Significant Progress Made on Commercial Production of Isobutanol at Luverne, Focus Turns to Licensing
Reports EPS of ($0.11) for the fourth quarter
Ended the fourth quarter with cash and cash equivalents of $6.4 million
In February 2015, closed an offering of common stock units representing gross proceeds of $6.65 million; have subsequently received an additional $2.0 million of gross proceeds through the exercise of warrants associated with this offering
Revenue in fourth quarter 2014 was $9.5 million, as compared to $1.7 million for the same quarter in 2013
Met milestone of producing greater than fifty thousand gallons of isobutanol in one month at Luverne in December 2014
Achievements and data at Luverne support the acceleration of Gevo's isobutanol licensing program
Luverne focus switched to the maximization of plant-level cash flows, while continuing to seed key isobutanol markets in chemicals and fuels
Introduced new ethanol-to-hydrocarbons technology which could provide the ethanol industry a much broader set of end-product market and margin opportunities
ENGLEWOOD, Colo., March 26, 2015 (GLOBE NEWSWIRE) -- Gevo, Inc. (Nasdaq:GEVO) today announced its financial results for the three months ended December 31, 2014 and provided an update on recent corporate highlights.
In the fourth quarter of 2014, Gevo continued to progress the commercial operation of isobutanol at Luverne under the Side-by-Side mode of production (SBS), meeting its stated milestone in December 2014 of producing greater than fifty thousand gallons of isobutanol in one month. This achievement was a result of the introduction of Gevo's second-generation yeast biocatalyst at the plant, as well as significant process improvements learned by Gevo since switching the plant to SBS production earlier in 2014.
The data generated at the Luverne plant and in the labs in Denver continues to support ultimate, optimized isobutanol production costs that would support EBITDA margins for isobutanol of $0.50-$1.00 per gallon. In the fourth quarter, Praj Industries Limited (Praj), a global leader in process engineering and equipment manufacturing for the ethanol and brewing industries, conducted extensive due diligence at the Luverne plant, and has confirmed these cost projections. Praj has subsequently signed a memorandum of understanding (MOU) wherein Praj will undertake to license up to 250 million gallons of isobutanol capacity for sugar-based ethanol plants over the next ten years.
With this data in hand, Gevo's focus has turned to the licensing of its isobutanol technology. In addition to the Praj MOU, Gevo signed a letter of intent (LOI) in the fourth quarter to license its technology to Highland EnviroFuels' sugar cane and sweet sorghum project based in Florida. These supplement the LOIs that were previously entered into with IGPC Ethanol Inc.based in Canada, and Porta Hnos S.A. based in Argentina. As a result of this interest, Gevo is targeting signing a binding agreement with at least one licensee for its isobutanol technology in 2015.
In the fourth quarter, Gevo continued to develop key segments of the isobutanol market, with a focus on those where renewable isobutanol performance attributes solve customer problems. Brenntag Canada began sales of isobutanol to the specialty chemical markets, while Gulf Racing Fuels began introducing isobutanol for use in off-road applications, including sales to retail consumers through NAPA Auto Parts in North Dakota.
Significantly, a consortium of leading organizations from the recreational marine industry announced the completion of more than four years of testing of Gevo's isobutanol for use in boat engines. They determined that isobutanol performs well across several gasoline marine engines platforms. The testing was performed in collaboration with the National Marine Manufacturers Association, the American Boat and Yacht Council and several engine and boat manufacturers across the industry, and was also supported by The US Department of Energy, the Office of Energy Efficiency and Renewable Energy and Argonne National Laboratory.
Gevo's hydrocarbons business continued to show progress, with strengthening demand being shown for the jet fuel, isooctane and paraxylene derived from isobutanol produced at Luverne. Certain parties have shown interest in offtake agreements for these products, and Gevo anticipates achieving both ASTM (American Society for Testing and Materials) and MIL-SPEC (Defense Specification) certifications for its jet fuel in 2015, which would help accelerate the commercial adoption of Gevo's product in both the commercial and military jet markets.
To augment the strategic interest in this hydrocarbons business segment, Gevo announced the introduction of a new technology it has developed to convert ethanol into a tailored mix of end-products, including propylene (an ingredient in consumer plastics, fibers, films, and superabsorbants) and renewable hydrogen. Preliminary technical and economic analyses indicate that the products, sourced from renewable feedstock, would be cost competitive with traditional petrochemical approaches. Following successful scale-up, we believe this technology would open up a much broader set of end-product market and margin opportunities for ethanol producers.
Gevo has continued to strengthen its intellectual portfolio position. Recent decisions at the U.S. Supreme Court and at the U.S. Patent Office (USPTO) continue to support Gevo's freedom to operate, as well as reinforce key aspects of Gevo's own technology. These are of paramount importance as Gevo accelerates its licensing program. In particular, the USPTO recently confirmed the validity of several Gevo patents covering key genetic engineering technologies, which Gevo believes are needed to make commercially viable isobutanol yeast biocatalysts.
"Having validated many aspects of our isobutanol production technology under SBS production, whereby we co-produce isobutanol and ethanol at Luverne, we now plan on operating the plant to maximize cash flows. We expect to continue the production of isobutanol at Luverne, and we expect the key drivers for such operations to be 1) customer demand for seeding key markets; and 2) proving out new facets of our technology. Isobutanol continues to be a very attractive product from a commercial point of view. The progress we have made in proving out isobutanol production at a commercial scale, in addition to the increasing demand from customers, reinforces the ramping up of our licensing efforts, including opportunities outside the United States, using non-corn feedstocks. We also have several licensing opportunities in North America that we are looking to sign up," said Dr. Patrick Gruber, Gevo's Chief Executive Officer.
"The conversion of alcohols to hydrocarbons is also generating significant interest from potential strategic investors. It is our goal in 2015 to establish multiple new strategic partnerships to accelerate the development of this hydrocarbons business, inclusive of Gevo's new ethanol-to-hydrocarbons technology. The ability to produce cost competitive renewable propylene, which is used in a multitude of consumer products, as well as renewable hydrogen, have been "holy grails" of the bio-based economy. We believe that we have an effective proprietary technology to do this based on feedback from partners and potential strategic investors," added Gruber. "Overall, we are very pleased with the results from Luverne operating under SBS, the demand for our isobutanol and the interest we are generating from potential licensees and strategic partners."
Financial Highlights
Revenues for the fourth quarter of 2014 were $9.5 million compared to $1.7 million in the same period in 2013. The increase in revenue during 2014 is primarily a result of the production and sale of approximately $8.8 million of ethanol and distiller's grains following the transition of the Luverne plant to the SBS configuration.
During the fourth quarter of 2014, hydrocarbon revenues were $0.5 million, primarily related to the shipment of bio-jet fuel to the U.S. military during the quarter. Gevo also continued to generate revenue during the fourth quarter of 2014 associated with ongoing research agreements.
Cost of goods sold increased by $5.8 million during the three months ended December 31, 2014, as compared to the same quarter in 2013, due primarily to the increased production activity at the Luverne plant under the SBS configuration. Gross loss was $1.4 million for the three months ended December 31, 2014. After adding back $1.4 million of depreciation expense, the cash gross margin was a positive $0.1 million for the fourth quarter of 2014.
Research and development expense decreased by $1.2 million during the three months ended December 31, 2014, as compared to the same quarter in 2013, due primarily to a $0.5 million reduction in salary and consultant-related expenses and a $0.5 million decrease in expenses at the hydrocarbons demo facility located in Silsbee.
Selling, general and administrative expense decreased $0.9 million during the three months ended December 31, 2014, as compared to the same quarter in 2013, due primarily to a decrease of $1.0 million in legal expenses, largely related to litigation matters.
Interest expense in the fourth quarter of 2014 was $2.0 million, which was slightly higher than the interest expense in the same period in 2013.
The company reported a non-cash loss of $0.2 million during the fourth quarter of 2014, as compared to a non-cash loss of $2.4 million during the same period in 2013, related to changes in the fair value of its derivative warrant liabilities and embedded derivatives contained in the convertible notes issued in 2012 (2022 Notes). The company did not have any holders of 2022 Notes opt to convert their note holdings into shares of Gevo common stock during the three months ended December 31, 2014.
The company also reported a non-cash gain of $0.1 million during the fourth quarter of 2014 related to a change in the fair value of the convertible notes issued in the second quarter of 2014 to Whitebox.
The net loss for the fourth quarter of 2014 was $11.1 million compared to $17.3 million during the same period in 2013.
Webcast and Conference Call Information
Hosting today's conference call at 4:30 p.m. EDT (2:30 p.m. MDT) will be Dr. Patrick Gruber, Chief Executive Officer, Mike Willis, Chief Financial Officer and Brett Lund, Chief Legal Officer. They will review the company's financial results for the three months ended December 31, 2014 and provide an update on recent corporate highlights.
To participate in the conference call, please dial 1 (800) 708-4540 (inside the U.S.) or 1 (847) 619-6397 (outside the U.S.) and reference the access code 39142759. A replay of the call and webcast will be available two hours after the conference call ends on March 26, 2015. To access the replay, please dial 1-888-843-7419 (inside the US) or 1-630-652-3042 (outside the US) and reference the access code 39142759. The archived webcast will be available until Midnight EDT on April 25, 2015 in the Investor Relations section of Gevo's website at www.gevo.com.
