Longmont, Colorado, USA
September 28, 2022
S&W Seed Company (Nasdaq: SANW) today announced financial results for the fiscal year ended June 30, 2022.
"We remain focused on developing the key centers of value we outlined last quarter, while moving to align our cost structure to support those key centers and assessing potential value-generating transactions to drive the business towards profitability," commented Mark Wong, President & CEO of S&W Seed Company. "We continue to see strong adoption of our lead value driver Double Team™, a next generation non-GMO herbicide tolerant sorghum solution. We are maximizing our production capabilities to meet the strong farmer demand, with an expectation of significant step-ups in high-margin revenue attributable to Double Team™ during fiscal 2023 and the years to come."
"We continue to encounter logistical and operational challenges within our international forage business which again has resulted in the delay of shipments at the end of our fiscal year due to the lack of shipping containers. We continue to take proactive actions to remedy the situation, however certain macro forces remain outside our control given the tight timelines between harvest and shipment at the end of June. We believe the market for our products remains strong and expect to capture in the first quarter of fiscal 2023 the vast majority of any sales that were unable to be shipped last fiscal year."
"In connection with the strategic review we announced last quarter, we have begun executing on our detailed plan to reduce annual operating expenses by approximately $5 million, are working on a deal for our wheat operations in Australia, have rationalized our European sunflower operations, and are working on various alternative strategies for unlocking value within our U.S. forage operations. Additionally, we are pursuing various opportunities for our specialty crops that leverage the uniqueness of S&W's technology, knowhow and assets. Our goal remains to drive towards profitability and enable value creation in the years to come as we work to further grow market share and seek out high potential opportunities," Wong concluded.
Financial Results
Core Revenue (which we define as total revenue, excluding product revenue attributable to Pioneer) for fiscal 2022 was $71.4 million, compared to Core Revenue for fiscal 2021 of $69.9 million, an increase of $1.5 million or 2.1%. The increase in Core Revenue for fiscal 2022 can be primarily attributed to increased sales of alfalfa in the middle East region, partially offset by lower pasture product sales in Australia and a slight decline in service revenue for treating and packaging services.
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.
Total revenue for fiscal 2022 was $71.4 million, compared to total revenue for fiscal 2021 of $84.0 million. As of June 30, 2021, S&W had fully recorded all revenue from Pioneer under the May 2019 agreement.
GAAP gross margins during fiscal 2022 were 8.9% compared to GAAP gross margins of 16.3% in fiscal 2021. Adjusted gross margins, excluding the impact of inventory write-downs (see Table A1), were 17.8% in fiscal 2022 compared to 18.0% in fiscal 2021.
GAAP operating expenses for fiscal 2022 were $39.2 million, compared to $33.9 million in fiscal 2021. The $5.3 million increase in operating expenses for fiscal 2022 can primarily be attributed to $2.6 million increase in selling, general and administrative expenses primarily due to changes in executive leadership and other severance and $1.5 million goodwill impairment charges due to the market capitalization of the company being below book value. Further GAAP operating expenses for fiscal 2021 included the impact of a one-time $1.9 million gain on the sale of property, plant and equipment. The increase is partially offset by $0.8 million decrease in research and development expenses due to reduced investment in sunflower programs.
GAAP net loss for fiscal 2022 was $(36.4) million, or $(0.93) per basic and diluted share, compared to GAAP net loss of $(19.2) million, or $(0.55) per basic and diluted share, in fiscal 2021.
Adjusted net loss (see Table A2) for fiscal 2022 was $(34.8) million, or $(0.89) per basic and diluted share, excluding goodwill impairment charge, interest expense – amortization of debt discount, change in contingent consideration obligation and dividends accrued for participating securities and accretion. Adjusted net loss (see Table A2) for fiscal 2021, excluding change in contingent consideration obligation, interest expense – amortization of debt discount and non-recurring transaction costs, was $(22.5) million, or $(0.65) per basic and diluted share.
Adjusted EBITDA (see Table B) for fiscal 2022 was $(23.8) million, compared to adjusted EBITDA of $(13.1) million in fiscal 2021.
Fiscal 2023 Guidance
S&W expects fiscal 2023 revenue to be within a range of $80 to $92 million, representing an expected increase of 12% to 29% compared to fiscal 2022 revenue of $71.4 million. Adjusted EBITDA is expected to be in the range of $(7.0) million to $(2.0) million for fiscal 2023, compared to adjusted EBITDA of $(23.8) million in fiscal 2022.
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