Alto Ingredients, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to Alto Ingredients' fourth quarter and year-end financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star, then 1 on your telephone. Please be advised that today's call is being recorded. If you require additional assistance, press star, then 0 to reach an operator. I would now like to hand the call over to Mariah Sheldon. Please go ahead.

Thank you, Michelle, and thank you all for joining us today for the Alto Ingredients fourth quarter and full year 2020 results conference call. On the call today are Mike Kandris, CEO, and Brian McGregor, CFO. Mike will begin with a review of business highlights. Brian will provide a summary of the financial and operating results, and then Mike will return to discuss Alto Ingredients Outlook and open the call for questions. Alto Ingredients issued a press release yesterday providing details of the company's quarterly and full-year results. The company 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 available through March 18th, the details of which are included in yesterday's earnings press release. A webcast replay will also be available at Alto Ingredients' website. Please note that that the information in this call speaks only as of today, March 11th. We will advise that 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 two of the presentation available online, which states that some of the comments in this presentation constitute forward-looking statements and considerations that involve a number of risks and uncertainties. The actual future results of all two 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 and also 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 being reported. The company defines adjusted EBITDA as unaudited net income or loss attributed to alto ingredients before interest expense, provision or benefit for income taxes, asset impairments, loss and extinguishment of debt, purchase accounting adjustments, fair value adjustments and depreciation and amortization expense. To support the company's review of non-GAAP information later in this call, My reconciling table was included in yesterday's press release. It is now my pleasure to introduce Mike Kandris, CEO. Mike?

Thank you, Mariah, and thank you, everyone, for joining us today. I'm excited to be with you this morning to discuss the ongoing transformation of Alto Ingredients. I'll begin with a recap of the major milestones of the past 12 months. and then turn to a discussion of the business today and our business and growth drivers in 2021 and beyond. We entered 2020 with an annual ethanol alcohol production capacity of 605 million gallons, 14% of which were approximately 85 million gallons with specialty alcohol produced at our Pekin, Illinois campus. Our long-standing specialty alcohol business is profitable, but results have been obscured in the past few years and more recently by operating losses in our renewable fuel business. We reduced our ethyl alcohol annual production capacity by 55% through a combination of idling unprofitable fuel ethanol plants and and selling certain undervalued production assets to stem these unsustainable losses. The majority of the proceeds from our asset sales were used to repay debt and improve the company's balance sheet. Today, we have total production capacity of 450 million gallons and are operating facilities with an annual production capacity of 290 million gallons. all operating facilities are at EBITDA break-even or better. Focusing on our core strengths, we maximize production of specialty alcohol at our Pekin campus where spot demand was expanding rapidly in response to the COVID-19 pandemic and increased our annual specialty alcohol production capacity in 2020 to 110 million gallons. We also completed the refurbishment of a grain-neutral spirit system, or GNS, at our Pekin campus by year-end, further increasing our annual specialty alcohol capacity to 140 million gallons entering 2021, which makes us the largest producer of specialty alcohol in the nation. In summary, over 48% of our production capacity at our operating facilities and over 56% of our peak in production capacity is now capable of producing alcohol that meets or exceeds USP quality specifications. We sold assets and generated substantial cash flow from operations over the past three calendar quarters. We also completed an equity raise in October generating $70 million in net proceeds. These additional steps accelerated our ability to repay $146 million in total debt over the past 12 months, materially reducing interest expense, strengthening our balance sheet, and positioning us for the growth opportunities we see ahead. We are now net term debt free. and on target to be term debt-free in 2021. Bryon will discuss additional details in his prepared remarks. Finally, to cap off the year, we announced a corporate rebranding. Our new corporate name, Elto Ingredients, and new ticker symbol, A-L-T-O, embody our goal to deliver the highest levels of integrity, purity and quality to create greater value for our customers, Partners, and shareholders. In summary, we are pursuing a consistently profitable path forward, which in 2020 produced adjusted EBITDA exceeding $67 million. This achievement was within the guidance we gave in October of last year. Turning to our business today, We are now a leading producer of specialty alcohol and essential ingredients. Our specialty alcohol products are used in common, everyday consumer goods, including mouthwash, cosmetics, sanitizers, disinfectants, and cleaning products. The majority of these products are sold under fixed price contracts that are one year duration or longer. This not only provides us with better visibility, but allows us to hedge our primary input costs and improve control over our bottom line results. Hand sanitizers were in the forefront of the news last year and bolstered our positive 2020 results, particularly in Q2 and Q3. In Q4 and continuing today, the surge in sanitizer demand has tempered, by the resurgence in COVID restrictions and an abundant supply of product. In anticipation, we concentrated our efforts to deepen and strengthen our sales in non-sanitizer product lines and to work with dominant name brand consumer product leaders such as Procter & Gamble, Mizcon, and MGP to name a few. As a result, our production mix today is well diversified with approximately 90% of our contracted volume being sold to major producers of food and beverage and home and beauty products and only 10% of our contracted volume going to sanitizer products. Although we've seen sanitizer demand return to pre-COVID levels, we do expect additional tailwinds and demand to increase as restaurants, arenas, theaters, offices and stadiums reopen. As social activities increase, existing low quality sanitizer inventories will be consumed and replaced by higher quality products that utilize USP grade alcohol. In short, we are well positioned to support customer needs for USP, API, and beverage-grade alcohol for 2021 and beyond, and to provide quality products for consumer goods and sanitizer demand as needed. For essential ingredient markets, our pinking campus has, for decades, produced a wide selection of products such as cornmeal, corn germ, and yeast for use in human and pet food production. Most of these higher value and higher margin ingredients are produced at our wet mill, producing coproduct returns in excess of 54% and lifting our average return across all operating facilities to roughly 44%. Some of our highest quality products are also sold under fixed price one-year contracts or longer to customers such as Nestle and Purdue. Regarding our renewable fuel products, we will continue to produce fuel ethanol to not only support our specialty alcohol production, but also to capitalize on ethanol's beneficial low-carbon characteristics integral to the ultimate decarbonization of our environment. And we are optimistic about industry discussions around carbon reduction. All this being said, Ethanol margins remain depressed, even more so for our western operations. After considering all reasonable alternatives and determining how and where to optimally deploy our resources and capital, we have decided, at best, to consider monetizing both of our idle California facilities. Doing so will not only further strengthen our balance sheet, but also improve profitability by eliminating fixed carrying costs on idled assets. Pivoting to 2021 and beyond. Today, we have contracted approximately 65% of the 110 million gallons of specialty alcohol capacity that was available during last fall's contract cycle, or 50% of our now expanded capacity of 140 million gallons. This represents a significant increase in both total gallons contracted and average price over our 2020 contracts negotiated in the fall of 2019. It also reflects reductions we've made to reflect the realities and current dynamics in sanitizer consumption. To this end, we are working with our customers to facilitate The blending and extending of these contracted volumes into 2022 and 2023 should consumer demand prove less than our customers originally anticipated. As we look beyond 2021, I'd like to share a few of our longer-term opportunities that will drive further growth for Alto Ingredients. We have worked diligently and collaboratively with key customers to obtain three critical and difficult-to-achieve certifications for our specialty alcohol production, ISO 9001, ICHQ-7, and EXAPAC, to support further penetration of domestic and international markets that require the highest quality products. As previously noted, Most of these products are contracted under fixed terms each fall for the following year. Our goal is to continue to increase our share within the health, home, beauty, and food and beverage markets to sell or expand capacity at higher values. Second, we are increasing our yeast facilities' annual production capacity by approximately 15%. We remain on schedule. and on budget to complete the expansion by Q3 of 2021. This project will require a relatively low capital investment of $5.5 million and is expected to produce a payback in less than two years or over $3 million annually in EBITDA. Additionally, this expansion represents only the first phase of the option to expand production of even higher value yeast derivatives with similar payback profiles. In addition to the yeast expansion project, we have currently earmarked an additional $14 million in various capital projects that are expected to expand revenue, increase efficiencies, and or plant reliability. An example is the upgrade to our pecan feed dryers. This $3.5 million enhancement is expected to produce even higher-valued feed, improve overall plant efficiency and reliability, and as a result, increase annual EBITDA by approximately $1.4 million beginning this year in Q4. As recently mentioned in congressional subcommittee hearings on climate change, our Pekin campus sits on top of the Mount Simon Sandstone Formation, considered to be one of the most significant potential carbon storage resources in the United States. As a member of the Carbon Capture Coalition, we are actively engaged in discussions to develop a carbon capture and sequestration program at the Pekin site and look forward to sharing more information regarding this uniquely profitable opportunity as activities progress. We believe ALTA will be an active player in the carbon capture space. There remain additional projects under development with attractive return profiles. We look forward to discussing them with you over the coming months once they are fully developed and approved. With that, I'd like to turn the call over to Bryon for a discussion of the financials. Bryon? Thank you, Mike.