Q2 2022 S&W Seed Co Earnings Call

Speaker 1: Good day and welcome to the SNWC Company reports second quarter fiscal year 2022 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Good day and welcome to the Swc Company reports second quarter fiscal year 2022 financial results Conference call. 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.

Speaker 1: After today's presentation, there will be an opportunity to ask questions.

After todays presentation, there will be an opportunity to ask questions. We.

Speaker 1: To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please also note, this event is being recorded. I would now like to turn the conference over to Robert.

Ask a question you May press Star then one on your telephone keypad.

Withdraw your question. Please press Star then two.

Please also note this event is being recorded.

I would now like to turn the conference over to Robert Blum.

With Lytham partners. Please go ahead.

Speaker 2: All right, thank you very much and thank all of you for joining us today to discuss the financial results for S&W Seed Company for the second quarter of fiscal 2022 ended December 31, 2021. With us on the call representing the company today are Mark Wong, President and Chief Executive Officer and Betsy Horton, Chief Financial Officer.

Alright, Thank you very much and thank all of you for joining us today to discuss the financial results.

W seed company for the second quarter of fiscal 2022 ended December 31 2021.

With us on the call representing representing the company today are Mark Wong, President and Chief Executive Officer, and Betsy Horton Chief Financial Officer.

Speaker 2: At the conclusion of today's prepared remarks, we'll open the call for a question and answer session.

At the conclusion of today's prepared remarks, we will open the call for a question and answer session.

Speaker 2: Before we begin with prepared remarks, please note that the statements made by the management team of S&W Seed Company during the course of this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E.

Before we begin with prepared remarks. Please note that the statements made by the management team of <unk> seed company. During the course of this conference call may contain forward looking statements within the meaning of section 27, a Securities Act of 1033 as amended and section 21 E.

Speaker 2: Securities Exchange Act of 1934 is amended, and such forward-looking statements are made pursuant to the safe, horrible provision of the Private Securities Litigation Reform Act of 1995. accurtory

Securities Exchange Act 1934 as amended.

Such forward looking statements are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 1095.

Speaker 2: 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.

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.

Speaker 2: but it seems to caution 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 in the company's 10-K for the fiscal year ended June 30, 2021, and other filings made by the company with its Securities and Exchange Commission.

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 projected in the forward looking statements as a result of various factors and other risks identified in the compass.

<unk> 10-K for the fiscal year ended June 32021, 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, whereas TWC company Mark. Please proceed.

Speaker 2: With that said, let me turn the call over to Mark Wong, Chief Executive Officer for S&W Seed Company. Mark, please proceed. Thank you.

Thank you. Thank you and welcome everyone to the call today.

Speaker 1: First of all, it is my great, great pleasure to introduce everyone on the call today to our new CFO , Betsy Horton, who actually has been here now three months, so not that new.

First of all it is my great great pleasure to introduce everyone on the call today to our new CFO .

Horton, who actually has been here now three months or not that new she came.

Speaker 1: came right after the last call, so you all didn't get to hear her. But she is a wonderful addition to the SNW senior staff. She has a long history in agriculture, 20 years with Cargill, three years with a company called Miller Milling, which was in the wheat, obviously business and she was CFO there and that was a bigger company than SNW. So she comes just with.

Right. After the last call for you all didn't get to hear her but she is a wonderful addition to the.

<unk> senior staff. She has a long history in agriculture, 20 years with Cargill three years with the company called Miller milling.

The wheat, obviously business and she was CFO there.

That was the bigger company then.

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It comes just with huge credential.

Speaker 1: huge credentials, a lot of energy, and the right background for the new F&W as we move into the future.ionn Junction area we always have this nice election like everywhere else that we remember that this new thing existed then came out.

A lot of energy.

And the right background for the new <unk> and W. As we move into the future remember that.

Speaker 1: uh in our model with stevia and our ingredient deal we are not just selling seed now we are also buying the leaf the dry leaf and from our farmers and we're selling that

In our model with stevia in our ingredient deal we are not just selling speed now we are also buying.

Let the dry leaf.

Our farmers and we're selling that to ingredient in back to back contract.

Speaker 1: to ingredient in back to back contract. So as we move closer to the consumer and we embed ourselves in the distribution chain of these products, we really feel very.

As we move forward.

Closer to the consumer and we embed ourselves in the distribution chain of these products, we really feel very very lucky to have Betsy with the person who has.

Speaker 1: lucky to have Betsy with us, the person who has a long history with Cargill where

A long history with cargo where.

Speaker 1: looking at supply chain and all of those kind of things for ag product was a big part of what PowerGuild does.

Looking at supply chain and all of those kind of things for AG product.

A big part of what <unk> done.

Speaker 1: So welcome Betsy and thank you so much for joining S&W. Your energy and your inquisitive questions and your sort of making us all look at the industry that we've known basically for our lifetime is just a breath of fresh air. And we really do appreciate you joining the senior.

So welcome Betsy and thank you so much for.

Joining ssw your energy and your.

The acquisitive question, you're sort of making us all look at the industry that we've known basically for our lifetime.

It's just a breath of fresh air and we really do appreciate you joining senior match from the company.

Speaker 1: Okay, on to my next point, I just want to make a few comments.

Okay onto my next point I, just wanted to make a few comments.

Speaker 1: Since the USDA has just come out with some projection for net farm income, I want to put this crazy market that we're all in with inflation and supply chain issues and

Since the USDA has just come out with.

Some projections for net farm income I want to put this crazy market that we're all in.

With inflation and supply chain issues and.

Speaker 1: all of sort of ag scratching their heads as other industries are. Just a few sort of grounding facts that we should all remember when we're looking at the industry and companies like S&W that are part of that industry.

All of sort of AG.

Scratching their heads as other industries are.

A few sort of grounding back.

We should all remember when we're looking at the industry.

And companies might get CW that are part of that industry. So.

Speaker 1: The USDA is saying that the net farm income for 2022 is projected to be $11314 billion.

The USDA is saying that.

Net farm income for 2022 is projected to be one.

100, <unk> hundred $14 billion.

Speaker 1: That's actually down from $5.4 billion or about 4.5%.

That's actually down.

Five $4 billion or about four 5% from the 2021 number of 119 billion.

Speaker 1: from the 2021 number of $119 billion of farm, net farm income. And remember, net farm income does include government programs and support from the federal and state government.

Farm net farm income and remember net farm income does include government programs and support from from the government from the federal and state government.

Speaker 1: It is important, though, to put these sort of projections in context, the 21 was a big increase in net farm income for farmers in the U.S.

It is important though to put these.

Sort of projections in context, the 'twenty one was a big.

Increase in net farm income for farmers in the U S.

Speaker 1: Farm income in net farm income in 2020 was only $94 billion. So 21 was about a 25% increase in net farm income for farmers. And as I said, 22 is about a 5% decrease.

Farm income in net farm income in 2020 with only $94 billion. So 21 was about a 25% increase in net farm income for farmers and as I said 22, it's about a 5% decrease.

Speaker 1: So while farmers are very optimistic about the crop that's being.

So while farmers are very optimistic about.

The crop that's being planted.

Speaker 1: this spring in the Northern Hemisphere. It's also good to look back on history and remember that there were in recent history both...

This spring in the northern Hemisphere.

It's also good to look back on history remember that there were in recent history. Both years of higher net farm income in years of lower net farm income so.

Speaker 1: years of higher net farm income and years of lower net farm income. So in 2016-17-18 farm

In.

2016, 17 18 farm.

Speaker 1: income was fairly low and in 2011 and 2013 farm income was higher than it actually is in 2022.

Income was fairly low and in 'twenty.

2011, and 13 farm income, which was higher than it actually is in 'twenty two.

Speaker 1: So it's a pretty profitable cycle for farmers in the US in 22, but not as profitable as kind of the best years of 20.

So it's a pretty profitable cycle for farmers in the U S in 'twenty two but.

Not as profitable as kind of the best years of 'twenty.

Speaker 1: 11 in 2013 and farmers are optimistic, but they're a little bit nervous. I mean, farm income is projected to be down while farm expenditures are projected to be up about 5%. So the farmer is spending more to generate very good farm income, but it's less farm income at least projected by the USDA than there was in 2000.

11 in 2013 and.

Farmers are optimistic, but theyre a little bit nervous.

Farm income is projected to be down while.

And detours farm expenditures are are projected to be up about 5%. So the farmer, you're spending more to generate.

Three goods farm income, but it's less farm income at least projected by the USDA than there was.

In 2021.

Speaker 1: So in that context of that general market, and I would say that Australia sort of, while I don't have specific numbers, and the ag business in Australia is much smaller than the US, I would say our opinion is that the markets in Australia also reflect the general conditions. OK, so here's one more question for you. What is the res Max

So in that context of.

That general market, and I would say that Australia sort of.

While I don't have specific numbers in the AG business in Australia is much smaller than the U S.

I would say our opinion is that.

Markets in Australia also reflect the general condition higher cost.

Speaker 1: very good income but not as high as maybe some other years. But farmers are optimistic, but they're a little bit wary that their input costs are increasing. Frankly, if you're in the animal protein business, it's feed that's higher. If you're in the row crop business, it's fertilizers really that have gone up in price because of cost increases. We all know what's happening to the price of oil and those kinds.

Very good income, but not as high as maybe some other years.

But farmers are optimistic, but they're a little bit worried that.

Their input costs are increasing and frankly.

If you are in the animal protein business.

The higher if you are in the row crop business. The fertilizers really that have gone up in price because of cost increases we all know what's happening to the price of oil and those kind of things.

Speaker 1: So that's the context in which we are operating S&W, in which we make, I make, and Betsy makes the report to you all today.

So that's the context in which.

We are operating <unk> in which we make I make and Betsy.

Our report to you all today, so in the second quarter, which is our smallest quarter remember and thats because.

Speaker 1: So in the second quarter, which is our smallest quarter, remember, and that's because in the third and fourth quarters, we're really selling seed for the spring planting in the northern hemisphere in the Americas. And because our business in Australia is really fall planted pasture products, it tends to overlap on our spring planting in the US in the northern.

In the third and fourth quarters were really selling.

Seed for the spring planting in the northern hemisphere in the Americas and because our.

Business in Australia is really all plant could pasture products.

It tend to overlap on our spring planting in the U S in the northern Hemisphere.

Speaker 1: And, you know, like all other companies who ship things long distances on water and by rail and by trucks.

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Like all other companies.

We ship things long distances on water in by rail and by truck.

Speaker 1: COVID and supply chain issues have been a problem for us. It's pushed our sales back a quarter in general, and Becky will go into some details about that. But net of all those difficulties which we're

Coven and supply chain issues have been.

Problem for us.

It's pushed our sales back a quarter.

General and Betsy will go into some details about that but net net of all of those difficulties, which we are.

Speaker 1: managing, I think fairly efficiently. We're still holding our guidance for the year of 80 to 85 million sales.

Managing.

I think fairly efficiently.

Still holding our guidance for.

For the year of 80 to 85.

No.

The key here.

Okay.

We're also obviously.

Speaker 1: still have Yibit-Dah smaller and smaller every year, but Yibit-Dah losses, so gross profit margins in addition to sales are a real priority for F&W.

Still have EBITDA smaller and smaller every year, but EBITDA losses. So gross profit margins in addition to sales.

Our real priority.

<unk> W.

Speaker 1: We believe that we have implemented price increases fairly across the whole product line that reflect our rising costs.

We believe that we have.

Implemented price increases fairly across the whole product line that reflect a rising cost.

Speaker 1: We are also trying to control our costs at sort of all levels. That includes the cost of producing our seeds, the cost of running our own plant.

Are also trying to control our costs. The total of all levels that includes.

The.

Cost of producing RC the cost of running our own plant.

Speaker 1: our research and sales and marketing costs we are trying to hold tight on. And on freight costs, which gets a lot of public press, we've managed to try to control that in a couple of different ways, more efficient and more people sort of looking at getting shipments out to customers.

Research and sales and marketing costs, we are trying to hold tight on and on freight cost which.

You get a lot of public press, we've managed to try to control that in a couple of different ways more efficient.

And more people sort of looking at getting shipments out to customers.

Speaker 1: passing on those freight costs to some of our customers where that's appropriate.

Passing on those freight cost to some of our customers, where that's appropriate and and.

Speaker 1: and just making sure that we are on top of on a daily basis the freight situation, both availability and price as we move our products to the market.

And just making sure that we are on top of them.

On a daily basis, the freight situation, both availability and price as we move our products to the market.

Speaker 1: If there is a big mover though in the next year or two for F&W it is

If there is a big mover, though in the next year or two for SW is.

Speaker 1: our largest opportunity to fail a double team sorghum. And as you all know, because we've talked about it in past calls, having a trait that Dexter asked him to complete,

Our largest opportunity the sale of double team.

Sorghum and as you all know because we've talked about it in past calls.

Having a trait.

Speaker 1: that is a herbicide trait is very, very valuable. There are a handful of traits in all of agriculture, and it is very unusual for a small company like SW to have the wherewithal to.

That is the herbicide trait is is very very valuable there are a handful of trades.

In all of Agriculture, and it is very unusual for a small company like Ssw have.

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Wherewithal to spend the development time and have the management capability to base.

Speaker 1: spend the development time and have the management capability to basically bring a product like Double Team through the whole process and produce the seed and introduce it to our farmer customers. And that's the process that we're working on.

Basically, bringing a product like double team through the whole process and produce the seed and introduce it to our farmer customers and Thats. The process that we're in right now we're in a bit of a rising market. The wind does that are back in sorghum. This year, the USDA has announced that the sorghum.

Speaker 1: We're in a bit of a rising market. So the wind is at our backs in sorghum this year, the USDA has announced that the sorghum crop that was planted was about 7.3 million acres last year, which is up 24%.

Crop that was planted.

<unk> was about seven 3 million acres last year, which.

It's up.

24% from the $5 9 million acres that were planted.

Speaker 1: from the 5.9 million acres that were planted the previous year. So farmers are kind of voting with their feet. Sorghum is a good alternative to...

Previous years, so farmers are kind of voting with their feet sorghum as a good alternative to corn and.

Speaker 1: And, you know, the input costs are less. The water required to make a crop are less.

The input costs are less the water required to make a crop are left and the economics of the grain price give farmers and excellent profit. So more acreage absorbed them went in to production in 2021, and we hope that that.

Speaker 1: And the economics of the grain price give farmers an excellent profit. So more acres of sorghum went in to production in 2021. And we hope that that continues in 2022 spring planting, which obviously for the US will be sort of in the April , May, June time, depending on where you are in the latitude wise in the US.

Continued in 2022 spring planting, which obviously for the U S will be sort of in the April May June time, depending on where you are in the.

In the latitude wise in the U S.

Speaker 1: So as I said, having a trade like this is very unusual for a small company. I can say in my career of 45 years doing this, I've been CEO of three other companies and none of them own their own trade. We did sell trades at my last company which Monsanto purchased and they purchased it because most of the trades we were selling were Monsanto.

So as I said, having a trade like there.

Is very unusual for a small company I can say in my.

Career over 45 years doing this ive been.

CEO of three other companies and none of them own their own trade.

We did sell trade at my last company, which Monsanto purchase and they purchase it because most of the trades, we were selling where monsanto trade and they.

Speaker 1: and they wanted to basically keep that margin sort of in our products. So they bought the company that I built there.

Wanted to basically keep that margin.

In our products. So they bought the company that I built there.

So we yes.

Speaker 1: at that company, which was called Emergent Genetics, we sold basically Monsanto and Congenda traits. We did not have a trait of our own. So the fact that S&W has double team is the thing that every morning I wake up with a smile on my face and I thank all of our dedicated employees in research, marketing, and production who have helped us get through this six to eight year product development cycle and bring this product to the hands of our farmers.

At that company, which was called emergent genetics, we sold basically Monsanto and Syngenta trade, we did not have a trade of our own. So the fact that ssw has double team.

Is the thing that every morning, I wake up with a smile on my face and I think all of our dedicated employees in research marketing and production who have helped us get through this six to eight year product development cycle and bring this product.

To the hands of our farmers.

Speaker 1: And you'll be hearing more about double team as we make and take market share in sorghum. So that's going to be a recurring theme to give all of you an update on the progress that we're making in our most exciting.

And youll be hearing more about double team as we make.

And take.

<unk> share in sorghum.

So that's going to be.

A recurring theme to give all of you an update on progress that we're making in our moats.

Are you doing.

Yeah.

Speaker 1: On the alfalfa side, we're seeing strong demand. You know, alfalfa's really first and best use is to the dairy industry. Dairy prices are up for milk and cheese. And, you know, farmers want to buy a good, high performing alfalfa varieties because they can get milk yield from their cows by feeding the best high protein feed.

On the upper side, we're seeing strong demand.

Alfalfa is really <unk>.

First and best use this to the dairy industry dairy prices are up for milk and cheese.

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Farmers want to buy.

Good high performing alfalfa varieties, because they can get milk yield on the from their couch by feeding the best high protein feed.

Speaker 1: We are also seeing some rising prices, mainly because the last couple of years where we had more inventory in the industry than really there was demand has finally sort of fixed itself. It's Cargill likes to say high prices, fixed supply. And so the.

We are also seeing some rising prices mainly because the.

Last couple of years, where we had more.

More inventory in the industry than really there was demand is finally.

Sort of fixed itself its cargo likes to say high prices fixed supply and so.

The.

Speaker 1: The prices in alfalfa are rising because supply is limited.

The prices in Alpha are rising because supply is limited.

Speaker 1: And you'll hear from Betsy a little bit that there are some positives and negatives about this. You know, for sure, we're shipping more crop out of our existing production for this year. So that's.

And Youll hear from back to you a little bit that there are some <unk>.

Positives and negatives about debt, we're sure we're shipping more crop out of our existing production for this year so that.

Speaker 1: alfalfa seed production that's in the ground right now yet to be harvested. So the positive there is that we have more efficient use of our balance sheet, more inventory turns in alfalfa. The negatives are that we have

Alfalfa seed production that's in the ground right now yet to be harvested.

The positive there is that we have more efficient use of our balance sheet more inventory turn and alfalfa. The negatives are that we have timing is very important we have to harvest the clean with the post the feedback received and ship it to our customers all before their spring planting season.

Speaker 1: Timing is very important. We have to harvest the seed, clean the seed, post the seed, bag the seed, and ship it to our customers all before their spring planting season which are mainly the Middle East and North African countries are the main markets that we're selling into with our

Which are mainly.

The middle East and North African countries are the main market.

Selling into with our.

Non dormant alfalfa product.

Speaker 1: On Stevia, we continue to move forward with that, as I mentioned in my opening comments.

On Stevia, we continue to move forward with that.

As I mentioned.

In my opening comments.

Speaker 1: We're very excited to have Betsy's expertise in the company. We think that by basically selling seed to our farmers and then buying their output, which is the dry leaf.

We're very excited to have these expertise in the company we think that.

Basically selling seed to our farmers and then buying their output, which is the dry leaf.

Speaker 1: that contains the stevia sweetener and then selling that to our partner ingredient is a business that we want to do more of.

That contains the stevia sweetener, and then selling that to our partner ingredient.

<unk> is a business that we want to do more of.

Speaker 1: And so as I've also said, you know, we're looking at other things other than stevia to produce that we can take a position in the output that our farmers have. Some of those might be, you know, fuel biofuels, green biofuels or green biofuels or green biofuels.

And so as I've also said, we're looking at other things.

Other than stevia to do.

Is that we can take a position in the output that our farmers have.

Some of those might be fueled biofuel green biofuels or.

Green.

Speaker 1: degradable plastics. Those things are discovered already and we're taking over.

Degradable plastics those genes are discovered already and for taking over.

Speaker 1: So, you know, it's a great situation with ingredient. We have.

So.

Great situation with ingredient we have.

Speaker 1: a belief in our product line that says we can produce dry leaf in the U.S.

I believe in our product line that says we can produce dry leaf in the U S on a cost per pound basis at competitive with China.

Speaker 1: on a cost per pound basis that's competitive with China. That's something that no one ever believes would be possible, given the cost of Chinese labor. But that's also another call we have developed with our proprietary germplasm, a production system that basically farms stevia as a perennial for a number of years. And then we're able to take multiple harvests off to spread the cost over more productive.

Something that no one ever believed would be possible given the cost of the Chinese labor.

After the call we have developed with our proprietary germ plasm production system that basically.

Farms Cvs as the perennial for.

A number of years and then we're able to take multiple harvests stop the spread the cost over more production.

Speaker 1: and produced at a price that's competitive on a per pound basis with China.

And produced at a price that's competitive on a per pound basis with China. We also think that it's pretty clear from all the logistics issues that.

Speaker 1: We also think that it's pretty clear from all the logistics issues that

Speaker 1: If you have a similar cost on a per pound basis.

If you have similar cost on a per pound basis.

Speaker 1: it's a pretty easy decision to sort of match local production to local markets and that is avoiding these supply chain issues which are frankly

It's a pretty easy decision to sort of match local production for local markets and that.

Avoiding these supply chain issues, which.

Our frankly.

Speaker 1: not controllable by most small companies like S&W. We can get efficient there. We can control our costs as best we can. We can work with our customers on all of that, but we're not big enough to rent our own ships, or have our own containers, or have a fleet of trucks, and so we're dependent on third parties.

Not controllable by most small companies like us and W. We can we can get efficient there we can control our cost.

Best we can we can work with our customers on all of that but.

We're not big enough to rent or own ships or have our own containers or have a fleet of trucks and so we're dependent on third party involved so having stevia produced in the U S for.

Speaker 1: So having stevia produced in the US for a stevia market, that is the world's biggest. So in the US, stevia is about a 900 million dollar value crop at the consumer level. And those are really, we believe, valuable things for the future of S&W.

Our stevia market that is the world's biggest U S. TB is about 900.

Million dollar.

Value crop.

At the consumer level those are really we believe valuable things for the future of FW.

Speaker 1: As we see these kind of opportunities, so Stevia, better pricing, which may not be a long-term thing in Alfalfa, but for sure in the next few years we believe we'll see that. And then the double-team opportunity in sorghum. It leads us to always raise the question that good companies have to ask, which is should we be restructuring, refocusing the business?

As we see these kind of opportunities so stevia.

Better pricing.

May not be a long term thing in alfalfa, but for sure in the next few years. We believe we will see that and then the double team opportunity in sorghum it leads us.

Always raise the question that good company.

At which it should.

Should we be restructuring refocusing the business and I'll tell you right now we're going through a process of taking a look at those three main crop that I've talked about sorghum, alfalfa and Cvs and making sure that we're doing everything we can to harvest the value that we're creating in those crops.

Speaker 1: And I'll tell you right now, we're going through a process of taking a look at those.

Speaker 1: three main crops that I've talked about sorghum, alfalfa and stevia and making sure that we're doing everything we can to harvest the value that we're creating in those crops.

Speaker 1: And if that means we have to pay a bit of less attention to some other things, we're going to do that and you will hear about that story in the next couple of calls.

And if that means we have to pay a bit of less attention to some other things.

We're going to do that and you will hear about that story.

In the next couple of calls.

Speaker 1: So with that, those are my general remarks. And again, it is my great pleasure to welcome Betsy to the senior management team of S&W. And Betsy, I will give the podium over to you to make your comments on the financial specifics of S&W for this quarter. Thanks.

So with that those are my general remarks.

Again, it is my great pleasure to welcome Betsy to the senior management team of <unk> and Betsy I will give the.

<unk>.

Podium over to you to make your comments on the financial specifics the vessel W. For this quarter. Thanks, so much.

Thank you so much mark and thanks to everyone joining us on the call. This morning.

Speaker 3: Thank you so much, Mark. And thanks to everyone joining us on the call this morning.

Speaker 3: With this being my first quarter as the chief financial officer of S&W, let me express how delighted I am to join this team with all the opportunities we have in front of us. I believe S&W is uniquely positioned to benefit from some significant macro trends with our next generation products and a global infrastructure that allows us to become a leader in a number of key middle market trends.

This being my first quarter as the Chief Financial Officer of Athene W. Let me express how delighted I am to join the team with all the opportunities we have in front of us.

I believe <unk> is uniquely positioned to benefit from significant macro trends with our next generation product and a global infrastructure that allows us to become a leader in a number of key middle market Clos.

Speaker 3: As Mark mentioned, my background is solidly in agriculture, first with 20 years at Cargill in various financial roles, and then the past three years as the CFO of a flour milling company called Miller Milling.

As Mark mentioned my background is solidly in agriculture first with 20 years at Cargill in various financial roles and then the past three years as the CFO of a flour milling company called Miller milling.

Speaker 3: I'm excited to bring that experience from a great risk management company like Cargill to help drive S&W into our next phase.

I'm excited to bring that experience from a great risk management company like Cargill to help drive <unk> into our next phase.

Speaker 3: I thank Mark and the board for this opportunity, and I look forward to some fun things ahead. With that, let's run through some questions.

I think mark and the board for this opportunity and it looks forward to some fun things ahead.

With that let's run through some key financial items.

Speaker 3: Core revenue, which excludes revenue to Pioneer, was $12.6 million for the second quarter, an increase of 15% compared to the $11 million in second quarter of the prior year.

Core revenue, which excludes revenue to pioneer was $12 $6 million for the second quarter, an increase of 15% compared to the $11 million in second quarter of the prior year.

Speaker 3: The increase in core revenue for the second quarter came primarily from sales to the Middle East, Argentina, and South Africa.

The increase in core revenue for the second quarter came primarily from sales to the middle East, Argentina, and South Africa.

Speaker 3: As we mentioned in the press release, the second quarter is seasonally a quarter, which is characterized by lower margin international alfalfa seed sales and very little from our higher margin sorghum sales, which tend to occur in the third and fourth fiscal quarter.

As we mentioned in the press release, the second quarter is seasonally a quarter, which is characterized by lower margin international alfalfa seed sale and very little from our higher margin sorghum sales, which tend to occur in the third and fourth fiscal quarters.

An important note that was made last quarter that I want to reiterate.

Speaker 3: An important note that was made last quarter that I want to reiterate. Poor revenue and total revenue will be the same number in fiscal 2020.

Core revenue and total revenue will be the same number in fiscal 2022.

Speaker 3: We will continue to reference core revenue as long as we are comparing against fiscal 2021 numbers.

We will continue to reference core revenue as long as we are comparing against.

'twenty one numbers.

Speaker 3: Our prior year Q2 results include revenue from Pioneer of $4.1 million, which brought year-ago total revenue to $15.1 million.

Our prior year Q2 results include revenue from pioneer a $4 1 million, which brought year ago total revenue of $15 1 million.

Speaker 3: As was discussed during the last two calls and Mark shared again today, we, like many other companies, are experiencing certain supply chain and logistical challenges, which is resulting in a shift of revenues to the right.

As was discussed during the last few calls and Marc shared again today.

Like many other companies are experiencing certain supply chain and logistical challenges, which is resulting in a shift of revenue to the right.

Speaker 3: We previously had about $5 million of revenue slated for Q4 21, which shifted into last quarter. And this quarter, we had about $3 million in sales, which shifted to the third quarter.

We previously had about $5 million of revenue slated for Q4 'twenty one.

<unk> shifted into last quarter and this quarter, we had about $3 million in sales that shifted to the third quarter.

Speaker 3: The limited availability of overseas containers and ongoing congestion at the port continues to delay shipments and complicate our operation.

The limited availability of overseas containers and ongoing congestion at the port continues to delay shipments and complicate our operation.

Speaker 3: At this point, we are expecting these dynamics to persist throughout the year.

At this point, we are expecting these dynamics to persist throughout the year.

Speaker 3: The annual revenue guidance we have put forth of 80 to 85 million takes into account these dynamics to the extent we can forecast.

The annual revenue guidance, we have put forth of $80 to $85 million takes into account. These dynamic to the extent we can forecast.

Therefore, we have already accounted for certain shipments would have historically made in June .

Speaker 3: Therefore, we have already accounted for certain shipments we would have historically made in June that will likely shift into fiscal 2020.

We will likely shift into fiscal 2023.

Speaker 3: We do see a risk of being able to process and ship the upcoming Australian harvest, which is coming out of the ground around April , and therefore the timelines to harvest the seed, clean, package, and ship is likely going to be more difficult this year than in years past when we had higher levels of carryover.

We do see a risk of being able to process and ship the upcoming Australian harvest, which is coming out of the ground around April and therefore, the timelines to harvest the seed clean package and ship is likely going to be more difficult. This year than in years past when we had higher levels of carryover crop.

Speaker 3: We are all optimistic that this global issue will be resolved, and we will see a bit of catch up. But the situation is fluid and impossible for us to control or forecast precisely.

We are all optimistic that this global issue will be resolved and we will see a bit of catch up but the situation is fluid and impossible for us to control our forecast precisely.

Now turning to margins.

Speaker 3: Gap gross margins were 13.1% compared to 13.5 in the prior year's second quarter.

GAAP gross margins were 13, 1% compared to $13 five in the prior year second quarter.

Speaker 3: adjusted growth margins, which excludes the impact of inventory right bounds, were 16.6% in the second quarter compared to adjusted growth margins of 13.8% in the second quarter of the prior year.

Adjusted gross margin, which excludes the impact of inventory write downs or 16, 6% in the second quarter compared to adjusted gross margin of 13 eight in second quarter of the prior year.

Speaker 3: Further, if we were to exclude the contributions from Pioneer from last year's results, which again were not repeated this quarter, adjusted gross margins last year would have been only 9.8%

Further if we were to exclude the contribution from pioneer from last year's results, which again were not repeated this quarter adjusted gross margins last year would have been only nine 8%.

Speaker 3: When you look at the improvements made during the quarter on a relative apples to apples basis, margins improved by 680 basis.

So when you look at the improvements made during the quarter on a relative apples to apples basis.

<unk> improved by 680 basis points.

Speaker 3: Considering the seasonality of the business, looking at the second quarter isn't always a full indication of the gross margin on an annualized.

Considering the seasonality of the business looking at the second quarter isn't always the full indication of the gross margin on an annualized basis.

Speaker 3: However, I believe the 680 basis point increase is a strong indicator of the progress being made to drive overall gross margin in

However, I believe the 680 basis point increase is a strong indicator of the progress being made to drive overall gross margin improvement.

Speaker 3: As a reminder, the key initiatives we are implementing to impact growth margins include price increases on the majority of our products to address overall rising costs and to more properly reflect the value of our proprietary products.

As a reminder of the key initiatives, we are implementing to impact gross margin include price increases on the majority of our product to address overall rising cost and to more properly reflect the value of our proprietary products.

Speaker 3: We are also modifying the terms and conditions of standard customer contracts to address the volatility and increased cost of freight and transportation.

We are also modifying the terms and condition of standard customer contract to address the volatility and increased cost of freight and transportation.

Speaker 3: As we look at the rest of the fiscal year, we continue to expect strong gross margin improvements compared to the levels achieved in fiscal 2021.

As we look at the rest of the fiscal year. We continue to expect strong gross margin improvement compared to the levels achieved in fiscal 2021.

Now I will transition to operating expenses.

Speaker 3: Our gap operating expenses for the second quarter of fiscal 2022 were 10.6 million compared to 9.4 in the second quarter of the prior year.

Our GAAP operating expenses for the second quarter of fiscal 2022 were $10 6 million compared to nine four in the second quarter of the prior year.

Speaker 3: The increase in operating expenses is attributed to a non-recurring $1.2 million increase in employee and severance related expenses.

The increase in operating expenses is attributed to a nonrecurring $1 $2 million increase in employee and severance related expenses.

Speaker 3: R&D and other SG&A expenses remained flat compared to prior year quarter and up just slightly from the most recent.

R&D and other SG&A expenses remained flat compared to prior year quarter and up just slightly from the most recent first quarter.

Speaker 3: I know in the past we have provided a general outlook for our operating expenses on a full-year basis and want to do so going forward.

I know in the past we have provided a general outlook for our operating expenses on a full year basis and want to do so going forward.

Speaker 3: So as we look at fiscal 2022 on a whole, we expect SG&A to be approximately 26.1 million, which includes non-cash stock-based compensation of approximately 2.2 million.

So as we look at fiscal 2022 on a whole we expect SG&A to be approximately $26 1 million, which includes noncash stock based compensation of approximately $2 2 million.

Speaker 3: Note that the increase from last quarter is due to the employee and severance related expenses I mentioned a moment

Note that the increase from last quarter due to the employee and severance related expenses I mentioned a moment ago.

Speaker 3: We expect R&D to be approximately 8 million in fiscal 2022, and depreciation and amortization to be approximately 6 million.

We expect R&D to be approximately $8 million in fiscal 2022, and depreciation and amortization to be approximately $6 million.

Speaker 3: At the adjusted EBITDA line, we had negative EBITDA of $6.5 million for the current quarter, compared to negative EBITDA of $5.5 million in the prior year.

At the adjusted EBITDA line, we had negative EBITDA of $6 $5 million for the current quarter.

<unk> to negative EBITDA of $5 5 million in the prior year.

Speaker 3: Now recall what I said a moment ago about the non-recurring $1.2 million increase in employee and severance related expenses.

Now recall, what I said, a moment ago about the nonrecurring $1 2 million increase in employee and severance related expenses.

Speaker 3: $700,000 of that is not excluded from adjusted.

$700000 of that is not excluded from adjusted EBITDA.

Speaker 3: If we were to exclude it, since it is a one-time expense, the current border-adjusted EBITDA would have been very close to the prior year.

If we were to explore that.

It is a onetime expense.

The current quarter adjusted EBITDA would have been very close to the prior year.

And once again, if we were to exclude contributions from pioneer and look at this on an apples to apples basis. Adjusted EBITDA last year would have been a negative $6 4 million.

Speaker 3: And once again, if we were to exclude contributions from Pioneer and look at this on an apples-to-apples basis, adjusted EBITDA last year would have been a negative 6.4 million.

Speaker 3: Therefore, the improvement would have been more than a half million dollars.

Therefore, the improvement would have been more than a $5 million.

Speaker 3: I recognize there's a lot of moving parts there, but I believe this helps to highlight the operating improvement that may not be visible on the...

I recognize there's a lot of moving parts there, but I believe this helps to highlight the operating improvement that may not be visible on the horizon.

Speaker 3: As you can hear from the general guidelines we have provided regarding revenue guidance, gross margin improvement, and operating expense expectations, the second half of the fiscal year will show significant improvement on the adjusted EBITDA line.

As you can hear from the general guidelines, we have provided regarding regarding revenue guidance gross margin improvement and operating expense expectations. The second half of the fiscal year will show significant improvement on the adjusted EBITDA line.

Now a few general comments on our future outlook.

Speaker 3: We continue to be focused on driving improved bottom line financial results.

We continue to be focused on driving improved bottom line financial results.

There are three key levers to that.

Speaker 3: we will increase sales and improve gross margins while maintaining or reducing operating expenses.

We will increase sales.

And improved gross margin, while maintaining or reducing operating expenses.

Speaker 3: We are gaining enthusiasm for our double team outlook, which we believe will be a key driver to both revenue growth and growth margins, as this product has margins far higher than the other products in our portfolio.

We are gaining enthusiasm for our double team outlet, which we believe will be a key driver to both revenue growth and gross margin. As this product has margins are higher than the other products in our portfolio.

Despite the logistical challenges we are driving towards core revenue growth in fiscal 2022.

Speaker 3: Despite the logistical challenges, we are driving toward core revenue growth in fiscal 2022 and believe that number will ramp further in fiscal 2023 as we are able to increase our double team speed production.

I believe that number will ramp further in fiscal 'twenty three as we are able to increase our double team in production.

Speaker 3: Simultaneously, we are focused on holding and reducing operating expenses where possible to ensure those margin improvements drop to the bottom line.

Simultaneously, we are focused on holding and reducing operating expenses, where possible to ensure those margin improvements drop to the bottom line.

Speaker 3: I just want to reiterate my excitement in joining SNW and how much opportunity I...

I just wanted to reiterate my excitement in joining us in <unk> and how much opportunity I see for this company I look forward to speaking with and meeting many of you in the near future.

Speaker 3: I look forward to speaking with and meeting many of you in the near future. With that, I will turn to the next speaker.

With that I will turn the call back over to Mark.

Thank you Betsy and I just wanted to conclude the call before we take questions with the.

Speaker 1: Thank you, Betsy, and I just want to conclude the call before we take questions with a couple of most important points, the sort of take home message of this call. So, as Betsy said, we're going to drive sales, but we're going to drive them to more profitable sales mix.

A couple of most important point.

Sort of take home message of this call so.

He said, we're going to drive sales.

But we're going to drive them to more profitable sales mix.

Speaker 1: more proprietary products with trade if possible, and fewer commodities. We think that has implications for our margin and it has implementation issues for our whole business going forward.

More proprietary products with trade if possible and fewer commodities, we think that has implications for our margin and it has implementation.

Issues for our whole business going forward.

Speaker 1: We believe that this kind of drive will improve margins and help us to also focus on our costs and allow us to spend our money where we're going to get the most.

We believe that this kind of drive will improve margin and help US also focus on our cost and allow us to spend our money, where we're going to get the most return.

Speaker 1: And for the near future, a big, big opportunity for us, pushing proprietary double team into the market, selling alfalfa in a rising price environment, and moving forward with our production and partnership with ingredient and speed.

And for the near future a big big opportunity for us is pushing proprietary double team into the market.

Selling alfalfa.

A rising price environment.

And moving forward with our production in partnership with.

Ingredient and Cvs.

Speaker 1: So, with that, I will, we've concluded our remarks today and I'll turn it back over to the operator and we can take some questions. Thank you so much for everyone attending the call today. Thanks.

So with that I will we've concluded our remarks today and I'll turn it back over to the operator, we can take some questions. Thank you so much.

For everyone attending the call today, Thanks again.

Thank you.

Speaker 1: Thank you. We will now begin the question and answer session. To ask the question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key....

We will now begin the question and answer session.

Ask the 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.

Speaker 1: To withdraw your question, please press star then 2.

To withdraw your question. Please press Star then two.

Speaker 1: At this time, we will pause momentarily to assemble our roster.

At this time, we will pause momentarily to assemble our roster.

Speaker 1: And the first question today will come from Starkeese Trebetian with B. Riley Securities. Please go ahead.

And the first question today will come from Sarkis <unk> with B Riley Securities. Please go ahead.

Speaker 4: Hey, good morning, Mark and Betsy, and thank you for taking my question here. I just wanted to

Hey, good morning, Mark and Betsy and thank you for taking my question here.

Just wanted to.

First talk a little bit about statement I saw on the press release it states that restructuring.

Speaker 4: first talk a little bit about a statement I saw in the press release. It's like that restructuring some key elements to improve financial results. Just wanted to see if you can dive into this in a little bit more detail.

Restructuring some key elements to improve financial results.

Just wanted to see if you can dive into this in a little bit more detail.

Speaker 1: Great, Sarkeesh. So, look, as we gain market share in introducing double team and, you know, we're, and we see, as I said, even a rising acre market in Sorghum.

Great start Keith so look as we.

Gain market share and introduction introducing double team and.

And we see as I said even.

Rising acre market.

Sorghum.

Speaker 1: um it's pretty clear based on you know I mean we sell forage oats for gross profit margins of 17 18 percent and we sell double team uh in grain sorghum for margins of 70 percent um and it's pretty clear that you know we need to maximize those high margin crops and we need to um

It's pretty clear based on that.

We sell porridge oats for gross profit margins of 17%, 18% and we sell double team.

In grain sorghum from margins of 70%.

And it's pretty clear that we need to maximize.

Those high margin crop and we need to.

Our focus are.

Speaker 1: focus our efforts on those and we need to apply our balance sheet because we're in a big growth phase for those products and we're spending money to produce inventory.

On those and we need to apply our balance sheet.

We're in a big growth phase for those products and we are spending money to produce inventory.

Yeah.

Speaker 1: And, you know, we really it's more and more obvious that these great opportunities in sorghum are clear to us and we're gaining share that we should that we should be refocusing the company.

And we really.

More and more obvious.

Rate opportunities.

In sorghum are clear to us and we're gaining share that we should that we should be refocusing the company on those on those high margin crops and we should be.

Speaker 1: on those high margin crops. And we should be selling out every year of the low margin crops and carrying no inventory and not spending huge amounts of marketing dollars or production dollars.

Selling out every year of the low margin, perhaps from carrying no inventory.

And not spending huge amount of marketing dollars or production.

Those crops.

Speaker 4: Got it. And this maybe ties back to my next question. Reading through the 10Q that was filed.

Got it and this is maybe it ties back to my next question reading through the 10-Q that was filed.

Speaker 4: you know, found a line that says that you're actively evaluating financing and strategic alternatives. Can you maybe give more color on that disclosure?

Found a line that says that you are actively evaluating financing and strategic alternatives can you maybe give more color on that disclosure.

Speaker 1: Yeah, I mean, you know, we're always looking at the.

Yes, I mean.

We're always looking at.

Speaker 1: better opportunities as we're growing. You know, the question always comes up for smaller companies. How do you do that? You clearly in this kind of market, you want to maximize the

Better opportunities as we're growing the question always comes up for smaller companies. How do you do that you clearly in this kind of market you want to maximize the.

Speaker 1: the debt that you have available to the company. So being able to use your receivables and inventory as a borrowing base for your evolving credit, which can exceed businesses always.

That you have available to the company, so being able to use your receivables and inventory as the borrowing base for your revolving credit which in the AG business is always a significant number.

Speaker 1: significant number. That's one thing that we're looking at. You know, we probably will need to raise a bit of equity just because of that.

That's one thing that we're looking at.

We probably will need.

Need to raise.

Bit of equity just because of that.

Speaker 1: revolving credit line will not cover all of the additions that we want to make in double team.

Revolving credit line will not cover all of the additions that we want to make in double team and all.

No we don't.

We don't give guidance to earnings, but I will tell you that.

Speaker 1: We don't give guidance to earnings, but I'll tell you that.

Speaker 1: You know, it's a significant number. I mean, the double team sales that we're expecting, and we pointed this out in our December 2020 seed and trait development report, we've said that revenue from tech products, seed and licenses, et cetera, in the three years, you know, sort of short vision, we're going to be $12 million.

It's a significant number I mean, the double team sales that we're expecting.

And we pointed this out in.

Our December 2020 seed and trait development report, we said that revenue from tech product seed and licenses et cetera.

In the three years.

So the short vision, we're going to be $12 million.

Speaker 1: We think double team will be all of that easily, easily in the sense that if we execute and based on the reception we've had from farmers in the field, we think that the double team will make those kind of numbers. And so, you know, we're in a phase where we have.

We think double team will be all of that easily.

Italy in the sense that if we execute and based on the reception that we've had from farmers in the field, we think that the.

Double team will.

We'll make those kind of numbers and so we're in a phase where we are.

Speaker 1: a great opportunity in a high margin product to really change our sales mix and to really increase our percent gross profit margin because this product is...

A great opportunity.

High margin product to really change our sales mix.

To really increase our.

Percent gross profit margin.

Because.

This product is.

Speaker 1: high performer in the farmers field and farmers want to buy it. And at these kind of margins, we want to sell every bag.

A high performer in the farmers' field and farmers want to buy it at these kind of margins we want to sell every bag that we can.

Speaker 4: Thank you for that. And that's a great segue into my next question where, you know, just wanted to kind of.

Thank you for that and that's a great segue into my next question, where I just wanted to kind of get a better understanding or a bridge. If you will on what specifically needs to happen between now and fiscal 'twenty four for the company to achieve that $130 million in topline boost the gross margin profile.

Speaker 4: get a better understanding or a bridge, if you will, on what specifically needs to happen between now and fiscal 24 for the company to achieve that $130 million in top line, boost the gross margin profile to 35%, and generate those 10% EBITDA margins. I mean, those were the metrics you communicated in the December 2020 tech deck. So just want to see if there's anything that you can give us from a gliding fast perspective.

The 35% and generate those 10% EBITDA margins I mean, those are the metrics you communicated.

December 2020.

<unk>. So just wanted to see if there is anything that you can give us from a gliding path perspective. Thank you.

Speaker 1: Yeah, I mean, the basic business has been growing 10% or so a year, that in our expectation will continue, but it's double team that's gonna, it's gonna, you know, make a big change.

Yes, I mean, the basic business has been growing 10% or so a year.

And our expectation will continue but it has a double a theme that's been.

No.

Make a big change.

Speaker 1: Um, you know, companies are willing to invest the six to eight years.

Companies are willing to invest six to eight years.

Speaker 1: to create these products and test them in the market and produce the seed because they're profitable. And, as I said, in the whole of seed biotech agriculture, which is dominated by the big four...

To create these prada.

Products and test them in the market and produce the seed.

Because they're profitable and as I said in the whole of.

Seed biotech agriculture, which.

It's dominated by the big four.

Speaker 1: you can count the number of genes that those companies offer on your hands and your feet after 20 years of doing R&D. So these genes are incredibly valuable and they're valuable because the farmer will pay for them because the farmer gets a higher yield and makes more money per acre even though he pays more for that bag of seeds he makes multiples of that from each acre that he wears. And so um

You can count the number of genes that both companies offer.

Your hands in your feet. After 20 years of doing R&D. So these genes are incredibly valuable and they are a valuable because the farmer will pay for them because the farmer.

Higher yields and makes more money per acre, even though he pays more for that bankruptcy. He makes multiples of that.

Each acre that each plant.

And so.

Speaker 1: If you look back historically at the Monsanto example and how they put multiple traits in the different crops and what that resulted in terms of earnings and eventually stopped share price in their buyout the buyer.

If you look back historically at the Monsanto example, in how they put multiple trade.

In the different crops.

What that resulted.

In terms of earnings and eventually <unk>.

Their price and their buyout of the buyer.

Speaker 1: You know, we're not going to have a pipeline of products because we don't have a bigger R&D budget. But in this case for double team, you know, it's a huge opportunity and we're going to maximize the benefit to S&W.

We're not going to have a pipeline of products because we don't have as bigger R&D budget, but in this case for double team.

Uh huh.

Huge opportunity and we're going to maximize the benefits of CW.

Speaker 1: Herbicide resistance traits are the easiest to sell to farmers.

Herbicide resistance traits are the easiest to sell to farmers.

Speaker 1: easier than insect traits because insects don't show up every year and easier than some of the other traits.

<unk> insect trades because in Texas.

Show up every year.

And easier than some of the other traits.

Speaker 1: um for disease resistance and things like that because diseases also don't show up every year.

<unk>.

For disease resistance and things like that because diseases also don't show up every year they sort of.

Speaker 1: depend more on whether. Weeds are pretty always there. And so, especially in sorghum, which is a grass, we have grass weed problems and double team controls those grass weeds. And that's what farmers want.

Depend more on whether we've got a pretty always there and so especially in sorghum, which is the graph we have grabbed we'd problems and double team.

Trolls those graphs we.

That's what farmers one.

Great. That's all for me thank you.

Thanks Archie.

Speaker 1: The next question will be from Ben Cleave with Lake Street Capital. Please go ahead.

The next question will be from Ben pleased with Lake Street Capital. Please go ahead.

Speaker 5: All right, thanks for taking my questions. And sorry, I had to hop out for a minute, though, if I'm asking you something that you've already addressed, I apologize for that. A few questions for me. First of all, on the supply chain issues and the degree to which it's affecting double team, if at all. Are you expecting any issues whatsoever around the scaling of inventory for the seed side? And then on the chemical side, do you foresee any issues with the supply chain, preventing farmers from getting the corresponding?

Alright, Thanks for taking my questions and sorry, I had to hop out for a minute. So if I'm asking you something you've already addressed I apologize for that a.

A few questions from me first of all on the supply chain issues and the degree to which it's affecting double team if at all.

Are you expecting any issues whatsoever around the scaling of inventory for.

For the seed side, and then on the chemical side.

Do you foresee any issues with the supply chain, preventing farmers from getting the corresponding.

Speaker 1: the corresponding herbicide for this upcoming growing season? Yeah, great question Ben. We don't. At this point, what's limiting us is the biology of seed multiplication, right?

A corresponding herbicide for up for the upcoming growing season, yes, great Great question Ben.

We don't at this point.

Whats limiting us is the biology of seed multiplication rate so sorghum as a hybrid so you have to have the three line hybrid they call. It. So you have to have a male line and a female line that you've put in the field too.

Speaker 1: Sorghum is a hybrid, so you have to have, it's a three line hybrid, they call it, so you have to have a male line and a female line that you put in the field to.

Speaker 1: produce the hybrid that we sell to the farmers and then you need a third line because the female has no pollen to basically multiply the number of

Produce the hybrid that we felt for the farmers and then you need a third line because the female has not fallen to basically multiply.

The number of female.

Speaker 1: bag of seed that you have. So that's why they call it a flea line system.

That you have but that's why they call it a mainline system.

Speaker 1: And that's what's limiting our ability to produce bags in the market. We're basically producing at a full capacity, all availability of our three parent seed lines. And so, and we're making some improvements each year, right? So, a product that we're selling today will be improved by the third year that we're selling it and pharma's

That's what's limiting our ability to produce bags in the market where basically producing.

At full capacity all availability of our three parent seed line.

So.

And we're making some improvements each year right. So.

That we're selling today will be improved by the third year that we're selling it and farmers.

Speaker 1: you know, understand kind of what improvements are coming because we talk about that in our.

Understand kind of what.

Improvements are coming because we talk about that in our.

Speaker 1: trials that the farmers come to and when they see the crop, they know our plan for the next few years. So we're really optimistic because of the share we're gaining now and the farmer response that we're gaining. We have four or five hybrids in the market this year and we're getting good response from the farmers.

Trials that the farmers come to an end.

When they see the crop.

They are they are they know our plan for the next few years. So we're really optimistic because of the share we're gaining now and the farmer response that we're getting we have four or five hybrids in the market this year.

And.

<unk>.

We're getting good response.

Speaker 1: I don't expect that there's going to be any problems on the seed side and Dama, our Ag Chem partner who's providing the herbicide, has been on their side, so things are fine.

I don't expect that there's going to be any problems on the seed side and Dharma are Ken partner who's providing the herbicide.

So it's been on their side things are fine too.

Speaker 5: Okay, all right, good to hear. Mark, you mentioned potential, you know,

Okay, alright, good to hear.

Mark you mentioned potential.

Speaker 5: potential coming from the biofuel angle or potentially integrating traits for bioplastics in the seed. I'm assuming especially in the biofuel you're looking to leverage your sorghum portfolio but I'm wondering if you can talk on a high level how you view your current.

Potential coming from.

From the biofuel.

From biofuel angle or potentially integrating traits for bioplastics in the industry.

Im assuming especially on the biofuel youre looking to leverage our sorghum portfolio, but I'm wondering if you can talk kind of on a high level. How you view your current.

Speaker 5: product line across those two opportunities versus having to potentially bring in additional crops beyond the sorghum alfalfa.

Roddick line.

Across those two opportunities.

Versus having to potentially bring in.

Additional crops beyond the.

Sorghum alfalfa.

Steve Yes.

Speaker 1: Yeah, I mean, our basic premise philosophy on the question that you asked.

Yes.

Sure.

Basic.

This philosophy on the question that you asked.

Speaker 1: And is we think that you have to plan a second crop after the primary crop. So if a farmer is raising wheat or sorghum, our focus is producing a second crop with that farmer that is not a food crop.

And is.

We think that you have to plan a second crop.

After the primary crops.

Farmer.

He was raising wheat or.

<unk>.

Our focus is producing a second crop with that farmer that looked not a food crops.

Speaker 1: that will therefore never make it into the food chain so we can sort of use all the tools in our science toolbox including GMO technology, CRISPR, whatever.

That will therefore never make it into the food chain. So we can sort of use all the tools in our science toolbox.

<unk> GMO technology, CRISPR, whatever and that we can create products because theyre not going into the food chain. The benefit of that is clearly many fold number one the farmer gets additional incremental revenue.

Speaker 1: and that we can create products because they're not going into the food chain. The benefit of that is clearly many fold, right? Number one, the farmer gets additional incremental revenue. Number two, that acre is producing a second crop that's really a cover crop that can be harvested for value.

Two that Aker is producing a second crop that's really a cover crops that can be harvested for value.

Speaker 1: And so you're sequestering carbon, but at the same time, you're making another commercial crop. You're just not making something you're going to.

And so your sequestering carbon but at the same time youre, making another commercial property, just not making something youre going to.

Speaker 1: plow under into the field to increase the carbon content of your soil, you're actually producing something that can be sold for a profit.

Plow under into the field to increase.

The carbon content of your soil, you're actually producing something that can be sold for a profit and so that.

Speaker 1: So that's the philosophy we're going on. You'll hear more about that in the coming quarters. But we're pushing hard to understand what the industrial benefits are of producing things in plants.

Thats the philosophy, we're going on.

Youll hear more about that in the coming quarters, but.

We're pushing hard to understand what the industrial benefits are producing things in plant.

Speaker 1: You know, I've mentioned the, I think that you said, you know, bio plastics or biofuels, you know, and when I when we started thinking through this, you know, it was not a popular thing. But frankly, you know, I think it's becoming more and more popular. And you're seeing some of the big oil companies sign deals along the same line.

I've mentioned.

I think as you said bioplastics or biofuel.

And.

When I when we started thinking through this.

Not a popular thing, but frankly.

I think it's becoming more and more popular and youre seeing some of the big oil companies signed deals along the same lines.

Speaker 5: Got it. I'm firmly with you on the benefits of a cover crop system. So, very interesting. Well, stay tuned for...

Got it not interesting.

Firmly with you on that.

The benefits of cover crops systems, So very interesting we'll stay tuned for.

Speaker 5: More news down the road there. Betsy, I got one for you, and then I'll jump back into you. You mentioned a couple times in your prepared remarks about looking to maintain or lower outback.

More news down the road there.

Betsy I got one for you and then I'll jump back in queue. You mentioned a couple of times in your prepared remarks about looking to maintain or lower opex.

Speaker 5: By that, do you mean on a percentage of revenue basis or on a raw dollar basis?

Do you mean by.

By that do you mean on a percentage of revenue basis or on a raw dollar basis and kind of and then what do you see within Opex, having some kind of some flexibility to to look to maintain or reduce here in coming quarters or years.

Speaker 5: And then what do you see within OpEx?

Speaker 5: having some kind of flexibility to maintain or reduce here in coming quarters of years.

Yes.

Speaker 3: Yeah, hi, Ben. Nice to talk to you. Thanks for the question. I think we definitely see maintaining or reducing operating expenses as one of our key levers. I would say we're looking both at percentages as well as raw dollars. I mean, I think we have to reduce it as an amount of revenue. We've

Yeah, Hi, Ben Nice to talk to you. Thanks for the question.

I think we definitely see see maintaining or reducing operating expenses is one of our key levers I would say, we're looking both at percentages as lots of raw dollars. I mean, I think we have to reduce it is an amount of revenue.

Speaker 3: With some of the growth initiatives we've had and things like BP, we've had to build SG&A ahead of time to prepare for that and to make sure we've got the right R&D investments and the right sales and marketing team to support that. So as we see it launch and we see revenues come up from that, I definitely expect that we should be able to create more of that leverage over those costs and see the percentage of those costs as a percentage of revenue come down.

With some of the growth initiatives, we've had in things like <unk>, we've had to build SG&A ahead of time to.

To prepare for that and to make sure. We've got the right R&D investments in the right.

Sales and marketing teams to support that so as we see it launch in EC revenues come up from that I definitely expect that we should be able to.

Create more of that leverage over those costs and see the percentage of those costs as a percentage of revenue come down at the same time looking at them at MFS whole numbers as well and taking a look across the portfolio of things, we're spending on and making sure that in some cases, we'll be investing more in some areas and at the expense of others.

Speaker 3: At the same time, looking at them as whole numbers as well, and taking a look across the portfolio of things we're spending on and making sure that in some cases we'll be investing more in some areas and at the expense of others. So that's definitely one of my key areas of focus coming in and taking a look at the company kind of with fresh eyes, and so something that you can expect to hear more from us in the coming.

Definitely one of my key areas of focus.

Coming in and taking a look at the company kind of with fresh eyes and sell something that you can expect to hear more from us in the coming quarters.

Speaker 5: Got it, got it, very good. Well, we'll stay tuned there as well. That's all for me. Thanks for taking my questions. I'll get back in queue.

Got it got it very good we'll stay tuned there as well.

That does it for me thanks for taking my questions I'll get back in queue.

Thank you Ben.

Speaker 1: And the next question is from Jerry Sweeney with Roth Capital. Please go ahead. Good morning, Pat.

And the next question is from Gerry Sweeney with Roth Capital. Please go ahead.

Good morning, Betsy and Mark Thanks for taking my call.

Speaker 6: Morning, Mark. Back to sorghum. One big question for me on that front.

Good morning, good morning Gerry.

Mark back to sorghum, one big question got me on that front.

Pricing thing.

Yes about that yes.

Yes.

Speaker 1: Go ahead. Yes. So as I've said in previous calls, I was on Monsanto's board and Monsanto first consultant and then employee during those times in the 1990s when all of the strategies for licensing,

Go ahead, yes.

So as I've said in previous calls.

I was on Monsanto's Board then.

Chat, though.

Consultants and then employee during those.

<unk> in the 19 nineties, when all of the strategies for licensing traits and keeping trades or in your own product line, we're being sort of worked out and I mentioned that all of the trade in the whole algae feed industry can be counted kind of on your hands in your feet and so.

Speaker 1: traits and keeping traits in your own product line were being sort of worked out. And I mentioned that all of the traits in the whole ag-feed industry can be counted kind of on your hands and your feet. And so that makes every trait super valuable. And Monsanto came to the conclusion that because they're so hard to find scientifically.

That makes every trade super valuable and Monsanto came to the conclusion that because there is so hard to find scientifically.

Speaker 1: that getting maximum market share was the right way to maximize.

That getting maximum market share was the right way to maximize.

Speaker 1: keep it a contribution to the company. And so they licensed their competitors. The competitors at the beginning were very hesitant. They thought there was some like trick to the whole thing. You know, why would you license your competitors a gene that they didn't have and wouldn't have for maybe a decade? You were giving up all that advantage in time and time as you all know who are on this call is everything in agriculture. And but

EBITDA contribution to the company.

Until they license their competitor competitors.

At the beginning we're very hesitant they thought there was some trips to the whole thing why would you license your competitors a gene that they didn't have and wouldn't have for maybe a decade, you were giving up all that advantage and time and time and as you all know who are on this call with everything in agriculture.

And but.

Speaker 1: Getting that share and that's how their traits in their focus crops of corn, soybeans and cotton, you know, have 97% market share penetration. So on every bag of seed that every farmer plants in America, 97% of those have traits that generates revenue for a Monsanto now buyer.

Getting that share and Thats, how theyre traits.

In.

They are focused crops, corn, soybeans, and cotton have 97% market share penetration. So on every bag of seed that every farmer plant in America, 97% of those are trade that generates revenue for Monsanto now buyer.

Speaker 1: And that lesson proved to be the lesson of maximizing EBITDA contributions. So Syngenta tried not to do that and they tried to keep

<unk>.

And that lesson proved to be the lesson.

Maximizing EBITDA contribution so syngenta tried not to do that when they tried to keep the.

Speaker 1: the traits for themselves because their market shares were a lot lower than Montantos and so they wanted to drive their share up and while that it did increase their share it did not improve their bottom line the way Montantos strategy.

<unk> traits for themselves because their market shares were a lot lower than.

Monsanto's and so they wanted to drive their share up.

And.

While that did increase their share it did not.

Improve their bottom line the way Monsanto strategy.

Speaker 1: So we're focused on licensing others. We have a small company that we are pretty much finished with our first license and we're speaking to one of the big competitors about a license with them.

So we're focused on licensing others, we have a small company that we are pretty much finished.

With our first license and we're speaking to one of the big competitors about our license with them.

Speaker 1: Double team is a super valuable gene and people want, farmers definitely want it, but our competitors are asking the question whether they want to sell it and some of them are coming to the conclusion that yes they do want to sell it and the best place to get it is from us because they're not going to spend the eight years it's going to take to develop the trait themselves.

Double team is.

Super Valuable gene and.

People want farmers definitely want it but our competitors are asking the question, whether they want to sell it and some of them are coming to the conclusion that yes, I do wanted to sell it in the best place to get it from us because they are not going to spend the eight years, it's going to take the developer trades themselves.

What are the gates.

Two.

Maybe excluding those.

Discussion.

Speaker 1: Yeah, so what normally happens is as we gain more share, our competitors come to our trials.

Yes, so what normally happens is.

As we gain more share or competitors come to our trials.

Speaker 1: Usually we have a separate trial for each competitor so they don't see who each of them is. But everybody knows who's got the share in the market, right? It's not really.

Usually we have a separate trial for each competitors because they don't see who each of them is.

But everybody knows who's got the share in the market right, it's not really a secret.

Speaker 1: kind of a smiley kind of a thing. You know, everybody knows who our targets are. We know they know. And there's been a historically in the market because I've been there so long and I've sold so many trades and I've sold my three companies, you know, my introduction, But Chandler??

Kind of a smiley kind of.

Thanks.

Everybody knows who are targets are we know they know and there has been.

Historically in the market because I've been there so long that I spoke to many trade.

Might be companies.

So two of them in the third.

Speaker 1: Everybody knows the order, right? And so in previous companies, you know, I didn't have a trade of my own, as I would think. So I maximized.

Everybody knows the order right and so in previous companies.

I didn't have a trade of my own as I was saying so maximize.

Speaker 1: the number of trades I sold that were Monsanto trades because I knew that Monsanto would buy my company eventually since they had control.

The number of trades I told that more Monsanto trades, because I knew that month that that would by my company eventually because they had to control.

Speaker 1: the marketing at the pharma level that I had created with her.

The marketing at the pharma level that I had created with their trade.

Speaker 1: So, you know, we're following that same path with fire. It's not totally clear that the Monsanto, you know, sort of the old Monsanto team is obviously gone now, retired.

And so.

We're following that same path with buyer, it's not totally clear that the monsanto sort of the old Monsanto team has obviously gone now retired.

Speaker 1: They made individually quite a lot of money and so they're not working anymore. The buyer team, they're different people that are in charge now. They're a little more conservative than Monsanto was. And so...

They made the individually quite a lot of money and so they're not working anymore the buyer team.

They are a little different people that are in charge now, they're a little more conservative than Monsanto was and so.

Speaker 1: Corteva is really probably now a more important...

Car T, but it's really probably now.

More important potential.

Speaker 1: potential partner for us because they're frankly with their pioneer brand a bit more.

A potential partner for us because.

They are frankly, but theyre pioneer brand.

A bit more innovative in the market, so, but we're talking to everybody and we'll see what happens.

Speaker 1: So, but we're talking to everybody and we'll see what happens.

Speaker 1: the timeline for that, Jerry, to your question. You know, once they actually get the gene, so we give them the gene in a donor line, and then they cross that donor line into their three parent lines. I said that in the call, you know, the male, the female, and the restorer line. And that takes about three or four years, so they're going to be three or four years behind them.

The timeline for that Jerry to your question once they actually get the genes. So we give them the gene in the donor line and then they cross that donor line into their three.

Parent lines.

Yes.

In the call.

Male to female and the restore aligned and that takes about three or four years, but theyre going to be three or four years behind us.

Speaker 1: Even if we sign an agreement in the 2022 fiscal year for us, they're gonna be three or four years behind it. So in those three or four years, we have the opportunity to gain share because we have no competition and then they'll be in the market. And so we expect.

Even if we sign an agreement in the 2022.

Full year for us.

They're going to be three or four years behind that so.

In those four years, we have the opportunity to gain share because we have no competition and then they'll be in the market and so we expect.

Speaker 1: you know, to take significant share in those first three years and then have a big smile on our faces when they start paying us their royalties on the gene in their sorcum bag. Gotcha. So, yeah, so I guess. Yeah, they're three or four years behind. Got it. But the key here would be them signing. Yes, exactly.

To take significant share in those first three years and then.

Have a big smile on our faces when they start paying the royalties on the gene in their store come back so to speak.

Got you.

Yes, sorry, guys.

Yes, there are three or four years behind.

Got it but the key here would be them signing.

Uh huh.

Yes exactly.

Yep.

And suffice to say if its targets for like.

Fiscal 'twenty for that 10% EBITDA margin would not be.

We certainly don't see licensing agreement kicks in again.

Alright.

We think we're going to hit the targets with our own share gains.

We don't need licenses to hit those targets.

Speaker 1: This is going to be a big opportunity for us. As that December deck says, it's an eight-figure EBITDA opportunity for S&W in its own bags of seed. And then obviously we're

This is this is going to be this is going to be a big opportunity for us.

As that the December deck says it's in <unk>.

Eight figure EBITDA opportunity.

Sure.

For <unk>.

Its own bags of seed got.

Got it.

And then.

Obviously, we're we're in fiscal 'twenty two 'twenty.

'twenty three 'twenty four is right around a point or so.

Speaker 6: How do we look at the production of seed this year versus next year?

How do we look at the production of <unk>. This year versus next year in terms of like a step change in production and how does that sort of roll through.

Speaker 1: Yeah, I mean, you know, our multiplication rate will allow us to produce four or five times more bags of seed than we have.

Yes, I mean.

Our multiplication rate.

Allow us to produce four five times more bankruptcies than we have this year.

So for a buyback, but our sales projections are for this year.

Speaker 1: So it's a four or five act what our sales projections are for the script.

Okay. Okay.

Sure.

Farmer dealer network helped you.

Okay that's out there.

Speaker 1: Yeah, you know, so, you know, we're doing a lot of work on our farmer dealer network. It takes a lot of work to have a good one like Pioneer does or like the CAB does. They're the dominant farmer dealer networks. Most of our sales still are through dealers and distributors, not our farmer dealers. So they're really the chain that's going to be most of our sales have double-seemed. Frankly, it's not going to be our farmer dealer.

Thanks.

Yes.

So.

We're doing a lot of work on our farmer dealer network. It takes a lot of work to have a good one like pioneer does or like the coup does.

They are the dominant farmer dealer networks most of our sales still are through dealers and distributors not our farmer dealers. So they're really the chain that's going to be most of our sales team frankly, it's not going to be our farmer dealers.

Got it alright.

Speaker 6: No, it's a great question. Occupational hazard of being an adult.

Curiosity occupancy, yes, no. It's a good great question now, it's a great question occupational hazard or pain in adults curiosity.

Yeah.

Speaker 6: That's maybe a question for you. We talked a little about it, I guess, in the preparedness.

Maybe a question for you we talked a little about I guess, the prepared remark terms and conditions that the sponsorship costs.

Speaker 6: I think on the last call prior to your arrival there was one area that we talked about.

I think on the last call prior to your arrival there was one area that we've talked about was.

Freight and transitioning maybe some of the freight so sort of F O b.

W facilities as opposed to it.

At W. P. I assume that's might be part of the terms and conditions that we discussed.

Speaker 6: I assume that might be part of the terms and conditions that we discussed.

Mentioned, then I'm curious as to.

Speaker 6: If that is, when do we start to see that kick in? Is that a-

That is when do we start to see that kick in is that a 'twenty two issue or is it some.

Some of the terms and conditions really starting to flow.

Flow through into 2020.

Speaker 3: Yeah, Jerry, that's a good question. It's kind of a different couple different mechanisms that we've used depending on on the market and how we're selling previously. For example, in the US, we used to give free shipping on on things based on a on a weight basis. And we've now shifted that to be based on a dollar basis. So that those small shipments used to, you know, when when freight costs went up by a lot, really had a huge impact on us. In other places.

Yes, Jerry that's a good question.

It's kind of a different a couple of different mechanisms that we've used depending on the market and how were selling previously for.

For example in the U S.

<unk>.

Give free shipping on <unk> based on a weight basis, and we've now shifted that to be based on a dollar basis, so that the small shipment <unk>.

Freight costs went up by a lot really had a huge impact on us and.

In other places.

Speaker 3: We were just simply passing the freight costs onto the customer. The customer pays it instead of F and W. So it really does vary. We went through that contract review kind of I believe starting, you know, last August , September , October timeframe. And so a lot of the contracts for this year do have it in effect already. And then there's some that we had contracted already that are still coming through.

We're just simply passing the freight costs onto the customer the customer pay that instead of instead of asking W. So it really does vary.

We went through that that contract review kind of I believe starting.

Last August September October timeframe until a lot of the contracts for this year do you have it in effect already and then there's some that we had had contracted already that are still coming through.

Speaker 3: But we think, you know, looking forward, the majority of it have used those different mechanisms.

But we think looking forward the majority of it have used those different mechanisms mechanism to make sure that they're not solely carrying the risk of increased freight costs.

Speaker 3: mechanisms to make sure that we are not, you know, solely carrying the risk of increased freight costs.

Got it okay.

Speaker 6: Well, I appreciate it. We're hitting up on an hour, so I'll save my other questions.

I appreciate it.

Hitting up on an hour. So I'll take my other question is related to.

Mark Thanks, a lot I appreciate it.

Youre welcome Terry.

And once again, if you have a question. Please press Star then one the next question is from Jonathan Fite with KMF investments. Please go ahead.

Speaker 7: Hey, good morning, Mark. That's you. Morning, Jonathan. Yeah.

Hey, good morning, Mark good.

Good morning, Jonathan.

Yes.

Speaker 7: I have two questions for you, one more balance sheet related, the other is more forward looking. So you made some comments about maybe some strategic raising of both debt capacity and equity capacity to fund growth, which makes sense. Over the last quarter, you all raised some equity to kind of cover the cash burn in the quarter. We're sitting at about $2 million of cash on the balance sheet as far as quarter end somewhat.

I had two questions for you one more balance sheet related the other is more forward looking so you made some comments about maybe some strategic raising of debt capacity and equity capacity to fund growth.

Which makes sense.

Over the last quarter you all.

So it's an equity raise some equity to kind of cover the cash burn in the quarter.

We're sitting at about $2 million of cash on the balance sheet.

Fourth quarter and look.

Speaker 7: As we look, as we kind of roll forward to the back half of the year, with the deferral of some revenues into the back half, does that improve the cash burn rate? Or are we, you know, while growth is wonderful, we got the current operations that we have, how do we think about the cash burn and the balance sheet over the next quarter or two?

As we look as we kind of roll forward to the back half of the year with the deferral of some revenues into the back half does that improve the cash burn rate or are we while growth is wonderful. We got the current operations that we have how do we think about the cash burn and the balance sheet over the next quarter or two.

Betsy I'll, let you.

I'll answer that.

Speaker 3: Yeah, yeah, definitely. You know, Mark had mentioned earlier that, you know, we continue to work with our banks and lending partners to ensure that we're optimizing our balance sheet and have efficient structures for our credit facilities. I think there's an opportunity to better leverage the assets that we have from a collateral basis and matching ourselves up with a partner that...

Yes, yes definitely.

Mark had mentioned earlier that.

We continue to work with our banks and lending partners to ensure that we're optimizing our balance sheet and have efficient structures of our credit facilities I think theres some opportunity to better leverage the assets that we have from a collateral basis.

Matching ourselves up with a partner that.

Speaker 3: that can reflect the value of that collateral when it comes to lending facilities.

That can reflect.

The value of that collateral when it comes to lending facilities.

Speaker 3: I think that part of the picture when it comes into the back half of the year where we are

That's part of the other picture when it comes into the back half of the year, where we are.

Speaker 3: shipping to customers but increasing our receivables and waiting for that cash to come in. And we, as a new CFO , I'm looking across the entire toolkit of...

Shipping to customers, but increasing our receivables and waiting for that cash to come in.

And we as a new CFO I'm looking across the entire tool kit.

Speaker 3: of products available to us. We have, you know, the raise that you mentioned was in October . You know, we did a $5 million pipe, and we were really pleased with the participation from our management team and board. And we will continue to look at all the available tools in the toolkit to fund, you know, this period of cash burn and also the growth of the company that we see going forward, which eventually then turns into a cash flow positive situation.

Of products available to us we have that.

The raise that you mentioned was in October you did a $5 million pipe and we were really pleased with the participation from our management team and board.

And we will continue to look at all the available tools in the toolkit to fund.

This period of cash burn and also the growth of the company that we see going forward, which eventually that turns to a cash flow positive situation.

So I appreciate that kind of general commentary there are some other portfolio companies that we've looked at that in addition to this too.

Speaker 7: So you would appreciate that kind of general commentary. There's some other companies that we've looked at that in addition just to. Leveraging receivables and inventory from a collateralization perspective to kind of get an RBL or something in place.

Leveraging our receivables and inventory.

From a collateral perspective to kind of get an RBR something in place.

Yes.

Whether its production facilities transportation or other assets that the company has do you see that.

Speaker 7: You know, whether it's production facilities, transportation, other assets that the company has, do you see that as kind of an untapped resource to kind of. Collateralize as part of a debt package, or are you primarily looking at inventory and receivables as the main mechanism?

I was kind of an untapped resource to kind of collateralized as part of a debt package or are you primarily looking at inventory and receivables as the main mechanism.

Speaker 3: No, we're absolutely looking at fixed assets as well, you know, and taking a look at some of the real estate that we hold and using that as collateral as well. That'll be something over them in the coming year that I'm evaluating and just seeing what options are available to us for that.

No we are absolutely looking at fixed assets as well.

Taking a look at some of the real estate that we hold and using that as collateral as well.

Something over that in the coming year that that I'm evaluating and just seeing.

What options are available to us for that.

Speaker 7: Great. And then Mark, as we look ahead, I think in the past you've provided some frameworks for how, you know, kind of what the appropriate revenue multiples are for trait-driven businesses. And this kind of post-COVID world, you still think that framework hangs together as you have seen it in the last couple of decades? Has it changed at all? Or is that still the model we'll think about kind of what the value of these traits are?

Okay, Great and then Mark as we look ahead I think in the past you've provided.

Frameworks for how.

Kind of what the appropriate revenue multiples are.

Portrait.

And Thats kind of post Covid world.

We still think that framework.

Together and as you have seen it in the last couple of decades has it changed at all.

Or is that still the model to think about kind of what the value of these states are going forward.

Speaker 1: Yeah, I think that's still the model. Jonathan, you know, it's hard to know sort of

Yes, I think thats still the model.

Jonathan.

It's hard to know sort of.

Speaker 1: on a snapshot basis, you know, kind of what the industry is sort of doing.

On a snapshot basis kind of what the industry sort of doing.

Speaker 1: You know, we're in a big four, obviously, or in a consolidation.

We're in a big four obviously are in a consolidation.

Speaker 1: stage in the last couple, three years and

Stage in the last couple of three years in.

Speaker 1: Uh, you know, just going from six to four companies that doing what, um, normally happens with big companies when they consolidate, you know, they first look to hold. Revenue and margin and to save on expenses because, you know, they may have two sales forces where a duplicate research program or a production plant that has the capacity to do all of the production and they can get rid of one. So, you know, that's what they're all doing. And, um.

Just going from 6% to four companies are doing what.

Normally happens with big companies when they consolidate they first look to hold revenue and margin.

To save on expenses because they may have two sales forces were duplicate research program or a production plant that Patrick capacity to do all of the production and they can get rid of one so that's what they're all doing and.

Speaker 1: You know, I don't see the multiples on the on the traits going up or down much.

I don't see the multiples on the trades.

Trades going up or down much.

<unk>.

Speaker 1: But, you know, I see more profit.

But.

I see more profit.

Speaker 1: profits coming from the big four because of cost savings, frankly. So it usually comes, there's usually a cycle that changes and all those cost savings are done. And then everybody's going, well, you know, what can we do to increase revenue and margin now that we've taken advantage of cost saving cuts.

Profit is coming from the big four because of cost savings frankly, so it usually comes there's usually a cycle that changes in all of those cost savings are done and then everybody is going well.

What can we do to increase revenue and margins now that we've taken advantage of cost saving cuts.

Speaker 1: And that's probably what the big guys are thinking of now. And they're doing it in a context of carbon credits and greener agriculture and what else can be made in plants, just like we're talking about on our...

And that's probably the big guys are thinking of now and Theyre doing it in a context of.

Carbon credits and Green Greener, agriculture, and what else can be made and plan just like we're talking about on our calls.

Speaker 1: Uh, you know, these are not the F and W, you know, secrets or, or soul. Uh, insights, I think the industry is going to be going the way that the, maybe the smaller companies go first because they're a little bit more, uh, flexible and, and, and, uh, you know, the big, but the big companies, uh, you know, will come.

These are not <unk>.

Secrets or more so.

Insights I think the industry is going to be going the way that the maybe the smaller companies go first because they are a little bit more.

Our flexible.

And.

But the big companies will come around this question.

Speaker 7: All right, and just kind of going back to the 1st question, is there any framing that you can provide on kind of. The, the magnets due to the cash burn or the next couple of quarters until we see some of the step change of production that we might see next next fiscal year.

Alright.

Just kind of going back to the first question is there is there any framing that you can provide on kind of the.

The magnitude of the cash burn over the next couple of quarters until we see some of the step change of production I will like Phoenix next fiscal year.

Speaker 1: I think we're still working through those calculations. With AG, as you all know on the call, we're still selling into the spring North American market. We're still booking sales.

I think we're still working through those calculations.

With egg.

As you all know on the call.

<unk>.

We're still selling into the spring.

North American market.

We're still booking sales.

Speaker 1: that seed's going to be put in the ground April-May for the most part. We have to put our seed crop in the ground April-May, so we'll have a better view of that and be able to answer your question probably with more accuracy maybe in the next quarter or quarter after that, after we sort of see how many acres of the double team did we really plant, how many hybrids did we plant.

She is going to be put in the ground April may for the most part.

We have to put our seed crop in the ground April may so we'll have a better.

View of that and be able to answer your question probably.

With more accuracy, maybe in the next quarter over quarter after that after we sort of see.

How many.

Acres of the double team did we really plan how many hybrids did we plan.

Speaker 1: How does the crop look? Or we have a crop release, but Mother Nature, in terms of number of bags, that's our target production. But Mother Nature has something to do with that. I mean, if the weather's bad, we get less weather favorable.

How does the crop look are we we have a crop for at least the nature in terms of number of bags. That's our target production, but mother nature has something to do with that right I mean, the weather's bad we get less whether it's favorable.

A bit more than that so.

Speaker 1: That's a question I think that we'll have more insight on in the next couple of quarters.

That's a question I think that will be have more insight on in the next couple of quarters.

Thanks I appreciate it.

More than welcome Jonathan.

Speaker 1: The next question will be from Richard Gernley with Long Partners. Please go ahead.

The next question will be from Richard Dearnley with loan partners. Please go ahead.

Good morning.

Speaker 8: Good morning. I am a relatively new to your company. Is it plausible that in the fiscal 23

Im relatively new to your company is it plausible that.

In the fiscal 'twenty three.

Speaker 8: you can get $12 million, which is the bogey for new products in sales and double team? Yes.

This year you can you can get $12 million, which is the.

The bogey for new products.

Yes.

Sales and double team.

Yes.

Simple answer.

Okay great.

Great.

Thank you.

Speaker 8: You're more than welcome Richard. I was going to follow with what would the investment and working capital be needed to do that, but you kind of just answered that with the previous question.

More than welcome Richard.

We're going to follow with what would the.

The investment in working capital.

We needed to do that but you kind of just answered that with the previous question. So we'll skip that one.

Speaker 1: Yeah, and you guys kind of.

And you guys kind of.

Speaker 1: You know, you're all smart people on the call. You kind of know what our margins are, right? Therefore, you know what our cost of goods are. You know, you can, if you're following sorghum at all, you kind of know what a bag of seed is worth, the trade. And so you can sort of back into how many, what the working capital needs going to be.

Youre all smart people on the call you kind of know what our margins are right. Therefore, you know what our cost of goods are.

You can if youre following.

Sorghum at all you kind of know what a bag of seed is worth the trade and so you can sort of back end.

How many.

But the working capital needs is going to be.

Right.

Speaker 1: OK, OK, we don't we don't give guidance, right? It's not a secret, but look, we're a public company. We don't give guidance to EBITDA. So we have to presume that the smart people on the call are understanding what we're saying or following the company and appreciate our message.

Okay.

Okay.

Give guidance right, it's not a secret but look we're a public company, we don't give guidance.

Okay to EBITDA, so we have to presume that the smart people on the call are.

Understanding what we're saying are following the company and I appreciate our message.

Yes, I understand.

Thank you.

Fantastic.

Speaker 8: Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.

Speaker 1: Yeah, so thank you everyone for being on the call and thank you for listening to Betsy's first call.

Yes, so thank you everyone for being on the call and thank you for.

Listening.

To betsy's first call it.

Speaker 1: We're going to go have a little cocktail tonight to celebrate that. She, as you can tell, has already a great view of the company.

We're going to go have a little cocktail tonight to celebrate that.

As you can tell.

It has already a great view of the company.

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Speaker 1: It's going to be a huge contributor to progress here at F&W. You know the take-home messages. It's really double team in sorghum, improve margins in alfalfa, and continuing with our program with ingredient and pea calcium negatively Warrior Trigger.

It's going to be.

Huge contributors the progress here at essence W.

You know the take home messages, it's really.

Double team and sorghum.

Prove margins in alfalfa and continuing with our program.

With ingredient in stevia.

Speaker 1: And we're focusing the company on those opportunities and maximizing the sales and the EBITDA that we can generate from those opportunities. So thanks everybody for being on the call today. And we look forward to the next quarter's report. Thanks again.

And we're focusing the company on those opportunities and maximizing the sales and the EBITDA that we can generate from those opportunities.

Thanks, everybody for being on the call today, and we look forward to next quarter's report thanks again.

Speaker 8: And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

And thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker 9: I.

[music].

Sure.

Okay.

Got it.

Yes.

Yes.

Yes.

Yes.

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