Benson Hill, Inc. (NYSE:BHIL) Q4 2021 Earnings Conference Call March 28, 2022 8:30 AM ET
Company Participants
Ruben Mella – Senior Director, Investor Relations
Matt Crisp – CEO
Dean Freeman – CFO
Conference Call Participants
Kristen Owen – Oppenheimer
Benjamin Theurer – Barclays
Adam Samuelson – Goldman Sachs
Brian Wright – ROTH Capital Partners
Operator
Good morning. Thank you for attending Benson Hill’s Full Year 2021 Earnings Call. My name is Emily and I will be your moderator. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. [Operator Instructions]. I would 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 Emily and good morning everyone. We appreciate you joining us to review our full year financial results, outlook for 2022, and capital formation to continue executing our growth strategy. Today you will hear from Matt Crisp, Benson Hill’s Chief Executive Officer; and Dean Freeman, our new Chief Financial Officer. Earlier this morning we issued our earnings release and filed our annual report on Form 10-K and Form 8-K. These documents as well as an investor presentation we will reference on this call 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 financials, business performance, and conditions and industry outlook as well as our current guidance about 2022 annual results. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions and are not guarantees of performance. We caution you to consider the 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 filing, 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 can be found in our earnings release and presentation. With that, I’ll turn it over to Matt.
Matt Crisp
Thanks Ruben and good morning everyone. I’d like to begin by expressing our sincere thanks on behalf of the Benson Hill team to DeAnn for her terrific work as our CFO. We lured her out of retirement while serving as the member of our Board of Directors. She was indispensable in leading our efforts last year to become a public company. DeAnn is not getting away from us as she returns to retirement while remaining on our Board. I’m also pleased to officially welcome Dean as our new CFO. He has settled in quickly after a transition period over the last two months. You’ll hear from Dean in a few minutes.
As I reflect on 2022 it’s amazing what the team at Benson Hill has accomplished. Our strong performance was driven by a commitment to execution as well as favorable markets and strengthening macro tailwinds as you can see mentioned on Slide 3. The fruits of these accomplishments were 47% year-over-year revenue growth to $147 million excluding the barley business we divested in 2020. We are pleased to build off of that momentum in 2022. As we mentioned on the third quarter call in November, our focus is on capturing market share with our proprietary non-GMO soy portfolio through our recently launched TruVail portfolio of human food ingredients, our Bright Day ingredients mainly for the aquaculture market. And our varied brand high oleic low linolenic cooking oil.
As shown on Slide 4, from technology to farmer engagement to commercial we are continuing to solidify the right foundation across each area of execution. We believe our financial results and outlook reflect this progress and we further believe that achievements like those listed here are helping to deepen and widen our competitive note. There is a significant window of opportunity open to us now and for the foreseeable future due to the favorable market conditions and ongoing supply constraints for high value soy ingredients namely white flake, texturized flours, and concentrates.
Let’s review these important milestones starting with technology on Slide 5. As a food tech company we’re always innovating and helping enable that innovation as high quality proprietary data underlying our technology platform CropOS. In 2021 we significantly expanded our CropOS platform with the largest data acquisition effort today including new data layers generated from our most expansive on farm data collection effort ever as well as incorporation of food sensory data. Our teams also brought online digital twin technology which uses simulation to model and assess billions of possible product opportunities prior to executing any biological prototyping.
According to data expansion effort was the launch of our collaboration with CropTrak shown on Slide 6 which connects Benson Hill with the farmer for field level data and sustainability metrics. This system worked extremely well during harvest last fall creating a robust database for us to work with CPGs and others too attest to the use of regenerative agriculture practices on farm. Eventually we expect CropTrak to help expand our sustainability practices including setting qualifications for carbon credit programs. We commissioned our crop accelerator last October which is a flagship state of the art 47,000 square foot facility you can see on Slide 7. It’s now fully operational and we’re executing crop and ingredient prototyping and breeding activities that allow us to drastically accelerate the early and mid-stages of soybean and yellow pea product development. With this facility now online we can essentially parallelize the seed and ingredient product development. And the datasets we create from these processes are uploaded to CropOS enabling further validation and refinement of our predictive analyses and simulation capabilities.
Turning now to Slide 8. The R&D team reached a critical milestone late last year when we achieved an important product specification for our first proprietary yellow pea protein concentrate ingredient. These results came from a successful 2021 testing and represents a validated protein level in the PPC between 61% and 65% which is suitable for texturization of the ingredient for products for plant based food markets. This validation paves the way for us to initiate our first commercial plantings of our proprietary yellow pea varieties in 2024 and we commenced commercialization of the resulting pea protein concentrate in 2025.
Turning now to farmer engagement on Slide 9. We exceeded our 2021 contracting acre goal by 33% for our proprietary non-GMO soy varieties including ultra-high protein. Then last fall we harvested the 70,000 acres with protein content achieving and in some cases exceeding our expectations. We now have an inventory of traceable nutrient dense soybeans as raw material for our ingredient product offerings that we believe supports our guidance for 2022 revenues. In 2021 we also deepened our relationships with farmers by launching the food system innovators program or FSI, which is a farmer partner network to help define data use standards on farm. That group also helped us define the plans for protein program for our 2022 contracting season which we believe will change the rules of engagement by compensating farmers for protein content as well as yield performance and identity preservation.
We launched our 2022 farmer contracting effort before Labor Day last year. Our teams have done a fantastic job working with farmers, which has led to early achievement of our goal for contracting proprietary soy acres. We saw an extremely high return rate from our farmer partners whose acreage commitments on average, increased by more than 20%. We also saw strong response from new farmer partners, which has led to more than doubling the size of our grower network year-over-year. The strong response for this growing season is, we believe, a testament to the experience farmers are having with Benson Hill and the value we are mutually creating on farm, especially during a time of highly volatile commodity markets.
On the commercial side, we have an ingredients leadership team with nearly 200 years of combined experience in soy-based protein products. They’ve chosen to come to Benson Hill to execute an aggressive strategy with a unique and attractive value proposition. We recently launched the TruVail soy ingredients portfolio, shown on Slide 10 with high protein content and less processed flour, textured flour, flake and soy protein concentrate. This broad portfolio opens additional and large market opportunities for our solutions beyond plant-based alternatives, such as in baked goods, snacks, cereals, and meat extension. In addition, we completed life cycle analysis across our products with the TruVail and Bright Day portfolios, which has helped us quantify the benefits of disintermediating certain expenses and environmentally intensive steps typically required for commodity soy ingredient manufacturing. Those studies demonstrate up to a 70% reduction in water usage and up to a 50% reduction in carbon emissions compared to commodity soy protein concentrates.
In addition to this breadth of opportunities in the human food ingredients space, aquaculture, which is currently the largest user globally of soy protein concentrate is another terrific opportunity for our high-protein soy. On Slide 11, you can see that the aquaculture market is large and growing rapidly. In fact, this is the fastest-growing segment of animal-based protein in the world. Our ultra-high protein soybeans provide a less processed, high protein, and lower anti-nutrient feed solution for this market, namely for trout and salmon. Recently, we announced a new partnership with Riverence, the North American aquaculture leader in trout farming. For this market, our solutions can result in up to an 83% reduction in water usage and up to an 89% reduction in carbon emissions compared to Brazilian sourced SPC when accounting for the impact of deforestation. Interest is high for our ingredients that are non-GMO, sustainable, traceable and domestically sourced. That is why our ultra-high protein innovations and what we are doing in yellow pea is garnering attention from a broad range of commercial customers as well as possible licensing partners during a time of unprecedented market tailwinds and supply constraints.
On Slide 12, we outlined some of the current macro trends. While some believe that these are headwinds for Benson Hill because we are a technology company, it’s important to note that we’re an integrated technology business. As such, we’re uniquely positioned to offer solutions that can simplify the supply chain and source 100% of what we sell domestically, which has become more important to CPGs and other customers in the industry who are seeking more simple, local, and sustainable supply chains. When it comes to food inflation currently running around 7% with animal products at more than twice that, we are using technology to bear inherently deflationary solutions by reducing the cost structure of the food value chain. Innovative ingredient solutions like those we are in market with now are compelling for customers seeking to preserve and expand margins as well as meet their sustainability commitments and the increasing demands of consumers for traceable and less processed foods.
Enabling the production of our ingredient products are our Creston and Seymour facilities, which were acquired over the last several months. The strategic importance of the Creston acquisition, shown on Slide 13, cannot be overstated. We accelerated the ability to produce soy white flake by at least a year, which reduces tolling costs as well as near-term CAPEX to add white flake capabilities at Seymour as we originally planned. The capacity at both facilities gives us the ability to scale our soy portfolio within our integrated business model to the range of 0.25 to 0.5 million acres. This is a point of critical mass that we believe demonstrates our ability to drive adoption and gain share in the market that helps also catalyze our licensing and partnership model.
Now turning to our growth drivers on Slide 14. We are confident that we have the innovations and the go-to-market approach to execute a strategy for meaningful market expansion and shareholder value creation. Ahead of completing the de-SPAC [ph] transaction last year, we had intended to bring in over $600 million in gross proceeds. But because redemptions were so high for us as with any companies that de-SPAC during that time, we raised less than $300 million in net proceeds. While we didn’t need the full $600 million to fully fund our plant, we needed more than 300 million. We felt it was prudent to strengthen our balance sheet now to help us achieve our priority of market share growth. After considering various financial paths and holding discussions with numerous investors, we recently chose to enter into a definitive agreement for a pipe offering, which has delivered $85 million in gross proceeds.
We saw terrific interest from a broad group of investors that led to an oversubscribed outcome. Participants included existing Benson Hill owners, both long-time holders and others from our pipe executed last year as part of our de-SPAC transaction as well as new investors who appreciate how we can win by advancing the food system for farmers, consumers and the planet. We believe this raise puts us on solid financial footing to execute on our planned high-priority growth efforts in the ingredients segment and continue our trajectory of revenue growth and margin expansion. This infusion of capital will also help support our objective to be EBITDA and free cash flow positive in 2025.
To meet our growth objectives, we will continue to invest in market share capture through scaling our proprietary product portfolio. By delivering our proprietary products directly through our integrated channel, we believe we are being rewarded with a more diverse customer base who are drawn not only to the value propositions of our innovative products, but the fact that the capacity in the market remains significantly constrained and we are solved for it. This degree of diversification across markets and products is something we are embracing as it provides additional upside exposure and commercial opportunity, but it also reduces our risk profile and supports our efforts and operational excellence. Furthermore, we continue to believe that a higher-margin partnership and licensing approach is an important part of maximizing the reach and impact of our innovative solutions. We are currently in active partnership and licensing discussions with numerous industry players that have an interest across both our soy and yellow pea portfolios, and we remain optimistic about leveraging this extension of our model to achieve yet another level of growth and margin expansion in the medium and long-term.
I will conclude my remarks by saying that we have positioned ourselves with a right to win, as detailed on Slide 15. First, we have a significant time advantage as new entrants must work within the constraints of biology. We possess genetics that have been bred for nutrition density for more than 20 years, and we are investing in a robust R&D program designed to expand our lead. Second, few, if anyone have done protein testing as we are doing for soy and yellow pea. We’ve successfully demonstrated our ability to use AI and machine learning to simulate product outcomes and significantly accelerate traditional breeding and product development. Third, we have invested aggressively to establish a distinct and sustainable proprietary data advantage across a spectrum of synergistic data layers to deliver improved product specifications with each new commercial generation. Fourth, we have built an integrated go-to-market business model that allows us to move beyond the farm gate with their seed innovations and meet the customer where they are. That is not easy to replicate, and it’s taken us years to stand it up.
Finally, we are approaching contracting 200,000 cumulative soy acres. It has taken significant time and investment to build the relationships with our farmer partners, and we consider our engaged and growing network to be yet another strategic advantage. In combination, these factors give us confidence that Benson Hill enjoys a 6 to 10 year advantage, which we will use to advance to market new generations of product innovations. With that, I will turn the call over to Dean.
Dean Freeman
Thanks, Matt and good morning, everyone. I’ll review our 2021 financial results, talk about our guidance for 2022 and provide some insights on how we think about 2022 and beyond. Let’s start on Slide 16 with our revenue for 2021. Looking at the revenue growth in 2021, our teams delivered solid growth results in the ingredients segment with revenue of $91 million, an increase of 55% year-over-year, and 104% increase excluding $14 million of revenue from the divested barely business in 2020. The favorable performance reflects volume growth with the introduction of our high-protein soymeal and high layer cooking oil products as well as favorable pass-through pricing for conventional yellow pea sales. These positive dynamics, specifically in soy were evident in the fourth quarter along with revenue contribution from processing non-proprietary soybeans to efficiently utilize capacity at the Seymour facility.
In the fresh segment, the market for fresh produce in the Southeast U.S. was under pressure throughout 2021, including the fourth quarter, with higher-than-expected crop yields, both domestically and imported. For Benson Hill, this negatively impacted average selling prices, which nearly offset increased volumes for the year. As a result, fresh segment revenues increased 2% to $56 million. Consolidated gross profit was a loss, just under $1 million, a decline of $12.9 million compared to 2020. The principal factors driving the margin performance, the lower market pricing in the fresh segment, higher growth-related commercialization costs to introduce proprietary soy ingredients, and start-up costs at our Seymour facility after acquiring the soy crushing assets in the third quarter.
We had two non-recurring items that impacted the year-over-year gross profit comparison. First, gross profit in 2020 included a $2.2 million contribution from the divested barley business. Second, we incurred $2.8 million in higher freight costs in the first quarter of 2021 to transport soybean seed stock from South America. Gross profit on an adjusted basis was $1.9 million with a margin of 1.3%. As Matt mentioned, we believe the current macro trends, the global supply chain and food inflation can be tailwinds for Benson Hill. However, that doesn’t mean we’re immune to the inflationary pressures in our business. Specifically, we did see cost increases in 2021 for fuel, storage, and freight which mostly impacted our fresh produce business.
Turning to operating expenses. At the — of the $122 million in operating expense for 2021, $39 million of that consisted of both non-cash and non-recurring cash items, including depreciation and amortization, stock compensation, SPAC merger transaction costs, and public company readiness costs. We continue to make investments to build out our capabilities, specifically in the ingredients business commercial team and investments in R&D to expand our capabilities for current and future innovations in soy and yellow pea. Adjusted EBITDA was a loss of $80 million in 2021 as a result of the factors I just described.
CAPEX was $31 million in 2021, which is about 50% below our earlier guidance as the Creston facility acquisition allowed us to avoid planned investments at Seymour. We ended 2021 with $183 million of cash and marketable securities on the balance sheet, which included $17 million to fund the Creston acquisition. With the $85 million in gross proceeds from the pipe raise, we are in a strong position to continue to execute our strategy and become EBITDA and free cash flow positive in 2025.
Turning to the outlook for 2022 on Slide 17. We expect to build on the momentum in 2021. The catalyst for growth will be the ingredients segment, where we expect revenues to be in the range of $250 million to $275 million. A key driver of growth is the increase in proprietary soy revenues driven by higher contracted acreage for proprietary soy and the engagement of our commercial teams offering a wider range of high-demand ingredient products. As a result, the proprietary revenue stream should nearly double to $70 million to $80 million and approach 30% of the total ingredients revenue mix. The non-proprietary revenue stream should be in the range of $180 million to $195 million, including $90 million to $100 million of legacy revenues from the Creston facility. We expect revenues from the fresh segment to be $65 million to $75 million, which reflects a modest recovery from the market challenges we saw in 2021.
Overall, on a consolidated basis, we expect 2022 revenue to be in the range of $315 million to $350 million. Last year, we developed and communicated a plan to condition the market to adopt our soy ingredient products and deliver expanding gross profit margins over time. We expect to see this expansion begin in 2022 as gross margins are expected to be in the range of $9 million to $13 million or 3% to 4% gross margins. That includes traditionally low double-digit contribution margins from non-proprietary revenue at both facilities. We do, however, expect to see improvement in contribution margins within the proprietary portfolio, primarily from a reduction in third-party tolling costs for white flake ingredients. In the near term, we will continue to use price discounts as a lever to promote product adoption and share capture, specifically in the introductory year of our ultra-high protein-derived products marketed under the TruVail brand. We expect relatively stable pricing in the fresh segment but below historical levels. So we expect gross margins will be high single digits instead of mid-teens that we saw back in 2020. This is a carryover from the oversupply situation in 2021 and represents a meaningful reset impact in gross margins this year.
For 2022, operating expenses are expected to be in the range of $135 million to $140 million. This includes approximately $36 million in non-cash items, primarily depreciation and amortization and stock compensation. Expenditures in R&D will remain flat with last year as we continue to invest in research and development of new generations of proprietary soy and yellow pea based products. We expect adjusted EBITDA to be in the loss in the range of $80 million to $85 million, which is slightly larger loss than in prior year.
If you turn to Slide 18, I’ll explain a little bit more about our revenue and margin mix over time. The projected scaling of our proprietary portfolio through the closed loop system will support an objective to become EBITDA and free cash flow positive in 2025. We expect to expand the revenue contribution from the proprietary closed loop portfolio from about 30% in 2022 to approximately 80% in the 2025 to 2027 time frame. We also expect to see meaningful revenue contribution from partnerships and licensing agreements as we continue with the active discussions, as Matt mentioned earlier. You can see the expected contribution margin in 2022 and the expansion we expect in the coming years. As we scale our soy portfolio, we plan to expand our product portfolio, optimize our pricing strategies and reduce operations, logistics and other supply chain costs.
As shown on Slide 19, our plan is to expand contribution margins from our proprietary soy portfolio in three ways. First, we expect to improve performance on farm to our predictive capabilities in CropOS. As we increase protein output on farm, we can lower cost through greater nutritional density per acre, meaning we can plant fewer acres and reduce or eliminate high-cost inputs such as soy isolate which sometimes needs to be used for spiking to participate in the higher end of the texturized protein ingredients markets. In fact, we expect to realize a portion of this benefit this year which is one reason why our 2022 ingredients contribution margin is higher than previously guided.
Second, as an innovation company, we’ll continue to introduce new seed varieties and next-generation product innovations as we scale our ingredients offerings to higher-margin segments, specifically for plant-based food ingredients and the aquaculture markets. Finally, we plan to scale back introductory discounts and improve our price mix through differentiated value offerings. And with that, I’ll turn it over to Emily for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions]. Our first question today comes from the line of Kristen Owen from Oppenheimer & Co. Kristen, your line is open.
Kristen Owen
Great, thank you so much. Good morning everyone, wanted to ask about — a couple of questions related to synergies from the Creston facility. Obviously, you came with a set of customers that came from that business. But beyond that, how are the conversations with proprietary ingredients customers changed since you’ve made that purchase?
Matt Crisp
Yes, thanks for that question, Kristen. So one big element or one significant element in the decision criteria for a lot of our customers, particularly those that have a — require a high degree of integrity in their supply chain, is to go and look at these facilities to audit these facilities to ensure that, indeed, we’re able to produce consistently food-grade spec material. And so having that facility in-house has, I’d say, changed the dynamic of the conversation from what was previously a slightly loosely held value chain, not completely in our control to one that now we do control. And so there’s a lot more assurance on the part of our customers and our impending partners that we indeed can deliver finished goods on a consistent basis.
Kristen Owen
And then as we think about sort of the — I think about that as sort of the product advantage, but can you talk about the data advantage, how does that contribute to the data feedback loop that’s embedded in the CropOS platform?
Matt Crisp
Sure. And just to clarify your question there, Kristen, do you mean that in respect of the Creston acquisition in particular?
Kristen Owen
Yes, specifically that acquisition and the new ingredients that, that brings into the portfolio?
Matt Crisp
For sure. So one of the very interesting features of this acquisition is it brought on board a wider breadth of product offerings. And the data that come not just from what we might have previously articulated to be the most premium texturized soy protein concentrate equivalents can also now be generated for a variety of other product categories like flours, texturized flours, market categories like bakery and meat extension. And so we’ve already, just in the last several weeks, undertaken internal food digitization efforts to quantify and dilute back into CropOS functional characteristics that are attributable to this wider body of product opportunities in the portfolio now marketed under the TruVail brand. And so that’s added some additional validation but has really opened up a range of new opportunities at the data level because, again, we’re not talking about as narrow band of commercialization opportunities. We’re talking about a more expansive band of product and ultimate end markets from which we can collect data and provide feedback to the system.
Kristen Owen
That’s super helpful, Matt. If I could squeeze in just one more. I appreciate you calling out the Aqua feed opportunity beyond the sustainability differentiation, can you speak to any sort of unique feed conversion benefits that might further the competitiveness of your products? And of that $245 billion TAM that you called out on the slides here, how much of that do you think Benson can capture over the next three to five years? I’ll leave it there. Thank you.
Matt Crisp
Sure. Sure. Glad you’re asking about that. It’s a very, very attractive market, and there’s a lot of excitement that’s built around it. It’s a very centered market in Europe, about half of the global production of salmon is produced out of Norway by itself. And when we talk about the competitive advantage, I’d say that, of course, you’re doing feed studies in species like trout and salmon to understand the conversion ratio and the health of the fish. We market this as good or better. The data would suggest that there are some features of feed conversion that are slightly better than even the incumbent products that are more expensive and far less sustainable. But we market it more as a same degree of product specification and so I think there’s an opportunity, though, and we’ll talk a little bit more about this during our Investor Day on April 5th, to further expand the profiles of healthiness, specifically by further reducing the anti-nutrient profiles and further enhancing the protein profile of this ultra-high protein soy-based Bright Day product that disintermediates the SPC stuff.
And then to the latter part of your question in terms of capture, when we think — when we described in this slide immediate market opportunity, think about this really as a serviceable addressable market. And so it’s not representing the TAM, which would probably be referred to just above that in the slide. And of that, what do we believe we have the right to win I think time will tell, but we need to demonstrate this in what is a quite consolidated market. There’s not a whole lot of players that produce salmon in the target category that we’re describing right now. And so it could happen — scaling in this category could happen quickly, but it will require in the next couple of years us establishing more strategic relationships with one or more of these large players.
Operator
Thank you for your questions. Our next question comes from Ben Theurer from Barclays. Ben, your line is open.
Benjamin Theurer
Perfect. Thank you very much and good morning Matt and Dean. Congrats on the results. First question, just I wanted to understand a little bit the leverage fervor into the 25 onwards period of the Creston facility. I mean obviously, you point out it’s still going to be some legacy revenue of round about a 100 million in 2022, but how should we think about that legacy contribution going forward and any plans of how you’re going to convert the facility to really only process what is then ultimately your proprietary ingredient piece, because if I just look into — it feels like this is going to take a much more relevant share, but how should we think about the cadence from here to 2025, which then ultimately should bring you to that EBITDA and free cash flow positive business? That will be my first question.
Dean Freeman
Well, I think when you look at the legacy business in this facility, there are certainly customers that are excited and will be eager to take on product opportunities that are delivered from our proprietary solutions. But that doesn’t mean that they all will. And so over time, we will, as you point out, move from a minority of the capacity of this facility being dedicated to our proprietary ingredient solutions to a significant majority. And ultimately, we’d like to see nearly all of that take over the capacity of the facility. But it probably does lead to some reorganization over time of the customer mix as we move into various of these premium markets. And namely to the extent that, as you see in this margin bridge namely when we begin adding capabilities that solidify our position to supply, for instance, texturized products and eliminate the remaining small amount of tolling that we have to execute.
I think it further allows us to sell up into a market that is highly desirous of a solution like we’re bringing to the table. And of course, there’s a range of margin opportunities involved there, some of which will be lower than the 30% to 40% range we previously discussed, but some of which continue to be higher. And the mix supplies a very attractive ultimate contribution margin that we’ve outlined there. So hopefully, that helps, Ben, when it comes to mix of customers and how we kind of view the evolution of how that facility will service our customer base.
Benjamin Theurer
Okay, perfect. And then I’d like to understand how, I mean, you’ve made this announcement about carbon capture and working together with farmers and basically kind of getting that certified to further leverage data availability, so to speak, into what then can be an additional revenue stream for your farmers. How should we think about the within the concept of Benson Hill, how relevant and not is this going to be, is it just leveraging the data you have to ultimately get the certification or do you think this is going to be an additional must-have asset within the broader offering you have for the farmers and then ultimately as well the closed loop potentially selling those credits to your customers to help them offset some of the carbon footprint, help us understand how what you’ve built around CropOS is going to work together on the carbon piece?
Matt Crisp
Yes. First, I’d say that because of the integrated approach that we employ, we’re enjoying three tiers, I’ll call it, of opportunity to look at environmental impact. The first is, of course, on farm, which I think is relevant to some of the comments I made today in respect of CropTrak and the ability to look at regenerative agriculture practices. I personally have a fairly bullish attitude about where the carbon markets will go in time. It won’t happen overnight. But that there will be and there’s some evidence to suggest there will be some organization to this. And when things are made consistent in the United States, we could see that blossom as a monetization opportunity. We currently don’t account for it, though. We don’t assume in our financial projections that there will be a monetization opportunity. The most important thing is that we’re using our presence on farm with our farmer partners to help them ultimately enable this market and how it might manifest itself in monetizable opportunities that transcend to the ultimate customer base, be it the CPGs or the consumers.
The second category is really the disintermediation of processing. And that’s principally where we’re seeing the most significant water and carbon reductions in the independent analysis, life cycle analysis that have been conducted. And that, again, is an area that could theoretically be monetizable over and above our current product offering at a base level if not today. There is not a green premium associated with it. In fact, because of its innovative nature it’s actually deflationary in nature. And we can offer products at a discount, let’s call it green discount rather than a green premium. So again, we don’t account currently in our financial modeling for that to be monetized. It’s really a feature of benefit that we’re offering.
And then thirdly, of course, is the product level benefit and from an environmental perspective, you can look at — there’s data out there suggesting, of course, the significant reduction by disintermediating the animal, for instance, and the plant-based alternatives market. And we think that our more affordable, more sustainable ingredient solutions help fuel that category and ultimately realize a greater degree of market potential because you really need to make these products more inclusive for the consumer in order to realize the full benefit of what this category could provide.
So it’s a long way Ben of saying that while we think that there is multiple points of opportunity over time, possibly to monetize these carbon benefits that innovative products like ours are bringing to the table. We don’t financially account for those yet. We feel strongly that it’s important to invest in the infrastructure because it’s a core part of our purpose and our mission as a company. And it certainly provides a degree of differentiation that we’re finding CPG’s view to be attractive, some of which will be table stakes and some of which won’t in the future.
Benjamin Theurer
Okay, perfect. And then my last question is more around the financing. So thanks for all the details about the pipe offering and the $85 million. If I remember right, when you closed the deal for the Creston facility on the financing side, there was some option to add on to that debt piece of the financing. Is that now not needed anymore, just given the fact that you took the $85 million or would you still consider that maybe if needed, for whatever CAPEX or maybe an opportunity to invest into something you would draw that capital as well?
Dean Freeman
Yes, hey Ben, that’s a great question. Thanks for asking. So what you’re referring to is the ad cap term loan that had an option to let us draw an additional $20 million against that facility. It certainly remains an option moving forward. I think the way we’re thinking about it between that and other non-dilutive financing options that we have, we’ll assess whether we need that or not and whether there’ll be other opportunities to forego that. But clearly, as we sort of broadly think about our capital needs moving forward and the optionality that this pipe raise has now given us we’ll assess that when we get to the time on the opportunity.
Benjamin Theurer
Okay, thanks guys.
Operator
Our next question comes from the line of Adam Samuelson from Goldman Sachs. Your line is open.
Adam Samuelson
Yes, thank you, good morning everyone. So I guess my first question is thinking about the long-term framing on revenue mix and contribution margin that you laid out, I guess, this is Slide 18 here. I’m just trying to think about that relative to how you framed things kind of initially at the time the SPAC announcement and it would seem like the anticipated mix of partnership and licensing revenue has gone down. And I just — I want to be sure that, A) that’s correct; and b) if it did, kind of maybe describe how the thinking on that opportunity has changed and kind of in conjunction with that, how should we think about kind of what your proprietary planted acres can be in that 2025 to 2027 period to get to that size?
Matt Crisp
Sure. I think your assumption is correct. I would characterize the change in partnership and licensing in the medium term as more or less having shifted slightly. And I think that, that shift is due in part, of course, to us wanting to find the right partners to scale the business in a really meaningful way that provides the target margin profile that we believe the business deserves and that our shareholders deserve. But then the other factor that plays into this is the advent of the Creston acquisition really pulling forward actually some additional capacity that we can control. And it’s enhancing our ability to execute against the integrated closed loop model and scale that more aggressively such that in the nearer term, we feel like we can convert that non-proprietary footprint in the closed loop system to a proprietary footprint in the closed loop. And so I’d say what you’re really seeing is a little bit of a shift, bringing forward more capacity and growth and the proprietary closed loop and shifting out slightly the partnership and licensing. But long-term and beyond the period viewed here, I think your expectations and ours are aligned that to reach maximum share and impact, we’ll see that proportion continue to evolve.
Adam Samuelson
Okay. And so if we think about maybe pushing or seeing more opportunity in the near term around that proprietary integrated model, how should we think about and I believe Dean said free cash flow positive in 2025, I think is what I heard. How should we think about kind of the working capital kind of needed over the next few years as you scale the business and how is the thinking kind of evolved there?
Dean Freeman
Yes. So let me just say a couple of things about that. First, our working capital, I do want to point out our working capital does have a natural seasonality to it. Certainly, as we’ve now sort of built out the processing and manufacturing infrastructure we are — about 60% of our working capital or cash is consumed in the first and in the fourth quarter. And that’s consistent with sort of the broader Ag industry, as you can imagine. I think while we certainly haven’t given specific guidance on this, I think if you look at the margin bridge and you start to think about 40% of the margin expansion is related to optimization, cost improvements, supply chain, and logistics optimization, working capital should follow with that pretty closely as you think about continuing to optimize the processing, the footprint, and the broader infrastructure, the working capital will take on much more of an optimal profile. But clearly, as we grow the business, certainly, as we saw in our guidance and as we saw in 2021, working capital will play prominently in how we fund in terms of the use of cash for the company, but we’re obviously working diligently to ensure that we’ve got a disciplined approach to managing that over time.
Adam Samuelson
Okay. And if I could just squeeze one more in, a lot discussion about a variety of different end markets and applications in the prepared remarks today. So again, maybe thinking into that five-year kind of time horizon, how should we think about the mix — your mix by application in terms of just annual feed versus aqua versus some of the food applications in both flour versus texturized protein concentrate, I’m just trying to think about where you see the opportunities, how you see — where you see the biggest near-term growth potentials that will be material at the enterprise level.
Matt Crisp
Sure. Yes, I’d say we’ve got in the near term validated value propositions around multiple of those applications. But we anticipate differing degrees of uptake in markets. It remains that the plant-based alternatives category is the fastest growing of all of these target markets. But as we appreciate, it’s relatively small compared to some of these more established categories that are there. When we think about the aquaculture market as another example, it’s growing at a pretty rapid clip and there’s a significant demand, but you obviously are talking about a far more concentrated customer base.
So as we put together our expectations for product mix over the course of the next three to five years, what I’d offer is that we’re executing against the lift in all of these categories. It’s not as though we’re intending to reduce or eliminate one relative to another. And I’d also say it’s an estimate, right. I mean, we’re doing — we’re seeing and planning for medium-term product mix opportunities the way that the market appears today, and we’re doing our best to anticipate where the puck is going there. But the beauty of this, frankly, and especially again that Creston acquisition, is it provide us the optionality to flex up or down in various of these product categories and even markets. And so we’re seeing — and I’ll give you this, just a quick example for a moment in respect of the situation in Ukraine, a war broke out and there’s a disruption in the food supply chain that’s materially impacting the availability of non-GMO high-oleic oil for which Europe is the largest global consumer and for which Ukraine is one of the largest, if not the largest, producer. We can look at our acreage footprint and begin to think about how in the next one to two or more seasons, we might flex up our production of acres that may satiate some of what we might think of as impending demand.
The same thing goes for the food market. While there’s a one to two year effective planning cycle because of the seasonality of producing the inventory, we’re transitioning now from what I’d call more of a push model of past to a pull model of the future. Such that we can react and move our product mix to meet some of these market demands and opportunities. So I know I can’t specifically answer, Adam, the question of what is the ratio of market or product level, but I’d just offer that it’s quite diversified in the next year but also in the next five years. And we probably haven’t accounted for some of the opportunities that we’re yet to see to see blossom in the space.
Adam Samuelson
Okay, all that is helpful. That’s about it, thank you.
Operator
Our next question comes from Brian Wright from ROTH Capital Partners. Brian, your line is open.
Brian Wright
Thanks, good morning. I apologize if I missed it, but you had mentioned that you’re ahead of target on the acreage for 2022, but I didn’t see your — I may have missed it, the acreage number for 2022 for planting?
Matt Crisp
No, you didn’t miss it, Brian. We haven’t published the 2022 acreage start. We did have a proprietary contract at acreage target. It constitutes, as you would expect, given the revenue mix outlined a minority of the total capacity that we’ll move through and acres from which we’ll draw. Suffice it to say, it’s a meaningful uptick from last year. But one thing that’s happened, especially coming off the 2021 harvest, is that we’ve been able to predictively model quite successfully, thanks to the efforts of our R&D team, more meaningful concentration as being put at a nutrition density per acre. And so we actually — in order to meet our production goals for 2022, don’t anticipate needing to produce quite as many acres as we might have thought we needed 6 to 10 months ago. And so I know that’s not fully answering your question here, but what we’re doing now is we’re really looking at that mix of acres and what we need to meet the demands on the pull side, as I described a minute ago and adjusting accordingly.
And so it doesn’t mean that we might not continue to pursue some acreage, but we had a goal that was to meet essentially our 2023 ingredient revenue needs that are forecasted. We backed into the acreage mix that would be required to satiate that demand. And we were really thrilled that our team was able to execute so well against that target and actually complete the contracting by the end of February, whereas for context last year, we were contracting acres well into May for 2021 crop.
Brian Wright
If I could follow up on that a couple of things. Would — does it mean that the team still would push to get more as you can or it’s about managing kind of all resource contribution kind of analysis or — I’ll start with that, and then I’ve got one more follow-up if that’s okay.
Matt Crisp
You’re correct. I think it’s a balance. I mean, we need to balance what we believe the demand side to look like, what we believe the working capital needs to be, and what ultimate risk we would bring on. I think we’ve taken a view that we want to have confidence in being able to sell up and sell out of the products that we have put into the market. And we’ve executed on plans accordingly. But as I used this example a moment ago, when you have geopolitical events that occur and wars breakout and supply chains are disrupted, there may be the need for us to go and look at some additional acreage and contracting that a little, what I would say, late in the season or late in the contracting cycle. So, we’ll continue to be open, of course, to those kinds of opportunities. But to your point, it’s very much a balance that we need to weigh the risk and reward against.
Brian Wright
Great, thank you. And just to follow up on the increased concentration of nutritional density per acre. Is that driven by you or is it more like it’s instead of 65% concentration, it’s a higher concentration level within the plant?
Matt Crisp
I might think about it as three main levers, and I’ll keep it at that level. One, of course, is yield, so bushels per acre. The second would be protein density per unit. So just percentage of protein in the bean itself or bean composition. And then the third would be agronomic practices. And underneath the umbrella of agronomic practices, I’d tell you that where the acre is, is important. The soil conditions, the planting date, a variety of ways that the farmer might farm that acre. So these are all contributors as well to ultimate protein production output.
Brian Wright
Okay. Great. And if I could just sneak one more in, sorry about that. Just wanted to give — did you all provide the kind of percentage of EFS [ph] Creston that was going to be internal on the revenue basis?
Matt Crisp
On the slide — I don’t have it in front of me. I’m sorry, Brian. But on the Creston slide, I believe it’s Slide 13 actually, we give you a qualitative view in 2022 that breaks out Benson Hill proprietary soy and the yellow versus the legacy revenue of Creston, which we estimate in 2022 to constitute between $90 million and $100 million of our guidance.
Brian Wright
But that is proportional. There’s no like — the spreadsheet that you used to make the chart wasn’t like numbers that were just randomly thrown in, you could use a lever basically?
Matt Crisp
I would say that this is a pretty good estimate.
Dean Freeman
Yes, about 100 million.
Brian Wright
Great, thank you.
Operator
That is all the questions we have on the line. So I’ll hand back to Ruben to take your online questions.
Ruben Mella
Thanks, Emily. And we’ll conclude with some questions we received from retail investors through our partnership with Safe Technologies. So I’ll start with you, Matt. One retail investor asked, what are some concerns that you might have about your business?
Matt Crisp
Sure. So Benson Hill is an execution story, and I often have said that execution is synonymous with team. And we have a very talented team and a team of very passionate professionals dedicated to our purpose and executing across the bands that I described earlier from technology to grower engagement to commercialization. And so when we think about what are the risks in the business, I’d say that there’s a band of execution from developing the best possible seed to contracting with the best farmer partners, to producing an identity preserved supply chain of high integrity and delivering of products that meet specifications consistently to our customers. And if you click across those four areas, those are the things that we think about day in and day out and how we can not just be operationally excellent, but maintain a mindset of innovation and drive the purpose of Benson Hill into the market. So there’s a lot to do to deliver on that strategy. We’re continuously learning and maintaining a growth mindset to find ways to improve and we’re thinking about the stakeholders across the food and agriculture value chain as our partners and lifting it up and advancing it.
Ruben Mella
Another question, do the fluctuations in the oil markets affect your business and if yes, how do you best manage this?
Matt Crisp
So the fluctuations in the oil markets have a relatively small impact on Benson Hill, of course. There is a proportion of the soybean that produces oil. Some of that for Benson Hill is a commodity soy oil, and some of that is our very brand high-oleic low linolenic oil. And so we see pricing fluctuations on the basis of that market. But the primary area where we might see impact and the cost elements of our P&L is in the fuel and the transportation cost. And as I think Dean mentioned earlier, that’s principally affecting our fresh business at this time.
Dean Freeman
Yes. That double-digit increase year-over-year related to fuel and transportation.
Ruben Mella
One more question. How has innovation and expansion throughout the company in the past couple of months affected your bottom line?
Matt Crisp
Sure. So I would say that the innovation and again, across those bands of execution I described earlier; technology, farmer engagement, and commercial has positioned us really for growth — for significant growth. And I couldn’t be prouder of the way that the team has come together to accomplish milestones as outlined there and then others that have really set us up on a growth trajectory that we think is highly attractive and meaningful in the agri food category. We’re expecting just continued revenue growth and share capture, but improved gross margins in 2022 and beyond, as Dean has outlined. And importantly, I’d add that over the last couple of months, we’ve solidified improvements in our balance sheet that put us on a really solid financial play to execute this strategy and to achieve these expectations as outlined with the EBITDA and cash flow positive in 2025. So, the way that the company has come together to execute on their achievements not just in the past couple of months but I would say in the past year have been very, very meaningful and I will just reiterate I am really proud of the way the team has banded together, grown, and executed as an organization.
Dean Freeman
If you go to Slide 19 in the prepared remarks presentation, the net buildup of the margin expansion, every single element of that has a technology dimension to it. And I think it is not just technology for technology sake, it is clearly a function of the execution of the team. But every single of those margin expansion opportunities is relying on our ability to execute on our technology platform.
Ruben Mella
Great, thanks Dean. And thanks to the retail investors. Those questions kind of captured the list we have. So we can respond more to retail investors later. Now I’ll turn it over to Matt for concluding remarks to end the call.
Matt Crisp
Super. Thanks, Ruben, and thanks, Emily. So we at Benson Hill have a great foundation from which to accelerate momentum and capture market share with our proprietary ingredients portfolio. Market conditions are very favorable and the unique value propositions we offer across our soy ingredients, seed and oil solutions as well as innovations in yellow pea continue to garner attention from customers and partners alike. We are now better positioned than ever with the right technology, the right team, the right product, and the right purpose to execute our growth plans and drive towards EBITDA and free cash flow positive in 2025. But it’s really a milestone to a much larger mission we have to lead the pace of innovation in food and to help transform the food system as the picks and shovels of the plant-based food revolution. We appreciate everyone’s time and engagement this morning, and we look forward to hosting investors at our headquarters here in St. Louis on our Investor Day, April 5th. Please contact Ruben if you wish to attend in person. Thank you very much. Have a great day.
Operator
That concludes the Benson Hill conference call. Thank you for your participation. You may now disconnect your lines.
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