Lavoro Ltd. Q4 FY2023 earnings call

• Overall Business Landscape: Fiscal year 2023 revenue was $1.8 billion, adjusted EBITDA $150 million, up 24% and 64% year-over-year. Crop Care was a significant growth driver.
• 4Q Results: Revenue and gross profit increased 17% and 27% year-over-year respectively. Market conditions in Brazil were challenging, but signs of stabilization were observed. The company expects the retail ag input business in Brazil to shrink approximately 20% for the '23/'24 crop year.
• Financial Highlights: 4Q consolidated revenue was $266 million (+16.6% year-over-year). Gross profit was $46.9 million (+26.7% year-over-year) with a gross margin of 17.7%. Operating expenses decreased by $4.2 million year-over-year. Net loss improved to $19.5 million from $27.5 million year-over-year.
• M&A Activities: Completed the acquisition of Referência Agroinsumos. Postponed the acquisition of NS Agro indefinitely. The deal pipeline remains full with 7 signed MOUs.
• Strategic Initiatives: Completed a commercial pilot with Pattern Ag. Launching a campaign with Stenon. Expanding agronomics service offerings and making advancements on crop insurance plans.

Crop Care: In fiscal year 2023, revenue and gross profit expanded by 94% and 138% respectively. It accounted for nearly 19% of adjusted EBITDA in fiscal year 2023, up from 8% the previous year. Brazil Ag Retail: For the 4Q ended June 2023, revenue rose 17% year-over-year. Gross profit increased 26.7% to $46.9 million, with gross margin at 17.7%. Biological sales grew 86% year-over-year. LatAm Ag Retail: Declined 3% year-over-year due to devaluation of the Colombian peso, but operations in Colombia performed well despite the removal of paraquat from a supplier's lineup.

• Fiscal Year 2024: Consolidated revenue is expected to be in the range of $2 billion to $2.3 billion, with inputs revenue (excluding grains) from $1.7 billion to $2 billion. Adjusted EBITDA is forecasted to range from $135 million to $165 million. Anticipates 40%-50% of adjusted EBITDA in the second half of the year. Q1 2024 is expected to be the low point in terms of adjusted EBITDA contribution due to deflationary effects and phasing of sales.

• Market Conditions: Price volatility in commodities and excess channel inventories in agrochemicals and fertilizers pose challenges. Impact on the Brazil ag retail business.
• M&A Risks: Uncertainties around pending acquisitions and market volatility affecting transaction decisions.
• Input Price Declines: Temporary headwinds to distribution margins during the deflationary period.

Q: Confidence in second half performance A: Ruy Cunha mentioned that farmers remain profitable, area expansion is ongoing, and order banks are forming as indicators of volume increase.

Q: Pricing headwind in fiscal year A: Ruy Cunha stated that pricing impact is expected in the first two quarters, with normalization anticipated in the third and fourth quarters.

Q: Crop Care growth potential A: Ruy Cunha said Crop Care has more room to grow, with strong demand for biologics and specialty fertilizers