FutureFuel Corp. Stock

Greetings, and welcome to the FutureFuel Third Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rose Sparks, Chief Financial Officer. Thank you. You may begin.

Thank you. Good morning, and welcome to the FutureFuel Third Quarter 2026 Results Conference Call. Leading the call today are our Chairman and CEO, Roeland Polet; and I am Rose Sparks, the company's Chief Financial Officer. After the close of U.S. trading yesterday, we issued a press release detailing our third quarter operational and financial results. This release is publicly available in the Investor Relations section of our corporate website at www.futurefuelcorporation.com. I would like to remind you that management's commentary and responses to questions on today's call may include forward-looking statements, which, by their nature, are uncertain and outside the company's control.

Although these forward-looking statements are based on management's current expectations and beliefs, actual results could differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest reports filed with the SEC. Additionally, please note that you can find reconciliations of all our historical non-GAAP financial measures mentioned on this call in the press release issued yesterday. Today's call will begin with prepared remarks from Roeland Polet, who will provide a business update, followed by my review of our third quarter financial performance. At the conclusion of these prepared remarks, we will open the line for questions. With that, I'll turn the call over to Roeland.

Thank you, Rose, and good morning to everyone joining us on the call today. Our third quarter performance reflected 2 distinct operating narratives. On the one hand, we had exceptional operating quarter in our biofuel segment, where capacity utilization increased to the highest level in more than 2 years, exceeding 80%. Biodiesel demand remains strong as we exit the third quarter, and we expect demand to further accelerate entering 2027. Recent regulatory changes in renewable fuels markets will further narrow the RIN equivalency advantage previously enjoyed by renewable diesel producers and improve the competitive position of biodiesel producers, including ourselves.

To that end, through early November, we have booked orders for more than 9% of our fourth quarter biodiesel production capacity, well ahead of prior expectations. That incredible visibility for our business provides us a good sense as to what 2027 could look like for our biofuel segment.

Even so, despite higher utilization sales volumes and price capture in the biofuel segment, the combined impact of elevated feedstock costs and derivatives losses resulted in a segment gross loss in the period. Worth noting, however, is the fact that we expect to sell $1.5 million of RINs generated from the third quarter biodiesel production and to recover $2.3 million in derivative losses tied to corresponding sales of physical inventory during the fourth quarter.

In our core Chemicals segment, extended maintenance at dedicated process units for 2 separate customers reduced sales volume by 27% versus the prior year period. At customer A, we pulled forward a planned turnaround on a dedicated production unit after the customer announced it would temporarily pause its normal order cadence to rebalance inventory levels. Importantly, customer A has expressed its intent to resume normal order cadence in November and its scheduled turnaround work has since been completed.

Further, it should be noted that customer A has committed $41 million of customer-funded growth capital investment at Batesville between 2026 and 2028 as they seek to leverage the optionality afforded by our site. They are an excellent partner, one that highly values our value proposition, and they remain highly committed to producing with -- proceeding with investments being made at Batesville.

Even so, the turnaround at the customer production unit, together with a separate turnaround at customer B, another long-term customer weighed on throughput rates within the Chemicals segment in the period. Lower production rates with Chemicals segment impacted operating leverage in the third quarter, resulting in a drag on profitability. Together, these events reduced third quarter adjusted EBITDA by approximately $4.3 million. Importantly, in a period of short-term disruption, we controlled the controllables. Overall production units produced on plan, costs were controlled, growth initiatives moved forward as planned.

Our operational rhythm was unchanged even as we adapt to short-term headwinds that we've since resolved. With both turnarounds within our chemical business completed and no major planned maintenance scheduled through the first quarter of 2027, we're positioned for a solid end to 2026 and a strong start heading into next year. Before I hand the call over to Rose for a brief overview of our third quarter results, I wanted to share an update on the meaningful progress we're making in advancing our strategic value creation priorities.

At FutureFuel, we have 3 pillars of value creation --commercial growth, operational excellence and returns-driven capital allocation. In application, our value creation road map is focused on accelerating quote-to-order conversion across the chemicals opportunities pipeline, expanding production volumes with existing customers as we deepen our integration into their supply chains, capitalizing on reshoring opportunities as European chemical producers increasingly evaluate the benefits of our cost-advantaged U.S. manufacturing footprint where natural gas costs remain substantially below those in Europe. Upgrading waste streams into higher value-added products to improve average selling prices and margins, restoring our biodiesels business to optimal production rates as market conditions continue to improve, consistent with what we experienced in the third quarter.

Importantly, we're not simply focused on these priorities. We're executing on them as we speak. Beginning with the commercial focus. In the third quarter, we established new relationship with a large European chemicals company that's reshoring production to the United States to better serve its customers and capture the cost advantages of U.S. manufacturing. Natural gas prices in Europe remain several times higher than those in the U.S., creating a significant structural cost disadvantage to European chemicals producers and making continued production increasingly uneconomic amid broader operating cost inflation.

FutureFuel offers a turnkey cost competitive domestic manufacturing solution for chemical producers seeking to reshore production from overseas to the United States, leveraging our established infrastructure, specialized technical expertise and scalable production capabilities. We expect to begin initial batch production with this customer in the first quarter of 2027 and to reach full production rates mid-2027. Operationally, we recently launched the productivity initiative to improve efficiency and optimize our cost structure.

Working with third-party advisers, we have identified multiple near-term opportunities to improve efficiency at Batesville, including refining waste streams into higher value-added products. Glycerin, our biodiesel waste stream can be refined and sold for roughly 3x the per gallon value of unrefined glycerin that comes up the biodiesel stream at minimal incremental cost to us, representing a potential opportunity to us of $5 million to $10 million beginning in 2027.

In an inflationary environment, we also continue to pass through higher energy material and labor costs under the customer agreements that provide us cost indexing. You'll hear more about the cost actions being taken in our business over the coming quarters. We're early days, but the opportunities are significant. Our capital allocation priorities remain unchanged with an emphasis on disciplined return-driven investments designed to maximize long-term shareholder value.

We will continue to prioritize customer-funded investments at Batesville and the working capital needed to support feedstock purchases while maintaining flexibility for a return of capital priorities. A note on liquidity. We're very focused on building our cash position back to $50 million over the next year.

Working capital for feedstock purchases remain elevated, which has created a significant draw on available liquidity. It isn't a surprise to us, and we're ready for it, but it also means that we intend to measure our approach towards share repurchases and/or increasing the cash dividend until further -- we further bolster the balance sheet, which we'll fully intend to do.

One final comment around customer-driven capital investments. This year, customer-funded growth capital was $16.1 million or approximately 50% of our total CapEx. Between 2028 and 2029, we currently expect customers to invest another $15 million to $20 million in our Batesville site. As we mentioned in the past, these third-party investments not only make us more valuable to our customers, they entrench the relationship, creating an uncommonly highly synergistic partnership. As the only domestic specialty chemicals platform that combines decades of technical expertise, complex chemical synthesis capabilities and integrated cost-competitive U.S. production platform, the value of our business is very clear.

Our customers rely on us not simply as a supplier, but as an extension of their manufacturing operations, allowing them to reduce capital intensity, maintain stringent quality standards and reliable scale production. From there, we will focus on building a leaner, more profitable business that delivers greater operating leverage over time. New customer acquisition and growing share of wallet with existing partners will drive the opportunity, but cost rationalization will be critical important as well. It's an exciting time for the business, and we appreciate the partnership of our partners, customers and shareholders as we move into a new phase of value creation. With that, I hand the call over to Rose for her prepared remarks.

Thank you, Roeland, and good morning to all those joining us. Today, I will provide a high-level overview of our third quarter financial performance, including a discussion of our balance sheet and liquidity profile at quarter end. Total revenue increased 361.3% to $104.7 million during the third quarter, up from $22.7 million last year. The $82 million increase comprised $36.3 million from volume and product mix and $45.7 million from pricing, principally in the Biofuel segment.

Total gross loss was $5.4 million during the third quarter of 2026 versus a gross loss of $6.5 million during the third quarter of 2025. Third quarter results include $8.7 million of net derivative losses comprising $8.3 million of realized losses and $0.4 million of unrealized losses. Included in realized derivative losses is $2.3 million associated with physical inventory not yet sold, which is expected to be recovered in the fourth quarter. At September 30, the company held approximately $0.7 million internally generated RINs with a value of $1.5 million for delivery in the fourth quarter. The related sales benefit was not included in third quarter results and will be recognized when those RINs are transferred.

The company reported a net loss of $8.4 million during the third quarter of 2026 versus a net loss of $9.2 million in the third quarter of 2025. Adjusted EBITDA was a loss of $4.9 million during the third quarter of 2026 versus $5.3 million loss during the third quarter of 2025. Turning to the Chemicals segment. Segment revenue was $16.9 million in the third quarter of 2026, up 8.6% from $15.6 million in the third quarter of 2025.

The increase reflected contribution from higher volume and product mix. Custom chemical revenue was $13.3 million, down 8% from $14.5 million a year ago, primarily due to delayed shipments as a large customer rebalanced inventory and production downtime for a second customer during an extended scheduled turnaround.

Performance Chemical revenue was $3.6 million, up 223% from $1.1 million a year ago, primarily due to higher volumes from a new customer that began production in the fourth quarter of 2025 and from higher glycerin sales. Gross profit was $4.4 million compared to a loss of $4.1 million in the third quarter of 2025. The improvement was driven by higher sales volumes in the energy market and lower indirect fixed cost absorption from operating infrastructure with strong biofuel volumes, partially offset by the customer disruptions Roeland described previously.

Business momentum in the Chemicals segment continued to build despite temporary volume disruptions in the third quarter as evidenced by recent customer wins and a robust project pipeline. Chemical segment capacity utilization was 32% in the third quarter of 2026 compared to 55% a year ago period. Following recent capacity expansions and debottlenecking activities, the company anticipates fourth quarter Chemical segment level capacity utilization above prior year levels.

For the Biofuel segment, revenue was $87.8 million in the third quarter of 2026 compared to $7.1 million in the same period last year. The increase was driven by greater regulatory clarity, record high renewable volume obligation levels and strong operational execution during the quarter. The Biofuel segment reported a gross loss of $9.8 million in the third quarter compared to a gross loss of $2.4 million in the prior year period. As Roeland discussed, significantly higher sales volumes and stronger pricing realization were more than offset by elevated input costs and increased plant operating and fixed manufacturing expenses compared to shutdown holding costs in the prior year period. The third quarter gross loss included hedging losses of $2.3 million, which are expected to be offset when the underlying physical commodity positions are sold in future periods and $1.5 million of RIN inventory will benefit Q4 when sold.

Market conditions in the biofuel segment have improved meaningfully on a year-to-date basis following improved regulatory clarity around domestic renewable fuel blending obligations, tax incentives and the treatment of domestically produced biofuels. Biofuels capacity utilization increased to 83% in the third quarter versus 56% in the second quarter, and sales volumes are expected to remain high entering the fourth quarter and into 2027. While demand conditions are expected to remain robust over the near to medium term, input costs for soy oil and other raw materials remain elevated, which is expected to impact Biofuel segment gross profit per gallon sold over the near term.

Turning to a discussion of cash flow, balance sheet and liquidity. As of September 30, 2026, the company had total cash and equivalents of $21.3 million, down from $34.3 million at June 30, 2026, and a $35 million revolving credit facility with no outstanding borrowings. The decrease in total cash during third quarter of 2026 was related to the operating loss in the third quarter of 2026, increased working capital requirements and capital expenditures to support growth.

Net cash used in operations was $10.3 million in the third quarter compared to a use of $1.1 million in the prior year period. Capital expenditures were $3.3 million in the third quarter, including $0.6 million and $2.7 million related to maintenance and discretionary programs, respectively.

In the first 9 months of 2026, approximately 74% of the $2.7 million in discretionary capital expenditures were customer-funded investments related to capacity expansions and new customer programs. That concludes our prepared remarks. Operator, we are now ready for the question-and-answer portion of our call.

[Operator Instructions] Our first question comes from the line of Jason Tilchen with Canaccord Genuity.

I guess to start, I wanted to dive a little bit deeper on the reshoring opportunity and the new relationship that you referenced with large European chemicals customer. Can you give us a little more background about how that relationship came about, the sort of timing and magnitude of the contribution that this customer is going to provide in 2027? And then more broadly, maybe how you're thinking about additional reshoring opportunities in this sort of serving as a proof of concept, if you will?

We have seen particularly over the last year, a significant uptick in inquiries from European chemical producers that service U.S. customers from European production. And that's how this opportunity came about. This customer approached us knowing that we have capabilities here in Batesville to make complex chemistries. They are importing product from Europe today where it's become economically not feasible to do so anymore and have chosen us to build a production line on the Batesville site in order to pick up that production.

So we see a number of these inquiries coming in. It's definitely picked up significantly. It probably is an even bigger opportunity than the reshoring activity from China and India. And we anticipate that this won't be the last customer that we see looking to reshore. So this is -- it's a meaningful impact on our bottom line. or a material impact on our bottom line. But really, the bigger impact here is going to be the other opportunities that are coming our way with respect to reshoring to the United States.

Okay. Great. That's really helpful. And you mentioned in the prepared remarks, this glycerin opportunity. Just wondering if you could just talk about some of the operational milestones also commercially for you to capture this opportunity, what sort of maybe the CapEx will look like and how quickly you can reach that run rate of $5 million to $10 million of incremental profit that was referenced.

Yes. So in all transparency, we refined a small amount of glycerin before. We have a modest -- very modest amount of CapEx that we are putting into this in order to convert more equipment to take crude glycerin to refined glycerin. So less than $1 million in CapEx to build this additional capacity. And what really is driving this is the margin expansion that we've seen in refined glycerin. So refined glycerin has seen significant upside in market pricing to the point where this became an almost no-brainer project for us to go execute. And we'll be up and running by, I'd say, the end of Q4, and we'll be running all through 2027.

Great. That's very helpful. And one last one for me, if I can sneak it in. We saw a pretty big significant shift in the political wins last week with midterm results. Curious if FutureFuel has any expanded thoughts on how that outcome may impact the business, either directly or indirectly, how the regulatory backdrop may evolve? Anything like that would be very helpful.

Yes. We don't really see a tremendous amount of shift in how that's going to affect our business, right? So the -- let's go to our biofuels business. So our biofuels business is really supported by both Republican party as well as the Democratic party. It includes farmers. It includes sort of the heartbeat of America. And both parties have been very favorable to that portion of the economy. And so we don't anticipate there to be a major change.

You know that we have regulatory clarity all the way through the beginning of 2030, really the end of 2029. We see no reason why that shouldn't continue beyond that. And that really has driven the upside, by the way, in our biofuels business, right? We are completely -- almost completely booked for Q4. We've seen a great uptick in that, and that's really because of that clarity. We don't think that the clarity is going to go away regardless of party that is in office or has control.

Our next question comes from the line of Jeff Van Sinderen with B. Riley.

Just wondering if we can chat a little bit about the elevated input costs. Maybe you can walk us through how you're offsetting those as we think about the metrics improving in Q4.

Yes, I can start, and Rose will certainly jump in here as well. So the elevated -- we look at the biofuels business, right? We look at it as a spread business. So we look at -- regardless of the input and the sales price, we look at generating a certain amount of spread. And that spread actually has been higher than what we had expected in the beginning of the year. It's been pretty healthy. But as diesel prices have been elevated, significantly elevated, so have been the prices for the inputs. So, bean oil that is one of our primary inputs has been at all-time highs. And a lot of the other fats and greases that we use to make biodiesel have been at all-time highs. Now I will tell you that we start -- we have started seeing a moderation of these inputs and particularly the inputs that -- maybe to step back, right? So FutureFuel is a very unique position to be able to run a multitude of inputs.

The way that we are set up as a chemical plant that makes biodiesel, we can take a wide variety of inputs. And all inputs were high. What we're starting to see now is that the -- that there's a larger group of inputs starting to relax in pricing, including bean oil, but also some of the animal fats that previously had not been available to us. So we think that, that environment will improve as we go into Q4. We see it improving as we go into Q4.

Yes, you've highlighted that very well. And I would say effective 1/1/27 also, we will have an equivalency factor benefit where our competitors' renewable diesel will be equivalent to our 1.5 D4 RIN. And so that will help as well close the margin. There's also the timing issue. We mentioned on our call just a moment ago in our comments that we had some timing differences of $2.3 million on our derivatives. And so that will benefit the physical gallons moving in Q4 of $2.3 million and then another $1.5 million on separated RIN sales. We generated them in Q3, but they were sold to deliver in Q4.

Okay. And then I know you mentioned visibility with some of the new wins you have. Obviously, some of the European reshoring, I would think, would help. But maybe just frame a little bit. I know it's early, but as we think about 2027, is there a way to have a sense of what -- how margins could evolve in 2027?

Sure. Yes, I would actually -- I would say Q3 was an atypical quarter, right? So if you think about -- we had a turnaround that took longer than anticipated. Then we had an inventory adjustment for what we call customer A, and it was about $4.3 million of EBITDA that we left there. We think that, that was atypical. Q4, we feel is coming back a lot more to a more typical operating rate of our plant and a more typical EBITDA generation.

And then going into 2027, I'll remind you of 2 things. The first one is we bought this -- we built this large methacrylate plant that we ran this year at 50% that next year, we're going to run at probably closer to 70% capacity utilization, that's new capacity. And then the customer that took the inventory adjustment this year is the same customer that's investing $41 million. And some of that is debottlenecking, which will come on next year.

And then there's a significant step-up in production capabilities end of 2027 into 2028. So it's the European onshoring. So we'll see more of that in terms of conversion out of the pipeline in 2027. But it's the actual investments that we made last year and the investments that are being made now, the customer funded investments that's going to drive volume upside into 2027.

We have reached the end of the question-and-answer session. I'd like to turn the floor back over to management for closing comments.

Yes. Thank you very much for calling in. Thank you very much for your interest in FutureFuel. We feel strongly about our business. We feel very strongly that this business is on a trajectory upwards, and we look forward to hosting you on the next quarterly investment call. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Greetings, and welcome to the FutureFuel Second Quarter Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Rose Sparks, Chief Financial Officer. Please go ahead.

Thank you. Good morning, and welcome to the FutureFuel Second Quarter 2026 Results Conference Call. Leading the call today are our Chairman and CEO, Roeland Polet; and I'm Rose Sparks, the company's Chief Financial Officer.

After the close of U.S. trading yesterday, we issued a press release detailing our second quarter operational and financial results. This release is publicly available in the Investor Relations section of our corporate website at www.futurefuelcorporation.com.

I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results could differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest reports filed with the SEC.

Additionally, please note that you can find reconciliations of all historical non-GAAP financial measures mentioned on this call in the press release issued this morning. Today's call will begin with prepared remarks from Roeland Polet, who will provide a business update, followed by my review of our second quarter financial performance. At the conclusion of these prepared remarks, we will open the line for questions.

With that, I'll turn the call over to Roeland.

Thank you, Rose, and good morning, everyone. Thank you for joining our call today. Again, I am Roeland Polet, Chairman and Chief Executive Officer of FutureFuel. I joined the company nearly 2 years ago following more than 35 years in the specialty chemicals industry, including senior leadership roles at global manufacturing companies such as Valspar, Celanese and DSM-Firmenich.

Since joining FutureFuel in the late 2024, I've had the privilege of working alongside our more than 500 dedicated employees to position the business for a new chapter of profitable growth and long-term value creation. Over that period, we have strengthened the foundation of the company, sharpened our strategic priorities and developed a clear roadmap for the future, which I will be discussing in greater detail today.

This is FutureFuel's first quarterly results conference call with investors in more than a decade. With that in mind, my remarks today will serve as a reintroduction of the company, who we are, what we do, how we are competitively differentiated and the opportunities we see to create meaningful shareholder value over time.

Going forward, our leadership team is committed to providing shareholders with greater access, transparency and insight into our business. The resumption of quarterly investor conference calls is an important step in that commitment and reflects our intention to engage more consistently with the investment community.

With that introduction and given that this is our first conference call together, let's begin with a high-level overview of our business for those less acquainted with us.

FutureFuel is a 100% U.S.-based manufacturer operating through 2 distinct businesses: Specialty Chemicals and Biofuels, both are supported by our approximately 2,200-acre manufacturing complex in Batesville, Arkansas, where we combine product development, engineering, and commercial production on one integrated campus. The Batesville site has supported complex chemical manufacturing for approximately 50 years and represents an established operating platform that will be difficult to replicate where it builds today, given factors of scale, permitting and production unit complexity.

Our Chemicals business has 2 primary areas of focus: custom chemicals manufacturing for third parties together with proprietary specialty chemicals manufacturing. In custom manufacturing, we work closely with customers to develop scale and commercially produce specialized products under long-term production agreements. Our proprietary portfolio involves the production of our formulations using our own IP, which are then sold into a variety of different applications. The total production capacity of our chemicals operations is approximately 250 million pounds annually.

Our Biofuel business manufactures biodiesel from the same Batesville complex, which has approximately 60 million gallons of annual biodiesel production capacity. The business benefits from significant feedstock optionality, which allows us to optimize production economics. While biodiesel economics differ from those of our Specialty Chemicals segments, and are more influenced by commodity and regulatory conditions, the Biofuel segment serves as a complementary business to our core specialty chemicals focus serving future optimized, the Batesville complex, while facilitating economies of scale.

Next, let's walk through our unique value proposition and why we win in the markets we serve. Our primary competitive advantage is a scale, integration and technical depth of our Batesville complex. When a chemical customer comes to us, we provide them with one integrated site that includes state-of-the-art laboratories, engineering resources, flexible manufacturing units, wastewater treatment, logistic infrastructure permits and experienced technical teams.

Our platform allows customers to move from development to commercial production with fewer handoffs, lower execution risk and more capital-efficient production options. We offer a one-stop shop solution that is difficult to replicate within the continental United States, positioning us as an attractive reshoring play for chemicals customers who want to avoid supply chain risk associated with sourcing key formulations from overseas partners.

While the integration of the Batesville asset is itself a major draw for customers, our deep technical expertise and experienced skilled workforce are another integral piece of our overall value proposition. At Batesville, our teams manage production, raw material procurement, production quality and formulation consistency across batch and continuous processes. We have built a strong reputation for being the go-to production partner on complex, technical demanding programs that customers may not be able to manufacture efficiently themselves. In regard to our value proposition, it centers on reducing technical, operational and supply chain risk for the customer.

A typical relationship begins with customer bringing us molecule process or manufacturing challenge. We then evaluate the chemistry, safety requirements, production economics and equipment needs, then work through development and scale up before entering commercial production. As we demonstrate value, the relationship may expand through additional volumes, longer contracts, new products or customer-funded capacity because changing manufacturers can require requalifications, audits, process transfer and production risk. Customer programs are often multiyear engagements, creating long-term stickiness within the customer base.

To that end, the average relationship of our top customers in 2025 was more than 15 to 20 years, highlighting the long-term nature and stickiness of our customer relationships.

Before I walk us through what's next for FutureFuel, it is important to provide some perspective around the challenges we faced over the last several years. How we've responded to those challenges and why we were excited about, what comes next for the organization.

In the years leading up to 2026, there were 3 primary factors that impacted our operation and financial performance: Plant and production reliability, regulatory certainty around biofuels economics, and elevated raw material input costs.

Beginning with plant reliability. Over the past 2 years, we have made strides to improve the plant process, enhancing the site safety and driving higher site utilization through executing on a number of high-impact capital projects. As I'll discuss shortly, we are encouraged by the improvement utilization of Batesville in the first half of the year.

Second, with respect to the regulatory environment, we, together with the broader biofuels industry were granted much needed relief with a new set of 2 RFS volume mandates issued by the EPA in March of 2026.

Under the new mandates, the EPA established the highest blending mandates in the program's history, targeting a 60% increase over 2025. To meet the 2027 volume targets existing U.S. domestic biofuels production levels are expected to reach peak capacity, which we expect will benefit us. Further, also during the first quarter of 2026, the U.S. Treasury Department and Internal Revenue Service issued regulations providing expanded guidance on a 45Z credit integrating changes from the budget Reconciliation Act of 2025. The rule is expected to help level the competitive environment for biodiesel by reducing the tax credit for SAF from $1.75 per gallon to $1 per gallon effective January 1, 2026. Requiring that all feedstocks be sourced from North America and requiring for biomass-based diesel and extending the 45Z credit for additional 2 years through year end 2029. Rose will speak more on how this benefits our business model shortly.

Finally, while both plant reliability and regulatory environment has improved meaningfully for us, raw material input costs remain elevated, which remains an area of focus for us.

Looking ahead, our value-creation road map centers on 3 key pillars, including commercial growth, operational excellence and a return-centric approach to capital allocation. Within our commercial growth pillar, our first priority is to increase penetration of key existing accounts as well as scale production volumes across the Batesville complex. We are focused on expanding the specialty chemicals pipeline, converting development products into commercial production and securing additional volumes from existing customers.

We will also pursue new custom manufacturing contracts and expand our proprietary chemicals portfolio into adjacent products and end markets for our technical capabilities and our existing infrastructure provide a clear advantage.

However, our objective is not simply to add volume. We intend to pursue programs that accelerate our shift towards higher value-add sales mix, whereby we capture ratable growth in margin realization within durable reoccurring revenue streams. By applying greater commercial discipline, we can concentrate our resources on the customers and opportunities with strongest potential to deliver profitable growth through the cycle.

Within our operational excellence pillar, we will seek to improve cost efficiency, utilization, safety, reliability across the Batesville complex. Higher sales volumes create value only when we can manufacture those volumes safely, consistently and an appropriate unit cost. We are therefore focused on plant reliability, production, scheduling, procurement, energy efficiency, maintenance practices and process productivity. We also intend to make operating performance more measurable and transparent by tracking metrics such as capacity utilization, plant uptime, safety performance and unit product costs, we can and will identify opportunities for improvement and hold the organization accountable for those improving results.

Finally, with respect to our capital allocation pillar, organic reinvestment will remain the top priority where products are supported by identifiable customer demand, including contractual commitments. Where appropriate, we will continue to seek customer-funded capacity expansions, while strengthening long-term commercial relationships. We will also evaluate complementary acquisition, particularly opportunities to add intellectual property, proprietary products or specialized capabilities that can be integrated into our Batesville platform. Any acquisition will strengthen our competitive position and meet disciplined financial return requirements.

Beyond reinvestment and acquisitions, we will continue to evaluate cash dividends and opportunistic share repurchases as part of a balanced approach to returning capital to shareholders. Taken together, each of the pillars of our strategic roadmap are designed to drive higher sales volumes, more efficient operations and stronger returns on invested capital. By growing selectively, operating more efficiently and allocating capital with discipline, we intend to produce more consistent earnings, cash generation and long-term shareholder value.

Turning now to a review of our second quarter results. The second quarter marked a return to profitable growth for FutureFuel, a performance driven by strengthening end market demand, improved production economics, continued cost discipline and enhanced optimization of our Batesville plant. At a strategic level, we remain highly focused on driving safe, reliable operations across the organization, while continuing to pursue customer co-investment in new capacity and capabilities as we seek to further accelerate growth within our core specialty chemical contract manufacturing markets.

As before, we remain on pace to deliver positive, adjusted EBITDA for the full year in 2026. At an operational level, total production increased 26% on a year-over-year basis in the second quarter, supported by broad-based demand growth across our specialty chemicals and biofuels end markets. Both segments generated positive gross profit per unit sold in the period and continue to exhibit strong operational momentum entering the second half of 2026.

Total Chemical segment production increased 34% year-over-year in the second quarter as increased demand across the energy and industrial end markets drove broad-based strength in both performance and custom chemical manufacturing. Chemicals gross profit was $5 million in the second quarter versus $1.1 million in the year ago period, reflecting improved volume throughput and stronger margin realization.

Biofuels segment production increased 21% year-over-year in the second quarter despite the impact of a more than 3-week biodiesel plant outage during the period as improved regulatory clarity and mandated renewable fuel production targets for 2026 and 2027 incentivized domestic production.

Biofuels gross profit was $10.1 million in the second quarter versus a gross loss of $13.5 million in the year ago period, reflecting improved plant reliability, higher throughput, better production economics, including a timing benefit related to ongoing biofuel hedging activities.

Our biodiesel production continues to ramp higher with third quarter production rates expected to exceed second quarter levels. Looking ahead, demand continues to remain robust across our chemicals and biofuel segment. While elevated input costs may continue to represent a near-term headwind for our business, we believe that our 100% domestic production footprint, deep technical expertise within specialty chemical manufacturing, capital-light approach to growth and long-term collaborations with world-class customer position our business for continued positive momentum.

With that, I'd like to hand the call over to Rose for her prepared remarks.

Thank you, Roeland, and good morning again to all those joining us. Today, I will provide a high-level overview of our second quarter financial performance, including a discussion of our balance sheet and liquidity profile at quarter end. Please note that the prior year comparisons have been adjusted to conform to the weighted average method of inventory costing adopted by the company January 1, 2026.

Total revenue was $78.7 million in the second quarter of 2026, an increase of 120.7% compared to $35.7 million in the second quarter of 2025. The increase in revenue was driven by higher throughput and improved revenue volume mix and higher average pricing in both the Chemical and Biofuel segments. Total volume growth was 40.4% during the second quarter of 2026, while average blended price increased by 80.2%.

Total gross profit was $15 million during the second quarter of 2026 versus a gross loss of $12.4 million during the second quarter of 2025. Second quarter gross profit benefited by $9.1 million related to the sale of physical inventory at prices above hedge levels, which fully offset realized derivative losses of $9.1 million recognized during the first quarter of 2026. Gross profit was benefited by unrealized derivative gains of $3.2 million during the second quarter of 2026. Excluding the derivative impacts, the year-over-year improvement in gross profit was driven by higher throughputs, improved price realization in both Chemicals and Biofuel segments.

We reported net income of $11.4 million during the second quarter of 2026 versus a net loss of $14.2 million in the second quarter of 2025. Adjusted EBITDA was $11.8 million during the second quarter of 2026 versus a loss of $11.4 million during the second quarter of 2025.

Turning to the Chemical segment. Chemical segment revenue increased $25.8 million during the second quarter of 2026 compared to $16.6 million in the second quarter of 2025. The increase was primarily driven by a 49% increase in volume product mix effects and a 6% benefit from higher average prices.

Custom Chemical revenue increased $18.5 million during the second quarter, up 30% from $14.3 million last year, primarily due to higher volumes of products sold to energy customers.

Performance Chemical revenue of $7.3 million during the second quarter was up from $2.4 million last year, primarily due to increased volumes for a new customer that began production during the fourth quarter of 2025. Chemical segment gross profit was $5 million during the second quarter of 2026, an improvement from $1.1 million in the second quarter of 2025. The improvement was driven by increased sales volumes in the energy market, including the new product revenue brought online in the fourth quarter of 2025 as well as increased fixed price absorption driven by the improved biofuel volumes.

Market conditions within the Chemicals segment continued to improve during the second quarter as demonstrated by improved capacity utilization, higher pricing and a growing pipeline of project activity. During the last 12 months, we've increased total chemical production capacity by 12% and expect to achieve continued improved operating leverage as production scales from current levels. Chemical segment capacity utilization improved to 65% during the second quarter of 2026, up from 54% in the prior year period.

Biofuels segment revenue increased $52.9 million during the second quarter of 2026 compared to $19.1 million in the same period last year. The increase was primarily driven by increased regulatory clarity, surrounding the Clean Fuel Production Credit and record high RVO levels.

Biofuel segment gross profit for the second quarter of 2026 was $10.1 million compared to a gross loss of $13.5 million in the prior year period, reflecting meaningful improvement driven by higher sales volumes and stronger price realization, while we continue to benefit from significant feedstock optionality, elevated input costs have partially offset the favorable pricing environment for finished products.

As previously disclosed, we recognized a $9 million hedging loss in the first quarter of 2026, and second quarter results reflect corresponding benefit of a similar magnitude as the underlying physical inventory was sold, and those previously recognized hedging costs were recovered.

Market conditions within the Biofuel segment continued to improve during the second quarter of 2026, given a favorable regulatory environment. Biofuel capacity utilization improved to 56% during the second quarter and sales volumes are expected to further improve during the second half of 2026, given improved regulatory clarity. Input costs for soybean oil and other raw materials used in the production of biofuels remain elevated, which is expected to have a continued near-term impact on Biofuels gross profit per gallon sold.

Turning the discussion to cash flow, balance sheet and liquidity. Net cash flow from operations was $18.8 million in the second quarter of 2026 compared to $5.2 million in the prior year period. Capital expenditures were $8 million in the second quarter, including $2.9 million of maintenance-related expenditures and $5.1 million of discretionary programs. In the first 6 months of 2026, capital expenditures were $13.4 million, including $4.1 million and $9.3 million related to maintenance and discretionary programs, respectively. Of the discretionary capital expenditures in the second quarter and the first 6 months of 2026, approximately $1.9 million and $3.5 million, respectively, were customer-funded investments related to capacity expansions and new customer programs.

As of June 30, 2026, the company had total cash and cash equivalents of $34.3 million up from $22.4 million at March 31, 2026, and a $35 million revolving credit facility with no outstanding borrowing. The increase in total cash between the first quarter of 2026 and the second quarter of 2026, was related to the reported operating profit in the second quarter of 2026 and customer funding related to custom chemical contract, partially offset by increased working capital requirements related to new program activity and capital expenditures to support growth.

During the second quarter, we secured a 4-year agreement with a third party to monetize Section 45Z Clean Fuel Production and Small Producer Tax Credits, consistent with our continued focus on balance sheet optimization. During the second half of 2026, we expect to receive $22 million in gross proceeds from the monetization of credits including approximately $3 million in the third quarter and $19 million in the fourth quarter.

That concludes our prepared remarks. Operator, we are now ready for the question-and-answer portion of our call.

[Operator Instructions]

Our first question is from Jeffrey Grampp with Northland Capital Markets.

Roeland, I was curious -- sure. I was curious to circle back on some of the comments you made about the improvements to plant performance and that being kind of a focus over the last couple of years for you guys. I'm curious if you could kind of contextualized things, I don't know, from the innings in a baseball game standpoint, maybe or whatever analogy you prefer, like where are we at in that kind of improvement cycle? Are we at where you guys want to be at today? Is there more optimization initiatives to go? Just any context there would be helpful.

Yes. Very good. Yes, Jeff, I'm a soccer guy. So we're kind of at the first half in injury time with the second half still need to be played. So we've made significant improvements in the last -- let me take a step back. We have about $1 billion of invested replacement value assets here in Batesville. So we have a significant site with significant capabilities, significant infrastructure that support those capabilities. So we've chosen to invest in the infrastructure around our site, wastewater treatment, the chemical incineration, all the assets that we need, nitrogen that we need to keep the plant running, the site running.

And then our site contains a lot of manufacturing cells that are put here by our customers that need to be supported. So I think we're -- I'm not a baseball guy, so I'm not sure about innings, but I'd say we're about 60% of the way -- 60% to 70% of the way there on really going after the most important infrastructure to make sure it's secure, to make sure it's dependable. And then our next step will be driving investment into efficiency. So we have a number of projects that we rank based on the payback that we can get on them where we will deploy capital against those projects to gain further efficiencies, operational efficiencies in the plant.

Got it. Those are helpful details. And for my follow-up, with respect to 45Z monetization I wanted to clarify, does that -- the agreement that you guys discussed in the release, does that cover essentially all of your expected 45Z generation through 2029? Is there additional monetization to do? And any clarity, I guess, on the quantum of monetization throughout that contract period?

Jeff, this is Rose. So, yes, the that we have quoted is for 2026 and 2025. So there's approximately $3 million that we were able to cash in Q3. And then there will be an additional $19 million on a gross basis that we will cash in December of this year. So that's an annual monetization that will occur each year as we produce product and sell it.

Our next question is from Jason Tilchen with Canaccord Genuity.

Congrats on the strong results and for hosting the first call in quite some time. It's an honor to participate. One thing I was curious about, you mentioned focus on some of these very niche complex, dangerous chemistries that others maybe don't want to or can't produce on-site. Can you elaborate on some of those core competencies that allow you to take on these projects in a safe and compliant manner? And what are some of the ways either through pricing or long-term relationships that you're able to extract value from those capabilities?

Yes. And again, thank you very much for calling in. Our history dates back to -- and not to take you back too far, but dates back to the Kodak days. And this plant made photographic chemicals as well as was set up to make sort of precursors to the pharmaceutical industry. So it has a long history, and it was permitted to operate very complex chemistries and in certain instances, dangerous chemistries.

This was also the site that all chemistries for later on Eastman and all chemistries were proven at this site and were tested at this site to make sure that they can be run and we have extensive facilities to do that, to be run in the Eastman plant and now in the FutureFuel plant. So it has a history that it's permitted to run complex dangerous chemistries. There's a lot of permit head space. The equipment that was installed and then we have since then reinvested in a lot of this equipment was installed to handle those complex chemistries.

And we're sitting on 2,200 acres in the middle of Arkansas, where we have the permit capability, and we have the capability to expand even further to drive it. But it really goes back to our history as a plant that was purpose-built to make complex chemistries.

And then I'll add one point to that, because we're in the middle of Arkansas, we are very self-contained. So we have everything that we need here. We also have the R&D department, the testing department. We have everything that we need in order to support that production.

Great. That's very helpful overview. And in the release in the prepared remarks, you mentioned an agreement with one of your customers to fund an investment of more than $40 million over the next 2 years to support incremental capacity. Just wondering if you could maybe share a little more about how that relationship has evolved? And if that's one of those 15, 20 relationships or maybe it's a bit on the newer side? And then more broadly, are there other opportunities like this that you're currently evaluating? And if so, do those have to sort of happen consecutively? Can there be multiple projects similar to this that you're pursuing at once? Any color would be really appreciated.

Yes, those are great questions. So our business model, and we do biodiesel and we run chemicals, right? In our Chemicals division, we have some proprietary chemicals that we make for ourselves and we market. But the majority of our business is contract manufacturing. So where on our site under our permitting with the benefit of chemical incineration, with the benefit of oversized wastewater treatment and all that, our customers build plants. We call them plants, but they're really kind of small production cells, right, that they build on our site and take advantage of existing infrastructure that we have here, so the lowest capital cost for them, the complex and dangerous chemistry knowledge that we have.

So that is our business model. And so we made reference to a, expansion that we're doing. We're doubling or tripling the capacity in that expansion. But that is our business model with other customers. So we have a long pipeline, a healthy pipeline of customer product combinations that we're now in engineering phases to execute building of plants on our site that we then will operate on behalf of those customers. And that's exactly what our business model is in chemicals.

Okay. That makes a ton of sense. And just last one for me. You've guided to positive adjusted EBITDA in 2026. If you were to sort of fast forward 6, 7 months and you're talking about your full year results. Are there one or two things, either on the upside or the downside, if results come in above or below expectations, that would be sort of the key things that you can sort of see now that would either drive that upside or that downside relative to expectations?

Yes. Of course, we're like any other company, right, where we are not impervious to things that happen in the economy or shocks in the economy that will have an effect on us as well. We stick with our guidance towards profitable EBITDA year-end, having a profitable 2026. And there'll be some -- there will be some lumps in between that we work our way through if there's a shock in soybean oil, that could have a negative effect, the reversal of that is all our inputs in the biodiesel business are commodities. They are at all-time high. So we would expect them to start reverting back to more of the mean values, and that should have a positive effect in our business.

We are exposed to the oil and gas industry and the oil and gas complex. So the current geopolitical situation is somewhat beneficial to that. And if that continues longer, that should be beneficial, should that go away and oil prices come back down dramatically, that could have some effect on our business, right? So that's kind of how to think about it.

Our next question is from Jeff Van Sinderen with B. Riley Securities.

You mentioned sort of building out, I guess, you would call them production cells for customers on the chemical business. Just wondering if you can give us more color on what you're seeing there? Has there been an increase in incoming request to build out those cells? What does the time frame look like around those? And then how do you see that impacting revenue and profitability, say, over the next year or so for the chemical business?

So I will tell you there is something that's very positive about that business, something that could be frustrating about the business, right? So the positive news is -- but once you build these out, it tends to stay on the site and it doesn't leave. The frustrating part is there is lead times, right? There's 1.5 to 2-year lead times from starting the project to finishing the engineering, starting to build, we would have to modify part of our plants and build it and then start production.

So I'd say you have to think about lead times around 1.5 years to 2 years from the start of a project to -- and we have projects that are currently in the pipeline, so not all projects that we're working on at that full 2 years. And then once commercialized right? A lot of the capital is allocated by the customer to the projects or we will recover the capital over the life of a project. And the life of a project, you have to think about that they usually started about 3 years -- 3-year contracts, and they will often continue on to 5 to 6 years, if not longer. We have projects -- products that we've been making here for 20 years under those kind of contracts. But they take a little time to ramp up. There's an approval. It's -- they are critical processes. But once they are ramped up, they tend to stay here.

Okay. Great. And then I guess, if we can switch a little bit over to the gross margin outlook. Any more color or any sense you can give us on gross margin outlook for the rest of the year? And then overall, what sort of quarterly cadence do you anticipate for the remainder of the year, maybe versus Q2?

The quarterly cadence in terms of -- maybe you can clarify it a little bit?

Yes, sure. Just trying to get a sense of -- I mean, is your metrics were really good here. I'm just wondering, do you think we're going to see sequential growth? Do you think we see gross margins improve further, just trying to get a sense of any metrics we can -- without giving -- without asking you to give guidance, just any sense...

So maybe to give color, right, let's go to the biofuels, right? So biofuels, we are running at margins that are higher than what we had anticipated, yet our inputs remain highly elevated, right? So when you see announcements like I think it was ADM or Cargill bringing on more soybean crush capacity because there's a bit of a shortage in soybean oil, that's good news for us, right? So that at some point, needs to translate to lower unit cost or lower cost in soybean oil, right?

Record harvest for soybeans at some point will translate to lower input costs. So the margin levels that we enjoy today, we don't see anything on the horizon that will dramatically disrupt that. And then in biodiesel, the elements that drive that input cost on the biodiesel market would have you believe that there's going to be a reversion back to the mean in terms of the cost. So there should be some upside, right? We don't have that in our numbers. We're not projecting that. But that's how we kind of think about it.

There are no further questions at this time. I would like to hand the floor back over to Roeland Polet for any closing comments.

Yes. Thank you very much, everyone, for showing an interest in FutureFuel. We believe we have a great business here. We also believe that we need to be more transparent with our investor base, and we intend to do so through investor presentations and further calls. And with that, we look forward to welcoming you back on our Q3 call later in the year. Thank you.

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