Business Overview and History
Benson Hill, Inc. (NYSE: BHIL) is an innovative agricultural technology company that has undergone a remarkable transformation in recent years. The company's strategic pivot to an asset-light business model, coupled with its focus on developing advanced soybean genetics, positions it as a key player in meeting the growing demand for sustainable and nutritious food and animal feed solutions.
Benson Hill was founded in 2012 with the goal of unlocking the natural genetic diversity of plants to create innovative food and agricultural products. The company's proprietary CropOS® technology platform, which combines data science, machine learning, and advanced plant breeding techniques, has been the driving force behind its product development and optimization.
In the early years, Benson Hill focused heavily on investing in technology and human capital to develop its product pipeline. This approach, while necessary for long-term success, resulted in significant losses as the company incurred costs associated with the early-stage commercialization of its products. By 2021, Benson Hill had accumulated a deficit of $126.2 million.
The company faced additional challenges in 2022 when it encountered market headwinds in the food, aquaculture, and specialty oil markets where its collaboration efforts had been primarily focused. This led to a strategic reevaluation, culminating in the 2023 announcement of plans to transition to an asset-light business model with a focused expansion into broadacre animal feed markets.
As part of this transition, Benson Hill made key divestitures in 2023 and 2024. In October 2023, the company sold its soybean processing facility in Seymour, Indiana for $35.4 million. Following this, in February 2024, Benson Hill sold its soy processing facility in Creston, Iowa for $72.2 million. These strategic moves allowed the company to fully retire its high-cost convertible debt ahead of maturity, significantly strengthening its balance sheet.
The divestiture of its soybean processing assets marked a significant milestone for Benson Hill, enabling the company to transition from a vertically integrated business model to an asset-light approach focused on licensing its technology and germplasm to partners across the value chain. This shift has allowed Benson Hill to reduce operating costs and capital expenditures while maintaining its ability to solve end-user challenges with its seed innovation capabilities.
Benson Hill's flagship product is its Ultra-High Protein, Low Oligosaccharide (UHP-LO) soybeans, which offer significant advantages over traditional soybean varieties. These proprietary soybeans boast higher protein content and reduced oligosaccharides, making them an attractive option for animal feed and food applications. The company's recent successful feeding trials with industry leader Perdue Farms have further validated the benefits of its UHP-LO soybeans, demonstrating their potential to reduce feed costs while maintaining animal performance.
Financials and Liquidity
Benson Hill's financial performance in recent years has been characterized by a focus on improving its liquidity and strengthening its balance sheet. In 2023, the company reported revenues of $473.3 million, a 24% increase compared to the previous year. Gross profit also improved, reaching $23.6 million, up from $3.5 million in 2022.
However, the company has continued to incur net losses, reporting a net loss from continuing operations of $111.3 million in 2023, compared to $99.7 million in 2022. This is largely due to the significant investments the company has made in its research and development efforts, as well as the costs associated with its strategic transformation.
In terms of liquidity, Benson Hill ended 2023 with $48.9 million in cash and marketable securities, a significant improvement from the prior year. This was largely driven by the company's divestiture of its soybean processing facilities in Seymour, Indiana and Creston, Iowa, which generated a combined $87.8 million in gross proceeds. Additionally, Benson Hill successfully retired its high-interest, senior convertible debt in early 2024, further strengthening its balance sheet.
The company's key financial ratios reflect its ongoing transition. As of June 30, 2024, Benson Hill's current ratio stood at 2.21, indicating a strong liquidity position, while its debt-to-equity ratio was 0.58, suggesting a conservative capital structure. The company also maintains a revolving credit facility of up to $6 million, subject to a borrowing base, providing additional financial flexibility.
Quarterly Performance and Guidance
In the second quarter of 2024, Benson Hill reported revenues of $33.8 million, an increase of 44% compared to the same period in 2023. This growth was driven by higher grain sales of proprietary soybeans and increased revenue from partnerships and licensing agreements, partially offset by lower yellow pea revenue. The company's net loss from continuing operations, net of income taxes, was $18.0 million, an improvement of $18.5 million compared to the prior-year period.
Benson Hill's Adjusted EBITDA, a non-GAAP metric that excludes the impact of certain one-time items, was a loss of $12.4 million in the second quarter of 2024, compared to a loss of $15.2 million in the same period of 2023. This improvement was primarily due to the company's cost-cutting efforts and the successful implementation of its expanded Liquidity Improvement Plan.
For the full year 2024, Benson Hill expects to continue its progress towards profitability, with a focus on securing additional strategic partnerships and licensing agreements to scale its seed innovations. The company remains committed to its long-term goal of becoming a leading provider of advanced soybean genetics and technologies to the animal feed, food, and biofuel industries.
Product Segment and Innovation
Benson Hill operates as a single reporting segment focused on seed innovation and technology. The company's core focus is on soybean innovation, with recent advancements in its soybean breeding program driving significant expansion of its commercial seed portfolio by 2025.
The latest field evaluations on Benson Hill's third generation of Ultra High Protein Low Oligosaccharides, non-GMO soybean varieties showed protein gains of 2% over the previous generation and achieved a yield gap of only 3-5 bushels per acre compared to commodity GMO soybeans. This represents a significant improvement in both protein content and yield, making these varieties more attractive to farmers and end-users alike.
A major milestone in Benson Hill's product pipeline is the development of herbicide-tolerant (HT) Ultra High Protein (UHP) soybean varieties, which are on track for commercial release in 2025. This innovation represents a significant step forward in providing farmers with options for weed control while enabling lower-cost, broadacre production of advantaged UHP soybeans for the animal feed industry. The company expects further acreage expansion and portfolio growth in 2026, solidifying its position in the market.
In addition to its soybean innovation, Benson Hill also processes dry peas in North Dakota through its Dakota Ingredients facility and sells its products throughout North America, Europe, and several other global markets. This diversification allows the company to tap into multiple revenue streams while leveraging its core competencies in plant genetics and processing.
Market Opportunities and Industry Trends
Benson Hill is well-positioned to capitalize on the growing global animal feed market, which is expected to expand at a compound annual growth rate (CAGR) of 5-7% over the next five years. This growth is primarily driven by increasing demand for meat and dairy products worldwide, creating a significant opportunity for Benson Hill's high-protein soybean varieties.
The company's transition to an asset-light business model allows it to focus on its core strengths in seed innovation while partnering with established players in the agricultural value chain. This approach not only reduces capital expenditure requirements but also enables Benson Hill to scale its innovations more rapidly through licensing agreements and strategic partnerships.
Risks and Challenges
Despite the positive momentum, Benson Hill faces several risks and challenges that investors should be aware of. The company's ongoing transition to an asset-light business model introduces execution risk, as it navigates the shift from vertically integrated operations to a licensing-focused approach.
Additionally, Benson Hill operates in a highly competitive agricultural technology market, where it must continually innovate and adapt to stay ahead of its peers. The company's ability to protect its intellectual property and maintain a robust pipeline of new products will be crucial to its long-term success.
Another key risk is the company's reliance on strategic partnerships and licensing agreements to scale its operations. Any disruptions or delays in these arrangements could have a significant impact on Benson Hill's financial performance and growth prospects.
Lastly, the agricultural industry as a whole is subject to various macroeconomic and environmental factors, such as commodity price fluctuations, weather patterns, and geopolitical tensions, which could affect Benson Hill's operations and financial results.
It's also worth noting that Benson Hill continues to face substantial doubt about its ability to continue as a going concern and will require significant additional financing to fund its ongoing operations and research and development activities. This financial uncertainty presents a considerable risk for investors and underscores the importance of the company's successful execution of its transformation strategy.
Conclusion
Benson Hill's transformation from a vertically integrated soybean processor to a seed innovation-focused, asset-light company has been a strategic and operational success. The company's commitment to developing advanced soybean genetics, coupled with its shift to a licensing-based business model, positions it well to capitalize on the growing demand for sustainable and nutritious food and animal feed solutions.
The company's recent financial performance, including the 44% year-over-year revenue growth in Q2 2024, demonstrates the potential of its new business model. The successful development of its third-generation Ultra High Protein Low Oligosaccharides soybean varieties and the upcoming release of herbicide-tolerant varieties in 2025 further strengthen Benson Hill's market position.
While the company continues to navigate the challenges of its transition, including ongoing net losses and the need for additional financing, its strong liquidity position, improved financial performance, and promising product pipeline suggest that Benson Hill is well on its way to becoming a leading player in the agribusiness technology space. As the company executes on its strategic priorities, investors will likely be closely watching for further evidence of its ability to drive long-term, profitable growth in the rapidly evolving agricultural technology sector.