Q2 2018 Highlights

  • Net income of $33.0 million or $0.78 per diluted share, up from net loss of $34.8 million, or $0.90 per diluted share y/y
  • Adjusted net income of $23.5 million or $0.56 per share, up from $4.5 million, or $0.12 per share excluding allocation of the 2017 BTC y/y
  • Adjusted EBITDA of $42.3 million, up from $19.7 million y/y, excluding allocation of the 2017 BTC
  • Revenues of $580.2 million, up 8% y/y
  • 172 million gallons sold, up 7% y/y
  • 124 million gallons produced, up 6% y/y

AMES, Iowa, Aug. 06, 2018 (GLOBE NEWSWIRE) -- Renewable Energy Group, Inc. ("REG" or the "Company") (NASDAQ:REGI) today announced its financial results for the second quarter ended June 30, 2018.

"We produced outstanding results in the first half of the year, demonstrating our ability to execute across all aspects of our business," said Randy Howard, President and Chief Executive Officer.  "We tripled our Adjusted EBITDA for the first six months compared to last year, excluding allocation of the 2017 BTC, which is an accomplishment made even more impressive because our Geismar renewable diesel refinery was offline for three weeks due to planned maintenance.  With Geismar back online and once again producing above nameplate capacity, combined with a solid margin environment, we look forward to a strong second half of the year."

Net income attributable to common stockholders was $33.0 million in the second quarter of 2018, compared to net loss of $34.8 million in the second quarter of 2017.  The improvement in net income reflects better margins in 2018 as well as more gallons sold.  Adjusted net income was $23.5 million compared to Adjusted net income of $4.5 million in the second quarter of 2017, excluding allocation of the 2017 BTC.  Second quarter 2018 Adjusted EBITDA was $42.3 million, compared to Adjusted EBITDA of $19.7 million in the second quarter of 2017, excluding allocation of the 2017 BTC.  After reallocating the net benefit of the BTC to applicable periods in 2017, Adjusted net income was $62.5 million and Adjusted EBITDA was $79.1 million in the second quarter of 2017.

Revenues for the quarter were $580.2 million on 171.9 million gallons of fuel sold.  Revenues in the second quarter increased $45.0 million compared to the second quarter of 2017 mainly due to more gallons sold and a higher average selling price in the second quarter of 2018, partially offset by lower revenue from sales of separated RINs.

The Company estimates that if the currently lapsed BTC is retroactively reinstated for 2018 on the same terms as in 2017, REG's net income, Adjusted net income and Adjusted EBITDA would each increase by approximately $66.2 million for business conducted in the quarter ended June 30, 2018 and would each increase by approximately $108.7 million for business conducted in the first six months of 2018.

Second Quarter 2018 Highlights

All figures refer to the quarter ending June 30, 2018, unless otherwise noted.  All comparisons are to the quarter ended June 30, 2017 unless otherwise noted.

REG sold a total of 171.9 million gallons of fuel, an increase of 7.3% primarily due to increased biodiesel and petroleum gallons sold, partially offset by fewer sales of biomass-based diesel gallons produced by third parties. The average selling price per gallon was $3.11, an increase of 8.7% excluding allocation of the 2017 BTC. The Company produced 124.4 million gallons of biomass-based diesel during the quarter, a 5.9% increase.

Revenues were $580.2 million, an increase of 8.4% that was primarily due to the increase in gallons sold and higher average selling price per gallon partially offset by lower revenue from sales of separated RINs.

Gross profit was $57.6 million, or 9.9% of revenues, compared to gross profit of $31.5 million, or 5.9% of revenues.  Gross profit as a percentage of revenue increased due to lower feedstock costs and operational improvements, partially offset by declining RIN prices.

Net income attributable to common stockholders was $33.0 million, or $0.78 per share on a fully diluted basis. This compares to a net loss of $34.8 million, or $0.90 per share on a fully diluted basis in the second quarter of 2017. Adjusted net income attributable to common stockholders was $23.5 million, or $0.56 per share, compared to an adjusted net income excluding allocation of the 2017 BTC of $4.5 million, or $0.12 per share, on a fully diluted basis in the second quarter of 2017.  Adjusted EBITDA was $42.3 million compared to $19.7 million, excluding allocation of the 2017 BTC, in the second quarter 2017.

At June 30, 2018, REG had cash and cash equivalents of $221.8 million, an increase of $144.1 million from December 31, 2017.  This increase is mainly due to receipt of the 2017 BTC refunds in 2018.

At June 30, 2018, accounts receivable were $91.2 million, or 14 days of sales. Accounts receivable at December 31, 2017 were $90.6 million. Inventory was $141.7 million at June 30, 2018, or 24 days of cost of sales, an increase of $6.2 million from December 31, 2017. Accounts payable were $120.7 million and $84.6 million at June 30, 2018 and December 31, 2017, respectively.  The increase in accounts payable is due to amounts due to customers resulting from the retroactive BTC reinstatement.

The table below summarizes REG’s results for the second quarter of 2018.

REG Q2 2018 and Q2 2017 Revenues, Net Income (Loss), Adjusted Net Income (Loss) and Adjusted EBITDA Summary
(dollars and gallons in thousands)

 Q2 2018 Q2 2017 Y/Y Change
Gallons sold171,943  160,219  7.3%
Average selling price per gallon, excluding the BTC$3.11  $2.86  8.7%
Total revenues$580,150  $535,103  8.4%
Net income (loss) attributable to common stockholders$32,956  $(34,809) N/M
Adjusted Net Income excluding 2017 BTC allocation$23,477  $4,486  423.3%
Adjusted Net Income$23,477  $62,474  (62.4)%
Adjusted EBITDA excluding 2017 BTC allocation$42,308  $19,703  114.7%
Adjusted EBITDA$42,308  $79,068  (46.5)%

Reconciliation of Non - GAAP Measures

The Company believes supplementing its consolidated financial statements presented in accordance with GAAP with non-GAAP measures provides investors with useful information regarding the Company's core operating performance, as well as short-term and long-term trends.

Adjusted net income and adjusted diluted earnings per common share are derived from GAAP results by excluding the non-cash impacts related to the change in the estimated fair value of the convertible debt conversion liability, change in fair value of contingent considerations, impairment of assets, and stock compensation, coupled with allocation of the net benefit of the 2017 BTC as set forth in the footnotes to the tables below and the other items identified in the tables below that we believe are not related to our core operating activities.

Earnings before interest, taxes, depreciation and amortization, and further adjusted for certain additional items identified in the table below, or Adjusted EBITDA, is presented in order to assist investors in analyzing performance across reporting periods on a consistent basis by excluding items that are not believed to be indicative of core operating performance. Adjusted EBITDA is used by the Company to evaluate, assess and benchmark financial performance on a consistent and a comparable basis and as a factor in determining incentive compensation for Company executives.

Adjusted net income, adjusted diluted earnings per common share and Adjusted EBITDA as presented by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Investors should consider non-GAAP measures in addition to, and not as a substitute for, or as superior to, financial performance measures prepared in accordance with GAAP.

Adjusted Net Income (Loss) and Adjusted EPS Reconciliation:

The following table sets forth Adjusted Net Income (Loss) and Adjusted net income (loss) per share for the periods presented, as well as a reconciliation to net income (loss) determined in accordance with GAAP:

(In thousands, except per share amounts)Three Months
 Ended 
 June 30, 
 2018
 Three Months
 Ended 
 June 30, 
 2017
 Six  Months
 Ended 
 June 30, 
 2018
 Six Months
 Ended 
 June 30, 
 2017
 
Net income (loss) attributable to the Company$33,850 $(34,809$248,239 $(50,723)
Gain on involuntary conversion(454)   (4,454)  
Gain on sale of assets    (990)  
Change in fair value of convertible debt conversion liability  32,546    32,718 
Change in fair value of contingent considerations(7,129) (24) (8,669) 565 
Gain on debt extinguishment(2,337)   (2,105)  
Loss on the Geismar lease termination  3,967    3,967 
Other (income) expense, net(2,066) (32) (2,289) 288 
Impairment of assets  1,341    1,341 
Straight-line lease expense(3) (85) (35) (117)
Executive severance payment50    215   
Non-cash stock compensation2,203  1,688  3,997  2,996 
2017 BTC (1)    (204,936)  
Adjusted net income (loss) attributable to the Company$24,114  $4,592  $28,973  $(8,965)
Effect of participating share-based awards637  106  730   
Adjusted net income (loss) excluding 2017 BTC allocation attributable to common stockholders$23,477  $4,486  $28,243  $(8,965)
        
Adjusted net income (loss) attributable to the Company$24,114  $4,592  $28,973  $(8,965)
Allocation of 2017 BTC  59,365    96,093 
Adjusted net income (loss) including 2017 BTC allocation attributable to the Company24,114  63,957  28,973  87,128 
Effect of participating share-based awards637  1,483  730  1,936 
Adjusted net income (loss) including 2017 BTC allocation attributable to common stockholders$23,477  $62,474  $28,243  $85,192 
        
Net income (loss) per share attributable to common stockholders       
Diluted$0.78  $(0.90) $5.94  $(1.31)
        
Adjusted net income (loss) excluding 2017 BTC allocation per share attributable to common stockholders       
Diluted$0.56  $0.12  $0.69  $(0.23)
        
Adjusted net income including 2017 BTC allocation per share attributable to common stockholders       
Diluted$0.56  $1.61  $0.69  $2.20 

(1) On February 9, 2018, the Biodiesel Mixture Excise Tax Credit ("BTC") was retroactively reinstated for the 2017 calendar year.  The retroactive credit for 2017 resulted in a net benefit to us that was recognized in the first quarter of 2018 for GAAP purposes.  Because this credit relates to the 2017 full year operating performance and results, we removed the net benefit of the 2017 BTC from our 2018 results and allocated a portion of the net benefit of the tax credit to each of the four quarters of 2017 based upon gallons sold.

Adjusted EBITDA Reconciliation:

The following table sets forth Adjusted EBITDA for the periods presented, as well as a reconciliation to net income (loss) determined in accordance with GAAP:

 Three Months
 Ended 
 June 30, 
 2018
 Three Months
 Ended 
 June 30, 
 2017
 Six Months
 Ended 
 June 30, 
 2018
 Six Months
 Ended 
 June 30, 
 2017
(In thousands)
       
Net income (loss)$33,850  $(34,809) $248,239  $(50,723)
Adjustments:       
Income tax expense3,835  1,960  2,632  3,035 
Interest expense4,925  4,479  9,576  9,015 
Depreciation9,124  8,523  17,983  16,946 
Amortization310  149  618  276 
EBITDA52,044  (19,698) 279,048  (21,451)
Gain on involuntary conversion(454)   (4,454)  
Gain on sale of assets    (990)  
Change in fair value of convertible debt conversion liability  32,546    32,718 
Change in fair value of contingent liability(7,129) (24) (8,669) 565 
Gain on debt extinguishment(2,337)   (2,105)  
Other (income) expense, net(2,066) (32) (2,289) 288 
Impairment of assets  1,341    1,341 
Loss on the Geismar lease termination  3,967    3,967 
Straight-line lease expense(3) (85) (35) (117)
Executive severance50    215   
Non-cash stock compensation2,203  1,688  3,997  2,996 
2017 BTC (1)    (204,936)  
Adjusted EBITDA excluding 2017 BTC allocation42,308  19,703  59,782  20,307 
Allocation of 2017 BTC (1)  59,365    96,093 
Adjusted EBITDA$42,308  $79,068  $59,782  $116,400 

(1) On February 9, 2018, the Biodiesel Mixture Excise Tax Credit ("BTC") was retroactively reinstated for the 2017 calendar year.  The retroactive credit for 2017 resulted in a net benefit to us that was recognized in the first quarter of 2018 for GAAP purposes.  Because this credit relates to the 2017 full year operating performance and results, we removed the net benefit of the 2017 BTC from our 2018 results and allocated a portion of the net benefit of the tax credit to each of the four quarters of 2017 based upon gallons sold.

About Renewable Energy Group
Renewable Energy Group, Inc. (NASDAQ: REGI) is a leading provider of cleaner, lower carbon intensity products and services. We are an international producer of biomass-based diesel, a developer of renewable chemicals and are North America's largest producer of advanced biofuel. REG utilizes an integrated procurement, distribution, and logistics network to convert natural fats, oils, greases, and sugars into lower carbon intensity products. With 14 active biorefineries, a feedstock processing facility, research and development capabilities and a diverse and growing intellectual property portfolio, REG is committed to being a long-term leader in bio-based fuel and chemicals.

Note Regarding Forward-Looking Statements
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended, including statements regarding expected production at our Geismar renewable diesel facility and an expected favorable margin environment in the second the half of 2018, the possible retroactive reinstatement of the BTC for 2018, and the estimated benefits to Adjusted net income and Adjusted EBITDA if the BTC is retroactively reinstated for 2018.  These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change, and actual results may differ materially from the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, potential changes in governmental programs and policies requiring or encouraging the use of biofuels, including RFS2; availability of federal and state governmental tax incentives and incentives for biomass-based diesel production, including that the BTC may not be retroactively reinstated for 2018 or that it may be reinstated on less favorable terms; changes in the spread between biomass-based diesel prices and feedstock costs; the future price and volatility of feedstocks; the future price and volatility of petroleum and products derived from petroleum; risks associated with fire, explosions, leaks and other natural disasters at our facilities; the effect of excess capacity in the biomass-based diesel industry; unanticipated changes in the biomass-based diesel market from which we generate almost all of our revenues; seasonal fluctuations in our operating results; competition in the markets in which we operate; our dependence on sales to a single customer; technological advances or new methods of biomass-based diesel production or the development of energy alternatives to biomass-based diesel; our ability to successfully implement our acquisition strategy; our ability to generate revenue from the sale of renewable chemicals, fuels and other products on a commercial scale and at a competitive cost, and customer acceptance of the products produced; whether our Geismar biorefinery will be able to produce renewable diesel consistently or profitably; and other risks and uncertainties described in REG's annual report on Form 10-K for the year ended December 31, 2017, Form 10-Q for the quarter ended March 31, 2018 and other reports subsequently filed with the SEC.  All forward-looking statements are made as of the date of this press release and REG does not undertake to update any forward-looking statements based on new developments or changes in our expectations.

Contacts

Company:
Renewable Energy Group, Inc.
Todd Robinson
Treasurer
+1 (515) 239-8048
Todd.Robinson@regi.com

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(in thousands, except share and per share amounts)

 Three months ended Six months ended
 
 June 30, 2018
 June 30, 2017 June 30, 2018 June 30, 2017
REVENUES:
       
Biomass-based diesel sales$551,109  $455,928  $825,870  $799,664 
Separated RIN sales26,186  67,349  73,365  124,674 
Biomass-based diesel government incentives915  10,821  366,200  27,762 
 578,210  534,098  1,265,435  952,100 
Other revenue1,940  1,005  3,967  1,896 
 580,150  535,103  1,269,402  953,996 
COSTS OF GOODS SOLD:       
Biomass-based diesel510,380  468,407  916,189  822,258 
Separated RINs11,011  34,218  43,748  80,847 
Other costs of goods sold1,138  1,024  2,276  2,154 
 522,529  503,649  962,213  905,259 
GROSS PROFIT57,621  31,454  307,189  48,737 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES24,512  22,812  56,166  45,719 
RESEARCH AND DEVELOPMENT EXPENSE2,485  3,181  9,083  6,779 
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT  1,341    1,341 
INCOME (LOSS) FROM OPERATIONS30,624  4,120  241,940  (5,102)
OTHER INCOME (EXPENSE), NET7,061  (36,969) 8,931  (42,586)
INCOME (LOSS) BEFORE INCOME TAXES37,685  (32,849) 250,871  (47,688)
INCOME TAX EXPENSE(3,835) (1,960) (2,632) (3,035)
NET INCOME (LOSS)$33,850  $(34,809) $248,239  $(50,723)
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY’S COMMON STOCKHOLDERS$32,956  $(34,809) $241,983  $(50,723)
NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:       
BASIC$0.88  $(0.90) $6.35  $(1.31)
DILUTED$0.78  $(0.90) $5.94  $(1.31)
WEIGHTED AVERAGE SHARES USED TO COMPUTE NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:       
BASIC37,413,387  38,679,849  38,112,531  38,639,672 
DILUTED42,079,944  38,679,849  40,713,114  38,639,672 
            

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
AS OF JUNE 30, 2018 AND DECEMBER 31, 2017
(in thousands, except share and per share amounts)

 June 30, 2018 December 31, 2017
ASSETS
   
CURRENT ASSETS:   
Cash and cash equivalents$221,775  $77,627 
Accounts receivable, net91,248  90,648 
Inventories141,736  135,547 
Prepaid expenses and other assets45,294  51,880 
Total current assets500,053  355,702 
Property, plant and equipment, net591,265  587,397 
Goodwill16,080  16,080 
Intangible assets, net25,944  27,127 
Investments12,153  12,250 
Other assets7,275  7,040 
TOTAL ASSETS$1,152,770  $1,005,596 
LIABILITIES AND EQUITY   
CURRENT LIABILITIES:   
Lines of credit$7,844  $65,525 
Current maturities of long-term debt176,746  13,397 
Accounts payable120,733  84,608 
Accrued expenses and other liabilities31,549  39,187 
Deferred revenue161  2,218 
Total current liabilities337,033  204,935 
Unfavorable lease obligation2,823  3,388 
Deferred income taxes8,430  8,192 
Long-term contingent consideration for acquisitions3,311  8,849 
Long-term debt (net of debt issuance costs of $4,592 and $6,627, respectively)31,006  208,536 
Other liabilities3,379  4,114 
Total liabilities385,982  438,014 
COMMITMENTS AND CONTINGENCIES   
TOTAL EQUITY766,788  567,582 
TOTAL LIABILITIES AND EQUITY$1,152,770  $1,005,596