BIOX Earnings Call Transcriptbeta

Operator: Good day, and welcome to the Marrone Bio Innovations Third Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Linda Moore, General Counsel. Please go ahead, ma’am.

Linda Moore: Good afternoon, everyone, and thank you for joining our call. Welcome to the 2020 third quarter earnings conference call for Marrone Bio Innovations. On the call today are CEO, Kevin Helash; CFO, Jim Boyd; and Chief Commercial Officer, Kevin Hammill. If you would please refer to slide 2, I would like to remind you that this conference call may contain statements regarding management's future expectations, plans, projections, forecast 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?

Kevin Helash: Thank you, Linda. And thanks to everyone who is joining us on the call today. If you refer to slide three, it's been an exciting for three months with Marrone Bio for me, I'd like to start by recognizing the unwavering commitment of everyone in the company to meeting our customers needs and contributing to their success. I've seen it demonstrated in every aspect of the business. And our results this quarter and year-to-date reflect its passion. Before we dive into the numbers, I want to revisit three commitments we made to you, our shareholders in our last earnings discussion. One, we said we would continue to grow our base business, and we have. Two, we said we would closely manage our operating expenses, and we are and we’ll continue to do so. And three, we said we would continue to bring novel efficacious Ag biological products to the market, products that deliver industry-leading value to our shareholders, stakeholders, and we are on track to deliver on this commitment, and we'll go into more detail on all three during this call. Overall, I believe the company is on the right path to continue to deliver double-digit revenue growth and become profitable in the near term, which is borne out in our numbers. Third quarter results were in line with our expectations and we delivered our ninth consecutive quarter of revenue growth. As shown here, revenues increased 27% quarter-over-quarter with gross margins of 56.7%. Looking ahead, our year-to-date results keep us on track to achieve full year revenue growth in the range of our historical levels and margins in line with our annual target in the mid 50% range. The team has delivered on two of our immediate growth objectives, and our results are a direct function of their success. First, we expanded our international business with the successful launches in Latin America. Our plant health products are now in the hands of our channel partners, and ready for application in the current growing season. Second, we're accelerating our presence in the seed treatment market. In North America product is currently moving into the channel, as seed companies begin applying treatments for corn and soybeans. Distributors and growers continued to see the benefit from our biological products for insect and nematode control, which is reflected in the demand we witnessed in our third quarter sales. In a few minutes, Kevin Hammill will discuss the outlook for the remainder of the year and into 2021 and the benefits of what we see as a positive shift in our product mix. If you would turn to slide four, a key focus area for us has been our R&D pipeline. The team has undertaken an in-depth review to recast the pipeline that delivers the maximum value for all key stakeholders, including our grower customers, our distribution channel partners and our shareholders. As outlined in the blue box on the right side of the timeline, we have a robust suite of products we intend to bring to the market between now and 2025. These launches will serve to further strengthen our portfolio and drive the expansion of our business. Slide five gives you a closer look at our near term launches. We've identified seven projects that have a high probability of reaching the market in 2021, and 2022. All are well understood in our pipeline and commercial portfolio, with clear lines of sight into addressable markets, crops and customer value propositions. Taken together, their revenues five years from launch could equal half of our revenue in 2019. Slide six provides a longer term view. As shown here, we have products and development across the spectrum of Ag biologicals. We believe our pipeline uniquely positions Marrone Bio as a clear leader in the research, development and commercialization of products within this rapidly growing sector of agriculture. Finally, slide seven takes us one step further, showing the impact and projects that can come to the marketplace through 2030. We are focused on a truly robust set of options across the entire sector, and especially in the seed treatment market. In addition, we have significant opportunity to build upon our leadership position in bio protection products, while making further inroads into the major row crops globally. The end result is powerful. We have a refresh pipeline that could add approximately $50 million in incremental revenues in the 2026 timeframe, and more than $100 million in incremental revenues by 2030. These updates are different and more detailed view of our pipeline than what we have shown in prior years. As you can see, some priorities have shifted, and we were fortunate to be able to add a number of new projects from our recent acquisitions. We believe this revamped R&D program is highly responsive to customer needs, while making the most efficient use of available resources to provide the greatest returns on investment. In summary, if you would turn to slide eight, the third quarter is a bellwether for what we believe is to come. One, we delivered further diversification of the portfolio and the benefits of that mix effect. Two, we extended geographically with both our current product line and new product offerings. And three, we solidified our obsession with being brilliant at the basics, delivering operationally with spending that is appropriate for our growth, while maintaining a tight focus on investing in areas that clearly match customer needs. As Jim will discuss in more detail, we believe we can hold the line on operating expenses, while still being able to adequately fund our growth ambitions. Before ask Jim to discuss our financial results in detail, I would like to thank him. As you know, Jim has announced his intention to retire and is working with us through the transition during the search for his successor, Jim and shepherded the company through its growth as a market leader in the biological space. And his contributions as CFO, leader and mentor are numerous. I speak for myself, the board and our employees when I express our gratitude and congratulations. Jim, I'll now turn the call over to you with our thanks.

Jim Boyd: Thank you, Kevin. It has been a privilege to be part of the Marrone Bio, and I look forward to watching the company continue to succeed and grow. Speaking of which, while we anticipated a smaller revenue contribution in the second half of this year, as compared with the first half, the team continued to deliver significant positive growth for the third quarter and the year-to-date. As you'll see on slide nine, third quarter revenues rose 27% to $8.8 million for the quarter and rose 35% to $30.7 million a year-to-date, with another quarter sales still to come, we already have surpassed our full year revenues for 2019. Gross margins increased in the third quarter by 520 basis points to 56.7%, and by 400 basis points year-to-date to 58.6%. We are now into our ninth consecutive quarter of revenue growth year-over-year, and our eighth consecutive quarter of gross margins above 50%. From both revenue and margin perspective, we are benefiting from our greater global reach with a more diversified mix of products that deliver on performance, value and sustainability. If you would turn to slide 10. We're making progress on managing operating expenses relative to growth of our revenues and gross profit. On a comparative basis, there were pluses and minuses in operating expenses for the quarter and the year-to-date. Some are ongoing, keeping in mind that we now have additional operating expenses from the acquisition of Pro Farm. Some items are specific to the year-to-date comparison. These include M&A, and litigation expenses in the third quarter of 2019. And the benefit of the PPP loan in the second quarter of 2020. Taking all these into account, we are moving in a positive direction with operating expenses that are flattening quarter-to-quarter and year-to-year. Looking forward, we don't anticipate any major creep in our ongoing operating expenses. We'll speak more specifically to our outlook for 2021 in our year end earnings call. But as a team, we are targeting to maintain operating expenses in line with 2020 levels, plus inflation. We believe this is a level of operating expenses that will support our continued strong growth and that we believe will accelerate our path to profitability by essentially flattening the curve. If you would turn to slide 11. Managing our cash position has been one of the most significant parts of my 10 years CFO. We have worked hard to balance expense management, while investing in our product portfolio, pipeline and channels to market. We believe we are managing our cash usage to deliver a leading biologicals company with strong growth potential and returns that benefit all of our stakeholders. This quarter, cash from operations was a use of $900,000, as compared with the use of $5.7 million in the third quarter of 2019. Year-to-date also improved with a use of cash of $8.6 million, down 48%, as compared with the first three quarters of 2019. Our recent warrant restructuring was designed to provide for our growth. The schedule of warrant expiration dates in 2020 and 2021 was carefully planned to anticipate our cash needs. Given that our first half is larger from a revenue perspective than our second half, we have planned for an influx of cash in the fourth quarters of both years. I would add, that the warrant restructuring reduced overall dilution and overhang. By the end of 2020, warrants outstanding will be reduced by 79%, as compared with the start of the year, and by 99% by the end of 2021. We believe the warrant restructuring significantly cleaned up our balance sheet and reduced dilution in a cost effective manner, while providing for the growth that will benefit all shareholders in the future, and therefore significantly de-risk the company's capital structure. As we approach year end 2020, I would like to echo Kevin for you. We continue to expect the second half of 2020 will be smaller than the first half. Uncertainties from the COVID-19 pandemic are still a lingering concern. And we are keeping a close watch on expenses, as our customers need shift with consumer demands. That said, our story is still one of strong growth in a unique sustainable space in agriculture. We remain on track to significantly outpace the single digit growth of the commercial Ag business, as well as the projected mid-teens growth for the biological sector. We have the funding to support commercial growth, as well as support our refocused R&D pipeline. Our prospects are as exciting as our past. And it has been my privilege to be a part of this growth story. I'd like to turn the call over to Kevin Hammill now to give you more color on our commercial outlook.

Kevin Hammill: Thanks, Jim. And thank you for being a strong supporter of the commercial team. We thank you for your contributions and leadership. We wish you all the best in retirement. Kevin Helash alluded to some of the factors shaping the Ag economy. Let me start by providing a bit more color. First, the entire world continues to deal with the COVID-19 pandemic. We anticipate the need to be prepared to operate with this virus at least to the first half of 2021. While we believe we have managed quite well so far, plans are being made to ensure we have the ability to continue to manufacture and deliver our products to the market in 2021. Well, it certainly will be a challenge, we do not see a material impact on the growth projections next year, as a result of the COVID virus. Second, weather conditions in the western United States have led to decreased fungicide and insecticide applications. However, I am pleased to say that year-to-date September, we grew our share in insecticides and fungicides. Looking forward, we're forecasting a return to a normal year in 2021. And we'll be well prepared to serve the market. Third, turning to seed treatments, we anticipate that stronger prices for row crops will provide tailwinds for demand of seed treatments in all markets. We've been in discussions with all of our customers, and have already started moving product to them to prepare for the upcoming planting season. All of this is a backdrop to our plans, as we complete the 2020 season and prepare for 2021. The most important trend for our growth however, is that diversification of our portfolio, and the corresponding positive mix effect. I'd like to address our diversification in three categories. The products we sell, the crops we serve, in the geographies we reach. Slide 12 are just a sales by product category. Our historical base has been in the crop protection arena, bio-based products that protect crops against fungus, insects, immune metode [ph] These are either sprayed on the leaves of plants and trees at various points in the growing season, or use as a seed or soil based treatment at planting. This is the heart of our portfolio, and one that we continue to grow. The seed and soil treatment side of our business has created a significant change in our product mix. We would expect seed and soil treatment to grow to 40% to 45% of our portfolio over the next three years. Two treatments provide insurance for growers, as they proactively respond to stresses that are present at the time of planting based on experience and known growing conditions. Performance, usage rates price and compatibility all come into the buying decision. All else being equal, we believe distributors to companies and growers will opt for biological treatments. New partnerships, like the one we announced last quarter with Vive [ph] will allow us to expand our BioUnite offerings into the plant health market. Our acquisition of Pro Farm also accelerated expansion into plant health. And we are forecasting that this segment will make up 14% of our sales in 2023. As we mentioned in our second quarter call, we are starting our commercial launch of our new Pacesetter product for plant health and are initially positioning it for use in corn and soybeans. Longer term Pacesetter potentially could be combined with Pro Farms emergent foliar product for plant health. The near term pipeline that Kevin Helash shared earlier, underscores the value that crop health products have in our portfolio, half of our products slated to be launched in 2021 or 2022 are in this category. The shift to mix plays itself out when you segment our sales by crop as shown on slide 13. Again, our specialty crops have been the foundation of our sales and it is seed and soil treatments that drive our growth in the major row crops. Today, the largest row crop market for us is soybeans, but our pipeline shows continued expansion in corn, wheat in other oil seeds. Finally, we're seeing the benefits of the relationships we built with partners in key corn regions outside the United States. If you would refer to slide 14, we are become a far less US centric company with potential to expand significantly in the large growing regions in Latin America and the European Union. In 2023, we expect our sales to be roughly equal between North America and the rest of the world. In summary, we have created the platform for the next wave and the continued evolution of the company. Our results will vary quarter-to-quarter, but the full year results will be the same. We expect to outpace our industry peers in terms of revenue growth, and to benefit from the types of margins associated with products that deliver exceptional customer value. Success requires the right product, performance, price and partners, plus a heavy dose of patience to build the presence. We're delivering on our commitments to expand internationally, diversify into row crops, and tap new market segments and plant health and seed and soil treatments. We can never say our work is done. But we are confident that we have the building blocks and the pipeline in place to succeed. At this point, we'd like to turn the call over to the operator to begin our Q&A session. Operator?

Operator: Thank you. [Operator Instructions] And we'll take our first question today from Ben Klieve with National Security.

Ben Klieve: Thanks for taking my questions here. So first, I want to turn to the R&D pipeline that you laid out on slide five and six, I don't see MBI-014 on here. Am I missing something? Or was MBI given - was that product given a name that I'm not aware of? Where is that in the timeline here?

Kevin Helash: Hi, Ben. Kevin Helash here. Yeah, Ben, so it's a great question. And as I mentioned in my opening remarks, we've gone back to the drawing board in terms of our R&D pipeline, and really taking a hard look at what products should we be focusing on to bring to the market to provide the highest value to us and our shareholders. With specifically regard to 014, we have elected to move on to 015, which is a much more, I would say, what we would call generation II product in that category. So you see it there as 015. And we're going to go straight to what we think is the clear winner in this category for us. And it's going to take us a bit more time to bring it to market. Kevin Hammill, do you have any thing to add to my comment?

Kevin Hammill: No, I agree is that one of the things we're fortunate to have is with Pro Farm’s acquisition to add in their pipeline. So we could re-evaluate, refresh, and reset up pipeline, and we're very excited that the pipeline, and we're actually in good shape to watch our near term products in ’21, ‘22. But specifically, today, 014/015 as Kevin mentioned, we transitioned to 015. And I believe we mentioned this in two to three earnings call prior. And it was the new launch - focus on 015, as you can expect it's going to take a little bit time to optimize the final formulation field test in the marketplace, and you get the final registration with the product. So it's still in there. We're still excited about it. And we're very focused on getting this product to market.

Ben Klieve: Perfect. And I guess, two clarifying questions here. Remind me that the distinction from 014 to -15 wasn't one of them targeted for organic and the other conventional, if I remember correctly? And then also on slide six, the 015 launch in 2027 is annotated with a C, what does that mean?

Kevin Helash: Yeah, Kevin, can you continue please. Thanks.

Kevin Hammill: Okay, no prob. Yeah, we did have an 014 but the 015 is the product we’ll be going forward with and this product can be both used in organic and conventional. We just designated the 015 to make sure that we have the conventional logo in there. But this product - the C stands for conventional, but this product will also be target [ph] into organic. So we have transitioned all the way from 014 completely to the 015.

Ben Klieve: Got it. Okay, that's helpful. Thank you. Perfect. Now turning to the quarter and you talked about kind of the timing of the Pro Farm acquisition with regards to OpEx. But I didn't catch a revenue number. So for - can you break down the revenue contribution that was - that we saw in the third quarter that was derived from the acquisition versus what was organic in nature?

Jim Boyd: Yeah. Ben, hi. Its Kevin Helash here again. So Ben, we don't segment out Pro Farm or our products for that matter. But what I can tell you and I'll ask Jim to chime in here in a second, is that we remain extremely happy with our Pro Farm acquisition. It has contributed a material amount to the company in the relatively short time that it's been here. And we foresee their pipeline continue to add value for us moving forward. But in terms of a bit more color on Pro Farm. I'll hand it over to Jim.

Jim Boyd: Yeah, well, I'll just echo what you said, Kevin, but add, that Pro Farm has contributed in every quarter. It is contributing now, as their seed treatments are rolling out for Europe. And we think long-term that they will be a very significant contributor to the company. I might add that we expect them to be accretive on a net earnings and a cash flow basis for the year.

Ben Klieve: Got it. Okay. Thank you. And last one for me. And I'll jump back in queue here. But I wondered if you could touch base on the press release that came out. I don't know, I guess a couple months ago now, on the distribution agreement with Rizobacter. Can you just kind of talk a bit about kind of the structure of this agreement? And talk about also timing? Is this just an agreement that's pretty well developed, such that you're expecting revenues this growing season in South America? Or do you need a couple years of field testing and educating the sales force, things of that nature? That would make us not really be material here for a couple of years.

Kevin Helash: Yeah. Ben, thanks. It's Kevin Helash again. So great question. And I'm glad you brought it up. We're very excited about our new relationship with Rizobacter. And the great part about it is it expands our footprint into the Southern Cone of Latin America. And we do expect it to start generating more - you know, immediately, basically. But Kevin Hammill was instrumental in getting that deal across for us with his team, and I'll let him expand on that further.

Kevin Hammill: Yeah, I just want to echo what Kevin Helash said that, when we bought Pro Farm, we saw the attractiveness of expanding in Latin America and expanding into row crops. And this agreement with Rizobacter achieves both of those goals. And what it is, it's the foliar [ph] of plant health use of the Pro Farm product. And what it does, it's helping control abiotic stress in crops like soybeans, the main regions, Argentina, Uruguay, Paraguay, and Bolivia. And what the grower showed – we see at the end, is that a higher yield by helping out control some of this is abiotic stress. In terms of your direct question, yes, we're seeing revenues in both third quarter and fourth quarter as a result of this agreement.

Kevin Helash: Got it. Very good. All right. I think those are from me. Thank you all for taking my questions, and I'll get back in queue.

Kevin Helash: Thanks, Ben.

Operator: Next, we'll hear from Bobby Burleson with Canaccord.

Bobby Burleson: Thanks for taking my questions. So just curious, you talked - you touched on diversification of products, especially as we look at a few years, curious, you know, with the row crop traction, what kind of synergies you see across the portfolio, or other opportunities to really boost what you're doing in row crops, outside of the seed and soil health?

Kevin Helash: Yeah. Hey, Bobby. Its Kevin Helash. So that is one of the great parts about our portfolios is that we do see lots of overlap - opportunities to combine. And as Kevin Hammill can articulate, we have three ways that we're looking at the market, whether it's BioUnite, BioFocus and TerraConnect. So yeah, we – we’re just getting started in our view, in terms of fleshing out all the opportunities of permutations and combinations of our products, not only with themselves, but with other products that are in the market. Kevin, I'll pass it over to you.

Kevin Hammill: Yeah. So as I mentioned earlier, the acquisition of Pro Farm just makes our tech pipeline that much more robust. We definitely do see synergies and in a couple different ways. One is the sales synergies in terms of the sales forces in the field, development people in both companies. But specifically to your question Bobby on product synergies, we actually see synergies in all segments of the business. We currently have in development, one of our pipeline products is a combination of one of our bio protection products with a - the crop health product from Pro Farm that we see d is able to go into the seed treatment business. And then the foliar side of things. We talked about quite a bit about a product called Pacesetter, but we did actually a lot of testing this summer of adding VDP [ph] crop health product into our Pacesetter product. And what we've seen is another stepwise change from added Pacesetter to the growers fungicide by adding VDP to the - to Pacesetter possible [ph] as fungicide. We continue to see stepwise changes as we put these products together. So all in all, we see a lot of synergies not only from the sales force, but also from the product pipeline by combining these products together and go to market, as we go to market.

Bobby Burleson: Great, that's helpful. So another one for me. You guys have laid out a pretty detailed product pipeline in terms of your launch schedule, et cetera. I'm just wondering, are there any metrics that you can flesh out a little bit in terms of how you came up with the expected revenue contribution? And what are you doing there to try to be conservative?

Kevin Helash: Hey, Bobby. Kevin Helash, here again. So that was one of the first things that we dug into when I came on board in August. And it's basically taken us until now, to go through all the work, product-by-product, looking at every aspect of what it would take to bring it to market, from the bench to field trials to regulatory, customer acceptance, price point, formulation, you name it. And then we've taken every single step along the way and risk adjusted it. So it's a long and lengthy process, with many, many, many hours of work that's gone into it. And I'd certainly like to give a big shout out to the team for diving into it. But I think what we have now is a very realistic pipeline. We're very focused now in terms of what we're going to work on. And I'd say equally important, what we're going to put on the shelf for now. And we believe we've come up with a revenue stream that is deliverable, and we're all committed to putting our hand in the fire and going to work to make it happen. So, Kevin, you are leading the pipeline from the commercial side with your team, what else can you add?

Kevin Hammill: Yeah, and I agree with you hundred percent, Kevin, is that when we looked over the pipeline, and as you said, we are so fortunate to have such a great pipeline, a very robust pipeline and opportunity to combine a product synergistically. But when we look at the risk factor, we did a couple things. First of all, Kevin Helash mentioned this is that, we risk adjusted it, so we went across the whole product line and looked at it from a risk, from regulatory, from a product development side of things, and also from a commercial launch side of things. And we risk adjusted that to come up with these forecasts in terms of sales and by year. The other thing we did is looked at heavy risk was, can we launch these. So we were fortunate that - for those products that we're planning to launch over the next two to three years, we really have done the heavy lifting so far. So we're really ready for the launch of these new products. And how we prepared for that is that, we have a - fortune to have an experienced team in place that really understands the market and has helped us to articulate this opportunities based on different regions in the world. We have done extensive field testing to ensure the product performance delivers on our commitment, and also allows us – our customer's to experience and work with the products prior to sale. And finally, we have the distribution in place for those products that have been established, for six of the seven products we have the distribution in place. And we are active in discussion for the remaining offer in our near term pipeline with a partner. So overall, the risk adjusted to sales to adjust for some risks from a regulatory development and sales. And we have taken precautions to make sure that we're - heavy lifting is done before we launch our new churn pipeline.

Bobby Burleson: Great. That's very helpful. And if I could just squeeze one more in, I'm wondering just with Jim on the verge of retiring here, what's see effect on the ability to deal with pushback on OpEx reduction, I know that there's always some kind of pushback in certain areas, everybody's project is the most important. And Jim has institutional memory and domain expertise to really be able to kind of decipher all that. Is there any – Jim, how deep is your bench in terms of being able to deal with that type of complexity when you're pursuing, when the firm is pursuing additional OpEx controls beyond your tenure?

Kevin Helash: Hey, Bobby. Kevin Helash, again. So really good question. So let me make two comments before I hand it over to Jim. First of all, Jim has been professional and gracious enough to commit to staying with us until we find his successor. That has allowed us to really take our time to conduct an extensive and thorough search. And I can tell you that we're being very picky in terms of looking for Jim's successor. So he's not going anywhere. Well, until we find his replacement, so thank you, Jim, for that. And then I would say also, in terms of our OpEx, the entire team built our budget. So this was not a Kevin Helash or Jim mandate, you know, thou shalt be, I mean, we really looked at our business and challenged ourselves to say, what do we need to run it effectively and efficiently. And we all collectively came up with the basis of 2020 as our runway. We think that is a sufficient amount of resources to us to do what we need to do, to fund the company, of course, with inflation. Jim, in terms of your team and the bench, I'll hand it over to you, in addition, any other comments you want to make.

Jim Boyd: Yeah. Thanks, Kevin. I guess I'd like to say that, as Kevin indicated, we've got cost control and expense control is part of the culture of the company. We've gone some really hard times and we've always been stretched for cash, yet facing a tremendous opportunity. So what to invest in, and what to manage in terms of our operating expenses, has always been sort of central to the company. And as Kevin said, it's a company-wide effort. We've got lots of good people throughout the company. And they're all very conscious of expense management and wanting to succeed and wanting to launch as many projects, products as we can. With regard to the bench. I am so fortunate to have so many good people, so many direct reports to me. I won't embarrass him by name and their names, but the corporate controller, our head of planning and budgeting, the head of supply chain, our manufacturing manager out in Michigan, they're all really solid, very capable professionals. And I honestly think that several of them could be the CFO. So I think we're in really good hands. It was one of the reasons that went into my retirement decision that, I felt the company was fundamentally strong in almost every aspect of its operations now, and was very capable. And it was time for me to spend some time with my family.

Bobby Burleson: Thank you for those answers and enjoy your time with your family, Jim. And I'll go ahead and jump back in the queue. Thanks.

Operator: [Operator Instructions] We'll now hear from Amit Dayal with H.C. Wainright.

Amit Dayal: Thank you. Good afternoon, everyone. 4Q is in typically sequentially lower for you guys, any chance to buck that trend this year?

Kevin Helash: Sure. I mean, it's Kevin Helash here. Can you repeat your question, please?

Amit Dayal: Yeah, so the fourth quarter is typically, you know, sequentially low for you. Any chance you may buck that trend this year?

Kevin Helash: Yeah, got it, Amit. Thank you. So in terms of our outlook for the fourth quarter, I'll make a few comments and then hand it over to Jim. So in terms of how we see the second half of the year, it is typically been the smaller half revenue wise. We continue to see that going forward. I would say that as we're looking to Q3, Q4 together, if you think about what our historical split has been between one 1H, 2H, we don't see any move off of that trend this year, and probably not going forward for some time. We are definitely looking to expand in the southern hemisphere, which will provide some more weight to our second half, but at least for 2020 and 2021. I would expect and we do expect to see similar splits between first half and second half, Jim.

Jim Boyd: Yeah, I guess I'd add. As Kevin said, the first half is stronger for us, so it has been. This year, we expect the first half, second half to be sorted in the same race, though, as it was in 2019. However, there has been an impact of COVID. Although, we've been very successful in the face of it. And so I think fourth quarter is going to be interesting. I think we're going to end the year very strong.

Kevin Hammill: And if you want, I can just add a little color into the marketplace, what's happening there, if you wish?

Jim Boyd: Yeah. Kevin, go ahead…

Kevin Hammill: Yeah. And so what I kind of see, when I look at the fourth quarter is that, in the US, domestic specialty market, I see us, you know, the crops have been harvested in most of the US and now we just have some application starting up, and they're like the Southeast, Southwest, where they certainly plant some of their crops for the seasonality. In Latin America, we're seeing some of our foliar applications for crops have been already planted a month or two ago. But our corn market is preparing for the US seed [ph] treatment market, where we're ramping up corn seed that was harvested, and is being treated now for planting in 2021. So as you say, we're kind of winding down the most of this specialty business with exception for Southeast and Southwest, in the US, finishing up some foliar applications in Latin America. But really starting to build on our seed treatment business in the US.

Amit Dayal: Thank you for that. I really appreciate it. Just maybe one more for me, with respect to sort of the refurbished pipeline, if you will, is there anything in the pipeline that could cannibalize current products?

Kevin Helash: Hi, Amit. Its Kevin, again, Kevin Helash. So the way we think about our entire portfolio is evolving, let's say. So as we are moving from what I call, or we call generation I, to generation II, we see opportunities to expand our footprint, both with the customers that we have on the crops that we're currently on, moving into new crops moving to new geographies. So when we show our pipeline revenue, as we have today, that is all incremental valuation to the company. We certainly have taken into account. For example, if we create a generation II product that yes, it will probably phase out of generation I. But what you've seen today is the net effect of that. So the short answer is yes, to some degree. But the good news is the one plus one generation I plus generation II is bigger than the generation I standalone, if that makes sense.

Kevin Hammill: Yeah. So, Kevin I agree with you. And kind of how I'm looking at the pipeline, I look at a couple different ways, the one that we outline in slide six. But there's also another one that you alluded to me, it was break down of - I break it down by second generation of products, stepwise changes for their BioUnite program and new novel modes of action. So if you look at that second generation of products, this is both for the crop protection and the crop health part of a portfolio. So both from the legacy products of Marrone, and Pro Farm, we have second and third generation products there, that will make us even more competitive in the marketplace from reducing usage rates, increase performance, lower cost of goods. So we're helping this second generation of products, its going to drive higher sales and margins. And that's, as Kevin Helash mentioned, this is all incremental to our current pipeline. Then the second part of how I look at the pipeline is these stepwise changes and BioUnite program. So that's introducing product combination of our biology with chemistry. And there's a couple different great options there we're looking at is, one of them is where we're providing, I mentioned this earlier on, we're mixing our chemistry, I am sorry, our biology, with Pro Farms biology and mixing that with chemistry and seed treatment, and we expect significant positive results from this BioUnite program. And the third part of our pipeline, is those new novel modes of action, like the herbicide that we talked about earlier on. So overall, yes, there will be some second and third generation products. But we believe that's going to help us increase our sales and margin as we go forward.

Amit Dayal: Yeah, sounds like you know, with these new generation of offerings, the potential for customer stickiness also goes up.

Kevin Helash: Yeah, Kevin, do you want to comment there?

Kevin Hammill: Sorry, my reception was a little bit off there. Amit, could you just repeat that question for me, please.

Amit Dayal: Yeah. That was going [ph] to continue whether with the second generation products, second and third generation products, the customer stickiness attributes of your products also increase?

Kevin Hammill: Yes, for the second generation the products could be anywhere from lower usage rates, and they perform better or having a better new component to this to get increased yield, or better performance efficacy on a fungus or a pest. So there's various different benefits that’s built into the second generation products. In addition to we believe that a lot of them they can get lower cost of goods that have ever been to.

Amit Dayal: Thank you, guys. That’s all I had. Appreciate it.

Operator: And that will conclude today's question-and-answer session. I will now turn the conference over to Kevin Helash for any additional or closing remarks.

Kevin Helash: Thank you, operator. And thank you to everyone for your time and interest today. We provided a lot of new information on how we view the business from the expansion of our commercial opportunities to the focus of our R&D pipeline, and from the management of our operating expenses to our ability to fund our operations going forward. All are significant positives in the continued evolution and growth of the company. We'll be providing some expanded investor information on our website over the next few weeks. And I invite you to look for additional investor information on the company. We expect to deliver on our growth commitments, while being brilliant at the basics. And well take boast [ph] to reach your goals to become profitable and further reward our shareholders. Thank you again for your time and attention today and we look forward to speaking with you in the near future.

Operator: That will conclude today's conference. Thank you for your participation. You may now disconnect.+