Alto Ingredients, Inc. (NASDAQ:ALTO) Q1 2024 Earnings Conference Call
May 6, 2024 5:00 PM ET
Company Participants:
- Kirsten Chapman – LHA Investor Relations
- Bryon McGregor – President and Chief Executive Officer
- Rob Olander – Chief Financial Officer
Conference Call Participants:
- Eric Stine – Craig-Hallum Capital Group
- Amit Dayal – H.C.W
- David Bastian – Kingdom Capital Advisors
Operator: Good day, and welcome to the Alto Ingredients, Inc. First Quarter 2024 Financial Results Conference Call. All participants are in 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 of LHA Investor. Please go ahead.
Kirsten Chapman: Thank you, Kaley, and thank you all for joining us today for the Alto Ingredients’ first quarter 2024 results conference call. On the call today are President and CEO, Bryon McGregor; and CFO, Rob Olander. Alto Ingredients issued a press release after market closed today, providing details of the company’s financial results. The company has also prepared a presentation for today’s call that is available on the company’s website at altoingredients.com. A telephone replay of today’s call will be made available through May 13, the details of which are included in today’s press release. A webcast replay will also be available at Alto Ingredients’ website. Please note that the information on this call speaks only as of today, May 6. You are advised that any time-sensitive information may no longer be accurate at the time of any replay. Please refer to the company’s Safe Harbor statement on Slide 2 of the presentation available online, which states that some of the comments in this presentation constitute forward-looking statements and considerations that involve risks and uncertainties. The actual future results of Alto Ingredients could differ materially from those statements. Factors that could cause or contribute to such differences include, but are not limited to, events, risks and other factors previously and from time-to-time disclosed in Alto Ingredients filings with the SEC. Except as required by applicable law, the company assumes no obligation to update any forward-looking statements. In management’s prepared remarks, non-GAAP measures will be referenced. Management uses these non-GAAP measures to monitor the financial performance of operations and believes these measures will assist investors in assessing the company’s performance for the periods reported. The company defines adjusted EBITDA as unaudited consolidated net income or loss before interest expense, interest income, provision for income taxes, asset impairments, loss on extinguishment of debt, unrealized derivatives, gains and losses, acquisitions related expense and depreciation and amortization expense. To support the company’s review of non-GAAP financial information, a reconciling table is included in today’s press release. On today’s call, Bryon will provide a review of our strategic plan and activities, Rob will comment on our financial results. Then Bryon will wrap up and open the call for questions. It’s now my pleasure to introduce Bryon McGregor. Please go ahead, sir.
Bryon McGregor: Thank you, Kirsten. Thank you everyone for joining us today. We began 2024 with a refined vision to produce a variety of essential ingredients and the highest grade beverage alcohol in the industry and prioritize our carbon capture and storage or CCS initiative. We are leveraging the unique capabilities of our Pekin campus and our other assets to moderate the impact of crush margin fluctuations. I’m encouraged by the strategic and operational progress we’ve made so far this year. However, relatively low but improving crush margins and various weather factors impacted our financial results in the first quarter. That said, high-quality alcohol sales from our Pekin campus increased year-over-year contributing toward an overall improved gross profit and adjusted EBITDA on a comparative basis. Rob, will discuss our financial results in greater detail. I’ll begin by reviewing CCS and our ongoing strategic projects. With CCS, our goal is to create value for Alto, our customers, our surrounding communities and our shareholders by substantially reducing our carbon footprint. Our Pekin campus facilities, their CO2 production and their location provide Alto a unique CCS opportunity. We continue to negotiate the terms of our proposed agreements with potential financial partners and with Vault, a leading CCS developer focused on the development, capitalization and operation of carbon storage assets. Our plan is to work with Vault to safely transport the CO2 to a geological reservoir nearby and permanently store it securely deep underground. As noted in March, together with Vault, we are driving ahead with our respective activities for system design, community outreach, vendor negotiations and schedule alignment requirements to procure equipment for compression and to support the installation of additional power. Vault completed the 2D seismic geologic survey and has begun data analysis. They’ve also advanced the work required to submit the EPA Class VI permit application. Our CCS project provides compelling economics that we believe we can enhance with more efficient, lower cost energy production. To this end, we are evaluating multiple capital line options. We are in discussions with a highly regarded independent energy company. This potential partner has been engaged to complete their Feed study for an energy cogeneration facility that they would build own, operate and maintain on-site. This facility will lower Alto’s capital expenditures, improve operating efficiencies and reduce our forecasted long-term energy costs. We are also continuing conversations with our current utility provider to expand energy supply capabilities as an alternative to cogeneration. Our specialty alcohol products include highly differentiated 192 proof and low-moisture 200 proof grain neutral spirits that create customer opportunities higher up the value chain. In Q1 2024, we sold 26 million gallons of specialty alcohol, up from 21 million gallons in Q1 2023. As mentioned in March, for 2024, we contracted approximately 93 million gallons of fixed price specialty alcohol and average premium to renewable fuel of $0.31 per gallon. Our biennial Pekin campus wet mill outage was completed in April. The plant was offline for 10 days, while we executed the scope of work with over 450 discrete tasks focused on corrective and preventative maintenance as well as upgrades to plant infrastructure. With the outage complete, the plant has safely returned to operation and is ramping up to target production rates. These efforts will result in more consistent and higher production rates, improving reliability as we approach the summer driving season. At Magic Valley, we have been diligently working on our corn oil and high-protein technology to return the facility to a more sustainable profitability by reducing the impact of periodic low-crush margins and higher destination corn basis. As outlined in March, we are working with our high-protein system vendor Harvest Technology to achieve the intended production rate, quality and consistency of our corn oil and high-protein output at the facility. While the plant is hot idled, we are using the downtime to accelerate routine maintenance activities to optimize plant efficiency upon restart. The equipment for the new system modifications has been ordered and based on current delivery and installation schedules, we expect to resume production in late June or early July. As a reminder, Harvest Technology is paying for the direct cost of equipment and design changes associated with the corn oil and high-protein systems. As noted previously, as always, we evaluate our path to increase margins, improve profitability and deliver the highest return to our shareholders. We continue to assess our current portfolio of assets. We will provide updates if and when appropriate. Before I turn the call over to Rob, I have a few corporate updates to review. As part of our sustainability efforts, we finished our annual Scope 1 and 2 Greenhouse Gas verifications during the quarter. In April, as part of our succession planning, we announced our new COO, Todd Benton. I’d like to congratulate Todd on his promotion and Mike Kandris on his forthcoming retirement. Todd has over 25 years experience at the Pekin facility and 30 years in the industry. With his good relations, with the workforce, deep connection with the community and extensive record of achievement for operational excellence, the Board and I look forward to his contributions to our ongoing safety, operational efficiency, reliability and sustainability efforts. Now, I’ll turn the call over to our CFO, Rob Olander.
Rob Olander: Thanks, Bryon. I’ll now review the financial results for the first quarter of 2024 compared to the first quarter of 2023. We sold…
