Alto Ingredients (ALTO) 6 Nov 232023 Q3 Earnings call transcript

Good day and welcome to the Alto Ingredients Third Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to hand the conference over to Kirsten Chapman, LHA Investor Relations. Please go ahead.

Thank you, Betsy, and thank you all for joining us today for the Alto Ingredients Third Quarter 2023 Results Conference Call.

On the call today are President and CEO, Bryon McGregor; and CFO, Rob Olander. Alto Ingredients issued a press release after the market closed today, providing the details of the company's financial results. prepared the for company's also is call has on available website company a today's presentation that The at altoingredients.com. of details included replay November telephone today's be will A available XX, the today's of in are which press release. call through at be the this only will speaks website. Please today, of on Ingredients available webcast note Alto A November call as also that information X.

ahead, of that on to from information replay. other cause Slide Alto disclosed statements risks forward-looking differences assumes any to and accurate involve at materially to debt, such for interest safe not of Ingredients fair depreciation statements. Factors taxes, believes any the uncertainties. update Management on Please You available call before referenced. non-GAAP law, as uses will performance wrap time loss but and Ingredients' to states will be no Then these to company's reported. events, value a defines harbor is impairment, my now results strategic of the measures activities remarks, and online, are for periods To income, statements. In this will for and these constitute review that required our with risks and SEC. performance and the differ pleasure reconciling Bryon net that the press X longer and company investors obligation prepared expense, go statement of advised non-GAAP and provision from Rob contribute today's plan income the Alto McGregor. the financial assist comment up actual presentation some assessing interest unaudited forward-looking The information, expense. introduce adjustments Bryon table time amortization will operations review, provide may those will include release. On monitor to no or adjusted Q&A. It measures company's conference be today's call extinguishment the considerations and loss that on call, is management's comments company's sir. Bryon results. to The measures of Except the or refer income are time-sensitive a acquisition-related support as in limited presentation the open the which in the and time expense, Please in and asset of non-GAAP by in included applicable of filings previously financial EBITDA could company factors could future

you Kirsten. you, today. Thank Thank all joining for us

I've the the spent customers, XX our collaborating and road of learning our investors to on reinforce and make better. I'm I've our team been of with life everyday As last our that the the talented days to proud profitably listening, accomplishments CEO, date. provide to ingredients mission: meeting and new overall dedicated continued teams facilities.

We continue and our our has high-margin transform ingredients of a X differentiated of beverage products. specialty realignment company food, to the to financial provider years. in and past greatly supplier over consumer, successfully pharmaceutical, from a strategic profile low-margin improved alcohols This essential industrial commodities

intermittent to subject basis and the harvest as from XXXX crush declined reflected contribution in are we results operational particularly positive although corn progress, ethanol commenced. as market good make margins, to September, commodity continue We challenges. QX improved

XXXX. generate and operational and shifted positive anticipated. Despite challenges, However, towards Combined maintenance downtime the over adjusted production repair QX delivered lowered unusually we our QX high and we anticipated a products. we these significant with results costs, unscheduled in volumes higher lower-margin EBITDA our improvement not XXXX mix did

few greater maintenance extensive repairs detail work completed benefit periods' during to the and in will going the future minutes. a Rob forward. quarter expect uptime reliability provide We and

on we initiatives. capital a initiatives. profile. time cost-reducing Each project line, In various outlined return review I'll different our has and and First, early our XXXX, revenue-enhancing risk investment

and funding responsible. evaluated with intentionally for we've the remaining of and As fiscally project needs options overarching such, each goal separately prioritized

short-term already along have installing with additional upgrades alcohol our in our other expanding systems. replacing various include corn products, site completed storage plant at high-quality our projects. boiler These several Pekin equipment of our We capacity and

capital-intensive engineering have to we cogeneration on engaged capabilities. gas FEED sequestration, For analyses include our scope, and experts, projects, and CCS; more firms, design pipeline; carbon front-end capture These projects conversion biogas and and timing or third-party cost. deeper conduct yeast; natural or firms, primary

season contracting few well. a are our sales, specialty our updates. material Beginning alcohol Here is with XXXX going

pace XXXX delivered exceed fuel-grade on ethanol. gallons to at premiums are We to

beverage-grade low larger our previously, advantages. a where mentioned and to chain quality, of our differentiations is the market, high goal competitive location up share moisture move and capture As the value create

Magic we and high-protein performance this line installed guarantees of to to continue out corn the the facility Regarding Valley, technology. oil achieve

process we our we longer output this plant's in anticipated, consistency facility's has taken remain production. While improve to the of than and the efforts resolute product optimize the

We interim, we the unique other corn oil our Pekin comparable corn yield design. mill process in evaluate continue through to In at locations. the rollout achieved optimization have its ICM high-protein dry the oil our of improvements and to at technology

preliminary FEED we Regarding study. just our have received results primary from yeast,

chain While XX the estimate cost impacted extended period construction our inflationary increases installation XX have the are our findings with promising, of to and over from from original pressures constraints and supply XX% materially months.

and priority reflect long-term profitability. critically to We costs fiscally are challenging conditions. ensure results, current the better reality. Considering operational we to construction In project market all and a this has we those projects reviewing the offset the vigilant giving to have sustainable market opportunity funding anticipated given to this with for short, declined these the improved. make this price evaluating are are that primary remain unique yeast current projects partial a market and our exploring As costs capital change, alternatives environment

of our grain As XXXX. new of we the in the installation reported, quarter completed previously second silo

this capacity delivered We corn costs have timely costs more seen through silo the for lower benefit of and and expanded operating reduced clean-outs.

added further to the capacity expect winter. operations benefit We this

contracts. construction engineering, and gas Regarding pipeline procurement we capabilities, now the are natural and cogeneration negotiating

FEED project. the and extended by sequestration preliminary findings a carbon current months. pipeline to Alto-dedicated within materially external designing reducing make our located our facility, capital short decreasing We we of distance X on system on XX progress goals With sequestration have changing environment, are to study development installation and expansion relatively risks. Based continue EBITDA we costs an and capture partner, and economic requirements, the our our

are near-term now adjusted and realized. long-term increase annual approximately are million XXXX to We with targeting the yeast, year-end over initiatives our EBITDA and by by completion by CCS XXXX other our fully when incrementally $XXX by of middle million of $XX the projects

and Rob, sustainability community customers' good turn to needs. I our I'll Before mention to the steward future be we efforts a addressing steadfast our current in call remain that while

facility publish This germ Food/Safe corn and services. on another Safe basis. an year-end products, sustainability Feed, publicly by product third-party our to certification, in key plan annual to this for format our earned differentiating Pekin our look forward We report our and quarter, further disclosures products safety meal and providing

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

our XXXX. Thanks, profit to crush strong improved gross Bryon. Due same third period margins, quarter in over the

that were to similar results there $X.XX profile period. XXXX, current increased several compared as However, the sequentially a and levels sharp by XXXX, by Corn tempered in demand $X.XX year. compared factors and increase QX basis substantially demonstrating QX illustrating supply a last to

and in The we anticipated noted, carry costs. to Bryon our addition, wet market losses associated volumes. in maintenance crush derivative downtime resulted This repair In were favorable to production of shifted that million sales ingredients spreads, alcohol significant our impacted lower incurred hedging margins. Year-to-date, our product unexpected mix reduced more impacted and consumer lock $X.X which lower by demand. in as adversely increases strategy specialty

a to of customers are portion XXXX. working into commitments volume roll with our We XXXX contracted the

the third As such, sales for and quarter. expected than profitability were lower

Additionally, we and incurred costs legal feasibility capital associated projects. with our higher strategic

same On Biofuel as Producer positive USDA received additional $X.X $X.X Program. the out for third period in $XX.X for XXXX. the million compared the quarter, third positive an to Adjusted side, EBITDA during cash closed million the million grant negative quarter the we was the

fourth the ahead Looking to quarter.

remain we Although will refrain providing currently, from several projections for reasons. positive crush margins

QX, during with they on based goal reflective are solely managing commitments by their year-end. of are inventory buyers First, inventory customer minimizing fuel-grade demand, market of balances levels the not rather

after to a tend winter Second, Thanksgiving QX. in demonstrate and day decline volumes the typically start patterns from buying deep

lengths. In the with investors confidence. unrealized on don't cannot by Therefore, qualify and expectation hedge to faced crush QX October. Fourth, losses XXXX, commodity facility used planned treatment, Third, we speculative improperly impacted with specialty unique The depending regard. the on it summary, materially quarterly advantage our for factors towards derivatives priced for fixed margins an the QX, to postponed hedge also building of we until booked to we fill winter higher are in results of would accounting margin entirety we forecasted particular our price in gains be sales guide intention be outages a portfolio. as alcohol preserve can take that sales be this and/or we mark-to-market in our these

numerous long improving which the our in and half XXXX, haul, the have position the With second of undertaken our maintenance of have repair XXXX. bettered heading into goal projects, for facilities we

liquidity. Regarding

the flow million. was quarter, $XX cash During from operations third

spend million. our capital quarterly bringing $XX million, was year-to-date Our to our investment plants $X in

XXXX, support loan million growth was balance to was and our XX, initiatives. September borrowing of availability cash million, As total $XX our business $XXX and operations

our operating Our that, $XX turn additional credit, million call $XX to request to to facility. With line facility under and million Bryon. of million includes term I'll borrowing up $XX option under under an the the our back availability an loan

long-term profitability to we Rob. you, pursuing maximize shareholder and realignment, value. have Thank committed creating Throughout our and target been that opportunities strategic

While to long-term continue and prudent agile We will prospects enthusiastic strategy. the the continuing has to confident profitable growth in be promising our and our opportunities. we capitalize remain financially on and while about path and been dynamic, most remain

like questions to Now open I'd our to analysts. sell-side the call Operator? from

Stine first from Eric The today question Instructions] Craig-Hallum. comes [Operator with

Eric. for on Aaron

the pro see you on you maybe certain I have that of updated And please. thoughts So then And to yeast. confidence reach on further of just of called that other kind of you just there don't maybe other for we high can driving areas point there, me, time some too, line, on first And that? just then that. at XX in months full to than to extensions the plants X Valley, kind out the are mean, are Magic some kind capacity did to speak that quarter? rollout the just

Sure.

So process. It sure that we anticipated, taken yeast want that is pro also to seen full include to in as remarks but we does but success. reflecting it completion success up out. things longer that of we the that before prepared in we implementation high of successful that's mentioned through make extension that we're challenges roll the There's We we the capacity. that lining months, has it learning The to than lots the across out at have installations. X project, see from a of the clearly extending XX

full the capacity we we being time at it but continue a protein make see been good able bit has the to levels, chip So to same all basis see with progress. sustainable away oil a we corn those have a good at But levels, good on and of challenge. aligned

That And remain we Aaron? our so your that to facilities. other optimistic fully that out that. needs we we I it it's said, before make to Did to achieve about what achieved roll want questions, sure cover

any yes. anything thinking kind an contribution? of just that of kind front? little to And just any going of on kind or maybe regulatory then a just thinking given how helpful. can of kind there you And legislation Yes, more give the changes just capture, us Are to you still changes similar -- you're And market? on about provide was detail update. No, carbon on

on activity dynamic, front, of in and in that's changes continuing the it's of still space right? options us. are lots in working ahead activity. clearly, through we're in still excited the the And for we We're negotiations -- Well, about the feel seeing incredibly documentation to sequestration so We finalized this line installation of think the our a for It the out We far the the transformative that natural. things continues us. drive funding is we with -- project. us all aligns do, and it's compression. But for analysis site all to just of the the towards or

we're about So that. excited

would There share much. we be we'll but share prudent to But public would we to significantly look too imprudent more is make -- be we're this, move nature, or -- information work this that time -- that. on gladly it at forward as there forward. significant -- of sharing progress to continue some We the

for Understood. specialty maybe And on then last just alcohols. me

of for you've bit You talked to about contracting little success a some the kind date. had of

versus split move maybe about rough at How XXXX. what year? also talked as of kind over looks of spot we next much we some You ideas -- of into on forward look kind for any rolling like kind contracted, as that

or running at about of XX think we're think XX So I this million -- -- for million. What's year, we've through numbers? shown I QX the

on tracking XXXX. we're of million XXXX achieve but way And closer for portion of to gallons for million the to a falloff we good are We're XXXX. for contracting the demand, XX XX with in the track

XXXX, the consumer of to volume in and into forward of fallen demand roll that's And that some we with process volume several XXXX. a portion working off are the customers for of

The next question Wainwright. comes from H.C. Amit with Dayal

additional color other the what that some Pekin any some Was Bryon, the of on downtime? work at was going on locations? extended caused facility or it

between So that may recall normally XX for shut clean-outs, do months somewhere that. things a a week wet days, down a and somewhere you weeks. mill It's the X we significant. and not well like is X significant -- XX it schedule between it and shutdown. because constitutes outage It's such It your

to and some during improvements on needed amount in capital were the opportunity. With local incurred have corn and spend chose said, to in spent be call, last scheduled done, next -- that carry was being to some has maybe supply we take basis we used as year in a corn to usually normally we postpone and to -- prior for that some corn bring And will to relation or had QX while still markets, down. We it to that the chose and facility sense in that while expectations. wet crush when they locked that year prices in supply the into We our our additional were the the will carry of it time it's available ethanol we so we such earnings losses repairs last years that will particularly that next of down, started seeing needed capital margins and QX was instead down where to there that of with and shutdown. talked mill seen makes overall it or was that into work in shutdown about we -- we're -- of to significant expenditures dwindled of this we've -- make materials the QX year, minimize we of -- high because capital next and that that advantage April that there year. That to couple seen and prices over that -- equipment be into expensed during be was August

issues, as plus we that maintenance, as and -- challenges as expect it forward. going probably particularly a would other notable. quarter types up -- So repair some dryer Rob you ended then those some production and the would reduced all we impact combination mentioned, significant but were benefit in take balance have to issues. during said, we what And X quarter. That experiencing events reduced storm, saw other to impacts and of But normal quality expect a said, And the -- elsewhere the water plants plants we of in then the have going increased with impacted, temperatures that not period. much experienced occur sales X operational sales timely. been wet seem things, wouldn't repairs were plants the that I significantly of a and across otherwise mill, to the But I significantly forward number these better a perfect summer for in call the we resulting of

And commentary, Understood. then you needs. and press highlighted the your in release it. funding Got potential in

that capital-type through Or be addressed? Just your working that we funding walked also do to for to commentary? you clarify, these are projects potentially us need needs have in

company for we generally in. no, operations. I'll the capital is comment Yes. for working fill than have and needs more Rob, its sufficient the But and and then, expectation

will to that with some But an able to have example, what the capital these vendors anticipated. parties bring the to we yeast interested than as fruition. particularly be more of need additional We that bring we're working fruition, significantly we that projects project number in of a to is also and leg to originally had

agree. I

And I one one, last guess, me. Got just for it.

is On focused and of a that something it permanent more, gallons, to situation? Is of looks are on how on you that Or I just year-over-year bit the decline front. market improvements products third-party bringing fuel the business? overall sort in like renewable that terms guess, other

Yes. I'll take Amit. that,

Third-party year-over-year. volumes declined

transit third-party They we in QX. recall, to due qualify be And longer did that a plants. And will California product did volumes. bit to marketing in had be that also sell we for provide market issue our of services the you of QX, the recognized non-owned no comment X If sales ethanol plants. we also on -- lower in a as recognized QX, other I'll some in also timing but were

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

Thank New Have all Betsy. again joining day. you, a see you you hope in for us to York today. in nice We November. Thank

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

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