Aemetis, Inc. (AMTX) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call revealed a revenue increase, improved operating loss, and strategic initiatives like the India IPO and RNG approvals. Although management was vague on some details, the positive outlook on tax credits, ethanol demand, and RNG approvals supports an optimistic view. The Q&A highlighted potential revenue growth from LCFS credits and tax credits. Despite uncertainties in LCFS pricing and GREET model updates, the overall sentiment is positive, expecting stock price to rise by 2-8% in the short term.

Key Financial Performance

Revenue $52.2 million, up by $9.3 million from the first quarter revenue, primarily due to the fulfillment of biodiesel orders with oil marketing companies in India.

California Ethanol Production 13.8 million gallons, slightly lower production rate to maximize margins during the quarter.

California Dairy Renewable Natural Gas Revenue $3.1 million from 11 operating digesters during Q2 using the CARB-approved LCFS pathway for 7 of the digesters.

Operating Loss Improved by $4.9 million from the first quarter of 2025, reflecting reduced SG&A in the second quarter of 2025.

Interest Expense $12.3 million, excluding the Series A preferred unit accretion, in line with the capital structure and investment phase.

Net Loss $23.4 million, roughly flat versus Q2 last year after adjusting for the nonrecurring charge during the prior quarter of last year.

Cash at Year-End $1.6 million following $3.6 million of investment in carbon intensity reduction and dairy renewable natural gas production expansion.

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Operating Highlights

Dairy Renewable Natural Gas (RNG): Scaling up gas production with a new multi-dairy digester increasing RNG production by 30%. Expected to reach 550,000 MMBtus of production capacity in 2025 and 1 million MMBtu annual run rate by 2026.

Ethanol Plant: Key equipment for a $30 million mechanical vapor recompression system is being fabricated. This system will reduce natural gas use by 80% and add $32 million in annual cash flow starting in 2026.

Sustainable Aviation Fuel (SAF) and Renewable Diesel: Received permits for a 90 million gallon per year facility in California. Awaiting clarity on tax credits and mandates for financing.

Carbon Capture Project: Initial site work and drilling for a geologic characterization well completed. Expected to sequester up to 1.4 million tons of CO2 annually.

India Biodiesel Market: Resumed biodiesel deliveries to government oil marketing companies, shipping $11.9 million in Q2. Targeting an IPO of the India subsidiary in early 2026 and exploring ethanol production expansion.

E15 Ethanol Blend Expansion: Legislation advancing for year-round E15 use in California, potentially increasing the U.S. ethanol market by 5 billion gallons annually and lowering fuel prices.

Revenue Growth: Q2 revenues were $52.2 million, up $9.3 million from Q1, driven by biodiesel orders in India.

Cost Management: Operating loss improved by $4.9 million from Q1 2025 due to reduced SG&A expenses.

Cash Flow and Financing: Cash flow expected to increase in H2 2025. Actively pursuing low-cost financing and refinancing alternatives.

Regulatory Support: Benefiting from California Low Carbon Fuel Standard amendments, federal Section 45Z production tax credits, and Section 48 investment tax credits.

India Market Strategy: Appointed a new CFO for the India subsidiary to lead the IPO process and exploring ethanol production expansion.

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Risk or Challenges

Interest Expense: Interest expense rose to $12.3 million, reflecting the company's capital structure and investment phase, which could strain financial resources.

Net Loss: The company reported a net loss of $23.4 million, indicating ongoing financial challenges.

Cash Position: Cash at year-end was $1.6 million, which is low and could limit operational flexibility and investment capacity.

Debt Reduction: The company is actively pursuing low-cost financing and refinancing alternatives, but high debt levels remain a challenge.

Ethanol Production: Ethanol production was decreased during the spring to optimize margins, which could impact revenue generation.

India Biodiesel Deliveries: Biodiesel deliveries to government oil marketing companies in India resumed after a 6-month pause, highlighting potential supply chain or demand risks.

Regulatory Uncertainty: Awaiting further clarity on Section 45Z production tax credit and biofuel mandates, which could delay project financing and execution.

Carbon Capture Project: The carbon capture project is still in the permitting phase, which could delay its contribution to revenue.

California LCFS Credit Prices: While LCFS credit prices have risen, the program's reliance on credit supply and demand dynamics introduces market volatility risks.

India Expansion: The company is seeking to expand into ethanol production in India, but this is contingent on government policies and pricing, introducing execution risks.

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Guidance & Outlook

Revenue and Cash Flow Projections: Aemetis expects multiple revenue streams from India, LCFS credits, and federal tax incentives to ramp up as the year progresses, positioning the company for a stronger second half of 2025. Expanding operating cash flow is anticipated in 2026 as new production comes online.

Dairy Renewable Natural Gas (RNG) Production: The company plans to increase RNG production by 30% with a new multi-dairy digester coming online this month. Aemetis aims to reach 550,000 MMBtus of RNG production capacity in 2025 and grow to a 1 million MMBtu annual run rate by the end of 2026.

Ethanol Plant Upgrades: The $30 million mechanical vapor recompression (MVR) system is expected to reduce natural gas use by 80% and add an estimated $32 million in annual cash flow starting in 2026. Equipment fabrication is underway.

India Biodiesel and Ethanol Expansion: Aemetis resumed biodiesel deliveries to government oil marketing companies in April 2025 and is targeting an IPO of its India subsidiary in early 2026. The company is also exploring ethanol production in India, supported by favorable government policies and pricing.

Sustainable Aviation Fuel (SAF) and Renewable Diesel Project: The company has received permits for a 90 million gallon per year SAF and renewable diesel facility in California. Financing discussions are ongoing, with further clarity on tax credits and biofuel mandates expected to support project financing.

Carbon Capture Project: Aemetis is advancing its carbon capture project at the Riverbank site, with the potential to sequester up to 1.4 million tons of CO2 annually. The company is in the process of obtaining a Class 6 CO2 sequestration permit from the EPA.

Regulatory Support and Market Trends: The California Low Carbon Fuel Standard (LCFS) amendments are expected to increase credit prices, strengthening revenue in the second half of 2025 and beyond. Federal Section 45Z production tax credits and Section 48 investment tax credits are anticipated to significantly enhance cash flow in 2025 and 2026. E15 ethanol blend expansion in California and other states is expected to boost the ethanol market and lower fuel prices for consumers.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Could you talk about at current LCFS prices around $60, what kind of EBITDA impact that might have for Aemetis? And are you currently waiting any other LCFS pathway approvals?

A:Aemetis has 7 dairies already effective, 4 more pending, and additional ones to be filed in Q4. They expect to exit the year with at least 12 dairies approved. The financial impact is highly correlated with LCFS credit prices, which are currently around $60. The company will provide a memo with detailed financial impacts as prices are volatile.

Q:Could I get your view on the D3 RIN supply-demand outlook? Do you have any hope that the EPA may revise up those initial 2026 and 2027 D3 RVOs?

A:The biofuels industry believes the D3 RIN is understated due to an EPA mistake. Comments are being submitted to emphasize the renewable fuel standard's focus on production availability rather than consumption. Aemetis is actively participating in this process.

Q:Could you update us on the progress of 45Z as you understand it, with respect to timing of final rules from treasury and the GREET model that will be used for the provisional emission rate calculations?

A:The GREET model update is expected soon, potentially allowing 45Z credits to be generated and sold by August or September. Current guidance is sufficient for transactions, but updates are needed to correct methane emission calculations. Aemetis is actively working with the DOE to implement these changes.

Q:Where does Aemetis stand in attaining the registrations and tax ID numbers for 45Z credits?

A:Aemetis is fully registered, including its ethanol plant and RNG production facility. Individual digesters do not require registration as they produce biogas, not renewable natural gas.

Q:What is the monetization strategy for production tax credits going forward?

A:Section 48 tax credits are expected to remain lumpy, but 45Z credits should become a recurring quarterly revenue item. Aemetis has already signed a transaction for multiple closings of tax credit purchases, with sales expected every quarter or 45 days.

Q:Has the official process for the India IPO begun, and what are the plans for the use of proceeds?

A:The process is underway with a new CFO in place. Public filings are expected this fall. Proceeds will likely be split, with 25% going to the parent company for debt repayment or project development, and the rest for expanding India operations, particularly in ethanol production.

Q:With your RNGs expected to get approval by the end of this year, are those approvals backward-looking?

A:The 7 approved dairies are already effective. The 4 pending approvals might impact Q4 2023 or Q1 2024, depending on the timing of the approval process. Aemetis is taking a conservative view, expecting impacts in Q1 2024.

Q:Could you provide more details about the refinancing process?

A:Aemetis is deep into refinancing discussions, with due diligence expected to conclude by the end of August. Finalization depends on proving 45Z production tax credit revenue, which requires cash realization from these credits.

Q:If California allows E15 gasoline, how quickly will it be implemented, and what will be the impact on ethanol demand?

A:Implementation will be gradual, likely over 18 months. E15 adoption in California could add 600 million gallons of demand, pushing the U.S. ethanol industry toward capacity limits. This could lead to higher ethanol prices and potentially new facility construction by 2026.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer regarding the exact EBITDA impact of LCFS prices, stating they would provide a memo later. They also did not provide a clear timeline for the GREET model update or the refinancing process, as both depend on external factors.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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The earnings call presents a positive outlook with multiple growth initiatives, such as increased RNG production, ethanol plant upgrades, and India expansion. Despite some uncertainties in tax credit monetization and political influences on RVO policy, the company is proactive in addressing debt and enhancing profitability. The Q&A reveals optimism in overcoming challenges, with strategic refinancing and expected revenue boosts from tax credits. The positive sentiment is further supported by increased LCFS credit revenue and significant investment tax credits sold, indicating strong potential for stock price appreciation.

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