Rex (REX) Q1 2026 Earnings Call Transcript

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DATE

Thursday, May 28, 2026 at 11 a.m. ET

CALL PARTICIPANTS

• Executive Chairman — Stuart A. Rose
• Chief Executive Officer — Zafar A. Rizvi
• Chief Financial Officer — Douglas L. Bruggeman

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TAKEAWAYS

• Net Income Attributable to Shareholders -- $18.5 million or $0.56 per diluted share, up from $8.7 million or $0.26 per diluted share in the prior-year first quarter.
• Gross Profit -- $29.1 million, increasing from $14.3 million year over year, attributed to 45Z tax credits and lower corn costs.
• 45Z Production Tax Credit Income -- $7.5 million recognized, booked at $0.10 per gallon for consolidated plants.
• Ethanol Sales Volumes -- 71.1 million gallons sold versus 70.9 million gallons prior-year; average selling price was $1.66 per gallon, down from $1.76 per gallon.
• Dry Distillers Grain Sales -- 155,000 tons sold at $155.86 per ton, compared to $145.65 per ton in the prior-year quarter.
• Modified Distillers Grain Sales -- approximately 13,400 tons sold at $76.94 per ton.
• Corn Oil Sales -- 23.9 million pounds sold at $0.54 per pound, up from $0.46 per pound previously.
• SG&A Expenses -- $9.7 million, increased from $5.9 million, due to higher incentive compensation and unpaid 2025 stock bonuses recognized at fair value.
• Income Before Taxes and Noncontrolling Interest -- $26.1 million, compared to $13.6 million in the previous first quarter.
• Equity in Income of Unconsolidated Affiliates -- $3.6 million, with $1.8 million attributable to 45Z credits, up from $1 million previously.
• Interest and Other Income -- $3.2 million, down from $4.2 million.
• Cash, Cash Equivalents, and Short-term Investments -- $364.3 million at quarter-end, lower primarily due to growth project capital spending.
• Total Investment in Growth Projects -- $176 million invested to date in ethanol expansion and carbon capture, with a combined budget of $220 million to $230 million.
• Debt Position -- No bank debt reported.
• Record Performance -- Company recorded the highest net income per share for any first quarter in its history, marking its 23rd consecutive profitable quarter.
• Ethanol Capacity Expansion -- Gibson City project on schedule for completion by end of 2026.
• Carbon Capture Regulatory Status -- EPA permitting for Class 6 well ongoing; plan to submit Illinois state application after July 1, 2026 moratorium expiration.
• Market Dynamics -- CEO Zafar A. Rizvi noted ethanol export volumes through March increased by 20% according to Renewable Fuels Association data.

SUMMARY

The company continues to allocate capital toward major growth initiatives, including a significant ethanol capacity expansion at its 1 Earth Energy facility and a carbon capture and sequestration project, staying within previously stated budget parameters. Management stated they began realizing Section 45Z tax credits in the prior quarter and recognized an additional $7.5 million in the current quarter as operating income. The Illinois state carbon pipeline moratorium is set to expire on July 1, 2026, after which the company plans to advance permitting for its carbon capture initiative. The company emphasized maintaining a debt-free balance sheet and expects to finance all major project investments internally. Management cited stable domestic ethanol demand and noted favorable export market conditions based on industry association data.

• Management said, "the first quarter of 26 was the most profitable first quarter on a net income per share basis in our company's history."
• Douglas L. Bruggeman reported, "This represents our 23rd consecutive profitable quarter."
• Ongoing federal policy discussions regarding incentives under Section 45Z remain a direct focus for management as they continue to monitor regulatory developments.
• The company confirmed capital investments were "within our combined project budget. Range of $220 million to $230 million subject to potential adjustments related to inflation and other market factors as the project advances."

INDUSTRY GLOSSARY

• 45Z Production Tax Credit: A federal incentive under Section 45Z of the Internal Revenue Code, providing production-based tax credits for qualifying ethanol and biofuel facilities based on their carbon intensity.
• Class 6 Injection Well: A type of well authorized for the injection of carbon dioxide into deep rock formations for long-term geologic sequestration under EPA regulation.
• Distillers Grains: Co-products resulting from ethanol production used as high-protein animal feed, available in dry or modified (wet) forms.

Full Conference Call Transcript

Stuart A. Rose: Good morning, and thank you to everyone for joining us today. The first quarter of 2026 continued to showcase REX's operational excellence and strategic discipline. Our team has once again demonstrated the ability to deliver outstanding results while advancing our key growth initiatives. As proof of this, the first quarter of 26 was the most profitable first quarter on a net income per share basis in our company's history. This consistent approach provides us with the flexibility to pursue value creating opportunities while maintaining a thoughtful approach to capital allocation. Both of our major growth projects the carbon capture and sequestration initiative and the ethanol production capacity expansion at our 1 Earth Energy facility continues to advance.

We remain focused on executing what is within our control while adopting while adapting to external factors as they evolve. Shareholder value creation remains a top priority. REX is particularly keen to take advantage of market tailwinds driven by both domestic policy and international export markets. And to maximize our profit potential. We believe that our team is incredibly well positioned and prepared to do this. I now turn the call over to our CEO, Zafar A. Rizvi, to provide updates on our ongoing projects.

Zafar A. Rizvi: Thank you, Stuart. Our ethanol facility expansion at Gibson City continues to progress on schedule. And we remain on track for completion by the end of 2026. This expansion represents an important step in settling our production capabilities and positioning the company for long term growth. We are pleased to announce a record profitable first quarter on a net income per share basis. Regarding our carbon capture and sequestration initiative, we continue to work closely with the EPA on our class 6 injection well permit application. The permitting process remains ongoing and we are addressing all regulatory requirements to move the project forward efficiently.

At the state level, the Illinois moratorium on carbon pipeline permitting is scheduled to expire on 07/01/2026. We have maintained engagement with the Illinois Commerce Commission and plan to submit our application shortly following the expiration of the moratorium. We are also closely monitoring ongoing federal policy discussions related to carbon capture incentives under Section 45Z. We began recognizing 45Z production tax credits in the fourth quarter of 2025 and during the first quarter of 2026, we recorded an additional $7.5 million in production tax credit. For the first quarter, we maintain booking the credit at $0.10 per gallon at the consolidated plants as we continue to monitor the 45Z regulations.

As of the end of the first quarter of 2026, our total investment in the carbon capture and ethanol expansion projects was approximately $176 million We continue to operate within our combined project budget. Range of $220 million to $230 million subject to potential adjustments related to inflation and other market factors as the project advance. I will now turn the call over to Douglas Bruggeman to discuss our financial results. Thanks. Zafar,

Douglas L. Bruggeman: During the first quarter of fiscal 26, our ethanol sales volumes reached 71.1 million gallons compared to 70.9 million gallons in the first quarter of 25. The average selling price for ethanol was $1.66 per gallon during the quarter, compared to $1.76 in the prior year's first quarter. Dry distillers grain sales volumes were approximately 155 thousand tons for Q1 with an average selling price of $155.86 per ton versus a $145.65 in the prior year. Modified distillers grain volumes totaled approximately 13.4 thousand tons with an average selling price of $76.94 per ton.

Corn oil sales volumes were approximately 23.9 million pounds during the quarter with an average selling price of $0.54 per pound compared to $0.46 in the prior year. The company reported $7.5 million in 45Z production tax credit income in the first quarter of fiscal 26, reflecting our change in accounting principles. We now report that as operating income from our consolidated plants. Gross profit for the first quarter was $29.1 million, compared to $14.3 million in Q1 25. This improvement primarily reflects the benefit of 45Z tax credits and reduced corn pricing. Selling, general and administrative expenses were approximately $9.7 million for the quarter compared to $5.9 million in Q1 25.

The increase was primarily due to higher incentive compensation and recording unpaid stock bonuses from 2025 at fair value. Our equity and income of unconsolidated affiliates increased from $1 million to $3.6 million with approximately $1.8 million of the increase due to income from 45Z tax credits. Interest and other income totaled $3.2 million for the quarter compared to $4.2 million in Q1 25. Income before taxes and non controlling interest was approximately $26.1 million compared to $13.6 million in Q1 25. Net income attributable to REX shareholders was $18.5 million or $0.56 per diluted share compared to $8.7 million or $0.26 per diluted share in Q1 25 This represents our 20 third consecutive profitable quarter.

We ended the first quarter with cash, cash equivalents and short-term investments of $364.3 million The reduction from the previous quarter primarily reflects our ongoing capital investments in our growth projects. REX continues to maintain its strong financial position with no bank debt. I will now turn things back to Zafar.

Zafar A. Rizvi: Thank you, Douglas. The Rex team continues to execute successfully against our long-term strategic objectives. Our core focus remains on building and operating a consistently profitable business. The first quarter of 2026 marked the strongest first quarter earnings per share in our company's history and represented our 20 third consecutive profitable quarter. This performance reflects our team's ability to capitalize on opportunities navigate changing market conditions, and consistently deliver value for our shareholders. We continue to position REX for sustainable, long-term growth through disciplined organic expansion initiatives. All funded through our strong balance sheet with no debt. Our ethanol capacity expansion and carbon capture project continues to advance as planned despite permitting delays and certain regulatory headwinds.

We remain focused on optimizing these investments expecting to drive future operational excellence and enhanced financial performance for our shareholders. We also plan to continue to evaluate the best use of our cash including investments that complement our existing platform. In addition, we continue to closely monitor policy developments at both the federal and state levels. The anticipated expiration of the Illinois carbon pipeline moratorium in July represents an important regulatory milestone. While policy outcomes remain outside our control, we believe we are well informed and working diligently to respond effectively to regulatory developments. Market fundamentals for the ethanol industry remains. Domestic demand continues to be stable.

While export markets remain strong according to renewable fuel Association, 2026 ethanol export to March increased by 20% compared to the same period last year. As we move through the second quarter, we continue to see stable operating conditions and remain confident in our ability to deliver another profitable quarter for our shareholders. With that, I would now like to open the call for questions. Operator?

Operator: Thank you. We will now be conducting a question-and-answer session. 1 moment while we poll for questions. Thank you. There are no questions at this time. I would like to hand the floor back over to Stuart A. Rose for any closing comments.

Stuart A. Rose: Thank you. Anyway, sorry, there is no questions, but I want to reiterate we have great plants, great locations, and I feel the best employees in the business led by our CEO, Zafar A. Rizvi, Again, I think they are better than anyone else in the industry. And our earnings prove it. We have been public for over 40 years, We had our greatest first quarter in earnings per share in our public history. Again, best people, best plants in my opinion. We are optimistic for future growth. Both in ethanol and receiving 45Z and Section 45 tax credits. We look forward to talking to everyone at the next call. And, again, thank you for listening. Bye.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.

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