Q1 2022 S&W Seed Co Earnings Call
Good day and welcome to the F. N W. Seed company reports first quarter fiscal year 2022 financial results all participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask.
To ask a question you May press Star then one on your Touchtone phone and to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Mr. Robert Blum. Please go ahead.
Right. Good morning, everyone and thank you all for joining us today to discuss the financial results for us in W. Seed company for the first quarter of fiscal 2022 for the period ended September 30th 2021 with us on the call representing the company today are Mr. Mark Wong, President and Chief Executive Officer, and Matthew is not.
<unk> financial officer.
At the conclusion of today's prepared remarks, we will open the call for a question and answer session.
Before we begin with prepared remarks. Please note that statements made by the management team of F. N. W. Seed company. During the course of this conference call may contain forward looking statements within the meaning of section 27, eight Securities Act 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 results or strategies and are generally preceded by words, such as may future plan or planned will or should expected anticipates draft eventually or projected.
Centers 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 projected in the forward looking statements as a result of various factors and other risks identified.
The company's 10-K for the fiscal year ended June 30th 2021, and other filings made by the company with the Securities and Exchange Commission.
With that said, let me turn the call over to Mark Wong Chief Executive Officer for US in W. Seed Company Mark. Please proceed.
Thank you Robert.
Hello, everyone who's on the call today.
I would like to just start out by saying that.
Commodity prices around the world are in agricultural or are very very high.
We have sort of record corn and soybean sorghum.
And wheat prices and.
As all of you know because a significant piece of our business is actually on the continent of Australia, where meat prices that would be beef and cheap prices drive kind of farmers' profitability. Those prices are also.
Proteins, very very high and so around the world in our markets, we find ourselves in a situation where farmers as we've talked about before are now willing to pay for that incremental book.
Bushel of yields I mean.
At these kind of returns for farmers every bushel as a bushel they make money off of so in some markets as we've discussed.
Commodity prices are low the farmer may manage his farm.
Sort of breakeven, but in a market like this he's going.
Our foot on the gas you get as much yield as he can and.
That's reflected in high demand for seeds in general and for <unk> in particular.
We will be seeing in the 2022 year.
Price increases and pretty much across the board some species obviously are.
Prices will increase more than others, but price increases across the board and improving margins for Essent Zap Viva real results from that.
That being said, though.
Our strong year this year is still.
Being buffeted by some of the logistics problems that everyone's reading in the popular press.
These problems are.
Really first generated by the shutdown of worldwide economies.
By Covid and now with the restarting of those economies and the huge demand being placed on trucking and shipping around the world that we are still feeling that and I would say.
Versus 12 months ago, I think it's not getting better it's actually getting a bit worse, but we've also.
Changed some of the things management wise in the company to try to deal with that so we have.
Organized our sales contracts. So that's some of the freight costs are now borne by our customers and we're doing things like cleaning our new crop seed as rapidly as possible. So we have clean to date in the northern hemisphere.
About twice at least twice as much sometimes more than that.
Then we had cleaned at this time last year and what helps us in the northern hemisphere.
We had a very good production season.
This year, we did not get any early frost and we did not get any rain on the crop. So all of that crop has been harvested in the northern Hemisphere U S production locations and in our two plants in Idaho, and Texas now being cleaned.
So because shipments.
Our.
Still troubling in terms of getting trucking companies and.
And shipping lines to hold to a schedule I thought it might be useful just to remind everybody kind of where the problems for S. And W are coming from so if I can dive into a little bit more detail in this kind of reflects what I said on the last call.
When we when we had a chance Matt nice to speak to all of you. So in the U S. It's a northern hemisphere cycle, we harvest in September and October and we sell in May and June and in a normal year, we have plenty of time to clean, let's see and get it ready.
And Thats augmented also by the fact that we carry over some inventory in different varieties and hybrids and so we can ship to our customers both out of new crop.
Harvest and out of carryover inventory.
And then the Australia at home market. So thats the continental of Australia. You know we have the same kind of thing, except it's a southern hemisphere production cycle and sales cycle.
That's another one of our big home markets.
A significant piece of our sales and we have $12 14 salespeople in the field, they're selling to distributors and dealers.
So the seasons are just opposite so we are selling now into the Australian farmer.
Customer.
Network that we have and you know, we normally harvest and that sort of April and May.
Period end again, we've shell out of carryover inventory, we have plants, there that we operate ourselves.
And we were we receive and clean the seat and so it's a much similar market to the U S and timing on the six months sort of delay.
The problem that we have is because we produce.
A majority of our alfalfa and in this case, it's the non dormant alfalfa the ones that are not grown in areas, which have severe winter.
So that we don't need to provide.
Alfalfa varieties that can survive wound care cause the winters are basically very mild. So this is the middle east.
What we have as a sub.
Southern Hemisphere production system, because we're harvesting and growing those crops mainly in alfalfa.
In this example.
In Australia. So we're harvesting in kind of April may and but we've kind of northern hemisphere, even though it's closer to the equator, northern northern hemisphere planting season. So these guys wanted to plant.
July ish August July sometimes June.
And so we always are pressed too.
Get the new crop cleaned in Australia, and send it to our customers in the middle East and a lot of times we.
Send the first shipments out of carryover inventory and then the later shipments in the season.
Have another 30 or 60 days, we send out of new crop.
And that will continue but COVID-19 and logistics issues have made those shipments the ones that.
Have a timing problem in terms of whether they make it into our fourth quarter or our first quarter of the next year.
And so as we has happened.
In the 2021 year those shipments did not make it into the 'twenty one fiscal year. Since we have at end of June fiscal year those shipments are in the.
'twenty two fiscal year, and Matt will talk a little bit about that in detail.
That's where our problem is not in the U S market or the Australia home markets.
But in the Australia production of alfalfa than goes.
From a southern hemisphere production cycle to northern hemisphere sales cycle and sales.
That.
Just wanted to be specific is.
The reason why our guidance of $80 million to $85 million is maybe a little bit lower as we've talked about.
Last calls than some people expected.
Just because.
We had 2021 sales.
Move to the first quarter of 'twenty, two and we will have fourth quarter 'twenty two sales moved to the first quarter of 'twenty three fiscal years, so that we're not double.
Double counting those sale.
Sales of alfalfa too.
The middle East in one fiscal year, we're not counting them twice and the reason is that the high demand.
In addition.
<unk> to the logistics issues.
<unk> almost <unk>.
Eliminated all of our carryover inventory and so most of the shipments we will have to come out of new crop, but it's going to be very very difficult to get that crop clean and in the environment of logistics issues get it on a boat and get it to the middle East.
<unk>.
In the 2022 fiscal year <unk>.
So what will those shipments will be in the 2023 fiscal year.
There is still plenty of time, even with shipping in July and August.
To get in September even to get those crop.
Bags of seed to our customers in Saudi we are not going to Miss the planting season, it's just.
Holding from one fiscal year to the next fiscal year for us because we because of the short inventory situation and that's a good thing because that just means there is high demand awesome from our customers and the.
Logistics issues that we're experiencing in trucking and containers, which is a bad thing, but we're trying to manage that by cleaning our seat as early as we can paying attention to.
All of the logistics issues every time Theres, just even the hint from a trucking company or a shipping company.
That theres going to be a problem, where sort of all over it now trying to look at alternatives.
And from a cost standpoint, we've passed some of those freight costs onto our customers.
So I just wanted to touch on that and just.
Absolutely spend a little bit of time, making sure everyone on the call understands.
Why the guidance as Matt is going to tell you its still in that 80 to 85 million dollar U S dollar range and with that said I'll go onto a couple of high points.
As I said the farmers are very excited about what's happening this year theyre going to make money.
So the demand for our seed is really high.
Our double team trade in sorghum, that's our herbicide resistance straight.
Control grass weeds is looking very very strong.
As I mentioned in the northern Hemisphere, we usually set prices around December one and so we're in the process of doing that but we're hearing very strong.
Reaction from our sales force.
That farmers were very very impressed with the performance of double team.
In this past 2021 year, and we expect them to be.
Pretty much sold out.
In the 'twenty two fiscal year also so double team is going really well that's a big thing for us in W. Because the.
The margins are very strong on trades as all of you know.
And.
We're very very pleased with that and it also gives our salespeople something to talk about with their customers hopefully it will drag along additional.
Sales of other sorghum.
Hum.
Since that we sell that are not double team. So.
Both double team and non traded.
Hybrid sorghum.
Grain sorghum look.
It looked like we're going to have a good year.
We're also as I said following the Monsanto strategy, where we are.
Based on this strong demand are pressing other seed companies to license the trait from us and that continues to go well I don't have any new news, specifically tell you right now but.
Are some of the bigger players in grain sorghum now looking at the trade and discussions with us about the license.
On the stevia stamp on the Stevia front.
As you all know we signed the agreement with ingredient.
We have.
An agreement to ship.
<unk> of lease to China to put it through their extraction plant and Theyre purification plant those plans remain on schedule, we planted a crop in North Carolina. This fall and we will plant more acres in the spring and we expect to be able.
To meet those requirements.
For leaf dry leaf that we.
Uh huh.
Going to delivered to ingredient in China, so that all looks.
Fantastic so far.
And again, that's just the beginning of a longer term relationship where eventually.
We hope that we will we being greedy on an S.
W will.
Embarked to really build the U S market, which is.
Supply market, which is the biggest demand market first stevia and <unk>.
There will be.
New production plant built in the U S.
<unk> extract and purify stevia from dry lease in that.
As our agreement with ingredient indicates that we will be the supplier of that leads to ingredient over the next decade.
We've touched a little bit on margins, but I'll just say we're in the process of selling prices as I mentioned in the U S.
We sort of do that in December early December we have set prices in Australia as we are selling into that Australian market and margins look good that's going to give you some indications of that and as the new prices hit in our big quarters, which is the third and fourth quarter.
We expect margins to actually improve some more over what they currently are.
Lastly, I'd just like to say it.
It did.
Track some interest in the shares I think one.
Yes.
When shareholders, both current and potential saw that management and the board stepped in.
To raise through a private placement $5 billion plus of equity and we're pretty simple guy. So we just sell common wasn't.
And any kind of.
High powered special equity.
The same kind of shares that we've always sold.
I am personally.
No.
Happy to say that I was also an investor in that round of $5 million and I just think that all the work that we don't have done as a management team is starting to really show in the form of.
Better margins and.
Our working now alfalfa in the middle East with the markets coming back.
Our deal with <unk>.
DVA with ingredient and more the most.
Important thing in the short term, it's our double team trade, which is going to add significantly.
Significantly to the financial returns.
In 2022.
So with that I'll turn the presentation over to Matt and then I'll conclude with a couple of comments Matt. Please.
Thanks, Mark and thanks to everyone joining us on the call. This morning.
Core revenue, which excludes revenue to pioneer was $15 5 million for the first quarter, an increase of 27% compared to $12 2 million in the first quarter of the prior year.
The increase in core revenue for the first quarter came primarily from the Mena and Australia regions.
Now I want to clarify that core revenue and total revenue will be the same number in fiscal 'twenty, two but we still referenced core revenue as long as we were comparing against fiscal 'twenty, one numbers as a point of reference our prior year Q1 results included revenue from pioneer of approximately $1 6 million.
Now as we discussed during our last call the supply chain and logistical challenges, resulting in approximately $5 million of sales orders that were originally expected to ship in Q4 of fiscal 'twenty, one to shift into the first quarter of fiscal 'twenty to <unk>.
The limited availability of overseas containers that mark talked about and and just the ongoing congestion at ports continue to delay shipments I'm really complicates our ability to precisely forecast the timing of shipments in any particular quarter.
At this point, we're expecting these dynamics to persist throughout the year.
So as we look to our annual fiscal 'twenty two guidance.
We're reiterating that core revenue and total revenue will be within a range of $80 million to $85 million. This estimate represents.
Presents core revenue growth of approximately 15% to 20% year over year.
Now as Mark mentioned during our fiscal 'twenty, one year end call in September it's important for everyone to remember that despite the shift in revenue from 'twenty one to 'twenty. Two we are expecting a similar shift of revenue from 'twenty two into 'twenty three and as mentioned, we expect shipping challenges to continue which will likely impact the timing of our middle East sales orders, which.
Typically get shipped in that June time period, So as Mark discussed earlier, we also see additional risk of being able to process and ship the upcoming Australian harvest, which is coming out of the ground roughly in the April timeframe and therefore, the timeline the harvest to see clean package it and ship it is going to be likely more difficult. This year in the past this.
As further.
Impacted by the fact that this year, we're going into the sales season with lower levels of carryover crop.
Now turning to gross margins GAAP gross margins were 21% compared to 12, 9% in the prior year adjusted gross margins, which excludes the impact of inventory write downs or 22, 1% in the first quarter compared to adjusted gross margins of 19, 4% in the first.
Order of the prior year.
Now despite the overall rising cost for shipping and transportation, we delivered higher gross margins than our alfalfa and pasturage product lines this quarter.
And as we previously mentioned we are expecting gross margins in fiscal 'twenty two to show solid improvement over 'twenty. One this improvement is expected to come from the various initiatives, we've put in place, including the implementation of price increases.
Passing along the incremental cost of freight and transportation as well as focusing on several other operational efficiencies.
We believe that the Q1 results reflect the early inning validation of the various initiatives that we're putting in place.
Now quickly turning to operating expenses, our GAAP operating expenses for the first quarter of 'twenty, two or $8 9 million compared to $8 1 million in the first quarter of the prior year.
During our call in September we provided full year operating expense guidance and I'll provide that recap again so.
So we project full year fiscal 'twenty to operating expenses as follows.
SG&A to be approximately $25 5 million, which includes noncash stock based compensation of approximately $10 million.
R&D to be approximately $8 million and depreciation and amortization to be approximately $6 million. So as you can see our Q1 actual operating expenses were lower than the Q1 pro rata portion of our annual guidance.
We're focused on holding and reducing operating expenses wherever possible and of course growing revenue on it in the margin line items.
Now at the EBITDA line, we had negative EBITDA of $4 million for the current year I am sorry for the current quarter I should say compared to negative EBITDA of $4 6 million in the prior year if.
If we exclude the pioneer contribution from last year's EBITDA, the euro the year over year improvement to EBITDA is actually $1 million. Please keep in mind that our Q1 and Q2 quarters are typically our slowest quarters. So we expect to see a meaningful improvement in EBITDA as we move into the second half of the fiscal year.
So as we mentioned in the yearend call in September given the impact to revenues and gross margins primarily from the logistical challenges in fiscal 'twenty. One we fell short of our adjusted EBITDA and cash flow targets in 'twenty, one and.
And as a result, we worked with our lenders and we entered into amendments and waivers with them to address the noncompliance with certain financial covenants as of June 32021.
I'll point out that we are in the final process of renewing our facility with our bank in Australia and this new agreement works not only expand the size of our credit facility, but also extend the maturity date to September of 2003, and lastly, as Mark mentioned and as many of you've seen in our recent disclosures, but we did complete a $5 million equity raise in October.
Led by our board and management software.
So we're certainly pleased with the insider participation as we continue to work on improving the strength of our balance sheet.
So with that I'm going to turn the call back over to Mark.
Thanks, very much Matt I'd, just like to remind people in my final comments here you know the AG markets are very very strong and F. N. W. We expect is going to have also a very strong year in 2022, we're working hard.
To get the company to.
Maximize our <unk>.
Sales and profits and margins in the third and fourth quarter, which as Matt said, our big quarters.
We expect seed volumes to be up and also prices to be up and as I said, we expect to be sold out of some of our hybrids and varieties in various species.
So with that I will turn the call back over to the operator.
And Matt and I would be happy to take some questions. Thank you very much.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
And the first question will come from Sarkis <unk> with B Riley Securities. Please go ahead.
Good morning, Mark and Matt. Thank you for taking my question here.
I wanted to.
I just wanted to start on the margins front clearly the margin improvement should be tied to.
The sales line and <unk>.
<unk> in the fiscal year the back half of your fiscal years, where the sales come. So I guess can you help me understand the cadence of the margin build especially as you've posted a 20% plus.
Adjusted gross margin here in <unk>, how do we expect that to evolve as the year progresses.
Yeah, Mark as you want me to take this yes, yes. Please.
So sorry, Keith as we've talked about before from a revenue perspective keep in mind that about roughly 70% of our revenues are on the back half of the year and the first half of the year, particularly Q1 and Q2 are not primarily dominate are concentrated with non dormant alfalfa sales orders, which you know.
No.
Our typically lower margin crop now we are seeing pricing improvements and non dormant alfalfa, particularly in the Mena region.
That contributed to the gross margin improvement in Q1, probably a similar gross margin profile for Q2, because again, its primarily going to be a concentrated and alfalfa.
And then certainly as we move into the back half of the year, when we start selling more of our higher margin products, particularly our double team saw gums and our other hybrid sorghum the margin profile really ramps up so as we look to the full year, we're looking at roughly 25% margins.
And then just acquiring hard cooler yeah.
Yeah, absolutely very helpful. There.
And then as far as just kind of the outlook on the AG markets I think Mark you are calling out the record prices for some of the other grains and then also the meat prices driving farmer profitability, especially in your Australia market I guess.
And then you kind of look out and look at the other grains.
<unk>.
Are you seeing some of your crop lines become more competitive in the farmers' sizing and how do you see those discussions playing out as your sales force goes out to sell product.
Yes.
I think a rising tide is lifting all boats as they say and.
The high grain prices and farmer profits.
Sure.
Sure.
Really changing kind of the psyche of farmers. So for a few years now we've had low prices and farmers have been in survival sort of mode and governments have been paying big subsidies.
So this is really a fairly new thing is this cycle. It's the beginning of an up cycle, how long, it's going to last and stuff, that's not really known sarkies, but I think it's.
A great time to be buying back stocks and.
Obviously, we all benefit from.
The farmers' ability to make money.
I think.
Our crops in particular, you know we tried to focus on.
Things that we can bring technology to like our double team sorghum, which as you know.
As I've said looking very very.
High in demand and.
And we also try to manage our portfolio with longer term issues like.
Water use and things like that in mind.
We think it's very.
Yeah.
Important for the long term to basically always understand how much value is created for every unit of water and so we.
Do that analysis kind of on the crops that we decided to go into.
And so I think.
For us.
Uh huh.
We're trying to.
Focus the company on these high demand kind of things carbon obviously is important so we're looking at how we might participate in those markets.
More clearly base.
Basically how would you make more.
Things in our plant so that's another.
Target that we're doing some work on so I don't think theres going to be obviously, some man made in plants or steel made in plants, but other things.
Obviously, our maiden plants today like the basic materials for some of the fuels and so we're looking at.
All of those kinds of opportunity. It's also I mean, the world to changing place for small companies like us with a really experienced management who are getting.
A little for myself at least open the tooth.
But you have the experience to look at the markets and remember what happened over the last 40 years.
Just.
It's just fantastic to get up in the morning come into the office to talk to our people.
For me it's.
Just the <unk>.
Culmination of.
Lifetime's worth of work and now the markets are giving us opportunities and.
And by Gosh, we're going to take some of them.
So we're very optimistic.
Great. Thank you that's all for me I'll hop back in.
The next question will come from Ben <unk> with Lake Street Capital markets. Please go ahead.
Alright, Thanks for taking my questions just a couple of kind of high level one for me.
<unk> you.
Mark you've talked a lot about kind of how robust the.
The AG economy is now in farmers kind of making planting decisions.
Differently now that commodity prices are up so so so nicely wondering if you can talk a bit about how you see farmers considering the tradeoff between corn and sorghum.
Particularly given how high nitrogen prices are are you guys seeing.
That you were sorghum varieties are able to take acreage in an increasing manner from corn.
Given the kind of underlying price dynamics in the market right now or am I am I overthinking it.
You are not over thinking it Ben.
You're showing.
Your insight to the market I think which is something we always appreciate when we talk to you.
The.
The whole sort of balance between corn and sorghum I hope, it's going to be changing but this is only the first year really in what is hopefully going to be a cycle I mean in the in.
In the nineties I think they were in grain sorghum at least thats, what let's focus on that and that's the most valuable sorghum family.
Theres also forage sorghum, but if grain sorghum.
There was almost.
20 million acres of grain sorghum in the U S. At one point and now it's down to sort of $6 million to $8 million and I think some of that's going to come back. That's why the double team trade is so popular because it gives farmers the ability to substitute.
Sorghum for corn.
Sort of the same acre.
And as you say with corn has much higher input costs.
Cost and much higher water costs.
So I think the farmers, making a portfolio decision and.
I think we're going to see a return of sorghum acres at <unk>.
Some of the expense of other crops. Some of it will be corn acres some of it'll be soybean acres, some little be wheat acres, because remember sorghum and sort of the western part of the corn belt, where it's dry or so thats, the Mississippi River to the Rocky Mountains, but I think we believe theres going to be a trend and we believe our ability to.
Troll weeds, which has been the problem and has eliminated acres historically.
Versus corn as a crop choice for the farmers, we think that that's changing and where.
We're hoping that that's going to come back.
I'll send you some information on our advertising and stuff, but that's kind of the theme of our.
Advertising the sorghum as back as kind of the theme of our.
This year sales program in the field.
So thanks got it got it no that's interesting.
Perfect.
My other question.
Regarding stevia.
I believe I heard you say that you plan to be kind of initial pilot plants in North Carolina in the fall and Youre expecting more to come spring first of all did I hear that correctly.
Good.
Okay and then.
I understand this is kind of a long long process, but I'm curious if you can kind of elaborate on your expectations around communicating the results from those from those plots is this something that you think maybe by the spring, we'll get kind of information on on.
The yield on a per acre basis from the plot that were just planet or is this going to be a longer term thing that we need to just sit tight on.
Well, we should have some preliminary information I would think by kind of the end of the fiscal year. The 'twenty two fiscal year.
But remember we.
We've got a harvest the crops the stuff still has to grow we don't make.
Steve you or any of our other crops and a production plant in the ground and mother nature said doing all the work.
And so we've got a harvest that crop we've got a and remember we do harvest. These crops three tie three seasons.
<unk> six times two times per season, but we've got to take the leap dry it send it to China.
Get through all of the issues of.
Transportation and then get the data back in terms of extraction and purification and look at the yields per tonne of dry leaf of the different <unk> that.
We're interested in producing so.
We will have maybe some preliminary information by the end of this year, but remember it is the sort of the way we farm at a three year crop in the first year's information will be important but.
We will also be following up on.
On the future years from the same acres.
My hope is that the U S markets the biggest market right now.
$600 million.
Stevia.
Ingredient sales and it's going to be.
Food comps.
Company's beverage companies banking companies.
All of those are pretty wide sector of companies that want to make use of stevia since.
It is it's not a sugar that causes diabetes.
So.
We're still optimistic that at some point.
Especially with Covid and all of these issues of transportation, both just getting it there and then the cost of getting it there right in some cases the container.
It's costing us four or five times, what it cost us last year to get it across the country et cetera.
Theres more so what I'm, saying is there's more and more cost savings and having the production is close to the market as it possibly can be and I think that the wins at our back and that that production coming from China cannot last forever, especially pushing up against these high transportation costs and I think.
That.
That there will be a source of.
Purification and extraction in the U S for stevia leaf and that that's going to come sooner than later and that will be a good thing for ingredient item for us.
Got you understood well looking forward to that whenever we're able to get that information and good luck.
Going forward with that.
That's that's probably a good place for me to leave it. Thanks for taking my questions I'll get back in queue.
Youre welcome.
The next question will come from Tom Aaron Berg with car M. Hennig incorporated. Please go ahead, yes.
Yes, Thanks for taking my question here.
Over from the fourth quarter into the first quarter was there any carryover from the first quarter into the second quarter.
Hmm.
Matt maybe you should probably answer that.
Yes, so good morning, Tom So to answer your question, yes. The carryover from Q4 wall was shipped out in Q1, but certainly but these ongoing logistical challenges that we've been talking about quite extensively.
Absolutely orders that typically would have been shipped in Q1 GAAP.
Got pushed to Q2, and we will likely see that sort of dine.
Dynamic play out for the remainder of the year.
Can you give us an indication as to the approximate size.
Tom It's really a moving target I think what's most important is we manage our business on an annual basis. What we're most concerned about is making sure we get products to our customers in time for the planting season.
Fortunately at this point in time, we're not losing any sales for a while things are moving from quarter to quarter. We are not missing the planting window for our customers, which is the most important thing that we're most focused on.
Hey, Ed.
And can you give us an idea of what kind of yield you had on the sorghum here are in the North North America. This year.
Oh, no we can't Tom That's a company secret we don't want to know how people to know how many.
How many bags of seed we've got.
I'm, telling you we're going to be sold out of <unk>.
Some things and we're going to get our price for that because we took the risk on inventory.
<unk>.
Being a bit facetious, but yield.
Yields were good.
The crop season was excellent this year.
The bad things that can happen to you is as you get closer.
To harvest you can get a frost or you can reign one of those two on your crop before you get it in the in the warehouse and get it under a roof and protection right.
None of those things happened.
This was one of the best crop seasons for sorghum, and it's all in the barn now it's all out of the field and we're cleaning seemed like like Mad men.
Excellent well I appreciate the chance to ask your questions and we'll look forward to your turn and turning that into a into profits. Thanks. So much. Thank you. Thank you very much.
Again, if you have a question. Please press Star then one our next question will come from Jonathan Fite with KMF investments. Please go ahead.
Hey, good morning, Mark Good morning, Matt Thanks for taking my call.
Morning, Jonathan.
Just two quick questions wanted to understand if the.
October capital raise from your perspective kind of bridges, you to the back half of the year as gross margins and EBITDA growth or.
If you think another capital raise maybe required some time over the fiscal year as.
We continue to have negative EBITDA.
Yes, great question look I'm.
I'm, a small company guy that has built companies starting with venture capital right and so I push the balance sheet pretty hard.
I just believe that.
The return that we generate from eventually the final returns that we generate from invested capital in essence there'll be are going to be good and I want to maximize those returns and so I really keep.
A pretty short string on surplus cash I mean, there isn't any ever.
That's always a matter of good CFO and that's always an issue in the sense of.
C&I, sometimes different how much liquidity, we really need but now we push it hard and I think that we have.
Several different scenarios of things that we are.
Portfolio sort of decisions about where our focus is in the company that we're sort of working on that we haven't announced yet.
Obviously, we raised enough money that they are that we believe.
In the intermediate term that that will carry us through we don't think.
For this fiscal year that will be raising any significant amounts of money there might be a small amount raised for if our growth is higher or something like that but there's not going to be a big rates no.
Okay I appreciate that commentary.
As we look over the next couple of years, especially as we kind of get into year two years three of the ingredient deal and assuming things go well there and there is.
This opportunity to build a new production facility does any of the capex associated with that type of Buildout fall on Essent that'd be shoulders are is that we're really providing the trade technology in that physical infrastructure Buildout is really where our partners would be would be deploying their capital.
I mean, the look we have a proprietary position based on the genetics of our.
Varieties in stevia.
That.
That's been a saleable as there are no other company to have stevia breeding programs like ours or have had them as long as ours.
So that's that's why we did a deal with ingredient and we see a benefit and obviously working with them. They have a long reach towards the final customers in food industry.
It would be normal for them to build the production facility.
<unk>.
We've.
We're in discussions with them all the time about.
<unk>.
How much capital will it take and we've depending on.
Sort of are.
Projected returns and what those might look like for investing in a facility like that in the U S. We've told them that we'd like to at least be part of the discussion about how the capital is raised and we haven't made any final decisions, but we wanted to keep that window open but it's for US it's based on returns because.
We and ingredient locked at the hip I mean, theres no place else for.
Us to sell to someone as big as ingredient on important BD on there's no where else to get.
Stevia leaf at the cost that we can produce it in the U S. No one else can duplicate that.
Interesting, okay, well look forward to more updates along those lines I. Appreciate your time guys sure thing.
This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks. Please go ahead.
So thank you everyone for being on the call today.
It is exciting times at <unk> and in AG in general.
Years that that we work this hard to be part of it.
It's much easier selling to our farmer customer who's got a smile on his face because he's making money.
So look for good results from US this year and thank you for your interest in <unk>.
Bye Bye now.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Yeah.
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Okay.