Good morning, ladies and gentlemen, and welcome to the Deveron Corp Q2 2022 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. I'd like to remind everyone today's call is being recorded. Tuesday, August the 23rd, 2022. I would now like to turn the conference over to Philip Linton. Please go ahead, sir. Thank you, operator. As we conduct this call, various statements that we make about future expectations, plans, and prospects contain forward-looking information. Certain material assumptions were applied in making these conclusions and forecasts. Therefore, actual results could differ materially from those contained in our forward-looking information. Additional information about these factors and assumptions are contained in our current quarterly report to shareholders, as well as our most recent annual report and MD&A and annual information form filed with Canadian Securities Administrators. Joining us today are Mr. David MacMillan, President and CEO, and Mr. Craig Hogan, VP, Finance. I'll turn the call over to David MacMillan for opening comments before we take your questions. David. Good morning, everyone, and thank you for joining Deveron's Second Quarter Earnings Call. Before we begin discussing Deveron's results and the company's outlook for the second half of 2022, I want to reiterate Deveron's vision and highlight three key opportunities the company can execute on to build a transformational company in the agriculture data space. Deveron is focused on becoming the clear choice for impartial agriculture insights and empowering data decisions by every farm. There's a big change happening in agriculture. Decisions on how to farm are being driven by science and data. We see ourselves as a natural partner for anyone looking for the best unbiased information in the industry. As Deveron continues to grow, we wanna reiterate three key themes. One, we wanna build a large company with substantial impact in the market focused on growth. Two, we believe we can create a company of the highest operational excellence capable of creating measurable value for our clients. Three, data is becoming more valuable, and we see ourselves as offering a unique end-to-end solution free of bias, helping our clients increase yield, reduce costs, and improve farm outcomes. Now, turning to our results and how we see the remainder of 2022 shaping up. Deveron delivered record quarterly revenue of CAD 5.2 million, achieving 183% year-over-year growth, highlighted by 64% organic growth. Our strategy of consolidating local agriculture service providers, laboratory testing, and agronomic advisors while enabling them with standardized technology continues to pay dividends. Our triple-digit revenue growth was also aided by the successful combination of Deveron with A&L Canada Laboratories, the largest soil testing laboratory in Canada. The deal was completed on May 24th. As such, we only recorded one month of A&L's business in the second quarter. Over the previous 12-month period, A&L had unaudited revenue of CAD 26.7 million and EBITDA of CAD 11.6 million. We believe we have a strong pipeline for continued growth as Deveron accelerates its vertical integration of field and data services with increased lab testing and integration into our data platforms. Today, we collect over 500,000 samples in the U.S. that are not processed in our laboratory ecosystem. Given our close relationship with the customer, we are confident in our ability to illustrate the value of an end-to-end standardized data solution and that our platform can be replicated across all geographies. More broadly, we have seen increased demand for our products given the inflationary environment that most farmers are faced with. Using soil data to better apply input products can have considerable impact on efficiency and application decisions. Today, Deveron's network of data technicians is increasingly becoming the trusted call for our customers' data needs. As we integrate more laboratory testing and increase our portfolio of products and service providers, we believe we can continue to deliver these record results. A few notes on our service and agronomic advisor business. We now have network coverage across many states through the U.S. Midwest. This is a great market for us as more growers adopt higher fidelity soil testing methods and agriculture retailers continue to use soil testing programs to help their growers drill down into their fertilizer needs. At what rate, how much, and where to apply to maximize their customers' yields. We believe we can continue to grow in this market through organic growth while also adding more local owner-operator partners to join Deveron. A key focus for us over the next 12 months is to continue to develop technology and value-add services to digest more of the soil into our lab ecosystem, develop great products to leverage the growing datasets we are seeing from farms across the United States. Now, turning to our expanding lab business. At the beginning of 2022, we had a limited research-based presence in soil health and minimal broader soil testing capabilities. Today, we have the capacity to test 600,000 samples annually in North America with expertise in carbon and fertility testing. Given the high margin of analytical testing, highly fragmented lab market in agriculture, and the growing demand for soil testing, we believe this can be a large growth engine for Deveron over the coming years. The value of local relationships in agriculture continues to impact our strategy, and we continue to look for more great operators to become part of our growing vertically integrated offering. Our M&A pipeline remains strong with over CAD 55 million in potential revenue additions, which we believe we can execute on over a period of 24 months. We continue to see significant growth across the company and remain focused on building out our digital products. Historically, our sales in the first half tends to carry through into the second, where more of a seasonal business is recognized. With the full integration of A&L complete, we believe we are well-positioned for significant growth, record results, and a unique ability to serve our 25,000+ customers by leveraging technology to help lower costs and increase farm outcomes. Our business has always been rooted in the boots on the ground and importance of local representation to our customer. Today, we have an ability to leverage this growing trusted network to continue to push data into our ecosystems, which is becoming more important for our current and future customers looking for leading, unbiased, and accessible agricultural information. With that, Phil, let's open the call for questions. Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number two. One moment while we compile the Q&A roster. Your first question comes from Nick Boychuk of Cormark Securities. Please go ahead. Good morning. Thanks for your time, guys. Just looking to get a little bit more color on how some of the prior acquisitions are integrating with the business, in particular A&L and how that's tracking for Q3 so far. Great. Thanks for your question, Nick. I think things are going really well. Obviously A&L was the largest transaction we've completed to date. It was over 150 employees down in London, and we've really been focused on culture and integration of our sales team. Obviously there's a really strong market presence in Canada. I think that the big opportunity to grow is again to replicate a lot of the service offerings that A&L has provided traditionally in Canada to the U.S. customer. Over the last kind of 2.5 months, we've really focused on getting our sales teams integrated, looking at where we can start, you know, providing value add of our digital products. Also looking from a perspective of how we, you know, can kind of bundle some of traditional Deveron's products with the A&L offering to their customer here in Canada. That's been the short-term focus. One of the great things which I mentioned at the beginning of the call is just this whole bundled opportunity around, you know, data collection, lab testing, and then analytical information. We're already, you know, leveraging this increased throughput down through especially enterprise customers in the U.S. who are very curious about working, you know, with one company that can handle the whole end-to-end solution. Last year, when we first started in the carbon business, we were going out and talking to customers really from a perspective of field services and a very small amount of lab testing capacity. Now that we have the throughput of over 600,000 samples a season, and being able to look at that whole end-to-end work, I think you're gonna start seeing, you know, a little bit of continued progress on our side of showing again, like how we're starting to bundle all that progress together. I think just to, just kind of summarizing, you know, the big things have been cultural making sure, you know, both companies are seeing eye to eye on the same perspective and really focused on one, developing the Canadian market with our co-bundle offering, but also really focused on replicating, you know, A&L's significant technology and IP resources in the U.S. market. Two, going out to our enterprise customers and offering them this full end-to-end solution where we can bundle, again, field services with lab testing, and data throughput through our API. That was some really good color. Thank you. Just clearly that analytics is gonna become. I think it's fair to say analytics will become increasingly more important over time. In terms of the margin, actually one of the things I was trying to unpack was it seemed like this quarter there was a little bit more collection revenue, which impacted the margin profile. Longer term, you're not expecting any headwinds in that regard? No, I think that's a really good point just to reiterate. Like, as I said at the end of my script here, Deveron is rooted in the fact that we've got boots on the ground and people going out to the farm gate. Like, the last thing on earth farmers wanna do is pick rocks, mend their fences, and collect soil samples. That starts this whole flywheel of once we can help make the data accessible, it can get into our lab ecosystems, where obviously margins are a lot higher. Think about the opportunity of standardizing that process across Canada and the United States. Like, if every retailer could get the same ecosystem approach to how soil is collected, tested, analyzed, and then put back into their backend systems, like that's really valuable, and that today just doesn't exist. Collection is always actually, I think, a great bellwether for how the business is doing because it means our salespeople are out. We're talking to customers. We're gaining trust. As we start to collect more and more of this data, now that we have this increased throughput, I really think over the next 12 months you're gonna see that flywheel continue to accelerate. Our product teams are really focused on how do we, again, think about providing a better user experience once the data has been collected in a digital sense. Yeah, we're really making great progress, and I think it's just the starting points of how we continue to compound the growth of the business. Makes sense. Just on the carbon platform, just wondering if you can kind of give us a little bit more color on what you're seeing in the demand environment. Obviously you guys were previously expecting to get premium credit prices. How is that dynamic unfolding? What's the kind of demand for your credits, but also the supply, in terms of the industry as a whole? I think from you know broad level just in dealing with enterprise we are seeing continued interest from, you know, large ag seed chem companies who are rolling out credit programs to their customers. It's still in the early days right? Even exponential growth for them is still only a small sliver of their market. I think if anything we're getting the phone calls from these companies that want us to be able to one help them on the service side and two now that we have the standardized throughput we can give them confidence in the fact that like all of this data can be tracked through the whole ecosystem. We're not really seeing anything there slow down. I know credit prices have been you know bobbing around a little bit just through the summer. Maybe that's more macro than anything. I mean, I take the general horizon that, the world is going to continue to try to find ways to properly price carbon. Agriculture probably offers one of the largest, obviously, carbon sinks out there, especially from a land-based measure. You know, to me, it's a huge opportunity for the company. We believe that there's two fundamental things at play here. Growers will happily collect a subsidy for doing things they've already been doing. The programs just have to be accessible for them. I think one of the things that we're starting to see is more protocols that are kind of coming to market and being developed are gonna make things easier for growers to be able to commit and participate in than perhaps just the original standard soil organic protocols that have been widely popular, I guess, over the last 18 months. Hope that answers your question, but from a very broad level, that's, we're very excited about the carbon opportunity. Yeah. No, that does. Thank you. Then just last for me, kind of like a housekeeping on margins, and the cost. Is the OpEx profile that you guys put up this quarter representative of what you think it's gonna look like into H2, or are there gonna be some synergies you'll be able to pull out of the business? Yeah. I think just to talk from that, obviously we've been growing so fast in the U.S. A lot of expansion opportunities were coming forward. You know, again, when we go back to as you're scaling up your collection business. You're adding people, you're adding equipment to be able to get out in the field and service those customers. I think there is a delta in putting those people in the field today and then recognizing some of the enterprise work. Again, our sales team has been pretty busy, you know, backfilling all the network expansion that we made. It'd be my expectation that, you know, how the business kind of operates is you start to see those investments in spring, and then they flow through into improved margin in the fall. We'll go through that cycle again as we continue to grow in 2023. Okay. Got it. Thanks so much. Thanks Nick. Your next question comes from Steve Hansen of Raymond James. Please go ahead. Yeah. Good morning, guys. Thanks for the time. Dave, just as you contemplate how the A&L facility is sort of sits now in your operations, you know, how do you feel about the broader footprint from the lab perspective? A&L is obviously a large facility that's come in here, but if you look at the footprint across the continent, where do you feel like you need to add, or what capabilities do you need still need to add at this point? I think, you know, from an IP and agronomic perspective as well as, you know, a huge Rolodex of soil data in Canada, we're sitting really great. You know, we've started to talk to our field reps about, you know, working on this flip of getting the U.S. customer pushing lab data through our broader ecosystem, where, as I mentioned today, there's probably about 500,000 samples a season that historically, like, we have not had any interaction with. I think there's, you know, an easy discussion around starting to convert some of that up in through London. I think more broadly, when you think about this opportunity across the entire North American agricultural landscape, you know, one lab in London is not going to be enough capacity, if we continue to be successful. You know, we're looking at, you know, choice expansions. I think a good model or mental framework is probably a little bit of a hub and spoke, right? Like, larger facilities to do some of the broader processing where, we're not taking away the importance of that local relationship. You know, for example, last quarter, we made a small acquisition in Agri-Labs, in Indiana. You know, this is a great facility that can't handle hundreds of thousands of samples a season, but it can be a dispatching depot, a great place to provide local agronomic advice once a sample has been collected, and like, we can perform you know, more fast-paced tissue testing and turnaround procedures through the season. You know, for us, there's really no stop to looking for partners that I think could fit under this umbrella. We believe that given our growth profile, we're gonna continue to need more and more throughput in the U.S. Obviously there's over 100 labs in the United States that, you know, we believe all have strong local relationships. And under maybe the larger Deveron umbrella could really help us build and create a business that at the end of the day provides really top-tier, you know, scientific and technical advice for growers in that market. Okay. Great. That's good color. I apologize if I missed it, but can you just perhaps speak to the M&A pipeline as it stands today and just trying to get a sense for, you know, how you balance that versus the priority of integration on A&L at the same time through the back half of this year and into next? Yeah. The high level pipeline's about CAD 55 million in potential revenue, which we think over, like, a 24-month period is something that is accessible. Obviously, integrating a business the size of A&L with 150+ employees, given our size previously, has been a lot of focus. We are getting pretty good. Like we've done, you know, nine transactions over the last almost 36 months and, you know, it's been a process in getting alignment on culture and moving towards the same Northern Star. At the end of the day, big or small, all these businesses care about the same thing, and it's providing great, you know, scientifically driven, unbiased information to the historical customer base they've worked with and the growing customer base that Deveron has access to. From that side, you know, are there big elephants out there? Absolutely. would we pull the trigger on something tomorrow afternoon? we do have our hands full, but, you know, the sort of CAD 1 million-CAD 5 million a year businesses are starting to turn into more tuck-ins for us, and we think we have a pretty good playbook. We've got someone heading up M&A integration now. we've made investments in that realm and have dedicated resources to it that again, part of the key strategies for Deveron is to add and leverage the strong local relationships that a number of these great businesses have developed, which we believe is to execute on that strategy we've got to be prepared to run quickly with. Okay, great. Just one last one for me is just on the progression towards positive EBITDA that you referenced in the release. It's great to see. You know, what kind of cadence should we expect as we move into the back half? Q4 is typically your stronger period. Is it sort of a modest step into that direction in Q3 and then a bigger move in Q4, or how should we think about that sort of cadence? Yeah, I think that's a pretty good way to look at it. I mean, when we completed the deal with A&L, obviously we disclosed their previous 12 months pro forma. I think if you look at the historical percentage revenue and margin growth of Deveron like Q1, Q2, Q3 and Q4, those things over time have stayed pretty consistent. You know, from our side, obviously North American agriculture is fairly heavily seasonal with maybe 60%-70% of the business operating in the second half of the year. I think there's a lot of good opportunities now when you own laboratories, the more soil that runs through them. You know, you're still turning the lights on each day. Margin profile can be a little bit better as well as volume increases. You know, I think with the previous disclosures we've made, as well as just generally how the business has been trending, I think, you know, you're on the right side of how I would be thinking about it as well. Okay. Appreciate the time. Thanks. Your next question comes from Nicole Cornick of M Partners. Please go ahead. Hey, guys. Congrats on the quarter. I had a question about the 30 years of soil data that you acquired. Are you guys starting to see any incremental growth in revenue based on that? Hey, Nick, thanks for the question. You know, it's kind of this great opportunity that we see around, you know, the general aggregation of agriculture information, and I think why we believe we're uniquely positioned in the market is because we're unbiased and really just care about improving farm outcomes. We don't really have a lens for looking at data to help us sell more inputs because we're not in that business. One of the core things, you know, 16 months ago now when we acquired Farm Dog, was to start building out a product and engineering team that focused on two things. One, provide technology to improve operational efficiencies internally. You know, we're moving a lot of people all around the country that are doing field services work. There's a huge opportunity to leverage data to improve that. On the other side is more of the customer-facing perspective. You know, how do we organize agricultural information to make better decisions for our customer, whether it be in the field or over time? You know, with A&L having such an established presence in Canada over the last 35+ years, there's a lot of information there that, you know, I think in general hasn't been a data set that the broader market has ever really had access to. We're thinking about data products that can help our customers make better decisions. How the historical data at A&L unpacks into that is something the product team's kind of working on now. I'd like to maybe have a more formal update on that as we head through the end of the third quarter and into the fourth. I think you will start to see some more releases from our side just around what we're doing with the data as well as a more, I guess, specific update on the product opportunity we see within Deveron that, you know, we continue to think will help build, you know, the next generation of the company. If you can imagine, like this business started in remote sensing, and we've continued to evolve by listening to what our customers' needs. Having this huge library of information that can potentially offer great aggregate analytical insights is something that's very like close to our heart, and we think again, over the next couple quarters, we'll really be able to make some momentum with that. All right. Okay. Thank you for that. Then my other question was, kind of about this new regulation the Canadian government's trying to put in force, limiting the use of fertilizer and how that plays into your whole value proposition. Yeah, it's I suppose maybe a bag of worms and not to take really one side of it of what's good or bad and if everyone has enough knowledge to be, you know, driving that policy. Let's say that it did happen, and, you know, our customers across, you know, Canada were forced to decide how much volume of fertilizer they use based on a policy. I mean, for us, it would be helpful because it forces people to start looking at efficiency decisions, and that's something that we do, right? We take a look at the broader ecosystem of the farm. We look at the data that we have toward it, and we help people maximize efficient use of inputs. I think there is a rough and rigorous application of certain inputs that, you know, for sure data models can help with. You know, is that 10%, 30% or 80%? This is where it's hard to make a broad sweeping, you know, policy that all farmers shall decrease by X because every farm is different and every field has different agronomic factors that actually might support a significant amount of fertilizer because it's lacking in, you know, nitrogen, et cetera. I think, you know, I hope that the government at least listens to growers and listens to the reality of, you know, producing output in Canada. You know, whatever that decision is in the long term, you know, we have data models, and we collect information that can help farmers, you know, maximize whatever product they have a rate for, if that answers your question. Perfect. Yep. Thanks for the time, guys. Thanks, Nick. We have a follow-up question from Steve Hansen at Raymond James. Please go ahead. Yeah, guys, thanks. Just one quick follow-up. Dave, your comments earlier about the sort of the breadth of the business and how it's been growing is curious. Just maybe on A&L specifically, I know they were, you know, very focused on soil and soil testing, but they were also involved with a bunch of other businesses and through plant tissue sampling and a bunch of other things that we often don't talk about as much. Is there anything in that business specifically that really draws your interest as you think about building a broader network over time? You know, is there other lines of business, I guess, we should be thinking about beyond just soil sampling and agronomic advice? Yeah. I mean, even to your point, Steve, tissue testing is actually a great business line, that I think is one of those, you know, again, inaccessible data points for the average grower because for the most part, in the middle of the season, kind of the last thing anyone wants to do is stroll through hundreds of acres of corn or canola pulling tissues to send to the lab. I mean, this is something that I think our data technician network is, you know, primed to be able to do. When you think about the average fixed cost of a field worker who's in the middle of Saskatchewan, anything we can be doing for our clients where we're out in the field is value add. Again, the more we can convince farmers not just to be soil testing, but to be tissue testing throughout the season is again, more volume in the lab when, you know, in general, soil testing volumes are not high. A lot of the analytical provisions for this around, you know, disease mitigation and, you know, when to use pesticides and what rates to potentially use pesticides is very valuable. When you think again about the 500 million acre market of the U.S. and Canada, you know, if we had everybody soil testing and we had everybody tissue testing, you know, that alone is a massive business opportunity. I think the other side of A&L that, you know, we're really excited about in general is just some of the research side of the business, especially in the biological space. They're sitting on quite an IP portfolio of different types of biologicals that, again, potentially can help with mitigating disease in crops. It's obviously like a non-synthetic fungicides. It's an area that we're starting to explore. There's obviously been a lot of venture capital chasing, I think, new products that are, you know, let's say, less harmful to the earth. Again, we're just kind of unpacking the opportunity on that side as well. I think there's a lot of nuggets of research work within A&L outside of its traditional, you know, soil testing and agronomic advice business that we think has broader application in the North American market. Again, over the first three months, we're really focused on, you know, culture integration, make sure the sales team are talking properly to the customer and then thinking about our few product priorities, in the U.S. market. Moving forward, I think again, there's quite a bit of scientific IP within A&L that we're excited about sort of digging into and finding some new business models to apply to our large customer base. Okay, great. Appreciate the time. Thanks. Ladies and gentlemen, once again, if you would like to ask a question, please press star one now. Ladies and gentlemen, there are no further questions from the phones. My apologies. This will indeed conclude your conference call for this morning. We would like to thank you all for participating. We wish you a wonderful day. We ask you to please disconnect your lines.