Participants

Mark Herrmann; President, Chief Executive Officer; S&W Seed Co

Vanessa Baughman; Chief Financial Officer, Corporate Secretary; S&W Seed Co

Robert Blum; Analyst; Lytham Partners

Benjamin Klieve; Analyst; Lake Street Capital Markets

Kurt Caramanidis; Analyst; Carl M. Hennig, Inc.

Presentation

Operator

Good day and welcome to the S&W Seed Company's second quarter fiscal year 2025 financial results conference call.
(Operator Instructions)
Please note this event is being recorded. I would now like to turn the conference over to Robert Bloom with Lytham Partners. Please go ahead.

Robert Blum

All right. Thank you very much, and thank you all for joining us today to discuss S&W Seed Company's second quarter fiscal year 2025 financial results for the period ended December 31, 2024. With us on the call representing the company today are Mark Herrmann, Chief Executive Officer; and Vanessa Baughman, the company's Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. (Event Instructions)
Before I begin with prepared remarks, please note that statements made by the management team of S&W Seed Company during the course of this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements describe future expectations, plans, results or strategies and generally preceded by words such as may, future, plan or planned, will or should, expected, anticipate, draft, eventually or projected.
Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events or results could differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in the company's 10-K for the fiscal year ended June 30, 2024, and other filings subsequently made by the company with the Securities and Exchange Commission.
To supplement S&W's financial results report in accordance with US generally accepted accounting principles, or GAAP, S&W will be discussing adjusted EBITDA and adjusted operating expenses on this call. These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the comparable GAAP measure and are not prepared under any comprehensive set of accounting rules or principles. An audio recording and webcast replay for today's conference call will also be available online on the company's Investor Relations page.
With that said, let me turn the call over to Mark Herrmann, Chief Executive Officer for S&W Seed Company. Mark, please proceed.

Mark Herrmann

Thank you, Robert, and good morning to all of you. I'm excited to be here today speaking with you all. To set the agenda for the call today, let me first touch on the actions we have taken over the past few quarters to reposition S&W focus on our high-value add crop opportunities where we can drive growth and profitability through leading crop innovation, mainly in Sorghum and Camelina and ultimately unlock value to shareholders.
We will then look at long-term opportunity for sorghum as well as where the market stands today. I then will provide a brief update on our joint venture with VBO. Vanessa will then provide a detailed review of the financials, and we will take a look at any questions that you may have at the end.
For those somewhat new to S&W, let me just take a brief moment to remind everybody of the key activities that have taken place over the past few months or so that we believe will ultimately unlock value for S&W and its shareholders. First, we successfully completed the VA process in Australia, which occurred in late November 2024.
Among other key conditions, the settlement agreement, which we finalized shortly after our last conference call in November, allowed for the release from the intercompany obligations owed to S&W Australia and agreement with the National Australia Bank that released S&W from the AUD15 million guarantee. In exchange, among other conditions, we transferred ownership of certain intellectual property and inventory to the new entity. Ultimately, this agreement provided the resources we mutually believe were needed to create going concerns for all entities.
Following the completion of the VA process, we successfully secured a new $25 million working capital facility with Mountain Ridge in late December 2024, which replaced the previous facility with CIBC Bank in connection with the agreement MFP, our largest shareholder, provided a letter of credit with a face amount equal to $13 million to be used as collateral. We believe the new facility and commitment could be viewed as a strong endorsement from both our largest shareholder and new strategic lending partner in the future of S&W and the opportunity it represents going forward.
With these key activities as backdrop, we have operationally focused on aligning the cost structure of S&W while implementing best practices across the organization. The end results has been improved gross margins, a reduced breakeven rate, as well as lower working capital through an overall improvement in inventory management, all of which has put us closer to profitability without having raised equity capital during this past year.
As a reminder, there are currently approximately 2.1 million shares of common stock outstanding and approximately 138,000 warrants, bringing the total diluted shares outstanding to approximately 2.2 million. Clearly, this has not been an easy task, threading the needle of the past year or so, and I want to personally thank the entire team here at S&W for their exceptional work.
With that as a backdrop, going forward, we are now exclusively focused on our core US-based operations, led by our high-value sorghum trade portfolio with Double Team as well as our biofuels partnership with Shell for Camelina. We are so excited about the new S&W. It's really driven by where we believe the market for sorghum is headed over the next decade. But more importantly, what our position in this market is.
As some of you are aware, sorghum historically has not benefited from significant research investment broad acre crops such as corn, soybeans and cotton have received. S&W is working to change all of that. In the four years since we first commercialized -- commercially introduced Double Team, we have grown from no acres to approximately 10% to 12% market share of the US great sorghum makers this year.
Based on expectation -- expected adoption rates, we believe Double Team sorghum can capture 25% to 30% of the US sorghum market share over the next eight years, which would generate about $70 million to $78 million in traded sorghum sales. This translates into a figure of about 16% to 18% through 2033.
At this scale, we estimate that we would generate gross margins of approximately 76% to 81% on the traded products. Key to this growth is to build on our strength of our initial Double Team product with continuous innovation. We currently have multiple new products set to be launched over the next decade, including the commercial launch of our second-generation Double Team or DT2 Grain Sorghum and PAF or Prussic Acid Free Forage Sorghum in fiscal 2025 and DT2 Forage Sorghum in fiscal 2027 in the US.
The commercial launch of DT2 plus Prussic Acid Free Grain Sorghum in fiscal 2028 in the US. S&W will be extending our trade portfolio to targeted countries through our licensing strategy and agreements to leading independent seed companies as we receive regulatory labels and registrations.
The commercial launch of broad-spectrum herbicide tolerant sorghum in fiscal 2031 in the US and certain other countries in fiscal 2033, and finally, the commercial launch of insect tolerant sorghum in fiscal 2031 in the US and certain other countries in fiscal 2033.
It's important to note that the pathway to these adoption rates is validated by adoption rates of similar technologies and other crops where leadership positions have been established and a multi-strategic go-to-market model has been enacted. This established road map we are following utilizes a combination of a robust direct technical sales team, private label licensing partners and distribution partners with some of the largest ag chem retail distributors in the US, along with an asset-light model in LatAm through collaborations with leading seed brands via licensing.
In our view, there is not another company in the world that boast the sorghum capabilities that we have, providing a very strong first-to-market position with an impressive pipeline portfolio to continue to build on our market strength. So that's the long-term look as we see sorghum, consistent 16% to 18% decade-long CAGRs, high 70% plus gross margins driven by strong R&D pipeline and an established commercial model.
Near term sorghum, we are focused on executing against our outlook that we have established for fiscal 2025, which includes global sorghum sales of about $24 million to $27 million, of which $12 million to $14.5 million of that is traded technologies. Looking at the numbers through the first 6 months certainly isn't indicative of our outlook that we have for the year.
Last year, we saw a lot of early sales in -- during the December ending quarter, which was somewhat abnormal to the normal purchasing patterns, which tend to occur in the March through June time frame. Therefore, we certainly expect to see the normal significant ramp here to the coming months as we look to achieve our targets.
Our confidence in the future of Double Team is being driven by the very high grower satisfaction results received from user market research with an extremely high percentage of growers reporting a positive experience. Overall, the majority of growers who have tried Double Team seek to increase acres. Simply put, farmers that have tried Double Team love it.
Now I'd like to be remiss if I don't exhibit some level of caution in the near term from a few of the macro factors that impact farmers' decisions, namely the potential impact from tariffs, as well as the rise in alternative crop prices as of recent. As most of you are aware, as a country, the US is a net exporter of sorghum, with the primary importer being China. Further alternative crop prices relative to sorghum could impact sorghum makers planted this coming season.
As we have discussed in our private label business model is moving from selling in inventory to licensees fully loaded with production costs, germplasm royalty and trait royalty to selling with production costs and moving the germplasm and trait royalties to a grower point-of-sale invoice. This effectively keeps inventory management at the licensees while aligning the royalty payments with timing of sales to farmers. This model will enable our strategy to realize significant sales growth in market penetration and align revenue recognition with timing of grower sales. The model transition will be completed in 2027 planning season, with all but three licensees expected to be operating under this model in 2026.
As you know, with the US seed business, our third and fourth quarters, which run from January through June, are our key quarters, and we are in full court press mode to ensure that our sales and logistics teams are in sync to get product to customers in a timely manner. In fact, we just completed a multi-day strategic sales meeting with high levels of enthusiasm from the organization. Clearly, the next few months will be busy for our teams, and I'm confident that we are well positioned as we can be to execute on the plans that we have put in place.
Let's transition for a moment to VBO. While there's not a lot of new information to report, everything related to our biofuels joint venture with Shell remains on track. As a reminder, we own a 34% interest in the JV. A quick reminder of this past fall, VBO introduced Camelina seed to farmers which carries resistance to [ glufosinate ], an effective broad-spectrum over-the-top wheat control system. There are currently promotions ongoing with them directly working with farmers into the spring months. I hope to be able to share more with you in the upcoming call.
Before I turn it to Vanessa, let me just briefly comment on the announcement we made in mid-January regarding the commencement by the Board to explore and evaluate various strategic alternatives that may be available to S&W in an effort to enhance shareholder value. As you can imagine, there is not a lot I can share with you besides what the Chairman, Alan Willits, mentioned in the press release, which is that we believe we have taken decisive actions to strengthen the company, much of which I have discussed today, and that the Board supports all initiatives that optimize shareholder value, and we'll consider the full range of potential strategic alternatives to ensure S&W Seed is best positioned for future success.
As always, there can be no assurance that the review process will result in the company pursuing any transactions or any other strategic outcome, nor as to the form or timing of any of the foregoing. The Board has not set a timetable for completion of this process, and we do not intend to disclose further developments unless and until it determines that further disclosure is appropriate or necessary. Let me turn the call over to Vanessa for a full detailed review of the financials, including our outlook and guidance for the upcoming year. I will then provide some brief closing comments and turn it over for any questions you may have. Vanessa?

Vanessa Baughman

Thanks, Mark. Good morning to everyone on the call today. Before I begin, let me just remind everyone that the completion of the divestiture of the Australian subsidiary has resulted in moving all Australian-related operations to discontinued operations on a look-back basis for FY '24. Therefore, when you look at the period-over-period comparisons, the Australian domestic and the Australian international businesses have been moved to discontinued operations for both of the financial years.
With that, let's dive right in. On the revenue line for Q2 only, we reported revenue of $5.1 million compared to $8.3 million in Q2 of last year. Again, the $8.3 million from last year excludes Australia. A couple of keynotes on revenue. Last year's Q2 had $1.1 million of ex-US international revenue, which was not repeated this quarter. No sales ex-US international occurred in Q2 of this year as we continue to evaluate our crop strategy moving forward for the remainder of fiscal year 2025. The remaining delta is primarily on Double Team, which had Q2 revenue this year of $1.9 million versus $4 million in Q2 of last year. The difference here is the timing of private label shipping.
Overall, Americas sorghum revenue, including Double Team and conventional sorghum, was $3.1 million. Americas forage revenue was $1.7 million, and there was a small amount of other pertaining to our VBO partnership. As I mentioned last quarter, Q1 and Q2 are seasonally our lightest quarters, with Q3 and Q4, which is our March and June ending quarters, being the bulk of our volumes where we expect about 65% to 70% of our annualized sales to occur. Q3 and Q4 will also be the quarters in which the greatest leverage in our business occurs to the bottom line, as many of the fixed costs are absorbed over greater revenue dollars. In fact, our guidance suggests that we will have positive adjusted EBITDA of $1 million to $3 million in the second half of fiscal 2025.
For fiscal 2025, which ends on June 30, 2025, our guidance remains unchanged from last quarter, with total revenue to be between $34.5 million and $38 million for the ongoing business. This number does include the $4.1 million of international sales recognized in Q1.
Let's break the guidance for the ongoing business down a bit more. We expect total global sorghum revenue to be $24 million to $27.5 million, of which DT will be between $12 million and $14.5 million and the pilot for Prussic Free will contribute $200,000 in revenue. The remainder will be our conventional trades in sorghum. This includes sorghum sales that we recorded in Q1 and expect to record in the international reporting segment in Q3 and Q4. International forage sales are expected -- are approximately $3.2 million, of which the full $3.2 million was recognized in Q1. And Americas forage will be between $7 million and $8 million, while other sales will be approximately $300,000.
Now turning to margins. Gross profit margin for Q2 was 37.1% compared to 42.8% in last year's Q2. Again, last year's gross margin excludes Australian operations. The change here is really due to the lower DT revenue in Q2 of this year versus Q2 of last year. We are expecting total gross margins for fiscal 2025 to be between 33% and 36%.
Now let's transition to operating expenses. Q2 fiscal 2025 operating expenses, inclusive of depreciation and amortization for the ongoing business in total, were $6.2 million compared to $5.7 million last year. The Q2 fiscal 2025 number also includes all of the nonrecurring transactional costs pertaining to voluntary administration of approximately $600,000. Excluding depreciation and amortization as well as the nonrecurring transaction costs, adjusted operating expenses during Q2 were $4.9 million, which is flat with last year at $4.9 million in Q2.
Looking at it on an annualized basis, our expectation is for total operating expenses exclusive of depreciation and amortization, stock-based comp and any one-time charges related to VA to be about $16.5 million. Including depreciation and amortization and stock-based comp, that number will be about $21.1 million. We have made a number of significant reductions in operating expenses through last fiscal year and leading up to Q1 of this year, and believe we have reached a very reasonable go-forward operating expense structure.
As I mentioned last quarter, we carry about $3 million of costs related to being a publicly traded company. But beyond that, we have made significant efforts to align our go-forward business plan with our expenses to try and drive the business towards profitability.
Now to EBITDA. Adjusted EBITDA for Q2 was a negative $2.9 million compared to adjusted EBITDA of negative $1.1 million in last year's Q2. For the first half of fiscal 2025, adjusted EBITDA is a negative $6 million. Based on the various inputs I provided, we are expecting adjusted EBITDA for the year to be between a negative $5 million on the low end to a negative $3 million on the high end compared to negative $5.6 million with Australia's businesses removed in fiscal year 2024.
Put differently, with the first half already at negative $6 million, we are expecting the high end of our range for the rest of the year to be a positive $3 million for the back half of the year and for the low end to be about $1 million in positive adjusted EBITDA breakeven for the rest of fiscal 2025 in aggregate.
As Mark mentioned, since our last call, we successfully secured a $25 million working capital facility with Mountain Ridge, which replaced the previous facility we had with CIBC. I want to take a moment to thank CIBC for their support of S&W over the past four years, and we're excited to be working with the team at Mountain Ridge moving forward. Their commitment, coupled with the $13 million letter of credit provided by MFP, are tremendous endorsements to the work done over the last year to reposition S&W going forward. Again, I'm happy to follow-up with any of the details we went through if you should have additional questions. With that, let me turn the call back over to Mark.

Mark Herrmann

Thank you, Vanessa. First, let me just thank the entire team at S&W for their hard work over the past year to get S&W to a place where we can focus on delivering value to farmers and shareholders alike. Going forward, our business is going to be driven by high value, high-margin sorghum trait technology in well-established markets in the Americas.
Our commercialization strategy is robust and validated by decades of success by similar products in adjacent crops. Our product development pipeline is deep, with multiple new products set to launch each year in various geographies over the next decade. Importantly, the value we bring to farmers has been validated. The farm gate value of our Double Team grain product is between $36 to $72 per acre. Our DT forage products provide between $30 to $67 per acre. Our Prussic Acid Free Trait adds an additional $30 to $55 per acre. When you look -- when you stack them, it allows farmers to take full advantage of each independent trait value. These are significant benefits to farmers, as they protect against hundreds of millions of dollars of estimated farm production loss each year.
And of course, we have large equity stake in Shell biofuels JV, which has a large opportunity ahead of ourselves as we progress in our second year of the JV. With the business dramatically more streamlined from an OpEx perspective and efficiencies in place to drive incremental gross margin improvements in both our traded products as well as our other forage products, I believe we are in a position to return S&W to profitability. I want to sincerely thank all the shareholders for their continued support. With that said, I look forward to taking your questions. Operator?

Question and Answer Session

Operator

(Operator Instructions)
Ben Cleeve, Lake Street Capital Markets.

Benjamin Klieve

Alright, thanks for taking my questions. I got a handful of them here. First, a couple regarding the current year, results. So first question on, the pertain to DT sorghum, I'm curious, what you see as the level of inventory for that. Product that's already within the supply chain, is that, our inventory level still such, that there, there's, real visibility of a pretty steep commercial ramp, or do you have any concern about elevated levels here at this point in the year?

Mark Herrmann

Ben, I appreciate the question. As we look at our business, over 50% of our business comes from Sorghum Partners brand, which S&W completely operates in the US, right? So with Sorghum Partners brand all unsold inventory at the end of the spring gets picked up and returned to our warehouse. So in reality, we know exactly that we start annually from 0, right? So there's no pre-existing supply in the channel, and we're moving forward with that business and expect to see the growth that we had built into the plan.
With the license business, they do the same activity with their own seed brands in the fact that they deliver and then they pull back into company warehouses and have an accurate count at the end of the year. So our previous model was shipping fully loaded trait in germplasm royalty as well as the cost of goods shipping to the licensed companies. And as I talked about in this call, that will be moving to more of a system of where the licensed company takes inventory at a cost of goods, just like every seed company, including ourselves, does and manages their internal inventory, and then we'll pay royalties based on grower actual sales each year reported by our year-end, right? So it will move to it.
So there's a bit of gap and information as to timing when each of the licensees pull in inventory. And last year, we did see a incremental amount of ordering in the fourth quarter, pulling inventory into their businesses, both to fill spring needs as well as to carry some inventory into the next year. I think potentially, it, along with some of just the indecision on farms, some of the things we're seeing geopolitically of question marks are moving, there'd be a question mark if our process going through the VA last year slowed some people down as far as bringing in their inventory in Q1 and Q2 versus bringing it in now in Q3 and Q4, right? So we're working to analyze that and be on top of it as we work through with licensees right now.
For what their production plans, one, what their demand, their sales, what inventory they need to ensure they can complete demand with their customers for this year for shipping, as well as then working up their production plan for next year's planned sales, and we'll have that effort over the next couple of weeks. So I think one of the pieces that delayed the one and two was our process of going through the Australian VA and some of the unknowns that put into the marketplace, as well as we are in kind of a unique situation on farm with farmer decision-making on cropping plans. There's been a huge amount of commodity price volatility on all crops between corn, soybean and cotton as far as the alternative crops as well as sorghum. But I do believe we'll see that settling out and farmers to be finalizing their decision as we move forward.
I don't anticipate that it's a significant problematic piece. But I do believe the model we're going to is a model that will help us have seed companies planning to carry the appropriate level of inventories on a year-round basis to really run their seed business efficiently versus trying to avoid bringing material in because of the fully loaded cost, which included germplasm royalty and trade royalty before they had the sales activity taking place with farmers.
Ben, is that -- does that kind of address it? I know it still leaves a huge unknown. But I don't see a signal that says that we're off track versus the guidance that Vanessa and I have rolled out to the organization.

Benjamin Klieve

Yes. That's -- I appreciate that there's a lot of moving pieces here. So I certainly appreciate the uncertainty, but that was all very helpful context. And you got to my -- you alluded to my next question, which I don't know if this is better directed to you or Vanessa, but regarding the current year guidance and the sorghum revenue that you lay out, I'm curious given the rising price of alternative commodities, especially corn, the level of embedded acreage you guys are expecting within the US market. The level of acreage within the US market that you're expecting embedded within your guidance, do you guys anticipate kind of a flat level of sorghum acreage year-over-year in the country? Or are you expecting some kind of decline given elevated pricing here for alternative crops?

Mark Herrmann

Yes, it's a great question. And I'll take a first swing at it, and then Vanessa, please, if you've got others to add. But if you look at the acre trend, sorghum had been on a bit of a growth trend if you look over the 2 years prior to last year, right, sort of growing from 6 million to about a 7.2 million, 7.3 million acre crop for the planting season of '23, which also had the contribution of very late planning, the weather through a lot of the sorghum market was wet, which prevented planting of cotton and alternative crops. Farmers came back with the sorghum crop, which helped also move acreage up.
Last year was the opposite impact. It was a perfect spring. Commodity prices were strong and the other commodity pieces and we saw acres move back down from 7.2 million into the 6.3 million to 6.5 million sorghum acres. We did not build our plan based on depending on growth of sorghum acres. But as we look at the market, it does have a pretty significant swing based on what acre planning does happen, right? So we started out very strong, the economics of planning sorghum versus alternative crops was very positive. It's leveled off a little bit with the increase in the corn price, which -- if you look at corn price seasonally, the corn market is very good at raising the price, working to get the acres planted, which I anticipate is what's taking place this year as well. But we really didn't build our plan based on a return to a 7-plus million acre base.

Benjamin Klieve

Okay. Good to hear the conservatism embedded within that, then. Vanessa, a question for you on the debt levels and update on the new credit facility. So first of all, I think I see the -- between getting the Australian business exited and then ripping working capital off the balance sheet, you guys are sitting at a level of debt that's lower than it's been since like 2016.
So congratulations on some real progress on that front. And my question to you is twofold here. The degree of visibility you have at further reductions in working capital here over the second half of this year or maybe over the next 12 months? And then also the level of availability you have today within your new credit facility?

Vanessa Baughman

Yes, of course. Thank you, Ben, for the question. So for the remainder of fiscal 2025 -- we -- and I'll mention this in comparison to last year. We will end -- or it's anticipated that we will end fiscal year 2025 at a lower debt position than last year. And it goes to exactly what you just mentioned.
So continued focus on OpEx and meeting our targets on OpEx as well as the working capital component. While we were able to achieve that through Q2 in terms of lower debt versus last year, one of the things from a cash flow perspective that we "had to cover for" are those onetime transactional costs that you can see in our adjusted EBITDA reconciliation within the financials of approximately $600,000 related to VA.
So unfortunately, that was a cash outlay that we had not planned, right, at the time that we were working through the particulars with Mountain Ridge. But for the remainder of fiscal 2025, we're in a position from a capacity perspective to be well supported with the Mountain Ridge facility as it is today. And as a reminder, it is an asset-based type of agreement. So as sales start to position themselves over Q3 and Q4, that gives us adequate credit financing for the remainder of 2025. That again, is expected year-over-year that we will be in a lower debt position and overcoming those onetime costs. But I will say that added some complexity to at least Q1 and Q2 and overcoming that $600,000 in those onetime nonrecurring costs related to VA.

Mark Herrmann

Vanessa, Could I just add? So as Vanessa and I came in, we did feel S&W was carrying far too much inventory for sales. So as we finish this year, we should reduce carryout inventories by about 40% to 50% versus what we carried out last year, which has a huge positive as far as cash tied up in inventory, but also most seed inventory, you lose approximately 10% due to quality just aging. So it's a significant reduction in it.
And I say this because I really don't even believe it's totally focused on just reducing working capital, but it puts the company in a very quick to move. When you've got a strong pipeline of new product advancements that we're going to have over the next 10 years, the ability to keep inventories tight to have the ability to ramp up the newest technology, the newest germplasm as quickly as possible, continues to drive the leadership position. So it will have very positive impacts on both the working capital as well as profitability, but also, it will put us in a place to continue to support a very aggressive ramp-up of sales success as well.

Benjamin Klieve

Okay. Very good. One more for me and then I'll get back in queue. And it's just kind of a big picture question. In the context of the strategic review, you laid out all of these kind of long-term expectations. And I'm curious, the degree to which the scale of S&W constrains the ramp in sorghum either from an R&D perspective or a commercial perspective? And any potential synergy that could come from a larger operation having this kind of business embedded within it? I mean, is there a material constraint from a financial or human capital perspective at S&W on the sorghum outlook that you think could be kind of unlocked if this was elsewhere?

Mark Herrmann

That's a great point and input, Ben. So there's always a strategic opportunity for entities to be able to look internally at the resources they're already spending and how does it either significantly contribute to or accelerate a trait pipeline or product release pipeline that we've got really in sight for the next 10 years. So I do think as we go through the process, there will be significant opportunities for different organizations to assess how the resources and assets inside of S&W really contribute and escalate their current paths, right, either S&W's ability to reach and accelerate or their ability to -- for efficiencies and investment in other places. So I do believe that there'll be significant value identified.

Benjamin Klieve

Very good. All right. Well, I appreciate you taking my questions. Congratulations. It's been a busy and very productive last few months. Good luck on second half of this year, and I'll get back in queue.

Operator

Kurt Caramanidis, Carl M. Hennig Inc.

Kurt Caramanidis

Hi, thanks for taking my question.
Questions on VBO. Are there constraints in selling that position as you do this review from Shell? Or any kind of color that you could give us on how that would be monetized potentially? And then is next year kind of a ramp year for the Camelina business?

Mark Herrmann

I'll cover the last one first. So as VBO keeps expanding their product lines, particularly focused on their trait position, which is very unique in the marketplace for Camelina for easy control of weeds at a very economical position. I do believe their continued ramp-up of success positioning with farmers will move forward.
As far as the other one, I probably have to say I can't really speak to the specifics with it other than what was positioned by the Chairman of the Board, Alan Willits. Alan Willits and Mark Wong are also on the Board of VBO, and as we look at it, we're looking at all opportunities that bring value to S&W shareholders as we move forward.

Kurt Caramanidis

Okay. Fair enough. And then did you -- I know you did the reverse split, but have you considered going to the OTC to save a couple? I know that wouldn't be free, but a couple of million bucks a year, what's kind of the thought process there?

Mark Herrmann

Yes. And you bring up a good point between what Vanessa positioned that we've got about $3 million tied with expenses for being publicly traded. And today, we're a company that has sales in that $35 million range position, right? It just speaks to this potential efficiency processes. I would just leave that as part of the whole discussion around looking at strategic options that bring value to S&W shareholders.

Kurt Caramanidis

Great, that makes sense. Appreciate it.

Operator

(Operator Instructions)

Robert Blum

Operator, we've got -- while we wait to see if there's anyone else in the queue, I have just a couple of questions here from the online portal to Mark and Vanessa. I'll try to bucketize them briefly here. Talk about maybe any competitive products out there, specifically within the herbicide resistance sorghum?

Mark Herrmann

Yes. So there's two other programs that are in the marketplace. And S&W has had a significant lead over each of those positions, both in volume and market penetration as well as farmer feedback as far as we control cropping options and others. So as we look at it, we're in a very, very strong position. And then with the pipeline, as it comes out, I do believe we can work to keep market leadership position, not just on DT and grass control, but also across a broad spectrum that brings value to farmers.
Everything is predicated on does your product truly turn into a positive economic investment for farmers, and we feel very good about the portfolio that we've got. And our approach has really been looking pretty directly at the economic impact. But as you look at peace of mind and other intrinsic values, I think part of the acceleration of our trade portfolio is going to be driven and has been driven the peace of mind of knowing you're going to be able to rescue your crop in the event of heavy pressure.
Same thing with Prussic Acid Free, if you know much about grazing cattle on sorghum, both the benefits and the drawbacks. The big drawback is prussic acid and the concern for animal health, which Prussic Acid Free completely resolves and puts a farmer in a great position to be able to utilize the great benefits of using a forge or even a post-harvest grain sorghum to provide feed for their livestock. So I believe we've got a strong position as far as the pipeline and where we're currently at for success. There's a significant advantage to our product position.

Robert Blum

Okay. Maybe just one more question here. Maybe just -- and I think you've touched on a few of these, but more broadly with some of the tariffs, some of the other subsidies, basically just overall change in administration. What sort of impact to this have you taken into account with the estimates that you provided here?

Mark Herrmann

Well, that's a great question, Robert. And I called it out a bit. And internally, we've had the discussions around the tariffs. China is the number-one importer of sorghum globally, right? And where the US is the number-one exporter. So there's a pretty tight relationship between China and the US as far as sort of consumption. And then there's the concern around tariffs where they could go and what could be the response from China to those, right?
So unfortunately, all of it is speculation and assessment. Clearly, if they have a block on importing US products or a significant tariff, it could significantly hamper sorghum pricing in the sorghum market. But we have not built overly aggressively, conservatism based on an assumption that will happen, right? It's something we'll watch for. We'll know more as we go forward. And it's a sensitivity, but it is not built into the numbers today.

Robert Blum

Okay. Fantastic. All right, Mark, Vanessa, I'm showing no further questions here. So Mark, I guess I'll turn it over to you for closing remarks.
I really want to thank everybody for joining this morning. Really appreciate your engagement with S&W in this call. And Vanessa and I look forward to hopefully speaking with you all again shortly. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.