Aemetis, Inc. ($AMTX)

Good day, ladies and gentlemen, and welcome to the Aemetis Fourth Quarter and Full Year 2025 Earnings Review Conference Call. Joining us today are Eric McAfee, Chairman and Chief Executive Officer of Aemetis; and Todd Waltz, Chief Financial Officer. I would now like to turn the call over to Mr. Todd Waltz. Sir, the floor is yours.

Thank you, Ali, and welcome, everyone. Before we begin, I'd like to remind everyone that during this call, we'll make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Please refer to our earnings release and our SEC filings for a discussion of these risks. For the fourth quarter of 2025, revenue plus tax credits totaled $53.7 million, compared to $47 million in the fourth quarter of 2024. Quarterly gross profit improved to $7.7 million, compared to a gross loss of $2 million in the prior year period. Operating loss improved to $2.5 million, compared to $13.5 million in the fourth quarter of 2024. The net loss improved to $5.3 million, compared to $16.2 million last year. For the full year 2025, revenue plus tax credits totaled $208 million, compared to $268 million in 2024. Operating loss improved to $37.2 million and net loss improved to $77 million, compared to $87.5 million in the prior year. During the fourth quarter, ethanol and RNG operations generated $10.3 million of production tax credits, reflecting the growing contribution of Federal Clean Fuel Incentives to the company's financial profile. With that overview, I'd like to turn the call over to Eric McAfee, Chairman and CEO of Aemetis.

Thank you, Todd. Before discussing the business segments, I want to highlight three key takeaways from the fourth quarter and last year. First, our Dairy Renewable Natural Gas platform reached an important milestone during 2025, achieving positive segment net income and EBITDA, while production increased 61% year-over-year in the fourth quarter. We generated net income of $12.2 million in our biogas segment in the fourth quarter of 2025. We expect strong annual growth in cash flow and profitability from the Biogas segment for the next 4 years, as 45Z is implemented and we continue to expand production. Second, during 2025, we continue to advance the mechanical vapor recompression upgrade at our Keyes ethanol plant, which is expected to increase plant cash flow by approximately $32 million per year when completed in 2026. And third, revenue from dairy RNG and ethanol production is generated by renewable fuel sales, as well as environmental credit monetization, including LCFS credits, federal D3 RINs and 45Z production tax credits. The 60% increase in the price of low carbon fuel standard credits in the past 9 months since the LCFS was extended by 20 years, and the recent treasury guidance for the 45Z production tax credit are important contributors to our growth in revenue and cash flow. Our dairy RNG platform continues to grow production and is becoming a significant driver of revenue and cash flow growth at Aemetis. During 2025, the dairy RNG business produced approximately 405,000 MMBtus of renewable natural gas and expanded to 12 operating digesters. Looking ahead, we expect RNG production to grow during 2026 as additional dairy digesters come online, with equipment fabrication contracted for the H2S cleanup and biogas compression units for 15 digesters, which will double the number of operating dairies in our network. Turning to our California ethanol business. The Keyes ethanol plant generated $158 million of revenue during 2025 and has approximately 65 million gallons of annual production capacity. We began receiving equipment on site for the installation of the mechanical vapor compression system at the ethanol plant for completion later this year. The MVR system is expected to reduce natural gas consumption by 80%, lower the carbon intensity of ethanol produced by the plant, and increase annual plant cash flow by approximately $32 million. In India, our biodiesel facility generated $29.7 million of revenue during 2025 and has significant available capacity to supply expanding government goals for biodiesel blending. Our plant has approximately 80 million gallons of biodiesel production capacity, along with about 8 million gallons of glycerin refining capacity. India continues to represent an attractive growth opportunity as the country focuses on the production of domestic renewable fuels to displace imported crude oil and to supply fuel to a fast-growing economy. We are expanding the India business into biogas production and sustainable aviation fuel as part of our work on an initial public offering of the India subsidiary this year. Looking ahead to 2026, our focus is on scaling production and monetizing the environmental credit values associated with our renewable fuels platform, as well as completing the India IPO and long-term refinancing of existing debt. Key policy developments include the finalization of the 45Z emissions rate calculation by the Department of Energy, further strengthening of LCFS markets, expanded ethanol markets via E15 blending approval in California and biodiesel blending mandates in India, which are expected to support long-term growth in low carbon fuels. Thanks to our shareholders, analysts and partners for your continued support. Operator, why don't we take some questions now?

[Operator Instructions] Our first question is coming from Derrick Whitfield with Texas Capital.

Great job with the year-end close. I wanted to start with your U.S. business. Maybe, Eric, just at a high level, could you give us your expectations for capital investment for 2026 between your RNG and your ethanol business?

We'll be wrapping up our MVR system. Total investment there is going to be roughly in the $40 million range. We'll be also continue to expand. We have 15 contracted H2S units for the next 15 digesters we're building. That's about a $27 million contract that we have with NPL. And then separately, the build-out of those 15, which will overlap into 2027 is roughly going to be another $70 million on top of that. So we continue to grow the assets, but our refinancing existing debt includes financing for the assets I just mentioned. And so we're fully financed for the completion of the MVR system. We're fully financed for the $27 million of H2S units. And as we roll out additional digesters, we expect to continue doing the type of 20-year financing, which we've completed. As you know, we completed two financings at 20 years each for our first Aemetis Biogas 1 and Aemetis Biogas 2 entity. We're working on Aemetis 3, 4, 5, 6, 7 and 8 right now.

That's terrific, Eric. And then maybe shifting over to ethanol. Margins are quite positive even before accounting for the MVR investment. How are you thinking about EBITDA generation for that asset in 2026?

Ethanol for us is a story of 2 worlds, pre-MVR and post-MVR. So this quarter, next quarter, we're going to be benefiting from removal of indirect land use change penalty for our corn on top of our existing carbon intensity. So we're currently at roughly $12 million a year. As you know, they're all rounded in nearest 5. So we're currently roughly at that $12 million a year run rate. That's not including any CO2 reuse, which we are waiting for the GREET model and potentially a provisional emissions rate that could be used -- CO2 reuse to lower our carbon intensity. But not including CO2 reuse or roughly $12 million a year. Post-MVR, we get rid of 80% of our natural gas costs, but also 80% of the penalty that we have for natural gas use. And so post-MVR, 45Z and LCFS values go up and generate roughly another almost $3 million a month of cash flow. So we should be running about $4 million a month on just 45Z plus MVR starting in what we -- we're currently targeting the third quarter for the MVR, but certainly going into the fourth quarter, that's what we expect to be. And then on top of that is the LCFS credit price increase. It's already gone from $40 to $70. We wouldn't be surprised at all to see it hit $100 this year and $150 or more next year as we continue to see quarterly deficits. We don't see any scenario in which you don't see quarterly deficits in the LCFS program. So that would be incremental to the numbers I just given.

Our next question is coming from Amit Dayal with H.C. Wainwright.

Congrats on the execution in 2025. It looks like you guys are set up very well for 2026 as well. This $40 million investment in the MVR, how much of it has already been made? Or is the $40 million going to take place in 2026, Eric?

Much of it's already made. We are well past half of that right now. And the remaining balance happens over the next 4 months or so. But it's fully financed and has no equity dilution through the completion of it. We don't have any funding through the ATM or otherwise for it at this time.

So conservatively, should we assume contribution post-MVR to only come through in 2027?

Contribution should hit in third quarter, be in full place in the fourth quarter. So it will affect roughly half of this year, roughly.

Okay. And does that -- the product coming out of this post-MVR, will it need to be qualified, et cetera, like the RNG had to go through an auditing process? Or will you be able to monetize right away those benefits?

It's -- for the MVR, we're monetizing it "right away". There is not a long year or 2-year delay. One of the points you're making is relevant, which is we're not including the opportunity to run renewable natural gas into our plant. Under the rules, the renewable natural gas has to be directly connected from the production source to the ethanol plant. There's only a few plants in the U.S. that are structured that way. We happen to be the owner of one of those plants. So we have 50 dairies signed that can supply our ethanol plant with the renewable natural gas. That would be additional monetization that in our structure, we really accrue to our dairy biogas business, not to our ethanol business. But yes, we are definitely uniquely situated to have incremental economics from 45Z, as well as LCFS by running our Dairy RNG into the ethanol plant. We expect that, that will be something we'll very seriously be considering. We're not announcing we're doing that yet, but it's because we're waiting for the GREET model from the Department of Energy, so we can do our final calculations.

Understood. Maybe just last one for me. I know you haven't provided any formal guidance for 2026, cash flow, EBITDA, et cetera. But at a minimum, can we expect you to perform in line with, sort of, the cash flows we saw materialize in 2025?

We should be significantly in excess of 2025, which represented virtually no 45Z for the ethanol plant from a cash flow perspective and minimal from our RNG. Our business is highly leveraged towards performance of the California Low Carbon Fuel Standard credit, which credit prices were $40, 8 months ago, they're $70 today and should be continuing to rise. The cap is $268. And the 45Z production tax credit, which we've only monetized $5 million of it. We did that the last couple of days of the fourth quarter of last year. And that should be a significant generator. When the updated GREET model is released by the Department of Energy, as we know, we have the February 4, 2026 U.S. Treasury guidance that was issued, that was consistent with The One Big Beautiful Bill of July 2025. But we're awaiting the spreadsheet to show up on the website of Department of Energy. From that, we will then be able to calculate, with great precision actually, what our total revenues are. And I think there'll be an education cycle, which we'll do with investors to let them show -- let them know what the dairy RNG molecule can do. I would cite Bloomberg's podcast. If you just -- you don't have to be a Bloomberg subscriber in order to get this podcast, but they did a half hour podcast just a few days ago and described that dairy RNG and swine RNG are the big winners under 45Z, and that there should be $7 per gallon of revenue for dairy RNG from the 45Z. There are 8.6 gallons under the 45Z regulation in every MMBtu. So 1 million British thermal units is 8.6 gallons under the rule and each gallon should be $7. And there's a Bloomberg podcast if you want to learn about the value chain and how the calculation works, et cetera, that is available for public consumption.

I'll take a look at that, Eric. With respect to the India operations, I mean, will investors just have to learn to live with this start-stop situation over there? I know it's more sort of policy than your production capabilities. But is something going to sort of change on that front? Or is this how that market will continue to operate?

Well, historically, the ethanol market operated that way until the government committed themselves to growth and then they went from 1% blend to 20% straight line in about 48 months. The biodiesel market is in a similar spot. The Russians and the Iranians have been selling heavily discounted crude oil into India. And about a month ago, the end of the 50% tariff that Mr. Trump imposed was an agreement by India not to import Russian oil and essentially indirectly fund the Ukrainian war using Indian money. And then, of course, the breakout of the Iranian war 2 weeks ago shut off the other cheap funnel of crude oil, which was in violation of the U.S. sanctions, but Indians have been doing it very commonly. Well, that kind of ended 2 weeks ago. So India does not have any domestic petroleum, natural gas or even coal of any meaningful amount. So they've just had their 2 great opportunities in the world, which is to buy cheap petroleum and remain dependent upon petroleum disappear. And the biofuels is a domestically produced job-creating agricultural economy-based industry, and that's why ethanol has gone from 1% to 20%. And we believe that biodiesel will have a similar kind of rise, 0.5% to 5% is a 10x expansion in the biodiesel business. Our IPO is not based upon solely being a biodiesel producer. It's also about the future energy in India, which includes compressed biogas, which is we would call in the U.S. renewable natural gas in India, they know it's known as CBG as well as sustainable aviation fuel, which is a very popular item in India right now, global sustainable aviation fuel market about $90 billion -- sorry, 90 billion gallons and flying in and out of Asia includes fueling up to meet European and other requirements, including the Singapore airport. So the business we're taking public in India is a global diversified biofuels IPO. We believe it will be the first global diversified biofuels IPO in the history of the India stock market. It happens to have as the centerpiece an 80 million-gallon biodiesel plant that is well positioned to become a sustainable aviation fuel plant. And those contracts would be with international airlines, and to a certain extent, circumvents this issue about the domestic demand for biodiesel in the country. Though we do have bullishness around that demand and do plan to have expansion in the biodiesel assets and production capacity we have in India.

Our next question is coming from Dave Storms with Stonegate.

Just wanted to start with the Keyes plant. It looks like it's been running at about 90% capacity for the last 2 years. How comfortable are you with the current run rate? And is there any potential plans to expand it once you are through the MVR project?

We have an industry that with the adoption of E15 in California already had about 600 million gallons of new market opened up from an approval perspective. And nationally, I think there will be an E15 adoption, certainly with the Iranian war. It's a top of mind as affordability move. So I do expect nationally that ethanol plants will be looking at expansion as a strategic goal as we go from roughly 14 billion gallons of actual consumption in the U.S. to over 20 billion gallons with the approval of E15. There is probably 1 billion to 1.5 billion gallons of available capacity just by debottlenecking and the like, but that's far short of the 6 billion gallons needed. And we currently have record exports of over 2 billion gallons a year, and those record exports could actually rise. We're seeing continued adoption of ethanol blending worldwide, which puts a further triangulation on the number of available gallons for domestic. But we have not announced expansion campaign yet. I would note that there is a plant that just announced today that they expanded from roughly 55 million gallons to 105 million gallons by using existing tankage and doing certain process improvements. So there's certainly technology available. And we do plan to expand our business. We're currently expanding it by reducing our carbon intensity, reducing our operating costs and optimizing the carbon. And frankly, mechanical vapor compression will allow us to be positioned for that kind of debottlenecking and expansion. So I would expect this is going to be more of a 2027 story. We might talk about it later on this year. But frankly, the margin improvement and sustainable positive cash flow from our existing asset is what we're focusing on right now. And I think we're going to be looking to have optimized that by the end of this year and then focus on expansion plans.

That's great color. And then just one more for me. You got some tailwinds coming out of The One Big Beautiful Bill, and I think it was you mentioned in your release that those tailwinds are starting to be implemented. Just curious as to how you see the logistics in the near term for the continued implementation of those tailwinds and maybe any more color you could give us there?

There -- the big lift was July 4, 2025 in the Senate House and the White House when they negotiated a doubling of the number of years, and a significant expansion in the amount of 45 production value that biofuels would obtain, specifically removing indirect land use change penalty, which had depressed the amount that had been available. That was completely removed. We're now in the implementation phase of that political decision by the President, frankly, and also both the House and the Senate. And the first step of that adoption is the Treasury's announcement on February 4, 2026, of 176 pages of tax guidance. There were no surprises in there. And we are now just awaiting the spreadsheet, known as the GREET model from the Department of Energy, which will allow us to calculate the amount of 45Z revenue that we generate from every MMBtu, or every ethanol gallon. And I should make note that there is a process that was set up January of 2025 called the provisional emissions rate, and that was further refined in the February 4 guidance with what's called a calculated emissions value letter. And so the process of getting our own distinct additional value, because we have done energy conservation and other enhancements in our facilities, that process of getting a CEVL was set up last month. And so we are actively seeking CEVLs that would allow us to have accurate calculations of both our ethanol as well as our dairy RNG business, carbon intensity, but they call emissions rate. And so the adoption should be that great model gets published this month by the DOE and that in a very short period of time thereafter, a matter of weeks, we should get a calculated emissions value letter because we just have a couple of little cells that need to be entered with our unique data, and the number that comes out gets put on a piece of paper and issued to us. And then with no real work at all, we file that with cash returns. So it's a very simple process. should be a very quick process. But the word should, unfortunately, is where the uncertainty comes in. We're waiting for the DOE to issue the GREET model, and we're waiting for the DOE to open up the calculated emissions value letter process so that we can get very accurate calculations.

Our next question is coming from Ed Woo of Ascendiant Capital.

Congratulations on all the progress. As you talk about being the first global bioenergy company in India market, have you considered expanding to other international markets? And also, what is your expansion opportunities in India? Would you consider possibly a second plant?

Let's take India first because that's what we're actually implementing right now. We are definitely planning to locate plants near feedstock sources, and we have a special relationship with the leading feedstock supplier in the tallow business, for example. And so we do expect to have multiple plants located near feedstock sources. That gives us the advantage both on cost inputs, but also, frankly, puts us closer to the blending facilities that are also regional. But our India business is diversifying into biogas and then into taking one of our facilities, making into sustainable aviation fuel and renewable diesel plant. And so our IPO in India is driving the adoption of new markets, quite frankly, the Indians are not currently involved with, including sustainable aviation fuel. And there's a lot of excitement about getting independence from imported crude oil in India. So we're in the middle of that process. And the reason why it's global is our India business, the subsidiary, 100% owned by our company, will be making investments outside of India as part of the IPO. So we're looking forward to more information being disseminated to the market as we put out our what's known as red herring and other documents, you'll be able to read more about that.

As we have reached the end of our question-and-answer session, I will now turn the call over to management for closing remarks.

Thank you to Aemetis stockholders, stock analysts and others for joining us today. We look forward to talking with you about participating in the growth opportunities at Aemetis.

Thank you for attending today's Aemetis earnings conference call. Please visit the Investors section of the Aemetis website, where we'll post a written version and an audio version of this Aemetis earnings review and business update. Ali?

Thank you. Ladies and gentlemen, this does conclude today's call, and you may disconnect your lines at this time, and we thank you for your participation.