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S&W Seed Co (SANW)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 FY2024 revenue was $18.3M (+3.7% YoY) with gross margin at 27.4% (up ~230 bps YoY), but GAAP net loss was ($5.5)M or ($0.13) per diluted share; Adjusted EBITDA was ($1.2)M, down vs ($0.4)M in Q3 FY2023 .
  • Management lowered FY2024 revenue guidance to $67–$70M (from $76–$82M) and cut Adjusted EBITDA guidance to $(8.5)–$(6.0)M (from $(7.5)–$(4.0)M), citing worsening MENA conflicts and Australia pasture supply constraints; Americas revenue and Double Team guidance were maintained .
  • Double Team sorghum adoption continues to scale, expected on >10% of U.S. grain sorghum acres in 2024, supporting higher company-wide margins; Double Team gross margins are >60% .
  • Liquidity improved via non-dilutive payments: $6.0M from Shell (VBO JV milestone) and $1.4M from Trigall (Australia JV exit), helping cover FY2024 operating cash needs per management .

What Went Well and What Went Wrong

What Went Well

  • Double Team commercialization: "expected to be planted on more than 10% of all sorghum acres in the United States in 2024," with gross margins >60%, driving year-to-date margin expansion to 29.2% vs 23.2% last year .
  • Gross margin improvement: Q3 gross margin 27.4% (vs 25.1% YoY), aided by FX gains on Australian receivables and production cost savings in sorghum .
  • Non-dilutive cash inflows: $6.0M from Shell (VBO partnership) and $1.4M from Trigall (sale of remaining interest), bolstering cash and mitigating operating cash needs for the year per CFO .

What Went Wrong

  • International headwinds: Management flagged worsening MENA conflicts (including Saudi Arabia discontinuing import permits for forages) reducing FY revenue by ~$6–$7M and Australia pasture supply shortages reducing revenue by ~$3–$4M in Q3–Q4 .
  • Guidance cut: FY2024 revenue lowered to $67–$70M (from $76–$82M) and Adjusted EBITDA cut to $(8.5)–$(6.0)M (from $(7.5)–$(4.0)M) due to the above headwinds, despite operational efficiencies .
  • Adjusted EBITDA deterioration: Q3 Adjusted EBITDA was ($1.23)M vs ($0.42)M YoY, reflecting lower Double Team volumes in the quarter and inventory write-offs in dormant alfalfa .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Revenue ($USD)$17,662,307 $16,432,466 $10,864,809 $18,324,635
GAAP Diluted EPS ($USD)$0.74 ($0.14) ($0.15) ($0.13)
Gross Profit Margin %25.1% 30.5% 30.3% 27.4%
GAAP Operating Expenses ($USD)$8,343,220 $7,909,158 $7,894,855 $7,659,952
Adjusted EBITDA ($USD)($419,114) ($1,414,890) ($3,224,308) ($1,225,525)

Estimate comparison: Wall Street consensus via S&P Global was unavailable at time of analysis, so “vs estimates” comparisons are not shown.

Segment breakdown (Q3 2024 vs prior year):

SegmentQ3 2023Q3 2024
Sorghum Revenue ($USD)$7.7M $8.3M
Double Team Sorghum Revenue ($USD)$3.8M $3.4M
International Forage ($USD)$7.7M $6.9M
Americas Forage ($USD)$2.0M $2.8M

Key Performance Indicators:

KPIQ3 2024YTD FY2024
Double Team adoption (% of U.S. grain sorghum acres)>10% n/a
Double Team gross margin %>60% n/a
Company YTD gross margin %n/a29.2%
Non-dilutive cash received (Shell)$6,000,000 $6,000,000
Non-dilutive cash received (Trigall)$1,400,000 $1,400,000

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD)FY 2024$76–$82M $67–$70M Lowered
International Revenue ($USD)FY 2024$45–$50M $35–$37M Lowered
Americas Revenue ($USD)FY 2024$32–$33M (reaffirmed) $32–$33M Maintained
Double Team Revenue ($USD)FY 2024$11.5–$14.0M $11.5–$14.0M Maintained
Adjusted EBITDA ($USD)FY 2024$(7.5)–$(4.0)M $(8.5)–$(6.0)M Lowered
GAAP Gross Margin %FY 202424–26% 24–26% Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Double Team adoption & margins~6% of U.S. acres in spring 2023; targeting >10% for 2024; ~65% gross margin; licensing strategy with 45% orders via private label >10% of U.S. acres expected in 2024; margins >60%; goal ~25% market share by 2027; 15 independent seed companies licensed Improving adoption
New traits pipeline (PAF, DT Forage, stacking)Pilot launch of Prussic Acid Free in 2024; DT Forage expected initial sales; future stacked traits Commercial launch of Double Team Forage Sorghum; PAF commercial launch expected in 2025; planned stacking DT+PAF in 2028 Advancing/commercializing
International/MENA dynamicsAnticipated low-end revenue due to MENA pressure; not discounting alfalfa against cheap EU seed Worsened: Saudi discontinued forage import permits; $6–$7M revenue impact; inventory write-offs in dormant alfalfa Worsening
Australia pasture supplyShortages limiting sales; $1.1M decrease in Q2; operational streamlining in Australia $3–$4M revenue reduction in Q3–Q4; facility consolidation underway Worsening near-term; restructuring underway
VBO (Vision Bioenergy) JV with Shell$6M payment expected Feb 2024; Shell funding plan $13M/$12M; equity method loss non-cash $6M received; exclusive license for glufosinate-resistant Camelina; demos in 2024/25; limited trials in 2025; broader in 2026 Advancing tech; cash milestone received
Cost/OpEx & inventory managementOpEx ~$32.5M FY; focus on LCM reduction; efficiencies Streamlining continues; Trigall exit reduces OpEx; targeting near cash-neutral FY2025 Improving efficiency

Management Commentary

  • “Double Team has gone exceedingly well, with expectations… on more than 10% of all sorghum acres in the United States in 2024… Double Team has gross margins of greater than 60%… year to date margins of 29.2% compared to 23.2% in the previous year.” — CEO Mark Herrmann .
  • “We expect to launch Prussic Acid Free… and introduce our first ‘stacked trait’ by combining Double Team and Prussic Acid Free… expand internationally through branded and licensing… Brazil & Argentina.” — CEO .
  • “The situation in the MENA region has worsened… Saudi Arabia… discontinued… import permits for all forages… impact of approximately $6.0 to $7.0 million in revenue… Australia Pasture products… $3.0 to $4.0 million revenue reduction.” — CEO .
  • “We received a $6.0 million payment from Shell… and $1.4 million from Trigall… helping to bolster our balance sheet.” — CEO .

Q&A Highlights

  • OpEx scalability to support Double Team growth: management emphasized licensing to 15 independent seed companies to scale with “very limited OpEx and CapEx” .
  • Variables driving Double Team FY revenue range: biggest near-term risk is total sorghum acres influenced by commodity/cropping conditions during planting through late June/early July .
  • Magnitude/duration of international headwinds: FY2024 reflects “worst case or steady state” for MENA disruptions; planning FY2025 without “wild optimism” on a quick rebound .
  • Trigall exit proceeds and OpEx savings: $1.4M cash received; ~$200K OpEx savings for remainder of FY; broader streamlining across low-margin lines and facilities .
  • Liquidity outlook: with $6.0M (Shell) and $1.4M (Trigall), management expects to cover FY2024 operating cash needs; targeting near cash-neutral in FY2025 via working capital and OpEx efficiencies .

Estimates Context

  • Wall Street consensus estimates (S&P Global) for Q3 FY2024 revenue and EPS were unavailable at the time of analysis due to data access limits; as a result, explicit “vs estimates” comparisons are not shown.
  • Given management’s FY2024 guidance reductions (total revenue and Adjusted EBITDA), sell-side models will likely need to adjust lower on international contributions while maintaining Americas/Double Team trajectories .

Key Takeaways for Investors

  • Double Team remains the strategic growth engine; adoption >10% of U.S. grain sorghum acres and >60% product margins underpin multi-year margin expansion and potential licensing monetization .
  • International headwinds are significant and near-term: Saudi forage import permit halt and Australia supply constraints drove guidance cuts; monitor geopolitical/permit developments and Australia supply normalization .
  • Americas and Double Team guidance were maintained; focus near term on execution in U.S. sorghum and margin preservation rather than volume growth in pressured markets .
  • Liquidity bolstered by $7.4M non-dilutive receipts (Shell + Trigall); management targets FY2025 near cash-neutral on working capital and OpEx efficiencies—watch progress on inventory utilization and facility consolidation .
  • Pipeline catalysts: Double Team Forage commercial launch, PAF trait commercial launch in 2025, and stacking DT+PAF (planned 2028) can expand TAM and improve blended margins .
  • VBO JV milestones and trait licensing (glufosinate-resistant Camelina) suggest medium-term optionality; equity method losses are non-cash; not expected to materially affect FY2024 P&L .
  • Trading lens: Expect sensitivity to updates on MENA permit environment and Australia supply, planting-season DT demand signals, and any incremental licensing announcements; narrative likely driven by margin resilience vs international volume pressure .