S&W Seed Company announces fiscal 2021 financial results

S&W Seed Company (Nasdaq: SANW) recently announced financial results for fiscal year 2021 ended June 30, 2021. The Company had announced preliminary fiscal 2021 financial results on August 19, 2021.

"The overall strategic plan to evolve S&W into an integrated agricultural seed technology company remains on-track, despite the logistical challenges we encountered in fiscal 2021," commented Mark Wong, President & CEO of S&W Seed Company. "We are seeing strong demand for our recently launched non-GMO herbicide tolerant sorghum solution, Double Team, which we believe provides an opportunity to not only gain sorghum market share, but also expand the size of the overall U.S. sorghum market. We also anticipate the launch of our second novel trait technology product in fiscal 2022, Improved Quality Alfalfa (IQ™), a gene-edited crop to down-regulate lignin synthesis and improve forage digestibility in ruminants. We believe these two innovative new products, coupled with improvements from our existing crop portfolio, including our recently announced stevia pilot production program with Ingredion (Nasdaq: INGR), should help to drive revenue growth in the future."

Wong continued, "We have made significant progress in overcoming the logistical challenges we experienced during fiscal 2021, having successfully shipped $5 million of product in the first quarter of fiscal 2022 that was originally expected to ship in fiscal 2021. Additionally, we have undertaken several strategic initiatives that are designed to drive improved operating results going forward, including the implementation of price increases on the majority of our products, to address overall rising costs and to more properly reflect the value of our proprietary products, and modifying the terms and conditions of standard customer contracts to address the volatility and increased costs of freight and transportation. We expect these actions to translate into improved gross and operating margins in the future."

Financial Results

Core Revenue (which we define as total revenue, excluding product revenue attributable to Pioneer) for fiscal 2021 was $69.8 million, compared to Core Revenue for fiscal 2020 of $59.9 million, an increase of $9.9 million or 16.5%. Due to continued logistical challenges, approximately $5.0 million of revenue that the Company expected to recognize in the fourth quarter of fiscal 2021 is instead expected to be recognized in the first quarter of fiscal 2022. Additionally, the Company also experienced weakness in its European sunflower program and delays in certain customer product registrations which also had an impact on the annual results.

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 fiscal 2021 can be primarily attributed to Pasture Genetics' operations in Australia, which the Company acquired on February 24, 2020.

Total revenue for fiscal 2021 was $84.0 million, compared to total revenue for fiscal 2020 of $79.6 million, an increase of 5.5%. For fiscal 2021, S&W recorded product revenue from Pioneer of $14.2 million, compared to $19.7 million in fiscal 2020. As of March 31, 2021, S&W had fully recorded all revenue from Pioneer under the May 2019 agreement.

GAAP gross margins during fiscal 2021 were 16.3% compared to GAAP gross margins of 18.8% in fiscal 2020. Adjusted gross margins, excluding the impact of inventory write-downs, were 18.0% in fiscal 2021 compared to 21.7% in fiscal 2020.

The COVID-19 pandemic had a significant negative impact on logistics, as experienced in several industries across the globe, contributing to delayed shipments to the Company's customers and also increased costs of goods sold. In particular, the Company experienced challenges in shipping product during the quarter ended June 30, 2021, due to limited availability of trucks and marine containers for product deliveries, congestion at ports, and rising shipping and transportation costs. The Company's strategy of concentrating its production to fewer, and larger facilities, became much more challenging due to these industry-wide supply chain issues.

GAAP operating expenses for fiscal 2021 were $33.9 million, compared to $33.7 million in fiscal 2020. The increase in operating expenses for fiscal 2021 can primarily be attributed to a $1.2 million increase in research and development expenses as well as additional expenses from the acquisition of Pasture Genetics, partially offset by a $1.9 million gain on the sale property, plant and equipment.

GAAP net loss for fiscal 2021 was $(19.2) million, or $(0.55) per basic and diluted share, compared to GAAP net loss of $(19.7) million, or $(0.59) per basic and diluted share, in fiscal 2020.

Adjusted net loss for fiscal 2021 was $(22.5) million, or $(0.65) per basic and diluted share, excluding non-recurring transaction costs, change in contingent consideration obligation and interest expense – amortization of debt discount. Adjusted net loss for fiscal 2020, excluding transaction costs, change in estimated value of assets held for sale, change in contingent consideration, loss on extinguishment of debt and interest expense – amortization of debt discount, was $(18.4) million, or $(0.55) per basic and diluted share.

Adjusted EBITDA for fiscal 2021 was $(13.1) million, compared to adjusted EBITDA of $(9.7) million in fiscal 2020.

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.