SANW - Earnings call transcript Q2 2018

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Operator

Hello everyone and welcome to the S&W Seed Company Reports Second Quarter Fiscal Year 2018 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that event is being recorded. I would like to turn the conference call over to Mr. Partners. Lytham with Blum Robert Please go sir. ahead,

Robert Blum

Officer XXXX Thank today to Steven Company the the fiscal and us XXXX. the open for the representing thank conclusion question-and-answer prepared we will us joining for Executive of call are Szot, for Chief session. year President and of Mark quarter for today’s call all Matthew second Wong, Financial December the a today Chief discuss on company Seed and Officer. At XX, With you S&W you ended the results remarks, financial

Before within for XXXX of the Litigation made Private course Securities and we following as XXXX as meaning and Act XXA Section the Securities Seed begin are by with Harbor amended record to the Statements of the Safe statements the prepared provisions the during this Act Securities remarks, made of amended XXE Exchange Section Reform of of Act conference S&W we pursuant statement. of XXXX. Company the submit call of statements the such may forward-looking team management forward-looking of the contain of

with over Mark Seed made Commission. filings as statements, will as Mark? statements future, Securities are generally such Company. various XX, S&W year said, strategies future plan and events for forward-looking a expectations, materially XXXX and or the call that Chief the Forward-looking results by anticipates, June from words the those let or are to plans, or preceded draft, fiscal expected, and of a by other cautioned Exchange actual company’s company in me factors subject describe uncertainties in results projected Wong, forward-looking from differ the multitude results to Executive or circumstances, projected other for planned, the to turn eventually statements Listeners should, Officer cause XX-K may, projected. the such in and may the With that future risks the or ended are that differ statements of risk risks could and those identified result that materially including

Mark Wong

Thank about we you, phone of talked return opportunity me certain will a Robert first managing today. trait in the one, provide also is assets and of I aligned alfalfa, products, a overall we I analysis. and our and operational our expanding good our and Without be to and agricultural base first on take to sunflower let strategy board competitive way capabilities team our push will our markets the that technology. aspects our push hindrance success into current while would sorghum, After risk globe, across of of including current our along our analysis with and footprint and advisors review careful maximize regional profile. management that stevia, a the go Number going on our forward. into to – continue we standpoint, from might at developing off spoke conclusion our becoming our key you unique threats, tremendous the and the would strengths with S&W and we further September, strong an existing to company thought integrating When would all as our months market our had technologies you middle six that of create leverage well I I as create opportunities new analyze crops, mentioned our more weaknesses, customer and trait that centric. and to afternoon

be two for development As calls, key conference the will going a S&W trait last on I have mentioned driver forward.

of are a can biotech currently resistance. and is of digestibility, platform degree build evaluating and high think a that genes integrate interest, large There seed to herbicide us that insect I for with the marketplace. value classes significant opportunity are bring including to disease there certain we

initiative. of number Over been advance this working have pathways collaborations we last six a on months, to the and

alfalfas. discussed have field the enhancing we this as in we summer, focused will into our agreement plant on such in digestibility the Calyxt, with be our past moving where Some,

agreement We emphasizing also non-regulated our have editing and focused technologies. on Genetics, traits gene patent with discussed and Generic which are and technologies we

announced that to we collaborations we Beyond previously not are any advancing time. these in detail multiple agreements, discuss this two other going at specific are

desirable last directions on we coming analyzing six have the on customers. and we chosen. months, we the lab on will markets have and be The understanding that be believe will focused the months work XX the based During strategic focused better the traits our field most to

about will more in progress We the share you our with future.

Second Australia. and sunflower of going sorghum major conclusion our analysis, to build business alfalfa, in we’re

strategies forward moving are we commercialization current development, crops. with specific our more trait for Beyond

First, we are in alfalfa, going Australia. programs sunflower and sorghum to our look to build out

As many with our have Seed alfalfa in sorghum in a we and of acquisition Genetics Australia of you XXXX of acquisition and in SV strong presence sunflower seeds our XXXX. are Genetics aware,

the that have product we approach focused more Now we centric have to three opportunity to our crops, on build development. customer- sales a

our of as from marketing Callachor Australia. Manager seed Hybrid Australia. weeks has to David traits over years many Queensland industry, have David sunflower we Southeast point experience for reasons. couple will and Australia also S&W within hire was seeds, Company, be a in enhancement Agrium sales important in us technology. different extensive focus hired our has overseas the we future for as our new This businesses. our and agricultural development from Australia of Crops. experience and focal build saw ago, an and is sorghum important a an He you for Commercial worked based us for including commercial international Limagrain will in XX Landmark as in and several for of hybrid years joined in look As David hybrid

environment regulatory markets in. global compared we is and of political that our with operate the stable many First,

the characteristics performed germplasm very see Australian our as development specifically Second, this fact commercial a much were thus the in We for across given crops the I of three market geography. the of point. well key and mentioned developed

perhaps exciting there. emerging opportunities Australia our We drive to the most key already a home return markets. play Australia I it enter relative our required already to for troops us focus the to is believe There will importantly, risk. to of facilities our Again, provides is one and with we opportunities. believe maximizing size want market no acquisition Third, Fourth of operating revenues the us is and minimizing while role on going existing reiterate with on forward. market ground

strategic in alfalfa U.S. the Third build and conclusion, sorghum

Our key sorghum focal within our point will U.S.-based operations alfalfa. be expanding and

them a seed where On in we them seed the where production have with place – agreement alfalfa already provide we our will will we with side, provide XXXX. Pioneer, through with distributor

is to a such be to distribution to U.S. have alfalfa strides herbicide our We trait expand traits as there significant we of but transitioning Key the and expand market share development of share to opportunity others seed disease such growth key seed insect with the believe market. Wilbur-Ellis, The is made as still digestibility. technologies. market will

driving is to I the penetration to is it market. is return further in that in I we’re past, there we on per the pound be in our for our As do our seed seed an this acquisition Fourth of market. expand options is In pursue might that garnered for But in is we All want focused in this to build the customers, that traits – to with into from this we all value grown speaking more U.S. in itself. in many But actual Asia. accelerate appropriate More an value. significant and that Stevia specific will into from assets opportunity maximizing U.S. leverage strategic believe, to there the discussed sorghum market I United States. stevia stevia stevia demand minimizing produced produced going believe currently risk not too conclusion, to while while specifics. get profile the believe

network to Evolving stevia production two sweetener create a farmer plan the with industry germplasm recap. proprietary is I’ll this taste more stevia our goal and details of high-quality use U.S.-based or over quarters. three our next superior Our beyond profiles. in of provide to grower stevia

economic higher marketing with One develop Number operations, be I marketing evolve higher of latest beyond our seed become and themes comprised markets, alfalfa has our capabilities S&W value trait our the evolve to recap. approaches beyond our lastly, majority products. operation. discussed And our to vast have classic beyond historical just on inception. carry two, and development one, Number evolve business will beyond Number strategy items on going CEO keys dependence regulatory which as since to our since tools our been I key three, biotechnology took focused which dependence over four evolve customer-centric geographic of for political, distribution more beyond The key forward. and risks. fourth, a of sales evolving

recap now Not been a from and of decisions. on all these evaluations strategic quarter. focus has the our me bit Let obviously little

a operations. current After also to are We on operate. all, day-to-day have business focused we our

seed. worth $XX.X compared quarter our against with approximately executed prior whom the Overall, year. revenue we During second during second to million million $XX.X the first the alfalfa shipped was $XX.X XXXX quarter, the plan Pioneer, quarter in of distribution million we of with fiscal

dairy execute the Africa from milk, We fiscal in Middle Saudi continue and of to to their We – farmers market hay the improved to volatile for market like. will as fluid points quarter what for XXXX. regions world. new dairy well as cheese, as margin other and where Arabia believe continue initiatives, and importation Northern demand second livestock, East for XXX determine will XX.X% compared profit in uncertain continue which will that butter Saudi be to gross XX.X% our demand forges countries in Ultimately, continues to milk require by on margins fresh basis the hay around of grow. successfully and and equilibrium customers look we alfalfa the products surrounding the milk to The

geographic water. cows dairy to producing available However, regions with relocate will

I their to alfalfa very we I we Our strategy December. in successful them our for S&W continued offering excuse new a market forward on for agricultural a strong of near-term years will in our recap our have some Matt. balance both improved want of strategy middle a to with places talk for and to private the look markets, sheet place. in long-term Also exiting have entire shareholders shareholders a cash before continue rights Overall, with company, across service in to about these turn existing balance July a value business One our the more becoming focus placement accretion with a Matt in going job detail, we position. believe significantly balance me, personally as XXXX, – driving I’m find – to with sorghum. into support sheet thank over it flows When business. come. to to completed driving is and I coupled strengthen at that to evolution leading a and our the and

I’m but maximizing on our overnight, managing made progress risks, opportunities, minimizing have extremely focused weaknesses. over last with and since our the are pleased Nothing may the strengths took CEO. We in our seven agriculture as in we months our I emphasizing happens

of Matt Let me now review presentation turn to Szot the results. our quarterly over for

Matthew Szot

to Thank you, on Mark. call thanks Great. everyone today. And the

For revenue million decrease million $X.X of year. largely the $XX.X million to to use in compared second $XX.X quarter, Saudi uncertainty revenue We the for the prior restrictions. regulatory quarter a second experienced due was in to Arabia, water

due driven margins margins. decrease also reduction This a $X.X the shipments total coupled previously dormant million as of shipments the This a gross compared our initiatives second the primarily improvements prior year. higher product improvement of sales in the second Gross in sales where concentration points cost. in to by of with discussed timing the Pioneer. mix we revenue quarter had with period, our expectations basis of had consistent to to a to to XXX XX.X%, gross is an in primarily during seed increase in the product quarter of were improvement We XX.X% domestic margins market, in was current percentage drive

XXX,XXX, prior prior point look which increase full to As million, the flat likely gross fiscal decrease the compared due $X.X the reduction the prior will expenses improvement for the sunflower points were compared second in $X.X expenses to compensation, XXX to stock-based primarily the our expect of SG&A basis for while million sorghum about EBITDA investment in up and million down expenses to Adjusted second of XXX to the XXXX, second year. quarter continued was range. due This of programs. were $X.X the margin Total we year. the a in were year. basis quarter we to second be quarter XXX,XXX quarter initiatives R&D year-over-year in and is nearly to year hybrid over operating cost

DuPont several which this with successfully closed a note refinance, other we’ve $XX we million capital Now, completed then recent of and second we two-year sheet. million raising Mark million during And to repay on Pioneer. $XX also the million as backed mentioned, promissory $XX.XX of authorized strengthen KeyBanc. our fully a our $XX.X outstanding XXXX, quarter, a the working total July complete term back on did November, initiatives the the also balance the placement. And offering a we used In new in to on we September, debt facility completed private to

the resulted the for positioned periods and us All deleveraging of balance flexibility of have these have really of sheet in to actions further come. our

there’s one Now inventory do I balance sheet levels. want and out our point item other to that’s

are up same million time $XX You’ll the see that last inventory from our levels year.

production dedicated communicated our we’ve increased the over last crop to seed acreage As XXXX. year, we for year

North America particularly in were Canada. and addition, In in yields higher

decline levels inventory going a our and other production of shipments represents to into relates XX% the carryover the higher increase in increase increase and So year-over-year in Saudi. season to about the

additional will deteriorate next that us not be increase higher it’s of we sales the inventory storage long will seed conditions. year, this and is positions as as keep our perishable and levels While many under capital proper as not Please does over opportunities it to quality also capture working in as mind carrying possible. inventory as require

of very I from be expect XXXX previous know standpoint recap through to a From to more do harvest carrying our to few $XX Based provide revenues balance certainly I do with to want production planted our the next historical over the expect guidance. we here. went end currently expect of fiscal line on we clarity be quarter months I our third for to to levels. So and also available lot XXXX, management, to inventory information volumes $XX XXXX. we year become acres XX And approximately crop XX the we we for at in that and low guidance a guidance. million. Accordingly, million our the expect and decrease decline, data of new U.S.

you have to if feel any ask. questions, please So

me let to back Now, turn it Mark. over

Mark Wong

you, Matt. Thank

by precision from of some feel conclude just and a believe has board here minutes here of ag to me great comments new giving that Let of with you biotechnology, made. and and agriculture of year. I last members at biotechnology, the Considered member many broad additions the team product I’m we’ve genomics, a as joined some of really company’s board as we implementation development – S&W Monsanto team as few we’ve our experienced covered Consuela a agricultural excited in some Fischhoff that founders She last diverse the management science. new development breeding, particular, on of overall company’s for trait one have business development David the Executive fellow all set. board of strategies Consuela range XX-year geographic the benefit will development strategy the another board on crop addition help David’s like the career day-to-day by of added the XX-person In S&W in business responsible drive – was across and plant operations. technologies, experienced strategy company I executives joined market Consuela going Monsanto who a and and Monsanto Executive our product tremendously forward. Madere, data about well several of

forward, and we our look trait expand development. expertise we in will market to As look

the about before company. opportunity agricultural is the said I’m unique, it middle our market I S&W at of call, excited beginning the As has

profile have a will for up strategic our that employees creating We shareholder us continued support. and work believe seven have past for your of months. our value. that minimizing and many gone of planning Thank through Thanks upside of these laid know call you an over while maximize your Thank I have a to our lot ultimately the I we extensive their process And pathway again. I them. allows out open all to now asked hard you questions. for risk

Operator

FBR. Thank go Please question comes you. B. Riley from And Instructions] [Operator our with ahead. Sarkis Sherbetchyan first

Sarkis Sherbetchyan

taking for thanks and question guys here. afternoon Good my

Mark Wong

Hey, Sarkis.

Sarkis Sherbetchyan

really question revolves hybrid and your seed sunflower sorghum programs. first expansion the just for So, around

give You the crops? that little on a you’re be color return, you focus line going of initial on and some us maybe on that. go bit mentioned ahead of Can of that targets maximize for the to to kind time may set

Mark Wong

structurally hybrid traditional that we have have alfalfa Sure. a planted I are different These little company these the first than a understand bit and they’re crops higher mean, bit crops year. on. built margin every

as And farmer varieties, forward we’re convey be believe and sorghum why we to our need performance on directly looking seed sunflower. to whether so, specifically, but and customer-centric dealers. distributors alfalfa, being or of our interaction have we’re more farmer through to customers our information valuable That’s closer with customers, we about either we it the focusing that

we on expect So and to we don’t product percentage that down, to begin – sunflower. have because sales to alfalfa sunflower big sorghum obviously and to expect market alfalfa same have larger do that expect larger figure Not sorghum we a mix improve as at our where a sales margins grow and share. we that but such of shifts the piece to rate basis a or improve have we market share a go smaller we we

So going markets. And excited will math excited three that. we the when about as of now you But how works we’re mentioned kind talk in we’re to I very really distinct many out the that’s crops. about many, product very lines more know have the different

users value not We that that that We area to our them quality user we business, for that’s understand but our have company opportunity instance and is to company either want company. of we what if it sell sometimes particular a products. want oil us to because industrial an or be gives want force. like with the another obviously at farmer, the products, gives field on trials and a value we’re through oil to it looking be sales in the Just trait development. sunflower farmers demonstrate fact-based our trials might to to And we

excited. while markets. really maintaining and obviously mean, Hopefully, the that in on answered new I It’s company historically it’s markets your and some over stevia we’re So strengthen a not we the have built businesses, in that like question? to these the a fun and we’ve years to be fun be alfalfa which had lot.

Sarkis Sherbetchyan

million right, just It sales If kind that, this following guess, take we it, call helps. $XX up low the guidance, low end year’s the right. I end? of on annual of on

Mark Wong

Yes.

Sarkis Sherbetchyan

percentage the hybrid would this kind would sunflower and just of to sorghum year program? us be sales help that you attributable of say What seed Maybe understand?

Mark Wong

Yes, that Sarkis, X% hybrid that to attributed would sorghum annual probably number of both be combined. of and about those sunflower product both categories,

Sarkis Sherbetchyan

help with kind expected of I growth any grow? to then, there piece the you Or And linear a frame the how Okay. regard either that of of can growth just kind path path color of long there? it’s on that, can rate if pattern or just more mean, quickly

Mark Wong

Yes.

So work and industry. see have light on hard All and demonstrate are seed performance people momentum and seed your all things these customers plants soil people seed affect geography just the seed company performance field yield technical very products. the can crops sensitive. day that depending and type, Because latitude, own climate, your in crops. products gain It what of their of of our sales the is. because to these remember do trials these is basics the a There is to lot to of in have and

and looking to little it have couple sales crops. numbers might always momentum beginning, the for years a these gain start at just we you a but next that to going pace. you talk at sales Matt, coming about rising at want start actual So bit slow of hopefully the rapidly more is the

Matthew Szot

the ramp start closer ramp. of Sarkis, this next there. XXXX, million. you $X $X I and But to – see two more to from but is really the mean But then million then close think to million subject change. last did FY in are dollars over there, certainly be where will from are steady – again, pronounced million sort the we’ll that do significant year, $X.X seeing these and we years, progress, numbers we $X.X roughly and And that FYXXXX here its to we’ll

Sarkis Sherbetchyan

That’s program, talking Understood. profile. margin alfalfa in versus on if margins helpful. of year-over-year throttle should that gross Maybe improvement business. you’re Obviously, again? can XXXX kind then, fiscal start margin in Do fiscal to the about the gross I switching gears sales upward. gross XXXX you touch as alfalfa And likely go the expect you

Mark Wong

margin Well, improvement in XXX XXX points. XXXX, we’re expecting basis to basis probably definitely points

look in As Certainly, play points got is to over laid on of we XXXX that’s expand how put margins there’s point. we based over I at not each or to at we for XXX time, But we’ve up say consistently long-term, path. think a continue basis every – the look initiatives to to a any clear of the factors this point improvement out. year. XXX path think there in we previously clear pretty basis as that we’re a going and long But period we lot

Sarkis Sherbetchyan

Got from hop the back in I’ll me it. One queue. more and

million at was forward? rate, kind right think our for at think looking G&A, think of about what of to something kind the variances the Is that. level model be would posted or quarter So your us not, to going $X.X for OpEx And run that about? I if like it

Mark Wong

But typically higher and is of you to do we QX for control run cost going we be have we us. continue a focus a – where Sarkis, in sales. will QX concentration Well, to higher

So you see SG&A versus our QX. in will increase an

QX. getting You’re that to QX $X.X million probably closer number and in

Sarkis Sherbetchyan

Understood. hop and back you guys. I thank will

Mark Wong

you. Thank

Operator

Malouf from Group. Mike comes Craig-Hallum from question next ahead. go Capital Please Our

Mike Malouf

issues much Thanks fill little question. next on How there? a to it the or on how And out market? impact over going on guys? you what’s actually you will play two? think this the any in the over Can for detail did update any water Or Great. taking my more we regards year Saudi bit

Mark Wong

Mike. question, Sure. Great

their to know basically company significant to to whether as some government trying is press, offers. lot agriculture There a to make And put it ask to take a going place the from things be being Saudi improvements. and through also Carlton Ritz you Statoil So public happening where decide they’re public the of is if changes going a the they’re for trying is just there. contribution into

a the as It But country. it permanent by we the is can takes production, sold make on be us. milk mark its production reduction. on reduction the to is So for it years seed being some felt the see in that quickly water

cycle normal cow the a for milk. much place So years. though three dairy them have basically calves conversion get XX up they to calves is of a for production for in longer to have their to they cycle, to The can even milk years where there inefficient feed

dairies replace the world in – are so, of most cows taken of year cows the in four, out brought three and younger And brought production are around to are milk new them. cows or in

that’s So Arabia. in happening Saudi

you biggest XX,XXX a dairies it’s world. there There’s XX,XXX, somewhere from the there for in numbers, efficient. U.S. number integrated previous modern in milking biggest incredibly the largest dairy in remember calls, dairies cows, just are XXX,XXX the the dairy. is round cows As and The and of

So U.S. dairy dairy. times the the biggest XXX,XXX about Saudi Saudi the And is than is milking biggest dairy cows. three bigger second

U.S. it’s times So bigger the than biggest two dairy.

that they make for it milk. local of and fluid they sophisticated. liter raise alfalfa butter, a cows. They and containers very the milk a milk they They cheese in their seeds. buy They take taste to out own, Saudi feed milk two times package the and processing of day. they’re them products They plan Middle that They markets yogurt, own them. three a So one to Eastern all

would inventory In distributors of they’re the country realigning it short And that. the seed Saudi’s an because run, the seed country. in was not of that all allow were concerned so any over imports in probably

not up that of in So in be country they kind seed the that preferred hay. be the companies they’ve have country, what sort expectation and changes that would and of of loaded would out produce pipeline to they the knowing and

for are the alfalfa companies own in their selling dairies to But holding alfalfa to farmers production. the producing the or sales who and inventory dairies. hay themselves in are So also it produce are there the dairies future independent and

that So Arabia. be in has cows short the the to by run, used hay inventory Saudi up in existing

They on So even seeded buy you although, though water are Farmers coming back of down reluctant you of and not even because to expect in seed long on long acres. alfalfa be investment back a may newly are local therefore, be water we are yet, how to know alfalfa, Arabia new acres acres hay to reluctant maintained be they cut on don’t and too. seed they that can in Saudi rights going incremental invest cut really total produce how basis. that and to

industry. things have to really So to dairy trying dairy has of in used are in business right. going mean it’s to everybody structure And all the is of those what get kind change Arabia, a to restrictions changing, water the the industry that Saudi company where

pretty much off difficult So us gives that’s seed good are to for cut long-winded to why as an and very right seed company, incredibly answer incredibly your sales now. to question. But that do you some insight

us cow planted still to the sales. and While in really being acres our are company, the may new for existing right be but seed production, acres that’s even might key no a is be still alfalfa the is of in

Mike Malouf

it. Got Yes.

your out, just shifting fermentation quick wondering what I RebD and cargo? market? that market if the how on think side. proprietary or know over comes we – stevia out year you just next then Thanks. is stevia and that mean of kind a And the see the disrupts from we two product kind targeted – How which do ever RebM stevia have I plant a Okay. question is when sweet you really coming of

Mark Wong

Yes.

So our be one of Cargill customers, would right.

as sort get when just trying Reb bit. aren’t are their But how are that little than know to level of think many To at that products personal taste, part takes the stevia I really sweeter sweetness And There’s good the that product. manage production. made mouth I and of funny so from comes the don’t is units even stevia profile sweetness going many these new believe mouth things your from my and you but a that that the there’s you Rebs But view, Cargill bitter a that can least. sort makes of to trying your taste profile. raw sweetener. So fact described. in appreciate at it sometimes – it’s sugar personally more other of it’s spread you that leaf much of think through I down buds XX on products – maintain probably you that everyone bitter with use mix it my manage to people be that And cut you the of I together, me stevia taste once to a if sweetness to in – point dilute that

Cargill think is of I in of And obviously be that up and the their fact to beveraged key customer Pepsi provides a stevia are share materials diet users industry market key stevia to diet Cargill beverages. seems Coke every who the going the year.

we So future. think profile, crop exciting to trying do but though is Reb you to a has that can What not Stevia that America. hugely a into that in we’re trying manage only grow stevia we’re make

today. the you’re it not to means be all do like you going in harvest where to to is be really So able stevia produced that what of is, hand Asia

like it’s tea. So produced a

done couple of over may it’s You harvested in be and you life, and times many couple that a and hand. its in of – times year years by

harvest so hand. crop field not the have the enough to people U.S. It’s And economic to to in by probably the be it comes to going

weather machine you much the and we stevia – to you’re harvestable. have that’s plant right more here develop going to to the going stand be can of that varieties U.S to proprietary you’re profile, at with same, up grow is conditions So some time the have to a going conditions in Reb have the to would resilient

So that’s we with of on stevia. granted for there. believe industry, power and everything Seed industry part, is have we The very patents been a our the personally. the I opportunity Because working indication big American We’ve go that think as a but of problems. We those we – seed, says, starts germplasm an for stevia. right? S&W like great part three proprietary that we’re it’s on that’s stevia sweetening company the ASTA the like Association, U.S. and expertise we think base of We We stevia, seeds like and model. that’s breadth base. the grow the important the small

Mike Malouf

Yes. that’s then… helpful. And Great

Mark Wong

I not work out love and stevia. sit really I’m and do about and the I I mean, like so crop. it. here this go excited on can

Mike Malouf

you let’s other too. on Well, focused the stuff keep

Mark Wong

We try.

Mike Malouf

last the on bit just I give are acquisitions. had about to do strategy of size in to identify there? you So of The kind a this you have little have you color just of place is balance about? sheet the Do type talked thing? we us to question sorghum talking what you’ve can Do

Mark Wong

good question again. Yes,

competition that we’re I illicit other at. So have tell to industry looking any currently can’t we’re we seed actually than that don’t knows But what candidates the think more from that, market. the because three And in I really I you companies.

crop. a And position in so a the coming deals are be be that want price out that to might good people when there really a way out our always stick you to believe that’s

opportunities. the about excited we’re So

We’re looking that us. candidates at understand trying the diligence are due to before and

along way. far pretty we’re So the

– selling We’re the is timeline negotiations, half to any half optimistic. but projections going of other company, we’re not obviously because only the we’re on make I’m pretty

it. which unfair get described our ask fund on they growth Obviously, as if have that they our conveyed till it’s board obviously fund consider one the raising has ago, with of the And far right – board the to acquisition potential, As to our some at deal are I to on acquisition table. we’ve the things business. potential earnings our you people more to ways right specifically we to that and comments would I price capital grow capital, minutes that primary made – in strategy, was the board management

to or sort that is that’s a funds there I of say you pool X been of committed So Y. of can’t

think wait of I and that deals price what is. what until deals do we’ll to have to kind those want we we see of the

Mike Malouf

it. Got

appreciate great. it. for the Thanks Okay, color. I

Mark Wong

Yes. Mike. Thank you,

Operator

comes Instructions] our Markets. from Klieve NOBLE next with [Operator Capital go And ahead. question Ben Please

Ben Klieve

comments the for the here. your for of especially guys, start thanks in call. thanks all Hey comments Mark,

of have if that that’s with yet? lot last in if away? couple distributors on on quarters customers customer-centric things. guys that You any provided. a still the we dialogue is your lot Couple have appreciate regarding you’ve your you’ve wondering I’m curious going your What, Or the initiatives been the months. changes still something I’m noticed of for few and of – color working

Mark Wong

Sure.

see early people through to to lots mechanisms, too for may right. of that. closer think getting I the of effect structural Distribution, customers different it’s

and a customer, punch absolutely to I dealer When like to formal to getting close But are customers. mean, with to their has to this them company you access farmer or farmer having distribute Pioneer to pleased their and say cow got Monsanto a dealer love be and But I’d that. we While afford economics to it our network have with relationship to I Pioneer farmer your dormant big corn the through our network. alfalfa in incredible dealers. able soybeans of be the has the gives reach you’ve

I germplasm that the an from share that? have household non-GM significant nor corn we’re be stevia. saw Yes, So sorghum, can that international plan and having plan. our that opportunity in company but we plan a three network. company to we along if maybe consider is in we’re or trying we not a indicate a do that we’re as without we to to a we picked Because we from come is and that crops and sunflower, that them, farmer the going corn markets you say for where And tell dealer soybeans, in, sense already to focus the basic stick came in on alfalfa plan our the

them. least can stick without we to try as that to the any with going that looking leaving at opportunities to pushing We’re them as at close table off

consolidated, and are there farmer. believe fewer fewer that they on farmers good good closer to trying people based that as And decisions. make we’re of they smart is it So and get make they And that We them. to the a data of to with that good other customers. performance be varieties our a we that’s we kind companies that that show of and their to partner seed show markets. local our thing want we demonstrate And can want the seed and in varieties

Ben Klieve

That makes a whole lot of sense.

have the because you range be David of in $XX million those are Australia bit I’m what is question long of did board. appropriate? Or targeting if Another curious and range that hybrid a think operations still kind shift earlier initiatives million that the higher $XX the of five-year make bringing your similarly term? than estimates for may I you on

Mark Wong

the it I’m Now trying fair to do do me you’re higher than just number going get Ben. not $XX just million. it. not I’m to to

we not are it. mean, XX persuasive You I gigantic guy, do a but going I’m target. made to

research happiest and whole we people and the going managers of group in to get $XX We’re the sales be world, our to million.

We’re going shorter, because materials been a the bit conditions. frankly chosen to Australia timelines Australia are for right. The

foundation then then of farmers their they We’re and company And in breeding the couple ones for field those plant are. – what and decide hybrids good they with in they’re what the seeds seeds do years the they evaluate seed does, call they raise that the a to customers. clean seeds mother have field seeds, sell then, put commercial those commercial which we what and the we in them to and grow those are bag from. the And those, all we harvest

at going to for in some if in U.S. speak the process Matt than slower momentum. beginning. it advanced million to momentum $XX be why that’s couple the the is that more then, a hopefully so said, Australia five is instance for we we’re gain always us. is in we years So of hit think in But content high And And years.

Ben Klieve

color. blame I appreciate can’t but guy And trying, the for you a

Mark Wong

Ben. good, You’re

Ben Klieve

curious regards are ongoing generation. status Next agreement if that could to the I’m for on you’ve curious question last about update talked I on us next the call of with the you that? the kind negotiations the have of development. is development Stevia I’m

Mark Wong

Yes.

yet. announcement an made haven’t we So

officially the But – and think we we’re say, And – that’s right market. So excited as all close one no so one can about now. the there say anything a could I of in we’re agreement with And almost not me. as there stevia but as as is really pretty me excited can to I multiyear be getting big customers there. but

to stevia. of put going money have We’re bit into little to

programs need bring to we done Some need that we have where haven’t of breeding breeding work. before. has way some markets to our to a there some We in places it do

our to varieties We’re on and techniques that more the analyses working have. they little performance bit make sure new a HPLC difficult. we have some and think on MacSpec It’s

this So [ph] difficult as difficulties is yields. they this to to you just Because after Mike a of little whatever Reb I RebL have stevia. one are. than manage going bit profile the RebA, asked, more think It’s RebM,

as have that yield. Okay, there I think as well you is, manage to case profile

to you’re basis, these that’s everything And science total are we’re of but on at sure doing the actually also at that analysis And to maximize efficiency quality the make we looking with that we so want very up techniques a up can speed why yield, just be important. our breeding yield. looking the you’re So of program. to

Ben Klieve

market couple any uncertain a are it it uncertain you the to a do sense looking different quarters. question there was do they Saudi. you’re Do – you’re one of uncertainty comments. And here, on gaining was The dozen there have ago than of that few today of clarity things kind good. aftermath truly customers seems strategy of level clarity? Very no any past Okay. but in ago? unchanged then, is And is at the Or few on Saudi the over can seems today regarding quarters a quarters tell I customers the is your are from what can that as the it

Mark Wong

No.

I that make they are the about biggest right. right. world here just that what The These huge I gaining talking all we’re sure are understand dairies. they are clarity. and think, vertically structurally mean, we integrated, in

grocery the trucks that in So stores. plants, you’ve you production bottling the the where the cows, vertically all business of feed, distribution are got a go to the integrated the have

not in to to savings we understand to like cost And you’re the are through and least but grocery probably steps, of basically understanding in the there more going can at them got everything about vertical directly four you’re all customers products the like. But because You’ve assets. for the wreak of stack doing need integration, get your innovative that. yourself, you’re you market vertical because milk of that selling and else you even new look to what profits investment faster, stores,

profitability have can’t crop. that in basement you easiest basically the any to companies. through they to not the of a respect come you out, think can window figure vertically at not grow to allow all pieces water your go out be profitable strategy somebody the and out, cost vertical – to these tell continue exactly It’s when big you kicks your the integrated to stack least so of the thing which your the to company. It’s and of stack And

in in those deafness assumption off issues sense frankly, are and basic them the their to me to net are of with not caught I’m talk clear some others bit when managing to are we understanding the their next what the is touch of hanger But issue that their going of of better So because in business going that a still doing are companies get difficult. that off people. hear I been we some the what than integrated to good that’s would thrown on some vertically just names mention head and take at with are address here. it’s the others options way issues to what And has pretty to in Saudi solve business the them them. you kind the efficient companies was my it’s this most markets very dairy that might

I’m you. out experience products am think built milk job its CEO this but vertical on have year, quality I and then, away and day. incredibly And do. market. what high I day milk is in been don’t and – And to was already have business, you at turned And don’t dairy my business, taken dairy of diary value the on direct place, if just difficult some in I water happens or do I to added I partners a local their have I that’s from coming the just I what I with background from when they’re necessarily it figure operate did stack of in that’s dairy what I know seed there is great getting to not doing because at a – still what S&W, my would the

countries they be a been that it’s. countries water sense the take that first Saudi around this is the think one And try what an think need parts wonder I’ll for problem U.S. just and of just I decision-making environment to and to water world. head may same add situation usage problem agriculture. get brave have is equilibrium this to I the hard the I And go decision. we’ve in got to on of a of other a make to through including where kind the

Ben Klieve

you Last I you jump question million what queue. position could that QX certainly quick Could there. have see $XX that, emphasize remind one, the last number I’ll me, what I from certainly in Pioneer back discussed. that The year? us was

Matthew Szot

year-over-year prior the of will we’re number for in number roughly the with but there year-to-date at year little variability, bit be in Pioneer year. It’s where be line with same it we’re and line roughly pretty much last

Ben Klieve

Okay, thanks Matt and, thanks guys. queue Mark and jump in back I’ll

Mark Wong

you Ben. Yes. Thank

Operator

Carter go from Gil please Our ahead. Keith comes with question next Terry.

Keith Gil

how are you, Mat, afternoon, Mark, Thank good you?

Mark Wong

Keith. Hey

Matthew Szot

good to hear from you. Keith, Hey

Keith Gil

much. My very question you Thank answered previously. already was

Mark Wong

welcome. You’re

Operator

Mark concludes session. the question-and-answer conference Wong for this the And closing I’d back remarks. our to any over like turn

Mark Wong

our know and to just analysts I company the feels want who I questions, like us is momentum everyone not give the would the obviously call the members, all around we company. some due public in S&W would to and working future. understanding thank our with in hope you forward without I your we follow all who Again members, our commitments today thank value all your like I board again there your Yes. the look our about board to employees, gaining new especially that support

learning We’re other. from each all

these We’re skill to from sets the problems address. the trying table of learning all that we’re bring to for that all difference we

to – something is that easy. we’re trying doing not We’re not

the our on best intelligence to in of set have do the are support kind depend of market can we And organization. things easy. new middle a we think certainly crops. abilities And and creating shareholders, this to it. these try of we And the these our never work our you our get We’re commitment the of skill but done to company ethic have our and

everybody. you thank So

of enjoy being I calls, So all its you for S&W. thank great these following your them and obviously

Operator

conference presentation. The attending is now for concluded. today’s Thank you

disconnect. now may You

S&W Seed (SANW) 8 Feb 182018 Q2 Earnings call transcript