Second Quarter 2019 Revenues Rose 22 Percent to $7.0 Million; First Half 2019 Revenues Increased 56 Percent to $15.7 Million.
Company Also Announces Pro Farm Acquisition to Accelerate Growth, and Establishes Financing Facility to Fund Acquisition and Operations.
Marrone Bio Innovations, Inc. (NASDAQ:MBII), an international leader in sustainable bioprotection and plant health solutions, has provided its financial results for the second quarter and first six months ended June 30, 2019.
Selected Operating and Financial Highlights
Q2 2019 Financial Highlights
- Revenues for the second quarter of 2019 increased 22 percent to $7.0 million from revenues of $5.8 million in the second quarter of 2018. The record second-quarter sales reflected the company’s continued growth in the seasonally smaller specialty markets for trees, fruits, nuts, vegetables and vines. Significant uptake in various nuts, strawberries, tomatoes and wine grapes was driven by the company’s BioUniteÔ strategy, which offers growers unique combinations of bio-based crop protection products with chemical options in their integrated pest management programs. Revenue growth was led by foliar applications of the Venerate, Grandevo and Regalia product families for insect and fungal disease control, respectively.
- Gross margins in the second quarter improved 710 basis points to 54.4 percent as a result of a favorable product mix.
- Operating expenses were $10.2 million in the period, as compared with operating expenses of $7.2 million in the second quarter of 2018. The increase was driven primarily by additional legal, accounting and acquisition-related expenses. Planned investments in strategic research and development programs and employee-related expenses also led to the higher level of spending.
- Net loss for the second quarter of 2019 was $6.8 million, or $(0.06) per share, compared with a net loss of $4.9 million, or $(0.04) per share, for the same period in 2018.
- Cash used in operations was $3.0 million in the second quarter of 2019, a 42 percent decrease from the cash used in operations in the second quarter of 2018, primarily from a more favorable working capital position.
H1 2019 Financial Highlights
- Revenues for the first half of 2019 reached $15.7 million, a 56 percent increase and a record for first-half sales. The strong performance in the first half reflected continued growth across the Venerate, Regalia and Grandevo families of products. The company had strong use of Venerate in the first quarter of the year for soil- and seed-applications in row crops and in the first half for foliar applications in fruits, vegetables and nuts. Regalia sales increased in the first six months of the year from expanded in-season market reach to treat fungal diseases in trees, nuts and vines. Use of Grandevo for in-season insect control continued to expand in the major fruit and vegetable crops.
- Gross margins reached 56.0 percent for the first six months of 2019, benefiting from a favorable product sales mix and improved manufacturing efficiencies as a result of higher volumes.
- Operating expenses in the first half were $18.9 million, compared with $14.8 million in the first six months of 2018. The increase reflected planned investments in commercial operations – Including for marketing programs driven by higher sales – and in key research and development projects. Operating expenses for the first six months of the year also included higher employee-related expenses, legal costs, and additional acquisition and financing-related expenses.
- Net loss in the first half of 2019 was $10.7 million, or $(0.10) per share, as compared with a net loss of $10.1 million, or $(0.11) per share, in the same period in 2018.
- On a comparative basis, the first half of 2018 included a non-recurring net benefit of $1.8 million to other income related to the Company’s comprehensive financing and debt restructuring transactions. Additionally, the diluted weighted-average shares outstanding in the first half of 2019 were 110.7 million shares, compared with 91.7 million shares in the first half of 2018.
- Cash used in operations in the first six months of 2019 was $10.6 million, a 29 percent decrease from the cash used in operations of $15.0 million in the same year-ago period, primarily from the Company’s improved working capital position.
Pro Farm Acquisition Announcement
Marrone Bio recently announced the entry into a definitive agreement for the acquisition of Pro Farm Technologies OY, which will expand the company’s portfolio of bio-based products for integrated pest management and plant health. Pro Farm is being acquired for an agreed enterprise value of $31.8 million, including a combination of $6.2 million cash and 12.7 million shares of Marrone Bio stock to be paid to Pro Farm’s equity holders, debt holders and advisors upon the closing of the transaction, as well as the opportunity for potential payment of a total of up to $7.5 million of additional shares of stock deliverable from 2021 through 2024 based on the achievement of agreed commercial milestones. The transaction is expected to close in the third quarter of 2019, subject to satisfaction of customary conditions.
This transaction is expected to lift market share and create a larger global platform for Marrone Bio in the $4.6 billion seed- and soil-treatment market. With the acquisition of Pro Farm, Marrone Bio will add proprietary nutrient and biostimulant technology and products for seed and foliar treatments to its portfolio. The acquisition also will give the company a significant opportunity to leverage an expanded global distribution network for all of MBI’s products.
Marrone Bio expects to benefit from partial-year sales in 2019 as a result of the transaction. With historical gross margins significantly higher than Marrone Bio’s current product portfolio average, the Pro Farm acquisition is expected to be accretive to net income and cash flow from operations in 2020.
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Marrone Bio has established a $36.6 million financing facility through a right to call the exercise of certain outstanding warrants at $1.00 per share, which Marrone Bio expects to draw upon only as needed. The company has issued an initial $10 million drawdown of the facility, which is scheduled to complete by early September. In addition to using a portion of the drawn funds for the Pro Farm acquisition, any resulting cash raised is anticipated to be sufficient to fund the current operating plan to a breakeven level, as well as fund near-term strategic alternatives. New warrants to purchase shares at a higher exercise price of $1.75 will be issued on a one-for-one basis along with every called share under the outstanding warrants.
“The commercial, financial and strategic results of the first half of 2019 underscore the breadth of the transformation we are undergoing at Marrone Bio,” said Dr. Pam Marrone, chief executive officer of Marrone Bio Innovations. “We see a clear path forward to leverage our scientific, manufacturing and commercial expertise into a global platform of biologically based crop protection and crop stimulant products.”
“With the announcement of the acquisition and the financing facility, we are creating the capacity to break through with a larger commercial presence and enhanced long-term strategic options as a partner of choice with our growers, distributors and agriculture company peers.”
- Marrone Bio and Compass Minerals (NYSE: CMP) Plant Nutrition formed a research collaboration to develop new specialty plant nutrient products enhanced with microorganisms. The new products will be developed with patented technologies aimed at helping crops take up nutrients more efficiently, to increase crop health and reduce crop stress.
- The Company entered into a global, non-exclusive research collaboration with Valagro S.p.A to leverage a subset of Marrone Bio’s collection of 18,000 microorganisms in conjunction with Valagro’s biostimulant products that enhance crop yield and quality.
- Marrone Bio received a notice of allowance from the U.S. Patent and Trademark Office for key claims covering the composition and method of formulating for Grandevo WDG microbial-based bioinsecticide.
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