Aemetis, Inc

Welcome to the AMETIS first quarter 2024 earnings review conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Mr. Todd Waltz, Executive Vice President and Chief Financial Officer of AMETIS, Inc. Mr. Waltz, you may begin.

Thank you, Kellie. Welcome to the AMETIS first quarter 2024 earnings review conference call. Joining us for the call today is Eric McAfee, founder, chairman, and CEO of AMETIS. 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 Exchange Commission, recent press releases, and previous earnings conference calls. 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 limitations, 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 risks 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 the SEC EDGAR system and our own company website. Our discussion on this call will include a review of non-GAAP measures as a supplement to financial results based on GAAP, because we believe these non-GAAP measures serve as a proxy for our company's source or Yusuf Kash. A reconciliation of the non-GAAP measure to the most directly comparable GAAP measures included in our earnings release for the three months ended March 31, 2024, 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, income tax expense, intangible and other amortization expense, accretion expense, depreciation expense, and share-based compensation expense. Let's review the financial results for the first quarter of 2024. Revenues during the first quarter of 2024 were $72.6 million compared to $2.2 million for the first quarter of 2023. Our Keys plant returned to full operation in the second quarter of 2023 after completing an extended maintenance cycle during the first quarter of last year. In Q1 of this year, Our dairy renewable natural gas segment produced 60,300 million BTUs of renewable natural gas from eight operating dairy digesters, sold its first LCFS credits and reported 3.8 million of revenue. Our India biodiesel business generated 32.7 million of revenue, primarily from sales to the three India oil marketing companies. Gross loss for the first quarter of 2024 was $612,000 compared to $1.3 million gross loss during the first quarter of 2023. Selling general and administrative expenses decreased to $8.9 million during the first quarter of 2024 from $10.8 million during the similar period in 2023. Driven primarily by reduction in fixed cost of goods sold, charged to selling general administrative expenses due to the extended maintenance during the first quarter of 2023. Operating loss was $9.5 million for the first quarter of 2024 compared to an operating loss of $12.1 million for the same period in 2023. Net loss was $24.2 million for the first quarter of 2024 compared to a net loss of $26.4 million for the first quarter of 2023. Cash at the end of the first quarter of 2024 was $1.6 million compared to $2.7 million at the close of the fourth quarter of 2023. We recorded investment in capital projects related to the reduction of carbon intensity of ametis ethanol and construction of dairy digesters of $3.6 million for the first quarter of 2024. Now, I'd like to introduce the founder, chairman, and chief executive officer of Emetis, Eric McAfee, for a business update.

Eric? Thank you, Todd. In the Emetis biogas business over the last year or so, we have closed $50 million in USDA-guaranteed 20-year loans to build dairy biogas digesters and to convert construction loans to term loans for digesters that complete the construction. We have signed 44 agreements with dairies and now have nine operating dairy digesters supplied with waste from 10 dairies. We plan to accelerate the rate of biogas digester development in 2024 as we expect to close $60 million of new private financing to accelerate project construction and as we expect to close an additional USDA guaranteed REAP loans that provide 20-year debt with each closing expected to provide $25 million of additional construction funding. We generated revenue from the sale of LCFS credits related to renewable natural gas for the first time in the first quarter of 2024. Renewable natural gas revenue is expected to significantly increase as we build new dairy digesters, as CARB approves our provisional pathway applications, including the existing digesters that we filed early last year, and as our Renewable Natural Gas Generates Inflation Reduction Act 45Z production tax credits beginning in January 2025. The California Air Resources Board has stated that renewable natural gas is an important feedstock for the production of renewable hydrogen for future truck engines, allowing the trucks to be zero emission using a carbon negative fuel. We believe that Inmetis is excellently positioned to supply renewable natural gas, renewable hydrogen, and negative carbon intensity electricity to power future trucks and cars in California, enabling the transition to zero emission and below zero carbon intensity heavy duty and light duty vehicles. The expected adoption this year by the California Air Resources Board of a 20 year mandate for the rapid decarbonization of transportation will directly benefit the lowest carbon intensity renewable fuels, as well as the feedstocks for renewable hydrogen and renewable electricity production. As we planned when we started the biogas project in 2018, AMETIS is, again, excellently positioned to be a significant beneficiary of the updated LCFS mandates this year. We are also well positioned to benefit from the Inflation Reduction Act 45Z production tax credit that starts in January 2025. In the development of our AMETA sustainable aviation fuel and renewable diesel business, during the first quarter we received the authority to construct air permits for our planned 90 million gallon per year sustainable aviation fuel and renewable diesel plant to be built in Riverbank, California. When operated to produce only sustainable aviation fuel, the design capacity of the plant is about 78 million gallons per year of SAF. The authority to construct permits are a significant milestone as we had already received the use permit and California Environmental Quality Act approval in 2023, which were the other key discretionary permits we needed to move forward with the project. We have signed $3.8 billion worth of supply contracts with 10 airlines and a $3.2 billion renewable diesel supply contract with a national travel stop company. The need for a sustainable aviation fuel continues to increase. but the overall market supply of SAF continues to be delayed, resulting in significant supply shortages that are expected to continue for the foreseeable future as the 90 billion gallon per year global aviation fuel industry seeks to reduce carbon emissions using renewable fuel to replace petroleum jet fuel. With a strong demand for SAF and limited supply, we are now discussing the use of innovative pricing structures with our airline customers to accelerate the financing, construction, and operation of the SAF plant. We're now working on the project financing for the SAF plant with due diligence and negotiations currently underway with investors. We're receiving a high level of interest from multiple strategic and financial investors, some of whom have significant commercial interests in the success of the aviation industry. As one of the very few companies with key permits needed to construct a large scale SAF production facility in the United States, and this is on track to be a leading supplier of renewable fuel to an airline market that cannot currently meet its goal of transitioning to lower carbon intensity operations. In the India biofuels business in late 2023, we announced that we received a $150 million one year allocation for biodiesel sales to the three India oil marketing companies under a cost plus contract structure. We started deliveries under this contract in October 2023 and have achieved excellent production and delivery performance. The positive impact of cost plus pricing that is now being used by the oil marketing companies to purchase biodiesel is expected to continue for the foreseeable future. The India business has positive EBITDA and funds its own operation and capacity growth. For the emetis ethanol business, the approval of a 15% blend of ethanol in 49 states for this summer and the EPA's recent statement that a permanent E15 approval will be adopted effective next year is expected to have a positive impact on the price of ethanol as retailers seek to provide lower-cost fuel to consumers. We have completed construction of an on-site solar energy facility with battery storage to reduce our energy costs. and reduce the carbon intensity of the ethanol produced by our Keys plant, which generates more low-carbon fuel standard revenue per gallon. The next major step in improving our cash flow and energy efficiency at the Keys plant is the installation of a mechanical vapor recompression system. We have completed process design and detailed engineering and are now moving forward with the procurement of equipment. The MDR system is designed to reduce natural gas usage by 80%. and increased cash flow by up to $15 million per year at the Keys plant. The MBR Energy Efficiency Project is budgeted to cost about $21 million and has been awarded $16 million of grants and tax credits from the California Energy Commission, Pacific Gas and Electric Company, the Department of Energy and the Internal Revenue Service. Our Imetis Carbon Capture subsidiary is in the process of financing the characterization well and the engineering for the EPA Class 6 permit using USDA 20-year financing. We have received the California State approval to drill the characterization well, and now we are working through the USDA loan process. In summary, all five Imetis business segments are synergistic and create what we refer to as a circular bioeconomy. The growing demand for renewable natural gas, Biodiesel sold under Cost Plus contracts in India, the undersupplied sustainable aviation fuel market, as well as the emerging carbon sequestration market are key areas of investment and project development at Emetis. Our existing operations in California and India are focused on projects that expand capacity, improve energy efficiency, reduce carbon intensity, increase revenues, utilize lower cost feedstocks, and significantly improve cash flows. Our company's values include a long-term commitment to building value for stockholders, the empowerment of and respect for our employees and business partners, and making significant and positive contributions to the communities that we serve. Now let's take questions from our call participants. Kelly?