S&W Seed Company

Good day and welcome to the SNWC fourth quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's press conference, you may ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Robert Bloom with some partners. Please go ahead.

All right. Thank you very much. And thank you all for joining us today to discuss S&W Seed Company's fourth quarter and fiscal year 2024 financial results for the period ended June 30th, 2024. With us on the call representing the company today are Mark Herman, company's chief executive officer, and Vanessa Bowman, the company's chief financial officer. At the conclusion of today's prepared remarks, we'll open the call for a question and answer session. If you dialed into the call through the traditional teleconference line, as the operator indicated, please press star then one to ask a question. If you are listening through the webcast portal and would like to ask a question, you can submit your question through the ask a question feature in the webcast player, and we'll do our best to get to as many questions as possible. 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 risk 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 30th, 2023, and other filings subsequently made by the company with the Securities Exchange Commission. In addition, to supplement S&W's financial results report 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 websites. An audio recording and webcast replay for today's conference call will also be made online on the company's investor relations page. With that said, let me turn the call over to Mark Herman, Chief Executive Officer for S&W Seed Company. Mark?

Thank you, Robert, and good morning to all of you. I'm excited to be speaking with you all today. To set the agenda for this morning's call, I will provide a high-level overview of the progress that we have made during the past year, including the commercialization of Double Team, where I will also provide an update of our commercialization plans for the upcoming year, as well as a review of the sorghum market as a whole. I will then touch on the progress being made in our VBO joint venture and some of the activities taking place there. I will, of course, discuss the voluntary administration process taking place in Australia, As I assume most of you saw, the process is expected to conclude in the fourth quarter of calendar 2024. Vanessa will then run us through the historical financial results, including the enhanced segment reporting, which was a component of the delay in the 10K filing process. We will then look to take any questions that you might have at the end of the call. First, let's take a look back at this past year. where I think it's important to note the general strength of our America's business. Double team revenue came in at $10.9 million, an increase of 68% compared to previous year. America's sorghum-related revenue, which includes double team as well as our conventional hybrids, came in at $20.4 million. This was up 10% compared to the previous year. On the America's forage operations, we came in at $9. 0.9 million, which was above the 9 million expectation we provided at the beginning of the year. Company-wide gross margins of 26.2% were above our stated outlook of 24% to 26%, as we maintained a keen focus on operational effectiveness. Total operating expenses, excluding any impairments, came in at $30 million. This was well below our stated guidance of 32.5 million. On the flip side, our international operations continue to experience challenges, which we have been discussing with all of you during the previous calls and led to our Australian subsidiary going into voluntary administration with Deloitte and Touche assigned as the administrators of the entity as of July 24th, 2024. Again, I will touch more on this in a moment. Overall, Australian domestic and international sales were just 29.1 million last year, well off expectations we had at the beginning of the year of $45 to $50 million, and overall was down 33% compared to last year. Despite the impact, this impact, the improvement in the Americas coupled with operational efficiencies where possible led to overall adjusted EBITDA improvement from previous year. Given the headwinds from the international, I believe this is quite an accomplishment. Let's discuss the Americas in more detail. As I mentioned during this past year, Double Team experienced a rapid growth in the marketplace with revenue up 68% compared to last year. We estimate that the proprietary high-value sorghum trait technology will be planted on approximately 10% of all sorghum acres in the United States in 2024, up from approximately 6% share in 2023. While the $10.9 million revenue was just below the low end of our outlook we provided of $11.5 million, we believe this delta is almost entirely due to the change in sorghum acres planted in the U.S. this year compared to previous years, and not reflective of the acceptance of the trade or the performance of our sales teams. For those of you that follow the industry closely, you're well aware that the USDA came out with their sorghum acre report on September 12th, which indicated total sorghum acres planted in 2024 was 6.3 million acres. This is down 12.5% from 7.2 million acres planted in 2023. This data makes it clear that we, in fact, met our market share objectives of being on more than 10% of total acres in 2024. The pullback in acres, however, did have an impact on total acre adoption and thus our revenue in 2024. While their disappointment in the acre numbers, our enthusiasm, and more importantly, the enthusiasm of growers towards double-team, remains extremely high with expectations to be on 13 to 15% of grain sorghum acres next year, as the farm value that double team creates is highly evident through the resulting increase in yield through controlling grasses, which rob the sorghum crop of nutrients, water, sunlight, and ultimately reducing sorghum yield. This rapid adoption of our high value, high margin solution in just three years since its initial introduction, remember Double Team has gross margins of greater than 60%, has led to a strong improvement in the company-wide gross margins. As total revenue in the future continues to shift more towards our robust Sorghum technology portfolio, including product line expansions, extensions and new technology offerings planned over the next year, we expect to see continued top line and margin expansion in support of our near-term goal of profitability. As we look to next year, we continue to build on a robust commercial infrastructure to drive continued market share adoption going forward. SNW is being recognized as the leader in sorghum technology. providing farmers production tools that increase the value of sorghum acres. Today we are working with over 15 independent seed companies in the U.S. market, which have signed onto an in-license of our sorghum traits, providing their growers customers the benefits of S&W sorghum traits in their seed brands. Each of these independent seed companies have strong relationships with their farmer customers. As part of our strategy to further accelerate growth, we have launched a pilot program with many of our licensees, which enables them to purchase finished units, including production, and then through a grower point of sales or GPOS reporting, pay S&W a royalty on units sold. We believe this model will contribute to continued market penetration growth. With the importance of all sorghum seed brands to our penetration success, we have also adjusted our sales and marketing efforts to ensure S&W is supporting all seed brands representing our technology in the market, including changing the job title of our sales reps to S&W technology reps. Their training and focus is on assisting all seed brands carrying S&W sorghum trade success which also supports the expanding S&W trait market penetration. S&W technology reps are also focused on the largest sorghum growers in the U.S. as they are both thought leaders and trend leaders in the market. Our reps' goal is to build a positive professional relationship supporting these large farmers' success with S&W sorghum traits while working with seed brands and retailer or dealer of the grower's choice. We are also making great progress with global partners. With our chemistry partner, Atoma, completing the chemistry trials and registrations in key global sorghum markets, as well as licensing agreements with global sorghum independent seed brands that are current market leaders, which will accelerate market success and enable timely sorghum trade launches in all targeted sorghum, global sorghum markets. These agreements enable S&W Sorghum Trades to optimize global market penetration while maintaining very efficient OpEx and CapEx. On the production side, we continue to make significant progress with our efforts to streamline operations and work towards best-in-class cost of goods with each element of production focused on ensuring quality and efficiency. We've made great progress in the last year with streamlining our inventories. At the end of 24-25, SNW America's carryout inventory will be reduced over 30% year-over-year. This will enable us to pivot our summer 2025 production to the newest, highest-yielding sorghum products, aggressively moving our lineup to the newest, high-yielding DT2 hybrids, as well as further drive improvement in our cash management through reduction of cash tied up in inventory. Also, increasing utilization supports reductions in obsolescence for 2025 and beyond. Our metric is to optimize the balance of total inventory allowing aggressive sales growth while enabling the launch and production of the freshest lineup of high-value products. As we have stated in the past, Our research commitment and investments are focused on creating sorghum intellectual property to increase the productivity in farm financial return, including conserving water and inputs, producing a crop with enhanced nutrients and supporting food security that is uniquely equipped and adapted for tougher growing conditions. While double team penetration continues to grow, we are in the process of launching the second generation double team trait, DT2, which will enable a wider application window as well as expanded crop resistance to the accompanying first act herbicide with a new and broadening class of high yield hybrids providing an expanded market fit. Beyond double team, which gives sorghum growers an over the top non-GMO grassy weed control option, We are expanding our focus on sorghum through the launch of our Presic acid free trait this year. Presic free sorghum is designed to remove naturally toxic metabolites from stressed sorghum for safe, worry-free grazing and hay. One quick point on that note is that our pilot launch of Presic free forage sorghum in 2024 expanded exposure and experience leading up to this year's full launch. will further broaden the lineup. To put some perspective to it, the farm value of PRESSIC free technology allows farmers to safely graze rumen animals, cattle, sheep, removing the concern of livestock feeding safety due to risks with PRESSIC acid due to drought conditions or freezing snaps in the fall. With our focus on bringing value to sorghum producing acres, we plan on introducing our first DAC trait in 2028 by combining double-keem and presic-free into a single-seed option, which adds value for farmers. The stack trait DT2PF grain sorghum creates an additional farm value of $30 to $60 plus per acre. Adding presic-free to DT grain sorghum will create an effective system of harvesting your grain sorghum, immediately being able to put livestock on those acres to graze, on a high quality forage for 30 to 60 days. In many farm areas, the sorghum can continue to regrowth to extend that feed value on the acre until a hard freeze. Whether the farmer is grazing their own livestock or PresicFree creates an effective new acre grazing lease opportunity to neighboring farmers, PresicFree will create a new farm value for grade sorghum acres. Together, we believe the added value is a tremendous opportunity for sorghum farmers. High-value trade technology solutions will be a key driver to S&W's long-term success as we are becoming the key technology provider in sorghum. Transitioning briefly to our joint venture with Shell focused on developing biofuels through our Vision Bioenergy Partnership, an entity in which we currently retain a 34% interest, minority interest. As most of you know, this partnership intends to develop camelina and other oil seed species from which oil and meal can be extracted for future processing into animal feed, biofuels, and other bioproducts. With a limited supply of arable land, camelina provides a long-term opportunity to maximize farmland, for food production. On February 14, 24, if you recall, Vision Bioenergy announced it had been granted a global license to certain proprietary varieties of camelina from Yield 10, a leader in the development of camelina. Yield 10 is supplying Vision Bioenergy certain camelina varieties, including varieties exhibiting herbicide tolerances to spray applications of the broad-spectrum herbicide gufosinate, which we believe will enable Vision Bioenergy to accelerate its planned commercial activities, especially given that herbicide tolerance is critical to enable a ramp-up to the commercial production of camelina. In calendar year 2024, Vision Bioenergy plans to sample this herbicide tolerance system through the summer and fall with some of its key camelina growers while simultaneously building planting seed supply to support a potential commercial launch in the calendar year 2025. While the Americas operations continue to improve and meet expectations, we have experienced challenges to our Australian domestic and international operations, which have been communicated over the past few quarters. As a reminder, in early 2023, we communicated that we were working on the possibility of a strategic transition involving our Australia international operations headquartered in Australia. Upon further evaluation to the changes within our Australia international commercial footprint, we announced that one of our subsidiaries, SNW Australia PTY, had entered into voluntary administration or VA under Applicable Australian law effective July 24, 2024. This decision was made after careful consideration of SNW Australia's financial position and ongoing challenges in the current market environment. These challenges include the lack of viable strategic alternatives to Saudi Arabia's recent discontinuation of import permits for alfalfa seed and all forages. and the increased risk that S&W Australia would be unable to meet its debt obligations. VA is a process designed to assess a company's financial situation and operations and explore options to provide a better return for creditors. The VA process is expected to conclude in November 2024, and we continue to work collaboratively in good faith with the administrators in Australia. We will look to share more with you as it becomes available. With that said, let me turn it over to Vanessa for a detailed review of the financials. I will then provide some brief closing comments and turn it over for any questions. Vanessa.