Q4 2023 Alto Ingredients Inc Earnings Call

Good afternoon, and welcome to the Alltel ingredients fourth quarter and year end 2023 financial results conference call.

Unknown Executive: Good afternoon, and welcome to the Alto Ingredients fourth quarter and year-end 2023 financial results conference call. All participants will be in listen-only mode.

All participants will be in listen only mode.

Unknown Executive: Should you need assistance, please signal the conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then 1 on your telephone keypad.

Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.

Unknown Executive: To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Kirsten Chapman, LHA Investor Relations, a division of Alliance Advisors. Please go ahead.

To withdraw your question. Please press Star then two.

Please note this event is being recorded.

I would now like to turn the conference over to Kirsten Chapman L. H, a investor Relations a division of Alliance Advisors. Please go ahead.

Kirsten F. Chapman: Thank you, Gary. And thank you all for joining us today for the Alto Ingredients fourth quarter and year-end 2023 results conference. On the call today are President and CEO Bryon McGregor and CFO Rob Olander. Alto Ingredients issued a press release after the market closed today providing details of the company's financial results. The company has also prepared a presentation for today's call that is available on the company's website at altoingredients.com. The telephone replay of today's call will be available through March.

Thank you Gary and thank you all for joining us today for the algae ingredients fourth quarter and year end 2023 results conference call on the call today are president and CEO, Bryon, Mcgregor and CFO, Bob Aulander alter.

Also ingredients issued a press release after the market closed today, providing 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 a.

A telephone replay of today's call will be available through March 18th the details of which are included in today's press release.

Kirsten F. Chapman: Details of which are included in today's presentation. A webcast replay will also be available at Alto Ingredients. Please note that the information on this call speaks only as of today, March 11th. Time-sensitive information may no longer be accurate at the time of any Please refer to the company's Safe Harbor Statement on slide 2 of the presentation available online, which states that some of the comments in this presentation constitute for the purposes of Operations that Involve Risks and Uncertainties. Actual future results of Alto Ingredients could differ materially. Factors that could cause or contribute to such differences include, but are not limited to, Other factors previously and from time to time disclosed in Alto Ingredients' filings, except as required by applicable law.

A webcast replay will also be available at altra ingredients website.

Please note that the information on this call speaks only as of today March 11th you advise that.

Time sensitive information.

May no longer be accurate at the time of any replay.

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

The actual future results without your 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 an alto ingredients as filings with the SEC.

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

Kirsten F. Chapman: The company assumes no obligation to update them any further. In management's prepared remarks, non-GAAP measures will be referenced. Management uses these non-GAAP measures to monitor the final performance of operations and believes these measures will assist, Subs by www.zeoranger.co.uk for the Periods Report. The company defines adjusted EBITDA as..., audited, consolidated. Asset, Loss, and Extinguish; Unrealized Derivative Gains and Loss.

In management's prepared remarks, non-GAAP measures will be referenced management uses these non-GAAP measures to monitor the final 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 an audited consolidated net income or loss before interest expense interest income provision for income taxes asset impairments loss on extinguishment of debt unrealized derivative gains and losses acquisition related expenses and depreciation and amortization.

Kirsten F. Chapman: Acquisition related, Appreciation, and Amor To support the company's review of non-GAAP information, a reconciling table was presented Presence. On today's call, Bryon will provide a review of our Strategic Plan and Activity, Rob will comment on our financial results, then Bryon will wrap up and open the call for questions. It is now my pleasure to introduce Bryon McGregor. Please go ahead.

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

On today's call Prime will provide a review of our strategic planning activities, probably comment on our financial results, Brian will wrap up and open the call for Q&A.

Now my pleasure to introduce Bryon Mcgregor. Please go ahead Brian.

Thank you Kirsten Thank you everyone for joining us today.

Bryon T. McGregor: Thank you, Kirsten. Thank you, everyone, for joining us today. During 2023, we continued our transformation to produce a variety of essential ingredients and the highest-grade beverage alcohol in the industry. We made significant investments in our facilities to improve our capacity utilization rates and expand margins long term. These strategies are beginning to mitigate the impact of negative commodity price fluctuations.

During 2023, we continued our transformation to produce a variety of essential ingredients and the highest grade beverage alcohol in the industry. We made significant investments in our facilities to improve our capacity utilization rates and expand margins long term.

These strategies are beginning to mitigate the impact of negative commodity price fluctuations.

Bryon T. McGregor: Although ethanol crush margins exhibited greater volatility in the second half of the year, both our fourth quarter and full year 2023 results significantly outperformed those same periods in 2022. We generated $16 million in gross profit for 2023, an improvement of $43 million over 2022. We also reported positive adjusted EBITDA of approximately $21 million for 2023, an improvement of $27 million over the prior year. In Q4 2023, we continue to evaluate our strategic initiatives based on current market dynamics, recent findings from our updated front end engineering and design or feed studies, interest from potential strategic partners, and Project Return Profiles. Our Carbon Capture and Storage, or CCS, project is our top priority. Under Section 45Q of the Inflation Reduction Act, we have a unique and compelling opportunity to capture and store the biogenic CO2 we generate at our Pekin campus

So ethanol crush margins exhibited greater volatility in the second half of the year.

Both our fourth quarter and full year 2023 results significantly outperformed those same periods in 2022.

We generated $16 million in gross profit for 2023, the improvement of $43 million over 2022. We also reported positive adjusted EBITDA of approximately $21 million for 2023, an improvement of $27 million over the prior year.

In Q4 2023, we continue to evaluate our strategic initiatives based on current market dynamics recent findings from our updated front end engineering and design or feed studies interest from potential strategic partners.

And project return profiles are carbon capture and storage or Ccs project is our top priority.

Under section 45, Q of the inflation reduction act, we have a unique and compelling opportunity to capture and store the biogenic C. O. Two we generated our pekin campus.

Bryon T. McGregor: Coupled with associated energy upgrades, our CCS project provides exciting economics. Given the significant amount of time, personnel, and financial resources necessary to complete our CCS project, we have decided to pause further development of our primary yeast and biogas conversion project. These continue to be opportunities for potential future development as resources permit. We are encouraged by recent progress on many aspects of CCS. These include overall system design, community outreach, financing, vendor negotiations, EPA application preparation, and schedule alignment requirements to procure equipment and install power and compression.

Coupled with associated energy upgrades are Ccs project provides exciting economics, given this significant amount of time personnel and financial resources necessary to complete our Ccs project, we have decided to pause further development of our primary used and biogas conversion projects.

These continue to be opportunities for potential future development as resources permit.

Yeah.

We are encouraged by recent progress on many aspects of Ccs. These include overall system design community outreach financing vendor negotiations EPA application preparation and schedule alignment requirements to procure equipment and installed power and progression and.

Bryon T. McGregor: In fact, today we announce that we have signed an exclusive non-binding letter of intent with Vault, and we are nearing the execution of definitive agreements to develop our CCS. The project involves Alto installing equipment to capture the CO2 generated at our Pekin facilities, and Vault safely transporting and permanently storing the emissions deep underground in a secure geologic reservoir located in close proximity to our campus. The intent is to substantially reduce CO2 emissions from the ethanol production process and provide direct value to surrounding communities. In addition to CCS, we are pursuing two attractive options to increase energy capacity at our Pekin campus with either our current utility provider or a highly regarded independent energy company that would build, own, and operate on-site energy facilities. Both options would greatly reduce our capital requirements and long-term energy costs while lowering our carbon footprint.

In fact today, we announced that we have signed an exclusive non binding letter of intent with vault and we are nearing the execution of definitive agreements to develop our Ccs project.

The project involves alto installing equipment to capture the C. O two generated at our pekin facilities involved safely transporting and permanently story the emissions deep underground and a secured geologic reservoir located in close proximity to our campus.

The intent is to substantially reduce cotwo emissions from the ethanol production process and provide direct value to the surrounding communities.

In addition to Ccs, we are pursuing two attractive options to increase energy capacity at our Pekin campus with either our current utility provider or a highly regarded independent energy company that would build own and operate onsite energy facilities.

Both options will greatly reduce our capital requirements and long term energy costs, while lowering our carbon footprint.

These capital light energy options May result, in our Ccs project being more accretive than originally estimated.

Bryon T. McGregor: These capital light energy options may result in our CCS project being more accretive than originally estimated. Additionally, beyond our control, the EPA has extended its CCS application approval process from 18 to 24 months, and the equipment manufacturing and installation times have grown longer than originally anticipated. Accordingly, we intend to make positive use of this additional time to better align our various project schedules and reduce our overall financial risk. Finally, as we evaluate our path to increase margins, improve profitability, and deliver the highest return to our shareholders, we continue to assess our current portfolio of assets, especially our Western facilities. We intend to leverage the distinctive strengths and opportunities of these locations by investing in new equipment and applications. Meanwhile, while doing so, we may also consider the possible disposition of one or both of these facilities.

Beyond our control the EPA has extended its Ccs application approval process from 18 to 24 months and the equipment manufacturing and installation times have grown longer than originally anticipated.

Accordingly, we intend to make positive use of this additional time to better align our various project schedules and reduce our overall financial risk.

Finally, as we evaluate our path to increase margins improve profitability and deliver the highest return to our shareholders. We continue to assess our current portfolio of assets, especially of our western facilities.

We intend to leverage the distinctive strengths and opportunities at these locations by investing in new equipment and applications.

While doing so we may also consider the possible disposition of one or both of these facilities as we have effectively demonstrated over the past three years with the sale of our California, and Nebraska facilities, we remain steadfast in our commitment to make value enhanced decisions.

Bryon T. McGregor: As we have effectively demonstrated over the past three years with the sale of our California and Nebraska facilities, we remain steadfast in our commitment to make value-enhanced decisions as appropriate to optimize long-term stakeholder value. Moreover, over the past two years, we have completed numerous upgrades. I'll review some of our larger initiatives that are in progress or that we have completed over the past 12 months. In February 2024, we completed the installation of a new high efficiency boiler at our peak in campus. We expect to reach full utilization by the end of Q1. This boiler replaces two inefficient high-pressure boilers and will significantly reduce our energy needs and operating costs.

As appropriate to optimize long term stakeholder value.

Over the past two years, we have completed numerous upgrades.

I'll review some of our larger initiatives that are in progress or that we completed over the past 12 months.

In February 2024, we completed the installation of a new high efficiency boiler at our Pekin campus, we expect to reach full utilization by the end of Q1. This boiler replaces too inefficient high pressure blenders, and we and will significantly reduce our energy needs and operating costs, we estimate.

Bryon T. McGregor: We estimate this will increase our annualized incremental EBITDA by $2 million. Additionally, in the second quarter of 2023, Pekin's new grain silo became fully operational, doubling our days of corn storage capacity. We achieved our goal of increasing flexibility and lowering costs related to quick or last-minute shipments and reducing corn premiums during extended weekends and harsh weather conditions. This project has already exceeded our target of delivering annualized incremental EBITDA of $2 million. We continue to expand into higher quality alcohol, and our ability to differentiate our offerings has been very important considering market trends. In 2021 and for part of 2022, the higher margin for specialty alcohol attracted many new producers, increasing product availability and supply. This, combined with ebbing consumer demand growth and fluctuations in supply chain dynamics, has resulted in margin compression over the past 18 months.

This will increase our annualized incremental EBITDA by $2 million.

Additionally, in the second quarter of 2023 beacons, new grain silo became fully operational doubling our days of corn storage capacity.

We achieved our goal of increasing flexibility and lowering costs related to quick or last minute shipments and to reduce corn premiums during extended weekends in harsh weather conditions. This project has already exceeded our target of delivering annualized incremental EBITDA of $2 million.

We continue to expand into higher quality alcohol and our ability to differentiate our offerings has been very important considering market trends.

In 2021 and for part of 2022, the higher margin for specialty alcohol attracted many new producers increasing product availability and supply.

This combined with ebbing consumer demand growth and fluctuations in supply chain dynamics was has resulted in margin compression over the past 18 months.

In anticipation of these changing market conditions in 2022, we began strategic investments to produce more beverage grade alcohols that leverage the unique capabilities of RPC campus.

Bryon T. McGregor: In anticipation of these changing market conditions in 2022, we began strategic investment to produce more beverage-grade alcohols that leverage the unique capabilities of our Pekin campus. We developed our highly differentiated 192 proof and low moisture 200 proof grain neutral spirits, which became available in early 2023. These new products were well received by our customers and actively sold in the spot market, generating significant sales and bolstering our gross margin for the year. To date, for 2024, we have contracted approximately 93 million gallons of fixed-price, high-quality alcohol at an average price premium to renewable fuel of 31 cents per gallon, with additional capacity to take advantage of spot sales. In our pursuit to expand higher-margin corn oil and high-protein products at our Magic Valley plant, working with our high-protein system vendor, Harvest Technology, we engaged equipment manufacturers and independent third-party engineers in Q4 to conduct an in-depth analysis of our challenges. They formulated a plan, including extensive design modifications, to achieve the intended production rate, quality, and consistency. We decided in mid-January to temporarily hot idle the facility to minimize the losses relating to negative regional crush margins and expedite the installation of the additional equipment. Harvest technology costs more than the direct cost associated with their design and equipment.

We developed our highly differentiated 190 to prove that our low moisture 200 proved grain neutral spirits.

Which became available in early 2023.

These new products were well received by our customers and actively sold in the spot market generating significant sales and bolstering our gross margin for the year.

To date for 2024, we have contracted approximately 93 million gallons of fixed price high quality alcohol at an average price premium to renewable fuel of 31 cents per gallon with additional capacity to take advantage of spot sales.

In our pursuit to expand higher margin corn oil and high protein products at our Magic Valley plant working with our high protein system vendor harvest technology, we engaged the equipment manufacturers and independent third party engineers in Q4 to conduct an in depth analysis of our challenges they formulated.

Plan, including extensive design modifications to achieve the intended production rate quality and consistency.

We've decided mid January to temporarily hot idle the facility to minimize the losses related to negative regional crush margins and expedite the installation of the additional equipment.

Harvest technology has borne the direct costs associated with their design and equipment.

Bryon T. McGregor: We intend to restart production in Q2 once the upgrades are complete and crush margins have improved. The operation of the upgraded high protein system at the Magic Valley facility will influence our decision and timing to roll out the system at our other dry mills. In the interim, we are operating the Magic Valley facility as a terminal to service our renewable fuel customers.

We intend to restart production in Q2 once the upgrades are complete and crush margins have improved.

The operation of the upgraded high protein system at Magic Valley facility will influence our decision and timing to rollout the system.

At our other dry mills in the interim we are operating the Magic Valley facility as a terminal to service our renewable fuel customers.

Bryon T. McGregor: We're also working with the local feed distributor and feed customers to meet supply requirements. Before I turn the call over to Rob, I'll review our sustainability efforts. As a renewable company, we are dedicated to implementing sustainable best practices that are good for our business, our stakeholders, and our planet. In December, we published our first sustainability summary.

We're also working with local feed distributor and feed customers to meet supply requirements.

Before I turn the call over to Rob I'll review, our sustainability efforts.

As a renewable company, we are dedicated to implementing sustainable best practices that are good for our business, our stakeholders and our planet.

In December we published our first sustainability summary, it reviews, our strategy and vision for advancements in sustainability responsible sourcing and risk management. We are focused on continuous improvements in environmental health and safety product quality and diversification by integrating innovative practices at our facilities to ensure.

Bryon T. McGregor: It reviews our strategy and vision for advancements in sustainability, responsible sourcing, and risk management. We're focused on continuous improvements in environmental, health, and safety, product quality, and diversification by integrating innovative practices at our facilities to ensure optimal efficiency and contribute to a lower carbon footprint. We are also focusing on giving back to the community through food drives and supporting charitable organizations.

Optimal efficiency contribute to a lower.

Carbon footprint.

We are also focusing on giving back to the community through food drives and supporting charitable organizations are.

Bryon T. McGregor: Our efforts improved our sustainability scores across the board with all three rating agencies, which is important to our customers. Looking ahead, we are working to obtain third-party greenhouse gas verifications, improve transportation safety, and earn additional EcoBIOTAS awards. Now I'll turn the call to our CFO, Robert Olander.

Our efforts improved our sustainability scores across the board with all three rating agencies, which is important to our customers.

Looking ahead, we are working to obtain third party greenhouse gas Verifications improved transportation safety and earning additional eagle by those awards now.

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

Robert lender.

Thanks, Brian I'll review, the financial results for the fourth quarter and full year of 2023 in greater detail.

Robert R. Olander: Thanks, Bryon. I'll review the financial results for the fourth quarter and full year 2023 in greater detail. We enjoyed stronger gross margins, and our efficiency initiatives contributed to improved bottom-line results in the fourth quarter and full year 2023, despite volatile commodity price fluctuations and lower plant utilization rates. Looking back over 2023, in Q2 and Q3, renewable fuel margins were strong, so we shifted a portion of our production back to renewable fuels to take advantage of the higher margins. As Bryon noted, ethanol crush margins exhibited extreme volatility in the second half of 2023, peaking in the mid-60s in September and dropping to slightly negative in December. These fluctuations impacted the gallons we were willing to sell, the price at which we did sell, and the volume of third-party sales with contracts.

Enjoyed stronger gross margins and our efficiency initiatives contributed to improved bottom line results for the fourth quarter and full year 2023, despite volatile commodity price fluctuations and lower plant utilization rates looking back over 2023 in Q2 and Q3 renewable fuel margins were strong so we shifted.

A portion of our production back to renewable fuel stake advantage of the higher margins as Brian noted ethanol crush margins exhibited extreme volatility in second half 2023, peaking in the mid sixties in September and dropping to slightly negative in December.

These fluctuations impacted the gallons we were willing to sell the price at which we did sell and the volume of third party sales with contraction.

In 2023, we sold 382 million gallons compared to 419 million gallons in 2022, primarily reflecting the aforementioned weaker crush margins in Q4 2023.

Is any of our Magic Valley facility in Q1, 2023, and the opportunity cost associated with navigating the challenges that the magic Valley installation.

Net sales were $274 million in Q4, 2023, and $1 $2 billion for the full year compared to $328 million and $1 $3 billion for the same periods in 2022.

Robert R. Olander: In 2023, we sold 382 million gallons, compared to 419 million gallons in 2022, primarily reflecting the aforementioned weaker crush margins in Q4 2023, the high identity of our Magic Valley facility in Q1 2023, and the opportunity cost associated with navigating the challenges with the Magic Valley installation. Net sales were $274 million in Q4 2023 and $1.2 billion for the full year, compared to $328 million and $1.3 billion for the same periods in 2022. In Q4 2023, we reported a gross loss of $3 million, improving by $19 million compared to Q4 2022. For the full year of 2023, we generated gross profit of $16 million, increasing $43 million compared to 2022. During Q4, repairs and maintenance expense was $7.7 million, compared to $7.1 million for Q4 2022.

In Q4, 2023, we reported a gross loss of $3 million, improving $19 million compared to Q4 2022.

For the full year of 2023, we generated gross profit $16 million, increasing $43 million compared to 2022.

During Q4 repairs and maintenance expense was $7 $7 million compared to $7 1 million for Q4 2022.

This brought 2023 total repairs and maintenance is $29 5 million compared to $30 million for 2022.

Our wet mill used facility and distillery capabilities at our Pekin campus provide significant differentiation and greater production capabilities and the typical driving.

That said the nature and age of these facilities require consistent ongoing repairs and maintenance and capital upgrades integral to the longevity sustainable performance and modernization of our assets.

To maintain reliable and efficient operations, we normally address smaller concerns as needed and conduct larger scheduled outages approximately every two years.

As noted on our last call. We originally scheduled a large peaking campus wet mill outage for August 2023.

Robert R. Olander: This brought 2023 total repairs and maintenance to $29.5 million, compared to $30 million for 2022. Our wet mill, yeast facility, and distillery capabilities at our Pekin campus provide significant differentiation and greater production capabilities than the typical dry mill. That said, the nature and age of these facilities require consistent, ongoing repairs and maintenance and capital upgrades integral to the longevity, sustainable performance, and modernization of our assets. To maintain reliable and efficient operations, we normally address smaller concerns as needed and conduct larger scheduled outages approximately every two years. As noted on our last call, we originally scheduled a large Pekin campus wet mill outage for August 2023.

Never favorable crush margins and sufficient corn supply motivated us to postpone the downtime until April 2024.

It's slightly negative crush margins heading into year end and continuing thus far in Q1 2024 in Q4, we recognized $2 $2 million lower of cost or market charge on our indeed renewable fuel inventories and related fixed foreign purchase commitments. This compares to a gain of $700000.

For Q4 2022.

During Q4, we recorded an asset impairment charge of $6 million to the goodwill associated with our acquisition of Eagle alcohol in 2022.

This charge reflects revisions to current market premiums and adjustments to projections are required annual goodwill evaluation.

Cooperating additional synergies, we intend to leverage Eagle alcohols transportation expertise across our entire platform, replacing a portion of our third party trucking services, reducing our logistical costs and improving margins.

Robert R. Olander: However, favorable crush margins and sufficient corn supply motivated us to postpone the downtime until April 2024. Slightly negative crush margins heading into year-end and continuing thus far in Q1 2024. In Q4, we recognized a $2.2 million lower cost-to-market charge on our Indian Renewable Fuel inventories and related fixed-form purchase commitments. This compares to a gain of $700,000 for Q4 2022. During Q4, we reported an asset impairment charge of $6 million to Goodwill associated with our acquisition of Google Alcohol in 2022.

We are also in the process of expanding our distribution territory and the new geographies such as southern California.

The Q4 2023, adjusted EBITDA was positive $3 million, improving $19 million compared to Q4 2022 for.

For the full year 2023, adjusted EBITDA was positive $21 million up $27 million compared to 2022.

This was a significant year over year improvement, particularly considering that in 2022, the company received $20 million more in USDA cash grants.

As of December 31, 2023, our cash balance was $30 million and our total loan borrowing availability was $98 million support our business operations and capital investment initiatives.

Robert R. Olander: This charge reflects revisions to current market premiums and adjustments to projections in our required annual Goodwill evaluation. Incorporating additional synergies, we intend to leverage EGLE Alcohol's transportation expertise across our entire platform, replacing a portion of our third-party trucking services, reducing our logistical costs, and improving margins. We're also in the process of expanding our distribution territory in new geographies such as Southern California. For Q4 2023, Adjusted EBITDA was positive $3 million, improving $19 million compared to Q4 2022. For the full year 2023, Adjusted EBITDA was positive $21 million, up $27 million compared to 2022.

Our borrowing availability includes $33 million under our operating line of credit and $65 million subject to certain conditions under our term loan facility.

We appreciate the confidence and continued support from our lenders.

Cash flow from operations was $12 million for Q4, bringing the annual total to $22 million.

In Q4, we repurchased 436000 shares of common stock for $1 million, bringing our total planned repurchases to $5 million since the plan's inception.

We invested $5 million on Capex for Q4, bringing the year end total to $30 million.

Compared to $13 million and $38 million for the same periods in 2022.

Robert R. Olander: This is a significant year-over-year improvement, particularly considering that in 2022, the company received $20 million more in USDA cash flow. As of December 31, 2023, our cash balance was $30 million, and our total loan borrowing availability was $98 million to support our business operations and capital investment initiatives. Our borrowing availability includes $33 million under our operating line of credit and $65 million, subject to certain conditions, under our term loan facility. We appreciate the confidence and continued support from our lenders. Cash flow from operations was $12 million for Q4, bringing the annual total to $22 million.

We are committed to continual improvement in our reporting as well as our performance.

First to increase transparency to our operating physical margins and conform reporting how management is evaluating altos performance will exclude the impact of unrealized noncash derivative gains and losses when calculating adjusted EBITDA.

Unrealized derivative gains and losses are noncash mark to market adjustments of derivative instruments on open positions related to future periods purchases and sales that are recorded as part of cost of goods sold.

Updated historical reconciliations have been added to our website.

Next we have updated the quarterly metrics as seen in today's press release and in the interactive financial data section of our website.

Robert R. Olander: In Q4, we repurchased 436,000 shares of common stock for $1 million, bringing our total planned repurchases to $5 million since the plan's inception. We invested $5 million in CapEx for Q4, bringing the year's total to $30 million, compared to $13 million and $38 million for the same periods in 2022. We are committed to continual improvement in our reporting as well as in our performance. First, to increase transparency to our operating physical margins and conform reporting to how management is evaluating Alto's performance, we will exclude the impact of unrealized non-cash derivative gains and losses when calculating adjusted EBITDA. Unrealized derivative gains and losses are non-cash, mark-to-market adjustments of derivative instruments on open positions related to future period purchases and sales that are recorded as part of the cost of goods sold.

The new metrics included unaudited segmented data with sales production and corn costs.

Going forward, we will consider both additional metrics and the frequency of providing that.

Finally, as we discussed our capital projects individually not in aggregate.

We will place them into three categories first in operation includes completed projects.

Second under development includes high priority strategic opportunities that have the greatest expected return as well as initiatives that support our near term operational goals and.

And third for future evaluation includes potential opportunities with attractive returns to be assessed as resources permit.

Now looking at 2024.

The crush margin trends for typical seasonality are beginning to improve over the end of 2023 further margins are approximately 20 better for January and February of this year compared to the same time last year.

Robert R. Olander: Updated historical reconciliations have been added to our website. Next, we have updated the quarterly metrics, as seen in today's press release and in the interactive financial data section of our website. The new metrics include unaudited segmented data for sales, production, and quarantine.

This said in January the polar vortex in the Midwest negatively impacted both operations and logistics that are paid in cash.

Despite significant preparations ahead of the freeze and timely recovery spots efforts, we experienced a shift to lower margin feed products and reduced alcohol production by approximately 1 million gallons as a result of frozen river conditions.

Robert R. Olander: Going forward, we will consider both additional metrics and the frequency of providing. Finally, as we discuss our capital projects individually, not in aggregate, we will place them into three categories. First, in operation includes completed projects. Second, under development, includes high-priority strategic opportunities that have the greatest expected return, as well as initiatives that support our near-term operational goals. And third, for future evaluation, includes potential opportunities with attractive returns to be assessed as resources permit. Now, looking at 2024.

As Brian discussed due to our hot idle the Magic Valley facility households, total ethanol production for Q1 will be lower but third party gallons sold should be higher in comparison to Q4.

We have confidence in the extensive design modifications underway and achieving our cornwell and high protein targets in 2024.

It is also important to note that our biannual wet mill repairs and maintenance outage is scheduled for April we.

We expected to take approximately 10 days, which will lower pecan campus production in Q2 and cost approximately $4 million for.

For the full year 2024, we expect to track to our typical repairs and maintenance run rate of approximately $30 million.

Robert R. Olander: The pressure margin trends per typical seasonality are beginning to improve over the end of 2023. Additionally, margins are approximately 20 cents better for January and February this year compared to the same time last year. However, this said, in January, the polar vortex in the Midwest negatively impacted both operations and logistics at our Pekin campus.

Bringing the total including the biannual outage expense to $34 million.

Regarding capex, we plan to invest approximately $25 million on equipment upgrades and process improvements and projects are short term paybacks. These ongoing.

In maintenance efforts and capital improvements position also for a much stronger future.

The biennial outages, historically increase reliability and production run rates. We expect these positive effects will benefit 2024 in particular as we head into more robust summer months with that I will turn the call back to Brian.

Robert R. Olander: Despite significant preparations ahead of the freeze and timely recovery response efforts, we experienced a shift to lower margin feed products and reduced alcohol production by approximately 1 million gallons as a result of frozen river conditions. As Bryon discussed, due to our hot idle at the Magic Valley facility, Alto's total ethanol production for Q1 will be lower, but third-party gallons sold should be higher in comparison to Q4. We have confidence in the extensive design modifications underway and in achieving our corn oil and high-protein targets in 2024. It is also important to note that our biannual wet mill repairs and maintenance outage is scheduled for April.

Thank you Rob.

Currently the overall outlook for 'twenty 'twenty four is favorable we have good corn inventories low natural gas and corn prices higher sugar prices domestic regulatory support for some of our blending and expected demand growth for U S ethanol.

Ethanol globally.

These factors should create an environment that results in crush margin improvements over the next few months and produced positive spreads through the most of them through the most of the year.

Although markets are dynamics, we remain agile and financially prudent and seek to capitalize on the most promising and profitable opportunities.

Robert R. Olander: We expect it to take approximately 10 days, which will lower peak and campus production in Q2 and cost approximately $4 million. For the full year 2024, we expect to track to our typical repairs and maintenance run rate of approximately $30 million, bringing the total, including the biannual outage expense, to $34 million. Regarding CapEx, we plan to invest approximately $25 million in equipment upgrades, process improvements, and projects with short-term payback. These ongoing maintenance efforts and capital improvements position Alto for a much stronger future. The biennial outages historically increased reliability and production run rates.

We are enthusiastic about our prospects and confident in our long term growth strategy.

Before I open the call to questions. Please note that we will be at the annual Roth Conference next week and hope to see you there.

Operator, we're ready to begin.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

If you were using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

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

Our first question today is from Amit Dayal with H C. Wainwright. Please go ahead.

Robert R. Olander: We expect these positive effects will benefit 2024 in particular as we head into more robust summer months. With that, I'll turn the call back to Bryon. Thank you, Rob. Currently, the overall outlook for 2024 is positive. We have good corn inventories, low natural gas and corn prices, higher sugar prices, domestic regulatory support for summer blending, and expected demand growth for US ethanol globally. These factors should create an environment that results in crush margin improvements over the next few months and produce positive spreads through most of the year. Although markets are dynamic, we remain agile and financially prudent and seek to capitalize on the most promising and profitable opportunities. We are enthusiastic about our prospects and confident in our long-term growth strategy.

Thank you good afternoon, everyone.

Brian just to begin with Magic Valley, you know the.

But issues with with respect to corn oil and high protein et cetera are these just are you.

Looking to just improve the yields or are there any other.

Challenges that you listen to welcome Ed.

At Magic Valley.

Hi, Matt.

The challenge that we face Ted.

We have faced at Magic Valley is.

Not surprising give.

Given the.

But this wasn't a bolt on system.

So as we brought in the additional equipment and materials.

We found it difficult at times to be able to produce consistent product.

At maximum capacity and qualities.

So as we evaluated that we determined that we needed to actually make some improvements and enhancements to be able to expand.

Robert R. Olander: Before I open the call to questions, please note that we will be at the annual ROC Conference next week and hope to see you there. Operator, we're ready to begin. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

The overall <unk>.

<unk> of the equipment to be able to be able to work better within the tolerances of the system. These are dynamic systems and easy to be able to have flexibility to.

To be able to move beyond some certain capacities in order to produce the products needed to produce so as we looked at what we needed to do.

Unknown Executive: To draw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question today is from Amit Dayal with H.C. Wainwright. Please go ahead.

And then taking advantage of those of the what were weak margins, particularly in the.

And the Idaho region.

We decided that it would be best actually would save the company money by Hot idling the facility and expediting the repair of or the upgrades of the of the system and to be able to then bring it back up online in Q2.

Amit Dayal: Thank you, Graeme, everyone. Bryon, just to begin with Magic Valley, you know, the issues with respect to corn oil and high protein, etc. Are these just, you know, are you looking to just improve yields or are there any other challenges that you're looking to overcome at Magic Valley? Hi, Amit.

And be able to produce a much more sustainable.

Higher quality product.

Got it thank you Brian.

With respect to your view on sort of crush margins going forward.

Bryon T. McGregor: The challenge that we faced that we have faced it at Magic Valley is not surprising given that this wasn't a bolt-on system. So as we brought in the additional equipment and materials, we found it difficult at times to be able to produce consistent product at maximum capacity and quality. So as we evaluated that, we determined that we needed to actually make some improvements and enhancements to be able to expand. The overall capacity of the equipment to be able to work better within the tolerances of the system.

It looks like <unk> going forward is still going to be a little bit challenging, but it looks like from your commentary you are more optimistic about the rest of the year starting to see you know what is driving that sentiment.

Again as I think I mentioned that there is a number of macro factors that really contribute to that not only.

What we would expect to be a.

Growing <unk>.

Yes.

Ex U S export market.

Given.

Other products that with which we compete internationally.

Yes.

The ethanol value and price is compelling so we've seen a lot more demand in and questions and requests for information.

Bryon T. McGregor: These are dynamic systems, and you need to be able to have flexibility to be able to move beyond certain capacities in order to produce the products that we need to produce. So as we looked at what we needed to do, and then took advantage of what were weak margins, particularly in the Idaho region. We decided that it would be best and would save the company money by hot idling the facility and expediting the repair of or the upgrades of the system and to be able to then bring it back online in Q2, and be able to produce a much more sustainable and higher quality product. Thank you, Bryon. With respect to your view on sort of crush margins going forward, it looks like 1Q24 is still going to be a little bit challenging, but it looks like, you know, just from your commentary, you are more optimistic about the rest of the year. Just trying to see, you know, what is driving that center.

And capacity along those lines, we're also seeing.

Good.

Good carry out into 2024 with corn supply.

Where we've seen.

Strong sugar prices, which bode well for exports as well, even even to Brazil.

Yes.

Those are tough just a couple of factors, but we would expect lower corn prices all of these things contributing to what should be a and low natural gas prices contributing to what should be a good production year and good pricing year.

In a minute I'll, just I'll add to that.

Q1 to date has been breakeven slightly negative turning positive.

Improving just recently, but we are starting the year off about 20 cents per gallon higher crush margins for January and February than we did this time last year, so that's reassuring as well.

Bryon T. McGregor: Again, as I think I mentioned, there are a number of macro factors that really contribute to that, not only what we would expect to be a growing US or US export market. Unknown Speaker, Other products with which, you know, we compete internationally. The ethanol value and price are compelling, so we've seen a lot more demand and questions and requests for information and capacity along those lines. We're also seeing, you know, good carryover into 2024 with corn supply, where we've seen, you know, strong sugar prices, which bode well for exports as well, even to Brazil. Those are just a couple of factors, but we would expect lower corn prices, all of these things contributing to what should be a good production year and a good pricing year.

And then maybe the last thing I'd add is again, having had having contracted the amount of volume that we.

That we were able to do this year in fixed price volume should also help support that.

Thesis.

Alright. Thank you. Thank you guys.

Just last one for me with respect to Ccs lift them next.

Milestone that we should be looking forward to.

Yeah.

Is this playing into.

The bad Guy and a little bit Tonight.

Unless there's any significant investments required or obviously.

At the moment probably again.

Yeah.

But.

Any any big milestone.

That may come into play if you will.

This tragic thing.

Notably the ones I would identify would be definitive agreements with with Walt is one and then the other one would be probably the next one would be the filing of the classics grimmett.

Those would be fairly major milestones.

Got it.

Bryon T. McGregor: In a minute, I'll just add to that, you know, Q1 data has been, you know, slightly negative, turning positive or, you know, improving just recently, but we are starting the year off about 20 cents per gallon higher crush margins for January and February than we did this time last year. So that's reassuring as well. And then maybe the last thing I'd add is again, having contracted the amount of volume that we were able to do this year in fixed price volume should also help support that. Thesis. Thank you. Thank you, guys.

That's all I have guys I think my other questions offline. Thank you.

Thanks, Amit.

The next question is from Eric Stine with Craig Hallum. Please go ahead.

Hi, Brian Hi, ramped.

Hello Hello.

Hello.

I can understand prioritizing carbon capture and a good first step here that you just announced.

But maybe Jim.

Just as you kind of make the transition to the way you'll start talking about.

These views.

Capital projects and how you prioritize them can we just talk about.

Maybe how you have been talking about it versus now just to kind of level set.

Bryon T. McGregor: Just last one for me, with respect to CCS, like, what's the next milestone that we should be looking forward to? I mean, is this playing, you know, in the background a little bit for now, once there's any significant investments required, or, you know, obviously, revenues and all are probably a little bit away. But any big milestones that may come into play for moving this project forward? Probably the ones I would identify would be definitive agreements with Vault as one, and then the other one would be, probably the next one would be a filing of the class six permit.

Things stand if I do the math I think you talked about 65 million plus of incremental EBITDA.

By mid 'twenty six.

It seems like that numbers may be now more like 15 to 20 and you actually have brought on most of that already through.

Through the storage in the specialty alcohol piece I guess, maybe first I'd like to confirm that.

So I think that's that's fair Eric I think.

Yes, I think thats close enough math I think what we would what I would indicate though is and the level setting department.

Bryon T. McGregor: Those would be fairly major milestones. That's all I have, guys. I'll take my other questions off. Thanks a lot.

Unknown Executive: The next question is from Eric Stine with Craig Hallam. Please go ahead. Hi Bryon.

When we started providing this information.

What a year and a half ago two years ago. It was in response to request for.

Eric Andrew Stine: Hi Rob. Hello. Hello, Um, I can understand prioritizing carbon capture and a good first step here that you just announced. But maybe, you know, just as you kind of make the transition to talking about these capital projects and how you prioritize them, can we just talk about, you know, maybe how you have been talking about it versus now, just to kind of level the playing field where things stand? If I do the math, I think you talked about 65 million plus of incremental EBITDA by mid-26, and it seems like that number is maybe now more like 15 to 20. And you actually have brought most of that already through the storage and the specialty alcohol piece. I guess maybe first I'd like to confirm that. So I think that's, that's fair, Eric. I think. Yeah, that's close enough, Matt.

From from investors to understand what the future could look like right. So and we wanted to also provide indication too to investors to shareholders that.

We had many not only interesting opportunities and growth and growth and profitability, but as well.

There were some very unique projects in there as well.

And we tried to provide a profile as far as over time, what that would look like if we were able to bring those to bear.

But there was still a lot of work to still be done with regards to feed studies getting into the details.

And and making sure that you have the means.

To be able to do so so as we've worked through those number of projects. There are clearly those projects that have risen to the top there are others that have.

Bryon T. McGregor: I think what we would, what I would indicate those things is, you know, in the level setting department. When we started providing this information, a year and a half ago, two years ago, it was in response to requests from investors to understand what the future could look like. And we wanted to also provide an indication to investors and to shareholders that we had many not only interesting opportunities for growth and in profitability but, as well, there were some very unique projects in there as well, and we tried to provide a profile as far as, over time, what that would look like if we were able to bring those to bear. But there was still a lot of work to still be done with regard to feed studies, you know, getting into the details and making sure that you have the means to do so.

Come in and a lot more expensive than what we thought they would they are still very compelling and very unique to our.

Our company, but given the resources that we have that we needed to give priority to certain projects over others, and then as resources and and.

And operator jus opportunities change that we'll we can bring those on as well going forward.

No totally understand I mean, the capital environment has changed somewhat since those came out I guess, that's an understatement.

Bryon T. McGregor: So as we work through these number of projects, there are clearly those projects that have risen to the top; there are others that have come in a lot more expensive than we thought they would, but they're still very compelling and very unique to our company. But given the resources that we have, we need to give priority to certain projects over others, and then, as resources and, and opportunities change, we can bring those on as well going forward. Yep. No, I totally understand. I mean, the capital environments have changed somewhat since those came out. I guess that's an understatement.

Maybe then just a follow up on the previous carbon capture.

Questions. So in your deck Youre talking about and you've been talking about this for some time, but I just want to confirm.

When you're targeting annual adjusted EBITDA, I mean that would be your portion.

Right, where you would be splitting some with your partner in this case it would be volte.

I guess I'd like to confirm that first.

That's correct.

Okay.

So in the end.

Yeah that would be too to alto.

And the arrangement with the bulk would be there'd be certain services and fees that would be paid for this for the pipeline for the transportation and sequestration of that of that product.

Eric Andrew Stine: Maybe then just a follow-up on the previous carbon capture question. So, in your deck, you're talking about, and you've been talking about this for some time, but I just want to confirm when you're targeting annual adjusted EBITDA, I mean, that would be your portion, right where you would be splitting some with your partner. In this case, it would be Vault.

Right and then this is a number that I would say I mean should we view this as potentially that is a different number if you decide to go the capital light route and lean on others for the.

Bryon T. McGregor: I guess I'd like to confirm that first. That's correct. Okay, so yeah, that would be for Alto. And the arrangement with the bulk would be, you know, there'd be certain services and fees that would be paid for this by the pipeline for the transportation and sequestration of that product. Right. And then this is a number that I would, I mean, should we view this as potentially, that is a different number if you decide to go the capital light route and lean on others for some of your energy needs. No. Those would actually stand on their own as well.

For some of your energy needs.

No.

Those actually would stand on their own as well. So when we would actually is Rob I think mentioned in his prepared remarks wasn't where there's actually potential or in my comments as well that there's actually potential to see.

A material increase over that number.

Got it so not disappear.

You'll recall that as we broke out in the incremental annualized EBITDA previously we used to assign a value for natural gas and for cogeneration.

While we have provided an indicative number on that amount yet.

Bryon T. McGregor: So, and we would actually, as Rob, I think, mentioned in his prior remarks, was that there is actually potential, or in my comments as well, that there's actually potential to see a material increase over that number. Got it. So not just, you know, as we used to assign a value for natural gas and for cogeneration. While we have provided an indicative number on that amount, yeah, the economics are still, you know, sufficiently compelling to, and they're very foundational to being able to bring on carbon sequestration and build a good foundation for operations going forward. Okay, makes sense. Man, maybe the last one for me.

The economics are still.

Sufficiently compelling.

Two.

And theyre very foundational to being able to bring on carbon sequestration and to build a good foundation for operations going forward.

Okay makes sense.

And then maybe last one for me I don't know if you gave us.

An exact number but when you did have these goals out there you did lay out I mean, they were pretty significant capital needs for this you know maybe just without I don't want to attribute capital needs to each specific project that doesn't that doesn't make sense, but I mean, maybe an idea of how much your capital needs are haircut.

Now at least near term, whether you just focusing on carbon capture and in the near term Magic Valley and getting that on the right track.

Bryon T. McGregor: I don't know if you gave an exact number, but when you did have these goals out there, you did lay out, I mean, they were pretty significant capital needs for this, maybe just without, I don't want to attribute capital needs to each specific project that doesn't, that doesn't make sense. But I mean, maybe an idea of how much your capital needs are haircut now, at least near term, with you just focusing on carbon capture and, in the near term, Magic Valley and getting that on the right track. Sure.

Sure. So there may be some incremental spend on magic valley, but our intent again.

Working with our partners.

<unk> certainly.

The capital costs associated with any of the changes that we've had to make to date.

With regards to we would expect those costs to.

To the extent, we're successful at Magic Valley and we just.

Determine how we're going to roll that out to other dry mills.

They would be.

Bryon T. McGregor: So there may be some incremental spend on Magic Valley, but our intent, again, working with our partners, is that Pyrus Tech is certainly more in the capital costs associated with any of the changes that we've had to make to date. With regard to, you know, we would expect those costs, you know, to the extent we're successful at Magic Valley, and we just determined how we're going to roll that out at other dry mills, they would be, you know, comparable to what we have to do on what we've been able to do at Magic Valley. Each one's going to be slightly different depending on the needs, but that hasn't changed much with regard to, you know, if you think about the cost of replacing power and natural gas at the Pete insight, you know, we're talking about, you know, well over $100 million.

Comparable to what we have to do on what we've been able to do our magic valley each ones can be slightly different depending on the needs but.

That hasnt changed much with regards to if you think about the cost of replacing.

We are replacing.

Power.

<unk>.

And <unk>.

Natural gas at at <unk>.

Pecan site, we're talking about well over $100 million.

So to be able to actually not have to spend that money and be able to leverage that and generate significant savings is not.

It's nothing to blush out right, so that somebody would be very excited about.

And can make a material difference donnelly.

On.

On the cost savings basis, but as well being able to lower carbon intensity scores alright.

Bryon T. McGregor: So to be able to actually not have to spend that money and be able to leverage that and generate, you know, significant savings is not it's nothing to blush at, right? It's something to be very excited about, and can make a material difference not only on a cost-savings basis but also as being able to lower overall carbon intensity scores, right? These facilities in Pekin are high-energy and high-steam demand facilities.

These facilities in Pekin.

Our high energy and high steam demand facilities. So anything we can do to make that much more efficient because it's significantly beneficial.

Okay.

Got it okay. Thank you.

Thanks, Eric.

Again, if you have a question. Please press Star then one.

Bryon T. McGregor: So anything we can do to make them much more efficient is significantly beneficial. Got it. Okay, thank you. Thanks, Eric. Again, if you have a question, please press star then 1. The next question comes from Justin Dopierowa with Domo Capital Management. Please go ahead. Hey guys, thanks for taking my phone call. Hey Justin.

The next question comes from Joseph Justin Dopey, Rawat with Domo Capital Management. Please go ahead.

Hey, guys. Thanks for taking my phone call.

You bet Hi, Justin.

That's true.

I guess a few questions.

Uh huh.

A couple of them were answered I was wondering if you could maybe walk us through a little bit better the gross losses, specifically at the Pic inside of $1 1 million.

Justin Dopierowa: Hey, nice to hear from you. I have a few questions. A couple of them were answered. I was wondering if you could maybe walk us through the gross loss a little bit better, specifically at the peak insight of 1.1 million. You know, for example, on the financials you provided here, you kind of show a 40 cent, over a 40 cent crush margin. I think last year, again, based on your financials, it was maybe around three cents.

For example on your on the fire.

Financials, you provided here.

You kind of show a 40 over 40 <unk> crush margin I think last year again based on your financial there was maybe around three cents in.

Q2, I think it might have even been negative and you guys had you know a much different operating result, so I was just wondering you know maybe even compared to Q2. You know is there is there something within that you can number.

Unknown Executive: And, you know, in Q2, I think it might even have been negative, and you guys had, you know, a much different operating result. So I was just wondering, maybe even compared to Q2, if there's something within that peak in number? I don't know if the derivative losses are in there that, you know, That's playing with that. Yeah, Justin, they do include the derivative losses. And that's, you know, most of the derivative is associated with cells and volume associated with that, particularly, you know, if you think about it, all of our fixed cells, or especially alcohol, is aligned with that facility as is, you know, the significant amount of natural gas, obligations, and the like that we would also, you know, hedge on a normal basis. Okay, so I mean, I think that number was over 8 million. So, you know, if we take that into account, then, you know, the peak in is more of a seven million gain backing out, you know, for example, those derivative losses as one thing. Yeah, quick, quick math that makes sense.

I don't know if the derivative losses are in there that yeah.

That's playing with that.

Yeah, Justin they do include the.

The derivative losses, and that's our largest most of the derivatives.

Associated with with.

With sales and volume associated with that particularly if you think about it all of our fixed sales.

For specialty alcohol is.

Is aligned with that facility is.

The significant amount of natural gas.

Obligations and like that we have been also in purge on normal basis.

Okay. So I mean, I think that number was over 8 million so.

If we take that.

Into account then the.

And as more of a 7 million gained back you know you know for example, those derivative losses is one thing.

Yes quick quick math that makes sense.

Okay, I guess just to further understand that so as you mentioned natural gas prices fell into the end of the year. So I assume that's you know.

Large part of the hit you took on a derivative losses.

Bryon T. McGregor: Okay, I guess just just just to further understand that. So as you mentioned, natural gas prices fell into the end of the year. So I assume that's, you know, a large part of the hit you took in the derivative losses. But, you know, that those those derivatives are to specifically to hedge in the margins of your specialty alcohol sales, right? Yeah, so the derivatives that we normally would carry are in two factors. One is to make sure that we've locked in natural gas prices right, as much as, You know, we wish we had a crystal ball to know what the weather is going to be like in in in our locations year in year out. It's difficult to do so.

But.

No that those those derivatives are too specifically to hedge in the margins of your specialty alcohol sales right.

Yes, so the derivatives that we normally would carrier and two factors one is to make sure that we've locked in natural gas prices right.

As much as.

Yes.

We wish we had a crystal ball to know what the weather is going to be like in in our locations year in year out it's difficult to do so.

The next best thing is to make sure that you avoid the significant risks that can happen over a very short period of time, right, where we've seen natural gas prices spike to not only hundreds of dollars.

Bryon T. McGregor: The next best thing is to make sure that you avoid significant risks that can happen over a very short period of time, where we see natural gas prices spike to not only hundreds of dollars but, you know, thousands of dollars as well. So to avoid that, it makes sense to lock in that winter strip to be able to cover those costs, as well as do some work around the electricity site on the, on the Fixed. Um, alcohol sales.

But thousands of dollars as well so to avoid that it makes sense to lock in that winter strip.

To be able to cover those costs as well as doing some around the electricity side.

On the.

On the.

Fixed.

Alcohol sales.

Or that is we will effectively take those fixed sales swap those back out into floating and lock in the spread between that and fuel prices.

Bryon T. McGregor: Most of that is we will effectively take those fixed cells, swap those back out into floating cells and lock in the spread between that and fuel prices, largely because it's difficult to go out and procure delivered corn to the facility to the extent we're able to do that, then you're able to lock in that spread as well. Got it, so as the specialty alcohol is sold... Then, you know, the derivatives are more of a paper loss. Correct. To your point, the natural gas hedges were part of that as natural gas prices fell.

Largely because it's difficult to go out and procured delivered corn to the facility to the extent, we're able to do that then you are able to lock in that spread as well.

So as.

So as especially alcohol or sold.

And then you know so the derivatives are more of a paper loss.

Correct.

Point.

Natural gas hedges were part of that as natural gas prices fell, but the largest that it was mainly related to Bakken and the premium on our high quality volume and contract keep in mind, we contracted that.

Robert R. Olander: But to a large extent, it was mainly related to plucking the premium on our high-quality volume that we contract. Keep in mind, we contracted that in Q3 and Q4 for all of 2024. And so as market prices fell, we're taking a timing loss, an unrealized loss, and those unrealized positions on the derivatives will continue to float throughout the course of next year as we unravel them, rateable with when we actually deliver the product physically. Right, that makes sense. Perfect. Hey, you know, Q4 and Q1 to take an unrealized loss on those.

Q3, and Q4 for all of 2024, and so as the market prices fell were taken.

Timing.

Loss, an unrealized loss.

And those those unrealized positions on the derivatives will continue to flow throughout the course of next year as we unravel them ratable with when we.

Actually deliver the product physically.

Alright perfect.

Perfect. Okay Q.

Q4, and Q1 to take an unrealized loss on those.

Bryon T. McGregor: And the reason we made this change just as well is that, historically, we have experienced times where we will lock in our, our, our fixed price sales. Aaron Spychalla, Sameer Joshi, Bryon McGregor, Michael Kandris, David Bastian, and so we thought it would be best instead that those were actually a distraction and really didn't reflect the true financial impact of the company, which is why we are now backing them out of EBITDA. I got it. And then as far as for the specialty alcohol sales, it looks like, you know, you guys had, you know, a higher target for the last quarter; I think you were hoping to hit 90 million for the full year. It looks like maybe you're only at about 75 million.

And the reason we made this change Justin as well is because historically, we have experienced at times, where we will lock in.

Our.

Our fixed price sales.

Hedges are derivatives.

And we will experience the whole game or the whole loss in the fourth quarter and you have then you effectively we're trying to work through that the remainder of the following year or you had to get the benefit or you.

Carry the burden of trying to make up for that loss in the.

Following four quarters.

So we thought it would be best in stead that those were actually.

A distraction and really didn't reflect the true.

Financial impact to the company. It's why we bought are now backing them out of EBITDA.

Got it and then as far as for the specialty I'll call sales so it looks like.

You guys had a higher target.

Bryon T. McGregor: I don't know if you have any comments on that. And then, you know, what we can expect for 2024. Yeah, so I think consistent with my comments earlier, Um, with regard to changes in the marketplace, we saw not only market pricing depression; we were protected from that because of the prices that we negotiated. However, the challenges were, as you saw demand, Consumer Demands start to change for different products, and our customers, as well, had to make adjustments to the product, how much, you know, how much alcohol they were taking in as well.

Last quarter I think you were open at $90 million for the full year. It looks like maybe you were only at about $75 million I don't know if you have any comments on that and then what we can expect for 2024.

Yes, so I think consistent with my comments earlier.

With regards to changes in the marketplace, we saw not only market.

Pricing compression, we were protected from that because of the prices that we negotiated however.

Challenges were as well that as you saw demand.

Consumer demand start to change for different products.

Our customers as well had to make adjustments to the product how much.

How much alcohol they were taking in as well. So there. There is an if you will 2020 for volume some of that 2023 volume that was rolled into 2024 and being able to continue to preserve that margin.

Bryon T. McGregor: So there is in, if you will, the 2024 volume, some of that 2023 volume that was rolled into 2024 and being able to continue to preserve that margin. So we should expect, you know, a material increase in gallons sold, especially alcohol for 24. That's the goal. All right, and then I guess one last comment, um, you know, it was really great to hear, you know, stronger statements and your willingness to potentially dispose of the Western assets. And, you know, I guess, just given a lot of the public comments made by your competitors on the potential value of facilities, is it safe to assume that, you know, any disposition of the Western assets would likely be over $100 million? You know, I would hope it would be $600 million. It's difficult to assess, right?

So we should expect.

Material increase in gallons sold especially alcohol for 'twenty four.

That's the goal.

Alright, and then I guess, one last comment.

No it was really great to hear.

Stronger statements and your willingness to potentially dispose of all of the western assets and I guess, just given a lot of the public comments made by your competitors on the.

The potential value of facilities.

Is it safe to assume that you know any any disposition of the western assets would likely be over $100 million.

I would hope it would be $600 million.

Yes.

It's difficult to SaaS right I mean, we have we have we will we will evaluate opportunities as we have always indicated that message has never really changed.

Justin Dopierowa: I mean, we have, and we will evaluate opportunities as we have always indicated. That message has never really changed, so it's not unique for us to say this. I mean, this goes for not only the Western assets but all assets, right?

So it's not unique for us to say this I mean this is goes for not only the western assets, but all assets right.

Bryon T. McGregor: We have to consider viable and reasonable opportunities. And so. That said, we have not, to date, found opportunities that exceed what we could otherwise do with the assets ourselves.

We have to consider viable and reasonable.

Opportunities.

And so.

That said, we have not found to date.

Opportunities that exceeded what otherwise we could do with the assets ourselves.

Bryon T. McGregor: And so we will continue to invest in those, and to the extent that that changes, we certainly will remain vigilant and, you know, do the right thing for the company and for shareholders. Thank you for being able to take that money and redeploy it and reinvest it. So we'll do that, and if not, we'll certainly extract the value out of these unique assets and drive home greater profitability.

And so we will continue to invest in those and to the extent that that changes, we certainly will remain vigilant and.

And.

Do the right thing for the.

For the for the company and for shareholders.

Thank you and we'll take that money and redeploy it and reinvest it so we'll do that and if not we will certainly extract the value out of these unique assets.

Hum greater profitability.

Thanks, a lot.

Bryon T. McGregor: Thanks a lot. You're right. This concludes our question and answer session. I would like to turn the conference back over to Bryon McGregor for any closing remarks. Thank you, operator. Thanks again for joining us today. We appreciate your ongoing feedback and support. Have a good day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

You bet.

This concludes our question and answer session I would like to turn the conference back over to Bryon Mcgregor for any closing remarks.

Thank you operator.

Thanks again for joining us today, we appreciate your ongoing feedback and support.

Have a good day.

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

[music].

Yeah.