MARRONE BIO INNOVATIONS, INC. You should read the following discussion of our financial condition and results
of operations in connection with our condensed consolidated financial statements
and the related notes included elsewhere in this Quarterly Report on Form 10-Q
and with our audited consolidated financial statements included in our Annual
Report on Form 10-K for the year ended
In addition to historical condensed consolidated financial information, this Quarterly Report on Form 10-Q contains forward-looking statements that reflect our plans, estimates and beliefs. Forward-looking statements are identified by words such as "would", "could", "will", "may", "expect", "believe", "should", "anticipate", "outlook", "if", "future", "intend", "plan", "estimate", "predict", "potential", "targets", "seek" or "continue" or and similar words and phrases, including negatives of these terms or similar words, phases, expressions, or other variations of these terms, that denote future events. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other "forward-looking" information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. For example, forward-looking statements include any statements regarding the strategies, prospects, plans, expectations or objectives of management for future operations, including our plans to expand our business through diversification of our portfolio and strategic acquisition or partnerships and investment in our sales and marketing efforts, plans to expand our manufacturing plant, the progress, scope or duration of the development of product candidates or programs, commercialization plans, timelines and potential results, the benefits that may be derived from product candidates or the commercial or market opportunity in any target indication, our anticipated operations, financial position, revenues, costs or expenses, statements regarding future economic conditions or performance, the impact of COVID-19 on our operations and revenues, statements regarding the potential completion and potential benefits of a merger transaction with Bioceres Crop Solutions Corp.,, our continued listing on the Nasdaq Capital Market, statements of belief and any statement of assumptions underlying any of the foregoing. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere, including Part II, Item 1A- "Risk Factors," in this Quarterly Report on Form 10-Q, and in Part I-Item 1A-"Risk Factors" of our Annual Report. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.
22 Overview
We are a growth-oriented agricultural company that supports environmentally sustainable farming practices through the discovery, development and sale of innovative biological products for crop protection, crop health and crop nutrition. Our portfolio of 18 products helps customers operate more sustainably while increasing their return on investment. Our products are used globally, and can be applied as foliar treatments or as seed-and-soil treatments, either on their own or in combination with other agricultural products. We target the major markets that use conventional chemical pesticides and fertilizers, where our biological products are used as alternatives for, or mixed with, conventional chemical products. We also target new markets for which there are no available conventional chemical products, or the use of conventional chemical products may not be desirable (including for organically certified crops) or permissible, either because of health and environmental concerns or because the development of pest resistance has reduced the efficacy of conventional chemical pesticides. We sell our products through distributors and other commercial partners to growers who use our bioprotection products to manage pests and plant diseases, our plant health products to reduce crop stress, and both our plant health and bionutrition products to increase yields and quality.
Business Strategy
We have built a full-service biologicals organization with scope and capabilities across the spectrum of biological products in the market today. Our strategic objective is to capitalize on that position and emerge as the clear leader in the biologicals space with the financial and operational wherewithal to accelerate our path to profitability.
As we look forward, our goal is to leverage our base business, while accelerating our expansion plans and broadening our global reach. We are committed to launching the brand extensions and pipeline products that offer the greatest return on investment for our channel partners and grower customers. We anticipate that synergistic, value-creating acquisitions and partnerships will be part of our strategy. We believe we can continue to tuck in additional product lines as we build a larger commercial presence with a scalable platform.
Our strategy for the current long-term period includes the diversification of
our portfolio, which includes expanding our reach globally, moving away from
having sales concentrated in
First Quarter 2022 Highlights
The following are the more significant financial results for the three months
ended
? Revenues increased approximately 0.5% year over year to$11.1 million , from$11.0 million for the same period in 2021; ? Gross profits decreased approximately 10.9% year over year to$6.2 million , from$7.0 million for the same period in 2021, and gross margins decreased to 55.9% from 63.1%% for the same period in the prior year; ? Operating expenses were$13.2 million in the first quarter of 2022, compared with$10.0 million in the first quarter of 2021; and ? Net loss in the first quarter of 2022 was$7.6 million , compared with a net loss of$3.3 million in the first quarter of 2021. 23
Other significant developments for our business during the three months ended
Bioceres Merger Agreement
On
The consummation of the merger is subject to certain closing conditions,
including (i) the approval of our stockholders, (ii) the expiration or
termination of all waiting periods under the Hart-Scott Rodino Antitrust
Improvements Act of 1976 and receipt of any other specified merger control
consents or clearances, (ii) the effectiveness of the registration statement to
be filed by
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenue, costs and expenses, and any related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Changes in accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and our actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
We believe that the assumptions and estimates associated with estimating revenue recognition, including assumptions and estimates used in determining the timing and amount of revenue to recognize, forecast estimated utilized in identifying impairment indicators of long-lived asset, intangibles and goodwill, contingent consideration liabilities and our going concern assessment, have the greatest potential impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.
Key Components of Our Results of Operations
Revenues
Our total revenues were
Product Revenues
We generate our revenues primarily from product sales, which are principally attributable to sales of our Grandevo, Regalia, UPB-110 ST, and Venerate product lines, but also include sales of our other product families. We believe our revenues may largely be impacted by weather, trade tariffs and other factors that affect commodity prices, natural disasters, infectious diseases and other factors affecting planting and growing seasons and incidence of pests and plant disease, and, accordingly, the decisions by our distributors, direct customers and end users about the types and amounts of pest management and plant health products to purchase and the timing of use of such products. Despite the continued impact of COVID-19, we presently expect revenues to continue to increase year-over-year for 2022.
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Product revenues consist of revenues generated primarily from sales to
customers, net of rebates and cash discounts. Product revenues constituted 99%
of our total revenues for each of the three months ended
We currently rely, and expect to continue to rely, on a limited number of
customers for a significant portion of our revenues because we sell through
large traditional distributors. We continue to develop our pipeline and
introduce new products to the marketplace and anticipate that, over time, our
revenue stream will be diversified over a broader product portfolio and customer
base, including contributions from our
Cost of Product Revenues and Gross Profit
Cost of product revenues consists principally of the cost of raw materials,
including inventory costs and third-party services related to procuring,
processing, formulating, packaging and shipping our products. As we have used
our
We expect to see increases in gross profit over the life cycle of each of our products as gross margins are expected to increase over time as production processes improve, including through expansion of our manufacturing plant, and as we gain efficiencies and increase product yields. While we expect margins to improve on a product-by-product basis our overall gross margins may vary as we introduce new products and as we move the manufacturing of more of our products in-house. In particular, we may experience downward pressure on overall gross margins as we expand sales of more recently commercialized products including Haven, Pacesetter, Optima, Stargus, Takla, and Ympact. Gross margin has been and will continue to be affected by a variety of factors, including plant utilization, product manufacturing yields, changes in production processes, new product introductions, product sales mix, sales incentives such as discounts and rebates and average selling prices.
While we cannot be certain as to the extent of the future impact of cost increases at this time, we have experienced increases in general cost of product revenues, included related to shipping and handling costs globally, and our gross margins could be negatively impacted.
Research, Development and Patent Expenses
Research, development and patent expenses include personnel costs, including
salaries, wages, benefits and share-based compensation, related to our research,
development and patent and regulatory staff in support of product discovery,
development, and support for manufacturing, quality, and regulatory activities.
Research, development and patent expenses also include costs incurred for
laboratory supplies, field trials and toxicology tests, quality control
assessment, consultants and facility and related overhead costs. Our research,
development and patent expenses have historically comprised a significant
portion of our operating expenses, amounting to
While we cannot be certain as to the results at this time, we believe changes in research, development and patent expenses, including external supplier costs, were impacted by COVID-19 and our most current comparative trends may not be reflective of normal operating expense trends during these period or in the future as activities continue to move towards levels priors to COVID-19.
25
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of personnel costs, including salaries, wages, benefits and share-based compensation, related to our executives, sales, marketing, finance and human resources and other administrative personnel, as well as professional fees related to, legal, audit and tax services, accounting fees, acquisition costs, public company expenses and other selling costs incurred related to business development and to acquire or build product and brand awareness. We create brand awareness through programs such as speaking at industry events, trade show displays and hosting local-level grower and distributor meetings. In addition, we dedicate significant resources to technical marketing literature, targeted advertising in print and online media, webinars and radio advertising. Costs related to these activities, including travel, are included in selling expenses.
We typically expect our general administrative expenses to remain relatively flat in most departments with increases for inflation. However, in order to drive our strategy and revenue growth, we expect expenses related to sales and marketing to increase in the future as we increase our marketing communications campaigns and put more "boots on the ground," as we continue to build our global sales and marketing organization to educate and support customers and provide technical sales support, field trials and demonstrations to promote sales growth, which should increase grower demand, or pull-through, develop new customer relationships, as well as expand business with existing customers. In previous periods, certain efforts have slowed or been delayed, due to COVID-19 related restrictions, which has impacted our ability to engage in sales and marketing efforts physically or perform in person demonstrations.
Interest Expense
Interest expenses are primarily driven by outstanding debt financing arrangements, however not all of our current debt instruments are currently generating interest expenses. See Note 6 to our condensed consolidated financial statements.
Income Tax Provision
As of the three months ended
Results of Operations
The following table sets forth certain statements of operations data as a percentage of total revenues:
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
2022 2021
Revenues:
Product 99 % 99
License 1 1
Total revenues 100 100
Cost of product revenues 44 37
Gross profit 56 63
Operating Expenses:
Research, development and patent 28 23
Selling, general and administrative 91 68
Total operating expenses 119 91
Loss from operations (63 ) (28 )
Other income (expense):
Interest expense (5 ) (4 )
Change in fair value of contingent consideration - 1
Other income (expense), net (1 ) 1
Total other expense, net (6 ) (2 )
Net loss before income taxes (69 ) (30 )
Income tax expense - (0 )
Net loss (69 )% (30 )
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Comparison of Three Months Ended
Product Revenues
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
2022 2021
(Dollars in thousands)
Product revenues $ 10,982 $ 10,904
% of total revenues 99 % 99 %
Product revenues during the three months ended
License Revenues
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
2022 2021
(Dollars in thousands)
License revenues $ 115 $ 134
% of total revenues 1 % 1 %
License revenues remained consistent for each of the three months ended
Cost of Product Revenues and Gross Profit
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
2022 2021
(Dollars in thousands)
Cost of product revenues $ 4,891 $ 4,069
% of total revenues 44 % 37 %
Gross profit 6,206 6,969
55.9 % 63.1 %
27
For the three months ended
Research, Development and Patent Expenses
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
2022 2021
(Dollars in thousands)
Research, development and patent $ 3,160 $ 2,512
% of total revenues 28 % 23 %
Research, development and patent expenses for the three months ended
As a result of COVID-19, research, development and patent costsmay not be at normal levels during these periods, but management cannot determine the direct impact on our operating results.
Selling, General and Administrative Expenses
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
2022 2021
(Dollars in thousands)
Selling, general administrative expenses $ 10,068 $ 7,483
% of total revenues 91 % 68 %
Selling, general and administrative expenses for the three months ended
As a result of COVID-19, selling, general and administrative expenses may not be at normal levels during these periods but management cannot determine the direct impact on our operating results.
Other Expense, Net
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
2022 2021
(Dollars in thousands)
Interest expense (551 ) (393 )
Change in fair value of contingent consideration 32 134
Other income (expense) net (66 ) 65
$ (585 ) $ (194 )
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For the three months ended
Seasonality and Quarterly Results
The second half of the year is typically a transition period in the agricultural industry, with the harvest of crops completing in certain areas and planting beginning in others. Accordingly, we have increasingly had higher sales during the first half of the year than the second half, and believe this trend will continue. However, the level of seasonality in our business may change due to a number of factors, such as our expansion into new geographical territories, the introduction of new products, the timing of introductions of new products, and the impact of weather and climate change. Further, we expect substantial fluctuation in sales year over year and quarter over quarter as a result of the number of variables on which sales of our products are dependent. Weather conditions, new trade tariffs, natural disasters, outbreaks of infectious diseases (including the current COVID-19 pandemic) and other factors affect planting and growing seasons and incidence of pests and plant disease. Accordingly, these factors may affect decisions by our distributors, direct customers and end users about the types and amounts of pest management and plant health products to purchase and the timing of use of such products. In addition, disruptions that cause delays by growers in harvesting or planting can result in the movement of orders to a future quarter, which would negatively affect the quarter and cause fluctuations in our operating results. Customers also may purchase large quantities of our products in a particular quarter to store and use over long periods of time or time their purchases to manage their inventories, and low commodity prices may discourage growers from purchasing our products in an effort to reduce their costs and increase their margins for a growing season, which may cause significant fluctuations in our operating results for a particular quarter or year.
Our expense levels are based in part on our expectations regarding future sales. As a result, any shortfall in sales relative to our expectations could cause significant fluctuations in our operating results from quarter to quarter, which could result in uncertainty surrounding our level of earnings and possibly a decrease in our stock price.
Liquidity and Capital Resources
In
In
On
As of
29
As of
Since our inception, we have incurred significant net losses, and we expect to
incur additional losses related to the continued development and expansion of
our business. We believe that our existing cash and cash equivalents of
Additional information regarding risks related to our capital and liquidity is described in our Annual Report filed on Form 10-K in Part I- Item 1A- "Risk Factors", and further discussion of our going concern assessment can be found in Note 1 to the accompanying consolidated financial statements, both of which should be read in connection with this disclosure.
We had the following debt arrangements in place as ofMarch 31, 2022 (dollars in thousands): PRINCIPAL STATED ANNUAL BALANCE (INCLUDING DESCRIPTION INTEREST RATE ACCRUED INTEREST) PAYMENT/MATURITY Promissory Notes (1) 8.00 % $ 3,277 Due December 31, 2022 Promissory Note (2) 5.25 % 7,849 Monthly/June 2036 Promissory Notes (3) 8.00 % 6,999 Due December 31, 2022 Secured Borrowing (4) 12.78 % 13,278 Varies(5)/May 2022(6) Proportionately each September 2022, 2023, 2024, Loan Facility 1.00 % 303 2025
See Notes 6 of the condensed consolidated financial statements for each of the following debt arrangements:
(1) "-October 2012 andApril 2013 Secured Promissory Notes." (2) "-June 2014 Secured Promissory Note." (3) "-August 2015 Senior Secured Promissory Notes." (4) "-LSQ Financing." (5) InFebruary 2018 , the maturity date and all interest payments were extended toDecember 2022 (6) Payable through the lender's direct collection of certain accounts receivable throughMay 2022 . 30 The following table sets forth a summary of our cash flows for the periods indicated (in thousands): THREE MONTHS ENDED THREE MONTHS ENDED MARCH 31, MARCH 31, 2022 2021 Net cash used in operating activities $ (8,396 ) $ (5,017 ) Net cash used in investing activities (198 ) (869 ) Net cash provided in financing activities (1,667 ) 8,968 Net increase in cash, cash equivalents, and restricted cash $ (10,261 ) $ 3,082
Cash Flows from Operating Activities
Net cash used in operating activities of
Net cash used in operating activities of
Cash Flows from Investing Activities
Net cash used in investing activities were
Net cash used in investing activities were
Cash Flows from Financing Activities
Net cash provided in financing activities of
Net cash provided in financing activities of
Recently Issued Accounting Pronouncements
See Note 2 of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q in Part I-Item 1- "Financial Information."
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