Aemetis, Inc

Welcome to the AMETIS fourth quarter and year 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, Kate. Welcome to the AMETIS fourth quarter and year 2021 earnings review conference call. Joining us for the call today 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 Security and Exchange Commission, recent press releases, and previous earnings conference calls. The presentation for today's call is available for review and download on the investor section of the ametis.com website. Before we begin our discussion today, I'd like to read the following disclaimer statements. 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 uncertainty, 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 available from the company without charge. Our discussion on the call 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 December 31, 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, gains on extinguishment, income tax expense, intangible and other amortization expense, accretion and other expense of Series A preferred units, depreciation expense, and share-based compensation expense. Now I'd like to review the financial results for the fourth quarter and year end of 2021. Revenues were $64.4 million for the fourth quarter of 2021 compared to $37.3 million for the fourth quarter of 2020. The selling price of ethanol increased from $1.60 per gallon during the fourth quarter of 2020 to $3.36 per gallon during the fourth quarter of 2021. The delivered corn price rose from an average of $5.61 per bushel during the fourth quarter of 2020 to $7.23 per bushel during the fourth quarter of 2021. Our California ethanol and dairy natural gas segments accounted for all of the reported consolidated gross profits in both periods. Gross profit for the three months ended December 31, 2021 was $12.7 million compared to a gross loss of $3.4 million during the same period in 2020. The gross profit increase was attributable to stronger ethanol and wet distillers grains pricing during the fourth quarter of 2021 compared to the fourth quarter of 2020. Selling general administrative expense increased to $7.5 million during the fourth quarter of 2021 compared to $4.3 million during the fourth quarter of 2020, principally due to a $2.5 million non-cash share-based compensation charge. Operating profit was $5.2 million for the fourth quarter of 2021 compared to an operating loss of $7.7 million during the fourth quarter of 2020. Net loss was $881,000 for the fourth quarter of 2021 compared to a net loss of $14.6 million for the fourth quarter of 2020. Turning to the financial results for the year ended December 31, 2021. Revenues were $212 million for the 12-month end of December 31, 2021, compared to $166 million for the same period in 2020, which is a 28% revenue increase for 2021 compared to 2020. The increase in revenue was primarily attributable to increase in the sales price for ethanol in California from $1.84 per gallon during 2020 to $2.72 per gallon as demand for ethanol increased as recovery from COVID-19 disruptions continued. Gross profit for the 12 months ended December 31, 2021 was $7.9 million compared to $11 million of gross profit during the same period in 2020, primarily due to the stronger margin associated with high grade alcohol sales coupled with lower corn prices during the December 31, 2020 in our California ethanol segment and lower gross profit margin contribution from our India biodiesel segment during 2021. Selling general and administrative expenses increased to $23.7 million during the 12 month ended December 30, 2021 compared to $16.9 million during the same period in 2020 driven principally from a charge for stock-based compensation, property insurance and professional services. Operating loss increased to $15.8 million for the 12 months ended December 31, 2021, compared to an operating loss of $6.1 million for the same period in 2020. Interest expense was $24.1 million during the year ended December 31, 2021, excluding accretion and other expensive Series A preferred units in our Ametis Biogas LLC subsidiary, compared to interest expense of $26.4 million during the year ended December 31, 2020. Additionally, our Ametis Biogas LLC subsidiary recognized $7.7 million of accretion in connection with preference payments on its preferred stock, during the year ended December 31, 2021, compared to $4.7 million during the same period in 2020. Net loss was $47.1 million for the 12 months ended December 31, 2021, compared to a net loss of $36.7 million during the same period in 2020. Cash at the end of the fourth quarter of 2021 increased to $7.8 million compared to $592,000 at the end of 2020. Investments in our low-carbon initiatives increased property plant equipment by $30.5 million, while debt repayment of $55.5 million were made during 2021. These activities and others were funded with proceeds from equity offerings of $103.6 million. This completes our review of the fourth quarter and year end of 2021. Now, I'd like to introduce the founder, chairman, and chief executive officer of AMETIS, Eric McAfee.

Let's update. Eric. Thank you, Todd. AMETIS 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 Blender's 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 revenues and $325 million of annual EBITDA cash flow by year 2025. Last month, we updated the five-year plan projecting revenues to grow to $1.5 billion and annual EBITDA to increase to $460 million by year 2026. We are on track with last year's five-year plan. In the past year and this year, we have paid $79 million to reduce the higher interest rate bridge loans from Third Eye Capital, with only about $90 million of high interest rate loans remaining outstanding to Third Eye. We are also on track with financing growth, using long-term 20-year low interest rate project financing from the United States Department of Agriculture, including a $50 million funding for our biogas subsidiary that is expected to close in the next couple of months. Importantly, our 2021 fourth quarter cash flow and our 2021 annual revenues were on track with the five-year plan. The positive regulatory trends for renewable fuels have continued to improve. driven by initiatives to decarbonize transportation, the need to reduce the cost of fuels as petroleum prices increase, and a renewed interest in energy security. California, and much of the rest of the country, currently enforces a 90% petroleum gasoline mandate, which is commonly known as a 10% ethanol blending limit. With record high gasoline prices in California, the fact that AMETIS sells ethanol for more than $2 per gallon less than gasoline creates a direct cost to California consumers by the California Air Resource Board's slow progress toward adoption of E15. E15 allows a 15% blend of ethanol into gasoline, directly decreasing fuel costs to California drivers and expanding the use of renewable fuels in the state. We're hopeful that this year, especially with consumers getting squeezed by high prices of the pump, CARB will move forward with the 15% ethanol blending requirement in California. During the fourth quarter and year of 2021, Emetis achieved important milestones toward revenue growth and sustained profitability in each of our four lines of business. Now, Andy Foster, the president of the Emetis Biogas and Emetis Advanced Fuels businesses, will review highlights of our renewable natural gas and ethanol business. Andy?