Good day, and welcome to the S&W Seed Company Reports First Quarter Fiscal Year 2022 Financial Results. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your touch-tone phone. 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 Mr. Robert Blum. Please go ahead.
All right. Good morning, everyone, and thank you all for joining us today to discuss the financial results for S&W Seed Company for the first quarter of fiscal 2022, for the period ended September 30, 2021. With us on the call representing the company today are Mr. Mark Wong, President and Chief Executive Officer, and Matthew Szot, Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session.
Before we begin with prepared remarks, please note that statements made by the management team of S&W Seed Company during the course of this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant 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 projected.
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 risk that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in the company's 10-K for the fiscal year ended June 30, 2021, and other filings made by the company with the Securities and Exchange Commission. With that said, let me turn the call over to Mark Wong, Chief Executive Officer for S&W Seed Company. Mark, please proceed.
Thank you, Robert. Hello, everyone who's on the call today. I would like to just start out by saying commodity prices around the world in agriculture are very very high. We have sort of record corn, soybeans, sorghum, and wheat prices. As all of you know, because a significant piece of our business is actually on the continent of Australia, where meat prices, that would be beef and sheep prices, drive kind of farmers profitability. Those prices are also for proteins very very high. Around the world in our markets, we find ourselves in a situation where farmers, as we've talked about before, are now willing to pay for that incremental bushel of yield.
I mean at these kind of returns for farmers, every bushel is a bushel they make money off of. In some markets, as we've discussed, when commodity prices are low, the farmer may manage his farm to sort of break even. In a market like this, he's going foot on the gas to get as much yield as he can. You know, that's reflected in high demand for seeds in general and for S&W seeds in particular. We will be seeing in the 2022 year price increases pretty much across the board. Some species obviously prices will increase more than others, but price increases across the board and improving margins for S&W will result from that.
That being said, though, our strong year this year is still being buffeted by some of the logistics problems that everyone's reading in the popular press. These problems are really first generated by the shutdown of worldwide economies by COVID, and now with the restarting of those economies and the huge demand being placed on trucking and shipping around the world, we are still feeling that. I would say versus 12 months ago, I think it's not getting better. It's actually getting a bit worse. You know, we've also changed some of the things management-wise in the company to try to deal with that. We have organized our sales contracts so that some of the freight costs are now borne by our customers.
We're doing things like cleaning our new crop seed as rapidly as possible. We have cleaned to date in the northern hemisphere about twice, at least twice as much, sometimes more than that, seed than we had cleaned at this time last year. What helps us in the northern hemisphere is that we had a very good production season this year, we did not get any early frost, and we did not get any rain on the crop. All of that crop has been harvested in the northern hemisphere, U.S. production locations, and is in our two plants in Idaho and Texas now being cleaned. Because shipments are still troubling in terms of getting trucking companies and shipping lines to hold to a schedule.
I thought it might be useful just to remind everybody kind of where the problems for S&W are coming from. If I can dive into a little bit more detail, and this kind of reflects what I said on the last call, when we had a chance, Matt and I, to speak to all of you. In the U.S., you know, it's a Northern Hemisphere cycle. We harvest in September and October, and we sell in May and June. In a normal year, we have plenty of time to clean the seed and get it ready. That's augmented also by the fact that we carry over some inventory in different varieties and hybrids. We can ship to our customers both out of new crop harvest and out of carryover inventory.
In the Australian home market, so that's the continent of Australia, you know, we have the same kind of thing, except it's a Southern Hemisphere production cycle and sales cycle. That's another one of our big home markets, and it's a significant piece of our sales. We have 12, 14 salespeople in the field there selling to distributors and dealers. You know, the seasons are just opposite. We are selling now into the Australian farmer customer network that we have. You know, we normally harvest in that sort of April and May period. Again, we sell out of carryover inventory. We have plants there that we operate ourselves, and where we receive and clean the seed.
It's a much similar market to the U.S., and timing only a 6-month sort of delay. The problem that we have is because we produce a majority of our alfalfa, and in this case it's the non-dormant alfalfas, the ones that are not grown in areas which have severe winter, so that we don't need to provide alfalfa varieties that can survive winter because the winters are basically very mild. This is the Middle East. What we have is a Southern Hemisphere production system because we're harvesting and growing those crops, mainly alfalfa in this example, in Australia. We're harvesting in kind of April, May. But we've got a Northern Hemisphere, even though it's closer to the equator, a Northern Hemisphere planting season. These guys wanna plant July-ish, August, July, sometimes June.
We always are pressed to get the new crop cleaned in Australia and send it to our customers in the Middle East. A lot of times we send the first shipments out of carryover inventory, and then the later shipments in the season when we have another 30 or 60 days, we send out of new crop. That will continue, but COVID and logistics issues have made those shipments, the ones that have a timing problem in terms of whether they make it into our fourth quarter or our first quarter of the next year. As had happened in the 2021 year, those shipments did not make it into the 2021 fiscal year.
Since we have an end of June fiscal year, those shipments are in the 2022 fiscal year, and Matt will talk a little bit about that in detail. You know, that's where our problem is, not in the U.S. market or the Australia home markets, but in the Australia production of alfalfa that then goes from a Southern Hemisphere production cycle to a Northern Hemisphere sales cycle. That I just wanted to be specific is you know the reason why our guidance of $80 million-$85 million is maybe a little bit lower as we talked about in our last call than some people expected.
That's just because, you know, we had 2021 sales move to the first quarter of 2022, and we will have fourth quarter 2022 sales move to the first quarter of 2023 fiscal year, so that we're not double-counting those sales of alfalfa to the Middle East in one fiscal. We're not counting them twice. The reason is that the high demand, in addition to the logistics issues, has almost eliminated all of our carryover inventory. Most of the shipments will have to come out of new crop, and it's gonna be very, very difficult to get that crop cleaned and in the environment of logistics issues, get it on a boat and get it to the Middle East in the 2022 fiscal year.
Those shipments will be in the 2023 fiscal year. There's still plenty of time, even with shipping in July and August, and September even, to get those crop bags of seed to our customers in Saudi. We are not gonna miss the planting season. It's just folding from one fiscal year to the next fiscal year for us because of the short inventory situation. That's a good thing because that just means there's high demand from our customers. The logistics issues that we're experiencing in trucking and containers, which is a bad thing, but we're trying to manage that by cleaning our seed as early as we can, paying attention to all the logistics issues.
Every time there's just even the hint from a trucking company or a shipping company, that there's gonna be a problem, we're sort of all over it now and trying to look at alternatives. From a cost standpoint, we've passed some of those freight costs on to our customers. I just wanted to touch on that and just, absolutely spend a little bit of time making sure everyone on the call understands, why the guidance, as Matt's gonna tell you, is still in that $80 million-$85 million range. With that said, I'll go on to a couple of high points. As I said, the farmers are very excited about what's happening this year. They're gonna make money. Demand for our seed is really high.
Our Double Team trait in sorghum, that's our herbicide-resistant trait to control grass weeds, is looking very, very strong. As I mentioned, in the Northern Hemisphere, we usually set prices around December 1, and we're in the process of doing that. We're hearing very strong reaction from our sales force that farmers were very, very impressed with the performance of Double Team in this past 2021 year, and we expect them to be pretty much sold out of the in the 2022 fiscal year also. Double Team's going really well. That's a big thing for S&W because the margins are very strong on traits, as all of you know. We're very, very pleased with that. It also gives our salespeople something to talk about with their customers.
Hopefully, it will drag along additional sales of other sorghum lines that we sell that are not Double Team. Both Double Team and non-traited hybrid sorghum grain sorghums look like we're gonna have a good year. We are also, as I said, following the Monsanto strategy, where we, based on the strong demand, are pressing other seed companies to license the trait from us, and that continues to go well. I don't have any new news specifically to tell you right now, but there are some of the bigger players in grain sorghum now looking at the trait and in discussions with us about a license. On the stevia front, as you all know, we signed the agreement with Ingredion.
We have an agreement to ship containers of leaf to China to put it through their extraction plant and their purification plant. Those plans remain on schedule. We planted a crop in North Carolina this fall, and we will plant more acres in the spring, and we expect to be able to meet those requirements for leaf, dry leaf that we are going to deliver to Ingredion in China. That all looks fantastic so far. Again, that's just the beginning of a longer-term relationship where eventually we hope that we will, we being Ingredion and S&W, will embark to really build the U.S. market, which is a supply market, which is the biggest demand market for stevia.
That there'll be a new production plant built in the U.S. to both extract and purify stevia from dry leaf, and that as our agreement with Ingredion indicates that we will be the supplier of that leaf to Ingredion over the next decade. We've touched a little bit on margins, but I'll just say we're in the process of setting prices. As I mentioned, in the U.S., we sort of do that in December, early December. We have set prices in Australia as we're selling into that Australian market, and margins look good. Matt's gonna give you some indications of that. As the new prices hit in our big quarters, which is the third and fourth quarter, we expect margins to actually improve some more over what they currently are.
Lastly, I'd just like to say, you know, it did attract some interest in the shares, I think, when shareholders, both current and potential, saw that management and the board stepped in to raise through a private placement $5 million of equity. You know, we're pretty simple guys, so we just sell common. Wasn't any kind of high-powered special equity. It's the same kinda shares that we've always sold.
I am personally happy to say that I was also an investor in that round of $5 million, and I just think that all the work that we have done as a management team is starting to really show in the form of better margins and our work in alfalfa in the Middle East with the markets coming back. Our deal with the stevia, with Ingredion and more, the most important thing in the short term is our Double Team trait, which is gonna add significantly to the financial returns in 2022. With that, I'll turn the presentation over to Matt, and then I'll conclude with a couple of comments. Matt, please.
Thanks, Mark, and thanks to everyone joining us on the call this morning. Core revenue, which excludes revenue to Pioneer, was $15.5 million for the first quarter, an increase of 27% compared to $12.2 million in the first quarter of the prior year. The increase in core revenue for the first quarter came primarily from the MENA and Australia regions. Now I wanna clarify that core revenue and total revenue will be the same number in fiscal 2022, but we still reference core revenue as long as we are comparing against fiscal 2021 numbers. As a point of reference, our prior year Q1 results included revenue from Pioneer of approximately $1.6 million.
Now, as we discussed during our last call, the supply chain and logistical challenges resulted in approximately $5 million of sales orders that were originally expected to ship in Q4 of fiscal 2021 to shift into the first quarter of fiscal 2022. The limited availability of overseas containers that Mark talked about and just the ongoing congestion at the ports continues to delay shipments and really complicates our ability to precisely forecast the timing of shipments in any particular quarter. At this point, we're expecting these dynamics to persist throughout the year. As we look to our annual fiscal 2022 guidance, we are reiterating that core revenue and total revenue will be within a range of $80 million-$85 million. This estimate represents core revenue growth of approximately 15%-20% year-over-year.
Now, as Mark mentioned during our fiscal 2021 year-end call in September, it's important for everyone to remember that despite the shift in revenue from 2021 to 2022, we are expecting a similar shift of revenue from 2022 into 2023. As mentioned, we expect shipping challenges to continue, which will likely impact the timing of our Middle East sales orders, which typically get shipped in that June time period. As Mark discussed earlier, we also see additional risk of being able to process and ship the upcoming Australian harvest, which is coming out of the ground roughly in the April timeframe. Therefore, the timeline to harvest the seed, clean, package it, and ship it is gonna be likely more difficult this year than the past.
This is further impacted by the fact that this year, we're going into the sales season with lower levels of carryover crop. Now turning to gross margins. GAAP gross margins were 20.1% compared to 12.9% in the prior year. Adjusted gross margins, which excludes the impact of inventory write-downs, were 22.1% in the first quarter, compared to adjusted gross margins of 19.4% in the first quarter of the prior year. Now despite the overall rising costs for shipping and transportation, we delivered higher gross margins in our alfalfa and pasture product lines this quarter. As we previously mentioned, we are expecting gross margins in fiscal 2022 to show solid improvement over 2021.
This improvement is expected to come from the various initiatives we've put in place, including the implementation of price increases, passing along the incremental cost of freight and transportation, as well as focusing on several other operational efficiencies. We believe that the Q1 results reflect the early innings validation of the various initiatives that we're putting in place. Now quickly turning to operating expenses. Our GAAP operating expenses for the first quarter of 2022 were $8.9 million compared to $8.1 million in the first quarter of the prior year. During our call in September, we provided full-year operating expense guidance, and I'll provide that recap again.
We project full-year fiscal 2022 operating expenses as follows: SG&A to be approximately $25.5 million, which includes non-cash stock-based compensation of approximately $2 million, R&D to be approximately $8 million, and depreciation and amortization to be approximately $6 million. As you can see, our Q1 actual operating expenses were lower than the Q1 pro rata portion of our annual guidance. We're focused on holding and reducing operating expenses wherever possible and of course, growing revenue in the margin line items. Now at the EBITDA line, we had negative EBITDA of $4 million for the current year. I'm sorry, for the current quarter, I should say, compared to negative EBITDA of $4.6 million in the prior year. If we exclude the Pioneer contribution from last year's EBITDA, the year-over-year improvement to EBITDA is actually $1 million.
Please keep in mind that our Q1 and Q2 quarters are typically our slowest quarters, so we expect to see a meaningful improvement in EBITDA as we move into the second half of the fiscal year. Now, as we mentioned in the year-end call in September, given the impact to revenues and gross margins, primarily from the logistical challenges in fiscal 2021, we fell short of our adjusted EBITDA and cash flow targets in 2021. As a result, we worked with our lenders, and we entered into amendments and waivers with them to address the non-compliance with certain financial covenants as of June 30, 2021.
I'll point out that we're in the final process of renewing our facility with our bank in Australia, and this new agreement will not only expand the size of our credit facility, but also extend the maturity date to September 2023. Lastly, as Mark mentioned, and as many of you have seen in our recent disclosures, but we did complete a $5 million equity raise in October, led by our board and management. We're certainly pleased with the insider participation as we continue to work on improving the strength of our balance sheet. With that, I'm gonna turn the call back over to Mark.
Thanks very much, Matt. I'd just like to remind people in my final comments here, you know, the ag markets are very, very strong. S&W, we expect, is gonna have also a very strong year in 2022. We're working hard to get the company to maximize our sales and profits and margins in the third and fourth quarter, which, as Matt said, are our big quarters. We expect seed volumes to be up and also prices to be up. As I said, we expect to be sold out of some of our hybrids and varieties in the various species. With that, I will turn the call back over to the operator. Matt and I would be happy to take some questions. Thanks very much.
We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. The first question will come from Sarkis Sherbetchian with B. Riley Securities. Please go ahead.
Good morning, Mark and Matt. Thank you for taking my question here.
Morning.
Just wanted to start on the margins front. Clearly, you know, the margin improvement should be tied to the sales line, and typically in the fiscal year, the back half of your fiscal year is where the sales come. I guess, can you help me understand the cadence of the margin build, especially as you posted a 20% plus adjusted gross margin here in 1Q? How do we expect that to evolve as the year progresses?
Yeah. Mark, did you want me to take this?
Yeah. Yeah, please.
Sarkis, you know, as we've talked about before, from a revenue perspective, keep in mind that about roughly 70% of our revenues are on the back half of the year. The first half of the year, particularly Q1 and Q2, are not primarily dominated or concentrated with nondormant alfalfa sales orders, which you know, are typically a lower margin crop. Now, we are seeing pricing improvements in nondormant alfalfa, particularly in the MENA region. That contributed to the gross margin improvement in Q1. Probably a similar gross margin profile for Q2, because again, it's primarily gonna be concentrated in alfalfa. Certainly as we move into the back half of the year when we start selling more of our higher margin products, particularly our Double Team sorghums and our other hybrid sorghums, the margin profile really ramps up.
As we look to the full year, we're looking at roughly 25% margins. Finish your question, Sarkis.
Yeah. Yeah, absolutely. Very helpful there. As far as just kind of the outlook on the ag markets, I think, Mark, you're calling out the record prices for some of the other grains, and then also the meat prices driving farmer profitability, especially in your Australia market. I guess, as you kind of look out and look at the other grains, are you seeing some of your crop lines become more competitive in the farmer's eyes? And how do you see those discussions playing out as your sales force goes out to sell product?
Yeah. You know, I think a rising tide is lifting all boats, as they say. The high grain prices and farmer profits, you know, are really changing kind of the psyche of farmers. For a few years now, we've had low prices, and farmers have been in survival sort of mode, and governments have been paying big subsidies. This is really a fairly new thing in this cycle. It's the beginning of an upcycle. How long it's gonna last and stuff is not really known, Sarkis, but I think it's a great time to be buying ag stocks. You know, obviously we all benefit from the farmer's ability to make money.
I think our crops in particular, you know, we try to focus on things that we can bring technology to, like our Double Team sorghum, which is, you know, as I said, looking very high in demand. We also, you know, try to manage our portfolio with longer term issues like water use and things like that in mind. You know, we think it's very important for the long term to basically always understand how much value is created for every unit of water. We do that analysis kind of on the crops that we decide to go into. You know, I think for us, you know, trying to focus the company on these high demand kind of things, carbon, you know, obviously is important.
We're looking at how we might participate in those markets more clearly. You know, basically how do you make more things in a plant? That's another target that we're doing some work on. You know, I don't think there's gonna be obviously cement made in plants or steel made in plants. Other things obviously are made in plants today, like the basic materials for some of the fuels. You know, we're looking at all of those kind of opportunities also. I mean, the world's a changing place, and for small companies like us with really experienced management who are getting a little, for myself at least, old in the tooth. You have the experience to look at the markets and remember what happened over the last 40 years.
You know, it's just fantastic to get up in the morning, come into the office, talk to our people. For me, it's just, you know, the culmination of a lifetime's worth of work. Now the markets are giving us opportunities and by gosh, we're gonna take some of them. We're very optimistic.
Great. Thank you. That's all for me. I'll hop back in.
The next question will come from Ben Klieve with Lake Street Capital Markets. Please go ahead.
All right. Thanks for taking my questions. Just a couple kinda high level ones for me. One, you know, Mark, you've talked a lot about kinda how robust the, you know, the ag economy is now and farmers, you know, kind of making planting decisions, you know, differently now that commodity prices are up so nicely. Wondering if you can talk a bit about how you see farmers considering the trade-off between corn and sorghum, you know, particularly given, you know, how high nitrogen prices are. Are you guys seeing, you know, that your sorghum varieties are able to take, you know, acreage in an increasing manner from corn, you know, given the, you know, kinda underlying price dynamics in the market right now, or am I overthinking it?
No, you're not overthinking it, Ben. You know, you're showing your insight to the market, I think, which you know, is something we always appreciate when we talk to you. The whole sort of balance between corn and sorghum, I hope is gonna be changing, but this is only the first year really in what is hopefully gonna be a cycle. I mean, in the 1990s, I think there were, in grain sorghum at least, let's focus on that, and that's the most valuable sorghum family. There's also forage sorghums. But of grain sorghums, you know, there was almost 20 million acres of grain sorghum in the U.S. at one point, and now it's down to, you know, sort of 6-8 million. I think some of that's gonna come back.
You know, that's why the Double Team trait is so popular because it gives farmers the ability to substitute sorghum for corn on sort of the same acre. As you say, corn has much higher input costs and much higher water costs. I think the farmer's making a portfolio decision and you know, I think we're gonna see a return of sorghum acres at some of the expense of other crops. Some of it will be corn acres, some of it'll be soybean acres, some of it will be wheat acres because remember, sorghum's in sort of the western part of the Corn Belt where it's drier, so that's the Mississippi River to the Rocky Mountains.
I think we believe there's gonna be a trend, and we believe our ability to control weeds, which has been the problem and has eliminated acres historically, versus corn as a crop choice for the farmers. We think that that's changing and we're hoping that that's gonna come back. If you, I'll send you some information on our advertising and stuff, but you know that's kind of the theme of our advertising, is sorghum is back is kind of the theme of our this year's sales program in the field. Thanks.
Got it. No, that's interesting. Perfect. My other question regarding stevia, I believe I heard you say that you planted the kind of initial pilot plots in North Carolina in the fall and you're expecting more to come in spring. First of all, did I hear that correctly?
You did.
Okay. I understand this is kind of a long process, but I'm curious if you can kind of elaborate on kinda your expectations around communicating the results from those plots. Is this something that you think maybe, you know, by the spring we'll get kind of information on a yield on a per acre basis from the plots that were, you know, just planted or is this gonna be a longer term thing that we need to just sit tight on?
Well, we should have some preliminary information I would think by kind of the end of the fiscal year, the 2022 fiscal year. Remember, we've gotta harvest the crops. The stuff still has to grow. We don't make stevia or any of our other crops, you know, in a production plant. It's in the ground and, you know, Mother Nature's doing all the work. We've gotta harvest that crop. Remember, we do harvest these crops three times, three seasons, sometimes six times, two times per season.
We've gotta take the leaf, dry it, send it to China, you know, get through all of the issues of transportation and then get the data back for, in terms of extraction and then purification, and look at the yields per ton of dry leaf of the different steviol glycosides that you know that we're interested in producing. You know, we'll have maybe some preliminary information by the end of this year, but remember, it's a sort of the way we farm it, a three-year crop, and the first year's information will be important, but you know we'll also be following up on the future years from the same acres. You know, my hope is that the U.S. market's the biggest market right now.
It's maybe $600 million of stevia ingredient sales, and it's going to, you know, food companies, beverage companies, baking companies, all of those, a pretty wide sector of companies that want to make use of stevia since, you know, it is, it's not a sugar that causes diabetes. You know, we're still optimistic that at some point, especially with COVID and all of these issues of transportation, both just getting it there and then the cost of getting it there, right? In some cases, a container is costing us four or five times what it cost us last year to get it across the country, et cetera. There's more.
What I'm saying is there's more and more cost savings in having the production as close to the market as it possibly can be. I think that the winds at our back and that production coming from China cannot last forever, especially pushing up against these high transportation costs. I think that there will be a source of purification and extraction in the U.S. for stevia leaf, and that's gonna come sooner than later, and that will be a good thing for Ingredion and for us.
Gotcha. Understood. Well, looking forward to that whenever we're able to get that information and, you know, good luck.
Yeah
you know, going forward with that. That's probably a good place for me to leave it. Thanks for taking my questions. I'll get back in queue.
Yep, you're welcome.
The next question will come from Tom Harenburg with Carl M. Hennig Incorporated. Please go ahead.
Yeah, thanks, fellas, for taking my question here. The carryover from the fourth quarter into the first quarter, was there any carryover from the first quarter into the second quarter?
Well, Matt, maybe you should probably answer that.
Good morning, Tom. To answer your question, yeah, the carryover from Q4 all was shipped out in Q1, but certainly with these ongoing logistical challenges that we've been talking about quite extensively, absolutely, orders that typically would have been shipped in Q1 got pushed to Q2, and we'll likely see that sort of dynamic play out for the remainder of the year.
Can you give us an indication as to the approximate size?
You know, Tom, it's really a moving target. I think what's most important is we manage our business on an annual basis. What we're most concerned about is making sure we get products to our customers in time for the planting season. Fortunately, at this point of time, we're not losing any sales. While things are moving from quarter to quarter, we are not missing the planting window for our customers, which is the most important thing that we're most focused on.
Okay. Can you give us an idea of what kind of yield you had on the sorghum here in North America this year?
Oh, no, we can't, Tom. That's a company secret. We don't want people to know how many bags of seed we've got. You know, I'm telling you, we're gonna be sold out of some things and, you know, we're gonna get our price for that because we took the risk on inventory.
Absolutely.
I'm being a bit facetious, but you know, yields were good. The crop season was excellent this year. You know, the bad things that can happen to you is as you get closer to harvest, you can get a frost or it can rain, one of those two, on your crop before you get it in the warehouse and get it under a roof and protection, right? None of those things happened. This was one of the best crop seasons for sorghum. It's all in the barn now. It's all out of the field and we're cleaning seed like mad men.
Excellent. Well, I appreciate the chance to ask the questions, and we'll look forward to you turning that into profits. Thanks much.
Thank you. Thanks very much.
Again, if you have a question, please press star then one. Our next question will come from Jonathon Fite with KMF Investments. Please go ahead.
Hey, good morning, Mark, good morning, Matt. Thanks for taking my call.
Morning, Jonathon .
Just two quick questions. Wanted to understand if the October capital raise from your perspective kind of bridges you to the back half of the year as gross margins and EBITDA grow, or if you think another capital raise may be required sometime over the fiscal year, you know, as we continue to have negative EBITDA?
Yeah, great question. Look, I'm a small company guy that, you know, has built companies starting with venture capital, right? I push the balance sheet pretty hard. You know, I just believe that the final returns that we generate from invested capital in S&W are gonna be good. I wanna maximize those returns. I really keep a pretty short string on surplus cash. I mean, there isn't any ever. You know, Matt's a good CFO and, you know, that's always an issue in the sense of, you know, he and I sometimes differ on how much liquidity we really need.
You know, we push it hard and I think that we have several different scenarios of things that we portfolio sort of decisions about where our focus is in the company that we're sort of working on that we haven't announced yet. You know, obviously, we raised enough money that we believe in the intermediate term that that will carry us through. We don't think for this fiscal year that we'll be raising any significant amounts of money. There might be a small amount raised for if our growth is higher or something like that, but it's. There's not gonna be a big raise, no.
Okay. I appreciate that, commentary. As we look over the next couple of years, especially, you know, as we kind of get into year two, years three of the Ingredion deal, and assuming things go well there and there is this opportunity to build a new production facility. Does any of the CapEx associated with that type of build-out fall on S&W shoulders or is that, you know, we're really providing the trait technology and that physical infrastructure build-out is really where our partners would be deploying their capital?
Yeah, I mean, look, we have a proprietary position based on the genetics of our varieties in stevia, you know, that's unassailable, right? There are no other companies that have stevia breeding programs like ours or have had them as long as ours. You know, that's why we did a deal with Ingredion. We see a benefit in obviously working with them. They have a long reach towards the final customers in the food industry. It would be normal for them to build the production facility.
You know, we've, we're in discussions with them all the time about you know, how much capital will it take and, you know, depending on you know, sort of our projected returns and what those might look like for investing in a facility like that in the U.S., we've told them that we'd like to at least be part of the discussion about how the capital is raised, and we haven't made any final decisions, but we wanted to keep that window open. It's, for us, it's based on returns because you know, we and Ingredion are locked at the hip. I mean, there's no place else for us to sell to someone as big as Ingredion.
For Ingredion, there's nowhere else to get stevia leaf at the cost that we can produce it in the U.S. No one else can duplicate that.
Interesting. Okay. Well, we'll look forward to more updates along those lines. I appreciate your time, guys.
Sure thing.
This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks. Please go ahead.
Thank you, everyone, for being on the call today. It is exciting times at S&W and in ag in general. These are the kind of years that we work this hard to be part of, and it's much easier selling to a farmer customer who's got a smile on his face because he's making money. Look for good results from us this year. Thank you for your interest in S&W. Bye-bye now.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.