Welcome to the Gevo’s Second Quarter 2018 Earnings Conference Call. My name is Sheryl, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will be conducting a question-and-answer session. Please note that this conference call is being recorded.

I will now turn the call over to Geoffrey Williams, Gevo's General Counsel and Secretary. Please go ahead, Mr. Williams..

Good afternoon, everyone and thank you for joining Gevo's second quarter 2019 earnings conference call. I would like to start today by introducing today's participants from the Company. With us today is Patrick Gruber, Gevo's Chief Executive Officer, and Carolyn Romero, Gevo's Vice President Controller and Principal 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 this 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 was filed with the U.S Securities and Exchange Commission or SEC 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 and strategy. Carolyn will then review Gevo's financial results for the second quarter of 2019. Following the presentation, we will open up the call for questions. I will now turn the call over to Pat..

Thanks, Jeff. Today I have a short presentation that makes clear our plans and our status. Now this presentation is available on our website and part of the webcast under the investors webcast tab. Before I get to that, though, here are some short takeaways. We are making great progress on our commercial off take agreements.

We are very glad to have Air TOTAL signed up. You can read the press release, but don't need to go into it here, its goods news though and it is a sign of things to come. We are engaged with more energy companies at airlines than ever before. In fact we have something like over hundred million gallons of jet isooctane under discussion for contracts.

We only have about five million gallons to sell, to justify building out our big plant in Luverne, Minnesota that we are talking about for a while. 100 million gallons on a negotiation, five million gallons of soft and I'm pretty sure we are going to get that done.

In fact, it is my hope that we maybe will even get to build much more than a 10 million to 12 million gallons hydrocarbon plant and maybe it needs to be much, much bigger. That would be great. We have several LOI or Letter of Intent from potential lenders and investors in the table, this is good.

I'm very confident we will be able to get deals done to fund what we want to do. We also have some who want to invest equity in our production assets, we will be sorting this out over the next few months, you will have to stay tuned, because if this come together it is going to be very exciting.

Now I’m going to take you through this deck, this presentation. It will help put in the context of some of our recent announcement and what is coming. Slide 2, is the standard disclaimer.

On Slide 3, one of the very important things I want to drive home is that we are going after the whole gallon of fuel not 10%, not 15%, not 30% like ethanol, we are going after the whole gallon. Yes, it can be done. Yes it will take time and work, but it changes the perception of what biofuels can do.

Now imagine this, the whole gallon of gasoline with a net zero carbon footprint, imagine if it was negative, that would be better than what electricity can do. Same thing with jet fuel. We see our product as enablers to go after that whole gallon of gasoline or jet fuel.

Now the place to start is with isooctane that is the basis of gasoline and are sustainable aviation fuel or jet fuel.

We drive the carbon footprint down by selecting the right raw materials to begin with start to make the fuel and by developing the right energy sources for our manufacturing process and delivery products that meet all the market requirements to performance.

People often ask me if I'm worried about electric cars, I like electric cars and I think they can be an important contribution to reducing greenhouse gases if and only if, we reduce the greenhouse gases from electricity production. If the Greenhouse gases from electricity production go down then companies like us who use electricity also benefit.

Our fuel GHG footprint goes down as the electrical grid becomes more green. So let's get after it. Even with successful electrification now and the green of electricity. I doubt that all cars that use gasoline are going to be eliminated.

I’m happy going after the giant niche of gasoline for those areas where electrification can't work as practical or just simply takes too long. Same story with jet fuel, I doubt jets are going to be electrified soon. Let's reduce eliminate the GHGs from their fuel.

Slide 4, is a reminder of what we have to consider in making our fuel with low or no net carbon greenhouse gas emissions. We use renewable carbon that originations from carbon dioxide that is CO2 in the atmosphere, we too are capturing carbon from the atmosphere for our raw material.

We just do it through plants the things that grow, raw material is part of what we need low carbon, green energy is the other part. When we measure our carbon footprint the majority of our emissions comes from the fossil-based natural gas and fossil-based electricity use.

Eliminating the fossil carbon from energy sources makes a major reduction in our carbon footprint. Slide 5, shows the way to think about our business system.

We are working to set up in Luverne, carbon dioxide is captured by corn, notice our corn is happy, that is because farmers in our area are very good and use good farming techniques better than most in the USA. With their advanced farming techniques they are capturing and sequestering carbon in the soil.

We calculate about two pounds of carbon oxide per gallon of jet fuel actually sequestered in the soil based on past studies and I think that we shall see increases going well beyond that because farmer techniques have improved further.

Note that the corn that we use is not the stuff of corn on the crop, it is not the stuff in can corn, is not what cornflakes are made from. No, this corn isn't even easy to get into the food chain without significant processing. The corn is grown for its protein and carbohydrates.

That's why this corn is grown, it’s very efficient at generating protein. We separate the proteins and carbohydrates. We use to carbohydrates to make our alcohols by fermentation.

We can sell those alcohols, that is the ethanol in the isobutanol as the gasoline blend stocks or better yet use them as raw materials to make gasoline and jet fuel using chemistry. It is a large amount of protein we produce its about 10 pounds per gallon on a jet fuel basis. We sell the protein as the food chain its food and fuel for us here at Gevo.

I know of no other process that generates this much protein for the food chain while making jet fuel or gasoline.

We sell our protein as animal feed the animals eat the protein, they eat the feed they make manure, we are working on and setting up a subsidiary that takes manure, digests it to make renewable natural gas that we can take back to our plant for production process or sell to the pipeline, we are well along at getting this established and we expect to finalize the deal soon.

We also have several options for financing with debt proposals on the table. We will be sorting it out in the next month or two. We are planning to call this renewal natural gas subsidiary business Gevo Energy with supply renewable natural gas to our Luverne plant and the pipeline is a good opportunity.

We are planning on reducing electrical load by working with Jewel Energy to establish wind power. This project is very far along, we are waiting for the final documents. I appreciate the city of Laverne and all the parties that are working to make this happen, they are doing a great job.

We expect that what we will pay the city for electricity will remain the same, but we will get the value from renewable credits. Renewable electricity, renewable natural gas, reduce our footprint that is what this game is about and then capturing the value through delivered fuels.

One final point of the slide, you saw the press release [Locust] (Ph) just last. Locust has technology that could boost the amount of carbon capture in the soil by a lot, maybe even an order of magnitude or more. So instead of talking about two pounds per gallon maybe much, much more we are keen to find out.

I really believe that improved agriculture offers a tremendous opportunity for capturing carbon while growing raw materials for people like us. Maybe you folks saw the article last week in New York times our farmers may be the answer GHGs.

I think that with the right systems in place, the reward improvement back to the farm level agriculture will be increasingly important. Instead of running away from the food and fuel, we can see how to generate lots of protein for food not giving up anything on that front and capture more carbon, reducing our footprint even further.

On Slide 6 the purpose of this one is to remind us all that our production technology works with feed stocks too, I care that the feed stocks are sustainable, available and cost effective with use egg residues, wood, waste wood, municipal solid waste or even foods waste offer a gain for us. Now one of my favorites is rice straw.

We work with Praj on that for India using rice straw potential to solve the waste problem while making jet fuel and gasoline. Slide 7, shows the greenhouse gas reduction potential of our hydrocarbon fuels. On the left is greenhouse gas profile of jet fuel isooctane. If we replace the carbon and energy we can get to very low levels of that emissions.

On the right side of the slide shows we are tending to do it at Luverne. The chart in the right of the slide has lots of dots. The dots represent fuel ethanol plants by various feed stocks. These values are reported carbon index scores for individual production plants. We are targeting to be well below all the others.

That is what I’m showing by the green line. If we replace the fossil-based natural gas with renewable natural gas and replace the fossil-based electricity with renewable electricity. We expect to be at or below that green line that I have shown on that chart using the California type scoring system. Moving to Slide 8.

The left side of Slide 8 shows the greenhouse gas profiles of farmers who supply us. On average our farmers generate 50% lower greenhouse gas emissions compared to the national average. If you look at the bars in the left side of that graph you can see that some farmers can do negative greenhouse gas emissions.

The notes in the blue arrow above that chart declares our intent. We intend to track how things are grown at individual farms and create a reward for farmers who supply lower carbon footprint corn.

On the right side of this slide there is a chart that shows a greenhouse gas profile that for growing corn depends in large part on current trimming practices and also on how one uses nitrogen for fertilizer. The blue box is pointing at a bar talking about reduced tillage practices.

We had an announcement last week for ISCC Plus certification, they are certifying agency in the EU and they certified this type corn supply for through our isobutanol at our plant. We are pleased that they determine the same amount of emissions that we had measured and predicted.

Note that the bar that the right at where that arrow is pointing is negative that is because of how they use manure on the field displacing some nitrogen and that they use no kill because that is instead of doing or scrip tiling, appalling it will be using drills for example. And on this next slide I’m going to show you why it matters.

The chart on Slide 9 shows the greenhouse gas footprint of our hydrocarbon fuels using the methodology required under Europe's EU RED II policy. The first green bar next to the black bar shows that using our farmers and the average values from the collection of farmers we do very well been below the requirements for EU RED policies.

The next bar over is negative, think about that negative carbon fuel for isooctane negative. This is result of using corn and isobutyl, we just certified with ISCC Plus that's a big deal. Negative carbon fuels, yes it could be done. Moving to the right you can see its value for greenhouse gas emissions could even go more negative.

No till corn would give a negative 30 to 40. If we count techniques like Locust suggests then it might be possible to get a much, much, much more negative carbon profile.

These negative profiles are game changing, imagine gasoline with its greenhouse gas profile limited while the raw material is certified to be sustainable and while producing large amounts of protein for the food chain its potentially game changing.

To accomplish all this improve what we are doing we are going to have to track farms, corn, how its produced, what the sustainability practices are, get it all certified and we have track where we send our fuel, we have some very extremely creative ideas on how to do all this tracking using DLP technology. I will talk more about that in the future.

Slide 10, shows the business system we are trying to build at Luverne, this is stage one, it includes right frac which is already deployed, wind power, which is the process of being deployed and million gallon hydrocarbon plant that will produce jet fuel and isooctane.

The purpose of the million gallon plant is not to improve technology very did that, but to provide larger amounts of isooctane for Haltermann and to supply add fuels and to supply Air TOTAL as well from others. The capacity of this plant is already sold out and mad some attractive investment and that's why that lenders are interested in this.

We project that will be about $60 million investment to build a one million gallon plant and its backed by take-or-pay contracts. On Slide 11 this shows how we are thinking of setting up Gevo and its subsidiaries. Agri Energy is actually the official name for a Luverne site and its production assets.

We plan on building one million gallon hydrocarbon plant at Luverne once we get financing. We expect that it will be deployed in 12-months or less, because it would be skid mounted and delivered mostly built.

We plan to setting up fuel energy which develops from renewable natural gas projects, we already have an LOI in place for our first biogas project. This is contemplate to be done with USDA loan guarantees even. The notes at the top of the slid in yellow tells what we are working on. $40 million of debt at Gevo achievable.

If we aren’t able to get the $40 million, we would use about $50 million to pay off White Box or alternatively we may refinance our debt with White Box who has been a very good partner for us.

We would use $60 million to build million gallon hydro carbon plant and the remaining money we would use to contribute equity at Gevo Energy or for other purposes.

Now suppose we did all of what I just described, we would have about 20 million gallons of low carbon footprint ethanol that we would get into California that is where we would be targeting about one million to hydrocarbon.

The ethanol that we target for California should be thought of, it is just general commodity ethanol this is like a specialty product that's value-added because of its low carbon footprint, which should give us preference on people wanting to buy our stuff and paying a premium price because of lower carbon footprint.

Now the cash flow for all of this set of activities models out to project that we could generate enough cash to be profitable depending upon how much we spend to do the development, to build a big business with isobutanol on jet fuel. It is pretty exciting. The next two Slides 12 and 13 show what we call Step Two.

This includes the build out of a large isobutanol plant and the 10 million to 12 million gallon per your hydrocarbon plant. This is what we actually are targeting and are trying to get accomplished have been for so long and we are getting there making progress.

But getting them still is large off take agreements for the remaining unsold five million gallons capacity, I mentioned earlier that Tim has got 100 million gallons in discussion, I think he is going to get the five million gallons pinned down with take or pay and will get on with this, we are going to get it nailed soon.

I hope that we get enough contractor we can build an even bigger plant much bigger than 10 million to 12 million gallons per year that's my hope. We will see. We already have lenders in the [Audio Gap]..

- 9.4 million in the same period in 2018. Cost of goods sold was 8.5 million in the second quarter of 2019 versus 10.7 million in the same period in 2018. Cost of goods sold included approximately 6.9 million associated with production of ethanol, isobutanol and related products and approximately 1.6 billion in depreciation expense.

Gross loss was $3.4 million for the second quarter of 2019 versus $1.3 million for the first quarter of 2018.

Research and development expense decreased by $0.5 million during the second quarter ended 2019 compared to the same period 2018 due primarily to a decrease in cost associated with our South Hampton facility offset by an increase in personal consulting expenses.

Selling, general and administrative expenses increased by $0.5 million during the second quarter of 2019 compared with the same period in 2018 due primarily to increase in personal, travel, legal and investor relations cost offset by decrease in professional fees.

Within total operating expenses for the second quarter of 2019, we recorded approximately $0.1 million for non-cash stock-based compensation. For the second quarter of 2019, we reported a loss from operations of $6.5 million compared to $4.4 million for the same period in 2018.

In the second quarter of 2019, cash EBITDA loss, a non-GAAP measure which is calculated by adding back depreciation and non-cash stock-based compensation due to GAAP loss from operations, was $4.7 million compared to $3 million in the same quarter of 2018.

Interest expense for the second quarter of 2019 was $0.8 million, a slight decrease compared to the same period in 2018. For the second quarter of 2019 we recorded a net loss of 7.1 million by a loss of $0.60 per share based on weighted average share outstanding of 11, 885,524 million shares.

This compares to a loss of 11.5 million in the second quarter of 2018, our loss of $7.19 per share. In the second quarter 2019 Gevo recognized net non -cash gain totaling $0.1 million due to changes in the fair value of certain of our financial instruments, such as warrants and embedded derivatives.

Adding back these non-cash gains resulted in a non-GAAP adjusted net loss of $7.2 million in the second quarter of 2018 or a non-GAAP adjusted net loss per share of $0.61. This compares to a non-GAAP adjusted net loss of $5.3 million in the second quarter of 2018 or a non-GAAP adjusted net loss per share of $3.31.

Having a stronger balance sheet is important to moving our business forward, developing and growing our business. With that, I would like to thank all of our shareholders for their continued interest and support in Gevo. Let's open up the call for questions.

Operator?.

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

Thank you. Hi Pat. So from your comments span it seems that there is quite a large appetite for jet fuel and isooctane products. I know you are negotiating, financing et cetera to build everything out.

The question I guess is are you moving as fast as you can or are you just held up a little bit because of bureaucracy, formalities, processes et cetera, I mean what is the time line on securing all this and starting to actually meet this type of customers demand at least with the one million gallon level first and then going on to step two of your plan..

Right, so there is similar parts for this right, one of them is decarburization because that is almost a pre-requisite that we have to reduce carbon footprint and that it give us the most secure and profitable position for delivering our fuels. The fuel energy and wind projects is very furlong I expect to sign definitive documents very soon.

It is just a matter of days or weeks could be I suppose as the large get to it in the final details, but it is something very, very soon. And that's a big deal because that wipe out the vast majority of our electrical footprint. The biogas projects we are going to get them underway and then we will get Gevo Energy going.

We have several parties interested in both off taking gas from us, but I want that gas for our plant, because it lowers carbon footprint. We think it is more viable putting it through our biofuel and selling it to a pipeline and we have a number of people offering to finance that.

So we are in the midst of here, lots of we got to get to finish off the deal with the farmers, the dairy, the banks et cetera, but that's going to happen I think I’m very, very confident that is a nice business onto itself and its going to lower our carbon footprint.

And as far as the build out go, we have several parties interested in financing the one million gallon hydrocarbon plant that is already designed, its ready to be build that is just waiting on the financing.

I don’t want to spend the money that I currently have on the balance sheet for that, because we have good take-or-pay offering in place to profitable plant, good paybacks, it is a nice deal and people can see that on the debt side and they like it. So were going to trying get our set up so we can take advantage of that.

And then in the overall big plant we are going to have, I hope we will have the financing in places to deliver this contracts will be ready to go. So that means it won't take very long. So the timeline would be in 12-months from now we could have our one million gallon hydrocarbon plant online.

I would expect something like that maybe will be 13-months or 14-months but it is in that kind of range because we skid mounted, to build a big plant it is going to probably take two and half years or less maybe two years, and so we got to get it finance and that will be the gating item.

But like I said, we got lots of people now negotiating with us on financing things..

Understood. With respect to sort of how you are managing the business right now, ethanol prices pressured in the market at this point, how are you planning to manage production for the rest of the year - minimum..

Yes, sure. I’m glad you asked that, because this is like one of my irritating things is that our profitability has been driven by ethanol, we are more of a milestone business, yet we have to report these things earnings-per-share it is quite irritating to see these sententious reports about how we missed.

We are able to slow down our grind, reduce our grind, we produce less when - or stop even put a pause on when ethanol price are low and core prices, I mean it is stupid to keep grinding once you are going to negative contribution margin space, so we don't do that, it is a policy we just don't do that.

So throughout the year, you are going to - compared to what we thought the margins were going to be for the being of the year, we are going to have less overall margin, less overall revenue from ethanol. Animal feeds have been doing pretty good, but we turn it down and we had to install the dry frac system, which by the way is working pretty good.

You know, we just didn't hurry and rush and turn it back on when corn prices are high that would be stupid and self-defeating..

In the press release you talked about hydrocarbon shipments being delayed this quarter could you give any color on what happened over there?.

Part of it was due to an electrical outages down in the Huston area.

And that was probably due to storms, probably due to just plain old infrastructure issues like a transformer blew or something like that and that caused power to be down, that caused stuff to fall behind in production, they made up the production, the plant is working quite well and then try to get the stuff out the door so we could hit this quarter, but it just didn’t make it in time..

Understood. And then just one final for me. In terms of inventory right now what is in it, it doesn’t - would you comment on just what the isobutanol..

We got quite a lot of isobutanol our hydrocarbons were - we don't have very much in inventory per say not because plants were generally small there anyway, but we are shipping that stuff generally as soon as we can, we have some jet fuel that is now committed because of TOTAL and air fuels..

Got it. Those are the questions and I will take my other questions offline. Thank you so much..

Thanks, Dayal. No problem..

And we have no further questions in queue at this time..

Alright, in that case then I thank you all for participating in this conference call. These slides are important, take a really good look at them. This is really telling what we are intending to do, planning to do in our business. There is a lot of interest, lot of excitement.

The financing thing is quite the different story, is the debt finance we are talking about here and its quite interesting and it is based on having these off-take agreements in place which in part we have already. Thanks for joining us. Bye, bye..

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