Gevo, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited consolidated results. Gevo is developing renewable fuels, particularly sustainable aviation fuel (SAF), and operates a development-scale plant in Luverne, Minnesota, and an RNG project in Iowa.
Financial results and liquidity
Amounts below are in millions of dollars except per-share data.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $0.089 | $0.346 | $0.321 | $0.359 |
| Gross loss | $(3.639) | $(2.448) | $(7.588) | $(4.429) |
| Operating loss | $(16.115) | $(19.098) | $(32.070) | $(29.056) |
| Net loss | $(13.161) | $(18.253) | $(28.834) | $(28.310) |
| Basic and diluted loss per share | $(0.06) | $(0.09) | $(0.14) | $(0.15) |
- Q2 sales included $71,000 of ethanol and related products and $18,000 of hydrocarbon products. Gevo reported selling 9,000 gallons of SAF, isooctane, and isooctene from Luverne during the quarter.
- Operating cash used was $17.1 million for the first half, versus $19.5 million a year earlier. Investing cash used was $8.4 million, including $46.2 million of property and equipment purchases, partly offset by securities maturities and sales. Financing provided $138.6 million, primarily from the June equity offering.
- At June 30, cash and cash equivalents were $173.0 million, short-term marketable securities $297.6 million, and restricted cash $76.2 million. Restricted cash is not freely available; $71.2 million secured the letter of credit for the RNG bonds. Working capital was approximately $459.0 million.
- Total debt was approximately $67.2 million, including $66.9 million of 2021 project bonds; finance lease liabilities were $22.6 million. The bonds are associated with the Iowa RNG project and described as non-recourse. Current liabilities were $25.6 million; total liabilities were $110.8 million.
- Gevo raised $139.0 million net in June by issuing 33.3 million common shares and 33.3 million five-year warrants exercisable at $4.37. Warrants were unexercised at quarter-end. Shares outstanding were 235.2 million at June 30, versus 202.0 million at year-end 2021.
Material changes versus comparable periods
- Q2 revenue declined $0.3 million year over year, while gross loss widened $1.2 million, as the Luverne facility operated as needed for development and production costs increased.
- Q2 operating loss narrowed by $3.0 million, primarily as preliminary-stage project costs fell $5.2 million; the prior-year quarter also included a $5.0 million asset-disposal loss. SG&A rose $4.4 million, reflecting hiring, stock compensation, and professional fees.
- Q2 net loss improved by $5.1 million, including $2.9 million of other income, primarily a USDA Biofuel Producer Program grant. For the first half, net loss increased $0.5 million year over year, despite higher other income and lower preliminary-stage costs.
- First-half capital expenditures increased to $46.2 million from $14.2 million, principally for RNG and the Net-Zero 1 (NZ1) project. Construction in progress reached $128.1 million at June 30.
Outlook, management commentary, and risks
- Management said it expects available cash, securities, and expected operations to cover obligations for the next 12 months. Gevo has incurred losses since inception and expects losses to continue; commercialization, adequate revenue, and additional project financing remain essential to reaching profitability.
- NZ1 in Lake Preston, South Dakota, is planned for approximately 55 million gallons per year of SAF, or 62 million gallons of total hydrocarbons. Initial SAF deliveries were expected in 2025. The company listed milestones including FEED completion, EPC selection, site preparation, and construction financing; it expected to close construction financing, including non-recourse debt, in the first half of 2023. No formal earnings or financial guidance is provided in the filing.
- Gevo reported more than 350 million gallons per year of SAF and hydrocarbon supply agreements and estimated about $2.1 billion in annual revenue represented by those agreements, inclusive of environmental value. These are projected amounts, dependent on constructing facilities and meeting contract conditions.
- The Iowa RNG project was commissioning: one of three digesters was fully operational and the others were in start-up. Management expected up to $11.4 million of additional RNG start-up, improvement, and expansion investment during the remainder of 2022 or into 2023. NZ1 preliminary additional capital expenditure estimates were $100–$120 million.
- Management anticipated remarketing the 2021 bonds in fall 2022. A successful remarketing was expected to allow termination of the letter of credit and release of pledged cash; failure to remarket by the April 2024 tender date could require repayment of the bonds using the letter of credit.
- Environmental incidents at Iowa digesters resulted in DNR notices. The February incident was resolved in July 2022 with a $10,000 assessment; possible sanctions remained for two April incidents, which management did not expect to be material. The filing also identifies execution, construction, financing, feedstock, market-demand, policy-incentive, supply-chain, and COVID-19 risks.
- After quarter-end, Gevo agreed to a $6.7 million water-system development charge for NZ1 and purchased approximately 245 acres near Lake Preston for about $6.0 million.
Important facts for investors to verify
- Progress against NZ1 engineering, construction, financing, cost, and 2025 delivery milestones; and the funding plan for the stated $100–$120 million of preliminary additional project costs.
- Whether the Iowa RNG digesters reach full operation, qualify for anticipated RIN and LCFS credits, and generate the expected production and economics.
- Remarketing and release conditions for the 2021 bonds and $71.2 million of pledged restricted cash.
- Conversion of announced offtake agreements into financed, operating capacity and realized revenue; the filing’s revenue expectations depend on future execution.
- Potential dilution from the June share issuance, outstanding warrants, and any further use of the ATM offering program.
- The MD&A describes a $2.1 million net realizable-value gain adjustment in Q2 cost of goods sold, while the financial-statement note reports a $0.8 million inventory write-down for the six-month period. Verify the accounting and period allocation underlying these disclosures.