SANW
$3.05
S&W Seed
$.04
1.33%
Earnings Details
1st Quarter September 2021
Thursday, November 11, 2021 8:00:00 AM
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Summary

S&W Seed Reaffirms

S&W Seed (SANW) reported a 1st Quarter September 2021 loss of $0.17 per share on revenue of $15.5 million. The consensus estimate was a loss of $0.16 per share on revenue of $13.5 million. Revenue grew 12.1% on a year-over-year basis.

The company said it continues to expect fiscal 2022 revenue of $80.0 million to $85.0 million. The current consensus revenue estimate is $82.25 million for the year ending June 30, 2022.

S&W Seed Co is engaged in breeding, growing, processing and selling of alfalfa seed. It also offers seed cleaning and processing for other seed manufacturers. Its products include Alfalfa seed varieties and Stevia.

Results
Reported Earnings
($0.17)
Earnings Whisper
-
Consensus Estimate
($0.16)
Reported Revenue
$15.5 Mil
Revenue Estimate
$13.5 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

S&W Announces First Quarter Fiscal 2022 Financial Results

LONGMONT, Colo., Nov. 11, 2021 /PRNewswire/ -- S&W Seed Company (Nasdaq: SANW) today announced financial results for first quarter of fiscal year 2022 ended September 30, 2021.

"The various strategic initiatives we are implementing to improve operating results were highlighted during the first quarter of fiscal 2022, as we reported core revenue growth of 26% and strong improvements in gross margins," commented Mark Wong, President & CEO of S&W Seed Company. "These initiatives, which include price increases on the majority of our products, modification of the terms and conditions of standard customer contracts to address the volatility and increased costs of freight and transportation, and improved logistical and supply chain management are expected to show continued improvement in operating results going forward."

Wong continued, "Overall, we are seeing strong demand for our products, including our next generation non-GMO herbicide tolerant sorghum solution, Double Team, which saw excellent field results during the last several months. Due to the positive reception by targeted customers, we have maximized commercial seed production of our Double Team solution this fall in preparation for the spring selling season to address the expected growing demand for the product. Additionally, our product development efforts are advancing, with progress made on our stevia pilot production program with Ingredion, as well as our Improved Quality Alfalfa (IQ™) and Dhurrin Free Sorghum (DF) programs. We are excited to have started fiscal 2022 off on strong footing and remain focused on operational execution against our strategic plan to evolve S&W into an integrated agricultural seed technology company."

Financial Results

Core Revenue (which we define as total revenue, excluding product revenue attributable to Pioneer) for first quarter of fiscal 2022 was $15.5 million, compared to Core Revenue for the first quarter of fiscal 2020 of $12.2 million, an increase of $3.3 million or 27.0%. Due to continued logistical challenges, approximately $5.0 million of revenue that the Company originally expected to recognize in the fourth quarter of fiscal 2021 was instead recognized in the first quarter of fiscal 2022.

As announced in May 2019, S&W entered into a termination agreement and an alfalfa license agreement with Pioneer Hi-Bred International, a subsidiary of Corteva Agriscience, to replace its prior alfalfa distribution agreement with Pioneer. Due to these agreements with Pioneer, S&W plans to disclose Core Revenue as a metric to track performance of its business on a go-forward basis until product revenue attributable to Pioneer is no longer reflected in comparisons between fiscal periods. The increase in Core Revenue for the first quarter of fiscal 2022 can be primarily attributed to growth in the Middle East, North Africa and Australia regions.

Total revenue for the first quarter of fiscal 2022 was $15.5 million, compared to total revenue for first quarter of fiscal 2021 of $13.9 million, an increase of 11.5%. As of March 31, 2021, we had fully recorded all revenue from Pioneer under the May 2019 agreement. During the three months ended September 30, 2021 we recorded no sales to Pioneer, compared to $1.6 million for the three months ended September 30, 2020.

GAAP gross margins during the first quarter of fiscal 2022 were 20.1% compared to GAAP gross margins of 12.9% in first quarter of fiscal 2021. Adjusted gross margins, excluding the impact of inventory write-downs (see Table A1), were 22.1% in first quarter of fiscal 2022 compared to 19.4% in first quarter of fiscal 2021.

GAAP operating expenses for first quarter of fiscal 2022 were $8.9 million, compared to $8.1 million in first quarter of fiscal 2021. The increase in operating expenses for first quarter of fiscal 2022 can primarily be attributed to a $0.7 million increase in employee related expenses.

GAAP net loss for first quarter of fiscal 2022 was $(6.4) million, or $(0.17) per basic and diluted share, compared to GAAP net loss of $(7.2) million, or $(0.21) per basic and diluted share, in first quarter of fiscal 2021.

Adjusted net loss (see Table A2) for first quarter of fiscal 2022 was $(6.3) million, or $(0.17) per basic and diluted share, excluding change in contingent consideration obligation and interest expense – amortization of debt discount. Adjusted net loss (see Table A2) for first quarter of fiscal 2021, excluding transaction costs, change in contingent consideration and interest expense – amortization of debt discount, was $(6.9) million, or $(0.21) per basic and diluted share.

Adjusted EBITDA (see Table B) for first quarter of fiscal 2022 was $(4.0) million, compared to adjusted EBITDA of $(4.6) million in first quarter of fiscal 2021.

Fiscal 2022 Revenue Guidance

S&W expects fiscal 2022 Core and Total Revenue to be within a range of $80 to $85 million, representing an expected increase of approximately 15% to 20% compared to fiscal 2021 Core Revenue of $69.8 million.

Conference Call

S&W Seed Company has scheduled a conference call for Thursday, November 11, 2021, at 11:00 am ET (8:00 am PT) to review these results. Interested parties can access the conference call by dialing (844) 861-5498 or (412) 317-6580 or can listen via a live Internet webcast, which is available in the Investor Relations section of the Company's website at http://www.swseedco.com/investors. A teleconference replay of the call will be available for three days at (877) 344-7529 or (412) 317-0088, confirmation #10161461. A webcast replay will be available in the Investor Relations section of the Company's website at http://www.swseedco.com/investors for 30 days.

Non-GAAP Financial Measures

In addition to financial results reported in accordance with accounting principles generally accepted in the United States of America ("GAAP"), we have provided the following non-GAAP financial measures in this release and the accompanying tables: adjusted gross margins; adjusted net loss; adjusted net loss per share; and adjusted EBITDA. We use these non-GAAP financial measures internally to facilitate period-to-period comparisons and analysis of our operating performance and liquidity, and believe they are useful to investors as a supplement to GAAP measures in analyzing, trending and benchmarking the performance and value of our business. However, these measures are not intended to be a substitute for those reported in accordance with GAAP. These measures may be different from non-GAAP financial measures used by other companies, even when similar terms are used to identify such measures.

For reconciliations of historical non-GAAP financial measures to the most comparable financial measures under GAAP, see Tables A and B accompanying this release.

In order to calculate these non-GAAP financial measures, we make targeted adjustments to certain GAAP financial line items found on our Consolidated Statement of Operations, backing out non-recurring or unique items or items that we believe otherwise distort the underlying results and trends of the ongoing business. We have excluded the following items from one or more of our non-GAAP financial measures for the periods presented:

Selling, general and administrative expenses; operating expenses. We exclude from operating expenses a portion of SG&A expense related to non-recurring transaction expenses related to acquisitions. Such acquisition-related expenses include non-recurring transaction fees, due diligence costs and other direct costs associated with our acquisitions. These amounts are unrelated to our core performance during any particular period and are impacted by the timing of the acquisition. We exclude acquisition-related expenses from our SG&A expense and total operating expenses to provide investors a method to compare our operating results to prior periods and to peer companies, as such amounts can vary significantly based on the frequency of acquisitions and the magnitude of acquisition expenses.

Change in contingent consideration obligation.  The change in contingent consideration obligation represents our estimated change in the value of contingent earn-out related to the February 2020 acquisition of Pasture Genetics.  These amounts are non-cash and are unrelated to our core performance during any particular period. We believe it is useful to exclude these amounts in order to better understand our business performance and allow investors to compare our results with peer companies.

Interest expense – amortization of debt discount.  Amortization of debt discount and debt issuance costs are primarily related to our working capital lines of credit and term loans. These amounts are non-cash charges and are unrelated to our core performance during any particular period. We believe it is useful to exclude these amounts in order to better understand our business performance and allow investors to compare our results with peer companies.

Non-GAAP Tax Rate.  The estimated non-GAAP effective tax rate adjusts the tax effect to quantify the tax consequences of the excluded non-GAAP items.

Descriptions of the non-GAAP financial measures included in this release and the accompanying tables are as follows:

Adjusted gross margins.  We define adjusted gross margins as gross margins, adjusted to exclude the impact of inventory write-downs. We believe that the use of adjusted gross margins is useful to investors and other users of our financial statements in evaluating our operating performance because it provides a method to compare our operating results to prior periods and to peer companies after making adjustments for amounts that can vary significantly from period to period.

Adjusted net loss and loss per share.  We define non-GAAP net loss as net loss less non-recurring transaction costs, change in contingent consideration obligation and interest expense - amortization of debt discount.  However, in order to provide a complete picture of our recurring core business operating results, we also exclude from non-GAAP net loss the tax effects of these adjustments. We used an estimated Non-GAAP Tax Rate that we believe would be applied had our income approximated the non-GAAP net loss for the presented periods. We caution investors that the tax effects of these adjustments are based on management's estimates. We believe that these non-GAAP financial measures provide useful supplemental information for evaluating our operating performance.

Adjusted EBITDA. We define Adjusted EBITDA as GAAP net loss, adjusted to exclude non-recurring transaction costs from SG&A, depreciation and amortization, non-cash stock-based compensation, foreign currency (gain) loss, change in contingent consideration obligation, interest expense – amortization of debt discount, interest expense, and provision for income taxes. We believe that the use of adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. We use adjusted EBITDA in conjunction with traditional GAAP operating performance measures as part of our overall assessment of our performance, for planning purposes, including the preparation of our annual operating budget, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance. Management does not place undue reliance on adjusted EBITDA as its only measure of operating performance. Adjusted EBITDA should not be considered as a substitute for other measures of financial performance reported in accordance with GAAP.

About S&W Seed Company

Founded in 1980, S&W Seed Company is a global agricultural company headquartered in Longmont, Colorado. S&W's vision is to be the world's preferred proprietary seed company which supplies a range of forage and specialty crop products that supports the growing global demand for animal proteins and healthier consumer diets. S&W is a global leader in proprietary alfalfa and sorghum seeds, with significant research and development, production and distribution capabilities. S&W's product portfolio also includes hybrid sunflower and wheat and the company is utilizing its research and breeding expertise to develop and produce stevia, the all-natural, zero calorie sweetener for the food and beverage industry. For more information, please visit www.swseedco.com.

Safe Harbor Statement

This release contains "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." Forward-looking statements in this release include, but are not limited to: expected improvement in operating results due to our recently implemented strategic initiatives; anticipated demand for Double Team; our guidance on Core Revenue for the fiscal year ending June 30, 2022; and our plans for the advancement of our business strategy.  You 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 effects of the COVID-19 pandemic on our business and operations; risks related to our need to raise additional capital in the future and our ability to continue as a "going concern"; changes in market conditions, including any unexpected decline in commodity prices, may harm our results of operations and revenue outlook; our proprietary seed trait technology products may not yield their anticipated benefits; changes in the competitive landscape and the introduction of competitive products may negatively impact our results of operations; our business strategic initiatives may not achieve the expected results; previously experienced logistical challenges in shipping and transportation of our products may become amplified and further decrease our gross margins; and the risks associated with our ability to successfully optimize and commercialize our business. These and other risks are identified in our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report on Form 10-K for the year ended June 30, 2021 and in other filings subsequently made by the Company with the Securities and Exchange Commission. All forward-looking statements contained in this press release speak only as of the date on which they were made and are based on management's assumptions and estimates as of such date. We do not undertake any obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events or otherwise.

S&W SEED COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED) 



Three Months Ended




September 30,




2021




2020


Revenue


$

15,531,682




$

13,855,386


Cost of revenue



12,405,012





12,074,454


Gross profit



3,126,670





1,780,932


Operating expenses










Selling, general and administrative expenses



5,587,635





4,684,744


Research and development expenses



1,995,128





2,016,686


Depreciation and amortization



1,331,045





1,378,088


Gain on disposal of property, plant and equipment



(18,067)





(1,000)


Total operating expenses



8,895,741





8,078,518


Loss from operations



(5,769,071)





(6,297,586)


Other expense










Foreign currency loss



162,545





99,217


Change in contingent consideration obligation



(62,254)





104,821


Interest expense - amortization of debt discount



192,195





110,136


Interest expense



518,486





572,283


Loss before income taxes



(6,580,043)





(7,184,043)


Provision for income taxes



(165,802)





1,833


Net loss


$

(6,414,241)




$

(7,185,876)


Net loss attributed to noncontrolling interests



(14,266)





(13,116)


Net loss attributable to S&W Seed Company


$

(6,399,975)




$

(7,172,760)












Net loss attributable to S&W Seed Company per common share:










Basic


$

(0.17)




$

(0.21)


Diluted


$

(0.17)




$

(0.21)


Weighted average number of common shares outstanding:










Basic



36,773,864





33,450,569


Diluted



36,773,864





33,450,569


 

TABLE A1









S&W SEED COMPANY


ITEMIZED RECONCILIATION BETWEEN GROSS PROFIT AND NON-GAAP ADJUSTED GROSS PROFIT


(UNAUDITED)













Three Months Ended




September 30,




2021



2020


Gross profit


$

3,126,670



$

1,780,932











Inventory write-downs



307,000




908,497











Non-GAAP adjusted gross profit


$

3,433,670



$

2,689,429











Non-GAAP adjusted gross margin



22.1

%



19.4

%

 

TABLE A2









S&W SEED COMPANY


ITEMIZED RECONCILIATION BETWEEN NET LOSS AND NON-GAAP ADJUSTED NET LOSS


(UNAUDITED)













Three Months Ended




September 30,




2021



2020


Net loss attributable to S&W Seed Company


$

(6,399,975)



$

(7,172,760)











Non-recurring transaction costs



-




20,000











Change in contingent consideration obligation



(62,254)




104,821











Interest expense - amortization of debt discount



192,195




110,136











Non-GAAP adjusted net loss


$

(6,270,034)



$

(6,937,803)











Non-GAAP adjusted net loss attributable to S&W Seed Company per common share:









Basic


$

(0.17)



$

(0.21)


Diluted


$

(0.17)



$

(0.21)


Weighted average number of common shares outstanding:









Basic



36,773,864




33,450,569


Diluted



36,773,864




33,450,569











 



S&W SEED COMPANY

ITEMIZED RECONCILIATION BETWEEN NET LOSS AND NON-GAAP ADJUSTED EBITDA

(UNAUDITED) 




Three Months Ended




September 30,




2021



2020



Net loss attributed to S&W Seed Company


$


(6,399,975)




(7,172,760)














Non-recurring transaction costs




-




20,000














Non-cash stock-based compensation




394,312




320,409














Depreciation and amortization




1,331,045




1,378,088














Foreign currency loss




162,545




99,217














Change in contingent consideration obligation




(62,254)




104,821














Interest expense - amortization of debt discount




192,195




110,136














Interest expense




518,486




572,283














Provision for income taxes




(165,802)




1,833














Non-GAAP adjusted EBITDA


$


(4,029,448)




(4,565,973)














 

S&W SEED COMPANY

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)




September 30, 2021




June 30, 2021


ASSETS






















CURRENT ASSETS











Cash and cash equivalents


$


1,894,727



$


3,527,937


Accounts receivable, net




22,247,866





19,389,213


Inventories, net




63,270,451





63,395,256


Prepaid expenses and other current assets




1,550,732





1,555,530


TOTAL CURRENT ASSETS




88,963,776





87,867,936


Property, plant and equipment, net




17,500,733





17,740,974


Intangibles, net




36,207,261





37,130,942


Goodwill




1,586,212





1,651,634


Other assets




7,129,149





7,079,490


TOTAL ASSETS


$


151,387,131



$


151,470,976


LIABILITIES AND STOCKHOLDERS' EQUITY











CURRENT LIABILITIES











Accounts payable


$


17,460,233



$


15,947,918


Deferred revenue




706,285





385,328


Accrued expenses and other current liabilities




9,726,059





9,134,869


Lines of credit, net




38,463,464





33,946,565


Current portion of long-term debt, net




8,420,259





1,681,166


TOTAL CURRENT LIABILITIES




74,776,300





61,095,846


Long-term debt, net, less current portion




4,407,195





11,590,500


Contingent consideration obligation




650,970





741,552


Other non-current liabilities




3,678,763





3,649,885


TOTAL LIABILITIES




83,513,228





77,077,783


STOCKHOLDERS' EQUITY











Preferred stock, $0.001 par value; 5,000,000 shares authorized;
   no shares issued and outstanding









Common stock, $0.001 par value; 75,000,000 shares authorized;
   36,802,094 issued and 36,777,094 outstanding at September 30, 2021;
   36,772,983 issued and 36,747,983 outstanding at June 30, 2021;




36,802





36,773


Treasury stock, at cost, 25,000 shares




(134,196)





(134,196)


Additional paid-in capital




150,040,406





149,684,357


Accumulated deficit




(75,711,884)





(69,311,909)


Accumulated other comprehensive loss




(6,311,953)





(5,850,826)


Noncontrolling interests




(45,272)





(31,006)


TOTAL STOCKHOLDERS' EQUITY




67,873,903





74,393,193


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$


151,387,131



$


151,470,976


 

S&W SEED COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED) 




Three Months Ended





September 30,





2021




2020


CASH FLOWS FROM OPERATING ACTIVITIES











     Net loss


$


(6,414,241)



$


(7,185,876)


     Adjustments to reconcile net loss from operating activities to net











        cash used in operating activities











        Stock-based compensation




394,312





320,409


        Change in allowance for doubtful accounts




97,028





35,435


        Inventory write-down




307,000





908,497


        Depreciation and amortization




1,331,045





1,378,088


        Gain on disposal of property, plant and equipment




(18,067)





(1,000)


        Change in foreign exchange contracts




235,912





(7,615)


        Change in contingent consideration obligation




(62,254)





104,821


        Amortization of debt discount




192,195





110,136


       Changes in:




-





-


           Accounts receivable




(3,247,001)





(957,486)


            Inventories




(1,040,417)





(3,103,060)


            Prepaid expenses and other current assets




(17,504)





69,035


            Other non-current asset




(17,800)





53,916


            Accounts payable




1,949,750





4,046,160


            Deferred revenue




324,688





2,099,161


            Accrued expenses and other current liabilities




566,298





(1,262,195)


            Other non-current liabilities




(65,426)





(80,409)


                Net cash used in operating activities




(5,484,482)





(3,471,983)


CASH FLOWS FROM INVESTING ACTIVITIES











    Additions to property, plant and equipment




(470,960)





(121,525)


    Proceeds from disposal of property, plant and equipment




18,313





2,000


               Net cash used in investing activities




(452,647)





(119,525)


CASH FLOWS FROM FINANCING ACTIVITIES











    Net proceeds from sale of common stock




2,481





-


 Taxes paid related to net share settlements of stock-based compensation
awards




(40,715)





(17,267)


 Borrowings and repayments on lines of credit, net




5,274,959





3,208,863


 Borrowings of long-term




150,768





-


 Debt issuance costs




(103,261)





(54,956)


 Repayments of long-term debt




(452,544)





(439,027)


               Net cash provided by financing activities




4,831,688





2,697,613


EFFECT OF EXCHANGE RATE CHANGES ON CASH




(527,769)





300,795


NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS




(1,633,210)





(593,100)


CASH AND CASH EQUIVALENTS, beginning of the period




3,527,937





4,123,094


CASH AND CASH EQUIVALENTS, end of period


$


1,894,727



$


3,529,994


 

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SOURCE S&W Seed Company