Shares of Danimer Scientific (NYSE:DNMR) were falling today after the maker of biodegradable plastics reported disappointing third-quarter results, as revenue growth nearly ground to a halt. As a result, the stock was down 17.7% as of 1:05 p.m. EST.
Revenue in the quarter grew just 4.2% to $13.4 million, which was below the average of two analysts at $14.6 million. The company's product segment, which makes up the vast majority of sales, was up 10% to $12.4 million as it ramped up PHA production at its Kentucky facility. Services revenue, however, which includes things like contracted research and development and specialty projects, fell 61% to $972,000.
Gross loss in the third quarter was $232,000, a troubling sign as it shows that the business is unprofitable in its current state, even before accounting for overhead costs like marketing, management salaries, and research and development.
On the bottom line, Danimer Scientific reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $7.4 million, compared to a loss of $0.5 million, and a GAAP operating loss of $31.8 million.
Nonetheless, CEO Stephen Croskrey was optimistic, saying: "As we look to the remainder of the year, we are confident in the trajectory of our business and our ability to build further upon the strength of our leading application development expertise. We are excited by our progress year-to-date and believe we are still in the very early stages of an immense opportunity for long-term growth and value creation."
Notable short-seller Carson Block also bashed the stock on Twitter in response to the report, saying, "Seems the market gets that the Q3 results were awful," and chided management for being opaque about its explanations.
In its guidance, management said it would accelerate its investments in head count to expand production and grow sales, and it expected that operating margins would improve. It also said that second-half revenue will be weighted more toward the fourth quarter, and it's targeting capital expenditures of $200 million-$210 million, which is several times higher than full-year revenue.
Danimer shares soared earlier this year on hopes for its technology, but then crashed as the market realized the mismatch between that valuation and where the business is today. Even after today's slide, the biotech stock is trading at a price-to-sales ratio above 25, meaning it could have a lot further to fall.