Gevo(GEVO) - 2023 Q4 - Annual Report

Part I Business and Properties Gevo is a carbon abatement company focused on producing energy-dense liquid hydrocarbons, primarily Sustainable Aviation Fuel (SAF), from renewable sources with a goal of achieving a net-zero greenhouse gas footprint - Gevo's mission is to reduce greenhouse gas emissions in transportation sectors by transforming renewable energy into energy-dense liquid hydrocarbons like Sustainable Aviation Fuel (SAF), aiming for a "net-zero" carbon footprint based on the GREET Model[17][18] - The company's primary production strategies are: - Greenfield Projects: Developing new "Net-Zero" facilities, starting with Net-Zero 1 (NZ1) in South Dakota, designed to produce ~65 MGPY of hydrocarbons, including 60 MGPY of SAF - Leveraging Existing Capacity: Converting existing ethanol plants for SAF production by decarbonizing their energy sources and adding hydrocarbon production capabilities[27][30][35] - The Gevo NW Iowa RNG project surpassed its 2023 production target of 310,000 MMBtu and expanded its annual design capacity to 400,000 MMBtu The company realized substantial sales from environmental attributes (LCFS credits and RINs) in 2023[39][40] - Gevo launched its Verity Tracking platform in Q2 2023, a blockchain-based system to measure, report, and verify the carbon intensity (CI) of feedstocks and fuels The company has signed joint development agreements with three ethanol producers to implement the technology[53][55][56] Employee Headcount and Distribution (as of Dec 31, 2023) | Category | Count | | :--- | :--- | | Total Employees | 103 | | Full-time | 101 | | Part-time | 2 | | By Department | | | Project Development | 31 | | Research and Development | 16 | | Production | 13 | | General, admin & business dev | 43 | | By Location | | | Colorado | 44 | | Other US States | 46 | | Foreign | 3 | Risk Factors The company faces significant risks, including a history of net losses ($66.2 million in 2023) and the need for substantial additional financing to fund its capital-intensive Net-Zero projects - The company has a history of net losses, incurring $66.2 million in 2023 and $98.0 million in 2022, with an accumulated deficit of $721.6 million as of December 31, 2023 Profitability is not expected in the foreseeable future[99] - Gevo requires substantial additional financing for its capital-intensive growth strategy, particularly for the development and construction of its Net-Zero Projects Failure to obtain this capital could force delays or termination of these efforts[102][107] - Revenue from existing offtake agreements is subject to significant conditions, primarily the successful financing and construction of production facilities There is no guarantee these conditions will be met or that expected revenues will be realized[110][112] - The business is exposed to market volatility, including fluctuations in the price of corn and other feedstocks, petroleum prices which affect demand for renewable fuels, and the value of carbon credits (e.g., RINs, LCFS credits)[113][117][118] - On February 29, 2024, Gevo received a notice from Nasdaq for non-compliance with the minimum bid price requirement of $1.00 per share, posing a risk of delisting if not rectified within the grace period[189][191] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None[216] Cybersecurity Gevo maintains an information security program to manage cybersecurity risks, overseen by the Chief People Officer and the Board's Audit Committee - The company has an information security program to identify and manage cybersecurity risks, which includes regular risk assessments and testing[217][218] - Oversight is provided by the Chief People Officer and the Board's Audit Committee, which receives regular reports on cybersecurity matters[220][221] - As of the report date, Gevo has not experienced a cybersecurity threat or incident that resulted in a material adverse impact[219] Legal Proceedings The company is not currently a party to any litigation that it believes to be material, nor is it aware of any pending or threatened litigation that could have a material adverse effect on its business - The company is not presently a party to any material litigation[222] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[223] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Gevo's common stock is traded on The Nasdaq Capital Market under the symbol "GEVO" and the company does not anticipate paying dividends in the foreseeable future - The company's common stock is listed on The Nasdaq Capital Market under the symbol "GEVO"[225] - No cash dividends have been paid to date, and none are anticipated in the foreseeable future[226] - A stock repurchase program of up to $25 million was authorized in May 2023, but no shares were repurchased during 2023[228][229] Management's Discussion and Analysis of Financial Condition and Results of Operations In 2023, Gevo's revenue increased significantly to $17.2 million from $1.2 million in 2022, driven primarily by its Renewable Natural Gas (RNG) project which became fully operational Comparison of Operations (Years Ended Dec 31, in thousands) | Account | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $17,200 | $1,175 | $16,025 | 1,364% | | Loss from operations | ($81,835) | ($102,686) | $20,851 | (20)% | | Net loss | ($66,215) | ($98,007) | $31,792 | (32)% | | Net loss per share | ($0.28) | ($0.44) | | | - The $16.0 million increase in revenue in 2023 was primarily due to sales of RNG and related environmental attributes from the RNG project, which commenced sales in Q3 2022[269] - The decrease in net loss was primarily due to the increased revenue and a $24.7 million impairment loss on the Luverne Facility recorded in 2022 that did not recur in 2023[277][279] - As of December 31, 2023, the company had $298.3 million in cash and cash equivalents and $77.3 million in current restricted cash, totaling $375.6 million[290] Cash Flow Summary (Years Ended Dec 31, in thousands) | Account | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($53,719) | ($44,311) | | Net cash provided by investing activities | $114,129 | $85,092 | | Net cash (used in) provided by financing activities | ($189) | $138,562 | Quantitative and Qualitative Disclosures about Market Risk The company is exposed to several market risks, including the pricing of environmental attributes (RINs and LCFS credits), commodity prices (RNG), and interest rates - A hypothetical 10% decrease in the average realized price per RIN would reduce operating profit by ~$1.0 million, and a 10% decrease per LCFS credit would reduce it by ~$0.5 million[307] - A hypothetical 0.25% decrease in market interest rates would negatively impact annual interest income by approximately $2.8 million[309] - The company anticipates its interest rate on the 2021 Bonds will increase to 4.5% upon remarketing in 2024, which would negatively impact annual interest expense by $2.0 million[310] Financial Statements and Supplementary Data The consolidated financial statements for the years ended December 31, 2023 and 2022 are presented, with key financial data showing total assets of $650.3 million and a net loss of $66.2 million for 2023 Report of Independent Registered Public Accounting Firm The auditor, Grant Thornton LLP, issued an unqualified opinion on the financial statements, identifying the company's assessment of Variable Interest Entities (VIEs) as a critical audit matter - The auditor identified a critical audit matter related to management's assessment of Variable Interest Entities (VIEs), specifically the determination of the primary beneficiary for the Project LLCs (Kingsbury County Wind Fuel, LLC and Dakota Renewable Hydrogen, LLC)[321][324] - The complexity arose from management's judgment in evaluating which party had the power to direct the activities that most significantly affect the VIEs' economic performance, especially after agreements were amended in December 2023, leading to their deconsolidation[324][325] Consolidated Financial Statements For the year ended December 31, 2023, Gevo reported total assets of $650.3 million, a decrease from $700.7 million in 2022, with a net loss of $66.2 million Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $298,349 | $237,125 | | Total current assets | $386,382 | $415,422 | | Property, plant and equipment, net | $211,563 | $185,174 | | Total assets | $650,322 | $700,748 | | Total current liabilities | $91,426 | $25,436 | | Total liabilities | $92,933 | $95,271 | | Total stockholders' equity | $557,389 | $605,477 | Consolidated Statement of Operations Data (in thousands) | Account | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Total operating revenues | $17,200 | $1,175 | | Loss from operations | ($81,835) | ($102,686) | | Net loss | ($66,215) | ($98,007) | | Net loss per share | ($0.28) | ($0.44) | Notes to Consolidated Financial Statements The notes provide detailed explanations of the financial statements, including revenue breakdown, significant commitments, and the deconsolidation of Project LLCs in December 2023 Revenue by Major Source (in thousands) | Major Goods/Service Line | 2023 | 2022 | | :--- | :--- | :--- | | Renewable natural gas commodity | $659 | $640 | | Environmental attribute revenue | $14,798 | $214 | | Licensing and development revenue | $1,300 | $— | | Other hydrocarbon revenue | $443 | $321 | | Total operating revenue | $17,200 | $1,175 | - In December 2023, the company deconsolidated two Project LLCs (VIEs) with ZEDI after amendments to the agreements resulted in a loss of control This led to the recognition of $33.6 million in 'Deposits and other assets' representing the company's maximum exposure to loss[478][479] - As of Dec 31, 2023, the company has significant future commitments totaling $83.8 million, including $43.4 million related to the Zero6 wind project for NZ1 and $37.9 million for RNG fuel supply payments[457] - The $68.2 million 2021 Bonds, used to finance the NW Iowa RNG project, are classified as current liabilities as of Dec 31, 2023, due to a mandatory tender date of April 1, 2024, by which they must be repaid or re-marketed[429][433] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no disagreements with its accountants on any matter of accounting principles or practices, or financial statement disclosure - None[487] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023, with a previously identified material weakness in VIE accounting fully remediated - Management concluded that disclosure controls and procedures were effective as of December 31, 2023[489] - A material weakness related to identifying and accounting for Variable Interest Entities (VIEs), identified in Q3 2023, was remediated as of December 31, 2023[490][491] - Remediation efforts included enhancing contract review procedures, performing a comprehensive review of existing agreements, and engaging third-party advisory services[491] Other Information During the fourth quarter of 2023, CEO Patrick Gruber and Chief Carbon Officer Paul Bloom terminated their Rule 10b5-1 trading arrangements Termination of Rule 10b5-1 Trading Arrangements in Q4 2023 | Name and Title | Action | Date of Termination | | :--- | :--- | :--- | | Patrick Gruber, CEO | Terminate | November 15, 2023 | | Paul Bloom, Chief Carbon Officer | Terminate | December 8, 2023 | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - None[499] Part III Directors, Executive Officers and Corporate Governance Information required by this item, including details on directors, executive officers, and corporate governance, is incorporated by reference from the company's definitive proxy statement for the 2024 annual meeting of stockholders - This information is incorporated by reference from the registrant's proxy statement for the 2024 annual meeting of stockholders[501] Executive Compensation Information required by this item regarding executive compensation is incorporated by reference from the company's definitive proxy statement for the 2024 annual meeting of stockholders - This information is incorporated by reference from the registrant's proxy statement for the 2024 annual meeting of stockholders[503] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required by this item concerning security ownership is incorporated by reference from the company's definitive proxy statement for the 2024 annual meeting of stockholders - This information is incorporated by reference from the registrant's proxy statement for the 2024 annual meeting of stockholders[504] Certain Relationships and Related Transactions, and Director Independence Information required by this item regarding related party transactions and director independence is incorporated by reference from the company's definitive proxy statement for the 2024 annual meeting of stockholders - This information is incorporated by reference from the registrant's proxy statement for the 2024 annual meeting of stockholders[505] Principal Accountant Fees and Services Information required by this item regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement for the 2024 annual meeting of stockholders - This information is incorporated by reference from the registrant's proxy statement for the 2024 annual meeting of stockholders[506] Part IV Exhibits, Financial Statement Schedules This section lists the financial statements included in the report, notes that all financial statement schedules have been omitted as they are not applicable, and provides a comprehensive list of exhibits filed with the report - This item lists the consolidated financial statements, notes that financial statement schedules are omitted, and provides an index of all exhibits filed with the Form 10-K[509][510][511] Form 10-K Summary The company indicates that no Form 10-K summary is provided - None[517]