S&W Seed Company (NASDAQ:SANW) Q4 2019 Earnings Conference Call Transcript

Sep 18, 2019 • 11:00 am ET

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S&W Seed Company (NASDAQ:SANW) Q4 2019 Earnings Conference Call Transcript

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Q & A
Operator
Operator

Thank you. [Operator Instructions] Our first question comes from Sarkis Sherbetchyan of B. Riley FBR. Please go ahead.

Analyst
Sarkis Sherbetchyan

Good morning and thanks for taking my question here.

Executive
Mark Wong

Hey, Sarkis. Good morning.

Analyst
Sarkis Sherbetchyan

So first, just wanted to kind of understand for the current year for Chromatin, I think, the press release said $12.4 million of sales was realized. And I wanted to kind of understand how that compared to the previous guidance the management team provided for $14 million to $15 million. Was there some sales that are maybe slipping into next year? Any kind of missed opportunities, just kind of help us understand the delta there.

Executive
Mark Wong

Matt, do you want to take that?

Executive
Matthew K. Szot

Yeah. Sure, Mark. Sarkis, yeah, so the top line at Chromatin did come in a bit lower than we had expected, but that was really related to the timing of sales. Some of those sales actually shifted to July of '19. And I do want to point out that although the top line was a bit softer, gross margin did come in better than expected, so we were still able to generate positive EBITDA on that $12 million of revenue for Chromatin, which we think is something to be proud of considering the historical losses that the business generated and really just sort of, I think, demonstrates how powerful this business can be as we start driving top line revenue growth, particularly with the margin profile that these hybrid sorghums are delivering.

Analyst
Sarkis Sherbetchyan

So, thanks for that. And then, with regards to that, I think in the past you mentioned, call it, 30% gross margin, maybe a little bit better. Can you give us a flavor on what you did generate?

Executive
Mark Wong

Yeah, Sarkis. The margins for our sorghum business came in around low-40% range, and we're expecting that margin profile to continue into 2020. And as we look to the outer years, probably increasing and improving from there.

Analyst
Sarkis Sherbetchyan

Great. That's good to learn. And then, I think, in prior calls you mentioned for fiscal '20, you'd expect the business for Chromatin, the sorghum assets, to do $17 million to $20 million in annual sales. Is that still the expectation or would there be a range that's a little bit lower?

Executive
Mark Wong

Yeah. Sarkis, based on the revenue guidance we gave of $64 million to $67 million, we're assuming that the Chromatin business would generate roughly $15 million of that. So certainly if we get back to that $15 million or $20 million range, that would be upside to the revenue guidance we've provided today.

Analyst
Sarkis Sherbetchyan

Got it. Good. And then, with regards to the guidance given for the Pioneer licensing sales, can you maybe give us kind of the cadence we should expect for fiscal '20? And then also, how would that impact gross margin, right? Would it be kind of, call it, in the low-30% range or would be 100% gross margin? Just kind of help us understand how we should think about the license as it flows through the