Gevo, Inc. 2026 Q2 Earnings Call

Eric? Good afternoon, everyone, and thank you for joining us on today's call to discuss Gevo's second quarter results.

I'm Eric Frey, Vice President of Finance and Strategy at Gevo. With me today, we have Paul Bloom, our Chief Executive Officer, and Leke Agiri, our Chief Financial Officer. We also have Kyle James, our Chief Commercial Officer, and Greg Hanselman, our Executive Vice President of Operations and Engineering. Earlier today, we issued a press release that outlines our second quarter 2026 results and some of the topics we plan to discuss. Copies of the press release are 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 potential expansion and debottlenecking of our Gevo North Dakota plant, our expected future cash flows and adjusted EBITDA, our expected carbon business revenues, our expected future tax credit monetizations, 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, Paul Bloom.

Paul? Good afternoon, everyone. Gevo is a strong, growing business.

Our operating results this quarter demonstrate that our company is set to deliver revenue growth and positive cash flow from operations. Our carbon strategy is working well. We are positioning the business for 3 stages of expansion that build on our existing operations and capture near and medium-term opportunities. Long term, we believe the businesses we are building today will serve as the blueprint for future growth. Our results also demonstrate that Gevo is not just a future story. Revenue increased 7% compared to the last quarter. Gross profit increased 70% in the past six months compared to the same period last year. Some of that increase reflects six full months of benefit from the Red Trail assets we acquired instead of five months during the same period last year.

The majority of that increase reflects a durable strengthening of our core low carbon ethanol and renewable natural gas businesses. In the second quarter, our team continued to deliver on critical milestones we've communicated previously. Our debottlenecking activities in our Gevo North Dakota facility remain on target to increase our low carbon ethanol capacity to 75 million gallons per year by the end of 2026. We also advanced new carbon market pathways, identified new cost efficiencies, and optimized the sale of carbon attributes. As a result, we now expect full year 2026 non-GAAP adjusted EBITDA of more than $60 million, which is double our previous estimate. These developments are significant. They reflect a disciplined execution to unlock new revenue opportunities.

A particularly important milestone is our recent Canada Clean Fuel Regulation, or CFR, pathway approval for low carbon ethanol with carbon capture and sequestration, which was granted in the second quarter. This pathway gives Gevo access to a more than 1 billion gallon per year compliance market for our low carbon ethanol beginning in the third quarter and further diversifies our cash flows internationally. It also gives us another lever to improve returns from our carbon business by directing carbon value to the markets where it is worth the most, whether bundled with our fuels in compliance markets or sold separately in voluntary markets. Importantly, the approval also applies retroactively to credits we banked for low carbon ethanol sold into Canada beginning in 2025. We've already sold approximately 17 million of these bank credits to be recognized in the third quarter.

Going forward, we believe our carbon business, based on current capacity and market conditions, can deliver over $30 million per year in revenue on a run rate basis, excluding our bank CFR credit sales. We're not simply producing low carbon ethanol co-products in RNG. Those commodity products are a means to deliver energy that drops into supply chains today while also driving down carbon intensity, producing more efficiently, capturing and storing carbon, and selling high-quality credits into compliance and voluntary carbon markets. Importantly, we believe the carbon business model we are building today will be the same durable model we use in the future for SAF, isobutanol, and other renewable fuels and chemicals powered by our Verity Carbon Accounting digital solutions platform. We expect to grow with discipline by scaling the businesses we have today and delivering the products and solutions our customers and markets demand.

At Gevo North Dakota, we are focused on growing our low carbon fuel and carbon businesses through a 3-stage plan. First, de-bottlenecking the plant. Second, expanding capacity to double low carbon ethanol and carbon capture, and 3, producing SAF. Stage 1 is our de-bottlenecking initiative to increase low carbon ethanol co-products, carbon capture, and associated incentive volumes by approximately 10%-15% by the end of this year. Meaningful progress was made during the second quarter. We remain on track and on budget to deliver this anticipated extra capacity, thereby enhancing revenues, growing adjusted EBITDA, and expanding our margins in 2027. This near-term expansion is fully funded and budgeted for this year and builds on our asset we already own and operate. We believe our Gevo North Dakota complex can create more value in the near term while also supporting longer-term growth.

Stronger cash generation from Gevo North Dakota helps us reduce risk and enhances our future financing flexibility. Our Gevo North Dakota complex is better suited to support a strategic platform growth than the Lake Preston South Dakota site we were previously developing. Gevo North Dakota combines one of the strongest active on-site carbon capture and sequestration capabilities in the world, with access to advantaged local feedstocks, established rail and truck logistics, an experienced operating workforce, available land and pore space capacity for future growth, and it's in a business-friendly state that supports agriculture, energy, and carbon management. Given the strengths of the Gevo North Dakota complex and other business factors we considered, we have finalized our decision to exit our ATJ-60 project activities in South Dakota and formally discontinued other non-core project activities. As a result, we recognized $176 million one-time non-cash impairment charge.

Leke will talk more about this non-cash charge. Continuing with our growth plans, stage 2 at Gevo North Dakota targets doubling our capacity to about 150 million gallons per year of low carbon ethanol, with associated carbon capture and sequestration, and tax incentive opportunities. Financing efforts for this expansion are on track and are targeted to be completed in the second half of 2026, consistent with our previously announced arrangement and timeline with Ara Energy. Engineering, permitting, and initial equipment procurement for the expansion project are underway. We anticipate completion of the expansion in 2028 once financing is complete and construction commences. This expansion is expected to result in meaningful revenue and gross profit growth.

Stage 3 of our growth plan contemplates the conversion of approximately one-third of Gevo North Dakota's expanded low carbon ethanol capacity into higher value synthetic aviation fuel through Project Northstar, also known as ATJ-30, which is our 30-million-gallon-per-year alcohol-to-jet development project. We are making good progress on this medium-term multi-year effort and provided details on our milestones in our recent business update. The team delivered our FEL3 engineering estimates on schedule in the second quarter. As we moved from FEL2 to FEL3, the capital estimate was refined based on substantially more detailed engineering, vendor engagement, and execution planning. The updated estimate of $600 million remains within the expected range and accuracy associated with an FEL2 estimate. We believe it provides much higher level of confidence as we approach FID. FEL3 showed very favorable results for the underlying alcohol-to-jet process modules, which were within 2% of the previous estimates.