Marrone Bio Innovations, Inc., an international leader in sustainable bioprotection and plant health solutions, has provided its financial results for the third quarter and first nine months ended September 30, 2019.
Third Quarter 2019 Financial Summary
- Third quarter 2019 revenues rose 28 percent to $7.0 million driven by strengths in the company’s specialty crop and cultivated garden businesses. Key U.S. markets in the quarter included berries, grapes, tomatoes, rice, hops, and tree nuts and fruits. Additionally, the company saw increased sales in its cultivated garden business, including sales to hemp producers. The recent acquisitions of Pro Farm as well as the Jet-Ag® and Jet-Oxide® products also added modest sales in the last few weeks of the third quarter.
- The 37 percent increase in the quarter in gross profit to $3.6 million was a function of a favorable mix of higher margin products. Gross margins reached 51.5 percent, and the company marked its fourth consecutive quarter of gross margins above 50 percent.
-Operating expenses were $13.4 million in the third quarter of 2019, compared with operating expenses of $6.8 million in the third quarter of 2018. Acquisition-related expenses of $2.7 million and a litigation settlement and related expenses of $1.4 million contributed to the increased level of spending. Excluding these expenses, operating expenses and cash used in operations were only slightly higher than those in the third quarter of 2018, the remaining difference is a result of planned strategic investments in the company’s commercial organization and research and development (R&D) programs.
- Net loss in the third quarter of 2019 was $16.4 million, as compared with a net loss of $4.5 million in third quarter of 2018. The increase in net loss was a result of higher operating expenses primarily attributed to $4.1 million in acquisition- and litigation-related expenses, as well as a $6.3 million non-cash charge related to the estimated fair value of a warrant exercise made under the Company’s new financing facility.
- Adjusted EBITDA, a non-GAAP financial measure, totaled a $4.3 million loss in the third quarter of 2019, compared to a $3.3 million loss in the third quarter of 2018. Adjusted EBITDA is further described in relation to its most directly comparable GAAP measure under "Use of Non-GAAP Financial Information" below.
First Nine Months 2019 Financial Summary
- Revenues for the first nine months of the year reached $22.7 million, compared with $15.5 million in sales in the same period of 2018. This 46 percent increase reflected a diversity of sales across row crops and specialty crops, and from seed treatments to foliar applications. The Venerate family of products was the largest contributor to the year to date sales growth.
- Gross profit rose 67 percent to $12.4 million, and gross margins reached 54.6 percent for the year to date period. Strong sales growth through the first nine months of 2019, coupled with a favorable mix of higher margin products and manufacturing efficiencies contributed to the year to date margin improvement.
- Operating expenses in the first nine months of 2019 were $32.2 million, compared with $21.6 million in the same year to date period in 2018. The largest components of the higher spending were expenses for recent acquisition activities of $3.7 million and for a litigation settlement and related expenses of $1.9 million. Ongoing strategic investments in the company’s commercial operations and R&D pipeline, plus associated employee-related expenses, made up the balance of the increase.
- Net loss year to date was $27.0 million, compared with a net loss of $14.6 million in the first nine months of 2018. The increase in net loss reflected the higher level of operating expenses due to the previously described acquisition- and litigation-related expenses in the third quarter, as well as the previously discussed non-cash charge due to the estimated fair value of a warrant exercise made under the Company’s new financing facility.
- Adjusted EBITDA, a non-GAAP financial measure, totaled a $10.7 million loss in the first nine months of 2019, compared to a $11.5 million loss in the same year-ago period. Adjusted EBITDA is further described in relation to its most directly comparable GAAP measure under "Use of Non-GAAP Financial Information" below.
Novel Bioherbicide Research Results
Field tests conducted in 2019 using commercial rates for Marrone Bio’s novel bioherbicide demonstrated control of a target weed approaching that of a current post-emergent chemical herbicide. These positive results move the novel bioherbicide along to next the phase of research to ensure crop tolerance, test for additional weed control and aim to prove effective commercial use in growers’ integrated pest management systems. The company has received a U.S. patent covering claims related to the pre- and post-emergent herbicidal activity to control weeds, in addition to previously issued patents on the active ingredients’ bacteria and associated pesticidal compounds.
Third Quarter 2019 and Subsequent Operational Highlights
- On Aug. 8, 2019, Marrone Bio announced that it had established a $36.6 million financing facility through a right to call the exercise of certain outstanding warrants at $1.00 per share. The company only expects to draw upon this facility as needed. Any resulting cash raised under this facility is anticipated to be sufficient to fund the current operating plan to a breakeven level.
- On Sept. 11, 2019, the company announced it had acquired from Jet Harvest Solutions all rights and assets to the Jet-Ag and Jet-Oxide product lines, which is expected to be immediately accretive to net income. Jet-Ag and Jet-Oxide are broad-spectrum products used both for control of fungal and bacterial diseases and as disinfectants.
- On Sept. 13, 2019, Marrone Bio closed the previously announced acquisition of Finland-based Pro Farm Technologies OY, adding proprietary nutrient and biostimulant technology and products for seed and foliar treatments to its portfolio. The acquisition is expected to be accretive to net income and cash flow from operations in 2020.
- The company’s novel Bacillus biofungicide, marketed in the United States as Stargus® for specialty crops, was approved for use in Mexico by the Ministry of Health COFEPRIS. Stargus will be used in Mexico to control downy mildew, late blight and a range of other plant-related diseases in zucchini, squash, chayote, melon, cucumber, watermelon and potatoes.
- Marrone Bio’s Regalia and Stargus biofungicides were approved by the U.S. Environmental Protection Agency for use on hemp plants. This is the first time that the EPA has allowed crop protection products for hemp, which became legal to grow under the 2018 Farm Bill.
“The third quarter was significant on several fronts,” said Dr. Pam Marrone, Chief Executive Officer of Marrone Bio Innovations. “We continue to drive sales growth from our core business and are adding exciting new platforms with the acquisitions of the Jet-Ag and Jet-Oxide product lines as well as Pro Farm’s biostimulant and bionutrient business. Excluding acquisition-related costs and a litigation settlement in the third quarter, our operating expenses remain in line with our internal plans and previously discussed investments in our commercial function and R&D pipeline.”
“The investments in our R&D programs have proven fruitful, especially with our novel bioherbicide that has produced results that give us solid foundation to move this project forward. We are making the strategic choices and investments that we expect will deliver on the potential of Marrone Bio to address our growers’ bottom line and sustainability needs as well as our stakeholders’ expectations for accelerated growth.”