Aemetis, Inc

Good day, ladies and gentlemen, and welcome to the AMETIS Third 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 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 AMETIS third quarter 2024 earnings review conference call. Joining us for the call today is Eric McAfee, founder, chairman, and CEO of AMETIS, and Andy Foster, president of 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 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 disclosure 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 activity 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 SEC's anchor 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 companies Non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the third quarter of 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 as of the third quarter of 2024. Revenue during the third quarter of 2024 increased to $81.4 million compared to $68.7 million for the third quarter of 2023. Our Keys plant recognized $45 million of revenue during the third quarter with a production of 15.5 million gallons of ethanol. Our dairy and renewable natural gas segment sold 85,993 MMBTUs from nine operating dairy digesters and sold 935,000 RINs and 20,000 metric ton of LCFS credits to report $4.2 million of revenue during the third quarter. Our India biodiesel business recognized $32.2 million of revenue primarily from sales to the India oil marketing companies. Gross profit for the third quarter of 2024 was $3.9 million compared to $492,000 profit during the third quarter of 2023. Selling general and administrative expenses were $7.8 million during the third quarter of 2024 compared to $9 million during the same period of 2023. The decrease in spending was driven primarily by professional services associated with the sale of tax credits during the third quarter of 2023. Operating loss improved to $3.9 million for the third quarter of 2024 compared to an operating loss of $8.5 million for the same period of 2023. Interest expense excluding accretion of Series A preferred units in the AMETIS biogas LLC subsidiary increased to $11.7 million during the third quarter of 2024 compared to $10.2 million during the third quarter of 2023. Additionally, Amedis Biogas recognized a significantly lower $3.3 million of accretion of Series A preferred units during the third quarter of 2024 compared to $7.7 million during the third quarter of 2023. Net loss was $17.9 million for the third quarter of 2024 compared to net income of $30.7 million for the third quarter of 2023, which was primarily driven by a sale of investment tax credits in September 2023. Cash at the end of the third quarter of 2024 was $296,000 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 capital intensity of a Metis ethanol production and the construction of dairy digesters of $4.5 million for the third quarter of 2024. Now, I'd like to introduce the founder, chairman, and chief executive officer of SurveyMetis, Eric McAfee, for a business update.

Thank you, Todd. Before we provide details, let me summarize some key items. Number one, the low carbon fuel standard update passed last Friday, setting 20 years of increasing support for low carbon fuels and transportation in California. In anticipation of the new mandates, the price of LCFS credits has increased from $44 to $74 in the past few months, and the late 2025 LCFS credits are already at $82. Second, to simplify calculations, renewable natural gas generates about 40% of the price of LCFS credits per MMBTU. So, a $200 LCFS price equals about $80 per MMBTU of revenues to Ometis when our pathways are in place. Exiting this year, our renewable natural gas business is scheduled to be producing more than 500,000 MMBTUs per year and to increase to a run rate of about a million MMBTUs by the end of 2025 as we construct additional dairy digesters. Thank you for joining us. Third, in addition to LCFS revenues, the sale of R&G generates about $35 per MMBTU of D3 window distribution numbers and about $5 per MMBTU from the sale of the gas, as well as up to $99 per MMBTU from the 45Z production tax credit. However, revenues from the sale of R&G without the 45Z production tax credit are between $70 and $120 per MMBTU, depending on the price of the LCFS credits. The Inflation Reduction Act Section 45Z Production Tax Credit begins on January 1, 2025, according to federal law. The realization of this tax credit is dependent on the IRS releasing the calculation of the Renewable Natural Gas 45Z Production Tax Credit, and we have yet to see a clear indication that the guidance will be issued by the current administration prior to January 20, 2025. We are finalizing the sale of investment tax credits from the Ametis Biogas projects with expected net cash proceeds of about $11.5 million this month. We expect to sell to the same buyer an additional $10 million of tax credits in Q1 2025. Sixth, the Ametis Biogas business will be operating 16 dairies and 12 digesters at the end of next month. with approximately 550,000 mm BTUs per year of renewable natural gas production run rate at a negative 350 carbon intensity. We plan to grow to 26 dairies operating or in construction by the end of 2025, generating 1 million mm BTUs in year 2026. Our LCFS pathways are now in the second round of requests for information. Thank you for joining us. that we submitted our LCFS pathway application 18 months ago. We're still at least four months away from the approval of our provisional pathway that allows us to generate LCFS revenues above the negative 150 default pathway. We expect to begin to show the increased revenues and cash receipts from LCFS pathway approval in Q2 2025. Seventh, The USDA has $75 million of amended biogas loan applications in process and we expect a closing of $25 million this quarter and commitment letters for an additional $50 million in Q1 2025 under the USDA Renewable Energy for America program. Last, the $200 million of low-cost EB-5 funding is making progress, but the immigration policies of the current administration has been unfavorable for EB-5 investors. We expect that the change of administration will support our financing and potentially enable an expansion of the funding. As we discussed on prior earnings calls, we noticed benefits from public policy towards renewable fuels. This past Friday, the California Air Resources Board approved an updated low-carbon fuel standard that establishes 20 years of mandates for the increased use of low-carbon energy in transportation. Amedis has focused our renewable fuels project development on California assets and production in order to be in the position that we now have achieved. Amedis was listed by a leading stock analyst as the number one stock in the world that would benefit from the adoption of the updated low-carbon fuel standard. The price of LCFS credits has increased, as we said before, from $44 to $74 in the past few months, reflecting the shortage of credits that are designed into the updated LCFS mandates. The 9% decrease in carbon intensity for fuels in year 2025 and the ongoing automatic adjustment mechanism are designed by Clark to provide confidence in a higher price of LCFS credits in order to attract debt and equity investments into low-emission transportation. The second milestone is the issuance of guidance by the IRS showing the calculation of the Inflation Reduction Act Section 45Z production tax credit that by law begins in January 2025. The current administration is not committed to releasing the 45Z production tax credit guidance before January 20, 2025, so we may be delayed for an unknown amount of time before the 45Z revenue begins. The calculation of production tax credits primarily benefits our dairy biogas business, so we are pursuing multiple avenues to communicate to the IRS and political leaders the critical role of the PTC in the growth of negative carbon intensity renewable fuels, such as renewable natural gas. Third, the approval of the 15% ethanol blend by the federal EPA has been scheduled for mid-2025 as a part of a legal settlement with eight Midwestern states. but California Governor Newsom issued a letter to CARB two weeks ago instructing that the regulatory work should be completed in order to be able to approve E15 in California as soon as possible. A 15% ethanol blend in California would decrease gasoline prices by an estimated 20 cents a gallon and save about $2.7 billion per year according to a UC Berkeley and Naval Academy study. E15 approval would increase the market for ethanol by more than 600 million gallons per year in California, and a 15% blend nationwide would enable the ethanol industry to grow revenues by 50% to more than 20 billion gallons per year. 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. if the 35Z production tax credit goes into effect as stated in the Inflation Reduction Act. Now let's quickly review each of our businesses. In the India biofuels business, we completed deliveries of $112 million during the one-year period ending September 2024, driven by biodiesel sales to the three government-owned oil marketing companies, known as OMCs, under a cost-plus contract structure. We completed this contract with 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 Indian business has positive EBITDA and funds its own operations and capacity growth. Last month, we bid on the current one-year contract and expect to announce an allocation from the OMCs within the next few weeks. This July, our new managing director for the India business joined the company after serving as the CEO of the GE joint venture in India to build renewable power plants. We have identified an excellent candidate for chief financial officer who has recent IPO experience, and we are expanding our Hygrabat office to support multiple plant sites and new products. We expect to have evaluation of the planned IPO after the offering has been marketed to investors. Now, Andrew Foster, president of Ametis Advanced Fuels, will review our North American businesses. Thanks, Eric.