Bioceres Crop Solutions (NASDAQ:BIOX) held its fourth-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.

This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.

Access the full call at https://events.q4inc.com/attendee/858577061

Summary

Bioceres Crop Solutions faced a challenging fiscal 2026 with an 18% decline in revenues due to ongoing litigation and business strategy shifts, particularly impacting their international business.

Despite revenue declines, the company stabilized its operations in Argentina and achieved positive adjusted EBITDA in Q4, driven by cost reductions and operational discipline.

Crop nutrition, especially microbial fertilizer, showed strong performance with a 36% increase in Q4, while crop protection and seeds saw revenue declines.

Full-year gross profit decreased by 21% due to inventory obsolescence and seed business reconfiguration, but core product categories are showing profitability improvements.

Adjusted EBITDA improved from negative $9.6 million to positive $0.6 million year-over-year in Q4, reflecting significant cost reductions.

Financial debt remained stable at $225.9 million, with successful reprofiling of local debt obligations in Argentina to strengthen liquidity.

For fiscal 2027, the company aims to increase gross margins to 40% by focusing on high-quality revenue streams and simplifying its product portfolio.

The company is also targeting a 23% SG&A as a percentage of revenue by fiscal 2028 through process and cost center simplification.

Full Transcript

OPERATOR

Hello everyone. Thank you for joining us and welcome to the Bioceres Crop Solutions fiscal fourth quarter and full year 2026 financial results conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Paola Savanti, Head of Investor Relations. Paola, please go ahead.

Paola Savanti, Head of Investor Relations

Good morning and thank you. Welcome everybody to Bioceres Crop Solutions fourth fiscal quarter and full year 2026 earnings conference call. Our prepared remarks today will be led by our Chief Executive Officer, Federico Trucco, and our Chief Financial Officer, Ezekiel Simalmajer. Both of them will be available for the Q&A session following the presentation. During this call we will be making forward-looking statements. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties.

I refer you to the forward-looking statements section of the earnings release and presentation as well as the recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed circumstances. In today's presentation we will be making references to certain non-GAAP financial measures. Reconciliations of the non-GAAP measures can be found in our earnings press release. The conference call is being webcast and the link is available at our investor relations website.

It is now my pleasure to turn over the call to Federico.

Federico Trucco, CEO

Thanks, Paola, and thank you everyone for joining us today. Good morning. Please turn to slide number three for today's highlights. Fiscal 2026 was a challenging year for Bioceres, marked by the ongoing litigation with certain of our creditors and the business consequences emanating from this dispute. Revenues from our continuing operations declined by 18% with its consequential decline in gross profits and adjusted EBITDA, excluding changes associated with our new seed business strategy.

The decline in revenues has been most significant in our international business. But in Argentina, our commercial operations have mostly stabilized, in part because of the successful reprofiling of our local debt obligations towards the beginning of the fourth quarter. Against that backdrop, our priorities have been to focus the business on our core capabilities, reduce our cost structure and strengthen operating discipline. Fourth quarter results provide encouraging evidence of progress.

Revenues from continuing operations were broadly stable year over year, with improved performance across several of our core product categories. At the same time, the cost actions implemented throughout the year resulted in a materially lower expense base, allowing us to return to positive adjusted EBITDA in the quarter. Ezequiel will now review our financial performance for the quarter and the full year. I will then return to discuss our outlook towards the end of today's call.

Ezekiel Simalmajer, CFO

Thank you, Federico, and good morning everyone. Before I begin, I want to remind everyone that unless otherwise indicated, the results I will discuss today reflect our continuing operations for all periods presented. Prior year amounts have been recast to exclude Pro Farm Group and are presented on a comparable basis. With that, let's turn to slide 4 and our revenue performance. Revenues for the fourth quarter were 55.9 million, slightly above the 55.4 million the prior year.

The main source of growth during this quarter came from the crop nutrition segment, increasing by 36% year over year, mainly as a result of a strong performance in microbial fertilizer. This increase was offset by lower revenues in crop protection and in seeds. For the full year, revenues declined 18% to 238 million. Approximately half of that decline was associated with the before-mentioned seeds business reconfiguration. Most of the remaining decline was in crop protection, while crop nutrition revenues were broadly stable for the year.

Within crop nutrition, the strong performance of microbial fertilizer was offset by lower inoculant revenues. Moving to gross profit, let's turn to slide 5. Reported gross profit for the quarter was 12.7 million, down 6%, with gross margin of 22.8%. There are a few important factors behind those reported numbers. First, the quarter included approximately 4 million of non-recurring inventory adjustments related to obsolescence. Following a comprehensive review, this had a meaningful impact on reported gross profit and masked improving profitability across several of our core product categories.

Crop nutrition is probably the clearest example. Gross profit increased 37%, led by microbial fertilizer where we had both higher revenues and improved margins. In crop protection, the overall decline was concentrated in third-party and other products. Our adjuvant portfolio actually delivered higher gross profit and improved margins year over year. And within seeds and integrated product, the remaining seeds continue to weigh on reported results, but seed treatment packs delivered higher sales and approximately 40% growth in gross profit.

Reported consolidated gross margin does not yet tell the full story. Beneath the headline numbers, we are seeing early signs of improvement across several of our core business, providing a strong foundation for future performance. For the full year, reported gross profit was 82.9 million, down 21%, with gross margin of 34.8%. As with the quarterly numbers, understanding the components of that decline is important. There were some significant effects during the year, the higher inventory obsolescence charge we just discussed, and the wind-down of the seed business model.

Looking at the underlying product performance, crop protection margins were broadly stable for the year despite lower revenues. Microbial fertilizer increased gross profit by approximately 20%, and seed treatment packs also delivered higher gross profit and improved margins. The largest reported decline was in crop nutrition, particularly inoculants, where the year-over-year comparison was significantly affected by the inventory obsolescence charge.

So while reported consolidated gross margin declined, the underlying composition of the portfolio continues to improve with a greater concentration of products that offer stronger profitability. Turning to slide 7 to look at adjusted EBITDA, that is where the impact of the cost actions we have been implementing throughout the year becomes much more visible. Adjusted EBITDA improved by approximately $10 million year over year, from negative 9.6 million to positive 0.6 million.

The main driver was a reduction in our operating expense base. SG&A was down 19% in the quarter, with reductions in both fixed and variable expenses, and those savings more than offset the decline in reported gross profit. Other income also contributed positively in the quarter, reflecting gains from joint farming and barter arrangements. So although 0.6 million is still a modest level of EBITDA, the important point for us is the magnitude of the year-over-year improvement and the fact that the cost actions taken during fiscal year 2026 are now clearly flowing through the P&L. For the full year, adjusted EBITDA was 25.5 million compared to the 28.9 million in fiscal year 2025. The bridge illustrates the scale of the cost reset. Gross profit declined by approximately 22 million year over year, but it was substantially offset by the more than 20 million of improvement in operating expense. Despite the 18% reduction in revenues and a 21% reduction in reported gross profit, adjusted EBITDA declined by only 12%. We think that demonstrates the magnitude of the cost actions implemented during the year and the significantly leaner operating structure with which we are entering fiscal year 2027.

Finally, turning to the balance sheet, total financial debt on June 30 was 225.9 million, broadly stable compared with the end of the third quarter. Cash and short-term investments totaled 12.2 million, resulting in a net financial debt of 213.6 million. As we have previously discussed, following the acceleration notice associated with the noteholders dispute, substantially all of the related secured notes, 118.6 million at year end, remain classified as short term.

The outstanding balance does not reflect any reduction in connection with the Pro Farm foreclosure. The company continues to dispute the acceleration of the notes and the foreclosure process, which remains subject to proceedings. Outside the secured notes, we also made meaningful progress on liability management during the year that was completed during the fourth quarter. As a result, we successfully pursued the reprofiling of approximately $28 million of bank debt obligations and completed a voluntary maturity extension process of our local bonds in Argentina, covering $46.5 million in aggregate principal amount of outstanding notes.

This initiative further strengthens our liquidity profile and extends our debt maturity schedule. Managing liquidity and the capital structure remains a key priority as we enter fiscal year 2027, alongside the operational and capital initiatives Federico mentioned.

Federico Trucco, CEO

Thanks, Ezequiel, and please now turn to slide 10 for a brief discussion on what to expect for the year ahead. We have now substantially completed the nearly two-year reconfiguration of our seed business and concluded an external strategic assessment of our continuing operations. That work has provided a clear roadmap for the next phase of the business, including rationalizing our portfolio and go-to-market channels, revisiting some of our commercial policies and strategic relationships, and realigning our R&D and investment with defined financial objectives while continuing to explore further efficiencies on the OPEX front and non-core asset monetization opportunities. These actions are also beginning to translate into improved portfolio profitability, although the benefits are not yet fully reflected in reported gross margins as we work through the portfolio and commercial transition described before. For instance, if you now turn to the next slide, you will see that if we adjust the non-recurring obsolescence associated with the portfolio transition, gross profit percentage has already expanded from fiscal year 25 to fiscal year 26.

For fiscal year 27 and beyond, we are targeting about 40% gross margins. We believe that this can be achieved by focusing growth on higher-quality core revenue streams, particularly in Brazil, as well as simplifying the product portfolio to focus on the most valuable and value-accretive SKUs. Just for reference, 99% of the aggregated gross profit from fiscal year 25 resulted from less than 50% of the SKUs in our catalog, so we see a great opportunity in this work.

We have also made great progress on the SG&A front as we have already discussed during the presentation and you can see this summarized in the next slide. Yet we believe that we can continue to improve on this front, targeting a combined 23% total SG&A as a percent of revenues for fiscal year 28. We believe this is achievable as we implement new systems and simplify our organizational arrangement in terms of processes, cost centers and legal entities.

As we enter fiscal 27, our focus remains on improving the performance and cash generation of our continuing business, maintaining cost and working capital discipline, and actively addressing the company's capital structure and liquidity position. We believe the actions taken during fiscal 26 have established a more focused operating base from which to move forward. We continue to recognize the significance of the ongoing litigation process in New York, where we'll continue to pursue the appropriate legal course as well as evaluate constructive alternatives where possible.

With this, we end our prepared remarks. We can now open the call for Q&A. Operator.

OPERATOR

Thank you. We will now begin the Q&A session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. There are no questions at this time.

I will now turn the call back over to Federico Trucco for closing remarks.

Federico Trucco, CEO

Thank you. With this, we can end the call for today. Have a great rest of the week.

OPERATOR

This concludes today's call. Thank you for attending. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.