Alto Ingredients, Inc.

Good afternoon and welcome to the Alto Ingredients Fourth Quarter and Year End 2023 Financial Results Conference Call. All participants will be in listen only mode. Should you need assistance, please signal the 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 telephone keypad. 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, LHA Investor Relations, a division of Alliance Advisors. Please go ahead.

Thank you, Gary. And thank you all for joining us today for the Alto Ingredients Fourth Quarter and Year End 2023 Results Conference Call. On the call today are President and CEO Brian McGregor and CFO Rob Olander. Alto Ingredients issued a press release after the 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 available through March 18th, 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, March 11th. You're advised 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 forelooking 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 forelooking statements. In management's prepared remarks, non-GAAP measures will be referenced. Management uses these non-GAAP measures to monitor the final 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 and extinguishment of debt, unrealized derivative gains and losses, acquisition-related expenses, and depreciation and amortization. To support the company's review of non-GAAP information, a reconciling table was included in today's press release. On today's call, Brian will provide a review of our strategic plan and activities. Rob will comment on our financial results, then Brian will wrap up and open the call for Q&A. It's now my pleasure to introduce Brian McGregor. Please go ahead, Brian.

Thank you, Kirsten. Thank you everyone for joining us today. During 2023, we continued our transformation to produce a variety of essential ingredients and the highest grade beverage alcohol in the industry. We made significant investments in our facilities to improve our capacity utilization rates and expand margins long-term. These strategies are beginning to mitigate the impact of negative commodity price fluctuations. Although ethanol crush margins exhibited greater volatility in the second half of the year, both our fourth quarter and full year 2023 results significantly outperformed those same periods in 2022. We generated $16 million in gross profit for 2023, an improvement of $43 million over 2022. We also reported positive adjusted EBITDA of approximately $21 million for 2023, an improvement of $27 million over the prior year. In Q4 2023, we continue to evaluate our strategic initiatives based on current market dynamics, recent findings from our updated front-end engineering design or feed studies, interest from potential strategic partners and project return profiles. Our carbon capture and storage, or CCS project, is our top priority. Under section 45Q of the Inflation Reduction Act, we have a unique and compelling opportunity to capture and store the biogenic CO2 we generate in our Pecan campus. Coupled with associated energy upgrades, our CCS project provides exciting economics. Given the significant amount of time, personnel and financial resources necessary to complete our CCS project, we have decided to pause further development of our primary yeast and biogas conversion projects. These continue to be opportunities for potential future development as resources permit. We are encouraged by recent progress on many aspects of CCS. These include overall system design, community outreach, financing, vendor negotiations, EPA application preparation, and schedule alignment requirements to procure equipment and install power and compression. In fact, today we announced that we have signed an exclusive non-binding letter of intent with Vault, and we are nearing the execution of definitive agreements to develop our CCS project. The project involves Alto installing equipment to capture the CO2 generated at our Pecan facilities, and Vault safely transporting and permanently storing the emissions deep underground in a secure geologic reservoir located in close proximity to our campus. The intent is to substantially reduce CO2 emissions from the ethanol production process and provide direct value to the surrounding communities. In addition to CCS, we are pursuing two attractive options to increase energy capacity at our Pecan campus with either our current utility provider or a highly regarded independent energy company that would build, own, and operate on-site energy facilities. Both options would greatly reduce our capital requirements and long-term energy costs while lowering our carbon footprint. These capital light energy options may result in our CCS project being more accretive than originally estimated. Beyond our control, the EPA has extended its CCS application approval process from 18 to 24 months, and the equipment manufacturing and installation times have grown longer than originally anticipated. Accordingly, we intend to make positive use of this additional time to better align our various project schedules and reduce our overall financial risk. Finally, as 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, especially our Western facilities. We intend to leverage the distinctive strengths and opportunities of these locations by investing in new equipment and applications. While doing so, we may also consider the possible disposition of one or both of these facilities. As we have effectively demonstrated over the past three years with the sale of our California and Nebraska facilities, we remain steadfast in our commitment to make value-enhanced decisions as appropriate to optimize long-term stakeholder value. Over the past two years, we have completed numerous upgrades. I'll review some of our larger initiatives that are in progress or that we completed over the past 12 months. In February 2024, we completed the installation of a new high-efficiency boiler at our peak in campus. We expect to reach full utilization by the end of Q1. This boiler replaces two inefficient high-pressure boilers and will significantly reduce our energy needs and operating costs. We estimate this will increase our annualized incremental EBITDA by $2 million. Additionally, in the second quarter of 2023, Pekin's new grain silo became fully operational, doubling our days of corn storage capacity. We achieved our goal of increasing flexibility and lowering costs related to a quick or last-minute shipments and to reduce corn premiums during extended weekends and harsh weather conditions. This project has already exceeded our target of delivering annualized incrementally EBITDA of $2 million. We continue to expand into higher-quality alcohol and our ability to differentiate our offerings has been very important considering market trends. In 2021 and for part of 2022, the higher margin for specialty alcohol attracted many new producers, increasing product availability and supply. This combined with ebbing consumer demand growth and fluctuations in supply chain dynamics has resulted in margin compression over the past 18 months. In anticipation of these changing market conditions in 2022, we began strategic investments to produce more beverage-grade alcohols that leverage the unique capabilities of our Pekin campus. We developed our highly differentiated 192-proof and low-moisture 200-proof grain neutral spirits, which became available in early 2023. These new products were well-received by our customers and actively sold in the spot market, generating significant sales and bolstering our gross margin for the year. To date, for 2024, we have contracted approximately 93 million gallons of fixed price, high-quality alcohol at an average price premium to renewable fuel of 31 cents per gallon with additional capacity to take advantage of spot sales. In our pursuit to expand higher margin corn oil and high protein products at our Magic Valley plant, working with our high protein system vendor, Harvest Technology, we engaged equipment manufacturers and independent third-party engineers in Q4 to conduct an in-depth analysis of our challenges. They formulated a plan, including extensive design modifications, to achieve the intended production rate, quality, and consistency. We decided mid-January to temporarily hot-idle the facility to minimize the losses related to negative regional crush margins and expedite the installation of the additional equipment. Harvest Technology has borne the direct costs associated with their design and equipment. We intend to restart production in Q2 once the upgrades are complete and crush margins have improved. The operation of the upgraded high protein system at the Magic Valley facility will influence our decision and timing to roll out the system at our other dry mills. In the interim, we are operating the Magic Valley facility as a terminal to service our renewable fuel customers. We're also working with the local feed distributor and feed customers to meet supply requirements. Before I turn the call over to Rob, I'll review our sustainability efforts. As a renewable company, we are dedicated to implementing sustainable best practices that are good for our business, our stakeholders, and our planet. In December, we published our first sustainability summary. It reviews our strategy and vision for advancements in sustainability, responsible sourcing, and risk management. We are focused on continuous improvements in environmental, health and safety, product quality, and diversification by integrating innovative practices at our facilities to ensure optimal efficiency, contributing to a lower carbon footprint. We are also focusing on giving back to the community through food drives and supporting charitable organizations. Our efforts improved our sustainability scores across the board with all three rating agencies, which is important to our customers. Looking ahead, we are working to obtain third-party greenhouse gas verifications, improve transportation safety, and earning additional eco-virus awards. Now I'll turn the call to our CFO, Rob Olander.

Thanks, Brian. I'll review the financial results for the fourth quarter and full year of 2023 in greater detail. We enjoyed stronger gross margins and our efficiency initiatives contributed to improve bottom line results for the fourth quarter and full year 2023, despite volatile commodity price fluctuations and lower plant utilization grades. Looking back over 2023, in Q2 and Q3, renewable fuel margins were strong. So we shifted a portion of our production back to renewable fuel to take advantage of the higher margins. As Brian noted, ethanol crush margins exhibited extreme volatility in the second half of 2023, peaking in the mid-60s in September and dropping to slightly negative in December. These fluctuations impacted the gallons we were willing to sell, the price at which we did sell, and the volume of third-party sales with contractions. In 2023, we sold 382 million gallons compared to 419 million gallons in 2022, primarily reflecting the aforementioned weaker crush margins in Q4 2023, the high idling of our Magic Valley facility in Q1 2023, and the opportunity costs associated with navigating the challenges with the Magic Valley installation. Net sales were $274 million in Q4 2023 and $1.2 billion for the full year, compared to $328 million and $1.3 billion for the same periods in 2022. In Q4 2023, we reported a gross loss of $3 million, improving $19 million compared to Q4 2022. For the full year of 2023, we generated gross profit of $16 million, increasing $43 million compared to 2022. During Q4, repairs and maintenance expense was $7.7 million compared to $7.1 million for Q4 2022. This brought 2023 total repairs and maintenance to $29.5 million compared to $30 million for 2022. Our wet mill, use facility, and distillery capabilities at our Peekin campus provide significant differentiation and greater production capabilities than the typical dry mill. That said, the nature and age of these facilities require consistent ongoing repairs and maintenance and capital upgrades integral to the longevity, sustainable performance, and modernization of our assets. To maintain reliable and efficient operations, we normally address smaller concerns as needed and conduct larger scheduled outages approximately every two years. As noted on our last call, we originally scheduled our large Peekin campus wet mill outage for August 2023. However, favorable crush margins and sufficient foreign supply motivated us to postpone the downtime until April 2024. With slightly negative crush margins heading into year end and continuing thus far in Q1 2024, in Q4, we recognized the $2.2 million lower of cost or market charge on our Indian renewable fuel inventories and related fixed foreign purchase commitments. This compares to a gain of $700,000 for Q4 2022. During Q4, we recorded an asset impairment charge of $6 million to the goodwill associated with our acquisition of Eagle alcohol in 2022. This charge reflects revisions to current market premiums and adjustments to projections in our required annual goodwill evaluation. Incorporating additional synergies, we intend to leverage Eagle alcohol's transportation expertise across our entire platform, replacing a portion of our third party trucking service services, reducing our logistical costs and improving margins. We are also in the process of expanding our distribution territory in the new geographies such as Southern California. For Q4 2023, adjusted EBITDA was positive $3 million, improving $19 million compared to Q4 2022. For the full year 2023, adjusted EBITDA was positive $21 million, up $27 million compared to 2022. This is a significant year over year improvement, particularly considering that in 2022, the company received $20 million more in USDA cash grants. As of December 31st, 2023, our cash balance was $30 million and our total loan borrowing availability was $98 million to support our business operations and capital investment initiatives. Our borrowing availability includes $33 million under our operating line of credit and $65 million subject to certain conditions under our term loan facility. We appreciate the confidence and continued support from our lenders. Cash flow from operations was $12 million through Q4, bringing the annual total to $22 million. In Q4, we repurchased 436,000 shares of common stock for $1 million, bringing our total plan repurchases to $5 million since the plan's inception. We invested $5 million on CapEx for Q4, bringing the year in total to $30 million, compared to $13 million and $38 million for the same periods in 2022. We are committed to continual improvement in our reporting as well as our performance. First, to increase transparency to our operating physical margins and conform reporting to how management is evaluating Alto's performance, we will exclude the impact of unrealized, non-cash, derivative gains and losses when calculating adjusted EBITDA. Unrealized derivative gains and losses are non-cash, -to-market adjustments of derivative instruments on open positions related to future period purchases and sales that are recorded as part of cost of goods sold. Updated historical reconciliations have been added to our website. Next, we have updated the quarterly metrics as seen in today's press release and in the interactive financial data section of our website. The new metrics included unaudited, segmented data for sales, production and corn costs. Going forward, we will consider both additional metrics and the frequency of providing them. Finally, as we discuss our capital projects individually, not in aggregate, we will place them in the three categories. First, in operation includes completed projects. Second, under development includes high priority strategic opportunities that have the greatest expected return as well as initiatives that support our near term operational goals. And third, for future evaluation includes potential opportunities with attractive returns to be assessed as resources permit. Now, looking at 2024, the crush margin trends per typical seasonality are beginning to improve over the end of 2023. Further, margins are approximately 20 cents better for January and February this year compared to the same time last year. This said, in January, the colon vortex in the Midwest negatively impacted both operations and logistics at our Peking campus. Despite significant preparations ahead of the freeze and timely recovery response efforts, we experienced a shift to lower margin feed products and reduced alcohol production by approximately one million gallons as a result of frozen river conditions. As Brian discussed, due to our hot idle the Magic Valley facility, Altos total ethanol production for Q1 will be lower, but third party gallon sold should be higher in comparison to Q4. We have confidence in the extensive design modifications underway and achieving our corn well and high protein targets in 2024. It is also important to note that our biennial wet mill repairs and maintenance outage is scheduled for April. We expect it to take approximately 10 days, which will lower Peking campus production in Q2 and cost approximately $4 million. For the full year 2024, we expect to track to our typical repairs and maintenance run rate of approximately $30 million, bringing the total, including the biennial outage expense to $34 million. Regarding CapEx, we plan to invest approximately $25 million on equipment upgrades, process improvements and projects with short term paybacks. These ongoing maintenance efforts and capital improvements position Altos for a much stronger future. The biennial outages historically increase reliability and production run rates. We expect these positive effects will benefit 2024 in particular, as we head into more robust summer months. With that, I'll turn the call back to Brian.

Thank you, Rob. Currently the overall outlook for 2024 is favorable. We have good corn inventories, low natural gas and corn prices, higher sugar prices, domestic regulatory support for summer blending and expected demand growth for US ethanol globally. These factors should create an environment that results in crush margin improvements over the next few months and produce positive spreads through the most of the year. Although markets are dynamic, we remain agile and financially prudent and seek to capitalize on the most promising and profitable opportunities. We are enthusiastic about our prospects and confident in our long-term growth strategy. Before I open the call to questions, please note that we will be at the annual Ross Conference next week and hope to see you there.

Operator, we're

ready

to begin. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our

first question today is from Amit

Dayal with HC Wainwright. Please go ahead.

Thank you, good afternoon, everyone. Brian, just to begin with Magic Valley, the issues with respect to corn oil and high protein, et cetera, are these just, are you looking to just improve the yields or are there any other challenges that you're looking to overcome at Magic Valley?

Hi, Amit. The challenges that we faced at, that we have faced at Magic Valley is not surprising given that this wasn't a bolt-on system. So as we brought in the additional equipment and materials, we found it difficult at times to be able to produce consistent product at maximum capacity and qualities. So as we evaluated that, we determined that we needed to actually make some improvements and enhancements to be able to expand the overall capacity of the equipment to be able to work better within the tolerances of the system. These are dynamic systems, and you need to be able to have flexibility to be able to move beyond some certain capacities in order to produce the products that we need to produce. So as we looked at what we needed to do and then taking advantage of those, of the what were weak margins, particularly in the Idaho region, we decided that it would be best actually and would save the company money by hot idling the facility and expediting the repair of, or the upgrades of the system, and to be able to then bring it back up online in Q2 and be able to produce a much more sustainable and higher quality product.

Okay, thank you, Brian.

With respect to your view on sort of crash margins going forward, it looks like one Q24 is still gonna be a little bit challenging, but it looks like, just from your commentary, you were more optimistic about the rest of the year. Just trying to see what is driving that sentiment.

Yeah, and as I think I mentioned, that there's a number of macro factors that really contribute to that. Not only what we would expect to be a growing US or US export market, given other products with which we compete internationally. The ethanol value and price is compelling, so we've seen a lot more demand and questions and requests for information and capacity along those lines. We're also seeing good carryout into 2024 with corn supply. We've seen strong sugar prices, which bode well for exports as well, even due to Brazil. Those are just a couple of factors, but we would expect lower corn prices, all of these things contributing to what should be, and low natural gas prices contributing to what should be a good production year and good pricing year.

In a minute, I'll just add to that. Q1 to date has been break even, slightly negative, turning positive, improving just recently, but we are starting the year off with about 20 cents per gallon higher crush margins for January and February than we did this time last year, so that's reassuring as well.

Then maybe the last thing I'd add is again, having contracted the amount of volume that we were able to do this year in fixed price volume should

also help

support

that thesis. All right, thank you, thank you guys.

Just last one from me, with respect to CCS, what's the next milestone that we should be looking forward to? I mean, is this playing in the background a little bit for now, once there's any significant investments required, or obviously revenues and all are probably a little bit away, but any big milestone that may come into play for moving this project forward?

Probably the ones I would identify would be definitive agreements with Vault as one, and then the other one would be, probably the next one would be filing

of the Class 6 permit. Those would be fairly major milestones. Got it. That's all I have, guys, I think my other question's offline, thank you. Thanks, I'm in.

The next question is from Eric Stein with Craig Howam, please go ahead. Hi, Brian, how are you? Brian, hi, Rob.

Hello. Hello. I can understand prioritizing carbon capture and a good first step here that you just announced, but maybe, just as you kind of make the transition to the way you'll start talking about these capital projects and how you prioritize them, can we just talk about maybe how you have been talking about it versus now just to kind of level set where things stand? If I do the math, I think you talked about 65 million plus of incremental EBITDA by mid-26, and it seems like that number's maybe now more like 15 to 20, and you actually have brought on most of that already through the storage and the specialty alcohol piece. I guess maybe first I'd like to confirm that. I

think that's fair, Eric. I think,

yeah, I think that's close enough math. I think what I would indicate though is in the level setting department, when we started providing this information, what, a year and a half ago, two years ago, it was in response to requests from investors to understand what the future could look like. So, and we wanted to also provide an indication to investors and to shareholders that we had many, not only interesting opportunities and growth in growth and in profitability, but as well that there were some very unique projects in there as well. And we tried to provide a profile as far as over time, what that would look like if we were able to bring those to bear. But there was still a lot of work to still be done with regards to feed studies, getting into the details, and making sure that you had the means to be able to do so. So as we worked through those number of projects, there are clearly those projects that have risen to the top. There are others that have come in a lot more expensive than what we thought they would. They're still very compelling and very unique to our company. But given the resources that we have, that we needed to give priority to certain projects over others, and then as resources and opportunities change, that we can bring those on as well going forward.

Yep, no, I totally understand. I mean, the capital environment's changed somewhat since those came out. I guess that's an understatement. Maybe then just a follow-up on the previous carbon capture question. So in your deck, you're talking about, and you've been talking about this for some time, but I just wanna confirm. When you're targeting annual adjusted EBITDA, I mean, that would be your portion, right, where you would be splitting some with your partner. In this case, it would be Vault. I guess I'd like to confirm that first. That's

correct. The 30-minute, so, and yeah, that would be to Alto. And the arrangement with Vault would be, there'd be certain services and fees that would be paid for the pipeline, for the transportation and sequestration of that product.

Right, and then this is a number that I would, I mean, should we view this as potentially, that is a different number if you decide to go the capital light route and lean on the capital light and then lean on others for some of your energy needs? No,

those actually would stand on their own as well. So, and we would actually, as Rob, I think, mentioned in his prayer remarks, was that there is actually potential, or in my comments as well, that there's actually potential to see a material increase over that number. Got it. So not just, you'll recall that as we broke out in the incremental annualized EBITDA, previously we used to assign a value for natural gas and for code generation. While we have provided an indicative number on that amount, yeah, the economics are still sufficiently compelling to, and they're very foundational to being able to bring on carbon sequestration and to build a good foundation for operations going forward.

Okay, makes sense. Man, maybe last one for me. I don't know if you gave an exact number, but when you did have these goals out there, you did lay out, I mean, they were pretty significant capital needs for this, maybe just without, I don't want to attribute capital needs to each specific project. That doesn't make sense, but maybe an idea of how much your capital needs are haircut now, at least near term, with you just focusing on carbon capture and in the near term magic valley and getting that on the right track. Sure, so

there may be some incremental spend on magic valley, but our intent, again, working with our partners, Iris Tech is certainly more in the capital costs associated with any of the changes that we've had to make to date. With regards to, we would expect those costs if to the extent we're successful at magic valley and we just determine how we're gonna roll that out with other dry mills, they would be comparable to what we have to do on, what we've been able to do on magic valley. Each one's gonna be slightly different depending on the needs, but that hasn't changed much. With regards to, if you think about the cost of replacing power and natural gas at the peak in sight, we're talking about well over $100 million. So to be able to actually not have to spend that money and be able to leverage that and generate significant savings is not, it's nothing to blush at. It's something to be very excited about and can make a material difference not only on a cost savings basis, but as well being able to lower overall carbon intensity scores. Right, these facilities in Peking are high energy and high steam demand facilities. So anything we can do to make them much more efficient is significantly beneficial. Got

it, okay, thank you.

Thanks, Aaron.

Again, if you have a question, please press star then one. The next question comes from Justin Dopierawa with Domo Capital Management. Please go ahead.

Hey guys, thanks for taking my phone call. Hey,

Justin.

Hey, nice to hear you. I guess a few questions, a couple of them were answered. I was wondering if you could maybe walk us through a little bit better the gross loss specifically at the peak in sight of 1.1 million. For example, on the financials you provided here, you kind of show over a 40 cent crush margin. I think last year, again, based on your financials, it was maybe around three cents. And in Q2, I think it might've even been negative and you guys had a much different operating result. So I was just wondering, maybe even compared to Q2, is there something within that peak in number, I don't know if the derivative losses are in there that's playing with that?

Yeah, Justin, they do include the derivative losses and that's a large, most of the derivative is associated with sales and volume associated with that. Particularly, if you think about it, all of our fixed sales for specialty alcohol is aligned with that facility as is the significant amount of natural gas obligations and the like that we would also hedge on a normal basis.

Okay, so I think that number was over eight million. So if we take that into account, then the peak in is more of a seven million gain backing out, for example, those derivative losses as one thing.

Yeah, quick math, that makes sense.

Okay, and I guess just to further understand that, so as you mentioned, natural gas prices fell into the end of the year, so I assume that's a large part of the hit you took in the derivative losses. But those derivatives are specifically to hedge in the margins of your specialty alcohol sales, right?

Yeah, so the derivatives that we normally would carry are in two factors. One is just to make sure that we've locked in the natural gas prices, right? As much as we wish we had a crystal ball and to know what the weather's going to be like in our locations year in, year out, it's difficult to do. So the next best thing is to make sure that you avoid the significant risk that can happen over a very short period of time, right, where we see natural gas prices spike to not only hundreds of dollars, but thousands of dollars as well. So to avoid that, it makes sense to lock in that a winter strip to be able to cover those costs as well as doing some around the electricity side.

On the fixed alcohol

sales, most of that is we will effectively take those fixed sales, swap those back out into floating and lock in the spread between that and fuel prices, largely because it's difficult to go out and procure delivered corn to the facility. To the extent we're able to do that, then you're able to lock in that spread as well.

Got it, so as the special alcohol is sold, so the derivatives are more of a paper loss.

Correct, and to your point, the natural gas hedges were part of that as natural gas prices fell, but to a larger extent, it was mainly related to locking in the premium or high quality volume that we contract. Keep in mind, we contracted that in Q3 and Q4 for all of 2024, and so as the market prices fell, we're taking a timing loss, an unrealized loss, and those unrealized positions on the derivatives will continue to float throughout the course of next year as we unravel them, rateable with when we actually deliver the product physically.

Right, that makes sense,

perfect. The Q4 and Q1 to take an unrealized loss on those.

And the reason we made this change, Justin, as well, is because historically, we have experienced at times where we will lock in our fixed price sales hedges or derivatives and we'll experience the whole gain or the whole loss in the fourth quarter, and then you effectively are trying to work through that the remainder of the following year, or you either get the benefit or you carry the burden of trying to make up for that loss in the following four quarters. And so we thought it would be best instead that those were actually a distraction and really didn't reflect the true financial impact of the company, which is why we are now backing them out of EBITDA. Got it.

And then as far as for the special alcohol sales, so it looks like you guys had a higher target. Last quarter, I think you were hoping to hit 90 million for the full year. It looks like maybe you're only at about 75 million. I don't know if you have any comments on that and then what we can expect for 2024.

Yeah, so I think consistent with my comments earlier with regards to changes in the marketplace, we saw not only market pricing depression, we were protected from that because of the prices that we negotiated. However, the challenges were as well that as you saw demand, consumer demand start to change for different products that our customers as well had to make adjustments to the product, the how much alcohol they were taking in as well. There is in, if you will, 2024 volume, some of that 2023 volume that was rolled into 2024 and being able to continue to preserve that

margin. So we should expect a material increase in gallons sold, especially alcohol for 2024?

That's the goal.

All right, and then I guess one last comment. Now it was really great to hear stronger statements and your willingness to potentially dispose of the Western assets. And I guess just given a lot of the public comments made by your competitors on the potential value of facilities, is it safe to assume that any disposition of the Western assets would likely be over $100 million? I would

hope it would be 600 million. It's difficult to assess, right? We will evaluate opportunities as we have always indicated. That message has never really changed. So it's not unique for us to say this. And this goes for not only the Western assets but all assets, right? We have to consider viable and reasonable costs and opportunities. And so that said, we have not found to date opportunities that exceeded what otherwise we could do with the assets ourselves. And so we will continue to invest in those and to the extent that that changes, we certainly will remain vigilant and do the right thing for the company and for the shareholders. Thank you. That means able to take that money and redeploy it and reinvest it. So we'll do that. And if not, we'll certainly extract the value out of these unique assets

and drive

home

greater profitability. Thanks a lot. You bet.

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

Thank you, operator. Thanks again for joining us today. We appreciate your ongoing feedback and support. Have a good day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.