Gevo, Inc. — 2020 Form 10-K Summary
Business context and reporting period
Annual report for the fiscal year ended December 31, 2020, filed March 17, 2021. Gevo develops renewable fuels and chemicals, including sustainable aviation fuel (SAF) and renewable premium gasoline, using fermentation-based isobutanol technology. Its commercial operations were limited: the Luverne, Minnesota facility’s ethanol production was suspended in March 2020, and the South Hampton facility was not producing SAF or renewable gasoline at year-end.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $5.5 million | $24.5 million |
| Gross loss | $9.5 million | $12.2 million |
| Operating loss | $26.3 million | $26.4 million |
| Net loss | $40.2 million | $28.7 million |
| Net cash used in operations | $19.3 million | $20.8 million |
- Revenue fell 77%, principally because Luverne ethanol and distillers-grains production stopped in March amid COVID-19 disruption and unfavorable commodity economics. Ethanol and related-product revenue was $3.8 million; hydrocarbon revenue was $1.5 million.
- Gross margin was negative in both years; gross loss was approximately 171% of revenue in 2020 versus 50% in 2019, reflecting the sharp revenue decline and continuing production and facility costs.
- Year-end cash and cash equivalents were $78.3 million, versus $16.3 million a year earlier. Current assets were $83.3 million and current liabilities $4.9 million.
- Year-end total liabilities were $5.7 million. The 12% convertible senior secured notes were fully converted into common stock by December 31, 2020; other loans payable totaled $1.3 million, including $1.0 million of SBA PPP loans.
- Financing activities provided $87.3 million in 2020, largely through stock and warrant offerings and exercises. Shares outstanding rose to 128.1 million at year-end from 14.1 million in 2019; 198.2 million were outstanding as of February 26, 2021.
Material changes versus 2019
- Revenue declined by $19.0 million, while gross loss narrowed by $2.8 million and operating loss was essentially unchanged.
- Net loss increased by $11.5 million. Other expense included an $8.6 million noncash loss from changes in fair value of embedded note derivatives, plus $1.9 million of conversion-related loss and $0.7 million of note-modification costs.
- Operating cash use decreased by $1.5 million; investing cash use was $5.9 million, and financing cash provided increased to $87.3 million from $10.9 million.
- The company raised $321.7 million net in a January 2021 registered offering and another $135.8 million net through its ATM program through February 26, 2021. These post-year-end proceeds materially changed liquidity but came with substantial share issuance.
Outlook, management commentary, and risks
- Management expects continuing losses and negative operating cash flows, and says profitability depends on developing the Net-Zero 1 Project and generating sufficient revenue. It reported adequate cash to fund operations for one year from issuance of the financial statements.
- Management planned to spend approximately $50–$60 million over the next 12 months on engineering and development for RNG, Net-Zero 1, and other initiatives. Net-Zero 1, planned for Lake Preston, South Dakota, is projected at 45 million gallons per year and approximately $650 million of unleveraged capital cost; financing and construction remain uncertain.
- The company expects intermittent isobutanol campaigns in 2021 to supply South Hampton for possible hydrocarbon production. It expects the Northwest Iowa RNG project to begin production in 2022, subject to financing; approximately $69 million of private activity bonds were anticipated to finance that project.
- Gevo cited take-or-pay agreements representing approximately 45 million gallons per year, but performance and revenue depend on facility development, financing, and other conditions. Delta’s agreement was amended in 2020; a February 2021 amendment with SAS contemplated 5 million gallons of SAF annually beginning in 2024.
- Key risks include project financing and cost overruns, scaling and production performance, customer and offtake conditions, COVID-19-related demand impacts, commodity and energy prices, regulatory incentives and approvals, and continued dependence on external capital. Eco-Energy, HCS, and Purina represented approximately 52%, 21%, and 15% of 2020 revenue, respectively.
- The company reported no material pending litigation and no recorded environmental liabilities. The independent auditor issued an unqualified opinion; management reported disclosure controls and internal control over financial reporting were effective.
Important facts for investors to verify
- Whether Net-Zero 1 and RNG obtain financing, permits, and construction commitments on the stated schedule and within projected costs.
- Whether the offtake agreements’ conditions are satisfied, remain in force, and support financeable project economics.
- Actual production restart, output, yields, customer qualification, and unit economics at Luverne and South Hampton.
- Use of post-year-end offering proceeds, ongoing cash burn, and further equity issuance or dilution.
- How demand, carbon-credit values, government policy, and corn, energy, and petroleum prices affect expected margins and project viability.