Origin Agritech Limited ($SEED)

Thank you for standing by, and welcome to Origin Agritech First Half Fiscal Year 2026 Results Conference Call. Please note that today's call is being recorded. It is now my pleasure to introduce Matthew Abenante of Strategic Investor Relations. Please go ahead.

Thank you, operator, and thanks to all of you for joining us today on the Origin Agritech conference call. Joining us on the call today are Mr. Weibin Yan, Chief Executive Officer; Dr. Zang James Chen, Chief Financial Officer; and Ms. Kate Lang, Director of Investor Relations. Before we begin, I would like to remind our listeners that any statements on this call that are not historical facts are forward-looking statements. Today's call includes forward-looking statements that address expected future business and financial performance and financial conditions and contain words such as expect, anticipate, intend, plan, believe, seek, will, would, target and similar expressions and variations -- forward-looking statements address matters that are uncertain and they are not guarantees of future performance and are based on assumptions and expectations which may not be realized. They are based on management's current expectations, assumptions, estimates and projections about the company and the industry in which the company operates, but involve a number of risks and uncertainties and many of which are beyond the company's control. Some of the important factors that could cause the company's actual results to differ materially from those discussed in forward-looking statements are failure to develop and market new products and optimally manage product life cycles, ability to respond to market acceptance, rules, regulations and policies affecting our products. failure to appropriately manage process safety and product stewardship issues, changes in laws and regulations or political conditions, global economic and capital markets conditions, such as inflation, interest and currency exchange rates, business supply disruptions, natural disasters and weather events and patterns, ability to protect and enforce the company's intellectual property rights and separation of underperforming or nonstrategic assets or businesses. The company undertakes no duty or obligation to publicly revise or update any forward-looking statements as a result of future developments or new information or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. Although the company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and actual results may differ materially from the anticipated results. You are urged to consider these factors carefully in evaluating the forward-looking statements contained herein and are cautioned not to place undue reliance on such forward-looking statements. which are qualified in their entirety by these cautionary statements. With that, I would like to turn the call over to our first speaker, Mr. Weibin Yan, Chief Executive Officer of Origin Agritech. Hello, Mr. Yan.

Thank you, Matthew and good morning, good evening to everyone joining us around the world. The 6 months ended March 31, 2026, represent the midpoint of the recovery phase of the strategic plan were launched in November 2024. As a reminder, the plan calls for recovery in 2025 under 2026, so done up from 2027 to 2029. On there, the industrial leadership from 2030 to 2032. When I presented on our fiscal year 2025 earnings call in February, I described the recovery work we had completed across our team building research capabilities, production facilities and sales infrastructure. So the half year or the fiscal year 2026 was about taking that review foundation and beginning to convert it into material commercial and scientific outcomes. I want to take you through several operational areas where we made tangible progress during the period. And then Dr. Chen will walk you through what that progress looks like in your financial statements. In November 2025, we hold a Research and Development Conference that sharpened our focus on variety of operations, variety of development and biotech commercial life. With the philosophy either be the first of the unit, we expanded breeding approvals at test scale and have made very good progress since then. Our 2025 Winter South China breaking work generated our 30,000 new tests across capitalizations on looking at those by the most breakthrough Jampasms. By using our high rate platform on the total financial reduction gene licensed from China Agriculture University, we completed position smart plant type informant on the major rates in the market to support our pore answer ourselves to meet higher lent trends in the industry. During this period, we have restored the sales team to 36 professionals deployed across the country, and we have rebuilt the original presence, including most importantly or reentering into North China, Northeastern China. In September 2025, we hosted a variety of showcase and the technology similar in Chongqing, which drove more than 200 on the corner. In early March of the year, we hold our 2026 annual marketing conference in Changsha, Hunan Province. The total conference combined our subsidiary, general managers, regional marketing leadership and key distribution points as the conclusion for of that conference. We formally launched the Audi 2026 new virality promotion program, our integrated commercial campaign for this marketing cycle and signed the KPI contracts with general managers of the 6 regional sales companies across China's principal home production rates. With OEM 2026 program on the performance compared with an every manager, every region and every product line law has worked the annual project and personally own the outcome. To fill our product portfolio with the most competitive varieties, we have deepened collaborations with the top readers across ecological zones. We reduced our jointly assembles our 10,000 new compilations in our tester pipeline this year by working with more than 30 outstanding products in the industry. And we now acquired a top-ranked variety Gen8 land, which was jointly developed with the Hana Agriculture University. Also CAU CUProdigy, which performs the drone in Northwestern time. In the month of 2025, the Bergen tone district marketing simulation administration approved the inclusion of GMO crop seed production license with our Origin Agritech limited in the business took up I have reported to you previously. We have 2 leadership miles subsequent to the reporting period that I want to address directly. First, in March 2026, we welcome Dr. Zheng Chen to our Board of Directors, an independent director. Dr. Chen has a 20-year of past experience in global crop biotechnology industry with prior Senior roles at 2 companies, Santina and the Bottles. Zheng's appointment brings world-class biotechnology on the international commercial titan experience to our board as exactly the right time in our development. We are also happy to welcome back, Dr. James Chen, Chief Financial Officer. Many of you will know Dr. Chen from his price service at Orange. Tenures as CFO; and an CFO; Dr. Chen, continuality, capital market sophistication and a deep institutional understanding of the capital. I'm pleased to have him by on the executer team, and this is very helpful for me. And I will hand the call over to him in a moment to walk through the numbers. Finally, during the reporting period, we completed an investment agreement that alluded a direct equity investment by myself. I want our shareholders to know that my conviction in the past, we are executing is reflected not just in my worst on the scope. Also in my own finest -- with that, let me hand it over to Dr. Chen. Thank you.

Thank you, Mr. Yan, and hello, everyone. It is great to be back addressing Origin Agritech shareholders. I will walk you through our financial results for the 6 months ended March 31, 2026 with comparisons to the prior year period. Total revenues for the first half of fiscal 2026 were RMB 49.2 million or USD 7.1 million. compared with RMB 72.3 million in the first half of fiscal 2025; a decrease of approximately 31.9%. The decrease was mainly due to the strategic transition in the company's product portfolio as we are focusing more on the sales of new concede products. and reducing the external side tolling service. Gross profit was RMB 5.5 million or USD 0.8 million in the first half of fiscal 2026, compared with RMB 8.1 million in the prior year period. Total operating expenses for the first half of fiscal 2026 were RMB 18.4 million or USD 2.7 million compared with RMB 32.8 million in the prior year period, a 43.9% reduction. Let me break that down. General and administrative expenses declined sharply from RMB 25 million to RMB 7.6 million, a 69.8% year-over-year reduction. The reduction reflects the operating discipline now embedded in the business following the leadership restructuring completed in December 2025 and the consolidation of corporate functions on the Beijing origin. Selling and marketing expenses increased from RMB 2.6 million to RMB 5.1 million, up 9.3%, that increase is intentionally and entirely consistent with our strategy. It reflects the build-out of the 36% sales organization and the field deployment of the OE 2026 commercial campaign. Research and development expenses were RMB 5.7 million compared with RMB 5.2 million in the prior year period, an increase of approximately 11.1%, reflecting continued investment in the high 3 platform and Song Fong licensed gene editing program and the new variety pipelines. Loss from operations for the first half of fiscal 2026 was RMB 12.9 million or USD 1.9 million compared with a loss from operation of RMB 24.7 million in the prior year period. a reduction of 47.8% year-over-year. Net loss attributable to Origin Agritech Limited was RMB 14.4 million or USD 2.1 million compared with a net loss of RMB 25.6 million in the prior year period; a 43.8% improvement. Basic and the diluted net loss per share was RMB 1.21 or USD 0.17 compared with RMB 3.55 in the prior year period. Turning to the balance sheet. As of March 31, 2026, the company had a cash and cash equivalents of RMB 13.4 million or USD 1.9 million compared with RMB 15.9 million as of September 30, 2025. Inventories were RMB 24.8 million or USD 3.6 million compared with RMB 14.4 million at fiscal year-end. That increase is seasonal, reflecting the inventory build into spring planting season. Short-term borrowings were RMB 9.5 million or USD 1.4 million compared with RMB 8.0 million at fiscal year-end. Total liabilities were RMB 68.1 million or USD 24.3 million compared with USD 62.2 million at fiscal year-end. With that financial summary, I will turn the call back to Mr. Young for closing remarks.

Thank you. I want to leave you with 3 observations as we head into the second half of fiscal 2026 on the back half of the recovery phase. First, the operating leverage in the business is becoming visible in the numbers. fundamental reduction in general administrative costs in a single year with sustainable gross margin and intentional investments in selling and the marketing. It's a financial signature of a company that has completed its restructuring and it's now positioned to grow into its customer base. Second, our biotechnology platform is a long research story. It is becoming a commercial story. High 3 is a recognized externally. The GMO variet or in trial or in the channel. Then connected tissue between teapot and the consumer and the customer is being built. Third, the commercial cycle ahead is concrete and the metric. The spring planting season is underway. Orange 2026 is in the field. Performance counter are assigned. The 36 professional sales team is deployed against a defined project. Our fiscal year, our first half of fiscal 2027 will tell the market whether the work of the past 18 months is converting in the commercial outcomes and I believe it will. Thank you.

Thank you, Mr. Yan. Moreover, we did receive a number of questions in advance of today's call. Ms. Kate Lang will now answer the questions submitted by investors. Hello, Kate.

Hello, Matthew. Thank you, and thank everyone who has submitted questions. Let's hear about them.

Our first question, China has been gradually expanding the geography and acreage for approved commercial GMO corn planning over the past 2 years. How does that policy direction affect Origin's commercialization time line, and is there a fiscal year in which investors should expect GMO-related revenue to become a visible line item?

The policy direction in China has been moving favorably over the past 2 years. With the gradual expansion of the geography and the acreage for commercial GMO corn planting. We are encouraged by that direction. However, I want to be careful now to characterize the future regulatory decisions. Those are decisions. The Ministry of Agriculture makes on its own time line, and I am not in a position to forecast them. What I can speak to is Origin's position relative to the policy window. We hold the biosafety certificator for BBL2-12 we have included the GMO crops the production within Beijing Origin's business scope as of October 2025. We have 2 crops, the production and the operation license in China. We have the Xinjiang processing facility restored to industry-leading standards. And we have the origin marker biological rating service consortium with the China Golden marker Biotech, which gave us a licensing pathway that monetizes the biotechnology independent of our own seed sales. The way I would frame it for shareholders is this -- there are now many CD companies in China that hold both the biotechnology credentials and the production and the distribution infrastructure to commercialize the GMO core at scale once the policy window fully opens. Origin is 1 of them.

You have stated a goal of being 1 of the top 3 Chinese corn seed companies by 2030 to 2032. What is the specific competitive position that lets origin take share from its bigger competitors over the next several years?

I appreciate the question. The path to a top 3 position by 2030 to 2032 is not a path of outscaling the incumbents on conventional terms. It is a path of competing on technology credentials in the Chinese feed industry that, in my view, is entering a decade of consolidation that rewards by our technology credentialed players. HI3corn haploid induction gene editing, recognized by the Chinese academic of Agricultural Sciences in December 2025, and as one of the top 10 major progresses in Chinese agricultural science, the Shine biotech patent license brings CASSF-01 into our editing tool kit in-house, AI-assisted breeding is running against more than 200,000 miterplasum resources, to crop seed production and operation license, GM business scope at Beijing Origin, the BBL2-2 biosafety certificate. That is about technology stack that is the conventional scale incumbents cannot easily match because it is the product of sustained focused 20-year investment in next-generation breeding. Over the next decade, I believe the market will increasingly value by technology credentials and Origin is well positioned for that.

And on to our last question, you have referenced AI-assisted breeding on prior calls and in press releases. Can you describe what that means operationally? What specific tasks are being run on AI, and what is there a measurable improvement in breeding sickle time trade identification or hit rate that you can point to?

It is a fair question. And I want to answer it concretely because I know that AI can be an overused term in our industry and in the broader market. What we are running operationally is, principally 3 things: First, the do not make selection models that score potential crosses against the trade targets we are pursuing yield drop recolor leaving, lodging resistance and growth ferro using our germplasm database of more than 200,000 core resources. The model identifies the highest probability candidates before we commit to fuel seeding capacity to evaluate them. Second, image-based phenotyping in our research stations that captures the planned performance data at a density and the consistency that many valuation cannot match and then feed that data back into the selection models. Third, prediction of optimal donor recipient pares for the HIV and Shunfeng licensed gene editing pipeline, which is where AI has the most direct impact on the speed of our bio technology platform. The operational outcome we are working towards and beginning to see is a reduction in the number of field sites required to validate a candidate variety. That translates into lower R&D cost per validated trade and a faster commercialization path.

Thank you again to everyone for participating in today's call. We look forward to providing additional updates in the near future. Goodbye.

We'd like to thank everybody for their participation on today's conference call. We appreciate your time and participation. You may now disconnect.