Alto Ingredients, Inc. (ALTO) Bundle
Understanding Alto Ingredients, Inc. (ALTO) Revenue Streams
Understanding Alto Ingredients, Inc.’s Revenue Streams
Alto Ingredients, Inc. generates revenue primarily from the sale of alcohol and essential ingredients across various production segments. The following sections provide a detailed breakdown of the company's revenue sources, year-over-year growth, and significant changes in revenue streams.
Breakdown of Primary Revenue Sources
The company's revenue is derived from three main segments:
- Pekin Campus Production Segment
- Marketing and Distribution Segment
- Western Production Segment
As of September 30, 2024, the net sales from each segment are as follows:
| Segment | Net Sales (Q3 2024) | Net Sales (Q3 2023) | Change (%) |
|---|---|---|---|
| Pekin Campus | $147.997 million | $180.551 million | -17% |
| Marketing and Distribution | $57.464 million | $62.271 million | -7% |
| Western Production | $46.811 million | $75.037 million | -37% |
| Corporate and Other | $2.733 million | $4.060 million | -32.6% |
| Total Net Sales | $251.814 million | $318.127 million | -20.8% |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, the total net sales amounted to $728.911 million, compared to $949.315 million for the same period in 2023, reflecting a decrease of 23.2%.
The year-over-year growth rates for each segment are as follows:
| Segment | Net Sales (9M 2024) | Net Sales (9M 2023) | Change (%) |
|---|---|---|---|
| Pekin Campus | $443.718 million | $558.969 million | -20.6% |
| Marketing and Distribution | $187.289 million | $224.767 million | -16.7% |
| Western Production | $98.146 million | $163.190 million | -39.8% |
| Corporate and Other | $8.565 million | $12.342 million | -30.4% |
Contribution of Different Business Segments to Overall Revenue
In the third quarter of 2024, the contributions of each segment to total revenue were:
| Segment | Contribution (%) |
|---|---|
| Pekin Campus | 58.7% |
| Marketing and Distribution | 22.8% |
| Western Production | 18.5% |
Analysis of Significant Changes in Revenue Streams
The decline in revenue across all segments can be attributed to several factors:
- Lower average sales prices due to a decline in commodity prices affecting the essential ingredients segment.
- Production downtime at key facilities impacting the volume of sales.
- Increased competition and market saturation leading to reduced pricing power.
For instance, net sales of essential ingredients from the Western Production segment decreased by $16.4 million, or 40%, to $24.2 million for nine months ended September 30, 2024, compared to the prior year.
Similarly, the Pekin Campus production segment's alcohol sales saw a decline of $73.1 million, or 19%, for the same period, from $388.6 million to $315.5 million.
A Deep Dive into Alto Ingredients, Inc. (ALTO) Profitability
Profitability Metrics
Gross Profit, Operating Profit, and Net Profit Margins: For the three months ended September 30, 2024, the consolidated gross profit was $5.96 million, compared to $4.16 million for the same period in 2023, indicating a gross margin of 2.4% versus 1.3% in the prior year. For the nine months ended September 30, 2024, gross profit was $11.11 million, down from $18.18 million in 2023, resulting in a gross margin of 1.5% compared to 1.9% in 2023.
| Period | Gross Profit ($ million) | Gross Margin (%) | Operating Profit ($ million) | Net Profit ($ million) |
|---|---|---|---|---|
| Q3 2024 | 5.96 | 2.4 | -0.72 | -2.44 |
| Q3 2023 | 4.16 | 1.3 | -4.33 | -3.49 |
| 9M 2024 | 11.11 | 1.5 | -12.46 | -17.27 |
| 9M 2023 | 18.18 | 1.9 | -6.68 | -9.06 |
Trends in Profitability Over Time: The gross profit for the three months ended September 30, 2024 increased by 43.2% year-over-year, although the nine-month total shows a decrease of 38.9%. The operating loss increased from $4.33 million in Q3 2023 to $0.72 million in Q3 2024, indicating improved operational efficiency despite ongoing challenges.
Comparison of Profitability Ratios with Industry Averages: The gross margin of 2.4% for Q3 2024 is below the industry average of approximately 5-10% for similar companies in the alcohol and ingredients sector. The nine-month gross margin of 1.5% also lags behind typical industry standards.
Analysis of Operational Efficiency: The increase in gross profit in Q3 2024 was attributed to lower corn costs, which declined by $0.63 per bushel. However, the overall gross margin trend remains affected by production downtimes and higher costs associated with plant upgrades. The Pekin Campus contributed $6.2 million to gross profit, significantly improving due to enhanced productivity and a favorable sales mix.
| Segment | Gross Profit (Q3 2024) | Gross Profit (Q3 2023) | Change ($ million) | Change (%) |
|---|---|---|---|---|
| Pekin Campus | 6.2 | 0.6 | 5.6 | 933.3 |
| Western Production | -2.1 | 1.7 | -3.8 | -223.5 |
| Marketing & Distribution | 1.3 | 0.9 | 0.4 | 44.4 |
In summary, while the gross profit has shown improvement in the most recent quarter, the nine-month period reflects a decline, largely due to external market pressures and operational challenges. The company continues to face significant hurdles in achieving profitability consistent with industry norms.
Debt vs. Equity: How Alto Ingredients, Inc. (ALTO) Finances Its Growth
Debt vs. Equity: How Alto Ingredients, Inc. Finances Its Growth
The company's total liabilities as of September 30, 2024, amounted to $153.3 million, while total stockholders' equity stood at $263.9 million.
Overview of Debt Levels
As of September 30, 2024, the company reported long-term debt of $83.3 million and no short-term debt. The breakdown of long-term borrowings includes:
| Debt Type | Amount (in thousands) |
|---|---|
| Kinergy line of credit | $30,572 |
| Orion term loan | $60,000 |
| Total Long-term Debt | $90,572 |
| Less: Unamortized debt discount | ($3,291) |
| Less: Unamortized debt financing costs | ($3,939) |
| Long-term debt (net) | $83,342 |
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio as of September 30, 2024, is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity = $153.3 million / $263.9 million = 0.58
This ratio is below the industry average of approximately 1.0, indicating a more conservative leverage position compared to peers.
Recent Debt Issuances and Refinancing Activity
As of September 30, 2024, the company had $27.2 million available for borrowing under its operating line of credit. The interest rates for the Kinergy line of credit and the Orion term loan were 6.43% and 10.00%, respectively.
How the Company Balances Between Debt Financing and Equity Funding
The company has adopted a strategy of balancing debt and equity financing to fund its operations and growth initiatives. As of September 30, 2024, cash, cash equivalents, and restricted cash totaled $38.5 million, while working capital was reported at $100.0 million.
This liquidity position, combined with the available line of credit, enables the company to manage its short-term obligations and invest in capital projects without overly relying on debt financing.
Assessing Alto Ingredients, Inc. (ALTO) Liquidity
Assessing Alto Ingredients, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 3.22, indicating a solid liquidity position, as it is significantly above the benchmark of 1.0, which suggests that the company can easily cover its short-term liabilities.
Quick Ratio: The quick ratio, which excludes inventory from current assets, is estimated to be approximately 2.15. This further emphasizes the company's ability to meet its short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
The working capital as of September 30, 2024, is $100.05 million, down from $103.48 million at the end of 2023, marking a decline of 3.3%. This decline is primarily due to a decrease in current assets, which fell by 14.0% to $145.15 million, while current liabilities decreased by 30.9% to $45.10 million.
| Metric | September 30, 2024 | December 31, 2023 | Change |
|---|---|---|---|
| Current Assets | $145.15 million | $168.77 million | -14.0% |
| Current Liabilities | $45.10 million | $65.29 million | -30.9% |
| Working Capital | $100.05 million | $103.48 million | -3.3% |
| Working Capital Ratio | 3.22 | 2.59 | 24.3% |
Cash Flow Statements Overview
During the nine months ended September 30, 2024, the cash flow from operating activities amounted to $6.27 million, a decrease from $10.23 million in the same period of the previous year. This decline is attributed to an increase in net loss and changes in working capital accounts.
Cash used in investing activities totaled $12.19 million, primarily for property and equipment additions of $9.79 million. Cash used in financing activities was $1.00 million, which included $0.95 million in preferred stock dividends.
| Cash Flow Activity | 2024 | 2023 |
|---|---|---|
| Cash from Operating Activities | $6.27 million | $10.23 million |
| Cash Used in Investing Activities | $12.19 million | $28.11 million |
| Cash Used in Financing Activities | $1.00 million | $0.95 million |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the total cash, cash equivalents, and restricted cash amounted to $38.49 million. The company also has $27.2 million available for borrowing under its operating line of credit, which matures on November 7, 2027. This indicates a robust liquidity position to support ongoing operations and capital projects.
Despite these strengths, approximately $56.3 million of net assets at subsidiaries are restricted and not available for transfer, which could pose potential liquidity constraints should the need arise for significant capital outflows.
| Liquidity Metric | Amount |
|---|---|
| Cash, Cash Equivalents, and Restricted Cash | $38.49 million |
| Available Borrowing under Line of Credit | $27.2 million |
| Restricted Net Assets | $56.3 million |
Is Alto Ingredients, Inc. (ALTO) Overvalued or Undervalued?
Valuation Analysis
To assess the financial health and market position of Alto Ingredients, Inc. (ALTO), we will delve into key valuation metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings Ratio (P/E)
As of September 30, 2024, the P/E ratio stands at -4.09, reflecting the company's net loss available to common stockholders of $18.2 million for the nine months ended September 30, 2024. This negative P/E ratio indicates that the company is not currently profitable.
Price-to-Book Ratio (P/B)
The price-to-book ratio is calculated by dividing the market price per share by the book value per share. The book value per share, as of September 30, 2024, is approximately $3.77. Given a current market price of $2.50, the P/B ratio is approximately 0.66, suggesting that the stock is trading at a discount relative to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA)
The enterprise value of Alto Ingredients is calculated as market capitalization plus total debt minus cash and cash equivalents. As of September 30, 2024, the enterprise value is approximately $162 million, with an EBITDA of $12.2 million for the last quarter. This results in an EV/EBITDA ratio of approximately 13.31.
Stock Price Trends
Over the past 12 months, ALTO's stock price has fluctuated significantly. Starting the year at $3.90, it has seen a decline to around $2.50 by September 30, 2024, representing a decline of approximately 36%.
Dividend Yield and Payout Ratios
Alto Ingredients does not currently pay a dividend, resulting in a dividend yield of 0%. The payout ratio is also 0%, as there are no dividends distributed.
Analyst Consensus
As per the latest analyst ratings, the consensus on ALTO's stock is a Hold, reflecting a cautious outlook amid ongoing operational challenges and market fluctuations.
Summary Table of Valuation Metrics
| Metric | Value |
|---|---|
| Price-to-Earnings (P/E) | -4.09 |
| Price-to-Book (P/B) | 0.66 |
| Enterprise Value | $162 million |
| EBITDA | $12.2 million |
| EV/EBITDA | 13.31 |
| Current Stock Price | $2.50 |
| 12-Month Stock Price Change | -36% |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Alto Ingredients, Inc. (ALTO)
Key Risks Facing Alto Ingredients, Inc.
The financial health of Alto Ingredients, Inc. is influenced by several internal and external risk factors. These pertain to industry competition, regulatory changes, and market conditions.
Industry Competition
In the alcohol and essential ingredients market, competition is fierce. For the nine months ended September 30, 2024, net sales of alcohol from the marketing and distribution segment declined by $36.7 million, or 17%, totaling $179.3 million as compared to $216.0 million for the same period in 2023. This decline highlights the impact of competitive pricing and market share pressures.
Regulatory Changes
The company is subject to various environmental regulations, which can affect production costs and operational capabilities. Compliance with these regulations requires ongoing investments, leading to increased operational expenses. For instance, repairs and maintenance expenses were projected to reach $34 million for 2024. Moreover, changes in subsidies or tariffs related to agricultural products could impact profitability.
Market Conditions
Market conditions, particularly the prices of key commodities, significantly affect financial performance. For the nine months ended September 30, 2024, net sales of essential ingredients from the Pekin Campus production segment declined by $41.9 million, or 25%, totaling $127.3 million compared to $169.2 million for the same period in 2023. This was attributed to a decrease of $63.13, or 25%, in the average sales price per ton.
Operational Risks
Operational risks are also a concern, particularly due to production downtimes. The Western production segment reported a gross loss of $2.3 million for the three months ended September 30, 2024, attributed to production downtime and higher costs associated with upgrading equipment.
Financial Risks
Financial risks include liquidity and capital resource constraints. As of September 30, 2024, the company had $38.5 million in cash, cash equivalents, and restricted cash. However, the need for significant capital to advance projects, including carbon capture and sequestration initiatives, poses a challenge. The company has indicated it must raise additional capital to complete these projects.
Strategic Risks
Strategic risks relate to the company's decisions regarding acquisitions and operational expansions. The acquisition of Eagle Alcohol has financial implications, with contingent payments amounting to $2.8 million. The integration of such acquisitions can pose risks if anticipated synergies and financial benefits do not materialize.
Mitigation Strategies
To address these risks, the company has implemented several strategies:
- Enhancing operational efficiencies to reduce costs and improve margins.
- Diversifying product offerings to mitigate the impact of market fluctuations.
- Investing in technology to improve production processes and reduce downtime.
| Risk Factor | Impact | Mitigation Strategy |
|---|---|---|
| Industry Competition | Decline in sales by $36.7 million (17%) | Enhancing product differentiation |
| Regulatory Changes | Increased operational expenses | Investing in compliance technologies |
| Market Conditions | Net sales decline of $41.9 million (25%) | Diversifying supply sources |
| Operational Risks | Gross loss of $2.3 million | Upgrading equipment and training |
| Financial Risks | Cash reserves of $38.5 million | Seeking additional capital investments |
| Strategic Risks | Contingent payments of $2.8 million | Thorough due diligence on acquisitions |
Future Growth Prospects for Alto Ingredients, Inc. (ALTO)
Growth Opportunities
The financial health of the company reveals several key growth opportunities driven by various factors. Below is an in-depth analysis of these growth drivers, revenue projections, strategic initiatives, and competitive advantages.
Key Growth Drivers
- Product Innovations: The company has reported an increase in specialty alcohol production, with expectations to sell 90 million gallons in 2024, matching this volume in 2025. This marks a significant shift towards higher-margin products.
- Market Expansions: The company is focusing on expanding its corn storage capacity to meet rising demands and mitigate transportation costs. Enhancements to production capabilities at the Pekin Campus are also a priority.
- Acquisitions: The acquisition of Eagle Alcohol has been pivotal, contributing to the company’s growth trajectory. The company spent $2.8 million in contingent purchase price payments related to this acquisition in 2024.
Future Revenue Growth Projections
For the nine months ended September 30, 2024, net sales decreased to $728.9 million from $949.3 million in the same period of 2023. Despite this, the company is projected to recover with a focus on specialty alcohol sales and improvements in operational efficiency.
The gross profit for the three months ended September 30, 2024, improved to $6.0 million compared to $4.2 million for the same period in 2023, indicating a positive trend driven by lower corn costs.
Earnings Estimates
The adjusted EBITDA for the third quarter of 2024 was $12.2 million, which reflects a strategic improvement in production capabilities. This is a decrease from $13.6 million in the same quarter of 2023, but the company expects to optimize its operations moving forward.
Strategic Initiatives and Partnerships
In November 2024, the company entered into a CO2 Transportation and Sequestration Agreement with Vault 44.01, which will facilitate the transportation and sequestration of CO2 from its Pekin Campus. This partnership is a significant step towards sustainability and may enhance the company’s market position.
Competitive Advantages
- Operational Efficiency: The Pekin Campus achieved its highest production levels since 2020, which is expected to enhance profitability.
- Cost Management: The company reported a decline in overall corn costs, which supports better margins.
- Market Position: The company’s focus on specialty alcohols and essential ingredients positions it favorably against competitors, especially in a market with fluctuating commodity prices.
| Metric | 2024 (9 months) | 2023 (9 months) | Variance |
|---|---|---|---|
| Net Sales | $728.9 million | $949.3 million | ($220.4 million) |
| Gross Profit | $11.1 million | $18.2 million | ($7.1 million) |
| Adjusted EBITDA | $12.2 million | $13.6 million | ($1.4 million) |
| Specialty Alcohol Sales (Projected) | 90 million gallons | N/A | N/A |
The combination of product innovation, strategic partnerships, and operational improvements positions the company to navigate current market challenges and capitalize on growth opportunities moving forward.
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Resources:
- Alto Ingredients, Inc. (ALTO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Alto Ingredients, Inc. (ALTO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Alto Ingredients, Inc. (ALTO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.