Longmont, Colorado, USA
May 13, 2021
S&W Seed Company (Nasdaq: SANW) today announced financial results for the third quarter of fiscal year 2021 ended March 31, 2021
"We experienced continued strong Core Revenue growth in the third quarter lead by organic growth and the recognition of a full quarter's results from our Australian-based Pasture Genetics acquisition," commented Mark Wong, President & CEO of S&W Seed Company. "As we enter our seasonally busy fourth quarter, we believe we are well-positioned to continue our momentum with the commercial launch of our first ever company-developed trait technology product, a non-GMO herbicide tolerant sorghum solution -- Double Team – which has now been commercially launched. With strong tailwinds expected from agricultural commodity prices that are near multi-year highs helping to drive farmer profitability, we are enthusiastic about the market opportunity for the remainder of this fiscal year and into fiscal 2022."
Financial Results
Core Revenue (which we define as total revenue, excluding product revenue attributable to Pioneer) for the third quarter of fiscal 2021 was $23.9 million, compared to Core Revenue for the third quarter of fiscal 2020 of $17.9 million, an increase of approximately 33.5%.
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 the third quarter of fiscal 2021 can be primarily attributed to Pasture Genetics' operations in Australia, which the Company acquired on February 24, 2020, and growth both in South Africa and Asia.
Total revenue for the third quarter of fiscal 2021 was $32.4 million, compared to total revenue for the third quarter of fiscal 2020 of $29.1 million. For the third quarter of fiscal 2021, S&W recorded product revenue from Pioneer of $8.5 million, compared to $11.2 million in the third quarter of fiscal 2020. As of March 31, 2021, S&W has fully recorded all revenue from Pioneer under its agreement announced in May 2019.
GAAP gross margins during the third quarter of fiscal 2021 were 19.1% compared to GAAP gross margins of 22.1% in the third quarter of fiscal 2020. Adjusted gross margins, excluding the impact of inventory write-downs (see Table A1), were 20.0% in the third quarter of fiscal 2021 compared to 24.1% in the third quarter of fiscal 2020.
During the three months ended March 31, 2021, the Company experienced numerous logistical challenges due to limited availability of trucks for product deliveries, congestion at the ports, and overall increases in shipping and transportation costs, which the Company attributes to the ongoing impact of the COVID-19 pandemic. The Company expects these logistical challenges to persist for the remainder of fiscal 2021 and potentially into fiscal 2022. Included in both GAAP and adjusted gross margins is approximately $0.9 million of additional freight charges due to these logistical supply chain challenges.
GAAP operating expenses for the third quarter of fiscal 2021 were $8.2 million, compared to $9.1 million in the third quarter of fiscal 2020. The decrease in operating expenses for the third quarter of fiscal 2021 can be attributed to a $1.3 million gain on the sale of the Company's Five Points, California processing facility, offset by additional expenses from the acquisition of Pasture Genetics.
GAAP net loss for the third quarter of fiscal 2021 was $(1.8) million, or $(0.05) per basic and diluted share, compared to GAAP net loss of $(3.3) million, or $(0.10) per basic and diluted share, in the third quarter of fiscal 2020.
Adjusted net loss (see Table A3) for the third quarter of fiscal 2021 was $(2.4) million, or $(0.07) 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 third quarter of fiscal 2020, excluding non-recurring transaction costs and interest expense – amortization of debt discount, was $(3.0) million, or $(0.09) per basic and diluted share.
Adjusted EBITDA (see Table B) for the third quarter of fiscal 2021 was $(0.2) million, compared to adjusted EBITDA of $(0.9) million in the third quarter of fiscal 2020.
Fiscal 2021 Revenue Guidance
S&W is reiterating its previously issued guidance for Core Revenue and total revenue for fiscal 2021.
S&W 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 expects total revenue for fiscal 2021 to be within a range of $92.5 to $95.5 million.
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