Alto Ingredients, Inc. Reports Second Quarter 2022 Results

Alto Ingredients, Inc.

• Grew Net Sales to $362.2 Million, Up 21% from Q2 2021
  

• Generated Net Income of $21.5 Million, $0.29 per Diluted Share, Up from $8.0 Million, $0.11 per Diluted Share in Q2 2021

• Increased Adjusted EBITDA to $29.9 Million, Up from $17.0 Million in Q2 2021

SACRAMENTO, Calif., Aug. 08, 2022 (GLOBE NEWSWIRE) -- Alto Ingredients, Inc. (NASDAQ: ALTO), a leading producer and distributor of specialty alcohols and essential ingredients, reported its financial results for the quarter ended June 30, 2022.

“Our strategy to diversify into specialty alcohols and essential ingredients continues to serve us well. Sales of these products, combined with a cash grant from the USDA, delivered solid performance and offset higher than usual freight expenses and repair and maintenance costs, resulting in positive gross profit, net income and Adjusted EBITDA in the second quarter,” said Mike Kandris, CEO of Alto Ingredients. “Anticipating the cash grant, we accelerated the timing of some of our infrastructure improvements. We are upgrading equipment and operating systems to increase efficiency and plant reliability, expanding our corn storage capacity, enhancing our specialty alcohol production and broadening its distribution, and reinvesting in essential ingredients capabilities. Building for the future, we are improving our position to capture a variety of opportunities, and our near- and long-term outlook is promising.”

Financial Results for the Three Months Ended June 30, 2022 Compared to 2021

• Net sales were $362.2 million, compared to $298.1 million.

• Cost of goods sold was $353.3 million, compared to $282.9 million.

• Gross profit was $8.8 million, compared to $15.2 million.

• Selling, general and administrative expenses were $9.0 million, compared to $7.2 million, reflecting Eagle Alcohol acquisition-related expenses and higher stock-compensation expenses

• Income from a cash grant from the USDA’s Biofuel Producer Program was $22.7 million.

• Net income available to common stockholders was $21.5 million, or $0.29 per diluted share, compared to $8.0 million, or $0.11 per diluted share.

• Adjusted EBITDA was $29.9 million, compared to $17.0 million.

• Cash and cash equivalents were $57.4 million at June 30, 2022, compared to $50.6 million at December 31, 2021.

• Working capital was $178.4 million at June 30, 2022, compared to $159.9 million at December 31, 2021.

Second Quarter 2022 Results Conference Call
Management will host a conference call at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time on Monday, August 8, 2022, and will deliver prepared remarks via webcast followed by a question-and-answer session.

The webcast for the call can be accessed from Alto Ingredients’ website at www.altoingredients.com. Alternatively, you may register for the conference by navigating to https://dpregister.com/sreg/10169223/f3aa59fe00 to receive a number and unique PIN by email or you may dial the following number up to twenty minutes prior to the scheduled conference call time: (833) 630-0017. International callers should dial (412) 317-1806. Please ask to join the Alto Ingredients call. The webcast will be archived for replay on Alto Ingredients’ website for one year. In addition, a telephonic replay will be available at 8:00 p.m. Eastern Time on Monday, August 8, 2022, through 8:00 p.m. Eastern Time on Monday, August 15, 2022. To access the replay, please dial (877) 344-7529. International callers should dial (412) 317-0088. The pass code will be 2155410.

Use of Non-GAAP Measures
Management believes that certain financial measures not in accordance with generally accepted accounting principles ("GAAP") are useful measures of operations. The company defines Adjusted EBITDA as unaudited net income (loss) attributed to Alto Ingredients, Inc. before interest expense, interest income, provision (benefit) for income taxes, asset impairments, loss on extinguishment of debt, acquisition-related expense, fair value adjustments, and depreciation and amortization expense. A table is provided at the end of this release that provides a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, net income (loss) attributed to Alto Ingredients, Inc. Management provides this non-GAAP measure so that investors will have the same financial information that management uses, which may assist investors in properly assessing the company's performance on a period-over-period basis. Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as an alternative to net income (loss) attributed to Alto Ingredients, Inc. or any other measure of performance under GAAP, or to cash flows from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity. Adjusted EBITDA has limitations as an analytical tool and you should not consider this measure in isolation or as a substitute for analysis of the company's results as reported under GAAP.

About Alto Ingredients, Inc.
Alto Ingredients, Inc. (ALTO) is a leading producer and distributor of specialty alcohols and essential ingredients. The company is focused on products for four key markets: Health, Home & Beauty; Food & Beverage; Essential Ingredients; and Renewable Fuels. The company’s customers include major food and beverage companies and consumer products companies. For more information, please visit www.altoingredients.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Statements and information contained in this communication that refer to or include Alto Ingredients’ estimated or anticipated future results or other non-historical expressions of fact are forward-looking statements that reflect Alto Ingredients’ current perspective of existing trends and information as of the date of the communication. Forward looking statements generally will be accompanied by words such as “anticipate,” “believe,” “plan,” “could,” “should,” “estimate,” “expect,” “forecast,” “outlook,” “guidance,” “intend,” “may,” “might,” “will,” “possible,” “potential,” “predict,” “project,” or other similar words, phrases or expressions. Such forward-looking statements include, but are not limited to, statements concerning Alto Ingredients’ near- and long-term outlook; and Alto Ingredients’ other plans, objectives, expectations and intentions. It is important to note that Alto Ingredients’ plans, objectives, expectations and intentions are not predictions of actual performance. Actual results may differ materially from Alto Ingredients’ current expectations depending upon a number of factors affecting Alto Ingredients’ business. These factors include, among others, adverse economic and market conditions, including for specialty alcohols and essential ingredients; export conditions and international demand for the company’s products; fluctuations in the price of and demand for oil and gasoline; raw material costs, including production input costs, such as corn and natural gas; and the effects of the coronavirus pandemic, and its resurgence or abatement, and governmental, business and consumer responses to the pandemic. These factors also include, among others, the inherent uncertainty associated with financial and other projections; the anticipated size of the markets and continued demand for Alto Ingredients’ products; the impact of competitive products and pricing; the risks and uncertainties normally incident to the specialty alcohol production and marketing industries; changes in generally accepted accounting principles; successful compliance with governmental regulations applicable to Alto Ingredients’ facilities, products and/or businesses; changes in laws, regulations and governmental policies; the loss of key senior management or staff; and other events, factors and risks previously and from time to time disclosed in Alto Ingredients’ filings with the Securities and Exchange Commission including, specifically, those factors set forth in the “Risk Factors” section contained in Alto Ingredients’ Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 10, 2022.

Media Contact:
Bryon McGregor, Alto Ingredients, Inc., 916-403-2768, mediarelations@altoingredients.com

Company IR Contact:
Michael Kramer, Alto Ingredients, Inc., 916-403-2755, investorrelations@altoingredients.com

IR Agency Contact:
Kirsten Chapman, LHA Investor Relations, 415-433-3777, investorrelations@altoingredients.com

ALTO INGREDIENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)

	Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
Net sales	$	362,189			$	298,110			$	670,307			$	516,844
Cost of goods sold		353,345				282,877				656,690				487,774
Gross profit		8,844				15,233				13,617				29,070
Selling, general and administrative expenses		8,996				7,230				16,625				14,244
Asset impairments		—				1,900				—				3,100
Income (loss) from operations		(152	)			6,103				(3,008	)			11,726
Interest expense, net		(319	)			(1,045	)			(519	)			(2,930	)
Income from cash grant		22,652				—				22,652				—
Income from loan forgiveness		—				3,887				—				3,887
Other income (expense), net		(66	)			(555	)			388				385
Income before provision for income taxes		22,115				8,390				19,513				13,068
Provision for income taxes		—				—				—				—
Net income	$	22,115			$	8,390			$	19,513			$	13,068
Preferred stock dividends	$	(315	)		$	(315	)		$	(627	)		$	(627	)
Net income allocated to participating securities		(284	)			(108	)			(251	)			(167	)
Net income available to common stockholders	$	21,516			$	7,967			$	18,635			$	12,274
Net income per share, basic	$	0.29			$	0.11			$	0.26			$	0.17
Net income per share, diluted	$	0.29			$	0.11			$	0.26			$	0.17
Weighted-average shares outstanding, basic		72,936				71,260				71,690				70,808
Weighted-average shares outstanding, diluted		73,123				71,929				71,958				71,961

ALTO INGREDIENTS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except par value)

ASSETS		June 30, 2022			December 31, 2021
Current Assets:
Cash and cash equivalents		$	57,376		$	50,612
Restricted cash		17,361			11,513
Accounts receivable, net		92,744			86,888
Inventories		67,438			54,373
Derivative instruments		27,488			15,839
Other current assets		11,081			10,301
Total current assets		273,488			229,526
Property and equipment, net		222,946			222,550
Other Assets:
Right of use operating lease assets, net		14,004			13,413
Notes receivable, noncurrent		—			11,641
Intangible assets, net		9,381			2,678
Goodwill		5,908			—
Other assets		5,592			5,145
Total other assets		34,885			32,877
Total Assets		$	531,319		$	484,953

ALTO INGREDIENTS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(unaudited, in thousands, except par value)

LIABILITIES AND STOCKHOLDERS’ EQUITY		June 30, 2022									December 31, 2021
Current Liabilities:
Accounts payable – trade			$	21,478							$	23,251
Accrued liabilities				21,404								21,307
Current portion – operating leases				4,132								3,909
Derivative instruments				32,770								13,582
Other current liabilities		15,340										7,553
Total current liabilities				95,124								69,602
Long-term debt, net of current portion				52,518								50,361
Operating leases, net of current portion				9,801								9,382
Other liabilities				10,288								10,394
Total Liabilities				167,731								139,739
Stockholders’ Equity:
Alto Ingredients, Inc. Stockholders’ Equity:
Preferred stock, $0.001 par value; 10,000 shares authorized;
Series A: no shares issued and outstanding as of
June 30, 2022 and December 31, 2021
Series B: 927 shares issued and outstanding as of
June 30, 2022 and December 31, 2021			1							1
Common stock, $0.001 par value; 300,000 shares authorized;    74,188 and 72,778 shares issued and outstanding as of June    30, 2022 and December 31, 2021, respectively			74							73
Non-voting common stock, $0.001 par value; 3,553 shares    authorized; 1 share issued and outstanding as of June 30,    2022 and December 31, 2021			—							—
Additional paid-in capital			1,036,692							1,037,205
Accumulated other comprehensive expense			(284)							(284)
Accumulated deficit			(672,895)								(691,781)
Total Stockholders’ Equity			363,588								345,214
Total Liabilities and Stockholders’ Equity			$	531,319							$	484,953

Reconciliation of Adjusted EBITDA to Net Income

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands) (unaudited)		2022			2021			2022			2021
Net income	$	22,115		$	8,390		$	19,513		$	13,068
Adjustments:
Interest expense		319			1,045			519			2,930
Interest income		(145	)		(186	)		(303	)		(370	)
Asset impairments		—			1,900			—			3,100
Acquisition-related expense		875			—			1,750			—
Depreciation and amortization expense		6,728			5,811			12,861			11,669
Total adjustments		7,777			8,570			14,827			17,329
Adjusted EBITDA	$	29,892		$	16,960		$	34,340		$	30,397

Commodity Price Performance

	Three Months Ended June 30,				Six Months Ended June 30,
(unaudited)	2022		2021		2022							2021
Renewable fuel production gallons sold (in millions)	51.3		41.4		100.4						80.4
Specialty alcohol production gallons sold (in millions)	25.8		24.3		49.1						43.3
Third party renewable fuel gallons sold (in millions)	30.0		59.3		60.8						113.3
Total gallons sold (in millions)	107.1		125.0		210.3						237.0
Total gallons produced (in millions)	77.0		63.6		151.3						121.5
Production capacity utilization	88%		59%		85%					56%
Average sales price per gallon	$ 2.84		$ 2.41		$ 2.65						$ 2.17
Average CBOT ethanol price per gallon	$ 2.16		$ 2.30		$ 2.16						$ 2.00
Corn cost per bushel – CBOT equivalent	$ 7.46		$ 6.05		$ 6.84						$ 5.51
Average basis	0.69		0.41		0.66						0.36
Delivered corn cost	$ 8.15		$ 6.46		$ 7.50						$ 5.87
Total essential ingredients tons sold (in thousands)	414.1		304.0		812.9						580.9
Essential ingredients return % (1)	32.7%		32.2%		34.6%									35.9%

________________
(1) Essential ingredients revenue as a percentage of delivered cost of corn.

Segment Financials

	Three Months Ended June 30,							Six Months Ended June 30,
		2022			2021				2022			2021
Net Sales
Pekin Campus, recorded as gross:
Alcohol sales	$	143,768		$	132,296			$	259,818		$	227,380
Essential ingredient sales		59,853			49,578				115,133			94,655
Intersegment sales		269			316				525			628
Total Pekin Campus sales		203,890			182,190				375,476			322,663
Marketing and distribution:
Alcohol sales, gross	$	63,558		$	86,299			$	117,484		$	143,309
Alcohol sales, net		317			532				668			984
Intersegment sales		3,242			2,618				6,239			4,862
Total marketing and distribution sales		67,117			89,449				124,391			149,155
Other production, recorded as gross:
Alcohol sales	$	67,184		$	22,153			$	126,991		$	38,121
Essential ingredient sales		23,372			7,252				42,309			12,395
Intersegment sales		—			332				12			637
Total Other production sales		90,556			29,737				169,312			51,153
Corporate and other		4,137			—				7,904			—
Intersegment eliminations		(3,511	)		(3,266		)		(6,776	)		(6,127		)
Net sales as reported	$	362,189		$	298,110			$	670,307		$	516,844

Cost of goods sold:
Pekin Campus	$	195,691		$	171,547		$	364,573		$	299,250
Marketing and distribution		63,796			85,746			118,510			139,705
Other production		91,606			27,325			169,851			51,442
Corporate and other		3,197			—			6,070			—
Intersegment eliminations		(945	)		(1,741	)		(2,314	)		(2,623	)
Cost of goods sold as reported	$	353,345		$	282,877		$	656,690		$	487,774
Gross profit:
Pekin Campus	$	8,199		$	10,643		$	10,903		$	23,413
Marketing and distribution		3,321			3,703			5,881			9,450
Other production		(1,050	)		2,412			(539	)		(289	)
Corporate and other		940			—			1,834			—
Intersegment eliminations		(2,566	)		(1,525	)		(4,462	)		(3,504	)
Gross profit as reported	$	8,844		$	15,233		$	13,617		$	29,070