Benjamin Cowart - CEO and Chairman Christopher Carlson - CFO John Strickland - COO Michael Porter - IR Consultant, Porter, LeVay & Rose

Eric Stine - Craig-Hallum Nathan Weiss - Weiss, Harrington and Associates Brian Butler - Stifel

Greetings, and welcome to the Vertex Energy 2016 First Quarter Financial Results. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to introduce your host Mr. Ben Cowart, Chairman and CEO. Thank you Mr. Cowart, you may begin.

Thank you, operator. Good morning, and welcome everyone. Joining me today on the call is Mr. Chris Carlson, our Chief Financial Officer; Mr. John Strickland, our Chief Operating Officer; and Michael Porter, our Investor Relations Consultant at Porter, LeVay & Rose. The company expects to make forward-looking statements during today's call. Statements including words such as believe, anticipate, expect, and statements in the future tense are forward-looking statements. These statements involve known and unknown risks and uncertainties and are based on management's current views and assumptions regarding future events and operating performance. A number of factors could cause the company's actual future results to differ materially from its current expectations. I want to thank everyone for joining us today on Vertex Energy's first quarter 2016 earnings call. We filed our 10-Q this afternoon and I’ll start with a brief statement about our business and then Chris Carlson our CFO will discuss our financial performance for the first quarter 2016. After Chris discusses the numbers, I'll provide additional information about our business. On our year end conference call on March 29, 2016 we outlined some broad themes that remain valid today and the industry continues to feel the price pressures that made 2015 a difficult year. However, we are seeing some ease in the pressure in 2016. The recent increase in oil prices mean industry is operating in slightly friendlier environment as a result we have seen improvements in our margins. Nevertheless, we remain aware that the higher oil prices of today can reverse tomorrow and we are taking steps to build on our weather business. We continue to watch every penny when managing our feedstocks. And our expansion plans are moving forward at a deliberate and measurable pace. At the same time, we seek to expand our sale of finished products in the markets which commend higher prices. Overall we are focused on profitability and growing free cash flow through greater operational and pricing discipline. I’ll now turn the call over to Chris, our CFO.

Thank you, Ben. Vertex Energy prepares its financial numbers unless otherwise noted in accordance with generally accepted accounting principles. Before we start it is important to note that our Q1 results were negatively impacted by the fire at our Heartland facility on February 14, 2016 which shutdown the facility for the remainder of the quarter. I will now carry you through the first quarter results. For the first quarter ended March 31, 2016 we reported consolidated revenue of $14.1 million compared to $37.7 million end of first quarter 2015. a decline of 62%. This decline was a result of lower commodity prices and volumes during Q1 2016 versus Q1 2015. During the quarter, WTI was less than $35 a barrel for more than a half of the quarter. In our Black Oil division, which includes our Marrero, TCEP and Heartland business units revenue was $10.1 million for first quarter 2016 as compared to $24.9 million in the first quarter of 2015, a decrease of approximately 59%. The business was impacted by the decrease in commodity pricing, a drop in our volumes and the fact that TCEP was not running during the first quarter and our Heartland facility did not run during the second half of the quarter. The Refining and Marketing division produced revenue of $2.6 million in the first quarter of 2016 versus $8.3 million in the first quarter of 2015. The decline was because volumes as well as commodity prices were down. For the first quarter of 2016, Vertex Recovery division generated $1.4 million in revenue, a decrease of approximately 70%, $4.5 million a year ago as commodity prices were down however volume was actually up year-over-year. For the first quarter ended March 31 2016, our gross profit was a loss of $238,524 compared to a loss of $324,117 during the same period last year, a 26% improvement. Gross profit for the Black Oil division was negative $1 million during first quarter of 2016, which was a 52% improvement over the negative $2.2 million in the first quarter of 2015. The Heartland fire had a dramatic impact on our gross profit. Refining and marketing this gross profit decreased 45% to $527,000 in the first quarter of 2016 compared to a gross profit of $960,718 a year ago. Vertex Recovery produced gross profit of $303,000 in the first quarter of 2016 compared to a gross profit of $942,313, a year ago a 68% decrease. Selling, general, and administrative expenses were $5.5 million in the first quarter 2016 compared to $5.4 million during the first quarter 2015. Our SG&A for the first quarter 2016 included a carrying cost of $300,000 for the one month we owned in Nevada facility in the first quarter of 2016. We expect SG&A to be between $5 million to $5.3 million per quarter for the remainder of 2016. For the first quarter ended March 31, 2016, depreciation and amortization was $1.6 million compared to $1.56 million in the first quarter of 2015. Fair value of the warrants issued, which is accounted for as liability, provided a charge in value of $1.9 million for the first quarter of 2016. Our reported interest expense for the first quarter was $1.9 million which reflects a one-time write off of $1.4 million deferred finance costs resulting from the accelerated payments made on our Goldman Sachs loan. Based on our current outstanding debt balance, we anticipate GAAP interest expense to be approximately $500,000 per quarter. We reported a net loss of $1,403,411 or a loss of $0.07 per fully diluted share in the first quarter of 2016. This compared to a net loss of $17 million or a loss of $0.60 per fully diluted share in the first quarter of 2015. Our shares outstanding for the quarter were $29.3 million shares. Our per barrel margin during the quarter was down 6% year-over-year. The decrease was due to the sharp decline in commodity prices during February. Our street collection volume was up 32% year-over-year. Our cash and cash equivalents were $1.8 million as of March 31, 2016 Subsequent to the close of the quarter, we announced that we raised $19.3 million. The transaction was a private placement involving a credit to the investors and we sold approximately $12.4 million units at a price of $1.56 per unit consisting of Series B1 convertible preferred stock in an aggregate principal amount of $19.3 million including warrants for the purchase of $3.1 million shares of the company's common stock. $11.2 million of the proceeds from the current placement will be used to repurchase and retire approximately $3.6 million shares of Series B preferred stock leaving net proceeds of $8.1 million afford deducting placement agent fees and estimated offering expenses. Our total long term debt and capital leases is approximately $14.6 million which includes $6.4 million owe to Goldman Sachs at the end of the quarter. However, we have earmarked $800,000 from our raise to make June's payment to Goldman, which will reduce the amount owed to our senior lender to less than $6 million. We have managed to reduce our debt to our lender from $40 million to its current level in less than 24 months. Now I’ll turn the call back over to Ben Cowart, our CEO.

Thank you, Chris. As Chris mentioned we recently completed a raise of $19.3 million after we retire the old Series B preferred we will have approximately $8.1 million we will be using $800,000 other raise make June's payment to Goldman. That will bring our debt to below $6 million. The balance of the cash will be used for working capital in possible acquisitions. We are encouraged by the vote of confidence shown by our company, management, by those who have participated about $18.6 million of this raise came from investors who participated in our June 2015 raise. In addition, the Heartland facility became fully operational during the first week of May. The plant is operating at full capacity and we expect to see revenues from this facility to bolster our business for the foreseeable future. We will see some negative drag in the second quarter as a result of being down for the first five weeks of the quarter. We continue to take vital steps in managing our spreads in this low crude price environment. During 2015, we made the transition of charging the generator for the used oil we pick up, since moving to the charge, we have implemented steadily cadence of price increases. Our charge for oil at the end of April was $0.37 per gallon, as an improvement from $0.27 at the end of February 2016 and $0.12 at the end of 2015. I'd like to commend our people and our team with our collection business in the hard work that they've done to manage this part of our spread. In our previous call, I noted that the used oil market is oversupplied and that inventories are building. With the mild winter we experienced this year, demand was lower than normal, the lack of demand contributable to increase in inventories. The U.S. has limited refining capacity that handle that inventory. The country can deal with about 42% of what's out there, therefore the oversupply is not likely to end anytime soon. We believe the generators of used oil are starting to prefer sending their oil to re-refining facilities. This is because we can address their cradle-to-grave liability better than alternative message of disposal. Because of that, we believe our charges are going to continue to rise. These market conditions also create pressure to consolidate. It has long been part of our strategy to make acquisitions of assets that fit our model. We intend to be opportunistic in our acquisition strategy. We are focused on tuck-in acquisitions of used oil collector, especially those within our geographic footprint, which augment the supply to our re-refineries and help drive down feedstock costs. Turning to our products, I said in our previous call that one of our objectives is to pursue alternative product markets. As a example, our vacuum gas oil at our Marrero facility is a product that's been sold to the marine fuel market today. We are making progress in particular market space and anticipate continue in this effort. In summary, we are still operating in low price -- in the low price market. Our goal is to build an all-weather business. We have seen some price improvements lately and have benefited from that. The important thing to remember is that we have restructured our business to operate and grow in the current low crude price environment. As a result, we believe 2016 will look much better than 2015 and 2017 and beyond will show additional improvements. I want to let the listener know that if we have any follow-up questions or comments, please feel free to contact Porter, LeVay & Rose, Investor Relations Representative, Marlon Nurse at area code 212-564-4700. Also want to mention that a digital replay will be available by telephone approximately two hours after the call's completion until September 30, 2016. Details on how to access the replay can be found in our recent press releases on the Investor Relations section of our website at www.vertexenergy.com. Operator, we are now ready to take a limited number of questions pertaining to the matters discussed on this call and our 10-Q. Remember, we are unable to discuss any information or business plans, which are not publicly available. Thank you.

[Operator Instructions] Our first question comes from Eric Stine with Craig-Hallum. Please state your question.

Hi Ben, hi Chris. I just wanted to start with the trends you're seeing in the ECA fuel at Marrero. Just curious if you could talk about the cost advantage you've got given that location and then may be where the percentage of output is, where that stands today and where you see that going long term?

Yes, good morning Eric. Good question and we're certainly excited about the ECA fuel market for us. I think a lot of the opportunity is strategic to our to location so being in the Gulf and have an the quality of VGO product that we produce at the Marrero facility and the ability to load it out in large quantities on the barges, I think make the opportunity what it is for us. And so today we have operational limitations that take us to about 23% to 25% of our current VGO production. We're working on additional improvements within the plant. It's mainly around available tankage that will allow us to put more of this product into the market. So we're at those levels today as far as percentage of our VGO product going into that market. So we anticipate maybe getting to 40% by the end of this year and owned to about 75% next year. And we believe by 2018, we'll be completely sold into that market. So it's a operational step and then just a market penetrations step that we have to go through.

Okay, good to hear on that and then may be lastly for me just on the collection volumes, very good to hear the trend in terms of oil pricing. You talked about your strategy going forward maybe just percentage, percentage of the collection makes up today and where you see that going forward over the long term?

20%

Yes, we're today about 20% of our volume we collect with our street -- street trucks. The balance is purchased from third party. We think that we should move over the next year let's say 2017 to maybe 40% of our total volume. So we plan to make significant headway in that category. So as you see, our charges are at market or maybe ahead with most of the companies. I think in April we were at $0.37 of gallon in total charge for all. But what's interesting is we've been able to accomplish that on a charge-for-all basis, but we grown our volume 32%. So we happen to be very cautious as far as market share and building our collection volume while we get our charge for all improvements. So I think our team has done a fantastic job to accomplish both at the same time.

Okay, thank you.

Our next question comes from Nathan Weiss with Weiss, Harrington and Associates. Please state your question.

Good morning. And talking about the Heartland fire, you discussed dramatic impact on segment gross profits and that continued -- lack of operations continued for the first five weeks of second quarter. Can you quantify the impacts at all and then any further updates on the possibility of insurance proceeds related to the facility with this interruption?

Yes, let me, I guess, address the insurance portion and the property claim. The damage was about $2.3 million. We've made most of -- the majority of the investments have been made into the rebuild. The claim with the insurance company has gone very smooth. We've just opened up the BI portion of the claim, the business interruption, so we don't have a lot of details on that. And with that claim open, I don't really want to speculate on what the missed revenues were. We however did break outs in our filing in the Q, the revenues and gross losses for the Heartland facility during the first quarter.

Okay. I haven't had a chance to review that yet so that's helpful. Excellent. Thank you.

Our next question comes from Brian Butler with Stifel. Please state your question.

Good morning. Thank you for taking my questions. Just as crude has come off the bottom, we’ve seen the base oil pricing pressure move away. Are you getting any pricing push back on your charge for oil, some customers?

I'd say there is an early indication that there could be a little push back just from the bigger companies, I think have started to get lags on the press for more charges. So that's something being the smaller collector in the market, we have to keep that in consideration. But so far we've - as you can see, even as April, we’ve improved charges close of the quarter to April from $0.32 to $0.37. So we've had a continuous improvement to this point. So it's too early for us to say that we are not going to continue for, we’ve done really good all year long. So we are going to keep pressing ahead. I do believe that the charge for all should reflect supply and demand, not necessarily the sale price of our finished products. I think it’s time for our industry and the companies out there that have made substantial investment to start getting returns again for those investments. So we think the oversupply is still an issue regardless of where crude prices go, and I think the street pricing for oil should reflect that component and that’s where we are managing the business today.

Okay. And then my second question. You’re talking last quarter about getting - the industry needed to kind get closer to the $0.50 a gallon, fairly you guys are making progress to be profitable. But with the improvement in base oil prices, it’s now reaching that $0.37 per gallon charge for oil. Should we be thinking about the business now being in the profitable range, or is it really still need more work to be done on the charge for oil side?

No, we are definitely in the profit range at $0.37. I think that we are not real happy with what that looks like at $0.37. I still believe the market is a $0.50 a gallon charge market based on the oversupply of used motor oil, and just manual losses the industry has suffered over the last couple of years. So we are going to keep pressing ahead. Hopefully, we will continue to report the counter results we’ve been able to report so far.

And then one more on the charge for oil. How about on the third party, last quarter I think you are still under a pay for oil on the third party guys, very low. Has that come down some more, or has that even gotten zero?

No, it’s not at zero. I don't believe we've made much improvement at a third party level because oil prices have gone up. A lot of that oil that we purchased is indexed. So it will escalate as oil prices escalate. Our discounts affirm that we haven’t really had to adjust our index discounts in which we purchased the products. So those are holding well.

Okay. And just one last one acquisition expansion plans. Can you give us a little bit more color on thoughts or maybe the size of the pipeline and what you are looking at. Are these distress companies that are having trouble in this environment, or are these businesses that are just truly small tuck-ins that are being run well?

I think it’s a little bit of everything, Brian. We’ve got strategic opportunities, we’ve distressed opportunities, and we have real simple tuck-in opportunities that we are evaluating. So it’s going to be mix bag. The key component is that with the oversupply of used oil in the market the collectors have limited market options. And it leaves them in somewhat of a captive position. So it’s allowing us to really evaluate some interesting opportunities, having the refining capacity that we do and having plenty of room for more self-collecting gallons. So we are encouraged by where we are and where the market is in respect to those opportunities.

Okay, great. Thank you for taking my questions.

[Operator Instructions] As there are no further questions, I’d like to turn the call back over to management for closing remarks.

Okay. Thank you operator and thank everyone for listening in and the questions that came forth. We appreciate the opportunity to have this communication and dialogue and look forward to our next quarterly call. Thank you.

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