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Item 2 — Management's Discussion and Analysis
Alto Ingredients, Inc. · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and notes to condensed consolidated financial statements included elsewhere in this report. This report and our condensed consolidated financial statements and notes to condensed consolidated financial statements contain forward-looking statements, which generally include the plans and objectives of management for future operations, including plans and objectives relating to our future economic performance and our current beliefs regarding revenues we might generate and profits we might earn if we are successful in implementing our business and growth strategies, and statements of the assumptions underlying or relating to any of the foregoing. The forward-looking statements and associated risks may include, relate to or be qualified by other important factors, including:
● fluctuations in the market prices of alcohols and essential ingredients;
● fluctuations in the costs of key production input commodities such as corn and natural gas;
● our ability to fund, and the costs, timing and effects of, our plant improvement initiatives and other capital projects;
● regulatory developments relating to our initiatives and projects or to our business;
● our ability to qualify for and receive Section 45Z clean fuel production tax credits under the Internal Revenue Code, as added by the Inflation Reduction Act of 2022 and amended by the One Big Beautiful Bill Act, including in anticipated amounts and at the expected times;
● the projected growth or contraction in the alcohol and essential ingredients markets in which we operate;
● our strategies for expanding, maintaining or contracting our presence in these markets;
● anticipated trends in our financial condition and results of operations; and
● our ability to distinguish ourselves from our current and future competitors.
You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report, or in the case of a document incorporated by reference, as of the date of that document. We do not undertake to update, revise or correct any forward-looking statements, except as required by law.
Any of the factors described immediately above or referenced from time to time in our filings with the Securities and Exchange Commission or in the “Risk Factors” section below could cause our financial results, including our net income or loss or growth in net income or loss, to differ materially from prior results, which in turn could, among other things, cause the price of our common stock to fluctuate substantially.
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Overview
We are a leading producer and distributor of specialty alcohols, renewable fuels and essential ingredients in the United States.
We operate five alcohol production facilities. Three of our production facilities are located in Illinois, one is located in Oregon, and another is located in Idaho. We have an annual alcohol production capacity of 330 million gallons, including both renewable fuels and specialty alcohols ranging from industrial-, pharmaceutical-, and high-quality food- and beverage-grade alcohols. Of this amount, we can produce up to 110 million gallons annually of specialty alcohols, depending on our product mix among high-quality beverage-grade alcohol and other quality specification alcohols. We market and distribute all of the alcohols produced at our facilities as well as alcohols produced by third parties. In 2025, we marketed and distributed approximately 350 million gallons combined of our own produced alcohols as well as fuel-grade ethanol produced by third parties, and over 1.2 million tons of essential ingredients.
We also own and operate a liquid carbon dioxide, or CO2, production facility adjacent to our plant in Oregon for the offtake of CO2 gas from the plant for conversion to liquid CO2 and subsequent sale. In addition, we break bulk and distribute specialty alcohols produced by us and third parties.
We report our financial and operating performance in three distinct segments:
● Pekin production, which includes the production and sale of alcohols and other products we refer to as “essential ingredients” described below, produced at our three production facilities located in Pekin, Illinois, which we refer to as our Pekin Campus;
● Marketing and distribution, which includes marketing and merchant trading for company-produced alcohols and essential ingredients on an aggregated basis, and sales of fuel-grade ethanol sourced from third parties; and
● Western production, which includes the production and sale of renewable fuels and essential ingredients produced at our production facilities located in Burley, Idaho and Boardman, Oregon, including our liquid CO2 plant, on an aggregated basis, none of which is individually so significant as to be considered a separately reportable segment.
Our mission is to produce the highest quality, sustainable ingredients that make everyday products better. We intend to accomplish this goal in part by investing in our specialized and higher-value specialty alcohol production and distribution infrastructure, expanding production in high-demand essential ingredients, expanding and extending the sale of our products into new regional and international markets, building efficiencies and economies of scale and by capturing a greater portion of the value stream.
Production Segments
We produce specialty alcohols, renewable fuels and essential ingredients, focusing on five key markets: Health, Home & Beauty; Food & Beverage; Industry & Agriculture; Essential Ingredients; and Renewable Fuels. Products for Health, Home & Beauty markets include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners. Products for Food & Beverage markets include grain neutral spirits used in alcoholic beverages and vinegar, as well as corn germ used for corn oils. Products for Industry & Agriculture markets include alcohols and other products for paint applications, inks, vehicle fluids and fertilizers. Products for Essential Ingredients markets include dried yeast, corn protein meal, corn protein feed, corn germ, distillers grains, gas and liquid CO2 and liquid feed used in commercial animal feed and pet foods. We also sell yeast, and gas and liquid CO2 for human consumption. Our products for the Renewable Fuels markets include fuel-grade ethanol and distillers corn oil used as a feedstock for renewable diesel and biodiesel fuels. Our specialty alcohols for the Industry & Agriculture, Food & Beverage and Health, Home & Beauty markets represented approximately 11%, 6% and 2%, respectively, of our sales in 2025 to customers in these three markets.
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We produce our alcohols and essential ingredients at our facilities described above. Our production facilities located in Illinois are in the heart of the Corn Belt, benefit from relatively low-cost and abundant feedstock and enjoy logistical advantages that enable us to provide our products to both domestic and international markets via truck, rail or barge. Our production facilities located in Oregon and Idaho are near their respective fuel and feed customers, offering significant timing, product transportation cost and logistical advantages.
All of our production facilities, other than our Magic Valley plant, were operating for all of 2025, other than for scheduled and unscheduled downtimes to address facility repair and maintenance.
Our Magic Valley facility remained cold-idled for all of 2025, the first quarter of 2026 and through the filing of this report to minimize financial losses. We continue to provide ethanol terminaling services at the plant and may resume operations at the facility if the economic environment in the region sustainably improves.
As market conditions change, we may increase, decrease or idle production at one or more operating facilities or resume operations at any idled facility.
Marketing and Distribution Segment
We market and distribute all the alcohols and essential ingredients we produce at our facilities. We also market and distribute alcohols produced by third parties.
We have extensive and long-standing customer relationships, both domestic and international, for our specialty alcohols, renewable fuels and essential ingredients. These customers include producers and distributors of ingredients for cosmetics, sanitizers and related products, distilled spirits producers, food products manufacturers, producers of personal health/consumer health and personal care hygiene products, and global trading firms.
Our renewable fuels customers are located throughout the Western and Midwestern United States and consist of integrated oil companies and gasoline marketers who blend fuel-grade ethanol into gasoline. Our customers depend on us to provide a reliable supply of fuel-grade ethanol and manage the logistics and timing of delivery. Our customers collectively require fuel-grade ethanol volumes in excess of the supplies we produce at our facilities. We secure additional fuel-grade ethanol supplies from third-party ethanol producers. We arrange for transportation, storage and delivery of fuel-grade ethanol purchased by our customers through our agreements with third-party service providers in the Western United States as well as in the Midwest from a variety of sources.
We market food-grade essential ingredients to human and pet food markets, our feed products (such as distillers grains) primarily to export markets from our Pekin Campus, and other feed products to dairies and feedlots, in many cases located near our production facilities. These customers use our feed products for livestock as a substitute for corn and other sources of starch and protein. We sell our corn oil to poultry, renewable diesel and biodiesel customers.
See “Note 2 – Segments” to our Notes to Condensed Consolidated Financial Statements included elsewhere in this report for financial information about our business segments.
Financial Review, Current Initiatives and Outlook
The second quarter represents our fourth consecutive quarter of positive gross profit, income from operations, net income and Adjusted EBITDA. We have been consistently profitable during this period even without the contributions from Section 45Z clean fuel production tax credits. Our results demonstrate the strength of our diversified operating model, which gives us the flexibility to shift production toward the most attractive end-markets and capture premium-value opportunities. We remain focused on disciplined execution of our strategic plan and unlocking additional value across our asset portfolio.
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Our trailing 12-month results are also a testament to our efforts to drive profitability, maximize the value of our asset base, and make smart decisions around capital allocations, including purchasing our Alto Carbonic business and investing in projects to optimize our dry mill and reduce the carbon intensity of our production.
For the second quarter, our results also reflect strong domestic demand and improved essential ingredient values compared to the same period last year.
The second quarter’s market crush margins improved significantly to $0.33 per gallon from $0.11 per gallon in the same period last year. This increase was driven by robust export demand, strong domestic blending activity, and tighter ethanol inventories following industry-wide spring maintenance outages. As a result, ethanol prices improved during the quarter, supported by strong Renewable Volume Obligation, or RVO, blending requirements. Meanwhile, favorable crop conditions and larger projected grain supplies contributed to lower corn costs, boosting margins. Second quarter crush margins were not only significantly higher than those in the same period last year but were also strong by historical standards. Third quarter margins thus far, which in the past have marked the annual peak, continue to be healthy and profitable.
While European demand remained robust, ongoing geopolitical disruptions in the Middle East negatively impacted renewable fuel export economics from the United States during the second quarter. Higher freight costs and reduced certainty of vessel availability to transport renewable fuel from the Gulf Coast compressed the U.S.-to-Europe trade arbitrage, increasing the competitiveness of Brazilian exports to Europe. As a result, we reduced our renewable fuel export volumes compared to the second quarter of last year but still generated higher overall revenue from export volumes for the quarter due to higher premiums to domestic renewable fuel compared to the second quarter of last year.
Given the strength of domestic ethanol markets, we successfully optimized our product mix toward fuel-grade ethanol sales in U.S. markets. This outcome underscores the benefits of our diversified commercial platform, which enabled us to adapt and capture the value of a strong domestic crush-margin environment.
During the second quarter, we also continued to improve utilization, reliability and throughput, with the goal of increasing total volume for 2026 over 2025. At our Pekin campus, we completed the planned outage of our dry mill along with a debottlenecking project to increase annual production capacity by approximately 8%, or 5 million gallons. This outcome illustrates our dedication to projects with highly attractive returns on investment. By increasing production capacity at our dry mill, our most efficient facility, we are positioned to capture additional gross margin and to qualify for additional Section 45Z clean fuel production tax credits. After a successful restart of our dry mill, we are now ramping up to our new production capacity and expect to realize the full benefit of this additional capacity in the fourth quarter. We also performed our routine spring outage at our ICP facility during the second quarter. We remain on track to finish the repairs on our Pekin campus’ existing dock and complete the installation of a second alcohol loadout by year end, improving our logistics and loading capacity.
At our Columbia facility, we began work to add a third CO2 storage tank and expect the tank to be operational in the fourth quarter. This expanded storage capacity will allow us to further capitalize on the growing demand for premium CO2 in the Pacific Northwest. We continue advancing multiple pathways to further monetize CO2 production, including opportunities for utilization and sequestration. Our strategy emphasizes low-capital, high-return projects while preserving flexibility as regulatory and commercial markets continue to evolve. We intend to move quickly by pursuing partnerships with stakeholders that already have compression capabilities, allowing us to accelerate commercialization.
Capital expenditures for the second quarter were $10.6 million for a total of $11.5 million year to date. We are on track to meet our annual capital expenditure budget of $25 million.
We are focused on increasing our Section 45Z clean fuel production tax credits by producing higher volumes of qualifying fuel. We also continue to explore opportunities to lower our carbon scores without significant capital investment by working with our farmer partners to encourage them to lower the carbon intensity of their corn. We remain on track to qualify 90 million gallons, or more, of combined production this year, supporting an expected minimum of $15 million in income from Section 45Z clean fuel production tax credits, net of monetization costs.
We remain encouraged by the growing momentum to adopt year-round E15 blending. As an example, the Renewable Fuels Association recently reported that about 72% of U.S. voters support year-round E15 blending, the highest level recorded since polling began in 2016. We believe that the ongoing geopolitical disruptions in the Middle East create conditions that drive domestic support for implementing year-round E15 blending. Nationally, support continues to build around the promise of E15 to reduce fuel costs, strengthen energy security and increase demand for domestically produced renewable fuels. Meanwhile, several Midwestern states have moved forward with permanent year-round E15 blending, providing an important blueprint for broader adoption nationwide.
California is also making progress toward E15 blending following the passage of Assembly Bill 30. While final implementation steps remain, we believe the state’s transition toward E15 blending represents a meaningful long-term demand opportunity given California’s position as one of the largest gasoline markets in the country. Taken together, expanding adoption of E15 at both the federal and state levels has the potential to drive significant incremental demand for ethanol, improve industry capacity utilization, and support a more favorable margin environment over time.
Use of Non-GAAP Financial Measures
Management believes that certain financial measures not in accordance with generally accepted accounting principles, or GAAP, are useful measures of operations. Management provides Adjusted EBITDA as a non-GAAP financial measure so that investors will have the same financial information that management uses, which may assist investors in properly assessing our performance on a period-over-period basis.
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We define Adjusted EBITDA as unaudited consolidated net income or loss before interest expense, interest income, unrealized derivative gains and losses, excess insurance proceeds, acquisition-related income or expense, provision or benefit for income taxes, asset impairments, and depreciation and amortization expense.
A table is provided below to reconcile Adjusted EBITDA to its most directly comparable GAAP measure, consolidated net income (loss). Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as an alternative to consolidated net income (loss) or any other measure of performance under GAAP, or to cash flows from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity. Adjusted EBITDA has limitations as an analytical tool and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP.
Reconciliation of Adjusted EBITDA to Consolidated Net Income (Loss)
Three Months Ended June 30, Six Months Ended June 30,
(in thousands) (unaudited) 2026 2025 2026 2025
Net income (loss) $ 11,701 $ (10,997 ) $ 15,972 $ (22,676 )
Adjustments:
Interest expense 1,960 2,811 4,158 5,540
Interest income (87 ) (67 ) (165 ) (150 )
Unrealized derivative losses (gains) 3,634 2,117 (4,439 ) 483
Acquisition-related income — (460 ) — (460 )
Depreciation and amortization expense 6,452 6,365 12,819 12,631
Total adjustments 11,959 10,766 12,373 18,044
Adjusted EBITDA $ 23,660 $ (231 ) $ 28,345 $ (4,632 )
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses for each period. We believe that our critical accounting estimates, defined as those estimates that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain, are: impairment of long-lived assets and valuation allowance for deferred taxes. These critical accounting estimates are more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our critical accounting estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2025.
Results of Operations
Selected Financial Information
The following selected financial information should be read in conjunction with our condensed consolidated financial statements and notes to our condensed consolidated financial statements included elsewhere in this report, and the other sections of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report.
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Certain performance metrics that we believe are important indicators of our results of operations:
Three Months Ended June 30, Percentage Six Months Ended June 30, Percentage
2026 2025 Variance 2026 2025 Variance
Alcohol Sales (gallons in millions)
Pekin Campus renewable fuel gallons sold 31.6 28.8 9.7 % 62.8 61.4 2.3 %
Western production renewable fuel gallons sold 9.4 8.3 13.3 % 17.6 16.6 6.0 %
Third-party renewable fuel gallons sold 24.0 29.7 (19.2 )% 47.5 54.1 (12.2 )%
Total renewable fuel gallons sold 65.0 66.8 (2.7 )% 127.9 132.1 (3.2 )%
Specialty alcohol gallons sold 23.5 19.9 18.1 % 46.5 44.2 5.2 %
Total gallons sold 88.5 86.7 2.1 % 174.4 176.3 (1.1 )%
Sales Price per Gallon
Pekin Campus $ 2.09 $ 1.95 7.2 % $ 2.05 $ 1.92 6.8 %
Western production $ 2.20 $ 2.00 10.0 % $ 2.13 $ 1.98 7.6 %
Marketing and distribution $ 2.27 $ 1.96 15.8 % $ 2.14 $ 1.98 8.1 %
Average sales price per gallon $ 2.15 $ 1.95 10.3 % $ 2.08 $ 1.94 7.2 %
Alcohol Production (gallons in millions)
Pekin Campus 51.8 50.9 1.8 % 103.0 105.2 (2.1 )%
Western production 9.0 8.3 8.4 % 16.9 16.6 1.8 %
Total production gallons 60.8 59.2 2.7 % 119.9 121.8 (1.6 )%
Corn Cost per Bushel
Pekin Campus $ 4.58 $ 4.86 (5.8 )% $ 4.51 $ 4.75 (5.1 )%
Western production $ 5.59 $ 5.71 (2.1 )% $ 5.57 $ 5.83 (4.5 )%
Average cost per bushel $ 4.73 $ 4.98 (5.0 )% $ 4.65 $ 4.89 (4.9 )%
Average Market Metrics
PLATTS Ethanol price per gallon $ 1.92 $ 1.72 11.6 % $ 1.82 $ 1.72 5.8 %
CME Corn cost per bushel $ 4.44 $ 4.51 (1.6 )% $ 4.41 $ 4.62 (4.5 )%
Board corn crush per gallon (1) $ 0.33 $ 0.11 200.0 % $ 0.25 $ 0.07 257.1 %
Essential Ingredients Sold (in thousands of tons)
Pekin Campus
Distillers grains 68.2 70.2 (2.8 )% 148.6 160.9 (7.6 )%
CO2 45.2 45.1 0.2 % 88.5 90.4 (2.1 )%
Corn wet feed 26.3 28.7 (8.4 )% 56.2 63.2 (11.1 )%
Corn dry feed 24.7 21.4 15.4 % 45.7 45.2 1.1 %
Corn oil and germ 19.1 18.9 1.1 % 37.2 38.5 (3.4 )%
Syrup and other 11.9 11.7 1.7 % 21.1 19.9 6.0 %
Corn meal 8.2 8.3 (1.2 )% 17.7 17.7 0.0 %
Yeast 5.9 5.7 3.5 % 12.0 12.1 (0.8 )%
Total Pekin Campus essential ingredients sold 209.5 210.0 (0.2 )% 427.0 447.9 (4.7 )%
Western production
Distillers grains 67.0 61.8 8.4 % 127.1 119.9 6.0 %
CO2 14.5 14.4 0.7 % 27.3 27.0 1.1 %
Corn oil 0.9 1.0 (10.0 )% 1.7 2.4 (29.2 )%
Syrup and other 0.6 1.2 (50.0 )% 1.4 2.0 (30.0 )%
Total Western production essential ingredients sold 83.0 78.4 5.9 % 157.5 151.3 4.1 %
Total Essential Ingredients Sold 292.5 288.4 1.4 % 584.5 599.2 (2.5 )%
Essential Ingredients return % (2)
Pekin Campus Return 51.7 % 44.2 % 17.0 % 52.8 % 46.1 % 14.5 %
Western Production Return 51.4 % 50.8 % 1.2 % 50.7 % 49.9 % 1.6 %
Consolidated Total Return 51.6 % 45.2 % 14.2 % 52.5 % 46.7 % 12.4 %
(1) Assumes corn conversion of 2.80 gallons of alcohol per bushel of corn.
(2) Essential ingredients revenues as a percentage of total corn costs consumed.
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Net Sales, Cost of Goods Sold and Gross Profit (Loss)
The following table presents our net sales, cost of goods sold and gross profit (loss) in dollars and gross profit (loss) as a percentage of net sales (in thousands, except percentages):
Three Months Ended June 30, Variance in Six Months Ended June 30, Variance in
2026 2025 Dollars Percent 2026 2025 Dollars Percent
Net sales $ 245,698 $ 218,436 $ 27,262 12.5 % $ 470,378 $ 444,976 $ 25,402 5.7 %
Cost of goods sold 229,062 220,373 8,689 3.9 % 444,523 448,720 (4,197 ) (0.9 )%
Gross profit (loss) $ 16,636 $ (1,937 ) $ 18,573 NM* $ 25,855 $ (3,744 ) $ 29,599 NM*
Percentage of net sales 6.8 % (0.9 )% 5.5 % (0.8 )%
* Not meaningful
Three Months ended June 30, 2026 as compared to the Three Months ended June 30, 2025
Net Sales
The increase in our consolidated net sales for the three months ended June 30, 2026 as compared to the same period in 2025 is primarily attributable to higher average sales prices per gallon across all of our business segments as well as higher average sales prices of essential ingredients due to a stronger commodity price environment. Net sales also improved due to higher total volumes sold of alcohols and essential ingredients.
Pekin Campus Production Segment
Net sales of alcohol from our Pekin Campus production segment increased by $20.2 million, or 21%, to $114.4 million for the three months ended June 30, 2026 as compared to $94.2 million for the same period in 2025. Our total volume of production gallons sold increased by 6.5 million gallons, or 14%, to 54.6 million gallons for the three months ended June 30, 2026 as compared to 48.1 million gallons for the same period in 2025. The increase of $0.14, or 7%, in the segment’s average sales price per gallon for the three months ended June 30, 2026 as compared to the same period in 2025 improved our net sales from the segment by $6.6 million. With the segment’s average sales price per gallon of $2.09 for the three months ended June 30, 2026, we generated $13.6 million more in net sales from the 6.5 million additional gallons of alcohol sold in the three months ended June 30, 2026 as compared to the same period in 2025.
Net sales of essential ingredients from our Pekin Campus production segment improved by $5.5 million, or 14%, to $45.1 million for the three months ended June 30, 2026 as compared to $39.6 million for the same period in 2025. The increase of $26.73, or 14%, in the segment’s average sales price per ton for the three months ended June 30, 2026 as compared to the same period in 2025 increased our net sales from the segment by $5.6 million. Our total volume of essential ingredients sold slightly decreased to 209,500 tons for the three months ended June 30, 2026 as compared to 210,000 tons for the same period in 2025, which resulted in $0.1 million less in net sales compared to 2025.
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Marketing and Distribution Segment
Net sales of alcohol from our marketing and distribution segment, excluding intersegment sales, declined by $3.5 million, or 6%, to $54.7 million for the three months ended June 30, 2026 as compared to $58.2 million for the same period in 2025. Our volume of third-party alcohol sold reported gross by the segment decreased by 5.7 million gallons, or 19%, to 24.0 million gallons for the three months ended June 30, 2026 as compared to 29.7 million gallons for the same period in 2025. With the segment’s average sales price per gallon of $2.27 for the three months ended June 30, 2026, we realized $12.9 million less in net sales from the 5.7 million fewer gallons of third-party alcohol sold gross in the three months ended June 30, 2026 as compared to the same period in 2025. The $0.31 per gallon, or 16%, increase in the segment’s average sales price per gallon for the three months ended June 30, 2026 as compared to the same period in 2025 resulted in a $9.4 million increase in our net sales from third-party renewable fuel sold by the segment.
Western Production Segment
Net sales of alcohol from our Western production segment increased by $4.2 million, or 25%, to $20.8 million for the three months ended June 30, 2026 as compared to $16.6 million for the same period in 2025. Our total volume of alcohol sold increased by 1.1 million gallons, or 13%, to 9.4 million gallons for the three months ended June 30, 2026 as compared to 8.3 million gallons for the same period in 2025. With the segment’s average sales price per gallon of $2.20 for the three months ended June 30, 2026, we realized $2.5 million in additional net sales from the 1.1 million additional gallons of alcohol sold in the three months ended June 30, 2026 as compared to the same period in 2025. The increase of $0.20, or 10%, in the segment’s average sales price per gallon for the three months ended June 30, 2026 as compared to the same period in 2025 increased our net sales from the segment by $1.7 million.
Net sales of essential ingredients from our Western production segment increased by $0.6 million, or 7%, to $8.8 million for the three months ended June 30, 2026 as compared to $8.2 million for the same period in 2025. Our total volume of essential ingredients sold increased by 4,600 tons, or 6%, to 83,000 tons for the three months ended June 30, 2026 from 78,400 tons for the same period in 2025. The increase of $1.31, or 1%, in our average sales price per ton for the three months ended June 30, 2026 as compared to the same period in 2025 increased our net sales of essential ingredients from the segment by $0.1 million. With the segment’s average sales price per ton of $106.54 for the three months ended June 30, 2026, we generated $0.5 million in additional net sales from the 4,600 additional tons of essential ingredients sold in the three months ended June 30, 2026 as compared to the same period in 2025.
Corporate and other
Net sales of alcohol from corporate and other increased by $0.2 million, or 12%, to $1.9 million for the three months ended June 30, 2026 as compared to $1.7 million for the same period in 2025. These sales are from Eagle Alcohol’s business.
Cost of Goods Sold and Gross Profit (Loss)
Our consolidated gross profit (loss) improved to a gross profit of $16.6 million for the three months ended June 30, 2026 from a gross loss of $1.9 million for the same period in 2025, representing a positive gross margin of 6.8% for the three months ended June 30, 2026 as compared to a negative gross margin of 0.9% for the same period in 2025.
Our consolidated gross profit improved due to higher sales and margins primarily driven by a few key factors. Our average sales prices per gallon improved across all of our business segments, reaching a combined average sales price of $2.15 per gallon, an over 10% increase compared to the second quarter of 2025. In addition, we benefitted from favorable overall production input costs, largely due to a lower cost of corn, which, together with higher average sales prices, significantly improved market crush margins to $0.33 cents per gallon for the second quarter of 2026 from $0.11 cents per gallon for the same period last year, driven by robust export demand, strong domestic blending activity, and tighter ethanol inventories following industry-wide spring maintenance outages. In addition, with RVOs for 2026 set, strong demand for corn oil and germ as a feedstock for biodiesel and renewable diesel drove essential ingredient prices higher. Our essential ingredients return improved to 51.6% for the three months ended June 30, 2026 compared to 45.2% for the same period in 2025. Improved crush margins contributed approximately $17 million of incremental gross profit for the second quarter, partially offset by $2 million of higher repairs and maintenance expenses arising from our Pekin dry mill and ICP facility spring outages and continued work at our Alto Carbonic facility to ensure we were prepared to reliably support the increased demand for our premium CO2 during the seasonally strong summer months.
Pekin Campus Production Segment
Our Pekin Campus production segment’s gross profit, net of intercompany activity, increased by $17.4 million to a gross profit of $12.4 million for the three months ended June 30, 2026 as compared to gross loss of $5.0 million for the same period in 2025. Of this increase, $15.9 million is attributable to improved alcohol sales margins and $1.5 million is attributable to higher sales volumes.
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Marketing and Distribution Segment
Our marketing and distribution segment’s gross profit, net of intercompany activity, decreased by $0.1 million to a gross profit of $1.4 million for the three months ended June 30, 2026 as compared to a gross profit of $1.5 million for the same period in 2025. Of this decline, $0.2 million is attributable to higher margins from sales of third-party renewable fuel, offset by $0.3 million attributable to lower sales volumes.
Western Production Segment
Our Western production segment’s gross profit, net of intercompany activity, increased by $0.4 million to a gross profit of $2.0 million for the three months ended June 30, 2026 as compared to a gross profit of $1.6 million for the same period in 2025. Of this improvement, $0.2 million is attributable to higher renewable fuel margins and $0.2 million is attributable to higher sales volumes.
Corporate and other
Gross profit from corporate and other increased by $0.9 million for the three months ended June 30, 2026, from a breakeven gross profit for the three months ended June 30, 2025, all of which were from Eagle Alcohol’s business.
Six Months ended June 30, 2026 as compared to the Six Months ended June 30, 2025
Net Sales
The increase in our consolidated net sales for the six months ended June 30, 2026 as compared to the same period in 2025 is primarily attributable to higher average sales prices per gallon across all of our business segments as well as higher average sales prices of essential ingredients due to a stronger commodity price environment, partially offset by a slight decrease in volumes sold.
Pekin Campus Production Segment
Net sales of alcohol from our Pekin Campus production segment increased by $20.9 million, or 10%, to $222.3 million for the six months ended June 30, 2026 as compared to $201.4 million for the same period in 2025. Our total volume of production gallons sold increased by 3.8 million gallons, or 4%, to 108.5 million gallons for the six months ended June 30, 2026 as compared to 104.7 million gallons for the same period in 2025. The increase of $0.13, or 7%, in the segment’s average sales price per gallon for the six months ended June 30, 2026 as compared to the same period in 2025 increased our net sales from the segment by $13.1 million. With the segment’s average sales price per gallon of $2.05 for the six months ended June 30, 2026, we generated $7.8 million in additional net sales from the 3.8 million additional gallons of alcohol sold in the six months ended June 30, 2026 as compared to the same period in 2025.
Net sales of essential ingredients from our Pekin Campus production segment increased by $4.9 million, or 6%, to $89.1 million for the six months ended June 30, 2026 as compared to $84.2 million for the same period in 2025. Our total volume of essential ingredients sold decreased by 20,900 tons, or 5%, to 427,000 tons for the six months ended June 30, 2026 from 447,900 tons for the same period in 2025. The increase of $20.63, or 11%, in the segment’s average sales price per ton for the six months ended June 30, 2026 as compared to the same period in 2025 increased our net sales from the segment by $9.2 million. With the segment’s average sales price per ton of $208.58 for the six months ended June 30, 2026, we generated $4.3 million in fewer net sales from the 20,900 fewer tons of essential ingredients sold in the six months ended June 30, 2026 as compared to the same period in 2025.
Marketing and Distribution Segment
Net sales of alcohol from our marketing and distribution segment, excluding intersegment sales, declined by $5.2 million, or 5%, to $102.0 million for the six months ended June 30, 2026 as compared to $107.2 million for the same period in 2025.
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Our volume of third-party renewable fuel sold reported gross by the segment decreased by 6.6 million gallons, or 12%, to 47.5 million gallons for the six months ended June 30, 2026 as compared to 54.1 million gallons for the same period in 2025. With the segment’s average sales price per gallon of $2.14 for the six months ended June 30, 2026, we realized $14.1 million less in net sales from the 6.6 million fewer gallons of third-party renewable fuel sold gross in the six months ended June 30, 2026 as compared to the same period in 2025. The $0.16 per gallon, or 8%, increase in the segment’s average sales price per gallon for the six months ended June 30, 2026 as compared to the same period in 2025 resulted in a $8.9 million increase in our net sales from third-party renewable fuel sold by the segment.
Western Production Segment
Net sales of alcohol from our Western production segment increased by $4.7 million, or 14%, to $37.5 million for the six months ended June 30, 2026 as compared to $32.8 million for the same period in 2025. Our total volume of alcohol sold increased by 1.0 million gallons, or 6%, to 17.6 million gallons for the six months ended June 30, 2026 as compared to 16.6 million gallons for the same period in 2025. With the segment’s average sales price per gallon of $2.13 for the six months ended June 30, 2026, we generated $2.1 million in additional net sales from the 1.0 million additional gallons of alcohol sold in the six months ended June 30, 2026 as compared to the same period in 2025. The increase of $0.15, or 8%, in the segment’s average sales price per gallon for the six months ended June 30, 2026 as compared to the same period in 2025 improved our net sales from the segment by $2.6 million.
Net sales of essential ingredients from our Western production segment remained flat at $16.1 million for the six months ended June 30, 2026 as compared to the same period in 2025. Our total volume of essential ingredients sold increased by 6,200 tons, or 4%, to 157,500 tons for the six months ended June 30, 2026 from 151,300 tons for the same period in 2025. With the segment’s average sales price per ton of $102.37 for the six months ended June 30, 2026, we generated $0.6 million in additional net sales from the 6,200 additional tons of essential ingredients sold in the six months ended June 30, 2026 as compared to the same period in 2025. The decrease of $3.77, or 4%, in our average sales price per ton for the six months ended June 30, 2026 as compared to the same period in 2025 reduced our net sales of essential ingredients from the segment by $0.6 million.
Corporate and other
Net sales of alcohol from corporate and other increased by $0.1 million, or 3%, to $3.4 million for the six months ended June 30, 2026 as compared to $3.3 million for the same period in 2025. These sales are from Eagle Alcohol’s business.
Cost of Goods Sold and Gross Profit (Loss)
Our consolidated gross profit improved to a gross profit of $25.9 million for the six months ended June 30, 2026 from a gross loss of $3.7 million for the same period in 2025, representing a positive gross margin of 5.5% for the six months ended June 30, 2026 as compared to a negative gross margin of 0.8% for the same period in 2025.
Our consolidated gross profit improved due to higher sales and margins primarily driven by the same factors that improved our second quarter results, as discussed above. Our average sales prices per gallon improved across all of our business segments, reaching a combined average sales price of $2.08 per gallon, an over 7% increase compared to the same period in 2025. In addition, we benefitted from favorable overall production input costs, largely due to a lower cost of corn, which, together with higher average sales prices, significantly improved market crush margins compared to the same period last year. In addition, our essential ingredients return improved to 52.5% for the six months ended June 30, 2026 as compared to 46.7% for the same period in 2025.
Pekin Campus Production Segment
Our Pekin Campus production segment’s gross profit, net of intercompany activity, improved by $27.9 million to a gross profit of $20.0 million for the six months ended June 30, 2026 as compared to a gross loss of $7.9 million for the same period in 2025. Of this improvement, $27.2 million is attributable to higher alcohol sales margins and $0.7 million is attributable to higher sales volumes.
Marketing and Distribution Segment
Our marketing and distribution segment’s gross profit, net of intercompany activity, declined by $1.2 million to a gross profit of $3.0 million for the six months ended June 30, 2026 as compared to a gross profit of $4.2 million for the same period in 2025. Of this decline, $0.8 million is attributable primarily to lower margins from sales of third-party renewable fuel and $0.4 million is attributable to lower sales volumes for the six months ended June 30, 2026 as compared to the same period in 2025.
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Western Production Segment
Our Western production segment’s gross profit, net of intercompany activity, improved by $1.4 million to a gross profit of $1.4 million for the six months ended June 30, 2026 as compared to a breakeven gross profit for the same period in 2025, related to higher margins on ethanol sales.
Corporate and other
Gross profit from corporate and other improved by $1.4 million to a gross profit of $1.3 million for the six months ended June 30, 2026 as compared to gross loss of $0.1 million for the same period in 2025, all of which were from Eagle Alcohol’s business.
Selling, General and Administrative Expenses
The following table presents our selling, general and administrative, or SG&A, expenses in dollars and as a percentage of net sales (in thousands, except percentages):
Three Months Ended June 30, Variance in Six Months Ended June 30, Variance in
2026 2025 Dollars Percent 2026 2025 Dollars Percent
Selling, general and administrative expenses $ 8,017 $ 6,171 $ 1,846 29.9 % $ 14,716 $ 13,361 $ 1,355 10.1 %
Percentage of net sales 3.3 % 2.8 % 3.1 % 3.0 %
Our SG&A expenses increased for the three and six months ended June 30, 2026 as compared to the same periods in 2025. The period over period increases in SG&A expenses are primarily due to an $0.8 million accrual for performance compensation as well as an $0.8 million one-time gain in 2025 related to the final payment for our acquisition of Eagle Alcohol that did not recur in 2026. Excluding those two notable items, SG&A expenses were comparable over the 2026 and 2025 periods despite higher net sales in the current year, reflecting the benefits of last year’s initiatives to right-size our staffing levels and cut costs.
Net Income (Loss) Attributable to Common Stockholders
The following table presents our net income (loss) attributable to common stockholders in dollars and as a percentage of net sales (in thousands, except percentages):
Three Months Ended June 30, Variance in Six Months Ended June 30, Variance in
2026 2025 Dollars Percent 2026 2025 Dollars Percent
Net income (loss) attributable to common stockholders $ 11,386 $ (11,312 ) $ 22,698 NM $ 15,345 $ (23,303 ) $ 38,648 NM
Percentage of net sales 4.6 % (5.2 )% 3.3 % (5.2 )%
The increase in our net income attributable to common stockholders for the three and six months ended June 30, 2026 as compared to the same periods in 2025 is primarily due to improved margins, as discussed above, Section 45Z clean fuel production tax credits, and reduced interest expense due to lower debt balances. For the three and six month periods in 2026, we had no tax provision as we expect to use a portion of our net operating losses to offset income for the year.
Liquidity and Capital Resources
During the six months ended June 30, 2026, we generated positive cash flow from our operations, and we supplemented our liquidity with net proceeds from Kinergy’s operating line of credit. In addition to funding our operations, we used our capital resources to make principal payments on our term debt, including an $8.5 million payment for the second quarter, ending the quarter with $29.9 million in term debt outstanding. Year to date, we have made a total of $25.1 million in principal payments on our term debt. As of June 30, 2026, we had $24.0 million in cash, cash equivalents and restricted cash, $41.3 million of unused borrowing availability under Kinergy’s operating line of credit and $65.0 million that may be available for capital improvement projects under our Orion term loan. We believe we have sufficient liquidity to meet our anticipated working capital, debt service and other liquidity needs for at least the next twelve months from the date of this report.
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Quantitative Period-End Liquidity Status
We believe that the following amounts provide insight into our liquidity and capital resources. The following selected financial information should be read in conjunction with our condensed consolidated financial statements and notes to condensed consolidated financial statements included elsewhere in this report, and the other sections of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report (dollars in thousands).
June 30, 2026 December 31, 2025 Change
Cash, cash equivalents and restricted cash $ 23,962 $ 25,673 (6.7 )%
Current assets $ 160,824 $ 155,917 3.1 %
Property and equipment, net $ 197,479 $ 198,501 (0.5 )%
Current liabilities $ 50,397 $ 59,071 (14.7 )%
Long-term debt, noncurrent portion $ 60,469 $ 63,027 (4.1 )%
Working capital $ 110,427 $ 96,846 14.0 %
Working capital ratio 3.19 2.64 20.8 %
Restricted Net Assets
At June 30, 2026, we had approximately $68.5 million of net assets at our subsidiaries that were not available to be transferred to Alto Ingredients, Inc. in the form of dividends, distributions, loans or advances due to restrictions contained in our subsidiaries’ credit facilities.
Changes in Working Capital and Cash Flows
Working capital improved to $110.4 million at June 30, 2026 from $96.8 million at December 31, 2025 as a result of a decrease of $8.7 million in current liabilities and an increase of $4.9 million in current assets.
Current assets increased primarily due to an increase in accounts receivable, transferable tax credits and derivative instruments, partially offset by a decrease in inventories.
Our current liabilities decreased primarily due to lower current portion of long-term debt and derivative instruments, partially offset by increases in accounts payable as a result of timing of payments.
Our cash, cash equivalents and restricted cash declined by $1.7 million due to $22.9 million in cash used in our financing activities and $11.5 million used in our investing activities, nearly offset by $32.7 million in cash provided by our operating activities.
Cash provided by our Operating Activities
We generated $32.7 million of cash from our operations for the six months ended June 30, 2026 as compared to $19.1 million of cash used in our operations for the same period in 2025. Significant factors that contributed to the change in cash provided by our operating activities include:
● an increase in net income of $38.6 million;
● an increase of $20.6 million related to changes in accounts payable and accrued liabilities;
● an increase of $15.5 million related to lower inventories due to reduced production volumes and the timing of sales; and
● an increase of other assets of $7.1 million related to transferable tax credits.
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These amounts were partially offset by:
● non-cash income of $9.0 million from transferable tax credits;
● a decrease of $13.3 million related to changes in accounts receivable due to higher sales volumes and the timing of payments; and
● a decrease of approximately $6.3 million related to our derivative instruments.
Cash used in our Investing Activities
We used $11.5 million in cash during the six months ended June 30, 2026 for capital expenditures.
Cash used in our Financing Activities
Cash used in our financing activities was $22.9 million for the six months ended June 30, 2026, which reflects $25.1 million in principal payments on our term debt, $2.2 million for employee taxes paid for stock vesting in lieu of shares and $0.6 million in preferred stock dividends paid, partially offset by $5.0 million in net proceeds from Kinergy’s operating line of credit.
Kinergy’s Operating Line of Credit
Kinergy maintains an operating line of credit for an aggregate amount of up to $85.0 million. The credit facility matures on November 7, 2027. Interest accrues under the credit facility at a rate equal to (i) the daily Secured Overnight Financing Rate, plus (ii) a specified applicable margin ranging from 1.25% to 1.75%. The credit facility provides for an unused line fee, payable monthly in arrears, at an annual rate of 0.25% to 0.375% on the amount by which the maximum credit under the facility exceeds the average daily principal balance during the preceding month. Payments that may be made by Kinergy to Alto Ingredients, Inc. as reimbursement for management and other services provided by Alto Ingredients, Inc. to Kinergy are limited under the terms of the credit facility to $1.5 million per fiscal quarter. The credit facility also includes the accounts receivable of our indirect wholly-owned subsidiary, Alto Nutrients, LLC, or Alto Nutrients, as additional collateral. Payments that may be made by Alto Nutrients to Alto Ingredients, Inc. as reimbursement for management and other services provided by Alto Ingredients, Inc. to Alto Nutrients are limited under the terms of the credit facility to $0.5 million per fiscal quarter. Alto Nutrients markets our essential ingredients and also provides raw material procurement services to our subsidiaries. In addition, the amount of cash distributions that Kinergy or Alto Nutrients may make to us is also limited to up to 75% of excess cash flow.
For all monthly periods in which excess borrowing availability falls below a specified level, Kinergy and Alto Nutrients must collectively maintain a fixed-charge coverage ratio (calculated as a twelve-month rolling earnings before interest, taxes, depreciation and amortization divided by the sum of interest expense, capital expenditures, principal payments of indebtedness, indebtedness from capital leases and taxes paid during such twelve-month rolling period) of at least 1.10 and are prohibited from incurring certain additional indebtedness (other than specific intercompany indebtedness). The obligations of Kinergy and Alto Nutrients under the credit facility are secured by all of our tangible and intangible assets.
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We believe Kinergy and Alto Nutrients are in compliance with the fixed-charge coverage ratio financial covenant as of the filing of this report. The following table sets forth the fixed-charge coverage ratio financial covenant and the actual results for the periods presented:
Three Months Ended June 30, Years Ended December 31,
2026 2025 2025 2024
Fixed-Charge Coverage Ratio Requirement 1.10 1.10 1.10 1.10
Actual 6.50 3.64 4.03 3.53
Excess 5.40 2.54 2.93 2.43
Alto Ingredients, Inc. has guaranteed all of Kinergy’s obligations under the credit facility. As of June 30, 2026, Kinergy had an outstanding balance of $34.6 million and $41.3 million of unused borrowing availability under the credit facility.
Orion Term Loan
On November 7, 2022, we entered into a credit agreement with certain funds managed by Orion Infrastructure Capital, or Lenders, under which the Lenders extended a senior secured credit facility in the amount of up to $125.0 million, or Term Loan. The Term Loan is secured by a first priority lien on certain of our assets and a second priority lien on certain assets of Kinergy and Alto Nutrients. Interest accrues on the unpaid principal amount of the Term Loan at a fixed rate of 10% per annum. The Term Loan matures on November 7, 2028, or earlier upon acceleration.
We must prepay amounts outstanding under the Term Loan on a semi-annual basis beginning with the six-month period ending December 31, 2023 in an amount equal to a percentage of our excess cash flow based on a specified leverage ratio, as follows: (i) if our leverage ratio is greater than or equal to 3.0x, then the mandatory prepayment amount will equal 100% of our excess cash flow, (ii) if our leverage ratio is less than 3.0x and greater than or equal to 1.5x, then the mandatory prepayment amount will equal 50% of our excess cash flow, and (iii) if our leverage ratio is less than 1.5x, then the mandatory prepayment amount will equal 25% of our excess cash flow.
As of June 30, 2026 and December 31, 2025, the principal amount outstanding under the Term Loan was $29.9 million and $55.0 million, respectively.
Other Cash Obligations
As of June 30, 2026, we had future commitments for certain capital projects totaling $12.0 million. These commitments are scheduled to be satisfied through 2026.
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