Gevo, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Gevo develops renewable fuels and chemicals, with a primary focus on sustainable aviation fuel (SAF), and operates a renewable natural gas (RNG) business in Iowa. Financial figures below are in U.S. dollars; millions unless otherwise indicated.
Key financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $4.06 million | $0.23 million |
| Operating expenses | $24.92 million | $16.19 million |
| Operating loss | $20.86 million | $15.96 million |
| Net loss | $17.62 million | $15.67 million |
| Basic and diluted loss per share | $0.07 | $0.08 |
| Cash used in operating activities | $19.45 million | $12.49 million |
| Capital expenditures | $11.43 million | $31.22 million |
Revenue comprised $3.53 million of environmental-attribute sales, $0.13 million of RNG commodity sales, and $0.40 million of hydrocarbon revenue. The filing does not provide a clear consolidated gross-margin figure. Operating expenses included $4.58 million of depreciation and amortization, $10.76 million of general and administrative expense, $2.96 million of project development costs, and $1.00 million of Luverne facility idling costs.
Balance sheet, debt and liquidity
- At March 31, cash and cash equivalents were $342.3 million, marketable securities $32.9 million, and restricted cash $77.8 million. Together, cash, cash equivalents and marketable securities totaled $375.2 million, excluding restricted cash.
- Net working capital was $360.8 million; current liabilities were $25.6 million.
- Total debt was $67.7 million, primarily the $67.4 million carrying value of 2021 project bonds. The bonds mature in 2042 but have a mandatory tender date in April 2024 and are supported by a letter of credit secured by $71.2 million of restricted cash.
- Investing cash flow was positive $124.2 million, largely reflecting $135.6 million of proceeds from marketable-security sales and maturities; it should not be read as cash generated by operations.
Changes versus prior-year quarter
- Revenue rose $3.83 million, primarily from RNG sales and environmental attributes; Gevo reported 63,846 MMBtu of RNG sales in the quarter.
- Operating loss widened by $4.90 million. Management cited higher depreciation following RNG assets entering service, increased project-development activity, higher personnel and professional costs, and Luverne idling costs.
- Net loss increased by $1.95 million despite investment income rising to $3.07 million from $0.25 million, mainly due to higher interest earned on cash investments. Interest expense increased to $0.54 million, largely reflecting 2021 Bond interest no longer being capitalized.
- Operating cash use increased by $6.95 million. The company cited, among other factors, deposits for NZ1 power infrastructure and higher working-capital needs.
Outlook, management commentary and risks
- Management said available cash and expected operations should cover obligations and potential cash requirements for the next 12 months, while noting continuing losses, expected future losses, and no assurance of raising capital or achieving profitability or positive operating cash flow.
- NZ1 is designed for approximately 65 million gallons per year of hydrocarbons, including 60 million gallons of SAF. Its forecast installed cost was approximately $850 million, excluding certain contingencies and financing costs. Full construction financing requires third-party equity and debt; management was pursuing a DOE loan guarantee, with the application process expected to continue into 2024. Start-up is expected 24–30 months after financing closes, whose timing is uncertain.
- For the Iowa RNG project, management expected 2023 production of approximately 275,000–300,000 MMBtu as the facility ramps up; the project’s potential capacity was described as approximately 400,000 MMBtu. Management expected continued environmental-attribute sales in 2023.
- Management identified risks including project financing, construction costs and timing, production ramp-up, feedstock availability and cost, environmental-attribute and commodity prices, market acceptance, and execution of offtake agreements. The company also faces interest-rate, counterparty-credit and equity-price risks.
- At quarter-end, Gevo had $360.6 million of remaining capacity under its at-the-market stock offering program. The 2022-A warrants covered 33.3 million shares and had not been exercised as of March 31, 2023.
- Subsequent events: an April 2023 LG Chem development agreement included $2.5 million of expected payments to Gevo over time, with further potential commercialization payments and royalties. A May 5, 2023 agreement involving Axens, Phillips 66 and ADM provides for milestone payments expected to total $50 million and royalties expected to total at least $75 million if stated milestones and conditions are achieved; these amounts are contingent, not reported Q1 revenue.
- The filing reports no pending or threatened litigation believed likely to have a material adverse effect and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether NZ1 secures the DOE-backed debt and third-party equity, and how financing terms, project cost and schedule evolve.
- Whether RNG production ramps toward management’s stated 2023 range and whether environmental-attribute approvals, generation and realized prices support revenue.
- How quickly operating cash use and project spending consume liquid resources, including restricted cash that is not freely available for general use.
- The status of the April 2024 bond mandatory tender and associated letter-of-credit arrangements.
- Whether contingent payments and royalties under the Axens-related and LG Chem agreements are achieved, and the potential effects of equity issuance and outstanding warrants on dilution.