GEVO - NASDAQ

Good day, and thank you for standing by. Welcome to the Gevo Incorporated First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Eric Fry, Vice President of Finance and Strategy. Eric, you may begin.

Good afternoon, everyone, and thank you for joining us on today's call to discuss Gevo's first quarter 2025 results. I'm Eric Frey, Vice President of Finance and Strategy at Gevo. With me today, we have Patrick Gruber, our Chief Executive Officer; Lynn Smull, our Chief Financial Officer; Chris Ryan, our President and Chief Operating Officer; and Paul Bloom, our Chief Business Officer. Earlier today, we issued a press release that outlines our first quarter 2025 results and the topics we plan to discuss. A copy of the press release is available on our website at www.gevo.com. Please be advised that our remarks today, including answers to your questions, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those statements include projections about the timing, development, engineering, financing and construction of our alcohol projects, our recently executed agreements, potential contracts for carbon credits, our Gevo North Dakota and RNG projects. and other activities described in our filings with the Securities and Exchange Commission, which are incorporated by reference. We disclaim any obligation to update these forward-looking statements. In addition, we may provide certain non-GAAP financial information on this call. The relevant definitions and GAAP reconciliations may be found in our earnings release, which can be found on our website at www.gevo.com in the Investor Relations section. Following the prepared remarks, we'll open the call for questions. I'd like to remind everyone that this conference call is open to the media, and we're providing a simultaneous webcast to the public. A replay of this call and other past events will be available via the company's Investor Relations page at www.gevo.com. I'd now like to turn the call over to the CEO of Gevo, Patrick Gruber. Pat?

Thanks, Eric. What a change since the last quarter of 2024. In this first quarter of 2025, we generated $29 million of revenue. Now this is only with two months of operations under our belt at Gevo North Dakota. The ethanol and carbon sequestration are working well, contributing value as we expected. Our RNG revenue and profitability has also improved. We believe our growth strategy reflected in our acquisition of the plant in North Dakota is going to pay-off and help drive us to be an EBITDA positive this year. This plant not only produces ethanol profitably in a tough market, it also has one of the three operating carbon sequestration operations in the country. We have received approval from the IRS to apply for the 45

Thanks, Pat. Let's go over the numbers. We ended the quarter with $135 million in cash, cash equivalents and restricted cash. Combined operating revenue and other net income was $30.9 million for the first quarter. Our RNG subsidiary generated $5.7 million in revenue during the quarter. This reflects an increase of $1.7 million compared to the previous year, primarily driven by the increased LCFS credit generation due to our improved carbon score in that program, partially offset by lower RIN prices. Regarding our income from operations and non-GAAP adjusted EBITDA numbers, at Gevo North Dakota or GevoND for the two months of February and March, income from operations was $0.5 million and adjusted EBITDA was $1.8 million. This does not include expected growth this year from our monetizing the ethanol 45

Thanks. I'll expand a bit more on operations this past quarter. Since completing the acquisition of Gevo North Dakota at the end of January, we've been working towards integrating that site into the overall business of Gevo and laying the foundation for growth of the site. We're evaluating a number of great opportunities and we've made progress on engineering of an ATJ or alcohol-to-jet plant that we could deploy there. This engineering effort has leveraged our ATJ design from our Lake Preston site, which is saving us time and money for development. And this is all part of our copy paste approach to building out ATJ capacity for ourselves and for others. Regarding operations at Gevo North Dakota, Gevo's first quarter 2025 results reflect the impact of just two months of February and March from Gevo North Dakota. During those two months, Gevo North Dakota operated exceptionally well producing over 11 million gallons of low carbon ethanol, while selling over 40,000 tons of high protein animal feed and 3 million pounds of corn oil, all from less than 4 million bushels of corn ground, that's a yield of about 2.9 gallons of ethanol per bushel, which we're really happy with. We see those as strong volumes and yields during two months of production and this reflects the consistent operational excellence of the facility. In addition to producing those value added energy and food products, we captured and sequestered 29,000 metric tons of carbon dioxide at the site. And with an estimated CI score of 21 for our ethanol using the 45

Thanks, Chris. On the commercial front, we continue to make solid progress for our adjusted EBITDA generating businesses that Chris just discussed and our alcohol-to-jet growth projects. Let me start with Gevo North Dakota and RNG as we are negotiating our first 45

Thanks, Paul. I want to conclude by saying that we are showing that domestic energy production can go hand-in-hand with economic growth, carbon reduction, production of food. You can get all of these things together if it's done right and that's what we're all about. It's more than about just fuel. It's about creating American jobs, supporting farmers, strengthen the rural economy. And unlike a lot of others in the space, we don't have to sit around and wait for government guidance on how sustainable agricultural impacts the 45

[Operator Instructions] Our first question comes from Dushyant Ailani with Jefferies. Your line is open.

Hey, team. This is Whitney Mutalemwa dialing in for Dushyant Ailani. Congratulations on a solid quarter despite a weaker than expected crush margin environment. You ended the quarter with, $135 million in cash equivalents and restricted cash. I'm aware you don't normally provide guidance for cash, but given the Gevo North Dakota acquisition, the $40 million CapEx spend for ATJ60 and just some other general maintenance spend. How should we think about the cash cadence for the year?

Sure. Well, we are going to be spending $40 MILLION this year on ATJ60. We've dialed back the spending on that, although, we are doing some work in shifting resources into the ATJ30 as we're waiting for the timelines to sort out for the DOE. So that'll be less. I think we also -- well, I know for a fact we're also planning on refinancing our RNG plant. We'll announce that shortly as to what we're doing there, but that'll also free up some cash. So you're right. We don't give guidance on cash, but we're we should be in pretty strong shape through the rest of the year.

Got it. I understand. And then just as a follow-up, relating to ATJ30, I don't believe there is a timeline disclosed on this project. Obviously, it's smaller and modular. How would the time frame compare to ATJ60? Yeah. That will be all. Thank you.

Same or sooner than ATJ60 is my guess. Yeah. We have been working on the ATJ30 for a quite a time here, and it is a copy, edit, paste type of an approach and that we already have these designs worked out for the ATJ60. This is about making it smaller and but the concepts are the same, which is that's actually the harder part, getting -- a lot of companies are going to fail because they simply don't know how to design a commercial plant well, we do. That's our background. So those kind of things have already been thought through. So we expect it to be more straightforward. We also expect that, it's going to generate a lot of interest because it's going to be a lot cheaper to build than an ATJ60 that has project financing. So that's going to be very interesting. We'll talk more about it once I have more numbers baked and then who else was going to participate with us up there. But it'd be a project level game again for us in that, except for it's going to be adding on to our site. So it's a pretty -- it's actually quite exciting up there between the -- all that's happening around the 45

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

Thank you. Good afternoon, everyone. Congrats, Pat on all the progress. Great to see the operating revenues and EBITDA starting to come through. I'm just curious, with respect to the carbon abatement product, right, it looks very interesting. Is there an established market for this already that you can tap into immediately or will there be some work required to be done to build that product and create a market for it?

Paul, why don't you go ahead and take this question? This is your work.

Yes, sure. Thanks, Amit for the question. There is already a market that's growing for these durable carbon dioxide removals, right? And so, if we choose to take that value and sell it separate from the fuel, they're traditionally classified as BECCS CDRs. So that's called bioenergy with carbon capture and sequestration. So that's really the market that we're in today and continuing to grow our presence there, which again was really started with the work that the Red Trail owners did before we acquired Gevo North Dakota. Now we're really going to grow that business and look at it as the optionality between selling that carbon value with the fuel or separate from that fuel depending on what we see in the market.

Understood. Thank you. And then with respect to 45

Yeah. So -- yes, we can -- expect to monetize it sooner rather than later. These are credits that exist, and they're already proven. Our CI scores are solid enough that unlike most companies, ours are really solid. I mean, we're metering carbon going down a hole. So, yeah, we expect to monetize it, and that'll surprise the heck out of people, right? And then as far as the EBITDA positive go, that should be overall for the year. We should be EBITDA positive is, what we'd expect, that's what we're shooting for. We're managing the cost side of things carefully. We see that we have these streams of money that can come into us, and we'll use those. But that's our goal is to do this because one of the questions that people always have, they always ask me, when are you going to raise more money, Pat? You're going to run out of cash. No. We aren't. Sorry, that's not the plan. The plan is, we already have enough operations to be self-sufficient, that's the idea. And we can execute projects. We have a well-developed intellectual property portfolio, engineering portfolio, project portfolio, mature projects. It's time to go execute those things. But the idea of big burn with no outcome, no. We'll have to still get money for projects to execute whether we expand ethanol or we do a but, when we -- or we do ATJ, but we expand ethanol. Well, that's what OIC said they're interested in. Great. We'll find out. So we are pretty -- we feel pretty confident in where we are. Now in terms of 45

Understood. Good to hear that. Congratulations, guys. That's all I have. Thank you.

Yeah.

Thank you. [Operator Instructions] Our next question comes from Derrick Whitfield with Texas Capital. Your line is open.

Hey. Good afternoon, Pat and team.

Hey. How are you doing?

Maybe staying on 45

Yes.

Could you speak to the amount you expect to receive for ethanol and dairy, RNG molecules?

Well, it's a -- it's proportional to the CI scores. So, when you have -- we're already at about a 20. Chris mentioned in his comments a 21, and he rounded upward. I'm rounding downward because I think there's a couple other things we can do still. But so, we'll be down in the 20s before taking out indirect land use. So that puts us down, what, another 8, 10 points. That will be the lowest CI score ethanol plant. And so when you figure they're worth, what a couple cents -- you got to get below 50 per -- you got to get a 50% reduction before you get the money, okay. And then we should be it's $0.02 per CI point. So it's going to be pretty healthy. Now what they're trying to do is sponsor economic development, growth, investment, jobs, that's actually what they're trying to do. We are firm believers that, tax credits have to have a sunset. They should not last forever because that creates wrong behavior. Everything's taken when you do that, it really people get starry eyed in what they think they can do. No. They actually should help pay for a plant and its capital and the jobs that are created, and that's the right idea. And that is the approach that we're seeing this congress take in their attitude. It's great. So it's significant. And then on the RNG side, that was fascinating and caught me by surprise. I was shocked that they included that because I wasn't expecting them to. The issue had been that they -- one of the things when you're using a biogas or making a biogas, you can do it rather than letting, whatever the raw material is just digest and spew methane into the atmosphere. You can -- by using the, RNG techniques or the processing, you can collect that, and you will also avoid then methane. It's a methane avoidance factor that goes into the LCA calculations. They punted it in the original 45

Completely agree, Pat. And we're hearing from ministry that you're potentially going to see a repeal against the transferability, that was stated in that house bill. From a senate perspective, what would you guys I mean, would you expect this to be very similar to what we saw from the House? Are there things that you're looking for out of that side that may be more favorable or less favorable for that matter?

No. I thought it was about -- honestly, the only -- the thing that you're right on my transferability after 2027 of the tax credits, I actually think that that's a good thing. And here's why I think it can be a good thing, and this is a can be a good thing, is that, it forces investment in plants if you want that to take advantage of that. So someone who has a tax burden needs to put up capital into a plant in order to get that tax credit, that actually makes a lot of sense from, if that's the intent is build capital, deploy plants. So I kind of like that. And of course, the alternative was that you can just sell the tax credit to anybody. Well, that is convenient. But I like from a policy standpoint, I kind of favor -- I like these things that favor industrial investment and growth. I also like the other language of some -- I forget what bill it was. I was just looking at it today where I was talking about depreciation and all that kind of stuff. They're trying to make it favorable for investment in America. Outstanding. Good guys. This is a good thing. So I like that quite a lot. So it's pretty good. Now remind me of the second part of your question there, Derrick? I lost track of my mind.

I think you covered it well. Just in it relates to if any changes you would expect coming out of the senate side versus the house.

I think I expect noise in the senate side. And the reason I expect noise is there's a fight that's afoot. And it's not in the -- it's not a senate fight. It's a fight of people and there's a group that wants blenders credit. Well, the blenders credit benefits a narrow group of people where a production tax credit benefits a whole huge number of people. And I saw a strong support for a – producing, a producer's tax credit versus a blender's tax credit. And people like us are the ones doing the work anyway and taking the risk. The guys downstream blending aren't doing that. They're just blending. So there's that noise. That's going to create some noise. It's going to show up in the form of maybe some alternatives, but I think they'll get beat back. So we've heard strong support on the senate side, same way as on the house. However, it's all got to go through markup. There'll be twists and turns. And in the end, I think it's going to look a lot like what we just saw from the house, maybe with a couple tweaks, but nothing substantial. Just getting rid of leveling the playing field by indirect land use is a huge deal. This is the main way. Indirect land use is the way that Enviro's penalize U.S. agriculture and raise money for themselves. And, it's not okay. Europe uses it as a bit, a hammer against feedstocks that could win their business. I mean, from an economic standpoint, if they ban it, then they go ahead and turn around and allow their own farmers to do things. So it's going to be very, very interesting to see, let all this dust settle. And the 45

And, Pat, I'd be remiss if I didn't ask you just one last question on your offtake agreements with Future Energy Global. Could you speak to the amount of value you're receiving for Scope 1 and Scope 3 emission credits in dollars per ton? And again, just in generalities here, I'm not looking for the exact number, just so that we can start to think about that incremental value from a voluntary perspective. And then just confirm that it's driven by additionality requirements for the production of staff.

Yeah. Well, so I'm going to have Paul answer this question. But, Paul, if you give it to -- give a range of what's out there in the marketplace of the kind of credits and just kind of what you're seeing and what's happening. Because I think this is an important question because it is, I know that the analysts in general, they're always looking at the LCFS or the 45

Yeah. Sure. Thanks. No, great question and appreciate that. And I mean these values are well north of the types of carbon value that we see in LCFS markets today. So we can't give you --so well over in the hundreds of dollars a ton type of range. So we're pretty excited about that and really makes the case for the value of the carbon abatement and the booking claim case because you're not going to have SAF at every airport, but you've got customers who want to access SAF. And that's where Future Energy Global can really help customers by taking these Scope 1s for airlines or the operators and the Scope 3s for the customer and basically giving them options to do this in booking claim style. So it really expands the capability and the market reach. And that's why we've got -- not just this first deal, but we hope that it's a series of deals that turn out this way.

Yeah. And the other thing that is a, we're trying to make sure that we have access to that market directly rather than losing it to somebody who's blending in the middle because that's in historically, what's happened with some of our competitive companies is that those Scope 3s in particular get lost in the channel somewhere, and then someone else monetized them. We're going to try to keep that for ourselves, and it's an important part of the strategy. And that's, of course, the whole reason of Verity and all the rest, and that really does help us.

Extremely, helpful. Thanks for your time guys.

You bet.

Thank you. Our next question comes from Peter Gastreich with Water Tower Research. Your line is open.

Thank you. Thanks for the presentation today and congratulations on your progress. You've got some great momentum here. Just three questions, I have about ATJ30 in North Dakota. First of all, it's great to hear that you have more than 50% of that capacity that's sold for ATJ30. Are these that entirely new discussions you're having or does this 50% reflect some excess demand perhaps from your volumes at ATJ60? So effectively, are these customers you already have in tow in South Dakota, and now you have the additional volumes that you can give them in North Dakota?

They're different. And the reason they're different is because the contract structures are different. And the contracts for the DOE have to be done in a certain kind of format to lend itself to financing. We think it'll be more equity financed up there in North Dakota. And so, it's a different kind of a contract. FEG is representative of it. And there's other deals that we've done where we've sold, the jet fuel and part of the carbon to somebody else, and we keep the carbon and sell that to some yet again on a third-party. So it's pretty darn interesting. We're on the right track. It's about time we figured this out. And part of it is because the DOE was, the DOE process is onerous. I mean, it's onerous. There's no question. They're very thorough. They're very good. They have a huge success rate with their 97% track record of success. Awesome. But my god, it's tedious. And it's got belt braces, suspenders, and protections, and blah-blah, blah-blah. And one of those things is how contracts are written. Here, we can do we have a wider range of latitude of what we can do. And so that makes it and that makes more sense. We'll eventually, I think, get that roped into ATJ60 as well, but we got to get it going first and make it happen. So we don't tie our contracts to one location. We can go make it anywhere and I mean, move contracts around. We have the ability to do that. It's just that here, we didn't have to start with the burden constraints.

Okay. Got it. Thank you. The second question is, how much expansion is theoretically possible at North Dakota side? I know you can get up to 1 million tons for the CCS capacity, but have you done any preliminary work on how much further you could scale up on ATJ if you wanted to go beyond ATJ30?

Yeah. So here's how we're thinking about is that we've had -- people know about the -- people in the industry. So colleague companies know that we're working on the ATJ30 plant, and the economies of scale for an ATJ30 are still pretty good. They're way, way, way better than a smaller plant. So it's already in the flat part of the curve, and we've made some optimizations. So the economics look pretty good compared even with an -- comparing it to an ATJ60. So we see the opportunity to do an ATJ30, but then do carbon copies of them in other places and other locations in the U.S. and around the world. And remember, our paradigm is, we're building these in a factory with large. And so, that derisk the living heck out of it because everything will be known to work by the time the modules show up on-site. They have to be assembled, and you can do, regional contractors to put it together and avoid these lump sum turnkey EPC project financing projects that really just add a lot of cost. So we like it a lot. We would see that -- the site up there has room to expand ethanol as well. Now that's an important thing because it's actually ethanol that generates more CO2 that we put down a hole. And so that's something we're looking at too, and I got to say, it's pretty darn exciting. I like it a lot. And so you can imagine that we do this -- we would do this in a series of things. We're going to -- I want that ATJ30 because I think that's the commercially viable plant that we can sell around the U.S. and around the world. We have other opportunities for ATJ60 that are copied from the one in South Dakota. We have a couple sites that that'll play really well. We could expand that ethanol plant up there and then add yet another ATJ30 up there. So it's -- I think that's more how the business will unfold. And in the meantime, we'll have parallel projects where we've sold the plant to somebody else for the deployment or we've licensed the technology to them. One of the things Paul mentioned in intellectual property, people forget that we have a hundred plus patents or so that cover the supply chain. We were the first to do ethanol to jet even though other companies claim to have done so. We have the technologies that work. It's with -- we're our partners with Axens. We have a lower cost technology in the future, or even Axens believes that we can win. So people forget that part of it, that intellectual property is a key component. We'll use it here along the way too. So it's a very interesting game. I'm so glad and thankful that we're on solid financial footing. It's really good. And I like what I'm seeing coming out of Congress.

Okay. Great. That's all my questions. Thanks, Pat. Appreciate it and again, congratulations.

You bet. Thank you very much.

Thank you. This concludes the question-and-answer session. I would now like to turn it back to Pat Gruber for closing remarks.

I want to thank you all for listening in on our call. This has been a very exciting quarter for us. I think next one is even going to be better. And is that, my gosh, we're putting -- we're getting revenue up. We're going to get EBITDA contributing. We're offsetting the costs. We're going to continue to make progress through the year. It's quite transformational year actually. And as I just got through saying, we have well developed projects and technologies. These are ready for deployment. And there's many people around the world interested. We got to go make that happen, and it doesn't come at a big cost to us anymore. We've already paid the upfront fees to go and get that done, all the learning curve stuff. We pretty much done it. It's now it's all about deploying things. And you know what? We've got a balance sheet that we can live on with along with the income that we expect going forward. It's a pretty exciting time for Gevo. Best that, sorry, it's the best that I think I've ever seen here, the best opportunity. Thank you all for joining us. Bye-bye.