Gevo, Inc. :GEVO-US: Earnings Analysis: Q3, 2016 By the Numbers : November 30, 2016

Gevo, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Gevo, Inc. – Pacific Ethanol, Inc., TerraVia Holdings, Inc., Green Brick Partners, Inc., Green Plains Inc., Amyris, Inc., Coca-Cola Company and Trecora Resources (PEIX-US, TVIA-US, GRBK-US, GPRE-US, AMRS-US, KO-US and TREC-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 6.94 million, Net Earnings of USD -9.85 million.
  • Gross margins narrowed from -35.28% to -43.29% compared to the same period last year, operating (EBITDA) margins now -63.03% from -95.52%.
  • Year-on-year change in operating cash flow of 21.01% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings declined although operating margins improved from -115.68% to -88.35%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 6.94 8.11 6.32 7.3 8.02
Revenue Growth (%YOY) -13.38 -9.09 7.14 -23.2 -19.63
Earnings (mil) -9.85 -21.49 -3.61 -7.96 -6.52
Earnings Growth (%YOY) -51.08 -49.53 50.91 28.13 -594.99
Net Margin (%) -141.83 -264.85 -57.04 -109.11 -81.31
EPS -0.1 -0.44 -0.16 -0.44 -0.39
Return on Equity (%) -62.94 -162.74 -30.11 -62.91 -46.94
Return on Assets (%) -34.96 -83.95 -14.52 -31.21 -24.72

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Market Share Versus Profits

Revenues History
Earnings History

GEVO-US‘s change in revenue this period compared to the same period last year of -13.38% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that GEVO-US is holding onto its market share. Also, for comparison purposes, revenues changed by -14.41% and earnings by 54.16% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year earnings decline was driven by the drop in gross margins from -35.28% to -43.29%. This drop in earnings would have been worse were in not for operational cost control activities, which helped the operating margins (EBITDA margins) improve from -95.52% to -63.03%. For comparison purposes, gross margins were -24.36% and EBITDA margins were -47.22% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

GEVO-US‘s change in operating cash flow of 21.01% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

Despite an overall improvement in operating (EBIT) margins, the company’s earnings fell. EBIT margins went from -115.68% to -88.35%. The decline in earnings appears to be largely because of one-time items. Pretax margins declined from -81.31% to -141.83%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Gevo, Inc. is a renewable chemicals and next generation biofuels company, which is focused on the development and commercialization of alternatives to petroleum-based products based on isobutanol produced from renewable feedstocks. The company operates its business through two segments: Gevo, Inc. and Gevo Development/Agri-Energy. The Gevo, Inc. segment is responsible for all research and development activities related to the future production of isobutanol, including the development of its proprietary biocatalysts, the production and sale of biojet fuel, its Retrofit process and the next generation of chemicals and biofuels that will be based on isobutanol technology. The Gevo Development/Agri-Energy segment is currently responsible for the operation of its agri energy facility and the production of ethanol, isobutanol and related products. Gevo was founded by Matthew W. Peters, Peter Meinhold and Frances Hamilton Arnold on June 9, 2005 and is headquartered in Englewood, CO.

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