Fresno, California, USA
November 10, 2016
S&W Seed Company (Nasdaq: SANW) today announced financial results for the first quarter of fiscal year 2017 ended September 30, 2016.
First Quarter Financial Highlights:
- Revenue of $12,250,000, compared to $12,255,000 in the first quarter of fiscal 2016;
- Gross profit margins of 15.9% during the first quarter of fiscal 2017, compared to gross profit margins of 16.1% in the first quarter of fiscal 2016;
- GAAP net loss of $(3.2) million, compared to a net loss of $(1.9) million in the first quarter of fiscal 2016;
- Adjusted non-GAAP net loss (see Table A) of $(1.6) million, compared to adjusted non-GAAP net loss of $(1.7) million in the first quarter of fiscal 2016;
- GAAP EPS of $(0.19) per diluted share for the first quarter of fiscal 2017, compared to a loss of $(0.14) per diluted share in the first quarter of fiscal 2016;
- Adjusted Non-GAAP EPS (see Table A) for the first quarter of fiscal 2017 of $(0.09) per diluted share, compared to $(0.12) per diluted share in the first quarter of fiscal 2016;
- Adjusted EBITDA (see Table B) of $(971,000), compared to $(605,000) in the first quarter of fiscal 2016; and
- Convertible debt balance as of November 9, 2016 was $2.1 million.
Outlook:
Based on the evaluation of information currently available to management, for the fiscal year ending June 30, 2017, S&W continues to expect record annual revenue of approximately $100 million, which would reflect an increase of approximately 4% over fiscal 2016.
Management Discussion
Mark Grewal, president and chief executive officer of S&W Seed Company, commented, "The first quarter of our fiscal year is seasonally our lowest sales volume quarter of the year, but our busiest production period as we work with our contracted grower base to finalize the North American harvests which will set the stage for the remainder of the fiscal year. Our production team did an outstanding job securing a 15% increase in acreage dedicated to seed production. With nearly 90% of the North American harvest complete, we are expecting a global increase of contracted seed production for calendar year 2016 of more than 20%. This improvement in contracted seed inventory will help us to drive organic revenue growth in fiscal 2017, replenish our depleted inventory levels, and minimize the need to purchase higher cost inventory from the spot market to meet the needs of our customers."
Matthew Szot, chief financial officer of S&W Seed Company, commented, "Revenues for the first quarter came in consistent with our expectations. Gross margins were lower during the first quarter due to the product mix sold which consisted of a higher concentration of lower-margin non-proprietary seed. With improved contracted seed acreage, decreases in our seed production costs, and expectations for relatively stable market pricing, we continue to believe fiscal 2017 will show improvements in organic revenues and gross margins. Additionally, we remain committed to strengthening our balance sheet and retiring the remaining balance of our convertible debt, with only $2.1 million remaining outstanding today. We have retired nearly $25 million of convertible debt over the last 23 months demonstrating our ability to execute on our strategic initiatives and continue to drive value for our shareholders."
Mr. Grewal concluded, "As diets in developing countries continue to evolve to include higher protein levels, we expect that the demand for alfalfa will continue to expand. S&W maintains a leadership position in this global crop with advanced product offerings, a large and diversified production base, worldwide distribution into more than 30 countries, and R&D collaborations that are looking to bring next generation traits to the marketplace. While we look to take advantage of this leadership position in alfalfa for years to come, we are also focused on leveraging the infrastructure we have built to expand into complimentary product offerings, including our recent entry into the hybrid sorghum and sunflower seed markets. With a tremendous team in place to drive growth, efficiencies and innovation, I look forward to a strong fiscal 2017."
Quarterly Results
For the first quarter of fiscal year 2017, revenue was $12,250,000, compared to $12,255,000 in the first quarter of fiscal 2016.
Gross profit margins during the first quarter of fiscal 2017 were 15.9%, compared to gross profit margins of 16.1% in the first quarter of fiscal 2016. Consistent with expectations for the quarter, sales mix consisted primarily of non-proprietary, lower margin, non-dormant varieties. As product mix shifts to higher levels of proprietary seed for the remainder of the year, the Company continues to anticipate gross profit margins over the course of fiscal 2017 to improve over fiscal 2016.
Selling, general and administrative (SG&A) expenses of $2.5 million, as well as total operating expenses of $4.0 million, remained flat during the first quarter of fiscal 2017 compared to the first quarter of the prior year.
Adjusted EBITDA (see Table B) for the first quarter of fiscal 2017 was $(971,000) compared to Adjusted EBITDA of $(605,000) in the first quarter of fiscal 2016.
GAAP net loss for the first quarter of fiscal 2017 was $(3.2) million, or $(0.19) per basic and diluted share, compared to a GAAP net loss of $(1.9) million, or $(0.14) per basic and diluted share, in the first quarter of fiscal 2016.
Adjusted non-GAAP net loss (see Table A) for the first quarter of fiscal 2017, excluding various items (change in derivative warrant liabilities, change in contingent consideration obligation, loss on equity method investment, and interest expense - amortization of debt discount), was $(1.6) million, or $(0.09) per basic and diluted share. Adjusted non-GAAP net loss (see Table A) for the first quarter of fiscal 2016, excluding various items (losses incurred on farming of non-seed crops, change in derivative warrant liabilities, change in contingent consideration obligation, loss on equity method.
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