If you’re on Twitter, you know there has been a lot of buzz about Bee Vectoring Technologies [stock_market_widget type="inline" template="generic" color="default" assets="BEE.V" markup="(TSXV: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"]. The company owns a patent-pending bee vectoring technology (i.e. utilizing bees as a delivery tool) to help farmers manage disease and enhance crop performance through a variety of naturally derived pesticides and biologicals.
They are holding their first conference call since releasing a slew of positive announcements. The conference call is scheduled for 4 pm EST tomorrow afternoon (December 4th).
In preparation, we’ve reviewed the business, including what we like and what questions we want to see answered.
What We Like
The most intriguing aspect of this company is the early traction they are getting from customers and the agriculture business community.
They have announced multiple commercial sales agreements with Strawberry and Blueberry farmers in the U.S. By our count, they will be treating over 950 acres of crop during the 2020 growing season as of today.
If these initial pilots are successful, there is a substantial upside with these customers in future years.
It should be noted that while the financial details of these early deals have not been released, investors should not expect fireworks. With any new technology, early-adopters often have to be given a good deal to sign on.
With that said, BVT was recognized at the International Agrow Awards for Innovation for its proprietary bee delivery system and VECTORITE technology. Obviously, the company has created something valuable for the industry.
This brings us to our next point — we like BVT’s underlying dual value-proposition.
First, is their proprietary bee system and natural VECTORITE biological, which can help farmers increase crop yields. This will result in measurable value creation for farmers, making it something easy for BVT to sell.
Second, is the use of bee vectoring technology as a whole, which generally uses a fraction of the pesticides required for spraying. If the resultant effect on the crop is similar, this will result in quantifiable cost-savings. It also fits with a larger societal push to reduce the injection of chemicals and pesticides into our environment.
Finally, they appear to be positioning themselves well in a large, growing market.
Agriculture is a tough business for farmers, creating a technology that increases yield and stabilizes crop health would be highly sought after. And with populations continuing to grow, crop productivity needs to move with it.
Further, society is moving away from the use of pesticides and other chemicals on crops. This means the Ag-biologicals are increasing in popularity and disrupting the multi-billion dollar pesticide industry.
Overall, we think the Bee Vectoring Technologies is intriguing, however questions remain. Just because everyone rideshares today, it doesn’t mean Uber and Lyft are automatically good investments.
The Questions – Financials
To start, it’s unclear the exact price they are charging for their technology, especially for early-stage pilot projects. The best estimate is likely their listed “total value delivered by BVT“, which they calculate to be $3,400/acre (for strawberries).
With the price unknown, obviously gross margins are unknown as well. At such a small scale, they likely won’t be impressive. The best estimate can be based on 2019 Q1 financials, where they had a gross margin of 22% on $58,000 in sales.
Based on 2019 Q2 cash operating expenses, they would need quarterly revenues of $1.6 million to be EBITDA positive. To put this into perspective, if they charge $3,400/acre for the ~950 acres they are treating, they would generate $3.2 million in revenue for the growing season.
To be clear, we do not think this will be their revenue, this is an exercise to ball-park what their current agreements might be worth.
With such a substantial revenue ramp-up, we would expect margins to improve along with an increase in operating expenses. With the information available, it’s unclear what revenues are required to achieve positive EBITDA at their current scale. However, investments are likely required, as they have only $220K of PPE on the balance sheet.
Luckily, after completing multiple raises over the last two months, BVT has approximately $2.5 million of cash (less quarterly expenses). Given the investments likely required for their production ramp-up, it’s too early to tell what runway this provides the company. However, this is still substantial for an early-stage company like BVT.
During the conference call, we will be looking for clarity on the terms of their deals and the economics of their proprietary BVT systems. Further information on how differentiated their product is and the degree of competition in the space would also be helpful.
It’s early days with new technology — there are a lot of unknowns. We are very intrigued by BVT as a speculative investment opportunity. We will be listening to the call intently to see if it’s worth all the buzz it has generated.