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Edited Transcript of REGI earnings conference call or presentation 2-May-19 8:30pm GMT

Q1 2019 Renewable Energy Group Inc Earnings Call

Ralston May 7, 2019 (Thomson StreetEvents) -- Edited Transcript of Renewable Energy Group Inc earnings conference call or presentation Thursday, May 2, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Chad Stone

Renewable Energy Group, Inc. - CFO

* Cynthia J. Warner

Renewable Energy Group, Inc. - President, CEO & Director

* Todd Robinson

Renewable Energy Group, Inc. - Treasurer

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Conference Call Participants

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* Alex Wong

* Craig Edward Irwin

Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst

* Hamed Khorsand

BWS Financial Inc. - Principal & Research Analyst

* Patrick Jacob Flam

Simmons Energy | A Division of Piper Jaffray - Research Analyst of integrated oil & refiners

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Presentation

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Operator [1]

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Greetings, and welcome to the Renewable Energy Group's First Quarter Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Todd Robinson. Please go ahead.

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Todd Robinson, Renewable Energy Group, Inc. - Treasurer [2]

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Thank you. Good afternoon, everyone, and welcome to our first quarter 2019 earnings conference call. With me today is our President and Chief Executive Officer, CJ Warner; and our Chief Financial Officer, Chad Stone.

Let me cover a few housekeeping items before I turn the call over to CJ. First, I would like to remind everyone that this call is being webcast and is available at the Investor Relations section of our website at regi.com. A replay will be available on our site beginning later this afternoon. The webcast includes an accompanying slide deck for your reference. This will appear automatically with the webcast, but you will need to advance the slides manually as we prompt you. For those of you dialing in, the slide deck can be downloaded, along with the earnings press release, in the Investor Relations section of our website.

Turning to Slide 3. We would like to advise you that some of the information discussed on this conference call will contain forward-looking statements. These statements involve risks, uncertainties and assumptions that are difficult to predict, and such forward-looking statements are not a guarantee of performance. The company's actual results could differ materially from those contained in such statements. Several factors could cause or contribute to those differences. These factors are described in detail in the Risk Factors and Other sections of our Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q, which are on file with the SEC.

These forward-looking statements speak only as of the date of this call. The company undertakes no obligation to publicly update any forward-looking statements based on new information or revised expectations. Today's discussion also includes non-GAAP financial measures. We believe these metrics will help investors assess the operating performance of our core business. Please see the press release or the appendix to the accompanying slide deck for a reconciliation of the non-GAAP measures to the most comparable GAAP measure.

With that, let me turn the call over to CJ Warner. CJ?

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Cynthia J. Warner, Renewable Energy Group, Inc. - President, CEO & Director [3]

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Thank you, Todd, and good afternoon to those on the call. I will discuss our first quarter operating highlights, and then Chad will cover financial results. Then I will come back to discuss our outlook.

We indicated in the guidance we provided in March that the first quarter would be a challenging margin environment, and it was. Those first quarter challenges were further exacerbated by extreme weather conditions in the Midwest, fog in the Gulf, flooding in the Midwest, and the fire at the ITC terminal at Deer Park, Texas, all of which impacted production and logistics at some of our plants.

Despite these challenges, our underlying operational performance in terms of production and gallons sold was strong. As you can see on Slide 4, we sold 162 million gallons of fuel. This was 20% higher than the first quarter of 2018. We produced 117 million gallons in the first quarter, a 10% increase year-over-year. Specifically, we produced 20 million gallons of renewable diesel at Geismar, a production rate which is 14% higher than the prior year quarter.

On the other hand, market conditions were highly challenging, and our adjusted EBITDA was negative $27 million for the first quarter. So as you can see on Slide 5, we had some significant elements influencing EBITDA both up and down. Relative to first quarter of 2018, factors that affected our 2019 first quarter adjusted EBITDA include the benefit of the 20% increase in volume sold; a $27 million increase in LCFS revenue reflecting our growing emphasis on selling into advantaged markets; a significant reduction in margin, with our average selling price dropping by $0.53 per gallon primarily due to lower RIN prices while feedstock costs held flat; and $20 million greater risk management charges for the quarter. Chad will elaborate shortly on the first quarter impacts in his comments.

Remember that our adjusted EBITDA is before any benefit from a potential retroactive reinstatement of a BTC. We estimate our adjusted EBITDA would increase by $55 million for business conducted in the first quarter if the incentive is reinstated on the same terms. We continue to believe that the BTC will be reinstated in 2019.

To summarize the quarter, underlying operating performance of our business was very good despite the margin environment that resulted in negative biodiesel margins and depressed earnings. Additionally, there remains the potential upside of the BTC, and we continue to address our growth initiatives.

Let me now provide a bit more detail on these initiatives. One area of growth that we continue to focus on is operational excellence and optimization. As I noted, the 117 million gallons we produced was up 10% and is a record for first quarter, with 5 of our plants establishing new production records. This is an exceptional result given that we had to temporarily reduce production at some of our plants due to weather and poor margins.

As you can see on Slide 6, we have added capacity year-over-year mostly through continuous improvement. Specifically, you can see that Geismar has been a significant driver of this track record. Since 2016, we have increased Geismar's effective capacity by 45 million gallons. This was accomplished through increasing the effectiveness of our pretreatment process by 31%, extending the time between turnarounds by 33%, and improving both reliability and throughput capacity. The increased capacity has boosted our efficiency, and we believe the production economics of our renewable diesel operations are comparable to those of our domestic renewable diesel peers.

Our sales and marketing team continued strong execution of the downstream expansion strategy. We are focused on moving down the value chain to serve our customers more directly and expand the overall use of biodiesel in the fuel pool. In addition to our strong first quarter sales, we are running several programs intended to develop new downstream channels and offers, starting out relatively small before expanding significantly. We added 5 terminals in the first quarter, and we'll continue to add more. Next week, for example, you will hear about a new terminal partnership with Broco Oil Company in Haverhill, Massachusetts, in which we will significantly expand the availability of BIO-BASE heating oil and transportation fuel to customers in the region.

We also continued our expansion to reach end-user customers directly from our local facilities. We have two examples to highlight. Soon we will open our first-ever REG cardlock station, which is adjacent to the Seneca Biorefinery. This will be an automated, 24/7 retail fueling station, which allows any customer to obtain their fuel directly from us. Our station will offer biodiesel blends produced at our local plant. This location allows us to serve our customers directly and enables us to refine our approach to further expand this channel.

Second, we're running a fuel distribution pilot in Iowa using an REG owned and operated delivery fleet that delivers blends of our locally-produced biodiesel direct to end users. One of the advantages of delivering direct to customers is we are generating greater enthusiasm for higher biodiesel content blends. In addition, as the fleet operator, we've modified our delivery trucks with a system that enables us to operate on B100, in other words 100% biodiesel fuel, year-round, even in harsh Iowa winters. We intend to significantly expand this exciting business model.

Finally, our initiative to offer differentiated blends of renewable diesel and biodiesel products continues to gain traction, and this includes REGI's Ultra-Clean Diesel brand. We sold 11 million gallons of premium blend of renewable diesel and biodiesel in the quarter, a rapid expansion over the first quarter of 2018. We continue to see customer enthusiasm and find opportunities to leverage the unique capabilities based on our scale of renewable diesel and biodiesel production.

As we expand our sales and marketing activities, we have been refreshing the look and feel of how we project the REG brand, as shown on Slide 8. You may have recently noticed a new look to our corporate and Investor Relations websites, and, if not, I encourage you to go take a look. The Fuel Forward Initiative is intended to better showcase the products and services that we offer in support of our growth initiatives and highlights our push for cleaner fuel to meet the increasing global demand. In summary, our downstream strategy is progressing as planned, and we look forward to providing updates in the future.

Now, let me update you on our divestiture of Life Sciences. We are pleased to share that we have identified a buyer. We're in late stages of negotiation, and we anticipate closing soon. Further expansion into renewable diesel continues to be a focus for us. We are advancing our project efforts with Phillips 66 for a planned joint venture to produce renewable diesel from an advantaged location on the West Coast. Work is progressing on schedule to engineer a 250 million gallon nameplate renewable diesel plant adjacent to Phillips' Ferndale, Washington refinery.

On the federal regulatory front, we are all awaiting a retroactive reinstatement of a BTC. Bipartisan support continues to grow, and we remain confident that the incentive will be reinstated for 2018 and 2019.

Now, before I turn the call over to Chad, I want to highlight some of our contributions on the environmental and social fronts. We are very proud of the carbon reduction we achieved in the first quarter. On Slide 9, you can see that the 117 million gallons of low-carbon renewable fuel we produced displaced 900,000 metric tons of CO2. This tremendous environmental benefit is another part of our Fuel Forward initiative that you'll be hearing more about in the months to come.

In addition, we continue to improve our safety track record, and we had zero reportable incidents in the first quarter despite the extreme weather conditions. Our 12-month rolling average injury rate is now at a company record low level and is well on the way to industry leadership.

I will now turn the call over to Chad for the financial update, and then I will return to discuss our guidance and outlook. Chad?

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Chad Stone, Renewable Energy Group, Inc. - CFO [4]

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Thank you, CJ, and good afternoon, everyone. Before I get into my comments on the quarter, I want to align everyone on the comparable results for the first quarter of 2018. Our first quarter 2018 results included the full-year retroactive BTC reinstatement for volumes associated with 2017 business which is not related to first quarter activities. Accordingly, we will be comparing our first quarter 2019 results to the first quarter 2018 adjusted results, as you can see on Slide 10.

Total revenues were basically flat versus 2018. Revenues benefited from 20% increase in gallons sold and an increase in LCFS revenues of $27 million. These increases were offset by a 17% lower average selling price primarily due to lower ring prices as well as lower revenues from sales of separated RINs. Our margins were challenged in the quarter, as CJ mentioned. We continued to run at a positive contribution margin with upside potential from the BTC reinstatement. And this is similar to other years when the BTC was not in effect.

We believe the current low prices for biodiesel are primarily due to downward pressure on RIN prices caused by a combination of the market's anticipation of a BTC reinstatement and the concern around small refinery exemptions for 2018 and 2019. Slide 12 shows that the current RIN prices are suppressed below the predicted level based on the historical correlation with the HOBO spread. Market prices for the lower-carbon options in our feedstock portfolio were higher than in 2018, with average spot prices up $0.04 per pound, also impacting our margins.

As you can see on Slide 13, the spreads between soybean oil and both distiller's corn oil and used cooking oil have compressed. We believe the compression is attributed in part to low soybean oil prices in response to trade with China. On the other side, demand for low-carbon intensity feedstocks intended for premium markets has provided supportive prices for waste fats and oils.

Cost of goods sold for the first quarter of 2019 included $23 million of risk management loss compared to a $2 million risk management loss in 2018. Recall our usual reminder that some of the risk management gains and losses recognized in the quarter are offset by the final realized pricing when the gallons are delivered in a subsequent period. And this is particularly relevant in the first quarter, when we are opportunistically building inventory in advance of peak demand quarters where we expect improved economics.

We remain focused on a lean and efficient organizational structure. Operating expenses were down primarily due to lower employee-related compensation. SG&A expenses as a percent of revenue were 5% in the quarter, which is consistent with prior years. Our adjusted EBITDA for the first quarter was negative $27 million pre-BTC. If the BTC is reinstated, the adjusted EBITDA would be a positive $28 million. The net benefit of a retroactive reinstatement of the BTC would result in an increase in our adjusted EBITDA of $55 million and $43 million for the respective first quarter for 2019 and 2018.

As we note consistently, our business is seasonal, and we do not believe a single quarter's results reflect our long-term earnings power. To see our long-term earnings power more clearly and to reduce the impacts of seasonality, we look at time periods of a year or more. Slide 14 shows our trailing 12-month adjusted EBITDA, and Slide 15 shows trailing 12-month return on invested capital. The light blue on the bar charts reflects the net benefit of the BTC is reinstated.

Moving to the balance sheet on Slide 16, cash on hand was unchanged during the quarter, but marketable securities were reduced as they matured. This is in addition to increased draws on our lines of credit funding working capital. Receivables and inventory were substantially higher at quarter-end, while we also reduced payables. We normally build inventory during the slower winter months, taking full advantage of our production capability and historically lower seasonal feedstock prices, with the expectation that we'll see better prices during our peak demand season in the summer.

Looking at our liquidity, we had $140 million of cash and cash equivalents plus marketable securities at the end of the quarter. We had $58 million available on our lines of credit at the end of March. And now that we're emerging out of the seasonally slow winter period, we're starting to sell more inventory and improve our cash flows.

As I've mentioned in the past, we have set aside cash for the 2019 convertible bonds that are maturing in June. We have $65 million to $75 million remaining of budgeted CapEx this year, excluding any large renewable diesel projects. We continue to prioritize our highest-impact projects while exercising fiscal prudence. Our effective tax rate for 2019 is expected to be less than 1%. Going forward, we expect our tax rate to continue to be less than 5% for the foreseeable future, and our blended average interest rate is less than 4%.

Now I'll turn the call back to CJ to discuss the outlook. CJ?

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Cynthia J. Warner, Renewable Energy Group, Inc. - President, CEO & Director [5]

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Thanks, Chad. Please all now refer to Slide 22 for our guidance. For the second quarter of 2019, we expect ongoing strong underlying performance, with gallons sold in the range of 190 million to 210 million gallons, which is a 10% to 22% increase over the second quarter of 2018. This includes the Geismar planned maintenance turnaround scheduled to take place during May. We do anticipate the margin environment to continue to be challenging in the second quarter due to lower RIN prices in the absence of greater certainty on the federal regulatory front.

In addition, as we noted in our full-year 2018 earnings call back in March, the change in LCFS compliance rules result in the quarterly credit validation period being extended from a 3-month deferral to a 4-month deferral. The net effect of this change is that what we normally would have booked in the second quarter of this year is being pushed into the third quarter. All subsequent quarters will begin to book quarterly at the 4-month deferral period. The resulting one-time impact of the LCFS deferral will occur in the second quarter and is estimated to be in the range of $25 million to $30 million. Recall this is a timing item and not an actual reduction in value.

With that in mind, guidance for adjusted EBITDA for the second quarter is in the range of negative $25 million to negative $10 million. We estimate that second quarter adjusted EBITDA would increase by approximately $63 million if the BTC is reinstated on prior terms for 2019. Therefore, adjusted EBITDA would be in the range of $38 million to $53 million.

To put these numbers in context and to more closely reflect actual performance, we have created a pro forma table on Slide 22. If we add back the one-time LCFS deferral to our guidance, adjusted EBITDA for the quarter would be in the range of breakeven to $20 million. Furthermore, if the BTC is reinstated, our second quarter pro forma adjusted EBITDA with the LCFS deferral added back would be in the range of $63 million to $83 million. This estimate for the second quarter is based on actual performance through last week and takes into account existing forward contracts expected to be fulfilled and existing spot margins through the end of the quarter. Any changes to the ULSD prices, margins, RINs or LCFS credit values, or a level of market volatility through the end of the quarter, could affect actual results.

We have included $10 million of risk management losses in our guidance, which reflects our estimate for the quarter as of April 24 based on the ULSD forward curve. Our full year guidance is increasing slightly with the improved underlying performance. We now estimate that gallons sold will be in the range of 750 million to 775 million and gallons produced to be in the range of 520 million to 550 million.

Now I would like to turn the call over to the operator for the question-and-answer segment of our call. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Craig Irwin with ROTH Capital Partners.

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Craig Edward Irwin, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [2]

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Thanks for taking my questions. The first thing I wanted to ask about is the BTC for 2018. Can you remind us what the cash value would be for REGI if that was reinstated tomorrow? What would you apply for from the IRS that would show up on your balance sheet?

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Chad Stone, Renewable Energy Group, Inc. - CFO [3]

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Craig, this is Chad. Thanks for the question. So the 2018 amount of the net benefit of the BTC is $237 million, and the net benefit for the first quarter is $5 million. So in total, that's $292 million.

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Craig Edward Irwin, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [4]

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But the onetime cash payment from the IRS would be a $237 million cash payment for 2018, is that correct, and then everything this year would be additive?

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Chad Stone, Renewable Energy Group, Inc. - CFO [5]

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Yes. That's correct, that benefit.

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Craig Edward Irwin, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [6]

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Second question, just a big-picture item. So there is some optimism out there for a trade settlement with China. But when we looked over the last year, soybeans, soybean oil prices have been compressed with this trade fight, seeing things trade in the $0.27 to $0.30 range on average for soybean oil. But over the same time period, distiller corn oil has actually rallied.

Would you expect a trade settlement with China to provide an uplift on soybean oil pricing? And the spread between soybean oil and distiller corn oil that was quite wide a couple years ago and narrowed over the course of the last year. Would you expect that to widen again, or that the rise in soybean oil prices would be accommodative for further increases in distiller corn oil pricing?

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Chad Stone, Renewable Energy Group, Inc. - CFO [7]

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Craig, this is Chad again. So first, I agree with your comment on the trade with China, that I believe what we've experienced is downward pressure on the entire soybean complex, including soybean oil. So I think that's been a force at work to keep a lid on soybean oil prices. So that's one part of the equation.

On the other side of the equation on distiller corn oil, I think there's a couple of things going on there. First of all, it's a lower carbon intensity feedstock that's very advantaged for markets like California, Oregon, and others that give us a premium for the low CI, or the low carbon intensity. And that's been very helpful, but that's been supportive of strong demand for distiller corn oil. And then I would say take a look at the ethanol producers because they've had some challenging margins and operational environment, so the supply has been somewhat impacted.

The net of all that is we certainly have seen a significant amount of compression year-over-year in the spread between soybean oil and distiller corn oil and used cooking oil, and I think it's because of those forces at work. The other variable out there that you've got to keep an eye on is growing supplies of palm oil. That keeps pressure, in addition to the China trade, that's also keeping pressure on soybean oil prices.

So all that being said, I think that increasing demand and increasing premiums from the advantaged markets is going to continue to provide a floor for the low carbon intensity feedstocks, like animal fats, used cooking oil, inedible corn oil, or distiller corn oil. So the historical spread may not get back to where it used to be. It's just my opinion. I know there's lots of opinions out in the market and lots of other forces, but I'll kind of stop there.

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Cynthia J. Warner, Renewable Energy Group, Inc. - President, CEO & Director [8]

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This is CJ. There's a couple other interesting things to keep a very close eye on in the market with some fairly large dynamic. One of them is the swine flu epidemic. And the slaughter rates that have been required in China have been absolutely tragic. And as they've had to slaughter their herd, of course, the implication on the need for feed is going to change dramatically. And that is likely to put some pressure downward on soy prices in the near-term, so that's a fairly significant thing for us to keep an eye on.

And the other dynamic, which I know people have been watching for, and we're waiting for it to happen probably in the second half of 2019, is the effective IMO fuel standard for marine where the sulfur regulation is going to go down for marine fuel. And all views at this point and predictions are that the diesel demand to blend down the sulfur level in the marine pool is going to go up, and so ULSD prices are likely to spike in the second half of 2019.

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Craig Edward Irwin, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [9]

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My next question is about the capital projects that you've been executing. I know there are a number of smaller projects that were in consideration at Geismar. As your most profitable facility, I could see many of those potentially being the highest return projects at RHE. Can you maybe discuss what you're actually executing now and what you expect to continue to work through in the second quarter and this summer? How should we look at these specific projects impacting the ability of Geismar either to take advantage of the local waterways or sell into alternative markets that could have different dynamics of demand?

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Cynthia J. Warner, Renewable Energy Group, Inc. - President, CEO & Director [10]

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Yes, great question. And our capital plan is something we keep a close eye on and can seek to keep the momentum going. So we focus on the projects first in order of priority with the highest impact, and that's kind of across the category. So safety, maintenance as well as strategy and growth all get their highest priority projects first in line. And in Geismar, we are continuing to do the engineering for access to the waterway as an example because that's highly strategic for us.

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Craig Edward Irwin, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [11]

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And then last question if I may, reinstatement of BTC, this is something we were all very comfortable, very confident in 9 months ago, and it's done nothing but drag on. Now, I know that there was something that was supposed to happen and then the shutdown changed everything, but then with the change in the House, there's a fairly different dynamic, I mean a dramatically different dynamic as far as the support and the votes, particularly given the hostility of Democrats to ag policies in the past.

Can you maybe highlight for us the specific items that give you confidence that the House will support putting the BTC reinstatement into some bill at some point this year? And can you just reaffirm for us that your key champions in the Senate are still with us and obviously committed to American ag?

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Cynthia J. Warner, Renewable Energy Group, Inc. - President, CEO & Director [12]

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Yes. Well, I'll jump in on that, and then Chad can back me up. He's had a lot of direct experience in Washington lately. It is no doubt frustrating to all of us, but we continue to hear and see and get feedback to us that it really isn't a matter of if. It's a matter of when. And we know it's not just the BTC that has been having trouble actually being activated, but there are a lot of other things in Congress. So BTC in many ways appears to be a bit of a victim of the polarity that's stymieing a lot of other movement, as well.

We do see actually ongoing growth in bipartisan support. So that's a very good sign. And as you've pointed out, the dynamics in the Senate are changing, but the good thing is because there's strong bipartisan support that's not really affecting the resolve with which we see for the BTC to be attached to some other bill from the House to be brought and floated to the Senate, where the Senate can act upon it.

As you know, we have a strong champion on the Republican side in Chairman Grassley from the Ways and Means Committee, but the Ranking Democrat, Senator Wyden, is also a sponsor. And so that's a very good sign. We have 27 co-sponsors of the bill. And there does appear to be a couple different vehicles that the bill could still be attached to in the coming weeks. One of them is retirement security. The other is the Tax Administration Bill. And we know from speaking to them that we have many Senators who are really just waiting for the House to float a bill so that they can attach this to it. Chad, do you want to add anything?

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Chad Stone, Renewable Energy Group, Inc. - CFO [13]

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Yes. I think that's great. The only thing I would add is just, even as recently as yesterday, there was a D.C. fly-in of biodiesel producers, and it was hosted by a bipartisan, bicameral group of congress folks. And really, it was highlighting and demonstrating the types of good-paying jobs, a lot of times rural, a lot of times good-paying production jobs in communities that need those. And again, in the Senate, I think that's been fairly well documented of the bipartisan support there.

Of the 27 cosponsors of that bill that CJ referenced, first of all, to get 27 congress folks to co-sponsor something is a lot. Nine of those 27 are House Ways and Means Democrats, so that's important progress that the industry has made to make inroads to the newly in-power House Democrats, to make sure that they were on board with our issues and our industry and the types of things we're trying to accomplish.

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Craig Edward Irwin, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [14]

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That's really encouraging. Thank you.

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Operator [15]

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Our next question comes from Hamed Khorsand with BWS Financial.

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Hamed Khorsand, BWS Financial Inc. - Principal & Research Analyst [16]

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Could you just talk about a little bit as to what you're expecting here with the increase in production that you would be certain to get some sort of positive traction on the margin side?

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Cynthia J. Warner, Renewable Energy Group, Inc. - President, CEO & Director [17]

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Well, I guess the two are somewhat separate, but we continue to focus on underlying performance because we know the volume production is getting us a positive contribution margin. In the winter months, which we're just coming out of now -- some of us have still had snow just in the last week -- we've been using our production capacity to build inventory and basically play and arbitrage with the lower feedstock prices that we tend to experience in the winter and the higher product margins that we get in the summertime. So that enables us to take advantage of that increased production. And of course, we are developing a very substantial BTC benefit as we're doing that.

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Hamed Khorsand, BWS Financial Inc. - Principal & Research Analyst [18]

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And how much excess capacity do you have to keep producing right before we get into the summer months? Are you producing at maximum now? Or do you have more capabilities? I know because you just raised guidance for how many gallons you're expecting to sell through.

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Cynthia J. Warner, Renewable Energy Group, Inc. - President, CEO & Director [19]

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Yes. Our guidance is based on our production capabilities and our improvement, and we're able to sell everything that we produce.

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Operator [20]

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Our next question comes from Patrick Flam with Simmons Energy.

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Patrick Jacob Flam, Simmons Energy | A Division of Piper Jaffray - Research Analyst of integrated oil & refiners [21]

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This first question is basically about the capital spending plan you guys have in place. If I heard it correctly, you said you still have something like $65 million to $75 million left in the authorized plan. I was wondering if you could talk about a cadence of that CapEx plan.

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Cynthia J. Warner, Renewable Energy Group, Inc. - President, CEO & Director [22]

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I'll start, and then I think it'll be good for you to hear from our CFO in terms of the fiscal prudence that he's put in place for our spending. But we do use, of course, a very strict stage gating policy, and so within that capital expenditure plan, as I mentioned earlier, we have a prioritization activity that we undertake and make sure that we're working first on the highest-impact projects, which include some of the longer-term strategic items.

And in addition to the Geismar [to the] water project, another obvious example probably is the P66 co-engineering that we're doing on that JV. But so far, we've been able to carry that natural cadence through and ensure that we are carrying through the project plan in the order that we would want to and be able to pull through the value that we would like. At the same time, our CFO ensures that we're following some strict guidelines for fiscal prudence. So Chad, you might want to add some color to that.

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Chad Stone, Renewable Energy Group, Inc. - CFO [23]

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Sure. Thanks, CJ. So Patrick, to that point, I mean, if you look at first quarter, we had about $8 million of CapEx in first quarter. We had generally guided in the $70 million to $80 million range for the full year. And sometimes these projects take 12 to 15 months. So you can imagine, as we go out throughout the year, the sooner you have certainty around BTC, the more likely you execute on all these.

In the meantime, we're going based on cash flow and forecasting and availability, obviously prioritizing safety first, maintenance first, but then we've got some very profitable, fast payback, rapid payback projects that are the first in the queue that we have underway. For example, we've got a great one at Seneca. We've talked several times about our planned venture with Phillips 66. Of course, there's some engineering work going on with that, some improvements at Geismar and Seneca. So that said, the fiscal prudence is obviously driven by our cash forecasting and availability.

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Patrick Jacob Flam, Simmons Energy | A Division of Piper Jaffray - Research Analyst of integrated oil & refiners [24]

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That's very helpful. As a follow-up question, on their recent call, Phillips 66 talked about that Ferndale project potentially being FID'd before year-end, which would time it for a 2022 startup. Is there anything on that that you can comment on? And is it in any way tied to the renewal of the BTC? Or is that a second issue?

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Cynthia J. Warner, Renewable Energy Group, Inc. - President, CEO & Director [25]

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No, we would just support our partner in that cadence for the project. We're working closely together and (inaudible) stage-gating. So that enabled us to work together to get the decision-making at the right time and in the right place and ensure we're spending capital wisely together. And it's basically a schedule-driven project because we both want to get the [R&D] production going as soon as possible.

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Operator [26]

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(Operator Instructions) Our next question comes from Alex Wong with (inaudible) Capital Management.

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Alex Wong, [27]

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I have a quick question on the deferred LCFS topic. So that I understand, during Q2 2019, you guys will not be able to book any LCFS credit, and all that -- so that $25 million to $30 million that you're supposed to be booking in Q2 is all pushed into Q3? Is that the right way to think about it?

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Chad Stone, Renewable Energy Group, Inc. - CFO [28]

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Yes. This is Chad, Alex. Think about it this way. Before that deferral, we normally would have been issued those credits from California in June and would have been able to monetize them. Now we're going to get them in -- let's just say July because of the 1-month further delay. And I can't record the benefit of those before we get them and deliver them. So that's why, for us, there's kind of a 1-quarter shift out.

And really, what California is doing is trying to improve their validation and auditing of people who comply with the program, so they're kind of asking participants for more time so they can do better diligence. The way that affects us is our ability to get our hands on them and then sell them separately to customers is delayed slightly. So that's why we're really highlighting the impact on this second quarter. And then, going forward, we expect it to become ratable again.

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Alex Wong, [29]

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So in Q1 2019, you had your LCFS credit, but because the rule changed, it just -- in Q2 2019, you booked zero. In Q3, you will resume this -- you get to book 3 months' worth of LCFS.

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Cynthia J. Warner, Renewable Energy Group, Inc. - President, CEO & Director [30]

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Correct.

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Chad Stone, Renewable Energy Group, Inc. - CFO [31]

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That's exactly right. And the other thing we said earlier in CJ's comments is that quarter 1 2019 was $27 million higher than quarter 1 of 2018. And part of that is driven by a significant increase in the number of credits, in the amount of fuel we're selling into California. And the other is attributable to a year ago LCFS credits were down near $100 per credit, and they've increased substantially. So they've become more -- things like this have become more significant in dollar value to us, and that's why we really wanted to flag this and get it on people's radar so they can model and start to give a sense of what the value is to the quarter.

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Operator [32]

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Thank you. There are no further questions. I would like to turn the floor over to CJ for closing comment.

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Cynthia J. Warner, Renewable Energy Group, Inc. - President, CEO & Director [33]

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Thank you so much, Operator. To wrap up, everyone, we continue to deliver on the controllable elements of our plan and have put in place several exciting programs that we believe will accelerate growth into the future. We remain confident in our long-term earnings power and the value we continue to create. Now, before we close, Todd's going to mention some upcoming investor events for REG. Todd?

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Todd Robinson, Renewable Energy Group, Inc. - Treasurer [34]

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Thanks, CJ. As shown on Slide 23, we will present at the BMO 13th Annual Farm to Market Conference on May 15th in New York. Attendance at this conference is invitation-only, so please contact your BMO sales representative if you want to attend or schedule one-on-one meetings with us. We will also be attending the Baird Consumer Technology and Services Conference June 4th through the 6th and the Roth 5th Annual London Conference June 17th through the 19th. Attendance at these conferences is invitation-only, so please contact your sales representative if you want to attend or schedule one-on-one meetings.

Lastly, our Annual Meeting will take place on May 8th at 10:00 at our office in Ames, Iowa. Doors will open at 9:00 for registration. Thank you all. This concludes the call, and you may now disconnect.