ALTO - Earnings call transcript Q2 2021

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Alto Ingredients, Incorporated Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we’ll conduct question-and-answer session [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Moriah Shilton of LHA Investor Relations. ahead. go Please

Moriah Shilton

and for Jerome conference all, joining for Thank Alto thank Ingredients' today the results second us you, you quarter call. XXXX

XX, Bryon operating begin call Kandris, provide business prepared a company's details the included are are today's closed the website also of McGregor, of of call then will the The altoingredients.com. available and August telephone CFO. replay on be financial of and On for highlights, a outlook the for presentation Bryon Mike at will questions. call today's And which a that with a today will call company's will is through summary press release. review the results. note Mike of Please CEO; press after webcast as The open of release X. and company A return Ingredients' also details today, call to only discuss replay that the Alto at be today, speaks the results. quarterly today's August in earnings available market website. information Ingredients the Alto Mike this available issued providing on will Ingredients' Alto

a of presentation the are on to, risks forward-looking of available obligation previously time-to-time no You filings at prepared to non-GAAP income and remarks, contribute no the management's expense, statements. SEC. Safe time forward-looking the defines Alto before that Ingredients my provision disclosed accurate asset net income, of information table to of introduce constitute reported. expense. referenced. with as considerations factors could refer loss the uses states impairments, that interest be and assist these any and and number depreciation which fair income assumes Alto of amortization was those involve limited In adjustments operations and as pleasure company's purchase cause or benefit the Mike performance these online, company's results to by risks of or comments It non-GAAP events, Slide accounting but statement later such include, today's CEO. in company to being Alto loss investors assessing believes for release. periods this Management could will monitor a required To unaudited review to applicable debt, EBITDA any to Factors company's taxes, are performance support other statements Except update adjusted in replay. the may from statements. Ingredients' The now company differ reconciling measures law, from press attributed value Kandris, extinguishment longer Harbor materially the and differences included future not X in the measures will of Please uncertainties. presentation Ingredients advised is call, The time-sensitive that for non-GAAP be this the the information that of and actual measures of adjustments, some and financial in in interest Mike?

Mike Kandris

our generated everyone, thank the $X.X we profit, net of and of producing for you, adjusted income afternoon. joining and this second consecutive of fifth Moriah, In you, us quarter, million. EBITDA quarter $XX Thank gross million

further was EBITDA to of $XXX year, benefits specialty and our half in was of million, improvement testament essential million. transformation net $XX was ingredients. the the year-over-year For over a million, and million, the to efforts represents of first over income This EBITDA $XX revenue a alcohol $XX

growth our and opportunities. these pursue invest balance sheet part efforts, in new and we our align today's improve long-term As to demand, expand meet and to continue product infrastructure our of offering accretive

mouthwash, everyday quality, customers and our specialty strengthening common cleaning production growing vinegars, consumer distinctions leading alcohols all that and specialty used surety products. volumes with enhanced as campus, provide we alcohol and variety relationships capacity. we of the us supply operations and as spirits, at our beyond, can we our These over redundancy, certified key are integration ahead, expanded and the other position of a in certifications, XXXX Through material and Looking alcohol a our growing well producer specialty Pekin cosmetics goods, thus for differentiators with contract time, utilization deepening along expanding, of including improving supply are among base. of production of a

approximately to in XX, a comprised of announced consideration for we of retire this proceeds facility. ethanol company total on liabilities. to save $XX.X We quarter million per in facility carrying sold $XXX,XXX California the quarter of in May in and $XX.X in an EBITDA and for our $X.X will debt, per we As fuel-grade additional million which Seaboard production use Madera, $XXX,XXX million, cost assumption Energy cash negative expense cash interest

we working will the interested ethanol have share appropriate. that and in been when have diligently We of and parties facility, our more on those either fuel-grade California sale Stockton, restart or with facility repurpose will

are on and to revenue and this plant efficiencies projects year improvement track capital Our increase expected reliability. and expand

QX completion expansion fully and yeast and scheduled alone projects upgrade Our operational Pekin before be in will year are facility for end.

contribute in EBITDA, payback We years. representing full two $X less in expect million the a annually projects than approximately to

$X.X by of estimated contribute Additionally, preparation taking tight these in beginning corn at fuel QX, our we in approximately corn oil and resulting expanding margins. in an ethanol for inventories conditions market annually X,XXX be choppy what advantage are production low will and our annual expect tons, pre-harvest million site improvements from In EBITDA capacity XXXX. we Pekin which will

in have and Pekin a our We at mid-August scheduled maintenance repair shutdown mill. wet

specialty of will repair third maintenance not impact increased however, This, our customer will demand. production align quarter limited an for with expenses. be and but meet our the improve reliability ability to contractual alcohol our and supply reduced obligations expect and We to in terms our the essential ingredients, efficiency better impact and revenues or to instead

quantity grow the our revenue and are will and bolster our there that Finally, of sources at future, our to earnings. diversify to mills for enhance and opportunities production looking us our quality protein dry

and good make sharing to progress information to look forward soon. more continue We

site. also discussion remain look this We now parties I'd actively that, opportunity. in to more with turn to over financials. the our profitable regarding With We sharing like to carbon over next Bryon for at forward the various quarters a engaged a the to Pekin capture develop few discussions of call information program Bryon?

Bryon McGregor

Thank I'll our quarter and metrics you, Mike. discuss for update financial on an the few metrics the on for certain highlights a provide year. and expectations

$XXX gallon price XXXX, quarter well in increase sold million specialty as second the $XXX alcohols, up as due of the third-party fuel-grade For an in million, increase gallons from to production and sold an were quarter the first gallons quarter, up ethanol sales contracts second net gallons sequentially fixed-price million per in the the consisted average was under XX of the fall. quarter. of specialty million gallons last XX the Of established alcohols, last quarter alcohols during over sold Most specialty in sold. X million

of While the current margins. we volume lower was locking so the than in of this price price positive which corn, average prices, contracted was hedge concurrently,

alcohol was were QX growing specialty year's comparative disinfectant and fall, total Now other increased in contracted our alcohol point, but exports. products partially consumption year-over-year sales The specialty to prices, last fixed-price corn. margins obscuring sold. decline more sanitizer demand, alcohol offset the specialty and tighter sold our year-over-year sanitizer in by uniqueness spike of alcohol sales this To higher specialty at of growth at and last QX the reflects transitory in specialty in during QX disinfectant gallons decline

corn generally prices and guidance was range co-product gallon in terminal service steadier now the expect While stable in products the essential increase between last Stockton year million as and customers continued sales. we million, SG&A $X.X dissipate. $XX will alcohol the slightly the fuel-grade our of up although additional to quarter over largely also and sequential returns, $XX.X facility heightened million, certain risen, in to by both using due ability quarter we kept more fuel-grade quarterly for a million sequentially, The to of to The average, of industry-wide is activity impacts elevated anticipate price latter from prices. dry our attributable for in sanitizer profit co-product sequentially are in from volatility ingredient full strategic line was for due revising per XXXX. ultimately both and production this third-party on $XX.X expense equilibrium gallons driven year-over-year. future, ethanol increase Pekin resulting declining - achieved to have demand the related and current specialty the ethanol demand initiatives. Accordingly, mill the expect to We our ethanol note correlation of disinfectant was while high third-party and by rise COVID to have in reflects from corn foreseeable as account prices, SG&A terminal. and California to that inflated supply million was not should a, pace new sales, in gallon be Gross average constraints which sales with costs $XX we and demand ethanol prices, in fuel-grade our our

for facilities. sell the operating property our our complementary hope XXXX, $X.X a sale at are our in complete acquisition sale have remaining of non-operating with Since parts to We for now largely equipment, year the productive parts, we associated quarter, supplies from Having and Illinois along source all used asset and negotiations other reflecting to results in Canton, as this and assets. the spare Aventine before end. million negotiations the our this facility impairment we've of used

we expense Our debt. our reduction year $XXX,XXX. balance we same The as QX high the interest second the interest lower in quarter and $X.X than million rate paid senior notes from is million, currently pay the was in $X XX% down XX% last to continue quarter outstanding of

remaining expect term We the repay XXXX. to in debt fully

is We've During of loan recorded SBA June $XX.X of million protection last $XX.X the are compared $X.XX million, equivalents for our Income program on XXXX. million to March was XX, from XXXX, the million share or $X.X to to approval. remaining common of applied income which loan in $X.X to available loans forgiveness $X.XX $X payroll from diluted cash quarter, year. our income XX, On our one turning quarter, shareholders sheet. and second per forgiveness diluted first compared cash million we per for or related to balance the $X.X share were million and awaiting

be million future corn impact the pre-harvest our minimize and let remaining mentioned one-time asset higher what our lost environment due expenses balances proceeds XX-day mill term sold, sale of - our rate and With fund year. Proceeds our million. you. Madera or We ethanol related contracted will to wet used back the sales outstanding, additional we and some this earlier. challenging maintenance debt, future outage, guidance elevated the To Mike to we liquidity $XX not budgeted we production. repair be bolster QX specialty approximately $X do from retire closing, We've a million $XX from repairs goods on around fuel-grade bringing otherwise from in this debt provided of expect than low earlier will further capital excess impact the detail profit anticipated million $XX.X debt to scheduled alcohol our reduced of gross the to revenues in high during inventories In and our to provide impact projects. outage and outage. our operating and the cost supplies believe interest future me loan to plant, less plant of parent of sale cash Mike,

Mike Kandris

the most Thank strategic our balance operating to focus past rationalized have time, operations, the you, over summarize, improved at and our year, on To footprint we and significantly our sheet. we profitable same Bryon.

we opportunities will for is to the open platform ongoing, Operator we and long-term And pursuing call Q&A. expand are partners through integration. enhanced with solid now we'll have which that, and offerings create up our while and service a profitable actively for vertical value shareholders, for product transformation growth, such, As accretive employees.

Operator

Dayal Wainwright. Instructions] Your from question Amit first [Operator comes with H.C.

open. is line Your

Amit Dayal

good afternoon everyone. you, Thank

from can question I million margin see specialty positive the sales? the this guidance. sales How on is, or from The to gross you year? ethanol any to guess we much $XX negative, alcohol continuing for guide whether are First impact,

Bryon McGregor

increases to recover, in has February ethanol to not recall, generally January Bryon. you'll that breakeven Hi have overly $X.XX pretty have say, have volatile $X.XX been some say to ethanol margins yet that year-to-date have if were overall corn QX. and and contributory better. good recovery started margins would in this I materially as there, late in been But saw year, prices. would fuel year-to-date. we lagged to and it's of They not recovered - I of negative. Indeed, sometimes been that or They

hole it at Now looking that mean been on fuel haven't does that if that above you're at margins, a year-to-date basis. breakeven it's we a been we've it had not just fill that operating means - to

Amit Dayal

of you softness other are And with towards filled you in being for some disinfectant there sanitizer sales that is sales, maybe already going that. thank and gap terms indicating that is Understood, then, to applications? capacity

Bryon McGregor

significant had in It's black a Those made significant - an certainly I'm we Those QX year QX events. right? what's the looking are a was unique. that The swan anomaly, gain for? it's - word are last and

last made prices at you spot year. this and year. - to well were in last Those take we through a as not are we volume of able not at and advantage get peak But been volume the the at necessarily or to replace same to duplicatable. easily to we the able sales so, opportunities. And have, fall be significant would industrial contracted prices QX sales they of degree, able QX that were least either the But

Amit Dayal

thank that you sales done asset with this question still are end by for next be pushed out that's the this expecting understandable just And sales pursuing, or to to Good year on could get the that. potentially? of are you you last potentially asset year

Mike Kandris

No in near able something are year that as the would hope facility complete our - the intention Stockton, announce the I remarks, on is we're be California that to again, in to And we by we mentioned definitely I think, that with end. working to definitely, term.

we're it. So that working hard our is intention, definitely at and

Operator

[Operator question Eric Craig-Hallam. Stein comes Instructions] Your from next with

is Your line open.

Eric Stein

unique. facilities it know So like I as sounds a far asset in your you I aren't Oregon those are Idaho, they necessarily mean, the the the bit sticking plans as are said sales. on side, that

might So what then I those how important platform? to can? And you you make unique to more, maybe types confirm they're make that, guess if maybe the discuss potential more and of investments

Mike Kandris

definitely person the we Idaho of makes take a had sold marketer Idaho, been remember let's possibilities place of grain that first. exploring we I that recall, you handling facility for if many assets we so the Okay, and our unique or a repurchasing well to market place protein that opportunity a of think area. if a look We a us. would have that we very area, had in at at from for have a look an that. protein. in lot be would performed market. that were, affiliation in that we that standpoint, years, with of players that's unique would things increasing And There sense the is would good not the really It's are and other we very when with that mentioned marketer area. different one a That lot in be we

Idaho. that's So

with far goes, As plant we working group adjacent longer-term prospects now, we're possibilities. COX are in working our Oregon Oregon. we to evaluating facility have a and as - that And on a right with

Stockton, So repurposing and and come Idaho to right focus Oregon is opportunities our on yes. thoughts now, we mainly around have and more and

Eric Stein

of I have at any and maybe to demand just might mean, would in the window and curious, be? rest the Got am it, contracting I maybe the with turning gallons, spot? And those XXX miss that’s leave of indications taking volumes the in that timing do steps you your of online - upcoming some million if I that ideal of of the you be kind early then the to volumes. know with you I bringing have a mind you contracts number mean window you're of And advance season, helpful. so the them what

Mike Kandris

a take think that - the large percentage to fact point. time it Well would that We're it's to a of to like I contracted. realistic that we does ideally, have get very in

quality very We crew. have working our diligently been

be to We've our work qualified. reasons process, you takes again, the enhanced transformation, to will larger the have ongoing, customers variety That able feel very their that's But part it get organization. into qualify is within a when an expand it. We process go And it was We're to that with it's certifications out improvement. through all to with working good a something a the say of QX. of One customers of you very the be been product that we transformation there. it's and about and hard time. feeling to QX we of to have get a is existing part going is

So, want to we'd and percentage XXXX XXXX, we would look a but to again, keep of like it spot. high XX% at as we for have that, XX%,

Eric Stein

Okay, got the it. Maybe on co-products. then just last one for me

could for mean, any You or do little remainder mentioned or corn. I you with kind hasn't mean, pricing expectation I that of happened know bit? see is what's the your the spot indications gap you that going year up necessarily kept close of that mirrored the could that a forward

Bryon McGregor

would gap to near to I close. of on mean low the fairly would the in Bryon, matter a dry relation trade where It's averages the dry you it's kind think co-products a in I basis see - that actually point matter corn.

it year If a phenomena industry-wide this And just Alto not looking and for an demand talking not supply you're over it specific. and supply, proteins. at if largely One back being I'm a seen today, corn. couple This significant is driven is amount just of other ago, to of by about was you look mid-XXs trading and things. a XXX% or is soybean as is growth you've access

high-value be we a so, to normalized. values. dry corn basis, - premium at, be that to at would a And proteins trading more these if On expect should matter not

Operator

to I'm Kandris. no conference Mike time. questions to right, the further CEO, showing this turn at would like All I back

Mike Kandris

support. your for you, thank you and again joining Thank and us today ongoing

the tell, we excited made future us. the ahead have bright very about are As we we have you and can progress of

and Thank XXrd we all. continuing Annual you Wainwright our Global as with further look virtually We progress. you will be in H.C. Investment September, to dialogue make attending forward upcoming we the Conference

Operator

for Thank this and day. have participation, today's concludes you your conference. and gentlemen, a wonderful Ladies

You all may disconnect.

Alto Ingredients (ALTO) 4 Aug 212021 Q2 Earnings call transcript