Benson Hill Inc (BHIL) 2022 Q4 法說會逐字稿

Good morning. Thank you for attending Benson Hill's Fourth Quarter and Full Year 2022 Earnings Call. My name is Harry, and I'll be your moderator. All lines are on mute for the presentation portion of the call, with an opportunity for questions and answers at the end. (Operator Instructions)

And I'd now like to pass the conference over to your host, Ruben Mella, Senior Director of Investor Relations with Benson Hill. Ruben, please go ahead.

Thanks, Harry, and good morning. We appreciate you joining us to review our fourth quarter and full year financial results and our outlook for this year. With me today are Matt Crisp, Benson Hill's Chief Executive Officer; and Dean Freeman, our Chief Financial Officer. Earlier this morning, we filed our earnings release and Form 8-K. These documents as well as an investor presentation we will reference 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, industry outlook as well as current guidance for 2023 annual results, 2025 financial targets and our plans and goals as we execute our strategy. 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 press release and investor presentation and that will be included in our Form 10-K and other filings with the SEC.

Also during this presentation, we'll be discussing certain non-GAAP financial measures. A reconciliation to GAAP is available on our earnings release and presentation.

I will now turn the call over to Matt.

Thank you, Ruben, and good morning, everyone. 2022 was a remarkable year of progress for Benson Hill. We demonstrated the efficacy of our growth playbook to expand our reach in the human food and aquaculture markets driven by consumer demand for better food choices. I continue to be impressed with our team and what they have accomplished as we leverage our technical capabilities through CropOS to partner with customers in a novel way. We continue to gain insights into which opportunities warrant the greatest focus to optimize the ingredient product mix for profitability while maintaining operational excellence.

As I look back on 2022, I want to highlight 3 important milestones among several that position us for future growth. First, we executed our closed loop business model for our soybean-derived ingredient products from farmer partners to our integrated soy processing facilities to our customers all within 12 months, which is a credit to the teams involved. This further demand for our proprietary soy portfolio, which led to nearly 100% year-over-year proprietary revenue growth to $73 million. And as a result of this demand, operational excellence and an elevated commodity pricing environment, we raised our ingredient segment guidance twice from the original outlook we gave this time last year.

Second, we introduced our ultra-high protein soy ingredients with differentiating value propositions of traceability, sustainability, accessibility, being domestically sourced and having higher nutrient densities. And as a result, we established important commercial relationships, including a significant licensing partnership with market leader, ADM, validating our technology and go-to-market capabilities that we have previously discussed.

Third, at our Investor Day in 2022, we unveiled a robust product pipeline to demonstrate how we expect our CropOS technology platform to extend our leadership in delivering innovative product solutions to meet increasing demand for better food options. We will talk about recent advancements in the pipeline at our upcoming Investor Day on March 29.

As we announced on February 2, we expect 2023 will be another year of strong growth with a 40% to 50% increase in proprietary revenues to a range of $100 million to $110 million as we continue to shift the mix away from nonproprietary commodity soy in our closed-loop model. We believe consumer-driven secular trends are tailwinds for our proprietary soy flour, flake and texturized products across plant-based market segments such as bakery, cereal, meat extension and alternative meat.

We are pleased with our partnership with Denofa, which gives us access and scale to service aquaculture customers such as BioMar, one of the largest aqua feed suppliers in Europe for ultra-high protein and low-oligosaccharide meal. We are already sold out for 2023 and we are in discussions now about shipments for next year.

We are also nearly sold out of our Veri brand cooking oil for 2023, which is our high oleic, low linolenic non-GMO soy oil product after we increased planted acres last season beyond our original plan to meet demand.

We entered this year fully engaged with ADM after initiating our strategic partnership last August to create exciting new advancements in food innovation through the introduction of product categories with novel advantages, while unlocking capacity with existing soy ingredient products. We recently achieved the first of what we anticipate will be many milestones with ingredient production from a portion of our 2022 ultra-high protein crop at ADM's Decatur, Illinois facility. Our teams are currently collaborating on a co-branding strategy to launch a portfolio of new soy ingredients powered by Benson Hill to ADM's broad and established customer base.

These examples of our commercial success among many demonstrate the demand side for a broad range of current and expected future products. When we spoke to you on the third quarter call, we were ambitiously pursuing acreage for the upcoming growing season across all of our proprietary meal and oil product categories to achieve our 2025 targets. At that time, we began to see a pattern emerge with delayed decisions by farmers, especially in our discussions with potential new farmer partners. That pattern has continued as commodity prices remain at elevated levels, which required us to significantly increase premiums to secure farmer commitments.

In addition, inflationary pressures and supply chain challenges have significantly increased product costs. Our highest margin products can take the increased costs with some margin compression, but we have other product categories at lower margins that cannot and which would have put at risk our plans to reach our desired margin targets and profitability in 2025.

As I mentioned to you at our last Investor Day, we are committed to growing Benson Hill in a responsible way that meets the commitments to our farmer partners and customers by expanding margins and appropriately managing our working capital. With that in mind, we made the decision to employ a more targeted growth strategy focused on our highest margin product categories to meet the specific needs of our customers, while deemphasizing but not eliminating products that are now more exposed to margin compression.

The 2023 planting season will expand as we planned, our ultra high-protein food ingredients, soy meal for the aquaculture market and the highest margin oil products. To support our goals for continued gross profit and margin expansion in 2024, we did not pursue acreage for certain soy flour, flake and oil product categories. In addition, we are offering farmers several new proprietary varieties this year with higher yields and expanded maturity planting zones. Over the next 2 to 3 years, we expect to introduce additional next-generation pipeline products that not only offer our customers more value, but gives farmers increasingly better-performing seed varieties that allow us to optimize unit costs well beyond 2025.

Given this more focused approach, we expect total planted acres, including new acres secured with ADM, for the 2023 crop season will increase by approximately 50% of the original plan -- instead of the original plan to double planted acres. The collaboration with ADM is giving us the opportunity to begin expanding our network with quite a few new farmers in Illinois with harvest that will be processed at ADM's Decatur facility. These farmers are joining our network to connect more directly when they grow with the consumer.

We completed our annual budget and long-range planning process based on our more focused growth strategy. We remain committed to achieving our target of positive adjusted EBITDA and positive free cash flow in 2025. We believe the deemphasis of certain lower-margin products will defer the previously planned proprietary revenue contribution beyond 2025, at which time we would expect commodity prices and operational cost pressures to normalize. Similarly, we tempered the revenue recognition for the ADM partnership and the timing for securing new partnerships for a more conservative view given the current environment. For these reasons, we are now projecting 2025 proprietary revenues to be at least $300 million. Total revenues are targeted to be over $400 million, which excludes projected revenues from the sale of the Fresh business. We remain committed to achieving gross margins of 25% with this more targeted approach to the market and other plans to optimize our closed-loop model that Dean will address shortly.

I will conclude by saying that we've demonstrated the ability to adapt in the face of shifting macroeconomic and market conditions. Our foundation is the talent that we have at Benson Hill who creates the value-added ingredient innovations we offer our customers, starting from the beginning with a better seed. We're off to a strong start in 2023 and expect our first quarter results to be indicative of the momentum we experienced last year. We are eager to work with our farmer partners for the upcoming growing season, fulfill repeat and new orders from our expanding customer base and continue to advance our pipeline of future product innovations.

We are putting the final touches on our Investor Day here in St. Louis for March 29. Our objective is to build on what you learned last year and offer an immersive experience around the future of food. We want you to leave with a clear representation of not only why Benson Hill wins, which is the theme for our Investor Day, but also a deeper understanding of how we are living our mission to set the pace of innovation in food.

I will now turn the call over to Dean for his perspective about our fourth quarter and full year performance as well as our outlook for 2023 and plans to further strengthen the balance sheet and reduce our cost of capital.

Thanks, Matt, and good morning, everybody. Let me just start with a couple of comments about Silicon Valley Bank. Benson Hill does have a relationship with Silicon Valley Bank, and we've had that relationship for many years. We took quick actions to minimize the impact of last week's events on our farmer partners, our vendors, our customers and our employees. We currently have approximately a little over $7 million in accounts with Silicon Valley Bank with about $6 million of that in sweep accounts where the funds are in custodial investment funds held by third parties on behalf of Benson Hill.

As of last night, at about 6:15 p.m., the FDIC issued a press release communicating that all deposit holders will have access to the funds as early as today. We'll wait for further instructions on that. And as of this morning, that was the only update we really have received. So while we wait further instructions on access to our funds, I want to reinforce that this situation will not have -- has not had any impact on our ability to meet all of our financial obligations.

As I review the financial results, keep in mind that our performance excludes the Fresh business, which is now reported as discontinued operations. We're on track to complete the sale of the business in the second quarter of this year and received the remaining $3 million from the $21 million transaction. It's worth repeating what Matt said about how well our operations and commercial teams performed in 2022. It would take too long to list the activities needed to not only stand at the closed-loop business model with newly integrated assets, but also realize the significant efficiency gains that led to several months of production records in the second half of the year.

The strong execution from our teams allow us to take advantage of high commodity prices to deliver nonproprietary top line growth in 2022 that was well ahead of our expectations. More importantly, we're well positioned in 2023 to continue the planned transition to produce more proprietary soy products. As a result, our consolidated revenue guidance is $390 million to $430 million, which includes our expectations for proprietary revenue growth that Matt mentioned earlier.

As I've said before, we're not immune to the challenges posed by increasing inflation and supply chain dislocation, primarily related to logistics. Our teams kept finding ways to move finished goods in the face of unprecedented factors such as the threat of national rail strike, ongoing availability of railcars, installed barge traffic due to record low water levels in the Mississippi River. Additionally, we had to address higher operating costs and labor shortages. These higher costs were a factor in, December, which impacted our fourth quarter cost of sales by approximately $1 million.

Other factors affecting gross profit were an approximate $1 million of noncash charge for the step-up of assets related to the Creston acquisition. And finally, we took delivery of more proprietary bean deliveries than expected, which resulted in a larger-than-planned recognition of already incurred seed production costs worth about another $1 million. These unusual items were the primary cause for our full year gross profit of $8.5 million, which excludes approximately $5 million loss due to mark-to-market timing differences coming in below our previous guidance.

As we look to 2023, we expect gross profit to more than double to the range of $20 million to $30 million. This will be driven by the planned increase in proprietary revenues, an expected increase in year-over-year profit contribution from the ADM partnership and contributions from the nonproprietary side of the Ingredients business. Our guidance also considers the impact of the persistent inflationary environment. We remain laser-focused on cost discipline while still supporting our strategic objectives.

Operating expenses in 2022 were $129 million, which was within our guidance. When you adjust for approximately $9 million of operating expenses for the Fresh business for 2023, we expect operating expenses to be in the range of $125 million to $130 million, which includes approximately $30 million of noncash depreciation and stock compensation.

Turning to adjusted EBITDA. We realized a loss of $77 million in 2022, which was within our guidance when excluding mark-to-market timing differences. With an increase in gross profit and continued cost management discipline, we expect a reduction in the 2023 adjusted EBITDA loss in the range of $63 million to $68 million, as we announced last month. As of December 31, we had $175 million of available cash, restricted cash and marketable securities. Consistent with our plans, we began a 2-year $28 million capital project to add texturization capabilities to our Creston facility, which led CapEx in 2022 at the top end of the original $12 million to $16 million range, including approximately $9 million in capital expenditures for the Fresh business. This anticipated high ROI investment will allow us to produce texturized soy flour from multiple product applications at a significantly lower production costs compared to third-party tolling. For 2023, we forecast capital expenditures to be in the range of $20 million to $25 million.

We remain opportunistic in pursuing to optimize Benson Hill's capital structure. To that end, we are in the advanced stages of finalizing plan that by as early as the third quarter of this year will enable a conventional lending facility with the syndicated banks for up to $100 million. The structure of the facility is planned to consist of a line of credit, equipment loan and term loan. The expected borrowing costs would reduce interest expense by approximately 40%. We view the interest from these conventional lenders as a validation of our ingredient innovations, go-to-market strategy and cash generation potential.

With the expected funds provided through the new loan facility, which we anticipate will be supplemented by up to $100 million of capital raised under the current shelf registration statement, including the ATM facility or an alternative form of equity financing. And to be clear, our expectation is that any additional equity raise proceeds will be in lieu of proceeds sourced from the ATM. Our plan is to pay off existing high-cost debt facility 2 years earlier than planned. While we cannot guarantee anything regarding the new lending facility, the negotiations to finalize it are far enough along and we have confidence that the successful completion will lower our cost of capital, give us greater flexibility to meet our strategic objectives.

The plan I just outlined will include prepayments and other costs. The capital project, which is central to our strategy and the onetime costs for the refinancing are expected to total between $30 million and $35 million and are significant contributors to the expected greater free cash flow loss in 2023 in the range of $120 million to $128 million. We'll continue to keep doing what we've been successfully doing, scale the proprietary portfolio for margin enhancement, deliver operating efficiencies and maintaining strong cost discipline. This is the foundation that we anticipate will lead to continued and significant reduction in our free cash flow burn in 2024 and position us with momentum to positive free cash flow in 2025.

Another element of our plan is to further improve capital deployment in our closed-loop operations for higher return on capital and reduced working capital intensity. Therefore, we're now exploring strategic alternatives for our facility in Seymour, Indiana, which may include but is not limited to the sale of the assets. The team at Seymour is doing a terrific job operating at record-breaking production levels. The capacity we now have access to, to our partnership with ADM, our Creston, Iowa facility and the ability to source capacity through partner tolling arrangements gives us the opportunity to reassess the capital intensity of our closed-loop manufacturing footprint.

I'll conclude by saying we are taking the necessary actions to address the current market realities, and we remain optimistic about our outlook today and into the future. We believe the pieces are in place this year to continue the scaling of our proprietary portfolio. And by focusing on the highest-margin product opportunities, we expect to successfully navigate the peak of the commodity cycle, inflationary pressures and the ongoing logistics challenges. The actions we're taking to optimize our capital structure are consistent with our strategy and path to achieving our targeted financial objectives in 2025 and our expectations for profitable growth in the years to follow.

And with that, I'll conclude my prepared remarks, and we'll take your questions.

(Operator Instructions) And our first question of the day is from the line of Ben Theurer of Barclays.

Matt, Dean, congress on the results. Two questions for me. So first one, obviously, you have a very good outlook for growth on the proprietary side, but you also mentioned a couple of challenges just with farmers and getting them signed up. So maybe help us understand a little bit what you're agreeing on with farmers and how you actually managed to sign farmers up just given the comments you made to still see, call it, roughly 40%, 50% growth on the proprietary side into next year, so we can kind of get a sense on how we should think for the years after on the sign-up rate here? That would be my first question.

Sure, sure. Ben, it's Matt. When we look at the market dynamics for signing up growers to grow non-GMO, identity-preserved beans, a few things are happening this year. Obviously, we've got really high commodity pricing environment. We're seeing a decline in non-GMO planted acres in the United States. And we're seeing a fair amount of demand for closed-loop production. The combination of those things has, this year, driven premiums to higher levels. And that's okay for us to maintain profitability of the highest-margin products, namely, as I mentioned, certain of our oil products and our UHP for the human food category as well as meal for the aquaculture feed category. But what it does is it compromises the profitability of some of the other parts of the portfolio.

And so what I'd say is we made a very conscious decision to sign up the acres with the varieties to produce the products that we need in order to meet those demands that we feel confident we'll have a profitability profile that increases our gross margin expansion the way that we've planned. But when it came to some of these premium levels with farmers, we made the conscious decision not to pay them in some cases where we felt like this was going to be compromising the output.

So there's a high confidence that we could have signed up substantially more acres, but I don't think that, that would have been the responsible thing to do nor were we in a position where we needed to break any contracts. In other words, we're able to meet all of our contractual obligations. But it's always a state of marrying what our demand side needs are looking out 2 years from now to what would ultimately be sales in 2024 and backing into how we're optimizing our seed variety mix at the farmer level.

Okay. Perfect. And then my second question, I guess, it's more for Dean. Can you help us understand -- because if I look at the balance sheet, cash and cash equivalents shows up only at like $25-ish million and marketable securities at $132 million. But then you say it was $175 million. So the difference, first question. And the second is the proceeds you received the first tranche of it for the Fresh business divestiture, is that reflected in that cash balance? Or is that not yet reflected in the cash balance just because of how the flows was as it was just around about the closing of the year?

Yes. So the $175 million should include restricted cash. And as you point out, our total cash balance is restricted cash, cash marketable securities and cash on hand. So for the end of December, that should be $175 million.

Okay. And does it include the proceeds from the Fresh sale or not yet?

Yes, it does. Yes.

Our next question is from the line of Kristen Owen of Oppenheimer.

I was wondering if you could start by just walking us through the puts and takes on the decision around the Seymour facility. What are the trade-offs that you're considering for that facility specifically? And are there maybe some opportunities outside of just outright selling it? I'll start there.

Sure. Kristen, it's Matt. For Seymour, what we evaluated was what the working capital intensity is of the business relative to our need to meet the demands for the proprietary revenue growth. And with a slightly tempered proprietary revenue growth profile and the product mix that we see being optimized, we feel that this is an opportunity for us to create some additional liquidity, less working capital intensity and still maintain the relationships with some of our farmer partners that we feel are really critical to meet the demands that we have.

So the expansion of our footprint into Illinois with the ADM relationship, the augmentation of additional third-party crushing and tolling relationships, combined with the backbone of our food-grade ingredient production at Creston, we felt is adequate for us to meet the needs that we have in the foreseeable future. And so again, in the interest of focusing our growth profile and ensuring that we maintain our commitment to shareholders to be profitable in 2025, we felt this was an opportune time to consider other strategic alternatives for that asset.

Yes. Kristen, let me just add and maybe reinforce a couple of comments that Matt made. The first consideration is the capacity to meet our customer requirements is sort of the first stop. As we assess and rationalize sort of the portfolio in terms of nonproprietary ingredients, it's clear that we have the adequate capacity to meet the demand, as Matt mentioned, with both the Creston facility as well as the options we have with regard to the Decatur facility and our partnership with ADM.

The other part of it is the working capital intensity. I mean as you kind of think about the trade-off between higher volumes, lower margins and the capital usage to support that, that trade-off became a point where we felt we could continue to optimize that with this decision. And so as we think about continuing to optimize the capital structure, being capital allocation disciplined but also meeting the demands of our customers with higher levels of profitability, it made sense to consider these options.

No, that's really helpful, Matt and Dean. Just as a follow-up and thinking about some of the updated 2025 expectations, what you're seeing in the marketplace today? We've talked historically about what the trend in margin looks like as you increase the percentage of proprietary revenue. And I'm wondering if you can help us bridge on the revenue line, how we get to your updated 2025 numbers given some of the mix shift that you've discussed.

Certainly. Well, the reduction from a previously published expectation of proprietary ingredients revenue of $350 million to revised $300 million or greater of proprietary revenues reflective of this reflective of this more targeted strategy and having reduced the expectation for some of the flour, flake and lower-margin oil product categories, so that's where it's coming from. It obviously requires a still significant growth curve in order for us to meet those expectations given the 2023 proprietary revenue guidance that we've just reviewed. But we've done a lot of modeling and we've looked very carefully at a lot of the demand side signals and contract pipeline and arrived in a bottoms-up manner to these numbers such that we feel that, yes, it will take a continued amount of, in my mind, terrific execution and focus. But that's an achievable goal, and it's a goal that provides a product mix that meets our profitability targets.

Yes. Let me just add to that. So Kristen, this will be a key focal point in our Investor Day commentary and presentation materials. But largely, if you think about what we talked about at the last Investor Day, we talked about sort of the 4-stack bridge to margin expansion. And that is still very much intact. About 60% is sort of commercially related, growth related; 40% was more operational. I would say that sort of given the -- some of the cost dynamics we're seeing, we're actually anticipating most of the margin expansion improvement coming from strong growth in the proprietary side, as Matt mentioned, other -- both pricing and expansion of proprietary ingredients largely coming from aqua and other sort of broader portfolio introductions that we expect to have over the next couple of years. But we'll have a lot more to talk about that when we have our Investor Day.

Our next question is from the line of Cody Ross of UBS.

If we go back to your initial guidance for 2022 proprietary revenue in the $70 million to $80 million range, what caused you to come in towards the lower end of that range? Is it what you just discussed about the higher fees to the farmers? Or is it something else?

For 2022, I'd say we came in on the lower end of that range in part due to timing. So when we moved to the back half of the year, we did expect, as you might recall, a pretty steep climb into the late months of the year. And that was a manifestation of a lot of work that had been done to advance customers through a sales funnel starting the prior calendar period. So I'd say that, in part, that's really just due to timing. It's not a reflection of any lower quality of the pipeline. In fact, it's quite robust. So I think this is really more timing related and customer commitment related.

There was arguably some delays, as Dean mentioned, due to supply chain challenges as well. But I don't think that those had a material impact on the proprietary revenue recognition that we saw in fourth quarter. It's just more how the pipeline is materializing and maturing.

As to say the least, Cody, sort of a 50% year-over-year growth curve was aggressive and we're meeting that aggressive target. And so to the extent that we sort of flattened the curve a little bit, as Matt mentioned, due to timing and just having a better understanding of sort of how the market will play out in 2023, we still feel obviously very pleased with the growth profile both in 2023 and as we move forward.

And my follow-up question, Dean, this is more related to you. Did you say -- did I hear correctly how much the interest expense would be reduced if you renegotiate your credit facility? Did you say $40 million?

I said 40%. I might have said a million...

40%. Okay. No, no, I was just confused, really. Got you. Okay. And then with that said, can you just elaborate on what is giving you the confidence that your interest rate would be reduced? I think your current interest rate is just under 6%.

No. I mean, my current interest rate is prime plus -- it's prime plus 7%, I think -- probably plus 5.25%. So that puts my current interest rate at about 13%, 14%. And so we're seeing a significant haircut. It's a conventional lender. We're able to demonstrate a cash flow profile and cash generation capability that I think resonated from a credit perspective. And at the end of the day, the confidence I have right now is we've got a term sheet and we signed a term sheet. While it's nonbinding, but we've got most of the terms conditions fairly well buttoned up.

Our next question is from the line of Adam Samuelson of Goldman Sachs.

So I guess the first question, as we think about some of the conscious kind of shifts you're taking to deemphasize some of the lower value products in the portfolio. Can you just help us think about in 2022, what were the total harvested acres, what was the kind of functional protein composition of that production and what that mix would look like in terms of total acres and protein kind of potential in 2023?

Yes. I mean you can back into the -- given the Investor Day 2022 disclosure where we talked about cumulative acres greater than 200,000 in the proprietary portfolio, I think you and others have backed into the math that last year, we planted more than 100,000 acres -- contracted for more than 100,000 acres. That harvest was successful. So the protein targets were consistently met. So that's very positive.

As you see a shift towards more emphasis on ultra-high protein varieties constituting a larger ratio of what we're contracting for, it's fair to assume that you'll see an ongoing portfolio shift to higher nutrient density. That's certainly expected. We don't measure, however, gross protein on a total basis. It's just I would assume, Adam, that you'll continue to see as we concentrate the portfolio to higher-value products for the foreseeable future that the ultra-high protein varieties will have a larger emphasis with our farmer partners.

Now if we look past the next 2 to 3 years, I think it's fair to assume that we should see, I'd be surprised if we didn't see, some softening in the commodity environment and some of the cost pressures that we've experienced in recent months that we expect to continue to see over the next couple of years abate. And as such, I would be cautiously optimistic that after the next 2 to 3 years, we continue to grow some of the products that in today's environment may be profit-neutral or close to it and be able to enhance and further grow the proprietary portfolio to create additional gross profit.

Okay. And the point on the acres for 2023 and putting more around Decatur and leveraging the ADM partnership, does the acres that you're contemplating, are you including both the proprietary ones where you're buying meat and soy? Or is that also including the ADM partnership acres? I just wanted kind of definitional kind of clarification.

It does include the ADM acres. So when we report on proprietary acreage growth and we say that approximately 50% year-over-year growth to '23, we're including acres that we've contracted that have moved volume to ADM. And you're also accurate. I mean the difference between the acres that we contract with ADM and the acres that we contract for our own closed loop is really who's carrying the contract and therefore the working capital after the harvest.

Got it. Okay. And then longer term, where you talked about maybe pushing out some of the revenue contribution of that ADM partnership kind of beyond 2025, can you just elaborate, Matt, on just how -- what's evolving with that relationship and the go-to-market for the various products you're collaborating on?

Sure. So the intent isn't to speak only about what's beyond 2025. But just that as we've revisited our long-range plan and our budget for this year, what we've considered is that the revenue recognition and the value share could decline somewhat. And so we've taken a more conservative view. And that's another reason why when we look at the 2025 expectations for a slightly lower proprietary revenue profile, that we're anticipating that, that we're looking at how do we adjust the ADM revenue recognition to reflect the current market environment and take, again, a bit more of a conservative view over the course of the partnership. So that -- I hope I have that answered your question.

No, that's helpful. And then, Dean, just one more clarifying question. The guidance for $27 million to $29 million of interest expense in 2023, that does not reflect any benefit from the refinancing that you're kind of -- you have a signed term sheet for. Is that correct?

No. Yes, yes. No. In fact, what we've built in is prepayment penalties and sort of in the extinguishment of that debt. So you'll actually see, as we called out in my script, an increase in the interest charge. However, as we move forward in '23, embedded in that number is some of the benefit, if you will.

(Operator Instructions) And our next question is from the line of Ben Klieve of Lake Street Capital Markets.

Just one for me. Kind of following up on your -- Matt, your comments on ADM that you just made. Can you help us kind of understand today versus when this agreement was first announced 6, 7 months ago, how much of the kind of changing expectations are due to kind of changes in the market or the supply chain that have arisen over the last 6 months versus changes in the revenue recognition, kind of an accounting treatment kind of perspective versus a challenges in getting acreage up and running with farmers? Is it -- it seems like there's a lot of things going on here with this agreement. And I'm just trying to understand kind of what the primary drivers of the kind of resetting expectations, if there is a primary driver.

Sure, sure. So the primary driver for the change is, as you indicated, more market related. So the same kind of margin compression that I described for the product portfolio affects the expectation for future value share derived from the ADM partnership. And so the way that this agreement is structured allows both of us to participate in the incremental unit economics that we realized with one another. And therefore, as you see the margin compression due to near term or next 2 to 3 years as we're anticipating it to be more pressures in the market, premiums with growers being the #1 factor that's affecting that, what we do is over time we just alter the pace at which we're recognizing the revenue. And so Dean can comment on this. I'm not -- I shouldn't. But the revenue recognition approach has not changed. The way that it's calculated has not changed. It's just that as we've learned more information, we want to take a more conservative view as we think about the remainder of the period in which we'll recognize that revenue.

Yes. I mean the bottom line, the revenue recognition is principally around the performance under the contract, full valuation of the value of the contract and then milestone performance. Milestone performance is then calculated to recognize the appropriate revenue along with that.

Thank you. We have no further questions on the line. So I'd like to turn the call back over to Matt Crisp for final comments.

Sure. Thanks, Harry. So we've had a very successful year in 2022 that laid the foundation for driving the growth that we expect. We're continuing to focus on executing our growth playbook and we're off to a strong start in 2023. We're taking the necessary actions to address the market realities while remaining steadfast to commercializing our innovations and achieving our strategic objectives. We're eager to shine a spotlight on our competitive advantages when we see many of you on March 29 for our Investor Day here in St. Louis. And until then, thank you for joining us.

That concludes the Benson Hill conference call. You may now disconnect your line and exit the webcast.