Earnings Call Transcript - GPRE Q1 2026

Operator, Operator

Good morning, and welcome to the Green Plains Inc. First Quarter 2026 Earnings Conference Call. (Operator Instructions) I will now turn the call over to your host, Will Joekel, Vice President and Treasurer. Will, please go ahead.

Will Joekel, Vice President and Treasurer

Thank you, and good morning, everyone. Welcome to the Green Plains Inc. First Quarter 2026 Earnings Conference Call. Joining me on today's call are Chris Osowski, President and Chief Executive Officer; Ann Reis, Chief Financial Officer; and Imre Havasi, Senior Vice President of Trading and Commercial Operations, along with the rest of the leadership team. There is a slide presentation available on the Investor page under the Events and Presentations links on our website. During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results can materially differ because of risk factors discussed in today's press release, comments made during this call, and in the Risk Factors section of our Form 10-K, 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements. With that, I'll turn the call over to Chris.

Chris Osowski, President and Chief Executive Officer (CEO)

Thanks, Will, and good morning, everyone. The first quarter reflected a different operating environment than a year ago and, more importantly, a different level of execution across the business. First quarter adjusted EBITDA was $71.5 million, up $22 million from Q4 and more than $95 million higher than the first quarter of 2025. The first quarter is traditionally the most challenging period of the year for ethanol producers. Our first quarter results are a strong example of what this organization can deliver when we stay focused on the fundamentals. Four things drove the improvement. First, our continued focus on operational excellence allowed us to run the platform at high rates. Second, strong sustainable demand for our products resulted in a favorable pricing environment, while input costs remain in check. Third, the cost structure and simplification work we've been executing on for several quarters continues to compound. And finally, our carbon program contributed $55 million of EBITDA in its first full quarter following the start-ups completed last year. I also want to recognize the work the team has done in terms of safety. We completed the first quarter with no recordable injuries, which is an important milestone and exactly how we expect to operate. Safety is a prerequisite for everything we're trying to accomplish. A clear example of this is our Central City plant, which achieved highly protected risk recognition from our property insurer, FM, a recognition that reflects exceptional operational discipline and safety standards, reinforcing the culture our team has built. On the production front, our focus on operational excellence once again paid dividends with the plants producing 174 million gallons during the quarter or approximately 97% of our operating capacity. In our York, Nebraska facility, we set a monthly production record in March, and our Superior, Iowa facility set a new quarterly production record during the quarter. These achievements are a direct reflection of the operational improvements the teams have made and gives us the confidence in the sustainability of these production rates. At the same time, ethanol, corn oil, and protein yields remained strong across the fleet and have been solid contributors to our gross margin. A key accomplishment for us in this quarter was the continued progress in our carbon strategy. Construction and start-up was completed last year, and the focus has shifted toward operational performance, monetization, and incremental opportunities to maximize 45Z. Capture performance is now near our expected long-term rates, which reduces CI and creates substantial value for the business. As shown in our results, our carbon program is improving results in a meaningful way. In February, we guided to at least $188 million of EBITDA contribution from 45Z production tax credits. Based on Q1 performance and operational data, we're raising that range to $200 million to $225 million for the full year with Advantage Nebraska contributing $140 million to $165 million of that. I'll now hand the call over to Ann to review the financials.

Ann Reis, Chief Financial Officer (CFO)

Thanks, Chris. Consolidated crush margins improved meaningfully year-over-year, driven by stronger ethanol margins, higher demand for corn oil, and the contribution from 45Z. During the quarter, we generated gross margin of $88 million, compared to $3 million in the first quarter of 2025. Revenue for the quarter was $446 million, reflecting lower gallons following the sale of the Obion, Tennessee facility. Net income attributable to Green Plains was $33 million or $0.42 per diluted share, compared to a net loss of $1.14 in the first quarter of 2025. On the cost side, consolidated SG&A totaled $19.5 million in Q1, continuing to trend lower year-over-year, and we remain on track for our full year SG&A target of approximately $90 million. Interest expense was $11.5 million, and we expect full-year interest expense to be in line with our previous guidance of approximately $35 million for the year. Depreciation and amortization expenses during the quarter were $23.6 million. Beginning in the first quarter, we early adopted ASU 2025-10, which provides a framework for accounting for government grants. As a result, our 45Z production tax credits are now reflected as earned credits recorded as a current asset and recognized as a reduction to cost of goods sold rather than through the income tax line. This change improves transparency around operating performance and does not impact cash flow or the underlying economics of the business. Please note that prior periods have been recast for comparability. On a gross basis, we generated $65.6 million of 45Z tax credit value. Net of monetization discounts and operating costs, the generation of production tax credits contributed $55.2 million to adjusted EBITDA in the first quarter. The $32 million increase in 45Z contribution to EBITDA compared to the fourth quarter was primarily the result of having a full quarter of operational carbon sequestration at our three Nebraska facilities. We consider our Q1 carbon results to be an appropriate baseline, and we expect the net contribution from our carbon strategy to generate approximately $200 million to $225 million of EBITDA for fiscal year 2026. As Chris mentioned, Advantage Nebraska is currently forecasted to generate approximately $140 million to $165 million of net EBITDA with the balance of the plants contributing approximately $60 million. We reported $95.7 million of unrestricted cash and equivalents as of March 31, a decline from December 31 that is primarily driven by our normal seasonal working capital requirements. The final cash payment from the sale of our 2025 45Z credits was received in April, and we're ensuring that we have all the compliance requirements in place to monetize our 2026 tax credits. Today, our cash and restricted cash balance is over $200 million. Capital expenditures in the first quarter were $6.4 million and primarily related to maintenance projects. We expect sustaining capital expenditures for maintenance, safety, and regulatory projects to total $15 million to $25 million for the year. Turning to the balance sheet. During the quarter, we completed the reclassification of our carbon compression equipment obligations. As the carbon sequestration projects at our three Nebraska facilities reached substantial completion late last year, the majority of liabilities related to carbon equipment moved into long-term debt, consistent with the underlying financing terms. The remaining $60 million of 2027 convertible notes became a current maturity during the quarter, and we expect to address those notes with available cash at maturity. In April, we reduced the size of our working capital facility and extended the maturity by 6 months. These modifications will allow for immediate cost savings and give us runway to execute a longer-term extension later this year. I'll now let Imre cover the commercial update.

Imre Havasi, Senior Vice President, Trading and Commercial Operations

Thank you, Ann. Unlike the past several years, the first quarter delivered strong ethanol crush margins, particularly in the second half of the quarter. Industry economics were supported by lower corn prices, solid ethanol demand, both domestically and internationally, and increasing corn oil values. Energy commodity prices were a tailwind during March, supported in part by elevated geopolitical risk premiums. Even before 45Z contributions, our gross margin per gallon was approximately $0.10 higher compared to the first quarter of last year. Exports were again an important part of the story. We continue to see strong demand pull for U.S. ethanol helping to balance the market and provide margin support during the quarter. Demand is coming from mandated blending and compliance requirements at destination markets, which have supported steady and sustainable export flow. I'd like to spend a little time on the Renewable Fuel Standard. The EPA finalized 2026 and 2027 renewable volume obligations in March at the highest levels in the program's history. Conventional ethanol volumes remain at 15 billion gallons, while biomass-based diesel volumes moved sharply higher. Combined with some restrictions on imported feedstocks, we see continued strong demand for our low CI corn oil for the foreseeable future. Pricing has been improving significantly, making corn oil an important component of our earnings. Protein remains a solid contributor to the overall gross margin. The relative value of our ultra-high protein product versus soybean meal has been strengthening. Our customers recognize ultra-high protein as a differentiated high-quality ingredient. Looking to the second quarter, current margins, co-product pricing, and carbon contribution all support a stronger result than in Q1. Our hedging strategy remains consistent and disciplined with a clear focus on downside protection while preserving meaningful upside participation. Importantly, our risk management philosophy spans the full margin stack, inclusive of all of our co-products and key commodity inputs like physical corn ownership and natural gas. The goal is total margin protection and cost certainty across all the moving parts of the business, not just the headline simple crush. Proactive risk management produced a $0.04 per gallon hedging adjustment with ethanol rallying late in the quarter as geopolitical events drove energy prices higher. That outcome reflects the trade-off we intentionally accept because it locked in part of our margin well above historical averages and protected the cash flow we need for capital deployment. Importantly, the strategy worked as designed, and we remain comfortable with our overall hedge framework and positioning going forward. I'll now hand the call over to Chris.

Chris Osowski, President and Chief Executive Officer (CEO)

As we look ahead, our focus has shifted from stabilization and simplification to disciplined execution and capital deployment. The first quarter demonstrates the earnings power of the platform when the plants are running well, risk is managed appropriately and carbon is fully operational. From here, the opportunity is protecting and enhancing margins, converting earnings into cash and putting that cash to work in the highest return opportunities available to us. We expect 2026 margin and cash flow performance to be driven by sustained operational execution across the fleet, continued contribution from the carbon program, disciplined commercial risk management, and growing demand for products. These four factors produced a great first quarter and are what will support cash flow generation for the rest of 2026 and beyond. That cash flow underpins our capital allocation priorities. Sustaining CapEx comes first, $15 million to $25 million to keep the fleet running reliably and keep our employees safe. Plant reliability is critical to margin capture, and we're focused on keeping our facilities running at a high level. From there, we're allocating capital to efficiency and CI improvement projects, which are modest in size, have a short payback, and will improve the earnings of the base plants for years to come. Our objective is to be a performance leader within the ethanol industry, and we're undertaking formal benchmarking exercises across our plants to identify operational gaps and best practices, and we're directing capital toward projects that improve reliability, efficiency, and lower carbon intensity. We're also planning on retiring $60 million of the 2027 convertible notes at maturity. And beyond that, we will continue to evaluate the highest return use of incremental capital, whether that is additional efficiency projects, growth opportunities, or capital structure optimization. To highlight a couple of the growth projects we are initiating: First, at Wood River, Nebraska, we've approved building approximately 4.5 million bushels of grain storage. This is a straightforward investment that reduces corn basis risk and supports consistent plant operations. Additionally, it will improve procurement flexibility, which will allow us to procure more bushels directly from the farmer, which will improve yields and maximize the opportunity from on-farm practices and further reduce carbon intensity scores. It's a perfect example of capital that is modest in scale, operationally grounded, and will improve the earnings power of the plant. As we complete this project and measure the results, we'll evaluate replicating it at other facilities where the return profile is similarly attractive. Also in York, Nebraska, we're engineering low-energy distillation upgrades. This investment is focused on reducing energy consumption and lowering operating costs to further reduce the carbon intensity score of the plant. Taken together, these projects reflect how we're deploying capital today, focusing on reliability and efficiency, permanently taking costs out, and improving CI scores. As these types of projects are replicated across the fleet, they will structurally increase cash generation. In summary, Green Plains is operating from a much stronger position than it was a year ago. Reliability across the platform has improved, the balance sheet has been strengthened, and all of our products are seeing strong sustainable demand. The structural backdrop for our products, ethanol, corn oil, and protein is as positive as it has been in years. Gross margins remain well above historical averages, and our carbon program is generating significant value. Going forward, we remain focused on disciplined execution and thoughtful capital allocation. Operator, we can now open it up for questions.

Operator, Operator

(Operator Instructions) Your first question is from the line of Andrew Strelzik with BMO.

Andrew Strelzik, Analyst (BMO Capital Markets)

First thing, I guess, I wanted to ask about the update to the 45Z guidance you provided. And I guess I'm just curious with the Q1 run rate kind of putting you at the high end of that range, and it's not a seasonally peak period. How should we think about the moving pieces within that range? If you could just maybe help us think through that.

Chris Osowski, President and Chief Executive Officer (CEO)

Yes. Thanks for the question. First and foremost, our plants ran at high utilization rates in Q1, so 97%. Going into Q2 is traditionally the time period where we take spring maintenance. We also take fall maintenance activities. So, we have to balance that out in terms of what that 45Z cash generation looks like through the entirety of the year. But in general, what's occurred is we have a few months of run rate under our belt. We've gained confidence in the ability of the system to operate at a high capture efficiency, and we're comfortable with updating that projection.

Andrew Strelzik, Analyst (BMO Capital Markets)

Okay. And the other question I wanted to ask was around corn oil, in particular, especially with the yields that you guys realized on that. I mean the company used to talk about kind of the sensitivity to changes in corn oil prices. Is there any kind of framework that you can provide on an updated basis to help us think about that?

Imre Havasi, Senior Vice President, Trading and Commercial Operations

Yes. The context after the EPA ruling is very supportive. There are different nuances that will influence the demand for the next two years and then past. But in general, structurally, there is very strong demand for corn oil both for the CI aspect of it and because of the relative tightness of the domestic supply. So, in terms of pricing, it will always be a function of the soy complex and the energy complex. But in relative terms, it will remain a very significant contributor on a per gallon basis to our margins, and that is for the next several years.

Andrew Strelzik, Analyst (BMO Capital Markets)

Okay. And I just want to quickly follow up on that. I guess with now the 45Z, with the changes that are impacting corn oil, I know that we've got some temporarily high energy prices here. But when you think about the durability of the different components of your margin structure, I guess how are you thinking about that on a go forward? It seems much more durable than in the past. But I guess would love your perspective on that.

Imre Havasi, Senior Vice President, Trading and Commercial Operations

I think from a product perspective, the demand is going to be solid. You have a significant ethanol pull more from international customers because of those mandates overseas and the deficit there. I won't go too much into detail, but if you also think about the long-term effects of the war in the Middle East, the diversification of fuel inputs would suggest that biofuel will continue to play and actually will play an increased role in fuel supply around the world. Of course, from an ethanol perspective, it's just the U.S. and Brazil exporting. The other regions are deficit and demand is growing. So that is supportive. We've already discussed corn oil; that's all domestic and the domestic demand will continue to be very strong. Protein — I don't expect anything like really special, but we have a customer base and a product portfolio that will be supportive. So, I think the only things that can have an impact on overall industry margins are corn and natural gas. Those are the ones that we're also monitoring, but that's largely unknown. The corn crop — next year's corn crop is the one that we're monitoring. The planting progress is good so far. It will all come down to weather.

Operator, Operator

Your next question is from the line of Matthew Blair with TPH.

Matthew Blair, Analyst (TriplePoint/Hubbell? TPH)

Did any of the increase to the 2026 45Z outlook come from the on-farm practice benefits that you referenced on the last call? And I guess, if not, how much could that raise future 45Z contributions? And then also, it looks like the contributions from the non-Nebraska plants moved up a fair amount. I have it as originally you were expecting $38 million. Now it sounds like it's up to $60 million. Could you talk about what's driving that increase? Is that just a function of better operations and marginal gains in CI scores?

Ann Reis, Chief Financial Officer (CFO)

Yes. So, if we start with your question around the on-farm practices and whether that's baked into our current guidance, the answer is not. The proposed ruling is out there from Treasury, and it does mention that we foresee being able to use that in the future. But we're still waiting on final guidance to really understand, and that final calculator hasn't been released yet to be able to truly understand what the impacts might be. We do think there are opportunities there, particularly in our regions where our facilities receive quite a few farmer bushels, and that is definitely one of the drivers for the Wood River corn expansion that Chris discussed. All of that helps when farmers go through harvest and want to deliver corn quickly. Being able to have good receiving facilities promotes their continued deliveries to us. So, that is one of the drivers for the additional storage. It's all favorable. We believe it will be favorable. As far as the range goes, it is still to be determined based on how the calculator is published and what those amounts look like. Right now, there is a beta version released, and it varies from county to county. So really a lot of numbers that we'll just have to see how everything pans out. But we've got a good plan in place. We feel like we have an ability to capture that when those numbers are finalized. As far as what it might do to the CI score, I don't think we're prepared to release that at this moment. Regarding the non-Nebraska plants, what's driving that is a couple of factors. One is that they removed the iLUC penalty for corn starting in 2026. That was a reduction of approximately 6 CI points. The other piece is the ability to buy RECs to offset our electricity. The combination of those two things plus just the plants operating more efficiently has increased the dollar amount that we intend to capture during 2026.

Operator, Operator

Your next question is from the line of Kristen Owen with Oppenheimer.

Kristen Owen, Analyst (Oppenheimer)

I also wanted to follow up on DCO, but more from a production side because you do have some technology in-house to sort of torque those yields a bit higher. So, I'm wondering, as you're considering your capital allocation priorities, some of that low dollar amount but high impact, if DCO capacity is on that list of potential projects.

Chris Osowski, President and Chief Executive Officer (CEO)

Yes. Thanks for the question, Kristen. The answer is yes. As part of the operational excellence program working through our plant network, we're looking at any opportunity to improve processing yields, starting with ethanol yields because that translates into good protein yields and good DCO yields. We do have the MSC technology in numerous plants, which helps increase our per bushel oil yield, and we're also looking at opportunities for the non-MSC plants where they can boost their oil yields to historically high levels. We're seeing good results with that. So, that will be part of the capital plan going forward and what we can do to further drive yield improvements to effectively improve the base business profitability.

Kristen Owen, Analyst (Oppenheimer)

Okay. Great. And then just two sort of related questions on the cash flow statement. It looks like Q1, you called out the seasonal use of working capital, but it does seem a bit higher. So maybe I'm missing a few moving pieces with the restatement. If you could speak to the working capital use and as well if there's any change in your timing expectations of cash receipts relative to EBITDA earned on those carbon credits.

Ann Reis, Chief Financial Officer (CFO)

With reference to working capital use, a large portion of the farmers we do business with prefer to be on a deferred payment schedule, so many of those payments go out after the first of January. You'll see some seasonal changes and swings with the cash flow due to that normal pattern. Regarding the 45Z cash flow, we received our final 2025 payment in April. We're feeling confident about the progress we're making on monetization for the 2026 credits. Our focus is getting the best value for those credits and the best cash structure to consistently receive cash flows each quarter in relation to our generation of the 45Z tax credits. While we don't have anything to officially announce today, we're very optimistic about the progress. There is a fairly heavy lift related to compliance requirements for the 45Z — making sure all our plants are in compliance with PWA, obtaining the highest level of the tax credit possible, and completing the audits associated with verifying gallons. There's quite a bit of audit work, so we're making sure we're dotting all of our I's and crossing all of our T's to get the best value for those tax credits.

Operator, Operator

Your next question is from the line of Craig Irwin with ROTH Capital Partners.

Craig Irwin, Analyst (ROTH Capital Partners)

So, I wanted to ask if there was any change in the CI score assumptions underlying the $55.2 million intake this quarter versus what you used in the December quarter?

Ann Reis, Chief Financial Officer (CFO)

Not as far as the inputs go. The difference, obviously, was that the iLUC penalty was removed in 2026, so that's a bit different compared to 2025. But as far as how we've generally calculated it, it's a factor of how much ethanol we produce, the efficiency of the plants, and how much carbon we're capturing. None of those factors have changed.

Craig Irwin, Analyst (ROTH Capital Partners)

Okay. Understood. The second thing is, you did mention that some of the CapEx this year is actually related to CI as a focus. Can you maybe give us a little bit more detail on where you're spending those capital dollars and what sort of CI returns you expect on those?

Chris Osowski, President and Chief Executive Officer (CEO)

So, a couple of things. First, increasing grain storage — the returns calculations on those projects are about managing corn procurement. There is potentially the added benefit of farm practices and having more farmer-procured bushels that can positively influence the CI score, but we're not factoring that into our justifications. We're making business decisions that are good for the base business outside of 45Z, and the 45Z impact could be additional benefit. Regarding low-energy distillation in York, that will significantly reduce energy consumption of the site, specifically natural gas consumption, anywhere from 30% to 40% reduced. That will reduce OpEx of the plant and pay dividends in perpetuity. On top of that, we'll have the benefit of a lower CI score and contributions associated with 45Z. But our priority is ensuring the base business is strong, durable, and profitable for the long haul.

Craig Irwin, Analyst (ROTH Capital Partners)

Understood. And if I could slip another one in here. So, first, can you confirm that you're selling your credits still through a broker? And then your 10-Q is not out yet, but in prior periods there's been a little lag between when you recognize the credits on your P&L and when you actually receive the cash intake. Can you talk a bit about the cash intake for the December quarter? Is all that cash for those credits you sold already on the balance sheet? And then where do we stand for the $55.2 million from this quarter? Is that something you would expect to take in over the next few months?

Ann Reis, Chief Financial Officer (CFO)

As far as the 2025 45Z tax credits, we have collected all the cash for that; the final payment occurred in April. That payment will be reflected in Q2 due to timing. From a 2026 perspective, with the release of the ASU, our accounting changed. This is a production tax credit, so we're able to recognize the gallons once they're produced and then verified at the end of the quarter. We go through checks on CI scores to calculate correctly, and everything is verified. We're on a quarter lag; we just completed Q1 and recognized those credits on the balance sheet for what we produced in Q1 2026. The cash flow will come in as we monetize, and you'll see those credits shift off the balance sheet and turn into cash as monetization occurs.

Operator, Operator

Your next question is from the line of Pooran Sharma with Stephens.

Pooran Sharma, Analyst (Stephens)

Congrats on the strong results. I guess my first question, and Imre, you kind of hit on this in your prepared remarks, but I was going to ask on the base business: you came into Q1 hedged and still posted $16 million of EBITDA, a better Q1 than what you would have expected on a seasonal basis. Could you help frame up the magnitude for upside potential in the base business for Q2? Maybe some color around where you placed your hedges or how much capacity you have open for Q2?

Imre Havasi, Senior Vice President, Trading and Commercial Operations

We are fairly well hedged for Q2, primarily because of the opportunity the run-up in energy prices provided to execute hedges. We always consider the whole margin stack: corn ownership, natural gas hedges, simple crush, corn oil, protein, and ethanol basis. We manage those components using analytics and make decisions across that margin platform. We're not completely hedged for Q2, but we're well advanced and input costs are largely locked down. Over the last several weeks we had opportunities to capture attractive margins and longer-term corn oil sales. We feel comfortable with where we are. We aim to capture margins that are attractive using analytics while leaving room for upside. That approach helped our Q1 results being better than anticipated; we were not fully hedged on the sell side while input costs were.

Pooran Sharma, Analyst (Stephens)

Okay. Appreciate that color. I guess on the follow-up, I wanted a better sense of the ethanol supply and demand backdrop. Production has been a little elevated, partly given the iLUC restriction removal at the start of the year. But you mentioned that demand domestic and international remains robust. There was momentum pre-war, and you talked about mandates abroad that are growing. Have you seen incremental momentum from the conflict itself? If we see resolution today, do you think it will take a while before oil prices return to pre-war levels?

Imre Havasi, Senior Vice President, Trading and Commercial Operations

Regarding the war's impact, even if crude oil drops lower, rebuilding refined product supply chains will take time. The short-term impact requires replenishing stocks and reorganizing supply. The long-term effect is that diversification of fuel sources will be positive for our products, particularly corn oil and ethanol. We expect short- and long-term impacts of the conflict to be supportive beyond the immediate shock. It will take time to reset everything, so we expect strength in demand and prices, and the long-term impact is beneficial in our assessment.

Operator, Operator

And at this time, there are no further questions. I will turn the call back over to Chris for closing remarks.

Chris Osowski, President and Chief Executive Officer (CEO)

Thank you again for participating in this morning's call and your interest in Green Plains. We remain excited about the opportunities ahead of us and look forward to sharing continued progress with you next quarter. Have a good day.

Operator, Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.