Alto Ingredients, Inc.

Good day and welcome to the Aalto Ingredients, Inc. Third Quarter 2024 Financial Results Conference Call. All participants will be 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 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 of Alliance Advisors Investor Relations. Please go ahead.

Thank you, Megan, and thank you all for joining us today for the Alto Ingredients Third 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 November 13th, the details of which are included in today's press release. A webcast replay will also be available at altoingredients.com. Please note that the information on this call speaks only as of today, November 6th. We're advised that any time-sensitive information may no longer be accurate at the time of 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 on today's call 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 the Alto Ingredients filings of 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 or income, provisions for income taxes, asset impairments, unrealized derivatives, gains and losses, acquisition-related expense, 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 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, sir.

Thank you, Kirsten. Thank you all for joining us today. In Q3 2024, our peaking campus increased its production capabilities and uptime compared to the prior year quarter, improving its profitability despite fluctuation and fluctuating market conditions. As a result, Q3 2024 consolidated gross profit improved to $6 million and adjusted EBITDA was $12.2 million. Rob will discuss our financial results in greater detail in a moment. First, I'd like to comment on today's TSA announcement. We've taken a significant step forward in our commitment to sustainability by finalizing a definitive CO2 transportation and sequestration agreement with Vault. Under the terms of the agreement, Vault will handle the transportation, injection, and sequestration of CO2 from our Pekin campus into the Mount Simon Sandstone Formation in Illinois. This partnership marks a critical milestone on our journey toward a more sustainable, and prosperous future. While we await EPA submission and approval, address financing, and source equipment, this agreement brings us closer to achieving our goals of lowering our carbon footprint and monetizing the value of the biogenic CO2 we produce at our Pekin Campus. Regarding our operations, in Q3, our Pekin Campus wet mill increased productivity by its highest level since 2020, reflecting in part the results of our successful biennial repairs and maintenance outage in Q2. This translated into greater production of specialty alcohols, reaching 42% of total peak in sales volume, seven percentage points higher than the same period last year. We remain on track to sell 90 million gallons of specialty alcohols in 2024 and expect to match this volume in 2025. We continue to modernize our equipment and facilities to improve reliability, lower our operational costs, and reduce our carbon footprint. In addition to assigning the TSA, we are currently building a second alcohol loading dock at our Pekin campus. Our goal with this project is to improve river logistics by expediting the shipping costs, adding redundancy, and expanding our capabilities to accommodate a wider array of barges. We expect a synergistic effect and increased overall loading efficiencies. The planned cost of this second dock is less than $3 million and is scheduled for completion in 2025. And at Magic Valley, we completed upgrades to harvesting technology system to capture high-protein and corn oil products and restart the facility to prove out the system and to benefit from positive crush margins at the time. In October, our facility consistently achieved average ethanol production rates at full capacity. Our protein content reached 50% or greater, and we've been able to expand our corn oil yields. We commend the yeoman efforts of our operational team, along with the technical support provided by SoilNet. This restart has informed us of the technology system's capabilities as we consider deployment at our other dry mills in the future. I'll have more to say on Magic Valley in a few minutes. Turning to a market review, Q3 began with solid ethanol crush margins supported by strong exports. Domestic demand began to weaken with a decline in miles driven attributable in part to weather related events. As ethanol production remained relatively high, it has outpaced demand resulting in higher ethanol inventory levels and lower ethanol prices. In Q3, carbon prices were approximately 80% lower in Oregon and Washington and 20% lower in California compared to the same period last year. While carbon prices remained low in October, we began to see some recovery. In Q4, we expect corn prices to remain low, reflecting a good harvest, resulting in a strong carryout into 2025, which is a good thing. However, with corn prices lower in the U.S. compared to international prices, Demand for U.S. corn exports will likely increase, straining logistics and driving up transportation costs. Also, when corn prices are low, corn suppliers typically require prices to at least cover their costs, driving up corn bases. This is one reason why we expanded our corn storage capacity at Pekin and are considering increasing storage even further. While higher transportation costs impact all ethanol producers, they have a more substantial impact on our western operations. In short, higher transportation costs significantly increase the price for delivered corn at our two western plants compared to Midwest producers that have access to local corn supplies and cheaper bases. Although the improvements we've made at our Magic Valley facility have delivered economic benefits, as we mentioned in our press release on October 15th, The recent increases in regional corn basis and declining protein and corn oil market prices have resulted in overall margin compression, outweighing the economic benefits of our plant improvements. To address these challenges, we continue to pursue opportunities to maximize the Western plant's strengths and advantages. We've engaged Guggenheim Securities to actively explore our alternatives to monetize or optimize these assets, including through potential partnerships. we will continue to explore operational opportunities and assess market trends. Unless there are notable improvements in economics at our Magic Valley facility, we plan to idle the plant before the end of Q4 and believe that will have a positive impact on the company's financial results. Finally, while our Columbia facility is also experiencing margin compression, the combination of lower transportation costs, premiums earned on lower carbon ethanol, And revenues generated from our CO2 sales make Columbia more economically resilient than Magic Valley. Turning to our sustainability efforts, we completed our 2023 sustainability report and have increased our disclosure on topics such as environmental, health, safety, quality, and social metrics. Our core values of responsibility, integrity, and quality drive our mission to produce the highest quality, sustainable ingredients that make everyday products better. We proudly offer the 100% bio-based renewable products from our specialty alcohol and essential ingredients to renewable fuels and plant-based proteins. Our highly efficient dry-grind facilities are striving for carbon intensity scores below 50% by optimizing efficiency, upgrading energy infrastructure, and selecting sustainable feedstocks. Our dedication to sustainability and social responsibility extends to our customers, employees, investors, partners, suppliers, and consumers, and our focus on product quality and safety. We conducted material assessments with internal and external stakeholders and identified multiple long-term market opportunities to viably expand bio-based renewable offerings. The third-party certification we earned include areas of oversight on risk management, chemical storage, handling, transportation, and disposal, multiple food safety initiatives, quality management, good manufacturing practices, and requirements for all active pharmaceutical ingredients and excipient products, and supply chains for waste streams. Now I'll turn the call to Rob.