Gevo, Inc. (GEVO) Q2 2025 Earnings Conference Call Transcript

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

Overview

The earnings call summary and Q&A indicate positive aspects such as strong revenue generation, strategic tax credit monetization, and expansion plans. Despite some unclear timelines for projects, the company's focus on high-quality carbon credits and partnerships for growth is promising. The management's optimistic guidance on EBITDA improvement and cash position further supports a positive outlook. However, the lack of specific timelines for ATJ projects and management's avoidance of detailed responses slightly temper the overall sentiment.

Key Financial Performance

Cash, cash equivalents, and restricted cash $127 million at the end of the quarter.

Combined operating revenue, interest, and investment income $44.7 million during the second quarter.

Income from operations $5.8 million during the second quarter.

Non-GAAP adjusted EBITDA $17.3 million during the second quarter.

Gevo North Dakota income from operations $17.1 million during the second quarter.

Gevo North Dakota non-GAAP adjusted EBITDA $24.2 million during the second quarter.

Gevo RNG income from operations $1.5 million during the second quarter.

Gevo RNG non-GAAP adjusted EBITDA $2.6 million during the second quarter.

Net income per share attributed to Gevo $0.01 per share for the second quarter.

Clean fuel production credits (CFPC) sale $22 million worth of credits sold in the second quarter.

Net income growth for 6 months ended June 30, 2025 Grew by $20 million compared to the same period last year.

Non-GAAP adjusted EBITDA growth for 6 months ended June 30, 2025 Grew by $32 million compared to the same period last year.

Carbon dioxide removal credits (CDRs) sales Over $1 million worth sold during the second quarter.

Corn processed at Gevo North Dakota 5.7 million bushels of corn processed in the second quarter.

Ethanol production at Gevo North Dakota 17 million gallons of low-carbon fuel-grade ethanol produced in the second quarter.

High-protein animal feed production at Gevo North Dakota 52,000 tons produced in the second quarter.

Distillers corn oil production at Gevo North Dakota Over 5 million pounds produced in the second quarter.

CO2 sequestered at Gevo North Dakota Over 40,000 metric tons sequestered in the second quarter.

Renewable natural gas (RNG) production in Northwest Iowa 92,000 million BTUs produced during the second quarter.

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Operating Highlights

Alcohol-to-Jet (ATJ) 30 million-gallon plant design: Focused on deploying the first ATJ 30 plant at the North Dakota site, leveraging existing ethanol and carbon capture assets. The design aims to reduce project deployment costs and achieve economies of scale.

Ethanol to Olefins (ETO) technology: Developing proprietary technology with LG Chem and Axens to convert ethanol into olefins for renewable fuels and chemicals, targeting low capital and operating costs.

Verity software platform: Developing a platform for traceability, compliance reporting, and monetization of carbon intensity in agriculture and renewable fuels. Partnered with LANXESS for a carbon intensity supply chain program.

Carbon dioxide removal credits (CDRs): Started selling CDRs, generating over $1 million in Q2. Anticipates growing sales to $3-$5 million by year-end and long-term sales exceeding $30 million annually.

Clean fuel production tax credits (CFPCs): Sold $22 million worth of CFPCs in Q2. Expects these credits to benefit net income and adjusted EBITDA by over $10 million per quarter going forward.

Gevo North Dakota operations: Produced 17 million gallons of ethanol, 52,000 tons of high-protein animal feed, and over 5 million pounds of distillers corn oil in Q2. Sequestered over 40,000 metric tons of CO2.

Renewable Natural Gas (RNG) operations: Produced 92,000 million BTUs of RNG in Q2, with ongoing optimization to increase production.

Strategic focus on SAF platform: Positioning to meet growing U.S. jet fuel demand, projected to rise by 2 billion gallons annually over the next decade. Plans to use modular ATJ plants to convert ethanol into SAF.

Expansion through ATJ plant designs: Developed standardized ATJ30, ATJ60, and ATJ150 plant designs to scale SAF production. Actively pursuing financing for the ATJ60 project in South Dakota.

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Risk or Challenges

Financing and Deployment of Jet Fuel Plants: The company acknowledges that financing and building synthetic aviation fuel (SAF) plants takes time and resources. Delays in financing or construction could impact strategic objectives.

Carbon Dioxide Pipeline Uncertainty: The ATJ 60 project in South Dakota is progressing slowly due to uncertainties surrounding the carbon dioxide pipeline, which could delay project timelines.

Dependence on Ethanol Feedstock: The ATJ 30 plant design requires 50 million gallons of ethanol as feedstock. Any disruption in ethanol supply or price volatility could adversely affect operations.

Regulatory and Compliance Risks: The company operates in a heavily regulated environment, including compliance with carbon credit certifications and tax credit standards. Changes in regulations or failure to meet compliance could impact financials.

Market Volatility for Carbon Credits: The company is entering the carbon credit market, which is subject to price volatility and demand fluctuations. This could affect revenue stability.

Dependency on U.S. Agricultural Output: The company relies on U.S. corn production for ethanol. Any adverse changes in agricultural output, such as poor harvests, could impact raw material availability.

Project Financing Delays: The ATJ 60 project in South Dakota is awaiting a $1.63 billion loan guarantee from the U.S. Department of Energy. Delays in securing this financing could hinder project progress.

Operational Risks in New Ventures: The company is expanding into new areas like carbon dioxide removal credits and clean fuel production tax credits. These ventures carry operational and market risks.

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Guidance & Outlook

Alcohol-to-Jet (ATJ) Plant Development: Gevo is focusing on the development of a 30 million-gallon ATJ plant at its North Dakota site, leveraging existing ethanol and carbon capture infrastructure. The company is also progressing on its ATJ60 project in South Dakota, with ongoing discussions for a $1.63 billion loan guarantee from the U.S. Department of Energy. The ATJ30 design is expected to reduce project deployment costs and serve as a scalable model for future plants.

Carbon Dioxide Removal (CDR) Credits: Gevo anticipates growing CDR credit sales to $3 million to $5 million by the end of 2025, with long-term sales potentially exceeding $30 million annually. The company is leveraging its North Dakota facility's geological sequestration capacity to expand this revenue stream.

Clean Fuel Production Tax Credits (CFPCs): Gevo expects to generate over $10 million per quarter in net income and adjusted EBITDA from CFPCs, based on its production of low-carbon ethanol and RNG. The company has already monetized $22 million worth of credits and plans to finalize additional agreements in 2025.

Synthetic Aviation Fuel (SAF) Market Opportunity: Gevo is targeting the growing U.S. jet fuel demand, projected to increase by 2.3 billion gallons annually over the next decade. The company plans to use its ATJ technology to convert ethanol into SAF, aiming to produce over 2 billion gallons of jet fuel with a few dozen ATJ facilities.

Technology and Intellectual Property: Gevo is advancing its proprietary ethanol-to-olefins (ETO) technology and holds over 400 global patent assets. The company is also developing its Verity software platform for carbon intensity tracking, which is gaining traction in the agricultural and renewable fuels sectors.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What is holding back the monetization of biogas credits, and when is it expected to occur?

A:The monetization of biogas credits is included in the clean fuel production tax credit (CFPC) for ethanol production. The $22 million sale to a private party was announced, and the transaction was secured with an insurance policy to manage residual risks. With the passing of the 'big beautiful bill,' retroactive tax law changes are addressed, and the market for ethanol facilities qualifying for 45Z or CFPC is expected to heat up. Gevo is in the process of monetizing the rest of its clean fuel production tax credits for this year and has identified pathways for credits in 2025 and 2026.

Q:Can we expect a similar cadence for the RNG business?

A:Yes, the deal structure for the ethanol facility is very similar to the RNG facility. The tax credits for the rest of the year will be monetized for both ethanol and RNG facilities, with the same approach for 2026 and beyond.

Q:Is the $10 million benefit per quarter from CFPC credits a base case, and what variance should be expected?

A:The $10 million figure is a conservative estimate tied to the actual production of the facility. If there are no concerns, Gevo believes it can generate more than $10 million in tax credits per quarter. This amount combines 45Z generation from both ethanol and RNG facilities.

Q:What is the path to $30 million in CDR sales, and what drives this growth?

A:The growth to $30 million in CDR sales will be driven by better capacity utilization for the sequestration business and shifting carbon capture and sequestration (CCS) value from low-carbon fuel markets to CDR sales. The market for carbon removal credits is growing, and Gevo is focusing on high-quality credits using PURO standards. The company produces 165,000-167,000 tons of carbon dioxide, with 1 million tons of capacity not yet included in projections.

Q:Can we expect faster movement on the ATJ30 or ATJ60 projects given the favorable regulatory environment?

A:The ATJ30 project requires completion of engineering and financing, which are the rate-limiting steps. The ATJ60 project depends on clarity around the Summit pipeline and DOE discussions. Gevo will not proceed with financing or building until economic clarity is achieved. The ATJ30 design is progressing faster due to leveraging the ATJ60 design.

Q:Does the outcome of 45Z and the 'big beautiful bill' affect capital allocation in North Dakota?

A:The 45Z tax credit, expiring in 2029, does not significantly impact ATJ project economics but influences ethanol-related projects. Gevo is exploring shorter-term opportunities to optimize the 45Z benefits and expand low-carbon ethanol capacity. The North Dakota site offers significant potential for expansion due to its CCS capabilities, land availability, and farmer support.

Q:How many customers does Verity have, and what are the prospects for growth?

A:Verity currently has agreements with five ethanol customers and is expected to grow significantly. It simplifies carbon accounting for tax and voluntary credits. Gevo plans to demonstrate Verity's capabilities at its North Dakota site, showcasing its ability to manage complex credit systems.

Q:What is the depth and durability of the CDR market, and what is the contract structure?

A:The CDR market is new and developing, with both spot sales and multiyear agreements. High-quality credits with high integrity are in demand, and Gevo is focusing on longer-term contracts. The spot market is growing, with only 2% of 40 million metric tons of credits delivered so far. Gevo is already delivering credits and sees opportunities in the spot market.

Q:How is Gevo optimizing revenue from low-carbon ethanol between voluntary and compliance markets?

A:Gevo balances selling CCS value in low-carbon fuel markets and separating it for CDR sales. The decision depends on carbon credit prices and returns. Currently, the focus is on low-carbon fuel markets, but Gevo plans to increase CDR sales if they offer lower volatility and higher returns.

Q:What is the market opportunity for accommodating third-party volumes at the CCS site?

A:Gevo's CCS site has a capacity of 1 million tons per year with potential for expansion. The company is exploring opportunities to bring in third-party CO2 via virtual pipelines or colocating partner sites. The focus is on ensuring sufficient capacity for Gevo's needs while evaluating projects with the best returns.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the contract structure for CDR sales, citing restrictions. Additionally, they did not provide clear timelines or financial specifics for the ATJ30 and ATJ60 projects, emphasizing the need for economic clarity and engineering completion before proceeding.

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Earnings Word Cloud

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

GEVO Transcript

Gevo, Inc. (GEVO) Q3 2025 Earnings Call Transcript

Positive11-10

The earnings call highlights strong financial metrics, including substantial ethanol and carbon credit production, and optimistic guidance on future projects like the ATJ-30 and Verity software. The Q&A section reinforced confidence with detailed plans for EBITDA growth and DOE financing. While there were some vague responses, the overall sentiment is positive due to strategic partnerships, market opportunities, and technological advancements, suggesting a likely positive stock price movement.

Gevo, Inc. (GEVO) Q2 2025 Earnings Conference Call Transcript

Positive8-11

Gevo, Inc. (NASDAQ:GEVO) Q1 2025 Earnings Call Transcript

Unknown5-15

The earnings call summary indicates mixed signals. While there are positive developments like EBITDA growth and the potential monetization of the 45Z tax credit, there are significant risks including regulatory uncertainties and competitive pressures. The Q&A section highlights management's evasiveness on key details, adding to uncertainties. Despite a strong cash position, the company's overall net loss and dependency on government support temper optimism. Given these factors, the stock price is likely to remain stable, resulting in a neutral sentiment rating.

Gevo, Inc. (GEVO) Q1 2025 Earnings Call Transcript

Unknown5-13

The earnings call presents mixed signals: positive revenue growth and strong liquidity position are countered by ongoing losses and market uncertainties. The Q&A highlights concerns about cash flow and lack of concrete guidance on key financial metrics. While the anticipation of monetizing 45Z credits and potential EBITDA positivity offer optimism, competitive pressures, supply chain challenges, and economic factors temper enthusiasm. The lack of a shareholder return plan further contributes to a neutral outlook.

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