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Edited Transcript of MBII earnings conference call or presentation 9-May-19 8:30pm GMT

Q1 2019 Marrone Bio Innovations Inc Earnings Call

Davis May 26, 2019 (Thomson StreetEvents) -- Edited Transcript of Marrone Bio Innovations Inc earnings conference call or presentation Thursday, May 9, 2019 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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* Benjamin David Klieve

National Securities Corporation, Research Division - Analyst

* Ian Trevor Gilson

Zacks Investment Research, Inc. - Senior Special Situations Analyst

* Robert Smith

* 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 First Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Linda Moore, General Counsel. Please go ahead.

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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 first 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. Any such statements are based on management's current expectations and beliefs concerning future developments and their potential effects on the company. There can be no assurance that future developments 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 offer in this conference call represents a point in time estimates. 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 today. As we discussed in our year-end earnings call, 2018 was a year of stabilization, both commercially and financially. We have continued the momentum we established in the second half of 2008, and early signs are in place for 2019 to be a transformative year. As a result, we will be speaking more about operational and financial matters that are indicative of our growth. This is a positive trend, and I'll talk about a few of those items during this call.

If you would turn to Slide 3. Let's take a deeper look at the first quarter. Revenues more than doubled to $8.7 million, a 102% increase. These results mark not only a record first quarter, but a record for any quarter in our history. We saw particular strength in 3 years. One, shipments of our venerate family of products continued to be strong. We saw improved sales, both in full year applications for vegetables and for soil and seed applied products for the spring-growing season for row crops in North America. Two, we saw substantial growth in the in-season placement of Grandevo for insecticides and mite control and specialty crops such as berries and leafy greens. Three, we are establishing a solid position in the high-value market for trees, nuts and vines.

To that point, Regalia's sales to treat fungal diseases and almonds were robust in the first quarter. The combination of higher sales, a favorable sales mix and better manufacturing efficiencies led to improved gross margins, which we expanded to 57.2% as compared with margins of 48.1% in the first quarter of 2018.

As you think about margins going forward, keep in mind that our margins fluctuate quarterly, largely depending on product mix. Our first and fourth quarters, they were row crops. The second and third quarter, specialty crops. We noted previously that we would be making targeted investments in our commercial programs and research and development in 2019. The 14% year-over-year increase in operating expenses reflected this planned funding, all chosen strategically to drive growth.

Net loss this quarter was $3.9 million or a loss of $0.04 per share compared with a net loss of $5.3 million or $0.07 per share in the first quarter of 2018. Please keep in mind that the quarterly comparison is skewed by a number of nonreocurring items in the first quarter of 2018; these onetime events related to our comprehensive financing and debt restructuring transactions. The net effect was a benefit of $1.2 million to other income in the first quarter of 2018.

Additionally, the diluted weighted average shares outstanding in the first quarter of 2019 were 110.7 million shares compared with 74.6 million shares in the first quarter of 2018. Cash used in operations for the first quarter was $7.7 million compared with $9.7 million in the first quarter of 2018. In comparison, the greater use of cash in the first quarter of 2018 reflected working capital reductions, following our comprehensive financing and debt restructuring transactions. In the first quarter of this year, cash used in operations grew sequentially from the fourth quarter of 2018 as a result of accounts receivable related to increased sales.

As we move further into the second quarter and the first half, we expect to continue our momentum by leveraging our existing portfolio and expanding our market reach. The seasonality of our product sales will shift to specialty crops as distributors and growers start applying fungicides and insecticides. Therefore, we expect to see a change in product mix as we complete the second quarter, which is somewhat smooth than first half results.

I would now like to turn the call over to Pam for a more in-depth look at our efforts to make our portfolio a key part of every grower's tools for improving productivity.

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

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Thank you, Jim. I would reiterate Jim's comments that we have put a solid foundation in place technically, commercially and financially to drive revenue growth. Our first quarter results carried forward the momentum from the second half of last year and there's a solid start to what we believe, can be a transformative year for Marrone Bio. As we discussed during our last earnings call, we are focused on 3 key deliverables in 2019: one, portfolio optimization; two, market expansion; and three, accelerated innovation.

I'd like to focus on the revenue side of the picture this quarter to give you a sense of how our portfolio meshes with grower needs in our key markets. To start, if you would turn to Slide 4. One of our strengths is the flexibility of our bio-based products to be used across all types of food and feed production. In our early days, our products were being used predominantly in specialty crops. As we move forward, we expect our crop mix to be more diversified with roughly 1/3 fruits and vegetables, 1/3 trees, nuts and vines, 1/3 row crops and a small percentage in greenhouse and covered crops.

This will be a significant shift in the product mix for us and speaks to the value we've been able to demonstrate whether you are producing leafy greens in Arizona, grapes in California or soybeans in Illinois. Much of what will enable this evolution of our sales mix is our emphasis on offering growers the and, not the or. We strongly advocate the use of our products in combination with complementary traditional agricultural solutions or with other compatible biocontrol or bio-stimulant offering. In fact, more than 80% of our product offerings are used in combination with conventional agricultural solutions. The grower doesn't have to choose one solution over another when he works with us. The grower benefits from our product profile, which offers less environmental impact, lower residues, better resistance management and improved plant health and performance. Our open architecture approach to agriculture coupled with proven performance provides the grower with a greater choice and thus enhances our revenue-generating capabilities.

If you would please turn to Slide 5. I'd like to highlight our demonstration trials, combining Regalia Rx for corn production with current fungicide treatments for plant health. Regalia Rx is a powerful bio-based fungicide in its own right and is applied in this case as a foliar spray. When added to the grower's existing fungicide program, the results are impressive, a 77% win rate, a yield increase of 4.2 bushels per acre and a 3 to 1 return on investment for the grower. We have tested Regalia Rx in other row crops, including soybeans, rice, wheat and alfalfa and have seen similar returns on the grower's investment. We are actively demonstrating this approach this quarter in soybeans and corn with partners and distributors. This fungicide combination has the potential to expand our footprint in global row crops with a mid-season foliar product that complements our soil and seed-applied offerings.

Combinations like this reach across the breadth of our portfolio. Last quarter, we highlighted our success with Venerate in conjunction with other insecticides to treat navel orange worm in almonds. Growers will see the results of this season's treatments at harvest time. In the second quarter, after corn, cotton and soybean are planted, we will see the early results of Venerate or Grandevo with other seed treatments for added nematode and insect control.

If you would refer to Slide 6. I'd like to emphasize the importance of our mix of target crops. This chart overlays the key growing cycles for our key market categories. We show you northern hemisphere versus southern hemisphere, which is important to understand as we work to expand our international presence. Obviously, there's some generalities here when you address broad categories of crops, but the key takeaway remains the same. This diversity of mix works to our advantages across seasons, reducing our dependence on the success of any one crop and helping to mitigate the inevitable vagaries of agriculture. As Jim mentioned, you'll see some mix effect as we move forward through the first half of the year and toward a greater use of our portfolio in full year applications for specialty crops in the northern hemisphere. As we grow globally, we'll benefit from counter-season production in the southern hemisphere.

If you would turn to Slide 7. As we discussed at year-end, we are highly focused in 2019 on delivering revenue growth through portfolio optimization, market expansion and accelerated innovation. As we broaden our customer outreach and distribution network, we expand our ability to sell our products for multiple uses in powerful combinations in any given crop. The first quarter was early proof of the power of this approach. We will continue to seek further opportunities to do so, particularly as we work to expand our footprint across crops, across geographies and in combination with other ag solutions. We are entering a transformative period for Marrone Bio, one of which the benefits of our technologies are rapidly moving into the hands of growers in ways that mesh positively with their growing systems, giving them greater choice and better return on their investments.

At this point, we'd like to open the call to your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll take our first question from Ben Klieve, National Securities.

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Benjamin David Klieve, National Securities Corporation, Research Division - Analyst [2]

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Congrats on a nice quarter here. First question for you. I'm trying to gauge kind of the sustainability of these 57% growth margins. Jim touched on the product mix being a positive contributor, but I'm wondering if you can comment at all on kind of the effect of R&D improvement and manufacturing initiatives on that 900 basis points? I mean if the sales mix was reversed, do you think you could have had still a few hundred points of gross margin improvement? Or do you think that sales mix really contributed heavily to that improvement?

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

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Yes. Ben, we -- as you mentioned, we've been keenly focused on improving our margins through improved manufacturing processes, efficiencies and R&D work on process improvement. But as you noted, we have a different product mix this quarter and that is because of the row crop business with Venerate family of products. So you are going to see that contributing to a higher margin in last quarter and this quarter. And Jim, do you want to comment further?

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [4]

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Yes. Ben, yes, I think we've long said that we're going to continuously improve our margins, and that both manufacturing efficiencies in the plant and increased utilization as volume grows in the plant plus yield improvements and potency increases, all contribute to our positive margins. I think that the margins are improving across all products. But having said that, we did mention in the script that mix is an important part of the quarterly fluctuations in our margins, and those seed and soil products are contributing to that higher 15% this quarter -- 57% rather.

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Benjamin David Klieve, National Securities Corporation, Research Division - Analyst [5]

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Okay. Perfect. I guess turning to the revenue line, you guys touched on, I think, in your prepared remarks regarding the seasonality, but I just want to revisit this briefly here. Do you think that seasonality is shifting such that the first quarter may be your peak revenue quarter for the year? Or do you still think some sequential improvement here from the first to the second quarter could come, given that the second quarter is traditionally your strongest quarter?

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [6]

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Yes. This is Kevin. Just let me talk about the progress in season a little bit and then probably I'll turn over to Jim for more deeper explanation. But so far the season is progressing well. Commercial team is really focused on partnering with the channel and understanding and meeting the grower needs. But let's look -- dig a little bit deeper into the U.S. domestic business in the 2 parts: one is the seed and soil platform; and then secondly, that foliar business for ourselves. Starting with the soil treatment business. Currently, that business is beginning for nematode control in various crops. In the first quarter, the seed treatment business actually finished, and now we're actually planting those seeds that were treated with our seed treatment products. This business will pick up again in the fall after harvest where the seed companies will treat their seeds with our products planting in 2020.

Our foliar business, we actually increased our share in the first quarter with the bloom sprays of Regalia. Now we're starting the May sprays in almonds with Venerate in combination with grower chemistry to improve the control of navel orange worm. The other thing is, right now, we're also starting the California fruits and vegetable plantings. This was a little bit delayed. But however, we've seen good uptick with our insecticides and fungicides so far. And just one final note, the northern U.S. has not started -- spring is upon us right now and they'll be starting the business soon. But Jim?

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [7]

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Yes. Ben, I'm actually glad you asked that because I think that's an important thing to understand about our business. We said in our prepared remarks that 2019 is a transformative year. I think that's because all the things that are in place or should be in place are in place. But we're going to see all that hard work start to emerge this year. And I think your question really centers on that.

Our seed and soil business is a new segment for us. It's coming out. You're starting to see it. It's augmenting and complementing the specialty crop business. It has a different seasonality that is important to note as you see our -- as we report our business results. With – it’s having its biggest influence in that fourth and first quarters. It's going to augment our specialty crop business or layer on, on top of it in the fourth and first quarters. Well, I'm not talking about specialty crops yet, but in -- but I would also expect our specialty crops to grow in all quarters and have its strongest influence in that second and third quarter.

So I think you're right. It's going to contribute to margins. The specialty crop business does have slightly higher margins, and we're going to continue to see quarterly fluctuations because of that different seasonality. But I think the specialty crop business will still continue to do very well in the second and third quarters.

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Benjamin David Klieve, National Securities Corporation, Research Division - Analyst [8]

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Perfect. That's very helpful. Another question I have is regarding the sales force and the retention rate within the sales force. So if you look back at the transition in that team from -- in late 2017, early 2018. The physicians that were still backfilled after that transpired. Those members of your sales force are now kind of ending their first year, beginning their second year with your company. And I'm curious if you can comment about the retention rates for those employees that were brought in a year ago. Have you maintained the same people on the team that are now beginning their second year? Or has there been some kind of continued reshuffling within that group over the past year?

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [9]

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Yes. This is Kevin again. In May, I'll be -- I've been coming here for about a year now. And so after we went through our strategic plan here in the summer and fall and realigned our whole sales force, we've really had strong retention of the players that we selected to be on the team and going forward. And I think we had only less than 5% to 10% departure rate after that. So really good, strong retention going forward. And the people here are really a strong team, a diversified team. We really value their experience and skill set.

And everyone right now is focused on working with the distribution and partnering with them to understand and meet the grower's needs. And what we're doing with this team is actually we're helping them accelerate the learning curve for these team members through technical and customer-centric training. From -- anywhere from our technical team to finding insight, external vendors, peer groups, customer support, peer interface and on-the-job training. So we're very happy with the acceleration of the learning curve for them, and we look forward to getting stronger every day in the -- and creating the future for Marrone Bio.

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [10]

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This is Jim. I'd like to add a few comments to that. I've been here sort of before and after and watched the transitions. And I think that we've got the best commercial function that we've ever had. We've moved all 3 sales, marketing and product development under Kevin, and I really think they're functioning on all cylinders. I think we've got the right people, the right products and the strategy to really continue the momentum.

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Benjamin David Klieve, National Securities Corporation, Research Division - Analyst [11]

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Perfect. And I guess one last one for me, I'll get back in queue. Just a quick question on your CapEx plans for the year. How do you see that playing out here for the balance of the year, especially with regards to potential on investments in your Michigan facility?

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [12]

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Yes. Thanks, Ben. It's Jim again. We're going to be moving the Venerate family of products into the plant. We'll probably begin construction on that this year. I would consider the capital cost to do that rather modest at below $5 million. But our plan is to finance that through a USDA-guaranteed loan as we did with the original construction of the plant.

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Operator [13]

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We'll take our next question from Sameer Joshi with H.C. Wainwright.

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

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The question about -- just touching upon what Ben was asking on the top line. Should we expect seasonality to become a lesser and lesser factor going forward based on the product mix and the geographic reach of your products? And so the part b of that question is do you expect revenues to sequentially increase going forward?

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

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Thanks, Sameer. This is Jim. Let me answer that. Let me start by just saying that in the past we've said that we expect our growth to exceed the biological growth rate 17%. With the strong performance that we've had in the last few quarters, we might add that we might see significant growth in some instances. It's rather early in the year, but -- and it's a challenging year for our growers, but we -- we're going to focus on continuing the momentum of our business. Now having said that, we did mention that the seed and soil business has its biggest influence on the second -- the first and fourth quarters. And I would expect that to -- that different season -- that complementary seasonality to affect both our margins and our sales. I would expect there to be a smoothing effect for revenues and continued fluctuations with seed and soil contributing positively to the margins in the fourth and first quarters.

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [16]

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And we tried to capture that concept of the smoothing that Jim mentioned with the Slide 6 in the slides, showing that as we add the southern hemisphere and we add the row crop business to the specialty crops that we will be smoothing it out all year long.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [17]

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Yes. No. I did note that. And even before, I saw that slide. One of the questions I had was, were the Venerate sales, or rather, what was the geographic distribution of the Venerate sales for the quarter?

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [18]

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Kevin?

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

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Yes. This is Kevin. The majority of the Venerate sales was a combination of -- in the U.S. between the -- our foliar business and our seed and soil business. So it's a combination and a blend of both of them, but mainly in the U.S.A.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [20]

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Okay. So just continuing the geographic discussion. I know you have initiatives in South Korea, Brazil and Argentina. Can you provide some color on how those initiatives are going? And do you expect sales from all these respective regions of the world going forward?

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Pamela G. Marrone, Marrone Bio Innovations, Inc. - Founder, CEO & Director [21]

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No. We did mention last quarter -- was it last quarter? Yes, last -- or this quarter, that we got expanded label in Brazil. So that then will -- for Regalia, that will -- our revenue will start kicking in there. And we are moving along very successfully with registrations in some of those countries that you named. So while we're not seeing the effect dramatically yet, we do expect to see more of that influence in the latter part of this year and into next year.

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [22]

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Yes. This is Kevin again. And we're really -- there's 3 pillars that we're looking at in terms of how we're diversifying outside of the U.S.A. The first one is, we've done a deep analysis of the market attractiveness. How does the market needs and sales potential line up with our product costs and market-entry adoption? The second is regulatory approval. Meeting regulatory requirements of each individual country is a little bit of a challenge, but the regulatory team is working hard to gain these registrations in key countries. And then our go-to-market strategies. So the third key is how is our international team working with the channel partners to understand their local market and have the ability to create market demand and sales in countries. So when you combine these 3 pillars together, we see a great opportunity to expand outside of the U.S.A. By looking at the market attractiveness, regulatory approval and our go-to-market strategy, we're actively doing that right now.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [23]

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Understood. Moving to some financial questions. I noticed that the accounts receivable is actually higher than the revenues this quarter. Is it because of any timing issues? Most of the sales happened in the latter half of the -- later part of the quarter? Or is it that there is long lead times in paying?

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [24]

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No. I think it's just the general business and additions to -- it's our biggest quarter, and I think that moved AR up by $6 million. But I think it was applied evenly in the quarter.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [25]

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And I was not very clear on the operating expenses going forward. The $8.6 million level, are you expecting that to stay the same? Or how should we look at OpEx going forward?

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James B. Boyd, Marrone Bio Innovations, Inc. - President & CFO [26]

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Well I think we mentioned -- this is Jim. I think we have talked about it in the past that we -- in the past, tightly controlled of our operating expenses. But a couple of quarters ago, we indicated that we were going to invest in the commercial function and in accelerating a couple of what we think might be breakout products, our oversight and our super managers team. And that we would be doing that over the course of the year in 2019. So I think the level of operating expenses in the first quarter reflects that investment that we're making in both our commercial function and accelerating our pipeline.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [27]

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Understood. And one last one I promise. Can you comment on the opportunity in your entrance into the cannabis and hemp markets? Any color on that?

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

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Sure. It's interesting that a new study by BDS Analytics came out that's at the hemp market. So this should be CBD products. It's $1.8 billion today, and it's going to hit $20 billion by 2024. And so we've been making strategic investments in that space by having some dedicated sales staff, which Kevin can comment on in a minute. And the other thing is we got our Regalia match registration in Canada. And Regalia is one of the best -- well, we think it's the best product for powdery mildew, and we tried it in some of the other diseases that occur in cannabis. So that's an exciting milestone. And likewise, we also got California approval or listing of Venerate as well for Canada. So Kevin, do you want to take that?

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

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Yes. There's not much to add there, but I just want to reiterate that cannabis and hemp fall into our broader portfolio that we call cultivated gardens, which is basically the green housing and covered market. And we see a good uptick and great fit for our products in this segment. And as we look at in further registrations going forward, but we also -- as Pam mentioned, we have dedicated sales force to this area to drive this opportunity and take advantage of it.

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Operator [30]

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We'll now take our next question from Ian Gilson with Zacks Investment Research.

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Ian Trevor Gilson, Zacks Investment Research, Inc. - Senior Special Situations Analyst [31]

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Congratulations on a splendid first quarter. A question on the -- not the seasonality but the type of conditions in Canada for the cannabis crop. I understand that a lot of the market out there is in greenhouse space. Is that correct? And then are the pest profile the same as it would be for the cannabis grown in United States?

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [32]

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Yes. This is Kevin again. To answer your first question -- the last question first is, the pest profile is very similar between the U.S. and Canada for the greenhouse market. The -- recently, we announced that we actually set up 2 distributors in Canada to manage this market. Planned products, who have a primary base in Eastern Canada just outside of Detroit; and Terralink, who primarily serves the western Canadian market. So we set them up to service this whole cannabis market. And right now, we're just doing the finalization of our labels and packaging to get aggressively into this market and penetrate it as soon as possible.

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Ian Trevor Gilson, Zacks Investment Research, Inc. - Senior Special Situations Analyst [33]

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Okay. Both of those distributors do have listed the Regalia on their product slate for sale currently. Is the specifications as a product going to change?

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [34]

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No. But what you can -- nuance in Canada is that you have to get -- once you get your label approved, then you have to -- then you start printing your label and packaging your product. So we're just going through that process right now, and it should be available for sale in the next 7 to 10 days in Canada. But you can legally post on your website the label based on what is approved, what's from the PRMA -- PMRA in Canada, which is the regulatory body in Canada.

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Ian Trevor Gilson, Zacks Investment Research, Inc. - Senior Special Situations Analyst [35]

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Okay. Going back to the product mix in the first quarter of this year versus the first quarter of last year, what were the changes in the crops treated that had a significant impact on the revenue growth?

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [36]

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Well there is probably 3 different areas. If I look back at some research last year in our foliar business, the uptake in -- with Regalia in almonds was quite significant this year based on our promotion and focus on that area to grow in there. And secondly, also in almond, right now, we're seeing a great uptick in this program of putting Venerate in with the standard products or standard chemistry from the growers for navel orange worm control. Some of the -- last year, you would not have seen in any Venerate -- almonds and Venerate in the market research information. Now that is our #1 crop because we've put a huge focus behind this initiative. So that's one area, the foliar business and primarily in almonds in California.

The second area is in our soil treatment business. We also increased our focus with -- in our soil treatment business. Now we're seeing some early adoption with our Majestene programs here in the first 4 months. And then finally, this is probably our first full planting season for a seed treatment business, and so we're seeing an uptake of the expansion and success we're having in the seed treatment business as in our first full season. And as Jim mentioned, seed production is mainly in the fourth quarter and first quarter. So that part -- contributed part of that product mix.

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Operator [37]

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We'll now take our next question from Robert Smith with Center for Performance Investing.

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Robert Smith, [38]

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Any particular weather-related impacts in the first quarter or in the current quarter?

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Kevin Austin Hammill, Marrone Bio Innovations, Inc. - Chief Commercial Officer [39]

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This is Kevin again. There, the theme is probably rain. And so as we look at -- and I'll be repeating myself a bit, but I'll break it into basically 3 different markets. In the almond market, as I mentioned, we saw an uptick of market share with the Regalia for bloom spray. This is partially offset by a little bit lower rate reduction because they switched to aerial application to -- from ground rigs because they could not get the Regalia on the ground rigs. The California fruit and vegetable market was delayed planting because of the rain, but we see in that progressing well, and we're actually seeing some good progress with their insecticides and fungicides in that market.

As you know, the Midwest row crop growers are under extreme rain and flooding and our first thought goes out to them, and hopefully, they can get dry weather. Right now, we're not too concerned about this. And the reason is that there is a stat out there that takes about 14 days to plant the entire U.S.A. corn crop. And so we believe that if we get some dry weather, there's going to be ample runway or ample time for them to get all the corn acres they have planned to put in and all the soybean acres they've planned to put in. So right now, not a major impact to our business by our thoughts and hope for dry weather for our growers going forward here.

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Robert Smith, [40]

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Any kind of comments on 014 and Zequanox?

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

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Sure. We're as excited as ever by 014. And what the R&D team is doing now is really focused on commercial applicability to all the things that we need to do to have a strong launch when it gets approved by EPA for both organic as well as conventional and conventional mixtures with other products. So -- and then we're doing the things that we do with each -- every product in terms of getting it ready for launch. In this case, we have chosen to invest a little bit more so we can have it even more effective for conventional when we launch.

And as far as Zequanox, we're also still very excited by the potential of Zequanox. We have -- we're still focusing on 2 areas, which is pipe treatment in industrial power plants and also open water. And we have activities going in both areas. So we have customers like a big power plant in Illinois that we've been treating this season. So continuing a pipeline of customers. And Kevin and team have -- a program that's designed to increase adoption in the pipe treatment area.

And then we're working on the Great Lakes restoration. The government bodies and NGOs are still very keen on using Zequanox to treat parts of the shores of the Great Lakes, and we'll be making product to do some treatments this year. I don't know, Kevin, if you had any -- no? Okay. Do you want any comment on that? No? Okay.

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Robert Smith, [42]

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All right. And just finally the cannabis and hemp barrier seems to be moving so quickly and there's so much publicity about it, is there any way for you guys to get some association in the press? Or the commentary on field itself as far as being a player?

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

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We -- I actually have got a number of interviews in Cannabis Times and other things, and we've been in some of the key cannabis press late -- earlier this year. We'll continue to focus on how biologicals can really help in this segment because a lot of -- they don't allow any chemicals in this and -- in cannabis and that we have a great, great products for this segment.

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Operator [44]

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Thank you. That does conclude our question-and-answer session. I would like to turn the conference back over to Ms. Marrone for any additional or closing remarks.

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

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Thank you, again, for joining us for the first quarter earnings call. While we're pleased with the start of the fiscal year, we are pressing hard on our strategic efforts to optimize our existing portfolio, expand our market reach and accelerate the potential of our R&D pipeline.

Of course, as we continue to prudently invest for growth, we're working to effectively manage costs and working capital and conserve operating cash. Again, our thanks, and we look forward to speaking with you further about the potential of Marrone Bio Innovations. Thank you.

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Operator [46]

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Thank you. That does conclude today's conference. Thank you all for your participation. You may now disconnect.