Aemetis, Inc

Welcome to the AMETIS Third Quarter 2021 Earnings Review Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Todd Waltz, Executive Vice President and Chief Financial Officer of AMETIS Inc. Mr. Waltz, you may begin.

Thank you, Paul. Welcome to the AMETIS third quarter 2021 earnings review conference call. Joining us today for the call is Eric McAfee, founder, chairman, and CEO of AMETIS, and Andy Foster, president of AMETIS Advanced Fuels and AMETIS Biogas. We suggest visiting our website at ametis.com to review today's earnings press release, the AMETIS corporate and investor presentations, filing with the Securities and Exchange Commission, recent press releases, and previous earnings conference calls. The presentation for today's call is available for review or download on the investor section of the ametis.com website. Before we begin our discussion today, I'd like to read the following disclaimer statement. During today's call, we'll be making forward-looking statements, including, without limitation, statements with respect to our future stock performance plans, opportunities, and expectations with respect to financing activities and the execution of our business plan. These statements must be considered in conjunction with the disclosures and cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward-looking statements made on this call involve risk and uncertainties, and that future events may differ materially from the statements made. For additional information, please refer to the company's Security and Exchange Commission filings, which are posted on our website and are available from the company without charge. Our discussion on the call today will include a review of non-GAAP measures as a supplement to financial results based on GAAP. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the quarter ended on September 30, 2021, which is available on our website. Adjusted EBITDA is defined as net income or loss plus, to the extent deducted in calculating such net income, interest expense, gain on extinguishment, income tax expense, intangible and other amortization expense, accretion and other expense of Series A preferred units, depreciation expense, and shared base compensation expense. Now I'd like to review the financial results for the third quarter of 2021. Revenues during the third quarter of 2021 were $49.9 million compared to $40.9 million for the third quarter of 2020. Our North America operation in the third quarter of 2021 as compared to the third quarter of 2020, experienced an increase in the selling price of ethanol from $1.59 per gallon to $2.84 per gallon, but also saw an increase in the delivered corn price from an average of $4.92 per bushel during the third quarter of 2020 to $7.99 per bushel during the third quarter of 2021. Gross loss for the third quarter of 2021 was $4.8 million compared to a gross income of $771,000 during the third quarter of 2020. Gross margin was negatively impacted by the establishment of a reserve of $5.3 million for California emission-compliant credits for the Keys plant in September. Selling, general, and administrative expense were $5.1 million during the third quarter of 2021 compared to $4.6 million during the third quarter of 2020 as a result of period expenses, specifically personnel and insurance incurred as part of the development of our low carbon and negative carbon intensity initiatives. Operating loss was $9.9 million for the third quarter of 2021 compared to an operating loss of $3.8 million for the third quarter of 2020. principally driven by the establishment of a reserve of $5.3 million for California emission compliance credits related to our ethanol plant operations. Interest expense during the third quarter of 2021 was $5.5 million, excluding accretion and other expense in connection with Series A preferred units in our AMETIS biogas LLC subsidiary, compared to $6.5 million during the third quarter of 2020. Additionally, our AMETIS biogas subsidiary recognized $2.2 million of accretion and other expenses in connection with preference payments on its preferred stock during the third quarter of 2021, compared to $1.8 million during the third quarter of 2020. Net loss was $17.6 million for the third quarter of 2021, compared to a net loss of $12.2 million for the third quarter of 2020. After adjusting for the establishment of a $5.3 million compliance reserve, net loss would have been $12.2 million, or 39 cents per share. Cash at the end of the third quarter of 2021 increased to $6.4 million compared to $592,000 at the end of 2020. Capital expenditures increased property, plant, and equipment by $18.8 million, driven by investment in our low-carbon and negative carbon intensity initiatives. Company debt decreased by $44.6 million by the end of the third quarter of 2021 compared to December 31, 2020. As we enter into the fourth quarter, ethanol pricing has rebound strongly with current pricing at $3.50 per gallon in today's market, while at the same time, the average delivery cost of corn has decreased to about $7.50 per bushel. These market changes indicate a healthy fourth quarter for our traditional fuels business, while our construction teams continue to move forward with the engineering and construction of the low-carbon projects. That completes our financial review of the third quarter of 2021. Now, I'd like to introduce the founder, chairman, and chief executive officer of AMETIS, Eric McAfee, for a business update.

Eric? Thank you, Todd. Ameditz is focused on producing below zero carbon intensity products, including the production of negative carbon intensity, renewable natural gas, and renewable fuels. Our projects maximize the value of carbon credits under the California Low Carbon Fuel Standard, the Federal Renewable Fuel Standard, IRS 45Q carbon sequestration tax credits, and blenders tax credits, while reducing operating costs by using waste materials as feedstock. In early 2021, we announced a five-year plan to grow to more than $1 billion of revenue and $325 million of annual cash flow. We are on track with the five-year plan. This year, we have paid $63 million on the higher interest rate bridge loans from Third Eye Capital. We are also on track with financing growth using long-term 20-year low interest rate project financing from the USDA, Department of Energy, and municipal bond markets. Importantly, our third quarter earnings are on track with a five-year plan. After adjusting for the establishment of a one-time $5.3 million reserve for California emission credits related to the Keys ethanol plant, our net loss would have been $12.2 million for the third quarter, which is a negative 39 cents per share, which is in line with our growth plan. The positive regulatory trends for renewable fuels have continued to improve by the passage of the Federal Infrastructure Investment and Jobs Act last week. This legislation supports all of Ametis' low-carbon renewable fuels businesses in both the U.S. and in India in various ways. First, the USDA and Department of Energy loan programs have received billions of dollars of expanded funding to provide 20-year 6% to 8% low interest rate, government guaranteed, or direct loans. EMETIS is working closely with these organizations to provide funding for the 52 Dairy Biogas Digester and Pipeline Project, the Sustainable Aviation Fuel and Renewable Diesel Plant, and the Carbon Sequestration Project that is under development. Second, the biodiesel and renewable diesel products to be produced at the Riverbank Carbon Zero Plant will benefit from the five-year extension of the $1 per gallon tax credit instead of requiring Congress to act annually. This adds greater stability and predictability as we proceed with our project to produce renewable diesel and sustainable aviation fuel. Third, in addition, the sustainable aviation fuel produced by the Riverbank plant will generate up to $1.75 per gallon tax credit. Fourth, the carbon sequestration projects will receive $85 per metric ton of federal tax credit, up from $60 per ton. The tax credits are expected to be paid in cash each year under the direct pay structure. With our planned 2 million metric tons per year of CO2 injection, the direct pay program could provide $170 million per year of funding to the Ametis Carbon Capture and Sequestration Project directly transferred from the federal government. During the third quarter of 2021, Ametis achieved important milestones toward revenue growth and sustained profitability in each of our four lines of business. Now, Andy Foster, the president of the Ametis Biogas and Ametis Advanced Fuels businesses, will review highlights of our renewable natural gas and ethanol businesses. Andy?