Aemetis, Inc. (DE) Common Stock 2026 Q2 Earnings Call

Thank you, welcome everyone. Before we begin, I'd like to remind you that during the call, we'll make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risk and uncertainty that could cause actual results to differ materially from those expressed or implied. Please refer to our earnings release and SEC filings for a discussion of these risks. For the second quarter of 2026, revenue grew 20% to $62.7 million, compared to $52.2 million in the second quarter of 2025, with growth in both the California ethanol and dairy renewable natural gas operating segments. biodiesel revenue relied upon sales from private customers. The three India Oil Marketing Company customers issued about $17 million of allocations to our India subsidiary in late July, allowing us to begin biodiesel shipments under this new tender.

Operating income improved by $16.4 million to $5.8 million in Q2 2026, compared with an operating loss of $10.7 million for the second quarter of 2025. Net loss improved by $14 million to $9.4 million, compared to $23.4 million in the second quarter of 2025. Adjusted EBITDA increased by $15.5 million to $9.7 million in the second quarter of 2026, compared with a negative $5.8 million in the second quarter of 2025. The reconciliation of Adjusted EBITDA to net loss is described in our earnings release issued today. An important new revenue component should be noted. Section 45Z credits contributed $8.6 million, $2.2 million in dairy renewable natural gas, and $6.4 million in California ethanol.

Excluding 45Z credits entirely, Q2 gross profit of $13.8 million still improved by more than $8 million year-over-year, driven by lower price corn, $6.07 a bushel versus $6.42 a bushel, a 12% increase in ethanol volume, ethanol pricing up 9%, and a significant 38% increase in RNG volume. Cash at the end of the quarter was $1 million. On July 9th, we announced that we received $17.6 million in net cash proceeds from the sale of Section 45Z credits. Capital investments supporting our energy efficiency projects and investments in biogas production were $8.6 million in the quarter, and $15.1 million for the first half. With that overview, I'll turn the call over to Eric.

Thank you, Todd. Let's highlight three key takeaways from the second quarter. First, Q2 continues the financial inflection points we noted during the last earnings call. We grew consolidated revenue 20% year-over-year, posted an improvement in operating income of $16.4 million, and increased adjusted EBITDA by $15.5 million compared to the second quarter of 2025. Second, we benefited from the California Air Resources Board approval a year ago of seven new Low Carbon Fuel Standard pathways for our Renewable Natural Gas business at an average carbon intensity score of negative 380, compared with the negative 150 default carbon intensity score for these digesters shown in Q2 2025 revenue. The approval of seven biogas digesters has been providing additional revenue at the higher LCFS value each quarter since Q3 2025, and six additional biogas digester pathways are nearing approval.

These LCFS pathway approvals substantially expand the LCFS credit generation per MMBtu of RNG produced and will continue to drive meaningful revenue increases as we scale production. Third, our capital projects are advancing. Let's review these projects and how we continue to create value as federal and state laws are being implemented. In our dairy Renewable Natural Gas business, every MMBtu of dairy RNG generates four revenue streams: the natural gas molecule, a California Low Carbon Fuel Standard credit that is sold to oil companies, a federal D3 RIN that is sold to oil companies, and a Section 45Z Production Tax Credit. The LCFS credit and the 45Z tax credit are calculated using the carbon intensity of our biofuel. Credits are generated in proportion to how far below the standard a biofuel is scored.

An LCFS pathway at negative 380 generates substantially more credit per MMBtu than the negative 150 default score. We have seven approved LCFS pathways averaging negative 380, with six more in the CARB process. For the 45Z Production Tax Credit, the credits we sold in July were valued at $15.20 per MMBtu at a negative 42 emissions rate. An emissions rate which generates significantly less revenue than required under the one big beautiful bill. We anticipate that the Department of Energy will correct this oversight with an updated emissions rate that more accurately reflects the carbon reductions created by the Renewable Natural Gas that we produce. As dairy Renewable Natural Gas volume grows, all four revenue streams grow.

The approval of LCFS pathways in California and a correct emissions rate issued by the Department of Energy are expected to create significant increases in revenues from the same level of Renewable Natural Gas production. We are waiting for the six pending digesters to be approved under the California LCFS and the corrected 45Z emissions rate to be implemented by the Department of Energy so we can generate Renewable Natural Gas revenues that are consistent with existing laws in California and at the federal level. Congress and the California legislature already passed the underlying laws that allow for these improvements. We now need the carbon pathways and the 45Z calculations to be implemented to generate the full amount of revenues from our RNG production.

We operate 12 biogas digesters today, taking waste from 15 dairies and transporting biogas through a 36-mile pipeline to our RNG production facility that is connected to utility gas pipeline. We have more than 50 dairies under contract. Two more methane capture digesters are scheduled to be completed within a month, and we have received 10 of the 15 cleanup and compression units that will be located at the next 15 digesters to come online. Regarding our California ethanol business, we had a good quarter and have two projects that are slated to significantly improve our financial performance, in addition to the expected reduction in corn emission rates that will increase 45Z revenues. Our mechanical vapor recompression system installation is an energy efficiency project that is expected to add approximately $32 million in annual cash flow from three positive impacts on our operations.

We will reduce about 80% of the natural gas needed for our operations at the Keyes Ethanol Plant, which is a direct cost reduction that begins at commissioning. Removing fossil gas lowers the carbon intensity of our ethanol, which raises the value of the 45Z credit and LCFS credits generated by every gallon of ethanol. The MVR project is making excellent progress. The key equipment arrived in June, including six 3,500 horsepower turbo fans, and the final large component arrived on site this week. Foundation concrete was poured in the past week, and the system is expected to be operational by the end of 2026. The MVR project has received approximately $19.7 million in grants and Section 48C tax credits from the California Energy Commission, Pacific Gas and Electric Company, and the IRS. Second, we are installing upgraded corn oil separation units.

Distillers corn oil is recovered from the ethanol process and sold as a low-carbon feedstock into the renewable diesel and sustainable aviation fuel markets, where demand has strengthened this year with higher federal renewable volume obligations. We have two of the three corn oil extraction units in operation, with a third scheduled for later this fall. Combined, the units are expected to approximately double corn oil production compared to our first quarter production rate. Our India biofuels business is shipping biodiesel to Oil Marketing Companies and to private customers. Biodiesel revenue was $2.5 million in the quarter, down sequentially, as the Oil Marketing Companies worked through their tender process that concluded in late July. On August fourth, we announced allocations to supply more than 18 million liters to India's three government-owned Oil Marketing Companies over a three-month period, which is expected to generate approximately $17 million in revenue.

Deliveries under the tender allocation are underway. We are also expecting to increase supply to private commercial customers due to increases in the price of India petroleum diesel this year. India's stated goal is to raise biodiesel blending from 1% today to 5% by 2030, which would create about 1.2 billion gallons of annual biodiesel consumption. We continue to prepare documentation for a potential public offering of a minority stake in Universal Biofuels, subject to market conditions.

Our outlook on milestones and timing includes two dairy digesters completing within a month, the third corn oil unit operational later this fall, doubling corn oil production over Q1 2026, MVR operational at the ethanol plant by the end of 2026, six additional Low Carbon Fuel Standard pathways moving through CARB with the customary look back on approval, dairy RNG and corn ethanol feedstock 45ZCF-GREET updates from the Department of Energy, generating significant increases in Renewable Natural Gas and ethanol revenues. Lastly, India deliveries across the current allocation period with additional orders anticipated before year-end. Thank you to our shareholders, analysts, and partners for your continued support. Operators, let's take some questions.