Q3 2023 Alto Ingredients Inc Earnings Call

Speaker 1: Good day and welcome to the also ingredients third quarter, 2023 financial devolved conference call. All participants will

Good day and welcome to the ultra of ingredients third quarter 2023 financial results Conference call.

All participants will be in a listen only mode.

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Speaker 1: after today's presentation. There will be an opportunity to ask questions.

After todays presentation, there will be an opportunity to ask questions.

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Speaker 1: I would now like to hand the conference over to Kirsten Chapman, LHA Investor Relations. See you. Go ahead.

I would now like to hand, the conference over to Kirsten Chapman L. H a investor Relations. Please go ahead.

Speaker 2: Thank you, Bethes, and thank you all for joining us today for the Alto-Ingredients Third Quarter 2023 Results Conference call. On the call today, our president, the CEO ,

Thank you Betsy and thank you all for joining us today for the algae ingredients third quarter 2023 results conference call on the call today are president and CEO, Bryon, Mcgregor and CFO, Rob I'll answer.

Speaker 2: Out to ingredients issued a press release after the market closed today providing the detail

Al two ingredients issued a press release after the market closed today, providing the details of the company's financial results. The company has also prepared a presentation for todays call that is available on the company's website at alto ingredients Dot com.

Speaker 2: The company is also prepared to present for today's call that is available on the company's website.

Speaker 2: I tell a phone replay of today's call will be available through November 13th, the details of which are included in today's press release. A webcast will also be available at Alto and Green's website. Please note that the information on this call speaks only as of today, November 6th. You advise that time-sensitive information may no longer be accurate at the time.

A telephone replay of today's call will be available through November 13th the details of which are included in today's press release and webcast will also be available at Alto ingredients website. Please note that the information on this call speaks only as of today November six Youre advised that time sensitive information may no longer be accurate at the time.

Any replay.

Please refer to the company's safe Harbor statement on site to the presentation available online, which states that some of the comments in this presentation and conference call constitute forward looking statements and considerations that involve risks and uncertainties.

Actual future results of Alto ingredients could differ materially from those statements factors that could cause or contribute to such differences include but are not limited to events risks and other factors previously and from time to time disclosed in alto ingredients as filings with the SEC.

Speaker 2: is required by applicable law, the company assumes new obligation to update any forthlooking statements. In management's prepared remarks, non-GAT measures will be referenced. Management uses these non-GAT measures to

Except as required by applicable law the company assumes no obligation to update any forward looking statements.

In management's prepared remarks, non-GAAP measures will be referenced vanished.

Management uses these non-GAAP measures to monitor the financial performance of operations and believes these measures will assist investors in assessing the company's performance for the periods reported.

The company defines adjusted EBITDA as unaudited net income or loss before interest expense interest income provision for income taxes asset impairments loss on extinguishment of debt acquisition related expenses fair value adjustments and depreciation and amortization expense.

To support the company's review of non-GAAP information a reconciling table was included in today's press release.

On today's call, Brian will provide a strategic plan and activities review and Rob will comment on our financial results said, Brian will wrap up and open the call for Q&A is now my pleasure to introduce Bryon Mcgregor. Please go ahead Sir.

Speaker 3: Thank you, Kiersten. Thank you all for joining us today. As an SEO, I've spent the last 90 days on the road meeting with customers and investors and the dedicated teams of our facilities. I've been listening, learning, collaborating, re-enforced our continued mission to profitably provide ingredients that make everyday life better.

Thank you Kirsten and thank you all for joining us today as a new CEO I've spent the last 90 days on the road meeting with customers investors and the dedicated teams of our facilities have been listening learning and collaborating to reinforce our continued mission to profitably provide ingredients that make everyday.

He likes better.

Speaker 3: I'm proud of our talented team and our overall accomplishments today. We continue to successfully transform our company from a supplier of low margin commodities to a provider of high margin differentiated specialty alcohols and essentially gradients and consumer, pharmaceutical, food, beverage, and industrial product.

I am proud of our talented team and our overall accomplishments today, we continue to successfully transform our company from a supplier of low margin commodities to a provider of high margin differentiated specialty alcohols, and essential ingredients and consumer pharmaceutical food and beverage and industrial products.

Speaker 3: This strategic realignment has greatly improved our financial profile over the past three years. We continue to make good progress, although we are subject to intermittent operational and commodity market challenges.

This strategy strategic realignment.

Greatly improved our financial profile over the past three years, we continue to make good progress, although we are subject to intermittent operational and commodity market challenges.

Speaker 3: Q3 2023 results reflected positive contribution from improved ethanol crush margins, particularly in September , as corn basis declined as the harvest commenced, however. And usually high, I'm scheduled down time lower our anticipated production volumes and shifted our mix towards lower margin products.

Q3, 2023 results reflected positive contribution from improved ethanol crush margins, particularly in September as corn basis declined as the harvest commenced however, unusually high unscheduled downtime lowered our anticipated production volumes and shifted our mix too.

Towards lower margin products.

Speaker 3: Combined with higher repair and maintenance costs, we did not generate the results we anticipated.

Combined with higher repair and maintenance costs, we did not generate the results we anticipated.

Speaker 3: despite these operational challenges, we delivered positive adjusted EBIDA in Q3 2023, and a significant improvement over at Q3 2022.

Despite these operational challenges we delivered positive adjusted EBITDA in Q3, 2023, and a significant improvement over Q3 2022.

Speaker 3: We expect the extensive repairs and maintenance work completed during the quarter to benefit future periods uptime and reliability going forward. Rob will provide greater detail in a few minutes. First,

We expect the extensive repairs and maintenance work completed during the quarter to benefit future periods up time and reliability going forward.

Rob will provide greater detail in a few minutes.

First I'll review, our various initiatives.

Speaker 3: In early 2023, we outlined our revenue enhancing and cost-reducing capital initiatives. Each project has a different timeline, return on investment and risk profile. As such, we've intentionally evaluated and prioritized funding needs and options for each project separately with the overarching goal of remaining distantly responsible.

In early 2023, we outlined our revenue enhancing and cost reducing capital initiatives. Each project has a different timeline return on investment and risk profile as such we've intentionally evaluated and prioritized funding needs and options for each project separately with the over.

Our jingle while remaining fiscally responsible.

Speaker 3: We have already completed several of our short-term projects. These include expanding our high-quality alcohol products, installing additional corn storage capacity and replacing boiler equipment at our peak in sight, along with other various upgrades in our plant systems.

We have already completed several of our short term projects. These include expanding our high quality alcohol products, installing additional corn storage capacity and replacing boiler equipment at our Pekin site, along with other various upgrades in our plant systems.

Speaker 3: For more capital intensive projects, we have engaged experts, third-party front end engineering and design firms or fee firms, to conduct deeper analysis on scope, timing and cost. These projects include primary use.

For our more capital intensive projects, we have engaged experts third party front end engineering and design firms or feed firms to conduct deeper analysis on scope timing and cost. These projects include primary use.

Speaker 3: Carbon Capturancy Questration or CCS, Natural Gas Pipeline, Co-Generation, and Biogasconversion Capabilities.

Carbon capture and sequestration or Ccs natural gas pipeline cogeneration and biogas conversion capabilities.

Here are a few material updates.

Speaker 3: Beginning with our specialty alcohol sales, our 2024 contracting season is going well. We are on pace to exceed 2023 delivered gallons at premiums to fuel grade ethanol. As mentioned previously, our goal is to move up the value chain and capture a larger share of the beverage grade market, where our high quality, low moisture and location differentiations create competitive advantages.

Beginning with our specialty alcohol sales our 2020 for contracting season is going well we are on pace to exceed 2023 delivered gallons at premiums to fuel grade ethanol as mentioned previously our goal is to move up the value chain and capture a larger share of the beverage grade market, where our high quality.

Low moisture and location differentiations create competitive advantages.

Speaker 3: Regarding Madu Valley, we continue to line out this facility to achieve the performance guarantees of the installed high protein and corn oil technology.

Regarding mountain Valley, we continue to line out this facility to achieve the performance guarantees of the installed high protein and corn oil technology.

Speaker 3: While this process is taking longer than we anticipated, we remain resolute in our efforts to improve the consistency of the facility's product output and optimize the plant's production.

While this process has taken longer than we anticipated we remain resolute in our efforts to improve the consistency of the facility's product output and optimize the plant's production.

Speaker 3: We continue to evaluate the rollout of the high protein and corn oil technology at our other locations. In the interim, we have achieved comparable improvements in corn oil yield at our peak in dry mill through process optimization unique to its ICM design.

We continue to evaluate the rollout of the high protein and corn oil technology in our other locations in the interim we have achieved comparable improvements in corn oil yield at our peak in dry mill through process optimization unique to its ICM design.

Speaker 3: Regarding primary yeast, we have just received preliminary results from our feed study. While the findings are promising, inflationary pressures and supply chain constraints have materially impacted the installation cost, with increases of over 70% from our original estimate, and extended our construction period from 18 to 27 months.

Regarding primary east we've just received preliminary results from our feed study while the findings are promising inflationary pressures and supply chain constraints have materially impacted the installation costs with increases of over 70% from our original estimate and extended our construction period from 18 to 27.

Yes.

Speaker 3: As a partial asset to this change, the anticipated operational costs have declined and the market price for primary use has improved. In short, we are evaluating this project and exploring funding alternatives to make this unique opportunity a reality.

As a partial offset to this change the anticipated operational costs have declined and the market price for primary use has improved in short we are evaluating this project and exploring funding alternatives to make this unique opportunity a reality.

Speaker 3: Considering these results, we are critically reviewing all our projects to better ensure that the construction costs reflect current market conditions. We remain physically vigilant given the current challenging capital market environment and are giving priority to those projects with sustainable long term profitability.

Considering these results we are critically reviewing all our projects to better ensure that the construction costs reflect current market conditions.

We remain fiscally vigilant given the current challenging capital market environment and are giving priority to those projects with sustainable long term profitability.

Speaker 3: As previously reported, we completed the installation of our new grain silo in the second quarter of 2023.

As previously reported we completed the installation of our new grain silo in the second quarter of 2023.

Speaker 3: We have seen the benefit of this expanded capacity in reduced costs for delivered corn and lower operating costs through more timely silo clean-out.

We have seen the benefits of this expanded capacity and reduce cost for delivered corn and lower operating costs through more timely silo clean outs.

Speaker 3: We expect the added capacity to further benefit operations this winter.

We expect the added capacity to further benefit operations. This winter.

Speaker 3: Regarding the natural gas pipeline and cogeneration capabilities, we are now negotiating engineering, procurement, and construction contract.

Regarding the natural gas pipeline in cogeneration capabilities, we are now negotiating engineering procurement and construction contracts.

Speaker 3: We continue to make progress on our carbon capture and sequestration project. With our development partner, we are designing an alto dedicated pipeline and sequestration system located within a relatively short distance of our facility, materially reducing installation costs and decreasing external risk.

We continue to make progress on our carbon capture and sequestration project with our development partner, we are designing and alto dedicated pipeline and sequestration system located within a relatively short distance of our facility materially reducing installation costs and decreasing external risks.

Speaker 3: Based on the current economic environment the preliminary fee study findings and changing capital requirements we have extended our EBITDA expansion goals by six to 12 months. We are now targeting to increase annual adjusted EBITDA incrementally by over $65 million by the middle of 2026. With the completion of our near term projects and by approximately $125 million by year and 2027 when our yeast.

Based on the current economic environment. The preliminary feed study findings and changing capital requirements. We have extended our EBITDA expansion goals by six to 12 months. We are now targeting to increase annual adjusted EBITDA incrementally by over $65 million by the middle of 2026 went to <unk>.

<unk> of our near term projects and by approximately $125 million by year end 2027, when our use Ccs and other long term initiatives are fully realized.

Speaker 3: PCS and other long-term initiatives are fully realized.

Speaker 3: Before I turn the call to Rob, I'll mention that we remain steadfast in our sustainability efforts to be a good community steward while addressing our customers current and future needs. This quarter, our peak and facility earns safe food, safe feed, another third party product safety certification for our corn meal and germ products, further differentiating our products and services.

Before I turn the call to Rob I'll mention that we remain steadfast in our sustainability efforts to be a good steward.

Steward, while addressing our customers' current and future needs this quarter, our pekin facility earn safe food safe feed another third party products safety certification for our corn meal and Jerome products further differentiating our products and services.

Speaker 3: We plan to publish, we plan to publish our sustainability report publicly by year end and look forward to providing key disclosures in this format on our on an annual basis. Now I'll turn the call to our CFO .

We plan to publish soon we plan to publish our sustainability report publicly by year end and look forward to providing key disclosures in this format.

On an annual basis now.

Now I'll turn the call to our CFO, Rob a ladder.

Speaker 3: Thank you, Brian . Due to strong press margins, our third quarter growth profit improved over the same period in 2022. However, there were several factors that substantially tempered results in the current period.

Thanks, Brian due to strong crush margins, our third quarter gross profit improved over the same period in 2022. However, there were several factors that substantially tempered results in the current period.

Speaker 3: Corn basis level increase by 31 cents compared to Q2 2023, illustrating an a sharp increase sequentially and by three cents compared to Q3 2022, demonstrating a similar supply and demand profile as last year. In addition, as Brian noted, we incurred significant increases in unexpected repair and maintenance costs.

Corn basis levels increased by 31 cents compared to Q2, 2023, illustrating a sharp increase sequentially and by three cents compared to Q3, 2022 demonstrating a similar supply and demand profile as last year. In addition, as Brian noted we incurred significant increase.

He says an unexpected repair and maintenance costs and the associated downtime reduced anticipated production volumes. This adversely impacted our hedging strategy to lock in favorable market crush spreads, which resulted in derivative losses of $3 $7 million and shifted our product mix to more wet ingredients that.

Speaker 3: The associated downtime reduced anticipated production volume.

Speaker 3: This adversely impacted our hedging strategy to lock in favorable market crush spreads, which resulted in derivative losses of $3.7 million and shifted our product mix to more wet ingredients that carry lower margins.

Carry lower margins year to date, our specialty alcohol sales were impacted by lower consumer demand. We are working with our customers to roll a portion of the 2023 contracted volume commitments into 2024.

Speaker 4: Year-to-date are especially alcohol sales were impacted by lower consumer demand. We are working with our customers to roll away portion of the 2023 contracted volume commitments into 2024. As such, sales and profitability were lower than expected for the third quarter.

As such sales and profitability were lower than expected for the third quarter. Additionally.

Additionally, we incurred higher feasibility and legal costs associated with our strategic capital projects.

Speaker 4: On the positive side, during the third quarter, we received an additional $2.8 million cash grant as the USDA closed out the BioFuel Producer Program.

On the positive side during the third quarter, we received an additional $2 $8 million cash grant as the USDA closed out the biofuel producer program.

Speaker 4: Adjusted EBIT out was positive $4.7 million for the third quarter compared to negative $20.6 million for the same period in 2022.

Adjusted EBITDA was positive $4 $7 million for the third quarter compared to negative $26 million for the same period in 2022.

Speaker 4: Looking ahead to the fourth quarter, although Crest margins remain positive currently, we will refrain from providing projections for several reasons.

Looking ahead to the fourth quarter, although crush margins remained positive currently we will refrain from providing projections for several reasons first during Q4 customer commitments are not solely based on market demand rather than they are reflective of buyers managing their fuel great inventory balances with the goal of.

Speaker 4: First, during Q4, customer commitments are not solely based on market demand. Rather, they are reflective of buyers managing their fuel-grade inventory balances with the goal of minimizing inventory levels by year-end.

Minimizing inventory levels by year end.

Speaker 4: Second, winter buying patterns tend to start the day after Thanksgiving and typically demonstrate a deep decline in volumes from Q3. Third, with an intention to take advantage of higher crush margins in Q3, we postponed our planned winter facility outages until October .

Winter buying patterns tend to start the day after Thanksgiving and typically demonstrate a deep decline in volumes from Q3.

Third with an intention to take advantage of higher crush margin margins in Q3, we postponed our planned winter facility outages until October.

Speaker 4: Fourth, as we fill our fixed price specially alcohol sales book for the entirety of 2024, we are also building our hedge portfolio. The derivatives we use to preserve the margin on these sales don't qualify for hedge accounting treatment, and the quarterly results can be materially impacted by mark-to-market unrealized gains and or losses depending on commodity price swings.

Fourth as we fill our fixed price price specialty alcohol sales book for the entirety of 2024, we are also building our hedge portfolio.

The derivatives, we used to preserve the margin on these sales don't qualify for hedge accounting treatment and the quarterly results can be materially impacted by mark to market unrealized gains and ore losses, depending on commodity price swings.

Speaker 4: In summary, we face unique factors in Q4 that cannot be forecasted with comp.

In summary, we faced unique factors in Q4 that cannot be forecasted with confidence therefore, it would be improperly speculative to guide investors towards a particular extra expectation in this regard.

Speaker 4: Therefore, it would be improperly speculative to guide investors towards a particular expectation in this regard.

Speaker 4: With the goal of improving our facilities for the long haul, in the second half of 2023, we have undertaken numerous repair and maintenance projects, which have bettered our position heading into 2024.

With the goal of improving our facilities for the long haul in the second half of 2023, we've undertaken numerous repair and maintenance projects, which are better our position heading into 2024.

Speaker 4: Regarding liquidity, during the third quarter, cash flow from operations was $23 million.

Regarding liquidity during the third quarter cash flow from operations was $23 million.

Speaker 4: Our quarterly capital spend was $7 million, bringing our year-to-date investment in our plants to $25 million.

Our quarterly capital spend was $7 million, bringing our year to date investment in our plants to $25 million as of September 32023, our cash balance was $26 million and our total loan borrowing availability was $118 million to support business.

Speaker 4: As of September 30, 2023, our cash balance was $26 million, and our total loan borrowing availability was $118 million to support business operations and growth initiatives.

Operations and growth initiatives.

Speaker 4: Our borrowing availability includes $53 million under our operating line of credit, $40 million under our term loan facility, and an option to request up to an additional $25 million under the facility. With that, I'll turn the call back to.

Our borrowing availability includes $53 million under our operating line of credit $40 million under our term loan facility and an option to request up to an additional $25 million under the facility.

With that I'll turn the call back to Brian.

Rob.

Speaker 3: Throughout our strategic realignment, we have been committed to creating and pursuing opportunities that target long-term profitability and maximum-high shareholder value. While the path has been, and will continue to be dynamic, we remain agile, and financially prudent, will continue to capitalize on the most promising and profitable opportunities.

Throughout our strategic realignment, we have been committed to creating and pursuing opportunities that target long term profitability and maximize shareholder value. While the path has been and will continue to be dynamic we remain agile and financially prudent will continue to capitalize on the most promising and profitable opportunities we remain enthused.

Speaker 3: We remain enthusiastic about our prospects and confident in our long-term growth strategy. Now I'd like to open the call to questions from our sell-side analysts.

You asked about our prospects and confident in our long term growth strategy.

Now I'd like to open the call to questions for myself at Atlas.

Operator, we will now begin.

We will now begin the question and answer session.

Speaker 1: To ask a question, you may press star then one on your touchtone phone.

To ask a question you May Press Star then one on your Touchtone phone.

Speaker 1: If you are using a speakerphone, please pick up your handset before pressing.

If youre using a speakerphone please pick up your handset before pressing the key.

Speaker 1: If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause one moment.

Is there any part of your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Speaker 1: The first question today comes from Eric Stein with Craig Howell. Please go ahead.

The first question today comes from Eric Stine with Craig Hallum. Please go ahead.

Speaker 5: Yeah, good afternoon Brian and Rob here in Spahal on for Eric. Thanks for taking the questions.

Yeah, Good afternoon, Brian and rabbits in Aaron's mahalo on for Eric Thanks for taking the questions.

Aaron.

Speaker 5: Hello, so maybe first for me, you know, just on the sixth to 12 months, you know, kind of timeline. You call that yeast. I mean, are there other certain areas you can point to that are kind of driving that and then just maybe speak to some of the confidence you have that, you know, we don't see extensions further than that. And then just on Hypro at Magic Valley, you know, did that reach full capacity in the quarter and just kind of some updated thoughts on the rollout to other plants there.

Hello, So maybe first for me just on the on the six to 12 months, you know kind of timeline.

You called out East I mean are there other certain areas you can point to that are that are kind of driving that and then just maybe speak to some of the confidence you have that you know we don't see extensions further than that and then just on high pro at at Magic Valley. You know did that reached full capacity in the quarter and just kind of some some updated thoughts on the rollout to other plants there too please.

Speaker 3: Sure, so that extension from six to 12 months, that's reflecting clearly the, the, the, the yeast project, but it also does include a extending out.

Sure so that extension from six to 12 months, that's reflecting clearly the the.

<unk> project, but it also does include.

A extending out.

Speaker 6: of the implementation of the

Of the implementation of the.

Hydro.

Installations.

Speaker 3: We want to make sure that we see that through and to a successful completion. Before we roll it out, there's lots of things that we're learning in the process. It has taken longer than we anticipated, but as we mentioned in a pair of remarks, that we have seen success. The challenge is is winding out that success across at full capacity. So we see good protein levels, we see good.

We want to make sure that we see that through to a successful completion before we roll it out there's lots of things that we're learning in the process. It has taken longer than we anticipated, but as we mentioned in the prepared remarks.

We have seen success the challenges is finding out that success across at full capacity. So we see good protein levels, we see good.

Speaker 3: Cornell levels, but being able to have those aligned with the full capacity, all at the same time on a sustainable basis, has been a bit of a challenge. But we continue to chip away at it and make good progress. And so we remain optimistic about that.

Corn oil levels, but being able to have those well aligned with the full capacity all at the same time on a sustainable basis has been a bit of a challenge, but we continue to chip away at it and made good progress.

So we remain optimistic about that.

Speaker 3: That's what we want to make sure that it's fully achieved what it needs to achieve before we roll that out to our other facilities.

That said, we want to make sure that it's it's a fully achieved what it needs to achieve before we rolled it out to other facilities.

Did I cover your questions Aaron.

Speaker 5: Yeah, yeah, no, that's helpful. Thanks. And then maybe just on on carbon capture He just provided a little more detail there on You know kind of just give us an update

Yeah, Yeah, no. That's helpful. Thanks, and then maybe just on on carbon capture can you just provide a little more detail there on you know.

Kind of just give us an update.

Speaker 5: you know, are you still thinking kind of similar contribution and you know any changes to how you're kind of thinking about going to market and just any changes given, you know, legislation or kind of anything on the regulatory front.

Are you still thinking kind of similar contribution and any changes to how you're kind of thinking about going to market and just any changes given you know legislation or kind of anything on the regulatory front.

Speaker 3: Well, clearly, it's dynamic. Right. We're seeing lots of activity in the space or changes in activity. We feel salt. We feel, you know, excited about the options is still ahead of us. And we're still in the, you know, we, we are working through an indigestion for finalized documentation on, on the sequestration front, continuing to line out the funding for the installation of the compression. But.

Well clearly it's dynamic I, we're seeing lots of activity in the in this space or or changes in activity. We feel solid we feel you know.

Excited about the options is still ahead of us.

And we're still in the we.

We are working through.

The negotiations are finalized documentation on on the sequestration front.

Continuing to line out.

The funding for the installation of the compression.

But.

All of the.

Speaker 3: and our analysis so far continues to drive us towards this project. We think it's incredibly...

In our analysis, so far continues to to drive us towards.

This project, we think it's incredibly.

Speaker 3: transformative for us it aligns with all the things that we do and and that the site is just a natural So we're excited about that we continue to move significantly forward there is some you know where we're we look forward to sharing more information on this but there It's it would be prudent or imprudent at this time to share too much But as we you know make significant progress that you know would be of the public nature will gladly share that

Transformative for us and it aligns with all the things that we do and and the site is just a natural so we're excited about that we continue to move significantly forward there is some.

Where we look forward to sharing more information on this but there it would be prudent or imprudent at this time to share too much but as we make significant progress that would be of the public nature, we'll gladly share of that.

Speaker 5: Understood. Thanks. And then you know, maybe last for me just on on specialty alcohols You kind of talked a little bit about some of the success you've had for contracting to date You also kind of talked about some you know, maybe rolling over into 2024. How much you know as we look at Kind of spot versus contracted. You know any any ideas on what that rough split You know kind of looks like as we move forward for next year

Understood. Thanks, and then maybe last for me just on specialty alcohol. So you kind of talked a little bit about some of the success you've had for contracting to date. You also kind of talked about some you know maybe rolling over into 2024, how much you know as we look at a kind of spot versus contracted you know any any ideas on what that <unk>.

Rough split you know kind of looks like as we move forward for for next year.

Speaker 3: I think for Q3 this year, I think we're running a, we showed about 58 or 70, what's the number?

I think for Q through Q3 of this year I think we're running we still have about 58.

Our 70 whatsoever.

We're tracking closely.

Speaker 7: I have so in 2023 with the fall off and demand, but we're good portion of the way of contracting for 2024. And we are on track to achieve the 90 million gallons for 2024. And some of the volume and consumer demand that's falling off for 2023, we are in the process of working with several customers to roll a portion of that volume forward into 2024.

<unk> 85.

'twenty three with the falloff in demand, but we are.

A good portion of the way of contracting for 2024, and we are on track to achieve the 90 million gallons for 2024 and some of the volume in consumer demand. That's fallen off for 2023, we are in the process of working several customers to roll portion of that volume forward into 2024.

Understood. Thanks for taking the questions I'll turn it over.

Thanks, Eric Thanks Darren.

Speaker 1: The next question comes from Unleaped Dale with HC WaynRite. Please go ahead.

The next question comes from Amit Dayal with H C. Wainwright. Please go ahead.

Speaker 8: Thank you guys, Grafen. Brian , any additional color on what class some of the extended down time with it?

Thank you guys good afternoon.

Brian any any additional color on what caused some of the.

Extended.

Downtime was it.

Speaker 9: work that was going on at the peaking facility or some other locations.

Look that was going on at the Pekin facility or some other locations.

So you may recall that.

Speaker 3: We normally schedule the wet mill outage somewhere between 18.

We normally schedule of the wet mill outage.

Somewhere between 18 and 24 months.

Speaker 3: And because it is such a significant shutdown, it's not a shut it down for two days. Do you know, bear.

And because it is such a significant shutdown its not a shut it down for two days do you out there.

Speaker 3: You know, you know, clean out things like that. It's significant. It's, you know, constitutes somewhere between a week and two weeks. And so while we're down, we will usually spend the significant amount of capital to make repairs and improvements to the facility while it's locked down. We chose as we started, when we had our last earnings call, we talked about

You know very well clean outs things like that.

It's it's significant it's constitute somewhere between a week and two weeks and so while we're down we usually spend a significant amount of.

Capital to make repairs and improvements to the facility well just walks down we chose as we started.

When we had our last earnings call we talked about.

Speaker 3: our expectations we were seeing, we normally scheduled it in August because we have seen in the last couple of years that corn supply has dwindled and we've seen such high bases and

Our expectations, we were seeing.

We we normally scheduled in August because we have seen over the last couple of years that corn supply has dwindled and we've seen such high basis and.

Speaker 3: and overall corn prices in relation to ethanol prices that it makes sense to bring it down during that time to minimize.

And overall corn prices in relation to ethanol prices that it made sense to bring it down during that time to minimize.

Speaker 3: losses and to take advantage of that opportunity.

Losses and two.

Take advantage of that opportunity.

Speaker 3: with margins where they were this year, particularly on crush and

With margins, where they were this year, particularly around crushed and some additional supply of corn that was available in our local markets. We chose to instead postpone the wet mill into Q2 Q1 next year or April of next year.

Speaker 3: Some additional supply of corn that was available in the local markets we chose to instead postpone the wet milk into Q1 next year or April or next year.

Speaker 3: That being said, there was still some work that needed to be done. And there was some capital or capital expenditures for equipment and materials that needed to be spent prior to the shutdown that will carry into.

That being said there was still some work that needed to be done and there was some capital.

Our capital expenditures for equipment and materials that needed to be spend prior to the shutdown that will carry into.

Speaker 3: That was incurred and expensed in Q3 that carry anything the early texture that will be used in that.

That was incurred in expense in Q3, they carry and team.

The early next year that will be used in that.

Speaker 3: with during a shutdown. So you take that plus then, um,

During that shutdown, so you take that plus the.

Then.

Speaker 3: We ended up experiencing some water balance issues, some drier issues. And as Rob said, the combination of those three things, the increased repair maintenance.

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We are we ended up experiencing some water balance issues dryer issues.

And as Rob said the combination of those three things.

You know the increased repair and maintenance.

Speaker 3: reduced production and reduced sales and then the quality of sales were significantly impacted. Resulting in a significant impact to what would otherwise have been a much better quarter. That said, as I mentioned,

Reduced production and reduced sales and then the quality and sales were significantly impacted.

Resulting in a significant impact to what would otherwise have been a much better quarter.

That said.

As I mentioned.

These repairs where were timely and we would expect that to significantly benefit the plants going forward or the wet no, particularly going forward, but we saw impacts elsewhere, another probably not as notable.

Speaker 3: We're timely and we would expect that to significantly benefit the plants going forward or the wet note particularly going forward but we saw impacts elsewhere in other plants, probably not as notable.

Speaker 3: But I wouldn't call it a perfect storm, but we seem to have experienced a number of operational challenges across all three plants during the quarter.

But I wouldn't call it a perfect storm, but we seem to have experienced a number of operational challenges across all three plants during the quarter with temperatures.

Speaker 3: with temperatures, you know, and other types of normal events that occur.

And other types of.

Normal events that occurred in the summer period.

Speaker 8: I'm so thank you for that, Brent. And then in the press release and in the commentary, you highlight potential funding needs.

Got it understood. Thank you for that Brian.

And then in the press release and an Oklahoman G U.

Potential funding needs.

Speaker 8: Just to clarify, are these for projects that you walked us through in your commentary or do we potentially also have working capital type funding needs that need to be addressed?

Just to clarify are these for you know projects that you.

We walked us through in your commentary or do we potentially also have working capital type.

You know for needs that need to be addressed.

Speaker 3: I mean i'll comment generally and then rob fill in but the expectation is no, I mean we have more than sufficient working capital needs for our for the company and for its operations um It we will need additional capital to bring some of these projects to fruition particularly as an example the east project That is significantly more than what we had originally anticipated But we also have a number of interested parties and you know vendors and the like that we're working with To be able to bring that to fruition You

I mean, I'll comment generally and then Rob to fill in but the expectation is no I mean, we have more than sufficient working capital needs for our for the company and for its operations.

We will need additional capital to bring some of these projects to fruition, particularly as an example to east project.

It is significantly more than what we had originally anticipated, but we also have a number of interested parties and vendors and the like that we're working with to be able to bring that to fruition.

Okay.

No no no I agree.

Speaker 8: Thank you for that. I just want to last one, I guess, for me. On the third party, the Neuble few gallons, you know, it looks like year over year decline on that front. Is that just...

Got it thank you for that.

One last one I guess for me.

Third party renewable fuel gallons.

Like year over year decline in that front is that just.

Speaker 8: market situation or is that something a bit more, I guess.

Market situation or is that something a bit more hmm I guess.

Speaker 8: permanent in terms of how you are focused on bringing some of other products and improvements to the overall

Permanent in terms of you know how you are focused on you know bringing sort of leather.

<unk> products and improvements to the overall business.

Speaker 4: Yeah, I'll take that a minute. The third party volume is declined year over year. You know, if you recall, we did sell our California plans. And we also no longer market, provide marketing services for the two other non-owned ethanol plants.

Yeah I'll take that.

Third party volumes declined year over year.

If you recall, we did sell our California plants, and we also no longer market.

Provide marketing services for the two other non owned ethanol plants.

Speaker 6: And I'll also comment that in to the three we also had a bit of a timing issue on some of the third party volumes. They were lower due to product and transit that did qualify to be recognized as sales in Q3 but will be recognized in Q4. Okay, understood.

And I'll also comment that in Q3, we also had a bit of a timing issue on some of the third party volumes.

They were lower due to product in transit that didn't qualify to be recognized as sales in Q3, but will be recognized in Q4.

Okay understood alright.

So I'll take my other questions I'm, saying guys. Thank you so much that's all right. Thanks.

Thanks.

Speaker 1: This concludes our question in session. I would like to turn the conference back over to Brian McRigger for any closing of

This concludes our question answer session I would like to turn the conference back over to Brian Mike Reger for any closing remarks.

Speaker 3: Thank you Betsy. Thank you all again for joining us today. We hope to see you in New York in November . Have a nice day.

Thank you Betsy. Thank you all again for joining US today, we hope to see you in New York in November.

Nice day.

Speaker 1: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

[music].

Sure.

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Okay.