S&W Seed Company

Good morning and welcome to the SNW Seed Company preliminary first quarter 2025 financial results conference call. All participants will be in listen-only mode. If 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. Please note, this event is being recorded. I would now like to turn the conference over to Robert Bloom with Liz and Partners. Please go ahead.

All right, thank you very much, Operator, and thank you all for joining us today to discuss S&W Seed Company's preliminary first quarter fiscal year 2025 financial results for the period ended September 30th, 2024. With us on the call representing the company today is Mark Herman, Company's Chief Executive Officer, and Vanessa Bowman, the Company's Chief Financial Officer. At the conclusion of today's prepared remarks, as the Operator indicated, we will open the call for a question and answer session. If you dial into the call through the traditional teleconference line, please press star then 1 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. 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 is 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 September 30, 2024, and other filings subsequently made by the company with the Securities and Exchange Commission. The preliminary results discussed on this call are based on management's initial review of the company's results as of and for the quarter ended September 30th, 2024, and are subject to revision based on the company's quarter end closing procedures and the completion and external review of the company's quarter end financial results statements. Certain details largely pertaining to the VA process, which are expected to impact financial results below the continuing operations line are not provided in today's announcements. Actual results may differ materially from these preliminary results as a result of the completion of quarter-end closing procedures, final adjustments, and other developments arising between now and the time the results are finalized, and such changes could be material. In addition, these preliminary results are not a comprehensive statement of the company's financial results for the quarter-ended September 30, 2024, should not be viewed as a substitute for full financial statements prepared in accordance were generally accepted accounting principles and are not necessarily indicative of the company's results for any future period. Please note that the accounting requirements for reporting the S&W Australia business going forward will be classified as a discontinued operation upon entry into VA on July 24, 2024. Accordingly, the company's preliminary consolidated financial information for all periods presented reflect the S&W Australia business as a discontinued operation. Finally, 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. The operator indicated an audio recording and webcast replay for today's conference call will also be available online and 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, please proceed.

Hey, 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 the call this morning, I will first touch at the high-level on an update of the VA process with our Australian entity. With this process nearing completion, I will then provide an overview of the Go Forward S&W, which consists primarily of our U.S.-based operations, including our industry-leading sorghum trade portfolio with Double Team and Presic Acid Free Sorghum Solutions, along with our BBO joint venture with Shell. Finally, Vanessa will provide a detailed review of the financials, including our fiscal 25 guidance. We will then look to take any questions that you might have at the end of the call. Taking a step back, as most of you that have followed SNW for the past few years are aware, SNW America's operations, which includes our sorghum operations led by our double team traded technology solution, as well as alfalfa primarily in the US and the broader Americas, have contributed solid revenue growth and increasing gross margins over the past year. For example, Double Team grew 68% last year from $6.5 million in fiscal 2023 to $10.9 million last year and contributed gross margins of approximately 70%. Conversely, our Australia-based operations have experienced ongoing challenges in the current market environment. During fiscal 2024, total Australia domestic and Australia international revenue went from 43.6 million to 29.1 million, a decline of more than $14 million or 33%. As recently as a few months ago, these challenges were amplified by 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 SNW Australia would be unable to meet its debt obligations. On July 24, 2024, our subsidiary, SNW Australia PTY, had entered voluntary administration, or VA. VA is a process designed to assess a company's financial situation and operations and explore options to provide a better return for creditors. As we mentioned in our 2024 earnings call, we expect the conclusion of the VA to occur here in November. Soon thereafter, we will provide the details of the VA resolution through a press release and 8K. I can say this process has resulted in providing the resources needed to create a going concern for all entities. Once VA is completed, S&W will be exclusively focused on its core U.S.-based operations, which, as I mentioned a moment ago, is led by our high-growth, high-margin sorghum trade portfolio led by Double Team entering its fourth year of sales, with trade adoption planted on 10% of U.S. grain sorghum acres in 2024. along with planned launches in motion for DT2 and prussic acid-free sorghum solutions. As I have stated in the past, the enthusiasm of growers towards Double Team is extremely high. In 2024, we estimate Double Team was planted on approximately 10% of all sorghum acres in the United States, up from approximately 6% in 2023. As we look to next year, our expectations are that Double Team will be on 12% to 14%, of grain sorghum acres. Vanessa will get into the guidance in more detail, but our expectation is that Double Team will be more than a third of our revenue this year, as total revenue in the future continues to shift more towards our robust sorghum technology portfolio, including product line 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. With this earnings call coming less than three weeks after our year-end call, without going into the same level of details I did on that call, let me just remind everybody on the key initiatives we have in place to drive our broader sorghum technology business going forward and expand our profitability. First, we continue to build a robust commercial infrastructure to drive continued market share adoption going forward. Today we are working with S&W Sorghum Partners brand seed as well as over 15 independent seed companies in the U.S. market have signed on to an in-license of our sorghum traits providing their grower customers the benefits of S&W sorghum traits in their seed brands. Second, 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 goods, including production, and then report gross sales as grower point of sales. We believe this model will contribute to continued market penetration growth. Third, we have adjusted our sales and marketing efforts to ensure S&W is supporting all seed brands representing our technologies in the market. This includes focusing our organization on activities that support all seed companies' success with S&W's sorghum traits. With their customers to contribute to this, we have realigned the S&W sales organization's job focus as well as job titles to S&W technology reps. Fourth, we're making great progress with our global partners, completing chemistry trials and registrations in key global sorghum markets, as well as licensing agreements with global sorghum independent seed brands. Fifth, 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. Sixth, we continue expanding our focus on sorghum through the launch of DT2 and prussic acid-free trait this year. As a reminder, DT2 will allow a broader application window to growers to control grassy weeds in their sorghum crop through an over-the-top application. And prussic acid-free sorghum is designed to remove naturally toxic metabolites from stressed sorghum for safe, worry-free grazing and hay. This will also lead way to the introduction of our first stack trait by combining double-team and prussic acid-free into a single-seed option, which continues to add value to farmers' sorghum production acres. High-value trait solutions will be the key driver for S&W's long-term success as we are becoming the key technology provider in sorghum. As we look to the future, we will continue selling other forage solutions beyond sorghum in the near term. In the Americas, we had about $10 million sales in forages last year, and that number will be relatively the same this year, perhaps down about $1 million or so. As a reminder, this is primarily dormant alfalfa seeds sold in the US and non-dormant alfalfa seeds sold in Latin America. This business will continue going forward as part of SNW. During the first quarter, we also had approximately 5 million of forage sold internationally, including about 4 million through our U.S. operations into the international markets, and 1 million that occurred in the 24 days prior to the entry of the VA that went through Australia. As we look at the go-forward SNW and Australia-related sales of alfalfa, will no longer be part of our consolidated sales. And it is unknown whether the sales into the international markets from the US will continue given the transfer of assets into the VA. Vanessa will expand upon this as she relates our guidance. Finally, when we think about the new go forward S&W, everything related to our biofuel joint venture with Shell remains exactly the same with us maintaining a 34% minority interest. This partnership is focused on development of camelina and other oilseed species, from which oil and meal can be extracted for future processing into animal feed, biofuels, and other bio products. This fall, VBO will be demonstrating camelina seed to farmers, which carries resistance to glufosinate herbicide, an effective broad-spectrum, over-the-top weed control system Let me turn the call over to Vanessa for a few detailed reviews of the financials, including our outlook and guidance for the upcoming year. I will then provide some brief closing comments and turn it over for any questions. Vanessa?