Longmont, Colorado, USA
February 10, 2022
S&W Seed Company (Nasdaq: SANW) today announced financial results for the second quarter of fiscal year 2022 ended December 31, 2021.
"We are gaining increased enthusiasm for the outlook of our Double Team sorghum trait technology solution, due to both the strong demand from farmers for the product and an increase in U.S. sorghum acres being planted during the most recent season," commented Mark Wong, President & CEO of S&W Seed Company. "The USDA recently reported a 20% increase in U.S. sorghum acres planted this season over last season, which we believe is due to strong demand domestically and internationally for the water-smart, resilient climate crop. We believe the introduction of our unique non-GMO herbicide tolerant solution will continue to benefit the utilization of the crop in years to come. We are currently in the process of maximizing our seed production capabilities this upcoming season to meet the anticipated growing farmer demand."
Wong continued, "The December ending quarter was characterized by our traditional seasonality, which saw the majority of sales consisting of lower margin international alfalfa seed sales. Operationally, we remain focused on preparing for the key upcoming selling season, which we expect will consist of sales of our high margin sorghum products in the U.S., while also restructuring key elements of the company to improve our financial results going forward. We look forward to the second half of fiscal 2022 as we remain on track to achieve our previously stated revenue expectations for the year and improve overall gross margins."
Financial Results
Core Revenue (which we define as total revenue, excluding product revenue attributable to Pioneer) for the second quarter of fiscal 2022 was $12.6 million, compared to Core Revenue for the second quarter of fiscal 2021 of $11.0 million, an increase of $1.6 million or 14.5%. Due to continued logistical challenges, approximately $3.0 million of revenue that the Company originally expected to recognize in the second quarter of fiscal 2022 will instead be recognized in the third quarter of fiscal 2022.
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 for periods in which product revenue attributable to Pioneer is reflected. The increase in Core Revenue for the second quarter of fiscal 2022 can be primarily attributed to growth in the Middle East, Argentina and South Africa regions.
Total revenue for the second quarter of fiscal 2022 was $12.6 million, compared to total revenue for the second quarter of fiscal 2021 of $15.1 million. As of March 31, 2021, S&W had fully recorded all revenue from Pioneer under the May 2019 agreement. During the three months ended December 31, 2021 S&W recorded no sales to Pioneer, compared to $4.1 million for the three months ended December 31, 2020.
GAAP gross margins during the second quarter of fiscal 2022 were 13.1% compared to GAAP gross margins of 13.5% in the second quarter of fiscal 2021. Adjusted gross margins, excluding the impact of inventory write-downs (see Table A1), were 16.6% in the second quarter of fiscal 2022 compared to 13.8% in the second quarter of fiscal 2021.
GAAP operating expenses for the second quarter of fiscal 2022 were $10.6 million, compared to $9.4 million in the second quarter of fiscal 2021. The increase in operating expenses for the second quarter of fiscal 2021 can be attributed to $1.2 million increase in employee and severance related expenses.
GAAP net loss for the second quarter of fiscal 2022 was $(9.8) million, or $(0.25) per basic and diluted share, compared to GAAP net loss of $(8.5) million, or $(0.25) per basic and diluted share, in the second quarter of fiscal 2021.
Adjusted net loss (see Table A2) for the second quarter of fiscal 2022 was $(10.0) million, or $(0.26) per basic and diluted share, excluding change in contingent consideration obligation, and interest expense – amortization of debt discount. Adjusted net loss (see Table A2) for the second quarter of fiscal 2021, excluding change in contingent consideration obligation and interest expense – amortization of debt discount, was $(7.9) million, or $(0.23) per basic and diluted share.
Adjusted EBITDA (see Table B) for the second quarter of fiscal 2022 was $(6.5) million, compared to adjusted EBITDA of $(5.5) million in the second quarter of fiscal 2021.
Fiscal 2022 Revenue Guidance
S&W continues to expect fiscal 2022 Core Revenue and Total Revenue to be within a range of $80 to $85 million, representing an expected increase of 15% to 20% compared to fiscal 2021 Core Revenue of $69.8 million.
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