating expenses increased by $8 million $40 million. However, we recorded an approximately $19 million non-cash impairment of the carrying value of Goodwill, principally based on a preliminary and more risk-adjusted conservative outlook and the valuation impact of higher-weighted average cost of capital and risk-adjusted discount rate. Excluding the Goodwill charge and an adjustment to non-cash stock compensation, operating expenses declined by approximately $5 million, or 15% due to the realization of a portion of the operating expense savings from our liquidity improvement plan. Adjusted EBITDA improved by approximately $6 million to a loss of $13 million. Free cash flow loss increased by $4 million to $14 million due to planned higher capital expenditures. We are well positioned at the halfway point of the year with consolidated revenues of $237 million and proprietary revenues of $45 million. We delivered approximately $11 million increase in gross profits to $10 million. As we turn to the balance of the year, we're making three adjustments to our guidance. All other metrics remain the same. First, we are narrowing the range of consolidated gross profit to $20 million to $25 million based on where we expect to end the year. and still representing a more than doubling of gross profit versus 2022. Second, we expect to recognize approximately $5 million in additional cost savings this year. This is offset by the recognition of $12 million in non-cash one-time items. We provided the breakdown in the presentation slide. Finally, we are reducing our capital expenditures by $5 million to a range of $15 to $20 million. Given the uncertainty with our working capital needs during the harvest this fall, our free cash flow guidance remains unchanged. We're on track to the first half of the year. We have more work to do, but we continue to believe 2023 will be a strong year for Benson Hill. As we outlined today, we are taking the necessary actions to adapt to the market landscape and proactively leverage our strengths to best position the company for long-term growth. That concludes the prepared remarks. We'll now begin with the Q&A.
spk02: Thank you. If you want to ask a question, please press star one on your telephone keypad. If for any reason you'd like to remove that question, please press star four by two. Again, to ask a question, that's star one. If you use speakerphone, please pick up your handset before asking questions. We will pause here briefly as questions are registered. Our first question today comes from Adam Samuelson from Goldman Sachs. Please go ahead.
spk06: Yes, thank you. Good morning, everyone.
spk05: Morning, Adam. Good morning.
spk06: Hi. So I guess the first question, maybe a clarification. If I look at the balance sheet in both the press release and the slides, cash equivalents and marketable securities are 94.4 million. Yeah, you cite a higher number in the text of the press release. Can you just maybe clarify that point?
spk05: Yeah, that question keeps coming up. And the restricted cash is sitting in one of the other asset accounts on the balance sheet. So the total cash balance, including restricted, is about $118 million.
spk06: Got it. Okay. And then as I think about the liquidity improvement plan and the kind of in the context of exploring strategic options, Dean, I guess the debt refinancing, is that something, I mean, you had the, I believe, letter of intent that you discussed at the investor day in March. Yeah. What's the progress on that and how do you think about timing of that relative to the exploration of some of these alternative options that the company is looking at?
spk05: I think if you take a step back, the financing follows the strategy and follows the assessment. The financing optionality is still intact. and in fact still under review, but that's going to be a function of ultimately how we think about the strategic outcome of the assessment that's underway right now. So that optionality is still available to us, but we've got to complete the strategic review to ensure we've got alignment between the capital needs, the sourcing of that capital, and the support necessary to drive the strategy.
spk06: Okay. And then if I could just squeeze one more final one in, and I appreciate that it's still early, but you talked about kind of declines in prices for different specialty proteins and specialty oils. As you think about the value that you could derive from the 2023 crop that's now kind of in the fields, is there any kind of framing in terms of the price change that you've seen in some of those ingredient categories relative to where your expectations would have been three or six months ago when you were getting those seeds in place for planting?
spk03: Adam, it's a great question. It's Jeannie. So a little perspective. The pricing pressure that we're experiencing today is new and emerging, and it's really being driven by a tremendous supply and demand imbalance by global economies. And so you're seeing massive pricing pressure from China. You're seeing Brazil with bumper soybean crops come in and you're even seeing prices for specialty oils spike and become more volatile. And so so if that wasn't enough, you've got Ukraine talking about, you know, kind of a shortfall and pressures under supply. We've never experienced a global economy like this as we went to 23 harvest or planting. We've acknowledged that we've had to pay a higher premium for our goods. We don't see the pricing environment rescinding going into next year. We actually think it's acute and quite resilient. So that's going to require us to take additional actions, which is why you heard Dean announce additional cuts in OPEX so that we can manage what we can manage. We will have an impact next year. We have not really nailed down how big of an impact that will be. trust that we're taking actions today because it's different from what we anticipated and as we refine this we will come back to you with a final answer but we're seeing that it's different enough now and it's going to be with us next year that we're already starting to take actions to address it okay i'll take it offline i appreciate the color i'll pass it on thanks
spk02: The next question on the line is from Kristin Owen from Oppenheimer. Please go ahead.
spk00: Hi, good morning. Thank you for the question. My questions are sort of a follow up to some, good morning, some follow up to what Adam was asking about. And the first is really just asking what, if you could provide maybe a little bit more of a granular update on the relationship with ADM, the ability to maybe use some of their generation capacity, just to the extent that you're able to, because I know there's a lot of things you can't say there, but a more thorough update on ADM would be helpful to start. Thank you.
spk03: Yeah, absolutely. So just taking a step back, partnerships and licensing have always been part of our growth plan, and ADM is a perfect example of that. There is a tremendous shared opportunity in terms of their network and their capacity. So in terms of the relationship, the partnership is progressing well. ADM has begun processing some of our 2022 crop, the ultra high protein crop, and is working to confirm the targeted value props and support applications. We're working with them, I think, rather closely on the end-to-end supply chain, Kristen, exactly what you said. It's utilizing their capacity and their network to leverage what we bring to the table well, which is advantage high protein crop. Our 23 crop dedicated to the partnership looks good so far. We're encouraged by what we see. We don't see major impact from the drought that has been experienced across much of the company, our country. And we're excited about really what the potential of this thing could be. But today, it continues to be a work in process. And we believe the partnership model for us going forward is the right model. I think today we have put a much sharper pen to paper in terms of doing an internal assessment to really identify where partnerships like this can create cost efficiencies for Benson Hill. And now marrying that with our innovation pipeline, I think we see the opportunity to take this kind of a model further. I'm hoping that answered your question.
spk00: Certainly, a very helpful additional commentary there. Just on that innovation pipeline, Dini, you did mention you've got some products where you feel like they're largely de-risked from an R&D standpoint. I'm just wondering if you can update us on the cadence of conversations with potential customers You know what sort of line of sight, you have in terms of bringing those to market and what kind of opportunity that could provide to to accelerate some of these timelines, thank you.
spk03: Absolutely, so the innovation pipeline becomes materially available to us by 2026 and that's something we outlined in the investor day. Back in March, and we continue to progress it, but for it to become material available in 2026 it means. In some instances, we've already got seeds in the ground to expand our seed production for next year so that we have in hand crops available for sale towards the end of 2026. And so we think there is tremendous value creation opportunities with that crop. I think what I alluded to in my comments was a broadening of the aperture in terms of innovation. And I think that through a new set of eyes, we've been able to assess the opportunity of our innovation more broadly and looking for ways to monetize it into market adjacencies that we really hadn't been as aggressively looking at in the past. It certainly was a part of the original thesis for the company. But when you look at animal feed and international, they were really later stage opportunities. And what we see now is the innovation that we have On the books de risk and ready to start growing in for 2026 actually has real application into some very big and buoyant animal livestock feed markets. Those that innovation could bring real competitive advantage in terms of nutrient density is so when we step back and we look at where our innovation could go, yes, we were we were human feed specialty ingredients and that continues, but now. We feel like there's an emerging opportunity to broaden our approach against animal livestock and potentially international. Those are the discussions we've begun having. And there's some real interest out there, which is why we step back and we say the investment thesis for this company remains really quite solid and compelling. We are going to have to accelerate our partnership model forward so that we can really create the value inflection that the company always had the opportunity to do. But we're doing so now in a more challenged operating environment. So that's where the partnerships really have to become a strategic enabler to our value creation that we see in front of us.
spk00: Really appreciate the commentary there. I'll take the rest offline.
spk03: Thank you.
spk02: The next question is from Antonio Hernandez from Barclays. Please go ahead.
spk08: Hi, good morning. Thanks for taking my question. You already mentioned a couple of relevant headwinds ahead, but if you could maybe provide a little bit more guidance on which ones are impacting more the revision of your guidance, especially a tightening of the guidance for gross profit on the lower side that will be helpful? What part of COGS is being the most relevant here? Thanks.
spk05: Yeah, thanks, Antonio. It's a great question. So, you know, we started the year with a guidance range of gross profit of $20 to $30 million. We've sort of tightened that range from $20 to $25 million. We think that range is very much intact. know as we as we sit here at the mid-year a couple of things one i think we're just de-risking that guidance uh from the upside to sort of the midpoint um and and that's really a function of ongoing logistical costs potential persistent inflationary dynamics that can affect a bit of pricing depending on which end market some of our proprietary um ingredients go to so there there could be some you know, some mismatch with regard to the guidance and relative to the margin realization we expect depending on which markets those products go into. And again, we're really just focused on de-risking that guidance, making sure that we've got visibility to the margin profile that we expect at the midpoint and ensuring that any of the volume, price, and or cost-related mix is fully embedded in the outlook So it's nothing, I wouldn't say there's one specific thing. It's just a full de-risking of the outlook relative to those factors.
spk08: Okay. Thanks, Noah. We'll take the reinstalled line as well. Thanks. Yeah.
spk02: The next question is from Ben Cleave from Lake Street Capital Market. Please go ahead.
spk07: All right, thanks for taking my questions. A couple from me. First of all, you know, Dini, it sounds like you're doing a, you know, pretty comprehensive and granular review here of the business heading into next year. I'm wondering if you can comment on the products that, you know, that have been communicated to be offered next year. You had 12 commercial varieties this year, three set to launch next year. Can you comment on kind of the characteristics that you're especially looking for with those products to either, you know, have those be priorities or perhaps have those, you know, kind of have a product, you know, reduction here as those become, you know, more non-core? What are the biggest characteristics you're looking for as you assess that product portfolio next year?
spk03: So I'll say that the product portfolio that we're looking at really is over the next two years. And in general, they're going to be focusing on higher protein deliverables, and lower or increase in our yield. So those are the things you're going to see come out overall. So next year you're going to see us introduce the Enlist 3 herbicide tolerant products and that will be directly against the protein and yield improvement on our crops. Beyond that you're going to see us get into the next generation ultra high protein varieties. Those will both be low oligosaccharides varieties as well that can go into the animal feed markets as well as high protein that could go into the human feed market. You're also going to see us pursue higher protein ELOP. And so those are all initiatives and innovations that over the next three years will be planted, will be matured, will be expanded into ingredient streams that we have a commercial team ready to go sell and customers who are engaged in those end products. Tricia Wynne- that's why we say, for the most part, these are the risk options within our portfolio what gets exciting is when you look beyond 26 and 27 because we still have. Tricia Wynne- Our advantage technical infrastructure and data stack happening, and so, when you look out into our pipelines, I would contend that our opportunity for innovation is. Natalie Kehleman- is only as high as the difficult questions we ask of our of our technical infrastructure we've got a whole lineup of innovation for the next five years. Natalie Kehleman- The next three years is relatively do risks after that we've got some work to do, but we have now a sustainable systemic way to drive innovation and I think. That's what's exciting because it is giving us quite a competitive mode versus the competition in the marketplace, and it is sustainable. So it will be a stream that starts in about two years and will continually go on from there.
spk07: Okay, thank you. That's helpful. One other question for me. You talked about the livestock opportunity a lot on this call, I think more so than I've heard historically. It sounds like you're pretty excited about this opportunity, but can you talk about what you're hearing from your downstream customers here about how you can be a materially differentiated product offering in the backdrop of you know, crush facilities here set to emerge over the next couple of years. I mean, how differentiated do you think your products can be versus, you know, versus commodity mail, given the supply growth that I think the industry is expecting as these facilities come online?
spk03: Yeah, it's a great question. It's a great question. And I think it comes down to this. When you look at the crush soy market, 96%, the vast majority of this market is going into animal feed. Only 4% of the crush market goes into human feed and consumption. And so the benefit of specially human is it's a much, much higher margin play, but it is susceptible to pricing and commodity issues. When you start playing an animal feed, it is a lower margin structure, but much higher volume opportunity, right? And so what we like about what we're seeing in our innovation pipeline is we have, we had an innovation coming down the pike that is low oligosaccharide traits, which that means is it's going to be easier to digest our products. And some of our previous studies would indicate that that is in fact the case for animals to more easily digest our soy. That means our soy could replace some of the higher cost ingredients in animal food. And so as we talk to potential customers, what they're indicating to us is if we could design that kind of an innovation stream, then they would be incredibly interested in pursuing that with us. And again, the brilliance of this technical infrastructure that has been established at Benson Hill is It's all based on being designed from the beginning, the characteristics of what you're looking for in the bean, and then through artificial intelligence, our data trait stack, speed breeding, and or gene editing, we are able to, in a much faster speed than market, get these products out the door. And so in our pipeline today, we have products that look very appealing to the animal feed market. We have only begun to scratch the surface of how to further design those products to better trade the market. We know we've got to be very, very cost efficient in terms of how we do this. But if we are able to do this, then we are able to tap into it with what is a better ingredient stream at a similar cost profile. And we think that's a very attractive proposition. You are hearing us talk more about this than we have in the past. But again, if you go back to the original investment thesis of Benetton Hill, This was always in the pipeline as the next gen of opportunity. And so what we're seeing is the opportunity to bring that forward and tap into yet a further innovation ingredient stream to help build the value for the company.
spk07: Very good. I appreciate that. Thanks for taking my questions and we'll get back in line.
spk03: Absolutely.
spk02: The next question is from Brian Wright from Ross MKM. Please go ahead.
spk09: Thanks. Good morning.
spk02: Hey, Brian.
spk09: Real quick question. Good morning. Good morning. Thanks for letting me ask you questions. I just wanted to take, like, the ADM, just to go a little further on the ADM agreement or partnership. Is there any kind of updated timing on, because I thought there was a co-branded product in the works and just like, am I recollecting that incorrectly and just kind of any update on that process?
spk03: Yeah, absolutely. So the teams have been working together for the last year on the partnership and the plan by ADM is still to launch TAB, These products into into the portfolio in the back half of this year their sales teams have been briefed. TAB, They have sales materials to do so, although an official launch date has yet to be set. TAB, And, and so we're working with ATM as we speak to get that all locked down for the back half of this year, but. TAB, Encouraging that we sat with the sales organization and brief them on the products that benefits of the products and the and the value they create for the customers. And there appeared to be very good receptivity on that front.
spk09: Yeah. Great. Thanks so much for that additional information. And then, you know, I'm not sure whether this is relevant or not, but just can you help us understand when you contract with the growers, is that on an absolute dollar basis? or is it on a reference based pricing right so if the soybean prices go down you committed to a certain percentage premium over you know over traditional soybeans or just how that works yeah brian so so when we cut we contract for volumes we contract for um sort of the you know acreage scale if you will uh with farmers but we price that delivery right the time of delivery
spk05: So, and that's why we have hedging programs that help us de-risk or forward sell those contracts when we ultimately price. So, first we contract the acreage and then, yeah.
spk09: Okay. So, the issue that you all have referenced on today's call is more of a function of the The input, the selling price of the specialty ingredients to your end customers is the volatility that you're kind of referencing there. Is that just to make sure I understand what's going on exactly?
spk05: Yeah. Well, it is. Yeah. I mean, our comments are referencing the specialty ingredients part of the market. But just to refer back to my comments on the contracting, So bean pricing is contracted on delivery. However, we pre-negotiate the grower premium in advance. So where there's potential pricing dislocations, dynamics, supply and demand of non-GMO acreage, that's where we get into potential escalation of premium pricing that we have to contend with.
spk09: Okay, so it is a reference-based pricing, and it's just a matter of what that reference premium is based on, you know, the commission, you know, the negotiations with the growers. Is that a – okay. Thank you so much.
spk01: Yeah, that's exactly right. Yeah. For any further questions, please press star 1 to ask a question.
spk02: It appears we have no further questions, so I'd like to hand the call back to Dini for closing remarks.
spk03: Thank you, Kat. We appreciate your time and attention this morning. On the back of strong quarterly performance and a 2023 outlook, we are excited about the opportunities ahead. Because of the foundation we've created, we're exploring all options that best leverage our strengths to position Benson Hill for long-term growth, given the current market landscape. We have the right talent, technology, and go-to-market capabilities to take Benson Hill to the next phase of its evolution. Please get in touch with Ruben if you have any questions or want a follow-up conversation. Thank you very much for your time.
spk02: That concludes the Benson Hill conference call. You may now disconnect your lines and exit the webcast. Thank you.
Disclaimer