Q2 2025 S&W Seed Co Earnings Call
Good day and welcome to the S. N W seed companies second quarter fiscal year 2025 financial results Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After today's presentation there'll be an opportunity to ask questions to.
Speaker Change: To ask a question you May press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Robert Blum with Lytham partners. Please go ahead.
Alright, Thank you very much and thank you all for joining us today to discuss W seed companies.
Speaker Change: Second quarter fiscal year 2025 financial results for the period ended December 31, 2024 with us on the call representing the company today are Mark Hermann Chief Executive Officer, and Vanessa Bachmann, the Companys Chief Financial Officer.
Speaker Change: The conclusion of today's prepared remarks, we will open the call for a question and answer session. If you're dialed into the call through the traditional teleconference line as the operator indicated. Please press Star then one to ask a question. If you are listening to the webcast portal and we'd like to ask a question you can submit your questions through the ask a question feature in the webcast player before.
Speaker Change: No with prepared remarks. Please note that statements made by the management team about the W. Seed company. During the course of this conference call may contain forward looking statements within the meaning of section 27 of the Securities acts 1933, as amended and section 21 E of the Securities Exchange Act. Thank you 34 as amended and such forward looking statements are made pursuant.
Speaker Change: To the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995 forward looking statements describe future expectations plans results or strategies and are generally preceded by words, such as may future plan or planned will or should expected anticipates draft eventually or project.
Speaker Change: 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 forward looking statements as a result of various factors and other risks identified in the <unk>.
Speaker Change: Company's 10-K for the fiscal year ended June 32024.
Speaker Change: Other filings subsequently made by the company with the Securities and Exchange Commission.
Speaker Change: To supplement often w's financial results reported in accordance with U S generally accepted accounting principles or GAAP.
Speaker Change: W will be discussing adjusted EBITDA and adjusted operating expenses on this call.
Speaker Change: non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the comparable GAAP measure and are not prepared under any comprehensive set of accounting rules or principles and audio recording a webcast replay for today's conference call will also be available online on the company's Investor Relations page with that said let me.
Speaker Change: I'll turn the call over to Mark Hermann Chief Executive Officer, Bruce Wc's Company Mark. Please proceed.
Mark Hermann: Thank you Robert and good morning to all of you I'm excited to be here today speaking with you all.
Mark Hermann: Set the agenda for the call today, let me first touch on the actions we have taken over the past few quarters to reposition <unk> focus on our high value add.
Mark Hermann: And crop opportunities.
Mark Hermann: Where we can drive growth and profitability through leading crop innovation, namely in sorghum make camelina and ultimately unlock value to shareholders. We will then look at long term opportunity for short term as well as where the market stands today.
Mark Hermann: Then we'll provide a brief update on our joint venture with D. B O. Vanessa will then provide a detailed review of the financials and we will take a look at any questions that you may have at the end.
Vanessa Bachmann: Although somewhat new to F. N W. Let me just take a brief moment to remind everybody of the key activities that have taken place over the past few months or so that we believe will ultimately unlock value for S. N W and its shareholders first we successfully completed the VA process in Australia, which.
Vanessa Bachmann: [noise] occurred in late November 2024, among other key conditions the settlement agreement, which we finalized shortly after our last conference call in November allowed for the release from the intercompany obligations owed to <unk>, Australia and agreement with the National Australia Bank that released Essent.
Vanessa Bachmann: W from the $15 million.
Vanessa Bachmann: <unk> guarantee.
Vanessa Bachmann: Change among other conditions, we transferred ownership of certain intellectual property and inventory to the new entity.
Lee: Lee This agreement provided the resources, we mutually believe where needed to create going concerns for all entities.
Lee: Following the completion of the VA process, we successfully secured a new 25 million working capital facility with Mountain Ridge in late December 2024, which replaced the previous facility with CIBC bake.
Lee: In connection with the agreement MFB, our largest shareholder provided a letter of credit with a face amount equal to $13 million to be used as collateral. We believe the new facility and commitment could be viewed as a strong endorsement from both our largest shareholder and new strategic lending partner.
Lee: And the future of S and W and the opportunity it represents going forward.
Lee: With these key activities as backdrop, we have operationally focused on aligning the cost structure of S. W. While implementing best practices across the organization. The end result has been proved improved gross margins are reduced breakeven rate as well as lower working capital through an overall improvement in inventory.
Lee: Tori management, all of which has put us closer to profitability without having raised equity capital during this past year.
Lee: As a reminder, there are currently approximately two 1 million shares of common stock outstanding and approximately 138000 warrants, bringing the total diluted shares outstanding to approximately $2 2 million.
Lee: Clearly this has not been an easy task threading, the needle of the past year or so and I want to personally. Thank the entire team here at asking W for their exceptional work.
Lee: With that as a backdrop going forward. We're now exclusively focused on our core U S. Based operations led by our high value sorghum trade portfolio with double team as well as our Biofuels partnership with shell for Camelina.
Lee: Why we're so excited about the new SJW is really driven by where we believe the market for sorghum is headed over the next decade, but more importantly, what our position in this market is if some of you are aware sorghum historically has not benefited from significant research investment.
Lee: Broad acre crops, such as corn soybeans and cotton have received SFW is working to change all of that.
Lee: In the four years since we first commercialized commercially introduced double team, we have grown from no acres to approximately 10% to 12% market share of the U S. Grain sorghum acres. This year based on expectation expected adoption rates, we believe double team sorghum can capture 25%.
Lee: 30% of the U S <unk> market share over the next eight years, which would generate about $70 million to $78 million in traded sorghum sales. This translates into a CAGR of about 16% to 18% through 2033.
Lee: At this scale, we estimate that we would generate gross margins of approximately 76% to 81% on the traded products.
Lee: Each of this growth just to build on our strength of our initial double team product with continuous innovation.
Currently have multiple new products to be launched over the next decade, including the commercial launch of our second generation double team or D. T to grain sorghum and P. F. R. Preston acid free forage sorghum in fiscal 2025, and DT to forage sorghum in fiscal 2000.
Lee: 27 in the U S. The commercial launch of <unk>, plus <unk> acid free grain sorghum in fiscal 2028 in the U S. S. N W will be extending our trade portfolio to targeted countries through our licensing strategy and agreements to leading independent <unk> companies as we were.
Lee: Receive regulatory labels and registrations.
Lee: The commercial launch of broad spectrum, herbicide tolerance, sorghum and fiscal 2031.
Lee: In the U S and certain other countries in fiscal 2033, and finally, the commercial launch of insect tolerant sorghum in fiscal 2031 in the U S and certain other countries and fiscal 2033.
Lee: It's important to note that the pathway to these adoption rates as validated by adoption rates of similar technologies in other crops, where leadership positions have been established in a multiyear strategic go to market model has been enacted this established roadmap weird roadmap. We're following utilizes a combination of a.
Lee: A robust robust direct technical sales team private label licensing partners and distribution partners with some of the largest AG chem retail distributors in the U S. Along with an asset light model in Tam through collaborations with leading seed brands via licensing.
Lee: In our view there is not another company in the world that boasts the sorghum capabilities that we have providing.
Lee: Providing a very strong first to market position with an impressive pipeline portfolio to continue to build on our market strength.
Lee: But that's the long term look as we see sorghum, consistent 16% to 18% decade long CAGR I, 70% plus gross margins driven by strong R&D pipeline and an established commercial model.
Lee: Near term sorghum.
Lee: We are focused on executing against our outlook that we have established for fiscal 2025, which includes global sorghum sales of about 24% to 27 million of which 12 to $14 5 million of that is traded technologies book.
Lee: Looking at the numbers through the first six months certainly isn't indicative of our outlook that we have for the year last year. We saw a lot of early sales in during the December ending quarter, which was somewhat abnormal to the normal purchasing patterns, which tend to occur in the March or June timeframe. Therefore weird.
Lee: Certainly expect to see the normal significant ramp here to the coming months as we look to achieve our targets.
Lee: Our confidence in the future of double team is being driven by the very high grower satisfaction results received from using market research.
Lee: With an extremely high percentage of growers reporting a positive experience overall the majority of growers, who have tried double team seek to increase acres simply put farmers that have tried double team love it.
Lee: Now I'd like to.
Lee: Be remiss, if I don't exhibit some level of caution in the near term from a few of the macro factors that impact farmers' decisions, namely the potential impact from tariffs as well as the rise in alternative crop prices as of recent.
Lee: As most of you are aware as a country. The U S is a net exporter of short with the primary importer being China.
Lee: Further alternative crop prices relative to Suriname could impact sorghum acres planted this coming season.
Lee: As we have discussed in our private label business model is moving from selling in inventory to licensees fully loaded with production cost germ plasm royalty and trait royalty to.
Lee: Selling with production cost and moving the germplasm and trait royalties to a grower point of sale invoice. This effectively keeps inventory management at the licensees, while aligning the royalty payments with timing of sales to farmers. This model will enable our strategy to realize significant sales growth.
Lee: In market penetration and online revenue recognition with timing of growers sales.
Lee: The model transition will be completed in 2027 planting season with all but three license he's expected to be operating under this model in 2026.
Lee: As you know with the USC business, our third and fourth quarters, which run from January through June.
Lee: Our key corridors and we are in full court press mode to ensure that our sales and logistics teams are insane to get product to customers in a timely manner. In fact, we just completed a multi day strategic sales meeting with high levels of enthusiasm from the organization.
Lee: Clearly the next few months will be busy for our teams and I'm confident that we are well positioned as we can be to execute on the plans that we have put in place.
Lee: This transition for a moment to Bbl, while theres not a lot of new information to report everything related to our Biofuels joint venture with shell remains on track as a reminder, we own a 34% interest in the JV.
Speaker Change: Remainder of this past fall <unk> introduced camelina seed to farmers, which carries resistance to <unk>, an effective broad spectrum over the top weed control system.
Speaker Change: Currently promotions ongoing with them directly working with farmers into the spring months I hope to be able to share more with you in the coming upcoming call.
Speaker Change: Before I turn it to Vanessa let me just briefly comment on the announcement, we made in mid January regarding the commencement by the board to explore and evaluate various strategic alternatives that may be available to <unk> in an effort to enhance shareholder value.
Speaker Change: As you can imagine there is not a lot I can share with you. Besides what the chairman Alan will it's mentioned in the press release.
Speaker Change: Is that we believe.
Speaker Change: We have taken decisive actions actions to strengthen the company much of which I have discussed today.
Speaker Change: The board supports all initiatives that optimize shareholder value and will consider the full range of potential strategic alternatives.
Speaker Change: Sure <unk> is best positioned for future success.
Speaker Change: As always there can be no assurance that the review process, which will result in the company pursuing any transactions or any other strategic outcome, nor as to the form or timing of any of the foregoing.
Speaker Change: The board has not set a timetable for completion of this process and we do not intend to disclose further developments unless and until it determines that further disclosure is appropriate or necessary.
Mark Hermann: Let me turn the call over to Vanessa for a full detailed review of the financials, including our outlook and guidance for the upcoming year. I will then provide some brief closing comments and turn it over for any questions you may have.
Speaker Change: NASA.
Vanessa Bachmann: Thanks Mark.
Speaker Change: Good morning to everyone on the call today.
Speaker Change: Before I begin let me just remind everyone that the completion of the divestiture of the Australian subsidiary has resulted in moving all Australian related operations discontinued operations on a look back basis for FY 'twenty four there.
Speaker Change: When you look at the period over period comparisons the Australian domestic and the Australian International businesses have been moved to discontinued operations for both the financial and years.
Speaker Change: With that let's dive right in.
Speaker Change: On the revenue line for Q2, we reported revenue of $5 1 million.
Speaker Change: <unk> $8 3 million in Q2 of last year again, the $8 3 million from last year excludes Australia.
Speaker Change: Couple of keynotes on revenue.
Speaker Change: Last year's Q2 had one 1 million of ex U S International revenue, which was not repeated this quarter.
Speaker Change: No sales ex U S International occurred in Q2 of this year.
We continue to evaluate our crop strategy moving forward for the remainder of fiscal year 2025.
Speaker Change: The remaining Delta is primarily on double team.
Speaker Change: Which had Q2 revenue this year of $1 9 million versus $4 million in Q2 of last year.
Speaker Change: The difference here is that tiny of private label shipping.
Speaker Change: Overall, Americas, sorghum revenue, including double team and conventional sorghum was $3 1 million.
Speaker Change: Americas voyage revenue was $1.7 million and there was a small amount of other pertaining to our <unk> partnership.
Speaker Change: As I mentioned last quarter, Q1, and Q2 are seasonally our lightest quarters with Q3, and Q4, which is our March and June ending quarters being the bulk of our volumes, where we expect about 65, 70% of our annualized.
Speaker Change: Sales to occur.
Speaker Change: Q3, and Q4 will also be the quarters in which the greatest leverage in our business occurs to the bottom line as many of the fixed costs are absorbed over a greater revenue dollars. In fact, our guidance suggests that we will have positive adjusted EBITDA of <unk>.
Speaker Change: $1 million to $3 million in the second half of fiscal 2025.
Speaker Change: For fiscal 2025, which ends on June 32025.
Speaker Change: Our guidance remains unchanged from last quarter with total revenue to be between $34 5 million and 38 million for the ongoing business.
Speaker Change: This number does include the $4 1 million of international sales recognized in Q1.
Speaker Change: Let's split the guidance for the ongoing business down a bit more.
Speaker Change: We expect total global so Oregon revenue could be 24 to $27 5 million of which D. T will be between 12, and $14 5 million and the pilot for a profit free well contribute 200000.
Speaker Change: Yeah.
Speaker Change: The remainder will be our conventional trade and sort out.
Speaker Change: This includes sorghum sales that we recorded in Q1.
Back to record.
Speaker Change: International reporting segment in Q3 and Q4.
Speaker Change: International <unk> sales are expected are approximately $3 2 million.
Speaker Change: Which the fall 3.2 million was recognized in Q1.
Speaker Change: And America sports will be between seven and 8 million, while other sales will be approximately 300000.
Speaker Change: Now turning to margins gross profit margin.
Speaker Change: For Q2 was 37, 1% compared to 42.8% in last year's Q2.
Speaker Change: Again last year's gross margin excludes Australian operation the.
Speaker Change: The change here is really due to the lower <unk> revenue in Q2 of this year versus Q2 of last year.
Speaker Change: We are expecting total gross margins for fiscal 2025 to be between 33% and 36%.
Speaker Change: Now, let's transition to operating expenses.
Speaker Change: Q2 fiscal 2025 operating expenses inclusive of depreciation and amortization for the ongoing business in total.
Speaker Change: Our 6.2 million compared to $5 7 million last year.
Speaker Change: The Q2 fiscal 2025 number also includes all of the nonrecurring transactional costs pertaining to voluntary administration of approximately 600000.
Speaker Change: Excluding depreciation and amortization as well as the nonrecurring transaction cost adjusted operation operating expenses during Q2 were $4 9 million.
Speaker Change: Which is flat with last year at $4 9 million in Q2.
Speaker Change: Looking at it on an annualized basis, our expectation is for total operating expenses exclusive of depreciation and amortization stock based comp and any one time charges related to VA to be about 16 5 million, including depreciation.
Speaker Change: <unk> and amortization and stock based comp that number will be about $21 1 million.
Speaker Change: We have made a number of significant reductions in operating expenses through last fiscal year and leading up to Q1 of this year and believe we have reached a very reasonable go forward operating expense structure.
Speaker Change: As I mentioned last quarter, we carry about $3 million of costs related to being a publicly traded company.
Speaker Change: Beyond that we have made significant efforts to align our go forward business plan with our expenses to try and drive the business towards profitability.
Speaker Change: Now to EBITDA.
Speaker Change: Adjusted EBITDA for Q2 was a negative $2 9 million compared to adjusted EBITDA of negative $1 1 million in last year's Q2.
Speaker Change: For the first half of fiscal 2025, adjusted EBITDA is a negative $6 million.
Speaker Change: Based on the various inputs I provided we are expecting adjusted EBITDA for the year to be between a negative $5 million on the low end.
Speaker Change: Again, its 3 million on the high compared to negative five 6 million with Australia businesses removes in fiscal year 2024.
Speaker Change: Put differently, but the first half already at negative $6 million.
Speaker Change: We are expecting the high end of our range for the rest of the year to be a positive $3 million for the back half over here.
Speaker Change: And for the allowance to be about 1 million and positive adjusted EBITDA breakeven.
Speaker Change: Our fiscal 2025 and aggregate.
As Mark mentioned since our last call. We successfully secured a 25 million working capital facility with not ranch, which replaced the previous facility we had with CIBC.
Speaker Change: I want to take a moment to thank CIBC for their support of Hudson W. Over the past four years and we're excited to be working with the team at mountain Ranch moving forward their commitment coupled with the $13 million letter of credit provided by MSP.
Speaker Change: Tremendous endorsement to the work done over the last year to reposition <unk> going forward.
Speaker Change: Again, I'm happy to follow up with any of the details. We went through if you should have additional questions with that let me turn the call back over to Mark.
Mark Hermann: Thank you Vanessa.
Mark Hermann: First let me just thank the entire team at <unk> for their hard work over the past year to get <unk> to a place where we can focus on delivering value to farmers and shareholders alike.
Mark Hermann: Going forward, our business is going to be driven by high value high margin sorghum treat technology in well established markets in the Americas.
Mark Hermann: Our commercial ice commercialization strategy is robust and validated by decades of success by similar products in adjacent crops. Our product development pipeline is deep with multiple new product set to launch each year in various geographies over the next decade.
Mark Hermann: Importantly, the value we bring to farmers has been validated the farm gate value of our double team grain product is between 36% to $72 per acre or D. T forage products provide between 30 to $67 per acre or press like acid free trade ads.
Mark Hermann: An additional 30 to $55 per acre.
Mark Hermann: When you look when you stack them. It allows farmers to take full advantage of each independent trade value.
Mark Hermann: These are significant benefits benefits to farmers as they protect against hundreds of millions of dollars of estimated foreign production loss each year.
Mark Hermann: And of course, we have large equity stake in shell Biofuels, JV, which has a large opportunity ahead of ourselves as we progress in our second year of the JV.
Mark Hermann: With the business dramatically more streamlined from an opex perspective, and efficiencies in place to drive incremental gross margin improvements in both our traded products as well as our other forged products I believe we are in a position to return <unk> to profitability.
Mark Hermann: I want to sincerely. Thank all the shareholders for their continued support with that said.
Mark Hermann: Look forward to taking your questions.
Mark Hermann: Operator.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
Speaker Change: Anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Ben: The first question comes from Ben <unk> with Lake Street Capital markets. Please go ahead.
Ben: Alright, Thanks for taking my questions I've got a handful of them here first a couple regarding the current year.
Ben: Results. So first question on the precision DT sorghum I'm curious what you see is the level of inventory for that.
Ben: Product that's already within.
Ben: Within the supply chain.
Ben: Our inventory levels still such that there is.
Ben: No real visibility of a pretty steep commercial ramp or do you have any concern about elevated levels here at this point in New York.
Ben: Hey, good morning, Ben I appreciate the question.
Ben: We look at our business over 50% of our business comes from Sorghum partners brand, which SFW completely operates in the U S rates, so with sorghum partners brand all unsold inventory at the end of the spring yet.
Ben: Picked up and returned to our warehouse. So in reality, we know exactly that we start annually from zero rates. So theres no don't pre existing supply in the channel.
Ben: And we're moving forward that business and expect to see the growth that we had built into the plan with the license business. They do the same activity with their own seed brands and the fact that they deliver and then they've pulled back into company warehouses and have an accurate count at the end of the year So our previous <unk>.
Ben: <unk> was shipping fully loaded treat in.
Ben: Germ plasm royalty as well as the cost of goods shipping too.
Ben: The licensed companies and as I talked about in this call that will be moving to more of a system of where the.
Ben: Licensed seed company takes inventory at a cost of goods just like every seed company, including ourselves does and manages their internal inventory and then we will pay royalties based on grower actual sales each year reported.
Ben: By our year end right. So it can move to yet. So there is there's a bit of of GAAP information as to timing when each of the licensees, Poland inventory and last year, we did see an incremental amount of ordering in the fourth quarter.
Ben: Pulling inventory into their businesses.
Ben: Both to fill spring needs as well as to carry some inventory into the next year.
Ben: I think potentially it along with some of just the indecision on farm some of the things we're seeing geopolitical.
Ben: Question marks on moving.
Ben: There'll be a question Mark if our process of going through the VA last year slowed some people down as far as bringing in their inventory in Q1, and Q2 versus bringing it in now in.
Ben: Q3, and Q4 right. So we're working to analyze that and be on top of it as we worked through with licensees right now for what their production plans one what their demand their sales what inventory they need to ensure they can complete demand with their customers for this year for shipping as well as then works.
Ben: <unk> up their production plans for next year's planned sales and we'll have that effort over the next.
Ben: Couple of weeks, so I think one of the pieces that delayed the one or two was our process of going through the Australian V. A and some of the unknowns at that put into the marketplace as well as we are in kind of a unique situation on farm.
Ben: With farmer decision, making on cropping plans theres been a huge amount of commodity price volatility.
Ben: All crops between.
Ben: Corn, soybean and cotton as far as the alternative crops as well as sorghum, but.
Ben: But I do believe we'll see that settling out and farmers will be finalizing their decision as we move forward I don't anticipate that it's a significant problematic piece, but I do believe that model. We're going to is a model that all helped us.
Ben: Have see companies planning to carry the appropriate level of inventories on a year round basis to.
Ben: To really run their seed business sufficiently versus trying to avoid bringing material in because of the fully loaded cost which included.
Ben: Germplasm royalty and trait royalty before they had the sales activity.
Ben: Any place with farmers.
Mark Hermann: When does that does that kind of address it I know it still leaves a huge unknown, but I don't see a signal that says that we're off track versus the guidance, if Vanessa and I have had.
Ben: Rolled out.
Mark Hermann: To the organization Yeah, Yeah that's.
Ben:
Ben: I appreciate that there's a lot of moving pieces here and so I certainly appreciate the uncertainty but but.
Ben: That was all very helpful context.
Ben: You got to meet.
Speaker Change: You alluded to my next question, which I don't know if this is a better directed to your Vanessa but.
Ben: Regarding the current year guidance.
Ben: The sorghum revenue that you lay out I'm curious.
Ben: Given the.
Ben: Rising price of alternative commodities, especially corn the level of embedded acreage you guys are expecting.
Ben: In the U S market.
Ben: The level of acreage within the U S market that you are expecting.
Ben: Embedded within your your guidance do you guys anticipate.
Ben: Kind of a flat.
Ben: Level of sorghum acreage year over year in the country or are you expecting some kind of decline given elevated pricing here for alternative crops.
Ben: Yeah, It's a great question.
Speaker Change: I'll take a first swing at it and then Vanessa please if you've got others to add but.
Speaker Change: If you look at the acre trend sorghum had been on on.
Speaker Change: A bit of a growth trend if you look over.
Speaker Change: The two years prior to last year, right sort of grown from 6 million to about a 7.273 million acre.
Speaker Change: Crop for the planning season of 23.
Speaker Change: Which also had the contribution of very late planning the weather through a lot of the sorghum market was wet which prevented planning of cotton and alternative crops farmers came back with the sorghum crop, which helped also move acreage up last year was the opposite impact it was a perfect spring.
Speaker Change: Commodity prices were strong in the other.
Speaker Change: Commodity pieces and we saw acres move back down from seven point to into the $6 three to $6 5 million sorghum acres, we did not build our our plan based on depending on on <unk>.
Speaker Change: Growth of sorghum acres.
Speaker Change: But as we look at the market. It does have a pretty significant swing.
Speaker Change: Based on what Baker planning does happen right. So we started out very strong the economics of planning sorghum versus alternative crops was very positive it's leveled off a little bit with the increase in the corn price, which if you look at corn price seasonally the corn market is very good at raising the price working to get the acres.
Speaker Change: Planted.
Speaker Change:
Speaker Change: Which I anticipate as whats taking place this year as well.
Speaker Change: But but we really didn't build our plan based on a return to a seven.
Speaker Change: Million acre base.
Okay.
Speaker Change: Good to hear the conservatism embedded within that then.
Vanessa Bachmann: Vanessa had a question for you on the debt levels and.
Vanessa Bachmann: An update on the new credit facility. So first of all I think I see.
Vanessa Bachmann: The.
Vanessa Bachmann: Between getting the Australian business exited in then.
Speaker Change: Ripping working capital off the balance sheet you guys are sitting at the level of debt that's lower than it's been since like 2016. So.
Vanessa Bachmann: Congratulations on some real progress on that front.
Vanessa Bachmann: And my question to you is is twofold here.
Vanessa Bachmann: The degree of visibility you have at further reductions in working capital here over the second half of this year maybe over the next 12 months and then also the level of availability you have today.
Vanessa Bachmann:
Vanessa Bachmann: Within your new credit facility.
Speaker Change: Yes of course, thank you Ben for the question so for the remainder of fiscal 2025.
Vanessa Bachmann: Weak.
Vanessa Bachmann: I've mentioned this in comparison to last year.
Vanessa Bachmann: We will and are it's anticipated that we will end fiscal year 2025 at a lower debt position than last year and it goes to exactly what you just mentioned so continued focus on opex.
Vanessa Bachmann: Meeting our targets on Opex as well as the working capital component.
Vanessa Bachmann: While we were able to achieve that through Q2 in terms of lower debt versus last year, one of the things from a cash flow perspective.
Vanessa Bachmann: When you quote unquote had to cover for are those one time transactional costs that you can see.
Vanessa Bachmann: In our adjusted EBITDA a.
Vanessa Bachmann: Reconciliation within the financials of approximately $600000 related to the <unk>.
Vanessa Bachmann: So unfortunately that was the cash outlay.
Vanessa Bachmann: We have not planned right at the time that we were working through that.
Vanessa Bachmann: Take hillary's Westmont ranch, but for the remainder of fiscal 2025, and we're in a position from a capacity perspective to be well supported with the mountain Ridge facility as it is today and as a reminder, it is our asset base.
Vanessa Bachmann: But the agreement so as sales start to position themselves over Q3 and Q4.
Vanessa Bachmann: That gives us adequate.
Vanessa Bachmann: Credit financing.
Vanessa Bachmann: For the remainder of 2025 that again as expected year over year that we will be in a lower debt position and overcoming those one time costs, but I will say that that added some complexity to them at least Q1 and Q2 and overcoming.
Vanessa Bachmann: That 600000, those onetime non reoccurring costs related to the <unk>.
Vanessa Bachmann: Okay.
Speaker Change: Could I just add so as we mentioned and I came in we did feel SW was carrying far too much inventory for sales.
Speaker Change: As we finish this year, we should reduce carryout inventories by about 40% to 50% versus what we carried out last year, which has a huge positive as far as cash tied up in inventory, but also most seed inventory.
You lose approximately 10% due to quality just aging.
Speaker Change: So it's a significant reduction in it and.
Speaker Change: And I say this because I really don't even believe it's totally focused on just reducing working capital, but it puts the company in a very quick to move when you've got a strong pipeline of new product advancements that we're going to have over the next 10 years the ability to keep inventories tight to have the ability to ramp up the newest.
Speaker Change: Allergy the newest germplasm as quickly as possible continues to drive the leadership positions. So it will have very positive impacts on both the working capital as well as profitability, but also it will put us in a place to continue to support a very aggressive ramp up.
Of sales success as well.
Speaker Change: Okay.
Speaker Change: A very good one more for me and then I'll get back in queue and its just kind of a big picture question in the context of the strategic review you've you've laid out all of these kind of long term expectations and I'm curious.
Speaker Change: The degree to which some of the.
Speaker Change: The scale of Essent W constrains the.
Speaker Change: The ramp in sorghum, either from an R&D perspective, or a commercial perspective and.
Speaker Change: And any potential synergies that could come from.
Speaker Change: A larger operation, having this kind of.
Speaker Change: Business embedded within it I mean is there is there a material financial constraint from a financial or human capital perspective, but us in W.
Speaker Change: On a on the sorghum outlook that you think could be.
Speaker Change: Kind of unlocked if this was if this was elsewhere.
Speaker Change: That's great.
Speaker Change: And input.
Speaker Change: So theres always a strategic opportunity for.
Speaker Change: Entities to be able to look internally at the resources are already spelt spending in and how does it either significantly contribute to or accelerate.
Speaker Change: Our trait pipeline or product release pipeline that we've got really insight for the next 10 years. So I do think as we go through the process there'll be a significant upward <unk> for different organizations to assess all the resources and assets inside of <unk>.
Speaker Change: You really contribute in.
Speaker Change: And escalate their current pass rate, either ssw's ability to reach and accelerate.
Speaker Change: Or their ability to.
Speaker Change: For efficiencies and investment in other places so I do believe that there'll be a significant value identified.
Speaker Change: Very good.
Speaker Change: Alright, well I appreciate you taking my question congratulations it's been a busy and very productive last few months because of like second half this year and I'll get back in queue.
Speaker Change: Thank you Ben.
Speaker Change: The next question comes from Kurt <unk> with Carl M. Hennig, Inc. Please go ahead.
Kurt: Alright, Thanks for taking my question questions on V. B O are there constraints in selling that position as you do this review from shell or any kind of color that you could give us on how that would be monetize potentially and then his next year kind of a ramp year for <unk>.
Speaker Change: The Camelina business.
Speaker Change: I'll cover the last one first so SBB.
Speaker Change: <unk> keeps expanding their product lines, particularly focused on their trade position, which is very unique in the marketplace for camelina for easy control of weeds that are at a very economical position I do believe there are continued ramp up of our success positioning with farmers will move forward.
Speaker Change: As far as the other one I'd probably have to say I can't.
Speaker Change: Really speak to the specifics.
Speaker Change: With.
Speaker Change: Other than what was positioned by.
Alan Will: Chairman of the board Alan will it's Alan will it send mark longer also on the board of <unk>.
Speaker Change: <unk> and.
Speaker Change: As we look at it we're looking at all opportunities that bring value to <unk> shareholders as we move forward.
Speaker Change: Okay Fair enough and then did you I know you did the reverse split but have you considered going to the OTC to save a couple I know that's wouldn't be free but a couple of million bucks here or whats kind of the thought process there.
Speaker Change: Yeah, and you bring up a good point between what Vanessa position that we've got about $3 million tied with expenses for being publicly traded and today. We're a company that has sales and that.
Speaker Change: $35 million range.
Speaker Change: <unk> right.
Speaker Change: <unk> two theres potential efficiency processes, I would just leave that as part of the whole discussion around <unk>.
Speaker Change: Looking at strategic options.
Speaker Change: Bring value tests and W shareholders.
Speaker Change: Great that makes sense I appreciate it.
Speaker Change: Again, if you have a question. Please press Star then one.
Mark Hermann: Operator, we've got while we wait to see if there's anyone else in the queue I have just a couple of questions here are from the online portal to Mark and Vanessa I'll try to bucket ties them briefly here talk about maybe any competitive products out there specifically within the herbicide resistant sorghum.
Mark Hermann: Yes. So there is there's two other programs that are in the marketplace and Oh best in W has had a significant lead over each of those positions.
Mark Hermann: Both in volume and market penetration as well as farmer feedback as far as we control cropping options and others.
Mark Hermann: So as we look at it we're in a very very strong position and with the pipeline as it comes out.
Mark Hermann: I do believe we can work to keep our market leadership position not just on BT and grass control, but also across a broad spectrum that brings value.
Mark Hermann: Value to farmers everything is predicated on does your product truly turn into a positive economic investment.
Mark Hermann: For farmers and we feel very good about the portfolio that we've got in our.
Mark Hermann: Our approach is really been looking pretty directly at the economic impact.
Mark Hermann: But as you look at peace of mind and in other intrinsic values I think part of the acceleration of our trading portfolio is going to be driven than it has been driven by.
Mark Hermann: The peace of mind of knowing you're going to be able to rescue your crop in the event of heavy pressure same thing with prosek acid free.
Speaker Change: You know much about <unk>.
Mark Hermann: <unk> capital on.
Mark Hermann: Sorghum, both the benefits and the drawbacks the big drawback is pressing acid and the concern for animal health with <unk> acid free completely resolves and puts a farmer in a great position to be able to utilize.
Mark Hermann: The great benefits of using afford short them or even a post harvest grain sorghum.
Mark Hermann: To provide feed for their further livestock so.
Mark Hermann: I believe we've got a strong position as far as the pipeline and where we're currently at for success. There is a significant advantage.
Mark Hermann: Two our product position.
Speaker Change: Okay, maybe just one more question here, maybe just and I think you've touched on a few of these but more broadly with some of the tariffs some of the other subsidies basically just overall change in administration.
Mark Hermann: Uh huh.
Speaker Change: What sort of impact to this have you taken into account with the estimates that you provided here.
Speaker Change: Well, that's a great question, Robert and I called it out a bit and internally we've had the discussions around the tariffs China is the number one importer of sorghum globally, right and where the U S is the number one exporter, so theres a pretty tight relation.
Speaker Change: Shift between.
Speaker Change: China and the U S as far as sort of consumption.
Speaker Change: And then there is the concern around tariffs, where they could go and what could be the response from China.
Speaker Change: To those right. So unfortunately all of it is speculation that assessment clearly if they have a block on importing U S product or a significant tariff it could significantly hamper sorghum pricing in the surgical market.
Speaker Change: But we have not built overly aggressively.
Speaker Change: <unk> based on an assumption that our debt.
Speaker Change: That will happen right, it's something we'll watch for we'll know more as we go forward.
Speaker Change: And it's a sensitivity, but it's not built into the numbers today.
Speaker Change: Okay fantastic.
Alan Will: Mark Vanessa I am showing no further questions here, so mark I guess I'll turn it over to you for closing remarks.
Speaker Change: Yes.
Mark Hermann: I really want to thank everybody for joining this morning really appreciate your engagement with <unk> in this call.
Speaker Change: And Vanessa and I look forward to hopefully speaking with you all again shortly.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.