Alto Ingredients, Inc. (ALTO) Q4 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to Alto Ingredients Fourth Quarter and Year-End Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's call is being recorded. [Operator Instructions] I would now like to hand the call over to Moriah Shilton. Please go ahead.

Thank you, Michelle, and thank you all for joining us today for the Alto Ingredients’ fourth quarter and full year 2020 results conference call. On the call today are Mike Kandris, CEO; and Bryon McGregor, CFO. Mike will begin with a review of business highlights, Bryon will provide a summary of the financial and operating results, and then Mike will return to discuss Alto Ingredients’ outlook and open the call for questions. Alto Ingredients issued a press release yesterday providing details of the company's quarterly and full year results. The company also prepared a presentation for today's call that is available on the company's website at altoingredients.com. A telephone replay of today's call will be available through March 18, the details of which are included in yesterday's earnings press release. A webcast replay will also be available at Alto Ingredients’ website. Please note that the information in this call speaks only as of today, March 11. You are advised 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 2 of the presentation available online, which states that some of the comments in this presentation constitute forward-looking statements and considerations that involve a number of 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 statements. 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 being reported. The company defines adjusted EBITDA as unaudited net income or loss attributed to Alto Ingredients before interest expense, provision or benefit for income taxes, asset impairments, loss on extinguishment of debt, purchase accounting adjustments, fair value adjustments and depreciation and amortization expense. To support the company's review of non-GAAP information later in this call, a reconciling table was included in yesterday's press release. It is now my pleasure to introduce Mike Kandris, CEO. Mike?

Thank you, Moriah, and thank you, everyone, for joining us today. I'm excited to be with you this morning to discuss the ongoing transformation of Alto Ingredients. I'll begin with a recap of the major milestone for the past 12 months, and then turn to a discussion of the business today and our business and growth drivers in 2021 and beyond. We entered 2020 with an annual ethanol/alcohol production capacity of 605 million gallons, 14% of which, or approximately 85 million gallons was specialty alcohol produced at our Pekin, Illinois campus. Our long-standing specialty alcohol business is profitable, but results have been obscured in the past few years, and more recently by operating losses in our renewable fuel business. We reduced our ethyl alcohol annual production capacity by 55% through a combination of idling unprofitable fuel ethanol plants and selling certain undervalued production assets to stem these unsustainable losses. The majority of the proceeds from our assets sales were used to repay debt and improve the company's balance sheet. Today we have total production capacity of 450 million gallons and our operating facilities with an annual production capacity of 290 million gallons. All operating facilities are at EBITDA breakeven or better. Focusing on our core strengths, we maximize production of specialty alcohol at our Pekin campus, where spot demand was expanding rapidly in response to the COVID 19 pandemic and increased our annual specialty alcohol production capacity in 2020 to 110 million gallons. We also completed the refurbishment of our grain-neutral spirits system or GNS at our Pekin campus by year-end, further increasing our annual specialty alcohol capacity to 140 million gallons entering 2021, which makes us the largest producer at specialty alcohol in the nation. In summary, over 48% of our production capacity at our operating facilities and over 56% of our Pekin production capacity is now capable of producing alcohol that meets or exceeds USP quality specifications. We sold assets and generated substantial cash flow from operations over the past three calendar quarters. We also completed an equity raise in October, generating $70 million in net proceeds. These additional steps accelerated our ability to repay $146 million in total debt over the past 12 months, materially reducing interest expense, strengthening our balance sheet and positioning us for the growth opportunities we see ahead. We are now net term debt-free and on target to be term debt-free in 2021. Bryon will discuss additional details in his prepared remarks. Finally, to cap off the year, we announced a corporate rebranding. Our new corporate name Alto Ingredients and new ticker symbol ALTO embody our goal to deliver the highest levels of integrity, purity and quality to create greater value for our customers, partners and shareholders. In summary, we are pursuing a consistently profitable path forward, which in 2020 produced adjusted EBITDA exceeding $67 million. This achievement was within the guidance we gave in October of last year. Turning to our business today, we are now a leading producer of specialty alcohol and essential ingredients. Our specialty alcohol products are used in common everyday consumer goods, including mouthwash, cosmetics, sanitizers, disinfectants and cleaning products. The majority of these products are sold under fixed price contracts that are one-year duration or longer. This not only provides us with better visibility, but allows us to hedge our primary input costs and prove control over our bottom line results. Hand sanitizers were in the forefront of the news last year and bolstered our positive 2020 results, particularly in Q2 and Q3. In Q4 and continuing today, the surgeon sanitizer demand has tempered by the resurgence and COVID restrictions and then abundant supply of product. In anticipation, we concentrated our efforts to deepen and strengthen our sales in non-sanitizer product lines and to work with dominant name brand, consumer product leaders, such as Procter & Gamble, [indiscernible] and MGP to name a few. As a result, our production mix today is well diversified with approximately 90% of our contracted volume being sold to major producers of food and beverage, and home and beauty products, and only 10% of our contracted volume going to sanitizer products. Although we've seen sanitizer demand returned to pre-COVID levels, we do expect additional tailwinds and demand to increase as restaurants, arenas, theatres, offices and stadiums reopen. As social activities increase, existing low-quality sanitizer inventories will be consumed and replaced by higher-quality products that utilize USP grade alcohol. In short, we are well positioned to support customer needs for USP, API and beverage-grade alcohol for 2021 and beyond, and to provide quality products for consumer goods and sanitizer demand is needed. For our essential ingredient markets, our Pekin campus has for decades produced a wide selection of products, such as corn meal, corn germ, and yeast for use in human and pet food production. Most of these higher value and higher margin ingredients are produced at our wet mill producing co-product returns in excess of 54% and lifting our average return across all operating facilities to roughly 44%. Some of our highest quality products are also sold under a fixed price one-year contracts or longer to customers such as Nestlé and Purdue. Regarding our renewable fuel products, we will continue to produce fuel ethanol to not only support our specialty alcohol production, but also to capitalize on ethanol's beneficial, low carbon characteristics, integral to the ultimate de-carbonization of our environment. And we are optimistic about industry discussions around carbon reduction. All that’s being said, ethanol margins remain depressed even more so for our Western operations. After considering all reasonable alternatives and determining how and where to optimally deploy our resources and capital, we have decided it best to consider monetizing both of our idled California facilities. Doing so will not only further strengthen our balance sheet, but also improve profitability by eliminating fixed carrying costs on idled assets. Pivoting to 2021 and beyond, today, we have contracted approximately 65% of the 110 million gallons of specialty alcohol capacity that was available during last fall’s contract cycle or 50% of our now expanded capacity of 140 million gallons. This represents a significant increase in both total gallons, contracted and average price over our 2020 contracts negotiated in the fall of 2019. It also reflects reductions we've made to reflect the realities and current dynamics and sanitizer consumption. To this end, we are working with our customers to facilitate the blending and extending of these contracted volumes into 2022 and 2023 showed consumer demand improved less than our customers originally anticipated. As we look beyond 2021, I'd like to share a few of our longer-term opportunities that will drive further growth for Alto Ingredients. First, we have worked diligently and collaboratively with key customers to obtain three critical and difficult to achieve certifications for our specialty alcohol production ISO 9001, ICH Q7 and EXCiPACT to support further penetration of domestic and international markets that require the highest quality products. As previously noted most of these products are contracted under fixed terms each fall for the following year. Our goal is to continue to increase our share within the health, home and beauty, and food and beverage markets to sell or expand capacity at higher values. Second, we are increasing our east facilities annual production capacity by approximately 15%. We remain on schedule and on budget to complete the expansion by Q3 of 2021. This project will require a relatively low capital investment of $5.5 million and is expected to produce a payback in less than two years or over $3 million annually in EBITDA. Additionally, this expansion represents only the first phase of the option to expand production at even higher value yeast derivatives with similar payback profiles. In addition to the yeast expansion project, we have currently earmarked an additional $14 million in various capital projects that are expected to expand revenue, increase efficiencies and our plant reliability. An example is the upgrade to our Pekin feed dryers, this $3.5 million enhancement is expected to produce even higher valued feed, improve overall plant efficiency and reliability. And as a result increase annual EBITDA by approximately $1.4 million beginning this year in Q4. Also, as recently mentioned in congressional subcommittee hearings on climate change, our Pekin Campus sits on top of the Mount Simon Sandstone formation considered to be one of the most significant potential carbon storage resources in the United States. As a member of the Carbon Capture Coalition, we are actively engaged in discussions to develop a carbon capture and sequestration program at the Pekin site and look forward to sharing more information regarding this uniquely profitable opportunity as activities progress. We believe Alto will be an active player in the carbon capture space. There remain additional projects under development with the crack feed return profiles. We look forward to discussing them with you over the coming months, once they are fully developed and approved. With that, I'd like to turn the call over to Bryon for a discussion of the financials. Bryon?

Thank you, Mike, I'll discuss a few financial highlights and metrics for the fourth quarter and full year 2020 and provide some thoughts on our expectations, on certain metrics for 2021. For the fourth quarter of 2020 net sales were $169 million compared to $205 million in the third quarter. The decline resulting primarily from reduced demand for transportation fuels and rationalizing our third-party trading volumes to focus on profitable geographical segments. Our trading volume reduction was tempered by an increase in fuel grade ethanol production from our Pekin campus, mostly attributable to the restart of our dry mill that remained offline due to logistical constraints caused by extended Illinois river block repairs from June through October. As Mike noted earlier, we also saw a drop in customer demand for specialty alcohol, for sanitizer as retail shelves remained overstocked with lower quality sanitizer products. Net sales were down by $189 million as compared to the same period in 2019, reflecting the idling or sale of most of our renewable fuel production. Loss available to common shareholders was $20.5 million or $0.30 per diluted share compared to income of $14.9 million or $0.24 per share in the third quarter. This loss is attributable to the impairment charges of $24.4 million associated with our western assets and their transition to assets held for sale on the balance sheet. Without these one-time impairments, we would have generated a positive net income for both the fourth quarter and the full-year. Adjusted EBITDA was positive $16.4 million bringing our second half of 2020 adjusted EBITDA to $55.3 million within our guidance. For the full year of 2020 net sales were $897 million compared to $1.4 billion in 2019, reflecting the idling of most of our renewable fuel production. Cost of goods sold was $844 million, which resulted in gross profit of $53 million for 2020 compared to a gross loss of $10 million in 2019. Cost of goods sold also included approximately $19 million in gross loss associated with our idled production. We expect these costs to be lower going forward as we implement our strategic initiatives and reposition or further monetize the idle facilities. As Mike mentioned, we currently have earmarked approximately $20 million in capital projects this year, including the $5.5 million for use to expansion. The remaining balance is intended to fund projects that will further increase our production of higher value feed as well as improve the reliability, efficiency and safety of our operations. SG&A expenses were $32 million down compared to $35 million in 2019 due to reduction in professional fees related to our efforts to resolve our debt issues. Having resolved these issues and further reduced overhead costs, we expect SG&A expenses for 2021 to total between $20 million and $25 million. Loss available to common shareholders was $16.4 million or $0.28 per diluted share compared to loss of $90 million or $1.90 per share in 2019. Adjusted EBITDA was positive $67.4 million compared to negative $1.7 million in 2019, Turning to our balance sheet, at December 31, 2020, our cash and cash equivalents were $47.7 million compared to $38.7 million at September 30, 2020. Improvements in the balance sheet came predominantly from improved profitability, asset sales and proceeds from the public offering completed in October for the net proceeds of $70 million. Of these proceeds, we used approximately $60 million to accelerate our repayment of high cost debt. In total for the fourth quarter, we reduced our debt outstanding by $66 million, a combination of $43 million in our term debt and $23 million in our line of credit. As a result, we have reduced our debt by approximately $146 million during 2020. Proceeds from our future assets sales will be used to further retire debt, bolster liquidity and fund needed capital projects. Given the ongoing market demand dynamics and associated volatility in both the hand sanitizer and renewable fuel markets, we believe it is inappropriate to provide guidance at this time. What we can provide is additional framework related to our specialty alcohol contracted product, setting aside the many other variables, including the sale of both our renewable fuel and un-contracted specialty alcohol, we would expect our specialty alcohol contracted sales to contribute at a minimum $60 million in gross profit for 2021. As noted, there are significant items that could materially impact these results. First export sales of – and growth in specialty and industrial alcohol demand. Second, the ability of our customers to take all their contracted volume. Third, market demands for products like hand sanitizer and disinfectant. Getting back to the new normal of people out in the public spaces could have a materially positive impact as we would sell at spot market premiums to meet the greater demand, similar to what happened in Q2 and Q3 last year. Fourth increased ethanol margins as demand rises for renewable fuel as businesses reopened and travel picks up. Gross margins year-to-date are negative $0.25 per gallon, materially impacting profit margins. Comparatively Q1 2020 gross margins were approximately negative $0.11 per gallon. And while our current operating facilities are operating at EBITDA breakeven or better every $0.05 increase in gross margins roughly equates to a $5 million increase in EBITDA on an annual basis. And fifth, realizing the timely close and the cost savings from the monetization of our California plants. In summary for 2021, in addition to this framework, we expect to further reduce annual SG&A expenses by at least $7 million. To reduce interest expense by as much as $14 million year-over-year and to reinvest these savings in capital projects that will further improve future results. With that I'll now turn the call back to Mike.

Thank you, Bryon. As you can see, we've now built a foundation based on consumer demand. We suspended and minimized the impact of unprofitable operations and reduced operating and overhead expenses. We also believe our transformation is far from complete. With a significantly improved balance sheet we are actively developing and exploring new build and buy opportunities to grow and expand our business to further increase revenues and profitability, while maintaining and controlling expenses. We look forward to sharing more information with you regarding our plans over the coming months and years. I'd now like to open the call for Q&A. Operator?

[Operator Instructions] Our first question comes from Eric Stine with Craig-Hallum. Your line is open.

Hi, Mike. Hi, Bryon.

Hey, Eric.

Hey. So just trying to do the math here. And I know that you're kind of separating out the volumes that are not contracted and you're also separating out ethanol. But if I do the math, I mean, it feels to me like that's basically kind of an EBITDA guide of flat year-over-year roughly, but then obviously there would be above and beyond that spot market sales that sort of thing. I mean, is that a fair way to characterize it?

I suppose, I guess that you've got to take into account all of the other factors that occurred in 2020 that is not in the numbers that I just gave you. You've got the ethanol sales. You've got other items that are impacting those results as well. I would say that it's actually an improvement, but…

Okay. No, that's fair. I mean, just to be conservative, I mean, just to kind of set a baseline, just doing the math on your gross margin or your gross profit guide what you talked about for SG&A, so that's a good starting point. Maybe just curious then how do we think about the rest of it? So you've got $70 million under contract at better pricing. And maybe that's the reason why it's higher year-over-year, but then in terms of the additional, well, that you brought on, it sounds like you missed the window. So that's the reason why some of that additional $30 million, the G&A facility is not under contract. That, I mean – so how should we think about the rest of that? Because clearly I mean there's a lot more volume that will contribute above and beyond whatever we judge the guide to be for 2021 just on the base.

Yes, we – I think one of the things we recognized, Eric, very early on, and Bryon commented on it, we saw the slowdown in sanitizer, which was kind of leading the charge in Q2 and Q3 and really bolstered the results. And immediately, we shifted our focus to doubling down on getting the certifications, working with customers like Procter & Gamble to intensify our efforts around gaining certifications that would give us a leg-up in terms of quality and the ability to penetrate new markets. And so that is where our focus is. You are absolutely right. We had 110 million gallons going into the contract period. The GNS system came on at the end of the year. And so we have that available to us or another 70 million gallons that we will work diligently to place during the course of the year. And definitely if you think about 2022 and 2023, all those gallons will definitely be in the contract cycle, and we need to be – we will be positioned to place those gallons going forward in future years. This year will be a big effort using our certifications and customer relations to be able to see what the proper direction is, but also to place some of those gallons during the course of 2021 at higher value.

Got it. But maybe not some of the spot sales that you saw, and I know it was focused on hand sanitizer more in Q2 and Q3. I mean, you're still planning to make spots sales of that remaining 70 million, that's not under contract, it's just that there's variability into what markets those might go into that sort of thing in terms of deciding to not include that as part of your outlook, is that fair?

That's fair. And I think a couple of markets in addition to the consumer goods that we're working hard at to penetrate, we're seeing opportunities internationally. We have some longstanding relationships and we've seen that, as you know, we have an ability to move some of that specialty alcohol internationally. When the market spiked in 2020, basically there was very little that moved into the international market. Now we see that as an opportunity to place some of that incremental capacity. Bryon, would you like to be maybe…

Eric, going in and out of that is again to just bring on the point is, is that we intend to produce that specialty alcohol, and we would expect that it would sell at a premium. But we're not framing that out for you with regards to – what’s that exactly is. It's not the same as fixed price contract.

No, absolutely. No, it makes total sense. And certainly, I mean, it helps obviously to have those two or the three certifications as you think about making those sales in various markets and you would command a premium sell. Okay. Then maybe just last one for me. So I guess not a surprise that you made the decision to sell some of the Western plants, it’s just a thought process, it sounds like you're just going to sell the California plants. And I know you're producing CO2 out of one of the others. What's the thinking on keeping the two, the one in Oregon and the one in Idaho?

What we will continue to do is monitor where we are with both of those locations. Again, we've said publicly, we know for the long-term we have to redo some repurposing. If we are going to run those plants to make sure that we can maintain profitable operations on a consistent basis. The Magic Valley location is very unique and that it has kind of a unique market. The markets we serve out of that location typically have commanded reasonable pricing. And we're looking at things like high protein at all our dry mills, basically to take advantage of what we enjoy at our wet mill, which we've been doing for an awful long time. We're looking currently at expanding that into our dry mills where it makes sense. So it's a work in progress on Oregon and Idaho. We're going to work hard to see if there is a positive path forward. With California, we looked hard at those and basically came to the conclusion that we needed to monetize those facilities.

And then I'm sorry, just maybe one last one. Can you just remind us of the carrying costs, most recent carrying costs of, I guess, maybe just stick with the two in California, since those are top of mind.

Yes. On an EBITDA basis, they cost us anywhere between $200,000 and $300,000 a month each.

Okay. Thank you.

Thanks, Eric.

Our next question comes from Amit Dayal with H. C. Wainwright. Your line is open.

Thank you. Good morning, Mike. Good morning, Bryon.

Good morning.

Hi. On the margin front, could you give us just a color on the specialty alcohol margins? And excluding ethanol, it looks like ethanol is still sort of pressuring or depressing margins that you’ve guided. It’d be nice to get a sense of what the specialty alcohol margins on a standalone basis are.

So I guess what I'd say is we're not prepared to provide for various reasons proprietary – and competitive reasons, We’re not prepared to provide that detail, but what you can see is from the information that we've given you is that on the gallons that are contracted that they'll be contributing at a minimum $60 million in gross margin or gross profit. So you can probably do the math at least then look on an aggregated basis what the contract volumes are for. And then I guess what I also emphasize is I was thinking about the question, the prior question that we got, what is it that we actually have volumes that are contracted for more than the 70 million, but we have paired that for this discussion to that 70 million gallons, because we just – you don't know what's going to happen with the sanitizer, that product is going into the sanitizer market.

Understood. And with respect to the specialty alcohol business, is there any seasonality in that, Bryon? Or is it pretty just steady volumes every quarter?

There's a little bit of seasonality, but I don't think anything that you need to make adjustments for in your model.

Okay. Understood. Interest payments for 2021, could you give us a sense of – I know you said that they're going to be around $14 million lower. And in that context, by 2022, will there be – will you eliminate another significant portion of debt potentially given if some of these assets seem to go through?

Yes.

So just trying to get a sense of what the interest burden on the company for 2021 is.

So I guess, worst case scenario is we have the senior notes mature in December of this year, we certainly intend to try and pay those off earlier than expected. We're actually obligated to use the proceeds from asset sales, particularly Western asset sales for the reduction of that debt or elimination of that debt. So, yes, we would expect that to come down significantly. But even if you carry that through maturity, it's a significant – we're talking about, we made a payment in January on the senior notes of $5 million. So we're basically at a $20.5 million balance on the senior notes. And we would continue to expect to make at a minimum reductions in amortizing payments on that debt through maturity. So it's fairly – well particularly comparatively to whether it was last year, it's pretty nominal.

Understood. Thank you. And just one last one on the carbon storage side, Mike, here what should we be looking for in terms of developments that need to come through for you guys to take the next steps in the moving towards maybe commercializing this opportunity?

Yes. We will provide more information as we get. We're very optimistic and excited about that opportunity. Again, we're uniquely positioned from a geology standpoint and we also produce at that campus a substantial amount of CO2 that would work well with the project. We have a couple of parties that we are discussing opportunities with, when we know more we'll certainly share that with you, but we are optimistic about. It's a long-term project, make no mistake about it, but it's a real mover. If you can pull it together and again, we're uniquely positioned to take advantage of that.

Understood. That's all I have guys. Thank you so much.

Thanks, Amit.

[Operator Instructions] Our next question comes from Hamed Khorsand with BWS Financial. Your line is open.

Hi, First I wanted to see if you encountered any competitive pressures during the contracting period and if that was resulting in any kind of pricing pressure or anything like that?

I'd say no more than, I mean it is a competitive business, right. And again, we expected as we had these discussions back in May, June, July, as we had discussions – discussed our quarterly results and then phone calls and then like. We expected that for lack of a better term, the benefits of the increased demand and the pricing that was occurring around the sanitizer product would help lift prices on the other products. And we saw that, but I would also say that, you weren't seeing the same times of premiums by the time you hit the contract period that you otherwise were seeing in May and June, which is normal, right. You would expect that these peak markets don't last long. And but I think that, we're optimistic and it's why we again made decisions early on in that contracting process, whether it was in May, in June to make sure that we are connected with customers that we thought had long-term, long standing incumbency that would allow us to continue to strengthen and deepen those relationships and not just sell one product, but multiple products.

Yes. I would add just that, definitely the customer base that we're dealing with when it comes to the higher grades of alcohol, it's all about quality. It's all about process. I's all about consistency, those type of things and spending the time, energy and financial resources to get the certifications was imperative for us to be able to work with those customers, you did not see the volatility and change once you have locked in with a customer and they are satisfied that you're a key member of their supply chain and you do things the right way. And our goal is to continue to build on that, because the more you can do that, it does create an opportunity to have a long-term relationship with really key people. And when you're dealing with high quality companies, it even becomes more important.

And what's the strategy behind getting your utilization rates up? I mean, it still remained pretty low in Q4?

When you say utilization rates, you're talking about overall production, you mean the utilization of the production capacity, I mean production versus capacity?

Yes. The overall production capacity.

Yes. I think, if you look at the way the Pekin Campus where we have 56% is specialty alcohol and we have our high value feed products, which don't want to ignore, that's a big contributor and a great piece of business for our company. That capacity is running quite well, we have a dry mill at the Pekin campus that we brought back online in Q4. That is one of the top tier producing plants. It shares, it has the benefit of being part of a campus. And it it's operating at a better than breakeven. As far as the other capacity, we just – we look at it from the standpoint of is it better to keep them idled or/and bear the idle cost or to try to run them at margins that just don't make sense. And that's – so we carefully monitor that, we look at it, daily, weekly, and that's why we decided to bring the dry mill on Pekin back on, because we saw that we could generate positive margin there. So it's a – look at it every day and we're running the capacity we know is at breakeven or better.

All right. And my other question was on the gross profit guidance. Does that also include the corresponding ethanol sale that would be coincided with the 70 million gallons?

No. The framework that we gave you was related only to the contracted specialty alcohol.

Okay. If you're producing 70 million of specialty alcohol, I would have to assume that you're also producing 70 million gallons of ethanol – fuel ethanol as well, right?

Yes. More or less. I mean, if you can optimize it’d be somewhere around 60:40 specialty versus ethanol, that's kind of your blend ratio, but yes. So if you put for simplistic purposes that's correct. And that framework that we gave you that gross profit is related only to the specialty – the contracted specialty alcohol, not the ethanol.

And my final question is, I mean as far as hand sanitizer is concerned, your customers have been very much publicly talking about hand sanitizer demand being up this year versus 2019 levels, but then they're not really contracting with you? Why that kind of talk, but not really falling through with any kind of contracting with you?

Yes. I don't know – I'm not sure that I agree with the premise of the question in the context of they're not contracting with us indeed. We had in fall of last year, 110 million gallons of which we contracted materially the majority of that product. To assume that you're going to actually start up a plant in first quarter or second quarter of this year and think that you're already going to sell product is I think questionable given the current supplies and capacity in the marketplace.

Yes we deal with folks that are household names in the sanitizer, hand sanitizer world. And we talked to them, we follow, we have contracted substantial amounts of their business, but it's more or less given the glut of product that's out there and a lot of the subpar product that came into the market in Q4. They're taking a wait and see look in terms of what – how much they want to contract until they see that the inventory has been liberated. And we do expect, again as we said in our remarks that once people get back out and drive, and schools, and arenas and so forth, we could see that volume go up. But we're – like in 2020, we're not rolling forward the exact same volumes of 2020. We're taking a very conservative approach.

Okay. Thank you.

Thanks Hamed.

At this time, I'd like to turn the call back over to Mike Kandris for closing remarks.

I want to thank everybody for joining us today, and we're excited about Alto Ingredients, the foundation we’ve built and the opportunities for growth going forward. And we look forward to speaking to you in the near future. Thank you very much.

Well, ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone have a great day.