REGI - Earnings call transcript Q2 2018 | Renewable Energy Group, Inc.

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Operator

Good day ladies and gentlemen and welcome to the Renewable Energy Group, Second Quarter 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Treasurer. Robinson, Todd begin. may Sir, you

Todd Robinson

to and are our Legal & the and Manufacturing; Gary Thank you, Second our Haer, today of President welcome our Randy everyone Brad our Stone. Affairs; Officer, Vice Also Good of Marketing. XXXX Development Earnings afternoon call Howard; Officer, Quarter, Executive me and and Chief on Bowen, Conference Corporate Financial President Chad our Business Albin, to Chief President Lisa. our Call. are Vice Sales Eric Vice answer questions President of and With

items Let I me cover a few the housekeeping Randy. over before to call turn

I later First, A be available at to available the this but this that the Investor with on Relations slide our slides manually replay prompt webcast call appear will includes as our to the The everyone webcast, regi.com. is would will which afternoon. advance an section we deck, webcast at is like website accompanying being and automatically you of remind website need will beginning you.

you earnings dialing the can downloaded, deck be in, website. Relations slide of the with of the our release, along section in press those Investor For

undertakes company’s statements this Annual slide XX, not XX-K forward-looking and uncertainties the and Report date to some other like form investors discussion Turning differences. information the expectations. factors file The results the Factors of based detail statements performance factors our of XXQ slide in a new remind that financial are cause help with revised of publicly and non-GAAP the March update assess Quarterly reconciliation materially the we are XXXX our GAAP differ are will in any the the me to actual most forward-looking assumptions includes ended how of The these contained for from statements. and the BTC see or believe statements appendix only contribute could non-GAAP and statements. call core speak those advise These our company operating that will today. forward-looking discussed discuss We Report this to the for a Today’s predict no those forward-looking you the on also obligation such period could of These on business. call. on measures. as in accompanying Also two, press to Form deck Several impacts measures or measures. or the of will metrics Risk for XXXX These on the you the to such release would information to statements sections risks, Please it described comparisons on we comparable conference contain about of let involve to performance. difficult guarantee SEC.

Chief reflect Randy. an retroactive over results. This excise of mixture of on detail credit bit biodiesel Howard. comparisons when the made President benefit quarter was the is by quarter the know, our call sensible. Officer, to credit reviews new this more adjusted allocation operating you the XXXX As our our benefits or reinstatement he will GAAP to the XXXX little credit more links our on XXXX. you Executive quarter. me statements makes of of our first results our tax a Randy XXXX that, give to Chad financial let for turn and for February year-to-year With financial X, results the the operations, Because XXXX. of in BTC net The reflected

Randy Howard

joining thanks and Todd you everyone the Thank call. for

last platform. the year focused on business has the of improving Over REGT aspects our all

highest our margin term return. on market among projects cost sheet Implementing organic our of expanding plans profits short and to feedstocks focus maximize in value to shift. as We production reduction balance markets shareholder fleet our serve growth highest and and are optimizing our customers, produce while feedstocks improve the continuing that to and and ability

reflected on that million was pre-BTC last team first the Geismar for improvement facility. XX.X the results capacity. quarter A demonstrate the year of plant range. Louisiana amount turnaround diesel, the the a three quarter went year or quarter. renewable than from second second The and through double running more Our and approximately downtime EBITDA a smoothly times about probably weeks produced at these QX slide up change Adjusted renewable the was nameplate turnaround tangible three catalyst three results in efforts. of REG XX% EBITDA strong is pre-BTC planned the results Geismar is from our maintenance XXXX. Adjusted and of that, Halfway delivering second approximately diesel the half gallons was of of on include capacity our again nameplate guidance

Our at running job efficiently. and doing team plant safely Geismar an outstanding is of the

year completing years of also the production engineering the profits fleet are and final will currently million a and produced the logistics based XXX and come diesel nameplate line We million day as our to is the on well. million additional of across grow improvements. gallons project per of The per biodiesel, XXX% a Final end almost expansion demand the We ran of nameplate XX to XXX contemplated and If biomass review we in to investment decision proceeds by to other diesel project fleet. be anticipated stage gallons year. renewable Renewable increasing key running rest at possible Geismar gallons from expect an the in diesel ahead. of to continues make related mid-XXXX. will driving the

before that have you that profitability. We and projects efficiency we improve ROI our high many regularly identify told

you a affected improvement. our through how vivid of are expanding capacity give continuous example me we Let

hit you of nameplate year gallon XXXX. slide of of million The and growth from our year in quarter our existing growth domestic annual to are that biodiesel incremental grown our approximately If XX first constrained capacity capacity. has has plant you marketing per cost effective since production our due and the production have capacity gallons of the have effective vessels, which across to XX% attractive note target four do we for represents quarter inspection we on XXX see Complementing of the our that turn will of very a this was fleet. annual biodiesel created required a the of nine the capacity Also another of green That line, accelerated won’t baseline fleet our the goal to time. production and capacity $X.XX efforts years. These to affected another was solid at total investment over XX materially outstanding our sales performance. XX organic

marketing primary of sold We XXX and diesel produce. majors a gallons excess production were our and team centers, Our of biodiesel, in X.X% was well categories capacity. travel balanced which million sales customer or our petroleum party and generated distributors jobbers. across Sales third renewable of

and renewable of We growing user to continue fleet. New a XXXX to customers to of recently meet operates contracted of supply list end York which vehicle a the City Department diesel the demand Administrative Services,

standards vastly quarter Ultra diesel our emissions federal customers Clean, and the introduced and and tailpipe reduce below of blend biodiesel, a REG renewable proprietary far their During our California we results emissions. the reduction enabling the of

RIN industry show complemented by oil stable difference next soybean the prices the was gross seven between oil the stable prices HOBO same period. in resulting remain market and excellence shows margin, indication that the and slides quarter, of during the prices during operational through the the correlation between Spread HOBO two or The decreased and Slide Spread, quarter. strong margins prices an Our RIN rose conditions. the heating

as well LCFS Credit, strongly increases the prices in were as supported by low California premium of results Our markets. carbon fuel other

XXXX based The category increased renewable gallons $XXX over quarter proposed grow LCFS XXXX can volumes. XXXX. You would eight momentum. working due to diesel finalized EPA’s are The in gallons from proposed see in waste continues these XXXX by producers are in by These see Directive renewable that in the of that we’re biodiesel Europe show REDX. values XXX The a as metric to million facilities. bio we on biofuel energy rule like pleased slide November. advanced to pleased our and categories, see ton regulatory numbers Germany XX% positive diesel per for fuel XX% changes or the by progress $XXX biomass category made obligations the on Since final Credit the satisfy has environment part biomass-based California. EPA diligently biodiesel and or million positive would XXX diesel RBO are advanced to grow based or over the and the been grow both In X

on reinstatement would BTC retroactive the be from expect we We the in At for this after the midterm of receive reinstatement elections. positive to session the lame-duck congressional taken our continue point up supporters feedback XXXX.

one reception beyond a construct group for of such We’re provide warm members receiving Congress industry solution working certainty coordination to solution. a are two to in diverse the a of close long term a years and BTC, with stakeholders on for or

a capital is authorized attractive for the use quarter but during allocation. prudent Now and of we CapEx the investment the value way shareholders. I generate want The touch additional $XX years. diesel. program authorization in This repurchase mostly, renewable last million. exclusively for new June for four growth million reflects an is to nearly repurchase capital REG second program for the $XXX We plan, grow our returns is Maintenance on over XXXX up can of the on previous repurchases not completed and the primary board cumulative focused on

renewable in renewable both earlier, As expansion are other diesel, and investments. at at options for many diesel I we Geismar mentioned looking

We by to end. reporting year decisions expect you making to be them and

call I update on business. to turn the Life you an the Sciences want Before give Chad, I

products the the and to unit maximize product research we demonstrating Science ExxonMobil have to portfolio, program potential on identify biodiesel. of its and with results, last of leading excellent customers. We to into attractiveness convert deliver certain positive the value Life received patents. Sciences year engaged Over market way sugars Life our includes in cellulosic Sciences The marketplace technology Technology. the Life best feedback program and continues the our to to of value actively business our their the This

the joint significant moving required agreements. arrangements commercial and portion can We into joint these investment portfolio the the launch of reducing those the work, development with the agreement stage development closest gates. fund of focused on are Exxon, are through to a that commercial help parts project Like advancing

year has value our Sciences allow agreement business most clear next family at and efforts XXXX. joint Sciences to annual from flow its term finalize prospects product Accordingly restart, focusing unit. this attractive to to to year to that million We CA agreement current not products positive it our joint we us level alternative and development of zero alternatives while minimizing investment approach in business of joint the to become cash project. and investment. will most $XX expected emerges. REGs to be Life allow on of us this processes values quickly This acquirers if unique to business reduce agreement our development do to per agreement initiate is REG’s maximize near the about in appropriate patented Life the range are net from the by is or a near are the sell creating Those of for Life the an our attractive Science when pursued and joint expect have partner development approach for end license available technology this shareholders a We time, that will or for shortly. believe additional development We aggressively benefit

call over return discuss to update I our the turn for guidance will me Chad and the financial and Chad. let outlook. Now to

Chad Stone

Thank you, Randy.

second quarter our by results. financial Let reviewing me start

quarter contain slides unless comparisons mind in Our on year-over-year. I instead need. going the all not focus press the all I’m and the results. supplemental numbers, the comparisons Keep going and repeat figures regular factors referring influence to that we’re we’re release all to you second figures, and otherwise say to main are

and strong was double Our high range in EBITDA that than end was the Adjusted despite shown as the BTC of nine. year’s profitability solid was slide near not fact on effect. more the our guidance very last

full adjusted for first year, Our benefit assuming an for million reinstatement BTC of the EBITDA would shy retroactive net allocation the on and half BTC as million. $XX reflected of our total the XX. nearly $XXX for slide adjusted first without year be estimated EBITDA of a Including the half the the is just

are we we can change You results, earning in XXXX. demonstrated the in power based see half step that on first our first sustaining

third XX our continues month inclusive see was XXXX sold on petroleum the on slide adjusted mix trailing XX on Europe, and the both XX. As trailing invested the on domestic reinstatement our as XX with near month should retroactive our of by gallons shown XX% from XX see is slide June. guidance, and and you for that financial see a you can BTC note can EBITDA to of our between collected all diesel XXXX quarter return end diesel, BTC second improve were in proceeds can the BTC of IRS I reinstatements. our remaining also slide XX, high Gallons renewable party slide end our you biodiesel results. On of capital

was Our although quarter of RIN was was by average to selling growth up expanded pricing, offset quarter, this X.X% the during partially a and as growth blend revenue Randy earlier. and mainly lower prices better by growth driven X.X%. prices the Total revenue highlighted values. declined due Spread HOBO RIN volume

were Our is in increased R&D by expenses SG&A revenue while line which our growth, expenses X.X% with down.

allocation. turn Now let’s to and balance sheet the capital

BTC higher of XXXX is compared due and all all funds. convertible at significantly than of almost lower debt the in reason. to slide now current mature year. you convertible see the can on one of down for credit term would using the are is of The bonds our less receivables BTC We the paid XXXX bonds you the expect, XX reclassification as due off Long line receipt of quarter, to the the start to far the If same cash liability.

set convert. aside when to funds bonds sufficient or have mature settle these We they

of million of XXXX December well became XXXX, amount the million notes In our on and can at repurchased authorization. quarter remaining as was classification addition, due the see our There X.X convertible $XX.X XXXX both XXXX the XX. stock to we have in stock trigger under convertible XXXX price based requiring price and slide the convertible on quarter, notes the bonds X.X principal balance the conversion XX you million increase shares on sheet. therefore current Year-to-date June $XX and the in current for as million in the

X-K repurchases. form June noted board for another our $XX in authorized we our As in million filing,

invested to purposes, CapEx In the primarily in diesel. used growth we that Madison was our quarter Great mainly $XX not although expect For and modeling directed we CapEx renewable to Harbour. be exclusively Ralston, for million

for renewable CapEx growth improvement next XX Our the high $XX in to for approved projects diesel million, plant CapEx, board platform. and XX months maintenance return is our

continue is to to rate tax than XXXX effective Our less for expected be X%.

from the benefit tax rate NOLs is quarter future deferred reserve BTC the mostly Our NOLs $XXX allowance, a treatment. and. to the our low valuation tax over effective due made at is assets, tax Without allowance which against was valuation up our of cash million resulting of

I’ll back outlook. Now the to turn Randy to call the discuss Randy.

Randy Howard

on on XXX as bringing the without for third we’re Based sold the Chad. XX to for Thanks slide are third the approximately XX the current we increase is environment, reinstated million would $XX estimate expected, to the total as to be adjusted If to XX million million million, XXX million retroactively $XX shown forecasting and BTC forecasting quarter in adjusted to EBITDA gallons the BTC. million. by EBITDA $XXX million gallons,

changes we are of of quarter. estimated to margins credits existing expected price the or to in would diesel, expected the through fulfilled to performance strong our year. estimate is first the third based into actual forward July, be quarter, This end to half existing well on spot account end feedstocks, a contracts the the through affect to another expectations record of and the the end be quarter RIMs under the results. our of LCFS for performance, takes Given way Any

operator the Operator? would turn like I for to to of the our over call the segment call. Now question-and-answer

Operator

Thank [Operator Instructions] you, sir.

Randy Howard

the one. Yeah we operator, if there hear can’t question is

Operator

moment see. me let One

Craig Irwin. is Okay, a that question there question and coming is now with

Your open. line is

Craig Irwin

for Good my taking thanks questions. evening and

the about congratulations is did though quarter. want big wow! That got the an What this numbers ask Randy, impressive I First to quarter, guidance. on I was to say

have seems fixed your estimated million than confidence the off-tick committed trading for weeks. of and been end more what’s the would range third around of about stronger level, little some range. little know the meeting give sort of or How and talk we’ve of RIN the RIN on bottom visibility. where I a So do guidance other much price the already $XX based top commodities last to have the that the you that that end might exceeding you any quarter, maybe Can agreements underlying few for and EBITDA the contributing bouncing you is of your guidance

Randy Howard

Yeah a factor the got quarter Craig, really standpoint. I we is running biggest say I on that think the third a feedstock would start from

know You and certain we anticipated downtimes people’s all that.

credits, And our performance. we benefiting expected and quarter you LCFS are quarter-by-quarter which So way from so third as forecast, to we But obviously quarter are choppy the than big that it’s credits a confident when quarter third a in obviously enter lower up we quarter moves. how to significant our know way, hard at that costs, of well those marched third to see driver. feedstock and look we lower LCFS driver the are under through feel monetized kind in we a is certainly the that’s really range.

Craig Irwin

June Great, quarter the the reporting you bit a this today you’re that Can little $X.X drove did there. upside. little for bit EBITDA following to quarter, in strong the were my in management gain with come RIN again, number healthy strength, such maybe then through any very in about of talk you and the the what million prices that offset about number? estimate, there you strength contributed and quarter how was the And risk a a

Randy Howard

helped off trigger we’ve the benefiting obviously and waste prices think continues us. quarter the really really RIN, I offset prices soybean fats was highlighted, then feedstock the side. the so and Well story; other correlation of again they as feedstock the basic that. HOBO we decline from margins, industry for to that usually And lower the equally largely been It at Spreads, that the increased through work of

you just year so and later that know levels. feedstock in we this certainly thought coming this mean into you projecting know from the they’re a and cattle that are than we rates are all that. addition, lot benefiting at record more we the slaughter market far fall are I and year In

Craig Irwin

Great!

Randy Howard

had – if look the to Craig our losses $XX in at we hedge relative million hedge you quarter. hedges, of details, the losses

Craig Irwin

Fantastic! Thank that. for you

bunch My numbers I that gallons that million, gallon Next also you sharing de-bottle XX front for million, so front your the the achieved is $XX touch number end plants of in end thank added more thing capabilities a you is had that you’ve understanding invested that de-bottle us, on capabilities for that the or the contributed the separates on the million you plants. a $X.XX necking of of last feedstocks take couple a your know included the flexibility a years. the for broader was to difficult some vanilla is this $XX to wanted some necking, million $XX over to more with to of

Randy Howard

you Yeah, rate different all and I run difficult it’s did know through together, an us not Obviously run say would what but gives capacity that’s our seeing. both. by effective improving that’s the more which feedstocks it plants, you’re mixed capability to larger different feedstocks only

Craig Irwin

then was correct. the a capacity for done is think expansion, I Ralston and Okay that less gallon than $X.XX

Randy Howard

Well.

So would have yeah, out executed Brad of the dilute and a was we that we kind so project, and consider it want specific project capital his because against. team didn’t data that we of took improvement what was of a continuous bread that butter major it to

in not numbers. these it’s So

Craig Irwin

that. clarifying for you thank Okay,

getting you successful at funding is ask capacity Next market, What you there, about a turnaround operating we go the for for thing so expansion looking well on the need decision this final I looking Geismar? that back commitment announce see to the thing permits. about Are on REG nameplate. to the Geismar, for the do on are to want to congratulations

or have that land. know with what we last maybe going forward the for us go know of you’re make sort describe sort the you you Can to whether of through, a to on expansion? stages up-down of the You the process decision not

Randy Howard

available move Geismar funds expansion, forward to issue. so it’s Sure the so with have a we funding

that the development We gate process engineering us through we before a reach advance project. stage project have put and place phases a in has go

what So actual phase in engineering the of the for we of we the is doing call last which that are FEL-X project. process final

I say we it, So to tried. another guess in couldn’t way faster we if go

cost final that gives schedule, that’s a the make that’s through just when final tighter quarter so fourth much engineering, cost and You we we But know we’ll investment it’s in a the matter that process that we’ll which going we’re and decision. schedule. an see until and us it’s our final the band doing decision confidence and of in us what gives see really make and just engineering our don’t on process

Craig Irwin

you that. for Thank

capacity environmental the about thing capture Another to investors rollout update plan diesel terminals, for rest market. where for you own maybe as RIN, of the greater that more biodiesel, the product of of your years? renewable is you go your us that benefit greater of next your as often and you can of brings couple far ask blending year where on your share compliance blending today on the plans Can you the over own to to stand think

Randy Howard

you give I those another we’re on much I year can. Like last as focused really year. We’ve up two XX this said, adding projects. after as terminals ramping added I’ll

slower California say projects largely selling fleet blended are we – move We little them the continue doing X where on product, forward. think that attractive, margins complete Obviously logistics more going so we’re on those hope that that a or we that than again this, is in add – because when in to means I and blended, a we’ve process focused fleets customers, continues California. and to the are in issues would very added we I California

in second of up blended would to have things a California visible product. in the half to those year on us We the and solve put place see I expect ramp

Craig Irwin

In over where biodiesel you us lot blender’s lame-duck; and the fact you shake to maybe where believe little five that that things I being a makes down? expect be you reinstated unfold? color it maybe a in think a maybe maybe as is give this stand ramp that credit on remarks a producer’s likely and do far or Randy of that bit mentioned prepared to likely to and year sense. of reinstatement a you a the transitioning out your think credits converting you things of to year Great! Can tax the credit as with credit, instead How to are five

Randy Howard

industry of That all, credit and us first excise is stakeholders. unifying the across have around all a in biodiesel form coalesced Well a tax same has been today. it theme the

So subsided have the need for is producer’s duties now that we countervailing imports. place in credit strong really to restrict Argentine subsidized

we review tax maybe EPA So something really Relative BTC we this over longer focused five are on I something a term, when and at past full are looking the point focused on we’re the credit. years. diesel XXXX even to longer years RFS bio so the excise than to five think takes of even at the than get

Craig Irwin

That’s good, that’s good.

that time all question is up Another the comes RVOs.

administrator of the So the before gave way the through assumptions XX the refinery RVO, adjusting out Pruitt that refineries remediate the a final out there get actually adjustment gift you think we for know some field Pruitt is is a these there out to shameful prospects X.X end numbers, some of of playing course to What for year. sort RVOs X.X over of to year. million are do RVOs last the the this even the handed an given administrator small galleon that largest in country, group you part that that the of

Randy Howard

niche up, us place best those exemption. those the the the and Obviously think that to end for reversed that increase RVOs, calls of highlight million I XXX advanced Well, I real refinery Relative legitimacy day the of end would we that’s of litigation that and so questions the gallon advocate. a there’s they and know see. its process that’s we reinstated we’ll we’ll would see the what if lot the at but be category. – that you is in think in the

the As biomass you well RVO. traditionally industry above diesel know the base produces

category. that the So drives market there, the advanced see it’s that great real we is growth number but that

Craig Irwin

Great, that. back go ahead again thanks I’ll strong and the for queue. on Congratulations in quarter. the hop

Randy Howard

Thanks Craig.

Chad Stone

Thanks Craig.

Operator

for the to no are queue. Howard like call Instructions]. Randy remarks. I back over [Operator There the in more turn would further to questions any

Randy Howard

Todd wrap you investor our of operator. you, going To up, event. are Thank mention to some

Todd Robinson

thanks Yeah, Randy.

As in at we host Thursday this will Conference, following you Conference on New York Annual on present present Jefferies and the Genuity Industrial X, week August Boston XXth in XX, will meetings slide at meetings that Canaccord on we X see host can August City. and Wednesday; Growth

on schedule August the to Finally, your attend Industrial meetings call us. Chicago. may in we will these disconnect. want This XX representative Seaport concludes again. contact you only, at at host you Attendance respective invitation the you you if please meetings in now sales Conference conferences one-on-one so with Global Thank all or and

Operator

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

disconnect. day! all may You Everyone have a great

Randy Howard	President, Chief Executive Officer
Chad Stone	Chief Financial Officer
Brad Albin	Vice President of Manufacturing
Eric Bowen	Vice President of Corporate Business Development & Legal Affairs
Gary Haer	Vice President of Sales & Marketing
Todd Robinson	Treasurer
Craig Irwin	Roth Capital Partners

Renewable Energy (REGI) 6 Aug 182018 Q2 Earnings call transcript