雅虎香港財經 Gevo, Inc. (NASDAQ:GEVO) Q4 2023 Earnings Call Transcript
Gevo, Inc. (NASDAQ:GEVO) Q4 2023 Earnings Call Transcript March 7, 2024
Gevo, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, and thank you for standing by. Welcome to the Gevo, Incorporated Q4, 2024 [sic] Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to turn the conference over to your speaker for today, Dr. Eric Frey, Vice-President of Finance and Strategy. You may go ahead.
Eric Frey: Good afternoon, everyone. This is Eric Frey, Vice President of Finance and Strategy. I'm responsible for Investor Relations here at Gevo as well. Thanks for joining us to discuss Gevo's fourth quarter and year-end results for the period ended December 31, 2023. I would like to start by introducing today's participants from the company. With us today are Dr. Patrick Gruber, Gevo's Chief Executive Officer, and Lynn Smull, Gevo's Chief Financial Officer. Earlier today we issued a press release that outlines the topics we plan to discuss. A copy of this press release is available at our website at www.gevo.com. Please be advised that our remarks today, including answers to your questions, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act.
These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those statements include projections about the timing, development, engineering, financing, and construction of our sustainable aviation fuel projects, our recently executed agreements, our renewable natural gas project, and other activities described in our filings with the Securities and Exchange Commission which are incorporated by reference. We disclaim any obligation to update these forward-looking statements. In addition, we may provide certain non-GAAP financial information on this call. The relevant definitions and GAAP reconciliations may be found in our earnings release, which can be found on our website at www.gevo.com in the Investor Relations section.
Following the prepared remarks, we'll open the call for questions. I would like to remind everyone that this conference call is open to the media, and we are providing a simultaneous webcast to the public. A replay will be available via the company's investor relations page at www.gevo.com. I'd like to turn the call over now to the CEO of Gevo, Dr. Patrick Gruber. Pat?
Patrick Gruber: Thanks, Eric. Good afternoon, everyone, and thanks for joining us on our call. We are filing our Form 10-K today, and we ask that you refer to it for more detailed information after this call. We entered the fourth quarter with about $376 million in cash, cash equivalents, and restricted cash on our balance sheet. The total that Gevo expects to have to spend to achieve FID for our Net-Zero 1project is $236 million to $286 million, excluding certain internal cost allocations, of which only $125 million to $175 million of cash is left to spend to get that project complete to FID. So it's a downhill slope to get there. I'd like to thank the Department of U.S. Energy Loan Program's office for the thorough and diligent work that their team is doing to help us secure a loan guarantee as part of this construction financing.
Now, we are quite excited about Net-Zero 1, in fact, even more excited. In the third and fourth quarter of last year, we had McKinsey in here working with us to challenge our assumptions, competitive position, competitive economics, and such. The results of their work with us reaffirmed that the NC1 plant design would be expected to deliver the lowest cost of carbon abatement compared to other SAF technologies, including HEPA, other ATJ routes, and especially direct air capture routes. The reason the NC1 design is expected to win economically is because of the mass reduction in the use of natural gas, the efficiency of the use of resources, creative integration technology, optimization of unit operations and overall efficiency, and selectivity in getting to high yields of SAF or other valuable products that we want to make.
More effective carbon abatement means that less carbon value has to be recovered in the marketplace to make economic returns. Think of it as more carbon reduction per gallon. That means more carbon abatement per gallon, more paying for the buck, if you will. All of this should result in a competitively priced product for customers and less burden on consumers and taxpayers. It's a good result. It reaffirms and makes it more clear why what we are doing matters. We are laser focused on delivering EPC contracts, a set of customer contracts with terms that work for the DOE loan guarantee and a DOE project loan lockdown so that we can begin construction, which we estimate would take 24 months. We still have work to do in front of us. We're making progress on the DOE and all the rest of it.
In addition to the equity that we have built in the Net-Zero 1project through that money that we've already spent developing, we have also generated know-how and patents that we filed on a reusable asset, that is the plant designs. This is critical because to enable the promise of SAF, you need an industrial process that works at large scale that dramatically reduces the fossil energy footprint. Well, that's what we've achieved, we believe. This doesn't require inventing new technologies. It requires engineering systems integration and know-how. The knowledge, technology, intellectual property we have gained through the work on NZ1, I expect would benefit way beyond NZ1. Why? Because there's 190 operating ethanol plants in the U.S., more than that actually.
We expect that there will be lots of opportunity to leverage our knowledge, know-how, capability, technology to produce higher value low carbon ethanol and SAF over time. So the market dynamics are strongly in our favour to reuse and repeat the knowledge-based assets we've built up in development of our NZ1 business model. That's something that's an important aspect. We are a knowledge business as well, and we've learned a heck of a lot on how to abate carbon. We have been pleased to see the progress on 40B in the future 45Z and the federal support for carbon abatement in the IRA bill. The interagency working group and the U.S. Department of Treasury have indicated an updated GREET model will be used to quantify carbon reduction and that carbon sequestration would count as well as certain agricultural practices.
The theme is you have to do the work though to actually have it real measurements to get it audited and then report it. So you don't get it, it's not a give, it's not going to be a giveaway, you got to do some work for it. Well, that's good, that plays to our variety business. More on that later. We strongly believe that field-level measurement and tracking of agricultural practices needs to be part of the GREET protocol because we believe that it is at that level that the strongest data for carbon abatement can be brought forth. We believe that getting the policy guidelines right is important since this will be a precedent for the long run. Paul Bloom was with Secretary of Agriculture Vilsack and EPA Administrator Reagan when they announced last week that it will take a few weeks longer for the next generation of that guidance to come out, but they are keen on making sure that it's going to work in the long run and we think that's a good outcome.
So we look forward to seeing the result. We also continue to see strong support for carbon abatement in states with New Mexico becoming the fourth state to sign into law a clean fuel standard just this week. This is a success for the second largest oil and gas producing state in the country as well as other states interested in creating similar programs. We congratulate Mexico on this milestone and look forward to working with other states to develop similar programs. Now I'll switch gears and make a few comments about R&G and Verity. Last year we expanded our dairy manure RNG capacity from about 350,000 to 400,000 MMBtu’s per year. I am pleased that we have generated positive standalone non-GAAP cash EBITDA from those assets for two consecutive quarters now.
Last quarter our production was at 91% of capacity. This year we estimate that the non-GAAP cash EBITDA from our RNG business could add up to about $12 million to $16 million on an annualized basis assuming we get the LCFS pathway approved with the score of a negative 350. Those papers are filed, we're just waiting for the result. There is a lot of embedded upside potential with this asset. We estimate that the number could be as high as $50 million to $60 million per year from this 400,000 MMBtu plant if LCFS prices recover to where they were a couple years ago and including the biogas production tax credit in 2025 to 2027. Ofcourse there can be no guarantee that the LCFS price in California will recover to that level but even a fraction of that would be meaningful to us.
I like this a lot, there's a lot of upside potential that's just embedded in it and I'm glad we have the asset. Last year in our third quarter our Verity tracking platform went live with farmers in South Dakota, Minnesota. We tracked ethanol plant customers totaling approximately 2% of the U.S. ethanol industry by volume and that's the, of course, we're the world's largest ethanol market. Our initial target market for Verity in the U.S. is estimated to be about $1.5 billion to $3 billion for reducing and tracking the reduction of carbon intensity through the value chain from a bushel of corn to a seat in a vehicle or aircraft. Verity is a capital light fee-based software as a service business so it's a nice complement to NZ1, Net-Zero 1, which is more capital intensive.
Providing customers and regulators with an audit trail so that they know what they are getting in terms of carbon abatement when they're paying and they're paying for that carbon abatement is necessary and value-added component to everything we do at Gevo as a carbon abatement company. Now I'll pass it off to Lynn to talk through the operations and numbers.
Lynn Smull: Thanks, Seth. Gevo's Q4 combined revenue and interest income was $9.4 million with the interest income benefiting from higher interest rates. Our corporate spend, that is G&A, was $25.5 million for the year in 2023 excluding non-cash stock-based compensation of $17.1 million which is $2.5 million increase from a 2022 number. Debt related to our RNG project was $68 million consisting of $68.2 million of base value less unamortized premium and insurance cost of $0.2 million. As Pat mentioned, we ended the fourth quarter of 2023 with a strong liquidity position of $375.6 million in cash, restricted cash, and other liquid investments. The restricted cash portion is associated with our RNG bonds and certain collateral related to the development of Net-Zero 1and totals $77.2 million.
During the fourth quarter of 2023, we invested and capitalized $13.5 million in cash, in capital projects comprised of $1.8 million into Net-Zero 1, $0.3 million into the expansion of our RNG project, $7.4 million into other Net-Zero projects, and $4 million for our fractionation and hydrocarbon skids. We also advanced $1.1 million of reimbursable expenditures to our partner developer for the purchase of wind and hydrogen equipment to support Net-Zero 1. On Net-Zero 1, the DOE and its suite of independent experts are working with us in due diligence and loan guarantee structuring. Once that component is pinned down with a formal term sheet, we'll formally ramp up the third-party equity capital raise and work towards a close of funding necessary to finance the project construction budget and all the project finance elements such as interest during construction, various reserves, and transaction costs.
Equity investors are standing by for a clear line of sight to the debt terms, which is underway and will be announced when the DOE term sheet is agreed. During Q4 2023, our dairy RNG assets in Northwest Iowa sold 90,666 MMBtu of RNG. Revenue of $4.4 million for the quarter included RNG sales of $0.2 million and $4.2 million net proceeds from the sales of environmental benefits. Between RNG and Verity growth, we continue to close in on positive cash flow for the company. As Pat mentioned, we see a lot of embedded growth in RNG just by continuing to operate that asset. We also look forward to announcing the first revenues at Verity this year, which is a capital-like, fee-based business. Now I'll turn the call back to Pat.
Patrick Gruber: Thanks, Lynn. Let me wrap up our prepared remarks by saying we believe Gevo was undervalued given our balance sheet and growth potential. We plan to address that first through execution and second by getting our message out. I hope everyone will take a look at the corporate investor presentation on our website, which lays out the enormous upside potential that we see and why now is such an exciting and pivotal time. Let's open it up for questions.
See also 15 Best Performing Currencies Against the US Dollar and 11 Best Cruise Stocks To Buy Now.
To continue reading the Q&A session, please click here.
