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 non-dormant 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 slightly. Overall, the company reported operating losses of $4.3 million and $8.6 million for the three and six-month periods, respectively, compared to $2.2 million and $5.2 million in the prior year.

Revenue and Profit Trends

S&W Seed’s revenue and profitability were negatively impacted by several factors during the quarter and six-month period:

• Decreased sales of the company’s high-margin Double Team sorghum product due to timing of private label shipments
• Reduced non-dormant alfalfa sales in the Middle East and North Africa region, driven by an import ban on alfalfa in Saudi Arabia
• Lower sorghum sales in Mexico related to tightening credit policies and carryover inventory from the prior year
• Decreased non-dormant alfalfa sales in the domestic market due to lower demand

These declines were partially offset by increased dormant alfalfa sales, higher conventional sorghum sales in the U.S., and growth in millet sales. However, the shift in product mix resulted in significant gross margin compression.

Strengths and Weaknesses

Key strengths of S&W Seed include:

• Robust research and development capabilities supporting new product development
• Diversified product portfolio spanning sorghum, alfalfa, and other crops
• Presence in both the Northern and Southern hemispheres to offset seasonal fluctuations

Weaknesses include:

• High dependence on sales of the Double Team sorghum product, which experienced a significant decline
• Exposure to geopolitical and macroeconomic risks, such as the import ban in Saudi Arabia and tightening credit in Mexico
• Ongoing profitability challenges and negative cash flow from operations

Outlook

The company’s outlook remains uncertain given the continued impact of adverse global conditions, including supply chain disruptions, inflation, and volatility in financial markets. S&W Seed is actively pursuing financing and strategic alternatives to fund its operations, including debt and equity financing and potential asset sales.

The company’s ability to return to profitability will depend on its success in diversifying its product portfolio, expanding into higher-margin crops, and managing its cost structure. Successful execution of the company’s strategic initiatives will be critical to navigating the current challenges and positioning S&W Seed for long-term sustainable growth.