Danimer Scientific(DNMR) - 2023 Q4 - Annual Results

Executive Summary & Business Overview Danimer Scientific is a leading bioplastics company focused on biodegradable PHA materials, with the CEO acknowledging a challenging 2023 but anticipating significant 2024 growth Company Overview Danimer Scientific is a leading bioplastics company specializing in the development and production of biodegradable materials, primarily PHA-based, holding over 480 patents for its formulations and manufacturing processes used in various end products - Danimer Scientific is a leading next-generation bioplastics company focused on biodegradable materials[1] - The company's technology is applied in various plastic end products, including additives, aqueous coatings, fibers, filaments, films, and injection-molded articles[10][11] - Danimer holds over 480 granted patents and pending patent applications in more than 20 countries for its manufacturing processes and biopolymer formulations[11] CEO Commentary CEO Stephen E. Croskrey acknowledged 2023 as a challenging year but expressed encouragement regarding the company's successes and its leading position in biodegradable plastics, particularly PHA-based materials, anticipating significant business growth in 2024 supported by enhanced operational liquidity - 2023 was a challenging year, but the company is encouraged by successes and believes it remains ahead of the competition in understanding the biodegradable plastics industry and production capacity[2] - The company is focused on leveraging its global market-leadership position in PHA-based materials to drive value[2] - Management maintains a strong belief in significant business growth in 2024, supported by a recently completed equity offering that enhances operational liquidity[3] Financial Highlights This section reviews Danimer Scientific's financial performance for Q4 and full year 2023, highlighting revenue trends, profitability metrics, and capital expenditures Fourth Quarter 2023 Financial Performance In Q4 2023, Danimer Scientific experienced a decline in revenue to $10.9 million from $15.3 million in Q4 2022, primarily due to a $4.9 million reduction in PLA revenue caused by the conflict in Ukraine, despite a $0.9 million increase in PHA revenue, with gross profit and Adjusted EBITDA also seeing declines Q4 2023 Financial Performance Summary | Metric | Q4 2023 (Millions USD) | Q4 2022 (Millions USD) | Change (Millions USD) | | :----- | :--------------------- | :--------------------- | :-------------------- | | Revenues | $10.9 | $15.3 | $(4.4) | | PHA Revenue | +$0.9 | N/A | +$0.9 | | PLA Revenue | -$4.9 | N/A | -$4.9 | | Gross Profit | $(6.4) | $(2.7) | $(3.7) | | Adjusted Gross Profit | $(1.2) | $2.0 | $(3.2) | | Adjusted EBITDA | $(10.7) | $(8.6) | $(2.1) | - The net reduction in product revenue of $4.0 million was primarily due to a $4.9 million decrease in PLA revenue, affected by the conflict in Ukraine, partially offset by a $0.9 million increase in PHA revenue[5] Full Year 2023 Financial Performance For the full year 2023, total revenues decreased to $46.7 million from $53.2 million in 2022, with PHA-related sales growing by 6% and constituting 69% of product revenues, while PLA-based product sales declined by $6.1 million due to the Ukraine conflict; gross profit and Adjusted gross profit worsened, but Adjusted EBITDA improved to $(39.0) million from $(45.0) million in 2022, reflecting expense control measures, with capital expenditures at $27.7 million Full Year 2023 Financial Performance Summary | Metric | FY 2023 (Millions USD) | FY 2022 (Millions USD) | Change (Millions USD) | | :----- | :--------------------- | :--------------------- | :-------------------- | | Revenues | $46.7 | $53.2 | $(6.5) | | PHA Sales Growth | 6% | N/A | N/A | | PHA % of Product Revenue | 69% | N/A | N/A | | PLA Sales Decline | $(6.1) | N/A | N/A | | Gross Profit | $(27.0) | $(10.4) | $(16.6) | | Adjusted Gross Profit | $(6.5) | $2.0 | $(8.5) | | Adjusted EBITDA | $(39.0) | $(45.0) | $6.0 | - The year-over-year improvement in Adjusted EBITDA primarily reflects the Company's comprehensive program of expense control measures[5] - Full-year capital expenditures were $27.7 million, consistent with guidance[6] Financial Position & Outlook This section details Danimer Scientific's capital structure as of year-end 2023 and provides financial guidance for fiscal year 2024 Capital Structure As of December 31, 2023, Danimer reported total debt of $382.8 million, which includes $45.7 million in low-interest New Markets Tax Credit loans expected to be forgiven starting in 2026, with a post-period equity offering on March 20, 2024, securing over $13 million in additional liquidity, enhancing the company's financial flexibility for its growth strategy - Total debt outstanding at December 31, 2023, was $382.8 million[7] - Approximately $45.7 million of the debt consists of low-interest New Markets Tax Credit loans, expected to be forgiven beginning in 2026[7] - An equity offering executed on March 20, 2024, provided over $13 million in additional liquidity, improving the company's position and strategic flexibility[8] Fiscal Year 2024 Guidance Danimer anticipates accelerating revenue growth in the second half of 2024, which is expected to lead to improved operating margins and cash flow, providing FY2024 guidance for Adjusted EBITDA in the range of $(22) million to $(32) million (an improvement from 2023), capital expenditures between $8 million and $10 million, and an unrestricted cash balance of $20 million to $25 million by year-end - Revenue growth is expected to accelerate during the second half of 2024, leading to improvement in operating margins and operating cash flow[9] Fiscal Year 2024 Guidance vs. 2023 Actuals | Metric | FY 2024 Guidance (Millions USD) | FY 2023 Actual (Millions USD) | | :----- | :------------------------------ | :---------------------------- | | Adjusted EBITDA | $(22) to $(32) | $(39.0) | | Capital Expenditures | $8 to $10 | $27.7 | | Unrestricted Cash Balance (Year-End) | $20 to $25 | $59.2 (Dec 31, 2023) | - The improvement in Adjusted EBITDA is expected to result primarily from revenue growth in PHA-based resins and benefits of scale from Kentucky manufacturing operations, along with ongoing efficiency and cost reduction initiatives[10] Financial Statements This section presents Danimer Scientific's condensed consolidated balance sheets, statements of operations, and cash flows for the relevant periods Condensed Consolidated Balance Sheets As of December 31, 2023, total assets slightly decreased to $698.13 million from $712.27 million in 2022, while total liabilities significantly increased to $420.11 million from $334.66 million, driven primarily by a rise in long-term debt, consequently declining total stockholders' equity from $377.61 million to $278.02 million Condensed Consolidated Balance Sheets | Balance Sheet Item | December 31, 2023 (Thousands USD) | December 31, 2022 (Thousands USD) | | :----------------- | :-------------------------------- | :-------------------------------- | | Cash and cash equivalents | $59,170 | $62,792 | | Total current assets | $108,038 | $125,071 | | Property, plant and equipment, net | $445,153 | $453,949 | | Total assets | $698,131 | $712,270 | | Total current liabilities | $15,723 | $25,287 | | Long-term debt, net | $381,436 | $286,398 | | Total liabilities | $420,111 | $334,658 | | Total stockholders' equity | $278,020 | $377,612 | Condensed Consolidated Statements of Operations For the full year 2023, total revenue was $46.68 million, a decrease from $53.22 million in 2022, with the net loss improving to $(155.47) million in 2023 from $(179.76) million in 2022, primarily due to a significant reduction in impairment of long-lived assets and lower selling, general and administrative expenses Condensed Consolidated Statements of Operations | Income Statement Item | FY 2023 (Thousands USD) | FY 2022 (Thousands USD) | | :-------------------- | :---------------------- | :---------------------- | | Total revenue | $46,684 | $53,218 | | Cost of revenue | $73,644 | $63,632 | | Selling, general and administrative | $68,983 | $81,589 | | Research and development | $29,242 | $31,939 | | Impairment of long-lived assets | $188 | $63,491 | | Loss from operations | $(125,619) | $(187,434) | | Net loss | $(155,473) | $(179,758) | | Basic net loss per share | $(1.52) | $(1.78) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $(47.26) million in 2023 from $(61.84) million in 2022, while net cash used in investing activities significantly decreased to $(27.66) million from $(182.48) million, mainly due to lower capital expenditures, and net cash provided by financing activities substantially increased to $84.03 million from $21.75 million, driven by higher proceeds from long-term debt Condensed Consolidated Statements of Cash Flows | Cash Flow Item | FY 2023 (Thousands USD) | FY 2022 (Thousands USD) | | :------------- | :---------------------- | :---------------------- | | Net cash used in operating activities | $(47,264) | $(61,837) | | Purchases of property, plant and equipment and intangible assets | $(27,685) | $(164,486) | | Net cash used in investing activities | $(27,663) | $(182,482) | | Proceeds from long-term debt | $130,000 | $24,700 | | Net cash provided by financing activities | $84,030 | $21,752 | | Net increase (decrease) in cash and cash equivalents and restricted cash | $9,103 | $(222,567) | | Cash and cash equivalents and restricted cash - end of period | $73,504 | $64,401 | Non-GAAP Financial Measures & Reconciliations This section defines Danimer Scientific's non-GAAP financial measures and provides reconciliations to their most directly comparable GAAP equivalents Non-GAAP Measures Definition and Rationale Danimer Scientific utilizes non-GAAP financial measures such as Adjusted EBITDA, Adjusted gross profit, and Adjusted gross margin to assess operational performance by excluding capital investment, financing decisions, and non-recurring charges, providing these metrics to offer investors a more complete understanding of the company's results and underlying business trends, despite their inherent limitations compared to GAAP measures - Adjusted EBITDA is defined as net income or loss plus net interest expense, income taxes, depreciation and amortization, adjusted for certain charges or gains like remeasurement of private warrants, stock-based compensation, and non-recurring items[23] - Adjusted gross profit is gross profit plus depreciation, stock-based compensation, and other nonrecurring items; Adjusted gross margin is adjusted gross profit divided by total revenue[24] - These non-GAAP measures are considered useful for evaluating performance by excluding impacts of capital investment, financing, and non-recurring charges, providing a more complete understanding of operations and trends[25] Reconciliation of Adjusted EBITDA to Net Loss For the full year 2023, Danimer's Adjusted EBITDA was $(38.99) million, an improvement from $(44.99) million in 2022, with this reconciliation detailing the adjustments made to the reported net loss, including adding back stock-based compensation, interest, depreciation and amortization, and other specific non-recurring items, to arrive at the Adjusted EBITDA figure Reconciliation of Adjusted EBITDA to Net Loss | Item | FY 2023 (Thousands USD) | FY 2022 (Thousands USD) | | :--- | :---------------------- | :---------------------- | | Net loss | $(155,473) | $(179,758) | | Stock-based compensation | $55,839 | $56,768 | | Interest, net | $29,641 | $1,723 | | Depreciation and amortization | $29,377 | $20,453 | | Impairment of goodwill | - | $62,663 | | Adjusted EBITDA | $(38,990) | $(44,986) | Reconciliation of Adjusted Gross Profit to Gross Profit For the full year 2023, Adjusted gross profit was $(6.49) million, a decline from $1.90 million in 2022, resulting in an Adjusted gross margin of -13.9%, with this reconciliation showing the adjustments made to gross profit, primarily the addition of depreciation, to derive the adjusted figure Reconciliation of Adjusted Gross Profit to Gross Profit | Item | FY 2023 (Thousands USD) | FY 2022 (Thousands USD) | | :--- | :---------------------- | :---------------------- | | Total revenue | $46,684 | $53,218 | | Cost of revenue | $73,644 | $63,632 | | Gross profit | $(26,960) | $(10,414) | | Depreciation | $20,386 | $12,249 | | Adjusted gross profit | $(6,487) | $1,895 | | Adjusted gross margin | -13.9% | 3.6% | Additional Information This section provides important disclosures regarding forward-looking statements and contact information for investor and media inquiries Forward-Looking Statements This press release contains forward-looking statements regarding future events, including projections for FY2024 capital expenditures, Adjusted EBITDA, and cash balances, which are subject to various risks and uncertainties, such as consumer demand, economic conditions, market volatility, regulatory changes, and the impact of the conflict in Ukraine, which could cause actual results to differ materially - The report includes forward-looking statements regarding expectations for full year 2024 capital expenditures, Adjusted EBITDA, and cash balances[12] - Forward-looking statements are subject to risks and uncertainties, including consumer demand, economic conditions, market volatility, financial strength of customers, ability to implement business strategy, regulatory changes, and the impact of the conflict in Ukraine[12] - Actual results could differ materially from those expressed or implied in forward-looking statements, and the company assumes no obligation to update them[12] Contacts Contact information is provided for investor relations, handled by Blake Chamblee, and media inquiries, handled by Richard Ivey - Investor Relations contact: Blake Chamblee, Phone: 770-337-6570, Email: ir@danimer.com[14] - Media contact: Richard Ivey, Phone: 229-254-7688, Email: rivey@danimer.com[14]