Group 1 - Alto Ingredients (NASDAQ: ALTO) has experienced significant challenges in operating performance and stock performance over the past few years [1] - The stock price of ALTO has declined from over $9 per share since late 2020 [1]

Core Insights - Alto Ingredients, Inc. has acquired Kodiak Carbonic, LLC for $7.25 million, enhancing its beverage-grade liquid CO2 processing capabilities and securing a long-term sales contract that will positively impact the company's bottom line [2][4] - The acquisition is expected to provide immediate financial benefits and future growth opportunities, with a focus on optimizing product value and expanding the premium ingredients portfolio [4] Company Overview - Alto Ingredients, Inc. is a prominent producer and distributor of specialty alcohols, renewable fuels, and essential ingredients, serving key markets such as Health, Home & Beauty, Food & Beverage, Essential Ingredients, and Renewable Fuels [5] - The company’s customer base includes major food and beverage companies and consumer products firms, indicating a strong market presence [5] Operational Details - Alto Carbonic, located in Boardman, OR, utilizes CO2 from Alto Ingredients' Columbia plant to produce and sell liquid CO2, with a processing capacity exceeding 200 tons daily [3] - The facility has been operational since 2015 and serves various industries, including food and beverage processing and industrial cooling [3] Strategic Goals - The acquisition aligns with the company's strategy to enhance its CO2 operations, improve distribution efficiency, and expand profit margins [4] - By entering into a long-term off-take contract with a leading supplier, the company aims to de-risk future cash flows from the acquisition [4]

Core Insights - Alto Ingredients, Inc. will cold idle its Magic Valley, Idaho facility on December 31, 2024, while continuing to provide terminal services at the plant [2][3] - The decision to idle the facility is based on forecasts of very low to negative crush margins in the West for the first quarter of 2025, aimed at minimizing anticipated financial losses [3] - The company plans to meet its remaining contractual responsibilities and intends to resume operations when the economic environment improves sustainably [3] Company Overview - Alto Ingredients, Inc. is a leading producer and distributor of specialty alcohols, renewable fuels, and essential ingredients, focusing on four key markets: Health, Home & Beauty; Food & Beverage; Essential Ingredients; and Renewable Fuels [4] - The company's customer base includes major food and beverage companies and consumer products companies [4]

Production Capacity and Sales - The company has an annual alcohol production capacity of up to 350 million gallons, including 110 million gallons of specialty alcohols[65] - In 2023, the company marketed and distributed approximately 383 million gallons of alcohols and over 1.5 million tons of essential ingredients[65] - Specialty alcohol production at the Pekin Campus reached 42% of total sales volume in Q3 2024, a 7 percentage point increase from the same period last year[82] - The company expects to sell 90 million gallons of specialty alcohols in 2024 and match this volume in 2025[82] - Total renewable fuel gallons sold decreased by 5.4% to 74.3 million gallons in September 2024 from 78.5 million gallons in September 2023[100] - Specialty alcohol gallons sold increased by 21.0% to 22.5 million gallons in September 2024 compared to 18.6 million gallons in September 2023[100] - Total volume of production gallons sold increased by 0.8 million gallons, or 2%, to 52.8 million gallons for Q3 2024 compared to 52.0 million gallons in Q3 2023[105] Financial Performance - In Q3 2024, the company reported a consolidated gross profit of $6.0 million and Adjusted EBITDA of $12.2 million, compared to $13.6 million in Adjusted EBITDA for Q3 2023[80] - Consolidated net loss for September 2024 was $2,441,000, an improvement from a loss of $3,489,000 in September 2023[96] - Adjusted EBITDA for September 2024 was $12,164,000, compared to $13,596,000 in September 2023, reflecting a decrease of 10.5%[96] - Net sales for the three months ended September 30, 2024, were $251,814,000, a decline of 20.8% from $318,127,000 in the same period of 2023[103] - Gross profit for September 2024 was $5,960,000, representing 2.4% of net sales, compared to $4,161,000 or 1.3% of net sales in September 2023[103] - Consolidated gross profit decreased to $11.1 million for the nine months ended September 30, 2024, down from $18.2 million in 2023, with gross margins of 1.5% and 1.9% respectively[127] - Pekin Campus production segment's gross profit increased by $8.6 million to $22.4 million for the nine months ended September 30, 2024, primarily due to higher alcohol sales margins[129] - Western production segment's gross profit declined by $12.3 million to a gross loss of $14.1 million for the nine months ended September 30, 2024, attributed to lower renewable fuel margins[131] - Net loss available to common stockholders for the nine months ended September 30, 2024, was $18.2 million, an increase of 82.1% compared to a loss of $10.0 million in 2023[135] Operational Changes and Future Plans - The company plans to idle the Magic Valley facility before the end of 2024 unless there are meaningful improvements in overall economics[72] - The anticipated cost for building a second alcohol loading dock at the Pekin Campus is $3.0 million, scheduled for completion in 2025[88] - The company is exploring alternatives to monetize or optimize its Western plants, including potential partnerships[86] - The hot-idling of the Magic Valley plant in January 2024 impacted sales, with the plant restarting in July 2024 but not reaching full capacity until October 2024[104] - Future commitments for capital projects total $8.6 million, scheduled to be satisfied through 2024 and 2025[152] Market Risks and Management Strategies - The company is exposed to market risks related to ethanol and corn pricing, with ethanol sales priced using contracts based on fixed or indexed prices tied to specific markets[155] - A sensitivity analysis estimated that a hypothetical 10% adverse change in ethanol prices could result in a pre-tax income decrease of approximately $34.8 million, while a similar change in corn prices could decrease pre-tax income by about $30.5 million[160] - The company manages its corn purchases through volume contracts to fix prices, but remains subject to market risks due to fluctuations influenced by weather, planting decisions, and global supply and demand[156] - The company employs risk management strategies, including the use of derivative financial instruments like futures and options, to mitigate market risks associated with ethanol and corn prices[158] - The company does not enter into derivatives for trading or speculative purposes, focusing instead on managing risks related to commodity prices[154] Cash Flow and Financial Position - Cash, cash equivalents, and restricted cash decreased by 15.4% to $38.5 million as of September 30, 2024, compared to $45.5 million at the end of 2023[138] - Working capital declined by $3.5 million to $100.0 million at September 30, 2024, due to a decrease in current assets[140] - Cash generated from operating activities was $6.3 million for the nine months ended September 30, 2024, down from $10.2 million in 2023[142] - Kinergy maintains an operating line of credit of up to $100.0 million, with an outstanding balance of $30.6 million as of September 30, 2024[145] - The principal amount outstanding under the Orion Term Loan was $60.0 million as of September 30, 2024[151] Legal and Regulatory Matters - Management believes that ongoing legal proceedings will not materially affect the company's financial condition or results of operations[164] - There have been no changes in internal control over financial reporting that materially affect the company's financial reporting processes during the last fiscal quarter[162]

Core Insights - Alto Ingredients, Inc. published its second Sustainability Report, showcasing its 2023 sustainability metrics and accomplishments [1] - The report emphasizes the company's commitment to sustainability, driven by core values of responsibility, integrity, and quality [2] Sustainability Initiatives - The company offers 100% bio-based renewable products, including specialty alcohols, renewable fuels, and essential ingredients [2] - Alto identified long-term market opportunities for expanding bio-based renewable offerings, such as novel end uses for waste products and carbon markets [3] - The company conducted materiality assessments to focus on key areas like Climate Change, GHG Emissions, and Sustainable Sourcing [3] Certifications and Awards - Alto earned multiple sustainability awards and certifications in 2023, including EcoVadis Bronze Medals for its Alto Pekin and Alto ICP plants [3] - Certifications include Food Safety System Certification (FSSC) 22000, ISO 9001:2015, and ISCC+ for various facilities [3] Market Position - Alto Ingredients serves a diverse range of markets, including Health, Home & Beauty, Food & Beverage, Industry & Agriculture, and Renewable Fuels [4] - The company aims to reduce emissions and enhance profitability through sustainable best practices [2][3]

1 Alto Ingredients, Inc. Q3 2024 Investor Presentation November 6, 2024 Safe Harbor Statement Statements and information contained in this communication that refer to or include Alto Ingredients' estimated or anticipated future results or other non-historical expressions of fact are forward-looking statements that reflect Alto Ingredients' current perspective of existing trends and information as of the date of the communication. Forward looking statements generally will be accompanied by words such as "ant ...

Financial Data and Key Metrics Changes - In Q3 2024, consolidated gross profit improved to $6 million compared to $4.2 million in Q3 2023, while adjusted EBITDA was $12.2 million, down from $13.6 million in the same period last year [9][25][30] - Net sales decreased to $252 million in Q3 2024 from $318 million in Q3 2023 due to lower market prices [25] - The consolidated net loss was $2.4 million, an improvement from a net loss of $3.5 million in Q3 2023 [29] Business Line Data and Key Metrics Changes - The Pekin campus contributed $6.2 million to gross profit, improving tenfold year-over-year, driven by productivity improvements and a positive sales mix [26] - Specialty alcohol sales increased by 4 million gallons compared to the same period last year, reaching 42% of total Pekin sales volume [12][26] - The Western facilities reported a gross loss of $2.3 million, a decline of $3.8 million year-over-year, primarily due to downtime and costs associated with upgrading the Magic Valley facility [28] Market Data and Key Metrics Changes - Q3 2024 began with solid ethanol crush margins supported by strong exports, but domestic demand weakened due to a decline in miles driven [15] - Carbon prices were approximately 80% lower in Oregon and Washington and 20% lower in California compared to the same period last year [16] - Corn prices are expected to remain low, which may increase demand for US corn exports but also strain logistics and drive up transportation costs [17] Company Strategy and Development Direction - The company is focused on sustainability, having finalized a CO2 transportation and sequestration agreement with Vault, aiming to lower its carbon footprint [10][11] - Plans to modernize equipment and facilities are ongoing, including the construction of a second alcohol loading dock at the Pekin campus to improve logistics [13] - The company is exploring alternatives to monetize or optimize its Western assets, including potential partnerships [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that market conditions have changed dramatically, impacting the original EBITDA uplift expectations for the Magic Valley facility [39] - The company remains optimistic about future profitability improvements and is committed to managing changing market dynamics [37] - Despite challenges, management believes that the fundamentals of the technology at Magic Valley are sound and that significant benefits are still expected [43] Other Important Information - The company generated $18.6 million in cash flow from operations in Q3, bringing the year-to-date total to $6.3 million [31] - The company invested $500,000 in CapEx during Q3, with a year-to-date total of $9.8 million [32] - The company completed its 2023 sustainability report, increasing disclosures on environmental, health, safety, and quality metrics [22] Q&A Session Summary Question: What is the outlook for Magic Valley's targeted annual EBITDA uplift? - Management indicated that original expectations are difficult to ascertain due to significant changes in market conditions affecting corn oil and protein values [39] Question: Will there be changes to the moratorium timeline for new permits due to recent ADM leaks? - Management noted no outward response from the EPA and highlighted improvements in operational practices since ADM's approval [41] Question: Have you considered seeking recourse against harvesting technologies for losses incurred? - Management is exploring all options, including potential recourse, but emphasized that the current market state is not permanent [43][44] Question: What is the purpose of engaging Guggenheim Securities? - The engagement aims to evaluate all options for maximizing returns, including partnerships, asset sales, or further improvements [45][46] Question: Will the review consider the sale of the entire company? - Management stated that all options, including the sale of the company, are always considered in the interest of shareholders [47]

Core Viewpoint - Alto Ingredients reported a quarterly loss of $0.04 per share, missing the Zacks Consensus Estimate of $0.02, and showing a year-over-year improvement from a loss of $0.05 per share [1][2] Financial Performance - The company posted revenues of $251.81 million for the quarter ended September 2024, which was 8.41% below the Zacks Consensus Estimate and down from $318.13 million in the same quarter last year [2] - Over the last four quarters, Alto Ingredients has surpassed consensus EPS estimates two times and topped consensus revenue estimates twice [2] Stock Performance - Alto Ingredients shares have declined approximately 27.4% since the beginning of the year, contrasting with the S&P 500's gain of 21.2% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.15 on revenues of $292.05 million, while for the current fiscal year, the estimate is -$0.04 on revenues of $1.04 billion [7] - The trend of estimate revisions for Alto Ingredients is mixed, which may change following the recent earnings report [6] Industry Context - Alto Ingredients operates within the Consumer Products - Discretionary industry, which is currently ranked in the bottom 29% of over 250 Zacks industries [8] - Research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1 [8]

Financial Performance - Net sales for Q3 2024 were $251.8 million, down from $318.1 million in Q3 2023, representing a decrease of approximately 21% year-over-year[3][4]. - For the nine months ended September 30, 2024, net sales were $728.9 million, down from $949.3 million in the same period of 2023, a decrease of approximately 23%[7][8]. - Net sales reported for the three months ended September 2024 were $251,814,000, a decrease of 21% compared to $318,127,000 for the same period in 2023[25]. - Total Pekin Campus sales for the nine months ended September 2024 were $443,718,000, down 21% from $558,969,000 in the prior year[25]. Profitability - Gross profit improved over 40% year-over-year to $6.0 million, compared to $4.2 million in the prior year, despite market fluctuations[2][4]. - Adjusted EBITDA was positive $12.2 million in Q3 2024, down from $13.6 million in Q3 2023, reflecting a decrease of approximately 10%[6]. - Adjusted EBITDA for the three months ended September 30, 2024, was $12,164 thousand, compared to $13,596 thousand for the same period in 2023, a decrease of about 10.5%[20]. - The net loss available to common stockholders was $2.8 million, or $0.04 per share, compared to a net loss of $3.8 million, or $0.05 per share in the prior year[5][14]. - The company reported a net loss of $18.2 million for the nine months ended September 30, 2024, compared to a net loss of $10.0 million in the same period of 2023[8][14]. Sales Breakdown - Specialty alcohol sold increased by 4 million gallons compared to the same quarter last year, positively impacting the sales mix[2]. - Alcohol sales at the Pekin Campus for the three months ended September 2024 were $106,459,000, a decline of 17% from $128,554,000 in the same quarter of 2023[25]. - Essential ingredient sales for the three months ended September 2024 were $41,217,000, down 20% from $51,634,000 in the prior year[25]. - Total marketing and distribution sales for the three months ended September 2024 were $57,464,000, a decrease of 8% compared to $62,271,000 in the same period of 2023[25]. - Western production sales for the three months ended September 2024 were $46,811,000, down 38% from $75,037,000 in the same quarter of 2023[25]. Cost and Expenses - Selling, general and administrative expenses decreased to $7.5 million from $8.5 million year-over-year[4]. - Cost of goods sold for the three months ended September 2024 was $245,854,000, a decrease of 22% from $313,966,000 in the same period of 2023[25]. Assets and Liabilities - Cash and cash equivalents increased to $33.6 million at September 30, 2024, compared to $30.0 million at December 31, 2023[7][15]. - Total current liabilities decreased from $65,288 thousand to $45,102 thousand, a reduction of approximately 31%[17]. - Long-term debt increased slightly from $82,097 thousand to $83,342 thousand, reflecting a 1.5% increase[17]. - Total stockholders' equity decreased from $279,557 thousand to $263,925 thousand, a decline of about 5.6%[18]. Market Trends - Average PLATTS ethanol price per gallon decreased from $2.29 to $1.81, a decline of approximately 20.9%[23]. - Corn cost per bushel decreased from $6.60 to $4.68, a reduction of approximately 29%[21]. - Total renewable fuel gallons sold decreased from 78.5 million to 74.3 million, a decline of approximately 2.7%[21]. - Total essential ingredients sold decreased from 423.2 thousand tons to 391.4 thousand tons, a reduction of about 7.5%[23]. - Consolidated total return on essential ingredients increased from 40.4% to 42.8%, an improvement of 2.4 percentage points[23]. Sustainability Initiatives - The company entered into a CO2 Transportation and Sequestration Agreement with Vault 44.01, marking a significant step towards sustainability[1][3].

Core Insights - Alto Ingredients, Inc. reported its Q3 2024 financial results, highlighting a significant increase in gross profit and a new CO2 Transportation and Sequestration Agreement with Vault 44.01 aimed at reducing carbon emissions [1][2][3]. Financial Performance - For Q3 2024, net sales were $251.8 million, down from $318.1 million in Q3 2023 [4]. - Cost of goods sold decreased to $245.9 million from $314.0 million year-over-year [4]. - Gross profit improved over 40% year-over-year to $6.0 million, despite market fluctuations [2][4]. - Selling, general and administrative expenses were reduced to $7.5 million from $8.5 million [4]. - The net loss available to common stockholders was $2.8 million, or $0.04 per share, compared to a loss of $3.8 million, or $0.05 per share in the prior year [4]. Production and Sales Metrics - Specialty alcohol sales increased by 4 million gallons year-over-year, contributing positively to the sales mix [2]. - Total renewable fuel gallons sold in Q3 2024 were 74.3 million, down from 78.5 million in Q3 2023 [17]. - The average sales price per gallon for the Pekin campus was $2.02, compared to $2.48 in the previous year [17]. Cash and Liquidity - Cash and cash equivalents at September 30, 2024, were $33.6 million, up from $30.0 million at the end of 2023 [5]. - The company's borrowing availability was $92.2 million, including $27.2 million under the operating line of credit and $65.0 million under the term loan facility [5]. Strategic Initiatives - The company is focused on improving profitability and reducing its carbon footprint through the new CO2 Transportation and Sequestration Agreement [3][2]. - The agreement aims to transport and sequester carbon emissions from the Pekin campus into the Mt. Simon sandstone formation in Illinois [1][3].