Robert Blum - IR, Lytham Partners, LLC Mark Grewal - President and Chief Executive Officer Matthew Szot - EVP and Chief Financial Officer.

Ian Gilson - Zacks Investment Research Brett Wong - Piper Jaffray Chip Richardson - Wedbush Securities.

Good afternoon, everyone. And welcome to the S&W Seed Company Reports Fourth Quarter and Fiscal Year 2015 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 also note that today’s event is being recorded. At this time, I would like to turn the conference call over to Mr. Robert Blum. Sir, please go ahead..

Thank you, Jamie, and thank you all for joining us today to discuss the financial results for S&W Seed Company for the fourth quarter and fiscal year 2015, which ended June 30, 2015. With us on the call representing the Company today are Mark Grewal, 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, we submit for the record the following statement.

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 risks 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, 2014, and other filings made by the Company with the Securities and Exchange Commission.

With that said, let me turn the call over to Mark Grewal, Chief Executive Officer for S&W Seed Company.

Mark?.

Thank you, Robert, and good afternoon to all of you. 2015 has been a transformational year for S&W Seed Company both from an operational and financial perspective.

From a financial perspective we showed strong improvements in nearly every key measurement particularly in the face of what was a difficult first half of the year within the alfalfa seed markets. In particular, we recorded record annual revenue of $81.2 million which was an increase of 58% over the prior year.

Our annual gross margins improved to 20.8% from 19.4% as seed pricing has improved and our margin enhancement strategies have begun to take hold.

Our record annual adjusted EBITDA of $7.5 million equated to a 9.3% adjusted EBITDA margins compared to 6.2% adjusted EBITDA margins last year and our adjusted non-GAAP diluted earnings per share improved to $0.12 compared to $0.03 last year.

During the fourth quarter we saw even stronger improvements in gross margins which came in at 21.6% versus 18.6% last year, excuse me, 300 basis points improvement and our adjusted EBITDA margins were 10.6% compared to 8.4% last year. We are very pleased with these strong results and believe that 2016 is setting up to be even stronger.

The strength of these results has been driven by our dedication to strategically building this business over the last number of years into a true market leader within the alfalfa seed segment built upon four key strategic pillars, strong product portfolio, leading-edge research and development, a large and diversified production base and global distribution.

The strategic pillars of this business are strong today as they have ever been and I might argue are strong as any that has ever been created within the alfalfa seed industry. We have a real opportunity to take significant advantage one of the world’s most utilized crops and drive significant shareholder value over the next number of years.

For those of you that know me, you know that this has been my passion and vision for the last five years. And I am more excited today than ever before about the opportunities that lie ahead for S&W. Before I turn the call over to Matt for a review of the financials let me touch briefly on a few of our strategic accomplishments over the year.

First, we successfully completed and have integrated our acquisition of DuPont Pioneer’s alfalfa seed research and production business. This acquisition was a natural product line extension for us that quickly accelerated our dormant capabilities nearly doubling the size of the company's addressable market.

That also provided a 10-year distribution agreement with DuPont Pioneer with minimum annual purchase commitments improving our revenues and earnings predictability By increasing our presence in the United States that dramatically diversified our sales base while allowing for significant cross-selling opportunities of the acquired germplasm within our existing distribution base.

Importantly, it continues to expand and diversify our production capabilities and contracted grower base as well with less reliance on any one geographic area for seed production requirements. And lastly, it continues to build upon a key pillar of our organization which has expanded R&D capabilities.

I talked about the pillars to which a great alfalfa seed organization is built on at the onset of the call. And as you can see this acquisition significantly strengthen each one of those pillars. One final point that clearly needs to be made is the exceptional team that came along with the Pioneer acquisition.

They have become an integral part of the company and will be the key components to the team that continued to drive S&W into the future. I couldn’t be more pleased with the way that the acquisition has gone thus far. Beyond the acquisition however, we worked hard throughout the year to organically build upon them as well.

Within R&D, we developed key strategic relationships and leading seed development companies including Bioceres and Calyxt to bring to market next-generation varieties to meet the demanding needs of customers around the globe. We also continue to develop next-generation varieties including as other varieties period.

From a production standpoint within the first few months of having acquired the Pioneer business we significantly increased the production acreage base to ramp up quantities of seed available to next – so for sale next year to drive growth in our dormant operations.

We believe there are significant opportunities to grow that business beyond the Pioneer agreement going forward. And finally, from a distribution standpoint we addedkey distributors in Argentina, Pakistan, the United States and elsewhere to drive continued market opportunities for our leading varieties.

Like any agricultural company we will always be subject to certain factors outside of our control such as weather and other macro related events that can have an impact on ag markets.

Most like what we saw over the last 18 months with the non-dormant markets, but what we have done over the last year to diversify and expand our operations has put us in a tremendous position to deliver solid results year-after-year with significant upside opportunities. But I couldn’t be more pleased with the progress made in 2015.

Now let me turn the call over to Matt Szot for a review of the quarterly and annual results, then I'll come back and discuss what we see taking place within our end markets and the outlook for the year.

Matt?.

Thank you, Mark, and thank you to everyone on the call today. Since most of you should have a copy of the financial results and the press release, let me spend some time going through some of the more pertinent details of the quarter and the year and discuss some of the impacts to the financial model on a go forward basis.

Before I begin, let me remind everyone that once again we completed the acquisition of the DuPont Pioneer Alfalfa business on December 31.

The financial statements have not been presented on a pro-forma basis and therefore the fiscal 2015 results of operations and statement of cash flows reflect only six months of activity from the combined business and fiscal 2014 results of operation and cash flows reflect only the legacy business.

For the fourth quarter revenues totaled $28.7 million, up from $19.6 million a year-ago.

As we indicated in our press release today, the $9.2 million increase in the fourth quarter revenue was largely attributable to an increase in sales of our elite S&W varieties coupled with an approximate $4.9 million of incremental sales from our distribution and production agreements with DuPont Pioneer.

For the year revenues totaled $81.2 million compared to $51.5 million in 2014. We had modest organic growth through the year of 3.5% with the majority of the increase being attributable to the Pioneer distribution agreement. As we look to fiscal 2016 we are anticipating revenues of approximately $95 million.

The majority of the increase from fiscal year 2015 will come from contributions from the Pioneer agreements and as we discussed in the press release the Australian harvest this year was lighter than previously expected.

Now due to the decrease in seed available for sale we believe we are being conservative with our revenue outlook until we have more visibility into April 2016 Australian harvest as well as our ability of source seed through the open market.

As we think about the allocation of revenues throughout the year please note that the majority of our year-over-year growth is coming from sales to Pioneer. Therefore, the majority of the growth will be seen in the third and fourth quarters which is when shipment for Pioneer take place.

Our legacy business from a quarterly revenue allocation standpoint should be generally consistent with prior year. Gross margins during the fourth quarter were 21.6% compared to gross margins of 18.6% in last years fourth quarter.

The increase in gross profit margin largely reflects the improved margin contributions from our optimization program as well as improvement in seed pricing. Please note that Pioneer operations represented only 17% of our revenues for the quarter.

I stress this as you can see that the majority of the margin improvement was really driven from our legacy business which we are obviously pleased with. For fiscal 2016 based on the mix of revenues that we see we are anticipating that gross margins will likely be in the low 20% range.

Again we believe that there can be upside to these numbers if we are able to source and produce certain inventories, but based on our current inventory levels we want to err on what we believe to be the conservative side for the moment.

Adjusted SG&A for the fourth quarter totaled $2.5 million which was slightly above our previous guidance and compared to $2 million for the comparable period of the prior year. This increase is due to the newly acquired operations. Now we do estimate that SG&A for the first quarter is going to be approximately $2.3 million to $2.4 million.

Now turning to R&D, during the fourth quarter, R&D expense was approximately $838,000 compared to $194,000 in the year-ago period. To remind you, we will continue to invest in our research and development from the robust program that we acquired from Pioneer.

We estimate that on an annual basis we will add roughly $1.7 million to $1.8 million of additional R&D expense on top of our annualized historical spend. So the increase of approximately $450,000 this quarter is entirely due to our newly acquired operations.

And as we look to next year we think approximately $750,000 per quarter is a fair estimate for our R&D spend, obviously timing sort of initiatives that we may pursue.

Now as we talked about on the call in January, as well as our earnings calls in February and May we funded the upfront payment of the Pioneer acquisition with a financing that consisted of convertible debt with warrants and a private placement of common stock to raise a total of $31.7 million in gross proceeds.

We issued $27 million of secured convertible debentures and $4.7 million of common stock. Through today we have made principal payments of approximately $8 million on the convertible debt. So the remaining balance is approximately $19 million.

There is a convertible feature to the notes so we cannot say with certainty what portion will be converted to equity but is our intention to the extent possible to utilize our cash flow from operations to pay down the notes.

We incurred approximately $694,000 in cash interest expense during the fourth quarter from the convertible debenture and other debt obligation. During 2016 we expect that number to be approximately $2.3 million of which $1.6 million will be related to the convertibles.

This expense will decrease each month as we pay down the remaining balance on the convert, which matures by June of 2017. Now these numbers assume no conversions and we are servicing all the convertible debt in cash.

On the last few calls we also talked about non-cash interest expenses related to the accretion of the debt discount associated with the derivative warrant liabilities and amortization of debt issuance costs. Under the effect of interest method, the non-cash interest expense is front-loaded and decreases as principal is paid down.

On the income statement, you will notice a line item called amortization of debt discount. That line item combines both the accretion of the debt discount associated with the derivative warrant liabilities and the amortization of debt issuance cost. During that quarter, that number was $888,000, which was in line with our previous guidance.

In 2016, these non-cash charges should be approximately $2.9 million and then $1 million in 2017, which is the final year. In addition to the non-cash amortization of debt discount, there is another non-cash charge in the quarter of $314,000 related to the change in fair value of the derivative warrant liabilities.

This charge is not an actual cash liability and strictly a function of the GAAP requirements to mark-to-market the estimated fair value of the warrants recently issued. Going forward, we will continue to record gains and losses to the P&L, driven by changes in the estimated fair value of the warrant.

As you can see from the press release, we specifically break these two non-cash, non-operating items out to provide a non-GAAP net income and EPS number. In addition to our adjusted EBITDA data, we will continue to provide this number on a go forward basis.

Now as Mark mentioned at the beginning of the call, adjusted EBITDA during the quarter was a record $3 million, compared to adjusted EBITDA of $1.6 million during the fourth quarter of last year. A full reconciliation is included in our press release. Our Q4 EBITDA margin was 10.6% compared to 8.4% during last years fourth quarter.

Again the ability to leverage the operating infrastructure of S&W, coupled with the newly acquired operations, should allow us to continue producing strong adjusted EBITDA margins on a go forward basis. Now non-GAAP net income was $614,000 or $0.05 per share compared to $620,000 or $0.05 per share in the fourth quarter of last year.

Again this backs up the non-recurring one-time transaction expenses for the acquisition as well as non-cash amortization of debt discount and change in derivative warrant liabilities. Now, I know we went through a lot of data here so if you have any questions please feel free to ask. Let me turn it back over to Mark..

Thank you, Matt. Since our last conference call we announced our collaboration with Calyx to prior the next-generation gene-editing technology into research to develop, produce and commercialize alfalfa seed products.

Calyxt technology allows for custom gene-editing of plant species to create various novel traits in a way which is currently classified as non-GMO. The approach is based on the same principles classical plant breeding, while allowing for a much more accelerated development timeline. Let me rephrase that.

We are hoping to have fields and trait development in the field to test within 18 months. This is truly a novel technology that we believe will have a far reaching applications especially within the alfalfa seed industry.

I think it’s important to pause there for a moment and understand the value add that S&W brings to this collaboration, but also through our agreement with Bioceres as well as Monsanto.

S&W through its years of leading research and development efforts and now with its broad production base and distribution channels has positioned itself as a key lynchpin to alfalfa seed biotech research and development.

Because we have the agreements with the farmers on the one end to produce the seed and the farmers on the other end to sell the seed to. We are positioned to be a key contributor within the transgenic or biotech seed market that is evolving across the world.

When we talked about building the pillars of the alfalfa seed company that can take advantage of the opportunities within the marketplace. It is precisely these types of agreements that we look to – to continue developing to be a leader in this industry for many years to come. Overall the market appears to be showing continued strength.

There is really good signs and strength followed by the softness that took place in the previous two years. The sell through of inventories within the distribution channels suffered with a weak Australian harvest this year are setting up for a year while the demand for seed appears to be outgoing with supply.

We continue to manage our business for the long-term and don’t want to overreact to any one trend positively or negatively, but it certainly seems like we will be in environment of strong pricing during the years.

Matt already touched on our outlook for the year, but to reiterate briefly we expect to record another record year of revenues driven by continued strength with our dormant operations however being offset of what we believe is a conservative outlook to our non-dormant operations due to the weaker harvest out of Australia impacting our available seed for sale and optimization efforts.

As more clarity on our seed sourcing opportunities in 2016 harvest come to fruition, we will look to provide an update to you. Again the diversification efforts that we have put in place from a product, production and distribution base is allowing us to put up strong results.

As I said at the onset and discussed last quarter the last year and has been transformational for S&W Seed Company. We have positioned ourselves to be the market leader in a very important agricultural crop.

We have the key pillars in place to drive significant expansion going forward including a leading product portfolio, research platform as well as production and distribution base that we believe is unmatched by anyone else in this industry. We thank you for your support. And now let’s open up the call for your questions.

Robert?.

Go ahead Jamie..

Ladies and gentlemen at this time we will begin the question-and-answer session. [Operator Instructions] And our first question comes from Ian Gilson from Zacks Investment Research. Please go ahead with your question..

Yes, good afternoon gentlemen. I got a couple of questions.

You said that the Australian crop will be lower than expected?.

It is lower, it’s already in and it is lower than we thought it would be, it’s a below-average crop for the year, but it also adds the tightness in the supply and demand..

Okay, how does that compare with last year?.

Matt, do you have the exact numbers, we were in 2013 we had a record year..

Yes, we know….

3600 tonne last year..

3600, okay so 7.2 to 8, it’s down about 30%..

It’s down about 30%?.

Let’s look at it in a different way, we tried to pull out 8 million pounds a year on average and that's our goal, it was down to say around 6.

Okay, did that answer that one?.

Yes, well yes sorry I guess it’s not much you can do about the weather down there, was that the prime reason or what?.

Weather is always a major contributor to the final yields and it could be water, irrigation, pollination, heat. So yes, weather affects seed and seed is one of the toughest crops and it’s why it such neat crop to be in because very few people know how to grow it and it’s got a barrier to entry.

So it’s one of the things that we are very excited about and our expertise in that area to allow the right amount of seed to have do to the markets that we want to do Ian..

And Ian I might add that we have been strategically out there in the marketplace, quietly accumulating other varieties to make up for that short fall..

Okay, that was going to be my next question actually, can you actually take seed from inventory in the U.S.

and ship it to customers that would normally have purchased from Australia?.

Ian, I would say that the shortfall from the Australian crop is not going to impact our ability to service customers that are being serviced directly out of Australia. What it does do is it limits the amount of Australian seed that we can bring back to the United States for our optimization program.

So we are absolutely focused on the optimization program, but we are accumulating other lower price point seeds from alternative sources to use in that blended optimization program..

Are we looking at a reduction in seed sales on a unit basis in 2016 versus 2015?.

Yes, volumes will be down, but ASPs will be up, as it relates to Australian varieties..

They have that overall..

Well, I think we are not going to get into granule details, but we’ve given you revenue guidance of roughly $95 million for next year..

Okay, on the balance sheet you have a line item called crop production costs, which showed a significant decline year-over-year.

What is that?.

So those are the long-term costs that basically stand establishment costs and if you’ll recall in March of 2015 we sold a section of farmland in the Imperial Valley so that reduced that number.

Additionally, we also entered an agreement for the other roughly 1200 acres that we were farming ourselves or having one of our partners farm on our behalf effective sort of June 30 that grower has taken over those fields and is growing that on a contract basis now. So we are in essence entirely out of our own internally farmed operation.

And they are reimbursing us for those stand establishment costs and you’ll see that receivables sitting in other half which is another line item on a long-term - and within our long-term assets. So it’s really moving in some crop production cost to other assets on our balance sheet..

So where did the costs on Stevia go and what is the current status of Stevia?.

The R&D on Stevia is basically a half a million a year..

Yes, and it is hitting the P&L, there is no Stevia cost in the balance sheet..

So what is the current status of the plant production or leaf production?.

We are not in the production, we are only in R&D. So there is no revenues coming in right now. We are working to continue and complete the data that’s necessary for the third path. You notice we are not speaking about Stevia because it isn’t contributing anything to the company at this time. But we are continually focused with the group on R&D..

Okay, is the – you had two patents already granted, correct?.

No, we’ve filed our patent pending and we’re working on the third at this time..

Okay. Two plants patents are pending. So presumably you had some plans towards producing or having produced for you some Stevia plants sometime….

Correct, Ian, and what would occur is we would actually once those patents are completed would be a royalty type and we contract just like we do seed production..

Okay great. Thank you very much..

You’re welcome..

[Operator Instructions] And our next question comes from Brett Wong from Piper Jaffray. Please go ahead with your question..

Hey, Brett..

Hey, guys.

How are you?.

We’re good, how are you doing?.

Doing well, thanks. Just wanted to dig into the margin a little bit here first, so nice to see an improvement year-over-year but there was a bit of a lower move from quarter-to-quarter.

So just wondering what the rationale for the sequential decline was, was there any pricing pressure or do they have something to do with the variability of the blending initiative, just any color there is helpful?.

You know I think Brett there's as we have tried to articulate in prior calls is that any one particular quarter margins are going to move up and down and that simply based on revenue mix for the quarter.

In Q3 our margins our revenue had a higher concentration of sales to Pioneer, which carries a higher margin profile business than our legacy business. And in Q4 a greater percentage of our sales came from our legacy business as opposed to the new channels to Pioneer.

And so it’s really just a revenue mix situation, not any sort of reduction in our ability to generate strong gross margins..

Okay. So nothing industry related, just mix..

Exactly..

Great and then looking at the margin for next year and you’re talking about kind of keeping it in this low 20% range with the lower Australian production then you guys expected. Do you - and you said you would be sourcing other low-cost seed in order to make this blending initiative continue as you have done this year.

Do you need to increase the volumes of that blend obviously would depend and where you are getting that low-cost seed from, but given the extreme low-cost seed of Australian seed.

Do you expect that you will have to buy increased volumes in order to kind of keep the margin in that low 20%?.

Let’s see how we can start this out Brett. First of all the public type varieties in general have actually increased quite a bit and where they are available to purchase. So there’s a higher price on the lower end.

The high-end proprietary is basically stayed around the same but what we’re cautiously optimistic about is normally in this business as the low-end pushes up and time it ramps up the proprietary types above that. But that’s why we are just being very cautiously optimistic on what we think the high-end of our proprietary.

And of course, what Matt mentioned to you on the mixes in anyone quarter and what we have to do to make sure our customers have the product they need as those lands and the optimization may have to change in the certain markets and that could be a higher component of Australian seed or there could be a higher component is actually seed we have the purchase in the open market to make sure our customers are taking care of.

And that’s where it’s very hard to just sit there and tell you well this one is 25% and this one is 30%.

It depends on what’s available at the time and how we could go with that market with our genetics and with our plant breeders and our marketing guys making sure that that customers still has a high-end, high quality product that will give him the protein that he is after for feeding their animals..

Okay.

So I guess in order to keep or to hit that low 20% margin range do you need to see additional price appreciation on either the low-end or for your proprietary seed?.

No, I don’t think so Brett. And I think as what Mark was touching on is hopefully the dynamics play out have this – like they have historically done where we sort of see this increase in ASPs on the lower price point products which we are experiencing right now.

Hopefully, that will translate to higher ASPs across the board particularly in our lead varieties and as that dynamic plays out like we hope it does that would certainly all be upside to the numbers that we’ve guided to here. But as Mark said we really just sort of want air on the side of caution until it actually materializes..

Okay. That makes good sense, thanks.

And then just looking at the guidance, the revenue guidance, if you back out the expectations of the Pioneer contract distribution agreement your expectations are to have very modest growth in the legacy business? Is that again just on the side of caution or can you talk a little bit more in terms of what you're expecting there?.

Well, Brett I think its two things, yes, I think we are hearing on the side of caution because as we tried to flag, is going to be a certain limitations to the amount of optimization we can do because of the lighter Australian harvest. And I think that's really was the main driver for why we want to just be cautious here.

We do there is certainly several different scenarios that can play out, that will enable us to beat these numbers and certainly that's what we are going to be attempting to do, but until these sort of variables sort of play out over the coming months, we just sort of again wanted this air or we think is sort of the baseline number..

Okay. And then just as we look at kind of that legacy business to and obviously things improved this year in terms of seed demands and global inventories reducing and you continue to see that and you continue to see major customers like in the Saudi Arabia coming to the market next year and that seems to any issues..

Okay, Brett. We have a very strong opportunity going forward to really ramp up the non-dormant side because of the Pioneer germplasm and what we can do again and a new type of optimization program in the private label with distributors.

But to do that it slow and we’re being cautious because we are increasing acreage for production and so we are out contracting more hopefully another 3,000 to 5,000 acres plus, but as we ramp up that acreage then we’ll be able to supply more which will equate to more revenue..

Okay, very good. Thanks a lot for the time guys. Appreciate it..

Thank you very much..

Thanks Brett..

[Operator Instructions] Our next question comes from Chip Richardson from Wedbush Securities. Please go ahead with your question. .

Chip, go ahead..

Mr. Richardson is it possible your phone is on mute..

Sorry about that. Congratulations on the good year and quarter. My question has to do with Bioceres and Calyxt.

There has been some issues about GMO seeds do these two agreements help with that and how are things going in terms of problems worldwide with GMO products for alfalfa?.

Chip, the Bioceres allows us to get into other parts of the world that don't have the high cost of the United States regulation into the biotech world and the reason that one is so intriguing into us as we have a collaboration agreement actually as a seed company and we are selling a lot of seed down there.

And so when it dovetails into the research that they are going to do with our high end genetics into that area and they don’t spend the money on the same type of abiotic or stress type system.

They're looking at through the technology that you would have to go through in the regulatory process in the United States and so we wanted to go to somewhere where we might be able to get in and actually be able to go to places that normally would take a longer to get to because of that regulation.

On the Calyxt side that's really exciting because that’s going to allow the ability to possibly have non-GMO labeling on normalized GMO traits at a very low cost and actually allow the sale of high-value traits for higher margins in areas that don't allow GMO..

Excellent, thank you very much..

Thank you very much. End of Q&A.

And everyone at this time and showing no additional questions I’d like to turn the conference call back over to management for any closing remarks..

Thank you, Jamie. Again my thanks for everyone for participating on today's call. We look forward to talking with you again at the conclusion of the current quarter and we hope you have a great evening..

Ladies and gentlemen the conference is now concluded. We do thank you for attending today's presentation. You may now disconnect your telephone lines..