Morning, ladies and gentlemen, and welcome to The Andersons 2025 Second Quarter Earnings Conference Call. My name is Joe, and I will be your coordinator for today. As a reminder, this conference call is being recorded for replay purposes. I will now hand the presentation to your host for today, Mr. Mike Hoelter, Vice President, Corporate Controller and Investor Relations. Please proceed.

Thanks, Joe. Good morning, everyone, and thank you for joining us for The Andersons second quarter earnings call. We have provided a slide presentation that will enhance today's discussion. If you are viewing this presentation from our webcast, the slides and commentary will be in sync. This webcast is being recorded, and the recording and the supporting slides will be made available on the Investors page of our website shortly. Please direct your attention to the disclosure statement on Slide 2 as well as the disclaimers in the press release related to forward-looking statements. Certain information discussed today constitutes forward-looking statements that reflect the company's current views with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Actual results could differ materially as a result of many factors, which are described in the company's reports on file with the SEC. We encourage you to review these factors. This presentation and today's prepared remarks contain non-GAAP financial measures. Reconciliations of the GAAP to non-GAAP measures are included within the appendix of this presentation. On the call with me today are Bill Krueger, President and Chief Executive Officer; and Brian Valentine, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will be happy to take your questions. I will now turn the call over to Bill.

Thanks, Mike, and good morning, everyone. Thank you for joining the call to discuss our second quarter results and outlook for the remainder of 2025. I'd like to start off by thanking all our employees for their continued hard work navigating the current markets while also evaluating several growth and M&A opportunities. Since our last earnings call, we have been able to advance our strategy through a number of projects. The most significant action was the purchase of our partner's share of our 4 ethanol plants. We have evaluated several ethanol opportunities and determined that this acquisition was the best use of our capital. I will talk more about this on the next slide. We have 2 significant long-term construction projects that we expect to have fully completed by mid-2026. Construction continues at the Port of Houston, which includes improvements to the grain facility as well as the expansion that will allow us to export soybean meal. In June, the EPA released the proposed RVOs for 2026 and 2027. This signaled further regulatory support for biomass-based diesel production, which in turn should drive increased domestic soybean crush, allowing the Houston expansion project to be well positioned to export the surplus meal. We have another project that builds on current capacity and serves a commercial need for a major energy company. We expect financial contributions from both projects starting in 2026. We have also recently completed projects to convert excess capacity at 4 of our grain elevators to perform light processing of premium ingredients for CPG companies, allowing us to better serve our customers and further improve our strong farmer relationships. With the current macro conditions in the ag industry, we remain focused on working hard for our customers and furthering our strategy. Our renewables business had a solid quarter with strong production numbers, including record yields and increased demand. In Agribusiness, we had improved fertilizer results with increased volume and margin as the increase in corn acres required additional nitrogen. We recently completed the wheat harvest and our facilities are prepared for the increased corn volumes expected at harvest. With the next slide, we'll discuss the ethanol acquisition. Our process to evaluate plants includes both strategic and financial criteria, and we have been disciplined in our approach. The strategic requirements include large and efficient production, the right geographic location to support the ethanol supply chain and the capability to produce low carbon intensity ethanol. As we were actively evaluating options, we kept returning to our own plants. We know the plants since we have been operating them for over a decade and know that they have been well maintained. We have plans to improve both efficiency and profitability moving forward. Completing this transaction affirms our commitment to the ethanol industry. Details of the transaction are listed on the slide. We purchased approximately 250 million gallons for $1.54 per gallon before considering working capital. We have limited integration risk given that we already manage and operate these sites. Plant management, marketing and administrative support will remain the same going forward under the new name of The Andersons Renewables LLC. We were able to fund this transaction with cash on hand of $300 million and borrowings under our existing credit facility. This transaction should be immediately accretive to EPS and will better align our reported EPS and EBITDA as we now control 100% of the EBITDA within the Renewables segment. Cash can be managed across the enterprise, allowing more flexibility and will drive efficiencies in capital deployment. Next, Brian will cover some key financial data on the second quarter. After that, I'll be back to discuss our forward strategy and outlook.

Thanks, Bill. We're now turning to our second quarter results on Slide #6. In the second quarter of 2025, the company's reported and adjusted net income attributable to The Andersons was $8 million, resulting in earnings per diluted share of $0.23 and $0.24 on an adjusted basis. This compares to adjusted net income of $39 million or $1.15 per share in the second quarter of 2024. Revenues increased slightly with the addition of Skyland despite overall lower commodity prices. Gross profit declined due to challenging ag fundamentals and an outsized year-over-year comparative in Renewables. Expenses also increased with the majority relating to the addition of Skyland. Adjusted pretax earnings were $15 million for the quarter compared to $45 million in 2024, with the decline coming from both segments. Adjusted EBITDA for the second quarter was $65 million compared to $98 million in 2024. Our effective tax rate varies each quarter based primarily on the amount of income or loss attributable to noncontrolling interests as well as tax credits. With the ethanol transaction Bill discussed and the reduction in income attributable to noncontrolling interests, our full year adjusted effective tax rate is now expected to be in the range of 22% to 25%. Next, we'll move to Slide 7 to discuss cash, liquidity and debt. We generated cash flow from operations before changes in working capital of $43 million in the second quarter compared to $89 million in the second quarter of 2024. While down year-over-year, this continues to demonstrate our ability to generate positive cash flows throughout the ag cycle. Our readily marketable grain inventories continue to be well in excess of our short-term debt, and we ended the quarter with a cash balance of more than $350 million. Next, we'll take a look at capital spending and long-term debt on Slide 8. Second quarter capital spending was $49 million compared to $29 million in 2024, with the increase attributable to spending on long-term growth projects as well as normal maintenance capital on the addition of the Skyland grain assets. We continue to take a disciplined, responsible approach to capital spending, which we expect could reach $200 million for the year, excluding acquisitions. Our long-term debt-to-EBITDA is approximately 1.9x, which remains well below our stated target of less than 2.5x. We funded the post-quarter ethanol transaction using cash on hand and borrowings on our line of credit and continue to have a balance sheet with significant capacity to support further growth investments. We are evaluating additional projects in our pipeline, including projects to improve efficiency and increase capacity at our existing facilities as well as further M&A opportunities that align with our growth strategy. Now we'll move on to a review of each of our businesses, beginning with Agribusiness on Slide 9. The Agribusiness segment reported pretax income attributable to the company of $18 million and adjusted pretax income of $17 million compared to adjusted pretax income of $33 million in the second quarter of 2024. As expected, our Nutrient business benefited from strong demand driven by the high corn plantings. Volumes were up substantially, and we saw a modest increase in margins as well. Similar to the first quarter, oversupplies of grain and weak demand in the Western grain belt impacted our asset locations and merchandising businesses as end users continue to make short-term purchasing decisions. We continue to evaluate opportunities to optimize our business portfolio as well as achieve efficiencies from combining the management of the former Trade and Nutrient business segments. During the quarter, we made the decision to exit a few underperforming businesses and minority investments that no longer align with our strategy. We will continue to review our portfolio, which could result in some additional changes going forward. Agribusiness had adjusted EBITDA for the quarter of $46 million compared to $56 million in the second quarter of 2024. Moving to Slide 10. Renewables generated pretax income attributable to the company of $10 million compared to $23 million in the second quarter of 2024. Ethanol margins remained favorable on efficient plant operations and elevated demand. Plant production remained high with record yields and gallons produced up year-over-year. Partially offsetting these factors were lower ethanol board crush and increased input costs, including higher Eastern corn basis and natural gas costs. Feed values were lower and are expected to remain challenged with a surplus of soybean meal in the market. Renewables had EBITDA of $30 million in the second quarter compared to $52 million last year. And with that, I'll turn things back over to Bill for some comments about our outlook for the remainder of the year.

Thanks, Brian. We are positive about the last half of the year. We're prepared for the fall harvest and are excited about the opportunities ahead of us. In our Renewables segment, the recent uptick in board crush and continuing increased demand suggests a stronger margin environment through the end of 2025. We could see record exports and expect that a large harvest will lower Eastern corn basis. We are interested in pursuing additional opportunities in ethanol and renewable feedstocks. We continue to make progress on plans to improve efficiencies, increase capacity and lower the carbon intensity of our ethanol. We expect that all 4 of our plants will begin to generate 45Z tax credits over the next year. A Class VI well permit has been filed on our behalf for a potential carbon sequestration project at our Clymers, Indiana production facility, which, if approved, would allow us to generate additional tax credits through on-site sequestration in the future. Agribusiness should see improvement in the last half of the year as wheat harvest concludes and fall harvest has the potential to be one of the largest in recent history. Our U.S. grain asset footprint should allow us additional storage and handling opportunities as we accumulate large quantities of grain at reasonable values. That will be positioned for both domestic and export use. Additional clarity on trade negotiations will help reduce market uncertainties. The third quarter is generally quiet for the fertilizer business, but we could see increased post-harvest application as weather permits. We are going to primarily focus on completing our long-term capital projects and integration in Agribusiness. We continue to evaluate additional growth projects and acquisitions aligned with our strategy. As mentioned earlier, with the near-term macro challenges in U.S. agricultural markets, we are taking this opportunity to assess our portfolio businesses and the enterprise organizations that support them to extract more value for the shareholder. We will continue to invest in our safety practices and culture, particularly around assets newer to our portfolio. We had previously provided a run rate target of $475 million of EBITDA by 2026. With the acquisition of the minority interest in our ethanol plant and the potential impact of tax credits to be delivered from our Renewables segment, we are now converting our existing EBITDA target into an EPS measure. At the time we set the target, the $475 million EBITDA would have equated to EPS of approximately $4.30 per share. We anticipate meeting the run rate EPS target by the end of 2026. I'm proud of our team's resilience in this dynamic environment. Our balance sheet remains strong, allowing us to fund additional growth. We will continue to make responsible decisions that benefit our customers and maximize shareholder value as we execute on our strategy. And with that, we are happy to answer your questions.

Our first question will come from Ben Klieve with Lake Street Capital.

Congratulations on the transaction you announced. It's really great to see. First question on this. You noted the kind of regulatory dynamic here is supportive of the space, which seems to certainly be clear in an accelerated fashion. And I'm wondering 2 things. One, did the timing of the transaction, was that correlated to this kind of regulatory tailwinds? And then also, you noted that there are some opportunities to unlock more capacity within the existing 4 facilities given regulatory tailwinds. Can you talk about kind of the incremental capacity that you could potentially introduce into these 4 facilities here given the regulatory dynamic?

Yes, we've been clear over the last eight quarters that we're considering additional ethanol capacity. I wouldn’t say the recent regulatory changes, which were signed into law on July 4, significantly impacted the transaction since we had been working on it for a few months prior. Regarding additional capacity, we are waiting for approval on a Class VI well permit that was filed on our behalf, which would enable us to explore more opportunities at our facility in Clymers, Indiana. If approved, both the Clymers facility and potentially Albion would have ample corn supply available, aligning with our criteria for expansion opportunities.

Got it. On the Agribusiness segment, you noted some nonstrategic exits. Can you characterize what those businesses were and what the financial impact was either in the quarter or on a full year basis?

Yes, we can discuss those. There were a few minority investments that resulted in an impact of about $7 million in the adjustments. Additionally, we wound down and sold a couple of facilities, including one in Idaho, and announced some closures in our contract manufacturing business related to fertilizers. Overall, these actions accounted for a few million dollars, and there was a small gain from one of the sales. There were also a few other minor adjustments, but those were the key elements.

Got it. Okay. That's helpful. And then I guess one more for me, and I'll get back in queue. You talked about the conditions on the ground here where you've got kind of a stale grain network here over the past quarter and then also a bumper crop coming up. Given these conditions, can you talk about the outlook here for kind of the mix between merchandising and storage for the second half of the year?

Sure, Ben. As we review the recently completed wheat harvest, we see more potential in space utilization compared to merchandising opportunities. We still need to wrap up what looks to be a very large corn crop, which should allow us to earn more from our elevators than from traditional merchandising. Given the size of the crop we're anticipating, we expect improvements in both areas in the second half of the year.

All right. Well, plenty more to talk, but I'll leave it there. Congratulations again.

And our next question will come from Ben Mayhew with BMO Capital.

Congratulations on the deal. I think it's great that you're bringing it in-house. So on that topic, can you discuss why acquiring the balance of TAMH ethanol assets was the right move now for The Andersons? And how does this deal fit into your longer-term strategic objectives to grow your EBITDA? And I think you said at the end of the prepared remarks there that you expected to hit your EBITDA run rate by '26. So I'm assuming that this all kind of ties into that. But if you could just elaborate, please.

Thanks for the question, Ben. I will hit the first part of the question and then have Brian address the EBITDA versus EPS portion of the question. So from our perspective, if we want to invest more in ethanol, taking the opportunity to acquire 50% of 4 plants, 3 of which we've built. The fourth one we've been operating since 2014, felt like a better deployment of capital, allowing us to be able to capture more EPS for shareholders. And quite honestly, as I mentioned, very little integration risk. All the employees are Anderson employees. The management, the marketing will all remain the exact same. We just simply have more financial opportunity from this investment versus buying plants that may need additional capital investment and that we don't know the marketplace as well as we do around the 4 plants that we already own. So in terms of something right down the center of the fairway for us, this feels like it couldn't hardly be better. Second of all, it also allows us to grow in the space and not have to take additional risk in terms of integration, allowing us to continue to look at additional plants and/or opportunities in renewable feedstocks simultaneously.

Ben, I want to address the difference between EBITDA and EPS. Since Andersons was already including TAM's results, our EBITDA reflects 100% of TAM because it excludes noncontrolling interests. However, Anderson shareholders were really benefiting from only about 50% of that plant's EBITDA. Moving forward, we'll fully reap the benefits of earnings and cash flows as it will no longer be part of a joint venture. To provide context from an EPS standpoint, if we analyze the past four years, we expect the annual incremental EPS impact to be around $0.70 to $0.75 per share from 2021 to 2024. In a peak year like 2023, it could exceed $1 per share. Therefore, given that we now own 100% and will see the full EPS benefits, along with the fact that tax credits are not included in the EBITDA figure, we believe it makes more sense to shift our focus to earnings per share moving forward.

Got it. That's very clear. Regarding ethanol, the fundamental environment has faced challenges, such as higher corn prices in the Eastern belt and increased natural gas costs at times. However, it appears we might be improving as we approach the second half of the year. I was hoping you could provide an updated outlook on margins and whether you think 2026 could be a better year given the ongoing policy changes.

Yes, I'll take that question, Ben. So again, until we get to new crop harvest where we will have some relief to the Eastern corn basis, we will have to focus on the current margin structure. However, I would tell you that I believe our team has done an excellent job in getting ownership of the corn basis in the East at or below the market through this period of time. So that's one of the benefits that having the large corn program has brought to us. But if you look at exports, you look at driving demand, the balance of '25 feels like it should be better than the first half of '25 has been. And then as you look into '26, there are a lot of opportunities that we are evaluating today in order to drive more free cash flow out of our plants using the entire set of regulatory and traditional methods of managing the ethanol plants. I do think it's important to understand that these plants have been successful without regulatory changes for a number of years. And we feel very confident in their location and their ability to continue to generate profits like they have in the past, with the potential addition of some regulatory benefits with the extension of 45Z through 2029.

Okay. I'm going to sneak one more in here. On the Port of Houston investment, soybean meal prices have been falling. Crush capacity is expanding in the U.S. Obviously, the RVO has very important implications for that. Can you just walk us through like how this investment works even with lower prices? I mean, is it a situation where you're taking advantage of the elevation margin aspect of the soybean meal transaction? And this might actually be more beneficial because you're getting it at cheaper interior costs and then you're shipping it overseas for more expensive prices? Just kind of allay any concerns over lower soybean meal prices and the impact it might have on that investment. And that will be it for me.

Yes. Good question. So for the export execution of soybean meal, the flat price or even the basis of the meal is not nearly as relevant as the fact that the U.S. is likely going to produce more soybean meal than there is demand. So with the shelf life of soybean meal being very different than wheat or corn because it has to ship, we believe that there are going to be opportunities where soybean meal is forced to move to export parity. That's going to be driven by price. That's going to be driven by much more than just the U.S. crush industry. It's going to be driven by global SNDs, specifically South America, of soybean meal. So as that price goes lower, it actually will make us more competitive. So as you think through it for the export arm of our facility in Houston, the price of the meal only matters in order to drive it to export parity versus how it affects the crush margin for the soybean plant.

Our next question here will come from Pooran Sharma with Stephens Inc.

Just wanted to ask about Skyland. You mentioned in the prepared comments that there was some revenue contribution. I was wondering if you could detail what that was from the quarter. And I believe last time you had mentioned that you were anticipating achieving the lower end of the $30 million to $40 million EBITDA guide. And I was just wondering if you could provide some updated thoughts on Skyland.

Yes, Pooran. It's good to speak with you this morning. As we noted with the first quarter results, the lack of export demand for Milo, sorghum, and hard wheat has significantly impacted the profitability we anticipated for our Western assets. Unfortunately, this situation did not improve in the second quarter as we had hoped. The Skyland assets had to compete for domestic feed demand, which was decreased due to the lower cattle numbers in the region. Looking ahead, the outlook for our Western grain assets appears promising. We experienced higher-than-expected hard wheat handling at Skyland, and the current market conditions are favorable for our space income. Additionally, we have a corn crop in the area that sometimes faces yield risks due to the prevalence of dry land corn. Our results from Skyland during the first half were below expectations, but we are optimistic that the results in the latter half will meet or even exceed those expectations. However, just to clarify, as mentioned after the first quarter, our Western grain assets faced challenges during the first half of 2025, and Skyland was no exception.

Yes. And Pooran, just to provide a little context from a financial perspective, you asked about revenue. It was about $200 million in each of the first 2 quarters, so just a little under $400 million year-to-date. And with regard to the full year EBITDA outlook, you're right, we previously said we thought it would be on the low end of that $30 million to $40 million range. If we had to characterize it today, I would probably put it somewhere in the $25 million to $30 million EBITDA range for the full year.

Thank you for that information, gentlemen. I also wanted to ask about the 45Z tax credits that were mentioned for all four plants over the next year. Could you provide more details on that? What kind of CI score are you aiming for, and how much of a tax credit do you think you can achieve from your plants?

Pooran, I would tell you that today, we are still working on the benefit of that tax credit, and we will be much more prepared to talk about that at the end of Q3 and into Q4 as we get some clarity on the legislation that was passed on July 4, 2025.

I appreciate that. It's encouraging that you'll be receiving those credits. However, I would like to understand the details of the deal a bit better. In your prepared comments, you mentioned purchasing the incremental $2.50 at $1.54 a gallon. From a per gallon standpoint, what other options are available? $1.54 seems like a great deal, especially when I compare it to the Red Trail and Gevo asset priced at $3.23 a gallon, which included additional features like sequestration. I'm interested in your perspective on the market and why you ultimately chose $1.54 as the best option.

To clarify, the $1.54 price was specific to the structural assets. When we factor in working capital, it becomes closer to $1.70, but we need to compare this against the new builds or expansion gallons. That's why we reference the $1.54, but you can calculate the adjustment by adding back the $40 million. Ethanol plants are quite intriguing, and we've assessed over 20 plants in the past 18 months. Our observations regarding location, size, technology, and corn sourcing present different dynamics for both strategic and financial considerations. Overall, we believe that the purchase price for the remaining 49.9% was fair for both parties.

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Mike Hoelter for any closing remarks.

Thanks, Joe. We want to thank you all for joining us this morning. Our next earnings conference call is scheduled for Wednesday, November 5, at 8:30 a.m. Eastern Time when we will review our third quarter results. As always, thank you for your interest in The Andersons, and we look forward to speaking with you again soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.