Spring Blossoms: Amyris First Quarter Earnings
Lily flowered tulip 'Maytime'
photo by Tom Konrad
In California, Amyris (AMRS) announced net income of $16.4M on revenues of $6.2M for Q1 2014, after reporting a $32.6M loss in Q1 2013 on revenues of $9.0M. The change in net income was primary due to a non-cash benefit relating to outstanding convertible notes, a result of a decrease in the Company’s stock price at 3/31/14 compared to the stock price at 12/31/13.
In a release accompanying the results, the company highlighted that it:
- Achieved combined inflows from product sales and collaborations during the first quarter of $17.9 million on a non-GAAP basis. On a GAAP basis, total revenues of $6.0 million.
- Validated the performance of renewable jet fuel with a third demonstration flight — by Etihad Airways on a Boeing 777 — and remain on track for ASTM validation in the coming weeks.
- Expanded its product development pipeline for the commercial introduction of a new cosmetic emollient and a solvent product.
- Resumption of production at the Brotas biorefinery following planned maintenance and facility upgrades to restart in conjunction with the sugarcane harvest period in Brazil.
- First month of farnesene production achieved better performance from prior year’s quality manufacturing runs. Now, farnesene yield is reported at around 80% of theoretical maximum.
- Validated downstream processes and quality systems for growing product pipeline being commercialized soon, including jet fuel.
- Received Roundtable on Sustainable Biomaterials (RSB) certification, the first of its kind in Brazil.
“During the first quarter, we delivered strong collaboration inflows, continued our focused commercialization activities, and ended the quarter with a stronger cash balance. We achieved a cash gross margin of 73% on sales and collaboration inflows of nearly $18 million,” said John Melo, Amyris President & CEO.
“Since quarter end, we successfully resumed farnesene production at the Brotas biorefinery with first month’s performance superior to our best fermentation runs in 2013 and remain on track for our objective of becoming cash flow positive during the second half of this year and profitable in 2015,” Melo concluded.
Resuming forward guidance
In a highlight for investors, Amyris reiterated its prior guidance for 2014, which was as follows:
- Inflows. We expect to achieve total cash inflows, which includes revenues from renewable product sales and inflows from collaborations, in the range of $100 to $115 million for 2014. Specifically, we expect (a) to double sales of renewable products over 2013 and achieve positive cash margin from products in the range of $10 to $15 million in 2014 and (b) maintain collaboration inflows in the range of $60 to $70 million.
- Expenses. We expect cash operating expenses for R&D and SG&A in the range of $80 to $85 million and capital expenditures less than $10 million in 2014.
- Earnings. We expect to achieve positive cash flow from operations during 2014, with positive non-GAAP EBITDA during the second half of 2014, and to become profitable in 2015.
- Payback. We expect cash payback for our Brotas biorefinery in the next two years (following 2013 start-up year), based on plant cash contributions of $10 to $15 million in 2014 and $40 to $50 million in 2015.
The product set
Here’s what Amyris is producing:
- arteminisic acid.
- farnesene — including farnesene-based elastomers, in collaboration with Kururay.
- patchouli fragrance.
- Three more molecules are in development, and there are reported to be 20 in the pipleline, with primary funding coming from R&D partners.
- The company is announcing two new products: hemi-squalane (with a 5-7x market size vs. squalane, but lower average selling price), and a new solvent for the d-limonene market, which has a 17 million liter market size. The company is also expecting to sell biojet fuel and liquid farnesene runner this year.
Commentary from analysts
Rob Stone and James Medvedeff, Cowen and Co
“On the operational front, Amyris is introducing two new molecules, both with first revenue expected by year-end. The first is a new solvent molecule, which will fall under the performance materials banner that is a major contributor to long-term product revenue mentioned earlier. The second new molecule is an emollient that targets the consumer care market, which is expected to have a price point in the $8-12/kg range. Finally, as it relates to biojet sales, discussions are underway with four potential buyers (including one active contract negotiation), and sales are expected by the end of this year. Worth noting, however, is that Amyris is not aiming to sell “commodity” jet fuel, but rather expects to be able to charge a meaningful “green premium,” with the explicit goal of securing better gross margins. Operational and commercialization progress is encouraging. Full year guidance was reiterated, but it appears heavily back-end loaded and visibility remains low. Maintain Market Perform (2) and cut PT to $3.00 from $3.50.”
Mike Ritzenthaler, Piper Jaffray
We maintain our Neutral rating on shares of AMRS. Sales (both product sales and collaboration revenue) were about half of our estimate and management stated on the call that 2Q would fall short of consensus. 2014 targets (for cash inflows, expenses, and positive EBITDA) were reiterated. Approximately half of product sales and collaboration funding included in the targets are firmly contracted, which exposes the story to disappointments should the year not play out as management has forecasted. Nonetheless, we are encouraged by the success on the technology and liquidity fronts, but at the same time we hesitate to fully endorse the ramp at this point given substantial gaps that have materialized in the past.
Pavel Molchanov, Raymond James & Company
After a period of retooling while in the “overpromise and underdeliver” penalty box, 2013 was Amyris’ first year with operations truly in commercial mode, and the outlook for 2014 (and beyond) is encouraging. There is visible commercialization progress, but the top line’s reliance (for now) on partner-based R&D revenue makes quarterly results very choppy. In addition to updates on the production ramp-up at the Brotas plant, the market wants to see additional clarity on the pace at which Total will be scaling up its fuels joint venture with Amyris. We maintain our Market Perform rating.
The Bottom Line
We’re seeing the product line-up unfold – the multiple molecules are starting to become an impressive set where the company is realizing its potential. An improvement in the larger-volume, low-margin markets will help move the company towards more substantial than its tasty but ultimately limited prospects in markets such as d-limonene. Bioject will be key.