REX

• Financial Strength: Achieved record second-quarter net income per share of $1.06. Closed the quarter with no bank debt and $379.5 million in cash, cash equivalents, and short-term investments.
• Ethanol Expansion: The One Earth facility expansion is on schedule to add capacity, bringing total production toward 200 million gallons by late 2026/early 2027. Current production is approximately 150 million gallons.
• Carbon Capture Milestone: Received draft Class VI well permits from the US EPA for three injection wells in August. This is a critical regulatory step forward.
• State Regulatory Progress: The Illinois moratorium on carbon sequestration expired on July 1. The Illinois Commerce Commission has started rulemaking, and the Illinois EPA has begun its permitting process. The company plans to submit applications for a ~5-mile connector pipeline and state EPA permits soon.
• 45Z Tax Credits: Recognized approximately $18.4 million in Section 45Z production tax credit income in Q2, bringing YTD total to ~$26 million. These credits flow directly through gross profit.
• Operational Discipline: Delivered 24th consecutive profitable quarter. Strong crush margins and favorable market conditions contributed to significant gross profit growth (~144% YoY excluding tax credits).

• Q3 Outlook: Management expects to remain profitable in Q3 and anticipates third-quarter results will be better than the same period last year.
• Expansion Timeline: Maintains guidance that the One Earth ethanol expansion will be completed by the end of 2026.
• Capital Deployment: No specific numerical guidance provided; however, management indicated a preference for share buybacks ('buying on dips') and potential M&A in related industries given their strong balance sheet.

The transcript does not provide a breakdown of financial performance by specific product segment (e.g., Ethanol vs. Carbon Capture) in absolute terms or revenue contribution percentages. The company reports consolidated Net Sales of $168.5 million and Gross Profit of $53.3 million for the quarter.

• Regulatory Delays: The timeline for final approval of the carbon capture project is uncertain, particularly regarding the Illinois Pipeline Commission's approval for the 5-mile connector pipeline, which could delay the project longer than federal EPA processes.
• Policy Dependence: Financial results are significantly influenced by government policies, specifically the 45Z production tax credits and RIN credits. Changes in these regulations could impact margins.
• Market Volatility: While current export demand is strong, future performance depends on continued favorable market fundamentals and export demand for US ethanol.

Q: Analyst asked if 'online by end of year' implies hitting 200 million gallons immediately and whether long-term capacity could exceed this level.

A: CEO clarified a phased approach: current output is 150M gallons, expanding to 175M first. Reaching 200M requires applying for permits at that stage, likely occurring early-to-mid next year. He did not confirm if capacity would eventually exceed 200M, focusing instead on the sequential milestone achievement.

Q: Analyst requested clarity on the timeline for Illinois state approvals compared to the clearer federal EPA process.

A: Chairman stated there is no clear timeline for state approval. While federal permits are progressing, the biggest bottleneck is expected to be the Illinois Pipeline Commission’s approval for the 5-mile connector pipeline, as the state moratorium recently expired.

Q: Analyst inquired about the feasibility of selling excess CO2 capacity to third parties once the project is permitted.

A: Chairman noted they have the physical capacity to take on third-party projects but currently have nothing imminent. Their primary focus remains on optimizing their own 45Z benefits, though they are open to discussions with direct heirs to CO2 projects.

Q: Analyst asked how recent news on RIN credits/exemptions might impact cash flows over the next 12-18 months.

A: CEO acknowledged some impact on RINs but anticipated minimal effect on overall ethanol sales due to strong export growth (up 13% YTD). He also highlighted the potential positive impact of E15 approval in California, which could drive significant additional consumption.

Q: Analyst asked about capital deployment strategy, specifically share buybacks, given the certainty of 45Z credits.

A: Chairman emphasized that share buybacks are their preferred method of distributing capital, buying on dips. They also signaled openness to acquiring other ethanol plants or similar industry assets, leveraging their strong cash position.