AquaBounty Technologies, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. AquaBounty develops and sells land-raised Atlantic salmon, including genetically engineered (GE) salmon. It began commercial sales in 2021 and reports operations in the United States and Canada.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $1.07 million | $0.23 million | $2.03 million | $0.30 million |
| Operating loss | $5.57 million | $5.18 million | $10.67 million | $9.26 million |
| Net loss | $5.54 million | $5.23 million | $10.65 million | $9.39 million |
| Basic and diluted loss per share | $0.08 | $0.07 | $0.15 | $0.14 |
| Cash used in operating activities | — | $11.26 million | $10.46 million |
Q2 revenue increased 371% year over year; six-month revenue increased 573%. GE salmon represented $1.02 million of Q2 revenue and $1.94 million for the six-month period. GE salmon harvest volume was 129 metric tons in Q2 and 262 metric tons for six months, versus 69 metric tons in each comparable 2021 period.
Product costs exceeded revenue by approximately $2.18 million in Q2 and $4.49 million for six months, before sales, research and administrative expenses. Costs included inventory valuation charges of $2.0 million for Q2 and $4.1 million for six months, reflecting production costs above estimated net realizable value. The filing does not provide a separately stated gross margin.
At June 30, 2022, cash and cash equivalents were $118.9 million, marketable securities $29.4 million, and restricted cash $1.0 million, totaling $149.2 million. Current assets were $154.6 million and current liabilities $8.4 million. Total debt was $8.86 million, including $8.11 million of long-term debt net of issuance costs and current portion. Total assets were $220.1 million and stockholders’ equity $203.4 million.
Material changes and capital spending
- Revenue growth reflected higher GE salmon harvests and sales, improved yields, and higher market prices. Product costs rose 76% in Q2 and 92% for six months, driven by greater production, feed and labor costs, processing and transportation, and inflation.
- Net loss widened 6% in Q2 and 13% for six months year over year. General and administrative costs increased; sales and marketing and research and development costs declined.
- Property, plant and equipment increased to $64.0 million from $33.8 million at year-end 2021. Six-month purchases and deposits for property and equipment were $30.5 million, primarily for farm construction and equipment.
- Investing activities provided $42.0 million for six months, principally reflecting marketable security maturities and purchases; this was not operating cash generation. Financing activities used $0.3 million. The prior-year period included $119.1 million of net proceeds from a public stock offering.
Outlook, risks and contingencies
Management expects revenue to grow modestly and slowly during the remainder of 2022 as weekly harvesting capacity at the Indiana farm increases, with seasonal demand and salmon prices affecting results. No specific earnings or revenue guidance was provided.
The planned Ohio farm is designed for 10,000 metric tons of annual capacity; estimated construction cost exceeds $320 million, and more than $30 million had been invested by the reporting date. The company is evaluating phased construction to reduce cost. Management plans to use cash, marketable securities and debt financing, but says it does not have the resources to fund the full project and expects to need additional financing to execute its plans. Management believes available uncommitted cash is sufficient for requirements beyond the next 12 months from the filing date.
- Key risks include construction cost escalation and delays, inflation, higher interest rates, financing availability, permits and approvals, labor and supply-chain constraints, and the company’s ability to achieve commercial-scale production and profitability.
- Management cited COVID-related and broader vendor, labor, transportation and equipment lead-time disruptions. The Indiana subsidiary was in compliance with its loan covenants at June 30, 2022.
- The company reported no legal proceedings believed likely to have a material adverse effect and no material changes to previously disclosed commitments and contingencies. It forecasts continued losses for 2022 and recorded no income tax expense.
Important facts for investors to verify
- Whether GE salmon production, yields, pricing and customer demand can improve revenue while narrowing the substantial gap between product costs and sales.
- Updated Ohio farm budget, construction schedule, phasing plans, permit status, committed spending and financing terms; assess whether available liquidity can support operations and expansion.
- Progress in reducing inventory valuation charges and the assumptions used to estimate fish biomass, yields, market value and completion costs.
- Exposure to inflation, interest rates, labor and supply-chain constraints, market acceptance, customer concentration and regulatory developments.