S&W Seed pany(SANW) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Core Revenue for Q1 2020 totaled $9.0 million, a 36% increase from $6.6 million in the same quarter last year, driven by growth in alfalfa and sorghum operations [22][23] - Total revenue for Q1 was $12.3 million, reflecting a decrease due to a $16 million drop in product sales to Pioneer, partially offset by organic growth [23] - Total gross profit margins improved to 25.1% from 20.9% year-over-year, indicating better pricing and value attributes of proprietary hybrids [25] Business Line Data and Key Metrics Changes - Alfalfa operations contributed $1 million to Core Revenue, while sorghum operations added $1.4 million, highlighting strong performance in these segments [22] - The company is experiencing pressure in the alfalfa segment due to oversupply, particularly from European competitors in South America [18][42] Market Data and Key Metrics Changes - Strong sales in sorghum, especially in Australia, Pakistan, and parts of Africa, with new varieties registered for trials in these markets [15][16] - The sunflower business is expanding into Eastern Europe, with initial introductions in Romania, Hungary, and Slovakia [17] Company Strategy and Development Direction - The company is focusing on hybrid crops to improve margins and simplify inventory management, moving away from perennial crops like alfalfa [41][42] - Strategic acquisitions are being pursued, with expectations to close at least one acquisition in the fiscal year, targeting profitable seed companies [34][36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the current year despite it being the smallest quarter, with expectations for significant growth in the core business [34] - The company anticipates a return to positive EBITDA in fiscal 2021, driven by organic growth and improved margins [30][40] Other Important Information - The company ended the quarter with significant working capital availability, with $10 million drawn on the Australian line of credit [31] - Recent property sales generated approximately $1.8 million, which will be used to pay down long-term debt and enhance working capital [31] Q&A Session Summary Question: Guidance on EBITDA loss for fiscal '20 - Management confirmed that the previously mentioned EBITDA loss guidance of $6 million to $8 million remains reasonable [38] Question: Drivers for returning to positive EBITDA in fiscal '21 - Management indicated expectations for top-line revenue growth and meaningful margin improvement, particularly in hybrid crops [40] Question: Competitive pressure from European peers - Management noted increased competitive pressure in South America and Europe, particularly affecting alfalfa sales [62]