Earnings call transcript Q1 2023

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Operator

Good day, and welcome to the Alto Ingredients First Quarter 2023 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Kirsten Chapman, LHA Investor Relations. ahead. go Please

Kirsten Chapman

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

Bryon at The issued call on call Kandris, providing the for details the are today's Company's McGregor, that altoingredients.com. also today and CFO. the financial prepared the results. presentation On market closed available Alto is Company's press a today Ingredients on release Company website after is CEO; Mike a

call will details Please today's on available X. through included A today's this the of telephone as A note available be May XX, information May on will call of in well. replay the the website be are speaks which that today, webcast as press release. replay of

information longer a no that You're be time-sensitive advised of time any at replay. any accurate may

statements. statements. Factors differences to, but refer previously X assumes Slide obligation uncertainties. involve that the future Except statement of SEC. such applicable risks considerations statements Ingredients the the contribute of which Alto that The results by Company's of and from the or presentation law, the limited Please forward-looking in factors, Safe to to states not Harbor materially risks Company and and online, in number of no filings cause and other differ time comments time with the to forward-looking some events, from update are available disclosed on include, Ingredients' could Alto those actual to constitute a as could presentation that any required

the To press as of loss will investors depreciation a being net was Company's loss for interest to any non-GAAP fair non-GAAP referenced. be believe in assessing amortization adjustments, expense. EBITDA Company's extinguishment Management information, income before Company these monitor unaudited in periods measures prepared impairments these assist management's and value interest In will income, and measures reconciling and the The the acquisition-related release. of today's adjusted asset or performance debt, financial operations non-GAAP review expense, defines measures the support of reported. for taxes, performance provision of the remarks, table expense, income included uses

of the Mike and for our On up Mike call will will plan a Bryon activities. financial review – are and on strategic open comment results. will the provide questions. call Then today wrap the

It's go ahead, now Kandris, Please my pleasure introduce to CEO. Mike sir.

Mike Kandris

Kirsten, transformative will continued we Since everyone, you, XXXX. March, EBITDA for to drive us which further the in our good minute. I you, and thank near capital joining to projects, today and a goals. our have in review quarter first discuss call our on long-term make Thank progress this of will expansion

sequentially. Crush pleased improved the this which each December. year are are have has with been our since impacting margins We market positively month also improvements, current Notably, business. improving

basis ethanol March which XXXX business. ended of prices, gas with corn greatly prices regional our benefited improved of and over December natural all XXXX,

in detail the quarter For generated positive adjusted the Bryon financial line the shortly. of positive we continue, strong would XXXX. will the results for EBITDA expect Should margins bottom crush financial results. month second we review of March,

commodity is reducing at though projects crush exposure positive series we This don't those exactly our Even we we to have long-term aimed near of control today, volatile margins and why implementing a are markets. pricing.

by increase profitability. Ingredients our Alto optimizing and transform operations and to continue to margins We expand further diversifying products

their are profiles. return We capital about our and excited improvement initiatives

end to when carbon of XXXX, million $XX by projects, of annualized increase fully With end XXXX, and initiatives sequestration, $XXX by million annually over of by EBITDA our we cogeneration the our the increase the to expect are capture completion and an near-term other realized.

paths. multiple pursue to is strategy our diversification, Regarding

differentiated most increasing and production highest products. are quality We our of

sequestration. neutral and plan well includes carbon longer-term primary yeast capture protein, grain includes and corn high as focus as our oil near-term Our spirits, and

where and, Regarding adding redundancy our costs, our by reliability own natural appropriate, plant efficiency, pipeline. corn near-term gas initiatives are and to installing storage improve

cogeneration includes converting gas equipment, biogas Our long-term energy and building our renewable natural our Pekin to at Campus. capabilities upgrading vision

current We our are resources confident facility, through generated capital operating expected and in our cash from ability to working near-term activities. capital fund loan our term projects

as As longer-term we our productive that with capital hold our will and to discussions we partners, funding needs far projects, continue at time. assess strategic

Let me capital provide on projects. updates our

First, I'll review our high-quality alcohol strategy.

market. wet we produce to proof XXX GNS our and at upgrade on low-moisture XXX previously, of discussed system As the highest products mill quality completed distillation the our the proof Pekin

capabilities, also packaging and the through acquisition distribution drum the Alcohol. enabling break We tote of added bulk and Eagle and distribution

on Recently, for we purchase product to remainder our working have added XXXX. place GNS beverage are of basis we the spot and a customers, new

XXXX. More additional place importantly, and our new contracting with customers this fall, annual for period to volumes we existing during expect

certifications Our advantageous EBITDA Beginning qualifications contribute work time. to by in approximately products estimate customers. in we grow be we XXXX, various towards million valuable annually continue over will these will as and $X

Regarding our protein. expanded production and corn of oil high

minimize plant to of As facility impact of sustained technology. high-protein production Pacific moderated idled installation natural to Magic Valley and This previously Valley opportunity temporarily discussed, in us the for an our the high gas focus finalizing December, created prices Columbia on Magic in at of the our the we Northwest. attention

and have resumed at of high-protein system. CoPromax installations facility We and the now all corn production completed Valley Magic our material oil

optimal systems and plant We the efficiency. new existing aligning at are currently ensure to all the operating

contribute oil combine third the volumes to at achieve these products protein EBITDA corn for higher annually. $X the quality by and and the begin both corn million approximately values facility dry and of higher We XXXX. increased to plan We production quarter. second We of the sales in quarter protein oil anticipate end full estimate of to will of high-quality

the our other oil plans of start dry three mills. Beginning rollout management XXXX, technology the in corn installation state to at late

a oil installed, similar we plants size, slightly aggregate $XX to different in average, in EBITDA over will we Although fully each is other Magic produce the to into facility results expect Valley. three corn installations million estimate annually. contribute When on financial

technology successfully dry will million other similar and contribute over corn expansion. over installations high-protein mills three other Magic the oil the is million out anticipate at EBITDA Valley, operational at we the our and system with We evaluate with annually high-protein estimate $XX expected plants $XX aggregate fully aggregate or the our in in will After high-protein in at economics. rolling

longer-term yeast into engineering successful complete to initiatives front-end and production. Having offerings, for the FEED engineering have expand or Regarding group third-party to trials, primary a completed plan qualified high-margin we product study. we selected highly our design

completed in study We expect QX. the to be

months would thereafter. operations. project This to yeast estimate million million product upgrades contribute the made increase EBITDA XX the to hence yeast the of annually approximately to past our potential first will $XX We in and over the primary $XX extend

in completing the in XXXX. of and beginning targeting construction early summer are XXXX We

you and also opportunity sequestration. As in have know, significant we a carbon capture

Pekin XXX,XXX As previously Campus. produced a discussed, approximately we tons year at of our carbon metric

negotiations this game-changing for Our project important in proceed earnest. advanced and

We selected FEED firm a to design. have determine third-party compression capture, and engineering

expect be QX. We study in completed to this

also turnkey a to provide partner of sequestration are the selection monitoring development and We transportation, services. finalizing

is goal to Our operational in CCS have XXXX.

of include sequestration As we is To be the annually believe discussed costs economic assumption the Inflation associated the production $XX ethanol. benefits of on metric ton, environmental XXQ per does last carbon can after and conservative Act, Reduction operating annual incentive $XX quarter, solely reflecting we this low any a of EBITDA. generate attributes with in million and substantial and not clear, over established we based carbon under the

and review On our plant efficiency, strategies capacity. reliability to improve of to a

to Regarding XXX,XXX million to contribute silo operational reliability costs, conservatively operating and now silo additional We improved EBITDA storage to Pekin Campus. procurement costs site, corn bushel and $X the over corn Pekin is plant our plant fully at the to contributing estimate annually.

on the our initiated Regarding process. the has natural the enables third-party gas new feedback and been the routing are initial been land steps, and which we around initial project pipeline, advance completed definitive to agreements the and Community has pipeline, positive. FEED to permit application interaction working construction study

usage the $X pipeline We optimizing fully our approximately are will by our and energy current million reduce of the with to When utility contribute annually. planning expense, sustainability our will our efforts. bypass new goal pipeline costs operational, which procurement, to

new renewable gas or more natural current on sell our will million waste estimate Upon pipeline Based opportunity in gas monetize biogas to RNG. us EBITDA than output, $X create stream and completion, produce could the current RNG into convert the annually. we and we for our for

our cogeneration a intended FEED design current the study support primary to needs, increased projects we power completed grid yeast and with CCS is third-party address energy offset of and our both expert. The electrical our Pekin, Regarding for requirements consumption.

based contribute EBITDA In cogeneration current addition to energy annually. million these in on prices, projects supporting that and approximately estimate we $XX will

them Alto initiatives capital our addresses of core the and of part advances Each tenets. Renewable Ingredients' DNA, safely is sustainability. our and producing products one address of are

the sustainability business. past ensure are are continual as labeled I'll ESG, our While actions review over our quality these and safety, improvements good simply and our decisions year. to process

of work have Our the included determine a all completed NASDAQ focus, survey we on with to roadmap and initial materiality of ESG action items. areas

our health, that our SEDEX, on-site to sustainability and such we components and code and environmental safety sourcing of some strengthened leading ethically and auditing goods program to with scorecards our security cases, as of supplier with ensure to We a transparency ethics XX,XXX have and are and data over and and, services. objectives, standards in code performance conduct, a added consistent supplier and implemented our supplier details with communicated partnered policy platform members, improve

achieve important our in Gallup for tools a to focus communication opportunity three-year with levels, and at employees. program than one more of goals mid-XXXX our Looking our metrics include of launched we survey. our program comprehensive with internally and assets, board and training we completed a in is have all facilitate been will for This XXXX. at sustainability first reporting. It's engagement December survey employee supporting Diversity has ahead, a a and we employee further recruiting engagement identify the most and our areas level, to engagement

achieve our XXXX at production and projects as We energy carbon emissions improving help X gas with our combined XXXX cogeneration targets us to capture, efficiencies do everyone sharing completed our We biogas have Scope have forward and for set development mid-year. carbon maximizing to This will information, both inventory and such boiler and to facilities. utilization, X third-party greenhouse ESG us and reduction key and with verification goals. look and sustainable lead meet all progress our part and upgrades

to the financials. you for that, of over review With a Bryon,

Bryon McGregor

impacted by provide I'll reemphasize quarter around business Mike. XXXX seasonal consumer swings results. can demand. our our be you, Thank like I'd to in color that first additional

For instance, summer provide normal activity is quarters in quarter [indiscernible]. of ethanol for and With period accurate a fourth ethanol periods, for annualization Therefore, reductions not will driving and projection increase usage margins simple or [immediately during improvement. impacted] winter demand increased margins. the an spring in first it the and

December, and March. challenging, February margin in from proved January benefited but we than improvement While better ethanol sequential significant

our greatly gross over As a XXXX. million XXXX result, improved QX of $X QX loss

$XX.X EBITDA. was expect a to negative and stockholders generate For common remain strong, In continued QX in assuming adjusted improvement EBITDA million. million, Mike XXXX, was mentioned, to QX as positive can loss adjusted and, we with XXXX, that available to $X.X they margins date

In EPA renewable outlook the EXX improved addition, for recently fuel the approved summer blending. by is was as

million was $X.X $XX.X Our The of end million of $XX.X cash represents at the crude in million in Eagle shares. to $X.X the and XXX,XXX March cash for $XX end balance million invested payments our million compared for at change to projects, earnout XXXX.

Given use these a of repurchases on resources. effective market current Alto's significantly undervalued capital investment return price, beneficial as and

sufficient Our and our for than liquidity needs. remains more strong immediate

million working December XXXX. was $XXX compared March million XX XX, capital to $XXX at Our

immediate loan committed these have facility to and in our term unutilized represent in million than improvement borrowing million plans. [indiscernible]. capital $XX We and In our aggregate, more resources our $XXX support million operations funds business uncommitted to support $XX under

summer, of of good as While long-term raise we no irrational intend an and or prices, to these at have it. conducting shelf equity our financial part we planning, this expires currently intention refresh

the provide While EBITDA guidance we will expect from it of have approximately projects benefit full-year this complete difficult XXXX, already from the $XX of capital is to year. to million we completed or for generated

over our year-end projects alcohols previously In fully XXXX progress other past essential as compared associated stated, almost forward look loan it our expect diversification EBITDA and addition, over the by in annualized ingredient products, discuss investment when the coming double we operational the our our double We term of made. the accelerated and again we've average three from specialty by quarters to EBITDA to nearly and years our year-end the further are to XXXX.

With that, I'll Mike. to the turn back call

Mike Kandris

we are specific plans, and revenue In about summary, optimization Bryon. our expansion, Thanks, margin plant excited initiatives.

pleased with and increasingly first ethanol We as are the Further, planned in executing margins progress, renewable crush the particularly positive are our quarter. encouraging.

expect crush and optimistic [indiscernible] are positive We on EBITDA adjusted based margins. current

approximately end of look million end our the and to of $XX annualized to which increase annualized EBITDA by million achieve sharing initiatives, roughly and by XXXX. with Regarding our CCS we near-term longer-term XXXX progress. EBITDA projects, expect including of will we the forward to $XXX additional expect cogeneration, our We

the call questions. With that, open I'd Operator? for like to

Operator

begin now Instructions] Amit Please today will The ahead. We go [Operator Dayal the with from comes H.C. question question-and-answer first Wainwright. session.

Amit Dayal

Thank you. Good afternoon, everyone.

Just are you to XQ respect outlook adjusted positive or quarter expecting for the net the you're the profit quarter? quickly, with the guys, on seeing, for margins EBITDA positive

Bryon McGregor

Right EBITDA. Amit. question, Good now, the comfortable positive with we're

world to be hope to but positive early guidance, know also able that Our of generate lots change. [indiscernible], still we a with to facts but net used I very give is still. it's a to it's continue longer

So numbers we're at EBITDA comfortable now, right with a least. positive

Amit Dayal

play contracted any this into that Thank mostly that. then you? in appreciate point, market, the also I No, Understood. is And or sales alcohol coming for specialty there at spot Bryon, you. volume is our

Bryon McGregor

entered first So in of gallons quality, the volume. gallons XX proof that in the of have with Mike about the dry the product as last off regards market represents the this we completed quarter we that spot of XXX – the quarter, or million year. The year proof, contracted made improvements highest to $XX of that's sold we million or mentioned coming XXX with comments value the

Mike Kandris

missed XXXX. a put GNS a Yes, That was – really I to little could clear the more that. coming – we lot more of referring out on cycle contracting or about

system now producing and so and wonderful. running And the that up is

when fully we this at fall. the the again spot the We XXXX cycle for year, contracting to are for the remainder looking get hit to market but of

Amit Dayal

And Understood. of year? EBITDA in half has Or one in any second one of improvement expecting XXXX, that to come expecting we XQ? for just This in me. you're the the materialized last are those through

Bryon McGregor

mean $XX the million mentioned you Oh, that previously? I of

Amit Dayal

Yes, yes.

Bryon McGregor

Yes, out being I as year. over think of the spread it

experiencing we're some yes, that. So of

Magic in – quarter facility so the we was recall, that of the – we're the that Valley we not earlier it in when assumed, QX. $XX included did Some you'll million restarting

comfortable and of but half the up of still – expect would we're the balance in So with I second show those those to year. numbers the

Amit Dayal

Thank you, have. Okay. guys. all That's I

Mike Kandris

Thank you.

Operator

comes go question Please with Stine Eric ahead. next The Hallum. from Craig

Eric Stine

Hi, Mike. Hi, Bryon.

Mike Kandris

Eric. Hi,

Bryon McGregor

Eric. Hi,

Eric Stine

me, the guess, can XXXX about your about out were that just follow-up then you question, kind it of approximately so phone, EBITDA you you see about out I you has that $XX that, confirm, of potentially talked just $XX previous outlook average on I not soft but typical sure this, it of into $XX in been have XXXX guess your way for three-year that's half been phone kind and to the So cut and – talking confirm million, XXXX, second million sounded talking my might want this The rolling XXXX? and how anticipating just you point. I and $XX again, a I incremental, or I'm million million. to about double Are at to it would and that incremental if

Bryon McGregor

going be this is on talking we've that benefits, producing been incremental would that basis. to run about whatever these right, adding to rate the we way be So a projects are

a some right, which So good quarters million really is incrementally top really would then it that. assumption, quarters, if a includes yes, good both good – $XX be bad base on some of and

at So in $XX adding you $XX million be on full-year. additional products XXXX you'd a million you'd then top GNS sold rate you're would have gallons million million, be an $X and for of sold that, that, incremental you're so assuming this for on that or and additions $XX include which run year, on

facilities. run benefit the full to for to We well as Magic So expect would you Valley that. rates get the see

that now storage and – as corn corn yeast, addition storage, incrementally, oil I'm we sequestration. benefits capacity staggered corn the be sorry, having them then, rollout the the benefits in of Mike and corn at cogeneration natural additional is time, gas, having the savings of is renewable a out course, from bigger rolling mentioned, from in and oil million, protein out, of projects, pipeline carbon adding additional the facility. the of then oil kind and sorry, – and course, you'd corn $XX And over rolling get [indiscernible] to in Included that

Eric Stine

Yes.

it. All Got right. Okay.

I like guess it that, So did sounds I correctly. that understand

Magic more Maybe I that anticipate the process rolling plays or kind what on it's sure that of either anticipate back some to longer and great. you've thoughts yields you talk of it a can do you do a it something where bring it? Valley, it as you're of that correctly? smooth completed little that's ramp-up? about running up, you just linear down, So out mean how term? early on bring turning expecting it's I And it maybe just to make out? Is type you've ramp-up then general mean Or got a just

Mike Kandris

Yes.

integrated the the a up, within fully a It's just is outside. not the plant. is this and So back plant to system bolt-on

So fine-tuning what up mechanisms trained, that sure speed. sure to controls we're the is is are make Eric, to make we're doing right everybody different all and operators now, the

harvest we're this technology system. on have site, in and We with dialing

expect We and in to weeks that dialed operating. have within

And in protein. sampling as in to worked placed. on people continue process protein We've then product, area indicated, several the already the with of get terms acceptance a in we we is and go that area the high that through the of and working expect surrounding XX% over to you which of with folks product various the

by oil, of – the we So will don't is system grow fully the Corn of work producing that be up strong do of we to a expect up product. the as away. for and a be demand such come to end happy right a There's But way, market. we that it will running, and the anticipate as quarter lot go a will forward. soon should system bit the by up ramp-up little running, this fully be oil corn

it's we side. So beyond. the will be Again, on then ramp-up integrated a QX fully for and expect it QX, mainly it and protein be to through

Eric Stine

it. Got

last Okay. for me. one And maybe

the a look million lot economics? Or splitting a number that's number of on when out in for I Just know obviously, carbon – potentially a the that after, know that you? kind targeting And that you're the that incremental. you would it's capture, $XX all-in plus cost. having partner to where of XXXX, I you're Does contemplate that's be

Bryon McGregor

that's options. about We're exploring for various way as It's a not with could, and the So best associated both right? may then seeing company, right, – parties, the with that, key the as talking independent with and require the parties great environmental part talking discussions thinking the well to question, with It optimize the as relationships attributes and discussions, it Eric. the other of certainly but there's crossover as all in negotiations start well. about and it for you shareholders that. We're well downstream value as

lot for a there's that So of demand product.

discussion of have lining the you that of is course, want of out so product. a good And that and part is, making that source sure customers that long-time

So significant this to of lot a a fully nuanced fairly resources a of this committed clearly it's opportunity, there's one. at and and but lot complex attention a And point.

Eric Stine

Yes. And that's be would I guess it XXXX. why

Okay.

you. that's think I Thank for it me.

Bryon McGregor

Thanks, Eric.

Operator

from Capital next [Operator comes ahead. Advisors. Please David go Kingdom Instructions] question The with Bastian

David Bastian

for my Hey guys. question. Thanks taking

guys really quarter. about number good It margins First, drivers realizations up? the essential of were being I what that was this key was the wondering curious got like there. I seemed ingredient you

Bryon McGregor

ingredients in – that, that we've essential think I is that is Yes. a David, wet market how mill clearly of driver well the operating. for part big Actually, it's us is

good So able yields up. results. get been really we to saw We've

had distillery, the to to that we've at requirements our like, accommodate of that better and back it's wet enzymes certain able – otherwise last over flag, the whether the the If requirements, you meet the has our couple us we be allowed certain not term, go cocktail, changed years, we've to to the yield get the like. or mill but ICP at customers would and

yield changes out made lot seeing some and of we've we're that. that, So a better to

But our better to So swear wet various drivers you a get getting that put $X to our jar Mike, of alignment had the we've the value out those various had you maximize better of of lot corn to values think... value for mill there. ingredients, be well. also able that almost as anything in essential the else

Mike Kandris

to critical of regard. Bryon David, in mean, us the the to absolute made wet that's we've mentioned, have you that No. the an path essential for with I out progress the as get mill, great – ingredients. value take And

David Bastian

That's Got Question on it. Thanks. liquidity. the helpful.

your for draws of reason there remaining liquidity on the didn't see Kinergy credit line the loan. your mentioned Is with You term I that? levers. listed a

Bryon McGregor

No.

think to capture in the we that I remarks. prepared tried

on $XX that did would balance line is quarter shows debt. first the sheet of that up of of be we mention QX. – Yes. the month assumption end we in So well, – the availability excess the the long-term off, have was Kinergy or that into What under as the million

was that million $XX for so – And $XX that's the plus million. million $XX a available

the $XX and available and that's So in $XXX That operating $XX million to improvements available, you that's that's committed additional gets working plus income million plus an million availability. million. in uncommitted, but the facility under improvements $XX the then capital additional Orion the any

David Bastian

then if And working working the capital think you'd that be liquidity. as to reasonably you you side, source do needed? How able on a draw much capital, down listed Okay. on of

Bryon McGregor

Yes.

capital that – under borrowing much different how to of amount Wells is credit additional collateral want rates of really their you the you of that line excess the you – how that difference on reflects advance It's existing about top only right? base excess get for to so may which that certain fact make availability. way the sense? had Fargo, and Does is another – from they So just this? question same it the the a do availability, way another before, it's working perspective is think on put I But

David Bastian

Got it.

you. Thank for That's me. Thanks. all Okay.

Bryon McGregor

David. Thanks,

Operator

like closing conference our Kandris concludes Mike any back over would turn This the to for I question-and-answer to remarks. session.

Mike Kandris

City and like arrange Investor you like conducting if that, this a let again for us today meeting. And to a Relations have in H.C. continued team month. you Thank I'd New with your later know non-deal with joining would everyone support. good Thank for Please to day. you. a your York Wainwright We'll roadshow be

Operator

now for you concluded. Thank has presentation. conference The attending today's

You may disconnect. now

Alto Ingredients (ALTO) 8 May 232023 Q1 Earnings call transcript