• Preliminary Revenue: $8.3 million for Q1, down from $10.8 million in the prior year.
• Sorghum Sales: $550,000 in Q1, compared to $2.3 million last year.
• America Forage Sales: $3.4 million in Q1, up from $2.4 million last year.
• International X US Forage Sales: $4.1 million in Q1, down from $5.9 million last year.
• Service Revenue: Estimated $200,000, primarily tied to VBO.
• Gross Profit Margin: 16% for Q1, compared to 25% last year.
• Operating Expenses: $5.6 million for Q1, compared to $5.7 million last year.
• Adjusted EBITDA: Negative $3.1 million for Q1, compared to negative $1.7 million last year.
• Fiscal 2025 Revenue Guidance: $34.5 million to $38 million.
• Fiscal 2025 Gross Margin Guidance: 33% to 36%.
• Fiscal 2025 Adjusted EBITDA Guidance: Negative $5 million to negative $3 million.

• Warning! GuruFocus has detected 9 Warning Signs with SANW.

Release Date: November 19, 2024

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

Positive Points

• S&W Seed Co (NASDAQ:SANW) reported solid revenue growth and increasing gross margins in its US-based operations, particularly in its Sorghum trade portfolio.
• The Double Team Sorghum trait saw significant growth, with a 68% increase in sales from fiscal 2023 to 2024, contributing gross margins of approximately 70%.
• The company is focusing on high-growth, high-margin US operations, with expectations for Double Team to be planted on 12-14% of US grain sorghum acres next year.
• S&W Seed Co (NASDAQ:SANW) has made significant reductions in operating expenses, aligning its business plan with expenses to drive towards profitability.
• The company is making progress with its global partners, completing chemistry trials and licensing agreements in key global markets, which could expand its reach and add value.

Negative Points

• S&W Seed Co (NASDAQ:SANW) faced ongoing challenges in its Australia-based operations, with a 33% decline in revenue due to market conditions and strategic challenges.
• The company entered a voluntary administration process for its Australian subsidiary, indicating financial difficulties and uncertainty in that region.
• Preliminary Q1 revenue was down from the previous year, with a decrease from $10.8 million to $8.3 million, reflecting challenges in international operations.
• Gross profit margin for Q1 decreased to 16% from 25% in the previous year, largely due to the absence of sales in Saudi Arabia.
• The company expects adjusted EBITDA for the year to be negative, indicating ongoing financial challenges and the need for further cost management.

Q & A Highlights

Q: Do you still expect the maximum liability from the Australian VA process to be $10 million? A: Vanessa Baughman, Chief Financial Officer, explained that they are negotiating with administrators representing creditors, including NAB, the largest creditor. While the parent company could be obligated to the $10 million guarantee, they aim to minimize this burden. More information will be available once the VA process concludes, expected shortly.

Q: What are your expectations for cash flow specific to working capital in fiscal 2025? A: Vanessa Baughman stated that working capital needs will improve slightly due to not supporting international forage sales. They continue to focus on cost initiatives and production efficiency, aiming to reduce corporate costs to improve cash flow.

Q: Can you comment on the status of the American forage business and its margins? A: Vanessa Baughman noted a slight decline in forage sales due to pricing adjustments, particularly in the Latin America market, to remain competitive. This led to a slight margin decrease.

Q: What are your expectations for the Double Team product's seasonality this fiscal year? A: Mark Herrmann, CEO, anticipates increased orders in the second quarter, with the third and fourth quarters maintaining the largest share of Double Team sales.

Q: Can you expand on the outlook for sorghum acres planted next year? A: Mark Herrmann mentioned optimism from the United Sorghum Producers Association for increased acres due to favorable conditions and changing commodity prices. Sorghum's efficiency compared to other crops like cotton and corn is expected to drive demand.

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