Five Points, California, USA
May 14, 2014

S&W Seed Company (Nasdaq: SANW) today announced financial results for its third quarter of fiscal 2014 ended March 31, 2014.

Third Quarter Overview:

• Third quarter revenues were $8.1 million compared to $4.2 million in the comparable quarter of fiscal 2013;
• Gross margins improved to 20.3% during the third quarter compared to adjusted gross margins of 8.8% for the third quarter of the prior fiscal year;
• Fourth consecutive quarter of year-over-year improvement in gross margins;
• Third quarter Adjusted EBITDA for the seasonally slow third quarter (see Table A) improved by $648,000 to $(20,000), compared to the third quarter of last year of $(668,000);
• Net loss per basic and diluted share of ($0.03) for the third quarter improved compared to adjusted net loss per basic and diluted share of $(0.07) in the period a year ago and compared to GAAP net loss per basic and diluted share of $(0.21).

Quarterly Results

For the third fiscal quarter ended March 31, 2014, S&W reported revenues of $8.1 million versus $4.2 million in the comparable period of the prior year. Revenues during the quarter were above the company's stated expectations and primarily driven by an increase in domestic orders.

Gross margins improved to 20.3% during the third quarter compared to adjusted gross margins of 8.8% in last year's third quarter, which excluded a $1.8 million inventory valuation charge for stevia recorded in the third quarter of the prior year. Gross margins improved for the fourth consecutive quarter as a result of the company's success in maximizing value of its seed inventory through a series of initiatives, including its optimization program.

Selling, general and administrative expenses ("SG&A") for the third quarter totaled $1.7 million compared to $1.3 million for the comparable period of the prior year. The increase in SG&A expense versus the prior year was primarily due to the acquisition of SGI which closed on April 1, 2013 and therefore was not included in the third quarter results in the comparable period of the prior year. Also, included in SG&A last year was $133,000 of acquisition related expenses. Non-cash stock-based compensation totaled $215,000 in the current quarter versus $179,000 in the comparable period in the prior year.

Net loss for the third quarter of fiscal 2014 was $(399,000), or $(0.03) per basic and diluted common share, compared to a net loss of $(1,872,000), or $(0.21) per basic and diluted common share during the third quarter of last year. Excluding the effects of the $1.8 million inventory valuation charge for stevia and a $133,000 impact on SG&A due to acquisition related expenses last year (see adjusted statement of operations), net loss would have been $(640,000), or $(0.07) during the third quarter of fiscal 2013.

Adjusted EBITDA, a non-GAAP metric (see Table A), for the third quarter of fiscal 2014 improved by $648,000 to $(20,000), compared to the third quarter of last year of $(668,000).

Outlook

Based upon the evaluation of information currently available to management, the company estimates revenues for the fourth quarter to be approximately $20 to $22 million, compared to revenues of $12.7 million in the fourth quarter of last year.

Management Discussion

Mark Grewal, president and chief executive officer of S&W Seed Company, commented, "We continued to execute operationally on our plan throughout the third quarter, which resulted in solid shipments of seed and a focus on driving improvements in gross margins to 20.3% compared to 8.8% last year. Strategically, we added new distributors domestically which should bode well for our continual growth in the U.S. markets over the coming years; we worked to expand the production capacity of our elite S&W varieties in Australia through a series of meetings with potential new growers in the country; and we executed on a number of steps to expand the addressable market opportunity for S&W through increased opportunities in the dormant market."

Mr. Grewal continued, "Our near-term focus is now squarely on the upcoming harvest and fall planting season, where sales have already commenced and will continue over the coming months. The market continues to be dynamic, especially in parts of the Middle East due to higher lead in inventory levels of non-proprietary varieties from last year and labor issues that we have previously discussed. Meanwhile, the market in parts of Northern Africa and Mexico continue to remain strong, where we have seen much more stability and normal purchasing patterns. We remain focused on meeting the needs of our customers around the world, while ensuring that we obtain adequate margins for our seed inventories."

Matthew Szot, chief financial officer of S&W Seed Company commented, "A number of opportunities for revenue growth and gross margin expansion continue to present themselves. In particular, we believe that our strategy to move into Australia will be one that has the ability to dramatically transform the capabilities of S&W over the next number of years due to the decreased cost of production in that region. We are already benefitting from the synergies of optimizing our group inventory, and look forward to the coming years as we increase our proprietary S&W seed production in Australia. There will continue to be quarterly fluctuations in gross margins based on revenue mix in any particular quarter, but we continue to stay focused on delivering improved results and managing the business efficiently."
Mr. Grewal concluded, "As we have seen over the last year or so, there are a number of factors that are at play not only in the alfalfa seed market, but the agricultural industry as a whole, that have created a rather dynamic market. Hay sales continue to remain robust, with pricing in certain markets remaining extremely high. We are also seeing a tremendous amount of exports from the western U.S. into Asia and MENA as the demand for hay remains strong. We will continue to stay focused on the long-term opportunities to create a great agricultural company, by avoiding the pitfalls of sacrificing that long-term focus for a short-term benefit. S&W has aggregated an outstanding set of assets, which allows us to leverage our elite alfalfa seed germ plasm, our strong production and distribution capabilities, and an expanding R&D pipeline, to create a strong return for our shareholders over the coming years."

Full release

Website: http://www.swseedco.com/

Published: May 14, 2014