Aemetis, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; filed May 12, 2021. Dollar amounts below are in millions unless otherwise indicated.
Business context
Aemetis develops and operates renewable fuel and related businesses. Its operations include a California ethanol plant and biogas projects, a biodiesel and glycerin plant in India, and development-stage projects in Riverbank, California, and Goodland, Kansas. The company reports North America and India segments. Q1 revenue came overwhelmingly from North America; the India business was sharply curtailed.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 / prior date |
|---|---|---|
| Revenue | $42.8 | $39.5; up 8% |
| Gross loss | $(3.6); gross margin about (8.4%) | $(0.4); gross margin about (1.1%) |
| Operating loss | $(9.0) | $(4.5) |
| Net loss | $(18.1); $(0.69) per share | $(12.1); $(0.58) per share |
| Cash from operating activities | $(14.1) | $0.6 provided |
| Cash used in investing activities | $(5.4) | $(2.4) |
| Cash from financing activities | $34.6 | $1.4 |
| Cash and cash equivalents | $15.8 at March 31 | $0.6 at December 31, 2020 |
| Total debt, net of issuance costs | $199.4 at March 31 | $229.6 at December 31, 2020 |
| Current assets / current liabilities | $24.2 / $66.4; current ratio 0.36 | $8.7 / $102.2; current ratio 0.08 |
Revenue growth reflected higher North American ethanol and wet distillers’ grains prices. The average ethanol price rose 22% to $1.91 per gallon and wet distillers’ grains price rose 36% to $106 per ton, while corn feedstock cost increased 36% to $6.87 per bushel. North America recorded a $3.6 million gross loss. India revenue fell 87% to $0.5 million, principally as biodiesel sales volume declined 90% amid COVID-related disruption, reduced production and uneconomic feedstock costs.
Q1 financing included $62.4 million of common-stock proceeds and $3.1 million from Series A preferred units, offset in part by $31.6 million of borrowing repayments. Capital expenditures were $6.6 million. Subsequent to quarter-end, the company raised $23.9 million net through its at-the-market offering and used approximately $22.0 million to repay Third Eye Capital notes.
Material changes and significant items
- Revenue increased 8%, but gross loss widened from $0.4 million to $3.6 million as input costs rose faster than selling prices. SG&A increased 37% to $5.4 million, and operating loss approximately doubled.
- Net loss worsened by $6.1 million. Interest expense and debt-related charges remained substantial; Series A preferred-unit accretion increased to $1.9 million from $1.0 million.
- Total debt declined primarily because the company repaid GAFI loans in Q1; the company reported $199.4 million of total debt at March 31. Third Eye Capital notes carried a stated maturity of April 1, 2022, following an extension.
- Common shares issued and outstanding increased to 29.9 million at March 31 from 22.8 million at year-end, reflecting equity issuance and option exercises. The filing reports 31.4 million shares outstanding on April 30.
- Construction in progress increased to $30.0 million. Q1 capital spending was directed mainly to North American projects, including biogas and Riverbank-related work.
Outlook, risks and contingencies
- Going concern: Management stated that negative capital and operating results, together with substantially all assets being collateralized, create substantial doubt about the company’s ability to continue as a going concern. Meeting obligations over the next 12 months depends on refinancing debt or continued senior-lender cooperation. Management’s plans include improving Keyes plant margins, expanding biogas, financing Riverbank projects, growing India sales, and pursuing equity, EB-5, grant, loan-guarantee and vendor-financing sources. No quantified earnings or revenue guidance is provided.
- Debt and liquidity: The company disclosed $70.0 million of undrawn Reserve Liquidity Notes available through April 1, 2022, with a 30% interest rate on borrowings and a 2% annual standby fee on unused capacity. It also relied on equity proceeds and lender waivers/extensions. The current ratio remained below 1.0. Future access to funds and covenant compliance are important uncertainties.
- Preferred-unit terms: Aemetis Biogas had not met minimum quarterly operating cash-flow requirements under its Series A preferred agreement. The filing says that, following this covenant violation, 100% rather than 75% of future free cash flow may be applied to redemptions. Related preferred-unit liabilities totaled about $39.3 million.
- Other obligations: Accrued property taxes were $6.1 million after a prior payment-plan default; the county had agreed not to enforce collection while discussions continued. The company had recorded a $6.2 million contingent litigation liability related to EdenIQ fee and cost awards; it intends to pursue legal claims and defenses.
- Operations and market risks: Results are exposed to volatile corn, ethanol, energy, biodiesel and feedstock prices; COVID-related disruption affected India operations. North America had substantial customer concentration, and India revenue was concentrated among a small number of customers.
- Execution and controls: Riverbank, biogas expansion and Carbon Zero 1 require financing and successful construction and commercialization. Management reported that disclosure controls and internal controls over financial reporting were not effective because of a material weakness identified in the prior annual report; remediation is ongoing.
- Other notable facts: The company reported no forward sales commitments and no off-balance-sheet arrangements. It reported no unresolved senior-security defaults during the quarter. Risk factors were unchanged from the 2020 Form 10-K.
Most important facts for investors to verify
- Whether subsequent ATM proceeds and debt repayments materially improve near-term liquidity, covenant headroom and the refinancing outlook before April 2022 maturities.
- Whether operating cash flow and unit margins improve, particularly given higher corn costs and the Q1 gross loss.
- Whether India biodiesel orders and production recover, and whether the APSRTC supply arrangement translates into shipments and revenue.
- Whether biogas operations meet preferred-unit cash-flow requirements and what the resulting redemption and cash-flow allocation obligations will be.
- Progress, funding and remaining capital requirements for Riverbank, Carbon Zero 1, Keyes upgrades and additional dairy digesters.
- Status of the property-tax payment discussions, EdenIQ litigation and the company’s internal-control remediation.