Tiny California-based Amyris, Inc. (AMRS) has a dream: transforming plant-based sugars into biofuel for use as an alternative fuel instead of petroleum. It's a popular idea, and helped Amyris to produce 61% growth in product sales in Q3 2016. Unfortunately, it wasn't a good enough idea to allow Amyris to actually earn a profit.
Instead, Amyris reported losses of $0.08 per share yesterday, which was $0.02 worse than what analysts had been expecting. This sparked a sell-off on Thursday that sent Amyris stock down as much as 24%. As of 3:30 p.m. EDT, the stock was still selling for 22.3% below its pre-earnings price.
Amyris may lack profits, but it's got plenty of revenue, so that's what the company chose to talk about in Wednesday's earnings report. As the company boasted, the $26.5 million in revenues it recorded in the quarter was a "record" for the company. What's more, while sales revenues ($6.8 million of that total) were up 61%, the $26.5 million total revenue number increased by more than 200%, thanks to greater "grants and collaborations revenue."
At the same time, management succeeded in cutting its operating costs 4% year over year, to $38.6 million. That wasn't enough of a cut to turn a profit, but it was enough to allow Amyris to eke out a small trickle of free cash flow: $0.7 million for the quarter.
The company has been historically unprofitable and free cash flow negative, and Q3's free cash flow gave us all a nice surprise. It doesn't appear, however, to have made investors any more enthusiastic about the GAAP earnings miss.
I'd like to be able to say that's a "mistake," and that Amyris is finally on track to a profitable future. The truth, however, is that almost anything can happen in a single quarter, and free cash flow is almost always a lumpier number than GAAP earnings. If and when Amyris starts stringing a few profitable -- or even free-cash-flow profitable -- quarters together in a row, the stock might be worth another look. For now, though, it still appears too volatile and early stage to be considered anything more than a very speculative investment.