S&W Seed Company announces first quarter fiscal 2020 financial results
Nov. 14, 2019
"I am very pleased with the improved financial results during the first quarter as the first stage of our refined go to market strategy begins to take hold," commented Mark Wong, President & CEO of S&W Seed Company. "Core Revenue increased by approximately 36% over the first quarter of the prior year, driven by double digit growth in our alfalfa and sunflower operations, and contributions from our recently acquired sorghum operations. Further, the strategies put in place to better showcase the value attributes of our proprietary hybrids and varieties resulted in a 410 basis point improvement to gross margins, which included measurable improvement in our alfalfa operations. We believe we are well positioned to build upon these improvements throughout the remainder of fiscal 2020 and into the future."
"We plan to unveil stage two of our revamped sales and marketing initiative to customers in the coming weeks, which includes a rebranding of our U.S. alfalfa operations to Alfalfa Partners to align with our current, more-established Sorghum Partners brand, the consumer facing identity of our sorghum operations. We believe that this rebranding, coupled with enhanced sales and marketing strategies and new product introductions, should set the stage for incremental growth going forward."
Mr. Wong concluded, "Over the last two years we have transformed the infrastructure of S&W into a leading multi-crop, middle-market agricultural company with global reach. We have acquired a market-leading sorghum portfolio; restructured our alfalfa licensing agreement to significantly strengthen our balance sheet; expanded our U.S. distribution capabilities by investing in the farmer-dealer network we acquired from Chromatin; converted our sales channel into a multi-crop platform; restructured our organization to capitalize on sales synergies; and advanced next-generation trait technologies designed to enable higher-margin products in sorghum and alfalfa. With the infrastructure and improved balance sheet now in place, we are focused on driving revenue and earnings growth, as well as operational efficiencies in the business, while pursuing accretive acquisitions intended to leverage our worldwide capabilities."
Core Revenue (excluding product revenue attributable to Pioneer) for the first quarter of fiscal 2020 ended September 30, 2019 was $9.0 million, compared to Core Revenue for the first quarter of fiscal 2019 of $6.6 million, representing an increase of 36%. Due to the recent agreements with Pioneer in May 2019, S&W discloses Core Revenue as a metric to track performance of its business on a go-forward basis. The increase in Core Revenue for the three months ended September 30, 2019 can be attributed to year over year growth in the Company's alfalfa and sunflower operations, as well as $1.4 million of revenue contribution from the Company's sorghum operations which were acquired in October 2018.
Total revenue for the first quarter of fiscal 2020 was $12.3 million, compared to revenue of $26.1 million in the first quarter of fiscal 2019. 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. Under the new agreement, Pioneer paid $45.0 million to S&W in May 2019 and $5.6 million in September 2019, and S&W expects to receive an aggregate of $19.5 million in quarterly payments through February 2021. For the first quarter of fiscal 2020, S&W recorded product revenue from Pioneer of $3.3 million under the revised agreement, which was a decrease of $16.2 million from the three months ended September 30, 2018 amount of $19.5 million.
Gross margins during the first quarter of fiscal 2020 were 25.1% compared to gross margins of 20.9% in the first quarter of fiscal 2019. The improvement in gross margins is a result of strategic initiatives to drive incremental value per pound in the Company's alfalfa, sorghum and sunflower operations.
In the first quarter of fiscal 2020, adjusted operating expenses, excluding transaction costs, (see Table A1), were $7.1 million, compared to $4.3 million in the first quarter of fiscal 2019. The increase in adjusted operating expenses can be attributed to additional expenses from the newly acquired sorghum operations of Chromatin and additional investments in S&W's sales and marketing and product development functions.
GAAP net loss for the first quarter of fiscal 2020 was $(4.9) million, or $(0.15) per basic and diluted share, compared to GAAP net income of $20,931, or $0.00 per basic and diluted share, in the first quarter of fiscal 2019.
Adjusted non-GAAP net loss (see Table A1) for the first quarter of fiscal 2020 was $(4.5) million, or $(0.13) per basic and diluted share, which excluded various items including transaction costs, change in estimated value of assets held for sale, and interest expense – amortization of debt discount. Adjusted non-GAAP net income (see Table A1) for the first quarter of fiscal 2019, excluding various items including transaction costs and interest expense – amortization of debt discount, was $0.5 million, or $0.02 per basic and diluted share.
Adjusted EBITDA (see Table B) for the first quarter of fiscal 2020 was $(2.7) million, compared to adjusted EBITDA of $2.1 million in the first quarter of fiscal 2019.
Subsequent to the end of the quarter, the Company completed the sale of the land and buildings for one its research facilities located in Arlington, Wisconsin and one of its production storage facilities located in Plainview, Texas. The Company received combined net proceeds of $1.8 million, of which $0.8 million was used to pay-down its secured real estate note.
S&W expects Core Revenue (excluding revenue attributable to Pioneer) for fiscal 2020 to be within a range of $41 to $44 million, representing an expected increase of 9% to 16% compared to fiscal 2019 Core Revenue of $37.9 million.
Including contributions from Pioneer, S&W expects total revenue for fiscal 2020 to be within a range of $64 to $67 million.
For complete press release including financial tables, please view press release online at https://www.prnewswire.com/news-releases/sw-announces-first-quarter-fiscal-2020-financial-results-300957028.html.
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