Alto Ingredients, Inc.

Good afternoon and welcome to the Alto Ingredients, Inc. Second Quarter 2024 Financial Results Conference Call. All participants are in listen-only mode. Should you need assistance, 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 touch-tone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Kirsten Chapman with LHS Investor Relations, a division of Alliance Advisors. Please go ahead.

Thank you, Kaylee, and thank you all for joining us today for the Alto Ingredients second quarter 2024 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 August 13th, 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, August 6th. You are advised that time-sensitive information may no longer be accurate at the time of any replay. Please refer to the company's AFARBOR 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 unadopted 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 expense, and depreciation and amortization. To support the company's review of any 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, and Rob will comment on our financial results. Then Brian will wrap up and open the call for Q&A. It is now my pleasure to introduce Brian McGregor. Please go ahead, sir.

Thank you, Kirsten. We welcome our investors, valued customers, and other stakeholders joining us today. The Pekin campus has been producing alcohol for over 150 years through many market cycles. We will continue to produce well into the future. Over the last few years, we've been leaning on our strong balance sheet by utilizing cash flow from operations and excess liquidity to fund capital upgrades and repair and maintenance to strengthen our facilities and to improve our long-term profitability. While these additional expenses can impact our short-term results, our recent efforts are beginning to yield operational improvements, and we are confident we will reap long-term benefits. In Q2, our initiatives increased production in our Pekin campus, positioning us to benefit from improving ethanol margins. These efforts further demonstrate the advantages of our production facilities located there, including the ability to operate profitably on a consistent basis. More specifically, in Q2, even with over $5 million related to spring outages, our peak in campus generated over $10 million of gross profit, up from over $4 million in Q1, reflecting these programs and higher crush margins in June. In Q2 2024, the average Chicago crush margin increased to 21 cents per gallon compared to just above break-even in Q1 2021. In July, the average Chicago crush margin rose further to 48 cents per gallon. These improvements align with the optimism we expressed on our Q1 call regarding strengthening crush margins, solid corn supplies, and growing export demand. Assuming margins remain strong, we expect to deliver solid financial results in Q3. That said, our consolidated Q2 2024 net loss and adjusted EBITDA were negatively impacted by the cost of our biennial wet mill outage, preventative repairs and maintenance at all our facilities, lower feed and carbon prices, particularly with respect to our Columbia facility, and realized losses on hedging activities. Rob will discuss our financial results in greater detail in a moment. To generate more sustainable profitability in the long term, we've been actively expanding our revenue streams. I'll review our operations and strategic initiatives, beginning with carbon capture and storage, or CCS, We'll expect that the regulatory developments and carbon market fluctuations will affect this initiative on an ongoing basis. Most recently, Illinois signed into law the Safe CCS Act on July 18th, establishing stringent safety, financial, and insurance requirements on carbon dioxide pipelines. This act also imposes a moratorium on construction of new carbon pipelines until the Federal Pipeline and Hazardous Materials Safety Administration finalizes its new safety rules, or July 1, 2026, whichever occurs sooner. This timing aligns with our current proposed CCS project permitting and construction schedules. We believe the Act will add clarity for the industry on CCS projects, although we do anticipate increased compliance and other requirements. The CCS market also remains dynamic. For instance, on the economic front, current prices in the low-carbon fuel standard markets are at historic lows and voluntary carbon markets are nascent. As such, it is difficult to project with certainty beyond the value of the 45 Q tax credits that begin at $85 a metric ton, what the dollar values of the associated environmental attributes will be over the life of our proposed CCS project. Given our plans to take a capital light approach to this project, we need to align Aalto and its various partners resources to best bear the various risks while retaining the appropriate financial benefits. Given these evolving dynamics, it's important that we bring the right partners to the table. We believe we're doing so effectively as we continue to work collaboratively with Vault and other parties. Moving to operations, as previously discussed, we conducted our binaural wet mill repairs and maintenance outage at the Pekin campus in April. This scheduled outage was completed on time, within budget, and is now demonstrating improvements over prior operational performance. For example, We increased production at the wet mill, improving capacity utilization while reducing our fixed cost per unit. The Beacon Campus is now fully operational and taking advantage of the summer driving season economics. We remain on track to achieve 90 million gallons or more of specialty alcohol sales in 2024. We are encouraged by the demand from existing and new customers. We're capitalizing on our proximity to the river, which gives us access to the gulf, and the ability to export product. We're building a second loading dock at our Pekin campus that will increase barge volume, reduce our overall transportation costs, and provide critical redundancy. We expect the cost of the second dock to be less than $3 million. Now let's pivot to review our Western plans. We built these facilities at a time when destination plans delivered a solid and differentiated value proposition. As competition in corn bases increased and carbon values declined, We began investing in these plants to broaden our revenue streams and improve profitability. Ultimately, our goal is to optimize their value, which could include operating them long-term as part of our portfolio of production assets or evaluating the sale of one or both plants. At Magic Valley, we continue to work with our high-protein system vendor, Harvesting Technology, to produce increased levels of corn oil and higher-protein feed products that garner higher prices. In January of this year, we hot idled the plant due to negative regional crush margins and to address the excess water and mass balance challenges that inhibited our ability to operate the plant at capacity and to achieve the target results from our corn oil and high protein system. We made significant modifications that included the installation of additional equipment and adjustments to the design process flows. Also in Q2, to optimize plant efficiency upon restart, We accelerated routine maintenance activities, including tuning other major plant equipment and operating systems, performing routine cleanings, and flushing prior process residuals. We resumed operations in early July and are encouraged by the initial results. We expect to increase production rates in the coming weeks as we complete the system upgrades. We intend to do so carefully to ensure the process remains balanced and our products meet quality expectations. We anticipate having a clearer picture with respect to the effectiveness of the system modifications and the general performance of the plant later this summer. In Q2, we significantly improved the production rates at our Columbia plant by addressing centrifuge limitations we experienced in Q1. As a result, we increased capacity utilization rates in Q2 and anticipate further improvements as the summer dry season continues. We're currently working on other ways to improve the facility's profitability and hope to share more information with you over the coming quarters. Before I turn the call to Rob, I'd like to note that customers have indicated their support of our efforts to continue to improve our sustainability and lower our carbon footprint. In July, our ICP and Pekin plants received the 2024 Bronze Medal Sustainability Rating from EcoVadis, which honors the top 35% of companies assessed. ECOBOTIS is a globally recognized business sustainability rating service that sets corporate sustainability standards. Now I'll turn the call to Rob.