• Total Revenue: $18.3 million in Q3 2024, up from $17.7 million in Q3 2023.

• Double Team Revenue: $3.4 million in Q3 2024, down from $3.8 million in Q3 2023.

• International Revenue: $6.9 million in Q3 2024, down from $7.7 million in Q3 2023.

• Americas Forage Sales: $2.8 million in Q3 2024, up from $2 million in Q3 2023.

• Gross Margin: 27.4% in Q3 2024, improved from 25.1% in Q3 2023.

• Net Loss: -$5.5 million in Q3 2024, compared to net income of $32.1 million in Q3 2023.

• Adjusted EBITDA: -$1.2 million in Q3 2024, compared to -$0.4 million in Q3 2023.

• Revenue Guidance for Fiscal 2024: Adjusted to $67 million to $70 million from previous $76 million to $82 million.

• Adjusted EBITDA Guidance for Fiscal 2024: Now expected to be between -$6 million to -$8.5 million.

• Warning! GuruFocus has detected 7 Warning Signs with SANW.

Release Date: May 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Double Team technology has been successfully commercialized, expected to cover over 10% of green sorghum acres in the U.S., doubling last year's coverage.

• Revenue from Double Team is projected to be between $11.5 million to $14 million for fiscal 2024, marking an increase of 77% to 115% compared to fiscal 2023.

• Gross margins have improved significantly, with year-to-date margins at 29.2% compared to 23.2% the previous year, driven by the sorghum technology portfolio.

• S&W Seed Co has implemented several efficiency initiatives, including lifecycle management improvements and manufacturing cost reductions, which are expected to continue driving margin expansion and profitability.

• The company received a $6 million payment from Shell in February 2024, bolstering the balance sheet and covering operational cash needs for the year.

Negative Points

• Geopolitical issues in the Middle East and Northern Africa have worsened, impacting operations and leading to a forecasted revenue decrease of $6 million to $7 million from previous guidance.

• The Saudi Arabian government's new policy to conserve water has led to the discontinuation of alfalfa import permits, further affecting revenue projections.

• Supply shortages in Australia have limited the ability to meet demand, resulting in a projected revenue reduction of $3 million to $4 million in the third and fourth quarters of fiscal 2024.

• Total revenue for fiscal year 2024 has been revised down to $67 million to $70 million from the previous range of $76 million to $82 million due to international challenges.

• Adjusted EBITDA guidance for fiscal 2024 has been adjusted to a range of negative $6 million to negative $8.5 million, reflecting the impacts of international market disruptions.

Q & A Highlights

Q: Can you discuss the expected operational expenditures to support growth from the Double Team portfolio over the next few years? A: Mark Herrmann, CEO of S&W Seed Co, explained that the expansion of the Double Team portfolio would not require a significant increase in operational expenditures. The company plans to leverage its existing commercial leadership and sales organization to manage the growth efficiently. Herrmann highlighted the licensing strategy as a cost-effective way to expand, noting that S&W has already partnered with 15 independent seed companies in the U.S. to offer Double Team through their brands.

Q: What are the major variables that could influence the revenue projections for Double Team in fiscal 2024? A: CEO Mark Herrmann identified market and cropping conditions as the primary variables. Changes in the acreage of sorghum planted due to these conditions could impact the revenue from Double Team. He noted that the technology's ability to control grassy weeds might influence farmers' interest in planting sorghum.

Q: Can you provide insights into the full-year contributions from international markets affected by geopolitical issues, looking towards fiscal 2025 and beyond? A: Herrmann suggested that the current fiscal year might represent a worst-case or steady-state scenario for international markets, particularly in the MENA region. He expressed hope that there would be no further deterioration beyond what has already been forecasted for these markets.

Q: What is the status of the Trigall Genetics partnership, and what financial impacts does this have? A: Herrmann confirmed the complete exit from the Trigall Genetics joint venture, with S&W receiving $1.4 million. This exit also results in a reduction of operational expenses, contributing to the company's efforts to streamline costs and focus on high-margin, high-demand areas.

Q: What are the plans for the Camelina crop development, particularly regarding the glufosinate-resistant trait? A: Herrmann detailed that the research team is working to integrate a glufosinate-resistant trait into leading Camelina germplasm and hybrids, with commercial planting expected by 2026. This development is seen as crucial for establishing Camelina as an efficient biofuel feedstock.

Q: How is S&W managing its liquidity over the next 12 to 18 months, and what strategies are in place to address potential financial constraints? A: CFO Vanessa Baughman explained that the company's liquidity is supported by careful working capital management and operational efficiencies. Payments received from partnerships, like the $6 million from Shell, are instrumental in covering operating cash needs. Baughman emphasized ongoing efforts to streamline costs to achieve a net neutral cash position by 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.