Press release·02/13/2025 23:11:26

Overview of the Company’s Financial Performance

S&W Seed Company experienced a challenging quarter and six-month period ending December 31, 2024 compared to the prior year. Revenue decreased by 38.5% and 29.6% for the three and six-month periods, respectively, primarily due to lower sales of the company’s high-margin Double Team sorghum product, decreased alfalfa sales in the Middle East and North Africa region, and reduced sorghum sales in Mexico.

Gross profit also declined significantly, down 46.7% and 48.6% for the three and six-month periods, respectively. Gross profit margins contracted to 37.1% and 24.0% for the three and six-month periods, respectively, compared to 42.8% and 32.9% in the prior year. The margin declines were driven by the lower sales volumes of Double Team sorghum, strategic dormant alfalfa sales, and lower pricing in the International segment.

Operating expenses increased modestly, up 8.5% and 3.0% for the three and six-month periods, respectively, primarily due to higher one-time transaction costs related to the voluntary administration of the company’s Australian subsidiary. Research and development expenses also increased as the company continued to invest in new product development.

The company reported net losses from continuing operations of $6.3 million and $12.5 million for the three and six-month periods, respectively, compared to $3.8 million and $8.6 million in the prior year. The increased losses were driven by the decline in revenue and gross profit.

Revenue and Profit Trends

S&W Seed’s revenue and profitability have been negatively impacted by several factors:

• Decreased sales of the high-margin Double Team sorghum product due to timing of private label shipments
• Lower alfalfa sales in the Middle East and North Africa region due to an import ban in Saudi Arabia
• Reduced sorghum sales in Mexico related to tighter credit policies and carryover inventory
• Strategic sale of dormant alfalfa inventory at lower margins

These declines were partially offset by increased sales of conventional sorghum in the US and higher dormant alfalfa volumes. However, the company was unable to fully offset the impact of the lower-margin product mix.

Gross profit margins contracted significantly as a result of the shift in product mix, with the high-margin Double Team sorghum and international alfalfa sales declining as a percentage of total revenue.

Strengths and Weaknesses

Strengths:

• Continued investment in research and development to expand product portfolio
• Diversified geographic footprint and product mix, though still heavily reliant on sorghum and alfalfa
• Execution of cost reduction initiatives to improve operational efficiency

Weaknesses:

• Significant reliance on a few large customers and distributors, leading to revenue volatility
• Ongoing challenges in the international markets, particularly the Middle East and North Africa
• High debt levels and need for additional financing to fund operations

Outlook

The outlook for S&W Seed remains uncertain given the continued macroeconomic and geopolitical headwinds impacting its business. The company will need to navigate supply chain disruptions, inflation, and potential further trade restrictions, all of which could continue to pressure revenue and margins.

To improve its financial position, the company is actively pursuing financing and strategic alternatives, including potential asset sales or divestitures. Successful execution of these initiatives will be critical to the company’s ability to fund its operations and investments in new product development.

Continued focus on cost control and operational efficiency improvements may help mitigate some of the external pressures, but the company will likely need to see a recovery in its core sorghum and alfalfa markets to return to profitability in the near-term. Overall, the path forward remains challenging for S&W Seed given the current market conditions.