In California, Amyris (AMRS) reported Q1 revenues of $13.0M compared with $8.8M for Q1 2016, and touted the “significant increase in product sales, primarily in the personal care and health and nutrition markets, offset by a slight decline in collaboration revenue.” Collaboration revenues contributed $4.7M and product sales added $8.3M for the quarter.
Big Q1 miss vs analyst expectations
As Jeff Osborne at Cowen & Co noted, “Amyris reported revenue of $13.0mn, well below our estimate of $37.1mn due to much lower collaboration payments than we had anticipated. Management has highlighted that these payments can be very lumpy in nature, and attributed the miss to a failed milestone payment from Ginkgo Bioworks. Gross Margin of 2% was well below our estimate of 40% due to the lower collaboration payments.”
A turning point of interest
We liked one item more than anything.
In Q1 2016, product sales were $5.2M and the cost of product sales were $11.2M, and a number of informed observers became alarmed that the company was losing money on every product produced, and that growth would be unsustainable. The company noted the concerns but said that future sales would arrive with stronger gross margins.
So, let’s look at Q1 2017.
And indeed, the company has staged a turnaround in that critical metric. In Q1 2017, product sales were $13.2M and the cost of product sales were $12.8M. IIt’s a rretunr to the kind of gross margins that company had achieved by Q3 2016 but with a 50% jump in revenues. Long ways to go before the company is out the financial woods, but we may see here a turning point.
The big hit is Biossance
The company recorded record quarterly Biossance sales following successful launch into Sephora with the brand delivering high growth and expected to drive much better than expected 2017 results growing from approximately $500,000 in 2016 total retail sales to over $10 million expected for 2017
The big miss is Ginkgo
There wasn’t much insight offered regarding the Ginkgo situaiton, excepting that a mysterious milestone payment was missed apparently, a huge one, because the miss on revenues compared to analyst expectations was almost $24M.
Indeed, the scale-up news from the Ginkgo universe this past week went in a completely different direction. Ginkgo Bioworks and Robertet USA completed the commercial-scale fermentation of “a key flavor and fragrance ingredient” – which one, we don’t yet know. The specific scale was 50,000 liters.
But think along the lines of rose oil ingredients and lactone ingredients that’s the Robertet sector. Overall, Ginkgo has a portfolio of over 40 products under contract with 20 customers.
The Q1 developments that will impact 2017 and 2018
The company highlighted three major developments that will positvely impact the company this year and next:
- Growing Farnesene for Vitamin E oil from around $6 million in 2016 to around $20 million in 2017
- Significant progress in healthy sweeteners with expected commercial production in 2018 of low cost, best performing healthy sweetener to focus on sugar replacement market
- Announced up to $95 million in anticipated equity financing led by Royal DSM along with institutional investors over two tranches and announced in-process reduction of the company’s debt by approximately $75 million, significantly strengthening the company’s balance sheet
Happy Campers at Camp Amyris
“We are pleased with our continued execution delivering increased product sales and very healthy revenue growth for Amyris,” said John Melo, Amyris President & CEO. “We are very excited to join with Royal DSM to accelerate product sales in health and nutrition markets, deliver better performing products and accelerate market access. With their support and that of our investors we have significantly strengthened our balance sheet and the company’s foundation as a leading company in its sector.”
Continued Melo, “Our product portfolio is growing at a faster rate than we expected within nutraceuticals, skin care and fragrance ingredients. We have evolved our business to predictable quarter on quarter product sales and continue to deliver on our strategic milestones for delivery of our collaboration revenue. While our competitors struggle to deliver material revenue and predictable growth we expect to deliver around $60 million of product revenue for 2017, or more than double from 2016, and we expect total revenue to be better than our 2017 plan.
The Bottom Line
It’s the 5th consecutive quater of year on year product revemue growth, and the company is targeting $115-120M in revenue in 2017 and of that $60M is expected to come from product sales.
In 2018, guidance is at $160M for product sales.
All that’s the good news. Here’s the bad news, Amyris has been pushing back it’s time to $100M in revenue for some time. Back in May 2016 we heard from AMyris that it was “On track to execute 2016 business plan with expected non-GAAP revenue of $90-$105 million for the year.” The company ended up with $67M for the year and with a $13M result in Q1, the company will need to average out at $33M per quarter to reach its $115M target in 2017.
Needless to say, the next 90 days are perhaps the most important in the company’s lifespan. There’s a time for building the long-term future and there’s a time for delivering on stated goals. Wall Street may well be able to put the past in the past with all forgive if Amyris can break out and hit that $100M revenue threshold, and even with a strong second half, the company will need to reach something like $30M in Q2 revenue to maintain belief, given the 2016 miss.