Q4 2025 Alto Ingredients Inc Earnings Call

March 4, 2026

Speaker #2: Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

Speaker #2: To ask a question, you may press star than one on your touch tone phone. And to withdraw your question, please press star, then two.

Speaker #2: Please note this event is being recorded. I would now like to turn the conference over to Ms. Harriet Fried of Alliance Advisors. Please go ahead.

Speaker #2: Thank you, operator, and thank you all for joining us today for the Alto Ingredients fourth quarter and year-end 2025 results conference call. On the call today, our president and CEO, Bryon McGregor, and CFO, Rob Olander.

Harriet Freed: Thank you, operator, thank you all for joining us today for the Alto Ingredients Q4 and year-end 2025 Results Conference Call. 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 for the Q4 of 2025. The company also prepared a presentation for today's call that is available on its website at altoingredients.com. A webcast and a webcast replay will be available on the Alto Ingredients website. Please note that the information on this call speaks only as of today, 4 March. You're advised that time-sensitive information may no longer be accurate at the time of any replay.

Harriet Fried: Thank you, operator, thank you all for joining us today for the Alto Ingredients Q4 and year-end 2025 Results Conference Call. 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 for the Q4 of 2025. The company also prepared a presentation for today's call that is available on its website at altoingredients.com. A webcast and a webcast replay will be available on the Alto Ingredients website. Please note that the information on this call speaks only as of today, 4 March. You're advised that time-sensitive information may no longer be accurate at the time of any replay.

Speaker #2: Alto Ingredients issued a press release after the market closed today, providing details of the company's financial results for the fourth quarter of 2025. The company also prepared a presentation for today's call that is available on its website at altoingredients.com.

Speaker #2: A webcast and a webcast replay will be available on the Alto Ingredients website. Please note that the information on this call speaks only as of today, March 4th.

Speaker #2: You're advised that be accurate at the time of any replay. Please refer to the company's Safe Harbor statement in the slide deck posted to the company's website, which states that some of the comments in this presentation constitute forward-looking statements and considerations that involve risks and uncertainties.

Harriet Freed: Please refer to the company's safe harbor statement in the slide deck posted to the company's website, 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 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' filings with the SEC. Except as required by applicable law, the company assumes no obligation to update any forward-looking statement. In management's prepared remarks, non-GAAP measures will be referenced. 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.

Harriet Fried: Please refer to the company's safe harbor statement in the slide deck posted to the company's website, 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 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' filings with the SEC. Except as required by applicable law, the company assumes no obligation to update any forward-looking statement. In management's prepared remarks, non-GAAP measures will be referenced. 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.

Speaker #2: The actual future results of Alto Ingredients could differ materially from those statements. Factors that could cause, or time-sensitive information may no longer 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' filings with the SEC.

Speaker #2: Except as required by applicable law, the company assumes no obligation to update any forward-looking statements. In management's prepared remarks, non-gap measures will be referenced.

Speaker #2: 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.

Speaker #2: The company defines adjusted EBITDA as unaudited consolidated net income or loss before interest expense. Interest income provision or benefit for income taxes asset impairments, unrealized derivative gains and losses, excess insurance proceeds, acquisition-related expense or recoveries, and depreciation and amortization expense.

Harriet Freed: The company defines adjusted EBITDA as unaudited consolidated net income or loss before interest expense, interest income, provision or benefit for income taxes, asset impairments, unrealized derivative gains and losses, excess insurance proceeds, acquisition-related expense or recoveries, and depreciation and amortization expense. To support the company's review of non-GAAP information, a reconciling table has been included in today's release. On today's call, Bryon will provide a review of the company's strategic plan and activities. Rob will comment on its financial results. Bryon will wrap up and open the call for Q&A. It's now my pleasure to introduce Bryon McGregor. Bryon, go ahead please.

Harriet Fried: The company defines adjusted EBITDA as unaudited consolidated net income or loss before interest expense, interest income, provision or benefit for income taxes, asset impairments, unrealized derivative gains and losses, excess insurance proceeds, acquisition-related expense or recoveries, and depreciation and amortization expense. To support the company's review of non-GAAP information, a reconciling table has been included in today's release. On today's call, Bryon will provide a review of the company's strategic plan and activities. Rob will comment on its financial results. Bryon will wrap up and open the call for Q&A. It's now my pleasure to introduce Bryon McGregor. Bryon, go ahead please.

Speaker #2: To support the company's review of non-gap information, a reconciling table has been included in today's release. On today's call, Bryon will provide review of the company's strategic plan and activities.

Speaker #2: Rob will comment on its financial results. Then Bryon will wrap up and open the call for Q&A. It's now my pleasure to introduce Bryon McGregor.

Speaker #2: Bryon, go ahead, please.

Speaker #3: Thank you, Harriet. And thank you all for joining us today. I'll begin with a quick review of our fourth quarter results and achievements after which I'll turn the call over to Rob for more details on our numbers.

Bryon McGregor: Thank you, Harriet. Thank you all for joining us today. I'll begin with a quick review of our Q4 results and achievements, after which I'll turn the call over to Rob for more details on our numbers. I'll give you an overview of our major initiatives for 2026 and the opportunities we're seeing in our markets. We'll open the call for Q&A. The Q4 capped a year of strong execution, and it was a pivotal milestone in our strategic realignment. Entering the year, we made tactical decisions to focus on opportunities that were within our control to maximize earnings. We adjusted staffing to align with our current organizational footprint, captured cost savings, invested in the throughput and efficiency of our plants, culled underperforming business activities in our marketing and distribution segment, and maintained operational disciplines in support of our diversification efforts.

Speaker #3: After that, I'll give you an overview of our major initiatives for 2026 and the opportunities we're seeing in our markets. We'll then open the call for Q&A.

Speaker #3: The fourth quarter capped a year of strong execution and it was a pivotal milestone in our strategic alignment, realignment. Entering the year, we made tactical decisions to focus on opportunities that were within our earnings.

Speaker #3: We adjusted staffing to align with our current organizational footprint, captured cost savings, invested in the throughput and efficiency of our plants, culled underperforming business activities in our marketing and distribution segment, and maintained operational disciplines in support of our diversification efforts.

Speaker #3: Earnings for control, to maximize the fourth quarter were $21 million, a 63 million improvement compared to the fourth quarter full year, 2025, earnings were $12 million, a 72 million improvement.

Bryon McGregor: Earnings for Q4 were $21 million, a $63 million improvement compared to Q4 of 2024. For the full year 2025, earnings were $12 million, a $72 million improvement. Further, adjusted EBITDA for Q4 was $28 million, a $36 million positive swing last year. For 2025, adjusted EBITDA grew to $45 million, a $53 million improvement compared to 2024. Increased crush margins, qualified 45Z credits, and strong renewable fuel export sales were major contributors to improved performance for both the quarter and the full year. Our Carbonic acquisition in early 2025 is a perfect example of our focused strategy. This acquisition and the resultant diversification into liquid CO2 improved the profitability of our Columbia ethanol plant.

Speaker #3: Further, adjusted EBITDA for the fourth quarter was $28 million, a 36 million positive swing last year. For 2025, adjusted EBITDA grew to $45 million, a 53 million improvement compared to 2024.

Speaker #3: Increased crush margins qualified 45Z credits, and strong renewable fuel export sales were major contributors to improved performance for both the quarter and the full year.

Speaker #3: Our carbonic acquisition in early 2025 is a perfect example of our focused strategy. This acquisition and the resultant diversification into liquid CO2 improved the profitability of our Columbia ethanol plant.

Bryon McGregor: Alto Carbonic also contributed positively to the profitability in our Western segment for both Q4 and for all of 2025. Further, we made significant progress in determining the amount of 45Z transferable tax credits for 2025 and associated incremental earnings. We expect to qualify approximately 90 million gallons of combined production on an annual basis for 45Z credits at our Columbia and our Pekin Dry Mill facilities. In Q4, we recorded for the full year $7.5 million in 45Z credit earnings, or $0.10 per gallon, net of estimated monetization costs. For 2026, with the removal of the indirect land use change, or ILUC, from the GREET model, we expect to qualify for $0.20 per gallon at our Columbia and Pekin Dry Mill facilities and to generate approximately $15 million in net proceeds.

Speaker #3: Alto Carbonic also contributed positively to the profitability in our Western segment for both the fourth quarter and for all of 2025. Further, we made significant progress in determining the amount of 45Z transferable tax credits for 2025 and associated incremental earnings.

Speaker #3: We expect to qualify approximately 90 million gallons of combined production on an annual basis for 45Z credits at our Columbia, Peak, and Dry Mill facilities.

Speaker #3: In the fourth quarter, we recorded for the full year $7.5 million in 45Z credit earnings, or 10 cents per gallon, net of estimated monetization costs.

Speaker #3: For 2026, with the removal of the indirect land use change, or ILEC, from the GREET model, we expect to qualify for $0.20 per gallon at our Columbia and Peak and Dry Mill facilities and to generate approximately $15 million in net proceeds.

Speaker #3: We continue to pursue opportunities to lower our carbon scores further. The Peak and Wet Mill and ICP do not currently qualify for these credits, but are advantaged to serve a variety of domestic and export markets.

Bryon McGregor: We continue to pursue opportunities to lower our carbon scores further. The Pekin Wet Mill and ICP do not currently qualify for these credits, are advantaged to serve a variety of domestic and export markets, which are predominantly sold at a premium to ethanol. Finally, with respect to our Western asset optimization and monetization plan, as I mentioned at last quarter's call, current market conditions, including operational improvements, together with the positive impact of our Alto Carbonic acquisition, have materially changed the calculus for simply selling the facilities. Given Columbia's improved profitability, we are no longer actively marketing the asset. We continue, however, to evaluate all options for our Magic Valley facility, including selling the plant, as well as restarting and capturing 45Z credits and monetizing the valuable CO2 the facility would produce.

Speaker #3: Which are predominantly sold at a premium to ethanol. Finally, with respect to our western asset optimization and monetization plan, as I mentioned at last quarter's call, current market conditions, including operational improvements, together with the positive impact of our Alto Carbonic acquisition, have materially changed the calculus for simply selling the facilities.

Speaker #3: Given Columbia's improved profitability, we are no longer actively marketing the asset. We continue, however, to evaluate all options for our Magic Valley facility. Including selling the plant as well as restarting and capturing 45Z credits.

Speaker #3: And monetizing the valuable CO2 the facility would produce. In summary, we are pleased with our Q4 and full year results that demonstrate the successful execution of our strategic realignment.

Bryon McGregor: In summary, we are pleased with our Q4 and full year results that demonstrate the successful execution of our strategic realignment. I'll now turn the call over to Rob for a more detailed review of our financial performance. Rob?

Speaker #3: I'll now turn the call over to Rob for a more detailed review of our financial performance. Rob?

Speaker #4: Thank you, Bryon. Thank you. First, I'd like to review the financial results for the fourth quarter of 2025 compared to the fourth quarter of 2024.

Rob Olander: Thank you, Bryon. Thank you. First, I'd like to review the financial results for Q4 2025 compared to Q4 2024. Net sales were $232 million, $4 million lower than in the prior year. This reflects a reduction in volume sold of 10.6 million gallons, primarily due to our decision to idle our Magic Valley facility at the end of 2024. On a consolidated basis, the average sales price per gallon increased to $2.10 from $1.88 per gallon, partially offsetting the reduction in volume sold. Gross profit for Q4 2025 was $15.2 million, a significant increase of $16.6 million compared to Q4 2024's gross loss of $1.4 million.

Speaker #4: Net sales were $232 million, $4 million lower than in the prior year. This reflects a reduction in volume sold of 10.6 million gallons, primarily due to our decision to idle our Magic Valley facility at the end of 2024.

Speaker #4: On a consolidated basis, the average sales price per gallon increased to $2.10 from $1.88 per gallon, partially offsetting the reduction in volume sold. Gross profit for Q4 2025 was $15.2 million.

Speaker #4: A significant increase of $16.6 million compared to Q4 2024's gross loss of $1.4 million. The significant improvement in gross profit was due to the following drivers: stronger market crush margin of 23 cents per gallon in Q4 2025 compared to 8 cents per gallon in 2024, accounted for approximately $8 million.

Rob Olander: The significant improvement in gross profit was due to the following drivers. Stronger market crush margin of 23 cents per gallon in Q4 2025 compared to 8 cents per gallon in 2024 accounted for approximately $8 million. An increase in renewable fuel export sales at premiums to domestic sales contributed $5 million on a higher volume and higher average sales price per gallon. We realized $2.6 million less in compensation costs for the quarter related to the staffing reduction implemented earlier in the year, including the impact of idling our Magic Valley plant and a gain on our annual pension valuation adjustment. The sale of Oregon carbon credits contributed an additional $2.9 million on improved market pricing.

Speaker #4: An increase in renewable fuel export sales at premiums to domestic sales contributed $5 million on a higher volume and higher average sales price per gallon.

Speaker #4: We realized $2.6 million less in compensation costs for the quarter related to the staffing reduction implemented earlier in the year, including the impact of idling our Magic Valley plant and a gain on our annual pension valuation adjustment.

Speaker #4: The sale of Oregon carbon credits contributed an additional $2.9 million on improved market pricing. We continued to benefit from our Carbonic acquisition, which we completed at the beginning of 2025, as it contributed $1.4 million to our Western production segment during the quarter.

Rob Olander: We continued to benefit from our Carbonic acquisition, which we completed at the beginning of 2025, as it contributed $1.4 million to our Western production segment during the quarter. With the idling of Magic Valley, this segment had a positive gross profit for the quarter and the full year. With high-value liquid CO2 now in our product mix, our Western essential ingredients return improved to 48% in Q4 from 30% a year ago and contributed to an increase in our consolidated return to 52% from 43%. Partially offsetting these positives was a net negative $4.2 million in combined realized and unrealized changes in derivatives. SG&A expenses decreased by $500,000 to $6.9 million. Once again, this is attributable to right-sizing staffing levels in the first half of the year.

Speaker #4: With the idling of Magic Valley, this segment had a positive gross profit for the quarter and the full year. With high-value liquid CO2 now in our product mix, our Western Essential Ingredients return improved to 48% in the fourth quarter from 30% a year ago, and contributed to an increase in our consolidated return to 52% from 43%.

Speaker #4: And partially offsetting these positives was a net negative $4.2 million in combined realized and unrealized changes in derivatives. SG&A expenses decreased by $500,000 to $6.9 million.

Speaker #4: Once again, this is attributable to right-sizing staffing levels in the first half of the year. As you may recall, in Q4 of 2024, we recorded the final acquisition-related expenses for Eagle Alcohol of $5.7 million and $24.8 million of impairment charges related to Magic Valley and Eagle Alcohol.

Rob Olander: As you may recall, in Q4 of 2024, we recorded the final acquisition-related expenses for Eagle Alcohol of $5.7 million and $24.8 million of impairment charges related to Magic Valley and Eagle Alcohol, both of which were excluded from adjusted EBITDA. In the Q4 of 2025, we recorded $800,000 of asset impairment charges related to the cleanup of CapEx projects. As discussed on prior calls, in April 2025, we sustained damage to our Pekin campus river loading dock. After filing an insurance claim with our carrier, in Q4, we received our maximum insurance coverage payment of $10 million. Of these proceeds, $1.5 million was recorded as a reduction to cost of goods sold as a reimbursement for previously recorded expenses.

Speaker #4: Both of which were excluded from adjusted EBITDA. In the fourth quarter of 2025, we recorded $800,000 of asset impairment charges related to the cleanup of CapEx x projects.

Speaker #4: As discussed on prior calls, in April of 2025, we sustained damage to our Peak and Campus River loading dock after filing an insurance claim with our carrier in Q4.

Speaker #4: We received our maximum insurance coverage payment of $10 million. Of these proceeds, $1.5 million was recorded as a reduction to cost of goods sold as a reimbursement for previously recorded expenses.

Speaker #4: $1.8 million was recorded in other income for lost profits related to the business interruption. The remaining $6.7 million of income was recorded as excess insurance proceeds in accordance with GAAP, which will be used to fund the repairs and improvements in 2026.

Rob Olander: $1.8 million was recorded in other income for lost profits related to the business interruption. The remaining $6.7 million of income was recorded as excess insurance proceeds in accordance with GAAP, which will be used to fund repairs and improvements in 2026. Since the excess proceeds were not related to operations, we excluded this gain from our calculation of adjusted EBITDA. As Bryon mentioned, we made significant progress in qualifying for Section 45Z credits and are entering into contracts to sell these credits to third parties. The expected proceeds from selling the 2025 credits are $7.5 million net of selling costs, which directly strengthen our bottom line in Q4.

Speaker #4: Since the excess proceeds were not related to operations, we excluded this gain from our calculation of adjusted EBITDA. As Bryon mentioned, we made significant progress in qualifying for 45Z credits and are entering into contracts to sell these credits to third parties.

Speaker #4: The expected proceeds from selling the 2025 credits are $7.5 million net of selling costs, which directly strengthen our bottom line in the fourth quarter.

Speaker #4: The combination of improved gross profit, lower SG&A expenses, recognition of 45Z tax credits, and the excess insurance proceeds resulted in net income attributable to common stockholders of $21.5 million, or $0.28 per diluted share for Q4 2025, an increase of $63.5 million compared to Q4 2024.

Rob Olander: The combination of improved gross profit, lower SG&A expenses, recognition of 45Z tax credits, and the excess insurance proceeds resulted in net income attributable to common stockholders of $21.5 million or $0.28 per diluted share for Q4 2025, an increase of $63.5 million compared to Q4 2024. For the year, net income attributable to common stockholders was $12.1 million or $0.16 per diluted share, compared to a loss of $60.3 million or $0.82 per share. adjusted EBITDA increased $35.6 million to $27.9 million for Q4 2025, compared to a negative adjusted EBITDA of $7.7 million for Q4 2024, reflecting the above-mentioned improvements in gross profit and SG&A, but excluding the $6.7 million in excess insurance proceeds.

Speaker #4: For the year, net income attributable to common stockholders was $12.1 million, or 16 cents per diluted share, compared to a loss of 60.3 million or 82 cents per share.

Speaker #4: Adjusted EBITDA increased $35.6 million to $27.9 million for Q4 2025, compared to a negative adjusted EBITDA of $7.7 million for Q4 2024, reflecting the above-mentioned improvements in gross profit and SG&A but excluding the $6.7 million in excess insurance proceeds.

Speaker #4: And for the year, adjusted EBITDA was 44.7 million, an improvement of 53.2 million compared to negative adjusted EBITDA of 8.5 million for 2024. Turning to our balance sheet, as of December 31, 2025, our cash balance was $23 million.

Rob Olander: For the year, adjusted EBITDA was $44.7 million, an improvement of $53.2 million compared to negative adjusted EBITDA of $8.5 million for 2024. Turning to our balance sheet. As of 31 December 2025, our cash balance was $23 million. During Q4, we generated $10 million in cash flow from operations. We generated $5 million in cash flow from investing activities, including $7 million from excess insurance proceeds, partially offset by $2 million in CapEx. We used $22 million in our financing activities as we paid down $16 million on our operating line of credit and $5 million on our term debt. As a result, we ended the year with $55 million outstanding on our term loan.

Speaker #4: During the fourth quarter, we generated $10 million in cash flow from operations. We generated $5 million in cash flow from investing activities, including $7 million from excess insurance proceeds, partially offset by $2 million in CapEx.

Speaker #4: We used $22 million in our financing activities, as we paid down $16 million on our operating line of credit and $5 million on our term debt.

Speaker #4: As a result, we ended the year with $55 million outstanding on our term loan. At year-end, we had a total loan borrowing availability of $102 million consisting of $37 million under our operating line of credit and $65 million under our term loan facility.

Rob Olander: At year-end, we had a total loan borrowing availability of $102 million, consisting of $37 million under our operating line of credit and $65 million under our term loan facility. Our improved profitability in the last half of 2025 allowed us to further pay down $10 million of principal on our term debt in February 2026, and we expect to pay down an additional $6 million in March. This will reduce the principal amount of our term debt to $39 million by the end of Q1. We are pleased to significantly reduce our debt and continue to strengthen our balance sheet. In 2026, we plan to elevate our CapEx to roughly $25 million while maintaining strong cost discipline and prioritizing the highest ROI projects.

Speaker #4: Our improved profitability in the last half of 2025 allowed us to further pay down $10 million of principal on our term debt in February of 2026, and we expect to pay down an additional $6 million in March.

Speaker #4: This will reduce the principal amount of our term debt to $39 million by the end of the first quarter. We are pleased to significantly reduce our debt and continue to strengthen our balance sheet.

Speaker #4: In 2026, we plan to elevate our capital expenditures to roughly $25 million, maintaining cost discipline and prioritizing the highest ROI projects. Approximately 45% of our capital expenditure budget is earmarked for maintenance projects, while the remaining 55% is for optimization projects, including taking further steps to implement capacity increases at our Peak and Dry Mill.

Rob Olander: Approximately 45% of our capital expenditure budget is earmarked for maintenance projects, while the remaining 55% is for optimization projects, including taking further steps to implement capacity increases at our Pekin dry mill. Included in the $25 million budget are the cost to complete the repairs of the existing dock and adding a second alcohol load-out dock. As a reminder, we are building the second dock to mitigate future business interruption and enhance our logistical capabilities by expanding throughput and creating redundancy. We expect to begin the repairs on the original dock and the installation of the second dock this spring and to complete both projects by the end of 2026. I'll now turn the call back to Brian.

Speaker #4: Included in the $25 million budget are the cost to complete the repairs of the existing dock and adding the second alcohol loadout dock. As a reminder, we are building the second dock to mitigate future business interruption and enhance our logistical capabilities by expanding throughput and creating redundancy.

Speaker #4: We expect to begin the repairs on the original dock and the installation of the second dock this spring and to complete both projects by the end of 2026.

Speaker #4: I'll now turn the call back to Bryon.

Speaker #1: Thank you, Rob. In summary, we entered 2026 with a leaner cost structure, a higher mix of premium exports, and carbon-advantaged volumes, expanded CO2 opportunities, and potential upside from 45Z tax credits.

Bryon McGregor: Thank you, Rob. In summary, we entered 2026 with a leaner cost structure, a higher mix of premium exports and carbon advantage volumes, expanded CO2 opportunities, and potential upside from Section 45Z tax credits. We've completed the heavy lifting of addressing losses at underperforming assets, removing structural costs, and repositioning our portfolio towards higher value and more consistent revenue streams, and are moving forward with plans to improve the company's return on assets. By continuing to improve operations, we believe we will strengthen Alto's ability to capitalize on favorable margin environments, to stabilize when margins are compressed, and to ensure that our assets are producing positive returns. In 2026, we intend to stay focused on what is within our control, on driving improved profitability and executing on multiple opportunities to grow earnings.

Speaker #1: We've completed the heavy lifting of addressing losses at underperforming assets, removing structural costs, and repositioning our portfolio towards higher value and more consistent revenue streams, and are moving forward with plans to improve the company's return on assets.

Speaker #1: By continuing to improve operations, we believe we will strengthen Alto's ability to capitalize on favorable margin environments. To stabilize when margins are compressed, and to ensure that our assets are producing positive returns.

Speaker #1: In 2026, we intend to stay focused on what is within our control, on driving improved profitability and executing on multiple opportunities to grow earnings.

Speaker #1: As a reminder, the first quarter is a seasonally challenging period for us. And in January of this year, extreme cold weather disrupted river logistics and curtailed production at our Peak and campus.

Bryon McGregor: As a reminder, Q1 is a seasonally challenging period for us. In January of this year, extreme cold weather disrupted river logistics and curtailed production at our Pekin campus. We took advantage of the downtime to make some of the repairs we had planned to be completed in Q2 during our biennial wet mill outage. This has allowed us to defer the remaining work until the spring of 2027 to make up for January's lost production next quarter. With respect to additional outages planned for 2026, we expect normal Q2 outages at ICP and Columbia, consistent with those in 2025. In the second half of the year, the Pekin dry mill will take a longer outage to implement a project to increase production capacity by approximately 8%, further improving the plant's profitability.

Speaker #1: We took advantage of the downtime to make some of the repairs we had planned to be completed in the second quarter during our biennial wet mill outage.

Speaker #1: This has allowed us to defer the remaining work until the spring of 2027 and to make up for January's lost production next quarter. With respect to additional outages planned for 2026, we expect normal Q2 outages at ICP and Columbia consistent with those in 2025.

Speaker #1: In the second half of the year, the Peak and Dry Mill will take a longer outage to implement a project to increase production capacity.

Speaker #1: By approximately 8%, further improving the plant's profitability. As Rob mentioned, we have important capital projects planned for 2026 and intend to maintain strong cost discipline. We will continue to prioritize the highest ROI projects.

Bryon McGregor: As Rob mentioned, we have important capital projects planned for 2026 and intend to maintain strong cost discipline and will continue to prioritize the highest ROI projects. CO2 utilization remains a compelling opportunity for us as demand for liquid CO2 continues to rise. In 2026, we intend to capitalize further on demand growth in the Pacific Northwest and on our liquid CO2 processing capabilities by increasing our throughput volume and storage capacity. We're also assessing large-scale CO2 utilization and sequestration opportunities at our Pekin campus and developing plans to capture more value for our CO2 as quickly as possible. We have contracted to sell a significant volume of renewable fuel exports for the first half of 2026 and believe there are increasing opportunities for us to expand volumes and premiums in this market. We are on track to match our 2025 high-quality alcohol volumes.

Speaker #1: CO2 utilization remains a compelling opportunity for us, as demand for liquid CO2 continues to rise. In 2026, we intend to capitalize further on demand growth in the Pacific Northwest and on our liquid CO2 processing capabilities by increasing our throughput volume and storage capacity.

Speaker #1: We're also assessing large-scale CO2 utilization in sequestration opportunities at our Peak and campus and developing plans to capture more value for our CO2 as quickly as possible.

Speaker #1: We have contracted to sell a significant volume of renewable fuel exports for the first half of 2026 and believe there are increasing opportunities for us to expand volumes and premiums in this market.

Speaker #1: We are on track to match our 2025 high-quality alcohol volumes and on the regulatory front, we continue to view E15 as a meaningful long-term demand tailwind for the farming and ethanol industries.

Bryon McGregor: On the regulatory front, we continue to view E15 as a meaningful long-term demand tailwind for the farming and ethanol industries. While permanent nationwide adoption remains pending, the EPA has consistently supported summer E15 sales through waivers, political momentum has strengthened entering 2026 with renewed administration and bipartisan congressional support. Taken together, we believe the trajectory for E15 remains clearly positive and supportive of incremental ethanol demand over time. I'm proud of the progress our team has made and excited about the path forward. Our focus remains on operational excellence and disciplined capital allocation. We enter 2026 from a position of greater strength, with an improved ability to navigate market volatility and a clearer strategy to drive higher margin diversification and enhance asset value. Operator, we're now ready to begin Q&A with sell-side analysts.

Speaker #1: While permanent nationwide adoption remains pending, the EPA has consistently supported summer E15 sales through waivers, and political momentum has strengthened entering 2026 with renewed administration and bipartisan congressional support.

Speaker #1: Taken together, we believe the trajectory for E15 remains clearly positive and supportive of incremental ethanol demand over time. I'm proud of the progress our team has made and excited about the path forward.

Speaker #1: Our focus remains on operational excellence and disciplined capital allocation. We entered 2026 from a position of greater strength, with an improved ability to navigate market volatility and a clearer strategy to drive higher-margin diversification and enhance asset value.

Speaker #1: Operator, we're now ready to begin Q&A with sell-side analysts.

Speaker #2: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star than one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys.

Harriet Freed: Thank you. We'll now begin the question-and-answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. We'll pause momentarily to assemble our roster. The first question will come from Amit Dayal with H.C. Wainwright. Please go ahead.

Operator: Thank you. We'll now begin the question-and-answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. We'll pause momentarily to assemble our roster. The first question will come from Amit Dayal with H.C. Wainwright. Please go ahead.

Speaker #2: If at any time your question has been addressed, and you would like to withdraw your question, please press star, then two. And we'll pause momentarily to assemble our roster.

Speaker #2: And the first question will come from Amit Dayal with AC Wainwright. Please go ahead.

Speaker #3: Thank you, Grafton. Everyone, Bryon, congratulations on a very strong quarter. Looks like a lot of drivers in place for a strong 2026 as well.

Amit Dayal: Thank you. Good afternoon, everyone. Bryon, congratulations...

Bryon McGregor: Hi, Amit.

Amit Dayal: On a very strong quarter. Looks like, you know, a lot of drivers in place for a strong 2026 as well. Just wanna focus on the, you know, the Section 45Z tax credits. You're guiding for around $15 million in those benefits in the year at $0.20 per gallon. What steps are you taking that could maybe get you even more, you know, in those benefits? Will that potentially come through in 2026 or, you know, are you working on it for maybe 2027 and beyond?

Speaker #3: But just want to focus on the 45Z tax credits you're guiding for around 15 million in those benefits in the year at 20 cents per gallon.

Speaker #3: What steps are you taking that could maybe get you even more in those benefits? And will that potentially come through in 2026, or are you working on it for maybe 2027 and beyond?

Speaker #1: Sure. I'll take the front part of this and then Rob, if you want to round out anything that I otherwise missed. It's a lot of the drivers and opportunities around 45Z for us at these plants is around lowering our carbon intensity scores.

Bryon McGregor: Sure. I'll take the front part of this, and then Rob, if you wanna round out anything that I otherwise missed. you know, it's a lot of the drivers and opportunities around Section 45Z for us at these plants is around lowering our carbon intensity scores in some form or another, either reducing our energy demands, or, you know, sourcing, changes in sourcing of products and/or services. anything that we can do in that regard or the way that we and the types of products that we purchase, whether it's corn, right, and traceability and the like. it's clear that, and compelling, that anything that you can do to lower your score further as quickly as possible, the better. it's really a priority for us.

Speaker #1: In some form or another, either reducing our energy demands or sourcing changes in sourcing of products and/or services. So anything that we can do in that regard or the way that we and the types of products that we purchase, whether it's corn, right, and traceability and the like.

Speaker #1: And so but it's clear that and compelling that anything that you can do to lower your score further as quickly as possible, the better.

Speaker #1: And so it's really a priority for us. I don't know that it's appropriate to share more than that with regards to some of the projects, but we're fronts.

Bryon McGregor: I don't know that it's appropriate to share more than that with regards to some of the projects. We're actively pursuing it on many fronts and making sure that we can do what we can to lower those scores further. Rob, anything else you want to add?

Speaker #1: And making sure that we can do what we can to lower those scores further. Rob, anything else you want to add?

Speaker #3: Yeah, sure. Thanks, Bryon. As we mentioned, one opportunity to capitalize further on the 45Z tax credits, it's also to increase our production capacity. And we do have a project scheduled for end of Q3, early Q4 to expand the production capability of our Peak and Dry Mill.

Rob Olander: Yeah, sure. Thanks, Bryon. you know, as we mentioned, one opportunity to capitalize further on the 45Z tax credits is also to increase our production capacity. you know, we do have a project scheduled for end of Q3, early Q4 to expand the production capability of our Pekin dry mill. it's already one of our lowest cost producing assets, but adding, you know, additional 45Z credits on that additional production really justifies that project. Our intent is to improve the capacity by about 8% or 5 million gallons.

Speaker #3: It's already one of our lowest-cost producing assets, but adding additional 45Z credits on that additional production really justifies that project. And our intent is to improve the capacity by about 8% or 5 million gallons.

Amit Dayal: Understood. Thank you for that, guys. You know, you just mentioned it, Bryon, you know, the traceability of the feedstock. Are we already in compliance with that? You know, there's a treasury proposal around, you know, Section 45Z eligibility, so just wanted to see how we stand on that front.

Speaker #1: Understood. Thank you for that, guys. And then you just mentioned it, Bryon, the traceability of the feedstock. Are we already in compliance with that?

Speaker #1: There's a treasury proposal around 45Z eligibility, so just wanted to see how we stand on that front.

Bryon McGregor: You know, we're active in that front. I wouldn't say that all of our, you know, bushels are traced. I think that there is some work that needs to be done around incentivizing the, our farmers to provide that information. It's not just something that we can do on a stand-alone basis, but it's gonna require re-regulatory support as well and adoption, you know, across the entire industry. That said, we're doing what we can, and we're making some headway there.

Speaker #4: that all of our bushels are traced. I think that there is some work that needs to be done around incentivizing the farmers to provide that information.

Speaker #4: So I think it, and it's not just something that we can do on a standalone basis, but it's going to require regulatory support as well.

Speaker #4: And adoption across the entire industry. That said, we're doing what we can. And we're making some headway there.

Speaker #1: Okay. Thank you.

Amit Dayal: Okay. Thank you. Just last one from me. On the Western assets, should we expect, you know, revenue pickup in 2026? I know operationally that, you know, it's performing much better now. Can we think of any revenue improvements coming through in 2026 for that segment?

Speaker #3: And then just last one for me. On the Western asset, should we expect revenue pickup in 2026? I know operationally that it's performing much better now.

Speaker #3: But do we see can we think of any revenue improvements coming through in 2026 for that segment?

Speaker #4: Certainly intend to try and increase production capacity there or increase our overall what's the word I'm looking for?

Bryon McGregor: Certainly intend to try and increase production capacity there or increase, our overall... What's the word I'm looking for?

Rob Olander: Utilization. Yeah. Our.

Speaker #3: Utilization. Yeah. We definitely tend to work on improving our production utilization rate. And then as I think Bryon mentioned in the call, we're exploring opportunities to expand our CO2 throughput as well.

Bryon McGregor: Thank you.

Rob Olander: Yeah. To, you know, work on improving our production utilization rate. As I think Bryon mentioned in the call, we're exploring opportunities to expand our CO2 throughput as well.

Amit Dayal: Okay. That's all I have, guys, right now. I'll step back into. Thank you.

Speaker #1: Okay. That's all I have guys right now. I'll step back into. Thank you.

Speaker #3: Thank you, Amit.

Bryon McGregor: Thank you.

Rob Olander: Thank you, Amit.

Harriet Freed: The next question will come from Eric Stine with Craig-Hallum. Please go ahead.

Harriet Fried: The next question will come from Eric Stine with Craig-Hallum. Please go ahead.

Speaker #2: Your next question will come from Eric Stein with Craig Hallam. Please go ahead.

Speaker #5: Hi, Bryon. Hi, Rob.

[Analyst] (Craig-Hallum): Hi, Bryon. Hey, Rob.

Eric Stine: Hi, Bryon. Hey, Rob.

Bryon McGregor: Hello, Tate.

Speaker #1: Hello.

Speaker #5: Hey.

[Analyst] (Craig-Hallum): Hello. You mentioned ethanol exports that you had locked in a portion of that. It sounded like a meaningful portion of that for the first half. I'm wondering if you can kind of quantify that a little bit. Also curious, you know, as you think about going forward, increasing volumes and increasing margins there. I know you have to have certain certifications to even access other markets. Just curious, you know, what kind of steps that would entail to both increase volumes and potentially the margins you get.

Eric Stine: Hello. You mentioned ethanol exports that you had locked in a portion of that. It sounded like a meaningful portion of that for the first half. I'm wondering if you can kind of quantify that a little bit. Also curious, you know, as you think about going forward, increasing volumes and increasing margins there. I know you have to have certain certifications to even access other markets. Just curious, you know, what kind of steps that would entail to both increase volumes and potentially the margins you get.

Speaker #1: Hello. So you mentioned ethanol exports that you had locked in a portion of that, it sounds like, a meaningful portion of that for the first half.

Speaker #1: I'm wondering if you can kind of quantify that a little bit. And then also curious as you think about going forward, increasing volumes and increasing margins there.

Speaker #1: I know you have to have certain certifications to even access other markets. So just curious what kind of steps that would entail to both increase volumes and potentially the margins you get.

Speaker #4: Yeah, sure. So while we don't specifically provide that level of detail, what's I think important to understand for us is that it's to try and find the optimal balance to optimize the value of the product that we're making.

Bryon McGregor: Yeah, sure. While we don't specifically provide that level of detail, what's I think important to understand for us is that it's to try and find the optimal balance to optimize, you know, the value of the product that we're making. particularly for ICP or the, you know, the distillery and the wet mill, to the extent that we can produce high, higher quality products or export fuel products would be the highest marginal value for those products, and they predominantly sell at a premium to what would be domestic fuel, even including, you know, Section 45Z credits.

Speaker #4: So particularly for ICP and for or the distillery and the wet mill to the extent that we can produce higher quality products or export fuel products.

Speaker #4: Would be the highest marginal value for those products. And they sell at a premium to or predominantly sell at a premium to what would be domestic fuel even including 45Z credits.

Bryon McGregor: Where we can as well at other plants, which are largely designed to be selling into the domestic fuel markets, we're doing all that we can to continue to optimize those values and to obtain as much Section 45Z credit as we can. It's really, again, finding a balance. What we've been able to do is to, you know, sell more of that product for increasing demand in Europe for those products. While we've seen somewhat of a margin compression around some of the high-quality products that we sell, we've been able to see an increase in demand for that in the, in the export market. Does that answer your question?

Speaker #4: But where we can as well at other plants which are largely designed to be selling into the domestic fuel markets, that we're doing all that we can to continue to optimize those values into obtain as much 45Z credit as we can.

Speaker #4: So it's really, again, finding a balance. And what we've been able to do is to sell more of that product for increasing demand in Europe for those products.

Speaker #4: So while we've seen somewhat of a marginal a margin compression around some of the high-quality products that we sell, we've been able to see an increase in demand for that in the export market.

Speaker #4: Does that answer your question, Rob? Would there be anything else you want to add to that?

[Analyst] (Craig-Hallum): Yeah.

Eric Stine: Yeah.

Bryon McGregor: Rob, would there be anything else you want to add to that?

Speaker #3: Yeah. No, that's good.

Rob Olander: Yeah. No. That, that's good.

Speaker #1: Good.

Bryon McGregor: Good.

Speaker #5: Yeah, I mean, clearly, back half of the year—the purchases or the exports to some of those European markets were quite significant.

[Analyst] (Craig-Hallum): Yeah. I mean, clearly back half of the year, I mean, the purchases or the exports to some of those European markets were quite significant. Okay. You know, I mean, I think the main question that I have is, and this might be, Bryon, a really hard question to answer, but, I mean, you've clearly raised the floor here to the business. I mean, I know in the past you had the platform when the crush was strong that you would do quite well, but conversely, when it was really tough, I mean, it would definitely show in results.

Eric Stine: Yeah. I mean, clearly back half of the year, I mean, the purchases or the exports to some of those European markets were quite significant. Okay. You know, I mean, I think the main question that I have is, and this might be, Bryon, a really hard question to answer, but, I mean, you've clearly raised the floor here to the business. I mean, I know in the past you had the platform when the crush was strong that you would do quite well, but conversely, when it was really tough, I mean, it would definitely show in results.

Speaker #5: So, okay. Then, I mean, I think the main question that I have is—and this might be, Bryon, a really hard question to answer.

Speaker #5: But I mean, you've clearly raised the floor here to the business. I mean, I know in the past, you had the platform when the crush was strong that you would do quite well.

Speaker #5: But conversely, when it was really tough, I mean, it would definitely show in results I mean, is there a way to think about what the business looks like maybe not in the worst-case scenario, but in some of the bad markets that we've seen in the past?

[Analyst] (Craig-Hallum): I mean, is there a way to You know, what the business looks like, maybe not in a worst case scenario, but, you know, in some of the bad markets that we've seen in the past, because correct me if I'm wrong, but it seems like you have, you know, you've raised the floor pretty meaningfully versus where it's been in the past?

Eric Stine: I mean, is there a way to You know, what the business looks like, maybe not in a worst case scenario, but, you know, in some of the bad markets that we've seen in the past, because correct me if I'm wrong, but it seems like you have, you know, you've raised the floor pretty meaningfully versus where it's been in the past?

Speaker #5: Because, I mean, correct me if I'm wrong, but it seems like you have— you've raised the floor pretty meaningfully versus where it's been in the past.

Speaker #4: Yeah, so I think there are a number of factors that go into that. I think part of it is, if you think back to the maturation and kind of the evolution of the company, we were originally focused around destination facilities.

Bryon McGregor: Yeah. I think there's a number of factors that go into that. I think part of it is as you think back at the maturation and kind of the evolution of the company where we were originally focused around destination facilities. The brilliance in the destination was, is that they perform really, really well when you see supply constraints, right? They also, demonstrate their vulnerability when you get an oversupplied ethanol market, which has been largely the case for most of the, you know, call it 18, 20 years, where we've, you know, been producing over, you know, 15, 14 billion gallons of capacity in the industry.

Speaker #4: The brilliance in the destination was that they're able to—they perform really, really well when you see supply constraints, right? But they also demonstrate their vulnerability when you get an oversupplied ethanol market, which has been largely the case for most of the, call it, '18-'20 years.

Speaker #4: Where we've been producing over 15, 14 billion gallons of capacity in the industry. So what we've been able to do is to some degree both through monetization and exiting certain locations, but as well then being able to shore up the financial viability of those assets with other revenue sources and be able to lower operating costs around that.

Bryon McGregor: What we've been able to do is, to some degree, both through monetization and, you know, exiting certain locations, but as well then being able to shore up the financial viability of those assets with other revenue sources and be able to lower operating costs around that, you're able to take out some of the vulnerabilities around the floor in tight crush margins. The other focus and in what would be the origin facilities at Pekin is around optimizing the value of those revenue streams and or the value of those products that generate that revenue stream, being diligent and efficient about how we execute. It's about cost management and then making sure that we're investing in projects that not only either increase revenue, but also reduce operating expenses and or improve efficiencies as well.

Speaker #4: You're able to take out some of the vulnerabilities around the floor in tight crush margins. And then again, the other focus and in what would be the origin facilities at Deacon is around optimizing the value of those revenue streams.

Speaker #4: And, or the value of those products that generate that revenue stream. And then being diligent and efficient about how we execute. So it's about cost management, and then making sure that we're investing in projects that not only either increase revenue, but also reduce operating expenses and/or improve efficiencies as well.

Speaker #4: So if we can do all three, that's a home run. And I think we've been able to see a lot of those benefits over the last couple of years.

Bryon McGregor: If we can do all three, that's a home run. I think we've been able to see a lot of those benefits over the last couple of years.

[Analyst] (Craig-Hallum): Got it. I mean, it sounds like you'd characterize it more as, I mean, this has been many, many, many years in the making. If you've, you know, you've gotten rid of a lot or you've sold the two California plants. What you've done in the next or I'm sorry, in the last, call it 2-plus years, you've just kind of taken it to that next level. Is that fair?

Eric Stine: Got it. I mean, it sounds like you'd characterize it more as, I mean, this has been many, many, many years in the making. If you've, you know, you've gotten rid of a lot or you've sold the two California plants. What you've done in the next or I'm sorry, in the last, call it 2-plus years, you've just kind of taken it to that next level. Is that fair?

Speaker #5: Got it. And so this is I mean, it sounds like you'd characterize it more as I mean, this has been many, many, many years in the making, if you've gotten rid of a lot or you've sold the two California plants.

Speaker #5: But then what you've done in the next—or I'm sorry, in the last, call it, two-plus years, you've just kind of taken it to that next level.

Speaker #5: Is that fair?

Speaker #4: Yeah, I think that's right.

Bryon McGregor: Yeah, I think that's right.

Speaker #5: Okay. Thank you.

[Analyst] (Craig-Hallum): Okay. Thank you.

Eric Stine: Okay. Thank you.

Speaker #1: And that will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Bryon McGregor for any closing remarks.

Harriet Freed: That will conclude our question and answer session. I would like to turn the conference back over to Mr. Bryon McGregor for any closing remarks. Please go ahead.

Operator: That will conclude our question and answer session. I would like to turn the conference back over to Mr. Bryon McGregor for any closing remarks. Please go ahead.

Speaker #1: Please go ahead.

Speaker #4: Thank you, Chuck. Thanks again, everyone, for joining us to hear about our progress that we've been able to make and our initiatives for 2026.

Bryon McGregor: Thank you, Chuck. Thanks again, everyone, for joining us to hear about our progress that we've been able to make and our initiatives for 2026. As always, we appreciate your feedback and support. Have a great day.

Speaker #4: As always, we appreciate your feedback and support. Have a great day.

Harriet Freed: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Q4 2025 Alto Ingredients Inc Earnings Call

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