Good morning, and thank you for standing by. I'd like to welcome you to the Bioceres Crop Solutions Fiscal Second Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Max Goya. You may begin. Máximo Goya: Thank you. Good day, everyone, and thank you for joining us. Presenting during today's earnings call will be Federico Trucco, Bioceres Chief Executive Officer; and Enrique López Lecube, our Chief Financial Officer. Both will be available for the Q&A session. Before we proceed, I would like to make the following safe harbor statement. Today's call will contain forward-looking statements, and I refer you to the forward-looking statements section of today's earnings release and presentation as well in our recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. Also, please note that for comparison purposes and a better understanding of our company's underlying performance, in addition to discussing as reported results during our presentation today, we will discuss comparable results, which exclude the impact of hyperinflation accounting in Argentina. Additional information in connection with the application of the rule IAS 29 can be found in our earnings report. I would now like to turn the call over to our CEO, Federico Trucco.

Thanks, Max, and thanks everyone for joining us today, and Happy New Year. Today, we are reporting on our second fiscal quarter that ended on December 31. As a technology company, our value proposition is centered on developing highly differentiated solutions that create economic incentives in the form of improved yields, management practices and other efficiencies to further decarbonize production processes while regenerating agricultural ecosystems. With this central purpose in mind, we have been investing over the last 18 years in a solution called HB4, designed to improve the resiliency of crops in the face of adverse climatic conditions, more specifically limited water availability, the single most important factor affecting agricultural sustainability. During the quarter, we achieved the first approval ever of this technology in wheat, an approval we have been working on since 2015. We discussed the implications of this approval in our September earnings call. Today, we're presenting the data obtained from our first pre-commercial production process with independent growers totaling close to 7,000 hectares and 17x more than in our prior production cycle. And the results are as follows: HB4 wheat outyielded commercial varieties commonly used by participating growers by 13.5% on average across all environments and locations. In lower-yielding environment, representing 1/3 of all hectares harvested, the average improvement from the HB4 technology was 42%. This is more than twice the performance we estimated using our historical data. In higher-yielding environments, we also outperformed our historical data, and we will discuss this in more detail later in today's presentation. As a result, all participating growers have anticipated their willingness to repeat and/or increase their exposure to HB4 wheat in the coming season, further validating our value proposition. The performance of the current HB4 wheat varieties and the validation of our value proposition with farmers as well…

[Operator Instructions] You have a question from Ben Klieve.

First, I have a couple on HB4 wheat. So first of all, congratulations on some really impressive data coming out of that program. My question to you is, do you have the sense that your farmer customers are going to be willing to purchase seed once that Brazilian approval comes? Or do you believe that these farmers are looking for additional certainty that there will be buyers for the grain after harvest before they commit to purchasing seed from you?

Ben, this is Federico speaking. And thank you for your question. Obviously, we believe that farmers will have more confidence once the Brazilian approval is in place and our conventional commercial channels become available for HB4 wheat. In the meantime, we're operating under the HB4 program, which is the identity preserved infrastructure we put in place to basically take care of that situation with farmers. And this is something we can do today. Because everything that is produced is needed for the next cycle of seed multiplication. So we become customers of all that grain that turns into seed as we are ramping up the HB4 process. Now eventually, if HB4 is not approved in Brazil, that will represent a risk and an issue that we probably need to take care ourselves and not leave that in the hands of farmers. No, we don't want farmers to purchase seed and produce grain that cannot be commercialized afterwards, and that's where we have taken a very prudent approach, no?

Got it. Okay. And then I guess one other question on the regulatory front around HB4 wheat. I mean I know it's impossible to lay out a time line, but do you have -- is there any sense that you can -- or any precedent that you can point to that suggests that you're looking for approval to come here in the next couple of quarters? Is there anything that's been published by any regulatory authorities that would suggest something like that? Or is it really just unknown?

Look, I think, obviously, having had the public hearing, which we referred to during the presentation on the 22nd of October, was kind of a final step in the regulatory process to be able to be in a position to obtain an approval. Since that public hearing, we have received no new inquiries from CTNBio, that is regulatory agency that deals with the seeds in Brazil. Bear in mind, obviously, that December and January are not active months for the public administration in Brazil. So there might be a question coming up after Brazilian carnival we believe. But in any instance, our working assumption is that the import approval is likely to be in place before the next cropping season. So we need to make decisions by May to be able to fully roll out our HB4 wheat inventories, and we think that it is possible that by that month, we will have a final answer from the Brazilian regulators.

Got it. Got it. Okay. Very good. We'll look forward to that. Over on the HB4 soybean side, I have a couple of questions on the NSIP collaboration. Are you looking for them to help you secure commercial partners for an eventual launch here? Or is it -- or are you looking at NSIP to really just kind of help you advance your breeding program in new geographies? It seemed like the latter, but I just wanted to see if you had any sense that they would really help you identify commercial partners. Or if that was more on you?

No. You're right, that is the latter. It's more about doing advanced breeding so that we can have the right materials faster for the geographies in which we believe HB4 can be a major contributor to yield. So we're focalizing ourselves in, for instance, the 10 million acres of the Dakotas, which is an area that is usually affected by water availability. There are also areas in the southern U.S., where there exists a very interesting market for HB4. So we want to use computational science to better predict the performance of varieties and fast-track the breeding process. Now from a commercial perspective, we're actively looking to structure relationships, initially probably equally to what we do in Argentina with the identity preserved structure so that we are ramping up inventories and engaging more directly with farmers. But eventually, with a more business-as-usual approach in seed distribution using the existing players in the U.S., no? And that you will see coming up some announcements regarding this in the next quarters.

Got it. Got it. Regarding the fast track of the development time line, do you think there's going to be any meaningful field trials in the United States this -- starting in a few months? Or is that going to be likely an event for 2022 or maybe thereafter?

No. We will be doing a lot of trialing in the U.S. in the coming season. So we have been doing trialing already with some of the materials. Remember that all our off-season production is done in the U.S. probably in a single location or a couple of locations. Because there, the emphasis is on scaling up seed and the quality of a seed, and not so much evaluating the technology in different geographies. So that is something we're starting to do more aggressively today in the coming season. And there is where we have now the capability to use NSIP's computational breeding and predictive targeting platform to be more efficient and essentially reduce the time to market. I mean in the past, you will have to do extensive trialing before you launch a variety. I think there's a possibility to weigh in the use of artificial intelligence and machine learning tools to shorten that process.

Got it. And then I guess last question on this is regarding locations then for those trials. I think you were ramping up your inventory last year, and I believe Arkansas. It sounds like you're looking at the Dakotas. Are those kind of the markets you want to -- you're probably going to be focused on first? Or are there additional geographies that you're maybe going to be trialing this year?

So we -- on the trialing side, we'll prioritize the Dakotas because we believe that is where the most immediate opportunity lies for HB4, and it's meaningful enough from an acreage perspective. For the production aspect of things, we will continue to do that in our Arkansas, where the maturity groups that we use in Argentina will probably grow better. If you remember the Dakotas, we usually do short-term maturity groups like 2 and below. And that's where we are slightly behind. What we plant here in South America is 3 and above. And for that, we need to go to some more southern locations in the U.S. for the seed multiplication. If we were to do seed multiplication specifically targeted the U.S. market, then the Dakotas will become more important.

Your next question is from Sebastian Azumendi with 5D+ Capital.

I have 2 questions regarding the balance sheet of the company. The first one is, if you can give further details on the cash use of proceeds for the quarter? And the second one is that, given the current liquidity, which is roughly [ half of EBITDA ] that the share price currently just $8, if we should be concerned about Arcadia liquidating their almost 2 million share position. And also, if you have any thoughts about them being a long-term shareholder.

Sebastian, this is Federico again, and thank you for your call. I'll answer the second question, and then I'll pass it on to Enrique for the first question. Essentially, I think that the first thing I need to say is that the 1.8 million shares that we gave Arcadia for the -- in consideration for the Verdeca acquisition are locked up for 6 months. So these are not shares that can become immediately tradeable. The second thing I will say that Arcadia probably is today well capitalized. They have recently done an equity raise of significance for them. So if -- I think that their willingness to sell or divest their equity in Bioceres will not depend on their near-term cash needs, but on sort of their perception of value. And there is where I feel that we continue to be aligned and might have a supporter of the Bioceres story in Arcadia. Now having said this, I believe that, that is a position of significant size that might be attractive to nonholders that want to participate in the Bioceres story. So if eventually, those shares become available, I don't anticipate a significant problem in sort of the daily trading of our stock today. I don't know, Enrique, if you want to comment further on this, or tackle the second question. Enrique López Lecube: No, I think that what you said about the second piece of Sebastian's question is accurate, Federico. So on your question about the uses of cash during the quarter, you know that our main uses of cash, as we have been communicating, are around the commercial launch of HB4. So during the quarter, we invested cash and continue to build up inventories of HB4 wheat and soy. That was a significant portion of the use of cash during the quarter. And the second one in terms of importance was the upfront payment related to the Verdeca acquisition for us to consolidate 100% ownership in the HB4 soy vehicle that we have. So those 2 initiatives were something that we anticipated in terms of use of cash. And then there's a seasonal nature in the buildup of inventories and working capital in general as we entered into high season in the 2 most important markets for us, Brazil and Argentina. So those were the main 3 streams in which we invested cash during the quarter, Sebastian.

Got it. I have a final question regarding the HB4. If you can give -- if you can talk more about the 42% yield for HB4 wheat you experienced during the quarter? And how should we think about that at much larger scale?

Thanks for the question, Sebastian. I think that the 42% improvement in the lower-yielding environment was unanticipated. If you look at everything we've reported until today or prior to this call, we were indicating a 19% yield benefit on average in environments of less than 2.5 tons. Here, we have thousands of hectares, I think, close to 2,000 hectares where yields were less than 3 tons. And across all those hectares, the average was of 42%. So that's more than twice what we obtained or what we had from our historical data. I think there's a combination of factors that play into this. One is obviously the good genetics that we have in wheat compared to sort of the historical data where most of the data was produced with the original event and not really the sort of the lead background that we're currently using. And then the extreme situation, this was a very extreme drought in the northern Argentina region where we had maybe 1/3 of these hectares of low-yielding environment. The general drop was 47%. That's not usual, I mean, 47% to the historical average. So it was a perfect year to showcase the technology, and we were basically -- we found ourselves with this amazing result. Now I can guarantee that farmers that tried HB4 wheat and saw this outcome will probably not use anything else but HB4 wheat in the future. This is too meaningful from a yield advantage perspective. So that should give us sort of the demand required to make this -- a game changer, if you will, in the -- with wheat seed business. So we are very bullish given the data that we have, given sort of the magnitude -- the number of hectares that -- where this number comes from. And hopefully, with the approvals in place, we can make this a reality for a much bigger group of farmers.

Excellent. I have a last question. It is, I saw your debt ratios coming from double digit to close to 2x. And seeing the lower cash and current debt, what are the options or any areas that you have for the next 12 months? Enrique López Lecube: Thanks for the question, Sebastian. As I explained previously, one of our main lines of investment is around the HB4 commercial launch. So as we invest in initiatives to ramp up inventories and also the investment in the Verdeca stake, which we believe is going to be highly accretive for our shareholders in the future, those 2 initiatives don't bring in revenues and profitability into the P&L. So it was something that we expected that the net debt or the leverage ratio, I should say, would go up as we invested in these initiatives. Also, we are in the high season now of our base main business. So that is also requiring cash that is going to return to the balance sheet once we get out of the high season. So as we move forward, we believe that we should be operating within the range of what you have seen in the past. And probably slightly higher than the previous quarters as we invest in HB4 and get to commercial -- come to commercial launch. But we will not anticipate something meaningful changing on the leverage ratio of the company in the coming months.

[Operator Instructions] Your next question is from Steven Ralston with Zacks.

Very interesting information about your seed effort in the HB4 area. Also with the -- really being able to test it in drought conditions. But if I could just turn to the Crop Protection and Crop Nutrition business, which was impacted by lower demand due to the drought conditions. Could you talk about the dynamics of the reduction of the -- that demand for both, especially in the micro-beaded fertilizer area?

Sure, Steve. So the first thing to keep in mind is that our portfolio is heavily geared towards the planting season. And in those 2 businesses, particularly in the Crop Nutrition business, we are not as geographically diversified as we are in our biologicals, for instance, where we sell in like 25 different countries. And then these extreme weather events tend to be less impactful because it's not frequent that you will have the same phenomenon in all geographies. Now in the Crop Nutrition space, we are highly dependent on Argentina, particularly in the micro-beaded fertilizers. Weather, it's a very important factor. We had almost no rains until late December. That's very close to the end of the quarter, and that basically hit us with the micro-beaded fertilizer sales that we were expecting. Now we also think that there is an [ interuse ] strategy in that particular product line. This is a product that we were -- we introduced into the market some years ago. And when we did so, we prioritized in our initial strategy the positioning of this solution as a high-value solution, like everything else we have in the portfolio. I think we do see that we probably achieved everything we could achieve with that strategy, and we are now shifting gears to have a more volume-driven approach, taking advantage of the installed capacity that we have to take care of higher volumes. We are, as I tell you before, slightly below 30% utilization of our manufacturing capability. So if we were to ramp that up significantly there should be cost synergies there that would allow us to be more competitive in pricing. And that is something we're actively discussing with our partners in that business, this and growth. In Crop Production business, if there is no rain, probably that's -- don't evolve as dramatically as when there are wetter condition. So there might have been 1 or 2 sprays that were missed, and that directly affects our adjuvant business. I don't know, Enrique, if you want to comment anything else on that. Enrique López Lecube: Yes. I mean so basically, what Federico said, if we -- on fertilizers, by getting into higher volumes strategy, that should allow us to dilute some fixed costs from the manufacturing facility and obviously, allow us to improve also sourcing of raw materials. So all of that should translate into a better pricing proposition to the farmer without eroding profitability of the product. So that is an initiative that we will be taking. And then on what Federico said about adjuvants and we referred to during the presentation, farmers skip at least 1 or 2 spayings in the fields. And obviously, that translates into less demand of adjuvants. But I think that apart from these 2 comments, what Federico expressed is what mainly explains the dynamics on the 2 segments.

Just getting a little granular. What was the capacity utilization at the micro-beaded fertilizer facility during the quarter? Enrique López Lecube: So it was on a 12-month basis, and that's how we monitor our progress on this end. It was 25%, down from 30%.

Your next question is from Matias Cremaschi with Delta Asset Management.

Following up a previous question regarding HB4 wheat. I would like to -- if you can provide some color on the -- how are evolving conversations with -- specifically with the buy side of the equation with potential buyers and crushers, how are that conversations are evolving.

Thank you for the question. We are actively engaged with all stakeholders, particularly the milling industry, not only in Argentina but in Brazil to provide comfort in terms of this new product. I think that we have been making very good progress compared to where we started. Initially, there was a reaction of concern being the first GMO wheat ever. But as they see the sort of the farmer appetite and in many ways, also on the environmental side of the equation, I think that we are gaining traction with them and probably equally to soy. We might be able to announce in the coming quarters strategic relationships with different processors to provide that commercial comfort that would enable the full rollout of our HB4 wheat plants. So we are doing this not only in Argentina, as I indicated before, but also in Brazil so that -- most of our customers in domestic market and international markets are taken into account.

At this time, there are no questions. Do you have any closing remarks?

So no specific closing remarks. I want to thank everyone for participating and remind everyone that we are fully available for follow-ups and to address any questions that might come up after the call. So I hope everyone has a great day, and looking forward to continuing the conversation in the months to come.

Thank you for participating in today's conference. You may now disconnect.