GEVO - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Gevo Incorporated First Quarter 2020 Earnings Conference Call. At this time, all participants lines are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference call is being recorded. [Operator Instructions]

hand over to today, your like Mr. now the to conference host I'd Williams. Geoffrey Sir, please begin.

Geoffrey Williams Jr.

and for Officer; to thank quarter everyone Gruber, and company. afternoon, Good you Controller. is today Romero, conference today’s from Patrick I Gevo’s With introducing President us XXXX Chief joining call. would Carolyn by like Executive start Gevo’s participants the and earnings first Gevo’s Vice

press listeners topics available is simultaneous release issued and webcast this our a Gevo’s available like on today’s public. to copy a press that we call the this the plan we outlines of A would to to the website. today, website that Earlier media of our conference that this call is of A on I at providing be we will today. are replay open discuss call release www.gevo.com. remind to

be in these measures directly which financial or information of most certain On financial posted measures and and discussions the call the measures distributed website. today non-GAAP not of in this webcast, GAAP our release hear for with accordance measures. financial Non-GAAP a will substitute considered on financial you press to contained isolation non-GAAP comparable on should GAAP. as is is financial today in presented the Reconciliation from

Form the on other of or information but with ended remainder current Form update which uncertainties, those reliance reports make Gevo new are the Gevo, limited to date XXXX, and subject the to based statements to, SEC result statements will such for was to including any that statements Gevo’s on Investors and including in SEC forward-looking Gevo’s whether year management’s as otherwise. Gevo’s quarterly in forward-looking Such by a and significant disclaims statements about of place including, activities XX-Q. are forward-looking on obligation undue expectations and beliefs, XX, filed any contained assumptions not statements. yet filings and as forward-looking certain for are December speak future made disclosed risks XX-K cautioned occurred, in the not We subsequent have today’s only projections also events beyond. and with of not circumstances events operating and these These about forward-looking information, and XXXX

On discussion Pat review today’s then Gevo’s for developments, Gevo’s the will call, with first financial results will XXXX. of begin a of quarter Carolyn business

for Following the presentation, call we open will questions. the up

Pat. I will now to turn over call the

Patrick Gruber

exploring plant first working equity engaged on Global outs. Thanks, in build quarter, financing for Geoff. build us Citi In we our will out. Citigroup these debt for the both project to be and project assist year Markets us year we're per that XX envision than way million million need capacity gallons attractive. have The in million under That's gallons of currently economics XX project We to look the contract. XX going to more per XXXX. we with

that by increase. online, Even hope agreements. help believe pricing to all with reasonable our would soon. are products background this the come value oil the in COVID, recent expected is and these to and to for market off-take fossil project oil to us expected in additional negotiate spite the done is That I gasoline outs to are the carbon renewable It continue customers We low time that build back financing. fuel jet contracts of and get crazy prices

to additional need production for make fuel. that opportunity two We to Luverne already course, of is the The sites discussion renewable three renewable the will building expand We projects. we currently to plant premium jet and gasoline plant see are sites. believe secure One, out those underway.

backdrop for challenging and interesting an for provided has COVID-XX Now everyone.

ethanol But In because Luverne future of the we quarter. this the operations, been time, as of cash, the negative; have COVID. is had production strong in to We to so. this a and too b, ultimately strategic off ethanol we've ethanol in we've members to conserve shut we lay Initially, we our of announced, production simply isn't down we us. a line foreseeable And very previously Unfortunately, low. impacts are the our the by done ethanol marks for ethanol for particular, turnaround; down production a: at important. we this really plant for c, to suspended too; prices due that did past, first the margins shut we sight can don't ethanol As d, were importantly, considering doing team. though, ethanol cash conserve

gasoline slowed renewable down. continues to looking clear continue That enquiries renewable midst new encouraging of even our actually have It's the that in we and buy It's to Texas, fuel, make sell to that or products. COVID jet to are been Silsbee, fuel. in beyond jet plant COVID. hasn't we premium The demand customers see

note for cleaner economies carbon encouraging from lot work to value has And to governments to push that back gets as products and It's fuel COVID. also everyone of talk there's held the comeback. through a

think air low people it's world like for fossil to ours gas emissions for greenhouse with and the the clearing air pollution. I around easier of burning the reduction cause understand the that of fuel, pollutants delivers that of low the products emissions because potential

going advisors we're our white refinance money are Clearly, to We the busy to need. raise going we're with to to need again. box working that

these especially project on could Many that level. the out Citigroup. as the for Gevo, options work financing have our people projects. we projects, attractiveness things, Gevo the open, for working additional on of build for the to out for And on financing Inc. do corporate as we given we also pointed need financings are doors also these at We work strategic with

investors lot these a We catalyze points talk about. continue of to had to we that need with seems what key It things. ESG

through financials. Now, will I'll who turn Carolyn, over it to take us Carolyn? the

Carolyn Romero

revenue to in $X.X the of the million compared first as in Thank you, XXXX. Gevo in of same quarter Pat. reported million $X.X XXXX period

production South million Hampton sales in with same volumes in the During the compared facility Hydrocarbon XXXX. in $X.X lower hydrocarbon the first Inc. because revenue quarter million was at of Resources, Silsbee, of Texas. XXXX, period $X.X decreased

During $X.X $X.X revenue million period was Facility and Luverne XXXX. of with related million derived XXXX, same products first the during at in the compared from quarter sales the ethanol

As during production XX, unfavorable ethanol XXXX, period. the a compared the of our resulted XXXX period commodity ended we with reduced sales environment months distiller of grains, March for the and same of lower result three in which

included Cost period isobutanol quarter the of million production $X.X goods goods first expense. in million $X.X and Cost with million and the $X.X approximately of sold in of in million approximately the depreciation XXXX in was $X.X ethanol, of sold products same associated related versus XXXX.

period quarter million development $X.X of of $X.X quarter was XXXX. the the XXXX, decrease primarily for with Gross quarter the versus personnel a first loss and of the Research $X.X million first compared to in decreased due first by expense XXXX and during in same consulting XXXX for million expenses.

the by of primarily fees. during to compared increase of of March general the decreases partially of in offset incurred million with and $X.X in XXXX, administrative million due increased employees renegotiating quarter XX Selling, and period to We an professional termination XXXX. by the total the $X.X first XXXX related same in contracts expense and restructuring in personnel consulting, expenses

million for first quarter reported for the total of $X.X expenses Within non-cash approximately we've stock-based compensation. operating XXXX,

XXXX. from of period reported a of million, we $X.X loss for the to compared the $X million For first operations in XXXX, quarter same

and that operations calculated is XXXX, with stock-based first quarter GAAP by EBITDA of quarter same depreciation compensation measure a loss in $X.X of million $X.X loss, non-GAAP the non-cash XXXX. back compared cash million was adding In to from the

related same to XXXX professional of a Interest of the fees compared expense during slight quarter million decrease XXXX $X.X of and incurred million, XXXX. for $X.X modification the period of the to was first XXXX. the We notes quarter in first legal

$X.XX first a per value $X.XX XXXX, instruments, the shares or quarter recognized million share certain of in loss million our of on per of quarter and of For embedded of XXXX, warrants fair Gevo $X.X loss of totaling weighted outstanding XXXX, In first to net non-cash of loss This first derivatives. a loss reported XX,XXX,XXX. the of such a to $X.X quarter net of a changes average in we million compares based a due loss financial $X.X the share. as of or

in of back quarter of adjusted first non-cash share loss a This adjusted non-GAAP share quarter the adjusted non-GAAP the or net net of adjusted to per loss $X.XX. in XXXX, million these per of million $X.XX. resulted $X.X compares a a losses of or non-GAAP first non-GAAP in loss a $X.X loss XXXX Adding net of net

Pat Now wrap I it back Pat? will over turn up. things to to

Patrick Gruber

Thanks, Carolyn.

Operator? the up call for open Let's questions.

Operator

of comment or Wainwright. question the from first Our comes from the Amit H.C. line Instructions] Dayal [Operator

open. line Your is

Amit Dayal

expect this year? changes of for guys over Perhaps I terms Thank be to respect the of to production out you. the in it of Good with sort would the should in mean, take there? Or we what everyone. rest restarting of for you market afternoon, consider commission to Luverne,

Patrick Gruber

I we see be the for in balance what year this out for commission to was rest on place. then demand the think ethanol gasoline how for of first and it'll based of

there's we'd make substantial plant staff we total. just staff across reduced in savings by The It's we next a of -- have reduced. have industry So up there. a the still possibility see a it. But It's run year, we'd to up that turnaround amount having there.

and so overcome margins the And be all profitable. that have to

is wind power the running, up that's As -- wind and useful. the

projects We forward. moving biogas have our

so order to more that things operational score want so in see And carbon to those we'd online and down, the makes margin. drive

the of half year if it we latter of did well. into So outs should -- starting the The that probably we big as construction -- But then, next well by be build would the the it. be the expansion. plant may

it So unfolds. how have see we'll just to

Amit Dayal

of, to guys? I look costs like the will it's next of layoffs, So sort facility. quarters guess, respect you operating for few the sort What all over with that

Patrick Gruber

me Luverne -- … you’re of terms -- you're costs plant in talking about or Operating terms about, the model, or in tell of thinking for what

Amit Dayal

taken, [Indiscernible] including you've the [multiple cutting measures at speakers] the level, corporate cost

Patrick Gruber

costs? operating Our

Amit Dayal

Yes.

Patrick Gruber

on be less. or should million We a zero month in a

Amit Dayal

is million that in in the Understood. sheet, showing you’re And what this inventories the Okay. $X.X comparison? balance

Carolyn Romero

Hey, Lynn, the are you on line?

Lynn Smull

didn't I hear the Well, question. Yes. fully

Amit Dayal

in about it I Yes, just wondering inventory was the of? what balance million was asking I the sheet. in $X.X comprises

Lynn Smull

for corn -- mostly with based are with work [indiscernible] inventories purchases. Those corn inventories our we

Carolyn Romero

you, just of $X.X number parts. is clarify that our spare And that in it'll for related million be to footnote five, to

Amit Dayal

Understood. two lastly plants you're additional project the progress towards financing And then at? looking the for any maybe securing on

Patrick Gruber

making IRRs we're large, levered people are progress done, that here sites. the the is we're terms In is that expansion I Luverne, two are $XXX million the can announcement The across interesting really in in this of is, terms reason amount plus of The XX%. quite models that of point it's XX% pre-tax good for capital talking is in to a about something shape. say, to projected but an it additional plant upwards

undertake $XXX are our already of contract. belt under Those of and life We that's million have the closed contracts or across the pay.

that they’re contracts people have negotiating pay negotiating. or play take these And people still of plugging the been billion been we're $X.X try craziness another is in continue to who me for the in contracts are oil, with who folks negotiate what's that us have with and to done. these We surprising oil, along, get even

this that that drive will oil will temporary, more. and back, So view to talked cheap, cheap becomes oil a we devaluation is almost people is as everybody has especially it gasoline come

kept so just of it, it's people And of oddly all face in slightly, even this. the enough, been it's after

have So levered you people. add you projects, pretty for those pre-tax darn them That's IRR interesting a when projection. XX%, you up, XX% take

are models it. now outreach Citi so the beginning good feels about the And pretty and good. We're

good it. makes me that feel So about

Amit Dayal

has a it airlines Understood. there bailout, on right of with respect respect play to And regulations, to as discussion with in to little fuels now? mean, part been and bit. anything touched jet etcetera, brought respect this all with that's into I specifically you

Patrick Gruber

that's to There's been but seen talk. anything There's been concrete talk, going stick. I haven't

out taken the and bill We talking bringing language that there. some airline So fuel. was the interested. -- in are would people interest far the People the from definitely green. they're European come more are requirements make doubling It's are industry build back back got It's have There down. partner by players. in of comes of our customers, the that greener in. funded there. is offices, but put some so it Europe, to a to that to hearing get Senate, House something been projects that it's of got it's be back In going out put of more back cleaner, that it green. we're jet see about back, a having some the Senate They possible And going it of saying that's

watch. good. that's So to something California is

gone are underlying down. should -- actually up. carbon take has everybody and a see You should look how That's trading. values demand They've fuels fascinating. gone The

past, the many we've bodes And states that talked that other work So are system adopt continues. as to like well. California in working and

are something. could think down take or because some capacity industry, while or recover. a them for the of XX% just, to little So X% them airline what I It to

when look fuel. product this, things than hydrocarbon. renewable jet actually that That's important the premium a premium Gevo, greater at our of the you that's gasoline. premium we're that in It's One isooctane. a works It's is And understand everyone doing well, exceptionally should renewable demand is gasoline.

so pony, God. And thank we're a not trip one

Amit Dayal

all have. it. will Thank back I I Got get queue. in That's you.

Patrick Gruber

Yes.

Operator

Thank you.

next Our comes from Fratt comment Markets. Capital from Poe question line of the or Noble

line Your is open.

Poe Fratt

Good afternoon, Pat.

the going month per SG&A? that just statement, is clarify, -- is mind. And where see R&D roughly quarter that income looking don’t of $X you could total you are on where a expenses -- If sort or are you is hit $X we at your million of of to million if a we can

Patrick Gruber

that's right. Yes, Yes.

[indiscernible] the R&D. With

Poe Fratt

And down like goods essentially, happen something in carbon There, change to the to of you're sold will continue for or Okay. going a become that'll investment plant we or -- then plant, it cost structure. depreciate to hydro What your running held will since that the Texas. Luverne your that? be

Patrick Gruber

we on plant hydrocarbon shut the never first down -- in down the Well, Silsbee. yes, did

to We front. changes that to to that. run continue continue We plan It's run. nothing on

to to gasoline jet for So fuel. turn we'll Europe might customers we and think fuel. premium make shipped And continue run renewable some will with jet new we up have isobutanol make even I and

at that we're you depreciation, terms Luverne As treating question? of Carolyn, answer far as to plant want how the in

Carolyn Romero

depreciated. is operational, it still It to we to intend going use be forward. is it continuing since Yes,

Poe Fratt

your Great. shutting forward at move those all the down near-term, strategy following the sort And, biograph does going or to this Pat, change your, continue change at putting strategy? on you are or Does operations of the biogas the it Luverne? to

Patrick Gruber

putting so the with And build the plant. are in a we forward taking strategy. something we then role. move far announced is at to up actually continuing deal yet. money We've Who to very haven't signed We're biogas exclusive looking developer a the

It's will how roll we get people one bigger can of that. so of things for possible, that And depending what may don't want But projects. paid it, know we view to how those I the out that timing back work phase. this liver unfold we into the and take a on is that. gaps need work, during And the would counterparty we're on all way is I that the I for diligence they implant, serious capital say burden. that guess that that have deal working the with but I that

Poe Fratt

up, cash? equity is Okay, days there great. starting started any potentially that And I then power, is in we talk as [indiscernible] your power Or in think the when far that as will investment up any you be fuel there wind see value will -- generation accrue correct? about ago,

Patrick Gruber

Yes, that’s right. don't expect No, I cash.

million we'll would and because about point built, where and something $X.X get so of out -- on We that the million accrue have invested the but trade work And it nine on to energy that's renewable project a credits for of it benefit is that. side. to we Juhl do with the

Poe Fratt

$X then million, at roughly it, per burn, it when million into cash And range, like should that might looks to $X to -- reasonable be is Pat, on impact great. get the burn able million I estimate? it $X a -- Okay, is quarter cash the look down to that the quarter -- you your

Patrick Gruber

to the side lower I think it should be that. of

Poe Fratt

Okay.

have So CapEx probably any won't too.

and then -- So …

Patrick Gruber

do yes, the we’ve year, we we planned done already -- most spending for did. spending this -- had don't, we’ve done We this the yes, that to of

be pretty So, should yes, low. we

that's yes, So, right.

Poe Fratt

think aggressive the two the may second some you have on how added can help that did a the you to plant or size, the or third you plant expected us of is framing commitment call, sounds look projects. it a since -- capital last more you or break … at that you sort geographic get into diversity And And you total parts understand little the like I capital then when

Patrick Gruber

Yes.

Poe Fratt

development little … bit call. a last since has changed maybe the plant

Patrick Gruber

sure. Yes,

So had we about million we gallons. previously that XX disclosed

contract expected across When gallons a talk of of up contract, to expect course. take-or-pay about those revenue dollars add contracts. that are They have the contract. life of couple over about the We we -- in collectively the in million XX we those billion

about feel are. those good So we pretty where

done Now, optimizations of it, the about capital we think to this and we of trying to were how has that we're and size at capital of looking with and plants at come doing of work the work improve out and need returns. we've looking the some Citi optimization

So makes gallons of on for to already the million there's much We’ve side the hydrocarbons. Call XX sense. a million that. lot at a isobutanol installed size XX it of of Luverne capital that

the XX we do how we down to can Because if some gallons. get and that the plant to using going looked work them stay do got It deals? done. And And a is do a money, to existing that already plants have said, Where been save kind within best we we We've hydrocarbon are and that's and well, of now. So improve do of many XX it? boundary so then million have We'd we've the million look, add already now capital that with cover next to to works. where some shut we're ethanol it. returns. okay, we probably

true started better generally. it the looking we at plant and So in the ethanol generally bigger it is economical that more that. And is the business, the

That right hydrocarbons. we some million of million what is medium of we should ethanol XX so, XX gallon at gallons plants, look would about plants. for do these And sized should be

And interesting found there so opportunities some with. very we

That's the of in course, sustainability for. some carbon out the And we're And keen for it how source, the on their we're cost, we're we why in We're parties way. care with having phase in that's mentality. footprint. several diligence at the energy fits infrastructure, is But candidates. emissions doing about the detail. production sites renewable what So that pretty it good zero net headed finding looking we're

Poe Fratt

Pat, it if And a dependent -- do you as guess is additional Great. committed. need CapEx factor is I project. a on there, at is XX% through will, to million -- we Are it you many this -- $XXX gating gating -- what’s sort look how of your in it, plan out you gallons how is planned you of trigger, before or or sort next I is guess, to fully when -- forward contingent fully of signing figure factor trying sort before I'm we move the your

Patrick Gruber

Yes.

So I think about it'll stages. think come -- as you

don't think so We'll we'll to staggered. exactly I we maybe So do get at have more three this. we We But close, be gallons it do produce. the same time. those already Luverne, wouldn't can and slightly plants,

So part and plant filled have you a the of already capacity second up.

would that a getting of plant months few third. think exceed set do things of of as parallel, it would we that the in be next I capacity then events contracts terms kind second fill do final that be those sequence. of of the plant, will we the then that the the at. we're in that are as working contracts on that with deal last for place. customers the out will All And in next the And one

people so the interesting they that under confidentiality financing projects, parties the the they in get financing counter for the know to who of the who things One are. see do things is project

with conversation them have can already. You

off public to setting So as game private, company this project that stuff. different companies balance a up talking It's we're because than do little a they're we're right? a game trying it's about, sheet. to if separate bit different

Poe Fratt

And expand Okay, the level. comment your it far of to ran to project mentioned, at could for need corporate on do just opportunities that as your then you through expand you part the box. then, potential Can the us? for Then you or productions? the the potential -- you you, development role Is on as core And thirdly, you need refinance financing. great. white

Patrick Gruber

Yes.

done, PIN have developer that is to what that work have and licenser culinary it stuff the at to So get is money down, the engineering to FEL-X and you we'll people you raise do as play like that. we the go is. and do a that development, we And role do some show point. engineering when

too. with Now, kind what's goes it hand-in-hand is projects, of the interesting

of So question it's all how unfold. they things timing a of and

gosh, do yeah, we'll our that, go, of the to balance till are to So it it to the going at end raise you that. because sheet Well, you some can year? make everyone look have money do can looks and like well,

-- We question. got a it's So bring white do a Well, white you doing any refinance in we’ve got box, Can money dilution? bit box. we without that’s -- but can okay?

How makes going can working to We're -- What a the if try. out certain on are do markets? sense. it We're you raise into in We and part too. that tap you way happens money you it. most equity that do

on. in How While we're working overall? most way that on that, we're you creates do the it what do too. That's a working value

So of part things the all are those overall discussions.

We continue to Wainwright. work with

about We interesting to going because timing. all how with Everyone's working it be work And well to it's piece it's continue to we together. Citi. together, see

Poe Fratt

Great. Thank so you much.

Patrick Gruber

You bet.

Operator

I’m at you. queue would time. in the Mr. back any turn no additional remarks. like closing conference showing the I for to over Thank Gruber to this questions

Patrick Gruber

time that you with finishing thank all, Well, to. the we've had COVID. I it's hate

are right does projects save the thing us very turning light in of part, the it's industry. You money. good of ethanol oil that regarding to bad do, the know, the out those. fact that return the ethanol shut it that's pricing down even to And the so are based all in we in I upon like potential margins what that that world the our terms have the have they changes we see Well,

as well about good pretty fuel. And not feel we especially touch there ours, like gasoline that. that that jet many aren't So as projects

today a all us call. this So great thank Have evening. for joining on you

Operator

concludes in This Ladies you thank for the gentlemen, participating and today's conference. program.

a have day. wonderful Everyone disconnect. now may You

Gevo (GEVO) 12 May 202020 Q1 Earnings call transcript