REX American Resources - Earnings Call - Q1 2026

Executive Summary

• Q1 2026 revenue was $158.34M, down 1% sequentially and 9% below Q3 2025; diluted EPS was $0.51 versus $0.63 in Q4 2025 and $1.38 in Q3 2025, driven by lower interest income and softer DDG pricing, while ethanol pricing improved.
• The company delivered its 19th consecutive profitable quarter; management highlighted continued strength in core ethanol operations and active capital allocation with 822K shares repurchased for $32.7M (~4.7% of shares) in Q1 2026.
• Project updates: One Earth expansion completion targeted for 2026 (vs prior mid-2025), and EPA Class VI injection well permitting timeline extended from Oct 2025 to Jan 2026, with call commentary indicating a further extension to April 2026; combined capex budget held at $220–$230M.
• Balance sheet remains strong with $315.9M in cash, cash equivalents, and short-term investments and no bank debt, providing flexibility to fund growth and buybacks.
• Near-term stock catalysts: buyback continuation, clarity on EPA permit timeline and Illinois pipeline moratorium, ethanol export momentum; potential risk from natural gas and DDG pricing volatility.

What Went Well and What Went Wrong

What Went Well

• “We achieved our 19th consecutive quarter of positive earnings in our core ethanol business,” reinforcing operational consistency despite market variability.
• Ethanol pricing improved YoY, supporting gross profit stability ($14.3M in Q1 2026 vs $14.5M in Q1 2025); ethanol volumes were 70.9M gallons and ASP was $1.76/gal.
• Shareholder returns: repurchased ~822K shares for $32.7M at ~$39.80 average price, with 1.18M shares remaining authorized (~7% of outstanding).

What Went Wrong

• DDG pricing weakness pressured gross profit; dry DDG ASP was ~$145.65/ton, down YoY, and equity income fell; net income declined to $8.7M vs $10.2M in Q1 2025.
• Interest and other income decreased to $4.2M from $5.9M YoY, a key driver of lower EPS despite stable operations.
• Project timelines extended: One Earth expansion shifted to 2026 and EPA Class VI permit timeline moved out, introducing execution/permit risk dependencies.

Transcript

Operator (participant)

Greetings and welcome to the REX American Resources Corporation's First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Doug Bruggeman, Chief Financial Officer. Please go ahead, sir.

Doug Bruggeman (CFO)

Good morning, and thank you for joining the REX American Resources Q1 2025 conference call. With me on our call today are Stuart Rose, REX Executive Chairman, and Zafar Rizvi, REX CEO. We'll get to our presentation and comments momentarily, as well as your questions, but first I will review the safe harbor disclosure. In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements that involve risk and uncertainties within meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the company's current expectations and beliefs but are not guarantees of future performance. As such, actual results may vary materially from expectations. The risk and uncertainties associated with the forward-looking statements are described in today's news announcement and the company's filings with the Securities and Exchange Commission, including the company's reports in Form 10-K and 10-Q.

REX American Resources assumes no obligation to publicly update or revise any forward-looking statements. I'd now like to turn the call over to our Executive Chairman, Stuart Rose.

Stuart Rose (Executive Chairman)

Good morning, and thank you to everyone for joining us today. First quarter of 2025 demonstrated REX's continued operational excellence and strategic execution. We maintained our position as one of the industry's most consistent performers in the face of uncertain and evolving regulatory and market conditions. During the quarter, we saw stable ethanol demand and managed our production as we have in the past to capitalize on market conditions as we see them. The strength of our balance sheet continues to provide us with flexibility to pursue strategic opportunities while maintaining our disciplined approach to capital allocation. As always, we continue to evaluate potential acquisition opportunities that meet our strict operational and financial criteria. Both of our organic growth initiatives, carbon capture, and expansion of ethanol production capacity at One Earth continue to progress. For the remainder of the year, we anticipate moving these projects forward, controlling what we can.

Beyond operations, one of the duties we take very seriously at REX is delivering consistent value to our shareholders. To this end, we have continued the share buybacks that we have talked about on our last call. During the first quarter, we repurchased approximately 822,000 shares for a total consideration of $32.7 million during a period when our share price, we believe, was undervalued. Average purchase price for the repurchased shares was $39.80. This brings our buyback activity to approximately 6.8% of our outstanding shares since reinitiating purchases in December 2024. Currently, we have approximately 1,182,000 shares remaining on the buyback authorization, which represents an additional approximately 7% of outstanding shares. We plan to continue executing on the remaining share purchase authorizations when and where we see value. I'll now turn the call over to our CEO, Zafar Rizvi, to provide updates on our ongoing projects.

Zafar Rizvi (CEO)

Thank you, Stuart. Regarding our ethanol facility expansion in Gibson City, we are continuing a technical review of several key project components. This ongoing evaluation has already yielded valuable insights that we believe will enhance the long-term operational efficiencies of the expanded facility when materialized. During the first quarter, we maintained close coordination with the EPA regarding our Class 6 injection well permit. The EPA currently anticipates issuing a final permitting decision on our application by January 2026. In parallel, we are closely monitoring potential changes to the Inflation Reduction Act, particularly regarding tax credit provision for carbon capture projects, specifically 45Q and 45Z, which is related to a low-carbon fuel. The Big Beautiful Bill includes several proposed amendments that could impact our planning and future economic decisions.

In the 2025 Illinois legislative session, Senate Bill 1723 was introduced with an amendment defining the term "soil source aquifer." Under this definition, the bill would prohibit carbon sequestration activities above, below, or through such aquifers. The legislation is now under consideration by the governor. Most importantly, our proposed injection well sites, including our initial well and two additional locations, are situated approximately 6 mi outside the map boundary of the Mahomet Sole Source Aquifer, as defined in the bill. We view this as a positive development for our project. From the beginning, we have supported measures to protect vital drinking water resources and are committed to ensuring safety for our operations and the broader community. As of the end of Q1, our total investment in the carbon capture and ethanol expansion projects stands at approximately $122.7 million.

We remain within our revised combined budget range of $220 million-$230 million for both projects. I'll now hand the call over to Doug Bruggeman to discuss our financial results.

Doug Bruggeman (CFO)

Thanks, Zafar. During the first quarter of fiscal 2025, our ethanol sales volumes reached 70.9 million gallons, compared to 74.5 million gallons in the first quarter of 2024. The average selling price for ethanol was $1.76 per gallon during the quarter. Lower ethanol sales volumes in Q1 2025 were mostly attributable to timing of shipments, as our production was relatively stable between periods. Dry distillate grain sales volumes were approximately 153,000 tons for Q1, with an average selling price of $145.65 per ton. Modified distillate grain volumes totaled approximately 22,000 tons, with an average selling price of $73.44 per ton. Corn oil sales volumes were approximately 21.4 million pounds during the quarter, with an average selling price of $0.46 per pound. Gross profit for the first quarter was $14.3 million, compared to $14.5 million in Q1 2024.

This primarily reflects lower sales prices for dry distillers grain, somewhat offset by improved ethanol pricing. Selling, general, and administrative expenses were approximately $5.9 million for the quarter, compared to $6.1 million in Q1 2024. Interest and other income totaled $4.2 million for the quarter, compared to $5.9 million in the first quarter of the prior year. Income before taxes, non-controlling interest, was approximately $13.6 million, compared to $16 million in Q1 2024. Net income attributable to REX shareholders was $8.7 million, or $0.51 per diluted share, compared to $10.2 million, or $0.58 per diluted share in Q1 2024. The reduction was primarily attributable to lower cash balances and interest income rather than operations. We ended the first quarter with cash, cash equivalents, and short-term investments of $315.9 million. The reduction from the previous quarter primarily reflects our ongoing capital investments in growth projects and share repurchases.

As previously announced, we remained active in our share repurchase program during Q1, acquiring approximately 822,000 shares for a total consideration of $32.7 million. This reflects our ongoing commitment to delivering shareholder value and our confidence in REX's future prospects. REX continues to maintain its strong financial position with no bank debt. I'll now turn things back to Zafar.

Zafar Rizvi (CEO)

Thank you, Doug. The REX team continued to execute on the three Ps I discussed on our last call. First, profit. Our ongoing goal is to run a profitable business. Despite market ups and downs, our team has consistently demonstrated their ability to overcome challenges and deliver strong financial results, quarter after quarter. For our shareholders, notably, the first quarter marked REX's 19th consecutive profitable quarter. Second, position. We have strategically positioned ourselves for organic growth. Funded entirely by our own strong balance sheet, our ethanol expansion and carbon capture and sequestration projects, we are focusing on what we can control and making investments to optimize our future operations. We are committed to building REX's long-term strength. Finally, policy. On the policy front, we continue to monitor developments closely at both the federal and state levels.

While many outcomes remain uncertain and outside our control, we believe we are well-informed and well-prepared to respond to any policy shifts that do arise. Our overall market conditions, particularly those that supported the ethanol sector in 2024, remain favorable. Ethanol exports in March 2025 were up 23% compared to March 2024. Cumulatively, U.S. ethanol exports through March 2025 were nearly 19% higher than during the same period in 2024, according to the Renewable Fuel Association. Following a strong first quarter, we are seeing stable performance in the second quarter and expected another profitable result. Now, I would like to open things up for questions. Operator.

Operator (participant)

Thank you. Ladies and gentlemen, if you would like to ask a question, please press Star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the Star keys. One moment, please, while we pull up for questions. Our first question comes from the line of Peter Gastreich with Water Tower Research. Please proceed.

Peter Gastreich (Managing Director and Energy and Sustainability Analyst)

Good morning, gentlemen, and thanks for taking my questions. It's great to hear the progress on the share repurchase program. For starters, congratulations on your results and on your 19th consecutive quarter of profitability. That consistent profitability is something that has eluded some of your peers, and it's not just profit. You've been generating superior returns on capital as well. I'd just like to ask, what drives REX's ability to consistently deliver this performance? Could you please discuss what it is about your strategy? Is it the cost control, logistics, or other factors at play? Thank you.

Stuart Rose (Executive Chairman)

Do you want me to answer that? Our CEO has a lot to do with it. We have the top CEO, in my opinion. This is Stuart talking. In the industry, he watches everything very, very closely. He watches the corn prices. He watches the ethanol. Very few CEOs, or very few people at his level, get down to the details that he does. On top of that, we have good locations and very, very good people that we have set up in each of our plants that have, I think, separated us from the pack. I'll let Zafar expand on what I'm saying, but the big difference is our people.

Zafar Rizvi (CEO)

Yes, I agree. I think the big difference is our people. We have a team. We communicate well. We exactly know what's happening day to day. We have a spreadsheet to monitor how the market is moving up and down, and we try to reach our targets. When we meet our targets, we will try to lock in profit. That's basically it. I think we cannot be successful without the great people and without the great team. We are very fortunate that we have those people who support us, our ideology and mission, and we continue to produce for our shareholders.

Peter Gastreich (Managing Director and Energy and Sustainability Analyst)

Okay, thank you. My second question is a regulatory question. Could you talk about what specific deregulation measures you'd like to see from the Trump administration that could help to smooth your runway? For example, where are we on federal pipeline regulations or other relevant areas?

Zafar Rizvi (CEO)

Stuart, do you want to answer that, or do you want me to? You know the answer.

Stuart Rose (Executive Chairman)

I don't know. I think we're—I'll answer it, but everything's in limbo right now until this bill passes. We've worked with—we definitely have contacts in Washington that we're working with, and we have very, very good contacts in Illinois. Right now, we're trying to know exactly what the target is. It's a moving target every day with what's going on in Washington, so I can't—it's very hard right now to give anyone any indication of when or if we'll ever—and hopefully, it's not if, but it could be if we ever get our carbon capture project going. Things in Washington are in great limbo right now.

Zafar Rizvi (CEO)

I think I add to that is a Big Beautiful Bill at this stage still includes 45Q and 45Z, and actually, 45Z is extended to up to 2031, and I think that's very positive. Recently, Illinois passed this Bill 1723, which is, we believe, also very positive for our ethanol location because we are 6 mi away from aquifer, considered to some other facilities may be very close to aquifer. They banned that over, under, and any pipeline or any carbon sequestration where aquifer is close to that area. We believe that's very positive. As Stuart mentioned, FSMA rules are still under review. We have some contact with them, and they are still saying they are trying to review, and that rules may—Trump administration may just leave it as it is, as those were passed two days before the Biden administration left.

If that's the case, then I think we should get those rules very soon. As Stuart mentioned, there's some of these behind our control. As you can see, my prepared remarks, I mentioned that January 31st will be issuing EPA permit, and today, this morning, they extended that date to April 31. Some of these things are behind our control, how the government moves forward and when they finalize their reviews. Those are just moving targets. We are watching them very closely.

Peter Gastreich (Managing Director and Energy and Sustainability Analyst)

Okay, thank you. Yeah, that sounds generally some good momentum on the regulatory side. Just a final.

Stuart Rose (Executive Chairman)

The other thing that you should remember is, no matter what, we are expanding our plant, and it's a great plant already. We are adding roughly 33% once we finish greater capacity in that plant. No matter what, we will be growing.

Peter Gastreich (Managing Director and Energy and Sustainability Analyst)

Okay, that's great. Thank you very much. Just one final question, just a macro question. It'd be great to hear your thoughts on the industry fundamentals. Where are ethanol margins trending as we approach the summer, and what are the drivers and outlook there? Thank you.

Zafar Rizvi (CEO)

I think we cautiously see that the ethanol margins are still very positive. For the first and second quarter, we see it still is a positive, as I mentioned in our prepared remarks. We expect the record on is expected this year, thanks to strong planting in a state like South Dakota and Illinois, and good weather so far. If this continues, it could boost our profit for the rest of the year. We are also pleased with our export at this time, ethanol. As I mentioned previously, it's approximately 19% up compared to last year. Also, if the dust settles with Canada and Mexico and there is no tariff, we believe that Trump's administrations may help us to eliminate those tariffs on the different countries which they have on ethanols or DDGs.

If that market opens up, we believe that will be great for ethanol industries. At the same time, we're cautionarily looking at natural gas. If natural gas is exported greater than we expect, then it can be negatively affected on our business. Because natural gas and corn, those are the major expenses we have in our ethanol business, so we are monitoring very closely, but we believe at this time there is a positive outlook toward 2025.

Peter Gastreich (Managing Director and Energy and Sustainability Analyst)

Okay, thank you very much. Appreciate it. I'll get back on the queue.

Stuart Rose (Executive Chairman)

Thank you.

Operator (participant)

Thank you. There are no further questions at this time. I'd like to turn the call back to Stuart Rose for closing remarks.

Stuart Rose (Executive Chairman)

Okay. I'd like to thank everyone for listening. Again, we feel we have among the best plants in the industry. We have great locations in the Corn Belt. We have what we feel is the best technology. Most importantly, as I said during the call, we, in my opinion, have the best people in the industry, and that's what sets us apart. We have very, very high hopes that these same people and the other people that we have hired will do the exact same thing in carbon capture that we've done in ethanol. Very much look forward to the future. Thank you very much for listening, and we'll talk to you at the end of the conference call for next quarter. Thank you. Bye.

Operator (participant)

This concludes today's conference. You may disconnect your lines at this time. Enjoy the rest of your day.