And you’re asking the right question, which I don’t have direct answers for you as we evaluate these, and we’re fairly early in stage with really drilling down on some, and asking the questions. Do we change our focus and redirect resources. But it is a process we’re going to go heavily through, as we move forward in the business.
Benjamin Klieve: Okay. Very good. That’s directionally very helpful. Very good. Well, best of luck with all these initiatives. And thanks for taking my questions and I’ll get back in line.
Mark Herrmann: Okay. Thank you, Ben.
Operator: [Operator Instructions] The next question comes from Nelson Obus with Wynnefield Capital. Please go ahead.
Nelson Obus: Yes. Hi, there. General, yes this call has been more informative and granular than past calls. So I find that very helpful. Just a quick question about R&D for fiscal ’24. Do you expect it to hold even to where it was in fiscal ’23?
Mark Herrmann: Thanks, Nelson. We are looking at relatively flat spending in research. Now some of what we talked about in the call is the exiting of – some of either the product line, or focus areas that we don’t see a clear future of driving revenues and margins. We’re exiting, and I’ll use the example of stevia, right? So, we’ve halted research activities with that product, and that’s enabled moving those to our sorghum pipeline. Where with our sorghum pipeline, we’ve got much more demand as far as the amount of testing requirements due to the depth of the product line, as well as efforts with germplasm transformation processes to introgress trades. So, there’s been a reduction in some areas, Nelson, and then moving those to what we see as really our high-margin drivers, both for the short and for the long-term.
But for this year, our discussion is to keep spend very tight, be highly efficient. And as we’re generating cash to Vanessa’s point, we’ll keep – reevaluating those on how we invest our resources going forward.
Nelson Obus: When you look at the EBITDA projections you’ve given us, does that imply a discontinued operation in stevia or those – or there might be some write-downs that — in other words, getting out of categories, which could trigger a write-down, is that anticipated in the EBITDA projections? Or is that a separate issue to be dealt with when they come up?
Mark Herrmann: Yes. I’ll let Vanessa refer to it.
Vanessa Baughman: Yes. There are no anticipated write-downs, Nelson, from any of the product lines that we’re pausing at the moment. The bearing on the income statement is pretty much all driven in OpEx, right? And so as Mark mentioned, just to put some dollars around it, pausing the stevia R&D program is about $300,000 per fiscal year that we’re refocusing our efforts in that R&D space. Again, towards our high-value options for farmers going into the near future, and longer term. So that’s about $300,000. But in our OpEx projections, there are no known write-downs of any of the product lines that we’re pausing at this moment.
Nelson Obus: Okay. Got it.
Mark Herrmann: And with that, Nelson, we’re also moving the material itself, right? Because we do have a platform of germplasm that has been developed. We’re moving it into cold storage as we look at the next step of where we go with the stevia, germplasm and program.
Nelson Obus: Fine. You’re doing a lot of your revenue in the international realm, and you touched on logistical delays in international shipping. It’s been my observation that that’s caused an enormous number of problems over the years. And I’m just wondering whether I’m right, and whether you’re attacking this cost area. Obviously, we went through a period of constrained capacity, where you really had to be on the ball to avoid accelerated costs. I think that’s trended down now, looking at dry cargo costs. But can you address that issue? Because it really has not been an area that we’ve excelled then in the past?
Mark Herrmann: Yes. And international movement of seed is complex in itself. And then I know of recent years with adding some of the geopolitical pressures on top of it, it’s been exasperated even further. So, one of the steps that the Australian team, which leads this started on, is breaking down every single step between an order, and being received by the ordering entity, every single step and looking at the time line for each of the pieces between paperwork, testing, quality, shipping and all the individual pieces. And looking at trying to build answers to remove complexity in different steps or make sure that there’s current activities wherever there can be so it doesn’t become the lengthy process that we’ve had in – to-date, I shouldn’t say in the past, but really to-date. So there’s an effort going on with that right now, Nelson, to look at really streamlining process, streamlining steps to improve, how we have fulfillment.
Nelson Obus: Yes. So a question – I’m sorry, go ahead.
Mark Herrmann: Some of the – I would just say some of the geopolitical issues, I mean, will continue to be a bit of a minefield that we’ll try to address as they arise. But anything we can control, we want to make sure we have the most efficient process as possible.
Nelson Obus: Yes. I would imagine the comment you made about expenses, holding expenses at $32 million or whatever, that’s – I mean, you might be able to do better if you’re able to rationalize certain aspects such as logistics, correct Vanessa?
Vanessa Baughman: That would be accurate. And what Mark describing is the order to cash process, right, and every step in between. As an example, from the moment, particularly in that Middle East, North Africa area of the world, the lead time required between order and delivery is up to four months, right? And that’s optimizing the delivery from whether it comes from the U.S. and/or Australia directly. So as Mark mentioned, we’ve masked those processes and aligned when orders come in, and the pace of orders to when demand is expected in that four-month period, and including any logistical obstacles in that evaluation, and removing them to the best of our ability. Post-COVID, at least throughout 2022 and 2023, we were experiencing post-COVID obstacles with regard to getting product in that Middle East and North Africa area of the world.
