Longmont, Colorado, USA
February 11, 2021
S&W Seed Company (Nasdaq: SANW) today announced financial results for the second quarter of fiscal year 2021 ended December 31, 2020. The Company also announced it is increasing its Core Revenue and total revenue outlook for fiscal 2021.
"We believe the second half of our fiscal 2021, which runs from January through June, is setting up to be strong, driven by both improved macro agricultural trends and company-specific initiatives that have the potential to transform S&W for years to come," commented Mark Wong, President & CEO of S&W Seed Company. "With the backdrop of agricultural commodities near seven-year highs, we remain on track to commercialize this spring our first ever proprietary seed trait technology product, a non-GMO herbicide tolerant sorghum, that we believe is expected to have the highest value of any commercial sorghum trait currently in the market. This launch is expected to position S&W as the only completely integrated agricultural seed company with trait technology products for a middle market crop. As we move forward, our goal is to replicate the business model applied by the larger integrated seed companies in leading acreage crops such as corn and soybeans, but focus on middle market acreage opportunities such as sorghum, alfalfa and sunflower which have had minimal tech investment by the industry over the years. We believe we are well positioned to take advantage of one of the next big opportunities in agriculture and are pleased by the continued execution of the strategy we laid out three years ago."
Financial Results
Core Revenue (which we define as total revenue, excluding product revenue attributable to Pioneer) for the second quarter of fiscal 2021 was $11.0 million, compared to Core Revenue for the second quarter of fiscal 2020 of $9.2 million, an increase of approximately 20%.
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. The increase in Core Revenue for the second quarter of fiscal 2021 can be primarily attributed to Pasture Genetics, which the Company acquired on February 24, 2020.
Total revenue for the second quarter of fiscal 2021 was $15.1 million, compared to total revenue for the second quarter of fiscal 2020 of $12.4 million. For the second quarter of fiscal 2021, S&W recorded product revenue from Pioneer of $4.1 million, compared to $3.1 million in the second quarter of fiscal 2020.
GAAP gross margins during the second quarter of fiscal 2021 were 13.5% compared to GAAP gross margins of 17.7% in the second quarter of fiscal 2020. Adjusted gross margins, excluding the impact of inventory write-downs (see Table A1), were 13.8% in the second quarter of fiscal 2021 compared to 21.6% in the second quarter of fiscal 2020. The results for the second quarter reflect the seasonality of the business which consists primarily of lower margin alfalfa seed sales. The decrease from the second quarter of the prior year is primarily due to increased strategic lower margin alfalfa sales into certain regions to gain market share and targeted low margin sales to clear excess alfalfa inventory, coupled with the absence of certain higher margin product sales which shifted from the second quarter to the third quarter of fiscal 2021.
GAAP operating expenses for the second quarter of fiscal 2021 were $9.4 million, compared to $8.1 million in the second quarter of fiscal 2020. The increase in operating expenses for the second quarter of fiscal 2021 can be attributed to additional expenses from the acquisition of Pasture Genetics, and additional investments in S&W's sales and marketing and research and development functions.
GAAP net loss for the second quarter of fiscal 2021 was $(8.5) million, or $(0.25) per basic and diluted share, compared to GAAP net loss of $(6.7) million, or $(0.20) per basic and diluted share, in the second quarter of fiscal 2020.
Adjusted net loss (see Table A3) for the second quarter of fiscal 2021 was $(7.9) million, or $(0.23) per basic and diluted share, excluding change in contingent consideration obligation, and interest expense – amortization of debt discount. Adjusted net loss (see Table A3) for the second quarter of fiscal 2020, excluding transaction costs, change in estimated value of assets held for sale, loss on extinguishment of debt, and interest expense – amortization of debt discount, was $(6.2) million, or $(0.19) per basic and diluted share.
Adjusted EBITDA (see Table B) for the second quarter of fiscal 2021 was $(5.5) million, compared to adjusted EBITDA of $(4.2) million in the second quarter of fiscal 2020.
Fiscal 2021 Revenue Guidance
S&W is increasing its previously issued guidance for Core Revenue and total revenue for fiscal 2021.
S&W now expects fiscal 2021 Core Revenue to be within a range of $78 to $81 million, representing an expected increase of 30% to 35% compared to fiscal 2020 Core Revenue of $59.9 million.
Including contributions from Pioneer, S&W now expects total revenue for fiscal 2021 to be within a range of $92.5 to $95.5 million.
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