Alto Ingredients, Inc.

Welcome to the Aalto Ingredients first quarter 2022 results conference call. All participants will be in a listen. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Kirsten Chapman with LHA and Visitor Relations. Please go ahead.

Thank you, Vaishnabi. And thank you all for joining us today for the Alto Ingredients first quarter 2022 results conference call. On the call today are Mike Kandras, CEO, and Brian McGregor, CFO. Alto Ingredients has issued a press release after the market closed today providing details of the company's quarterly 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 May 16th, 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 9th, and you are advised that any time-sensitive information may no longer be accurate at the time of the 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 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 Altering Gradients filing with the SEC. Except as required by 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 an unaudited net income or loss attributed to Alto Ingredients before interest expense, interest income, provisions for or benefits of income taxes, asset impairments, loss on extinguishment of debt, acquisition-related expenses, fair value adjustments and depreciation and amortization expense. To support the company's review of non-GAAP information, a reconciling table was included in today's press release. On the call, Mike will begin with some highlights of the financials and a review of our vision and quarterly activities. Brian will then provide additional detail on our Q1 2022 financial results. Then Mike will wrap up with a summary before opening for the Q&A. Now my pleasure to introduce Mike Kandras, CEO. Please go ahead, Mike.

Thank you, Kirsten, and thank you, everyone, for joining us today. I'm pleased to report that our further diversification into specialty alcohols and essential ingredients has provided us with a buffer against the macroeconomic challenges and weak renewable fuel crush margins we experienced in the first quarter. And as a result, we were able to generate positive gross margin and adjusted EBITDA. We remained focused on managing the areas of our business within our control by executing on our strategic goals, investing for future growth, and diversifying and high grading our product offering. During the quarter, we continued to make good progress on our strategic plans. In January, we acquired Eagle Alcohol, an established leader in premium alcohol distribution. This downstream entity specializes in small package products preferred by most of the premium grain neutral spirits companies. As such, Eagle expands our scope of offerings, broadens our target customer base, increases our commercial opportunities, and accelerates our ability to capture additional high margin markets. Already, we have begun leveraging Eagle's capabilities including enhancing our distillation process and optimizing our production capabilities. The integration is progressing on track, providing opportunities to focus on expansion opportunities and leveraging Eagle's strong distribution and sales services. In February, we expanded our certification portfolio by qualifying for two additional internationally recognized certifications at the Pekin campus, one for active pharmaceutical ingredients and the other for the use of excipients. Combined with the certifications we received in 2021, these new certifications now create redundancy across the entire Pekin campus. Further, it increases Elto's appeal to high margin customers that use high grade alcohols in pharmaceutical, health, home, and beauty, and distilled spirits that require documented high-grade product on a consistent basis. By achieving these standards, we are producing a highly sought-after product. As a result, we are expanding existing relationships and attracting new customers domestically and in the growing international markets. As previously reported, we restarted our Magic Valley facility in Q4. In Q1, we made progress installing our CoPro Max high-protein solution. We expect to see initial benefits in the second half of this year from the corn oil extraction system to the tune of $4 million on an annualized basis in EBITDA. We expect the protein enhancements to be completed by early 2023 producing an additional $5 million annually in EBITDA based on current market prices. As we shared previously, we intend to reinvest further in diversification and other capital market strategies over the next few years. Regarding EGLE, we expect the base business to contribute around $4 million in EBITDA for 2022. Additionally, we plan to invest $5 million this year to further optimize our specialty alcohol production, quality, and distribution. Subject to supply chain constraint delays, we plan to complete our improvements before fourth quarter contract negotiations begin, producing an additional $5 million in EVA DA annually beginning in 2023. We have begun expansion of corn storage at our Pekin campus. This will increase the company's corn buying flexibility, enabling Elto to reduce the need to purchase product at premium prices when farmers and elevators are not shipping corn during holidays or unfavorable weather conditions. This year we will spend approximately $6 million to complete the storage installation and expect this project to provide over $2 million of EBITDA annually with the payback in less than three years beginning in Q1 2023. We continue to reinvest in our facilities by upgrading equipment and operating systems to create efficiency and plant reliability. As an example, and for a nominal expense, we've now added the ability to load corn oil into rail cars across our facilities, expanding access to higher-valued corn oil markets. Our capital expenditure projects like this will be more ongoing in nature, and we will provide color on these projects periodically as the year progresses. As previously discussed, once we have successfully completed the installation of the CoPro MAX system at our Idaho facility, we then plan to roll out these upgrades to our other three dry mills with the goal to have them fully operational by 2025. The total investment plan is approximately $70 million for all four facilities. The benefit is expected to exceed $34 million in EBITDA annually based on current market values. We are exploring additional opportunities for development. And during the first quarter, we evaluated investing in a natural gas bypass at our Pekin campus, reducing the price we pay for natural gas by approximately 11% based on 2021 values and bypassing the local utility. This potential gas bypass system would also create the opportunity to sell renewable natural gas produced by the plant directly into the pipeline in the future. We would expect to invest approximately $9 million in 2023 for a return of approximately $5 million in EBITDA annually in 2024 and beyond. With regards to carbon capture and sequestration at our PECAN site, it bears repeating that we continue to evaluate multiple opportunities for this important project and are making progress in advancing our plans. Finally, like carbon capture, we will continue to pursue additional profitable opportunities with a focus on 2024 and beyond and look forward to sharing more details once they are sufficiently developed. I'd now like to take a minute to provide a brief overview of our focus on environmental, social, and governance, or ESG, initiatives. Please note that in addition to laying out the focus on our future actions, much of the work will be increasing the transparency of the work we have already completed to date. An environmental focus is at the heart of Alto Ingredients business, and social and governance are simply sound business practices that we have been implementing in the natural course of our business. As a producer and distributor of high-quality bio-based alcohols, we are committed to creating a greener environment. We've launched initiatives, set baselines, and began tracking resources to improve employee health and safety, and further reduce environmental impacts. Earlier this year, we created an ESG committee consisting of senior executives, subject matter experts, and members of our board. Additionally, we completed an extensive company review with a third party and refined our strategy. As part of this process, we promoted Stacy Swanson, who led our rigorous certification efforts to head our day-to-day ESG programs in the newly created position of Vice President of Quality and Sustainability. We look forward to providing periodic updates on our ESG strategy and greater transparency of the many accomplishments to date and of our activities moving forward. I would like to now turn it over to Brian to review the financials. Brian?