Vertex Energy Inc. (VTNR)·Q2 2024 Earnings Summary

Executive Summary

• Vertex delivered Q2 2024 revenue of $0.750B and diluted EPS of $(0.58), with adjusted EBITDA swinging to $(22.4)M as gasoline/diesel crack spreads weakened 28% vs Q1, compressing conventional fuel gross margin per barrel to $5.67 .
• Management executed the pause-and-pivot of the hydrocracker from renewables to conventional fuels, decommissioning renewables and targeting conventional contributions in Q4 2024; SG&A fell 6% QoQ and 12% YoY as cost control continued .
• Liquidity actions included $15M and $20M term loans and appointment of a Chief Restructuring Officer amid high net leverage (22.5x TTM adj. EBITDA) and net long-term debt of $284.9M; cash was $18.9M at 6/30/24 .
• Q3 2024 guidance calls for lower throughput (55–60 mbpd), higher direct opex per barrel ($5.52–$6.02), and capex of $15–$20M during turnaround and hydrocracker conversion; all prior guidance was withdrawn .
• Stock narrative catalysts: macro crack-spread weakness and renewable pivot execution; financing steps plus CRO signal active balance sheet management; near-term margins hinge on conventional redeployment and Q3 turnaround timing .

What Went Well and What Went Wrong

What Went Well

• Conventional Mobile refinery reliability remained strong: 67,758 bpd throughput (90% utilization), with finished product yields at ~64% (gasoline, ULSD, jet) and direct opex per barrel down to $2.59 .
• Cost discipline: SG&A down 6% QoQ and 12% YoY; capex reductions and updated guidance reflected tighter spending (Q2 operational update lowered capex by ~29% vs prior midpoint) .
• Strategic execution: completed running renewable feedstock, safely decommissioned hydrotreater from renewable service, redeploying hydrocracker to conventional with expected Q4 contribution, preserving optionality for future renewables if economics warrant .
  • “We are focused on navigating through the recent lower crack spreads and continue to believe that the decision and execution to convert the hydrocracking unit to conventional fuels will help us…” — CEO Benjamin P. Cowart .

What Went Wrong

• Macro-driven margin compression: 28% decline in crack spreads vs Q1 lowered adjusted EBITDA to $(22.4)M and cut conventional fuel gross margin per barrel from $12.63 (Q1) to $5.67 (Q2) .
• Renewables economics remained unfavorable: renewable operations posted gross loss of $(11.8)M even as renewable fuel gross margin per barrel printed $16.08 due to higher direct opex ($31.75/bbl) and scale constraints (3,092 bpd throughput) .
• Leverage and liquidity constraints persisted: net long-term debt $284.9M, net leverage 22.5x TTM adj. EBITDA, cash $18.9M at quarter-end, necessitating incremental $15M and $20M loans and CRO appointment .

Financial Results

Revenue, EPS, vs prior year and prior quarter

Margins and KPIs (conventional vs renewable)

Segment breakdown (Q2 2024 vs Q2 2023)

Guidance Changes

Earnings Call Themes & Trends

Note: The Q2 2024 earnings call transcript could not be retrieved due to a document database inconsistency; thematic tracking uses the Q2 press release and presentation and prior-quarter materials .

Management Commentary

• “We continued to demonstrate operational reliability for conventional refining and overall continued strong performance in safety…We saw a difficult crack spread environment…that drove our Adjusted EBITDA lower.” — CEO Benjamin P. Cowart .
• “Given continued near-term EBITDA and liquidity constraints, the Company continues its pursuit of strategic pathways, considering alternatives and exploring financing pathways to maximize value…naming Seth Bullock as our Chief Restructuring Officer.” .
• “We are focused on navigating through the recent lower crack spreads and continue to believe that the decision and execution to convert the hydrocracking unit to conventional fuels will help us…” — CEO Benjamin P. Cowart .

Q&A Highlights

• The full Q2 2024 earnings call transcript was unavailable due to a document retrieval error; we anchor clarifications on the press release and presentation: withdrawal of prior guidance and Q3 throughput/opex guidance, hydrocracker conversion timeline, and liquidity actions (loans, CRO) .
• Management indicated Q3 turnaround will impact throughput while facilitating hydrocracker redeployment to conventional service .
• Emphasis on liquidity management and margin improvement strategies given macro weakness and high leverage .

Estimates Context

• Attempts to retrieve S&P Global consensus estimates for Q2 2024 EPS and Revenue were unsuccessful due to missing CIQ mapping for VTNR; therefore, comparison to Wall Street consensus is unavailable for this quarter [SpgiEstimatesError].
• Given the lack of available estimates, near-term models should reflect materially lower fuel gross margin per barrel vs Q1, elevated opex in Q3 turnaround, and no renewables contribution until hydrocracker returns in conventional mode in Q4 .

Key Takeaways for Investors

• Crack-spread sensitivity is high: a 28% decline QoQ drove a swing to negative adjusted EBITDA and halved conventional fuel gross margin per barrel; margin recovery into Q4 hinges on macro and successful hydrocracker redeployment to conventional products .
• Liquidity remains tight: cash $18.9M, net long-term debt $284.9M, net leverage 22.5x; financing steps and CRO engagement underscore continued balance sheet risk management focus .
• Operational reliability is intact: 90% conventional utilization with finished product yields ~64%; Q3 turnaround will pressure throughput but enables redeployment for Q4 margin capture .
• Cost control is a bright spot: SG&A down 6% QoQ and 12% YoY; capex cut vs prior guidance; monitor sustainability of opex per barrel as Q3 opex guide steps up due to lower throughput .
• Strategy pivot reduces renewables drag: pausing renewables and converting hydrocracker to conventional should improve margin mix; optionality preserved for renewables resumption if economics improve .
• Trading lens: absent consensus estimates, watch crack-spread indicators and Q3 operational cadence; any signs of conventional margin improvement or additional liquidity access could drive narrative upside; conversely, prolonged macro weakness or execution delays would be negative .

Appendix: Additional Data

• Consolidated balance sheet snapshot (6/30/24): Total debt $303.8M, cash and equivalents $18.9M, net long-term debt $284.9M; net leverage 22.5x TTM adj. EBITDA .
• Segment operating loss: Refining & Marketing loss from operations $(30.2)M; Black Oil & Recovery $(1.2)M; Corporate $(6.9)M in Q2 2024 .
• Q3 2024 operational targets: throughput 55–60 mbpd, capacity utilization 73–80%, % finished products 64–68%, direct opex $5.52–$6.02/bbl, capex $15–$20M .

All prior guidance should no longer be relied upon per management’s statement .