Marrone Bio Innovations, Inc.
Q4 2016 Earnings Call Transcript

Published: 29 Mar 2017

[Operator:]

Good day, ladies and gentlemen. Welcome to the Marrone Bio Innovations’ Fourth Quarter and Full Year 2016 Earnings Conference Call. Today's program is being recorded. At this time, I would like to turn the conference over to Ms. Linda Moore, General Counsel. Please go ahead Ma'am.

[Linda Moore:]

Good afternoon, everyone. And thank you, for joining our call. Before beginning, I would like to remind you that this conference call may contain statements regarding management's expectations, hopes, beliefs, intentions, or strategies regarding the future, as well as projections, forecasts, or other characterizations of future events or circumstances. Such statements are based on management's current expectations and beliefs concerning future developments and the potential effects on the Company. There can be no assurance that future developments affecting the Company will be those that management has anticipated. Such statements involve a number of risks and uncertainties, some of which are beyond management’s control or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these statements. Important factors that could cause differences are contained in reports filed by the Company with the Securities and Exchange Commission, including the Form 10-K that the Company will file by March 31, 2017 under the heading risk factors and elsewhere and in our earnings release posted on the Company’s Web site. Should one or more of these risks or uncertainties materialize, or should any of management’s assumptions prove incorrect, actual results may vary in material respects from those discussed today. Additionally, the Company will be making reference to certain non-GAAP financial measures on this call. The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the Company’s earnings press release published today, which is posted on the Company’s Investor Relations Web site. Any guidance that management may offer in this conference call represents a point-in-time estimate. The Company expressly disclaims any obligation to revise or update any guidance or other forward-looking statements to reflect events or circumstances that may arise after the date of this call. After our remarks, we will answer your questions. Now, I will turn the call over to our Chief Executive Officer, Pam Marrone. Pam.

[Pam Marrone:]

Thank you, Linda. Good afternoon and thank you to, everyone for joining us. With me today is Jim Boyd, our Chief Financial Officer and as you just heard, Linda Moore, our General Counsel. Fiscal 2017 was a truly pivotal year for our Company. We are excited to have ended the year with strongest level of shipping activity in our history. Fourth quarter product shipments were more than double 2015 first quarter level. More importantly, our momentum has continued into the beginning of 2017 as we’ll discuss. I would like to focus on two areas; number one, our financial highlights for the full year and the fourth quarter; and number two, our continued achievement of strategic goals that are driving our rapid growth. Let's start with the full year highlight. We grew 2016 GAAP revenues by 43% to $14 million. Product shipments grew at nearly double that pace by 81% to $16.4 million versus $9 million in 2015. Every one of our major agricultural product Regalia, Grandevo, Venerate and Majestene contributed to our growth. We were particularly pleased to see Regalia; still our largest revenue product perform well; Grandevo shipments were also up; Venerate shipments more than doubled this year; and Majestene, our newest pest management product, which launched in January 2016, was a significant contributor to our total growth. We are proud to have received the Best New Biopesticide award for Majestene by Agrow, our industries’ leading trade publication. We have seen yield and quality in places on a wide range of vegetables, fruits, row crops and turf. The market response to this bio-nematicide is encouraging, and we are working to capture as much of this large market and major business opportunity as quickly as possible. Every one of the four ag products have shown solid or improving levels of gross profit. This is critical as leveraging economies of scale is a key driver of our overall goal for sustainable profitability and cash flow. Jim will provide further details around our margin, but I'm very pleased with Regalia, Venerate and Majestene in particular. For the full year of 2016, our renewed focus on operations and on research and development cost control paid-off. We reduced operating expenses by $11.8 million for the full year compared to 2015. We reduced our full year SG&A spending by $8 million, including $7.6 million of non- recurring expenses in 2015 attributable to our financial restatement and related matters. In addition, by focusing our research and development, we enabled another $3.8 million of year-over-year cost reduction. Together, that was a total full year reduction of 29.6% in operating expenses. I'll now turn to the fourth quarter highlights. Because much of our fourth quarter business related to our largest customers for whom we often book deferred revenue on sell-through accounting, there was a significant difference in the quarter between GAAP revenues and product shipment. Our fourth quarter GAAP revenue was up 41% to $2.7 million. Our fourth quarter product shipments were $5.2 million; this was a little more than double from 2015, and I'm pleased to say is a record level of shipments for any quarter in the history of the Company. Furthermore, I'm pleased to say that based on our preliminary review, we expect product shipments for the first quarter of 2017 will be greater than that record level in the fourth quarter of 2016. One significant operational challenge we had within the quarter was in Grandevo WDG toll manufacturing, which experienced the production shortfall from our third-party providers. As a result, our inventory availability was constrained during the quarter and will remain tight. We have decided that the best solution to this problem is to bring production and granulation of Grandevo WDG into our Michigan M3 facility later this year. The M3 team continues to prove its effectiveness and inspire confidence with outstanding dedication and performance. Our expectation is to have our M3 facility up and running with the granulation line by the fall. In the mean time, we are increasing production of the wettable powder formulation. As you know, it has always been our position that vertical U.S. based manufacturing will be a most responsive, flexible and profitable supply chain for MBI. We are developing plans to expand our plants, and increased our capacity as the Michigan facility to handle the growth we expect to see in 2018. Looking back over the last five quarters, I think our delivery of consistent growth is compelling. On the top line and gross margin; we continue to be careful about our cost; thoughtful about our growth; and mindful that we both manage for the short-term targets, while building a foundation for sustained performance. The entire organization has contributed and executed well, and we are all slight energized by our progress. We are continuing to focus on growth as our overwriting objective; domestic growth; international growth; growth of existing products; growth of new products; and growth we would create through strategic partnerships. We saw growth from all of these sources in 2016, and we believe that each can contribute significantly to our future results. It is also important to put our growth this past year into a large content. The agricultural market has been sluggish, and yet, we have accelerated our business and ended the year with the strongest quarter of shipping activity to-date. We receive encouragement and endorsements from new and existing customers daily. In addition, our employees are motivated by the contribution we can make to the agricultural industry and society, in general. Our performance track-record is increasingly encouraging for us, and reflects not only our improved execution but it also shows the value of our intellectual property. The secular shift in the industry is integrated too integrated pest management solutions and the increased demand coming from organic growers. We believe we are in the right place, at the right time, with the right people and the right technology, to capture significant opportunity and create value for our shareholders. We are winning business because the use of our products generates economic returns for growers. In the short-term, through better yield, perhaps even more importantly over the long term, because of the significant economic benefits from avoiding the development of resistance to synthetic chemical products. While I will cover some field trial results in a moment, I want to give a good example of the economic advantages we can provide. In strawberries, use of Regalia resulted in, at average grower pricing, an additional $1400 per acre versus the standard fertilizer input regime alone. The cost of adding Regalia to that regime is only about $150 per acre. Such from the growers prospective, the use of Regalia generates a return on investment of almost nine-times to the grower. In 2016, our field data demonstrated examples of increased return on investment from Regalia applications and in alfalfa, tomatoes and rice. That’s powerful math that clearly demonstrates the value of our technology to growers and answer the question as to why we are so confident in our potential as a growth company in a generally stagnant and mature market. I would like to now update you on a few of our key growth strategies. We continue to believe that we see the best success through offering a wide portfolio of bio-based solutions that meets growers’ need. This strengthens the business and gives them our own brand a halo effect that benefits every product. We certainly believe this contributed to the initial uptake of Majestene, which has been the strongest year-one performance for any of our product. We have worked hard to now have four cornerstone agricultural products. This is an excellent foundation and we are excited to continue to build on it. We just launched Haven this week, and we're continuing to plan for the launch of at least one new additional commercial product in 2017. Haven is an Anti-Transpirant, which reduces water loss in plant under intense sunlight or other stress conditions. 2016 field data showed yields increases in almonds, walnuts, tomatoes and corn, and reduction in sun damage and bitter pit in some apple varieties. MBI-601 received EPA registration, and we are conducting trials and demos in key crops, such as strawberries leafy green to prepare for a targeted launch. MBI-601 is a biofumigant that means a critical grower need to replace toxic chemicals, such as methyl bromide that are being phased out or under significant regulatory restrictions. For MBI-110 biofungicide 2016 field trials confirmed its performance on downy mildew, especially on grapes and against white mold. MBI-110 is our second biofungicide, which will enhance and complement our first biofungicide, Regalia. We again expect a halo effect by addressing the two largest markets for fungicides downy mildew and powdery mildew, which together are multibillion dollar market. We expect EPA registration of MBI-110 after the third quarter 2017. After initial toll manufacturing, we are working on a plan to bring the manufacturing process of our MBI-110 product in-house to M3 in Michigan. We continue to work toward completion of the development and the EPA submission of our systemic bioherbicide MBI-010. This product, which we believe is one of our most significant future growth opportunities, addresses large needs in both organic and conventional production. Weed control as often reported by organic growers, as the most difficult and costly problem on their farm and one of the major reasons why they revert back to using chemical herbicides. It is also a prime reason why more conventional growers do not transition to organic production. Conventional growers face an increasing number of herbicide resistant weed, which require increasing applications of increased chemical mixes. Our most recent field trial research with MBI-010 showed good efficacy of both pre and post emergent formulations against the scourged palmer amaranth, including glyphosate-resistant strain. These kinds of new product development activities can be the most exciting part of our research and development. Even so, the work we are doing on manufacturing process improvement on the new formulation and on applications for our already commercialized products are the most important to support our near-term growth. This work increases the value of our products, and thus our competitive position, and drives our profitability. Now, I’d like to take a few minutes to highlight some additional information from our 2016 field trials. First, I would like to mention on work and seed treatment. This portion of the agricultural market is a multibillion dollar growing market. Based on the microbes in our Grandevo, Venerate and Majestene products, field trials in multiple states showed yield increases and pest reductions that are comparable to or better than commercial chemical and biological plus chemical stacked seed treatment standards. We now have three years of data against key corn and soy pest, including rootworm and nematode. In 2016, we aim deal with Albaugh LLC, which is using one of these microbes in their seed treatment stacks, which they successfully field-tested. With Groundwork BioAg, we developed and successfully field tested an all bio logical seed treatment with our pesticidal microbes and their bundled bio-stimulant. Second, I am excited to share that Regalia is showing powerful benefit for a number of important crops. This is in addition to the earlier comments I made about our economic benefit for strawberry. In trial for California rice, Regalia treatments resulted in approximately 1,000 additional pounds per acre, a yield increase of 12% against the control. In alfalfa for which we now have three years of trial data, the yield increases nearly 2,000 pounds per acre. On California tomatoes, where a serious solid disease, Fusarium reached havoc, Regalia applied as a foliar spray on top of the chemical standard soil applications increased yields by 12% compared to the chemical-only regime. Examples of solid disease control results are reductions in apple fire blight and almond shafou and scab, and best in class powdery mildew control on grapes. Finally, Grandevo and Venerate have shown good performance for both organic and conventional production on some key pests for sauce fruits and nuts; Grandevo on spotted wing Drosophila, especially for resistance management with the commercial standards; Venerate on walnut husk fly, and both products on grape leafhoppers and mice on peaches. Our third focus area, along with ramping up existing products and launching new ones, is international expansion. We expect global growth due to the same drivers we see in the U.S., resistance, residue and regulatory constraints on chemical. We are conducting the required regulatory field trials, often with our distributor partners, in many regions and countries around the globe, including Central America, Philippines, Australia, New Zealand, Africa, Brazil, China and Europe. In 2016, we received registration in Mexico for both Venerate and Grandevo, and we commenced sales of Grandevo. Sales of Venerate and Majestene in Mexico are expected to begin later in 2017. We submitted MBI-110 registration to Canada and we received label expansions of Regalia there. We signed a Grandevo distribution agreement with new farm for Australia and New Zealand. Looking ahead, we have a number of key objectives for 2017; continued product shipment growth and gross margin improvement; launch Haven and one additional new product; additional row crop field; more international distribution contracts and strategic partnerships; Zequanox distribution partnerships; and submit MBI-010 to the EPA. As we have said in prior calls, with strong growth and good execution, we are in the best position to address our capital needs. We are intently focused on completing a transaction that will enable our continued growth. With regard to working capital, we are pleased to have entered into a receivables back line of credit, made possible by our rapid pace of expansion. I would now like to turn the call over to Jim. Jim?

[Jim Boyd:]

Thank you, Pam. Good afternoon everyone. Our GAAP revenue in the fourth quarter was $2.7 million, up 40.6% as compared to $1.9 million in the fourth quarter of 2015. For the full year of 2016, we grew our GAAP revenues to $14 million, up 43.3% versus $9.8 million in 2015. This GAAP revenue number does not include deferred revenues not yet recognized from customers on the sell-through revenue recognition method versus the sell-in method. Please note that while we use the sell-through method for certain customers, our standard terms of sale do not include any return or inventory rights except for normal warranty claims. As customary for us, we are also providing information on product shipments, a non-GAAP measure of sales that includes the net change in deferred revenue in the period; in order to represent the value of our product shipment volumes in a given period and to provide additional insight into our business performance. In the fourth quarter, we grew product shipments by 102% to $5.2 million as compared to $2.6 million in the fourth quarter of 2015. As Pam highlighted, this is the record for product shipment. I'll also repeat that we expect to achieve another record for product shipments in the first quarter of 2017. For the full year of 2016, we grew product shipments to $16.4 million, up 81.1% versus $9 million in 2015 and we expect to continue continued high growth in 2017. Our gross margin in the fourth quarter increased to 39% as compared to a slightly negative margin in the fourth quarter of 2015. The improvement reflects growth in revenues, product mix and improved manufacturing efficiencies. We were very pleased to see manufacturing cost from underutilized capacity during the quarter drop to $234,000 from $600,000 in the fourth quarter of 2015. For the full year, our gross margin increased to 32.2% from 5.6% in 2015. Manufacturing cost from underutilized capacity during the year was $771,000, a solid improvement when compared to $2.5 million of unabsorbed cost in 2015. I’ll echo Pam's comment that we are very proud of the team in Michigan and the solid dependable performance they are delivering. I would like to call out and recognize the tremendous job our supply chain group is doing in the face of many challenges in order to keep up with our historical planned growth. Also, our sales and product development teams are doing a great job supporting our customers and leading our growth. Finally, it doesn’t all happen if R&D is not driving everything by continuously improving our manufacturing processes and formulations, and developing new products at a tremendous pace. We are excited by the progress that we have already seen in all three areas in 2017. In short, all the departments are doing a great job contributing to growth. Getting back to the financials, SG&A expenses in the fourth quarter were $4.7 million, down from $5.9 million in 2015. This primarily reflects continued strong emphasis on cost containment and our laser light focus on how we spend those dollars to accelerate revenue growth. Our R&D expenses were $2.4 million in Q4 2016 compared to $3.3 million in the same period of 2015. For the full year of 2016, SG&A expenses came in at $18.5 million versus $26.5 million in 2015, an $8 million reduction. For the full year of 2016, R&D expenses which included field trials patents and regulatory, were $9.7 million as compared to $13.5 million in 2015, a reduction of $3.8 million. This illustrates the impact of the restructurings we did in 2014 and 2015. Turning to the balance sheet, inventory at the end of the year was $8.5 million and we had cash, cash equivalents and restricted cash of $12.6 million. Cash used in operations in 2016 was $24.3 million compared to $36.2 million in 2015. For Q4 2016, cash used from operation was $6 million, an improvement of $1.5 million as compared to the fourth quarter of 2015. As Pam highlighted, we are pleased to announce we have entered into an agreement for receivables and inventory back financing with LSQ. This line can finance up to $7 million of existing and future working capital growth. Thank you. And I'll turn the call back to Pam.

[Pam Marrone:]

Thank you all for listening. Before we go to your questions, I would like to close with the following comments. First, we have just closed the strongest quarter in the Company's history; $5.2 million in product shipment is a record. We also announced today that we expect to exceed that number in the first quarter of 2017. Second, we have the most efficient operating structure in the history of our Company. We have been disciplined and created cost efficiencies and greater capabilities. Third, our Michigan plant is performing with excellent and driving improvements in gross profitability. That team has not missed a bit. If you put together record product shipments, a more efficient cost structure and vertical efficiency, I think that demonstrates that this Company has tremendous promise. After 2014 and in 2015, we needed to show investors we can get it done. As you know, there are far too many bio-based science companies that have not been able to back up their technology with the strong business foundation. I think we have clearly demonstrated that we have both. Thank you.

[Linda Moore:]

Now it's time for questions.

[Operator:]

[Operator Instructions] And first is Sameer Joshi, Rodman and Renshaw.

[Sameer Joshi:]

So just a high level question for the revenue recognition, is there any provision for product returns from these sell-through customers that you have sold product, shipped product to?

[Jim Boyd:]

No, that’s what I was trying to indicate with my comments. There are no inventory return rates when we ship the product to our customers, the customer takes ownership and they own it.

[Sameer Joshi:]

So, the 2.6 -- roughly 2.6, in deferred revenue will ultimately be recognized over the next few quarters. Is that a correct statement?

[Jim Boyd:]

Yes.

[Sameer Joshi:]

A few questions about product development, on the February announcement from Groundwork and the joint development for the seed treatment what are the next steps in this process now. When do you actually expect sales from this effort to materialize?

[Pam Marrone:]

Well, we’re repeating field trials this year and doing some semi commercial trials. But we actually haven’t set a launch date yet. So we’ll see how the grower demos go this year in the semi-commercial trials, and go from there.

[Sameer Joshi:]

So sort of similar question for the Albaugh development, there was a microbial product for state seed treatment being developed, any progress on that?

[Pam Marrone:]

They have purchased product, that product is in the market.

[Sameer Joshi:]

It is in the market already.

[Pam Marrone:]

Yes, that’s in the market.

[Sameer Joshi:]

And you did refer to some bio-herbicide development. Maybe can you give us a little bit more on how that portfolio is being developed and what are the next products to be expected from there?

[Pam Marrone:]

Yes, so we have three but we focus most of our -- the R&D resources we have dedicated to product development, we focused it on 010. So 010 is a systemic bio-herbicide and from that one of our microbes. And when you spray it on the weed, it moves in the plant and kills a broad range of weeds, especially glyphosate resistant palmer pigweed palmer amaranth. And we said 2016 increasing the yields in manufacturing and developing new formulations that we're more potent than previous formulations and more stable; so we're redoing the toxicology from previous formulations; so it's in the tox test now and so far so good; and putting together all the things necessary for the EPA submission. We have another herbicide that is MBI-011, which is formally an extract of Chinese pepper plant, but we can make it synthetically. And we are formulating that now and working a bit on that one as well. It's a burn down herbicide as opposed to a systemic herbicide, like 010. It's already registered by EPA and we're just developing a better formulation. And we haven’t launched that one because of the high manufacturing cost but we have a toll manufacturer who is making good progress on scaling it up for us. So we’ll probably see that one comes back and talked about further in a future call.

[Operator:]

[Operator Instructions] And next is Tyler Etten, Piper Jaffray.

[Tyler Etten:]

I was wondering if you could expand a little bit on Eden. Could you explain a little bit how a first -- is it something that replaces on that base currently used by a synthetic chemical? Or is it a standalone product that increases quality in the respective crops?

[Pam Marrone:]

It's a standalone product. So it can be used along with any other programs that can use their normal pesticides or whatever they are using, and it adds an additional yield. And it is not like any other product on the markets. There are other sun blockers sun stress products, but they are put on much later during a sun event on the fruit or the nut. And they turn the crop white because they block, they are kale and clay or calcium carbonate because they block the sun. Ours is a very different mode of action. You put it on late bloom or early nut or fruit set, so much, much earlier. And then it reflects that lit peak and light, which results in the higher yield. It doesn’t leave any white deposit, so it's completely clear on the leaf, so the growers don’t have any restrictions in having to wash that off.

[Tyler Etten:]

Then for Majestene, what type of customers are adopting this product, I know obviously, there is a wide variety of crops that can go on. But what is the -- what customers really resonate in that?

[Pam Marrone:]

Potatoes, onions and tomatoes, those are some of the big crops for Majestene in 2016.

[Tyler Etten:]

Then could you remind us which products are currently made in-house. Obviously, a long term goal is to be vertically integrated. But just which ones are currently?

[Pam Marrone:]

So Grandevo and Zequanox are fermented in-house; although, they’re dried with a contractor. And Regalia is formulated in-house. And then Venerate and Majestene are fermented elsewhere.

[Tyler Etten:]

Then just one last one here. Obviously, there is lot of international markets you guys are being growing and have approvals then. What is the priority in 2017 and any new markets that you believe if you could fit in there sometime this year?

[Pam Marrone:]

We’re focusing on markets where there is the fastest registration, so we can get revenue. They may be small countries but that still mean -- that doesn’t mean it's not a significant market for us, because of the intensity of the crops. So for example, in Africa, Morocco Regalia is registered in Morocco in Latin America, countries like Guatemala where we are registered with Regalia and working on our other products. Of course Mexico is a growth driver, because it's one that we can get registration there quickly. And generally, because there’s a lot of growers in Mexico also U.S. growers, they hear about our products; so adoption is pretty rapid like with Grandevo; and then faster registration countries also would include Philippines, Korea…

[Operator:]

Next that is Robert Smith, Center for Performance Investing.

[Robert Smith:]

Just a couple of questions. Do you expect the R&D budget to stabilize here?

[Pam Marrone:]

Yes. So our R&D budgets are -- were not really expanding much of R&D at all. We have replaced positions that were open and they were a quite a few open positions. But in terms of lot of new hiring, we don’t expect to do a lot of new hiring in R&D.

[Robert Smith:]

But I mean decline from '15 to '16 will at least stabilize in '17?

[Jim Boyd:]

I would expect R&D to be similar small increase in '17 mainly due to increased formulation and regulation.

[Robert Smith:]

Can you say a little -- something with Zequanox and the Evogene collaboration?

[Pam Marrone:]

So on Zequanox, I didn’t talk much about it, because it’s a non-ag product. But we're still working on it. We have customers who -- we have some power customers who are buying the product and others in the queue. And we are working with both potential open water lake treatment distributors and implied potential distributors continuing to work with companies who can help drive the Zequanox business further. So we are not dedicating R&D resources to it but continues to move along. The second one was Evogene, so on the Evogene collaboration, which was funded by BIRD Foundation, in part. They took, I think it was between 20 to 30 microbes from our collection, and then mind them. Means they looked at those microbes for the proteins that kill insects from those; so those microbes produce proteins that kill insects. They found some, clone them and then we have tested them and found that they have interesting insect cell activity. So we did announced yesterday that those companies would be moving forward some lead candidates; we’re into the bio-pesticide pipeline and them into the protein pipeline, which means they would then put it inside of a plant to make an insecticidal plant when we would have a sprayable bio-pesticide product.

[Robert Smith:]

Any ideas for the time line to an actual product?

[Pam Marrone:]

Well, we can get a product to market in three to four years, because you have to go through EPA timeframe. So it's still a few years away for a product for that.

[Robert Smith:]

And of the four products currently being marketed, in ’17, what do you expect the drivers to be? I think they expanded -- all of them expanded in ’16. But which ones will be the primary drivers in ‘17?

[Pam Marrone:]

We expect to see growth from all of those products in 2017, so all four of the main products. Majestene is because of the high need in the marketplace for nematicides where most of the chemicals have been restricted out. We’re expecting good growth of that product that probably leads the way in terms of growth to rate. But we expect growth from all of the products. And why, because there is more awareness of these products and we've been doing a lot of education about how to use and adopt biologicals, including our own products; and there is concerns about pest resistance to the chemicals; and there is concerns about residues for exported crops; and there is a higher growth of organic production; and most importantly, our products are showing, as I gave some examples, a return on investment to the grower. So they get higher yields and quality and that means money in their pocket.

[Jim Boyd:]

I think we’re also seeing this greater assessment of biological.

[Robert Smith:]

Do you expect more collaborations to be announced this year?

[Pam Marrone:]

I do. We did say in our objectives that we are continuing to look for collaborations, and we’d like another row crop deal this year.

[Robert Smith:]

And just could you give a little more color on the question of the capital needs in the current year?

[Jim Boyd:]

So we’ll be probably investing in our Michigan facility. I wouldn’t expect that that will be great. We do have $1.4 million of restricted cash that's required to go for capital expenditures at that Michigan plant. And I think we’ll probably be investing a good portion of that in 2017. And in 2018, it's a little too early to tell how much we’ll be investing.

[Robert Smith:]

What's your preference when looking at ways to raising the capital?

[Pam Marrone:]

Well, obviously, we need to do something, but we have access to capital different ways to raise it. And we're confident in our ability to raise the funding. And because of our results, we’re in the best position to attract new capital based on our performance.

[Robert Smith:]

So you have some arrangements with some really big players. Is that a possibility as well? I mean, to have some kind of an arrangement with your established collaborators.

[Pam Marrone:]

Our strategic deals have historically included payments in such. And of course we are always looking for more of those strategic deals.

[Operator:]

[Operator Instructions] And everyone, at this time, there are no further questions. I'll hand things back to our speakers for any additional or closing remarks.

[Pam Marrone:]

Thank you very much for your attention today and for listening. We’re really very excited to have completed our strongest quarter and to be expecting to establish a new record for product shipments in the first quarter. We are very grateful for the support and shared vision of our shareholders, and we are dedicated to making sure we show our thanks by creating strong sustainable value. Thank you.

[Operator:]

Ladies and gentlemen, that does conclude today's conference. We would like to thank you all for your participation. You may now disconnect.