Gevo, Inc.

Givo's second quarter results for the period ended June 30th, 2023. I would like to start by introducing today's participants from the company. With us today are Dr. Patrick Gruber, Givo's chief executive officer, and Lynn Small, Givo's chief financial officer. Earlier today, we issued a press release that outlined the topics we plan to discuss. A copy of this press release is available on our website at www.givo.com. Please be advised that our remarks today, including answers to your questions, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those statements include projections about the timing, development, engineering, financing, and construction of our sustainable aviation fuel projects, our recently executed agreements, our renewable natural gas projects, and other activities described in our filings with the Securities and Exchange Commission, which are incorporated by reference. We disclaim any obligation to update these forward-looking statements. In addition, we may provide certain non-GAAP financial information on this call. The relevant definitions and GAAP reconciliations may be found in our earnings release, which can be found on our website at www.jibo.com in the investor relations section. Following the prepared remarks, we'll open the call for questions. I would like to remind everyone that this conference call is open to the media, and we are providing a simultaneous webcast to the public. A replay will be available via the company's investor relations page at www.jivo.com. I'd now like to turn the call over to the CEO of Jivo, Dr. Patrick Gruber. Pat?

Thanks, Eric. Good afternoon, everyone, and thanks for joining us on our call. We are filing our Form 10-Q today, and we ask that you refer to it for more detailed information after this call. Today I'll explain what we have been investing in, what it means, how we think about further investments, our use of capital, and progress against milestones. At the core of GEVO is a whole lot of technology. We've got multiple technology platforms that we've developed. These include the net zero plans for IBA and ethanol and conversion of those alcohols into net zero hydrocarbon fuels and chemicals. We have Verity Tracking and even our version of Dairy R&G. We have to drive all of these things to commercialization, larger commercialization. That's our primary mission now. To get these technologies commercial, we think that it's most valuable to shareholders for us to take on roles other than just being an investor in projects. To make technologies commercial, someone has to take on the role of project developer. Well, that's us. Let me explain further. Now, we've been investing the technology engineering in the plant design to convert corn kernels into SAF, protein, vegetable oil, all with the potential of a net zero carbon footprint. We work with multiple technology suppliers in addition to using our own proprietary technology. We use multiple engineering firms because of their expertise and capabilities. Our plant designs are well thought through by our strong team of engineers and operators for operability, efficiency, and troubleshooting. We need these plants to work well. We've got a deep bench here of people who are good at this, having designed plants in the past. We are now investing in the engineering and design of modules. We want modules because we believe it will be a more cost-effective way of de-risking plants and allows more rapid build-out of additional plants. GEVO owned the plant designs and details. We are the owners of the designs or the kits as they're sometimes referred to. It's hard fought and expensive. It's taken us two years, more than a hundred million dollars to get where we are today on net zero one. There is no single technology supplier out there that has the expertise to design an NZ plant. It's GEVO who brings that capability. For example, it is our innovative integrated designs that reduce the consumption of natural gas for the integrated NZ1 plant by about 70%, which makes that a lot more practical and realistic to achieve a net zero footprint or even drive it to negative footprint. The NZ plant designs are ours. No one else's. It's our IP, and yes, we file patents on that. We won't have to do this heavy engineering and design lift more than once for an NZATJ plant that is based on 100 million gallons of ethanol input. We can copy and paste that for use with other sites. That's what we've been working on. Now, to monetize our investment in engineering, we need to get something built and operating. So how does that happen? Well, to do this, someone needs to play the role of a developer. Someone who gets the project lined up for investment gets it de-risked so investors can make that investment with confidence. The developer typically obtains land or arranges the utilities, in-licenses plant designs, pays for the construction and engineering, lines up additional investment needed to get that plant built, and otherwise takes care of all the details needed to get that plant built, de-risking the whole project along the way. As a reward for taking the risk of development of a project, it is common for a developer to recover development capital upon financial close. It is also common for a developer to obtain what is called a carried interest in the project. Carried interest is an ownership position in the project, usually in the 5 to 20% range with no cash required. It's just named a carried interest. Project developers also have the option to invest additional capital and with their investment, gain more return than a common project investor. Developers frequently take the reimbursement money they got back at the financial close and use it to develop more projects, recycling the money, if you will. Projects also need infrastructure investors in the project. These investors usually want to see a de-risked project matured by the developer. Debt is also part of the game of project financing. Project debt requires additional capital above what we call the hard cost. That is the cost of equipment and installation of a plan in order to fund the prepaid accounts that mitigate risks of various types. However, debt also enables lower levels of equity and incrementally higher levered IRRs. Debt also requires an EPC contractor who gives a guaranteed price to the project. The problem is that EPCs typically boost costs and fees and capex surcharges to mitigate risk. We have a very good engineering team with lots of project experience, so we're very good at uncovering a reasonable cost. So why should a shareholder care about what role we take? Well, the short version is that we can generate higher returns and generate more cash flow faster at less risk than if we handed off development or just did a serial investment. Now I'm going to step through it. Number one, we expect a higher return on capital. Well, why do we expect a higher return on capital? Well, to answer that, let me describe a little bit about what it means for us to be a developer of projects in sustainable aviation fuel or SAF and related low-carbon products. As a developer, we have been putting our capital into things like site selection, purchasing of land, front-end engineering, the detailed design engineering, permitting, contracting with SAF off-takers, finding out and discovering the value in the marketplace, working with carbon capture partners and setting up those contracts arranging utilities, the wind and the green hydrogen partners, setting that up so it's done on a deep boom basis over the fence in a contract. And we have arranged EPC agreements. We've also arranged to have the option to, we've created RNG from our own dairy RNG project that has the ability to take RNG up to that plant at net zero one. We have an option. done the work of identifying the best of ethanol and ethanol-to-jet technologies, improving them, and then integrating them into a design. We've led the engineering and specifications of the process. We've been signing up the farmers to work with our Verity carbon tracking platform so that we can measure, verify, and audit carbon reduction at the individual field level, in fact, all the way through the whole of the value chain, including our plants. And finally, we've been putting all these pieces together into a simple product, namely a modularized repeatable alcohol-to-jet kit. And by a kit, I mean a combination of existing technologies that are turned into a turnkey plant design. And this all achieves a low-carbon SAF and other products. We at GEVO own the kit, the design, and the specifications. It's an intellectual property. that the engineering and design time and money that we have spent will pay off. We are the owners of the NC plant designs. People will be licensing the plant designs to the projects. We'll get paid for that. And so we are actually more than just typical developers. We also do technology and innovation. Given that this market is so big, we may even license our plant designs to other developers for fees or royalties. Number two, Less of our capital is required. So what do I mean by this? Again, it's commensurate with our role of a developer. The amount of capital that is required is lower compared to the amount of later stage project level capital that would come in to complete our projects. I already mentioned that it is common that developers get a carried interest. That means we get an ownership position before we contribute any additional capital from GEVO. It is common for projects to have multiple classes of stocks with different returns. Developer shares in a project commonly get more return in the dividend as a reward for the work in creating the project and de-risking it. Said differently, we expect higher returns on our capital that goes into the project. By doing good development work, we enable something much bigger, namely infrastructure capital to come into the project because we've de-risked it. And we are working, and it shows up in things like our success in getting the term sheets phase with the DOE. Consider our recent announcement that we've entered into due diligence and the team shirt negotiation phase for up to $950 million of debt on our NZ1 project in the USDA Loan Guarantee Program. You know, one of the things that I liked in that letter that we got, it said that GEVO's Net Zero One project is highly qualified and suitable. That's actually a quote. Number three. We are also a licensor of technology know-how and IP. This can enable more rapid EBITDA growth, capturing value from our IP. So when I was talking about our progress with DOE and NC1 a moment ago, I said we enable something much bigger. Well, what does bigger mean? It means that the end markets for these projects are so enormous and they're ripe for disruption from a drop-in, low-carbon, carbon-negative alternatives. No single individual company can meet the market needs and the demand. Regarding SAF, consider that jet fuel demand in the U.S. alone is about 20 billion gallons per year and growing. And there are nearly 200 ethanol plants in the U.S. with a collective capacity of roughly 17 billion gallons per year. This presents GEVO with many opportunities, namely enabling ethanol to jet plants using our modularized standardized NV1 kit. We want lots of the ethanol from these plants converted to SAF with our kit. We plan on developing plants, but we may just license plants to others too. It's all about the growth and bringing in the money. In addition to the ATJ kit, we've also developed a different set of kits to lower the CI of existing ethanol plants. We need ethanol from existing plants decarbonized. Our NZ innovations that we've just spent this time and engineering money on and bringing in our innovations will apply there too. Those learnings can be transferred. More decarbonized ethanol means more ethanol that may be suitable as a feedstock for our NZ ATJ kit and innovations. We also have the development opportunities like what we see with P66 and ADM where we enable them for ethanol We used our knowledge to catalyze something that we couldn't do ourselves. And the good news is that they agreed to pay us up to $125 million over the course of the next several years as they execute their projects. We'll gladly help them be successful. We want to see that $125 million come to GEVO and hopefully starting sooner rather than later. We are also addressing another enormous end market, plastics and chemicals. There's tons of interest from the marketplace about this type of thing. The market potential here is more than 400 million tons and hundreds of billions of dollars. We have proprietary technology to make olefins, the building blocks for most chemicals and plastics. The plastics and chemicals made from our olefins would be massively carbon negative if they were made in NZ style of plants. We think that we have an outstanding position on CI and cost to deliver ethylene, propylene, and butenes and other intermediates that the world just hasn't seen before. Lots of companies have technology to convert ethanol into ethylene. Ethylene goes into chemicals, plastics, and fibers. Everyone has heard of polyethylene. Normally, it's made from petroleum, but people have long ago figured out how to make ethanol into ethylene. We have chosen access technology as part of our ATJ process. In that process, one of the steps takes ethanol and makes it into polymer-grade ethylene, so we can supply that market too. It's built into the NZ1 process. If we chose to supply ethylene to chemicals and plastics, we'd expect our ethylene to be massively carbon negative, the lowest in the industry, and we think probably the lowest cost, given the scale of what we're doing and the infrastructure that's built in. Now, in addition to that, for the last decade, we've been developing proprietary ethanol to olefin technology, or ETO, as we call it. It's with a focus on butenes and propylene. ETO is a proprietary technology owned by GEVO that reduces the capital and operating cost to convert ethanol to olefins using proprietary catalysts. We filed patents on this. It's our intellectual property. We believe that ETO will save money on OPEX and CAPEX for fuel plants, sure. But this proprietary ETO technology also enables conversion of ethanol to carbon negative polymer grade propylene and butene. In ATJ, a net zero plant that has ETO installed, we could simply convert the olefins to SAF or diesel. But we would also have the ability to selectively produce propylene and serve it to the chemicals, plastics, and materials markets. Propylene is a key ingredient for a range of polymers and plastics and fibers used today in everything from car components to consumer goods, carpet, diapers, and packaging. Propylene made in an NZ plant with an ETO kit would be massively carbon negative. We think it's going to be valuable. It's very interesting for the chemical industry at large. We're solving a problem that other people have tried to do, but we have that technology. Now we have to commercialize it. Well, we're not alone. LG Chem thinks we're onto something, too. That's why they've done a license and development deal with us. Our agreement with LG Chem is specifically designed to develop biopropylene for the production of drop-in low carbon alternative to the typical polypropylene products. We want to drive to carbon negative products. Our agreement with LG Chem includes a license and a development agreement. We've already received the first payment from them under this agreement. We've already outlined the terms for investing in the projects. LG Chem is a great partner, hugely committed to decarbonization, and our ETO helps that. We can create something much bigger and faster by playing the role of licensor and developer. ETO is real and gives us an entry into another giant market, that of carbon-negative plastics, chemicals, and fibers leveraged off NZ plants and their designs. I think it's going to be a really big deal. We look forward to announcing more examples of being a developer and technology licensor related to our Verity carbon tracking platform, our NZ projects, of course, and that includes isobutanol and other projects. Those things are still alive and kicking. We just don't talk much about them. The fourth advantage of our approach is creating the optionality in how we use our capital. This is super important. We have the option to invest in the development of projects, and we can also invest directly in those projects like other investors. Obviously, we want to take as much of the cash flow streams we possibly can. We want that EBITDA, but we also have to improve in our use of capital. We aren't going to overcommit our balance sheet. We also don't want to be forced to raise nasty dilutive capital at the Jibo level. We're going to be careful about this. As we make choices in how we put our capital to work, the choice will depend upon us weighing the availability and attractiveness of third-party project-level capital and the availability and attractiveness of new projects that we can develop at those higher developer returns for less of our capital. Remember, we get a disproportionate reward if we've been the developer. As we look forward from today, it may make the most sense for Chiva to recycle some of its capital to develop new projects, but We also like our projects, and we want to invest in them. It's not one or the other. It's both developer and investor. We want as much of that EBITDA as fast as we can get it. This means a balancing act of being a licensor, developer, and co-investor in the project. As we go forward, I wouldn't be surprised if we take a significant stake in NZ1 above what we would get just by taking the development and carrying it. That choice will be driven by options available to us at the time as the decisions and financings get made. Another more subtle point is that getting NC plants built is not the only way GEVO becomes profitable. You don't have to have those plants built to become profitable. We like them and want them because we'll get much bigger, faster growth. Between R&G, Verity, Specialty Chemicals, and Fuels, as well as other initiatives, we have multiple pathways to becoming EBITDA positive in the near future. Like I said, though, we want those NC projects built out, not just by us, but by others as well. Now let's talk about key milestones we've achieved year to date. I'm working off of the milestone slide in our investor deck. We have four business areas that we've bucketed things into. One is the hydrocarbon projects and their development. So first part, progress on MZ1 financing. While we still need to secure the equity investors, we can make progress on that more now that we have an indication from the DOE that should help us. We still need to know what the rules are for SAF and ethanol from the IRS in the rulemaking under 45Z so we can update the carbon value and therefore the returns in the project. We have been in close contact with our airline partners who understand that timelines are changing. We don't anticipate any issues regarding timelines and contracts with them. This is very much of a partnership approach, and they've been very, very good about it. We will have to start out any economic issues that might arise from the rulemaking on an IRS on a 45Z. None of us knows exactly what it's going to include. We've been told it should be favorable, but you just never know until it's done. We've been discussing all this with them and with potential equity partners as to how to solve the issue should they arise. So we should, we just need a little more information and we'll get this thing done and figured out. Second one under this section is Finalize the price and schedule for the EPC contracts. Well, we had a contest. We worked with several companies who had the potential to become EPC contractors, looking at how they worked and what they do. And we selected our lead horse. That's McDermott. The EPC terms look good. They're still working through pricing. They've promised to be transparent with no game playing. My team is going to make sure that that happens. The next milestone was enter the diligence process for the DOE loan. Done. As I mentioned, you're invited to the term sheet phase. We announced this on August 7th. And this term sheet negotiation is for up to $950 million of loan guarantee to finance the NZ1 projects. This is a really big deal for us and our shareholders. As a reminder, in January this year, the DOE invited GO to submit a Part 2 application to DOE's Title 17 Loan Guarantee Program. We completed that application and all the qualifying work that went with it. It's a lot of work. And getting through this successfully is a huge milestone towards DOE's conditional commitment for the project debt of net zero one and the financial close. We still, by the way, to get this close done with the DOE, this is going to take till probably the second quarter of next year. Complete the design of ATJ critical modules. This is all about de-risking the build-out of the ATJ plan, and we're taking a modularization approach. We're doing much more heavily modularized than you would have done, say, five years ago. This is all about de-risking the build. It's underway. The design is being worked on. This is a strength of both McDermott and Praj with whom we work. The next milestone we had listed was sign the agreement with existing ethanol plants for ATJ. This looks on track, although it is slower than we would like because of the lack of clarity around the IRA bill and the 45z rules. I expect this will still happen with the focus of decarbonizing ethanol first as a prerequisite to building out ATJ. Complete the FVL2 design for NZ2. That's the 300 million gallon ethanol input to 195 million gallons of ATJ. Done. This was done by Burns McDonald, one of our other engineering firms with whom we work. No more money is being spent on this right now. It's shelved. It's going to sit idle for a while as we finish financing on NZ1. One other item on the NZATJ front. We verbally agreed with Axis to extend our relationship for two years. We like each other as partners. It's a great relationship. They're really good. We still have to paper up this agreement, but, you know, they're really, we work together well all over the world. The next business area is Verity. Here the milestone, first milestone is to sign up additional customers and partners for Verity. We already have Sire. with 135 million gallons per year ethanol plant. Now we have an additional ethanol partner that has signed up who has more than 100 million gallons per year. The goal of Verity here is to capture carbon value that's been left on the table and monetize it. So we want our partner companies to make a lot of money, and we will make money as they make money. Progress looks good. We expect to add more companies this year. The next milestone, expand Verity Acres track to 100,000 acres or more. This was slowed a bit because the USDA grant process has taken longer. We just got the final award notice and the final contract last week. So this should get going soon and we should have the money in the bank and be able to spend it. That $30 million is going to be useful. And with the USDA money in hand, we'd expect to have 100,000 acres by next season. One that we added as a milestone is that get the Verity tracking carbon tracker applications working in launch. That's been done. It works to track carbon and CI field by field and should help farmers make better decisions on how to lower CI. This is very good progress by the Verity team. The results look good. We can see field level differences in CI. This is going to be very, very important in the future as we make the case as to why improved agricultural practices can be measured and reported. We actually, believe it or not, we run into people in the government who go, They actually, they're told, oh, no, it's not possible to measure. Well, we've got the data that says, yes, you can. And we have it here. And it's straightforward. Took a lot of work to create it. And it's proprietary. But you know what? It works. The next milestone is provide guidance for 2024 and beyond for Verity revenue and do this by year end. I'm looking forward to seeing this, too. I'm sure Paul Bloom, who's in charge of Verity, will wait until the end of the year to give this to us. But that's okay. His team is making progress. Givo RNG, first milestone, complete the expansion of RNG and achieve greater than 90% of 400,000 million BTUs by the end of the year. This project's on track. Equipment's already being delivered. The expansion is going. We also have a milestone to produce more than 300,000 million BTUs in 2023. Our team has achieved 90% of capacity already. And the RNG plant is running incrementally positive cash flow basis, even with a temporary CI score of minus 150, which is low, and of course, low LCFS carbon values. We expect profitability to improve once the score of minus 350 is approved and capacity increases. The next business segment that we have is chemicals and specialty fuels. The goal has been to restart IBA and octane sales. While those plans are being put into place, the interaction with customers is occurring already. We're out there working on it. We're seeing a lot of interest for IBA and iso-octane. It'll start off as a specialty business, specialty products, specialty fuels. And then I think it'll grow from there. It's time to get the contracts in place for the IBA and iso-octane. And in the long run, we'd expect to be a really big business too. Next milestone is the scale of E2 to E2 to the pilot plant stage. Well, this is on track. So we've developed a lot of proprietary technology here at GEVO. It's showing up in our NZ plant designs for ATJ, for methanol, and IBA. We have proprietary technologies like ETEL and IBA. I like the opportunities that are opening up for chemicals and plastics because of our technology and intellectual property. We are excited about Verity, both about what it can do and the intellectual property that's being created as we do it. The more we get into it, the more potential we see. For Verity, this isn't just about tracking carbon. It's all about monetizing that carbon. That's where we want to get to. Now, at the core of Jibo are several technology platforms. I've just listed some. By taking on the roles of a developer, licensor, in addition to project investment, we think we can optimize the use of our capital and grow EBITDA faster, leveraging those technology platforms. So overall, we'll stay focused, driving towards a positive EBITDA sooner rather than later, and managing our balance sheet, optimizing the use of capital. We are keenly interested, like you, in seeing our share price be maximized. Now I'll pass it off to Lynn to talk through the operations and numbers, including our dairy RNG asset.

Thanks, Pat. GEVO's Q2 combined revenue and interest income was $9.3 million. with the interest income benefiting from higher interest rates. Our corporate spend, that is SG&A, was $6.7 million for the quarter, excluding non-cash stock-based compensation of $3.9 million, which is a $0.2 million decrease from Q1 as a result of our cost control efforts. Debt related to the Northwest Iowa RNG project was $67.6 million, consisting of $68.2 million base value less on unamortized premiums and issuance costs. We ended the second quarter of 2023 with a strong liquidity position of $426 million in cash, restricted cash, and other liquid investments. The restricted cash portion is associated with our Northwest Iowa RNG bonds, and certain collateral related to the development of Net-01, in total $77.8 million. During the second quarter of 2023, we invested and capitalized $17.7 million cash in capital projects comprised of $9.8 million into Net-01, $3 million into Northwest Iowa RNG, and $4.9 million into other NZ projects. As has been discussed, we intend to finance the majority of NZ1 capital necessary to fully construct and start up the facility at the Net-01 project level with debt and third-party equity. It's also worth noting that while the DOE loan is the primary track to secure construction debt, we are exploring a syndicated bank loan process in parallel so as to keep our options open. Our dairy RNG asset in northwest Iowa has been injecting into the pipeline since June of 2022. This last quarter, the project achieved impressive year one performance against its design capacity with on stream injection of 97% and uptime of 91%. RNG revenue realized for the quarter was 2.9 million using the CARB low carbon fuel standard temporary pathway approval of negative 150 CI. Despite being constrained to the temporary CI score, we achieved positive standalone RNG EBITDA in Q2, and we expect to improve results with the CARB's final approval of the project's negative 350 CI application submittal anticipated to occur in 2024. We can't say when exactly in 2024 as timing is dependent on the CARB process. But achieving the permanent pathway will substantially improve LCFS credit revenues under the California program itself, as well as per the terms of our marketing agreement. In addition to the project having approached its full design capacity with an annualized production rate of 355,000 MMBTUs last quarter, we are expanding the project's capacity to 400,000 MMBTUs per annum, expected to be complete in Q4. Regarding our ETO technology, we received payment of $1.3 million for the second quarter and expect to get another $1.2 million over the next two years associated with joint development efforts. We expect other payments upon commencement of commercialization, including royalties on net sales from future production volumes. I'm really pleased that we have a pathway to positive cash flow. We've trimmed back our corporate burn from what was originally planned, and our project spend is expected to decrease. Cash flow from R&G and fees and licenses have helped put our net burn on a downward trend. With that, I'll turn it back to Pat.