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| Statement |
|---|
| So we're feeling very good about where we're sitting at inventory |
| As we continue to see strong farmer satisfaction demand and adoption of the high margin trait technology |
| Gross margins have improved substantially during the first half of the fiscal year |
| So quality is solid, and we believe we've got a good handle on the LCM or obsolescence as well |
| Seed operational improvements coupled with the high margin nature of our double team sorghum trait solutions resulted in our second consecutive quarter with gross margins above 30%, an improvement of 900 basis points compared with last year, as well as further reduction of our operating expenses by more than $1 million |
| The net result is a $1.4 million improvement in adjusted EBITDA, and please remember the second quarter is seasonally our smallest quarter of the year |
| Beyond the operational improvements my goal has been to build upon the existing trait technology pipeline that will ultimately be the key driver to S&W long-term success |
| Sales during the second quarter were up 233% to $4 million as we continued to see strong farmer satisfaction, demand and adoption of the high margin trait technology |
| Simply put the feedback from growers is positive on value satisfaction and performance of the system |
| The improvement in gross profit margin was primarily driven by increased sales of our high-margin Double Team-traded sorghum and a more favorable product mix in the Australian domestic market |
| I'm pleased to share the progress that we are making with you today to continually transition S&W into an efficient, operated best-in-class seed company, driven primarily by the rapid adoption of our high-value trait technology solutions within sorghum |
| So I feel very good about where the sorghum business is positioned right now |
| Double Team provide superior grass weed control which protects yields under high weed pressure and delivers a positive return on investment and thus increases overall farm profitability |
| It's all pretty consistent with our forecasts that are in place for the full year, but an extremely positive signal for the continued demand and success of the product in the marketplace |
| As we've discussed we have had tremendous operational progress to move S&W towards a best-in-class Seed Company |
| These superior traits will drive greater numbers of Sorghum planted acres |
| The performance in the second quarter was a positive surprise to me |
| High-value trait technology solutions will be a key driver to S&W long-term success |
| Overall I'm very pleased with the progress that we are making and am appreciative of the continued support of our shareholders |
| And during the quarter, we have begun conversations with potential international licensees and have positive momentum leading us into the next season |
| I believe the actions that we have showcased on the margin improvement, OpEx reduction, successful execution of our high-value sorghum trait solutions and our JV with Shell, highlight our commitment to develop a best-in-class seed company for the long-term |
| We are excited about the long-term value |
| This is not only a tremendous achievement for our sales team, but also highlights the value and demand for innovation in this critical crop which can be used as a substitute for many grains in the market today due to its key nutrient profile and its ability to handle higher temperatures drier climate better than many other crops and has been void of innovation to this point by larger agricultural companies |
| It has been a big success for the operations team |
| We successfully achieved all the stated objectives required of VBO, and received the $6 million payment from Shell on February 6, 2024 |
| For the year we continue to remain on target to achieve our stated goal of $11.5 million to $14 million of Double Team sales more than doubling our revenue from last year and don't forget our gross margins on Double Team are approximately 65% which will be a key driver of future bottom-line improvement |
| And finally, we had a $0.3 -- the key points here, Americas and Double Team are up nicely, which are being offset by the macro drivers impacting MENA and Australia operations |
| As I've said in the past corn soybeans and cotton growers have all benefited from the research investments in advanced tools for weed control technologies covers Sorghum’s has not benefited to this point from innovation despite being the fifth largest cereal crop globally |
| This is now the second consecutive quarter with GAAP gross margins north of 30% |
| Breaking it down a bit, we saw a $0.4 million improvement from research and development expenses; a $0.5 million improvement in depreciation and amortization; and a $0.2 million improvement in selling, general and administrative expenses |
| Statement |
|---|
| As we alluded to last quarter, we are seeing Saudi Arabia shifting acres to wheat, demand and price erosion as well as mix shifts in the marketplace, all putting pressure on our business in the region |
| The war in Ukraine and the civil war in Sudan as well as the conflict between Israel and Hamas, all contributing to expanded geopolitical conflicts in the MENA region has cause disruptions to normal farming operations and seed distribution channels |
| Further into a smaller scale, we have seen a shortage in supply within the Australia pasture business with specific products, which has limited our ability to meet demand in Australia |
| We also had a $1.1 million decrease in Australia pasture products due to a shortage in supply |
| International forage sales were $3.6 million compared to $8.6 million, a decrease of $5 million and US forage sales were $1.4 million, compared to $2.3 million, a decrease of $900,000 |
| GAAP net losses for Q2 fiscal 2024 was negative $6.5 million or $0.15 per basic and diluted share compared to GAAP net losses of negative $6 million or negative $0.14 per basic and diluted share in Q2 of last fiscal year |
| Despite our negative adjusted EBITDA expectation which translates rather closely, to our cash utilization |
| Again, we are maintaining our guidance for fiscal 2024 of negative adjusted EBITDA to be between negative $7.5 million to negative $4 million |
| As well as our broader decision to not discount non-dormant alfalfa as cheaper European seed disrupted the market |
| As discussed in previous calls, we will incur a loss of equity method due to our interest in VBO |
| I thought that revenue would kind of trickle in from that product in the second quarter, but it was much more material than I had expected |
| Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances events or results to differ materially from those projected in the forward-looking statements including the risks that actual results may differ materially from those projecting 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, 2023 and other filings subsequently made by the company with the Securities and Exchange Commission |
| So, we weren't surprised by it |
| Breaking the guidance down further |
| So we weren't surprised by it |
| We also saw a $3.5 million decrease in MENA for the reasons Mark discussed |
| We couldn't be more pleased with the progress made to-date within our sorghum trait technology commercializations solutions as well as our pipeline |
| While we are achieving strong adoption in our high margin solvent-free technology solutions, as we reported in the press release |
| We currently expect fiscal 2024 revenue to be on the lower end of the previously communicated range of $76 million to $82 million |
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