Dutch Bros Q4 2025 Earnings Call Transcript

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March 26, 2025

There are 5 speakers on the call.

Operator

welcome to Rex American Resources Fourth Quarter and Full Fiscal Year twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Operator

Doug Brogeman. Thank you. You may begin.

Speaker 1

Good morning, and thank you for joining this morning's call. Joining us today is Stuart Rose, Executive Chairman and Zafar Rizvi, Chief Executive Officer. We'll get to our presentation and comments momentarily as well as your questions. But first, I will review the Safe Harbor disclosure. In addition to historical facts or statements of current conditions, today's conference call contains forward looking statements that involve risks and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker 1

Such forward looking statements reflect the company's current expectations and beliefs, but are not guarantees of future performance. As such, actual results may vary materially from expectations. The risks and uncertainties associated with the forward looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10 ks and 10 Q. Rex American Resources assumes no obligation to publicly update or revise any forward looking statements. I would now like to turn the call over to our Executive Chairman, Stuart Rose.

Speaker 2

Good morning and thank you again to everyone for joining us. Fiscal twenty twenty four saw a continuation of the positive results from Rex's time tested approach to our core ethanol business. Sales of ethanol grew over 2023 levels with 289,700,000 gallons of ethanol sold. Despite lower prices, our management of the overall business remained as focused as ever and total net income and income per share remained strong along with gross profit. Rice continues to be among the best in the industry in our core ethanol business line.

Speaker 2

As far as our several growth projects, during 2024, we substantially completed construction of the capture and compression portions of our planned carbon capture facility. Additionally, we progressed our capacity expansion project at the One Earth Energy Ethanol facility. Our overall business saw great financial results and good operational progress during 2024. As we move forward through 2025, the Rex team is bringing the same attention to detail, close management, the day to day as we have in the past. We are concentrating on the things we can control and acting prudently as and when conditions change.

Speaker 2

Aside from our headstand focus on efficient and profitable operations, Rex has had a long standing commitment to delivering value to our shareholders through a well considered share repurchase program. We are selective in how we apply this authorization from our Board of Directors and act when we see value in our share price. To this way of thinking, we are active in the fiscal fourth quarter, repurchasing approximately 373,000 shares and we've been active in fiscal quarter one with repurchases totaling 282,000 shares. As of yesterday, Rex's Board of Directors authorized an additional 1,500,000.0 shares to be available for repurchase. These are in addition to the remaining 222,510 shares still available for repurchase under the previous buyback authorization.

Speaker 2

As far as additional avenues for growth, we're always looking for facilities that come on the market that meet our operational and financial criteria. Our ability to do so is always thanks to the incredible team we have at REX, whether operating the facilities, there are plans to high efficiency or monitoring corn and natural gas markets and taking advantage of beneficial conditions to lower our cost base. The people we have at REX are second to none in the industry. And I want to take a moment as always to thank them for the work they do on a daily basis.

Speaker 3

All of

Speaker 2

this is to say that Rex is in good position to make progress on our strategic goals during 2025, delivering value to our shareholders. I'd now like to turn things over to our CEO, Zafar Rizvi to discuss the progress of our growth projects at REX.

Speaker 3

Thank you, Stuart. During fiscal year '20 '20 '4, we made steady progress on our carbon capture and sequestration project in Gibson City, Illinois. During the year, we substantially completed construction on the capture and compression portion of the facility. During 2025, we anticipated moving forward in the sequestration portion of the project. Currently, we are awaiting approval of Class VI injection well permit from the EPA.

Speaker 3

The EPA currently projects issuance of this permit in October. We are hopeful that once we have obtained this permit that we will be able to move forward with other required state and local permitting. Given proposed rulemaking earlier in the year by the Pipeline and Hazard Materials Safety Administration, we are closely monitoring potential action to accelerate the updating rules and regulations for CO2 pipeline from the Trump Administration and toward getting the project moving forward. Once all approvals are received and the facility is operational, the One Earth Carbon Capture and Squares Station facility should contribute to RAC's bottom line through both 45Z and 45Q tax credits. These tax credit impacts would be maximized through the related expansion of our Gepson City ethanol production facilities capacity once it is completed and in operation.

Speaker 3

During 2024, LEX moved forward on construction of the ethanol facility expansion project and made substantial progress. Currently, management is undertaking a review of certain elements of the project plan. The review is in keeping with our priority of maintaining efficiency and higher production level at our facilities. And we believe we will ultimately benefit the long term operation and profitability of the capacity expansion. However, as a result of the review, we do anticipate the timeline for the completion of the expansion to extend past the previous target of the middle of twenty twenty five.

Speaker 3

As of fiscal year end, we have invested approximately $115,600,000 into the One Earth Carbon Capture project and associated ethanol production capacity expansion. Due to the anticipated impacts of the ongoing review of certain elements of the expansion projects and inflation, we are now budgeted a total of $220,000,000 to $230,000,000 for both projects combined. I would like to hand the call to our CFO, Doug Bruggman to discuss our operational and financial results.

Speaker 1

Thank you, Zafar. I'll begin with our operational results. Rex's ethanol sales volume during fiscal year twenty twenty four were 289,700,000 gallons, a slight increase over fiscal year twenty twenty three sales volumes of 285,900,000 gallons. Volumes in the fourth quarter of twenty twenty four were 74,700,000 gallons versus 72,100,000 gallons in the fourth quarter of twenty twenty three. Average selling prices for our consolidated ethanol volumes was approximately $1.71 per gallon for the full year 2024 and $1.64 for the fourth quarter.

Speaker 1

Dry distillers grain sales volumes during fiscal year twenty twenty four totaled 632,000 tons, a 3% decrease over fiscal twenty twenty three volumes of 652,000 tons. Volumes during the fourth quarter were approximately 166,000 tons, a decrease of approximately 2% over the fourth quarter of twenty twenty three. Average selling price for DDGs was approximately $160.37 per ton for the full year and $143.81 per ton for the fourth quarter. Modified distillers grain sales volumes were 70,000 tons in fiscal twenty twenty twenty four compared with approximately 54,000 tons in fiscal year twenty twenty three. For the fourth quarter, modified distiller grain volumes totaled approximately 19,500 tons, an increase of approximately 11% over the same period in 2023.

Speaker 1

The average selling price for modifieds was approximately $69.93 per ton for the full year and $72.84 per ton for the fourth quarter. Corn oil sales volume in fiscal twenty twenty four were approximately 88,100,000 pounds compared to 87,500,000 pounds sold in fiscal year twenty twenty three, increase of approximately 1%. For the fourth quarter, corn oil sales volumes totaled approximately 23,500,000, an increase of 7% over the fourth quarter of twenty twenty three. The average selling price for Rex's coronary product was approximately $0.44 per pound for the full year and the fourth quarter of twenty twenty four. Gross profit for fiscal year twenty twenty four was $91,500,000 versus gross profit of approximately $98,200,000 for fiscal year twenty twenty three.

Speaker 1

Gross profit in Q4 twenty twenty four was $17,600,000 compared to $30,400,000 in the fourth quarter of twenty twenty three. The decrease was due to lower selling prices across all categories, slightly offset by lower corn and natural gas prices. Our selling, general and administrative expenses decreased to $27,100,000 for fiscal year twenty twenty four versus $29,400,000 in 2023. SG and A in the fourth quarter decreased to approximately $6,200,000 versus $7,400,000 in the fourth quarter of twenty twenty three. The fourth quarter decrease was primarily due to lower incentive bonuses based on company profitability levels.

Speaker 1

Interest and other income grew by approximately 22% in 2024, totaling $19,200,000 compared with approximately $15,700,000 for fiscal year 2023. We reported the interest and other income for the fourth quarter of approximately $4,200,000 versus $4,800,000 for the same period in 2023. Income before taxes of non controlling interest for 2024 was approximately $92,900,000 a 6% decrease from $98,500,000 in 2023. During the fourth quarter, we reported approximately $17,900,000 in this metric versus $32,500,000 during the same period during the previous year. Net income attributable to REX shareholders for the year was $58,200,000 compared to $60,900,000 in fiscal year twenty twenty three.

Speaker 1

For the fourth quarter twenty twenty four, this equaled $11,100,000 compared with $20,600,000 for the fourth quarter of twenty twenty three. On a per share diluted basis for the full year, this amounts to $3.3 per share of net income in 2024 compared to $3.47 per share in 2023 and for the fourth quarter twenty twenty four, diluted net income per share was $0.63 per share compared to $1.16 per share for the same period the previous year. During the fourth quarter of twenty twenty four, REX repurchased approximately 373,000 shares of our common stock for total consideration of approximately $15,500,000 So far during the fiscal first quarter of twenty twenty five, Rex has repurchased an additional 281,709 shares of our stock for a total consideration of $11,900,000 Total share repurchases equaled 654,276 shares or approximately 3.7% of REX's outstanding shares. We ended the fiscal year with total cash, cash equivalents and short term investments of $359,100,000 compared with $378,700,000 for fiscal year end 2023. This net reduction in cash was primarily due to capital expenditures related to the projects at the One Earth Energy facility as well as the share repurchases mentioned earlier.

Speaker 1

Rex American ended the year without any bank debt. I'd now like to turn things back over to Zafar.

Speaker 3

Thanks, Doug. I would like to give some color around our priorities for 2025 and the several factors that will influence our business for the remainder of the calendar year. Overall, we are pleased with Q4 and how we managed through some challenges and are now focused on profitable 2025. Q1 is already off to a good start and we are expecting a profitable Q1, which would be our nineteenth consecutive profitable quarter for a net income prospective. Against this positive current financial and operational backdrop, we are maintaining a focus on properly positioning our business for the future and executing on our several growth projects during the year.

Speaker 3

Importantly, we are carefully watching the policy forces that could impact our business and the overall market for our products. Chief among these is the possibility of tariffs on ethanol and co product exports, which could be imposed by foreign governments. During 2024, total ethanol export from The U. S. Reached a record high of 1,900,000,000 gallons, supporting pricing throughout the year.

Speaker 3

We are particularly mindful of tariff impact of the Canadian and Mexican market as Canada represent approximately 36% of U. S. Ethanol exports and Mexico represent approximately 21% of U. S. DDG export in 2024.

Speaker 3

Both of these were the top export markets for the respective products. Second is the debate around year round E15 blending. We believe this proposed policy change, part of the nationwide Consumer and Fuel Retailer Choice Act introduced to Congress in February would be beneficial not just to ethanol producer, but to U. S. Consumer as well, creating increased demand while also lowering fuel price for drivers.

Speaker 3

We are closely monitoring developments in the market as well as on Capitol Hill to continue making informed and prudent decision for our business. In closing, I want to say that the entire Racks team looks forward to what is to come for our business in 2025. Thank you to all our stakeholders for your continued support. Now I'd like to open things up to questions. Operator?

Operator

Thank you. Our first question comes from Jordan Levy with Truist Securities. Please proceed with your question.

Speaker 4

Good morning all and thanks for taking my questions. Nice quarter again. Can you maybe just provide a little details of far around what went into the higher capital budget on the expansion project recognizing that the timeline kind of is in flux as you kind of await that approval for from the EPA?

Speaker 2

Sure. So far?

Speaker 3

Yes. Sure, Jordan. As you know, we always concentrate on three things. One is number one is we look at what is our profit. We have able to produce 18 consecutive profitable quarters.

Speaker 3

We also have decided to see how we can position our company towards the growth and particularly organically growth. And we looked at that. Number three, we always look at the policies. So coming back to the growth, when we looked at our equipment different kind of equipment, which was energy efficient equipment, which we looked at it, we realized that some of those equipment is not be able to handle 200,000,000 to 200,000,000 gallon production because we want to position our plants so that way if we in future, we try to grow further from 200,000,000 gallon to two twenty five million and we don't have to spend extra money in future. So we decided to evaluate those and we decided to have equipment which can manage 200,000,000 to 200,000,000 gallon production.

Speaker 3

So when we looked at that, so that's one of the major reason that we have to spend extra money for the future growth. And that's the main reason that we have really our budget is increased. And also due to that same reason, the timeline is also increased.

Speaker 4

And I appreciate that transparency. I think it makes a lot of sense. Maybe just moving over to the regulatory side, the permitting side of things. Can you just talk you guys, is there first update since the new administration?

Speaker 3

I'm sorry, Jordan, you were cut off. Could you repeat that question again, please?

Speaker 2

We lost Jordan somehow.

Speaker 3

I think if I understood correctly, probably you were talking about FSMA rules. So as you know FSMA issued new regulation two days before the end of the Biden administration. However, these were not posted for the required sixty days public comments period and are currently under review by the new administration making them invalid for implementing we are waiting for a Trump administration to review those and then repost it either eliminate some of the new rules. So that's where we are at this time for the FSMA rules, if that's what your question was.

Speaker 4

Yes. Can you hear me now?

Speaker 2

Yes. We can hear

Speaker 3

you. Yes.

Speaker 4

Okay. Yes. No, I appreciate that. And then just lastly, I just wanted to see if you've had any direct dialogue with the EPA on Class six well permitting since the new administration took over, if there's been any change in that dialogue?

Speaker 3

Yes. Actually, what happened is originally when Trump administration took over in January 20, by January 28, all the communication was stopped and later on now the communication is started already. We have in March about two conversations with EPA and then we believe that we will be able to answer all those questions which previously they were asking. And so there is communication is started.

Speaker 2

Jordan, we can't control Jordan, I was going to say, we can't control the administration, but with the Biden administration, they were very, very slow on everything. It appears the Trump administration, at least is responsive and we'll see how fast they are, but we don't know yet. We don't know what the legislation is going to include. It may be more favorable, maybe less favorable when they come out with a tax bill. But in terms of responsiveness, it seems like we're getting or the communications have opened up and they seem to be going very well at this moment, at least with the EPA?

Speaker 3

Yes, exactly. As I mentioned, we're watching the AUGIS policies very closely. So that's what Stuart is saying that these are some of these are behind our control, but we are watching them how we can really make sure that we are stay ahead of that.

Speaker 4

Yes, totally. Appreciate all the context. Thanks so much.

Speaker 2

Thank you.

Operator

There are no further questions at this time.

Speaker 3

At this

Operator

point, I'd like to turn the call back over to Stuart Rose for closing comments.

Speaker 2

Thank you. We had another great year. I think it was third best in our history and really a terrific year. We have great plants. We have great we're in great areas of the country with our plants.

Speaker 2

We have great growth prospects, which Zafar outlined. But most importantly, we have, in my opinion, the best people in the industry, including our CEO. There's no one that knows the ethanol business, in my opinion, better than Zafar. And between Zafar and the people he's assembled and the rest of the team, that's what makes Rex so much better, I believe, than the rest of the industry. And again, we thank you for listening and we'll talk to you when we have our first quarter conference call.

Speaker 2

Bye. Thank

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Earnings Conference Call
Dutch Bros Q4 2025
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