S&W Seed Company

Good day and welcome to the S&W Seed Company reports third quarter of fiscal year 2021 financial results conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Robert Bloom with Litham Partners. Please go ahead.

All right. Thank you very much, and thank you all for joining us today to discuss the financial results for S&W Seed Company for the third quarter fiscal 2021, ended March 31, 2021. With us on the call representing the company today are Mark Wong, President and Chief Executive Officer, and Matthew Zott, Chief Financial Officer. At the conclusion of today's prepared remarks, we'll open the call for a question and answer session. Before we begin with prepared remarks, please note that statements made by the management team of S&W Seed Company during the course of this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results, or strategies and are generally preceded by words such as may, future, plan or planned, will or should, expected, anticipates, draft, eventually, or projected. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements. including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in the company's 10-K where the fiscal year ended June 30, 2020, and other filings made by the company with the Securities Exchange Commission. With that said, let me turn the call over to Mark Wong, Chief Executive Officer for S&W Seed Company. Mark, please proceed.

Thank you, Robert, and thanks. Hello to everyone on the call today. Third quarter is obviously, as everyone knows, a big quarter for S&W and a big quarter for agriculture. Just a couple of comments. So in the Northern Hemisphere, it's planting time. Excuse me. And so we're very excited to work with our farmer customers, start selling them the seed that we've been basically talking to them about. winter as we build the information that they have on our proprietary products and the AG markets are very very strong so corn soy sorghum commodity grain prices are very high highest since 2013 so farmers are very excited and in Australia meat prices are very high so that is driving all of the pasture products in Australia so our markets are also very good there Remember that I've said before, ag has long cycles, and this is obviously a very, very good year in that cycle. Farmers know that they're going to make a profit on every bushel, every incremental bushel that they can produce, and so they are willing to spend their money with us for the best seed, with fertilizer companies for ample amounts of fertilizer. and with pesticide providers to protect their crops against diseases and insects because they know every bushel that comes out of the field is a profitable bushel and they're really ready to invest in that and they know that these opportunities don't come along that often and so when we as a company and as an industry have good years, it's very, very important that we all take advantage of that. So, as you might take from my comments, my opening comments. It is a very strong year. Farmer interest is very high in our products and we are predicting a very strong third quarter and we're predicting that our increased guidance that we gave you last quarter is still an excellent target for the company. So we're saying the third quarter and you'll get more detail From that is it's going to be strong and we're saying that for the full year Our total revenue of sort of ninety two point five to ninety five point five. That's the guidance we gave Increase in guidance we gave last quarter is still a number that we think is a good number so a couple of qualifying insights to that yearly sales number and Our bookings are very, very strong, both in the Americas and international. So, I don't think that sort of the sales book is going to be much of an issue for us. The real issue that you'll also hear from Matt and that you've heard from, I think, other seed biotech companies, the bigger ones in our industry, and from other industries in general, is all the logistical challenges that the COVID year has put on industries, the changes of demand, the movement of products from China to China to Asia, from Asia to the U.S., is really creating shortages in shipping, in logistics trucking, both in the U.S. and as we ship our containers all around the world. And so we're doing, I think, an excellent job keeping on top of all that. But as our head of international said to me yesterday on a call, you know, we have everything arranged. We have all of our containers booked. But if there's a glitch somewhere, we have to get and we don't make those bookings because of a problem in logistics, then we have to get to the back of the line. And so we will have some sales potentially if there are problems that are pushed into next year, rather the 2022 fiscal year for S&W rather than this year, the 2021 year. But as of this point, we think we have those under control as well as they can be in this challenging market. And we are... confident that that total revenue number in the $92 to $95.5 million is a good target. And Matt's going to give you some more detail on that in his presentation today. The rest of the business, you know, because as you all know, It's a long product life cycle in the feed biotechnology business when you create these proprietary products that we have and you fund breeding programs and you develop new materials for the farmer and then you have to test them and then you have to go through production and all of that. It can easily be a six-year timeline. And so, as we announced a couple of quarters ago, these traits that we are coming out with in addition to our proprietary seed products are something that we're obviously very, very excited about. An update on those, on our double teamed sorghum, as you remember that is a non-GMO sorghum that has the ability when we spray over the top with a herbicide to control grass weeds, we are introducing that for the first time this spring in the northern hemisphere, mainly in the U.S., and those sales and those introductions have gone very well. I can tell you that we are sold out for this year already. I will also give a little bit of qualifier there. Seed companies don't have a huge amount of seed in the early years. Next year will be a much more important year for us financially on Double Team Sorghum. But Double Team is being well accepted by growers. We're being very careful to have the best growers in each of these markets try the product, buy the product, so that we can see performance in lots of different geographic areas in the U.S. All of our sales in Double Team Sorghum is in the U.S. this year. There will be future sales in Australia, and we have moved germplasm to Australia as some people know Australia has very tough quarantine rules and so you have to go through a very careful process to bring your new germplasm into the country and then test it there and produce seed there that you can sell to farmers and so we have begun that process in Australia with our double team and in the U.S. we continue to we've planted the or in the process of planting our crop that will supply hybrid seed for the U.S. market in the next coming year, in the 2022 year, and all that has gone according to plan. Our second trait, improved quality alfalfa, IQA alfalfa, is being introduced this fall in, again, the U.S. and the Americas. as the first market, so we do not again have a huge amount of seed. My expectation is that once the sales program gets underway here in the fall, because alfalfa is a fall planted crop, whereas sorghum is a spring planted crop in the northern hemisphere, that we will again be sold out of our improved quality alfalfa. Remember, though, that the development times are long, and so we are also gathering not just sales information about who's buying our product and placing that product carefully with the best growers, again, as we did with the double-team sorghum. But with alfalfa, it's a quality trait, right? Hence the name, improved quality alfalfa. And so the presumption in our research shows that when you use our alfalfa and feed that to your dairy cows, that a ton of alfalfa, because it's more digestible, will yield for the dairy farmer more milk. So it's more milk per ton. That is the selling point of the product. And so we are in the process of selling that alfalfa to farmers and then gathering the information. Dairy farmers, these will be, of course, and then gathering the information on cow milk yields and things like that to basically be able to get a book of information about the efficiency and proficiency of our improved quality alfalfa. So that's starting this fall in the U.S. Again, small sales will be sold out again. More sales next fiscal year in 2022. but we're very excited to have our second trait coming to the market in the same calendar year as our double-team sorghum trait. Obviously, different fiscal years because we have a June 30th fiscal year, but same calendar year. So our sales force has basically been preparing all year in the U.S. to sell these two traits in this calendar year, this planting season. Our third trait, the durian-free sorghum, remember that is sorghum line that removes natural toxic metabolites from alfalfa sorghum so this is not grain sorghum this is sorghum that is fed to animals so we think it's going to be a big potential crop in the US but we also are looking at frankly a lot more acres in the rest of the world than the US and so our ability to sell This kind of new product in places like Africa, in Australia, is important to the success of the product. And we, as with double-team sorghum, we have moved germplasm into Australia and are beginning the trialing and seed increase functions in germ-free sorghum also. So that product's... probably going to be launched in 2023. Don't see an issue right now, uh, with meeting that date. So that would be not the next fiscal year for us, but the year after that. Um, so, uh, it's exciting times and, uh, our three traits are right on schedule and, uh, farmer acceptance has been excellent so far on the double team sorghum. And we are hoping that, uh, our fall sales program and improve quality alfalfa. And then a couple of years from now, our, our spring program, because again, sorghum is a spring planted crop. The during three sorghum will be as successful as double team sorghum looks for us. So the traits are looking really good. Our product line's really strong. We are doing the things that all good seed companies do to make their businesses more efficient. So we're, knocking out some older material that's been in the product line for a while that maybe our precursor companies who we acquired felt like they had to keep in the product line but we're all about new market share in new proprietary products and so on purpose we get rid of those ones that might be a little bit long in the tooth and we have plenty of new stuff out of our breeding programs and our trade programs to introduce the farmers. So that's all going very, very well. And that's all the comments that I have. Clearly, after Matt's comments, we'd be happy to take some questions. But with that, I will turn the presentation over to you, Matt, please.