Gevo, Inc. (GEVO) Earnings Call Transcript & Summary

Good afternoon. I am Patrick Gruber, Chief Executive Officer of Gevo, Inc. I'm pleased to welcome you to the 2021 Annual Meeting of Stockholders of Gevo, Inc. We appreciate your attendance, your interest and, most importantly, your support of Gevo. Due to the impacts of COVID-19 pandemic, the 2021 meeting of stockholders is being held entirely online live via audio webcast. I hereby call the 2021 Annual Meeting of Stockholders to order. I will act as Chair of this meeting; and Geoff Williams, the Vice President, General Counsel and Secretary of the company, will act as Secretary of this meeting and will record the minutes for the meeting. For your reference, the agenda and rules of conduct have been posted on the virtual meeting platform. We ask that you please follow these rules so that we may have an orderly meeting. I have with me a complete list of the stockholders of record of the company's common stock as of April 14, 2021, the record date for this meeting. This list is certified by the American Stock Transfer & Trust Company, the company's registrar and transfer agent. The list of stockholders entitled to vote at this meeting has been available for inspection by any stockholder at the company's headquarters for the past 10 days and is available on the virtual meeting platform for any stockholder to examine. I also have an affidavit of Internet availability, containing a sworn statement by Broadridge, indicating that a notice of Internet availability of proxy materials was sent to each stockholder of record beginning on April 23, 2021. Stockholders entitled to vote at this meeting have the ability to submit questions through the virtual meeting platform, and we will try to answer any germane questions later in the meeting. Tony Carideo of the Carideo Group has been appointed to act as inspector of election at this meeting. The inspector's duties are to decide upon the qualifications of voters, accept their votes and count the votes cast. Based upon the records of the company, there are present at this meeting, either in person, including by means of remote communication, or by proxy, a majority of our outstanding shares of common stock, which constitutes a quorum. The polls are now open for voting on the matters to be considered. All Gevo stockholders entitled to vote have the ability to do so using the virtual meeting platform from now until the polls are close. If you have already voted to the meeting, you do not need to vote during this meeting, unless you wish to revoke or change your previous vote. As described in the proxy statement for 2021 Annual Meeting of Shareholders, there are 5 items submitted to stockholders for consideration at this meeting. First, the election of Andrew J. Marsh as a Class II Director on the Board of Directors to serve as -- a 3-year term until our 2024 annual Meeting of Stockholders; two, the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021; three, the approval of the amendment and restatement of the Gevo, Inc. Amended and Restated 2010 Stock Incentive Plan; #4, the approval of an amendment to the company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 250 million shares to 500 million shares; and five, the advisory nonbinding vote to approve the compensation of our named executive officers. There are no items -- no other items properly submitted to be considered at this meeting. Please finalize your voting on the virtual platform now if you wish to vote. I will pause for a bit and allow you to vote. [Voting]

The polls are now closed and the proposals and the votes will be counted. The inspector of election has provided me with a preliminary tally of the votes for the proposals. Based upon the preliminary tabulations of the inspector of election, we can announce that: number one, Andrew J. Marsh was elected Class II Director of the Board of Directors; two, the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021, was ratified; three, the amendment and restatement of the Gevo, Inc. Amended and Restated 2010 Stock Incentive Plan was approved; four, the amendment to the company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 250 million shares to 500,000 (sic) [ 500 million ] shares was not approved; and number five, the compensation of our named executive officers was approved on an advisory nonbinding basis. Thus, Proposals 1, 2, 3 and 5 each passed. Now Proposal 4 to increase the number of authorized common stock available to the company did not pass. That proposal required a higher vote threshold to pass than the other proposals. For that one to pass, we need to get more than 50% of the company's total shares outstanding as of the record date to approve it. The other proposals only needed approval by a majority of the shares that actually voted. Now since we had such a low voter turnout for the meeting, it's about 52% of the shares outstanding, it was a challenge to get to the higher threshold needed for Proposal 4. We believe that if we would have had a higher voter turnout, Proposal 4 likely would have passed because 82% of the votes that we obtained were in favor of approving Proposal #4. We will report the final voting results for each of the proposals on Form 8-K within 4 business days from today. We now begin the Q&A session. For those stockholders in attendance, you can ask a question by submitting it in the Q&A session on your virtual meeting platform. Please feel free to submit your questions now. If we receive substantially similar questions, we may group such questions together and provide a single response to avoid repetition. While we're waiting for questions to come up, we will take questions, if you guys -- if you all submit them. This Proposal #4, we'll have to come back to it again. It is something that is important to increase the number of shares outstanding. It's important so that we can do -- we're going to need more shares in the long run of time. And it will be particularly important as we get bigger and bigger, bigger and need to do more projects, particularly as strategics and others look at us. It's going to be important. But we have some time, and we'll come back to it again.

One of the questions that comes up is around when are we going to see more contracts? The answer to that is I would expect relatively soon. I can't predict these because these are big contracts. It takes senior approvals. They aren't in our control. They are in the customers' control. Net-Zero 1 is going well in terms of the planning. Net-Zero -- I think the next size of contract should satisfy Net-Zero 2, and we're working on Net-Zero 3. So it's going to get interesting for us. We're going to have multiple projects all at once is what I think.

Hey, Pat. We've got a couple of other questions that have come in. The first one is what will be the next steps with Section 4 being voted down?

We'll come back and have another special shareholders meeting at some point here, probably -- I don't know the exact time yet. We have to talk about it internally, but in the next couple of months. I think it will make it easier for people to understand look, here's Net-Zero 2. Here's the customers. We've got more projects. Here's the strategics we're interested or whatever happens to be, those are all hypotheticals. But it's that kind of stuff. It makes it a lot easier. We still have to corral everybody. Our issue wasn't that people weren't in favor of it. It was that we have a big diverse shareholder base and trying to track everybody down who only has a few shares that's hard work. And we'll have to come back at it again.

Okay. The next question is one we get quite a bit. So it will be good for you to clarify. It is, what is your plan to tackle the problem with Gevo's fuels freeze at sub zero temperatures?

What? I don't even understand that. Ours don't freeze at sub 0 temperatures. So I don't get it. I don't know where that data comes from, and I can tell you that's complete c***.

We also have a video, specifically touching on this. If anyone wants to go watch it on gevo.com.

Yes. That false information stuff really gets on my nerves. It's -- our information is well published, well documented. You can't have a certified fuel or anyone else, if it did that, get real.

So the next thing we have in line is what is the justification for the additional shares?

Well, as we look to the future, we're going to have multiple Net-Zero projects. And remember, every one of these Net-Zero projects represents significant cash flow streams for Gevo, Inc. Each one of those projects, if it's $45 million, you will also have an EBITDA of about $100 million. We either can raise money along the way as our stock price appreciates and control those projects and take those cash flow streams, which is, by the way, the great situation that we're in for Net-Zero 1 or we'll have to find a way to raise money otherwise to continue to build those projects. And that means giving away those cash flow streams. Our business is a capital-intensive business. We are going to have to raise more money over time. It's about doing it smartly. I like the model that Plug Power uses. If their stock price goes way up, they raise a bit of money. They also bring in this -- we think the same way here. We also are interested in bringing in partners who are interested in a private placement or they are interested in other kinds of deals or that we want -- might want to use our stock to acquire something. All those are possibilities that we could use additional stock for. What we don't want to do is simply use all the stock and be empty in the pool of stock. That'd be stupid on our part. So that we cannot allow that to happen. And that's really what drives us to want to go ahead and do this now. This idea that whenever we talk about raising more -- putting more in the pool of stock that it means we necessarily do a deal. That's ludicrous. That isn't how we work. We have a huge amount of cash in the balance sheet. We're doing quite well as a company. Our businesses are going well and the interest in our products are going well. We're looking to the future and figuring out how to grow and become a big time multi billions of gallon business. It's a different kind of game to play. It's big.

Great. Thanks, Pat. The next question is a two-part question. When are we going to start the second renewable natural gas project? And will Net-Zero 2 and R&D to do start or the first ones are done?

The timing for -- as part of Net-Zero 1, we are going to be building a biogas plant. We won't be upgrading it to put it to be RNG to send it down a pipeline, but we're just going to use it right there on site. That is likely to be our second. There's a couple other candidate RNG projects we're looking at. I'm not sure that we'll want to do them. I need the right size materiality to make it worthwhile. We also are exploring various opportunities with other strategic partners. I don't know what it's going to lead to yet, and those could be pretty interesting as well. And Heather, what was the second part of the question?

And the second part was, will those projects be done before Net-Zero 1 is complete?

They would be -- I think that we will -- I think it's highly probable that we'll see Net-Zero 2 under construction before Net-Zero 1 is complete. And as far as additional RNG projects go, every time that we talk about doing, whether it's a Net-Zero 1 plant or any Net-Zero plant, we have to do something about power. As you remember, it's the carbon footprint that comes from electricity and from natural gas. That is the problem. It costs us the footprint. We got to do some repowering, and that's the game to play. So every time we do we'll have to deal with it. I just don't know what form it's going to take yet because we can do something similar to what we're doing in at Net-Zero 1, generate our own biogas on site or I like these ideas of doing the RNG projects. But we got to find the right size, the right place, the right deal so we don't have to take undue risk.

Great. Are all the future Net-Zero plants expected same size, same cost as Net-Zero 1?

I think that the next set of Net-Zero plants -- because of the criticality of getting product into the marketplace and showing that it can be done, those are -- I think Net-Zero 1, Net-Zero 2, in my paradigm and how I think about it, they're going to be the same size. I think it likely that Net-Zero 3 could be the same size. I think it's likely based on what I see from what Tim Cesarek, our Chief Commercial Officer, is doing, I think it likely that we might wind up with needing to have Net-Zero 2 and Net-Zero 3 at the same time, the fastest that they can be online is 9 months after Net-Zero 1. And if that's the case, they're all going to be the same size, different locations, same basic plan, cookie-cut and know they wouldn't be the same cost. It would be a reduction in cost because we're just cookie cutting. Now Net-Zero 1 is actually being designed for infrastructure to have roughly about 2x the capacity. So we're going to probably spend a little more money on capital in Net-Zero 1 to make sure that we can expand it. Our customer pipeline is really big, and people want the product. There aren't that many avenues, that many routes making gasoline, for sure, the hydrocarbons for gasoline. And definitely, there's not very many routes to make sustainable aviation fuel. So it's looking pretty attractive. On our minds also is how do we go bigger and faster? That's starting to be where I'm turning my attention. I want to go bigger and faster. These 45 million gallon plants, they're great. It's a good business, $100 million EBITDA, beautiful, love them. Let's go bigger sooner. That's on our minds now. And it looks like the customer and marketplace is out there to support that. I hope. We'll see. Heather, any more questions?

Yes. I think she's on mute. Heather?

Okay.

The next question, Pat, is about the status of Luverne...

I was on mute. Yes. So the next question is one that actually gets asked quite a bit on StockTwits, but it has been asked. What is the status of the Luverne, Minnesota plant converting to isobutanol production and what sales volumes we expect to generate?

Well, okay. So one, the answer is, let me just break this down. Are you not running the Luverne plant? Yes, we do run the Luverne plant. We do it to make isobutanol to supply our Silsbee plant for the hydrocarbons. Remember, the production quantity needed in Silsbee is about -- I don't remember the total amount, but hydrocarbons-wise, maximum production capacity is like 100,000 gallons a year. It's a big demo plant. We will continue to run batches of our Luverne, Minnesota plant. We're running -- we're doing some debottlenecking out there to make it easier to run sustainably at the 1.5 million gallons per year range, core project purposes, proving things out to people. We are not trying to make that plant profitable at that site. So the paradigm that this is somehow a profitable business running it at Luverne, that's not we're trying to do. Cover costs, sure. But it's not trying to be a business unto itself at Luverne. We have other plans for Luverne to expand it and how to make it a Net-Zero plant. We just aren't ready to talk about them yet. They aren't quite big. And so we'll have to do that. And as far as -- so we don't -- we can't talk about sales volume or all the other things that go with it.

Great. Another one that's come in is, was the #4 holding Gevo back from any contracts or agreements or deadlines?

I'm sorry. What was that, Heather?

He asks was the #4 proposal holding Gevo back from any contracts or agreements or deadline?

Today, I would say no. It doesn't impact us as of this date and time. If, on the other hand, we start to run out of stock, it is a big damn deal. And so that -- you want to deal with this well in advance. And so what we don't -- what will be really not okay is for us to simply run out of stock without having dealt with this. It's a big deal because companies look at us and they go, well, I would like to -- someone approaches me, hypothetically speaking, and says, we would like to take a strategic position in Gevo, and we'd like to take it in stock. Well, you know what, there isn't enough stock. So we're going to wind up with a separate shareholder meeting to deal with this issue again. So we aren't going to let go of it. We're going to be back at it. People can expect more phone calls and letters and us being nuisances to you so until we get the right turnout.

Thanks, Pat. I actually skipped one. So let me go back. This next one is, when do you think Gevo will get used to more institutional investors?

Well, I think that, that has been. So I think that last call, we've talked to like -- of institutional investors, we've had at least 60 meetings over the last couple of months with -- is that right, Heather, something like that, 60 meetings?

Approximately 60.

Yes. So those are meetings that we aren't asking for. Those are people coming in here. We're -- here's the things that are -- that we'd be looking at. Our stock is volatile. We popped up out of being invisible, and all of a sudden, we're substantial. Where the hell do we come from, that takes a little bit of work. We're working on getting more coverage for banks. People are doing it. They say they'll do it. We expect more coverage. We -- the volatility does put people off. We're in pre-revenue and so we're milestone-oriented. And so that's something people got to wrap their heads around is that this is the fact of life. You've got to go build assets before you can get revenue for God's sake. People get -- I mean, the ones you explained to them, they go, oh, yes, of course. But you got to tell them. And so it's a -- I think we have -- Heather, do you know the count of institutionals right now?

I have to go look at that, but it's -- it was about 24% last time I looked.

Okay. It's increased because it used to be like less than 5%.

Okay. All right. The next one is, I understand that there's sustainable aviation fuel legislations under consideration on the Hill. How would these legislations affect our business?

Generally, anything that happens in the state of aviation fuel area that gets approved is good for our business. It's just a question of what form does it take. One of the things that's out -- that people talked about that there was a press conference last week, I think, was about this blender's tax credit making it for our sustainable aviation fuel. Now what's interesting about that is the blender's tax credit already applies to kerosene under the tax code. And so that's already worth $1. Here, they're trying to get it up to $1.5. Okay, good. That helps. It is good, but we don't base our economics on future stuff like that. Ours already worked good with the existing policies. So we -- good, pure amount, let's go people. And you know what, all that provides additional upside and better returns. So we like those things, and we're quite active in the DC circuit.

And I think this is our last question. Will you explain the Russell 3000 things so that they can understand it?

Yes. So this rebalancing of the Russell 3000 is, it's an index fund. And to -- when they do the rebalancing, they're basically buying -- and they're rebalancing their fund. They're acquiring new names in that big fund and get rid of others. And in this, I think we calculated something like it would take about 26 million shares bought on the open market is something like that, if I did it right. Now I'm an amateur at this, but it's something like that. And so that's the effective date where they got to be doing this stuff is, I think, June 25. So it's in that time frame, and so they'd be in the market acquiring these positions. That's what I think will happen. And that's why people get excited by it.

And that's it. We'll wrap it up, Pat.

All right. I appreciate everybody's attention and support. I'm sorry, we're going to have to come back at you and be pressed about this Proposition #4, increasing our outstanding shares. We have to get it done. Now we want to do it well in advance of when it becomes a critical item. And so we are going to be continuing to work on that. We'll be back to it. Overall, our business is going well. The engineering in Net-Zero 1 is going well. The business development is going well. So I like the position we're in so far and feel pretty good about it. And even in our budgets and spending, we're doing really well. So things are going pretty darn good at this moment in time. Appreciate it. Everybody, thank you for joining us today. If there's no other formal business to be addressed at this meeting, therefore, the 2021 Annual Meeting of Stockholders of Gevo, Inc. is hereby adjourned.