Aemetis, Inc

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, Ali. Welcome to the AMETIS Second Quarter 2024 Earnings Review Conference Call. Joining us for the call today is Eric McAfee, founder, chairman, and CEO of Amedis, and Andy Foster, president of North America. We suggest visiting our website at Amedis.com to review today's earnings press release, the Amedis corporate and investor presentation, filings with the Security and 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 limitation, statements with respect to our future stock performance plans, opportunities, and expectations with respect to financing activity and the execution of our business plans. 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 Security and Exchange Commission filings, which are posted on the SEC's EDGAR system and our own company website. Our discussion in the call We'll 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 sources or uses of cash. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the three and six months ended June 30, 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 financial results for the second quarter of 2024. Revenue during the second quarter of 2024 were $66.6 million compared to $45.1 million for the second quarter of 2023. Our Keys plant operated during the entire quarter compared to its extended maintenance cycle during a portion of the second quarter of 2023. Our dairy natural gas segment produced 89,400 MMBTUs from eight operating dairy digesters and reported 1.6 million of revenue, and our ninth digester began producing biogas at the end of the second quarter. Our India biodiesel business recognized $24.8 million of revenue primarily from sales to the India oil marketing companies. Gross loss for the second quarter of 2024 was $1.8 million. compared to a $2 million profit during the second quarter of 2023. Selling, general, and administrative expenses were $11.8 million during the second quarter of 2024 from $9.7 million during the same period in 2023, driven primarily by the recognition of a loss on asset disposal of $3.6 million. Operating loss was $13.6 million for the second quarter of 2024 compared to an operating loss of $8.7 million for the same period in 2023. Interest expense, including a creation of Series A preferred units in the Ametis Biogas LLC subsidiary, increased to $11.7 million during the second quarter of 2024 compared to $9.6 million during the second quarter of 2023. Additionally, Amedis Biogas recognized $3.5 million of accretion of Series A preferred units during the second quarter of 2024 compared to $6.9 million during the second quarter of 2023. Net loss was $29.2 million for the second quarter of 2024 compared to $25.3 million for the second quarter of 2023. Cash at the end of the second quarter of 2024 was $234,000 compared to $2.7 million at the close of the fourth quarter of 2023. We recorded investments in capital projects related to the reduction of carbon intensity of amethyst ethanol and construction of dairy digesters of $5.4 million for the second quarter of 2024. Now, I'd like to introduce the founder, chairman, and Chief Executive Officer of AMETIS, Eric McAfee, for a business update. Eric?

Thank you, Don. AMETIS is executing on a five-year plan that includes expanded positive cash flow from operations combined with long-term lower interest rate debt financing guaranteed by the U.S. Department of Agriculture to finance growth. We see solid progress across each of our five business units, as we will review today, and are currently positive cash flow from operations in all three of our operating businesses. However, before discussing our operations and projects, let's review regulatory events that are expected to have a significant positive impact on our businesses. In addition to hearings and meetings with the California Air Resources Board, we recently hosted a representative of the USDA Office of the Chief Economist, for a biogas ethanol plant and SCF plant site tour in California. I also visited Washington, D.C. for a week in May and again last week for meetings with top USDA officials, EPA Secretary Michael Reagan, and various staff of senators and Senate committees that directly impact the Inflation Reduction Act incentives for renewable fuels and for ethanol E15 blending approval. From these meetings and discussions, I can highlight three important external regulatory events that are scheduled to occur over the next two quarters that strongly support the EMETIS business plan. The California Air Resources Board vote on November 8th that is slated to approve the next 20 years of increased demand for renewable fuels and other low carbon energy sources for transportation. The IRS guidance showing the calculation of the Inflation Reduction Act Section 45Z production tax credit that begins in January 2025. And the permanent approval of the 15% ethanol blend by the federal EPA, which has been scheduled for early next year as part of a legal settlement with eight Midwestern states. Combined, these three regulatory events significantly increase the value of our products and are expected to generate more than $50 million per year of increased positive cash flow starting in January 2025. Positive cash flow is expected to continue to grow strongly as the value of LCFS credits increase and as additional biogas digesters are built. I should note that in the current quarter, the third quarter of 2024, We are already showing positive cash flow from each of our three operating businesses, including ethanol production, dairy renewable natural gas, and India biodiesel. We have five additional digesters under construction, but the regulatory events on November 8th for LCFS, by January 2025 for the 45Z production tax credit, and the EPA adoption of E15 are the key elements of strong cash flow and future profitability. In the Ametis biogas business over the past 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 already completed construction. We recently received the USDA conditional commitment approval for the next $25 million Renewable Energy for America loan and expect to close the funding later this month. An additional $50 million of USDA guaranteed funding is in process for closing later this year for a total of $75 million of new long-term financing for biogas digester and pipeline construction this year. We stored a significant amount of our Q2 2024 renewable natural gas production until Q3. in order to generate almost 80% more LCFS credits under the provisional pathway approval that we expect later this year. In July, we dispensed a portion of the RNG production and will continue to dispense storage inventory throughout Q3. Cashing in later on the expected higher price of LCFS credits and more than a 80% increase in the number of credits earned at the provisional pathway rate instead of the negative 150 default carbon intensity. 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 AMETIS is well 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. In the development of our AMETA Sustainable Evasion Fuel and Renewable Diesel business, during the first quarter we received authority to construct air permits for our planned 90 million gallon per year Sustainable Evasion 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 need for sustainable aviation fuel is expected to increase rapidly for the foreseeable future as the 90 billion gallon per year global aviation fuel industry seeks to reduce carbon emissions using renewal fuel to replace petroleum jet fuel. With the strong demand for SAF and with 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. As one of the very few companies with all the key permits needed to construct a large-scale SAF production facility in the United States, AMETIS is building production facilities to supply renewable aviation fuel to an airline market that is currently not expected to meet its ambitious goals 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, or OMCs, under a cost-plus contract structure. We began 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 OMCs to purchase biodiesel is expected to continue for the foreseeable future. The India business has positive EBITDA and funds its own operations and capacity growth. This July, our new managing director of the India business joined the company after serving as the chief executive officer of the GE joint venture in India to build renewable power plants. We are busy with the IPO process. and work on the next annual contract for biodiesel sales to India government-owned oil marketing companies. For the Ametis ethanol business, the temporary 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 ethanol industry margins as retailers seek to provide lower-cost fuel to consumers. A recent study by UC Berkeley and Naval Academy economists showed that the adoption of a 15% ethanol blend in California would provide a $2.7 billion per year savings on fuel costs for consumers, equal to about $7 million per day, or 20 cents per gallon, in California. In Q2, we commissioned an on-site solar energy facility with battery storage to improve cash flow through the reduction of our energy costs and decrease the carbon intensity of the ethanol produced by our Keys plant, which generates more low carbon fuel standard revenue per gallon using solar energy. 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, or MVR. We have completed process design and detailed engineering and are now moving forward with the procurement of equipment. The MVR system is designed to reduce fossil natural gas usage by 80% and increase cash flow by $15 million to $29 million annually at the Keys plant, depending on the value of LCFS credits. The MVR energy efficiency project is budgeted for a direct cost of about $21 million. and has been rewarded $20 million of grants and tax credits from the California Energy Commission, Pacific Gas and Electric's Energy Incentive Program, and the Department of Energy and U.S. Treasury Department. Our Imetis carbon capture subsidiary has received California state approval to drill the characterization well. The first phase of drilling and installation of the conductor pipe is expected to occur in the next two months. In summary, all five Amedis business segments are synergistic and create what we refer to as a circular bioeconomy. 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 we serve. Now let's take some questions from our call participants. Ali?