Longmont, Colorado, USA
September 23, 2020
S&W Seed Company (Nasdaq: SANW) today announced financial results for fiscal year ended June 30, 2020.
"I am extremely pleased that we delivered Core Revenue growth of 58%, or 27% when excluding revenue from recently acquired Pasture Genetics, during fiscal 2020 which reflects the strategic transformation we have made in our operations to become a multi-crop agricultural company with enhanced focus in the United States and Australia," commented Mark Wong, President & CEO of S&W Seed Company. "Further, we made important and purposeful investments in our sales and marketing function to become a more customer-centric organization. We also made investments in our research and development functions to enhance our trait development, such as our herbicide tolerance trait for sorghum, which we believe has the potential to revolutionize the sorghum market in the same way other weed control technologies have enhanced yields for crops such as corn, soybeans and cotton. We believe we are even better-positioned to continue driving strong Core Revenue growth in fiscal 2021."
Financial Results
Core Revenue (which we define as total revenue, excluding product revenue attributable to Pioneer) for fiscal 2020 was $59.9 million, compared to Core Revenue for fiscal 2019 of $37.9 million, an increase of approximately 58%. Included in Core Revenue for fiscal 2020 was $11.8 million pertaining to a partial year contribution from Pasture Genetics, which the Company acquired on February 24, 2020. Excluding contributions from Pasture Genetics, Core Revenue growth was 27% for fiscal 2020 compared to the prior year.
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 discloses Core Revenue as a metric to track performance of its business on a go-forward basis. Other than the contribution from Pasture Genetics, the increase in Core Revenue for fiscal 2020 can be attributed to an increase in alfalfa sales in Saudi Arabia and sorghum sales in the United States as well as growth in Pakistan, Europe and South Africa.
Total revenue for fiscal 2020 was $79.6 million, compared to total revenue for fiscal 2019 of $109.7 million. Prior year revenue was comprised of $75.5 million of total product revenue and $34.2 million in licensing revenue. For fiscal 2020, S&W recorded product revenue from Pioneer of $19.7 million under the new agreements, compared to $37.6 million in fiscal 2019. The Company also recorded $11.8 million in revenue during fiscal 2020 attributable to Pasture Genetics.
GAAP gross margins during fiscal 2020 were 18.8% compared to GAAP gross margins of 37.1% in fiscal 2019. Adjusted gross margins, excluding the impact of inventory write-downs (see Table A1) were 21.7% in fiscal 2020 compared to adjusted gross margins of 20.3% in fiscal 2019 (excluding the impact of inventory write-downs and licensing revenue from Pioneer). The increase in adjusted gross margins for the year ended June 30, 2020 is primarily driven by improved gross margins in alfalfa. Adjusted gross margins reflect inventory write-downs of $2.3 million and $8.8 million in fiscal 2020 and 2019 respectively, and the recognition of $34.2 million of license revenue in fiscal 2019 pertaining to Pioneer.
GAAP operating expenses for fiscal 2020 were $33.7 million, compared to $45.7 million in fiscal 2019. Adjusted operating expenses, excluding transaction costs and goodwill and intangible asset impairment charges (see Table A2), were $32.9 million in fiscal 2020, compared to $26.4 million in fiscal 2019. The increase in adjusted operating expenses for fiscal 2020 can be attributed to additional expenses from the newly acquired Pasture Genetics operations, and additional investments in S&W's sales and marketing and research and development functions.
GAAP net loss for fiscal 2020 was $(19.7) million, or $(0.59) per basic and diluted share, compared to GAAP net loss of $(9.3) million, or $(0.31) per basic and diluted share, in fiscal 2019. The change in net loss is primarily attributable to the recognition of $34.2 million of license revenue in fiscal 2019 pertaining to Pioneer.
Adjusted non-GAAP net loss (see Table A3) for fiscal 2020 was $(18.4) million, or $(0.55) per basic and diluted share, 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. Adjusted non-GAAP net income (see Table A3) for fiscal 2019, excluding transaction costs, goodwill impairment charges, intangible asset impairment charges, reduction of anticipated loss on sub-lease land, change in estimated value of assets held for sale, loss on extinguishment of debt and interest expense – amortization of debt discount, was $11.7 million, or $0.39 per basic and diluted share. The change in Adjusted non-GAAP net income (loss) is primarily attributable to the recognition of $34.2 million of license revenue in fiscal 2019 pertaining to Pioneer.
Adjusted EBITDA (see Table B) for fiscal 2020 was $(9.7) million, compared to adjusted EBITDA of $19.2 million in fiscal 2019. The change in Adjusted EBITDA is primarily attributable to the recognition of $34.2 million of license revenue in fiscal 2019 pertaining to Pioneer.
Fiscal 2021 Revenue Guidance
S&W expects Core Revenue for fiscal 2021 to be within a range of $73 to $79 million, representing an expected increase of 22% to 32% compared to fiscal 2020 Core Revenue of $59.9 million.
Including contributions from Pioneer, S&W continues to expect total revenue for fiscal 2021 to be within a range of $88 to $94 million.
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