Green Plains Partners LP

Welcome to Green Plains Inc's fourth quarter and full year 2024 earnings call. Joining me on today's call is Todd Becker, President and Chief Executive Officer. There is a slide presentation available, and you can find it on the investor page under the events and presentations link on our website. During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's press release, in the comments made during this conference call, and in the risk factors section of our Form 10-K, Form 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. Now, I'd like to turn the call over to Todd Becker.

Thanks, Phil, and good morning, everyone, and thanks for joining our call today. As part of our ongoing strategic review, as you can see, we have executed a number of actions designed to improve our operating performance going forward, and set ourselves up for when carbon comes on later this year in order to realize the maximum benefit from our protein, oil, and carbon footprint. Over the last several years, we invested significant capital to get our new products to market, and the time has come to rationalize those costs among other decisions we have made. To accomplish significant cost savings and margin expansion, we took the necessary step of reorganizing our corporate and commercial functions to streamline and enhance our agility and resilience and to improve alignment around our core strategic focus. We have identified up to 50 million in annualized cost savings, and based on the actions we have already done this week, we executed on the first 30 million of improvements already. This included a move to smaller corporate workforce, winding down some of our innovation platform, attacking SG&A expenses, having a smaller executive leadership team with a number of executive departures, And lastly, looking at everything we do across the board that does not make us money. This was our natural move from innovation to commercialization, including rationalization. We knew this day would come. As a result, we may incur a small one-time restructuring charge in the first quarter, which we do not believe will be significant or material. As part of this, as well, in January, we made the difficult decision to shut down our 120 million gallon facility in Fairmont due to market conditions. This is not just the macroethanol market, but the acute issues stemming from the flooding last spring in southern Minnesota, which resulted in a short corn crop and elevated basis levels in that area, which we think will last throughout the year. We are keeping a skeleton crew to perform maintenance on the facility while it is in cold idle for the foreseeable future. The plant also needs a new upgrade to the grain handling and drying systems, and permitting in Minnesota is just a long slog. If market conditions dictate, we can always bring this production back online, but we will be careful and thoughtful on this decision. We are still planning for carbon capture to be in place at this plant, but we will talk more on that with regard to carbon later in the call. Now on to the quarter. We reported a net loss for the quarter of $54.9 million, or $0.86 per share. One thing I want you to notice, though, is we took a non-cash income tax charge, making our number look worse. And Phil will talk about the settlement later in the call, although we were disappointed that our EBITDA was negative for the fourth quarter. Yet in full 2024, the company earned $44.7 million in EBITDA positive for the year. Still a disappointing result. Phil will review all the specifics shortly. Again, when we look at EBITDA for Green Plains, the SG&A that plagues us is being attacked as we speak, and we cannot continue to be set up to burn our SG&A like we did this quarter. Our standalone assets performed to the market standard at many of our locations or even sit at the top of the market stack, yet our centralized structure was too large for a smaller production footprint, and that is why we announced the restructuring today. Well, I could spend all day talking about the deterioration of the ethanol margins. You have heard it many times across industry earnings calls already. Market fundamentals were weak with high levels of production and elevated stocks, with the one bright spot being strong exports. as we were on pace to set a new record this year of approximately 1.9 billion gallons, and we expect 2025 to exceed that. We were largely unhedged and open to the crush going into the fourth quarter, which was the wrong choice to make. As many of our shareholders have voiced concerns with our hedging programs, this quarter would have been the one to hedge. As we enter into the month two of 2025, the market has remained under pressure, yet when you look at where we have been historically, and Q1 at this time. The forward curve is in better shape and position than is typical for this time of year, but we need to see either an increase in demand or a decrease in supply or both. We are watching planting attentions closely, and we believe the setup for favorable industry fundamentals is in place, although the global market remains very tight on corn, so the U.S. farmer will need to act on putting serious acres in the ground. Otherwise, we are setting up for a higher-priced corn market in the future. Despite having extended seasonal maintenance at Mount Vernon during the quarter, which we said was coming on the prior call, we achieved an operating rate of 92% and expect to continue to operate in the mid-90s after the exclusion of Fairmont. Our plans continue to operate better and better every month, and we are also focused on reducing our OPEX per gallon, as well as with many programs that are being kicked off as well there. We continued to track record For strong corn oil yields and yields at our MSC plant continue to push the upper end and what is possible with corn oil even exceeding 1.2 to 1.3 pounds per bushel. Ultra high protein yields were also in line with prior quarters and we are constantly making improvements to the process at our MSC location. The overall volumes were lower than the record levels in Q3 due to the decision to take protein downtime in the quarter at Wood River to re-baseline that plant in anticipation of carbon capture coming online later in the year. While the overall protein complex is under significant pressure from oversupply due to expanded domestic soy crushing capacity, and it's becoming a bit ethanolized in that industry, there are definitely some bright spots as we move from innovation to commercialization. Just last week, we sold one of the largest aquaculture companies in the world. The largest amount of quantities we've sold to date, which will be converted to bulk vessel and is repeat business as we expect, into South America of 50% protein, which is the result of three to four years of work. We see growing interest in our 60% sequence product from those same customers and others abroad, as global tightness in corn has resulted in a tightening corn gluten meal market in the destinations, and the replacement product is, guess what, sequence. And we are determined to keep in this position as a premium product and not let it be commoditized, and we are pricing it accordingly. Our legacy pet food customers extended their contract with us once again, and we continue to focus on the growing market share in premium markets with our team and our distribution partnerships on pet food. The progress on carbon has been exceptional. The rulemaking is supportive to our company and shareholders, and we remain on track to begin capturing biogenic CO2 in the second half of this year with these policies in place to support not only our decarbonized ethanol, but our low-carbon renewable corn oil as well. We continue to believe that the value of our Nebraska assets are not reflected in our current share price. Carbon earnings are to begin later this year and will fundamentally transform the earnings power of our business and our valuation. We are hearing and seeing individual transactions at a much higher multiple and per gallon valuations than traditional Generation 1 plant without carbon capture. With our reduced enterprise value based on the potential market for our decarbonized gallons, The Nebraska assets are more than our market capital loan, and that makes absolutely no sense. And between that and our SG&A rationalization, it sets us up for a significant re-rate once again, and we are looking forward to that. And now I'll hand the call over to Phil to provide an update on the overall financial results. I'll come back on the call to provide additional color and outlook on what we just discussed, as there are a few really important factors to consider as we move forward together. Phil?

Thank you, Todd. Green Plains consolidated revenues for the fourth quarter were $584 million, which was $128.4 million, or approximately 18% lower than the same period a year ago. As it has been the last couple of quarters, the lower revenue is attributable to lower market prices experienced for ethanol, dried distillers, grains, and renewable corn oil in Q4 of 24, as compared to the same period a year ago. While we have seen a decline in our commodity inputs with corn and natural gas down significantly year over year, the margin opportunity was significantly weaker for the quarter compared to the prior quarter and the prior year due to market oversupply as Todd has talked about. Our plant utilization rate was 92% during the fourth quarter compared to the 95% run rate reported in the same period last year. For the trailing four quarters, we have averaged a 94% utilization rate and we anticipate our operating plants to continue to perform in the mid 90% range of our stated capacity for the first quarter excluding the impact of Fairmont being idle and barring any events outside of our control. For the quarter, we reported a net loss attributable to Green Plains of $54.9 million, or negative 86 cents per share, per diluted share, compared to net income of $7.2 million, or 12 cents per diluted share, for the same period in 2023. As Todd mentioned, we had negative non-cash tax adjustments to the quarter that impacted EPS. Even up for the quarter, was negative $18.9 million compared to $44.7 million in the prior year period. Depreciation and amortization expense was lowered by $2.9 million versus a year ago at $21.4 million. For the fourth quarter, our SG&A costs for all segments, including our plants, was $25.6 million, $7.2 million lower than the prior year due to lower personnel costs and adjustments to incentive accruals. Remember, this includes our plant assets, and the rationalization was almost all around our non-plant costs. Interest expense of $7.7 million for the quarter, which includes the impact of debt amortization and capitalized interest, was $0.9 million favorable to the prior year's fourth quarter. This decrease compared to prior year was primarily due to lower loan balances associated with the payoff of the Green Plains partner's debt retired in the third quarter of 2024. Our income tax for the quarter was $7 million compared to a tax benefit of 0.3 million for the same period in 2023. As both Todd and I outlined in our earlier comments during the quarter, we reached a settlement in principle with the IRS Independent Office of Appeals regarding our R&D tax credit for the tax years 2013 through 2018. Due to the agreement, we booked 6.2 million of tax for the year to increase our reserve for unrecognized tax benefits related to the R&D tax credit issue, net of our valuation allowance. At the end of the quarter, the federal net loss carried forward available to the company was $124.3 million, which may be carried forward indefinitely. Our normalized tax rate on a go-forward basis is around 23% to 24%. Our liquidity position at the end of the year included $209.4 million in cash, cash equivalents and restricted cash, along with approximately $200.7 million available under our working capital revolver, a bit weaker due to the margin structure in the quarter. For the fourth quarter, we allocated $27 million of capital expenditures across the platform, including $6 million to our clean sugar initiative, about $7 million to other growth initiatives, and approximately $14 million toward maintenance, safety, and regulatory capital improvements. On a year-to-date basis, we have incurred capital expenditures of $95 million, In line with our prior estimates, we anticipate plant related capex for 2025 will be in the range of 20 to $35 million as we have most of what is needed at this point for our platform. This range excludes the remaining balance of the approximately 110 million in carbon capture equipment needed for our Nebraska initiatives as we have financing in place to cover those needs. Now I'll turn the call back over to Todd.