Good day, and welcome to the Alto Ingredients Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kirsten Chapman with Alliance Advisors Investor Relations. Please go ahead.

Thank you, Asha, and thank you all for joining us for the Alto Ingredients Second Quarter 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 financials for the second quarter of 2025. The company also has 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 August 13, the details of which are included in today's press release. A webcast replay will also be available on Alto Ingredients website. Please note the information on this call speaks only as of today, August 6, 2025, and you're advised that time-sensitive information may be no longer 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 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 reported. The company defines adjusted EBITDA as consolidated net income or loss before interest expense, interest income, provision for income taxes, asset impairments, unrealized derivative gains and losses, acquisition-related expense and depreciation and amortization. To support the company's review of non-GAAP information, a reconciling table was included in today's press release. On today's call, Bryon will provide a review of strategic -- our strategic plan and activities, and Rob will comment on our financial results. Then Bryon will wrap up and open the call for Q&A. It's now my pleasure to introduce CEO, Bryon McGregor. Please go ahead, sir.

Thank you, Kirsten. Thank you all for joining us today. The main takeaway for Q2 is that our adjusted EBITDA improved by nearly $6 million compared to last year, reflecting the successful execution of our initiatives to increase productivity. For some time, we have been focusing on short-term projects with more immediate returns, and we see the roots taking hold and delivering success. This approach will support our path to incremental profitability and an improved future. Projects under evaluation will be prioritized by anticipated cost, timing and ROI impact. Under consideration are projects to lower our carbon intensity and capture more of the benefits of the 45Z regulations, increase our CO2 utilization at our Pekin campus and at Columbia, building on our successful Carbonic acquisition and improve our prospects to monetize our Western assets. Further, we will continue to pursue opportunities to improve efficiency and productivity like we did in Q1 and Q2. As a brief update to our carbon capture and storage project for our Pekin campus, on August 1, the Governor of Illinois signed Senate Bill 1723 that prohibits CO2 sequestration directly through the Mohammad Aquifer as contemplated in our EPA Class VI permit. As a result, we are developing alternatives with [ Walt ] as well as evaluating other promising non-sequestration options to optimize the value of our CO2 production. The bottom line is while we lay the groundwork for longer-term capital-intensive projects, we are focusing on executable strategies within our control with short-term paybacks and potential long-term benefits. Our adjusted EBITDA for Q2 compared to last year's quarter reflects the benefits of multiple initiatives. We generated positive gross profit at our Western assets resulting from the combination of our liquid CO2 facility acquisition, improvements at our Columbia ethanol plant and our decision to cold idle Magic…

Thank you, Bryon. I'll review the financial results for Q2 2025 compared to Q2 2024. We sold 86.7 million gallons compared to 95.1 million gallons. The change in volume reflects our decision to rationalize unprofitable business in our marketing and distribution segment and the impact of the dock availability at our Pekin campus. Because we sold fewer gallons in Q2 2025 and at average lower prices, net sales were $218 million, $18 million lower than the prior year. Cost of goods sold or COGS was $9 million lower than the same quarter last year. Gross loss was $1.9 million compared to gross profit of $7.6 million, reflecting the following factors. The Pekin campus year-over-year change in unrealized noncash derivatives was negative $13.2 million and the realized derivative gain was positive $7.6 million, resulting in a net unfavorable change of $5.6 million. Although the market crush continued to improve in 2025, we're still on average $0.10 lower than the Q2 of 2024. This equated to $5.5 million of lower crush margin comparatively. As Bryon mentioned, we are heading in the right direction with the market crush averaging $0.30 per gallon for July. High-quality alcohol premiums were $0.15 per gallon less than the same quarter last year due to increased competition during the annual contracting process. This translated to $3 million, which we were able to offset with our ability to shift higher volumes into the more profitable ISCC export markets. This is a prime example of how our strategy to diversify production enables us to take advantage of market opportunities. Our essential ingredients return at the Pekin campus dropped this quarter by nearly 4.5 points to 44.2%. However, this doesn't include the impact of our related hedging activities. Taking our realized hedging gains into consideration, there was no impact to profitability.…

Thank you, Rob. Our purposeful initiatives in 2025 have delivered adjusted EBITDA improvements, even though markets remain volatile. With these successes and positive overall backdrop, we are doubling down to focus on executable projects within our control with short-term paybacks, more immediate returns and long-term benefits. . We are prioritizing these projects by their anticipated cost, timing and ROI impact. We are also evaluating opportunities to improve low-carbon prospects, improve asset monetization and increase CO2 utilization and production. The regulatory environment is positive for the industry and is conducive to creating opportunities for Alto. The change in 45Z have created the opportunity for at least 2 plants to apply for credit totaling approximately $18 million in the next 2 years alone based on our nameplate and targeted carbon-intensity scores and for our other plants to capture more of the export market. Notably as a result of the 45Z updates, the earnings profile and thus the intrinsic value of all our facilities have improved. Finally, working with Guggenheim, we continue to make progress on our Western asset optimization and monetization plan. We are also evaluating strategic alternatives and interest for Pekin and the company as a whole. We will share more information in this regard when appropriate. Before we turn the call to questions, I'll note we will present at the H.C. Wainwright Investor Conference on the 9th of September in New York City and hope to see some of you there. With that, operator, we're ready to begin Q&A with sell-side analysts.

[Operator Instructions] The first question comes from Eric Stine with Craig-Hallum.

This is Luke on for Eric. So first, with the Carbonic acquisition in Colombia already paying off in a big way in terms of profitability, what's your outlook for further operational benefits there? Do you think there's still substantial synergies yet to have been not realized? And how early are we just in the process of realizing some of these benefits?

So we're -- look, it's a good question. We certainly haven't peaked yet with regards to our overall capacity at our Carbonic facility. We produce -- if you want to round numbers out, you're looking at over 100,000 tons of CO2 that's produced at the Columbia facility on an annual basis and about 70,000 capacity, and we're producing on average for sale about 50,000 metric tons. So there's clearly room for growth, and we're working with our core customer to make sure that we get quality set product if there is interest. But it takes time to build that infrastructure and support around that. So we think that's really a nice positive for us without really much lifting that would be required. It would certainly require more capital spend if you wanted to expand the capacity of the Carbonic facility, but it's mostly vessels and the like. So it would be generally a light other general light lift to the extent that the demand increase is there for that need.

Great. That's helpful. And switching gears a little bit for the second question. On the export strategy to Europe, how equipped are you to make this a substantial revenue stream out of Pekin? And does the dock damage recently impede any progress on that front materially? Or is that not really a factor.

So I'll answer that in maybe reverse order. The dock, we have certainly developed workarounds and are working and are grateful for the support that we received from long-standing relationships. That said, it's not as effective as if we were to run it as we have historically with our own dock. So it's imperative that we get our dock repaired and replaced. And we're working diligently to that end, as Rob had mentioned. That said, we have found that as we think back to what we had originally projected and expected around European sales that we are significantly exceeding that and that there continues to be demand for the product. And it's unique in regards to what we can produce because of the high-quality products that we produce at the ICP and the wet mill that make that product unique and eligible for sale there. So we would expect that to continue to improve as well.

The next question comes from Sameer Joshi with H.C. Wainwright.

Yes. I just want a clarification on the SG&A improvement. Was the $1.1 million Eagle Alcohol improvement a onetime thing? Or should we expect that going forward as well.

No, that was a onetime. That was just the change in the deferred acquisition costs associated with acquiring Eagle. And those are the final acquisition costs. So you won't see that going forward.

Yes. Yes. That's what I thought. So going forward, it will be $6.1 million plus $1.1 million or around about those levels SG&A on a quarterly basis.

Yes, that's fair.

Okay. Are there any further reductions specifically on the SG&A front that you can -- not at the COGS, but at the SG&A level that you can realize?

Yes, it's a good question. We took pretty significant efforts to right size our staffing levels to better align with our current organizational footprint. And we've seen the benefit of that. You annualize the impact of that for Q2, we're exceeding our $8 million targeted savings goal, which impacts SG&A and COGS alike. But in regards to SG&A and some other areas, as mentioned in our remarks, we are -- we're looking across the board, and we're scrutinizing all spend. We're trying to be very wise with our liquidity. We've negotiated better terms with some of our key suppliers, both in respect to payment terms and in pricing. We've spoken with our property tax assessors and lowered some of our real estate taxes. And we've also taken the opportunity to in- source some activities that historically we use contractors for. So a lot of these efforts individually aren't significant, but collectively, we think that they'll make a pretty meaningful impact moving forward.

Yes. No. It is really good to see improvement on that front. On the 45Z, $18 million estimated benefits over the next 2 years, are those based on CI improvements that you are targeting? Or are those based on existing facility generating those CI scores and $18 million in savings or other benefits.

Yes. No, that's a good question. That number is based on what our current CI scores are anticipated to be under the GREET calculations. It improves for Columbia, it will qualify in 2025. And then with the ILUC standard change being removed, that will double the impact for 2026 is the anticipation at Colombia. The dry mill, we don't anticipate will qualify in 2025. But again, with the ILUC change, we believe they will qualify in 2026. So any additional changes to reduce our carbon score would be above and beyond these targets.

Right, right. And they will come with associated CapEx, which you have indicated you will deploy based on your ROI calculation.

Yes. And some will have CapEx implications, but others may not. It just has to do with ways to continue to be more energy efficient. And to some degree, it may include sourcing feedstock, as I mentioned in my prepared remarks, we're still evaluating it, but certainly sourcing feedstock that has a lower carbon footprint. And if you do so effectively, there's significant benefit, as you can see. I mean there's an additional $0.80 to be had between where we will be in 2026. And if you get to 0, that's an incredible lift, but still something to aspire to and achieve.

Yes, yes. And just a clarification on that, it just struck me. You have been using only American-sourced feedstock, right? There was nothing being imported for feedstock.

That's correct.

Got it. Just last one. Is there any color or insight into the Western asset monetization process or it's being worked on, but no more details.

Yes, I'll take that one. Yes, we're continuing to work with Guggenheim. We're having conversations with prospective buyers, and we're evaluating the opportunities. The process for transactions of this size and for unique assets being destination plants tends to take a little bit longer to get through the diligence process. Each plant is nuanced in its own way. It takes time to discuss in diligence, the high-protein technology at Magic Valley and then also the recent acquisition of the Carbonic CO2 liquid processing facility. Now with the positive regulatory changes that we've seen around 45Z, that's also going to increase our valuations, which is going to impact the diligence process as well. But also point out that we're considering all options as part of our ongoing efforts to maximize shareholder value. And that's including asset sales potentially in addition to Western assets, the merger or really any strategic transactions that better align the long-term value potential of our company.

And I guess with that, we'll have more to report when appropriate.

This concludes our question-and-answer session. I would like to turn the conference back over to Bryon McGregor for any closing remarks. Please go ahead.

Thank you, operator, and thank you all again for joining us today. We appreciate your ongoing feedback and support. Please have a good day.

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