Aemetis, Inc

Welcome to the AMETIS fourth quarter and year-end 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, the Executive Vice President and Chief Financial Officer of AMETIS. Mr. Waltz, you may begin.

Thank you, Tom. Welcome to the AMETIS fourth quarter and year end 2020 earnings review conference call. Joining us for the call today is Eric McAfee, the founder, chairman, and CEO of AMETIS, and Andy Foster, the president of AMETIS Advanced Fuels. We suggest visiting our website at ametis.com to review today's earnings press release. The AMETIS corporate and investor presentations, 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 limitations, 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's Security Exchange Commission filings, which are posted on the SEC Edgar system and on our own company websites. Our discussions on this call will include a review of non-GAAP measures as a supplement to the financial results based on GAAP because we believe these non-GAAP measures serve as a proxy for our company's sources and uses of cash. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in today's earnings release. Adjusted EBITDA is defined as net income or loss plus, to the extent deducted in calculating such net income, Interest Amortization Expense, Gain on Debt Extinguishment, USDA Cash Grants, Income Tax Benefit or Expense Intangible and Other Amortization Expense, Accretion Expense, Depreciation Expense, Loss on Asset Disposal, and Share-Based Compensation Expense. Let's review the financial results for the year ended December 31, 2024. Revenues were $268 for the 12 months ended December 31, 2024, compared to $187 million for 2023, with all three segments reporting increases. Specifically, California ethanol increased by $57.7 million from operating during the full year. India biodiesel increased $15.7 million from stronger oil marketing company Tender Delivery Volumes, and California Renewable Natural Gas increased $7.6 million from increased production, stronger sales of RIMS, and sales of LCFS credits. Cost of goods sold increased from $184.7 million during the 12 months ended December 31, 2023 to $268.2 million during the same period in 2024 in keeping with the change in revenue for each of the segments. Gross loss for the 12 months ended December 31, 2024 was $580,000 compared to a gross profit of $2 million during the same period in 2023. Our dairy renewable natural gas segment accounted for $5.4 million of gross profit, principally from the sale of environmental attributes for the year ended December 31, 2024. Selling general and administrative expenses remained constant at $3.4 Thank you for joining us today. which was a $5.5 million increase from interest expense of $64.8 million during the year ended December 31, 2023. Income tax benefit of $10.8 million during 2024 and $53.7 million during 2023 represent tax credit sales of $12.3 million and $55 million respectively. Net loss was $87.5 million for the 12-month end of December 31, 2024, compared to a net loss of $46.4 million during the same period in 2023. Cash at the end of the fourth quarter of 2024 was $898,000, compared to $2.7 million on December 31, 2023. Capital expenditures for carbon intensity reduction projects and the expansion of biomass of biogas production capacity were $20.3 million for 2024 as our engineering and construction teams move forward with low-carbon production capacity and energy efficiency projects. Now, I'd like to introduce the founder, chairman, and chief executive officer of AMETIS, Eric McAfee, for a business update.

Thanks, Todd. Amedis benefits from public policy that supports domestic energy producers that grow markets for agricultural and waste products. The strong year-over-year growth that we achieved in 2024 in each of our businesses in biogas, ethanol, and biodiesel is expected to be further supported by federal and state policies that are being implemented this year. The President has repeatedly stated his strong support of ethanol and agricultural-based biofuels in executive orders and public statements. So we are hopeful that the new administration will continue to support domestically produced renewable fuels that support energy independence. Let's review some of the key government policy issues that had a significant impact on our businesses and we expect will be strongly supportive of our continued growth. First, the California LCFS credits. After four years of policy development, amendments to California's low carbon fuel standard were approved by the California Air Resources Board on November 8, 2024, setting 20 years of increasing mandates for low carbon fuels in California. The LCFS amendments mandate a 9% decrease in carbon intensity for fuels in 2025. and have an ongoing automatic adjustment mechanism to provide confidence in a higher price for LCFS credits in order to attract debt and equity investments in low-emission transportation fuels, infrastructure and vehicles. In anticipation of the implementation of the new mandates, the price of LCFS credits increased from $44 last year to $75 by February 2025. A surprise delay occurred, however. Recently, the implementation of the amended LCFS was delayed by the California Office of Administrative Law due to a request to CARB to provide clarity in certain new language in the LCFS amendments. This unexpected delay in implementation of the LCFS amendment caused a rapid 30% decrease in the price of LCFS credits as the market waits for final adoption of the LCFS amendments to occur. We expect that the process of final adoption of the LCFS amendments will occur later this year. LCFS prices should increase thereafter as the 9% reduction in 2025 will take effect, as will a 20% limitation on the use of crop-based feedstocks for renewable diesel. Additionally, slower than expected hydrogen truck and electric vehicle adoption anticipated by CARB is expected to result in a rapid decline in the LCFS credit bank during 2025 and 2026. By 2027, the implementation of the LCFS amendments is designed to reduce the 32 million credits currently in the LCFS credit bank to zero. and according to CARB's own estimate, the LCFS credit price is expected to increase significantly higher, eventually approaching $200 per ton. Amethyst biogas, ethanol, carbon sequestration and other businesses are designed to benefit from an increased LCFS credit price as we produce LCFS credits through the production of low carbon intensity renewable fuels. To quantify the impact, Amedis Renewable Natural Gas generates about 40% of the price of an LCFS credit per MMBTU of production. So, a $200 LCFS price per ton equals about $80 of LCFS credit value per MMBTU once our provisional pathways are in place. At an average LCFS price of $150 per ton, Amedis Biogas would generate credits worth $60 million per year from the sale of 1 million MMBTUs of dairy RNG. Second, the Federal Renewable Fuel Standard. In addition to LCFS credits, the sale of renewable natural gas generates D3 RIMS with a value from $28 to $40 per MMBTU. Combined with the LCFS credit, this represents up to $120 per MMBTU from just these two credits alone. Third, the Federal Section 45Z Production Tax Credit, which started on January 1, 2025. The U.S. Treasury released tax guidance in January 2025 that we are now using for the planned sale of tax credits for both our Keys ethanol plant and our renewable natural gas businesses. We expect further guidance from Treasury will be issued this year to assist in the calculation of the tax credits. Fourth, federal Section 48 investment tax credits. After selling $63 million of investment tax credits in September 2023, We completed the sale of additional investment tax credits generated by the Amedis Biogas Projects and our Keys Plant Solar Project in December 2024 and February of this year. We received net cash proceeds of about $11 million in January and $6 million in February 2025 for a total of $17 million of cash received from investment tax credits so far this year. We expect the same buyer to purchase additional federal investment tax credits this year and potentially also purchase production tax credits. Fifth, 15% ethanol blend approvals. Two weeks ago, the U.S. EPA approved the year-round sale of gasoline containing up to 15% ethanol, known as E15, for eight Midwestern states with an indication that all 49 states, other than California, should be approved this year. Thank you for joining us. A 15% ethanol blend in California is projected to decrease gasoline prices by 20 cents per gallon, saving drivers about $400 per year in fuel costs equal to $2.7 billion per year statewide, according to a UC Berkeley and Naval Academy study. E15 approval in California would increase the market for ethanol. by more than 600 million gallons per year. And a 15% ethanol blend nationwide would enable the ethanol industry to grow revenues by up to 50% to more than 20 billion gallons per year. Combined, the ongoing implementation of these five policies directly and positively impact our business by significantly increasing the value of our fuels and by expanding the markets that we supply. Let's review each of our businesses. In the Indian 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, or OMCs, under a cost-plus contract structure. We completed these contracts with excellent production and delivery performance. The positive impact of cost-plus pricing that has been used by the OMCs to purchase biodiesel is expected to continue for the foreseeable future, Our India business has generated positive EBITDA in the past and has funded its own operations and capacity growth from these OMC contracts. Unfortunately, the price of feedstock used in the OMC pricing formula increased significantly in Q4 2024, and OMCs delayed taking deliveries of biodiesel. After a six-month period of negotiations, OMCs are expected to issue a new tender for biodiesel and begin taking deliveries in Q2 2025. This past 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 have signed an employment agreement with an outstanding professional with recent IPO agreement experience who will serve as our chief finance officer beginning in June 2025. We have signed a lease to move our India headquarters into a newly built office building in Hyderabad next month to support our expanding management team for the operation of multiple plant sites and new products. The timing of the planned IPO is currently estimated for late 2025 or the first half of 2026 due to the delay in OMC deliveries. But we expect to benefit from a renewed government commitment to biodiesel blending and new OMC orders supporting renewed retail and institutional industrial interest in renewable biodiesel later this year. Andy Foster, president of Ametis Advanced Fuels, will now review our North American businesses.