Greetings, and welcome to Lavoro's Fiscal First Quarter 2024 Earnings Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tigran Karapetyan, Investor Relations for Lavoro. Thank you. You may begin. Thank you for joining us today on Lavoro's Fiscal 2024 First Quarter Earnings Conference Call, where results ended September 2023. On today's call, our Chief Executive Officer, Ruy Cunha, and Chief Financial Officer, Julian Garrido. The company has provided a supplemental earnings presentation on its investor relations website at ir.lavoroagro.com, that may be helpful in your analysis of the quarterly performance. Before we begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future results and operations and financial position, industry and business trends, business strategy, and market growth, among others. These statements are based on management's current expectations and beliefs and involves risk and uncertainties that could materially differ, from actual events or those described in these forward-looking statements. Please refer to the company's registration statement on Form F-1, filed with the SEC on March 23, 2023, or our report on Form 20-F for the period ended June 30, 2023, filed with the SEC today, and our reports filed with the SEC from time to time, for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note, on today's call, management will refer to certain non-IFRS financial measures, including adjusted EBITDA, adjusted EBITDA margin, among others. While the company believes that these non-IFRS financial measures will provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with the IFRS. Please refer to today's release for reconciliation of non-IFRS financial measures to the most comparable measure prepared in accordance with the IFRS. I'd like to now turn the call over to Ruy Cunha, CEO. Thank you, Tigran. I'll begin by touching upon the overall business landscape and the broader economic context, after which Julian will delve into our financial highlights, and then I will return for some concluding remarks. So for our first quarter 2024, ended in September, Lavoro delivered revenues of $483 million, up 11% year-over-year, and up 3% in current local terms. Adjusted EBITDA was $11 million, declining 75% over the previous year quarter. Our revenue grew in the quarter in spite of the intense industry-wide deflationary pressures fell across major product categories. A strong volume growth led through market share gains, as well as currency tailwinds and growth in grains revenues, more than offset the 40%-50% average price declines in crop protection and fertilizer in Brazil. These deflationary pressures were a headwind to our profitability, in particular to ag retail in Brazil segments, where gross margins contracted by 10.7% compared to previous year, to reach 8.7%. It translated to Lavoro's adjusted EBITDA margins compressed to 2.3%. Now, let me take a moment to update you on the market environment. Since our last update, we saw an emergence of a disruptive El Niño phenomenon in Brazil. Severe drought conditions in many producing states, including Mato Grosso, have caused delays in planting of the soybean crop and created challenges for the next crop as well. We now expect this to adversely impact the second corn crop, with reduced planted acres, as well as seeing a portion of farmers opt for medium-tech corn seeds over high-tech alternatives, as well as curtail investment in specialty inputs, such as biological solutions. We anticipate this impact to our second and third quarter results, both in Brazil ag retail segment as well as crop care segments. Next, let me provide you with some brief updates on our distribution margins recovery. In our last earnings call, we briefly expanded on the effects that ag input price variations have on our distribution margins. As a reminder, we explained that as a markup business, we are relatively agnostic to absolute price levels of input over time, so long as they remain relatively stable. When prices are in an uptrend or downward trend, our distribution margins are temporarily impacted, given the 3-4 months inventory days, causing the delay between COGS and average sales price adjustment. I refer to this as temporary, given the fact that, this trend eventually dissipates. Naturally, inventory turnover causes the inventory costs to catch up to sales price and distribution margins revert to normalize, to their, normal average. So this, in a sense, what occurs is a normal environment when our margins are relatively stable. What is unusual about the last 12 months in Brazil, is that the sheer steepness of the deflationary trend with crop protection and fertilizer prices declining 40%-60% year-over-year over multiple quarters, is a pressure that Ag retail industry has not experienced since 2014. While our distribution margins for fertilizer and crop protection have indeed been gradually recovering, the pace of the improvement thus far has been below what we have expected. The destocking of excess agrochemical inventories is taking longer than expected. With all that said, we're updating our financial guidance to reflect the unanticipated impact of El Niño, as well as the slower recovery in distribution margins. We're now forecasting Adjusted EBITDA to be in the range of $80 million-$110 million, while our guidance for revenues remains unchanged. With that, let me turn to Julian for some details on our financials. Thanks, Ruy. I'll begin by covering our consolidated financial results for the fiscal first quarter 2024, which ended on September 30, 2023, and providing additional details regarding our revised full year fiscal 2024 guidance. Let me start with the first quarter. Consolidated revenue rose by 11% to $482 million, as Ruy has mentioned. In constant currency terms, the revenue increase was 3%. The inputs revenue increased 5%, with volume growth more than offsetting price declines. Grains revenue increased 109%, driven by greater desire by our customers for entering larger transactions. Looking at revenue by segment, Brazil retail saw revenue increasing by 15%, reflecting the improved sales volumes of crop protection, fertilizers, and specialty product categories, which increased 54%, 53%, and 33%, respectively. This more than offset the decline in average sales price, Ruy elaborated on before. Lavoro gained share in the quarter, driven by good execution from our local commercial teams. The contribution from recently acquired Referência in the south of Brazil contributed roughly 2% to the overall revenue growth for the segment. Now, talking about the Latin retail revenue, it increased by 1%, 9% in Colombian peso terms, relative to the prior-year quarter, landing at $66.3 million. The decline was primarily driven by the pricing headwinds to fertilizers, as well as supply shortages of corn seeds from a key supplier, which resulted in lost revenue opportunity amounting to just over $2 million for the quarter. Actions have already been put in place to add new suppliers to mitigate impact for the rest of the year. In addition, our Latin business continued to suffer from the impact of the rupture of supply of Paraquat, top leading herbicide in Colombia, from a key supplier. The year-over-year headwind from Paraquat amounted to just over $2 million in the quarter, and is expected to continue impacting the results for the next two quarters. Crop care revenue decreased by 1% to $35.7 million, driven by a sharp decline in revenue for Perterra, due to price declines in agrochemicals. As a reminder, Perterra is the crop care subsidiary that imports off-patent agrochemicals from Asia, with Lavoro's Brazil retail as the customer. An additional detractor in the quarter was Agrobiológica, which faced headwinds from delays in farmers purchasing, sorry, decision making, which pushed revenue out to future quarters. Offsetting the year-over-year impact of this, was the new M&A contribution from Cromo Química, a manufacturer of adjuvants, acquired in Q4, as well as double-digit growth for Union Agro, our specialty fertilizer manufacturing subsidiary. Consolidated gross profit for the quarter decreased by 34% to $59.5 million. Gross margin contracted by 150 basis points to 12.3%. The main driver was the steep price decline in crop protection and fertilizers in our Brazil agriculture retail segment, detailed by Ruy. Latin agriculture retail saw its gross margin decline by 50 basis points to 13.8%, as we had mentioned, driven by the compression in crop protection distribution margin, as well as a negative product category mix shift, as higher margin seed distribution was hampered by previously mentioned product shortages. Crop Care gross margin retreated by 3.3% - 43.3%, driven by a lower margin at Perterra, as you mentioned, due to agrochemical price declines and negative product mix shift at Union Agro, while our higher margin foliar fertilizer product faced timing shift from delayed farmer decision making. These effects were partially offset by the financial contribution from the newly acquired Cromo Química, which boosts gross margins more than the Crop Care average, as we expected. Adjusted EBITDA in Q1 was $11.1 million, down $32.9 million from the prior-year quarter, while adjusted EBITDA margin contracted 7.9% - 2.3%, chiefly driven by the impact of gross margin compression detailed above. Now, SG&A to sales ratio remained constant at 11.9% of sales. Yes, higher consulting and legal expense related to Lavoro's public company expenses, as well as increasing allowance for expected credit losses due to the impact of El Niño on our expected farm client payment schedules, were offset by lean initiatives charging low overhead expenses. All three operation segments saw negative year-over-year change in adjusted EBITDA as well as adjusted EBITDA margin. Non-recurring expenses excluded from adjusted EBITDA increased by $5.4 million to $8.5 million in Q1 2024, due to, number one, M&A accounting and tax due diligence expenses to $9 million, which includes a one-time deal break fee related to NS Agro, resulting from suspending our plans to acquire them. Second, the provision of the second half of the De-PAC bonus to employees that will be paid in Q3 2024, $1.3 million. And last, related party consultancy services expenses recognized as non-recurring to 0.3, and the increase of $1.2 million amortization of the fair value of inventories owned from acquired companies, which relates to purchase accounting. Having said that, I'll pass the ball back to Ruy. Thank you, Julian. Now I'll move to my concluding remarks. Guys, we're living in a very unusual situation in the global ag markets, but particularly in Brazil. Even though grain prices and ag input price adjustments are normal when expected, the intensity of some of those movements was not seen in the last decade, given the high inventory levels carried by retailers. On top of that, we had the severe impact from El Niño that created additional challenges to farmers. In this context, Lavoro is acting to mitigate short-term impacts in our results, and at the same time, we're positioning the company to capitalize on the expected market recovery. Lavoro has gained market share in the first quarter and hired new experienced RTVs that can bring potential new sales of more than $100 million for the next fiscal year. The market scenario is temporary and will improve as the secular trends and strong fundamentals of Latin agriculture have not changed. When this occurs, Lavoro will be even better positioned to deliver strong results and further consolidate our leadership position. With that, I return to your questions. Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. If you'd like to ask a question, you may press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Bobby Burleson with Canaccord. Please proceed with your question. Hi, thanks for taking my questions. So I guess maybe just starting with the share gain efforts that you highlighted. You know, this is a tough market, obviously, in Brazil, but you guys are working to kind of accelerate those share gains. I'm curious, you know, your position in the market versus other players and how that might advantage you in some ways, and maybe just expand on the efforts underway to drive share gain. Hi, Bobby, thanks for the question. Yeah, absolutely. We're actually accelerating our share gains through some actions that includes, as I mentioned, the hiring of experienced sales consultants that in this more challenging scenario, they see the opportunity of joining a company that is more solid and with higher growth perspective. So we have been very successful in attracting new RTVs as well as we have been achieving a very low level of attrition between our current RTVs. So I think this is a first key component of that. In addition to this, we have been very successful in also... preparing our logistics to deliver products to clients and to take orders in the last minute, as farmers were not taking the same approach as previous years of placing orders in advance. So we've managed to present the very, you know, strong volume growth that Julian has mentioned, by being better prepared to supply these last-minute orders, and we plan to continue doing so. So I think there's a, it's a combination of factors, but it's, in the end, it's related to our, you know, strong position to serve this market. Okay, great. And then just quickly on the, yeah, the comparison to 2014, I guess this is the worst environment we've seen since. And I'm wondering, maybe just contrast the way things unfolded in terms of a recovery from 2014 versus the way things are positioned to recover, in your opinion, from this current situation. Yeah, I think, Bobby, the difference between the current scenario and 2014 is that, first, the magnitude of the change in prices were not even that close. So we have, say, higher intensity of price changes in this time, particularly in the fertilizers and herbicides. And I think another point that is important is that the inventory on the retail channel is at a much higher levels this time because retailers were preparing for a shortage of products, right? So what may be different this time is the pace of which the retail comes back to normal inventory levels and the situation of the overall market normalizes. So it will be a, I would say, slower recovery this time, and it's definitely slower than what we have anticipated. We see early signs of improvement, so we see improvements in the level of inventories. We see farmers already planning for the next crops, but I think the timing will be longer this time. Okay, super helpful. And Bobby, if I may, if I may just add a couple of points. I think just contrasting 2014 and this cycle. This cycle, you had effectively a number of unrelated, whether geopolitical or pandemic-related events occur, and El Niño being the latest one, that were not really related to the market, to the supply and demand for these products, just hit all at the same time. You know, 2014, the decline then was driven by kind of the hangover from the ethanol mandate in the U.S., you know, with... So it was more of a supply and demand question. Here, here, as far as inputs are concerned, it's sort of a reverting to the mean after the post-pandemic shock to the system. Now, a couple of things that are different is that as far as Brazilian farmers are concerned, they're in excellent shape. In fact, they're, you know, even despite this, these headwinds, their margins are still, you know, double digits. And, you know, they will see a recovery next year once a lot of these trends dissipate and normalize. So that's a couple of things just for you to think about as you compare those two cycles. Okay, thanks, Tigran. Thanks, Ruy. I'll jump back in the queue. Thank you. As a reminder, it is star one if you'd like to ask a question. Our next question comes from the line of Ben Theurer with Barclays. Please proceed with your question. Ben, your line is live. You have your line on mute. Our next question comes from the line of Vincent Anderson with Stifel. Please proceed with your question. Yeah, thanks. Good evening, guys. So I just wanted to dig into the biologicals component of the guidance. I know you're starting up new capacity, so maybe there's some fixed cost absorption there that you're not getting, in this revised guidance. But, you know, maybe beyond that, can you talk about the revised expectations between, you know, repeat customers that are not buying versus just pace of adoption being slower in this market environment? Hi, Vincent. I think I can start, and then, the rest can complement here. So, first thing, the short-term impact on the biological solution is related to the fact that farmers are more skeptical to invest now in the corn crop. Okay, so we have a lower expected margins for the second crop, and we have also a shorter time window for this crop as the soy crop got delayed, so we get, you know, higher risks for them to invest. So I think the level of adoption of biological solutions in the corn crop this time will be lower than in the previous year. So this is what is reflected in our guidance. I don't think this is, again, it is not a structural change, but it's something that will affect the next corn crop. Regarding our new facility, we have the facility ready. We will not initiate production on the new facility until August, so we will most likely postpone some of the additional costs related to initiating this operation. And we expect the market to normalize, and then we will eventually accelerate again. So I think it's a temporary thing that we'll face over the next months. That's helpful. Thanks. And then just maybe going back to guidance as a whole, just to help frame your decision-making process. Like, the drought obviously has been developing for a couple months now. Internationally, fertilizer prices have been falling for a while now. So I'm trying to just understand where the tipping point was in terms of your expectations on the year, and, you know, is it just as simple as you had to make volume commitments before you were certain corn would be delayed, or is there something else that I'm missing? So I think, compared to our last discussion, what, you know, some of the things that have changed. First is the fact that we expect some of the margins on the inputs to be improving and end prices, not prices from suppliers to retailers, but end prices to farmers to be recovering faster. So one thing that we observed is that, given the competitive scenario in the market, we continue to see prices at very low and unusual levels, you know, from retailers to farmers. Another thing that has caused this concern is what Tigran has just mentioned on the climate events, particularly the El Niño implications. We saw the situation getting worse as both the soy crop was affected in terms of replanting. So farmers were planting, and then they have eventually to replant some of the soy, and also the shrinkage of the time window for the safrinha. So I think, you know, those were the main changes. And so basically, the market we continue to believe that the market will recover and the challenges are temporary, but the pace is just different based on what I just described. Okay. No, that's, that's helpful. And then maybe just one last one on kind of just Brazil in general, because the U.S. doesn't have two growing seasons, so I don't have a good comparison. But is the Brazilian farmer, is there an opportunity right now for a Brazilian farmer who's looking at a very difficult Safrinha corn environment, to then sell them more product to maximize soybean yields? Or have most of the opportunities to do kind of in-season adjustments to things like nutrient levels or biologicals has that window largely passed? Vincent, the way to think about it is the reason why the delayed planting and harvesting of soybean is impacting Safrinha, which may not be super obvious at first, but it's effectively, there's a window when you start planting the Safrinha, typically early to mid-February, all the way to early March. And the reason why you want to plant then is because the more drought-like or potential for drought-like conditions in Brazil in general kick in in April, May, and you don't want your seedlings to be in the growth phases when those things happen. And so what happens when you have a delayed planting for the Safrinha is you increase the risk, the farmer has a higher risk of facing, you know, yield challenges. Therefore, what they're doing is either they're, you know, doing what they did last year, so they keep planting exactly like they did last year, or they're downgrading technology in terms of medium technology for the seed, or they are shifting their crop type to, you know, other types, whether it's beans or sorghum or other types. And those obviously also have potential for, you know, demand for agrochemicals. But, you know, from our standpoint, what's impacting us more so is the corn seed business for us, which is higher margin in agrochemicals and fertilizers. Right. Yeah, what I was getting at is a farmer facing that likelihood, does it change their purchasing behaviors on the soy that's already in the ground? But it sounds like, you know, the impact of corn just outweighs any opportunity for incremental sales into the current soybean crop that is, you know, causing the delay. Yeah, that's probably a good assumption. Okay. All right, well, thank you. Next question comes from the line of Brian Wright with Roth. Please proceed with your question. Thanks. Good afternoon. I wanted to give a little bit of how to think about the issue between a medium tech seed environment for Safrinha versus your kind of view for planted hectares. So how to think about the relevant impact or the magnitude of the impact on each of those on your outlook? I would say it's a couple of things. A part of it is the downgrading. A part of it is just less acres. You know, we went from, you know, I think early November, Conab was, and some of the consultancies were forecasting acres to be anywhere between -2 to +5. I think now the consensus is more like anywhere between -10 and -3. So it's sort of shifted. And it's also impacting our crop care business in the sense that our biologicals, Agrobiológica, does sell bio insecticides for the corn for certain insects. And we expect that to be a headwind as a result of what's going on in Safrinha. Now, the reality is there's still a couple of weeks left, and so we took, I would say, an approach of not guessing and sort of taking what, what we thought was, you know, a scenario that's likely and rather than wait. You know, there's chances that the acres actually end up being better than we expect, but, you know, we didn't wanna take a chance. Okay, so it sounds like you're kind of thinking more of along like this outlook is kind of more predicated on a -10 on the acres than the -3, or is that the range you're kind of thinking as far as, you know, what you're predicating things on? Brian, yeah, I think more important than the reduction in acreage here is the assumption behind the level of technification that farmers will want to apply in the corn crop. And this is actually more impactful to the overall retail results, right? So we basically believe that they may be trading down some seeds in the sense that, you know, using lower technology seeds and also lower application of biological solutions. It's not as much as the reduction in area that as Tigran mentioned, is there's still not, you know, a consensus in this market. But I think there's an overall consensus that farmers will be more cautious this year with those types of technology investments. Okay. No, t hank you. If I could ask one more just on, you know, the press release talked about ways to go on the destocking and just like, and how to weigh, and you also mentioned the fertilizer, but just maybe how to think about relative impact. Is it more fertilizer, more crop protection on the destocking, or like, just help us, you know, figure out the relative importance of those. No, the crop protection is the most important category in the destocking process now. So, I think fertilizers, they had an impact, but looking forward, the most important category to be looking at is the level of destocking of herbicides, fungicides, and insecticides. So this is what we expect to see normalization over the next months. Okay. And in the, I just wanna make sure I read, so I'm recalling the press release correctly, that, that you the thought process is, by the end of March kind of timeframe, is the kind of view on the substantially complete on the destocking, or is that a fair characterization, or? Brian, I think, it's hard to say. I mean, certainly that some of the data that we've been hearing from consultancies that run surveys suggest that as of December, we're probably 2/3 along the way. But, to be quite honest, the data is really hard to get, and, you know, we'll really see it when, you know, we see prices at the farm gate, as Ruy mentioned, start to recover. And then that will be really the real leading indicator. And we've yet to see a meaningful, you know, reversal or uptrend. You know, it's sort of been bouncing along in a kind of in a range-bound way. SKU by SKU is different, but generally speaking, it's stabilized, and it's been bouncing around for the last couple of months. Okay. Thank you so much. Our last question comes from the line of Ben Theurer with Barclays. Please proceed with your question. Ben, your line is live. Okay. Does this work? Can you hear me? Hello? Now we can hear you. Hello. Oh, finally, we got this done. Technology! First of all, thank you very much for squeezing me in at the end. Had a few technical issues. So, two things I wanted to ask. So first of all, as you look into it, I mean, obviously, the data we just got is, ending September, and, and we're late January. But as we think about the whole Ag Chem destocking, that's been an issue in Brazil and, and all this high inventory you talked about. So what's like your kind of, like, your best guess with that softened outlook that we're gonna get through this? Is that still going to last one, two or even more quarters than that? So anything that you have from off-the-ground information, that would be my very first question. I'm not sure if you've answered this already, but I got lost, so hopefully you can help me out on that, and thank you very much for that. Ben, I think we mentioned that it's right now it's hard to predict. What I can say is that we have some lead indicators that show that the level of inventory is improving, okay? So when you compare the levels of inventory of retailers in January last year to December last year, we saw a decline back, you know, towards, I would say, more normal levels. The thing is that it's hard to predict if the, you know, the normalizations are gonna occur between three months or six months. I think right now, it's, we're gonna have to see the development of Safrinha, as well as, farmers' intentions on starting the new season, whether it's gonna be delayed or if they're gonna, you know, advance some of their purchases. So I would say, we should see at least more three months of this process of destocking it by what the local consultants say, with the possibility of extending a couple of months more. Okay, perfect. And then, just for understanding reasons, because, it's been a while that we had El Niño, and you've mentioned it as having had an impact. So if that were to last for a little longer, and, I mean, in a similar situation as we had La Niña for a couple of years, prevailing, if we were to assume a similar scenario, can you kind of frame or help us understand what the market dynamics would be and how that would impact your business, just from, like, a historic context, how it used to be in the past, and how we should think about the impact go forward, if under an assumption that El Niño is going to last? Ben, always difficult to predict climatic events, but I would say relative to the historical data, this has been a particularly severe El Niño. Just to give you one indicator, the percentage of soybeans that had to be replanted in Brazil, so basically had to scrap and replant it altogether, was between 5%-6%, which is 4x-5 x higher than normal. I mean, that's a fairly large area. Obviously, that's, you know, another very atypical thing to add to the series of atypical things happening this year. But, we can't obviously predict what's gonna happen next year with the El Niño, but I would say relative to historical El Niño, this one has definitely been on the severe side. Perfect. Well, thank you very much, and good luck with what's left for the year. That concludes our question and answer session. I'd like to hand the call back to management for closing remarks. So I think we covered most of the topics already. Maybe the last comment from my side is. I mean, it became very clear all the challenges, but we're also. I think it's important to say that this crisis is also an opportunity for Lavoro to further consolidate its leadership position. The company solid fundamentals will actually act in our favor. So this moment is a good moment for us to continue expanding market share. We'll continue to invest in the acquisition of new clients, and we expect to bring some news for the next quarters based on our continuing investments in the market. Thank you all for participating, and I will be all available for further questions you need. Thank you. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect.