S&W Seed Company

Good morning, everyone, and welcome to the SNWC Company Reports first quarter fiscal year 2024 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 and then one on a telephone keypad. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Robert Bloom with Lithium Partners. Sir, you may begin.

All right. Thank you very much, and thank you for joining us today to discuss S&W Seed Company's first quarter fiscal year 2024 financial results for the quarter ended September 30, 2023. With us on the call representing the company today are Mark Kerman, Chief Executive Officer, and Vanessa Bowman, the company's Interim 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 with the meaning of Section 27A of the Securities Act 1933 as amended and Section 21E of the Securities Exchange Act 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 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 for the fiscal year ended June 30, 2023. and other filings subsequently made by the company with the Securities and Exchange Commission. In addition, to supplement S&W's financial results reported in accordance with U.S. generally accepted accounting principles or GAAP, S&W will be discussing adjusted EBITDA on this call. These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the comparable GAAP measure and are not prepared under any comprehensive set of accounting rules or principles. A description of adjusted EBITDA and reconciliations of historical adjusted EBITDA to net loss are included at the end of S&W's earnings release issued earlier today, which has been posted on the Investor Relations page of S&W's website. An audio recording and webcast replay for today's conference call will also be available online on the company's investor relations page. With that said, let me turn the call over to Mark Kerman, Chief Executive Officer for S&W Seed Company. Mark, please proceed.

Yeah, thank you, Robert, and good morning to all of you. As this call comes on the heels of our year-end conference call that took place about 45 days ago, I'll keep my comments today a bit more brief than I did the last quarter. but I'm certainly available to expand on any details during our Q&A session of today's call. At a high level, we made solid progress during the first quarter, instituting key operational initiatives to drive the business towards profitability in the near term, including the initiative that I laid out on the year-end call, such as improved lifecycle management to reduce obsolescence costs, the rationalization of certain low-margin forage product lines and seed treatments, suspension of our stevia development program, and the overall seed manufacturing cost reduction plan. These initiatives, along with early sales of DT and higher margin alfalfa sales, resulted in a gross profit margin of 30.5%, which is 780 basis point improvement compared to a year ago first quarter, and a $0.2 million improvement in our adjusted EBITDA. As most of you know, the first quarter of our fiscal year, which ends in September, is seasonally one of our smallest quarters consisting primarily of forage shipments. To that point, forage revenues were approximately 86% of the revenues during the first quarter. Given the strong progress made during the first quarter, particularly on the gross margin front, I believe the stage is well set for continued improvement throughout the year, especially during later quarters of the fiscal 2024 when we ramp up shipments of our double team sorghum solutions. Our focus as a management team has been to define our business strategies with financial targets that will be delivered based on operational effectiveness by optimizing our two key areas of focus, our sorghum technology solutions and forage products. To that point, the result of first fall within our expectations and support the annual guidance that we provided during our year-end call. Vanessa will expand in more detail on the numbers momentarily. Beyond our focus on operational excellence to align SNW with best-in-class seed industry standards within both sorghum and forage product lines, we are making continued developmental progress to build off that momentum of our first trait technology solution, double team grain sorghum. As most of you know, double team is truly special and unique product as the only product available to control grassy weeds and sorghum, which robs water, nutrients, and ultimately yield from the crop. Since its limited launch in 2021 and broader commercial launch in calendar year 2022, double team grain sorghum accounts for what we estimate to be 6% of all green sorghum acres in the United States today, and believe we will grow to more than 10% next calendar year based on demand for the product. This is not only a tremendous achievement for our sales team, but also highlights the value and demand for innovation in this critical crop, which has been a void of any innovation to this point by the large agricultural companies. In my conversations with Double Team customers since taking over as CEO, the response has been universally positive. As I have said in the past, corn, soybeans, and cotton growers have all benefited from research investments and advanced tools for weed control technologies. However, sorghum simply has not benefited to this point from innovation despite being the fifth largest cereal crop globally. SNW is ideally positioned to benefit from this. While we ensure we execute on our fiscal 2024 sales objectives for double-team grain sorghum, remember we are expecting total sorghum trade revenue to be between $11.5 to $14 million, which would represent an increase of 77% to 115% compared to fiscal 2023. We are also looking to continually innovate with sorghum through the introduction of new traits. First in the queue is the expansion of double-team weed control system being introduced in forage sorghum with initial sales expected this year. Early demand has been strong and we expect it to sell out of its inventory this year and continue on a penetration curve similar to what we have already seen with double-team grain sorghum. Second, we are set to commence a pilot launch of our presic acid-free trait for sorghum. what we previously called durian-free, with a few thousand acres being planted this year. We plan on commercially launching our prussic acid-free trait in 2025, initially as a solo trait, and then shortly after, we expect to be providing a stacked trait with double team. Finally, in our trait pipeline, we are developing a second-generation post-grass herbicide trait, which we plan to launch in 2025. and in discovery stage for an insect tolerant resistance trait and a broad spectrum herbicide trait as well. We are clearly becoming the key technology provider in sorghum, a key global crop that can be used as a substitute for many of the grains on the market today due to its key nutrient profile and ability to handle higher temperatures and drier climates better than other crops. Well, our focus today is on driving sales of these traits through our S&W-owned Sorghum Partners brand and through partners with domestic independent seed companies. We remain focused on the international expansion of our traits as well. As I mentioned last quarter, there are approximately 8.7 million acres of sorghum being grown in four key countries, Mexico, Argentina, Brazil, and Australia. Remember, there are about 6.5 million acres in the U.S., so this would more than double our addressable market opportunity. In these non-U.S. regions, we will look to align with independent seed companies with current market-leading brands to maximize market penetration through licensing S&W, Dermplasm, and or trades. This process is underway and while it may not be a 2024 contributor to revenue as the breeding process typically can take about two to three years, it is a long-term growth and valuation creation driver for us that we are focused on executing with. Within our forage operations, I recently came back from spending two weeks in Australia. A key focus of mine was to implement many of the same strategies internationally as we have in the U.S., to drive growth and efficiencies in this segment. Specifically, we are looking to optimize our production capabilities to drive down cost of goods sold, while developing a sales and marketing approach that highlights the benefit of our forage solutions around the world. One of the key elements of this strategy is to remain tightly focused on the core drivers of profits. which is both Australian domestic alfalfa sales and also export alfalfa sales in Tamina region. To help support this strategy, the Australian business has begun the process of right-sizing its supply chain footprint into more streamlined and efficient operations. The result of this is the closure of some underutilized facilities, which includes some headcount reduction and reinvestment into existing facilities that can accommodate more throughput at reduced overall cost. Further to this is the Australian business has reaffirmed its commitment to the forage and pasture seed portfolio and is making sure all product categories now align with this affirmation. As a quick update to our partnership with Shell for Renewable Biofuels, You may have seen the press release they issued announcing that BBO and Atoma, one of the world's leading crop protection companies, entered into a joint development agreement to bring to market a suite of new crop protection solutions for camelina growers. As a background, Atoma is also partnered with our double team sorghum cropping solution with their first act herbicide. We are excited to see this development and the dividends that can be brought to developing the Campbellina industry and to VBO farmer customers. As I hope you took away from the last call and this one as well, we are keenly focused on operationally becoming the best in class seed company. Every organizational decision we make is data driven to ensure it will have a positive impact on our customers and shareholders going forward. We have instilled increased engagement with the finance team and financial analysis with all decisions that impact cost, margin, cash management. The operational initiatives we have instituted are geared to drive the business towards both customer satisfaction and allow for shareholder value creation in the both near and long term. I am pleased with the results of the first quarter, particularly on gross margin improvement, but we know there is still a lot of work to be done. Let me now turn it over to Vanessa to review the financials in detail. I'll then provide a few final words, and then we can address your questions. Vanessa?