S&W Announces First Quarter Fiscal 2024 Financial Results
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Financial Highlights
- Revenue for the first quarter of fiscal 2024 was
$16.4 million , a 17.3% decrease compared to the first quarter of fiscal 2023. Double TeamTM sorghum revenue was$0.5 million in the first quarter of fiscal 2024 compared to$0.0 million in the first quarter of fiscal 2023. - GAAP gross profit margin for the first quarter of fiscal 2024 was 30.5%, an improvement from 22.7% in the first quarter of fiscal 2023.
- Operating expenses were
$7.9 million for the first quarter of fiscal 2024, which is consistent with operating expenses for the first quarter of fiscal 2023. - GAAP net loss was
($6.0) million , or ($0.14 ) per basic and diluted share, for the first quarter of fiscal 2024 compared to a GAAP net loss of($4.5) million , or ($0.11 ) per basic and diluted share, for the first quarter of fiscal 2023. - Adjusted EBITDA (see Table B) improved by
$0.2 million to($1.4) million for the first quarter of fiscal 2024 compared to($1.6) million for the first quarter of fiscal 2023.
Recent Highlights
- In
July 2023 , seed industry veteranMark Herrmann was appointed as Chief Executive Officer, or CEO, following the planned retirement of its previous CEO,Mark Wong , who remains on the Board.
Management Discussion
"We have made good progress during the first quarter instituting key operational initiatives to drive the business towards profitability in the near-term, including improved life cycle management to reduce obsolescence costs; the rationalization of certain low margin forage product lines and seed treatments; suspension of our stevia development program; and an overall seed manufacturing cost reduction plan," commented S&W's recently appointed CEO,
"Beyond our focus on operational excellence to align S&W with best-in-class seed industry standards, we are making continued developmental progress to build off the momentum of our first trait technology solution – Double Team Grain Sorghum. We are planning to introduce our Double Team Forage Sorghum solution and Prussic Acid Free Trait for sorghum in fiscal 2024, with full commercial launch slated for the following year. Prussic Acid Free will initially be introduced as a solo trait and then shortly thereafter it is expected to be provided as a stacked trait with Double Team. We are also developing a second-generation post grass herbicide trait which we plan to launch in 2025 and are in discovery stage for an insect tolerance/resistance trait, and broad-spectrum herbicide trait as well. We are clearly becoming a key technology provider in sorghum, the 5th largest cereal crop globally, that can be used as a substitute for many grains on the market today due to its key nutrient profile and ability to handle higher temperatures and drier climates better than many other crops."
"We look forward to making continued commercial and development progress throughout fiscal 2024 with a laser focus on operating S&W with best-in-class practices, from top to bottom," Herrmann concluded.
International Operations Update
In
The Company cautions that there can be no assurance the Board's evaluation will result in a completed transaction, or any assurance as to its outcome or timing. It does not intend to disclose any developments related to the process unless and until S&W executes a definitive agreement for a particular transaction, or the Board otherwise determines that further disclosure is appropriate or required.
Financial Results
Total revenue for the first quarter of fiscal 2024 was
GAAP gross profit margin for the first quarter of fiscal 2024 was 30.5% compared to GAAP gross profit margin for the first quarter of fiscal 2023 of 22.7%. The improvement in GAAP gross profit margin was primarily driven by improved non-traited sorghum margins due to better inventory life-cycle management, improved non-dormant alfalfa margins due to pricing in the global market, and increased sales and improved margins of our high margin Double Team traited sorghum.
GAAP operating expenses for the first quarter of fiscal 2024 were
Adjusted operating expenses (see Table A1) for the first quarter of fiscal 2024 were
GAAP net loss for the first quarter of fiscal 2024 was
Adjusted net loss (see Table A2) for the first quarter of fiscal 2024 was
Adjusted EBITDA (see Table B) for the first quarter of fiscal 2024 was
Fiscal 2024 Guidance
S&W expects fiscal 2024 revenue to be within a range of
As the partnership with Shell is accounted for as an equity method investment, it is not expected to have a material impact on S&W's full-year financial results for fiscal 2024.
Conference Call
S&W Seed Company has scheduled a conference call for
Non-GAAP Financial Measures
In addition to financial results reported in accordance with accounting principles generally accepted in
For reconciliations of historical non-GAAP financial measures to the most comparable financial measures under GAAP, see Tables A1, A2, and B accompanying this release. We have not reconciled our guidance for adjusted EBITDA for fiscal 2024 to net loss because the reconciling line items that impact net loss, including interest expense, non-cash stock-based compensation, and foreign currency loss, among others, are uncertain or out of our control and cannot be reasonably predicted. The actual amount of these items during fiscal 2024 will have a significant impact on net loss. Accordingly, a reconciliation of this non-GAAP measure to its most directly comparable GAAP measure is not available without unreasonable efforts.
In order to calculate these non-GAAP financial measures, we make targeted adjustments to certain GAAP financial line items found on our condensed consolidated statement of operations, backing out non-recurring or unique 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 depreciation and amortization, non-cash stock-based compensation, and non-recurring transaction costs. We exclude non-recurring transaction costs 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.
Foreign currency loss. The foreign currency loss represents fluctuations from changes in exchange rates that are uncertain or out of our control and cannot be reasonably predicted. We believe it is useful to exclude this amount 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.
Interest expense, net. Interest expense, net primary consists of interest incurred on our working capital credit facilities, the MFP Loan, and equipment capital leases. We believe it is useful to exclude these amounts to better understand our business performance and allow investors to compare our results with peer companies.
Dividends accrued for participating securities and accretion. Dividends accrued for participating securities and accretion relates to dividends accrued for the Series B convertible preferred stock and the accretion for the discount related to the warrants issued in conjunction with the Series B convertible preferred stock. 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.
Equity in loss of equity method investee (Vision Bioenergy), net of tax. This loss represents S&W's percentage of Vision Bioenergy's loss for the three months ended
Descriptions of the non-GAAP financial measures included in this release and the accompanying tables are as follows:
Adjusted Operating Expenses. We define adjusted operating expenses as GAAP operating expenses adjusted to exclude depreciation and amortization, loss on disposal of property, plant and equipment, and one-time, non-recurring expenses. We believe that the use of adjusted operating expenses 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 depreciation and amortization and amounts that are not expected to recur.
Adjusted net loss and loss per share. We define adjusted net loss as net loss attributable to S&W Seed Company less interest expense – amortization of debt discount, non-recurring transaction costs, dividends accrued for participating securities and accretion and equity in loss of equity method investee (Vision Bioenergy), net of tax. We believe that these non-GAAP financial measures provide useful supplemental information for evaluating our operating performance.
Adjusted EBITDA. We define adjusted EBITDA as net loss attributable to S&W Seed Company adjusted to exclude interest expense, net, interest expense – amortization of debt discount, provision for (benefit from) income taxes, depreciation and amortization, non-recurring transaction costs, non-cash stock-based compensation, foreign currency loss, equity in loss of equity method investee (Vision Bioenergy), net of tax, and include dividends accrued for participating securities and accretion. 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.
Financial Tables
For a complete press release including financial tables, please view online at: https://swseedco.com/investors/press-releases/.
About S&W Seed Company
Founded in 1980, S&W Seed Company is a global multi-crop, middle-market agricultural company headquartered in
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 "ability," "believe," "may," "future," "plan," "should" or "expects." Forward-looking statements in this release include, but are not limited to: our guidance on revenue and adjusted EBITDA for the fiscal year ending
Company Contact:
S&W Seed Company
Phone: (720) 593-3570
www.swseedco.com
Investor Contact:
Lytham Partners, LLC
Phone: (602) 889-9700
[email protected]
www.lythampartners.com
S & W SEED COMPANY | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(UNAUDITED) | ||||||||
Three Months Ended | ||||||||
2023 | 2022 | |||||||
Revenue | $ | 16,432,466 | $ | 19,865,865 | ||||
Cost of revenue | 11,421,152 | 15,361,354 | ||||||
Gross profit | 5,011,314 | 4,504,511 | ||||||
Operating expenses | ||||||||
Selling, general and administrative expenses | 5,786,579 | 5,056,257 | ||||||
Research and development expenses | 1,086,512 | 1,515,380 | ||||||
Depreciation and amortization | 1,069,022 | 1,336,434 | ||||||
Gain on disposal of property, plant and equipment loss | (32,955) | (3,660) | ||||||
Total operating expenses | 7,909,158 | 7,904,411 | ||||||
Loss from operations | (2,897,844) | (3,399,900) | ||||||
Other (income) expense | ||||||||
Foreign currency loss | 372,189 | 190,915 | ||||||
Interest expense - amortization of debt discount | 455,574 | 283,643 | ||||||
Interest expense - convertible debt and other | 1,405,767 | 786,679 | ||||||
Other income | (37,560) | (44,270) | ||||||
Loss before income taxes | (5,093,814) | (4,616,867) | ||||||
Provision for (benefit from) income taxes | 1,207 | (101,664) | ||||||
Loss before equity in net earnings of affiliates | (5,095,021) | (4,515,203) | ||||||
Equity in loss of equity method investees, net of tax | 861,896 | — | ||||||
Net loss | (5,956,917) | (4,515,203) | ||||||
Loss attributable to noncontrolling interests | (7,288) | (6,262) | ||||||
Net loss attributable to S&W Seed Company | $ | (5,949,629) | $ | (4,508,941) | ||||
Calculation of net loss per share: | ||||||||
Net loss attributable to S&W Seed Company | $ | (5,949,629) | $ | (4,508,941) | ||||
Dividends accrued for participating securities and accretion | (120,045) | (114,061) | ||||||
Net loss attributable to common shareholders | $ | (6,069,674) | $ | (4,623,002) | ||||
Net loss attributable to S&W Seed Company per common share, basic and diluted | $ | (0.14) | $ | (0.11) | ||||
Weighted average number of common shares outstanding, basic and diluted | 43,009,221 | 42,604,020 | ||||||
TABLE A1 | |||||||||
S&W SEED COMPANY | |||||||||
ITEMIZED RECONCILIATION BETWEEN OPERATING EXPENSES AND NON-GAAP ADJUSTED OPERATING EXPENSES | |||||||||
(UNAUDITED) | |||||||||
Three Months Ended | |||||||||
2023 | 2022 | ||||||||
Operating expenses | $ | 7,909,158 | $ | 7,904,411 | |||||
Less: | |||||||||
Depreciation and amortization | (1,069,022) | (1,336,434) | |||||||
Non-recurring transaction costs | (162,232) | (73,493) | |||||||
Loss (gain) on disposal of property, plant and equipment | 32,955 | 3,660 | |||||||
Non-GAAP adjusted operating expenses | $ | 6,710,859 | $ | 6,498,144 | |||||
TABLE A2 | |||||||||
S&W SEED COMPANY | |||||||||
ITEMIZED RECONCILIATION BETWEEN NET LOSS AND NON-GAAP ADJUSTED NET LOSS | |||||||||
(UNAUDITED) | |||||||||
Three Months Ended | |||||||||
2023 | 2022 | ||||||||
Net loss attributable to S&W Seed Company | $ | (5,949,629) | $ | (4,508,941) | |||||
Interest expense - amortization of debt discount | 455,574 | 283,643 | |||||||
Non-recurring transaction costs | 162,232 | 73,493 | |||||||
Dividends accrued for participating securities and accretion | (120,045) | (114,061) | |||||||
Equity in loss of equity method investee (Vision Bioenergy), net of tax | 776,973 | — | |||||||
Non-GAAP adjusted net loss | $ | (4,674,895) | $ | (4,265,866) | |||||
Non-GAAP adjusted net loss attributable to | $ | (0.11) | $ | (0.10) | |||||
Weighted average number of common shares outstanding, basic and diluted | 43,009,221 | 42,604,020 | |||||||
TABLE B | |||||||||||
S&W SEED COMPANY | |||||||||||
ITEMIZED RECONCILIATION BETWEEN | |||||||||||
(UNAUDITED) | |||||||||||
Three Months Ended | |||||||||||
2023 | 2022 | ||||||||||
Net loss attributable to S&W Seed Company | $ | (5,949,629) | $ | (4,508,941) | |||||||
Interest expense, net | 1,405,767 | 742,409 | |||||||||
Interest expense - amortization of debt discount | 455,574 | 283,643 | |||||||||
Provision for (benefit from) income taxes | 1,207 | (101,664) | |||||||||
Depreciation and amortization | 1,069,022 | 1,336,434 | |||||||||
Non-recurring transaction costs | 162,232 | 73,493 | |||||||||
Non-cash stock-based compensation | 411,820 | 456,112 | |||||||||
Foreign currency loss | 372,189 | 190,915 | |||||||||
Equity in loss of equity method investee (Vision Bioenergy), net of tax | 776,973 | — | |||||||||
Dividends accrued for participating securities and accretion | (120,045) | (114,061) | |||||||||
Non-GAAP adjusted EBITDA | $ | (1,414,890) | $ | (1,641,660) | |||||||
S & W SEED COMPANY | ||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||
(UNAUDITED) | ||||||||||
As of | As of | |||||||||
ASSETS | ||||||||||
CURRENT ASSETS | ||||||||||
Cash and cash equivalents | $ | 987,422 | $ | 3,398,793 | ||||||
Accounts receivable, net | 27,945,969 | 24,622,727 | ||||||||
Notes receivable, net | 6,910,691 | 6,846,897 | ||||||||
Inventories, net | 42,941,333 | 45,098,268 | ||||||||
Prepaid expenses and other current assets | 3,359,517 | 4,099,027 | ||||||||
TOTAL CURRENT ASSETS | 82,144,932 | 84,065,712 | ||||||||
Property, plant and equipment, net | 9,769,222 | 10,082,168 | ||||||||
Intellectual property, net | 21,304,305 | 21,650,534 | ||||||||
Other Intangibles, net | 7,758,855 | 8,082,325 | ||||||||
Right of use asset - operating leases | 3,340,651 | 2,983,303 | ||||||||
Equity method investments | 22,176,338 | 23,059,705 | ||||||||
Other assets | 2,327,714 | 2,066,081 | ||||||||
TOTAL ASSETS | $ | 148,822,017 | $ | 151,989,828 | ||||||
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY | ||||||||||
CURRENT LIABILITIES | ||||||||||
Accounts payable | $ | 17,076,594 | $ | 13,312,180 | ||||||
Deferred revenue | 306,758 | 464,707 | ||||||||
Accrued expenses and other current liabilities | 10,514,049 | 8,804,456 | ||||||||
Current portion of working capital lines of credit, net | 41,593,630 | 44,900,779 | ||||||||
Current portion of long-term debt, net | 3,938,493 | 3,808,761 | ||||||||
TOTAL CURRENT LIABILITIES | 73,429,524 | 71,290,883 | ||||||||
Long-term working capital lines of credit, less current portion | — | — | ||||||||
Long-term debt, net, less current portion | 4,786,699 | 4,499,334 | ||||||||
Other non-current liabilities | 2,382,695 | 2,102,030 | ||||||||
TOTAL LIABILITIES | 80,598,918 | 77,892,247 | ||||||||
MEZZANINE EQUITY | ||||||||||
Preferred stock, and outstanding at | 5,394,193 | 5,274,148 | ||||||||
TOTAL MEZZANINE EQUITY | 5,394,193 | 5,274,148 | ||||||||
STOCKHOLDERS' EQUITY | ||||||||||
Common stock, issued and 43,022,951 outstanding at and 42,979,011 outstanding at | 43,048 | 43,004 | ||||||||
Treasury stock, at cost, 25,000 shares | (134,196) | (134,196) | ||||||||
Additional paid-in capital | 168,011,474 | 167,768,104 | ||||||||
Accumulated deficit | (98,002,482) | (91,932,808) | ||||||||
Accumulated other comprehensive loss | (7,148,770) | (6,987,791) | ||||||||
Noncontrolling interests | 59,832 | 67,120 | ||||||||
TOTAL STOCKHOLDERS' EQUITY | 62,828,906 | 68,823,433 | ||||||||
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY | $ | 148,822,017 | $ | 151,989,828 | ||||||
S & W SEED COMPANY | ||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
(UNAUDITED) | ||||||||||
Three Months Ended | ||||||||||
2023 | 2022 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
Net loss | $ | (5,956,917) | $ | (4,515,203) | ||||||
Adjustments to reconcile net loss from operating activities to net cash used in operating activities: | ||||||||||
Stock-based compensation | 411,820 | 456,112 | ||||||||
Allowance for doubtful accounts | 165,342 | (155,421) | ||||||||
Inventory write-down | 376,168 | 537,998 | ||||||||
Depreciation and amortization | 1,069,022 | 1,336,434 | ||||||||
Gain on disposal of property, plant and equipment | (32,955) | (3,660) | ||||||||
Equity in loss of equity method investees, net of tax | 861,896 | — | ||||||||
Change in deferred tax provision | 13,730 | — | ||||||||
Change in foreign exchange contracts | 64,127 | 503,985 | ||||||||
Foreign currency transactions | (329,196) | (1,294,985) | ||||||||
Amortization of debt discount | 455,574 | 283,643 | ||||||||
Accretion of note receivable | (63,738) | — | ||||||||
Changes in: | ||||||||||
Accounts receivable | (3,712,963) | (8,996,608) | ||||||||
Inventories | 1,703,845 | 3,124,383 | ||||||||
Prepaid expenses and other current assets | 574,099 | (216,080) | ||||||||
Other non-current assets | 33,551 | 72,381 | ||||||||
Accounts payable | 3,985,916 | 1,671,381 | ||||||||
Deferred revenue | (156,719) | 361,348 | ||||||||
Accrued expenses and other current liabilities | 1,291,682 | (436,714) | ||||||||
Other non-current liabilities | 40,394 | (48,989) | ||||||||
Net cash provided by (used in) operating activities | 794,678 | (7,319,995) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||
Additions to property, plant and equipment | (239,434) | (151,376) | ||||||||
Proceeds from disposal of property, plant and equipment | 92,656 | 3,660 | ||||||||
Net cash used in investing activities | (146,778) | (147,716) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
Net proceeds from sale of common stock | (153,230) | — | ||||||||
Taxes paid related to net share settlements of stock-based compensation awards | (15,176) | (8,210) | ||||||||
Borrowings and repayments on lines of credit, net | (2,860,874) | 6,750,048 | ||||||||
Borrowings of long-term debt | 201,322 | 266,734 | ||||||||
Repayments of long-term debt | (131,709) | (457,929) | ||||||||
Debt issuance costs | (140,304) | (128,879) | ||||||||
Net cash provided by (used in) financing activities | (3,099,971) | 6,421,764 | ||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 40,700 | 213,839 | ||||||||
(2,411,371) | (832,108) | |||||||||
CASH AND CASH EQUIVALENTS, beginning of the period | 3,398,793 | 2,056,508 | ||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 987,422 | $ | 1,224,400 | ||||||
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SOURCE S&W Seed Company
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