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Edited Transcript of MBII earnings conference call or presentation 12-Mar-20 8:30pm GMT

Q4 2019 Marrone Bio Innovations Inc Earnings Call

Davis Mar 31, 2020 (Thomson StreetEvents) -- Edited Transcript of Marrone Bio Innovations Inc earnings conference call or presentation Thursday, March 12, 2020 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* James B. Boyd

Marrone Bio Innovations, Inc. - President & CFO

* Kevin Austin Hammill

Marrone Bio Innovations, Inc. - Chief Commercial Officer

* Linda V. Moore

Marrone Bio Innovations, Inc. - Chief Compliance Officer, General Counsel, Executive VP & Secretary

* Pamela G. Marrone

Marrone Bio Innovations, Inc. - Founder, CEO & Director

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Conference Call Participants

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* Ian Trevor Gilson

Zacks Investment Research, Inc. - Senior Special Situations Analyst

* Sameer S. Joshi

H.C. Wainwright & Co, LLC, Research Division - Associate

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Presentation

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Operator [1]

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Good day and welcome to the Marrone Bio Innovations Fourth Quarter 2019 Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Ms. Linda Moore, General Counsel.

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Linda V. Moore, Marrone Bio Innovations, Inc. - Chief Compliance Officer, General Counsel, Executive VP & Secretary [2]

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Good afternoon, everyone, and thank you for joining our call. Welcome to the 2019 fourth quarter earnings conference call for Marrone Bio Innovations. On the call today are CEO, Pam Marrone; President and 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 expectations, hopes, beliefs, intentions or strategies regarding the future as well as projections, forecasts or other characterizations of future events or circumstances. Such statements are based on management's current expectations and beliefs concerning future developments and the potential effects on the company. There can be no assurance that future developments affecting the company will be those that management has anticipated. Such statements involve a number of risks and uncertainties, some of which are beyond management's control or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these statements.

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 and elsewhere in the company's annual report on Form 10-K for the year ended 2018 and in our earnings release posted on the company's website. Should one or more of these risks or uncertainties materialize, or should any of management's assumptions prove incorrect, actual results may vary in material respects from those discussed today.

Any guidance that management may offer in this conference call represents a point-in-time estimate. 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 President and CFO, Jim Boyd. Jim?

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [3]

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Thank you, Linda, and thank you to everyone for joining us on the call.

If you would turn to Slide 3. Fiscal year 2019 was a high watermark for Marrone Bio. Record revenues of $29.4 million, an increase of 38%, were driven by double-digit sales growth in the Venerate and Regalia product families and partial year sales from the Pro Farm and Jet-Ag acquisitions. In the United States, we saw strong growth in both our specialty crop business and our seed treatment businesses. Top crops for 2019 were soybeans; corn; nuts, especially almonds and pistachios; berries, led by strawberries; grapes; and our Cultivated Garden segment.

From 2015 to 2019, our compounded annual growth rate for revenue was 31.6% versus single digits for the ag industry in general and approximately 15% for biologicals over the same period. Looking forward, we expect to see continued strong growth from our legacy portfolio and also strong growth from our international markets as Pro Farm adds geographic diversification with significant additions to our business in Europe and Latin America. The Pro Farm portfolio also gives us multinational access to the new and growing large market segments of bionutrients and biostimulants, which complement our base bioprotection portfolio. Together, we expect even stronger revenue growth in 2020 than we experienced in 2019.

In 2019, our seed treatments business grew to be approximately 1/3 of our total net revenues. The combination of Pro Farm and our domestic seed treatment businesses should give our second and third quarters our strongest revenue. In the United States, early forecasts for row crops in 2020 indicate a rebound in corn and soybean acres with acres that went unplanted last year coming back into production this year. However, we continue to see ag retailers and distributors operating under a just-in-time inventory approach as they balance the more positive industry crop forecast with inventory positions from the prior season.

As I look at 2019 full year numbers, I am most pleased with the 56% growth in gross profit dollars from 2018 to 2019, which is indicative of our path to adjusted EBITDA breakeven. Strong sales and a favorable mix of higher-margin products brought the gross margin to a record 54.9%, a 630 basis point improvement. We have now seen 5 quarters of gross margins above 50% on top of 6 quarters of double-digit revenue growth.

Full year operating expenses of $44.1 million included $7.9 million in specific transaction, litigation and acquisition-related expenses as well as Pro Farm operating expenses. Excluding those items for a true apples-to-apples comparison, operating expenses were $6.4 million higher than last year or approximately $1.6 million per quarter, which reflects the planned 2019 strategic investments in our commercial organization and key R&D projects and in line with our previous guidance. As we look back on our 2019 results, the benefits of those investments have paid off with a 38% increase in revenues and a positive field trial results for the key R&D projects, specifically our breakout new bioherbicide and our next-generation insecticide/nematocide.

Net loss for the year reflected our previously mentioned $7.9 million in specific transaction, litigation and acquisition-related expenses as well as the addition of Pro Farm and $7.6 million in noncash charges related to the estimated fair value of warrants under our new financing facility for an apples-to-apples year-over-year comparison of $21.7 million versus $21.8 million or approximately flat.

In addition, cash used in operations for the full year was up $2 million to $21.4 million compared to $19.4 million in 2018. Cash usage in 2019 includes the previously mentioned $7.9 million in acquisition and litigation-related expenses as well as Pro Farm. Without those expenses, cash usage would have been approximately $13.5 million or $1.1 million per month.

Our core business performed as expected as our adjusted EBITDA loss in 2019 was $16 million, approximately flat with the $15.7 million last year, again, reflecting our increased investments in the commercial team and R&D.

Turning to Slide 4. We closed out the fourth quarter with 17% revenue growth and our fifth consecutive quarter of gross margins of 50% or greater. As you know, 2019 was a challenging year in agriculture because of weather and trade headwinds. The continued adoption of our biopesticide portfolio against this backdrop speaks to the value growers are experiencing with our strong portfolio of products.

We had our first full quarter of sales of Pro Farm's bionutrient seed treatment in Europe. We are extremely pleased with the early contributions from Pro Farm and with the inroads they are making into the international seed treatment and foliar markets. The integration of Pro Farm into our business is going very well with many positive opportunities for leverage and synergies arising in both companies.

Gross margins improved 530 basis points to a record 55.8%, largely due to sales mix.

Operating expenses in the fourth quarter were $11.9 million as compared to $8.3 million in the fourth quarter of 2018. When we back out the $800,000 in specific transaction, legal settlement and acquisition-related expenses and the first full quarter of Pro Farm's operations, our operating expenses were in line with our historic average even in light of our quarterly investment in our commercial team and key pipeline projects.

The net loss in the fourth quarter of 2019 was $10.1 million as compared with a net loss of $5.6 million in the fourth quarter of 2018. The loss includes the $800,000 in specific transaction, legal settlement and acquisition-related expenses as well as a $1.3 million noncash charge associated with our new warrant facility.

Our adjusted EBITDA loss increased by $1.3 million.

Cash used in operations was up $2.4 million, in line with our previous guidance, which included our increased investment in key R&D projects and the expansion of our commercial team as well as Pro Farm. The message here is clear. We continue to closely monitor and manage our operating expenses to bring in our longer-term strategic objectives.

2019 was a pivotal year in Marrone's Bio's history. We delivered exceptional growth in our core portfolio, entered 2 new market segments for bionutrients and biostimulants, made steady improvements in our overall margins, strategically managed our operating expenses and significantly advanced our breakout novel bioherbicide and next-generation insecticide and nematicide products.

From here, we see a path to achieving profitability and a positive adjusted EBITDA level of operations. It will take accelerating revenue growth, global market expansion, strong margin improvements and tight expense control. But we believe all are achievable because we have the experience, capable employees and a strong science underlying an effective product portfolio that generates an attractive ROI for our grower customers.

And with that, I would like to turn the call over to Pam for her comments.

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [4]

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Thank you, Jim.

I would underscore Jim's comments that 2019 was a transformational year for Marrone Bio, as we show on Slide 5. In addition to our robust financial performance in 2019, we launched our BioUnite program to expand the base business, successfully completed 2 compelling acquisitions, demonstrated positive field trials and toxicology test results in support of our anticipated breakout products, gained key regulatory approvals to support future growth and completed a carbon footprint study of our products, eliciting our strong commitment to sustainable agriculture.

If you would turn to Slide 6, we launched our BioUnite program in the marketplace in early 2019. But in fact, it is just formalizing an approach we've taken from the start. Integrated pest management is central to meeting the global needs for sustainable food production. Biological products are ideal tools in holistic, integrated pest management programs as they give growers new sustainable options within their existing production practices. Through BioUnite, we're harnessing the power of biology with the performance of chemistry to improve yields and drive greater returns for the grower, all while improving sustainability.

A portion of the additional investment we made in R&D in 2019 was to provide data to prove the value of BioUnite on the farm. For example, in 2019, we experienced a more than 400% increase with Venerate bioinsecticide in almonds with our BioUnite strategy. It's a successful on-farm tool that drove growth in 2019 and as the strategy will continue to expand in 2020 and beyond.

Another example of BioUnite in corn includes test results from our new product, Pacesetter, a new formulation of Regalia tank mixed with a standard chemical fungicide. The tank mixture drove a yield increase of approximately 7 bushels per acre over either product used alone. Likewise, in trials, Pro Farm's product, tank mixed with a standard chemical fungicide, drove a yield increase of at least 6 bushels per acre over either product used alone. In addition, in a completely biological program, Pro Farm's product in combination with our Pacesetter saw an 8-bushel yield boost per acre over the standard fungicide and at least 4 bushels over Pro Farm or Pacesetter used alone.

Finally, we also saw comparable test results in soybeans for these combinations. In corn, the grower ROI for Pacesetter would be 5:1; and in soybeans, 8:1.

As we've discussed today, the early contributions of our recent acquisitions of the Jet-AG assets and of Pro Farm have been impressive. Both meshed perfectly with our BioUnite approach.

If you refer to Slide 7, Pro Farm, in particular, gives us a new platform in the fast-growing $4.6 billion seed treatment market. In fact, over 1/3 of our business in 2019 was derived from row crops. Given the recent acquisition of Pro Farm, we are positioned to significantly expand this business and become a leading player in the global row crop and seed treatment marketplace.

We believe the partial year sales we saw in 2019 were a positive indicator of the immediate value of the acquisition. Longer term, we think the real synergies will be in how customers integrate these new offerings for plant nutrition and plant health, along with our biopesticide, into their crop production programs, as we demonstrated in 2019 field trials.

Integration will be the key to successful expansion of the Jet-Ag product lines as well, and we'll be directing additional field trials to support this effort. The Jet-Ag product line also provides the potential for geographic expansion.

As we show on Slide 8, we are on the cusp of broadening our geographic reach in no small part because of our recent acquisitions. Approximately 90% of our business has historically been from the U.S. market. By 2021, however, we expect that mix to shift significantly due to both Pro Farm and continued progress on registrations of our products in new countries.

As you might anticipate, given the potential for Pro Farm, Europe will become our second largest geographical presence in the shorter term, blowing by Brazil and the rest of Latin America over a longer period. While smaller in scope on the international front, I don't want to overlook that we also entered into 2 new distribution partnerships with 2 Canadian crop input suppliers in 2019 and we just announced signing a new distributor for our insecticides in Chile.

Our international expansion needs to be supported with field trial data generated in the countries where the products are used. This is important both for growers and for regulatory approvals as they are part of the strategic investment Jim mentioned earlier.

On Slide 9, you can see this shift with a particular emphasis on the large agricultural markets in Latin America. I would note that these data are from Marrone Bio's legacy portfolio alone, as we did not own Pro Farm until late 2019. When we add in the Pro Farm field trials for 2020, the international component of the mix will increase significantly.

As previously mentioned, we strategically increased our operating expenses slightly. Slide 10 illustrates some 2019 results in our R&D programs, regulatory expansions and research partnerships. As an example, tests using commercial rates for our novel bioherbicide demonstrated control of a target weed, the dreaded palmer amaranth, approaching that of a current post-emergent chemical herbicides. These positive results move our novel bioherbicide product to its next phase of development, which includes toxicology, crop tolerance, tests for additional weed control and data showing effective commercial applications in growers' integrated test management systems.

In late 2019, we also announced positive results from U.S. field trials of our next-generation nematicide/insecticide. These field trials confirmed higher yields and cost-effective control of yield-robbing insects and nematodes in corn that were equivalent to or better than current industry chemical standards.

Several key regulatory approvals came to fruition in 2019 as well. Regalia's label in Brazil was expanded and our new novel biofungicide, marketed in the U.S. as Stargus, was approved in additional markets of Mexico, Canada and California. In addition, Haven received approval in Canada, while Grandevo and Venerate were approved in Mexico for the control of the Asian citrus psyllid that spreads the devastating citrus greening disease. All expand our reach into numerous fruit and vegetable crops.

We've also taken steps to address the evolving and rapidly growing cannabis and hemp markets. Our REGALIA MAXX biofungicide was approved for use on cannabis in Canada, while our Venerate CG label was approved for use on cannabis in the California market. Further, the nationwide opportunity arising from the passage of the 2018 Farm Bill, which legalized the cultivation of hemp in the United States, paved the way for Regalia and Stargus biofungicide registrations for use on hemp, an exciting new crop, which will have its official opening season in 2020.

In December 2019, Regalia and Stargus were 2 of the first of only 10 pesticide products that's EPA-approved for use on hemp for the initial hemp season. This marked the first time that the EPA has allowed crop protection products for hemp and represents a significant milestone and growth opportunity for the company.

Our expansion and growth strategy also focuses on our ability to be a partner of choice in emerging technologies. We announced 2 such research collaborations in 2019. The first, with Compass Minerals Plant Nutrition, is designed to develop specialty plant nutrient products enhanced with our microorganism. The second, with Valagro, leverages a subset of our 18,000-plus microorganism collection with their biostimulant products to enhance crop yield and quality. Both have the potential to cost-effectively expand our presence in the bionutrition and the biostimulant markets.

I am pleased to discuss with you today our recently commissioned study to determine the greenhouse gas effect -- effects of selected Marrone Bio biopesticides in plant health products compared with conventional chemical pesticide products. We believe this to be a first-of-a-kind study on the greenhouse gas impact of biopesticides. Based on a comparative assessment of manufacturing processes, labeled rates and seasonal use practices, using Marrone Bio products would, on average, potentially result in net reductions of greenhouse gas emissions of 69% to 91% or 39 to 46 kilograms of CO2 equivalent per acre per year. This is significant and something we believe will reflect well in a new ESG study we are conducting.

Needless to say, 2019 was a busy year. If you turn to Slide 11, I wanted to close out the call and showcase the progress we've made as a company, not only from an operational perspective, but from a financial standpoint. From 2015 to 2019, we have delivered a revenue compound annual growth rate of 31.6% and have steadily and consistently increased our gross profit dollars, which demonstrates the potential of scale in our business.

As many of you know, in December, I formally announced that I'll be retiring from the position of CEO of Marrone Bio Innovations. However, I plan to stay involved with the company as a Board Member and consultant. While our CEO search is still underway, this likely will serve as my final earnings call at Marrone Bio. So I wanted to take a moment to thank all of you who believed in and contributed to our incredible success as a company. Your unwavering support throughout the years has allowed Marrone Bio Innovations to become the industry leader in biologicals that it is today. To our employees, investors, customers, partners and other stakeholders, a sincere thank you. We could not have done it without your support.

With that, I'd like to turn the call over to the operator to begin our Q&A session. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll first start with Samir Joshi from H.C. Wainwright.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [2]

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First of all, Pam, best of luck for your future. And congratulations on the progress that you achieved.

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [3]

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Thank you.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [4]

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The first question relates to MBI-014 and 015. Are they still on track to generate revenues in 2021? Or has that time line changed?

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [5]

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What we've -- what -- while we were doing some of the additional studies that the EPA called for on 014, we actually developed a better version, 015. And we're contemplating that we might want to resubmit the 2 of them together, and then that will accelerate the approval of 015. So rather than have one out first and then another one delayed, we'd actually have the better one sooner. So I don't think -- and Kevin can -- I don't see how we'll be able to be on the market in '21. No. So it will be pushed, but it will be better in the longer term because the newer version will be faster to market.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [6]

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But not pushed that far.

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [7]

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Yes, but not pushed that far. That's right.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [8]

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Understood. And as far as the revenues goal for this year, have you spelled out how much was organic growth versus -- from Jet-Ag and Pro Farm?

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [9]

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No, we haven't -- we don't break out our segments. But we really feel we acquired Pro Farm at the perfect time, and it's really ready to take off. And we're really pleased with the positive impact we've seen so far. There are a lot of synergistic opportunities and growth opportunities for the 2 companies together. So we're really excited about the future.

Kevin, do you want to add anything about the -- Kevin, do you want to say anything about the revenue projections?

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [10]

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Yes. Yes. No, this is Kevin. And thanks, Jim. We're pretty confident we can build on our 2019 success by adding to that double-digit growth that we saw in Venerate and Regalia in our core crops.

A few other things. First of all, we're launching Stargus Fungicide in California, the largest market for this product. Also, we're having a full year of sales with the recently acquired Jet-Ag. We're building on the BioUnite concept in almonds. And as Pam talked about, we're expanding our Pacesetter into new crops like soybeans and corn. There's another upside we see in this year is that the recovery of the soybean acres will help us solidify our domestic seed treatment business and the addition of Pro Farm will help us expand internationally. So overall, we're looking forward to a robust 2020.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [11]

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Understood. And as regard to Slide 8 where you talk about the forecasted revenue distribution, can you give us some color on which products we should expect to see in Europe and Africa as against South America, U.S. and Australia?

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [12]

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Kevin, would you like to talk about that?

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [13]

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Yes. So right now -- and if you look at the map right now, it's -- Europe is mainly the Pro Farm products -- Europe, Middle East, Africa and CIS countries are mainly the Pro Farm products. And in Latin America, it is mainly Pro Farm with some MBI. And of course, North America is primarily Marrone Bio products. But as we go forward, we're seeing the opportunity to implement it, for example, in all the regions around the world, immediately in North America, followed by Latin America, followed then by Europe that Marrone Bio products in with the Pro Farm products.

We see there's a lot of synergies. We see there's a lot of complementary nature. So for example, in North America, we're looking at both the seed treatment opportunity and the foliar opportunity of putting Pro Farm with the MBI products. In Latin America, we're doing joint testing on -- in 100 field scale demonstration sites with -- in seed treatment and some foliar opportunities with MBI and Pro Farm products. The -- in Europe, the Pro Farm products are going to be dominant for the next couple of years as we get registrations of our core products in that region.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [14]

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Understood. So stepping back, 2019 or 2018 was great, 35 -- 38% growth. And in addition, you have these new acquisitions. Do you expect similar levels of growth for the next couple of years? Or would there be additional growth from additional acquisitions that may be in the pipeline?

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [15]

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This is Jim. I would expect our revenue growth to actually accelerate in 2020 and 2021 and just keep growing thereafter, for that matter. And as far as M&A activity, I think -- a lot of people are coming to us, we see companies every week, a new company every week looking to partner with us. And I think we would consider companies but only companies who had strong revenue growth that would be accretive on an EBITDA basis. And -- sorry, we got a phone going off here. But it'd be accretive on a revenue -- or earnings basis and the attractive multiples. I'm sorry, we got distracted by somebody's phone going off.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [16]

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Right, right, right. I understand. So I think I may have asked this question in the past, but is it more likely that you will buy a private company? Or would you seek to expand distribution capabilities?

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [17]

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I think it will -- it's keeping in with what -- we like companies that have proprietary technology that's synergistic with ours. And as you said, that are -- can give us some revenue growth, be accretive and be attractive multiples.

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [18]

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Okay, Kevin. Go ahead.

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [19]

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This is Kevin. So Pam just talked about the M&A side of things. From my perspective, we're looking at adding additional distribution globally, but more specifically, we're looking at adding distribution in the Midwest of the U.S. for our Pacesetter products, in the BioUnite strategy with the Pro Farm and our Pacesetter product. In Latin America, we see rapid expansion there with both Pro Farm and MBI products. So we'll be adding distribution there, both the seed and the foliar side of the business. And then Asia, we're just started penetrating that a little bit. So we look forward to additional partners in that region of the world.

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Operator [20]

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(Operator Instructions) We'll next go with Ian Gilson from Zacks Investment.

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Ian Trevor Gilson, Zacks Investment Research, Inc. - Senior Special Situations Analyst [21]

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Congratulations on the quarter. Last year -- well, in 2018 where you actually had an increase in the third quarter or the fourth quarter in revenue, whereas in 2019, it was sort of reversed. We dropped. Plus the fact from comments that we've made, seed treatments were a significant increase within the product mix and the overall revenue. So what were the drags on revenue, say, in 2019 versus 2018 in the fourth quarter?

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [22]

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It's Jim Boyd. Yes, I think we didn't have any drags in the fourth quarter -- over fourth quarter. We just had some products that were flat. We had a very positive increase in our specialty crop business and everything else performed well. But the mix, just the performance of the mix was such that it caused the margins to improve.

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [23]

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And maybe you can comment on the horrible Midwest weather that affected the seed treatment business.

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [24]

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Yes.

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [25]

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As Jim was referring to.

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [26]

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Right. So a couple of things there. Overall, as mentioned earlier on, our specialty business saw really good growth, especially with Regalia and our Majestene, Zelto and nematicide. But as you might recall last summer, due to the wet weather, we had probably a 10% to 15% reduction in the soybean acres in the Midwest. This -- and if you look at our seed treatment business, one of our key crops is actually soybeans. So what we're doing is we are working through some of the inventory over the last few months from that decrease in soybean acres. But the positive note is, I was just looking at some prospective plannings, USDA does not come until the end of March. By looking at some early forecast, it appears the soybean acres are going to rebound significantly this year in 2019...

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [27]

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2020.

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [28]

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2020.

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [29]

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2020, significantly above 2019. And they might not be back to the 2018 levels, but we see good rebound. So we're seeing a positive momentum going into this season as the soybean acres and the corn acres rebound from the Midwest with our seed treatment business.

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Ian Trevor Gilson, Zacks Investment Research, Inc. - Senior Special Situations Analyst [30]

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Okay. As we -- going forward -- oh, I noticed we had a very modest tax expense in the fourth quarter. Was that due to Pro Farm?

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [31]

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Yes.

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [32]

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It's the acquisition.

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [33]

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Yes.

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Ian Trevor Gilson, Zacks Investment Research, Inc. - Senior Special Situations Analyst [34]

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Okay, okay. As we go through this year, and you mentioned that you feel that the middle of the year, the second and third quarter was going to show significant gains year-over-year. Is that correct?

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [35]

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What we said was that the second and third quarter would be our strongest quarters. We actually expect somewhat of a smoothing effect because if you'll remember right, a couple of quarters ago, we talked about our first and fourth quarter being our strongest because of the advent of the seed treatment business. But with Pro Farm being added to that business, they -- their business actually starts a little earlier in the year than ours. And so it makes the second now shifted into the second and third quarter, but we would expect strong growth in every quarter.

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Ian Trevor Gilson, Zacks Investment Research, Inc. - Senior Special Situations Analyst [36]

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Yes. My question really was as we look at the seasonal trend of revenue in the year, are we going to show basically more or a larger increase in the second and third quarter versus the first and fourth quarter?

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [37]

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In terms of dollar size, yes. So your second and third quarters would be bigger than your first and fourth in terms of size.

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [38]

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But he's talking about growth.

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [39]

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Of growth?

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [40]

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But that's true of growth, too.

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [41]

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Is it true also of growth? Okay. All right.

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Ian Trevor Gilson, Zacks Investment Research, Inc. - Senior Special Situations Analyst [42]

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Okay. Okay. That's fair. You said you showed -- was it 400% increase in homeland treatment?

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [43]

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Yes.

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Ian Trevor Gilson, Zacks Investment Research, Inc. - Senior Special Situations Analyst [44]

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Is that correct? And what is -- was that a third -- the second quarter revenue? Or where does that fall in? We're pretty well over the flowering season aren't we for almonds?

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [45]

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Yes. So I'll have Kevin answer that. So that growth was due to our -- largely due to our BioUnite for navel orange worm, I believe. And Kevin can talk about the timing.

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [46]

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Yes. So the bloom season is really more regarding our Regalia fungicide product. And then from there on in, throughout the spring and summer months is when you see navel orange worms come out, and that's where we -- there's 2 or 3 different timings of applications throughout the year. That's when we use our BioUnite strategy of putting Venerate in with the synthetic chemistry. So it's not kind of 1 month or 1 quarter. It's spread out between the seasons of spring, the summer, depending on the insect pressure.

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Ian Trevor Gilson, Zacks Investment Research, Inc. - Senior Special Situations Analyst [47]

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Okay, okay. So that -- the almonds is now a significant product for you when you compare it to corn and soybeans?

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [48]

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Almond is one of our top 3 crops that we have right now.

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Ian Trevor Gilson, Zacks Investment Research, Inc. - Senior Special Situations Analyst [49]

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Okay, okay. Looking at the hemp market, there's been a lot of discussion as to whether the market is -- the legal market is as big as many tax authorities had thought, particularly within the state of California. I know down in the southern part of the state that a lot of the smaller shops have basically gone past. Is that still a near-term product for you? Or are we looking out beyond '21, 2022?

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [50]

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Yes. And we combined hemp, cannabis and our greenhouse business all under our portfolio called Cultivated Garden. And we've seen some nice successes with this portfolio last year. It's a little bit harder to track because sometimes you send a product to a customer, they can either put it into fruit and vegetables or into cannabis or hemp, but overall, the portfolio is growing.

Interesting enough, I was reading an article yesterday or a couple of days ago, and that indicated that hemp could be the third largest U.S. crop by revenue in the future. But our experience in California per se is that it's going through a lot of turmoil and transition, especially with the harvesting and storage and processing challenges that they need to overcome. So we are investing in the area, but we're not betting the future on -- it's an opportunistic opportunity for us as we go forward.

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Ian Trevor Gilson, Zacks Investment Research, Inc. - Senior Special Situations Analyst [51]

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Okay. Great. So you have not dedicated a sales force for that market?

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [52]

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Yes. We have an individual who manages the overall direction and insight for that business. Yes.

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Operator [53]

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This concludes today's question-and-answer session. I'd like to give the floor back over to the moderators for closing or additional remarks.

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [54]

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Thank you, again, for joining us today and for your interest in Marrone Bio.

2019 was a landmark year for our company. I believe we are uniquely positioned to meet grower demands for new solutions in the integrated pest management and plant health programs. Our revenue growth underscores the value of our BioUnite approach, which harnesses the power of biology with the performance of chemistry. Our recent strategic acquisitions and R&D investments have the potential to greatly expand our opportunity into the biostimulant and bionutrition markets.

I am proud of the accomplishments of the Marrone Bio team. I firmly believe that Marrone Bio is poised for significant shareholder value creation over the longer term. Thank you.

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Operator [55]

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This concludes today's call. Thank you all for your participation. You may now go ahead and disconnect.