Q3 2021 S&W Seed Co Earnings Call
Good day and welcome to the S and W. Seed company reported third quarter of fiscal year 2021 of financial results Conference call. All participants will be in a listen only mode share.
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Note. This event is being recorded.
I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead.
Alright, Thank you very much and thank you all for joining us today to discuss substantial results for us and W. Seed company for the third quarter of fiscal 2021 ended March 31, 2021 with us on the call representing the company today are Mark Wong, President and Chief Executive Officer, and Matthew <unk> Chief financial.
Officer.
And the conclusion of today's prepared remarks, we will open the call free question and answer session.
Before we begin with prepared remarks. Please note that statements made by the management team of S and <unk>.
<unk> seed company during the course of this conference call may contain forward looking statements within the meaning of section 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act of 1934 as amended and such forward looking statements are made pursuant to the safe Harbor provisions of the private securities.
Litigation Reform Act of 1995.
Forward looking statements describe future expectations plans and results of our strategies and are generally preceded by words, such as may of future plan or planned will or should expected anticipates draft eventually or projected.
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 those projected and the forward looking statements, including the risks that actual results may differ materially from those projected the forward looking statements as a result of various factors and other risks identified and the Companys 10-K.
<unk> for the fiscal year ended June 30 of 2020 and other filings made by the company with the Securities Exchange Commission.
With that said, let me turn the call over to Mark Wong Chief Executive Officer for Us and WC. The company Mark. Please proceed.
Thank you Robert and.
Hello to everyone on the call today.
Third quarter is a obviously as everyone knows a big quarter for S and W and a big quarter for agriculture.
A couple of comments that when the northern hemisphere.
And it's planting time excuse me and so we're very excited to work with our farmer customers start selling them. The seed that we've been basically talking to them about all winter as we build the information that they have on our proprietary products.
And the AG market, the very very strong so corn and soy sorghum.
Commodity grain prices are very high and the highest since 2000 thirteen's of farmers are very excited.
And in Australia, and meat prices are very high so that is driving all of the pasture products.
Australia. So our markets are also very good there.
Remember that I've said before our AG.
Has long cycles and this is.
Obviously, a very very good year in that cycle of.
Farmers.
Know that theyre going to make a profit on every bushel every incremental bushel that they can produce and so they are willing to spend there.
And their money with us for the best seed.
With fertilizer companies for ample amount of fertilizer and with pesticides the providers to protect their crops against diseases and insects, because they know every bushel of that comes out of the fields of profit of a bushel and theyre really ready to invest and that and they know that these opportunities don't come along.
And that often and so when we.
As a company and as an industry have good years, it's it's very very important that we all take advantage of that.
So as you might.
The take from my comments my opening comments, it's a it is the very strong year of farmer interest is very high in our products and we are predicting of very strong.
Third quarter, and we're predicting that the our increased guidance that we gave you last quarter, it's still and.
Excellent and target for the company.
So, we're saying the third quarter and you'll get more detail from that and it's gonna be strong and we're saying that for the full year.
Our total revenue of sort of 92.5 to 95 five that's the guidance we gave.
The increase in guidance, we gave last quarter is still the number that we think is a good number.
No.
A couple of the qualifier and.
The insights to that yearly sales number our bookings are very very strong both in the Americas and international.
So I don't think of.
And that are sort of the the sales book is gonna be much of an issue for us the real issue.
You'll also hear from that and that you've heard from I think others see.
And the biotech companies the.
The bigger ones in our industry.
And from other industries in general there's a it's the all of the logistical challenges that are net.
The COVID-19 year has has put on industries, the changes of demand and the movement of products from China to China to Asia.
From the Asia to the U S and.
And is really creating shortages and shipping and logistics trucking.
Both of the U S and as we ship our.
<unk> all around the world and so we're doing the I think of an excellent job keeping on top of all of that but as of.
And our head of International said to me yesterday on the call. You know we have everything of range do we have all of our containers booked but if there's a glitch somewhere.
We have to get and we don't make those bookings because of a problem and logistics and we have to get to the back of the line and so we will have some sales potentially if there are problems that are pushed into next year.
Rather the 2022 fiscal year for S and dumping and rather than this year, the 2021 year, but at the.
And as of this point, we think we have those under control as well as they can be and this challenging market and we are.
Confidence that that the total revenue number and the 290 <unk> excuse me the 92 lots of <unk> 95.
$5 million is a good target and Matt is going to give you.
The more detail on that and.
As our presentation today.
And.
The rest of the business you know because as you all know it's a long product lifecycle.
And the seed biotechnology business when you create these proprietary products that we have and you fun breeding programs and you develop new materials.
For the farmer and then you have to test them and then you have to go through production and all of that it can easily be a six year of timeline and so that's we announced a.
A couple of quarters ago. These traits that we're coming out with in addition to our proprietary seed products are something that we're obviously.
Very very excited about so.
Update on those on our double team. So all of them as you remember that is a non GMO.
So all of them that has the ability when we spray over the top.
And with the herbicide to control of grass weeds, we are.
Introducing that for the first time this spring and the northern hemisphere, and mainly in the U S and.
Those sales of and those introductions have gone very well I can tell you that we are sold out.
For this year already.
That.
I will also.
The give a little bit of qualifier. There you know seed companies don't have a huge amount of seed and the early years next year will be of much more important year for us financially and double team. So all of them, but double the team is being well accepted by growers, we're being very careful to have the best growers and each of these markets.
And try the product by the market by the product. So that we can see performance in and of lots of different geographic areas and the U S.
All of our sales and double team so all of them as in the U S. This year are there.
There will be future sales in Australia, and we have moved our germplasm to Australia as it is some.
Some people know Australia is very tough.
Tough quarantine rules and so you have to go through a very careful process the bring your new Jerome.
Jerome class of them into the country, and then test it there and produce seed there that you can sell to farmers and so we have begun that process.
And in Australia, with our double team and in the U S. We continue to we planted the.
Or in the process of planting a crop.
That will supply a hybrid seed for the U S market in the next coming year, and the 2022 year and all of that has the going has gone according to plan.
Our second trade improved quality alfalfa IQ a alfalfa is being introduced this fall and again the U S and the Americas that's the.
First market. So we do not again and have a huge amount of seed.
And my expectation is that once the sales program and gets underway here in the fall that because all of us of fall planted crop, whereas sorghum as the spring planted crops and the.
And the hemisphere.
That we will again be sold out of our improved quality alfalfa remember, though that the that the development times are long and so we are also gathering not just sales information about who is buying our product and placing that product carefully with the with the best growers again as we did with the double teams sort of them.
But without phosphate it's of quality trait right, hence the name of improved quality alfalfa and so you are the the presumption and our research shows that when you use our alfalfa and seed that to your dairy cows that a ton of alfalfa because its more digestible will yield.
And the dairy farmer more milk.
It's more of milk per ton.
That is the selling point of the product and so we are in the process of selling.
Selling that alfalfa to farmers and and gathering the information the dairy farmers of these will be of course, and then gathering the information on the.
And on Cal milk yields and things like that to basically be able to.
Get a book of information about the.
Efficiency and proficiency of our improved quality alfalfa. So that's starting this fall and the U S. Again small cells will be sold out again more sales. The next fiscal year and 2022, but we're very excited to have our second trade coming to the market and the.
Same calendar years are of double team sort of them trade, obviously different fiscal years, because we have of June 30th fiscal year, but the same calendar year.
So our sales forces the basic.
Basically been preparing all year and the U S to sell these two trips.
And this calendar year this planting season.
Our third trade the darn thing sorghum and remember that is.
Historically on the line that are the moves natural toxic metabolites from alfalfa sorghum. So this is not grain sorghum and sorghum and that is fed to animals.
So we think it's gonna be a big.
And the potential crop in the U S. But we also are looking at frankly, a lot more acres in the rest of the world and the U S and so our ability to sell this.
And this kind of new product in places like Africa.
And in Australia is important to the success of the product and we.
We as with double team sort of them, we have moved germplasm into Australia and are beginning the trialing and seed increase.
The functions.
Endure and freeze all of them.
And also so that products the.
And probably going to be launched in 2020, three don't see and issue right now.
And with meeting that date, so that would be not the next fiscal year for us, but the year after that.
So it's exciting times and.
Our three traits are right on schedule and the farmer acceptance has been excellent so far and the double team. So all of them and we are hoping that the.
Our fall.
The sales program and improved quality Alfalfa and then a couple of years of now our US our spring program because of again sort of go into the spring planted crop the during the free store and it will be as successful as double team sort of and looks for us. So.
So the traits are looking really good product line is really strong.
We are doing the things that all good seed companies do to make their businesses more efficient. So we're knocking out some older material that's been and the product line for a while that.
And maybe.
Our precursor of companies, who we acquired felt like they had to keeping the product line, but we're all about.
The new market share and do proprietary products and so on purpose we.
Get rid of those ones that might be a little bit of along and the tooth and we have plenty of new stuff out of our breeding programs and our trade programs to introduce the farmers.
So that's all going very very well and that's all of the comments that I have clearly after matt's comments, we'd be happy to take some questions, but with that I will turn the.
And over to you Matt please.
Thanks, Mark and thanks to everyone joining us on the call. This morning, I'm going to jump right into the results. So core revenue, which excludes revenue to pioneer was $23 9 million for the third quarter and increase of 34 per cent compared to $17 9 million of third quarter of the prior year. Please keep in mind that we also delivered.
Core revenue growth of 59% during fiscal 2020, and our year to date core revenue through March 31.
And he's coming in at 30 per cent.
We believe core revenue growth and Q3 with somewhat restricted due to the logistical challenges and widespread across the industry as a whole.
We did experience and change and sales mix for the quarter of certain higher margin products, such as grain sorghum and shifted from Q3. The Q4, we are working really hard to overcome and overcome these dynamics.
Total revenue, which includes revenue the pioneer was $32 4 million per the third quarter compared to $29 1 million per the third quarter of the prior year.
And as we look to the remainder of the year and we are maintaining our guidance for core revenue and total total revenue for the year as a reminder, in February we called up our revenue guidance for the year.
We expect core revenue to be within a range of 78 to 81 million for fiscal 'twenty, one representing core revenue growth of 30 to 35 per cent for the full year. This rapid growth is coming primarily from our two key home markets the U S and Australia.
And we also expect total revenue, which includes contributions from pioneer to be within a range of $92 5 million to $95 5 million.
Now turning to gross margins GAAP gross margins were 19, 1% and the third quarter of 'twenty, one compared to gross margins of 22, 1% and the third quarter of the prior year.
The decrease in gross margins for the third quarter was primarily driven by compressed gross margins and Australia due to sales mix as we had a higher concentration of lower margin Ford cereal products. In addition, we experienced numerous logistical challenges that mark talked touched on but this is due to limited availability of trucks and product delivery and <unk>.
And at the ports and overall rising cost for shipping and transportation.
During the quarter, we estimate that these challenges and amounted to approximately 900000 more and logistical expenses than we otherwise would've occurred.
And this impact and the change in sales mix for the quarter gross margins would have been closer with the expectations for gross margins, we shared with you back in February.
Now clearly this is a fluid situation, but at this point, we expect the logistical challenges to persist for the remainder of this fiscal year and potentially into next fiscal year.
And as we discussed last quarter, we are expecting gross margins in 2020 one to show improvement over 2020, and this improvement is expected to come primarily from the growth of our higher margin silicon products and on the overall sales mix, particularly within the fourth quarter.
Now quickly turning to operating expenses, our GAAP operating expenses for the third quarter were $8 2 million compared to $9 1.002 million 20, I do want to highlight that the decrease in operating expenses for the third quarter of the current year can be primarily attributed to a $1 $3 million and gain on the sale of our five point.
Processing facility and that was partially offset by additional expenses from our acquisition of pasture genetics, we expect that our operating leverage will continue to improve and the fourth quarter as we enter the busiest times of the selling season.
Now as I've mentioned previously over the last several quarters, we have made several investments and purposeful purposeful spend both in sales and marketing and research and development function.
Now we've discussed this during the last three quarterly calls, but I would like to reaffirm our guidance for operating expenses. We project full year 2021 operating expenses are as follows.
G&A to be approximately $22 million, which excludes noncash stock based compensation of $1 5 million R&D should come in right around $8 million and depreciation and amortization will be approximately $6 million.
Now at the adjusted EBITDA line, we had negative EBITDA of 250000 and for the current quarter compared to negative EBITDA of 900000 and the prior year.
The third quarter of the current year was impacted by timing shift of product revenues for the fourth quarter due to the supply chain issues and I mentioned and the overrun of costs associated with the logistical challenges.
Based on the improved seasonality of our fourth quarter, which includes a higher concentration of our higher margin products. We are we believe youll see a significant improvement and adjusted EBITDA for the fourth quarter of this year and as we leverage our infrastructure deliver core revenue growth. Our goal continues to be driving towards positive EBITDA contribution out of the coming periods.
Now quickly turning to the balance sheet I, just want to point out that we continue to make lots of progress and reducing our inventory levels and freeing up working capital.
Most importantly, I'd like to stress that our alfalfa inventory balances have decreased $16 million of 30% over the last 12 months. This.
This progress is the reflection of these ongoing efforts and.
And we're converting this inventory to cash while more work ahead is ahead of US we definitely believe we're on track and we've made significant progress to date.
So to summarize we're continuing to execute against our plan and the fourth quarter and definitely expect it to be our largest quarter of the year with improvements in core revenue gross margins and certainly further leveraging our infrastructure.
So with that I'm going to turn the call back over to Mark.
Thank you, Matt and to everyone on the call as you heard the fourth quarter is our biggest quarter and very important to us, but we are very optimistic that the numbers as Matt and I have.
Giving you today.
And still good targets and that we will manage through these logistics problems and and be able to book the sales that are matter of iron.
Our sales order backlog.
Backlog right now so.
The things are very very exciting and epson W. Please remember that we are unique and the seed biotech business in terms of.
Our crop focus and that we are the only pure play.
Seed company with trades.
And the biotech business that has the worldwide footprint also and we think that that's going to lead to huge amount of tremendous opportunities and in the next few years to come and we're very excited that the.
We can share of those improved results with our investors and our potential investors every quarter as we give these calls.
So thank you we'll be now able to take some questions and we look forward to speaking to you all on the fourth quarter call and.
And the next several months. Thank you very much everybody and operator, I'll turn it back to you.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you were using a speakerphone. Please pick up of your handset before pressing the case if the.
At any time of your question and that's been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Okay.
Our first question will come from Sarkis <unk> with B Riley Securities. Please go ahead.
Hey, good morning, and thank you for taking my question here.
Good morning, Matt I wanted to.
And I start off the just the gross profit of <unk>.
One item I know you mentioned here in the prepared remarks that you may see some higher margin shifts from <unk> to four Q and it just seems like that might be the the mix shift that you talked about and.
That you're you're expecting improved operating leverage share and in the fourth quarter I just wanted to get some more color and clarity around that and if I look at your gross profit reconciliation, there's a little bit of inventory write down and you called out about 900000 and and the logistical challenges just wanted to get a sense for what you think of reasonable.
Gross margin profile of target looks like.
Yeah sure Keith So as you saw here, we did in Q3, and unfortunately incur about 900000 of additional cost, which almost had a three percentage point drag and our margins.
But I would say that as we move and no doubt will we continue to deal with these logistical issues in Q4, but we.
After taking these into consideration.
We're thinking of our Q4 margins are going to come in and around 25% to 27% of kind of fourth quarter and that's very much largely driven as you touched on is our sales mix and keep in mind that Q3, and Q4 and and particularly this year Q4 and in particular, our Q4 is kind of much higher concentration of our proprietary.
The products, which carry higher margins and <unk>.
Grain soybeans.
And while the other products that we're selling in Q4. So we're looking at 25% to 27% margins for Q4, and this will probably bring us in for the full year and approximately 22% margins excluding the inventory write downs, we've taken earlier in the year.
But we are definitely confident that we're going to be driving.
The improvement here in Q4 versus ours kind of core results.
Okay. Thank you that's super helpful. And then if I just move down to the non-GAAP operating expense.
Cable and in the press release, I think it's let's say roughly $8 $2 million.
Does that include the gain on the.
The sale of the five points facility just trying to understand what we should think about from a kind of a normalized opex run rate going forward.
Yes, sorry, Keith so under GAAP, we do need to include the any sort of gains or losses on the sale of property is included within the operation. So it's.
It's netted against our operating expenses and our P&L ease of use.
Notice, but I would say that as you think about our go forward SG&A expenses and R&D expenses, I think that's pretty much consistent with Si with the.
The guidance that I've laid out and my remarks earlier and this call.
Got it so just from a again coming back to the leverage question.
Most of the improvement and operating leverage is largely going to be driven by mix and.
And that's where we should expect maybe better sequential performance is that the right way to think yeah, I would say for <unk> for Q4 in particular of the operating leverage is going to be most pronounced within gross margin and as they move into next fiscal year, we will see that operating leverage both at the margin level as well as within <unk>.
Operating expenses.
Great Thanks for that and.
Mark You mentioned, you know kind of and update on on the double team trade.
Any I guess additional color on what it means to be sold out for this year already.
It doesn't sound like it may be and material kind of per month incremental sales contribution perspective, but just wanted to get a better sense for what that means.
Yeah. So it's very important to us with any product, whether its AG or consumer or whatever to get the product off too.
Good start with momentum and so we are very careful so we had the order book that was way in excess of the seed we had to sell so we were very careful to pick through that order book and and sell seed to the farmers, who we thought had of following and their local area. So that they could buy.
Word of mouth.
Spreads there.
Content with the the performance of our double team and in their field and.
So and we also had some parameters as to the minimum amount of seed they could buy because we wanted to make sure that they had a big enough trial that they could see the performance of the grain sorghum with the trade so.
And with the sales force did a great job, where you sort of debt all of that.
The pushed it on social media, which.
And the last year or two of its been a new thing for us of W.
To use social media so strongly so.
What was the full.
Marketing effort through traditional channels and through new channels and.
We're very happy with how it sort of alternative out in terms of the.
Profile of the portfolio of farmers that we've now.
Kind of.
Half of our seed purchase start seed and they're gonna playing out and seed this year and and we're pretty excited about that.
So it sounds good. Thank you that's all for me and I'll hop back in the queue.
Great. Thanks, Thanks for the case.
Our next question will come from Ben <unk> with Lake Street Capital. Please go ahead.
Alright, thanks for taking my questions and <unk>.
First on the sort of market overall the.
And the outlook and the U S. Here it looks like Theres going to be a pretty considerable interest and plantings. This year Mark I'm wondering if you can just kind of comment on the high level about the performance of your sort of portfolio collectively relative to this.
So really really healthy market. This year and do you guys think that you are outpacing the market do you think youre in line, where do you think you stand here domestically with the scrap.
Yeah. So you know circumstance of interesting crop because it's the last crop planted so the farmer makes.
His choice about corn and soybeans kind of starting in December and obviously, we don't sell those but I've sold those crops before.
And you know he's already booked the seed by February and he knows how many acres, he's putting and pretty much. Although he can change that number a little bit as he watches the.
And the prices of commodities into the spring, but circumscribed of the crop that actually has a natural rotation with cotton so.
So we're always watching the cotton acres.
And.
Sorghum is gonna be strong really because.
Prices are really good like like we said for the other commodities, but on a relative basis sorghum has a small advantage over corn from a price commodity price standpoint.
Locally adjusted basis. So that's you know of.
The positive thing and.
And.
You know whether.
People follow it or not and much of the western corn belt, which is most of the sorghum area. There has been a sort of partial drought rain has not been a plentiful and so sorghum is probably going to be.
The acreage and we're gonna be up because of sorghum will be.
The preferred crop over corn.
So we're pretty excited it's hard to sort of at this point.
Figure out how much sales, we have relative to others, so market share gains and stuff like that we won't have the an estimate estimate of that and probably.
Three or four months more.
But sort of can makers are as you said.
And Oh.
Gonna be strong our sorghum sales and bookings are really strong and in the last couple of weeks grain sorghum sales have been.
Blockbuster. So those are all good things.
So I can't tell you exactly how we're competing against the others, but I'm pretty darn sure based on our bookings, we're going to at least hold our share of not take some share.
Got it got it that's helpful.
Mark another high level question for you you talked to that and your and your opening comments about the.
Growth in Australia, with the pasture products and the context of with grain costs being through the roof.
When you made that acquisition a year ago, you talked about the <unk>.
Potential of integrating more pasture crops and the U S markets and what that same dynamic here domestically. I mean are you seeing are you seeing increased interest from from farmers to have more pasture crops planted as that of market you guys have been able to penetrate yet.
And any thoughts there and the high level.
Yeah, so on a high level.
If you listen to the comments of our New AG Secretary Secretary of valves that true. This is the second time around just the AG Secretary So he knows the.
The farming community well and he knows the politics of being ex secretary of very well he's pushing.
For a target of a much higher percentage of U S acres put in this CRP program, which is not really pasture, but a lot of that ends up and pasture.
So CRP as the conservation reserve program and its kind of.
Government program, where farmers are paid a small government subsidy to basically rest of their lands rights to put the put akers of size for the future and come.
Combined that push by.
The current administration with the general.
We need to help the environment, what can and do too.
Help with the.
Sequestering carbon you know Ken egg and establish methodologies that allow carbon credits to be sold on the farmers acre.
All of those pushes our.
Are going to basically.
Transform the AG markets and the U S two to one and which.
You'd never sort of see any dirt right, there's either a interim crop of cover of crop of CRP crop or the the major crops corn and soybean sort of got them.
And cotton.
The plan and not every acre of almost 365 days a year because everyone realizes now even if you're not.
Adding a crop that you can sell like of grain crop like sorghum.
You are getting sequestering of carbon someone may pay you for that Youll plows the.
Cover crop down into your soil or if you know.
And you're in some kind of know til program, you'll allow that crop to basically.
The integrated by the soil to build soil quality.
So there's a real push on soil quality and.
Cover crops on pasture crops basically these are perennials right. These are not annual crops, so corn and sorghum.
Cotton.
The way beans are all annual crops, we plants and once a year. They are they don't do not survive the winter.
And pasture crops are perennial crops and they survived.
Survived the winter and S and W. As the company has a lot of historical experience and perennial crops alfalfa as one of the big perennial crop. So it's not a major crop and it's the middle market crop as we describe it but it is probably the largest perennial crop and the other interesting printing of crop is.
Stevia, so and our stevia of productions, we harvest stevia for three years before we replant and so we have a lot of experience and perennial crops, which should give us an advantage to creating better products for the farmers that really work better for him that are you know something maybe that he's not very free.
And with right because of the perennial and not annualized.
So we're pretty excited about all of that and.
You know in general, we're excited about opportunities and the business, but the.
That and our trades, because remember trade to help you drive market share so and double team as we have more.
Seed available and we take more market share and next year, we'll be able to drive more sorghum sales towards the SW proprietary.
The varieties and hybrids.
And that's always a good thing for sales and a good thing for margins.
Got it and the very very interesting color I appreciate that.
I think that's a good place for me I. Appreciate you guys, taking my questions and I'll get back in queue.
Thanks, very much of that.
As a reminder, if you have a question. Please press Star then one our next question will come from Gerry Sweeney with Roth Capital. Please go ahead.
Hey, good morning, Mark and Matt and thanks for taking my call.
Yeah, Martin good morning Gerry.
Andre.
Mark you touched upon the strategy behind sort of the allocation of what.
Limited seed you had on the the double team sort of of them.
But I thought of maybe helpful to maybe touch upon.
And how that inventory or the sellable inventory increases over the next couple of years.
To be able to talk about that.
Yeah. So every every seed.
And.
So sorghum has a different a multiplication rate that and does corn and does alfalfa.
So you know and what I mean by most of application rate is you know for every pound of mothers seeds that you plan. This would be the Miami and the daddy's seeds that produce the offspring that is actually the seed that we sell to of farmer. There are different most of the vacation rates the month of vacation rate on the sorghum is relatively.
Hi, corn is relatively high.
And the wheat is relatively low.
Alfalfa the.
Sort of and the middle.
So you know there will be a lot more seed the next year and we don't plan on having to have a riskier production strategy like we did this year, where we had to do and off season production in Puerto Rico Remember and you know COVID-19 was here, we couldn't get our people down there and we couldnt get a day and flight out of there we couldn't.
Yeah, it's just.
And it was just terrible and we won't have to do that again, because we've multiplied in the spring all of our mother and father seats also for our double team hybrid.
And are you now.
We've taken the risk out because now we'll be growing it and the U S and you know.
And we will still be seed limited to and the in 2022, but it'll.
It'll be financially.
Much more meaningful debt.
And we're predicting some number around at least the $1 million and EBITDA from double team and more importantly, you know as I mentioned is this ability to get farmers interested and your product line because you have of new trade that nobody else has and so there's a there's.
There's a kind of.
Magnetic effect on your other products to the guidance, the farmers and say well, yes I'll.
I'll take a you know ex number of bags of double team, but while youre at it.
To try.
The other two new hybrids for my area of which don't have double team and them, but which I.
I would like the plan on acres that don't have a grass.
Grass weed problem for me and so you know I have the acres with grass problems and acreage without grass problems and I'd like to try some of your other products on those other acres without the grass problems. So it's a really.
History has shown that when you come out with traits and.
And when we were.
When I was running my other companies and stuff you just get a lot of carry on effect.
And that lifts your whole product line from having something that really farmers are taking notice for because it's just so interesting different and you know.
And differentiate <unk> from other People's products. So we're pretty excited it's like I said, it's a six year of at least.
Timeline chromatin.
Chromatin and the company, we acquired put it in the beginning years of that.
And we're just fortunate to have a.
Acquired the company and now being able to be able to market the <unk>.
Alex that they originally envisioned to real farmers and real time.
Yes, sorry.
And then yeah go ahead of us.
Spoken about the life.
And part of the strategy of eventually licensing.
The seed to some of the other yeah.
Larger seed.
Yes Lars.
Seed companies out there and that sounds like that's probably a 2023 type number because we sort of get this step up next year than a bigger step up in 2020.
One is that and accurate assumption and two are there any discussions going on that front.
Yeah. So.
Just to back up for everybody who's not as knowledgeable as you are Jerry and and maybe don't follow the company as closely so our strategy that's embedded in this three five and 10 year.
Uh huh.
The technology products and plan that we put out a few months ago.
Envisions that we will license our traits to our competitors.
And the reason we license our trades the competitors just because of the trade so very profitable and we want to sell on as many acres as we can.
So those of the acres that are bags of seed get plenty of that on but they might be the acres that are some of the big companies bags of stores and more plants and out and so that would be the.
The Dekalb brand, which is which belongs to the buyer.
Three of them on Santo acquisition, and then the pioneer brand, which is part of <unk>. So we're in discussions with both of those companies they're watching the performance of the product in the field. This year right. This is the planning time and that's why it's so important to have.
Those good farmers as I said, the 10 15 minutes ago.
As our customers of this year, having purchased the seed pay their good money the planet paying attention.
To what the the performances on those products because our competitors of watching because they are in line to get a license.
I'm not sure.
I think 23 years of good sort of.
To remember, but I will.
Keep people aware of kind of the status.
Of that day.
And our competitor.
Competitors licensing.
Discussions as we go through this because I think it'll be informative to the people who follow the stock or one of the stock.
But remember that once once our competitors sign up they have to go through the same process that we went through to increase the amount of seed that they have to be able to sell right. So they're not going to sell our hybrids with the gene the double of trade gene and it.
They're going to license the double tree gene and put it in there of hybrids and sell their material with the double trade.
Jean and and that's going to take them. The same number of years that it takes us because of sorghum and sorghum has the same multiplication rate doesn't matter, which seed company is handling it and why I'm presuming we all.
Are reasonably efficient and we know what we're doing so the sort of the multiplication rate should be you know close for all of us and but it will take them a couple of years and have enough seed to be entering the market. So 2023 would be.
Early for them to be and I think probably 2020 four would be the first share that.
Have seed available if they.
And they signed up for a license in 2022 fiscal year of S and W, which as you know this coming year.
Got it and then one final operating discipline.
Yep Okay.
Go ahead.
And what's helpful. IQ a you're doing some planting this fall, but just curious if you have any sort of preliminary data on the.
You know the milk enhancers.
Introduction of young.
And so quality traits are much more difficult to evaluate the performance of than a grain trade debt.
It helps the farm and get more yield because you control weeds or insects or diseases.
And the sorghum fields with double team.
And when the farmers going through his field, and Kansas or Texas or wherever.
Nebraska and he's.
Harvesting his sorghum and he has a way scale out of his harvester and he is keeping data and now his harvester keeps data based on the GPS position of that harvest of the right. So he's kind of pretty know pretty well knows what yields he got in terms of pounds of grade per acre.
Throughout this whole field.
With these quality traits like IQ a.
Like I said, it's not that he may get more tons of alfalfa per acre he needs to get a competitive yield of alfalfa tons per acre for sure, but whats really important is how.
Key.
The seats, the alfalfa and what he sees as milk gain and the.
That has a lot to do unfortunately, it adds to the number of variables.
Has a lot to do with what kind of cow herd he has.
So cows in general and the dairy industry are kept for three or four years and then their sense frankly to the hamburger plant because the industry of so efficient that once the cow gets that old and and a cow can have cash for 10 years.
Once of the cow gets kind of to the fourth year.
It's the it's and if its efficiency of digestion goes down and it's not really of profitable cow anymore at some milk prices. So.
And the farmers always changing over the counter and his herd and the younger cows are first time mothers for instance.
Ill show, a higher efficiency of IQ, a alfalfa and will force here of cows.
So we have to be very careful right. We have to make sure that the farmers not only of good dairy farmer, but he is a relatively young herd.
See the biggest performance game of IQ way.
And so that's you know that's what we're trying to manage for but it's the bits.
And that's another variable that you don't face when it's when you can evaluate just yields across the combine.
So that's kind of a long explanation, but remember I was in the dairy business I did one with my partners.
10000, cow dairy one of the largest and Florida and I've lived the dairy business all of the dairy business.
Robley better than any of human deserves to so.
Any other questions and anybody has had any kind of about the dairy industry or our alfalfa.
Performance in the dairy industry I'm always happy to talk about.
Got it.
That's it for me I appreciate it really helpful. Yeah. Thank you Gerry good questions as usual.
This concludes our question and answer session I would like to turn the conference back over to Mark Wong for any closing remarks.
Thank you operator so.
We're very optimistic at the company as you probably heard from Matt's and my explanations got lots of things going most of which I think will bear.
Bear fruit.
Everything that you try of courses and have success, but we've been around a long time, so hopefully our success rates a little higher than the average company.
But it's of Great AG market, it's the kind of an AG market with these kind of prices that.
AG input companies live for and so we're hoping for a good year this year and the good year.
Nearly and the fiscal year 'twenty two I would just like to note that we are having a conference.
And sort of June 14 through 16, and we're happy to have people sign up if they want to.
A more detailed description of what's going on at S and W and if they have some specific questions.
And we'd be happy to answer them and one on one meetings with the.
Potential interested investors and so on that note I'll just.
And thank everyone for being on the call and.
Again, it's a wonderful year to be and input company and agriculture. Thanks again.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.