Alto Ingredients (ALTO) Q2 FY26 earnings call: guidance and Q&A

Alto Ingredients has achieved its fourth consecutive quarter of profitability, including positive gross profit, income from operations, net income, and adjusted EBITDA. This consistent performance, even without 45Z tax credits, demonstrates the success of the strategic realignment initiated three years ago. The diversified operating model provides flexibility to shift production to the most attractive end markets, maximizing asset utilization and capturing premium value opportunities.

Second quarter market crush margins significantly improved to $0.33 per gallon, up from $0.11 per gallon in the prior-year period, contributing approximately $17 million in incremental gross profit. This increase was driven by robust export demand, strong domestic blending activity, and tighter ethanol inventories following industry-wide spring maintenance outages. Favorable crop conditions and larger projected grain supplies also contributed to lower corn costs and higher margins.

The company completed a planned outage and debottlenecking project at its Pekin Campus dry mill, increasing annual production capacity by 8% or 5 million gallons, with full benefits expected in Q4 FY26. Routine spring outage at ICP was also completed. At the Columbia facility, work began on adding a third CO2 storage tank, anticipated to be operational in Q4, which will expand capacity to capitalize on growing demand for premium CO2 in the Pacific Northwest.

Alto Ingredients is on track to qualify 90 million gallons or more of combined production for 45Z tax credits in FY26, expecting to generate a minimum of $15 million in income after monetization costs. The company is actively exploring opportunities to lower carbon scores without significant capital investment, including working with farmer partners to encourage low-carbon intensity corn production, which could translate into significant financial benefits for participating farmers.

There is growing momentum for year-round E15 adoption, with recent polling showing 72% support among U.S. voters. Several Midwestern states have already implemented permanent year-round E15 access, and California's transition towards E15, following Assembly Bill 30, represents a meaningful long-term demand opportunity. Expanding E15 adoption at both federal and state levels has the potential to drive significant incremental ethanol demand, improve industry capacity utilization, and support a more favorable margin environment.

The company generated $28.5 million in cash flow from operating activities during Q2 FY26 and paid down an additional $8.5 million in term debt, bringing total principal payments this year to $25.1 million. To maintain financial flexibility and pursue attractive high-return organic opportunities, Alto Ingredients established a $50 million at-the-market (ATM) equity program. This program provides a prudent and low-cost tool to access equity capital when market conditions and shareholder interests align.