S&W announces fiscal 2024 financial results

S&W Seed Company (Nasdaq: SANW) announced financial results for the fiscal year ended June 30, 2024.

Financial Highlights

• Revenue for fiscal 2024 was $60.4 million, a 17.8% decrease compared to fiscal 2023. Double Team™ sorghum revenue was $10.9 million in fiscal 2024 compared to $6.5 million in fiscal 2023.

• Gross profit margin for fiscal 2024 was 26.2%, an improvement from 19.8% in fiscal 2023.

• Gross profit dollar for fiscal 2024 was $15.8 million, an improvement of $1.3 million from $14.5 million in fiscal 2023.

• GAAP net loss was ($30.1) million, or ($13.21) per basic and diluted share, for fiscal 2024 compared to GAAP net income of $14.4 million, or $6.40 per basic share and $6.38 per diluted share, for fiscal 2023. A $38.2 million gain was recognized in fiscal 2023 related to the formation of Vision Bioenergy Oilseeds LLC, or Vision Bioenergy, a biofuel production partnership with Equilon Enterprises LLC (dba Shell Oil Products US, or Shell).

• Adjusted EBITDA (see Table B) was ($8.5) million for fiscal 2024 compared to ($9.3) million for fiscal 2023.

• Received $6.0 million payment from Shell in February 2024 as additional consideration related to the formation of Vision Bioenergy in February 2023. Received $1.0 million payment from Trigall Genetics S.A., or Trigall, in January 2024 as additional consideration related to the sale of 80% interest in Trigall Australia Pty Ltd., or Trigall Australia, a wheat development partnership, in December 2022. Received additional $0.4 million from Trigall in May 2024 for the sale of remaining 20% interest in Trigall Australia and assets used in the partnership.

Management Discussion

"Since taking over as CEO in July 2023, my focus has been to define our business strategies to optimize results centered around best-in-class operational effectiveness of our broader sorghum technology program and forage operations," commented S&W Seed Company's CEO, Mark Herrmann. "Within our Americas operations, which is led by our proprietary, high-value sorghum Double Team trait technology, we enacted a number of strategies to increase adoption of Double Team while improving operational efficiencies. This resulted in Double Team revenue increasing by 68.1% during fiscal 2024, which was a lead driver in boosting our company-wide gross margins increase of 640 basis points to 26.2% in fiscal 2024, up from 19.8% in the previous year. On a dollar basis, gross profit dollars increased to $15.8 million in fiscal 2024 compared to $14.5 million in the year ago period. Our commercial launch of Double Team has gone exceedingly well, with expectations for the proprietary, high-value sorghum trait technology to be planted on approximately 10% of all sorghum acres in the United States in 2024. As total revenue in the future continues to shift more towards our robust sorghum technology portfolio which carries gross margins in excess of 60%, including product line extensions and new technology offerings planned over the next year, we expect to see operational improvement in support of our near-term goal of profitability."

"While the Americas operations continue to improve and meet our expectations, we have experienced challenges to our international operations. As a reminder, in early 2023, we communicated that we were working on the possibility of a strategic transaction involving our international operations, headquartered in Australia. Upon further evaluation of the changes within our international commercial footprint, among other factors, we announced that one of our subsidiaries, S&W Australia, had entered Voluntary Administration, or VA, under applicable Australian law effective July 24, 2024. This decision was made after careful consideration of S&W Australia's financial position and ongoing challenges in the current market environment. These challenges include 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 S&W Australia would be unable to meet its debt obligations. VA is a process designed to assess a company's financial situation and operations and explore options to provide a better return for creditors. The VA process is expected to conclude in the fourth quarter of calendar year 2024."

"As we look to the remainder of fiscal 2025, we are laser focused on the continued growth and expansion of our Double Team operations in the Americas, while working toward resolve the VA process involving a significant portion of our international operations. We intend to provide a detailed outlook for our go forward operations as part of the release of our first quarter fiscal 2025 financial results in mid-November 2024," Herrmann concluded.

Financial Results

Total revenue for fiscal 2024 was $60.4 million compared to total revenue for fiscal 2023 of $73.5 million. The $13.1 million decrease in revenue was primarily attributable to an $11.4 million decrease in non-dormant alfalfa sales in the Middle East North Africa, or MENA, region due to the ongoing conflict in Sudan, reduced sales into Libya, and the import restrictions enacted in Saudi Arabia, a $2.8 million decrease in the Australian domestic market across all crop segments due to inventory quality and lower pricing, a $2.8 million decrease in non-traited sorghum sales in the U.S., a $1.7 million decrease in Mexico driven by decreased non-dormant alfalfa sales that were partially offset with increased grain sorghum sales, and a $1.3 million decrease in sales to Asia of alfalfa and sunflower. This was partially offset by a $4.3 million increase in Double Team sorghum revenue, a $1.7 million increase in dormant alfalfa sales in the U.S., and a $1.0 million increase in grain sorghum to South Africa.

Gross profit margin for fiscal 2024 was 26.2% compared to gross profit margin for fiscal 2023 of 19.8%. The improvement in gross profit margin was primarily driven by increased sales of higher margin Double Team sorghum and decreased sales of low margin sorghum forages and grasses. The 6.4 percentage point increase is attributed to increased sales of higher margin products including Double Team sorghum (6.3 percentage points) and improved focus on inventory management and reducing operational costs while increasing efficiencies in S&W's production facilities (3.9 percentage points), offset by decreased margin of non-dormant alfalfa driven by reduced demand in the MENA region (-3.4 percentage points) and lower volumes in the Australian domestic market (-0.4 percentage points).

GAAP operating expenses for fiscal 2024 were $33.5 million compared to GAAP operating expenses for fiscal 2023 of $32.5 million. This increase was primarily driven by a $3.5 million increase attributable to impairment charges related to intangibles offset by a $1.2 million decrease in research and development expenses, a $0.7 million decrease in selling, general and administrative expenses, a $0.5 million decrease in depreciation and amortization, and a $0.2 million decrease in (gain) loss on disposal of property, plant and equipment.

Adjusted operating expenses (see Table A1) for fiscal 2024 were $25.1 million compared to $26.4 million for fiscal 2023. The $1.3 million decrease in adjusted operating expenses for fiscal 2024 was attributed to a $1.2 million decrease in research and development expenses and a $0.1 million decrease in selling, general, and administrative expenses after excluding non-recurring transaction costs.

GAAP net loss for fiscal 2024 was ($30.1) million, or ($13.21) per basic and diluted share, compared to GAAP net income of $14.4 million, or $6.40 per basic share and $6.38 per diluted share, for fiscal 2023.

Adjusted net loss (see Table A2) for fiscal 2024 was ($21.3) million, or ($9.35) per basic and diluted share, excluding impairment charges, interest expense - amortization of debt discount, non-recurring transaction costs, dividends accrued for participating securities and accretion, loss on sale of equity investment, and equity in loss of equity method investee (Vision Bioenergy), net of tax. Adjusted net loss (see Table A2) for fiscal 2023 was ($20.3) million, or ($9.02) per basic share and ($8.98) per diluted share, excluding interest expense - amortization of debt discount, other finance expenses, non-recurring transaction costs, dividends accrued for participating securities and accretion, gain on sale of business interest, gain on sale of equity investment, and equity in loss of equity method investee (Vision Bioenergy), net of tax.

Adjusted EBITDA (see Table B) for fiscal 2024 was ($8.5) million compared to adjusted EBITDA for fiscal 2023 of ($9.3) million.

S&W Australia

S&W Australia's entry into VA constitutes an event of default and automatic acceleration of S&W Australia's obligations under its debt facilities with National Australia Bank, or NAB. However, such acceleration is stayed, or paused, while S&W Australia is under VA. The NAB debt facilities are guaranteed by S&W Seed Company, or S&W, up to a maximum of AUD $15.0 million (USD $10.0 million as of June 30, 2024). S&W's obligations under this guarantee are not subject to a stay in connection with S&W Australia's VA. S&W is working with the administrators of the VA and NAB on a resolution to the VA process. S&W Australia's entry into VA also constituted an event of default under S&W's Amended and Restated Loan and Security Agreement with CIBC Bank USA, or CIBC, because of a cross-default provision in S&W's loan agreement with CIBC that is triggered by the event of default under NAB's debt facilities. S&W obtained a waiver from CIBC on the cross-default event on July 31, 2024 and communicates frequently with CIBC on the progress of S&W's activities with the administrators of the VA and NAB throughout the VA process.

Nasdaq Listing

As previously announced, S&W received a letter from The Nasdaq Stock Market on November 14, 2023 advising S&W that for 30 consecutive trading days preceding the date of the notice, the bid price of S&W's common stock had closed below the $1.00 per share minimum required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2), or the Rule. S&W subsequently requested an extension of time to regain compliance with the Rule and submitted to Nasdaq a plan to regain compliance. On May 14, 2024, Nasdaq informed S&W that the request for extension was granted. As a result of the extension, S&W must provide evidence that it has regained compliance with the Rule by November 11, 2024.

Following a special meeting of stockholders, S&W's Board of Directors, or the Board, unanimously approved a reverse stock split of all issued and outstanding shares of the Company's common stock, at a ratio of 1-for-19, or the Reverse Stock Split. The Reverse Stock Split was implemented at 5:00 p.m. Eastern Time on October 17, 2024. The Company's common stock began trading on a split-adjusted basis commencing upon market opening on The Nasdaq Capital Market on October 18, 2024.

Fiscal 2025 Guidance

S&W anticipates providing a detailed financial outlook for fiscal 2025 in its first quarter fiscal 2025 financial results press release and related earnings call in mid-November 2024.