Image source: The Motley Fool.
DATE
Tuesday, Nov. 10, 2026
CALL PARTICIPANTS
- Vice President of Finance and Strategy - Eric Frey
- Chief Executive Officer - Paul D. Bloom
- Chief Financial Officer - Oluwagbemileke Agiri
- Chief Operating Officer - Greg Hanselman
- Chief Commercial and Risk Officer - Kyle James
TAKEAWAYS
- Revenue -- $83.0 million, representing a 94.2% increase driven by record low-carbon ethanol volumes and significant growth in the carbon business.
- Net Income -- $22.7 million, or $0.09 per diluted share, reflecting the realization of carbon credit values compared to a net loss of $8 million in the prior year period.
- Non-GAAP Adjusted EBITDA -- $44.1 million, representing a record for the company due to the sale of previously banked carbon credits.
- Cash Flow from Operations -- $41.1 million, driven by the receipt of cash proceeds from customers for production tax credits and operational efficiency.
- Carbon Business Revenue -- $29.4 million, primarily reflecting the monetization of Canadian Clean Fuel Regulation (CFR) credits.
- Full Year 2026 Adjusted EBITDA Guidance -- Greater than $90 million, including approximately $20 million from nonrecurring carbon credit revenue and improved tax credit values.
- 2027 Adjusted EBITDA Guidance -- Greater than $70 million, reflecting higher anticipated production from debottlenecking projects and excluding nonrecurring credits.
- RNG Asset 45Z Annual Value -- $10 million in additional expected annual value, due to model improvements recognizing avoided methane emissions from dairy manure.
- Ethanol Production -- 19 million gallons during the quarter, representing an 11.8% increase versus the prior year due to the timing of scheduled maintenance.
- RNG Production -- 91,729 MMBtu, remaining relatively consistent with the 92,396 MMBtu produced in the third quarter of 2025.
- Cash and Cash Equivalents -- $67.6 million as of Sept. 30, 2026, providing liquidity to fund near-term equity commitments.
- Section 45Z Tax Credit Sales -- $70 million, representing contracted sales for substantially all expected 2026 ethanol and RNG production.
- Debottlenecking Capacity Goal -- 75 million gallons per year, reflecting a nameplate capacity increase at the Gevo North Dakota plant expected by year-end 2026.
- Expansion Production Target -- 150 million gallons per year, representing a doubling of current capacity through a planned joint venture expected by 2028.
- Carbon Capture Goal -- 400,000 tons per year, coinciding with the 2028 expansion of the North Dakota facility.
- Gross Margin -- 57.6%, representing margin expansion from 30.5% in the prior year quarter through the monetization of carbon attributes and incentives.
- Total Assets -- $540.2 million, compared to $718.9 million at the end of fiscal 2025.
Need a quote from a Motley Fool analyst? Email pr@fool.com
RISKS
- Bloom stated, "Carbon markets will evolve, prices will move, and regulations can change," indicating potential volatility in a key future revenue stream.
- Agiri noted that "cash flow can vary significantly from quarter to quarter" due to the timing of when customers purchase generated tax credits.
- Bloom warned that the 2027 outlook "is based on current market conditions, those conditions can change as we move through 2027," suggesting potential variability in future earnings power.
SUMMARY
Gevo, Inc. (NASDAQ:GEVO) reported record third quarter results, achieving profitability and positive operating cash flow through the expansion of its carbon credit and low-carbon fuel operations. Management stated that the company is transitioning from a project-dependent model to a diversified operating platform focusing on capital efficiency and asset optimization. The company is prioritizing near-term debottlenecking and ethanol capacity expansion at its North Dakota facility over immediate large-scale investments in sustainable aviation fuel (SAF). Management reported that this strategy allows the company to strengthen its balance sheet and fund future growth using cash generated from operations.
- The company is utilizing a capital-light strategy to monetize isobutanol technology in India through an alliance with Praj, targeting an addressable market of 3 billion gallons.
- Management reported that approximately 50% of the equipment needed for the North Dakota expansion has already been acquired and paid for, reducing future capital requirements.
- CEO Bloom stated, "We are no longer a company whose future depends on financing and building 1 large SAF project."
- The company is advancing a project-level joint venture with Ara Energy for the North Dakota expansion, with a targeted finalization in the fourth quarter.
- Gevo is using its proprietary Verity platform to track and verify carbon intensity and regenerative agriculture benefits for farmers and fuel customers.
- The company plans to fund its equity commitments for the 2028 expansion using existing cash and ongoing cash generation from its operating assets.
INDUSTRY GLOSSARY
- 45Z Clean Fuel Production Credit: A tax credit under the Inflation Reduction Act incentivizing clean fuel production based on lifecycle greenhouse gas emissions.
- RNG (Renewable Natural Gas): Biogas derived from organic waste, such as manure, processed to meet pipeline-quality standards.
- SAF (Sustainable Aviation Fuel): A renewable alternative to traditional petroleum-based jet fuel produced from sustainable feedstocks.
- CFR (Clean Fuel Regulations): Canadian environmental regulations designed to reduce the carbon intensity of fuels.
- MMBtu: A standard unit of measurement for heat energy, representing 1 million British Thermal Units.
- CI (Carbon Intensity): A measure of the lifecycle greenhouse gas emissions associated with the production and use of a fuel.
- GREET Model: A tool used to calculate the lifecycle environmental impact and carbon intensity of various fuels.
- Isobutanol: A renewable alcohol that serves as a building block for sustainable aviation fuel and other specialty chemicals.
- CCS (Carbon Capture and Sequestration): The process of capturing and storing carbon dioxide emissions underground to prevent them from entering the atmosphere.
Full Conference Call Transcript
Operator: Thank you for standing by, and welcome to the Gevo, Inc. Third Quarter 26 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star, then the number 1 on your telephone keypad. I would now like to turn the call over to Eric Frey, vice president of finance and strategy. Eric, please go ahead.
Eric Frey: Good afternoon, everyone, and thank you for joining us on today's call to discuss Gevo's third quarter 26 results. I am Eric Frey, vice president of finance and strategy at Gevo. With me today, we have Paul D. Bloom, our chief executive officer and Oluwagbemileke Agiri, our chief financial officer. Also have Greg Hanselman, our chief operating officer, and Kyle James, our chief commercial and risk Earlier today, we issued a press release that outlines our third quarter 26 results and some of the topics we plan to discuss. Copies of the press release and the slides we are presenting during today's call are available on our website www.gevo.com.
Please be advised that our remarks today, including answers to your questions, contain forward looking statements within the meaning of the Private Securities Litigation Reform Act. These forward looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those statements include projections about the timing, development, engineering, finance, and construction of the debottlenecking and potential expansion of our Gevo North Dakota plant, the timing of a final investment decision for Project NorthStar, our expected future cash flows and adjusted EBITDA, our expected carbon business revenues, our expected future tax credit monetizations, other activities described in our filings with the Securities and Exchange Commission, which are incorporated by reference.
We disclaim any obligation to update these forward looking statements. In addition, we may provide certain non GAAP financial information on this call. Relevant definitions and GAAP reconciliations may be found in our earnings release, can be found on our website at www.gevo.com, in the investor relations section. Following the prepared remarks, we will open the call for questions. I would like to remind everyone that this conference call is open to the media, and we are providing a simultaneous webcast to the public. A replay of this call and other past events will be available via the company's investor relations page. At www.gevo.com. I would now like to return the call over to the CEO of Gevo, Paul D.
Bloom. Paul?
Paul D. Bloom: Good afternoon, everyone. I am very pleased to tell you that this was a record quarter for Gevo. We set records for revenue net income, adjusted EBITDA, and cash flow from operations. But I think the significance goes well beyond 1 strong quarter. Gevo has become profitable, Our operations are generating cash. Our carbon business is creating real value. We are expanding production and importantly, we are building a stronger operating platform and balance sheet that gives us choices about how and when we fund our next stage of growth. For the quarter, revenue was $83 million Gross profit was $48 million Adjusted EBITDA was $44 million and cash flow from operations was $41 million.
We also ended the quarter with $68 million of cash on the balance sheet. Leike will take you through the financials in more detail, But first, I want to focus on what is driving the business, why these results matter, and where we plan to go from here. Let me start with carbon. Because I believe this is 1 of the most important developments at Gevo. In 2025, I was chief carbon officer, we set out to build carbon into a distinct product line for Gevo with its own customers, markets, and revenue streams. We are now demonstrating that commercially. We expect more than $50 million of carbon revenue in 2026.
This quarter alone included $20 million of previously banked Canada Clean Fuel Regulations, or CFR credits $10 million of additional revenue from CFR credits recognized during the third quarter. Excluding onetime items, we estimate our carbon business can generate $30 million of annual revenue on a run rate basis, given our current capacity and market conditions. Here's the important point. Carbon is becoming another product for Gevo. We sell fuel. We sell protein. We sell corn oil, and increasingly, we sell carbon credits created by the way we make those products.
Carbon credits have their own customers and markets, giving us a distinct source of value beyond incentives like the 45Z fuel production tax credits. that is the power of lowering carbon intensity. it is good for the environment, It drives efficiency. And at the same time, it increases the profitability of every gallon we make. And the opportunity does not stop with ethanol. We are building a model that can create value across our entire low carbon fuels platform. I believe that opportunity becomes even more powerful as we move into sustainable aviation fuel and other renewable hydrocarbon fuels. There is still work to do. Carbon markets will evolve, prices will move, and regulations can change.
But this quarter is an important proof point that carbon can be a meaningful and profitable product line for Gevo. The second theme I want to highlight is capital efficiency. We are increasingly focused on getting more value from the assets, technology, and intellectual property 've already paid for. Renewable natural gas is a great example. Recent improvements to the 45Z-GREET model provide greater recognition for avoided methane emissions from dairy manure which is 1 of the environmental benefits our RNG assets were built to deliver. Based on current estimates, we expect this improvement to create more than $10 million of additional 45Z value from our existing RNG assets in 2026 subject to third party validation.
And importantly, this is incremental to the $70 million of 45Z credits we sold through the third quarter. I like this kind of growth. It does not require another plant or significant incremental capital. it is simply more value from the assets we already own. We are applying that same philosophy elsewhere. In India, our alliance with Praj gives us an opportunity to monetize isobutanol technology through a capital-light licensing and catalyst sales model. Praj is currently constructing the first demonstration plant for a leading oil marketing company in India, which is an important step in. Toward the broader commercialization of isobutanol for diesel blending and other applications.
We are also generating additional value from assets we previously installed at the Luverne facility in Silsbee, Texas. Those assets are running near capacity producing sustainable racing fuel blend stocks. With demand continuing to grow, we are evaluating opportunities to significantly expand our specialty fuels business using modular hydrocarbon equipment we already own. Built with Praj and acquired in 2024. These businesses may look different, but strategically, they fit together. We are building multiple ways to grow Gevo by creating more value from the technology equipment, and intellectual property we already own. And when new capital is required, we will invest behind demonstrated demand where we see the strongest risk adjusted returns. That brings me to what this means financially.
Based on the progress we have made, we now believe our full year 2026 adjusted EBITDA could exceed $90 million including onetime items. That includes approximately $20 million from the previously banked CFR credits that we recognized in the third quarter and the additional $10 million of RNG 45Z value we currently anticipate. Leike will take you through the details but I think the more important number for investors is what comes next. After removing onetime items and based on the expected production and current market conditions, we currently anticipate reaching an adjusted EBITDA of more than $70 million during 2027. that is up from the $60 million we previously communicated.
That includes the benefits of debottlenecking at Gevo North Dakota and the anticipated improvement in RNG 45Z value. Of course, that outlook is based on current market conditions, those conditions can change as we move through 2027. But the direction is important. The underlying earnings power of Gevo is getting stronger. Giving us a significantly stronger platform from which to fund and build the next stage of growth. And that leads me to growth. As we have outlined previously, our growth strategy has 3 steps. First, debottleneck what we own. Second, approximately double the capacity of Gevo North Dakota. Third, add SAF and other high value hydrocarbon fuels when the commercial market and the returns support the investment.
That sequence matters. The first step is happening now. Our debottlenecking program at Gevo North Dakota is designed to increase annual low carbon ethanol production to 75 million gallons on a sustainable and repeatable basis while allowing us to continue optimizing beyond that level. Some debottlenecking projects are already operating, and the remainder are being commissioned. So investors should not think about growth as something that begins several years from now. The first increment of growth is already happening. And we expect the full year benefit to show up in 2027.
The next step is considerably larger, We plan to approximately double annual low carbon ethanol production to roughly 150 million gallons while increasing carbon capture to 400,000 tons per year with start up expected to begin in 2028. There are several important reasons that we believe we can move quickly. First, we are not starting from scratch, building a new plant. We are expanding the 1 that we already own. Second, we have already acquired approximately 50% of the equipment we expect to use for the expansion, including certain long lead time items. That equipment is already paid for and reflected in their current cash position, and will be repurposed for the expansion.
Reusing quality equipment where it makes economic sense and combining it with new carbon capture technology and newly engineered systems designed to use less energy and water and further reduce carbon intensity. The objective is not just to double production. The objective is to build a larger, more efficient, more profitable low carbon fuel production platform. And third, we are advancing our project level joint venture for the expansion with Ara Energy. By combining Gevo's operating and low carbon fuels expertise with Ara's infrastructure investment experience and strategic capital, we believe we are establishing the right partnership to help accelerate the expansion and reduce execution and financial risk.
We expect to finalize the JV in the fourth quarter subject to closing on its required definitive agreements followed then by FID and financial close as the next key milestones. Finally, there is another important element to the economics. As we approximately double production at Gevo North Dakota, we do not expect to see any substantial increase in corporate cost. This gives us the opportunity to spread and optimize our fixed costs across a much larger earnings base creating meaningful operating leverage and greater cash generation. As we generate more cash, we can strengthen the balance sheet and increase our ability to fund future growth. And that brings me to SAF and Project NorthStar. I want to be very clear.
Our conviction in SAF has not changed. What has changed is the strength of the Gevo North Dakota platform underneath it, and the number of attractive opportunities now available to us. The question is not whether SAF will become an important market for Gevo, The question is when will investing significant Gevo capital into SAF generate the right risk adjusted return for our shareholders relative to other opportunities available to us. Today, we see attractive opportunities to deploy capital into assets we already own increase ethanol production, capture more carbon, grow cash flow, and strengthen the balance sheet, with lower execution risk. So that is where we are putting our near term priority. That is capital discipline.
And importantly, expanding Gevo North Dakota first can make our future SAF opportunities stronger. Think of what we are doing today as setting the table for deploying alcohol-to-jet. It gives us more low carbon ethanol feedstock It creates more carbon value. It generates more earnings and cash, and it strengthens the balance sheet from which we can ultimately finance SAF. We have the technology the proprietary position, and a well engineered plant design for Project NorthStar.
We will continue advancing the commercial readiness of Project NorthStar we can invest when we believe the market and the project economics support attractive risk adjusted returns for our shareholders. that is not a change in our SAF strategy. that is disciplined capital allocation and sequencing. So let me bring this together. I think the way investors should think about Gevo is changing. We are no longer a company whose future depends on financing and building 1 large SAF project. Today, we have a profitable operating business. We have demonstrated that carbon can be a valuable product line. We are increasing our production towards 75 million gallons now.
We are preparing to approximately double Gevo North Dakota to roughly 150 million gallons per year and double our carbon capture by 2028. We are growing cash flow and strengthening the balance sheet. We are finding capital light ways to monetize technology and assets we already own. And we maintain substantial future upside from SAF and other higher value renewable hydrocarbon fuels built on an increasingly strong operating platform. We have the optionality in how we sequence our growth projects We now have choices.
And I think that is 1 of the most important changes for Gevo Our job is to take the next dollar we generate and put it where we believe it can earn the highest risk adjusted return for our shareholders. Right now, that means running our plants well, monetizing carbon, expanding production, growing cash flow, and strengthening the balance sheet. And as we do that, we create more options for what comes next. The vision is to build Gevo into a larger, more profitable, low carbon fuel company with multiple products, multiple pathways to growth, and the financial strength to invest when the economics make sense. We are building that company 1 step at a time.
And I believe that this quarter shows that the strategy is beginning to work. With that, I will turn the call over to Leike.
Oluwagbemileke Agiri: Thanks, Paul. Now turning to our third quarter results. Revenue for the third quarter was a record $83 million which is nearly double the $43 million reported in the same quarter last year. Third quarter revenue included approximately $20 million from the sale of previously banked CFR credits. Excluding those nonrecurring bank credits, revenue still grew 47% year over year driven by the higher low carbon ethanol production volumes and pricing, and continued growth in our carbon business. Gross profit increased to a record $48 million representing a gross margin of 58% compared to $30 million, 30% in the same quarter last year.
This margin expansion reflects the growing value we are realizing across the full economics of our low carbon fuels platform, including fuel, carbon attributes, and 45Z incentives. We recognize 45Z as a reduction to cost of goods sold when generated, which is why we view gross profit as an important measure of the underlying earnings power of our operating assets. Adjusted EBITDA was a record $44 million, compared to $7 million in the third quarter last year. Bringing adjusted EBITDA for the first 9 months of 26 to $64 million. Net income attributable to Gevo was $23 million, or $0.09 per share on a diluted basis. Compared with a loss of $8 million in the same quarter last year.
Cash flow from operation was $41 million for the quarter, and we ended the quarter with $68 million of cash and cash equivalents. I want to distinguish between adjusted EBITDA and operating cash flow because the timing can be different in some quarters. Our 45Z credits are generated based on the volumes, and carbon intensity of our low carbon ethanol and RNG production and do benefit adjusted EBITDA in the period in which they are generated. Cash flow reflects when we receive actual cash proceeds from customers purchase these credits from us. So cash flow can vary significantly from quarter to quarter even when the underlying earnings performance remains strong.
For the 2026 full year, we believe our operating assets are now positioned to generate adjusted EBITDA of over $90 million when we include the benefits of our nonrecurring CFR revenue and at least $10 million of the expected additional 45Z value from our RNG asset. We are also tracking to generate positive operating cash flow for the year. Looking ahead to 2027, we currently expect adjusted EBITDA of over $70 million This outlook also includes the additional expected 45Z value from our RNG assets. It excludes the benefit from the nonrecurring sale of the previously banked CFR credit recognized this year and includes a full year of the increased production from our debottlenecking project.
The important point is that we expect strong underlying earnings power to continue even after removing the benefit of the bank's CFR credits recognized this quarter. We will provide more detail on our 2027 outlook early next year. Turning to capital allocation, our debottlenecking project at Gevo North Dakota is fully funded and remains on track for completion by the end of the year. For the Gevo North Dakota expansion project, we are working with Arrow Energy to finalize the joint venture structure including our respective equity commitments and anticipated project level debt.
Our objective is to fund Gevo's equity commitment from cash on hand and ongoing cash generation while using capital from Ara and project level lending to fund the remainder. This approach is consistent with the capital discipline Paul outlined earlier. For Project NorthStar, our strategy has not changed. We continue to advance the project and intend to make final investment decision when we have the financeable offtake agreements and financing structure necessary to support the investment. In the meantime, we remain focused on executing disciplined near-term growth opportunities that generate attractive returns and strong cash flow, providing additional capacity to advance Project NorthStar.
This quarter demonstrates the increase in earning and cash generating power of our operating assets, We are building a stronger financial foundation while maintaining the ability to fund growth in a disciplined way. That puts us in a stronger position to execute the opportunities Paul outlined, and create long term shareholder value. With that, I will turn the call back to Paul.
Paul D. Bloom: Thanks, Leike. It was an outstanding third quarter with record results. We covered a lot of progress today. With that, I will turn it over to the operator and open the call for questions.
Operator: As a reminder, if you would like to ask a question, press star. Then the number 1 on your telephone keypad. To withdraw your question, simply press star 1 again. Your first question comes from the line of Amit Dayal with H. C. Wainwright. Your line is open.
Amit Dayal: Thank you. Good afternoon, everyone, and congratulations on really strong results. You have multiple revenue streams. So which ones can investors sort of to be more consistent and steady, you know, in respect to the revenue generation and cash flows and which ones could we see some variability with?
Paul D. Bloom: Thanks, Amit. I mean, I think you were breaking up a little bit, but I think I got the question. Look. On the durability, right, 1 of the big ones that we like today is obviously the carbon business. Right? So that is where we have been focusing a lot of our time. And that is a combination of the compliance markets, that is where we are selling our carbon with the fuel and then the voluntary markets, which are which are growing. Right? that is a that is a new more nascent market. But overall, carbon is turning into a durable business for us. We.
We have also got 45Z revenue, which, of course, know, we think it is great because now we are finally getting credit. For the extra methane avoidance that we put in place already, with the RNG project. So that is 1 that, you know, we still have to get that validated by third parties, but that is very strong. And, you know, the demand for low carbon fuels the fuel itself is only going up. We see more states having low carbon fuel programs. RFS had, you know, record RVOs this year. So the underlying business of fuels, carbon, and incentives and putting all those together gives us a really durable revenue stream we believe is gonna continue.
And, you know, then we can add everything else on top of that. Just like what we are seeing in, you know, some of these new businesses like racing fuels. But those are more the new ones that we will. we will give those more time, to develop before we say how durable those become.
Amit Dayal: Understood. Thank you, Paul. And then just last 1 for me maybe. You know, to double ethanol and carbon capture capacity, how much CapEx are we looking at Yeah.
Paul D. Bloom: Look. We have not disclosed what we are doing as far as the total capital. We are gonna deploy today. But I think there is a couple important things. 1, we have already got about 50% of the equipment that we are going to put out into that plant. I think that is a big step forward, and so we are excited to have that already paid for. And so that is really high quality equipment that we are repurposing from an existing facility.
While we are putting together the engineering and getting some of the longer lead time items 'll help us reduce the water and improve the efficiency, for the carbon intensity that we will have in the expansion. So that we think is a big accelerator which, you know, there is 2 factors. there is the capital, but there is also the speed. That we get this thing done. So we think that helps us a lot. I think then, you know, the other big pieces that we are working on today is obviously getting the JV done like I was talking about too.
Because we plan to finance this with a combination of balance sheet, cash, and, you know, project level debt. Combined with what we see coming from Ara's strategic capital. Think that puts us in a really good position And like I said, we are gonna have more details as we reach FID. that is when we will give you a little bit more background on what we see from the capital. But you know, we are in a really good position to keep this moving forward. Like, any other comments on that?
Oluwagbemileke Agiri: Well, Paul, no. I think you captured it. I think from a financing perspective, so just to underscore, our priority is to make sure that we fund the equity commitments to be able to move the project forward, the expansion project forward, from cash on hand and cash that we generate from our operating assets. So feel very confident that this is the right equation for us to deliver the project by 2028 as we are targeting.
Paul D. Bloom: But this is by far the best risk adjusted return that we have got on the plate. So we are gonna be going after this and, you know, getting this at the right carbon intensity the right returns and expanding this business gives us the platform that we need grow Gevo. So thanks for the question.
Amit Dayal: Thank you, Paul. Thank you, Leike. that is all I have.
Operator: Your next question comes from the line of Jeffrey Grampp with Northland Capital Markets. Your line is open.
Jeffrey Grampp: Hi. Afternoon, guys. Paul, given your comments that you have already got a fair amount of the equipment for the ethanol expansion. I was curious if that perhaps provides some timing acceleration optionality relative to some of the timelines you had put out previously? Or was that timeline already, I guess, giving credit for the benefits of having a lot of this equipment already on hand?
Paul D. Bloom: Yeah. I think it gives. it definitely gives us the confidence in that timeline. Jeffrey. So I mean, having about 50% of the equipment, which does include some long lead time items, is definitely kind of the feather in our cap right now. But still, we are on track for 2028. that is really the time. And that is an accelerated timeline to get you know, an expansion done and get it all combined and up and running. And still achieve the low CI that we have today. Because, really, like I said before, expanding the plant, but we have to not just make the gallon. We have to get this low CI.
Because that is how we derive the value from the carbon business. And that is what we are already demonstrating with the kind of great returns that we are seeing this quarter. So it just continues to build that platform for us. But we really need to focus on delivering the right CI along with those gallons to get the value proposition that we are that we are creating.
Jeffrey Grampp: Understood. That. that is helpful. For my follow-up, the, production in the quarter was super impressive. I think you are if we annualize Q3 numbers, we are kinda already at the debottlenecking increase you guys have talked about around the mid-70 million gallons at a at a run rate Are you seeing some early benefits from the debottlenecking you have done thus far? Is this just kind of organic outperformance? Just kind of hoping to get a little more context on the Q3 unders.
Paul D. Bloom: Yeah. No. Good catch on that because we really like the 19 million gallons of production. Right? I mean, that already puts us on the run rate that we want to have going forward. But what we really need to do now is we need to prove that we can deliver that reliably and repeatably and then optimize from there. So I think there is a lot of upside that we can do from that. But we gotta prove that performance before we really take credit for it. But there is no doubt that the team, the operations team has just done a fantastic job.
And pushing that production to near 75 million gallons, on an annualized rate this quarter already. So obviously, that gives us a lot of confidence in not only seeing that the 75 million gallons is repeatable, but do we optimize from there?
Jeffrey Grampp: Understood. I will turn it back. Thank you, guys.
Operator: Your next question comes from the line of Derrick Whitfield with Texas Capital. Your line is open.
Derrick Whitfield: Hey, good afternoon, and congratulations on a very solid quarter. And thanks for thanks for taking my questions.
Paul D. Bloom: Yeah. Thanks, Derrick.
Derrick Whitfield: With respect to your 2027 outlook, could you just kind of, at a high level, give us the gives and takes from your updated 2026 plan?
Paul D. Bloom: Yeah. Leike, why do not you go over that 1?
Oluwagbemileke Agiri: Yeah. Absolutely. So we guided to $60 million last quarter in terms of what we are expecting in 2027. what is effectively changed is, as Paul went over, we expect incremental 45z generation from our RNG asset This year, that is gonna translate to next year as well, and that is an incremental $10 million. This takes us to the $70 million of the projection that we have for 2027. What was really important to sort of take away is the guidance is prudent, and it is something that we feel very strongly about in terms of the ability for our business to actually generate cash to strengthen our balance sheet, but more importantly, to fund our growth projects.
So we are really excited with that prospect.
Paul D. Bloom: And maybe just to add a little bit there, Leike. You know, this is a good example of really getting value from every aspect of our business. it is about how we are paying attention to the carbon, who we are paying attention to incentives, paying attention to the underlying fuel. And making sure that we are driving that value. So, I mean, just the. it is culminated in a in a really tremendous outlook for the rest of the year.
Derrick Whitfield: And not to set you guys into a much higher number for 2027, but when we were thinking about it, there is even greater upside than what you articulated because you have got greater run rate across ethanol you have got some cost control things that you guys are working through. So it seems like there is still the ability to move higher as you think about 2027.
Paul D. Bloom: Yeah. Look. I think that is a. it is a good point. And we will be watching that closely. But if we can keep up the run rates that we are seeing in production today, we continue to see strong performance in the RNG business. Obviously, we need to you know, get the final third party validation on the RNG score. And, you know, you put all that together, yeah, we could see some potential upside over that 90. So we are saying, you know, 90. Over 90 is definitely a possibility for us. Right.
Oluwagbemileke Agiri: And just to clarify, the 90 is for 2026. So just to clarify, and I think the 2027 number that is what you were speaking to earlier, Paul is absolutely correct. I think there is runway for upside. Based on operational performance, so there is headroom there. But again, from a prudent perspective, recognize it we are from a market dynamic perspective, $70 million is what we can point to. An early next year, we will provide additional guidance when we know more as well.
Derrick Whitfield: Terrific. And then, Paul, with respect to carbon, could you speak to your ability to scale the value of carbon as you double your ethanol capacity in 2028? And can it scale on a 1-for-1 basis as you see it today?
Paul D. Bloom: Yeah. that is absolutely the goal here for us is that you know, as we continue to scale carbon, it is we will be scaling carbon not only on the, expansion, but with the debottlenecking as well. Right? So all that is starting. And we have got upside, and this is 1 of the great things that we have optionality because we are selling into compliance markets. We are selling into voluntary markets. And you have seen from our last business update that now we even have more offtakes that are in even multiyear off takes that are starting in the voluntary market.
So we will continue to scale our carbon sales at the same time that we are scaling the underlying fuels and look at how do we optimize that business to get the best returns for our shareholders by know, doing what we call carbon arbitrage. Right? Making sure that we are getting the. Where's the where's the market taking us and then those markets will change. But placing that carbon value as quick as we can in those highest value markets, as we scale fuel. So absolutely, we plan to do that simultaneously as we expand volumes. And get that revenue as soon as we are able to produce more gallons.
Derrick Whitfield: Maybe 1 last, if I could, just staying on carbon. Well, I realize you are nearly capped down on 45Z credits for ethanol. How could regenerative ag further improve your ability to lower CI and other regulatory markets?
Paul D. Bloom: Ah, great question. Right? So this is 1 that we are very passionate about because this is where our Verity platform really helps us. We have been working with farmers. We believe farmers should get rewarded for, you know, contributing to this. So we still have a few million dollars, maybe $6-7 million that we think we can capture. And regenerative agriculture can come in and play a part of that. Now probably will not capture all of that because we will be sharing some of that upside with the farmers who are generating the credits and, putting that value to work.
But, look, that is a great point because as we continue to scale, not only you know, today, but as we double our production, then we are gonna continue to use regenerative agriculture and those benefits that we are now starting to see in 45 z to get every last bit, again, back to optimize all the value and making sure every component of our business is getting that value that regen ag is a key part. So thanks for the question.
Derrick Whitfield: Thanks, guys. Great update.
Operator: Your next question comes from the line of Peter Gastreich with Water Tower Research. Your line is open.
Peter Gastreich: Thank you. Yes, congratulations on the result, Paul. it is great to see the earnings power of your platform and also to hear about your disciplined capital strategy. And also, thanks for, taking my questions. Okay. Thank you. So just first of all, could you talk a bit more about the CO2 hub kind of, you know, how the you know, third party, you know, attraction is kind of evolving there? And what sort of, in terms of building that, what kind of, milestone should investors kind of be, you know, focused on there with respect to that strategy?
Paul D. Bloom: Yeah. Right now, Peter. And it is a great question. Because we do have more capacity. Today, we are only using about 17-18% of the capacity that we have at Gevo North Dakota to store carbon dioxide. But our first goal is not necessarily store somebody else's CO2. Our first goal is to get the expansion done and then increase with debottlenecking, we are gonna be up. And even right now, we are run rate around 200,000 tons. We are gonna be close to 400,000 tons of carbon capture for ourselves. brings us to about 40% utilization. So that is our primary focus.
And where we are deploying capital today because not only do we have to, you know, make more fuel, but we have to capture more carbon. there is there is extra capital that goes into that. So right now, I would say the. You know, our the priority is not storing carbon for others, so we will continue to monitor that. As that opportunity develops. that is gonna be incremental revenue down the road but, you know, not anytime in the near future.
Peter Gastreich: Okay. Thank you. For my next question, turning to India. Could you talk about the Praj partnership and how you would size that market opportunity? And how should we think about the timing and the structure there of that licensing revenue?
Paul D. Bloom: Sure. We are, again, we are excited about this 1 because this is how do we monetize technology that we have already own and develop. there is really 2 sources of revenue that we see coming out of this. 1, licensing fees that is gonna be based on installed capacity. And the second part is a recurring revenue stream that we will get from selling bio. Biocatalysts. Right? So the yeast, basically. So the good news is Praj is already moving forward. And they are building a demo plant for a major oil company.
All goes well with that and the continued testing and the approvals that we are we are seeing, those revenues probably start in 2028. there is still a lot that needs to happen. Just thinking about the market, you asked about the size of the market. So think about a 10% blend, which is kinda where everybody's targeting. But that puts the total addressable market in India about 3 billion gallons of isobutanol. We are talking a lot of plants and a lot of catalyst sales. So, again, we like this because it helps us monetize our technology that we already have. And, you know, Gevo does not really need to make a huge additional investment here.
And once this gets going in India, we can continue to deploy the technology globally. So we think it is a really good fit and a great next step for the isobutanol technology and isobutanol platform.
Peter Gastreich: Okay. Great. Thank you. I will just ask 1 more question about RNG. That was a. That a big surprise. it is been sitting there quietly for a while, but suddenly we have got this big these numbers coming through. Does this sort of change how you think about or whether you think about growing that business from a you know, production or capacity standpoint in the future, whether it is you know, debottlenecking or other sort of growth opportunities?
Paul D. Bloom: Peter, I think it really just reinforces that we are getting the cash and the returns out of every asset that we have today. And so as we think about what we do next, we are gonna continue to optimize that asset just like we are optimizing others. And continue to derive, you know, as much of the incentives and the carbon value and the base, fuel value as we possibly can. Would not say this changes our mind on how we grow that business, Really, the focus on that was to be able to take that gas I mean, the strategic reason was to take that gas and to put it into and power a SAF plant.
So that is where that is where we started. And, but it was not really to build a renewable natural gas business and continue to grow that. Good question.
Peter Gastreich: Great. Okay. Thanks, Paul. Congrats again.
Paul D. Bloom: Thank you.
Operator: That concludes our question-and-answer session. We will now turn the call back to chief executive officer Paul D. Bloom for closing remarks.
Paul D. Bloom: Well, thanks everyone for the questions. I will just close with this. I believe Gevo is in a fundamentally stronger position today than it has been in the past. We are profitable. We are generating cash. Carbon is becoming a meaningful product line, and we have a clear path to grow production and earnings from the assets we already own. Importantly, that gives us choices. We can invest capital where we see the strongest risk adjusted returns while maintaining the upside from SAF and other high value fuels as those markets develop.
We still have a lot of work ahead of us, but I believe this quarter demonstrates that the strategy is working and that we are building a larger, more profitable, and financially stronger low carbon fuels company. I wanna thank our employees, our partners, customers, communities, and the shareholders for their continued support. And we look forward to updating you on our progress next quarter. Thank you.
Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.