ALTO Alto Ingredients Inc

Alto Ingredients, Inc. (NASDAQ: ALTO), a leading producer and distributor of specialty alcohols, renewable fuels and essential ingredients, reported its financial results for the quarter ended September 30, 2024. In a separate press release, the company announced it entered into a CO2 Transportation and Sequestration Agreement (TSA) with Vault 44.01 to transport, inject and sequester carbon from the company’s Pekin campus into the Mt. Simon sandstone formation in Illinois.

Bryon McGregor, President and CEO of Alto Ingredients, said, “Our team is committed to delivering the highest quality products to our customers while improving profitability on a consistent basis. In Q3 2024, we increased the production capabilities and uptime at our Pekin campus, compared to the prior year quarter, reflecting the success of our scheduled repairs and maintenance outage in Q2. As a result, specialty alcohol sold increased by 4 million gallons compared to last year, positively shifting our sales mix. Consolidated gross profit for the quarter improved over 40% year-over-year to $6.0 million despite fluctuating market conditions.

“We are managing through the current market dynamics and positioning the company to leverage the opportunities presented by our unique facilities. In addition, consistent with our strategy to lower our carbon footprint, we entered into an agreement for the safe transportation and storage of our CO2 emissions from our Pekin campus. While we await EPA submission and approval, address financing and source equipment, the TSA marks a significant milestone on our path toward a more sustainable and prosperous future.”

Financial Results for the Three Months Ended September 30, 2024 Compared to 2023

• Net sales were $251.8 million, compared to $318.1 million.
• Cost of goods sold was $245.9 million, compared to $314.0 million.
• Gross profit was $6.0 million, including $3.6 million in realized gains on derivatives, compared to a gross profit of $4.2 million, including $6.2 million in realized gains on derivatives.
• Selling, general and administrative expenses were $7.5 million, compared to $8.5 million.
• Gain on sale of certain idled assets was $0.8 million, compared to none in the prior year period.
• Income from cash grant was $2.8 million in 2023, while none in 2024 as the USDA closed out the Biofuel Producer Program associated with the pandemic.
• Net loss available to common stockholders was $2.8 million, or $0.04 per share, compared to $3.8 million, or $0.05 per share.
• Adjusted EBITDA was positive $12.2 million, including $3.6 million in realized gains on derivatives, compared to positive $13.6 million, including $6.2 million dollars in realized gains on derivatives and $2.8 million income from cash grant.

Cash and cash equivalents were $33.6 million at September 30, 2024, compared to $30.0 million at December 31, 2023. At September 30, 2024, the company’s borrowing availability was $92.2 million including $27.2 million under the company’s operating line of credit and $65.0 million under its term loan facility, subject to certain conditions.

Financial Results for the Nine Months Ended September 30, 2024 Compared to 2023

• Net sales were $728.9 million, compared to $949.3 million.
• Net loss available to common stockholders was $18.2 million, or $0.25 per share, compared to $10.0 million, or $0.14 per share.
• Adjusted EBITDA was negative $0.8 million, including $0.9 million in realized gains on derivatives and $5.4 million in costs related to the biennial outage in the second quarter, compared to positive $17.2 million, including $4.0 million in realized gains on derivatives and the aforementioned $2.8 million USDA cash grant.

Third Quarter 2024 Results Conference Call Management will host a conference call at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time on Wednesday, November 6, 2024, and will deliver prepared remarks via webcast followed by a question-and-answer session.

The webcast for the conference call can be accessed from Alto Ingredients’ website at www.altoingredients.com. Alternatively, to receive a number and unique PIN by email, register here. To dial directly up to twenty minutes prior to the scheduled call time, please dial (833) 630-0017 domestically and (412) 317-1806 internationally. The webcast will be archived for replay on the Alto Ingredients website for one year. In addition, a telephonic replay will be available at 8:00 p.m. Eastern Time on Wednesday, November 6, 2024, through 8:00 p.m. Eastern Time on Wednesday, November 13, 2024. To access the replay, please dial (877) 344-7529. International callers should dial 00-1 412-317-0088. The pass code will be 8828903.

Use of Non-GAAP Measures Management believes that certain financial measures not in accordance with generally accepted accounting principles ("GAAP") are useful measures of operations. The company defines Adjusted EBITDA as unaudited consolidated net income (loss) before interest expense, interest income, provision for income taxes, asset impairments, unrealized derivative gains and losses, acquisition-related expense and depreciation and amortization expense. A table is provided at the end of this release that provides a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, net income (loss). Management provides this non-GAAP measure so that investors will have the same financial information that management uses, which may assist investors in properly assessing the company's performance on a period-over-period basis. Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as an alternative to net income (loss) or any other measure of performance under GAAP, or to cash flows from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity. Adjusted EBITDA has limitations as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of the company's results as reported under GAAP.

About Alto Ingredients, Inc. Alto Ingredients, Inc. (NASDAQ: ALTO) produces and distributes specialty alcohols, essential ingredients and renewable fuels. Leveraging the unique qualities of its facilities, the company serves customers in a wide range of consumer and commercial products in the Health, Home & Beauty; Food & Beverage; Industry & Agriculture; Essential Ingredients; and Renewable Fuels markets. For more information, please visit www.altoingredients.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 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 “anticipate,” “believe,” “plan,” “could,” “should,” “estimate,” “expect,” “forecast,” “outlook,” “guidance,” “intend,” “may,” “might,” “will,” “possible,” “potential,” “predict,” “project,” or other similar words, phrases or expressions. Such forward-looking statements include, but are not limited to, statements concerning Alto Ingredients’ projected outlook and future performance; Alto Ingredients’ repair and maintenance programs, plant improvements and other capital projects, including its carbon capture and storage (CCS) project, and their financing, costs, timing and effects; and Alto Ingredients’ other plans, objectives, expectations and intentions. It is important to note that Alto Ingredients’ plans, objectives, expectations and intentions are not predictions of actual performance. Actual results may differ materially from Alto Ingredients’ current expectations depending upon a number of factors affecting Alto Ingredients’ business and plans. These factors include, among others adverse economic and market conditions, including for specialty alcohols, renewable fuels and essential ingredients ; export conditions and international demand for the company’s products; fluctuations in the price of and demand for oil and gasoline; raw material costs, including production input costs, such as corn and natural gas; adverse impacts of inflation and supply chain constraints; and the cost, ability to fund, timing and effects of, including the financial and other results deriving from, Alto Ingredients’ repair and maintenance programs, plant improvements and other capital projects, including CCS, and other business initiatives and strategies. These factors also include, among others, the inherent uncertainty associated with financial and other projections and large-scale capital projects, including CCS; the anticipated size of the markets and continued demand for Alto Ingredients’ products; the impact of competitive products and pricing; the risks and uncertainties normally incident to the alcohol production, marketing and distribution industries; changes in generally accepted accounting principles; successful compliance with governmental regulations applicable to Alto Ingredients’ facilities, products and/or businesses; changes in laws, regulations and governmental policies, including with respect to the Inflation Reduction Act’s tax and other benefits Alto Ingredients expects to derive from CCS; the loss of key senior management or staff; and other events, factors and risks previously and from time to time disclosed in Alto Ingredients’ filings with the Securities and Exchange Commission including, specifically, those factors set forth in the “Risk Factors” section contained in Alto Ingredients’ Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 8, 2024.

Company IR and Media Contact:                  Michael Kramer, Alto Ingredients, Inc., 916-403-2755, Investorrelations@altoingredients.com

IR Agency Contact: Kirsten Chapman, LHA Investor Relations, 415-433-3777, Investorrelations@altoingredients.com

ALTO INGREDIENTS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited, in thousands, except per share data)
	Three Months Ended September 30,							Nine Months Ended September 30,
		2024			2023			2024			2023
Net sales	$	251,814		$	318,127		$	728,911		$	949,315
Cost of goods sold		245,854			313,966			717,798			931,137
Gross profit		5,960			4,161			11,113			18,178
Selling, general and administrative expenses		(7,510	)		(8,488	)		(24,403	)		(24,281	)
Gain on sale of assets		830			—			830			—
Asset impairments		—			—			—			(574	)
Loss from operations		(720	)		(4,327	)		(12,460	)		(6,677	)
Interest expense, net		(1,867	)		(2,000	)		(5,170	)		(5,299	)
Income from cash grant		—			2,812			—			2,812
Other income, net		146			26			358			104
Loss before provision for income taxes		(2,441	)		(3,489	)		(17,272	)		(9,060	)
Provision for income taxes		—			—			—			—
Net loss	$	(2,441	)	$	(3,489	)	$	(17,272	)	$	(9,060	)
Preferred stock dividends	$	(319	)	$	(319	)	$	(950	)	$	(946	)
Net loss available to common stockholders	$	(2,760	)	$	(3,808	)	$	(18,222	)	$	(10,006	)
Net loss per share, basic and diluted	$	(0.04	)	$	(0.05	)	$	(0.25	)	$	(0.14	)
Weighted-average shares outstanding, basic and diluted		73,835			73,191			73,364			73,464

ALTO INGREDIENTS, INC.CONSOLIDATED BALANCE SHEETS(unaudited, in thousands, except par value)
ASSETS	September 30, 2024				December 31, 2023
Current Assets:
Cash and cash equivalents	$	33,591		$	30,014
Restricted cash	4,903				15,466
Accounts receivable, net	52,038				58,729
Inventories	48,014				52,611
Derivative instruments	36				2,412
Other current assets	6,568				9,538
Total current assets	145,150				168,770
Property and equipment, net	238,892				248,748
Other Assets:
Right of use operating lease assets, net	19,283				22,597
Intangible assets, net	8,057				8,498
Other assets	6,029				5,628
Total other assets	33,369				36,723
Total Assets	$	417,411		$	454,241

ALTO INGREDIENTS, INC.CONSOLIDATED BALANCE SHEETS (CONTINUED)(unaudited, in thousands, except par value)
LIABILITIES AND STOCKHOLDERS’ EQUITY				September 30, 2024					December 31, 2023
Current Liabilities:
Accounts payable			$	17,205				$	20,752
Accrued liabilities				14,255					20,205
Current portion – operating leases				4,440					4,333
Derivative instruments				3,394					13,849
Other current liabilities				5,808					6,149
Total current liabilities				45,102					65,288
Long-term debt, net				83,342					82,097
Operating leases, net of current portion				15,740					19,029
Other liabilities				9,302					8,270
Total Liabilities				153,486					174,684
Stockholders’ Equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; Series A: no shares issued and outstanding as of September 30, 2024 and December 31, 2023 Series B: 927 shares issued and outstanding as of September 30, 2024 and December 31, 2023				1					1
Common stock, $0.001 par value; 300,000 shares authorized; 76,625 and 75,703 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively				77					76
Non-voting common stock, $0.001 par value; 3,553 shares authorized; 1 share issued and outstanding as of September 30, 2024 and December 31, 2023				—					—
Additional paid-in capital				1,043,501					1,040,912
Accumulated other comprehensive income				2,481					2,481
Accumulated deficit				(782,135			)		(763,913	)
Total Stockholders’ Equity				263,925					279,557
Total Liabilities and Stockholders’ Equity			$	417,411				$	454,241

Reconciliation of Adjusted EBITDA to Net Loss
	Three Months Ended September 30,							Nine Months Ended September 30,
(in thousands) (unaudited)		2024			2023			2024			2023
Net loss	$	(2,441	)	$	(3,489	)	$	(17,272	)	$	(9,060	)
Adjustments:
Interest expense, net		1,867			2,000			5,170			5,299
Interest income		(194	)		(179	)		(519	)		(590	)
Unrealized derivative (gains) losses		6,199			8,917			(8,079	)		1,517
Acquisition-related expense		675			700			2,025			2,100
Asset impairments		—			—			—			574
Depreciation and amortization expense		6,058			5,647			17,860			17,382
Total adjustments		14,605			17,085			16,457			26,282
Adjusted EBITDA	$	12,164		$	13,596		$	(815	)	$	17,222

Sales and Operating Metrics (unaudited)
	Three Months Ended September 30,							Nine Months Ended September 30,
		2024			2023			2024			2023
Alcohol Sales (gallons in millions)
Pekin Campus renewable fuel gallons sold		31.1			34.4			93.6			104.4
Western production renewable fuel gallons sold		18.0			22.2			38.2			46.6
Third party renewable fuel gallons sold		25.2			21.9			89.3			82.4
Total renewable fuel gallons sold		74.3			78.5			221.1			233.4
Specialty alcohol gallons sold		22.5			18.6			69.8			56.6
Total gallons sold		96.8			97.1			290.9			290.0
Sales Price per Gallon
Pekin Campus	$	2.02		$	2.48		$	1.96		$	2.46
Western production	$	2.02		$	2.57		$	1.94		$	2.63
Marketing and distribution	$	2.17		$	2.69		$	2.01		$	2.62
Total	$	2.06		$	2.56		$	1.97		$	2.53
Alcohol Production (gallons in millions)
Pekin Campus		53.4			51.8			157.0			158.1
Western production		19.2			22.5			37.5			47.3
Total		72.6			74.3			194.5			205.4
Corn Cost per Bushel
Pekin Campus	$	4.40		$	6.29		$	4.55		$	6.72
Western production	$	5.52		$	7.37		$	5.69		$	7.91
Total	$	4.68		$	6.60		$	4.76		$	6.98

Sales and Operating Metrics (unaudited)
	Three Months Ended September 30,									Nine Months Ended September 30,
		2024				2023				2024				2023
Average Market Metrics
PLATTS Ethanol price per gallon	$	1.81			$	2.29			$	1.72			$	2.32
CME Corn cost per bushel	$	3.92			$	4.98			$	4.23			$	5.94
Board corn crush per gallons (1)	$	0.41			$	0.51			$	0.21			$	0.20
Essential Ingredients Sold (thousand tons)
Pekin Campus:
Distillers grains		83.7				85.3				251.1				252.5
CO2		53.5				48.9				135.9				139.0
Corn wet feed		30.0				28.3				80.4				70.0
Corn dry feed		26.5				22.1				65.2				67.3
Corn oil and germ		18.8				17.8				54.1				55.6
Syrup and other		8.0				9.2				28.6				28.5
Corn meal		9.8				8.2				26.1				27.8
Yeast		6.3				6.4				17.8				19.7
Total Pekin Campus essential ingredients sold		236.6				226.2				659.2				660.4
Western production:
Distillers grains		116.6				144.6				250.2				307.7
CO2		14.7				14.9				43.1				41.7
Syrup and other		21.4				35.2				37.6				71.6
Corn oil		2.1				2.3				4.5				5.2
Total Western production essential ingredients sold		154.8				197.0				335.4				426.2
Total Essential Ingredients Sold		391.4				423.2				994.6				1,086.6
Essential ingredients return % (2)
Pekin Campus return		49.0%				44.8%				49.7%				44.1%
Western production return		28.6%				31.3%				33.0%				32.3%
Consolidated total return		42.8%				40.4%				46.0%				41.2%

                                            

(1)		Assumes corn conversion of 2.80 gallons of alcohol per bushel of corn.
(2)		Essential ingredients revenues as a percentage of total corn costs consumed.

Segment Financials (unaudited, in thousands)
	Three Months Ended September 30,							Nine Months Ended September 30,
	2024			2023				2024			2023
Net Sales
Pekin Campus, recorded as gross:
Alcohol sales	$	106,459		$	128,554			$	315,494		$	388,629
Essential ingredient sales	41,217			51,634				127,297			169,220
Intersegment sales	321			363				927			1,120
Total Pekin Campus sales	147,997			180,551				443,718			558,969
Marketing and distribution:
Alcohol sales, gross	$	54,531		$	58,805			$	179,118		$	215,741
Alcohol sales, net	71			74				169			292
Intersegment sales	2,862			3,392				8,002			8,734
Total marketing and distribution sales	57,464			62,271				187,289			224,767
Western production, recorded as gross:
Alcohol sales	$	36,395		$	57,159			$	74,084		$	122,477
Essential ingredient sales	10,408			17,841				24,184			40,614
Intersegment sales	8			37				(122)			99
Total Western production sales	46,811			75,037				98,146			163,190
Corporate and other	2,733			4,060				8,565			12,342
Intersegment eliminations	(3,191)			(3,792)				(8,807)			(9,953)
Net sales as reported	$	251,814		$	318,127			$	728,911		$	949,315
Cost of goods sold:
Pekin Campus	$	141,823		$	179,995			$	423,135		$	546,591
Marketing and distribution	53,553			58,051				176,676			212,923
Western production	49,079			73,584				112,762			165,401
Corporate and other	2,952			3,538				8,690			9,322
Intersegment eliminations	(1,553)			(1,202)				(3,465)			(3,100)
Cost of goods sold as reported	$	245,854		$	313,966			$	717,798		$	931,137
Gross profit (loss):
Pekin Campus	$	6,174		$	556			$	20,583		$	12,378
Marketing and distribution	3,911			4,220				10,613			11,844
Western production	(2,268)			1,453				(14,616)			(2,211)
Corporate and other	(219)			522				(125)			3,020
Intersegment eliminations	(1,638)			(2,590)				(5,342)			(6,853)
Gross profit (loss) as reported	$	5,960		$	4,161			$	11,113		$	18,178