Longmont, Colorado, USA
May 16, 2022
S&W Seed Company (Nasdaq: SANW) today announced financial results for the third quarter of fiscal year 2022 ended March 31, 2022.
"Over the last few months, S&W has undergone a strategic review of its operations and future growth opportunities to identify key centers of value, while moving to align our cost structure to support those key centers and assess other potential value generating transactions to drive the business towards profitability," commented Mark Wong, President & CEO of S&W Seed Company. "Going forward, we intend to primarily focus our efforts on three key components of value within S&W, including our U.S. sorghum operations led by Double Team, our international forage operations, and our specialty crops consisting of stevia and camelina. Additionally, we are working on various alternative strategies for unlocking value within our U.S. forage operations, which includes unique germplasm, as well as valuable research and production facilities. The culmination of this focus should position S&W to drive towards profitability and enable value creation in the years to come as we work to further grow market share and prove out high potential opportunities."
"We continue to expect the Double Team sorghum solution to be a lead value driver for us. We are currently working on maximizing our production capabilities to meet the strong demand in the market as well as potential licensing opportunities. The farmer response, shown by strong sales of the product in this first year, has been tremendous, reinforcing our vision of revolutionizing the sorghum market by introducing a first of its kind non-GMO herbicide tolerant solution."
"In connection with the strategic review, we plan to take certain steps that are expected to reduce our annual operating expenses by approximately $5 million, are exploring the possibility of combining our wheat efforts in Australia and are taking steps to rationalize our European sunflower operations. Further, during February and March 2022, we raised approximately $11.2 million through a combination of a private placement and ATM sales to help improve our balance sheet," Wong concluded.
ATM Sales and Private Placement
On February 18, 2022, S&W Seed Company entered into a Securities Purchase Agreement with MFP Partners, L.P., pursuant to which the Company sold and issued equity securities in a private placement for aggregate gross proceeds of approximately $5.0 million.
For the three months ended March 31, 2022, the Company received gross proceeds of approximately $6.2 million from the sale of 2,633,900 shares of its common stock pursuant to an At Market Issuance Sales Agreement.
Financial Results
Core Revenue (which we define as total revenue, excluding product revenue attributable to Pioneer) for the third quarter of fiscal 2022 was $23.2 million, compared to Core Revenue for the third quarter of fiscal 2021 of $23.9 million, a decrease of ($0.7) million or (2.9%).
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 decrease in Core Revenue for the third quarter of fiscal 2022 can be primarily attributed to lower sales into Australia and South Africa regions, offset by higher sales in the United States.
Total revenue for the third quarter of fiscal 2022 was $23.2 million, compared to total revenue for the third quarter of fiscal 2021 of $32.4 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 March 31, 2022, S&W recorded no sales to Pioneer, compared to $8.5 million for the three months ended March 31, 2021.
GAAP gross margins during the third quarter of fiscal 2022 were 11.7% compared to GAAP gross margins of 19.1% in the third quarter of fiscal 2021. Adjusted gross margins, excluding the impact of inventory write-downs (see Table A1), were 16.6% in the third quarter of fiscal 2022 compared to 20.0% in the third quarter of fiscal 2021.
GAAP operating expenses for the third quarter of fiscal 2022 were $8.9 million, compared to $8.2 million in the third quarter of fiscal 2021. Operating expenses for the third quarter of fiscal 2021 included the impact of a one-time $1.3 million gain on the sale of the Five Points facility in January 2021.
GAAP net loss for the third quarter of fiscal 2022 was $(7.4) million, or $(0.19) per basic and diluted share, compared to GAAP net loss of $(1.8) million, or $(0.05) per basic and diluted share, in the third quarter of fiscal 2021.
Adjusted net loss (see Table A2) for the third quarter of fiscal 2022 was $(7.2) million, or $(0.18) 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 third quarter of fiscal 2021, excluding change in contingent consideration obligation and interest expense – amortization of debt discount, was $(2.4) million, or $(0.07) per basic and diluted share.
Adjusted EBITDA (see Table B) for the third quarter of fiscal 2022 was $(4.5) million, compared to adjusted EBITDA of $(0.2) million in the third 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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