Fresno, California, USA
September 15, 2016
S&W Seed Company (Nasdaq: SANW) today announced financial results for the fourth quarter and fiscal year 2016 ended June 30, 2016.
Fourth Quarter Financial Highlights:
- Revenue of $34.6 million, compared to $28.7 million in the fourth quarter of fiscal 2015, an increase of 20.6%;
- Gross profit margins of 19.8%, compared to gross profit margins of 21.6% in the fourth quarter of fiscal 2015;
- Adjusted EBITDA (see Table B) of $3.5 million, compared to $3.0 million in the fourth quarter of fiscal 2015, an increase of 15.0%;
- GAAP net income of $0.3 million, compared to a net loss of $(0.3) million in the fourth quarter of fiscal 2015;
- Adjusted non-GAAP net income (see Table A-1) of $1.3 million, compared to adjusted non-GAAP net income of $0.6 million in the fourth quarter of fiscal 2015, an increase of 118.3%;
- GAAP EPS of $0.02 per diluted share for the fourth quarter of fiscal 2016, compared to a loss of $(0.02) per diluted share in the fourth quarter of fiscal 2015; and
- Adjusted Non-GAAP EPS (see Table A-1) for the fourth quarter of fiscal 2016 of $0.08 per diluted share, compared to $0.05 per diluted share in the fourth quarter of fiscal 2015.
Fiscal Year 2016 Financial Highlights:
- Revenue of $96.0 million, compared to $81.2 million in fiscal 2015, an increase of 18.3%;
- Gross profit margins of 19.1%, compared to 20.4% in fiscal 2015;
- Adjusted EBITDA (see Table B) of $6.9 million, compared to $7.5 million in fiscal 2015;
- GAAP net income of $0.4 million, compared to a net loss of $(3.2) million in fiscal 2015; and
- Adjusted non-GAAP net income (see Table A-2) of $0.4 million, or $0.03 per diluted share, compared to adjusted non-GAAP net income of $1.5 million, or $0.12 per diluted share, in fiscal 2015.
Outlook:
Based on the evaluation of information currently available to management, for the fiscal year ending June 30, 2017, S&W expects to record annual revenue of approximately $100 million, which would reflect an increase of approximately 4% over fiscal 2016.
Management Discussion
"During fiscal 2016, S&W strengthened its leadership position in the alfalfa seed segment, expanded its product offerings into two new complimentary crops, and positioned itself for growth through the expansion of contracted production acreage and newly signed licensing agreements," commented Mark Grewal, president and chief executive officer of S&W Seed Company. "By leveraging our expanded infrastructure and a strong market for our products, we believe that we are well-positioned as we move into fiscal 2017."
Matthew Szot, chief financial officer of S&W Seed Company, commented, "Gross profit margins came in stronger than expected during the fourth quarter as we accelerated our optimization program and maintained a strict pricing strategy within key alfalfa seed markets. As we look to fiscal 2017, we expect to see an improvement in gross profit margins driven by stable pricing, enhanced optimization, and decreased production costs. Our balance sheet continues to be strengthened as we pay down our convertible debt. With a balance of only $5.0 million remaining on the convertible debt through today, we expect to retire the balance over the next six months."
Mr. Grewal concluded, "Sound operational execution and favorable market conditions should allow us to benefit from our position as a global leader in the production and distribution of alfalfa seed in the coming year. We also made a strategic investment to leverage our distribution, production, and research capabilities through the addition of hybrid sorghum and sunflower to our product portfolio. We believe there are growth capabilities for both of these crops as we expand our licensee base and work with our partners to drive additional end market sales of our proprietary hybrid varieties. We believe we have a solid foundation in place to take advantage of significant global agricultural trends, and remain committed to driving value for our farming customers and shareholders alike in the coming years."
Quarterly Results
For the fourth quarter of fiscal year 2016, revenue was $34.6 million, compared to $28.7 million in the fourth quarter of fiscal 2015. The increase was primarily attributable to an increase in shipments to DuPont Pioneer.
Gross profit margins during the fourth quarter of fiscal 2016 were 19.8%, compared to gross profit margins of 21.6% in the fourth quarter of fiscal 2015. While the Company continued to be impacted by higher seed costs in the fourth quarter within the Company's non-dormant operations, driven by lower than expected yields on the 2015 alfalfa seed harvests, this margin drag is expected to subside as we look to fiscal 2017. Despite the headwinds of higher seed costs, gross profit margins were stronger than anticipated as the Company accelerated its optimization program and maintained a strict pricing strategy within key alfalfa seed markets.
Adjusted selling, general and administrative (SG&A) expenses for the fourth quarter of fiscal 2016 totaled $2.9 million, compared to adjusted SG&A of $2.5 million in the fourth quarter of fiscal 2015. The Company incurred expenses of approximately $0.2 million in the fourth quarter of fiscal 2016 pertaining to transaction expenses associated with its previously announced acquisition of SV Genetics Pty Ltd and implementing a new tax planning strategy. Total adjusted operating expenses for the fourth quarter of fiscal 2016 were $4.5 million, compared to adjusted operating expenses of $4.4 million in the fourth quarter of fiscal 2015.
GAAP net income for the fourth quarter of fiscal 2016 was $0.3 million, or $0.02 per basic and diluted share, compared to a GAAP net loss of $(0.3) million, or $(0.02) per basic and diluted share, in the fourth quarter of fiscal 2015.
Adjusted non-GAAP net income (see Table A-1) for the fourth quarter of fiscal 2016, excluding various items (transaction costs, change in derivative warrant liabilities, change in contingent consideration obligation, loss on equity method investment, and interest expense - amortization of debt discount), was $1.3 million, or $0.08 per basic and diluted share. Adjusted non-GAAP net income (see Table A-1) for the fourth quarter of fiscal 2015, excluding various items (transaction costs, change in derivative warrant liabilities, change in contingent consideration obligation and interest expense - amortization of debt discount) was $0.6 million, or $0.05 per basic and diluted share.
Adjusted EBITDA (see Table B) for the fourth quarter of fiscal 2016 was $3.5 million compared to Adjusted EBITDA of $3.0 million in the fourth quarter of fiscal 2015.
Annual Results
For fiscal year ended June 30, 2016, S&W reported record revenue of $96.0 million, compared to revenue of $81.2 million in fiscal 2015. The increase in annual revenue was primarily attributable to sales from the Company's distribution and production agreements with DuPont Pioneer, as well as increases from the Company's non-dormant seed operations.
Gross margins during fiscal 2016 were 19.1%, compared to gross margins of 20.4% in fiscal 2015. The decrease in gross profit margins is due to the impact of higher seed costs during the year within the Company's non-dormant operations, driven by lower than expected yields on the 2015 alfalfa seed harvests. This impact is expected to subside during fiscal 2017 as the Company has terminated production arrangements where its production costs are variable on a per unit basis.
GAAP net income for fiscal 2016 was $0.4 million, or $0.02 per basic and diluted share, compared to a GAAP net loss of $(3.2) million, or $(0.25) per basic and diluted share, in fiscal 2015.
Adjusted non-GAAP net income (see Table A-2) for fiscal 2016, excluding various items (non-recurring cost of revenue costs, transaction costs, change in derivative warrant liabilities, change in contingent consideration obligation, loss on equity method investment, gain on sale of marketable securities, and interest expense - amortization of debt discount), was $0.4 million, or $0.03 per basic and diluted share. Adjusted non-GAAP net income (see Table A-2) for fiscal 2015, excluding various items (non-recurring cost of revenue costs, transaction costs, impairment charges, change in contingent consideration obligation, change in derivative warrant liabilities, and interest expense - amortization of debt discount) was $1.5 million, or $0.12 per basic and diluted share.
Adjusted EBITDA (see Table B) for fiscal 2016 was $6.9 million, compared to adjusted EBITDA of $7.5 million in fiscal 2015.
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