Aemetis, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2021. Unless noted otherwise, financial amounts below are in millions of dollars; the filing presents most financial statements in thousands.
Business context
Aemetis develops and operates renewable fuels and related businesses. Its North American operations include a 65-million-gallon-per-year ethanol plant in Keyes, California, dairy biogas projects and development of low-carbon fuel facilities. Its India segment operates a biodiesel and glycerin plant. Results for 2021 reflect strong North American ethanol pricing, higher input costs and sharply lower India sales.
Key financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $49.9 | $40.9 | $147.6 | $128.2 |
| Gross profit (loss) | $(4.8) | $0.8 | $(4.7) | $14.4 |
| Gross margin | -9.6% | 1.9% | -3.2% | 11.2% |
| Operating income (loss) | $(9.9) | $(3.8) | $(21.0) | $1.7 |
| Net loss | $(17.6) | $(12.2) | $(46.3) | $(22.1) |
| Basic and diluted loss per share | $(0.55) | $(0.59) | $(1.55) | $(1.06) |
- Revenue and margins: Q3 revenue rose 22%, while cost of goods sold rose 36%, producing a gross loss. North American revenue increased 50% in Q3, primarily as the average ethanol price rose 79% to $2.84 per gallon; ethanol volume fell to 13.8 million gallons from 15.0 million. Corn cost averaged $7.99 per bushel versus $4.92. India revenue was only $0.1 million in Q3, with no biodiesel or refined glycerin sales.
- Nine-month trends: Revenue grew 15%, but cost of goods sold increased 34%. Management cited higher corn and energy costs and weaker high-grade alcohol demand. North American ethanol volume and price both increased year over year; India revenue declined 95%.
- Cash flow: Operating activities used $20.0 million in the first nine months, compared with $7.1 million provided in 2020. Investing activities used $17.5 million, including $18.8 million of capital expenditures, partly offset by grant proceeds. Financing activities provided $43.3 million, including $94.2 million from common-stock offerings, offset substantially by borrowing repayments.
- Liquidity and capital structure: Cash was $6.4 million at September 30, versus $0.6 million at year-end 2020. Current assets were $17.0 million and current liabilities were $74.6 million; the reported current ratio was 0.23. Total debt was $185.0 million, including $117.2 million of Third Eye Capital senior secured and revolving notes, and stockholders’ deficit was $132.1 million. The balance sheet also included $46.9 million of Series A preferred unit liabilities, current and long-term combined.
Material changes, outlook and risks
- Management states that negative capital and operating results, substantially all assets being collateralized, and reliance on the senior lender create substantial doubt about the company’s ability to continue as a going concern. To meet obligations over the next 12 months, Aemetis needs to refinance debt or obtain continued senior-lender cooperation.
- Third Eye Capital notes had an April 1, 2022 maturity, with an option to extend to April 1, 2023 subject to notice and a 1% fee. The company reported $40.0 million of available reserve-liquidity capacity, but no borrowings under that facility at September 30; drawn amounts bear 30% annual interest, or 40% following a continuing default. Subsequent to quarter-end, a November 5 amendment waived specified covenant violations for a $0.1 million fee.
- The company reported repeated covenant waivers and an ABGL minimum-cash-flow covenant violation. Under the Series A preferred agreement, future ABGL free cash flow may be applied to redemption at 100%, rather than 75%. Series A accretion and other expenses were $7.9 million for the nine-month period.
- Management’s plans include improving Keyes plant efficiency and margins, expanding the biogas network, financing the Riverbank Carbon Zero project, and restoring India sales. The filing gives no quantified financial guidance. The Keyes membrane dehydration system was commissioned in Q4 2021; management expects it to reduce natural-gas use and carbon intensity. A fuel ethanol offtake agreement with Murex became effective October 1, 2021.
- Risks include volatile corn, natural gas and product prices; customer concentration (two customers represented 77% and 21% of North American Q3 segment revenue); financing and refinancing needs; and India operating disruption related to COVID-19 and unfavorable feedstock economics. Aemetis disclosed a $6.2 million accrued EdenIQ litigation award and $6.8 million of accrued property taxes after defaulting on a county payment plan; the county had agreed not to enforce collection while discussions continued.
- Management concluded disclosure controls and internal controls over financial reporting were not effective, despite ongoing remediation of a previously identified material weakness.
Important facts for investors to verify
- Progress and terms of any refinancing, lender extensions, covenant waivers and access to the reserve-liquidity facility.
- Whether operating margins recover as input costs, ethanol pricing and plant efficiency change, and whether India resumes commercial production and sales.
- Cash use, capital expenditure funding and financing availability for biogas and Riverbank projects, including grants, equity and EB-5 proceeds.
- Status and potential financial effect of the EdenIQ litigation and unpaid property taxes.
- Remediation of the disclosed material weakness and any subsequent improvement in internal controls.