ALTO - Earnings call transcript Q4 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Alto Ingredients Fourth Quarter 2021 and Year-end Financial Results. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to turn the conference over to your speaker for today, Dusty Buell, you may begin.

Dusty Buell

Thank you, operator, and thank you all for joining us today for the Alto Ingredients Fourth Quarter and Year-end 2021 Results Conference Call.

On the call today are Mike Kandris, CEO; and Bryon McGregor, CFO. press the the company's a providing closed issued of details quarterly Ingredients release market after today, Alto results. company's The for company at the today's presentation altoingredients.com. website call that also is available prepared a on call today's of details included of replay are telephone will available XX, which press through earnings today's be in the March release. A will also replay Alto webcast available at Ingredients website. A be of information Please any at you are XX, of today, note that March accurate information be on that replay. this may time-sensitive call the longer time speaks only as no advised refer available that statement this the the Please risks and company's Slide on of uncertainties. harbor in number statements and to safe online, the considerations X of a that presentation comments some presentation constitute forward-looking states involve which of differ materially from The future actual those could results of Ingredients statements. Alto to Ingredients cause time differences SEC. with limited factors could are not and contribute Alto events, from previously and that an but filings or to, disclosed include, risks other the time such to Factors company forward-looking as assumes Except law, to statements. update required obligation no by applicable the any management's be remarks, referenced. non-GAAP In measures will prepared non-GAAP to the believes in monitor and performance operations assist of will measures these the uses measures reported. being company's performance assessing Management period the for financial these investors Ingredients net income, taxes, adjusted value and company as The purchase adjustments, to expense, debt, loss accounting on or impairment, depreciation provision fair asset adjustments interest unaudited EBITDA attributed loss Alto or defines benefit income expense. before interest income for extinguishment of this later press support a To release. of on table call, was review information non-GAAP in the reconciling included today's company's few On and the by financial plans accomplishments highlights today's for with next followed Mike key some call, XXXX, for begin will years. XXXX on our financial provide additional results. -- QX will detail QX then and Bryon summary up with before for the Then Q&A. opening Mike will call a wrap to CEO. introduce now Mike is Kandris, It my pleasure Mike?

Mike Kandris

We that have I goal. some financial company, strategic we everyone, for XXXX initiatives. Thank we you, to on highlights and market I'll the year the progress hear we we for us would joining focus with about making vision believe and of full our as continue strategic accomplished and exciting execute change the promised the thank to are today Dusty, you, XXXX. begin over

Our compared million of XXXX, This company in we net increased outstanding our the of million and to loss grew important sales To up and performance reinforce to Ingredients. to brand increased was beginning to of internally $XX.X is reached $X.X This achievements. a an up result Gross renamed XXXX, XX%. XX%. to highlight broadened the few, us a profit Net and to adjusted XX%. $XX.X $XX.X increase outlook, direction. Alto both million, in income externally $XX.X EBITDA million, strategic for numerous billion,

margins. we invested due net became During a our which XXXX, protein is idled restarted expanded strategy, in Valley the debt growth fuel selling facility, optimized asset aquaculture. renewable to and experiencing year, certifications, by Valley in Magic our secured November market noncore that has low of we Magic base in the advantage poultry, we free. valuable XXXX pork our facilities located In cattle, significant being in capacity, of and

and protein. began feed contributed the on EBITDA X over will facility almost this food When corn sales of produce market produce CoPromax these content adjusted prices completed, and corn protein of Given concentrated pounds upgrading tons high-value harvesting system. the feed patented system combination annually installing the over resume by based operations mill million XX% Increased to we million XX,XXX protein dry and committed than or in technologies at of the opportunities, to greater additional by oil yields current annually oil XX%. ingredients and $X and annually with

protein oil our to commence and and feed in be fully in be we expanded to at production facility corn operational expect expect planned, oil of the mid-XXXX before We to year-end. able as

alcohol of new as appeal well These XXXX, of XXXX, home we spirits. after components systems, specialty our the recognized demonstrated where valuable are Pekin recognized for and the and for excipients, comprehensive XXXX, distilled Manufacturing redundancy the turned drug our for export full same market, opportunities In sought invested in production, the Practices market. markets. rigorous relationships management and is earned processes which markets world's in certified domestic globally well certifications having EXCiPACT ingredient of market importantly, we which securing quality supply, December are as reliability deepen campus. On which assets. focus review through the They customer of stable pharmaceutical we as certifications robust specialty certification in Then, standard beauty is to QX, February stakes widely the earned certification, as our high-grade to in and Good thus of of customers. we use standard the creating pharmaceutical required the most and and high-quality Alto medication. using of to on XXXX most facility, and of certification, open alcohols distinctions certifications as product alcohol differentiators the the surety the Pekin the customers Next, ICP, our in at at health, or inactive ISO After and and advantage medical and procedures existing a for recognized growing internationally of February door ICH can at for active monetizing

of combined to in completed Eagle free. of As Today, it operations in expect base and we a our debt the and of leader will retire accelerate elaborate more To established of discussed, scope leaning January focused into XXXX, restricted net moment. dedicated stronger products break a a acquisition by this new suppliers, chose denatures, cash alcohol exiting an we towards the alcohol alcohol distribution, package from are alcohol dispose to volatility, alcohol proceeds penetration these creating food, we price segment and on Eagle's and strengths, with businesses, bulk Bryon we margins smaller organic markets. lowering to garner Eagle resells opportunities then including to and customer large beverage have and Alcohol, sheet look preferred and in also drones, Eagle customers and that have our production concentrating process California. fleet opportunities, relationships, facilities utilized trucks, differentiated industries small Eagle less its in packages including market, expands strong downstream balance debt. new to and markets. distribution. trucking offerings noncore from end, and alcohol more Upon premium on we premium On bulk Alto, XX, in products we our to our our Nebraska commercial from flow carrier. we the beverage, delivers customer high-margin commoditized via profitable Between in established sales, common to our and specializes the both own Alto's sizes, products forward that increasing and bulk pharma capabilities Eagle stores, in the totes distribution bulk purchases companies, for our exposure tank specialty related including growth. a alcohols.

chemical He We of to welcome former and team Eagle Dan Alto experience Eagle. and in industry. the XX excited bring Vice expertise team over combined Manager are President, of years alcohol distribution of President General our his Croghan, and and to as

mills are X quality progressing our distribution with dry biorefinery some X we produce grades integration production raise X and minimal map XXX neutral worked of Illinois; are fits strong enhancing As as time, Idaho highest alcohol we In efforts further optimizing Eagle spirits road of and campuses services. for to to and to capabilities Eagle's able with the our the continue today, wet process, the by and integrating million Eagle Burley, and Pekin, located our our of perfectly smoothly. annually. have distillation Oregon summary production grain strategic sales gallons and we into Boardman, operate in

we Missouri. Eagle's in In distribution center also now St. located addition, operate Louis,

goods Our of numerous into foods. our from touch lives incorporate range day pet customers every finished pharmaceuticals products high-quality to that people's a various blue-chip vital

For reinvest used In Ingredients oil products and the products in example, markets, gluten, the used mouthwashes, Beverage Alcohol pet Grade further. and our neutral in used industrial Health, food Beauty production food, pharmaceuticals. corn cleaning ice. and Home germ market, in corn the and In we Vinegar, And in USP GNS in used In are applications & spirits alcohol yeast, our sanitizer the products used and products disinfectant and intend corn API condensed transportation Ethyl include Alto feed. or COX distillers, and products markets, animal Grade markets, include industrial-grade Essential beverages our enhanced in and to distillers Food Fuels in cosmetics fuels. Ethyl grain Alcohol ethyl dry alcohol. XXXX, our grains, include & all Renewable used

optimize $X Eagle, million Regarding distribution. plan specialty alcohol in further we invest to to XXXX

$X at additional expand storage an in contribute $X our at corn for Pekin corn annually to to purchase million million elevators XXXX need holidays during or increase reduce premium million to farmers will product $X total Also, Eagle prices not a corn weather annually. in expect the the unfavorable buying flexibility, when EBITDA to are $X will enabling of we and campus. shipping XXXX of $X million beginning Alto This company's and conditions. million We to

million will this of will efficiency capital expect to in be and more in over reinvest payback QX upgrading as These years in provide and to facilities, these spend we we with year X in will ongoing systems color million provide on $X less of than $X continue our progresses. increase nature will approximately periodically EBITDA and to XXXX. projects project annually the improving Naturally, plant expenditures uptime. We and beginning a

total on Then out them beyond, other to current The and EBITDA with values. in to we is XXXX completing opportunities facilities. There Valley. all annually no based As development. $XX previously later year-end market at our is The XXXX, in X CoPromax to goal by focused exceed discussed approximately on have than for operational also mills benefit the X to we other system expected are are plan these million Magic upgrades plan XXXX. fully million investment in the dry roll $XX in

XXXX. gas investing in values natural are to on in reducing utility. the example, renewable annually XX% We a For bypassing beginning XXXX price we opportunity in by our This the plant the million would would EBITDA invest $X create produced in campus, the in and gas the we approximately for local gas a the of XXXX at sell return pay expect by natural million into $X approximately to directly Pekin bypass natural future. approximately based pipeline evaluating for

facility the that sequestration, to benefits carbon we to system project commitments, ago At believe operate. the Prior date. development company probable fully affect want outcome include the more we profitable our in look began developing in a proximity for is our sequestration other and sized priority information which and to at stand-alone under this we and time, high transformation close as viable to investors, and a we the us, signing the Regarding XX a and options to into best ensure highest providing capture risks communities months systems same a Alto and also or for and consistently interconnecting with various evaluate our turned later to Pekin company. have campus. gathering and the live we We forward that

We and to XXXX on to by are opportunities transform focus pursuing company the additional committed continue beyond. profitable with a

Before to of components, over I multiple XX chemicals, financials. legal has new over Bryon, executive to Bryon team. be our years to the welcome the the she and a including Alastair would and General I would now President turn in coatings, Counsel. Vice to valuable our specialty call review to like industries, I Alastair addition Graham, experience turn call will and over industrial

Bryon McGregor

I'll provide quarter results our around and the for year. Mike. color you, some and full additional Thank metrics

over constraints $XX.X line quarter-over-quarter were strong million improvement of average gross in million XX sold profit essential prices. had over facilities, profitable reflecting were our revenue and expanded same the from and and but net and million specialty This of increased in last quarter $XXX alcohol quarter, gallon reflects million XXXX, per SG&A million $XX fourth capacity price consisted sales million our Of production loss sales fuel Idaho gross in not with campus, We average quarter Gross from quarter from due price increase at million the bringing from $XX also Oregon annual swing XXXX, our only $XXX fourth to into sales industrial and of period. million export alcohols, reflects $XXX gallons million gallon. largely up in for the up fourth the gallons supply million, of significantly in quarter. of guidance. of million The this previous gallons $XX the improved $X.X sales in of -- renewable to million, operations our For million an third per our in XX of an ingredients. $X a SG&A sales demand. ethanol the up our a expenses translating million, XX $XX.X year-over-year quarter Pekin over profit $X.X the

selling This quarter, for was Provision $X.X million we our Stockton, of had production $X.X California. facility for a gain million. income in taxes

we beyond, we was a $XX.X federal XXXX, $X.XX Net $XX.X million to a of the totaled to compares use per offset common available have Taking income $X.X which states quarter. profits expense. in diluted compared their in operate a taxable quarter. third This in While in in loss or third considerable resulting was per million. share the share. in $X to income million NOLs, amount million $XXX or modest shareholders million available EBITDA $X.XX some net XXXX, Adjusted NOLs for XXXX and to suspended into account tax of

renewable The the For the were of alcohol items driven compared void in specialty million. in recovery largely to million. XXXX, year profit contributors note. to XXXX optimization expenditures of our to in our testament of Gross our which sales sanitizers were gross earnings early results million Net primary pandemic. production. results financial use improved disinfectants, was focus and rationalization Capital the are of demand in and for XXXX on fuel to In of and the $XXX a billion $XX.X quality spike and efforts short, to $XX.X $X.X improvement totaled full XXXX compared year-over-year which in Adjusted million. year, few the by significant for from compared profit to sales a reached sales $XX.X previously EBITDA as hand surge. the million was discussed, compared $XX.X versus is to previously this million, -- prior which $XX.X sanitizer year benefited

compared XX, December $XX equivalents million our Turning cash XXXX. On on and September balance sheet. our million were cash to to XXXX, $XX XX,

the in and CapEx. During the from the $XX with quarter, million operations, proceeds debt sale facility spent of million down paid of and we flows from cash Stockton in $XX million $X our

million working As and debt only remaining we retired credit, the of debt leaving line than balances are with in by offset QX cash of $XX December outstanding XX, us cash term XXXX, free more term free. in and inexpensive debt capital Having net and both equivalents. the

excluding the increase our beyond. the to unusual more last gallons contracted tighter to Mike, as the year. fuel as year demand priced spreads This provide our I'll color experienced in a expectations still and and higher prior goal contracted for These over million volume while with for alcohol sale in alcohol to Eagle's turn the last I a at time prices already XXXX back reflect some gallons, place renewable we related well premium to on same year XXXX specialty swings commodity at in to due similar than pandemic. volume, Before call XX% Consistent sales. XX in we've to XXXX in specialty represents

expect demand Looking levels. more to margins stable forward, return and and specialty as supply to normalized rebalance, alcohol we

$XX million improvements, for fuel over we over acquisition expect in months contracted over year expected generate visibility impact ongoing for base excluding commodity greater in to the our and results war much commodities and corn XXXX guidance gross time. have constraints XXXX on initiatives it Nonetheless, EBITDA the in potential at or to the business, renewable prices, volumes the to may results revenue in the produce the the profit year, extreme our Ukraine past provide related the positive While supplies volatility into this logistical related business. our XX our completed provide additional and makes difficult and

which of of investors to projects through that in ingredient continue years Mike outlined and and and are XXXX. future, Looking of alcohol projects or the this few over business result to completed $XX additional strategic This to contribution lines of be other to the today, we've In include next the intend build end business. we further on on short, resilient additional evaluation benefits just base profitable, EBITDA capture essential a our over in the in under expect specialty investment built million can not annually the into by carbon we foundation rely development. does

be expect million. under to for SG&A line XXXX with addition, In or $XX for our XXXX in we results

have opportunities, of are properly pursue Finally, equity further to new long-term cost in leverage reflects projects of further debt base. lower market return improve the as options to sheet and debt we high sheet, that believe the kind the rate high-value balance we line. balance our evaluating growth funding of bottom our bolster capital with should accelerate a We right investment

share we so, to do we consider also opportunities. continue repurchase As

Although capital to we long-term our a value return we options believe back weigh continue I'll the better shareholders. provides to turn return With profile, time the to our will optimize Mike. current investing that, in projects to

Mike Kandris

that. Thank having company pleased into and top XXXX and in opportunities are initiatives we unique to you, line successes, are summary, Bryon. for a a growth, appreciate we with as In great I key position feel with our continue and profitable we turned beyond. in bottom on we significant business execute the

I'd I'd remiss the significantly if call that I questions. success. be to contributed didn't that, employees efforts to have our Operator? acknowledge Finally, for the open tremendous like our With of

Operator

comes Eric of Stine the [Operator line from with Craig-Hallum. First Instructions] question

Eric Stine

if when XXXX? even and about would think where contracted is think what your little EBITDA and so it's many love directionally ethanol fuel just to XXXX that. to would your maybe difficult of very dig now, right maybe about today there the But I nonfuel your and volumes, to at judging So you I a parts appreciate that pricing to expectations bit, kind aside look in can with certainly about moving grade try putting the on think be and are versus guide you maybe able are

Bryon McGregor

It's that in that's interruptions the is Eric, would, and normally in -- and board. supply ethanol about It's it's the challenges so much that with there's occurring I costs. corn, just across not volatility logistical about everything. about

were probably So it that information. if comfortable at would providing while looking position, a we feel we’d in more -- steady

we best the we see feel you a base think can -- as our with determination is, looks of like I build you forward. can look of that at that comfortable segmented we and information, provide you off kind make do what business, is, could what and if going that you look to and

Eric Stine

the years, operational about that the of think we X done. million a as as then $XX things of maybe Well, difference mentioned some result the between the Okay. you've you

I you EBITDA about this I'm So corn to storage called numbers I which X, Eagle, in believe We've out make -- another thinking in XXXX, now and the then I got is wrong. just tell have the $X incremental million me, want potentially certainly sure that'd you be said could right. another

Bryon McGregor

Yes, QX. That would in completed. be corn storage the would be

earnings what them call, we had the in So we've took in we did projects and we QX completion based the of those projects. just that on is identified layered

a While, But the on net, if bracket. of track, the million they're track all not you are rest much pretty in on world. all disruptions that's we pretty the and Eagle contribution, unlike $XX those projects from of few supply much had chain, the add in

Eric Stine

XXXX. of kind the at think way XXXX. to least incremental million about fault. XX-plus, laid referring storage, Yes, $X for for about in Eagle point range, for Is plus what somewhere what this you the my discussed. $X at million that would that be for had it? That's previously to And Okay. think an you Those $X the to out, million you then are

Bryon McGregor

Correct. Yes.

Bryon McGregor

if with is to -- historical look ethanol. thinking though I tracked you even today, other of real margin in panic crush corn. ethanol prices, cause -- the well kind prices prices commodity want the we're the highest seeing also relatively real about at Indeed, actually around fuel don't any

actually crush is same time. actually was better a it's tracked that So well ago margin than it year and the at

least. think a ground So and again, of at around. not stake be it moving just the with things lot prudent there's yet a -- put in -- we not And to I would to regard XXXX it's

Eric Stine

I can appreciate that. No, understood. certainly

certification. So that contracted. thinking Curious, I the got million XX the key about you gallons know

grade certifications. overall in received or the any in of what's weren't of way those Did is of overall contracting by those all given now today in that a going world for in your you were to number on and is Pekin pharmaceutical given covered it XXX. that limit the able the in So the XXXX, recently just lock higher medical market that you terms

Mike Kandris

just the out that We want what we're to year term. very And about think be be We look we XX% back and the what to want go do to longer I you at It's sitting said but to that that really Yes, entire to is to try XX. XXXX, to diligent. then at want that very have We to XXX And by want the to all at XXX the capable, a XX, want a No. sensitive to we place go be damage in. thoughtful. in way more careful and up able is we is to layer volume. of along contracted market, ramped very and don't we we've way market. be do were grow we XX, to been we've now

our gained us being and of comfort having that certified to surety the comfort that that to is redundant gives play going supply maintain think that a that to lot campus Pekin adequate customers Bryon -- or we on have honor our And do a that customers redundancy that of contract the of contractual XXX I level to inside with. path. to have want The by never make of certain in of market we'll be the to supply ability we're we to and a going the able our to we amounts. able customers contract certified that for because We're spot product lot we number. entire sure the continue mentioned

Bryon McGregor

to product one between able longer facilities, by us constrained forth allows you're back so to no also and the move the It or be other.

Eric Stine

with the -- Got XX. sticking it. that And XX just

line I of give is what it that fair XX your a mean, given mean, So not your is outlook, with to were. I in that kind number obviously, you'd expectations say ever that's

Bryon McGregor

also provided XX on we ended if that it's Yes. Yes. think about gallons sold. the we early I And and year you look, year we guided XX at gallons on indications last million like and up were million at

able product year. we’d be sell So to this expect to

Operator

comes Our from the line Instructions] of [Operator Dayal Wainwright. next Amit question H.C. with

Amit Dayal

to specialty XX is concentration there million on there Or any that any concentration multiple that alcohol sticking just number, that? spread is is? across mean I customers,

Bryon McGregor

necessarily not and talked X if about, I Actually, to -- the segments segments. it kind mean, at we of the that across indeed, look that board, business grow all you of across spread we actually were able those

to expand we So as make move actually had we chain able on those goal the and -- to year-over-year. a value up goal continue execute were we that as product and

and know, just So -- include Eagle. not that's and not that does to

Amit Dayal

Okay.

some is customers? of Or of on you for Got played front? to in With XXXX a now, own environment this to increases you for think guys Are respect towards to what about lag on types out you those sort guys? you opportunity we’re should there things is think shifted that potential cetera? about or have costs market. margins XXXX in Okay. How and do costs How you the and shaping their able up of between on we when can should how right we to pass margins, it. relative ingredients inflationary et impact

Bryon McGregor

across our all the on up product broke of asking lines? our different ingredients the kind you board asking Amit, you Were you part. essential or with to regards across first are Yes.

Amit Dayal

can any --just well ingredient you across the be I But generally as would color side, for on Primarily, provide Bryon. helpful. mean,

Bryon McGregor

contracts where of a a of selling more and products on they if particularly for you you're Clearly, you It's index ability fixed-price built the the have great the you're on what price, question. challenge. or pass selling, under becomes get to some depending are more that into

offset we lock input that try much much and something eye that able as or certainly as can So for as But to yes, possible. on -- be we to pressures those it's we spread. fix in products our a challenge keeping offset to to that making an can and sure those those we're costs as

Amit Dayal

I right. I'll other has but guys. color the off-line, question All on the Okay. had a trials, already that. Mike on provided take questions

Operator

turn to you. now remarks. I call would and Thank Ladies the for like over gentlemen, closing to Mike

Mike Kandris

for execute you, joining excited made, feel we We're everyone. about have support. thank extremely everyone, our we of progress as on the future today and you, about we Alto. us optimistic continue Thank Thank your to and and the strategic plan, you, continued

Operator

today's conference call. concludes participation. this gentlemen, Thank for your you and Ladies

disconnect. You may now

Alto Ingredients (ALTO) 11 Mar 222021 Q4 Earnings call transcript