Marrone Bio leading the charge toward more environmentally-conscious effective pest management for farmers

Marrone's products are made from naturally-occurring substances like bacteria or plant extracts Biopesticides used in conjunction with chemical ones gives growers more control over pests The biopesticide industry is projected to more than double to $6.4 billion by 2023 What Marrone Bio does: Marrone Bio Innovations Inc (NASDAQ:MBII) is leading the charge toward more environmentally-conscious effective pest management for farmers with its unique line of biological pesticides. Its products are made from naturally occurring substances such as microbes, bacteria, plant extracts, fatty acids or pheromones, and it is currently the only publicly traded biopesticide company on the US market. Marrone’s biopesticides, used alone or in combination with traditional chemical pesticides, help customers operate more sustainably while controlling pests, improving plant health, and increasing crop yields. Founded in 2006, the Davis, California-based company holds more than 400 issued and pending patents and has brought six US Environmental Protection Agency-registered biological product lines and one biostimulant to market. Its suite of biologicals includes a bevy of bacteria strains and plant extracts that fight pests, control plant diseases and reduce stress from sun and water. Besides its California operation, Marrone cultivates its biologicals at a facility in Bangor, Michigan armed with three 20,000 litre fermentation tanks. How is it doing: Marrone Bio has been inking a few deals at the end of 2020 and the start of 2021. On December 21, 2020, the company revealed that farmers in Uruguay will have a new solution to grow a more sustainable crop thanks to a new arrangement that will allow PGG Wrightson Seeds (PGGWS), New Zealand’s largest seed company, to distribute the group's line of Pro Farm UBP Technology products. The recently signed agreement provides PGGWS with exclusive crop dependent selling rights to MBI’s Pro Farm UBP seed treatment line for the next five years (2020-2025) in Uruguay. The UBP Seed Treatment is based on a proprietary process turning plant-based lignin into a supramolecular, nutrient complex that supports plant growth and improves plant health, resulting in improved yields and crop quality. The seed treatment has proven applications on soybeans, wheat, oats, sorghum, and forage crops, all of which are widely grown in Uruguay. Then, on January 14, 2021, Marrone announced that it had received approval for its Grandevo WDG Bioinsecticide for use in New Zealand and Chile.  In addition, Grandevo WDG and Grandevo CG have also been approved for use on hemp by the US Environmental Protection Agency, the company said.     Marrone Bio said that in New Zealand, Grandevo WDG will be sold by Nufarm as BioGro and is approved for controlling mealybug on New Zealand’s famous wine grape crop. BioGro is registered and approved by Sustainable Winegrowing NZ (SWNZ), a world-leading sustainability program for growing wine grapes, and is allowed for use on both organic and conventional grape-growing systems from pre-flowering to bunch closure. Additional crops and pests are expected for approval in the coming year. The company noted that Grandevo WDG was approved for use in blueberries, grapes, stone fruit, tomatoes, avocados, and onions by the Ministry of Agriculture in Chile (Servicio Agricola y Ganadero - SAG) in November 2020 and is distributed by Anasac, a leading Chilean agriculture inputs provider. In a letter to shareholders published on February 2, 2021, Marrone Bio's new CEO Kevin Helash revealed that the company expected its fiscal 2020 results to be in-line with expectations. The plant health solutions company previously projected revenue growth in line with its four-year compound annual growth rate (CAGR) of 25% or more, with gross margins in the mid-50s The actual 2020 numbers, reported on March 24, 2021, saw Marrone Bio post a 31% year-over-year surge in its fiscal 2020 revenue to $38.4 million, driven largely by the company’s expanded product line and international footprint. Marrone also said its net loss and adjusted EBITDA for the year improved by 46% and 31%, respectively, achieving gross margins of 59.6% as a result of an improved product mix. For 4Q 2020, Marrone saw revenue rise 15% to $7.7 million, marking the company’s tenth consecutive quarter of increased revenues, while its net loss for the period narrowed to $4.2 million from $10.1 million a year earlier as gross margins increased by 790 basis points to 63.7%. The company added that its focus on cost management resulted in a reduction in operating expenses for both the fourth quarter and the full year. In the boardroom, on January 28, Marrone Bio announced the appointment of Suping (Sue) Cheung as its chief financial officer. She started in the role on February 18, succeeding James Boyd, who had already announced his intention to retire.   Marrone Bio noted that Cheung, a certified public accountant, brings to Marrone Bio 28 years of experience in international strategic and financial operations, including financial reporting, forecasting, and budgeting, mergers and acquisitions, equity and debt financing, internal controls, and investor relations.  She was the CFO for QuickLogic Corporation for five years, and corporate controller in the eight years before that promotion. Prior to QuickLogic, she has held senior roles at both publicly-traded and privately-held companies in accounting, finance, and operational management, and began her career as an auditor and tax consultant at PricewaterhouseCoopers (PwC).   Inflection points: Further expansion of product line and international footprint Ongoing cost savings and efficiencies from new management What the broker says: In a note to clients on March 24, 2021, following the company's fourth-quarter results, Canaccord Genuity reiterated a 'Buy' rating on Marrone Bio with an unchanged price target of $3,50, having raised the target from $2.00 in a note on February 19. The Canaccord analysts said: "New management is delivering solid execution out of the gate with top-line momentum complemented by margin upside and a lower-than-expected adjusted EBITDA loss. We believe revenue guidance for 2021 is appropriately cautious considering lingering COVID uncertainty and some weather headwinds in Q1. "Nevertheless, the implied adjusted EBITDA outlook for the current year (guided revenue, gross margins and opex) looks essentially in line with our estimates, and we believe offers room for upside on product mix and as management continues to look for cost savings and efficiencies." They concluded: "We are trimming our revenue and increasing our EBITDA (2022) assumptions, while leaving our $3.50 PT unchanged. Our DCF-based price target assumes a discount rate of 10% along with a terminal growth rate of 2% and reflects an EV/Sales multiple of 9x our 2022 estimate." What the boss says: In a statement with the company's latest results, Marrone Bio Innovations CEO Kevin Helash said: “We remain committed to our mission of rapidly advancing Marrone Bio toward profitability, and the results this year supported this objective." He added: “We expect this momentum to continue in 2021, with an ongoing focus on expanding sales both through our existing product portfolio and through potential strategic partnerships or acquisitions. Looking forward, we expect a strong first half of the year, with revenue growth in line with our annual revenue target.” Contact the author at jon.hopkins@proactiveinvestors.com