Earnings call transcript Q2 2023

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Operator

Good day. And welcome to the Alto Ingredients Second Quarter 2023 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please also note, today's event is being recorded.

At this time, I'd like to turn the floor over to Kirsten Chapman, LHA Investor Relations. ahead. go please Ma'am,

Kirsten Chapman

thank second for call. quarter And for us Alto Ingredients' XXXX you Jamie. joining all today Thanks, results conference

the COO, me McGregor; with Rob call and On Bryon CEO, Olander. are Director Kandris; Mike President Interim and CFO, and today

issued a the closed Alto on call is presentation details for a today Company The the release financial at available company's today's the results. press altoingredients.com. company's has providing after Ingredients market on also website prepared that

will webcast be of the call through be A August in details telephone today's website. replay on the available which today's XX, of available Ingredients Alto press replay included are release. A will

information Please the on note X. call today, speaks that as August of this

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

the considerations on the statement number to involve refer those could comments slide states some differ Harbor statements. and Safe materially available from of presentation and results this The of company's statements that Ingredients of in forward-looking that actual Alto the which future online, uncertainties. of a risks constitute X presentation Please

contribute filings such Except required Factors time cause no assumes or any by statements. time law, update from previously forward-looking and Alto not other events, SEC. to that factors, and are differences include, in to the company disclosed with limited could the to, Ingredients' but risks applicable as obligation to

measures will financial performance reported. remarks, be Management non-GAAP assist referenced. non-GAAP company's assessing prepared will the believe in the periods of for performance the In operations being these to investors management's monitor uses these the and measures measures

any income of adjustments, expense. information, in acquisition-related depreciation a release. expense, table before included today's net unaudited loss expense, fair of press the of The reconciling amortization non-GAAP interest extinguishment EBITDA income debt, company as impairments adjusted income, and support review for provision asset loss company's was interest taxes, To and value or defines

open Rob and our review Mike Bryon On Q&A. will will financial results, will introduction, the a and plan today's will call, our strategic provide comment and Bryon activities, call start of on up for then an with wrap

pleasure go It Please Kandris. my is now to Mike introduce ahead.

Mike Kandris

you, Olander that President today. I'm Thank morning, has issued joining And pleased been Bryon this in for to CEO as continue director press McGregor everyone, the has year and release Rob I been appointed have you, CFO. the transition the operating Kirsten. as announce, and us thank for to will up the company appointed support as and chief on the leadership a officer. to interim agreed during

very do end, and I for succession working one the vision take we so planning it on To believe management last and that We even our to outstanding optimize diversify years, expand leadership, is and seriously. strategic strategic and Bryon revenue EBITDA. the of that three his years, streams, we for strong closely more Bryon that important and many plan capabilities. together most things been have recognized is operations,

Brian Prior in in needs. The business a and he to XX Alto, financing gained team developed lead understanding board will and Bryon. and sustainable Congratulations, of Ingredients' the and as of excess he Alto for Alto to $XX our are deep Then years, critical managed I XX projects, valued profitability. markets a global over player over confident billion. infrastructure for industrial capital drive

and an will a been a is public CFO, contributor accounting Rob player be strategy. our has new and valuable company CFO. new Rob. our Olander, implementing process He as Rob strong our developing improvement. expert in financial Congratulations, accounting, in

McGregor. Now, hand and President CEO, will Bryon the our call I to

Bryon McGregor

member to to you projects work forward I Mike. the as leadership our we you, as board. your Thank working look of a to and transition, transformative advance complete continued with our

I'm to comments my keep brief. today quarter. the everyone to speak will to Turning delighted and

term long transform Alto we takeaway key to that successfully executing are Our achieve and our our targets. plan EBITDA is to Ingredients

We operating the by cash economics positive and continued solid from adjusted EBITDA flow. specifically, ingredient improvements markets specialty income, our by and products. positive posting complemented crush a alcohol QX essential favorable in pleased ethanol We're delivered the margins, quarter, XXXX, net

continue revenue streams our markets. to to to business significant capital commodity support expenditures transformation, make our We exposure and diversify reduce

With our the ultimate focusing goal we margins increasing low on of profitability, in XXXX, cost/high late expanding began initiatives. and modifying operations, value

as grade so our were financial Since demand and in projects. were strategy, XXXX, then, as share efforts as our when prepared market alcohols, market. well we high sheet to our In and significant a investment did liquidity, longstanding sharply, we Our serve on fruitful. quality balance as continued improving well term successfully, as pharmaceutical results. line for increasing strengthening alcohol progress of accelerating producer top the have rose We bottom making longer

focus near including upgrades. term to well increase plant strategies products, been oil, protein of production corn high to has spirits, other neutral corn reliability storage by and Our as and adding and execute improve grain quality as to efficiency high

convert we sequestration. natural biogas waste gas, pipeline, capabilities, produce our install yeast, launch importantly, a natural capture our to carbon renewable preparing and Now gas most primary cogeneration are expand to and,

different of prudent financing. efficient, To Each a capital our has timeline. be with projects our being we are

facilities. term using near our excess working capital our and operations we resources, excess under of generated availability from endeavors, our are For cash credit

longer and discussions capital we our partners, will productive with as term those we appropriate. needs strategic continue projects, For fulfill hold to

important have have our or as we design on our to next quarters. are of front end note, made complete we to expect in finalized, share each we information initiatives, more them. It's publicly FEED studies Working that engineering capital we diligently the however, which can on will few progress

projects. updates on provide Now I'll capital our

market. XXX alcohol, to ultra-low produce quality moisture from grain long the high the quality, projects producing proof proof revenue near neutral spirits XXX on highest now and we term, term first on Regarding

for are As garnering for new XXXX. annual value high planned, contracting sell additional and we us the positioning qualifications, customers to to existing beverage GNS period

XXXX. the In unique on and highly GNS, of our product basis spot to will remainder continue differentiated supply sell addition, moisture we especially ultra-low a for

continue to feed obtain to and working high are and permits Valley expanded dryer is low protein integral on full of at cost which a production of products capacity, corn oil, ethanol, the our optimizing to we corn other Magic production the achieve Regarding basis. and high to system protein, oil align

time provide full our at for production and needed and now achieve fourth optimize we expanded To expect protein properly to XXXX. market offerings products in appropriate coil the these to value of place prices, quarter the

installation Regarding negatively production, primary on cost pressures be design and have expect yeast These the an and than impacted is expansion into originally inflationary progressing well anticipated. of work higher costs schedule. to we

On the product have yeast side, primary for positive prices risen. also

continue XXXX. in Assuming construction to commencing the justified, returns we early target will remain

more deep know will as We work progresses.

and we sequestration, carbon unique Regarding compelling capture opportunity. and a have

Mt. largest one XXX,XXX ideally campus sandstone approximately Illinois carbon a discussed, operation year, significant carbon capture the Pekin located metric monetize tons in locations. of And campus Simon yield is carbon most to sequestration. above is of storage we which our frequently current and as intend Our formation, of sequestration resources basin, carbon the the US one the to the proximate and through

believe a metric clear, tax carbon or Inflation based the natural annually annual $XX is EBITDA. As of gas or Act, ethanol incentives generate not with the conservative ethanol, fuel, we $XX ton. include after the production under can XXZ low we costs any stated ethanol, million over fuel, sustainable assumption solely this per synthetic To associated before, with from including SAF. XXQ at is be Reduction on use of attributes sold increased of in jet blue economic environmental production and and sequestration does carbon operating of the aviation benefits substantial and in This

have Notably, and have capture, monitoring further on we project project and and to services. firm requires standalone To selected our our turnkey contracted gas provide CCS and which to returns excellent the cogeneration determine a the we engineering the compression transportation, initiative, basis. of this of natural design, FEED upgrading development partner both study pipeline projects, sequestration

have achievable this Our an to CCS by goal the XXXX. end We is schedule. of but represents aggressive, operational believe

and the finalizing of publicly installation While we the nature associated costs discretion, requires compression, capture limiting we time. are this with can what the fund activities discuss these arrangements at to

we until do reveal to mid-XXXX. not partners strategic expect As our such,

as plant operating corn call on the Regarding long first, and discussed is improved from plant cost new corn greater reliability last to our costs. fully and projects, to saving costs, our at Pekin near contributing storage campus reduced procurement term, operational

finalizing completed new targeting a of and year-end. having construction study, FEED before we gas access as commencement easements well pipeline, as are Regarding natural the

to Pekin campus. pricing the costs goal and projects. will Our It improve natural our procurement, stability, support future at is gas which energy our will our also lower capital for needs

biogas the gas will by costs Additionally, natural pipeline gas. renewable lower new into and stream, waste environmental revenue operating reduce our converting create footprint a

Regarding expanding financing study, furthered FEED we campus, design initiated our work, Pekin the have prep completed capabilities and our the discussions. and at cogeneration

as current our also address energy to for capabilities as these expect operations projects. well capital both We our needs

like I'd turn the on sustainability. daily our which Rob renewable commitment our over to is that our to remarks, call focused business products, Before reiterate financial underscores for to I

status Silver proud our and that As part peers. pursuit Metal sustainability percentile ratings at EcoVadis We're of we both during ICP Pekin, our QX, the of amongst XXth in indicating achieved sustainability, efforts XXXX continue We programs plan statement. in bolster and this team's proxy our on procedures to health details and on include and build focused safety. implement to and greater our

the new CFO. over Now I'll our call to Rob, turn

Rob Olander

Thanks, Bryon.

increased capacity XXXX. significantly from profit XX% utilization from XXXX and production our QX QX XX% Our in gross increased

two expect to for we capacity production ahead, further Looking increase reasons.

First, to are that achieve Valley expect Magic systems capacity at we optimal aligned, when facility.

basically economics of low new new a Columbia shifting recently low opening fuel for justifies State production carbon a our market that approved the ethanol Washington north, Second, plant. standard the carbon fuel

to XXXX, QX $XX adjusted For improved we million. EBITDA

well we and margins expect QX. XXXX. margins July's consideration, adjusted as EBITDA Taking QX positive for positive were positive spreads as this positive forward so crush locked ahead, currently current curve, into strong, we for press some generate a Looking in

million million. QX in $XX During $X spent to investment XXXX, bringing CapEx, year-to-date we

for shares average $X shares September, campaign X.X $X.XX price common Since of purchased an back at $X per we the our share. also million repurchase for have We approximately last bought a share total stock of million beginning of XXX,XXX overall million.

return Given market believe these beneficial use price, Alto's repurchases undervalued we are on of a and investment an resources. effective capital significantly

balance million $XX XX, to up term up growth total million to an additional initiatives. borrowing facility, June availability $XX and on As $XX loan line under request our was operating under to an business and million credit, support $XXX option of facility. cash availability of million loan was and operations $XX our our includes our Borrowing that million XXXX, to

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

Bryon McGregor

Rob. Thanks,

our for for reiterate, to employees side open customers, covering all the shareholders dedicated is questions Before long to term analysts, stakeholders, call team driving as sustainable like I'd ourselves, and to investors. sell our including I value

that vision. share the for We best pursue investment to our believe option of of strategic party continually capital company. mission, together assets board, value industrial the part enterprises of that with and to maximize provides inherent value As our liberate approach third the our management, legitimate with this partnerships opportunities the

sell to more and facilities, chosen appropriate, also invest productive those profitable including and Aurora, and non-core proceeds Madera Where previously in as and demonstrated, we've Stockton, alternatives.

experienced is team our value leveraging from Our diversified, and specialty our to sustainable ingredients. and assets deliver committed alcohol essential revenue more to streams and higher

is value far greater pieces, strategic sum the an and benefits evidenced high improvements. Our of coming and carbon parts quality value our cost carries will our even products capture plan fruition to new by as The when and our sequestration be aggregate deployed. from individual higher intrinsic than is

be about long to increase which $XXX of continue annual the by completion and the other XXXX by million XXXX when we realized. our $XX capital the approximately fully we excited are by our of such, over cogeneration, projects near expect term initiatives by to end our EBITDA projects, and of CCS, term million end our with incrementally As

call Now like this questions. open I'd to for

Operator

Instructions]. [Operator

from question first comes Stine from Craig-Hallum. Our Eric today

Eric Stine

things very coming July, got markets crush are to other to given million think fair came the stands about I on, as is here I thoughts? a operational of And you today, factors off way that just ethanol positive. that be But the that it can but there know in our are just that directionally You seem Or expecting adjusted a me change positive QX. it given that would should directionally, sequentially for to it? it quickly, guiding EBITDA $XX you're know some higher. you've in drive

Bryon McGregor

now, harvest I But that, harvest corn a That as think will is and coming be and being From seeing it still occur. what into disservice margins to – well I'd fourth would was on to as a year-end. as your quarter said, crush say we're be think there's through actually questions Rob the also positive mouth rising, bases that we said, ears. God's the But right to positive the quarter to as comment would when through rising, prices with through we're sure.

expect quarter positive good But been able QX. again, spreads. lock the some EBITDA and for we've We're to margins in feeling about

Eric Stine

capture. carbon Maybe just on

and if million, percentage at that's you get kind $XX I of term if the but of it solo a plan, to just know you're that's million So, economics. clear, or going definitely longer a $XX the be high

maybe confirm you're you've towards options take kind table? doing, you're the of approach? something where work as first. And is the it so of Just early leaning then a of we on some Or that still all got more partnered should that

Bryon McGregor

Well, certainly paths. down we're going

selection. to the bring the the the COX, optimize have not one certainly final the of to the since We to company, benefit made intent a company to the returned right? particularly generating that's bear that's for shareholders value the is But and we're

that that are in those they're But in. or sharing alone just doesn't that are that, And execution The of are mentioned attributes environmental I would numbers about, whether of that premature include it execution that's we'll talk be million that we over the the reason and we that the can benefits also to as the we to that remarks, associated that economics taking in by sure we're get XXQ. as be it are we optimize that, all XXZ And so the part best make information make because certainly $XX think is available. prepared that all we and drop ourselves with and all It sure really and and those going our place. available sharing today. you bottom we line are the nor some contributory the whether beneficial that that get is that around

Eric Stine

one Maybe me. for last

Just protein. about was and newer did diligence I of on early high a it, due a but you CoPromax, on know it lot technology.

Just your if early that that's talk it's could played I expectations. at Valley, still but maybe you original out – curious how about out. how Again, versus Magic played know your

Bryon McGregor

to the will, facility. the through hoped is accelerate of be Clearly, if the in CoPromax of the you startup. had that, technology regards to through significant to We able implementation the, profile

to any moving as assets of so, the have of time were able a lot project you out of with all line and And you different and that facility. would you need that changing the be where operations parts to

par the good on to facility. able operations results both basis sustainable But and an in do and corn and protein, seen with these, oil in capacity ongoing, for challenge you're being market. able do in individually We've be it to the open what of on is all full real hearing it at the

expect making we're have before working that, or progress. of good we do We're be So at we longer able remain it's full hard than But QX. end that But taken that. or capacity expected. to optimistic and at on to we year-end

Operator

question next Wainwright. from H.C. our Sameer Joshi comes And from

Sameer Joshi

you Bryon, too. life. Mike, towards enjoy to congratulations. retirement trying move nice Rob to see And And and

Or these? this use is my how studies. have of Is it question and just months? completed FEED following within each So, to estimate CCS progressing? few the on gas first primary nat up going Do is the you next on engineering any be for front-end it

Bryon McGregor

about equipment FEED that getting on and bids the and and the done just out had now it's cogeneration, for lining study materials. We

gas regards natural that to study FEED pipeline, done. have also With we

And making mentioned our and the the all the we point, start And are, kinds carbon As at facility we building the that those foundation. again like bid of just to of so before that to make would this then prepared the firm obtained able in sequestration good some end improvements to course, expect on of important we of be we're integral at finishing would we've to And a remarks, year. of facility, that up the it's on easements. work.

there the and as working we'll on and making concurrently good those well. sequestration need continue to we're carbon progress then So, progress to

Sameer Joshi

the going alcohols sales, next certification On how for customer the have is cycle? buying the Do process you the ongoing that? any for on specialty insight

Bryon McGregor

some I quarter in actually early actually would not to well. in but it's the going only exercise. also the pretty seeing just fourth that think actually product, interest be what We're otherwise

corn were prices because partially QX. in that's where off think from materially seen I we've earlier come they

the crowded market, And specialty feedback. general getting So positive. would that's really though, especially a again, in it's we're say, good that, all product. excited And, we're space. I about

And so, along we with to forward we information you more look here. move sharing as

Sameer Joshi

beneficial least increased ethanol any at And the seen you that. on we positive expected term. are the Have in benefit demand understand and as from Is any the EXX requirement? the sales, there already crush near a of result spreads

Bryon McGregor

I think I still but demand up it's think I solid all contributory hard year. seen XXXX a We've it's margins think to integral. that from down to yes, I it's measure. this gas But, that think But, it's been yeah, slightly, bit. the

regards and the I also to in think values just And market with and we've discipline been contributory that's generally seen that. space helpful to some that volumes. also production production

Sameer Joshi

this tied is other And capacity have you access such know And of Any this Do $XXX to parameter? last to know what one, to we cost $XXX of the million. borrowing I capital? million it LIBOR? is

Bryon McGregor

think I Yeah, we do.

out figure retain don't sources, you've – to as we'd and – from But I ongoing inexpensive. the which that, laid math. our on do Rob? X.X%, borrowing cash and Rob have have of three is our credit, of we know then top line have but think, cash really You'd X%? I got out, what's earnings, to Something, or and base operations

Rob Olander

that. Yeah. Like

Bryon McGregor

the the Orion SOFR we spread And public. on all have rate It's plus, is, then small and top XX% that's then term at [indiscernible]. the of whatever fixed loan. that, from

Sameer Joshi

progress. the on Congrats

Operator

for to be turn and with like the closing question-and-answer ladies management over we'll floor that, any remarks. to ending today's And gentlemen, session. I'd

Bryon McGregor

at day. in Thank York in and Jamie. great Thank joining XX. XX September City Have H.C. conference you today. be We'll New Wainwright us you, a all again the for

Operator

you today's We conclude we'll conference for that, thank and Ladies joining. call and gentlemen, with presentation.

now your lines. may disconnect You

Alto Ingredients (ALTO) 7 Aug 232023 Q2 Earnings call transcript