0000890447 false 0000890447 2022-08-09 2022-08-09 iso4217:USD xbrli:shares iso4217:USD xbrli:shares
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM  8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of Earliest Event Reported): August 9, 2022

 

VERTEX ENERGY, INC.

(Exact name of registrant as specified in its charter)

 

Nevada 001-11476 94-3439569
(State or other jurisdiction of
incorporation)
(Commission File Number) (IRS Employer
Identification No.)

 

 

1331 Gemini Street

Suite 250

Houston, Texas

77058
(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (866) 660-8156

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common Stock,

$0.001 Par Value Per Share

VTNR

The NASDAQ
Stock Market LLC

(Nasdaq Capital Market)

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

 

 

 

  

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On August 9, 2022, Vertex Energy, Inc. (“Vertex” or the “Company”) issued a press release and will hold a conference call regarding its financial results for the three and six months ended June 30, 2022. A copy of the press release, which includes information on the conference call and a summary of such financial results is furnished as Exhibit 99.1 to this Form 8-K and incorporated herein by reference. Additionally, a copy of a presentation which will be discussed on the earnings call is furnished as Exhibit 99.2 to this Form 8-K and is incorporated herein by reference, and has also been posted to the Company’s website at https://www.vertexenergy.com/presentation, although the Company reserves the right to discontinue that availability at any time.

 

The information contained in this Current Report and Exhibits 99.1 and 99.2 hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

The Company is making reference to non-GAAP financial information in the press release, presentation and the conference call. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release and presentation.

 

Item 9.01 Financial Statements and Exhibits.

 

Exhibit No.   Description  
       
99.1*   Press Release of Vertex Energy, Inc., dated August 9, 2022
99.2*   2022 Second Quarter 2022 Earnings Call Presentation
104   Inline XBRL for the cover page of this Current Report on Form 8-K

 

* Furnished herewith.

  

The inclusion of any website address in this Form 8-K, and any exhibit thereto, is intended to be an inactive textual reference only and not an active hyperlink. The information contained in, or that can be accessed through, such website is not part of or incorporated into this Form 8-K.

 

Forward-Looking Statements

 

This Current Report on Form 8-K, including the press release and presentation furnished as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K, contains forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and assumptions. You can identify these forward-looking statements by words such as “may,” “should,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. These forward-looking statements relate to the Company’s current expectations and are subject to the limitations and qualifications set forth in the press release and presentation as well as in the Company’s other filings with the Securities and Exchange Commission, including, without limitation, that actual events and/or results may differ materially from those projected in such forward-looking statements. These statements also involve known and unknown risks, which may cause the results of the Company, its divisions and concepts to be materially different than those expressed or implied in such statements, including those referenced in the press release. Accordingly, readers should not place undue reliance on any forward-looking statements. Forward-looking statements may include comments as to the Company’s beliefs and expectations as to future financial performance, events and trends affecting its business and are necessarily subject to uncertainties, many of which are outside the Company’s control. More information on potential factors that could affect the Company’s financial results is included from time to time in the “Cautionary Statement Regarding Forward-Looking Statements,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s periodic and current filings with the SEC, including the Form 10-Qs and Form 10-Ks, filed with the SEC and available at www.sec.gov and in the “Investor Relations” – “SEC Filings” section of the Company’s website at www.vertexenergy.com, and including its Annual Report on Form 10-K for the year ended December 31, 2021, and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2022. Forward-looking statements speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise that occur after that date, except as otherwise provided by law.

 

  

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  VERTEX ENERGY, INC.
   
Date: August 9, 2022 By: /s/ Chris Carlson
    Chris Carlson
    Chief Financial Officer

 

 

  


 

 

Vertex Energy, Inc. 8-K

 

Exhibit 99.1

 

 

 

VERTEX ENERGY REPORTS SECOND QUARTER 2022 RESULTS

 

HOUSTON, August 9, 2022 -- Vertex Energy, Inc. (NASDAQ: VTNR, “Vertex” or the “Company”), a leading specialty refiner and marketer of high-quality refined products, today announced its financial results for the second quarter 2022 ended June 30, 2022.

 

SECOND QUARTER 2022 RESULTS

 

Completed acquisition of Mobile refinery on April 1, 2022

Reported net loss of $63.8 million

Record Adjusted EBITDA of $71.3 million

Reported net loss includes $127.8 million of adjustments to adjusted EBITDA

Renewable diesel conversion scheduled for start-up in the first quarter 2023

Total cash of $98.0 million as of June 30, 2022

 

For the three months ended June 30, 2022, the Company reported a net loss of $63.8 million, versus a net loss of $16.0 million in the second quarter 2021. The second quarter net loss includes a $46.9 unrealized commodity derivative loss, a $23.2 loss on an intermediation agreement due to backwardation, and a $46.1 million realized commodity derivatives loss, together with $11.6 million.

 

The Company reported record Adjusted EBITDA of $71.3 million in the second quarter 2022, versus $4.0 million in the prior-year period. Second quarter 2022 results benefited from a combination of strong operational reliability, elevated refined product margins and robust demand for conventional fuels, including the first full quarter of financial contributions from the Mobile refinery acquisition, which closed on April 1, 2022.

 

Schedules reconciling the Company’s GAAP and non-GAAP financial results, including EBITDA and Adjusted EBITDA is included later in this release (see also “Non-GAAP Financial Measures”, below).

 

SEGMENT PERFORMANCE (inclusive of discontinued operations)

 

Refining and Marketing Segment

 

The Refining and Marketing segment includes the Company’s flagship Mobile, Alabama (“Mobile”) refinery and primarily consists of the sale of gasoline, diesel and jet fuel, together with related logistics assets.

 

During the second quarter 2022, the Refining and Marketing segment reported $20.7 million of pre-tax operating loss.

 

Total throughput at the Mobile refinery was 72,133 barrels per day in the second quarter, resulting in 96% utilization on operable capacity of approximately 75,000 barrels per day. The Mobile refinery generated refining gross margin of $14.11 per barrel of throughput in the second quarter 2022. Excluding the inventory adjustment and realized hedging loss, the Mobile refinery generated adjusted refining gross margin per barrel of $23.16 in the second quarter 2022.

 

The benchmark 2/1/1 Gulf Coast crack spread was $45.06 in the second quarter 2022, an increase of 205% versus the second quarter 2021, supported by strong demand for conventional refined products. On a gross profit per barrel basis, excluding non-recurring items, the Mobile refinery captured 51% of the 2/1/1 crack spread.

 

Black Oil Segment

 

The Black Oil segment focuses on the sale of petroleum products, including base oils and industrial fuels; the collection of used motor oil; and the sale of re-refinery products.

 

During the 2022 second quarter, the Company’s Marrero (Louisiana) and Heartland (Ohio) refineries operated at 94% and 93% of total utilization, respectively.

 

The Black Oil segment generated total pre-tax operating income of $5.9 million in the second quarter 2022, flat versus the prior-year period. Excluding non-recurring, non-cash items, the segment reported adjusted EBITDA of $8.0 million.

 

A year-over-year increase in both sales volumes and margin per barrel was offset by higher selling, general and administrative expense in the second quarter 2022.

 

 

 

Recovery Segment

 

The Recovery segment consists primarily of revenues generated from the sale of ferrous and non-ferrous recyclable metals products that are recovered from manufacturing and consumption, together with revenues generated from trading and marketing base oils and lubricants.

 

The Recovery segment generated total pre-tax operating loss of $0.4 million in the second quarter 2022, versus income from operations of $0.5 million in the prior-year period. The year-over-year decline in sales was attributable to lower sales volumes in the second quarter 2022, given lower demand in the metals markets.

 

STRATEGIC UPDATE

 

Vertex continues to advance a multi-year strategy focused on the creation of long-term value for shareholders. During the second quarter, the Company continued to prioritize operational safety and reliability, organic growth investments, and strong free cash flow conversion, together with disciplined capital management.

 

Robust end-market demand supporting strong operational utilization. The Mobile refinery operated at 96% of planned utilization in the second quarter 2022, given operable capacity of 75,000 barrels per day. During July 2022, the Mobile refinery ran above its operational capacity of 75,000 barrels per day to support strong seasonal demand for conventional fuels. During July 2022, both the Marrero and Heartland refineries were operating above 93% of total capacity.

 

Renewable diesel conversion project expected to come on-stream by the first quarter 2023. Vertex has initiated a previously disclosed capital project designed to modify the Mobile refinery’s hydrocracking unit to produce renewable diesel fuel on a standalone basis. To date, Vertex has engaged technology, engineering and construction partners to lead the project. All major long lead-time equipment has been purchased with the goal of ensuring a timely completion of the project by year-end 2022. Initial renewable production volumes are expected to come on-stream by the first quarter 2023. The Company expects the total project cost to be in the range of $90 to $100 million, funded entirely through existing cash on-hand and cash flow from operations.

 

Ample liquidity to support growth. As of June 30, 2022, the Company had total cash, including restricted cash, of $97.9 million, versus $36.1 million at the end of the second quarter 2021. Vertex had total net debt outstanding of $299.0 million at the end of the second quarter 2022, including $45.3 million in lease finance obligations. The ratio of net debt to trailing twelve month Adjusted EBITDA was 2.4x as of June 30, 2022, which includes only one quarter of EBITDA contribution from the Mobile refinery.

 

MANAGEMENT COMMENTARY

 

“During the second quarter, we capitalized on robust refined product demand within our regional markets, while ensuring continued operational reliability across our refining system,” stated Benjamin P. Cowart, President and CEO of Vertex Energy. “During a volatile period for the broader energy complex, we generated record second quarter Adjusted EBITDA of $71.3 million, supported mainly by contributions from our recently acquired Mobile refinery. Entering the third quarter, market conditions remain favorable, supported by regional supply-demand imbalances that continue to support elevated refined product margins.”

 

“In our first full quarter of operations at Mobile, we produced more than 72,000 barrels per day, or more than 96% of operable capacity, which was ahead of our operating plan, while our yield of high-value light product was approximately 70% in the period,” continued Cowart. “During July, demand for gasoline and distillate remained strong, leading us to run the refinery toward full operational capacity, with the benchmark 2/1/1 Gulf Coast crack spread well above prior-year levels.”

 

“Earlier this year, we entered into an inventory hedging program designed to mitigate financial risk, while positioning us to generate ratable cash flows with which to support our business for the first six months during the transition period,” continued Cowart. “This program worked as planned during the second quarter, ensuring a ratable stream of cash flow into the business during a period of significant, planned capital investments. However, given expectations for a continued tightening in product supply and strength in refined product margins over the near-to-medium term, we intend to close out our remaining hedges in the third quarter, while maximizing our spot market exposure beginning in the fourth quarter 2022.”

 

“Our planned conversion of the Mobile refinery’s hydrocracker remains on schedule, consistent with our prior guidance,” noted Cowart. “During the second quarter, we continued to complete detailed engineering, while mobilizing the personnel and resources required for field construction. As previously communicated, we anticipate the total conversion cost will be in a range of $90 to $100 million, all of which is expected to be funded through cash from operations, together with existing cash on-hand. At this time, we expect the unit conversion will reach completion by year-end 2022, with 8,000-10,000 barrels per day of renewable diesel production expected to come on-stream during the first quarter 2023.”

 

“During a period of transition, our people executed on-plan, ensuring a successful integration of the Mobile refinery, while continuing to drive value creation across our legacy businesses,” concluded Cowart. “I am exceptionally proud of the combined efforts of our entire team and look forward to building on the momentum evident across our business.”

 

 

 

 

MANAGEMENT OUTLOOK

 

All guidance presented below is current as of the time provided and is subject to change. All prior financial guidance should no longer be relied upon.

 

For the third quarter 2022, Vertex currently anticipates the following:

 

Total throughput of between 72,000 and 74,000 barrels per day at the Mobile refinery

Direct operating expense per barrel of between $3.50 and $3.75 at the Mobile refinery

Consolidated total capital expenditures of between $30.0 million and $35.0 million

 

For the full-year 2022, Vertex currently anticipates the following:

 

Consolidated total capital expenditures of between $115.0 million and $120.0 million, excluding amounts paid on acquisition

 

CONFERENCE CALL AND WEBCAST

 

A conference call will be held today at 9:00 A.M. ET to review the Company’s financial results, discuss recent events and conduct a question-and-answer session.

 

A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of Vertex’s website at www.vertexenergy.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software. To participate in the live teleconference:

 

To participate in the live teleconference:

 

Domestic Live: 888-506-0062

 

To listen to a replay of the teleconference, which will be available through August 16, 2022:

 

Domestic Replay: 877-481-4010

Conference ID: 45917

 

ABOUT VERTEX ENERGY

 

Houston-based Vertex Energy, Inc. (NASDAQ: VTNR) is an energy transition company focused on the production and distribution of conventional and alternative fuels. Vertex owns a refinery in Mobile (AL) with an operable refining capacity of 75,000 barrels per day and more than 3.2 million barrels of product storage, positioning it as a leading supplier of fuels in the region. Vertex is also one of the largest processors of used motor oil in the U.S., with operations located in Houston and Port Arthur (TX), Marrero (LA), and Columbus (OH). Vertex also owns a facility, Myrtle Grove, located on a 41-acre industrial complex along the Gulf Coast in Belle Chasse, LA, with existing hydroprocessing and plant infrastructure assets, that include nine million gallons of storage. The Company has built a reputation as a key supplier of base oils to the lubricant manufacturing industry throughout North America.

 

 

 

 

FORWARD-LOOKING STATEMENTS

 

Certain of the matters discussed in this communication which are not statements of historical fact constitute forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. Words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “would,” “will,” “estimates,” “intends,” “projects,” “goals,” “targets” and other words of similar meaning are intended to identify forward-looking statements but are not the exclusive means of identifying these statements. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. The important factors that may cause actual results and outcomes to differ materially from those contained in such forward-looking statements include, without limitation, the Company’s ability to raise sufficient capital to complete future capital projects and the terms of such funding; the timing of planned capital projects at the Mobile Refinery and the outcome thereof; the future production of the Mobile Refinery; the estimated timeline of the renewable diesel capital project, estimated and actual production associated therewith, estimated revenues over the course of the agreement with Idemitsu, anticipated and unforeseen events which could reduce future production at the refinery or delay planned capital projects, changes in commodity and credits values, and certain early termination rights associated with the Idemitsu agreement and conditions precedent to such agreement; certain mandatory redemption provisions of the outstanding senior convertible notes, the conversion rights associated therewith, and dilution caused by such conversions; the Company’s ability to comply with required covenants under outstanding senior notes and a term loan and pay amounts due under such senior notes and term loan, including interest and other amounts due thereunder; the ability of the Company to retain and hire key personnel; risks associated with the ability of Vertex to complete current plans for expansion and growth, and planned capital projects; the level of competition in our industry and our ability to compete; our ability to respond to changes in our industry; the loss of key personnel or failure to attract, integrate and retain additional personnel; our ability to protect our intellectual property and not infringe on others’ intellectual property; our ability to scale our business; our ability to maintain supplier relationships and obtain adequate supplies of feedstocks; our ability to obtain and retain customers; our ability to produce our products at competitive rates; our ability to execute our business strategy in a very competitive environment; trends in, and the market for, the price of oil and gas and alternative energy sources; the volatile nature of the prices for oil and gas caused by supply and demand, including volatility caused by the ongoing Ukraine/Russia conflict; our ability to maintain our relationships with our partners; the impact of competitive services and products; our ability to integrate acquisitions; our ability to complete future acquisitions; our ability to maintain insurance; the outcome of pending and potential future litigation, judgments and settlements; rules and regulations making our operations more costly or restrictive; changes in environmental and other laws and regulations and risks associated with such laws and regulations; economic downturns both in the United States and globally, increases in inflation and interest rates, increased costs of borrowing associated therewith and potential declines in the availability of such funding; risk of increased regulation of our operations and products; negative publicity and public opposition to our operations; disruptions in the infrastructure that we and our partners rely on; an inability to identify attractive acquisition opportunities and successfully negotiate acquisition terms; our ability to effectively integrate acquired assets, companies, employees or businesses; liabilities associated with acquired companies, assets or businesses; interruptions at our facilities; unexpected changes in our anticipated capital expenditures resulting from unforeseen required maintenance, repairs, or upgrades; our ability to acquire and construct new facilities; our ability to effectively manage our growth; decreases in global demand for, and the price of, oil, due to COVID-19, state, federal and foreign responses thereto, inflation, recessions or other reasons, including declines in economic activity or global conflicts; our ability to acquire sufficient amounts of used oil feedstock through our collection routes, to produce finished products, and in the absence of such internally collected feedstocks, and our ability to acquire third-party feedstocks on commercially reasonable terms; unexpected downtime at our facilities; risks associated with COVID-19, the global efforts to stop the spread of COVID-19, potential downturns in the U.S. and global economies due to COVID-19 and the efforts to stop the spread of the virus, and COVID-19 in general; the lack of capital available on acceptable terms to finance the Company’s continued growth; anti-dilutive rights associated with our outstanding securities; the expected benefits, output, financial metrics and production of proposed transactions; unforeseen technical or operating difficulties and unplanned maintenance; the development and competitiveness of alternative energy and emission reduction technologies; our ability to pay our debt when due and comply with our debt covenants; our level of indebtedness, which could affect our ability to fulfill our obligations, impede the implementation of our strategy, and expose us to interest rate risk; dependence on third party transportation services and pipelines; risks related to obtaining required crude oil supplies, and the costs of such supplies; counterparty credit and performance risk; unanticipated problems at, or downtime effecting, our facilities and those operated by third parties; risks relating to our hedging activities; and risks relating to planned divestitures and acquisitions. Other important factors that may cause actual results and outcomes to differ materially from those contained in the forward-looking statements included in this communication are described in the Company’s publicly filed reports, including, but not limited to, the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 and future Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. These reports are available at www.sec.gov. The Company cautions that the foregoing list of important factors is not complete. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on behalf of the Company are expressly qualified in their entirety by the cautionary statements referenced above. Other unknown or unpredictable factors also could have material adverse effects on Vertex’s future results. The forward-looking statements included in this press release are made only as of the date hereof. Vertex cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, Vertex undertakes no obligation to update these statements after the date of this release, except as required by law, and takes no obligation to update or correct information prepared by third parties that are not paid for by Vertex. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

 

PROJECTIONS

 

The financial and production projections (the “Projections”) included herein were prepared by Vertex in good faith using assumptions believed to be reasonable. A significant number of assumptions about the operations of the business of Vertex were based, in part, on economic, competitive, and general business conditions prevailing at the time the Projections were developed. Any future changes in these conditions, may materially impact the ability of Vertex to achieve the financial results set forth in the Projections. The Projections are based on numerous assumptions, including realization of the operating strategy of Vertex; industry performance; no material adverse changes in applicable legislation or regulations, or the administration thereof, or generally accepted accounting principles; general business and economic conditions; competition; retention of key management and other key employees; absence of material contingent or unliquidated litigation, indemnity, or other claims; minimal changes in current pricing; static material and equipment pricing; no significant increases in interest rates or inflation; and other matters, many of which will be beyond the control of Vertex, and some or all of which may not materialize. The Projections also assume the continued uptime of the Company’s facilities at historical levels and the successful funding of, timely completion of, and successful outcome of, planned capital projects. Additionally, to the extent that the assumptions inherent in the Projections are based upon future business decisions and objectives, they are subject to change. Although the Projections are presented with numerical specificity and are based on reasonable expectations developed by Vertex’s management, the assumptions and estimates underlying the Projections are subject to significant business, economic, and competitive uncertainties and contingencies, many of which will be beyond the control of Vertex. Accordingly, the Projections are only estimates and are necessarily speculative in nature. It is expected that some or all of the assumptions in the Projections will not be realized and that actual results will vary from the Projections. Such variations may be material and may increase over time. In light of the foregoing, readers are cautioned not to place undue reliance on the Projections. The projected financial information contained herein should not be regarded as a representation or warranty by Vertex, its management, advisors, or any other person that the Projections can or will be achieved. Vertex cautions that the Projections are speculative in nature and based upon subjective decisions and assumptions. Since the Projections cover multiple years, such information by its nature becomes less meaningful and reliable with each successive year. As a result, the Projections should not be relied on as necessarily predictive of actual future events.

 

 

 

 

NON-GAAP FINANCIAL MEASURES

 

In addition to our results calculated under generally accepted accounting principles in the United States (“GAAP”), in this earnings release we also present Refining Gross Margin, EBITDA and Adjusted EBITDA . Refining Gross Margin, EBITDA and Adjusted EBITDA are “non-GAAP financial measures” presented as supplemental measures of the Company’s performance. They are not presented in accordance with GAAP. Refining gross margin is defined as revenues less the cost of fuel intakes and other fuel costs. It excludes operating expense and depreciation attributable to cost of revenues and other non-operating items in cost of revenues. EBITDA represents net income before interest, taxes, depreciation and amortization, for continued and discontinued operations. Adjusted EBITDA is defined as EBITDA before other income, impairment loss on assets, loss (gain) on change in value of derivative warrant liability, unrealized (gain) loss on derivative instruments, gain (loss) on intermediation agreement, Shell transaction related expenses and stock-based compensation expense (for continued and discontinued operations) and other unusual or non-recurring items. Refining Gross Margin, EBITDA and Adjusted EBITDA are presented because we believe they provide additional useful information to investors due to the various noncash items during the period. Refining Gross Margin, EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We use Refining Gross Margin, EBITDA and Adjusted EBITDA as supplements to GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, to allocate resources and to compare our performance relative to our peers. Additionally, these measures, when used in conjunction with related GAAP financial measures, provide investors with an additional financial analytical framework which management uses, in addition to historical operating results, as the basis for financial, operational and planning decisions and present measurements that third parties have indicated are useful in assessing the Company and its results of operations. Refining Gross Margin, EBITDA and Adjusted EBITDA are unaudited, and have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are: Refining Gross Margin, EBITDA and Adjusted EBITDA do not reflect cash expenditures, or future or contractual commitments; EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, capital expenditures or working capital needs; EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments; although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements. In addition, other companies in this industry may calculate Refining Gross Margin, EBITDA and Adjusted EBITDA differently than Vertex does, limiting its usefulness as a comparative measure. The Company’s presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items. We compensate for these limitations by providing a reconciliation of each of these non-GAAP measures to the most comparable GAAP measure. We encourage investors and others to review our business, results of operations, and financial information in their entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measure. For more information on these non-GAAP financial measures, please see the sections titled Unaudited Reconciliations of Gross Profit (Loss) to Refining Gross Margin”, each included at the end of this release and “Unaudited Consolidated Continued and Discontinued Operations Reconciliations of Net Loss attributable to Vertex Energy, Inc., to Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA” each included at the end of this release.

 

CONTACT

 

Investor Relations 

720.778.2415 

IR@vertexenergy.com

  

 

 

 

 

 

VERTEX ENERGY, INC. 

CONSOLIDATED BALANCE SHEETS 

(in thousands, except number of shares and par value)

 

(UNAUDITED)

 

   June 30, 2022   December 31, 2021 
ASSETS        
Current assets          
Cash and cash equivalents  $97,914   $36,130 
Restricted cash   100    100,497 
Accounts receivable, net   90,854    5,297 
Inventory   201,752    3,736 
Derivative commodity asset       96 
Prepaid expenses and other current assets   36,627    4,280 
Assets held for sale, current   92,494    84,116 
Total current assets   519,741    234,152 
           
Fixed assets, at cost   116,722    13,811 
Less accumulated depreciation   (4,475)   (2,045)
Fixed assets, net   112,247    11,766 
Finance lease right-of-use assets   44,373     
Operating lease right-of use assets   4,768    5,011 
Intangible assets, net   8,375    359 
Other assets   1,159    14,772 
TOTAL ASSETS  $690,663   $266,060 
           
LIABILITIES, TEMPORARY EQUITY, AND EQUITY          
Current liabilities          
Accounts payable  $50,652   $4,216 
Accrued expenses   30,560    3,618 
Finance lease liability-current   652    302 
Operating lease liability-current   953    960 
Current portion of long-term debt, net   1,927    2,413 
Obligations under inventory financing agreements, net   172,857     
Derivative commodity liability   46,536     
Liabilities held for sale, current   35,507    37,645 
Total current liabilities   339,644    49,154 
           
Long-term debt, net   135,332    114 
Finance lease liability-long-term   44,640     
Convertible senior unsecured note 2027, net   41,543    64,016 
Operating lease liability-long-term   3,816    4,052 
Derivative warrant liability   26,615    75,211 
Other liabilities   1,378     
Total liabilities   592,968    192,547 
           
COMMITMENTS AND CONTINGENCIES (Note 3)        
           
TEMPORARY EQUITY          
Redeemable non-controlling interest       43,447 
Total temporary equity       43,447 

 

 

 

 

   June 30, 2022   December 31, 2021 
EQUITY          
50,000,000 of total Preferred shares authorized:          
Series A Convertible Preferred Stock, $0.001 par value; 5,000,000 shares designated, zero and 385,601 shares issued and outstanding at June 30, 2022 and December 31, 2021, with a liquidation preference of $0 and $574,545 at June 30, 2022 and December 31, 2021.         
           
Series C Convertible Preferred Stock, $0.001 par value; 44,000 shares designated, zero shares issued or outstanding.         
           
Common stock, $0.001 par value per share; 750,000,000 shares authorized; 75,509,002 and 63,287,965 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively.    76    63 
Additional paid-in capital   278,455    138,620 
Accumulated deficit   (182,588)   (110,614)
Total Vertex Energy, Inc. shareholders’ equity   95,943    28,069 
Non-controlling interest   1,752    1,997 
Total equity   97,695    30,066 
TOTAL LIABILITIES, TEMPORARY EQUITY, AND EQUITY  $690,663   $266,060 

 

 

 

 

VERTEX ENERGY, INC. 

CONSOLIDATED STATEMENTS OF OPERATIONS 

(in thousands, except per share amounts) 

(UNAUDITED)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2022   2021   2022   2021 
Revenues  $991,839   $30,228   $1,032,056   $55,273 
Cost of revenues (exclusive of depreciation and amortization shown separately below)   984,442    28,041    1,023,008    50,850 
Depreciation and amortization attributable to costs of revenues   3,122    116    3,236    228 
Gross profit   4,275    2,071    5,812    4,195 
                     
Operating expenses:                    
Selling, general and administrative expenses   36,641    4,177    45,423    7,035 
Depreciation and amortization attributable to operating expenses   763    27    790    54 
                     
Total operating expenses   37,404    4,204    46,213    7,089 
                     
Loss from operations   (33,129)   (2,133)   (40,401)   (2,894)
                     
Other income (expense):                    
Interest income   18        18     
Other income   152    4,222    625    4,223 
Loss on change in value of derivative warrant liability   (945)   (21,508)   (4,524)   (23,288)
Interest expense   (47,722)   (139)   (51,952)   (251)
Total other expense   (48,497)   (17,425)   (55,833)   (19,316)
Loss from continuing operations before income tax   (81,626)   (19,558)   (96,234)   (22,210)
Income tax benefit (expense)                
Loss from continuing operations   (81,626)   (19,558)   (96,234)   (22,210)
Income from discontinued operations, net of tax (see note 16)   17,844    3,601    31,643    9,219 
Net loss   (63,782)   (15,957)   (64,591)   (12,991)
Net income attributable to non-controlling interest and redeemable non-controlling interest from continuing operations   165    243    97    626 
Net income attributable to non-controlling interest and redeemable non-controlling interest from discontinued operations   3,023    3,175    6,829    4,783 
Net loss attributable to Vertex Energy, Inc.   (66,970)   (19,375)   (71,517)   (18,400)
                     
Accretion of redeemable noncontrolling interest to redemption value from continued operations   (6)   (387)   (428)   (762)
Accretion of discount on Series B and B1 Preferred Stock       (284)       (507)
Dividends on Series B and B1 Preferred Stock               258 
                     
Net loss attributable to shareholders from continuing operations   (81,797)   (20,472)   (96,759)   (23,847)
Net income attributable to shareholders from discontinued operations, net of tax   14,821    426    24,814    4,436 
Net loss attributable to common shareholders  $(66,976)  $(20,046)  $(71,945)  $(19,411)
                     
Basic income (loss) per common share                    
Continuing operations  $(1.20)  $(0.39)  $(1.47)  $(0.48)
Discontinued operations, net of tax   0.22    0.01    0.38    0.09 
Basic income (loss) per common share  $(0.98)  $(0.38)  $(1.09)  $(0.39)
                     
Diluted  income (loss) per common share                    
Continuing operations  $(1.20)  $(0.39)  $(1.47)  $(0.48)
Discontinued operations, net of tax   0.22    0.01    0.38    0.09 
Diluted  income (loss) per common share  $(0.98)  $(0.38)  $(1.09)  $(0.39)
                     
Shares used in computing earnings per share                    
Basic   67,923    52,683    65,660    50,210 
Diluted   67,923    52,683    65,660    50,210 

 

 

 

 

VERTEX ENERGY, INC. 

CONSOLIDATED STATEMENTS OF EQUITY  

(in thousands, except par value) 

(UNAUDITED)

 

Six Months Ended June 30, 2022
   Common Stock   Series A Preferred   Series C Preferred                     
   Shares   $0.001 Par   Shares   $0.001 Par   Shares   $0.001 Par   Additional Paid-In Capital   Retained Earnings   Non-controlling Interest   Total Equity 
Balance on January 1, 2022   63,288   $63    386   $       $   $138,620   $(110,614)  $1,997   $30,066 
Exercise of options   60                        76            76 
Exercise of warrants   1,113    1                    (1)            
Share based compensation expense                           250            250 
Conversion of Series A Preferred stock to common   5        (5)                            
Reclassification of derivative liabilities                           78,789            78,789 
Accretion of redeemable non-controlling interest to redemption value                               (422)       (422)
Net income (loss)                               (4,547)   3,739    (808)
Less: amount attributable to redeemable non-controlling interest                                   (3,769)   (3,769)
Balance on March 31, 2022   64,466    64    381                217,734    (115,583)   1,967    104,182 
Exercise of options to common   498    1                    553            554 
Exercise of options to common- unissued                           3            3 
Distribution to noncontrolling shareholder                                   (380)   (380)
Adjustment of redeemable non controlling interest                           29    (29)        
Conversion of Convertible Senior Notes to common   10,164    10                    59,812            59,822 
Share based compensation expense                           324            324 
Conversion of Series A Preferred stock to common   381    1    (381)                           1 
Accretion of redeemable non-controlling interest to redemption value                               (6)       (6)
Net loss                               (66,970)   3,188    (63,782)
Less: amount attributable to redeemable non-controlling interest                                   (3,023)   (3,023)
Balance on June 30, 2022   75,509   $76       $       $   $278,455   $(182,588)  $1,752   $97,695 
                                                   

 

 

 

 

 

Six Months Ended June 30, 2021
   Common Stock   Series A Preferred   Series C Preferred                     
   Shares   $0.001 Par   Shares   $0.001 Par   Shares   $0.001 Par   Additional Paid-In Capital   Retained Earnings   Non-controlling Interest   Total Equity 
Balance on January 1, 2021   45,555   $46    420   $       $   $94,570   $(90,009)  $1,318   $5,925 
Exercise of options   23                                     
Exercise of B1 warrants   1,080    1                    2,757            2,758 
Exchanges of Series B Preferred stock to common   2,359    2                    4,114    630        4,746 
Share based compensation expense                           150            150 
Conversion of Series B Preferred stock to common   638    1                    1,978            1,979 
Conversion of Series B1 Preferred stock to common   2,087    2                    3,254            3,256 
Dividends on Series B and B1                               (372)       (372)
Accretion of discount on Series B and B1                               (224)       (224)
Accretion of redeemable non-controlling interest to redemption value                               (373)       (373)
Net income                               974    1,991    2,965 
Less: amount attributable to redeemable non-controlling interest                                   (1,542)   (1,542)
Balance on March 31, 2021   51,742    52    420                106,823    (89,374)   1,767    19,268 
Exercise of options to common   505                        229            229 
Exercise of options to common- unissued                           475            475 
Leverage Lubricants contribution                                   (13)   (13)
Exercise of B1 warrants   157                        1,634            1,634 
Exercise of B1 warrants-unissued                           1,186            1,186 
Share based compensation expense                           205            205 
Conversion of Series A Preferred stock to common   28        (28)                            
Conversion of Series B Preferred stock to common   1,842    2                    5,707            5,709 
Conversion of Series B Preferred stock to common-unissued                           760            760 
Conversion of Series B1 Preferred stock to common   5,635    6                    8,785            8,791 
Accretion of discount on Series B and B1                               (284)       (284)
Accretion of redeemable non-controlling interest to redemption value                               (387)       (387)
Net loss                               (19,375)   3,418    (15,957)
Less: amount attributable to redeemable non-controlling interest                                   (3,113)   (3,113)
Balance on June 30, 2021   59,909   $60    392   $       $   $125,804   $(109,420)  $2,059   $18,503 

 

 

 

VERTEX ENERGY, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(in thousands) 

(UNAUDITED)

 

   Six Months Ended 
   June 30,
2022
   June 30,
2021
 
Cash flows from operating activities          
Net loss  $(64,591)  $(12,991)
Income from discontinued operations, net of tax   31,643    9,219 
Loss from continuing operations   (96,234)   (22,210)
Adjustments to reconcile net loss from continuing operations to cash provided by (used in) operating activities, net of acquisitions          
Stock based compensation expense   574    356 
Depreciation and amortization   4,026    282 
Gain on forgiveness of debt       (4,222)
Gain on sale of assets   (82)   (1)
Provision for environment clean up   1,428     
Increase (reduction) of allowance for bad debt   (12)   620 
Increase in fair value of derivative warrant liability   4,524    23,288 
Loss on commodity derivative contracts   93,745    1,925 
Net cash settlements on commodity derivatives   (64,814)   (1,961)
Amortization of debt discount and deferred costs   40,000     
Changes in operating assets and liabilities, net of acquisition          
Accounts receivable and other receivables   (85,545)   (2,489)
Inventory   (67,796)   (704)
Prepaid expenses and other current assets   (12,614)   1,641 
Accounts payable   46,399    2,890 
Accrued expenses   26,891    (217)
Other assets   (50)   (89)
Net cash used in operating activities from continuing operations   (109,560)   (891)
Cash flows from investing activities          
Acquisition of business, net of cash   (227,525)   2 
Software purchase   (106)    
Purchase of fixed assets   (1,159)   (861)
Proceeds from sale of fixed assets   157    75 
Net cash used in investing activities from continuing operations   (228,633)   (784)
Cash flows from financing activities          
Payments on finance leases   (107)   (134)
Proceeds from exercise of options and warrants to common stock   632    2,829 
Distributions to noncontrolling interest   (380)    
Net borrowings on inventory financing agreements   172,607     
Line of credit proceeds, net       1,032 
Redemption of noncontrolling interest   (50,666)    
Proceeds from note payable, net   165,718     
Payments on note payable   (7,716)   (1,837)
Net cash provided by financing activities from continuing operations   280,088    1,890 
           
Discontinued operations:          
Net cash provided by operating activities   21,366    5,936 
Net cash used in investing activities   (1,578)   (1,961)
Net cash used in financing activities   (296)   (118)
Net cash provided by discontinued operations   19,492    3,857 
           
Net change in cash, cash equivalents and restricted cash   (38,613)   4,072 
Cash, cash equivalents, and restricted cash at beginning of the period   136,627    10,995 
Cash, cash equivalents, and restricted cash at end of period  $98,014   $15,067 
SUPPLEMENTAL INFORMATION        
Cash paid for interest  $11,438   $483 
Cash paid for taxes  $   $ 
NON-CASH INVESTING AND FINANCING TRANSACTIONS          
Equity component of the convertible note issuance  $78,789   $ 
Conversion of Series B Preferred Stock into common stock  $   $8,447 
Conversion of Series B1 Preferred Stock into common stock  $   $12,046 
Exchanges of Series B Preferred Stock into common stock  $   $4,747 
Accretion of discount on Series B and B1 Preferred Stock  $   $507 
Dividends-in-kind accrued on Series B and B1 Preferred Stock  $   $(258)
Conversion of Convertible Senior Notes to common stock  $59,822   $ 
Equipment acquired (disposed) under leases  $45,096   $174 
Accretion of redeemable noncontrolling interest to redemption value  $428   $762 

 

 

 

 

Segment information for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):

 

THREE MONTHS ENDED JUNE 30, 2022
   Black Oil   Refining & 
Marketing
   Recovery   Total 
Revenues:                
Gasolines  $   $255,909   $   $255,909 
Jet Fuels       143,688        143,688 
Diesel       322,317        322,317 
Pygas       20,685        20,685 
Oil collection services   26            26 
Metals (1)           4,318    4,318 
Other refinery products (2)   666    72,460    877    74,003 
VGO/Marine fuel sales   19,562    151,331        170,893 
Total revenues   20,254    966,390    5,195    991,839 
Cost of revenues (exclusive of depreciation and amortization shown separately below)   20,147    959,767    4,528    984,442 
Depreciation and amortization attributable to costs of revenues   31    3,009    82    3,122 
Gross profit   76    3,614    585    4,275 
Selling, general and administrative expenses   12,027    23,597    1,017    36,641 
Depreciation and amortization attributable to operating expenses   27    736        763 
Loss from operations  $(11,978)  $(20,719)  $(432)  $(33,129)

 

THREE MONTHS ENDED JUNE 30, 2021
   Black Oil   Refining & 
Marketing
   Recovery   Total 
Revenues:                
Gasolines  $   $6,083   $   $6,083 
Diesel       13,481        13,481 
Pygas       3,862        3,862 
Industrial fuel       410        410 
Oil collection services   155            155 
Metals (1)           6,151    6,151 
Other refinery products (2)           86    86 
Total revenues   155    23,836    6,237    30,228 
Cost of revenues (exclusive of depreciation and amortization shown separately below)   363    22,248    5,430    28,041 
Depreciation and amortization attributable to costs of revenues   19    31    66    116 
Gross profit (loss)   (227)   1,557    741    2,071 
Selling, general and administrative expenses   3,281    687    209    4,177 
Depreciation and amortization attributable to operating expenses   27            27 
Income (loss) from operations  $(3,535)  $870   $532   $(2,133)

 

 

 

 

SIX MONTHS ENDED JUNE 30, 2022
   Black Oil   Refining &  
Marketing
   Recovery   Total 
Revenues:                
Gasoline  $   $263,458   $   $263,458 
Jet Fuels       143,688        143,688 
Diesel       344,225        344,225 
Pygas       25,375        25,375 
Industrial fuel       572        572 
Oil collection services   240            240 
Metals (1)           7,733    7,733 
Other refinery products (2)   666    72,460    1,410    74,536 
VGO/Marine fuel sales   20,898    151,331        172,229 
Total revenues   21,804    1,001,109    9,143    1,032,056 
Cost of revenues (exclusive of depreciation and amortization shown separately below)   21,797    992,854    8,357    1,023,008 
Depreciation and amortization attributable to costs of revenues   47    3,033    156    3,236 
Gross profit (loss)   (40)   5,222    630    5,812 
Selling, general and administrative expenses   19,438    24,721    1,264    45,423 
Depreciation and amortization attributable to operating expenses   54    736        790 
Loss from operations  $(19,532)  $(20,235)  $(634)  $(40,401)

 

SIX MONTHS ENDED JUNE 30, 2021
   Black Oil   Refining & 
Marketing
   Recovery   Total 
Revenues:                
Gasoline  $   $10,494   $   $10,494 
Diesel       25,060        25,060 
Pygas       6,835        6,835 
Industrial fuel       721        721 
Oil collection services   278        3    281 
Metals (1)           11,796    11,796 
Other refinery products (2)           86    86 
Total revenues   278    43,110    11,885    55,273 
Cost of revenues (exclusive of depreciation and amortization shown separately below)   643    40,198    10,009    50,850 
Depreciation and amortization attributable to costs of revenues   39    63    126    228 
Gross profit (loss)   (404)   2,849    1,750    4,195 
Selling, general and administrative expenses   5,223    1,447    365    7,035 
Depreciation and amortization attributable to operating expenses   54            54 
Income (loss) from operations  $(5,681)  $1,402   $1,385   $(2,894)

 

(1) Metals consist of recoverable ferrous and non-ferrous recyclable metals from manufacturing and consumption. Scrap metal can be recovered from pipes, barges, boats, building supplies, surplus equipment, tanks, and other items consisting of metal composition. These materials are segregated, processed, cut-up and sent back to a steel mill for re-purposing. 

(2) Other re-refinery products include the sales of asphalt, condensate, recovered products, and other petroleum products.

 

 

 

 

The following summarized financial information has been segregated from continuing operations and reported as Discontinued Operations for our black oil segment for the three months ended June 30, 2022, and 2021 (in thousands):

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2022   2021   2022   2021 
Revenues  $59,429   $35,068   $112,459   $68,216 
Cost of revenues (exclusive of depreciation shown separately below)   33,585    24,965    65,977    45,611 
Depreciation and amortization attributable to costs of revenues   1,332    1,278    2,636    2,513 
Gross profit   24,512    8,825    43,846    20,092 
Operating expenses:                    
Selling, general and administrative expenses  (exclusive of acquisition related expenses)   6,243    4,648    11,327    9,716 
Depreciation and amortization expense attributable to operating expenses   427    456    872    912 
Total operating expenses   6,670    5,104    12,199    10,628 
Income from operations   17,842    3,721    31,647    9,464 
Other income (expense)                    
Interest expense   2    (120)   (4)   (245)
Total other expense   2    (120)   (4)   (245)
Income before income tax   17,844    3,601    31,643    9,219 
Income tax benefit (expense)                
Income from discontinued operations, net of tax  $17,844   $3,601   $31,643   $9,219 

 

 

 

 

Unaudited Reconciliation of Refining Gross Margin and Refining Gross Margin per throughput barrel to Gross Profit

 

  

Three Months Ended  

June 30, 2022 

 
In thousands (unaudited)  Total Refining and Marketing   Mobile Refinery 
Gross profit  $3,614   $1,967 
Operating expenses including in cost of revenues   17,575    17,575 
Depreciation and amortization attributable to cost of revenues   3,009    2,986 
Unrealized loss on hedging activities   46,901    46,901 
Loss on inventory intermediation agreement   23,180    23,180 
Refining gross margin  $94,279   $92,609 
Refining throughput (bpd)   72,133    72,133 
Refining gross margin per throughput barrel  $14.36   $14.11 
           
Refining gross margin       $92,609 
Realized loss on hedging activities        46,135 
Inventory adjustment        13,300 
Refining gross margin excl non-recurring items       $152,044 
Refining throughput (bpd)        72,133 
Refining gross margin per throughput barrel       $23.16 

 

Unaudited Reconciliation of EBITDA and Adjusted EBITDA to Net loss from Continued and Discontinued Operations

 

   Three Months Ended   Trailing Twelve Months Ended 
In thousands (unaudited)  June 30, 2022   June 30, 2021   June 30, 2022   June 30, 2021 
Consolidated EBITDA and Adjusted EBITDA                    
Net loss including discontinued operations  $(63,781)  $(15,957)  $(59,259)  $(17,889)
Depreciation and amortization   5,644    1,876    11,368    7,345 
Interest expense   47,719    259    55,351    976 
EBITDA  $(10,418)  $(13,822)  $7,460   $(9,568)
Unrealized loss in hedging activities   46,901    351    46,528    (530)
Loss on intermediation agreement (backwardation)   23,180        23,180     
Acquisition costs   9,078        19,271     
Environmental reserve   1,428        1,428     
(Gain) loss on the change in value of derivative warrant liability   945    21,507    (3,078)   23,236 
Stock compensation expense   324    205    1,081    692 
Asset impairment loss           2,124     
Other   (147)   (4,222)   (562)   (4,222)
Adjusted EBITDA  $71,291   $4,019   $97,432   $9,608 

 

 

 

   Three Months Ended June 30, 2022 
   Black Oil   Mobile Refinery   Other Refining and Marketing   Total Refining and Marketing   Recovery   Consolidated 
Segment EBITDA and Adjusted EBITDA                              
                               
Net income (loss), including discontinued operations  $(39,379)  $(23,961)  $10   $(23,951)  $(451)  $(63,781)
Depreciation and amortization   1,817    3,722    23    3,745    82    5,644 
Interest expense   44,450    3,250        3,250    19    47,719 
EBITDA  $6,888   $(16,989)  $33   $(16,956)  $(350)  $(10,418)
Unrealized loss in hedging activities       46,901        46,901        46,901 
Loss on intermediation agreement (backwardation)       23,180        23,180        23,180 
Acquisition costs       9,078        9,078        9,078 
Environmental reserve       1,428        1,428        1,428 
(Gain) loss on the change in value of derivative warrant liability   945                    945 
Stock compensation expense   324                    324 
Other   (128)   (19)       (19)       (4,222)
Adjusted EBITDA  $8,029    63,579   $33   $63,612   $(350)  $71,291 

 

   Three Months Ended June 30, 2021 
   Black Oil   Other Refining and Marketing   Recovery   Consolidated 
Segment EBITDA and Adjusted EBITDA                    
                     
Net income (loss), including discontinued operations  $(17,309)  $868   $484   $(15,957)
Depreciation and amortization   1,779    32    65    1,876 
Interest expense   212        47    259 
EBITDA  $(15,318)  $900   $596   $(13,822)
Unrealized loss in hedging activities   351            351 
(Gain) loss on the change in value of derivative warrant liability   21,507            21,507 
Stock compensation expense   205            205 
Other   (4,222)           (4,222)
Adjusted EBITDA  $2,523   $900   $596    4,019 

 

 

 


 

Vertex Energy, Inc. 8-K

 

Exhibit 99.2

 

Second Quarter 2022 Results Conference Call August 2022

 
 

Certain of the matters discussed in this communication which are not statements of historical fact constitute forward - looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995 , that involve a number of risks and uncertainties . Words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “would,” “will,” “estimates,” “intends,” “projects,” “goals,” “targets” and other words of similar meaning are intended to identify forward - looking statements but are not the exclusive means of identifying these statements . Any statements made in this news release other than those of historical fact, about an action, event or development, are forward - looking statements . The important factors that may cause actual results and outcomes to differ materially from those contained in such forward - looking statements include, without limitation, the Company’s ability to raise sufficient capital to complete future capital projects and the terms of such funding ; the timing of planned capital projects at the Mobile Refinery and the outcome thereof ; the future production of the Mobile Refinery ; the estimated timeline of the renewable diesel capital project, estimated and actual production associated therewith, estimated revenues over the course of the agreement with Idemitsu , anticipated and unforeseen events which could reduce future production at the refinery or delay planned capital projects, changes in commodity and credits values, and certain early termination rights associated with the Idemitsu agreement and conditions precedent to such agreement ; certain mandatory redemption provisions of the outstanding senior convertible notes, the conversion rights associated therewith and dilution caused by such conversions ; the Company’s ability to comply with required covenants thereunder and pay amounts due under such senior notes and a term loan, including interest and other amounts due thereunder ; the ability of the Company to retain and hire key personnel ; risks associated with the ability of Vertex to complete current plans for expansion and growth, and planned capital projects ; the level of competition in our industry and our ability to compete ; our ability to respond to changes in our industry ; the loss of key personnel or failure to attract, integrate and retain additional personnel ; our ability to protect our intellectual property and not infringe on others’ intellectual property ; our ability to scale our business ; our ability to maintain supplier relationships and obtain adequate supplies of feedstocks ; our ability to obtain and retain customers ; our ability to produce our products at competitive rates ; our ability to execute our business strategy in a very competitive environment ; trends in, and the market for, the price of oil and gas and alternative energy sources ; the volatile nature of the prices for oil and gas caused by supply and demand, including volatility caused by the ongoing Ukraine/Russia conflict our ability to maintain our relationships with our partners ; the impact of competitive services and products ; our ability to integrate acquisitions ; our ability to complete future acquisitions ; our ability to maintain insurance ; the outcome of pending and potential future litigation, judgments and settlements ; rules and regulations making our operations more costly or restrictive ; changes in environmental and other laws and regulations and risks associated with such laws and regulations ; economic downturns both in the United States and globally, increases in inflation and interest rates, increased costs of borrowing associated therewith and potential declines in the availability of such funding ; risk of increased regulation of our operations and products ; negative publicity and public opposition to our operations ; disruptions in the infrastructure that we and our partners rely on ; an inability to identify attractive acquisition opportunities and successfully negotiate acquisition terms ; our ability to effectively integrate acquired assets, companies, employees or businesses ; liabilities associated with acquired companies, assets or businesses ; interruptions at our facilities ; unexpected changes in our anticipated capital expenditures resulting from unforeseen required maintenance, repairs, or upgrades ; our ability to acquire and construct new facilities ; our ability to effectively manage our growth ; decreases in global demand for, and the price of, oil, due to COVID - 19 , state, federal and foreign responses thereto, inflation, recessions or other reasons, including declines in economic activity or global conflicts ; our ability to acquire sufficient amounts of used oil feedstock through our collection routes, to produce finished products, and in the absence of such internally collected feedstocks, and our ability to acquire third - party feedstocks on commercially reasonable terms ; unexpected downtime at our facilities ; risks associated with COVID - 19 , the global efforts to stop the spread of COVID - 19 , potential downturns in the U . S . and global economies due to COVID - 19 and the efforts to stop the spread of the virus, and COVID - 19 in general ; the lack of capital available on acceptable terms to finance the Company’s continued growth ; anti - dilutive rights associated with our outstanding securities ; the expected benefits, output, financial metrics and production of proposed transactions ; unforeseen technical or operating difficulties and unplanned maintenance ; the development and competitiveness of alternative energy and emission reduction technologies ; our ability to pay our debt when due and comply with our debt covenants ; our level of indebtedness, which could affect our ability to fulfill our obligations, impede the implementation of our strategy, and expose us to interest rate risk ; dependence on third party transportation services and pipelines ; risks related to obtaining required crude oil supplies, and the costs of such supplies ; counterparty credit and performance risk ; unanticipated problems at, or downtime effecting, our facilities and those operated by third parties ; risks relating to our hedging activities ; risks relating to planned divestitures and acquisitions ; and the expected benefits, output, financial metrics and production of proposed transactions . Other important factors that may cause actual results and outcomes to differ materially from those contained in the forward - looking statements included in this communication are described in the Company’s publicly filed reports, including, but not limited to, the Company’s Annual Report on Form 10 - K for the year ended December 31 , 2021 , and the Company’s Quarterly Report on Form 10 - Q for the quarter ended June 30 , 2022 and future Annual Reports on Form 10 - K and Quarterly Reports on Form 10 - Q . These reports are available at www . sec . gov . The Company cautions that the foregoing list of important factors is not complete . All subsequent written and oral forward - looking statements attributable to the Company or any person acting on behalf of the Company are expressly qualified in their entirety by the cautionary statements referenced above . Other unknown or unpredictable factors also could have material adverse effects on Vertex’s future results . The forward - looking statements included in this press release are made only as of the date hereof . Vertex cannot guarantee future results, levels of activity, performance or achievements . Accordingly, you should not place undue reliance on these forward - looking statements . Finally, Vertex undertakes no obligation to update these statements after the date of this release, except as required by law, and takes no obligation to update or correct information prepared by third parties that are not paid for by Vertex . If we update one or more forward - looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward - looking statements . The financial and production projections (the “Projections”) included herein were prepared by Vertex in good faith using assumptions believed to be reasonable . A significant number of assumptions about the operations of the business of Vertex were based, in part, on economic, competitive, and general business conditions prevailing at the time the Projections were developed . Any future changes in these conditions, may materially impact the ability of Vertex to achieve the financial results set forth in the Projections . The Projections are based on numerous assumptions, including realization of the operating strategy of Vertex ; industry performance ; no material adverse changes in applicable legislation or regulations, or the administration thereof, or generally accepted accounting principles ; general business and economic conditions ; competition ; retention of key management and other key employees ; absence of material contingent or unliquidated litigation, indemnity, or other claims ; minimal changes in current pricing ; static material and equipment pricing ; no significant increases in interest rates or inflation ; and other matters, many of which will be beyond the control of Vertex, and some or all of which may not materialize . The Projections also assume the continued uptime of the Company’s facilities at historical levels and the successful funding of, timely completion of, and successful outcome of, planned capital projects . Additionally, to the extent that the assumptions inherent in the Projections are based upon future business decisions and objectives, they are subject to change . Although the Projections are presented with numerical specificity and are based on reasonable expectations developed by Vertex’s management, the assumptions and estimates underlying the Projections are subject to significant business, economic, and competitive uncertainties and contingencies, many of which will be beyond the control of Vertex . Accordingly, the Projections are only estimates and are necessarily speculative in nature . It is expected that some or all of the assumptions in the Projections will not be realized and that actual results will vary from the Projections . Such variations may be material and may increase over time . In light of the foregoing, readers are cautioned not to place undue reliance on the Projections . The projected financial information contained herein should not be regarded as a representation or warranty by Vertex, its management, advisors, or any other person that the Projections can or will be achieved . Vertex cautions that the Projections are speculative in nature and based upon subjective decisions and assumptions . Since the Projections cover multiple years, such information by its nature becomes less meaningful and reliable with each successive year . As a result, the Projections should not be relied on as necessarily predictive of actual future events . DISCLAIMER Forward - looking statement 2

 
 

In addition to our results calculated under generally accepted accounting principles in the United States ("GAAP"), in this earnings release we also present Refining Gross Margin, EBITDA and Adjusted EBITDA . Refining Gross Margin, EBITDA and Adjusted EBITDA are “non - GAAP financial measures” presented as supplemental measures of the Company’s performance . They are not presented in accordance with GAAP . Refining gross margin is defined as revenues less the cost of fuel intakes and other fuel costs . It excludes operating expense and depreciation attributable to cost of revenues and other non - operating items in cost of revenues . EBITDA represents net income before interest, taxes, depreciation and amortization, for continued and discontinued operations . Adjusted EBITDA is defined as EBITDA before other income, impairment loss on assets, loss (gain) on change in value of derivative warrant liability, unrealized (gain) loss on derivative instruments, gain (loss) on intermediation agreement, Shell transaction related expenses and stock - based compensation expense (for continued and discontinued operations) and other unusual or non - recurring items . Refining Gross Margin, EBITDA and Adjusted EBITDA are presented because we believe they provide additional useful information to investors due to the various noncash items during the period . Refining Gross Margin, EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry . We use Refining Gross Margin, EBITDA and Adjusted EBITDA as supplements to GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, to allocate resources and to compare our performance relative to our peers . Additionally, these measures, when used in conjunction with related GAAP financial measures, provide investors with an additional financial analytical framework which management uses, in addition to historical operating results, as the basis for financial, operational and planning decisions and present measurements that third parties have indicated are useful in assessing the Company and its results of operations . Refining Gross Margin, EBITDA and Adjusted EBITDA are unaudited, and have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our operating results as reported under GAAP . Some of these limitations are : Refining Gross Margin, EBITDA and Adjusted EBITDA do not reflect cash expenditures, or future or contractual commitments ; EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, capital expenditures or working capital needs ; EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments ; although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements . In addition, other companies in this industry may calculate Refining Gross Margin, EBITDA and Adjusted EBITDA differently than Vertex does, limiting its usefulness as a comparative measure . The Company’s presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items . We compensate for these limitations by providing a reconciliation of each of these non - GAAP measures to the most comparable GAAP measure . We encourage investors and others to review our business, results of operations, and financial information in their entirety, not to rely on any single financial measure, and to view these non - GAAP measures in conjunction with the most directly comparable GAAP financial measure . For more information on these non - GAAP financial measures, please see the sections titled Unaudited Reconciliations of Gross Profit (Loss) to Refining Gross Margin”, each included at the end of this release and “Unaudited Consolidated Continued and Discontinued Operations Reconciliations of Net Loss attributable to Vertex Energy, Inc . , to Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA” each included at the end of this release . DISCLAIMER Non - GAAP Financial Measures 3

 
 

SECOND QUARTER 2022 Performance Summary

 
 

2Q22 Performance Indicators EXECUTIVE SUMMARY Second Quarter 2022 5 2Q22 Performance Summary • Closed on Mobile refinery acquisition April 1, 2022; Reported record Adjusted EBITDA of $71.3 million in 2Q22, versus $4.0 million in 2Q21 • Domestic supply - demand imbalances for conventional refined products contributed to significant y/y increase in benchmark product spreads during 2Q22 • Strong operational reliability at Mobile refinery (96% utilization), Marrero (94% utilization) and Heartland (93% utilization) in 2Q22 • 2Q22 results include $127.8 million of non - operating hedging losses, transaction and other expenses • $98 million of cash/availability; Net debt of $299.0 million; net debt to TTM 2Q22 adjusted EBITDA of 2.4x *Includes both continued and discontinued operations (a) A full - reconciliation of GAAP to Non - GAAP metrics is provided in the Appendix of this presentation (b) Net debt defined as total debt outstanding less cash and equivalents (c) Net leverage defined as net debt (cash) divided by trailing twelve - month adjusted EBITDA Key Performance Indicators Key Takeaways 2Q21 2Q22 TTM 2Q21 TTM 2Q22 Total gross profit ($MM) $10.9 $28.8 $43.1 $74.5 GAAP net income (Loss) ($MM) ($16.0) ($63.8) ($17.9) ($59.3) Adjusted EBITDA (a) $5.2 $71.3 $9.6 $97.4 Cash and availability ($MM) $18.2 $98.0 NM NM Net debt ($MM) (b) ($6.4) $299.0 NM NM Net leverage (c) -0.7x 2.4x NM NM

 
 

Mobile Performance Indicators MOBILE REFINERY PERFORMANCE Second Quarter 2022 6 Mobile Performance Summary • Seamless transition of commercial operations from Shell to Vertex commenced April 1, 2022 • Operated at 96% utilization in 2Q22, producing 71,755 barrels per day; on a standalone basis, Mobile generated $63.6 million in 2Q22 Adjusted EBITDA, including a $46.1million realized hedging loss • Refining gross margin per barrel, excluding hedging impact and inventory adjustment, was $23.16 per barrel in 2Q22, or 51% of the benchmark 2/1/1 Gulf Coast crack spread • Production yield of high - value light product ~70% in 2Q22 (a) Assumes 75,000 barrels per day of nameplate capacity (b) Full reconciliation of GAAP to non - GAAP metrics is listed in the appendix of this presentation (c) Other includes naphtha, intermediates and LPG Second Quarter 2022 Key Takeaways Apr-22 May-22 Jun-22 2Q22 Total throuhput (bpd) 70,298 74,772 71,240 72,133 Total production (bpd) 69,904 74,381 70,894 71,755 Utilization rate (a) 93% 99% 95% 96% Direct operating expense per barrel $2.47 $2.50 $5.13 $3.35 Refining gross margin per barrel (b) $10.27 $17.82 $13.87 $14.11 (+) Realized loss on hedging activities impact NM NM NM $7.03 (+) Initial inventory purchase margin impact NM NM NM $2.02 Refining gross margin per barrel, excluidng hedging and margin impact (b) $23.16 2/1/1 Gulf Coast crack spread $40.24 $43.71 $51.27 $45.06 Gross profit per barrel as % of 2/1/1 Gulf Coast crack spread 26% 41% 27% 31% (-) Hedge and Inventory Impact NM NM NM 51% Production yields Gasoline (BPD) 17,793 18,562 17,618 17,997 Distillate (BPD) 20,124 19,633 18,496 19,420 Jet (BPD) 8,699 12,362 10,959 10,692 Other (BPD) (c) 23,288 23,824 23,821 23,646

 
 

MOBILE REFINERY PERFORMANCE BRIDGE Actual results reflect inventory, yield, spread and hedging impacts 7 *On May 10, 2022, in conjunction with its first quarter 2022 results conference call, Vertex provided second quarter 2022 Adj ust ed EBITDA guidance for the Mobile refinery of between $110 million and $130 million, a point - in - time estimate. This bridge assu mes the midpoint of that guidance, or $120 million, for the purposes of them bridge to actual second quarter 2022 results of $63.6 million Mobile Refinery Adjusted EBITDA Bridge 2Q22 Guidance vs. Actual ($MM) $63.6

 
 

MOBILE REFINERY RENEWABLE DIESEL PROJECT Remain on budget to achieve Dec - 22 mechanical completion; On - stream By 1Q23 8 Renewable Diesel Project Workflow Project Update • Construction of foundations, fabrication of piping has commenced • Planned hydrocracker shutdown in October 2022; no anticipated impact to crude rates • Mechanical completion remains scheduled for year - end 2022, despite longer lead times for construction materials • Reiterate project budget of $90 to $100 million • Start - up projected to come on - stream in 1Q23 Estimated Project Timeline As of August 2022

 
 

DOMESTIC FUELS DEMAND REMAINS STABLE Fuels demand was within historical averages during 2Q22 US Gasoline Demand 9 Total Finished Motor Gasoline Supplied ( kpbd ) US Distillate Demand Total Distillate Supplied ( kbpd ) 4500 5500 6500 7500 8500 9500 10500 2017-2021 2022 2021 2500 3000 3500 4000 4500 5000 5500 2017-2021 2022 2021 Source: EIA

 
 

FUELS INVENTORIES BELOW HISTORICAL LEVELS Both domestic and gasoline inventories remain below the five - year average US Gasoline Inventories 10 (millions of barrels) US Distillate Inventories (millions of barrels) Source: EIA 200 210 220 230 240 250 260 270 280 290 2017-2021 2022 2021 100 110 120 130 140 150 160 170 180 190 200 2017-2021 2022 2021

 
 

DOMESTIC FUELS PRODUCTION LEVELS Production levels in - line with historical averages, albeit with fewer refineries in operation US Conventional Gasoline Production 11 ( kbpd ) US Distillate Production ( kbpd ) Source: EIA 2500 3000 3500 4000 4500 5000 5500 6000 2017-2021 2022 2021 5000 6000 7000 8000 9000 10000 11000 12000 2017-2021 2022 2021

 
 

REFINED PRODUCT MARGINS REMAIN ELEVATED Low product inventories, decline in domestic refining capacity, driving margin expansion Benchmark Refined Product Margins 12 As of August 2022 2/1/1 GC Crack spread $6 per barrel 2/1/1 GC Crack spread $15 per barrel 2/1/1 GC Crack spread $36 per barrel Source: Platts; 2/1/1 assumes Louisiana Light Sweet crude oil per barrel, Gulf coast gasoline and Gulf Coast distillate $0 $10 $20 $30 $40 $50 $60 $70 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 Jul-22 2/1/1 Gulf Coast Crack Spread Gulf Coast Coast Gasoline Crack Gulf Coast Distillate Crack

 
 

BALANCE SHEET UPDATE Capital allocation focused on organic investments, bolt - on acquisitions and debt reduction 13 Total Cash & Liquidity ($MM) Total Working Capital ($MM) Total Net Debt ($MM) Debt Maturity Schedule ($MM) $18.3 $124.5 $98.0 2Q21 1Q22 2Q22 $7.9 $182.3 $180.0 2Q21 1Q22 2Q22 ($6.4) $21.2 $299.0 2Q21 1Q22 2Q22 $14 $10 $154 $2 $2 $39 2023 2024 2025 2026 2027 Thereafter

 
 

Projected Financial Guidance PROJECTED FINANCIAL GUIDANCE Third Quarter 2022 14 Management Commentary • For the third quarter 2022, the Company expects the Mobile refinery to generate total throughput of between 72,000 to 74,000 per day, given strong demand for refined products, versus 72,133 in the second quarter 2022 • Vertex expects direct operating expense per barrel of between $3.80 to $4.00 per barrel in the third quarter 2022 • Vertex anticipates total consolidated capital expenditures of between $30 million and $35 million in the third quarter 2022, and $115 million to $120 million for the full - year 2022 • Vertex has 3.2 million barrels of production hedged at an average price per barrel of $15.13 for the third quarter 2022; no additional production is currently hedged beyond September 30, 2022 Third Quarter and Full - Year 2022 Third Quarter 2022 Low High Mobile Refinery Throughput (BPD) 72,000 74,000 Mobile Direct Operating Expense Per Barrel $3.50 $3.75 Consolidated Capital Expenditures ($MM) $30 $35 Low High Consolidated Capital Expenditures ($MM) $115 $120 Third Quarter 2022 Full-Year 2022

 
 

OUR STRATEGIC FOCUS Three - Year Strategic Plan 15 Pursue balanced capital deployment program and optimization of asset base • Strategic investments that improve the long - term profitability of the Mobile refinery • Seek to acquire complementary assets in adjacent markets that leverage core energy transition / independent refining expertise Capitalize on favorable refined product margin environment • Mobile Refinery capitalizing on conventional distillate and gasoline economics • Marrero capitalizing on strong VGO margins • Heartland capitalizing on elevated Group II+ base oil prices Invest organically in high - value, renewables fuels opportunities • Complete conversion of Mobile refinery hydrocracker by year - end 2022, positioning the refinery to commence production of 8,000 - 10,000 bpd of RD by 1Q23 • Invest in the production of other alternative fuels, such as sustainable aviation fuel Energy transition company of scale focused on driving above - market free cash flow conversion Deploying capital toward high - return organic, inorganic opportunities, debt reduction

 
 

APPENDIX

 
 

NON - GAAP RECONCILIATION 17 Unaudited Reconciliation of Refining Gross Margin and Refining Gross Margin per throughput barrel to Gross Profit

 
 

NON - GAAP RECONCILIATION 18 Unaudited Reconciliation of EBITDA and Adjusted EBITDA to Net loss from Continued and Discontinued Operations

 
 

NON - GAAP RECONCILIATION 19 Unaudited Reconciliation of EBITDA and Adjusted EBITDA to Net loss from Continued and Discontinued Operations

 
 

NON - GAAP RECONCILIATION 20

 

vtnr-20220809.xsd
Attachment: XBRL SCHEMA FILE


vtnr-20220809_lab.xml
Attachment: XBRL LABEL FILE


vtnr-20220809_pre.xml
Attachment: XBRL PRESENTATION FILE