AgroFresh Solutions, Inc.
Q1 2017 Earnings Call Transcript

Published: 13 May 2017

[Operator:]

Good day, and welcome to the AgroFresh Solutions, Inc. First Quarter 2017 Results Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. John Cassidy, Director of Financial Planning and Analysis. Please go ahead, sir.

[John Cassidy:]

Thank you, and good morning. Welcome to the 2017 First Quarter Earnings Conference Call for AgroFresh Solutions. The comments during today’s call and the accompanying presentation contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are considered forward-looking statements. These statements are based on management’s current expectations and beliefs as well as a number of assumptions concerning future events. Such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward-looking statements. Some of these risks and uncertainties are identified and discussed in the company’s filings with the SEC. We’ll also refer to certain non-GAAP financial measures. Please refer to the tables attached to the slides accompanying this presentation, which can be found in the Investor Relations section of our website for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures. I would now like to turn the call over to Jordi Ferre, Chief Executive Officer.

[Jordi Ferre:]

Thank you, and good morning, everyone. I’m joined today by Kathy Harper, our Chief Financial Officer. Let me start this morning by noting that we have had a strong first quarter with revenues up 15% from last year, while we continue to make progress in reducing operating cost, resulting in a significant improvement in profitability. Additionally, our recent Dow, Avenue agreements speak volumes about the confidence of two large shareholders having in our technology, management, and most importantly, growth strategy. Let’s turn to Slide 3, where we can review some of the highlight for the quarter in more detail. Revenue for the first quarter of 2017 was $33 million, up 15% over last year’s first quarter. This is the second consecutive quarter of revenue growth versus a comparable period of the prior year, primary attributable to the solid performance of our core Post-Harvest business and our evolution from a single product to a quality system that includes other solutions, such as AdvanStore and Harvista. We also saw strong growth in Ethylbloc including increased demand in Columbia, where it is used to ensure the quality of flowers during a rainy season. In addition, Ethylbloc has been adopted as part of a standard quality programs for potted orchids in the Netherlands. We also saw encouraging progress in our New Business Development segment, where, although, from a still relatively low base, both RipeLock and LandSpring, saw our sales grow this quarter compared to the same quarter last year. We had another quarter of stable margins and further decreases in operating expenses. This led to a significant improvement in EBITDA and a reduction in our net loss, while also generating $9 million of cash so that we ended the quarter with a cash balance of $85 million. Our performance continues to be driven by the strength of SmartFresh, where sales increased in Latin America in the first quarter 2017, despite a continued increase in competition, especially in Argentina. Overall, pricing in the quarter was stable, evidence of the strength of our basic value proposition that apple and other fruit growers overwhelmingly choose SmartFresh when they need someone they can depend on to protect their investment. Harvista experienced double-digit growth in Argentina versus the first quarter of 2016. RipeLock revenues were also up versus the same quarter last year, although, from a low base. We believe this is the indication of the potential of this product. RipeLock is a big part of our retail strategy and our trials for the large retailers in the U.S. and U.K. are continuing to produce positive results. We are working with retailers to roll out RipeLock systemwide. Consequently, we believe overall first quarter results reflect the health of our business and provide an early indication that our new strategy and enhanced financial discipline are helping to improve performance. Keep in mind, as we discussed in our last call, crop size can vary from year to year, therefore, we continue to expect some variability in our performance attributable to acute weather conditions that can have an impact on specific crops. Our strategy is to diversify the business to manage the challenges of weather-related crop impacts. While these diversification efforts are beginning to take root, they’ll need more time before helping us better manage our exposure. Please turn to Slide 4. Since joining AgroFresh in October, Kathy and I have been working hard to implement changes we believe will unlock AgroFresh growth potential. We both came from competitive industries, so competition is not new to us. I have now visited all of the geographies in which we operate, meeting with a wide range of customers and potential partners. And engaging with our teams around the world in Washington State, Latin America, China, to discuss implementation of our new commercial strategy, this has provided me with a better appreciation of the outstanding professionals on our team. Our global infrastructure and our overall potential in the food waste prevention space and has strengthened my confidence in our strategy. We continue to believe AgroFresh has strong growth potential in the business of preserving and enhancing the quality and freshness of food, reducing food waste and improving productivity. We have developed a 4-point plan to implement our strategy. So let me provide you some updates on the progress being achieved across these broad initiatives. Please turn to Slide 5. At the center of our strategy is our goal to strengthen the core Post-Harvest business, which is comprised of our SmartFresh, AdvanStore and existing Harvista-based business. Strengthening our core is the key to establishing a solid foundation that will support the various growth initiatives and provide sufficient time and resources for them to develop and mature. We are continuing to strengthen our SmartFresh Quality System with introduction of AdvanStore Phase 2, a program that provides risk prediction utilizing microbial volatile organic compounds gas detection and genomic testing. Scale-up preparations are in progress for both North America and Europe, and we’ll be completing before the Northern Hemisphere selling season. Additionally, in the second quarter, we also expect to be introducing a new product to the SmartFresh Quality System platform to further differentiate and strengthen our competitive positioning. In the appendix, we have a slide showing the long-term trends in the global apple crop. Since crop size, the proportion of apples actual stored and the degree of SmartFresh penetration affect the core Post-Harvest business. Although, the crop performance can vary from year to year, over the long term, it tends to fall within a fairly predictable range. The average of the ranges what we are using as a steady-state crop size, as we believe, over time, it has shown to be fairly reliable. Relative to the steady rate scenario, there were a few variations that impacted the first quarter. Revenue in Latin America grew 20% from last year with a volume of apples treated in Brazil up 23%. Generally speaking, the 2017 Latin America harvest was also slightly earlier than last year. In Argentina, we increased our penetration, growing SmartFresh and Harvista volumes. Revenue in Australia and New Zealand was down 12% from last year, as the Australia 2017 harvest season was approximately two weeks later than 2016. We continue to work eventually on new registrations for the additional crops and in new geographies as a means to continue to expand our core SmartFresh franchise. To that end, we have recently received approval for the use of SmartFresh ProTabs in Germany on apples as well as on pears, plums and tomatoes. Consequently, we are starting to have success expanding SmartFresh to new crops. For instance, upwards of 40% of our first quarter revenue growth came from crops other than apples. Turning to Slide 6, Harvista and LandSpring continue to be our primary pre-harvest products. Harvista remains a key element of our SmartFresh Quality System for integrated apple growers and packers. In addition, Harvista also has growth potential as a standalone product. For such opportunities, we believe it’s best to partner with companies that have the scale, resources and specialized expertise needed to succeed in the pre-harvest market, allowing us to concentrate our resources on strengthening our Post-Harvest franchise. As mentioned last quarter, we recently entered into an agreement with Red Gold, the recognized leader in the tomato industry, based on the positive impact LandSpring had on their tomato yield. In early April, LandSpring secured EPA approval for over 12 additional crops, including broccoli, brussels sprouts, cabbage, cantaloupe, cauliflower, cucumber eggplant, bell peppers, summer squash and watermelon. This doubles LandSpring’s potential acreage. Additionally, we are working with a number of potential pre-harvest partners to expand and diversify our one -MCP pre-harvest technology in crops such as cotton, melons and pineapples. As seen on Slide 7, we are also making great progress with our third initiative, innovation. Our innovation strategy is focused on enhancing our food preservation and waste reduction technology solutions across the entire supply chain. And so we have defined 4 different innovation platforms. Food Fresheners and Preservation, Detection Systems, Software as a Service, and Post-Harvest Chemistry. During the first quarter of 2017, we have made two small investments for the purpose of gaining access to innovative technologies and in securing distribution rights, consistent with our strategic focus on food freshness, extension and waste reduction. First, we have made a small investment in an organic produced treatment that has the potential to dramatically extend the shelf life of fruits, such as cherries and strawberries. It also has antimicrobial properties. Our second investment was in the food sensor company, which has a technology that is designed to provide real-time freshness reporting anywhere in the world for just a few cents per carton. These are both early-stage innovating technologies and products in exciting areas off the Post-Harvest space. They also offer the opportunity to expand into new crops where one -MCP is less effective, especially high-value fruits, such as cherries and strawberries. We are in an evaluation process with each of these companies and we’ll provide more details of these evaluations progress. On Slide 8, you will see the progress we have achieved with our fourth grow initiative, expansion into retail. Retail is the largest growth opportunity for AgroFresh. Food waste is an increasing global concern, with 2/3 of these losses occurring from harvest to retail. With our global footprint and proven food preservation technology, we believe that AgroFresh is ideally positioned to capitalize on growth opportunities in retail. RipeLock is our first product entry in the retail market and it represents a substantial growth opportunity for our business. Though still small, revenues continue to grow with positive customer trials to date, showing that RipeLock helps reduce shrinkage by as much as 15% to 30%. As an example, based on positive test results, Toni Direito, Commercial Director, Compagnie Fruitiere, a leading supplier of bananas in the U.K. said, "It is eye-opening to see how effective RipeLock is. We added RipeLock to our program last year and immediately saw better quality and color in our bananas. It has helped us manage our banana supply, and our retailers and wholesalers like that the bananas have a longer shelf life." The key to success will be to rollout the RipeLock program in major retailers. And with our 2 largest shareholders agreeing to provide up to $100 million in loans for approved acquisitions, we have significantly expanded the range of candidates we could potentially acquire to reinforce our retail strategy. Now let me turn the call over to our CFO, Kathy Harper to go through the financial results in greater detail.

[Kathy Harper:]

Thank you, Jordi, and good morning to everyone on the call. Let me review the first quarter financial highlights. The new year’s off to a strong start with improved top and bottom line performance. Beginning with net sales, please turn to Slide 10. Net sales for the first quarter of 2017 were $33 million, up 15% from a year ago. Sales of Harvista and SmartFresh and apples made up 60% of this growth, with our largest contributions coming from Brazil and Chile. As Jordi noted, over 40% of the growth in the quarter came from crops other than apple, including pears, flowers, bananas and persimmon. Harvista, for other crops, also contributed meaningful growth as our business in Argentina continues to expand. The impact of currency on revenue was negligible in the first quarter of 2017 compared to the first quarter of 2016. Operational gross margin of 82% was in line with the first quarter of 2016 and was the result of a relatively stable pricing environment and some impact of higher revenue against the fairly consistent fixed cost base. Turning to Slide 11, we are continuing to reduce operating expenses with selling, general and administrative expenses down by over $4 million from a year ago quarter, due to efficiency and productivity improvements. There were a number of nonrecurring items, such as litigation cost and expenses associated with our strategic review included in SG&A this quarter, pricing us above our targeted run rate for the quarter. That said, we made progress during this quarter with our ongoing efforts to embed efficient and effective systems and processes and still expect to have average SG&A of $11 million per quarter in 2017. Research and development costs were $3 million, which is $1 million less than the same quarter last year, reflecting our efforts to more intently concentrate on products supporting our strategy. Over time, we expect to achieve continued performance improvements in our business by further driving down operating expenses. Additionally, interest expense decreased by nearly $5 million from a year ago to $10 million for the quarter. This decrease was driven by lower non-cash accretion expense on the contingent consideration, otherwise known as the earn-outs. As a result of the adjustment to the value of contingent consideration recorded in the fourth quarter of 2016, an additional adjustments arising out of our recently announced agreements with Dow and Avenue Capital, we expect interest cost to be reduced by $5 million per quarter compared to 2016. On Slide 12, you will see we generated EBITDA of $11 million in the quarter, which is a $7 million improvement over the $4 million in EBITDA generated in the first quarter of 2016. The company also continues to generate strong cash flow with cash flow from operations of $9 million in the quarter. Capital expenditures from $1 million in the first quarter up marginally from a year ago quarter. For the full year, we expect capital expenditures to be roughly $7 million, with the majority of the increase versus 2016 attributable to standing-up our own independent IT infrastructure and ERP. Turning to Slide 13, the balance sheet at March 31, 2017 was strong, including significant liquidity. Debt was $408 million and cash was $85 million with total liquidity of $110 million. In addition, we now have access to up to $100 million in loans from Dow and Avenue for approved acquisition. Since the Dow and Avenue agreements were executed subsequent to the end of the first quarter, we have included a couple of slides at the end of our presentation, summarizing the deal and reflecting its impact on our balance sheet and statement of operations. The net effect is that the agreements reduced liabilities by $85 million. Now, I’ll turn the call back to Jordi for a discussion of our outlook for 2017 before opening the call to Q&A.

[Jordi Ferre:]

Thank you, Kathy. Please turn to Slide 14. The year is off to a good start, and we are encouraged by the progress we achieved in the first quarter. Since our business is more heavily weighted towards the second half of the calendar year, we are working diligently to ensure we sustain our success over the remainder of the year. To that end, we reconfirm our full year views provided during the fourth quarter conference call. For gross profit margin, we expect a slight decline in percentage similar to what we experienced in 2016, driven mainly by product mix. In terms of our balance sheet, we are taking deliberate actions to improve our working capital in 2017. From a cash flow perspective, we expect to continue generating significant cash from operations. We expect our ending cash balance in 2017 to grow before the impact of any acquisitions or strategic investments. Summarizing, in the first three months of 2017, we continue to make progress in all of the areas that are key to our long-term success, strengthening our business, reducing unnecessary operating cost and implementing our growth strategy. Our agreements with Dow and Avenue improve our financial flexibility and give us access to additional resources to implement our growth strategy. We are hard at work preparing for the balance of the year, where we believe the development of our new marketing strategy and the SmartFresh Quality System will sharpen our competitive edge. In the first quarter, we gain key insights as to our new marketing strategy. We are certain these insights will help improve our success in the upcoming Northern Hemisphere selling season. We want to thank you for all your continued support. Now I would like to open the line to Q&A.

[Operator:]

[Operator Instructions] And the first question will come from Daniel Jester of Citi. Please go ahead.

[Daniel Jester:]

So I thought I caught this in your prepared remarks, but could you say that the Latin America season was a bit early this year? And I was just wondering if you can comment about some of the weather issues in Argentina in the second quarter and just help us kind of bridge first quarter, second quarter in terms of seasonality this year for revenues?

[Jordi Ferre:]

Yes. The crop, you’re correct. The crops that we saw, especially in Brazil was a little bit earlier this year. Concerning Argentina, I think, I may have mentioned Australia as potentially having some weather issues rather than Argentina, but as you saw that in first quarter, we already were -- we did not have stellar results in Australia. So that, I would say, that’s already accounted in the results on Q1.

[Daniel Jester:]

Okay. And then, with regards to the M&A dry powder, which you referenced as part of the Dow, Avenue transaction. Is there, are there time restrictions in place? And maybe you can just kind of update us on sort of what you’re seeing out there in the M&A landscape?

[Kathy Harper:]

Daniel, the time restrictions, you mean, on the debt facility available to us? We’ve got -- it’s out there till ‘19.

[Daniel Jester:]

And then on sort of what’s the pipeline look like, updates from the fourth quarter?

[Jordi Ferre:]

We, obviously, we have to be careful what we say, but let me just put it this way, we’ve been very active in building a strong pipeline of potential Q&A, sorry, of potential M&A. So you stay put for more news, but we haven’t been just sitting on this. We’ve been very actively working on this, and there’s a number of discussions and actions that we’re doing right now. And in near time, we will be able to announce.

[Daniel Jester:]

Okay. And then, as you’ve been meeting with customers, can you give us any feedback on some of the changes you’re making in terms of how you go to market, particularly in U.S.? And any initial thoughts about the pricing environment for the upcoming U.S. season?

[Jordi Ferre:]

I think the -- my observation is that customers have received very positively, the fact that we are expanding our platform of services. We have a good reputation. Our people are well liked and appreciated, the service we do. And the fact that we can actually extend it to other areas has been, generally, very well received. In terms of the pricing environment, I don’t think there’s any change of what I had already reported in the past. We have already facing competition and about, we estimate 50% of our revenue base. And I don’t think there’s going to be a big change this year. What’s going to change is the way we’re going to approach that by broadening our services. And in the next quarter, I’ll be able to announce a little bit more of what we are going to do, especially in Northern Hemisphere in that respect.

[Daniel Jester:]

Okay. And then just a couple of quick ones maybe for Kathy, can you -- what’s the bridge between the 11 million run rate you mentioned for SG&A and the 16 million that you reported in the first quarter?

[Kathy Harper:]

So in first quarter, I did note that we had a few onetime items. We had some significant litigation expense in the first quarter this year, which was round numbers, 2 million. We did have some cost associated with strategic review and other valuations, so it’s about 1 million. And we had incentive cost. We introduced a new long-term incentives plan that we booked some expense for, and then 331 period to incentivize national research, as well as fourth quarter of last year, we were well below the 11 million, and so just trying to give you a view. We are at a target bonus accrual rate, where in December fourth quarter of ‘16, we actually, for bonuses in 2016, employees received 24%, not 100%. And so there was a credit in the fourth quarter and we’ve got a full 100% target in the first quarter, so. There is the chunk of the pieces.

[Operator:]

[Operator Instructions] And the next question will come from Brian Nolan of JP Morgan. Please go ahead.

[Brian Nolan:]

I wanted to ask you quickly. Can you give us some more information regards to where you’re seeing more sales outside of apples? Are you getting from -- is it Brazil watermelons? And did that have carry overs into the North American season as well?

[Jordi Ferre:]

Yes, we see more sales in areas like pears, kiwis and watermelons, yes. And obviously, we also mentioned this situation, we have very positively on flowers, where we’re making progress as well with our solution.

[Brian Nolan:]

And also there’s something you mentioned during the call, Jordi, that I didn’t quite pick up. You had talked about gross margin expectations being similar to 2016? Is that correct or is there...

[Jordi Ferre:]

That is correct. Sorry, yes. I was -- yes. Similar to 2016, we’ve potentially supplied degradation because of the change of product mix.

[Operator:]

The next question will come from Michael [indiscernible] of BMO Capital Markets. Please go ahead.

[Unidentified Analyst:]

In terms of, you mentioned 2 new competitors in Argentina, which it doesn’t look like they got much traction. But can you give a little more color around who that is? And exactly what’s going on down there?

[Jordi Ferre:]

I would prefer not to mention any of our competitors. I would say that Argentina has been an open market for a while. We have faced some local competition and some of the more international companies have tried to get in. But what I was mentioning, I don’t know if had made that clear in the call is, in spite of increased competition, we actually increased market share. So I thought, I view that as very positive and I wanted to point it out during my call.

[Unidentified Analyst:]

Yes. No, I agree. Obviously, as I said, obviously, they’re not getting any traction against the increasing market share despite more competition is clearly very positive. The other question I guess with Kathy, in terms of just, is there sort of an adjusted EBITDA number more similar to like sort for the bank term loan definition you can provide? Just so we can sort of track that against where we are in terms of covenants in previous quarters?

[Kathy Harper:]

No. We told you last year, we are shifting to the EBITDA. We manage the business by EBITDA.

[Unidentified Analyst:]

Okay. I guess, would something be posted on the SyndTrak site ultimately, for, lenders then?

[Kathy Harper:]

Yes.

[Operator:]

The next question will be from Eric Gomberg of Dane Capital Management. Please go ahead.

[Eric Gomberg:]

Going back to the, I guess then, in the first question, I just wanted to get if you can provide any more clarity regarding on a like-for-like basis shifting for seasonality in harvest, what the growth looks like Q1 this year versus Q1 last year? To the extent you could provide that.

[Jordi Ferre:]

That’s a little bit difficult to do, because in summer events, the, like in Latin America, we saw that a little bit earlier while in Australia and New Zealand, it was actually delayed. But I would say that I am going to give you an approx number. It’s fair to say that probably growth was -- would have been between 5% to 10%. So we still have, I mean, the fact that the crops in Latin America was a little bit earlier would all take away from the fact that we actually seen growth in this first quarter.

[Eric Gomberg:]

That’s great. That’s helpful. And I assume the things that helped you grow on an organic kind of like-for-like basis in the Southern Hemisphere are things that ought to help in the Northern Hemisphere later this year, all things being equal in terms of the crop size.

[Jordi Ferre:]

That’s correct.

[Eric Gomberg:]

Okay. And and then just one other question. I just, just looking through the deck, it’s the way it reads to me, it sounds like Dow has not yet started buying back 10% of the stock. But I wasn’t clear on that. So I just wanted any color you can provide.

[Kathy Harper:]

So Eric, the easiest way to track that would be to look for Dow filing.

[Operator:]

The next question will come from Kunal Banerjee of Brigade Capital Management. Please go ahead.

[Kunal Banerjee:]

First question on the LandSpring progress. You talked about Red Gold. Any other customers that are encouraged by what’s going on at Red Gold? And then, if you could just handicap the size of the Red Gold opportunity now with the doubling or potential doubling of the acreage there with the additional crops?

[Jordi Ferre:]

First, yes, Red Gold, it’s seen as very positive and that will have an effect on other customers. I would like to remind the fact that the improving in United States is for everything but California. We’re still two third of the potential. So that is still not there in play. But in the rest of the United States, yes, we see that all these other approvals will double, basically, the potential we have in the U.S. ex California.

[Kunal Banerjee:]

And what will it take for California to fall in line? Or is that just not going to happen?

[Jordi Ferre:]

I will not like to comment on what we’re doing on regulatory. What I would like to say that obviously, we would like to see the whole of the U.S. using LandSpring.

[Kunal Banerjee:]

Okay. And then -- and just in terms of handicapping, is it a low single-digit million dollars opportunity? Or -- just rough numbers there would be helpful.

[Jordi Ferre:]

I think that when California comes in play, you will see a potential of a few million dollars.

[Kunal Banerjee:]

Okay. And then just on the financials. I think there was a statement saying expected to be at an $11 million per quarter average for 2017, but you were over that, let’s say 16 million. So 11 times 4 is 44, and you had $16 million. So do the other three quarters then total 28 million? Is that the way we should look at it? Or are you just saying that it’s going to revert to 11 million? Or it’s going to track at $11 million quarterly for Q2 through Q4?

[Kathy Harper:]

We do expect the balance of the quarters to fall below that $11 million run rate.

[Kunal Banerjee:]

Okay. Okay. So okay. That’s good. And then just looking at the last Slide 20, your reconciliation from GAAP to non-GAAP to arrive at the 10.6 million of EBITDA, doesn’t seem like you excluded any of those oneoffs in the SG&A, such as litigation cost and strategic review. So is that -- am I right in that conclusion?

[Kathy Harper:]

That’s correct. We had announced in the third quarter of 2016 that we were moving away from all those adjustments, because we think that management and stakeholders are better served by us managing the business by EBITDA not adjusted EBITDA.

[Kunal Banerjee:]

Okay. But I mean, just qualitatively speaking, your quarter could’ve been better if those oneoff costs were not incurred, right? Your underlying business was actually reflective of something closer to 15 million? I mean, ex those costs, which aren’t going to recur.

[Kathy Harper:]

Correct.

[Operator:]

And the next question will come from Francesco Pellegrino of Sidoti & Company. Please go ahead.

[Francesco Pellegrino:]

Just a couple of questions. The first person was, could you guys briefly comment on the effectiveness of SmartFresh as part of the quality system in contrast to a standalone product?

[Jordi Ferre:]

I think that SmartFresh has the same effectiveness whether it’s part of a quality system or it’s a standalone product. What happens is when you do a system, basically you have other things that, in combination, can give you better results, right? So, there is synergies in using Harvista and SmartFresh, for instance. So that is a positive. And there is other things as well that we’re doing there. The AdvanStore is basically measuring that effectiveness. So not all of that is being included in that system will necessarily have an impact. It has other role, like I say, AdvanStore will measure that effectiveness. Yes, but eventually like Harvista and SmartFresh adjust together, they have, one plus one makes three.

[Francesco Pellegrino:]

Makes sense. And could you also comment on maybe some lessons learned from pricing in the Northern Hemisphere during the first quarter?

[Jordi Ferre:]

I think that the biggest lesson we have learned in places like, just to give you an example, the market in Argentina, where we saw increased competition is that when you put the services together and you sell them as a platform, it’s very effective competitively. In Argentina, Harvista plays a big role, and Harvista and SmartFresh together, both in terms of the effectiveness that we just talked before, but also in terms of how you price it and approach customers does have a positive effect and impact. So we expect that, we take those lessons and actually we’ll bring more into it into the Northern Hemisphere, because we will have other elements as we already announced and others that will be announced that we’ll add on to that SmartFresh Quality System. One of them, obviously, is AdvanStore, which is very well received by our customers and has definitely a place and a role in detection of what’s going on in those rooms. For all the other things that I said, we’ll be announcing in Q2. We’re launching into that platform.

[Operator:]

The next question will be a follow-up from Brian Nolan of JP Morgan. Please go ahead.

[Brian Nolan:]

One of the things you guys had mentioned on the previous call, you think you might look for alternative methods of distribution for Harvista. Have you made any progress on that side? Can we expect to see [multiple speakers] in North America?

[Jordi Ferre:]

Yes. We, Yes, I made a reference. There is a number of ongoing discussions right now. I cannot make an announcement at this point, but I hope that next quarter probably, I will be able to make an announcement in that respect. But yes, we are very, very active in different discussions and engagements we’re having with partners that can complement what we already can do in the apple business.

[Operator:]

And ladies and gentlemen, this will conclude our question-and-answer session. This also concludes our conference call for today. We thank you for attending today’s presentation, and you may now disconnect your lines.