Benson Hill, Inc. (NYSE:BHIL) Q2 2022 Earnings Conference Call August 8, 2022 8:00 AM ET
Company Participants
Ruben Mella – Senior Director, IR
Matt Crisp – CEO
Dean Freeman – CFO
Conference Call Participants
Benjamin Theurer – Barclays
Adam Samuelson – Goldman Sachs
Kristen Owen – Oppenheimer
Operator
Good morning. Thank you for attending the Benson Hill Second Quarter 2022 Earnings Call. My name is Jordan and I’ll be your moderator. All lines are on mute during the presentation portion of the call, with an opportunity for questions-and-answers at the end. [Operator Instructions]
I’d now like to pass the conference over to your host, Ruben Mella, Senior Director, Investor Relations with Benson Hill. Ruben, please go ahead.
Ruben Mella
Thank you, Jordan, and good morning. We appreciate you joining us to review our second quarter and year-to-date earnings results and the exciting news we have announced today that advances the achievement of our strategic objectives.
With me are Matt Crisp, Benson Hill’s Chief Executive Officer; and Dean Freeman, our Chief Financial Officer. Earlier this morning, we issued our earnings release and Form 8-K. These documents, as well as the presentation, which we are referencing during the prepared remarks are available on the investors section of the Benson Hill website.
Comments today from management will contain forward-looking statements including Benson Hill’s expectations of future financial and business performance, current guidance about 2022 annual results and our 2025 financial targets, as well as industry outlook. Forward-looking statements are inherently subject to risks, uncertainties and assumptions and are not guarantees of performance.
We caution you to consider these risk factors that could cause actual results to differ materially from those in the forward-looking statements. Such factors include those referenced in the cautionary note included in our Form 10-K and 10-Q filings, press release and other filings with the SEC. Also during this presentation, we will be discussing certain non-GAAP financial measures. A reconciliation to GAAP is available on our earnings release and presentation.
I’ll now turn the call over to Matt, who will give an update on the business and recent developments.
Matt Crisp
Thanks, Ruben and good morning, everyone. As some of you may have seen earlier this morning, we announced a long-term strategic licensing partnership with ADM. We look forward to talking more about this exciting news during our call today. But first, we want to note how 2022 continues to shape up as a dramatic year of change for the food system itself.
If you turn to Slide 4, the macro forces we talked about at our April Investor Day, skyrocketing food inflation, food supply chain disruptions, environmental impact and food-driven health implications remain disruptors of the status quo, which are intensifying the sense of urgency for the change we see today. As we shared with you at that time and as exemplified by this morning’s announcement, we believe the evolution of the food system is well underway, supported by a growing number of established agro food companies, as well as new entrants. At the center of this new paradigm remains the consumer who is demanding better food options that are more nutritious, sustainable, traceable and accessible. It is important to reiterate that we fundamentally believe innovation is deflationary, evolutionary and capable of significant sustainability improvements.
As you can see on Slide 5, our innovations are two-sided, underpinned by both technological advancement and an integrated go-to-market approach. Together, the synergistic combination enables our mission to set the pace of innovation in food through our efforts to drive adoption and to achieve scale of our proprietary solutions with partners in an expedited format. Through our actions and performance since last year, we are proving how to run new trains down old tracks in the food, edible oil and aquaculture markets and to do so in a way that increases speed without a derailment. This requires innovative thinking about how each link in the food system can work together.
Now, turning to Slide 6. Our business innovation is a three-step playbook. Step one positions us with a channel to market and to build relationships with customers, which help inform the development of new products enabled by our CropOS technology platform. Step two introduces our new innovations into that channel with the goal of introducing and establishing these Benson Hill Ingredient products in the marketplace. Step three is where we form partnerships and licensing agreements to further broaden our market reach and to scale the adoption of our innovations.
We have discussed this approach with you previously, but it’s worth repeating as it reinforces the commercial strategy of our proprietary soybean portfolio underway today, as well as efforts and yellow pea that we are undertaking in the coming years. We have also shared with you previously the strong interest and ongoing engagement with prospective licensing partners across the markets we serve.
As you can see on Slide 7, our agreement with ADM moves us to step three of our playbook by combining our soybean seed innovation with ADM’s current and expanding processing infrastructure, as well as their capabilities as a protein ingredient leader to serve the growing plant based markets. Here are some key features of this partnership. First, ADM will exclusively license Benson Hill ultra-high protein soy in North America to produce and commercialize protein concentrates, texturized protein concentrates and texturized flour containing 60% to 65% protein content, as well as protein isolate products. ADM is a market leader in these categories which are an ideal fit for our soy genetics.
Second, ADM will utilize its current and planned protein ingredient manufacturing capacity designated for human food to process Benson Hill’s proprietary soy that includes leveraging the sizable investment that ADM has planned for its Decatur, Illinois production and innovation facilities. To put into perspective, what this scale means for Benson Hill, the acres required to fill this capacity on an annual basis in the next three to five years will be greater than all of the cumulative acres Benson Hill has contracted for planting over the last three years since we began to commercialize our proprietary soy portfolio.
Third, we will cooperate to engage ADM’s existing network of U.S. farmers to help source proprietary Benson Hill’s soybeans to fuel this collaboration. This enables rapid expansion of the farmer network with access to our technology, giving farmers the opportunity to participate in the seed-to-fork revolution that this partnership exemplifies. We and ADM are also aligned around the importance of on-farm data collection to provide important insights to our farmer partners while maintaining the integrity of the traceable closed loop production system for the benefit of our customers. Data collected in collaboration with farmer partners will further improve the capabilities of CropOS to bring more value back to the farm in a way that better connects them with the end consumer.
Fourth, through this collaboration, ADM will bring to the market an expanded and more diversified portfolio of proprietary ingredients to serve the alternative meat, meat extension, alternative dairy, specialized nutrition, and other markets in North America. The products will include current ingredients from Benson Hill’s TruVail portfolio, as well as proprietary ingredients enabled by Benson Hill and CropOS that are not currently available on the market. Our products in this diverse portfolio of ingredients will provide a compelling value proposition to customers, bringing enhanced functionality, traceability and sustainability attributes. In some cases, the products will also feature the significant energy and water savings of our ingredients as shown on slide 8 and similar to those offered in our current CleanCRUSH ingredients.
Turning to Slide 9. We are enthusiastic about what our companies can deliver and believe that together, we will make an impact that neither of us could achieve alone. It is this kind of licensing arrangement that brings innovation to the next level, evolving from one mega commodity system to deliver more customized ingredient streams that serve the plant-based protein markets with efficiency of scale. It is a proof point that the seed-to-fork evolution is underway and that our CropOS platform is the engine to help drive it.
For the sake of clarity, let me specify now what is not within the scope of the partnership. Not included are ultra-high protein and high-protein flour products within our TruVail soy ingredients portfolio, our proprietary soy meal for animal markets including aquaculture, our high-oleic oil ingredients and anything related to yellow pea or other ingredient portfolios. Benson Hill will continue to market the aforementioned ingredient products, and of course, we maintain the ability to market our entire ingredient portfolio outside of North America.
I would like to take this time to also note that we have decided to sunset the TruVail brand name. Going forward, we will use the name Benson Hill Ingredients for all of our products and the portfolio of products with ADM will be co-branded by both companies. We believe this partnership represents a pivotal milestone that validates our strategic playbook and will meaningfully contribute to our commercial plan, which supports our previously stated financial targets, including becoming profitable in 2025. While financial terms are not being disclosed, we can share that the agreement includes value sharing on all products delivered from Benson Hill genetics, technology access fees for the use of Benson Hill proprietary soy, and milestone payments upon achievement of certain commercial objectives.
This alignment with an industry leader represents a win-win scenario for both parties, and we are eager to engage with the ADM team to leverage what we do best, genomic innovation in a seed and commercialize ingredients that are made better from the beginning. We will continue to execute our closed-loop business model to observe greater capacity at our Creston and Seymour facilities along the lines of our previously discussed plans. As a result, we will continue to grow the proportion of proprietary Ingredient Solutions and adjacent human food-related markets and other markets domestically and elsewhere.
One example, on Slide 10 is an edible oil market where we remain well positioned with our Veri brand cooking oil sourced from Benson Hill’s proprietary soy. Veri is a more sustainable alternative to other vegetable oils like canola by using significantly less land, reducing CO2 emissions and conserving water. Furthermore, this product boasts a healthier oleic fatty acid profile than commodity soy oils and a longer useful life in frying applications which reduces our customer’s operating costs.
We are sold out of our inventory from our 2021 crop and are already forward-selling inventory that will be derived from our 2022 crop. We recently announced the regional supplier agreement with St. Louis based Schnuck Markets along with its network of more than 100 grocery stores. And we’re also seeing an emergence of demand in Europe where there are shortages of heart-healthy high-oleic oil for human food markets given supply chain challenges coming out of Ukraine.
Another example shown on Slide 11 is in the aquaculture market where activity is ramping up to supply our ultra-high protein soymeal sourced from the U.S. for the trout market and also for Northern European salmon producers and feed suppliers. Our commitment to the aquaculture category provides an opening for Benson Hill to also become a global commercial player. As these milestones and progress reflects the headway we are making in the Ingredients business is real and continues to gain momentum ahead of our expectations.
Year-to-date, we are executing well on our priority to gain share across multiple segments as evidenced with the year-over-year Ingredients revenue growth of 332%, to $160 million, and we are on track to deliver organic growth in excess of 80% as we increased our revenue guidance for the full year. We believe that we are in the midst of a once in a generation opportunity to accelerate the adoption of plant-based foods, which requires more consumer-centric food system.
The most impactful investments that we can make against this thesis right now is in our Ingredients business. As such, earlier this year, we announced the suspension of R&D for our fresh segment. While we believe seed innovation and fresh produce can support the rapidly emerging food-is-health movement, it is important that we press our advantage and fully commit to higher value product opportunities and ingredients. This has led us to the decision to explore strategic options for our fresh business.
I will conclude my remarks after covering two other topics, starting on Slide 12. We completed the planting of our proprietary soy varieties for this growing season after delays that were caused by a cool wet spring. Our colleagues and farmer partners work tirelessly to make up for the lost time and for that, we’re grateful. This is the time of year when we now engage farmers for our 2023 planting season. What’s different this year is that we can offer a stronger value proposition due to the assets we have in place now, as well as the major validating commercial partnership with an industry leader, neither of which we had at this time last year.
In addition, we are ideally positioned to be more deliberate with our farmer engagement efforts across the I-States and to optimize our supply chain in the primary North American soy growing regions. In fact, last week, I had the chance to meet with several of our current and prospective farmer partners across Missouri and Iowa, and in the next few weeks, I’ll have the opportunity to do the same in Indiana and Illinois. This process of listening and learning from farmers informs how we invest in innovation and build a more resilient and connected food system together. It’s also energizing to hear directly from stakeholders who are eager not only to bring more value back to the farm but help connect more with the consumer demand for the benefit of their families, land, and society.
Now turning to Slide 13. We recently published our 2021 ESG report. This culminated from months of effort, and I hope you’ll find that its content meet expectations for transparent reporting. But most importantly, we hope it further validates that our financial success is inextricably linked to social and environmental KPIs. We have established corporate governance best practices to ensure we operate with transparency and with an unrelenting curiosity to learn and continually improve. This ongoing effort is ever seen by the sustainability and governance committee of our Board of Directors. We have also established processes for ESG reporting across our operations including completing our first materiality assessment, as well as GHG Scope 1 and Scope 2 inventory assessments.
Our role enabling seed-to-fork innovation gives us a unique opportunity to catalyze social and environmental impacts across our supply chain. Being a pure play ESG company means that as we scale our products, we not only deliver financial performance but also realize positive social and environmental impact beyond our walls and fields. Our closed-loop traceable production model offers a unique competitive advantage and as we seamlessly leverage data from the farm through ingredient production to support the sustainability goals of our customers, which now more than ever is front and center for CPGs in the private sector.
Our ESG report further highlights our CleanCRUSH ingredients and strategy, which in the case of multiple of our proprietary soy-based ingredient products enable significant reductions in water and CO2 emissions. I invite you to read the ESG report at bensonhill.com/impact to understand better the scale and types of positive impact that we expect to deliver as we grow.
With that, I will turn the call over to Dean for his perspective.
Dean Freeman
Thanks, Matt and good morning, everyone. I’m going to focus my remarks on three themes from the strategic milestone Matt shared with you and our financial performance year-to-date. First, as we previously communicated, our long-range targets include the contribution from partnership and licensing agreements. We expect ADM to be a significant contributor to achieving that overall objective.
Second, strong customer demand has led to Ingredient sales growing faster than expected. As a result, we now forecast full year revenues for the Ingredients Segment to exceed our previous guidance. In addition, our operations are taking actions to further optimize and reduce higher than expected costs in our supply chain, logistics, and production work streams to meet this demand and further mitigate growing inflationary pressures.
Third, we’re enabling our strategic plan to achieve positive EBITDA and free cash flow in 2025 by further accessing non-dilutive sources of capital, and we’ll continue to pursue other options to extend our liquidity runway.
I’ll begin with comments on the financial impact of the ADM partnership on Slide 14. Matt mentioned the partnership enables Benson Hill to not only achieve scale and accelerate market adoption of our innovations with an industry leader, we believe it also results in mitigating risk in the execution of our strategic plan. One of our key objectives has always been to scale our technology innovations through an asset-light approach, and ADM will utilize Benson Hill innovations across its vast processing, operations, and commercial platform starting at the farm gate.
Revenue streams Matt mentioned are expected to contribute a significant portion of the 20% proprietary partnership, and licensing annual revenues targeted in the 2025 to 2027 time frame as we outlined on our Investor Day in April. Additionally, the payments and proceeds from our value-sharing agreement are anticipated to represent a significant majority of all currently forecasted gross profit from partnership and licensing sources across our three year strategic plan. We expect the vast majority of the economic benefits just described to occur in later fiscal periods with minimal revenue contribution in 2022.
Turning to Slide 15 and 16 to review our performance in the first half of this year and an updated outlook for the full year. Revenues for the Ingredients Segment grew 332% to $160 million, which exceeded our expectations and positions us to deliver full year Ingredients Segment revenues between $275 million and $325 million, above the $250 million to $275 million range provided in our earlier guidance. We are still on track to achieve $70 million to $80 million in proprietary soy product revenues. In terms of potential sales from the 2022 crop in the fourth quarter, we will have greater clarity once the harvest is complete. The upside in guidance is largely a result of higher than expected volumes from non-proprietary sales, as well as price.
Revenues from the fresh segment increased 26% to $43 million which was ahead of expectations in the first half of the year. While we are pleased to have strong growth in the Ingredients business, the volume we’ve seen and continue to anticipate is putting stress on current supply chain and logistics infrastructure as processing throughput and shipping volumes are temporarily lagging the faster pace of growth.
Also, as we’ve mentioned throughout the year, we’re not immune to inflationary pressures which has become more acute in the second quarter with higher costs for freight, logistics and factory overheads. The Ingredients revenue upside is expected to cover these additional cost pressures as we take actions to optimize our production throughput and logistics value chain. Therefore, we are maintaining our consolidated gross profit guidance in the range of $9 million to $13 million and contribution margins of 1% to 3% for the proprietary portfolio.
Gross margins year-to-date for the fresh segment were in high-single digits, which is in line with guidance for the full year inclusive of the inventory write-down this quarter. Adjusted EBITDA year-to-date was a loss of $43 million. For the full year, we expect adjusted EBITDA and free cash flow losses to be within our previously guided range of $80 million to $85 million and $120 million to $130 million respectively.
Our guidance for capital expenditures of $14 million to $16 million remains the same. As we outlined in the earnings release, a sizable part of the $8.2 million in mark-to-market losses in the first quarter related to timing differences reversed in the second quarter. We still have $2.9 million of losses in our reported results that we expect to unwind in the coming quarters.
Let’s turn to liquidity on Slide 17. As of June 30, we have $210 million of cash and marketable securities, which includes the remaining $20 million available from $100 million credit facility for our 8-K filing last month. While we look forward to activating other opportunities to further improve our liquidity, our near-term priority is to remain disciplined in our use of cash. Anticipated revenues from ADM for access to our technologies and potential milestone payment will also contributed to our non-dilutive sources of funding.
We believe the milestones achieved over the past few months, including the PIPE raise, the alliance with ADM, as well as important commercial agreements with Kellogg’s, Denofa and [indiscernible] coupled with continued discipline and focus cash management reaffirms our required liquidity sources into 2024. By the end of this year, we’ll have an update on the operating performance and the outcome of the strategic assessment of the Fresh business Matt mentioned in his remarks. All-in taken together, we expect these initiatives will further position our cash funding to achieve the 2025 financial objectives as shown on Slide 18.
That concludes our prepared remarks, and we’ll now take your questions.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from Ben Theurer of Barclays. Ben, your line is open.
Benjamin Theurer
Perfect. Thank you very much. Good morning, Matt, Dean. Congrats on I guess, the results and the partnership. Almost feels like you guys bring something — it feels like you guys come up with something like that every quarter, right? So, first is on the customer [Multiple Speakers] purpose, right?
Matt Crisp
Of course, right.
Benjamin Theurer
Good. So let’s put this aside and focus on a few things around this. And I guess, there will be obviously a lot to be discussed on follow-ups, et cetera. But wanted to elaborate and get your maybe additional comments you can share on what you said, what’s not included, but also on what is included. How exclusive is this agreement with ADM? How should we think about it on what you’re basically licensing out?
Is there a certain level of exclusivity, which is why there are certain products not included? Because you think you’re potentially better off with a different partner? How should we think about what you’ve struck on the deal now with ADM versus what’s not part of it as you’ve highlighted during the remarks, Matt, on the not included piece and where do you think this could potentially go? So that kind of would be my first question, little broader, I guess.
Matt Crisp
Sure. Yeah, the way that we think about this is, as we’re marrying the capabilities that ADM has and is a distinct market leader in, particularly as it relates to the protein ingredients category in North America and even more, more specifically concentrates texturized concentrates, functional concentrates and obviously a market leading business as well and other adjacencies. And so, what we’ve done here is we’ve built a partnership that marries the ultra-high protein portfolio with an organization that has a track record of making very, very significant investments in developing its leadership position in those areas and frankly continues to do so.
I think we’re very encouraged by the dedication of the ADM leadership behind its nutrition business which spoke to us as a team when we were evaluating various go-to-market, we call it, step-three options in that licensing paradigm that we’ve discussed with you and others extensively. And so that — geographically, North America as we’ve designated from a protein ingredient portfolio perspective, it’s really centered around those high-value areas in which ADM has made and continues to make really, really material investments that align with the differentiating factors our soybean genetics can bring to the market.
Benjamin Theurer
Okay. That’s okay. Thank you very much. And then, it hasn’t been talked much about it, but in the press release, you’ve talked about at the very beginning, there is just this one line, it’s — that management is assessing strategic alternatives for the Fresh business. Any commentary you can give around this because it kind of feels like there’s always something going on with the Fresh business you still haven’t — how should we think about what’s going to happen with the Fresh business in three years out by 2025? So is this still something we should consider or do you think this is better off for someone else?
Matt Crisp
Well, I mean we can’t speculate on time frames. What I can say is that we and the Board have had this discussion, and there is strong alignment that we need to really play the hand that we have in the Ingredients Segment, which is an area of terrific strength for us and to provide the opportunity for management to focus for us to best allocate capital and for us to as an organization, relentlessly execute in the area where we have a distinct and significant competitive advantage. We’ve decided to now explore options for that business.
I think it’s a little bit of old news here as well, but you also would recall that we’ve discontinued the research and development that was focused on the Fresh business as of earlier this year. So, our innovation team is already focused on and has been for the bulk of 2022 the Ingredients current and prospective opportunities. I think this is a logical extension of looking at other alternatives that may be explored, and as Dean alluded to in his commentary, if that manifests itself in some additional liquidity, that would be of further benefit, but it’s just too soon to speculate on if and when that might occur.
Benjamin Theurer
Okay. Perfect. Now, thank you very much. I’ll leave it here so others can ask questions. Well, congrats again.
Matt Crisp
Thank you, Ben.
Operator
Our next question comes from Adam Samuelson of Goldman Sachs. Adam, please go ahead.
Adam Samuelson
Hi. Yes. Thank you. Good morning, everyone.
Matt Crisp
Good morning, Adam.
Dean Freeman
Good morning, Adam.
Adam Samuelson
Good morning. I guess, first question is going deeper into the agreement with ADM as far as you can. Any way to frame, maybe, kind of the economics of this relative to how you would frame some of the theoretical licensing agreements at the time of the [indiscernible] last year, so thinking about the investor presentation ahead of kind of going public and there have been some kind of economics on future licensing agreements and how you would frame kind of the unit economics of the ADM agreement versus that?
Matt Crisp
Sure, I can comment on it at a high level, more so qualitatively. When we looked at the opportunity to move in this step three last year as we talked a little bit about that business model evolution and licensing and what it would mean from an economic perspective, we talked about the strong need for us to maintain an interest in incremental unit economics that were supplied in the scope of these partnerships to our partners. And we also talked about the fact that there may, depending on the partnership opportunity, come with that adjacent licensing or technology licensing fees and we very much achieved our goals in these regards.
We have — we had a target and a set of criteria as we evaluated a number of different partnership options. Some of those we’re, of course, economic and quantitative in nature. Some of them were qualitative in nature around terms and conditions and scope of exclusivity, and I’m really pleased to report that we were able to meet all of our objectives on both ends of that spectrum through the way that this partnership has been organized.
And that I think, let me just say, I think it speaks to ADM’s leadership position and understanding that if they want to partner with an organization that is investing as much in the next generation of seed development, specifically, to link farmer and consumer interest, their willingness to come to the table and to establish very much a win-win scenario with Benson Hill to achieve that, I think just speaks to the progressive nature of what’s going on in that nutrition business and there is a strong alignment of how we’re going to go to market together and really create some very synergistic value between the two organizations. So long answer there, Adam, but I just want — I do want to say that it related to what we talked about last year publicly and in the process of publicly listing, we were able to achieve all of our quantitative and qualitative targets.
Adam Samuelson
Okay. That’s very helpful. And then, if you could just maybe, any additional color you can give on kind of the timing of implementation? And when — you talked about some upfront, kind of cash payment factors with the technology, as well as kind of progress payments over the next couple of years, but how do we think about kind of the phasing of this in terms of which crop year will really start delivering kind of ingredient revenue and licensing income associated with that in the following year?
Matt Crisp
Yeah, for sure. I’ll talk to the operational start-up of the partnership and then I’ll ask Dean to comment on some of the financials. So, we obviously have what we have from the 2021 crop year, so it’s one reason why you’re not going to see very much impact in 2022 because we’re dealing with the inventory that we’ve already produced. And frankly, we’re dealing with the inventory that will get out of the 2022 crop, which was not done in planning for one of these partnerships. So, that’s the reason why the near-term impact that Dean will talk about it isn’t going to be very, very substantive.
But in terms of how and when we ramp, it’s an aggressive path over the next several years to move, as I mentioned and to a large portion quite expeditiously, the ADM production capacity. That will involve collaboration at a couple of levels, obviously at the origination level which is igniting right now for the 2023 planting cycle, as well as on the commercial side, which will also be a fast follow such that we can land what we’re going to do together from a co-branding and marketing perspective of the products that we’re collaborating with to take to market. So those things are happening quite quickly, and it will have a meaningful impact on our plans going into the 2023 planting cycle. Dean, you want to talk about the financial side?
Dean Freeman
Yeah, I think Matt hit it spot on. I think this is about — more about the trajectory of the value economics going into 2023 and is in 2022. So I think the way we framed it with minimal impact on revenue in 2022 sort of the — as much as we can talk about, I think that it’s really about realizing the full quantum of the benefit into 2023. The other thing I guess I would point you to is the comments around the significance of the partnership on the 20% total proprietary or the total partnership and licensing revenue from 2025 to 2027 that this represents and the substantial gross profit coverage that this provides us across the full term of that forecast horizon.
Adam Samuelson
That’s all very helpful. Maybe, I could just squeeze one more in. If I think about kind of that pathway to funding — cash funding through 2025, just help us understand kind of what still needs to happen to give you that full line of sight to getting to cash flow positive without external financing or dilutive financing in 2025? Is it the sale of the Fresh business? Is there other licensing kind of agreements on things not encompassed by this agreement? Just anything else would be helpful.
Dean Freeman
Yeah. I think — and I would let Matt make some comments as well. Look, I don’t think much has changed — I mean we are executing to our strategic plan. I think as we’ve alluded to, once we raised the PIPE, we talked about funding into 2024. This is all sort of building up to making sure that we’ve got the ample amount of liquidity into executing through 2025 and 2027, but not the least of which I’ll just say is that — is the gross profit expansion is the margin expansion that we talked about, that is the number one thing that needs to happen.
Execution is sort of underpins the entirety of that and candidly, the proprietary business growth, as well as the partnership and licensing, those milestones are critical in that margin expansion. And I think today’s announcement is critical first step in allowing us to achieve that and derisking that margin outlook for the balance of the forecasted term. Matt?
Matt Crisp
Yeah. I mean piggybacking on that a little bit, when Dean mentioned that the significant majority of the gross profit derived from licensing and partnerships is covered by virtue of this deal in the next three-year operating plan at Benson Hill, obviously, it speaks volumes to the quantum of what we’re achieving here.
But to your point, what else has to happen or what else has to be true in order for us to meet those published financial targets. We’ll continue to explore as we’ve stated previously, additional licensing and partnership opportunities. This isn’t a one-and-done-type approach. We’re making substantial investments in the yellow pea portfolio for starters. We’ve got adjacent markets domestically and a full slate of opportunity that we may intend to pursue over time outside of North America.
So there is a number of other, call it, step three possibilities, none of which I’d say is an urgent need, and we’re going to do what we did with respect to establishing those partnership. And that is maintain patience and ensure that we’re doing — we’re establishing a partnership that preserves healthy and fair proportion of incremental unit economics because that’s frankly what I think our shareholders should expect of us, is not to go and hurriedly do something, but to look at the long term to build a company that last and to maximize long-term shareholder value. And I think this is certainly a major step towards achieving that, but there are other opportunities to do so as well.
And then lastly, I’d say, we’ve also got continued very, very strong organic growth in the business, and I want to just highlight the remarkable execution of our team. The team has this year really, really performed across the board and that’s at the plants, that’s with our farmer partners that’s engaging with cutting-edge innovation in the labs and in our Crop Accelerator. Those are things that are going to continue to lead to an expanded breadth of opportunities along these lines, not just in the next three year period.
Adam Samuelson
All right. Great. That’s all very helpful color. I’ll pass it on. Thank you.
Operator
[Operator Instructions] Our next question comes from Kristen Owen of Oppenheimer. Kristen, please go ahead.
Kristen Owen
Great. Thank you for taking my question and congratulations on the announcement this morning. And wanted to follow up on your comments on yellow pea since that is not part of the partnership and just wondering if you can provide us an update on where you’re tracking in that portfolio and how we should think about the opportunity set, given now that you have a foundation for these types of partnerships?
Matt Crisp
Sure. Thanks for the question, Kristen. When we look at yellow pea, we think that it’s got a meaningful role to play in the future of plant-based alternatives, there is a lot of attractiveness. We’ve continued to invest in both the AI-accelerated breeding driven approaches for yellow pea, as well as CRISPR gene edited enabled approaches for yellow pea. We continue to believe that there is likely a place for both in the future and we’re on track. We’ll know more at the end of this year about the breadth of the program in the ’25 and beyond. But we are on track to plant initial commercial acreage in 2024, which as you might recall we shared during Investor Day, is tracking about a year ahead of the schedule that we published in 2021. So that effort continues to go well.
I know we had a team last week in North Dakota at our breeding stations, visiting plots. They came back very energized with what they were seeing and I’m energized by seeing some of the results that come out of that program. So the breadth and depth of that is there and we’re definitely in what we call pre-commercial phase with the leading edge product opportunities. And I think in the next cycle or so, it will become time for us to begin exploring some of these possible opportunities. But again, just to reiterate what I mentioned a minute ago, it’s not as though we’re in a hurry to do so.
Kristen Owen
That’s really helpful. Couple of questions just on the scale of the opportunity that you have here. I think, Matt, you said in your prepared remarks, the cumulative acreage of this partnership is something that exceeds the acreage that you’ve planted thus far. So, thinking about 0.5 million acres that will be accelerated through this ADM partnership. I’m wondering if you can help us understand what that means from an innovation cycle in terms of the data collection that you’ll be getting and how that attributes to the CropOS and innovation flywheel that you have planned? Thank you.
Matt Crisp
Certainly. Well let me answer that in sort of two parts. One, I want to make sure that my comments in my prepared remarks were clear. When I said that the cumulative acres that Benson Hill has planted as part of its proprietary soybean program for the last three years, which as we published is greater than 200,000 acres on our Investor Day, that the annual expectation for drawdown of production from acreage will be greater than that as we move through the next three to five years with the ADM partnership. So, I just want to clarify that’s the scale, which is obviously very, very meaningful.
To your — to the second part of your question, how is that actualized? I’d say that we’re playing from the same playbook of how we engage farmer partners, but we are eager to leverage the existing farmer network that ADM has to ensure that we accelerate and ramp our on-farm engagement in order to meet the expectations of volumes that will be required in the commercial context here. So what does that mean is that, our team will be collaborating literally in the next several days with the team at ADM to outline plans on how we can go and achieve closed-loop contracting at the target levels that we foresee being required in 2023 and laying the foundation for the relationships that will be important in that area for long-term success of the partnership and the value chain that we’re establishing from an ingredients perspective.
So it’s — that second part is really just execution, execution. It’s not as though we need to build or organize a different capability. We truly are leveraging the mutual capabilities of our organizations and it will just put additional pressure on ensuring that we achieve those goals, but the plan that we’ve had to date is working really, really well and I have no reason to believe that it won’t continue to work well, particularly as we’re taking a tremendous amount of risk out of the equation and partnering with an industry leader.
Kristen Owen
Thank you so much. I’ll take the rest offline.
Operator
We have no further questions on the line. So I’ll hand back to Ruben for the closing remarks.
Ruben Mella
Thank you, Jordan. As is our custom, we reach out to retail investors for questions, Matt and Dean, a lot of these were already covered, but we were asked by retail investors, what’s your plan to improve? We covered that today. What are the three areas that Benson Hill is focused on internally to improve the business operation? We addressed that as well. How much cash does the company have? How much money is the company spending monthly? We kind of covered that in your remarks, Dean.
And then there were two questions around the status of the market and where we’re going? So I think we’re really grateful for the questions from retail investors, and I think we covered a lot of it on the call. One question we did get, Matt, and I’ll direct this to you is with all the flooding in St Louis, how did that affect Benson Hill?
Matt Crisp
I appreciate that question. So we, for those who may be unaware, had some very persistent storms that hit St. Louis in the last couple of weeks and now parts of Kentucky as well, which has caused a huge amount of damage and loss of life, and our thoughts go out to those who’ve been affected. Fortunately here, our colleagues are safe and our headquarters and our facilities were not affected by those storms, though it is mess and we’ve got friends of colleagues who have been affected. And so, that’s obviously a terrible situation for some folks locally. But I do appreciate that question. Fortunately, hasn’t impacted Benson Hill.
Ruben Mella
With that, Matt, I’ll turn it over to you for closing remarks.
Matt Crisp
Certainly, thanks Ruben. Thanks, Jordan for facilitating. I’ll conclude by just saying that we are really appreciative of the time and engagement from the group today. Dean and I are really proud of what our team has accomplished this year through strong execution and taking some really bold steps to build a company to last. Our premise is that we can accelerate the evolution of our food system using science and technology and combining that with a novel business approach to deliver food choices that are indeed more sustainable, nutritious, and accessible.
And it’s clear that 2022 will be a pivotal year for Benson Hill as we validate our purpose, as we deliver on our promises, and as we demonstrate the value of our products across the food value chain. We’re off to a really good start in the second half of the year as we ramp up sales of our proprietary portfolio and we prepare for harvest of the 2022 crop, which will give us visibility into 2023. And we remain disciplined in executing our strategic plan and finding ways to extend our liquidity to achieve our targets and become EBITDA and cash flow positive in 2025.
With that, I’ll thank everyone for their time this morning.
Operator
This concludes today’s call. Thank you for joining. You may now disconnect (ph).
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