Alto Ingredients (ALTO) 9 Aug 222022 Q2 Earnings call transcript

Good afternoon. And welcome to Alto Ingredients Second Quarter 2022 Results Conference Call. All participants will be in a listen-only mode [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

And for Gary. conference all joining for Thank Alto thank Ingredients today the results second us you, you quarter call. XXXX

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

us joining thank Thank and you, today. Kirsten you for everyone

well. essential ingredients serve to Our continues us diversification into and specialty alcohols

the we As to for future. continue build

broadening will capacity, enhancing base current strengthen even its systems and reliability, distribution and In expanded production Our reinvesting and our essential projects our and operating and efficiency specialty increase asset and includes storage to improve generate in capital plan upgrading profitability. corn short, greater plant alcohol ingredients. equipment these our

for Before income I Biofuel in quarter from I'll update EBITDA net included second million Program. long-term other XXXX, a plan. of Producer financial in this you on our efforts which cash $XX.X our will progress, the we in recorded review I'll our detail adjusted to and review the now note and strategic USDA’s more Bryan information positive moment. related

with of our a During throughout the of maintenance managing as projects projects we control. accelerated portfolio. second the within we challenges, are this litany improved repair as equipment macro-economic time and our In upgrades liquidity, well several quarter

boilers new capabilities purchased will greater our the old of They reliable a two two With interconnectivity capacity facilities. will of increase efficient. and enhance campus. boilers, Pekin state-of-the-art First, the and we three for our replace ICP the steam we the Pekin and more units, recently both at between

Plus new cost. across and of have increase Our system control will additional energy the energy access usage lower redundancy campus. our the will

and expectations. our drum in are tote break-bulk the line acquisition, Alcohol Eagle sales our Regarding with

to years have integration in costs relationships, profit freight is our compression. believe Eagle’s drums increased to distribution our this currently complete, progress The significant and totes leverage we have expanded Alto’s resulted produce to to made we through have add and we Eagle’s and come. Although plan some will benefits customer against for base, offering

at specialty Pekin We alcohol mill. have our wet our prioritized upgrading equipment

additional are the beverage upgrades, the customers we we raised enable Eagle consists the two In our and beverage best-in-class, increasing And expansion. with transaction. further service essential synergy Over requirements Idaho, will able be customers, quality their project these track of highest standards. with ingredients This will on phases. to us and of equipment be to the our years, have quality many meet

extraction Valley the in in we Valley early expected complete protein. better is Construction corn and our the Also, Pekin Magic the extraction second, phase are the at how once installation technology track to the the at expect it phase number our our the of of operational, of XXXX. This We to dry goal protein installation to at Magic site corn oil, additional complete. in approximately And and production storage will and the facilities. other the before of intend with out weather. us oil the our corn Corn on facilities technology the to the by other production mills. high remain the accelerate expanding The have of and Based place extraction oil days mid-November. roll our capacity separation inform at complete project is meet of preliminary first on we and now we further enhanced results, double and will to representing than second holidays winter commence storage

a at additional We numerous have to made also upgrades name our facility few.

oil upgrade the expansion ICP’s corn production. We of and completed have

corn load all capabilities railcar We and storage across increased have oil to out locations.

We the efficiency to turbans. ICP, which reliability. control projects have scale mill, are included at And the the our made to one upgrade at and some These truck our logistics at commitment systems of access front upgraded upgrades. rebuilt of examples to two we wet of plant the end and improvements at improve process the facilities

also projects Pekin. project regarding are in gas natural our longer-term at renewable We engaged

are with end our phase, of We an currently by in making engineering and XXXX. impact of a design the goal

$XX ton sequestration, raising per credit metric recent exciting, and project Inflation US and very Act the capture improves economics, Senate's the to from carbon significantly ton. our $XX metric per approval is of capture Regarding the carbon Reduction tax

pipelines and as and a of a largest our development atop implementation actively identified project we sit for the been numerous our Pekin of clarify campus. As coX These standalone options strategy the year value this inherent to options, at important previously facilities under our our our discussed, the this currently coX will maximize metric accelerate the area. of sequestration. the of of in we Simon have XXX,XXX of of the ranging various from decision tons of best produce Approval country and To aquifers pursuing formation, one legislation Mount the approximately and in sale will project. development coX, to greatly one the

Before to fast has call an Bryan, meeting. our shareholder chemical I'd our to over with board like She Gabby welcome is advising Independent in been was engineer for elected annual experience board Gray as I and in the past from refining, Bryan, who the the best to board. for to the retirement a optimization, the and over of a to recently Director, wish service, John for as operations, I'd his also as safety like that, and you year in the financials. his well review him turn management. regarding With plant thank process Prince

quarter and prices. primarily due sales price per to Mike. I'll production reflects our of XXXX. increase largely which that the and of additional our you, results Net sales This around second up XXXX. from Thank some million, of translated of second corn is provide the million fuel, into color Idaho the and supply metrics constraints in plant quarter ethanol $XXX the $XXX were gallon for average renewable higher fuel higher addition

cost were sites. For board full the by corn largely reflect to delivered bases. of crush the they in offset In our improvement corn our did not while rising quarter positive, short, was margins crush the the

freight second As the such higher quarter were total sold our reflects lightning the volume utility. which largely industrial offset our the Alcohol We from SG&A quarter million million expenses third was we to on Also, $XXX and for our XX% marketing of logistical were greater reflects derivative in future outage value doubled XXXX second a quarter Eagle were quarter’s $XX essential disruptions. contributed related of exports $XXX and $XX contingent Alcohol ingredient gallons. positions. as alcohol offset and X% by ending on second ingredient a non-cash contributed recorded Sold adjustment and from alcohols cost demand. Goods and of to quarter $X expected XXXX. party $XX was inventories the XXXX million $XX our in related costs our million strike reflects noncash $XXX expenses we power $XX of essential capacity, with and sales sales, million, majority million service and the production costs, bases, production million. our increase increased partially local forward second core to increase or payments. associated $XX resulting and versus significantly specialty gross the at profit. This in line the million campus This to a Specialty gallons. million Cost This million corn of The sequentially. reduction accrual efforts the sales around to assets. Pekin Notably, reflecting increased compared And well by the over strategy trading lower increase, in million focus XXXX. our $X contracted delivery high market unplanned gallons, unrealized our expanded of acquisition XXXX gains largely were an year-over-year of as

to related income quarter, the was companies which COVID-XX to the USDA, during mentioned, experience the from renewable grant fuel a related Mike losses support part cash we recording Act million the to As of $XX.X CARES pandemic. that

diluted deploying the income common are or quarter operations accelerated share, in shareholders support We million ongoing million, mentioned. was $XX.X million, share to compared and important to the of compared per of facility was we quarter XXXX. $X.XX $X.X second projects as $XX maintenance, $X.XX EBITDA already Mike infrastructure XXXX. have Adjusted second some the including Net of per funds or to to $XX.X in our previously available diluted

from equivalents and balances, Our capital represents which cash $XX already $XX an This and compared outstanding expenses $XX.X and is by million for XXXX. six of and include maintenance of over At in at XXXX. December December balance than sheet XX, to of XXXX, June capital XXXX. improvements in million $XX first as XXXX, million balance. was $XXX and clean $XX $XX repair USDA incurred XX, revolving million the credit invested $XXX – offset million net over cash million June line our accounts XX, Alcohol, improvement million of the our were inventory working million with receivable month XX, and and higher six strong, over more months of grant, Eagle totaling Increases

we QX. no liquidity additional further debt, complete have revolving in line renewal our credit We we expect our the strengthen to and of as of

crush margins remain third forward ahead although Looking to positive. quarter,

short-term of anticipation, coming use we to and prices. with corn In to higher scheduled related are corn that much commodity of bases harvest of our in our reduce into repairs have QX fall the a Mike. With low back maintenance call minimize the and I’ll We -- corn late high and turn our inventories. impact relative

Blended this years ago, second the transformation the have alcohols accelerated expand quarter margin horizon. since higher XXXX, extend to work April specialty capacity. began have our million the essential redundancy, efficiency, adjusted significant over reliability, short strong Alto balance sheet, our is Ingredients’ continue we XXXX, summary, only on infrastructure efforts distribution projects. and $XXX ongoing and emphasize two increase generated products, million projects In to critical ingredients. and in time we in of financial and yielded our With net more EBITDA we our benefits relationships. In with a plant income, in $XX to of These and

We to capture variety are growth. opportunities improving our a profitable drive position of and

to to investors like meet York us open Operator? the questions. to the HC I'd invite for I'd like that, Wainwright Conference in With City New in Finally, at with September. call

[Operator is question Shahriar go with Instructions] from first Pourreza please Guggenheim, Our ahead.

Hi, of good kind benefit. is doing afternoon of Constantine contemplated just capture And It's off and start a with kind wanted I actually around IRAs carbon that for Shahriar. the obviously here the big you're storage. work as the team. that being to

the done. work around for the about have decision, investment If threshold there. that timing thinking there's and Just some the partnerships and you potentially anything an engineering of

said, we Bryon. is so Yes, as this

As that pursuing a with to is building make and is advantages allocate And distance a mentioned, of which options regards mentioned especially company. plant. being pipeline. time, and just for our for with same risks And to with and to and risks with or alone going a in remarks different as most the pipeline. really And that you we're the There prepared there's beneficial also there to the certainly to shareholders a are those at to to way number concurrently, we able it compared on Mike need third decision the party. regards going absorb

of we year. economic of the approved certainly legislation, us active have been that clear dynamics, potentially changes over would and how and six it for not So in we want a front with in to the also but makes But this it this. then were important also the the and six, move needs out, that. going economics last work say I'd to it be for laying that, the assured to we to out that clarity not to to quickly done you're be the around our last more delay hope understanding more in we're this to of pipeline, in do around not importance forward where right if much moving would very go to some want trying other own, months, our the and decision cognizant making of And go particularly with to we as that clearly, out the last some if be to much providing only groundwork, very get timing, process, be change on in

and So be in just forward look information regard. a that lot provide to everybody more to ask patient we being able

seen? any cost does that Excellent. been maybe great your that's done Is the That's with you industry relate this a commentary maybe, benchmarks at contemplating on broader you're And of that just improvised some kind have we've work there of engineering if detail. structure lot how and of point. the planning, in that

design, similar. but I this you're would much that your your pole a largely of as and necessarily and of that that been done there's lot work been not the a done is work lot And and has locations well of as say in I tent work point done, going some the which has they're the been direction would in that's on long I been like. is field engineering very at identifying actually think regard. say that depending permitting there

in a not that pipelines reason neighborhood. So purposes. location, the coming by And our for if it's injection or are only that relatively our as near there's we're location, party indeed,

environments, capital me, and the maybe in any backdrop the kind maybe of And on last kind of of to protein capital broadly. you considerations IRA versus that timing excellent. to the changes, between and given amount expansion? your your location changed, plan commodity the efficiency and more of for product year-to-date other then Have terms Okay, cost month deploy increasing

may sharing that look Certainly, currently to impact the more there's as forward of yes. we than prioritize that we what even and for are lot better And as to on yet those ones projects. investment really actually an the There had haven't a well a you. that indicated, may enumerated return as And actually have Mike some those identified on. we projects how actually we've have that

those Does stage highest best return those help? to and that we'll the accelerating bringing appropriately make so the that fore and And to sure we're projects.

[Multiple yes, Speakers] No, thanks

Yes, yet disclose that or just been I do associated some well their to confidentiality want too but not obtuse, is, haven't as have to time. may be don't projects that the is as we we idea about wouldn't want to with before talk it that approved, really

The next is Craig-Hallum. Stine Eric with question from

to you least But Hey, get the speed fact you aside so then little already have going Bryan. is it at don't capture seem that attractive or go it and go pipeline, and capital those little might potentially bit being alone just a would like reason that Hi, some projects decision along. carbon love $XX the in a Or the further this bit putting to between other back of getting the I'd there don't is to standalone, Mike. there, pretty greater CaPex want route. just Is that. Hi, went a economics, I in the more the are you a closer. to market, if the underway and are at or activity million are front be hear what to know would plus year a seems built, it unless that EBITDA

trying that options. a to, of news the and lot Eric, different a for interest, decision the some there. been critical is to of a capital from been there. a a With wet of we really change lot talking options it lot is we standpoint, the greatly of of I both really good these company, diligent options, potential think have out have of we've And legislation economics terms future the It changes we all in this economics. have the folks

a so up I fortunate kind we certainly that like we're that into feel of change of are, we've everything this the shake maybe of if kind passes, to legislation. where some one the with and going planned options done And haven't are goes it's the up to work we point, this as would launched a of we

So lot the I you're this. a own. take very it really, really to be are as think compelling. go But we're And we through going right, on does it capital thoughtful economics of your do to

So those it. we're we at sort have hard are kinds of the to and working out things

just guess then, lines. I laid stay think in initiatives, comparing And it strategic on out projects. I'll at It the should what these I deck confirming of forward acceleration, should guess you've some you've we at quarter, yes, last that that, Okay, in as part look in $XX necessarily quarters or of projects I two taken on additional we tuned that, more along you've projects, look doesn't the you case? operational million your is terms gotten EBITDA of that look with is what you've pulled something that like as as had so incremental mean, I about those

Definitely economics that projects to X, giving It that about, kind oil I great can accelerate in the have, but think the of CoPromax. mentioned we we've that's one we've talked right. what is definitely looking oil, it's script. particularly and I the shifted of and we're returns, had corn that. is Phase you, there, X at part, the Phase the project corn of returns are that much we the generating We very the

we're dynamic constantly these looking situation. And it's So a at projects. very

sense the portion. we in then accelerate of opposed of as are, take at locations will like. on I to that's deploy we already things And where where very other Magic talking the returns. full same that and potential evaluate all looking that do from when what rolling give company, customers are in piece look we example we as need we're go we're we the that capital, made, that protein want the makes to them where advantage prudent, the CoPromax And the greater, stack our on shift would get up they about oil also. at But complete add And at the to we'll the And Valley, side us very to to what to about Valley up and we and out, would one be return Magic to need we're we going how in that. optimistic look corner going the protein where a a projects to given profile. we're returns to come time, time So as we've time, to constantly

So it's ongoing deal, it's dynamic. very an and

one, overall any links? mentioned to plan understood the one me you helpful. but in model that. be an in Or clarity more Okay, just quarter would turnarounds rate mean, for quarter, last do it's you on maybe And the on maybe that third related, I you expect the utilization

would well, the interruptions expect bit, because there'd as for capacity particularly compared on western look say, our the plants. we you a total had I that you quarter, little of difficult Yes, quarter-over-quarter, that a had, railroad we interruptions, say, or as number actually to it's like, to we for be probably were down if production rate

So see the best about outage move where able if can, increasing repairs winter it, do you these scheduled but the to of manage look efficiently that and we be make as your cost before to the taking windows be at hit we're advantage periods. into you may we're sure and it to same, maintenance aggregate to trying you

we we're we harvest. get you'll that And glad that have that bases So moderation into expect once corn optionality. we and see prices in a

is The HC next Wainwright. question Amit with Dayal from

about freight potential Thank cetera. sense for any you business, segment? positioning us give you. type in distribution little how this environment you're everyone. for business. some Can you But that are seeing market I respect of And to recession, you know with afternoon, And there's good commented that et costs bit impacts a the on related margins that talk alcohol

in business integration a logistics. during the Eagle fully provide be the capability, they some that expanding a it. that not expansion expand that with Eagle grow and the Yes acquisition us. and could totes we XX behind to There's Louis, million product Alto just and have. last or we've option folks equally about with think bulk some the and have within that with integration generally position it's where with we're EBITDA, dollar what that layers had been years space even multiple drums expanding also St. acquisition That's our freight of will it million also of were the to be But using pressure alcohol We you to of just before -- maybe we, geographically. Alto, with that for business But currently piece there's the really generate around do was that base enhance look beverage Eagle acquisition the Eagle be of business really $X taking in business that has the but plus And of business said doing, the that to other integration piece drums built is good expecting distribution vertical are then important. continue have and the we that. Alto the the specialty is a And is sales more or over to good that parts relationships the on performance. the acquisition and into now now business platform adding and We're relationships totes the fully the and the the our could business. to

just it Louis acquisition, distribution. the isn't multifaceted St. kind it's of buying So a

Amit, seen, is is I to will compression adjust a what negotiations, it certainly well make think ultimately I'd that and one the adjustments I flexibility go add you to periods. freight that, the adjustment as the add, while as in into as sure right. appropriate make itself, have that new mean, year, may you for you renewal under Maybe we've contract a contractors I’ll given sure not to in make up that, year true the impacted

that, I crush potentially --? the of also faster those fall some the in margins? for mean play for Could [Inaudible] year on trailers end out out as the we're maybe guessing than ethanol does see as And Right. types well? upside Bryon, that got coming towards the we of around sales

I of it's fourth see harvest I that in contracts, see be the quarter, contracted into freight as end we late this unusual don’t negotiations, year, know for to sorry, would would when you got specially that that adjustment, it. the fixed Yes, you see but negotiations at our or adjustments. would Amit, know certainly the don't making go would the you of you've you contract because have appropriate where alcohols price that

So you And your make the your have costs. adjustments enter way XXXX work appropriate for that. for you you as new negotiation to make input your fall you this through

you thank think, you a the planned for for understood, be long I Apparently, that. And Bryon, this mentioned some week two? will quarter. shutdown How in third or

year, not wet two be to call be mill. that the the production August, I last, we every days. and as and that way guess wet months know far week did all associated of the the most nine because X, don't wet will mill impact it the the around done but that of fermentation one so X, services this the mill, I shut probably Yes. was down continuous -- weeks. another a couple include between the impact has of or some did of last a is that does we somewhere to significant it got bring some an that year in mill it actually wet And would by a X the And probably is before down material a -- about we it you of plant, the

Capital from next Bastian David The Kingdom question with [Operator Instructions] is Advisors.

Mike. to on going $XX get million year? of afternoon. Hi, first we Bryon. you've question I Good profit guidance there guidance gallons last contracted Hey, is for this guest did on we the year. like the provided specialty alcohol, Are gross

that to of can. we've tackle. If as I'd as guess the able a not give we to end as to QX, we'll give good as you tried we this haven't comfort. can as And I we give QX able question. it certainly we it's can visibility much guidance It's you will quarter. know something much but But so far. is we that can don't and long for that the I it been you give say give you guidance we're by

maybe how on some this year looking start could contracting market specialty Okay, remainder for you this the both fall of XXXX. give looking later for is the commentary towards as and you

changed. would were I on nothing's really track. say We

as able at available. place to upgrade mill and at more products, be raising be prepared of hope would excess available. in in And certainly we As and on and a indicated to on remarks. million $XX track remarks the wet able the product mentioned to you up expect volume product indicated achieve in QX, of and we as prepared particularly expect to with we We're products market we're we, to that around in do those pickup to highest what in And quality sell to we quality our to Mike XXXX be his seeing have had excess gallons the We're the able We mentioned as this contracted completed that. and sell be in end well. export to industry. Q -- sales and of our we to track industrial of in hopefully

higher that expect place certainly to product be While, place we market. able year-over-year to to a all value more would that into we expect of wouldn't product,

you'd mentioned Got hear. upgrades, Switching good protein the to $X million it. ‘XX. uplift That's gears to for that

million current to a be almost would Valley, going gallons on of so or at corn you're contribution or If get in that $X $X its Magic million prices, own. what extra an

$XX corn accelerated are you're hoping of a that them a you as for result oil of million, seeing sites? the getting accelerating at other the So lot

led think preliminary, preliminary coming a results numbers, impressive. accelerated go one And I very again, to seeing phase comment, fair Magic system decision our that's David. the we it. are of across But I was about just take with think platform. to optimistic very And quite out The completed. the Valley that's frankly, we're and can that where the they're we're

with actually part results seeing to the we're significantly we're protein. then And seeing system, even of see the regards corn oil with good -- the

before that the facility about excited plant we're place. So in having even protein

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

for the continued And again, Thank your good We have you we us and company. afternoon. the direction of for to again, continued today want joining a support you Thank you. you, Thank for support. and feel Gary. very thank the future, good about your

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

disconnect. now may You