Welcome to Gevo, Inc. Q4 2018 Earnings Conference Call. My name is Adrianne, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. [Operator Instructions] Please note this conference is being recorded. I will now turn the call over to Geoffrey T. Williams, Jr., Counsel and Secretary of Gevo, Inc. Geoffrey Williams, you may begin.

Good afternoon, everyone, and thank you for joining Gevo's fourth quarter 2018 earnings conference call. I would like to start today by introducing the participants from the company. With us today is Patrick Gruber, Gevo's Chief Executive Officer, and Bradford Towne, Gevo's Chief Accounting Officer. Earlier today, we issued a press release that outlines the topics we plan to discuss today. A copy of this press release is available on our website at www.gevo.com. I would like to remind our listeners that this conference call is open to the media and that we are providing a simultaneous webcast of this call to the public. A replay of today's call will be available on Gevo's website. On the call today and on the webcast, you will hear discussions of certain non-GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in accordance with GAAP. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in the press release distributed today and which is posted on our website. We will also make certain forward-looking statements about events and circumstances that have not yet occurred, including, but not limited to, projections about Gevo's operating activities for the remainder of 2019 and beyond. These forward-looking statements are based on management's current beliefs, expectations and assumptions, and are subject to significant risks and uncertainties, including those disclosed in Gevo's Form 10-K for the year ended December 31, 2018, which will be filed with the SEC on or about March 27, 2019, and in subsequent reports and other filing made with the SEC by Gevo, including Gevo's quarterly reports on Form 10-Q. Investors are cautioned not to place undue reliance on any such forward-looking statements. Such forward-looking statements speak only as of today's date and Gevo disclaims any obligations to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise. On today's call, Pat will begin with a discussion of Gevo's business developments. Brad will then review Gevo's financial results for the fourth quarter of 2018. Following the presentation, we'll open up the call for questions. I'll now turn the call over to Pat.

Thank you, Jeff. And thank you all for joining us today. The position of our company is quite a change from a year ago. We've turned our balance sheet around. We have a solid plan to get to profitability and we have huge growth potential as the markets for low greenhouse gas fuels become real. Now, in terms of our balance sheet, as of today, we have approximately $35.5 million of cash on hand and less than $14 million of debt. The improved capitalization of the company, of course, makes a difference going forward. We have money to get going on the plant to decarbonize our Luverne Facility and significantly improve the profitability of that plant. Between the startup and operation of the Shockwave Dry Frac technologies, which are designed to make feed products that result in higher margins and the decarbonization of the Luverne facility we can see it's possible to make significant improvements in profitability over the next 18 months, maybe even becoming profitable in spite of carrying a fairly hefty burn for the market development and commercialization of IBA, isooctane, jet fuel and other related products. Said differently, we plan to, A, decarbonize the Luverne facility to improve profitability, while concurrently, B, obtaining IBA, isooctane and jet fuel contracts that drive large future growth. Now, we just signed a deal with Haltermann Carless. It is significant because it's a long-term deal, worth up to $80 million for isooctane and specialty markets. The contract is set up to be attractive to debt lenders. It's what people commonly call a financeable take-or-pay contract. It's significant to us because between Haltermann Carless and what we already have from Avfuel, significant capacity, about 50% of our planned expansion of the Luverne facility is spoken for. Recall that our process makes mixtures…

Thank you, Pat. Gevo reported revenue in the fourth quarter of 2018 of $6.6 million as compared to $ 6.7 million in the same period in 2017. The decrease in revenue during the fourth quarter of 2018 is primarily the result of a declining coproduct revenues due to a decline in production volumes, combined with the elimination of the lease of our feedstock storage facilities in our Luverne, Minnesota facility effective January 2018. Cost of goods sold was $9.7 million in the fourth quarter of 2018 versus $9.3 million in the same period in 2017. Cost of goods sold included approximately $0.1 million associated with the production of ethanol, isobutanol and related products and approximately $1.6 million in depreciation expense. Gross loss was $3.0 million for the fourth quarter of 2018 versus $2.7 million for the fourth quarter of 2017. Research and development expense increased by $0.4 million during the fourth quarter ended 2018 compared with the same period in 2017 due primarily to facility expansion investments at Gevo's production facility located at South Hampton Resources to increase production of hydrocarbons. Selling, general and administrative expenses increased by $1.1 million during the fourth quarter of 2018 compared with the same period in 2017 due primarily to increase in employee related expenses and consulting expenses. Within total operating expenses for the fourth quarter of 2018, we reported approximately $0.3 million for non-cash stock-based compensation. For the fourth quarter of 2018, we reported a loss from operations of $6.7 million compared to $4.8 million for the same period in 2017. In the fourth quarter of 2018, cash EBITDA loss, a non-GAAP measure which is calculated by adding back depreciation and non-cash stock-based compensation due to the GAAP loss from operations, was $4.8 million compared with $3.1 million in the same quarter of…

Thank you. [Operator Instructions]. And our first question comes from Amit Dayal from H.C. Wainwright. Your line is open.

Thank you. Good afternoon, everyone. So, Pat, this 1 million gallon isooctane capacity buildout, can you clarify why you are sort of waiting on maybe, say, some external financing to move forward the buildout. And the balance sheet looks relatively strong. Is there any sort of particular reason why you want some sort of external financing to support this buildout?

Yeah. It's because I think that this contract is a good take-or-pay contract and I can get debt financing to do it to help with it, and that will make sure that we don't have to raise money anytime soon. So…

Are you already working on sort of trying to get financing for this or is this going to be dependent on any other agreement like HCS coming through?

We have enough agreements to work on the debt already.

Understood.

And, plus, we have to refinance white box in March of 2020 or buy that or redo the agreement or something. And so, we've got to sort it out sooner rather than later. I don't want to get – I want to make sure we stay well in front of stuff. But, yeah, the reason is that we spent some money on engineering. Our expense went up in the fourth quarter. So, we did spend some money on engineering for some of this stuff that we thought was coming. We're going to finish out. It shouldn't take very long to build the skid, is what we call it, the million gallon plant as a skid. And it's for market development and it doesn't impact. It will, in fact, enhance what we do for the full buildout and its timeline. But it's all about market development, making sure there's enough quantities of product especially in Haltermann Carless serving these specialty markets, the high-end stuff. We want to make sure we get that.

So, how much sort of financing are we talking about, like below $10 million, below $5 million. Like, how much do you need to get this going?

We haven't disclosed it yet. We will. It's not a huge number, though.

Okay, understood. And just following along those lines, does your agreement with HCS require you to deliver certain volumes by certain dates in 2019? Or is this – there's flexibility around this?

There's flexibility around it. We work with them closely. They recognize what we are doing is new and that we – I don't have – I can't build out the big plant, for example, when they need the real quantities because we still have to sell more of our plant, and so its flexible in that regard. We work with them.

Understood. And just moving to the ethanol side of things, of the 18 million gallons you're shipping in – or planning to ship in 2019, how much do you think the low-carbon ethanol will comprise of?

That is a good question. And in 2019, I think that our low carbon projects, that's wind and renewable natural gas, the wind could probably be implemented by the end of the year, although I'm not 100% sure yet, but early next year I would expect it for sure. And then, the renewable natural gas would probably – we start to see a benefit from that in 2020. So, those projects I think we're well-funded for. And they do add quite a lot of value. It's a big CI difference. And you recall how that works, right? The lower the CI score, each CI unit is worth right now about a $0.015 in California. And so, that's a straight up margin add. And so, when we're talking about a 30 or 40 CI score drop, that would be great. That's the kind of thing we're thinking about here and then try to spend the least amount of our own money as possible, while we do it and leverage up debt because each of those projects themselves are financeable.

So, even if you assume 2019, there won't be a lot of low-carbon ethanol in the sales mix, will 2020 be like 90%, 80%? Like, what level of low-carbon ethanol will – you're able to sort of deliver in 2020?

I don't know yet. That's a question for the next quarter probably. I'll have a better time line because we're – if I want to spend my equity that I have on the balance sheet now, I could probably drive it to the – in the first half of the year. I think it's a much wiser decision to use a little bit of our equity and a whole bunch of debt on subprojects or subco-projects, is how we are thinking about it. And that's going to take a little bit longer, but I think it makes more sense. It's much less dilutive for us because otherwise I'd have to go and raise money eventually. So, we're trying to really make sure that we're taking advantage of the money that's out there in the least dilutive way we can.

Understood. Just one last one for me. The hydrocarbon sales in 4Q 2018, who are they to?

It was a mixture of people, but Haltermann.

Okay, understood.

The other thing we did, we talked about – I didn't put it in the press release, I should have. We did expand successfully the plant down in Silsbee to 100,000 gallons a year.

Yes. Actually, I read it in the press release.

Oh, good.

Yeah, yeah, yeah. I'll follow-up with my other questions offline. Thank you so much.

Yeah, sure.

And that concludes our question-and-answer session. I'll turn the call back over for final remarks.

I do expect this year to be a breakout year. Tim Cesarek is very pleased – I'm too – with this Haltermann Carless contract. It is the first domino to fall. And I think it'll be quite interesting to see what happens with us as we bring home more isooctane contracts and jet contracts. So, it should be a good year, I think. Thank you very much for joining us. Bye.

Thank you, ladies and gentlemen. This concludes our conference call. Thank you for participating. You may now disconnect.