S&W Seed pany(US:SANW)2020-02-22 00:39Financial Data and Key Metrics Changes - Core revenue for the first half of 2020 increased by 17% to $18.2 million compared to $15.5 million in the same period last year [22] - The company reiterated its core revenue guidance of $41 million to $44 million and total revenue guidance of $64 million to $67 million, excluding contributions from Pasture Genetics [22] - Gross margins for the second quarter were lower than Q1, primarily due to the product mix, with expectations for improvement as hybrid sorghum sales ramp up [23] Business Line Data and Key Metrics Changes - The second quarter revenue was mainly driven by the alfalfa business, as sorghum sales are typically lighter during this period [22] - The company is focusing on expanding its product offerings from a single crop (alfalfa) to a multi-crop focus, including sorghum, sunflower, and wheat [8][10] Market Data and Key Metrics Changes - The Australian seed market is estimated to be over $400 million, with significant portions attributed to pasture products and hybrid crops [14] - The acquisition of Pasture Genetics is expected to enhance the company's competitive position in Australia against major players like Heritage Seeds and Advanta Seeds [12] Company Strategy and Development Direction - The company is focused on expanding distribution, converting to a multi-crop focus, refocusing the organization, and investing in technology to increase margins [6][8][10] - The acquisition of Pasture Genetics is seen as a strategic move to solidify distribution power and enhance product offerings in Australia [15][27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the Australian market following recent droughts and fires, indicating that farmers are excited about purchasing seeds for the upcoming planting season [11][48] - The company is confident in its strategy and believes it will lead to financial success and improved profitability [11][37] Other Important Information - The company closed a new $35 million revolving credit facility with CIBC Bank, which provides flexibility for growth strategies [26] - Inventory levels decreased by nearly $13 million or 15% year-over-year, reflecting efforts to reduce alfalfa inventory [25] Q&A Session Summary Question: Can you provide more details on how you expect to leverage seed coating technology across your portfolio? - Management indicated that the seed coating technology acquired from Pasture Genetics will allow for cost savings and margin improvements by processing seeds in Australia instead of the U.S. [42][43] Question: Is there an opportunity to increase Pasture Genetics' gross margins over time? - Management expects that the gross profit margins for Pasture Genetics will increase as proprietary products are integrated into their offerings [44] Question: How has the Australian fire season impacted Pasture's business? - Management noted that while droughts and fires have been challenging, the seed industry historically rebounds after such events, and they are confident in future opportunities [48] Question: What are the main drivers of growth for Pasture Genetics next year? - Key growth drivers include the introduction of proprietary hybrid products and the marketing of the wheat program [49] Question: What is the expected timing for updates on improved digestibility alfalfa? - Management explained that the evaluation process for alfalfa is longer due to its perennial nature, but they are actively working on it [52][53]