S&W Seed (SANW) 14 Feb 242024 Q2 Earnings call transcript

Good day, and welcome to the S&W Seed Company Second Quarter Fiscal Year 2024 Financial Results Conference Call. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead.

All right. Thank you all for joining us today to discuss S&W Seed Company's Second Quarter Fiscal Year 2024 Financial Results for the quarter ended December 31, 2023. call Executive company the Officer; Financial the Herrmann, is company's on Officer. Chief company's and us representing today the Mark Chief With Vanessa Baughman,

full-time has that we as served will prepared for At Financial Secretary call S&W see, the those Corporate Chief February a Vanessa open and May For in having the didn't Interim a question-and-answer remarks, since capacity Officer previously conclusion effective XX, today's joined session. XXXX. of

statements call with and made S&W XXXX XXE the Reform made begin and Before forward-looking Section are as harbor of prepared Exchange XXA pursuant of to of team the the note that Act the statements XXXX. of Section of amended Litigation the remarks, of by we Seed forward-looking course please management as Securities such the Private of may safe statements within during Securities Act amended provisions Company of Act Securities this meaning conference the of XXXX contain

describe company XXXX, will risks Securities Forward-looking filings forward-looking risks results are may ended are results planned, generally company's made actual other and circumstances, XX, from as to and those the the for or plan future Commission. and including that differ anticipates, Listeners that factors in the a a the eventually statements statements to or may, subsequently risks as of fiscal cautioned those that XX-K multitude uncertainties the Exchange could future, projected or result words statements, cause other year are in by the in from projected of such or June preceded with identified forward-looking draft, projected. the and by materially strategies various should, subject such statements and events expected, or plans, results expectations, future materially differ

adjusted or a These EBITDA on loss -- non-GAAP the will and EBITDA S&W's under of generally principles. recording which issued on In at principles, website. earlier with call. net addition, the are not of of included meant GAAP are discussing be on accepted financial will S&W's replay historical A conference any considered be adjusted reported in for S&W's accounted are description has end company's financial in accounting to set S&W rules supplement U.S. call or the been the audio this to to prepared earnings comprehensive page. be and substitute page EBITDA GAAP, today's of for comparable as available reconciliations accounting not Investor results accordance adjusted release of Relations measures or An online and isolation webcast today, Relations also Investor posted measure

Executive said, that Mark, call With for me S&W Herrmann, Company. Mark Officer proceed. the over to let turn Chief please Seed

want operated, the the permanent making today you. high-value best-in-class of all X as continually rapid you, into adoption solutions seed I that to S&W are morning role. to and of efficient, great you driven Thank S&W has good with pleased sorghum. interim the to that transition share start how an technology I'm Robert, and confirming Vanessa CFO within by company, primarily progress trait we the she leadership accepted are the has months excited CFO that last provided with to over we our

product seed our of to improved included lines reduction obsolescence low-margin cost have cycle seed manufacturing program key As in of forage towards suspension life certain stevia my operational July, took near have business term. reduce development has operational treatments initiatives profitability to the back and I focus I about in the talked and CEO costs, plan. management rationalization as the drive overall over since These initiatives instituting been

improvement quarter million our expenses with adjusted of is of improvements, Team the result XXX further more trait quarter our XX%, an sorghum million. $X than coupled the year. $X.X Double is second solutions a year compared second smallest margins the resulted our in points The net as quarter of as by operational with basis of EBITDA. to our consecutive last These above nature well seasonally high-margin And in improvement reduction operating please gross remember

improvements, operational has success. the to to been build pipeline technology Beyond upon goal that driver S&W be the long-term existing will ultimately my trait key

$X Team during that run Our the to the adoption Grain up Sales second and XXX% first home we trait, been to quarter satisfaction, demand continue see be. of expected high-margin trait strong it to Double technology. Sorghum million we as were farmer has the

XX% share XXX% few of system Double Double of the of use Team, said growers and Double growers Double farm health: lastly, secondly, value want satisfied they system; of use with they that the the wheat acres control growers were XXX% Team they was this said recent our year; of in tried fourth, survey the from I a performance; saw easy-to-use would Double Team were an on XXX% the of said system a be coming brand the XX% growers third, Double who to satisfied who with pertains points increasing system. growers it system; off, grass to As First Team stated Team Team

Double on pressure feedback provides weed return control, increases under a overall put, yields thus and the farm and protects profitability. positive Simply investment wheat delivers and high positive satisfaction on performance is superior growers of system. which value Team from the grass

For companies. to will XXXX, for this than be for and tremendous these other and of our its sales been achievement sorghum. Grain to green many today reasons, to green its grow for climates, this acres key nutrient planted many of broader its this not of buoyed agricultural to accounts as due spring profile Team crops in highlights ability in team, of in planting XXXX year's for has is a and Sorghum but only since innovation X% sorghum dryer U.S. and a of critical estimate more This believe in the XX% higher the the demand and the larger year XXXX to it value used and grains by we Double in can also commercial all temperatures, launch what crop which innovation be than handle substitute better calendar point launch in market

As I've corn research the growers tools all soybeans and from and weed advanced have past, the technologies. control for said investments cotton benefited in

sorghum that of about has superior increase and greater increase traits the not S&W's point to However, globally despite grasses numbers robust of crop being and drive with the simply It's of benefited million technologies, to value farmers the There technologies cereal this currently corresponding largest acres new to to tools, grazing expectations increasingly from due planted introduction new safety fifth are innovation globally. will enhancement sorghum these through my yield. yield reduction controlling opinion recognize risk acres. as management crop XX

launch of Initial year. Team Forge expected that key solutions of Grain be sales being a S&W success trait planted driver will Team a Trait of we the for Double fiscal the Forage upon Sorghum technology is build this to looking technology Trait in Double it to pilot our Sorghum Sorghum Prussic are for solution Acid in and are Team introduction a Free are long-term sorghum. key High-value Double Free clear with is and sorghum. becoming provider XXXX and Prussic We the Acid Sorghum success,

sorghum current through drive of market companies grain S&W-owned to market-leading continue and Sorghum in forge to germplasm but licensing strategy penetration aligned markets key with brand Partners our brands also through sales to S&W commercialization have and/or momentum maximize is potential with in our U.S., the XX% are positive international Our conversations with we traits. and during the label close orders private leading season. quarter, On that licensees the with of to And front, begun companies. into next us independent have

be sorghum the as We well more trait commercialization progress made couldn't pleased our to date solutions within with technology as pipeline. our

gross of our million Double to to doubling remain Team are $XX driver approximately XX%, million last on on of margins Team which year. be Double more our For And goal revenue the bottom continue $XX.X a future line year, stated we sales, forget, will to don't key from than improvements. target achieve of our

is another on green takeoff for Shell required trait to BBO Camelina develop successfully the has agreement sorghum SAF February our agreement which from $X with achieved feedstock Shell a stated million and key technology XXXX. received value production. Shell diesel We fuel the objectives driver develop to biofuels, all as payment our jet a Beyond of portfolio,

of infusion of from The As a S&W currently about payments novel Camelina. repayments excitement in great, crop we includes and Shell. is produce solutions like the cash is really to on loan the Nampa from the total low-carbon the the a partnership to paid reminder, interest. own capital the sustainable, million $XX XX% sciences however, financial -- was fuel facility energy JV JD Remember, and of

payment our in also from are and we as will Australia JV its part received the we expected about on $X JV the Australian its million bring Within of position partnerships, X, value the this business. January wheat We of the long-term believe to XXXX S&W Trigall the excited shareholders.

adoption normal war trait in the has alfalfa geopolitical disruptions international The from achieving we well as conflict in closely MENA channels. Ukraine and we our on reported expanded and our as are operations. Israel contributing Hamas, expanding press region the region as monitoring the are to and in farming release, the the the conflicts we in war caused strong civil Sudan conflicts sorghum between While distribution seed operations dynamics in technology MENA high-margin in all to solutions,

mix wheat, demand are we the in erosion and to in marketplace, shifts putting on acres alluded well seeing quarter, price pressure shifting last our as we region. as the As business Arabia to all Saudi

our have in supply with specific limited has Australia Further demand pasture scale, ability products, Australia. a seen we into in which to meet smaller business shortage the a within

of largest business us. year third our quarters and of are the for The the fourth always quarters

a optimization began mitigate international We operations our to and our impact are well the initiatives closely as on the potential as bottom dynamics of line. series production within year, cost-cutting any fiscal initiatives monitoring

to We as continues. update any upcoming season provide will look selling critical further

OpEx our solutions highlight in the sales is our best-in-class not believe for term, profitability the on at reduction, we showcased JV near Shell a Again, that have with term. our I long improvement, commitment trait our the execution of focus cost. the on high-value margin actions and to company any sorghum successful growth develop

With call up review to turn the I wrap things that, and the will your Vanessa financials. to to look quickly let Vanessa? questions. then take me

call Thanks, everyone the to on Mark. today. Good morning

of million $X decrease were increase. million. $X.X $X forage of of And of million ago, million million to $X.X International year the in QX $X.X $X.X was a decrease million, sales compared of improvement versus million year. sales XXX% $XXX,XXX. a further, million, of the Team to it compared $X.X with this, me Total starting QX of through last sorghum million versus $XX.X to Breaking the an was down compared million million XXXX $X.X $XX.X last $X sales in for Of quarter, million. Let QX run year, revenue. Double forage details were or a million an revenue $X.X U.S. were increase $X.X

at Looking $X.X it was growth. we of geographically, Double Team U.S. increase $X.X million sorghum, in with a which million saw associated

as saw the also MENA a reasons European discussed broader discount $X.X not We seed the to in million well decision our as nondormant for disrupted alfalfa decrease as cheaper market. Mark

in decrease being shortage the We a we also Again, had due products in a operations. supply. Team key MENA pasture drivers million up a million Americas And are in decrease Double and Asia. finally, $X.X Australia and which macro the points impacting offset to by Australia here, are $X.X nicely, had

MENA currently on Due range the XXXX million of expect region, of to international $XX to to discussed operations. end Mark the communicated impacting We be lower revenue in the alfalfa potentially previously $XX dynamics the million. fiscal

the entering are year. of our mentioned, quarters As Breaking we the further. guidance X Mark down largest

million, sorghum-related XX% compared we $XX.X expect Team in is to to of million fiscal be million to million $XX.X increase XXXX. to be fiscal total anticipating to $XX in an We sorghum, million between are XXX% compared $XX and Double and Within to $XX revenue XXXX.

to international revenue previously on to side, year. communicated forage we And last compared finally, $XX.X in on of million million we million compared of $XX see to to $XX end the fiscal expecting $XX.X are U.S. $X operations, XXXX. the low million revenue be of the range million, On the about

high-margin of in XX.X% of margins. were for margins the consecutive our GAAP product of second GAAP XXXX to and sales offset market. quarter XX%. increase MENA more was quarter turning of sales decreased margin a domestic in margins the This grain fiscal partially region quarter Australian the XX.X% sorghum now fiscal second compared favorable by The XXXX. Now prices increased by our driven Mexico. second gross sorghum in in the is This primarily improvement lower-margin increased the Team-traded Double and mix to was gross to gross with of profit north

inclusive in our compares quarters, to Looking XX% any XX.X% expectations of Remember, in for maintain gross be to first XXXX. a between and fiscal whole. the to want full fiscal year quarters, To this to these XXXX date. the XX%. we on conservative we Despite factors more any margins, alfalfa strong and to have LCM as second to we charges at have side these will the market clarity we look expectations, a revise needs rather the that account we but for extent taken on margin to view potential coming the believe

the Now we'll we the quarter were to continue $XX.X believe saw for and year improvement depreciation million, research year and million operating down administrative for with around $X.X depreciation from last and in Consistent million which and second first expenses. a a inclusive fiscal expenses $X $X.X provided selling, quarter, improvement to an it general expectations transition $X.X million we million amortization. expenses. is the improvement operating consistent to in a million of our operating compared be bit, amortization; total in a is expenses; quarter development quarter. second expenses and GAAP with which $X.X this to improvement Breaking last year's and of

Now A XXXX to fiscal EBITDA improvement QX million. is available EBITDA. in XXXX, $X.X reconciliation release. of was full in compared a to EBITDA adjusted the $X.X press an million negative Adjusted QX million $X.X negative of for

fiscal Again, compared would $X.X million. of we guidance $X XXXX million $X.X XXXX. negative fiscal This are represent to million approximately improvement between for million maintaining negative an EBITDA negative to adjusted to $X to be our of

compared basic of $X.X to XXXX GAAP per year. losses QX on million share for or of per line. $X.XX share and million diluted the negative in was losses fiscal net basic income diluted and Finally, $X QX net GAAP $X.XX or net negative negative fiscal last

due in BBO. our As we method discussed incur to in will previous loss equity calls, interest a of

During year, that S&W. noncash this QX to This $X.X expense to a of amounted million. is

as only non-GAAP We for for reconciliation adjusted in well. EBITDA, but release, have loss press not a provided our adjusted net

expectation, XXXX. the last not Shell closely any December the in our the is needs from XXXX. EBITDA cash adjusted this to mentioned discussed included of in and which February end Shell of translates to expected from we is This negative payment cover utilization, a received operating quarter we As release, of year. in payment million Despite our our press $X as cash number cash rather number

a cost benefits details follow initiatives With XXXX, of our able near thought went flow Mark. fiscal our to the will with back turn achieve to continue position that positive stability the in the be Beyond technology call the am over any me have is the future. Again, it that, should I we in across and of cash if growth the if parts we happy up sorghum to any the let and questions. you we are of portfolio containment remaining the through organization,

you, Vanessa. Thank

to fiscal during best-in-class operating to reduce As move the and year, margins we've year on had operational the of discussed, have have progress last progress a Gross we towards improved we S&W seed have substantially tremendous made first company. built half the expenses.

of adoption the looking be. which sorghum, in up product developed, run Grain million high-margin it to the Sorghum of we Forage to $X second have the expected upon trait revenue the Sales strong of and XXX% the demand Double the for trait been see and will We're solution Free that technology to of trait Sorghum both Double Our quarter we Acid coming technology. has trait to Double home Prussic Team Sorghum introduction farmer continue Team were build first season. during we satisfaction recognize Team success with as

progress are look Shell all plan continued focused few questions. of impacts to laser here through our operations sorghum-growing our are and have and I with shareholders. that clearly feedstock million develop may support for Camelina Operator? with as that performance across green fuel and any week. pleased to MENA. Overall, last the business Our continues said, appreciative that up and diesel taking on $X of came SAF I'm executing our to coming the milestones, move within the We seasons come potential we payment this jet I'm mitigating an With and your Shell against meet months biofuels, and production important international to from pertaining making and we a forward in forward agreement alfalfa

comes Ben Instructions] Today's with from question Lake first Klieve [Operator Street.

any, Australian talked strategic what you if a had about, update effect, wondering the on One, couple the comment provide on questions status review. review. if they've strategic that And on of if dynamics operations. second an First, can of Australia on you of all, of kind these could the then within Mark, macro you

Yes. Thanks, Ben.

So really review, for I initiatives, what initiatives implementing relationship to of facilities. in beneficial We've of at and or decided costs business strategic the we've value to contributing most looking and/or the S&W lines weren't unlock on change non-EBIT we significant streamline were them options several would moved call our shareholders.

probably initiatives spring. financial cost implementing savings forward year. XXXX being in be by the we're those that But We've are So significant X fiscal fully and/or now those. with will got team. by implemented we're moving now implemented and Most of local structure benefits come changes the of

Okay.

product, magnitude? Or when question you I you to well? on surprise question full in that expected. positive of but in to trickle a My that. have it I is, laid your was that in second much to positive anticipate a of question for the that me. the revenues performance than had I that you surprise product material second did as follow-up revenue more Double was second Next year quarter, a quarter then was out expectations revenue The And would from kind Team. quarter you for thought this

Yes.

brands U.S. trait has technology. in both So portion the are now our Ben. become planning of part process, it significant and licensing, seed third-party in sales that of was germplasm A

and seed being processing for the the year. going their position in and So plan sales, their December to will that channel are happen process companies to into and in able with in that seed moving then for prepare bag material earlier it

it. surprised a been a big weren't was for the success It by we It team. has operations So significant initiative.

last March. challenges sitting and we're movement through February steady delivery this and now remember particularly right, were winter very, period, and some calm material marketplace, in of you year, well smooth If the into there right very for

success in in So the all consistent It's we of But full year. are forecasts the an signal pretty demand it. product that weren't surprised positive for extremely our with place and for the by the marketplace. continued

Okay. sounds but of comfort follow-up kind product of inventory with think of that have I level you inventory in Great. number. place.to $XX levels into if around question, curious to up there's just you the high heading I the addressed of end like year. you've second to target you million. fiscal I'm it about that of think kind that got here of But And hitting hit my half the uncertainty revenue then inventory curious for the mean any

good to No, being sales DT very, side we're the a We've early product other good Sorghums for sure well -- really us through X the has Forage key signals the aggressively high-demand solid. spring. there's through. continue we one that sold supply a demand sitting driving Sorghum organization making Grain all demand. on of that very out follows as have now And with new then right that DT that have to got selling very then And keep supply of

course, And where about or either all was this feeling last produced year. good of inventory. product sitting we're at So we're this very year

handle a got we've believe we and as on solid, the or is obsolescence quality LCM good So well.

sorghum positioned good very is feeling about So now. business where right the

that you've S&W investment -- how initiative foreseeable regarding is question be Bio, going something Great. in And the licensing in require cash last curious like future. Vision to for that context the if to to about here from But this going then the going into Very historically, at isn't me -- modest reiterated for another particularly any from an that's good. talked Vision today, making of looks is Vision least thought just a company.

initiative is at XX not XX here, S&W that next, don't months? is consuming still for be cash you to I think that the an going So least any to know,

consistent. still that's believe I Yes.

business $XX would neutral creating million BBO budget operating from then place for then revenue this original $XX closing year know that it to year. probably million the the is be was the going be supporting Shell in enough cash deal And into operations that putting the forward. You next plan in and in

is as to Vision -- I Bio we working X-year So are. simultaneously know also their on plan

for we but and do So through we'll as the more future in they're place that believe now, all move well. milestones hitting information near-term right give the as that that it are fully anticipate

And remarks. this our session. [Operator conference for to Herrmann over I'd to back Mark Instructions] like question-and-answer turn closing concludes the

just to awareness bring one like Yes, I'd thing. of

the the to updating get week. to investor are this deck, and targets We website on our are that

information would well, marketplace any try happening will be going find in work we as we significant it in So our at interest. deck the to with we forward go We're as to plan and include, place. the X-year updated investor to keep as update that as far information as would investors move new forward, look as customer that's any of which to,

send to that, hopefully all forward with call. to you look shortly. thanks I'd We for participating of in today's everyone here with again like to So speaking my

today's Thank you. all concludes thank call. We today's attending for presentation. conference This you

may disconnect You day. a have your and wonderful now lines,