Welcome to Lavoro's first half 2023 earnings conference call. At this time, all participants are on listen only mode. If anyone requires operator assistance during the conference, please press star 0 on your telephone keypad. Please note that this conference call is being recorded and a replay will be made available on the company investor relations website at ir.lavoroagro.com. I will now turn the conference over to Jeff Sonnek with investor relations at ICR. Thank you. You may begin.
Good afternoon. Thank you for joining us on Lavoro's inaugural earnings call to discuss our fiscal 2023 first half results ended December 31, 2022. On today's call, our Chief Executive Officer, Ruy Cunha, and Chief Strategy Officer, Gustavo Modenesi. Before we begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future results and operations and financial position, industry and business trends, business strategy and market growth, among others. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual results or those described in these forward-looking statements.
Please refer to the company's registration statement on Form F-1, filed with the SEC on March 23, 2023, or our report on Form 6-K for the period ended December 31, 2022, filed with the SEC today, and other reports filed from time to time with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note, on today's call, management will refer to certain non-IFRS financial measures, including adjusted EBITDA, adjusted EBITDA margin, pro forma adjusted EBITDA and pro forma adjusted EBITDA margin, among others. While the company believes these non-IFRS financial measures will provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with IFRS.
Please refer to today's release for reconciliation of non-IFRS financial measures to the most comparable measures prepared in accordance with IFRS. I'd now like to turn the call over to Ruy Cunha.
Thank you, Jeff. Good afternoon, and thank you for joining us today. I'll begin with a review of our business for those that may be newer to the Lavoro story and then pass the call to Gustavo for some financial remarks. I'm excited to kick off Lavoro's inaugural earnings address today as a public company following our business combination transaction on February 28, 2023. Lavoro is the first and only Latin America agriculture pure-play listed on the U.S. stock exchanges. This has been an exciting journey with the support of our sponsor group led by Dave Friedberg at The Production Board.
In the past month and a half since the closing the transaction, we've been putting the infrastructure in place to operate a U.S publicly traded company and meeting with our leadership team to ensure that our operating strategies are aligned towards our goal of delivering consistent, profitable growth and value for our shareholders. Lavoro is the largest ag input retailer in Brazil, yet we believe we only have approximately 10% share of the Brazilian market, which represents a tremendous long-term opportunity that we intend to capitalize on. We offer farmers a comprehensive portfolio of products and services through our differentiated business model that blends our network of highly skilled technical sales reps or RTVs.
With our unique ability to offer vertically integrated private label specialty crop input products via our Crop Care business, which includes our portfolio of proprietary biologics as well as digital tools that complement the third-party products that we distribute. Our goal is to help our farmer clients succeed by providing omni-channel support throughout the crop cycle, generating value for farmers and in turn, gaining their trust. By leveraging the direct agronomic service provided by our RTVs with our proprietary analytic tools, we believe that we can build an intimate understanding of our farmer clients and offer products and services tailored to their specific needs. The services and solutions that we provide are key enablers for our customers to better compete on the global stage.
Consider that Brazil uses approximately the same amount of nitrogen fertilizers as U.S. on a per hectare basis, yet Brazil's corn yields are about half of the U.S. While Brazilian farmers have readily adopted new seed technologies, they are only just beginning to utilize variable rate application equipment and other digital agronomy technologies. With the help of Lavoro, we believe we're providing Latin American farmers with the ability to become more competitive through an accelerated use of crop protection specialties and biologics. As we create economic value for our clients through the organic growth for their crop production and enhanced profitability, we believe that we can drive simultaneous value for our shareholders. In terms of our footprint, we have a broad geographical presence that spans more than 72,000 customers operating in the key agricultural centers of Brazil and Colombia.
Our customer base is focused on the small to mid-size farmers whose operation is large enough to make growth investments, and thus are keen to adopt technology, yet have been underserved by the lack of quality consultation and competitively priced solutions. These customers are serviced by our 215 retail locations and supported by our approximately 1,000 RTVs to help them plan, purchase the right inputs, and manage their farming operations to optimize outcomes. Our business is also diversified across geographies, clients, suppliers, and crop types, and we expect this to only improve as we expand. Our geographic diversification mitigates operational risks, in particular concerning potential adverse weather events and the seasonality of specific crop types.
We have a multiproduct, multi-brand approach which enables us to cater to a diverse set of producers across many regions that grow a variety of crops, including soybean, corn, potato, and rice. This wide range sales network is reflected in our customer concentration, where our top 100 clients accounted for only 16% of our fiscal year 2022 revenues. The strong fundamental backdrop that underpins our organic growth is reflected in the $38 billion target addressable market for agricultural inputs in Brazil, which has grown at a 16% compounded rate since 2017. Our strategy aims to build open depth foundation and further advance our scale through M&A consolidation and organic store openings. Our future growth plans include entry into other Latin American markets, where we are currently holding conversations with potential targets.
We have completed 24 acquisitions since 2017 and have memorandums of understanding with additional companies in our pipeline. M&A is a core competence of our organization, and our track record of successful integration is yet another level to drive our future organic growth post-close. In fact, since fiscal 2018, our acquisitions have delivered an average revenue acceleration of over 2x the legacy prior year growth rate before being acquired. This is a direct reflection of the strength, quality, and diversity of our product portfolio, which our RTVs can leverage upon shifting over to the Lavoro platform. Further supporting our growth profile is our vertically integrated Crop Care business, which represents significant upside potential as farmers' adoption increase throughout Latin America in key product segments such as biologics and specialty fertilizers.
The Crop Care segment also produces significant gross margins, and when coupled with its growth trajectory, is expected to account for a greater share of our gross profit mix in time. Another pillar that supercharges our growth is the implementation of other services to clients. I would like to highlight our strategic partnership with Pattern Ag, which was commenced with an initial investment from our sponsor, TPB. On October 21, 2022, we enter into a multi-year partnership with soil metagenomic sequencing and digital agronomy leader Pattern Ag to offer Brazilian farmers a groundbreaking service that can predict crop risks and nutrient deficiencies and other specific product recommendations through a personalized software experience. This strategic partnership expands Lavoro's portfolio of digital tools and services for Brazilian farmers, a key growth driver for the company.
With Pattern Ag, we aim to offer clients a digital agronomy platform that will map their fields, analyze their agronomy data, leverage applied metagenomic sequencing and soil chemistry analysis, and provide specific product application recommendations to clients, helping farmers improve yields while minimizing their costs, land, water, and carbon footprint. This service is expected to be launched by the end of the second half fiscal year 2023. In summary, we're very excited to embark on this journey. The financial profile of our business is compelling, driven by a combination of consistent organic growth that is supplemented by a proven M&A consolidation strategy.
We believe that these high rates of growth when coupled with the inherent margins advantage that we enjoy from our vertically integrated Crop Care solutions business and future penetration of other adjacent services, create an attractive recipe for significant margin expansion in the years ahead. Combined, we expect to compound adjusted EBITDA growth well over revenue rates. I will now turn the call over to Gustavo Modenesi.
Thank you, Ruy. I'll be covering our financial results for the first half of fiscal 2023 period, starting July 1 of 2022 and ending December 31 of 2022. During this period, we closed acquisition of four additional companies that presented total revenues of $105 million for the first half fiscal 2023. Three out of them enhanced our leadership positions in regions in which we already operated, the fourth one marks our entry into the Rio Grande do Sul state, one of the largest markets in Brazil, in which we were not present yet. I'll also be referencing pro forma figures. Pro forma assumes Lavoro owned its acquired companies for the complete current and prior periods for comparison purposes, this can be interpreted as a proxy for a pure organic view of Lavoro.
We are talking about the same company basis. The pro forma disclosure is also consistent with the financial presentations used during the marketing of our business combination with TPBA, making it easier to follow our progress versus those projections we shared previously. Suffice it to say, we believe that we are on track and feel great about where we are at halfway through the fiscal year, which for Lavoro ends in June. I'll start with our combined results on a pro forma basis for the first half of fiscal 2023 as compared to the same period of fiscal 2022, ending in December. Pro forma revenue increased 26% to $1.1 billion compared to the prior year.
Pro forma adjusted EBITDA grew at a higher rate of 64% to $125.2 million, which translates to a pro forma adjusted EBITDA margin expansion of 270 bps to 11.3%. Turning now to the combined reported IFRS results, net revenue increased 45% to $1.0 billion compared to the prior year period. This growth was primarily driven by the increase in agricultural retail sales, reflecting both our organic and inorganic expansion, and also the increase of our private label products Crop Care. One of the KPI that we track, the average net revenue per RTV, was approximately $1 million per RTV in this six months period.
Reported gross profit increased 70% to $213.1 million, gross margin expanded 300 basis points to 20.4%. The strong results was driven by four key components. First, the higher contribution of Crop Care on Lavoro sales mix. Second, procurement synergies achieved through our more recent acquisitions. Third, a more favorable product mix reflecting the growth in the sales of higher margin categories such as seeds and specialties. Fourth, price mix. Operating expenses increased 50% to $111.1 million, driven primarily by the hiring of new RTVs to our sales force, the opening of new stores to support growth and increase our capillarity, as well as incremental back office investments aimed at enhancing M&A integration and the overall control of our operations.
The operating leverage that derives from our model is demonstrated in the growth of our net profits for the period, which increased 68% to $50 million in the first half fiscal 2023 compared to the prior year period, while our net margin increased 70 basis points to 4.8%. The result was partially impacted by higher finance costs in the periods, in particular driven by an increase in the interest service expenses as a result of an increase in our indebtedness and an increase in the basic interest rates in Brazil, as it also occurred worldwide. Adjusted EBITDA increased 88% to $118.5 million in the first half fiscal 2023 compared to the prior year period, and adjusted EBITDA margin expanded 260 basis points to 11.4%.
This result was driven by higher revenues and gross profit due to the factors mentioned previously, and partially offset by a higher investment in our SG&As. With that, now I'll pass it back to Ruy to talk about our guidance and conclude our prepared remarks.
Thank you, Gustavo. We are reinforcing our projections for the full year fiscal 2023, as we presented to the market at the announcement of our business combination with TPB on September 15, 2022. Pro forma revenue is expected to be approximately $2.7 billion. Pro forma adjusted EBITDA is expected to be approximately $210 million, which implies a pro forma adjusted EBITDA margin of approximately 7.7%. As a reminder, our pro forma projections includes all M&A contributions as of the beginning of the current and prior fiscal year to align with our prior presentations. The main drivers to achieve those projections are organic revenue growth, capturing synergies from cross-selling between Crop Care and retail segments. Gross margin expansion, which is chiefly benefited by Crop Care and the enhancement of our product mix, in particular through specialty sales.
The improvement of our operating leverage as we ramp up of our commercial efficiency and synergies from past acquisitions. We may also see the financial contributions of new acquisitions, such as the three companies we've signed binding MOUs. Number 1, NS Agro, a holding company of agricultural input retailers in Chile and Peru, which will mark Lavoro's entry into these countries. Number 2, Cromo Química, a company specialized in the production of high-performance adjuvant and enhancers for agriculture, which will contribute for the portfolio expansion of our Crop Care segment. Referência Agroinsumos, an input retailer from south of Brazil with strong growth rates in the last years. Additionally, we may count on the contributions of five targets we signed non-binding MOUs. In closing, we had a strong performance in the first half of 2023. We grew revenue by 45%.
We drove a 300 basis point expansion on gross margin. We generated 64% growth on our pro forma adjusted EBITDA. We believe that our results demonstrate the successful execution of our business plan as we previously presented to the market. We believe that the outlook for our segment remains positive, supported by ongoing demand for agricultural inputs, which we expect to carry through the second half of 2023. We are committed to presenting another period of great performance and growth in order to support our 2023 projections and deliver long-term value to our shareholders. I would like to recognize our entire team for all of their accomplishments to date and their contributions in helping us reaching this milestone of becoming a U.S. publicly traded company. Thank you.
Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.