Aemetis, Inc

Good day and welcome to the AMETIS fourth quarter and year end 2023 earnings review conference call. At this time, all participants are in a listen only mode and 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 Incorporated. Mr. Waltz, you may begin.

Thank you, Ali. Welcome to the Ametis Fourth Quarter and Year-End 2023 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 North America. 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, 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 available from the company without charge our discussion on this call will include a review of non-gap measures as a supplement to financial results based on gap because we believe these non-gap measures serve as a proxy for the company's source or use of cash during the period presented. Reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the three and year ended December 31, 2023, 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 loss on extinguishment, loss on lease termination, USDA cash grants, income tax expense, intangible and other amortization expense, accretion expense, depreciation expense, gain on litigation, and share pays compensation expense, less income tax benefit. Let's review the financial results for the fourth quarter and year end of 2023. Results for the The three months ended December 31, 2023. Revenues were $70.8 million for the fourth quarter of 2023, an increase from $66.7 million for the fourth quarter of 2022. The ethanol gallons sold increased from 13.4 million gallons during the fourth quarter of 2022 to 15 million gallons during the fourth quarter of 2023. Biodiesel sales of 18.3 thousand metric tons were recorded during the fourth quarter of 2023 at $1,157 per metric ton. Our California ethanol segment accounted for $45 million of revenue, and our India biodiesel segment accounted for $22 million of revenue during the period. Cost of goods sold increased from $67.9 million during the fourth quarter of 2022 to $69.9 million during the fourth quarter of 2023 due to an 18% increase in feedstock costs from the incremental sales in our Indian biodiesel segment, coupled with an increase in corn ground from 4.3 million bushels during the fourth quarter of 2022 to 5.2 million bushels during the fourth quarter of 2023, offset by a 33% decrease in the average delivery cost of corn. Gross profit, selling general administrative expense, and operating loss were consistent between the fourth quarter of 2022 and 2023. Net loss was $25.4 million for the fourth quarter of 2023, compared to a net loss of $22.4 million for the fourth quarter of 2022. Cash at the end of the fourth quarter of 2023 was $2.7 million, compared to $4.3 million at the end of the fourth quarter of 2022. The financial results for the 12 months ended December 31, 2023. Revenues were $187 million for the 12 months ended December 31, 23, compared to $257 million for 2022. During 2023, $77.2 million of revenues were generated by the India biodiesel segment. $55.5 million of revenue were generated by the California renewable natural gas segment. and $104.3 million of revenue were generated by the California ethanol segment. We idled the plant during the first five months of 2023 due to historic and unexpected high energy costs and took advantage of this period to lead a variety of maintenance and plant efficiency projects. Gross profit for the 12 months ended December 31, 2023. was $2 million compared to a gross loss of $5.5 million during the same period in 2022. Our India biodiesel segment accounted for $9 million of gross profit from sales of biodiesel for the year ended December 31, 23. Selling general and administrative expenses increased to $39.3 million during the 12 months ended December 31, 2023, compared to $28.7 million during the same period of 2022, attributable in part to the reclassification of expenses from cost of goods sold during the extended five month maintenance and upgrade cycle for the Keys plant in early 2023. Net loss was $46.4 million for the 12 months ended December 31, 2023, compared to a net loss of $107.8 million during the same period in 2022. Investments in our low-carbon initiatives increased property, plant, and equipment by $33 million, while debt repayment of $51.3 million were made to our senior lender during the 12 months ended December 31, 2023. Now, I'd like to introduce the founder, chairman, and chief executive officer of Amedis, Eric McAfee, for business update.

Eric. Eric. Thanks, Todd. We released the updated Amedis five-year plan about two weeks ago, and we encourage investors to closely review the extensive information provided in the presentation, which is available on the homepage of the Amedis website. Before discussing the many milestones that we achieved in 2023, let's talk about financing, since an understanding of how Amedis plans to continue to grow rapidly in the current market environment is a key part of our five-year plan. The first important point regarding the Amedis funding plan is that the financing of our projects is being completed on a project finance basis for each subsidiary. So the debt position of the Amedis parent company does not impair our funding of new projects. I make this point to clarify any suggestion that our well-established financing relationship with Erdai Capital is somehow constraining our project financing or the growth of our company. In fact, the opposite is true. Third Eye Capital has been integral to our success in providing project development funding and then obtaining long-term project financing from our other lenders, enabling Ametis to receive $50 million of 20-year financing in just the past year. We expect more than $100 million of 20-year financing for Ametis biogas capital expenditures to close in the current year, in addition to other significant project financings that are in process now. Third Eye Capital is a primary beneficiary of the long-term lower interest rate project financings provided by other lenders as the excess cash flow from these new projects are expected to continue to reduce the amounts outstanding to Third Eye Capital. Rather than being a hindrance to the growth of Amedis, for the past 15 years, Third Eye Capital has been funding the growth of our initiatives and continues to support Amedis in attracting 20-year financing from other lenders for new projects that create new revenues, new cash flow, and new debt repayment capabilities. The second important point about financing at Emetis is our long relationship with the U.S. Department of Agriculture, which is a major provider of loan guarantees that enable 20-year financing for projects. Over nearly two decades, Emetis has built strong and productive relationships with a number of top leaders at the USDA as we share similar goals of strengthening the agricultural sector by creating new energy markets for ag and ag waste products. And our board member for the past 15 years, Jack Block, a former secretary of the USDA, has been extremely helpful in this shared vision and collaboration. Our positive relationships at the USDA are key to our confidence in USDA programs, such as the Renewable Energy for America program, known as REAP, that support renewable fuels projects. These USDA programs have already guaranteed funding of 20-year financing for the Ametis Renewable Natural Gas business. but also can provide government guarantees and 20-year financing for sustainable aviation fuel, the conversion of our ethanol plant to use electricity instead of petroleum natural gas for power, and our carbon sequestration projects. A third important point about financing at Ametis is that we have already fully repaid our long-term debt at our India plant and have been generating strong positive cash flow from India biodiesel production operations over the past two years under cost-plus pricing with oil refineries owned by the India government. This strong financial position has allowed the India business to internally fund expansion to 60 million gallons per year from ongoing positive operating cash flow. And now it's positioned our India subsidiary for a planned initial public offering onto the India stock exchanges. Our India business is highly attractive as an IPO company onto the fast-growing India stock exchanges since we are one of the largest biodiesel suppliers in the booming India economy. We have no long-term debt. We sell biodiesel on a cost-plus pricing formula to government-owned oil marketing companies. And we are in a rapidly growing market that has more than $5 billion per year of growth. to meet the biodiesel blending targets set forth in the 2022 India National Biofuels Policy. It only took 15 years for Ametis to become an overnight success in India by building and operating a production plant, paying off all of our long-term debt, and then expanding production capacity. Our strong financial foundation in India and $150 million of current biodiesel supply contract allocations is only the beginning of our planned growth. We plan to expand our biodiesel production capacity in India using cash flow from operations, but a primary use of funds from a potential IPO onto the India stock markets would include the production of sustainable aviation fuel to meet growing global airline demand for SAF. The India plant can be expanded to supply SAF for airlines in India, as well as international markets. such as the existing 10 airlines that have signed $3.8 billion of agreements with Emetis for delivery of SAF in California. The fourth important point about financing growth at Emetis is the attractiveness of our projects to lenders and preferred investors. The sophisticated investors and lenders in our projects understand that our risks are mitigated by using bonded contractors, technology guarantees, and even cost plus pricing to provide confidence that debt obligations will be paid. The markets for our new projects in dairy, renewable natural gas, sustainable aviation fuel, and carbon sequestration are rapidly growing, supported by regulatory policy, and uniquely positioned to generate positive margins. The final point I'd like to make about financing related to METIS projects is the design of our business model. in which our existing cash flow from operations supports future capital expenditures to reduce the need for debt as we grow. In 2023, we generated positive cash of $32.7 million from adjusted EBITDA plus tax credit sales. This positive cash generation from operating the business is expected to continue to expand, allowing us to fund future interest and principal reductions on debt, as well as fund a meaningful amount of our capital expenditures from our growing operational positive cash flow. Let's review our five businesses. In the India biofuels business in late 2023, we announced a $150 million one-year allocation for biodiesel from the three oil marketing companies under a cost-plus contract structure. We started deliveries under this contract in October 2023 and have achieved excellent production performance during the four months of winter fuel specifications that require higher cost feedstocks. Beginning this month, the summer fuel specification allows lower cost feedstock to be used. The positive impact of cost plus pricing that is now being used by the India oil marketing companies to purchase biodiesel is expected to continue for the foreseeable future. The India business is debt-free and now funds its own operations without outside long-term financing. Our India plant expanded to 60 million gallons per year of capacity during the third quarter, entirely funded by the positive cash flow from operations. We continue to expand the production of capacity of biodiesel using an enzymatic process, a technology developed by Amedis at our India plant that allows lower cost, lower grade feedstock to be used to produce high quality biodiesel. Amedis believes that our India biodiesel plant is the largest capacity producer in the world, using Novozymes enzymes to convert low-cost feedstocks into biodiesel. To meet rapidly expanding demand for biodiesel by the government-owned oil marketing companies, we are continuing to expand production capacity in India with a plan of 100 million gallons per year of capacity in 2025. The Indian market is about 25 billion gallons of petroleum diesel, and the government has set a goal of a 5% blend of biodiesel. We expect the cost-plus contracts from India government oil refineries will support the addition of a significant amount of new biodiesel production capacity in India over the next five years, with Imedis continuing to expand the capacity beyond 100 million gallons to supply the increasing demand for renewable fuels. The planned export of refined tallow from the India facility to renewable diesel producers in the U.S. is making steady progress, with feedstock sales to several biorefinery customers in active discussions. Andy Foster, president of Amedis North America, will now review the Amedis biogas and ethanol businesses. Andy?