Good day, ladies and gentlemen, and welcome to the Vertex Energy Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host for today, Mr. Noel Ryan. Sir, the floor is yours. Noel Ryan;Vallum Advisors;Senior Partner: Thank you, Jess. Good morning, and welcome to Vertex Energy's Fourth Quarter 2019 Results Conference Call. Leading the call today are our Chairman and CEO, Ben Cowart; CFO, Chris Carlson; COO, John Strickland; and I'm Noel Ryan of Vallum Advisors, the company's Investor Relations counsel. We issued a press release before the market opened this morning detailing our fourth quarter results. In conjunction with this release, we also posted a conference call presentation that is posted in the Investor Relations portion of our corporate website at vertexenergy.com. We will reference this presentation throughout the remainder of today's call. Please note that we recently updated the Investor Relations portion of our corporate website to provide increased accessibility to key resources, while allowing users to sign up for real-time alerts. We encourage you to sign up for these real-time alerts, if you have not done so already. 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 of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the risk factors that could cause actual results to differ, please refer to the Risk Factors section of Vertex Energy's latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today. Today's call will begin with remarks from Ben Cowart, followed by a financial review from Chris Carlson. At the conclusion of these prepared remarks, we will open the line for questions. With that, I'll turn the call over to Ben.

Thank you, Noel. Good morning to those joining us today. Earlier today, we posted an accompanying presentation materials on the Investor Relations section of our website that I'll refer to throughout this call. We will begin with an overview of the third quarter results on Slide 4 through 7 of the conference call presentation. Our fourth quarter results benefited from a combination of increased sales volumes, elevated product margins and strong operational execution, resulting in improved profitability in the period. We reported fourth quarter adjusted EBITDA of $3.9 million, an increase of $5.5 million from the period -- prior year period, or 40% ahead of our fourth quarter financial guidance. On balance, the improved performance was driven mainly by a record quarter at our Marrero refinery, which benefited from a widening in product spreads related to the highly anticipated low-sulfur marine fuel transition on January 1, 2020, as mandated by the International Marine Organization. In the years leading up to this transition, we've positioned our refineries and distribution channels to fully capitalize on this market change, realizing the significant opportunity it presents for our business. Ahead of this transition, we ran our refineries at peak rates, building the inventories of marine fuel blendstock, while building a relationship with a world-class bunkering partner, Bunker One USA, to ensure we had surety of offtake for all of our marine fuel production at attractive netbacks. In the end, the scenario played out as expected, positioning Vertex as a clear winner coming out of this transition. The Marrero and Heartland refineries operated at 100% and 103% of capacity, respectively in the fourth quarter, positioning us to capitalize on the increased product demand and favorable margins. At the Heartland refinery, we have begun to work to expand our base oil production capacity by more than 30%, with anticipated completion of this project by early 2023, as outlined in our joint venture partnership with Tensile Capital. Turning to Slide 8. Direct collections of used motor oil increased more than 20% in the full year 2019 when compared to the prior year period. Used motor oil collections represented approximately 45% of overall feedstock processed at the company's refineries in 2019 versus 36% in 2018, with the remaining feedstock being sourced from third-party UMO suppliers. Turning to Slide 9. Here, we've provided an adjusted EBITDA bridge that outline key variances on a year-to-year basis. Marrero was responsible for much of the year-over-year growth in EBITDA during the quarter -- fourth quarter, driving improvements in both spread and volume impact. While spreads at Heartland weren't materially better during the period, we increased our sales of base oil volumes when compared to the prior year period. The metals business, which has been a drag on results in recent quarters, showed signs of recovery in the fourth quarter, also leading to our improved results. Looking ahead, our Bunker One relationship remains one of the most exciting opportunities ahead of us. As one of the largest bunker-fuel marketers in the world, Bunker One offers its customers a global physical supply network at ports all over the world, including ports in Alabama, Texas, Louisiana, Mississippi and Florida and in the Gulf of Mexico. For the next 10 years, Bunker One has agreed to sell 100% of our marine fuel production at Marrero, together with any new incremental production we may develop during that period through capacity expansions and a negotiated price correlated to fair market Platts-based benchmarks. Turning to Slide 11. After an outstanding fourth quarter, we began to see sharp mirroring of product spreads in January as concerns around COVID-19 dampened global supply-and-demand activity. During the fourth quarter, high-sulfur fuel, the historical price marker for used motor oil, our feedstock sold for $16 a barrel below WTI. Beginning in February, we saw the spread declined to $6 below WTI and is expected to drift even lower in March. Currently, the EIA assumes that the timing of COVID-19 impact on petroleum demand will follow a similar path as the 2003 SARS coronavirus outbreak. Demand reductions intensified in February then bottomed out in March, with incremental spread improvements as we move into the remainder of the year. We believe this trend toward improved spreads is currently reflected in the paper markets, as illustrated in the gray bars of this chart. Turning to Slide 12. In recent months, WTI and ULSD have continued to trade in lockstep with one another, while high-sulfur fuel has begun to trade independent of the other 2 contracts. The dislocation between high-sulfur and WTI has resulted in narrowing the spreads for the Marrero refinery early in the first quarter between November '19 -- 2019, and March 2020. The high-sulfur WTI spread declined by more than 50% or $10 per barrel from $20 to $9 per barrel. As we look to the back half of the year, we expect spreads to recover somewhat closer towards long-term historical averages as global trade recovers. At present, it is too early to quantify the overall impact COVID-19 may have to full year adjusted EBITDA guidance. Clearly, first quarter results will be impacted by the disruption. We intend to provide an update on our full year guidance on our first quarter 2020 call in May. With that, I'll turn the call over to Chris for a discussion of our fourth quarter financials, liquidity and capital structure.

Thanks, Ben, and welcome to everyone joining us on the call today. For the 3 months ended December 31, 2019, the company reported net income available to common shareholders of $1.4 million or $0.04 per diluted share versus a net loss of $200,000 or $0.01 per basic share in the fourth quarter of 2018. Vertex reported adjusted EBITDA of $3.9 million in the fourth quarter of 2019 versus a loss of $1.6 million in the prior year period. For the full year 2019, the company reported a net loss available to common shareholders of $11 million or $0.28 per basic share versus a net loss of $8 million or $0.23 per basic share in 2018. Vertex reported adjusted EBITDA of $7.4 million in 2019 versus $7.3 million in the prior year period. A schedule reconciling the company's GAAP and non-GAAP financial results, including adjusted EBITDA, is included later in this release. Fourth quarter results benefited from a combination of increased sales volumes and elevated product margins, resulting in improved profitability in the period. In advance of the January 1, 2020 low-sulfur marine fuel mandate set forth by the International Maritime Organization, the spread between high-sulfur fuel oil and corresponding middle distillate values widened materially. In response to improved market conditions, the Marrero refinery operated at peak capacity during the fourth quarter, capitalizing on favorable refining economics evidenced in the market. During the fourth quarter, Marrero sold near-record volumes of middle distillate to the company's long-term distribution partner, Bunker One USA. At the Heartland refinery, increased sales volumes of high-purity base oils also contributed to the year-over-year improvement in fourth quarter results. Turning to a discussion of our balance sheet and capital structure, we are currently in compliance with all of our debt covenants under our term loan and other credit facilities. As of December 31, 2019, we had total cash and liquidity on our revolving credit facility of $7.9 million versus $4.7 million at the end of the fourth quarter 2018. With that, I will turn the call over to the operator as we take questions from those joining us on the call today.

[Operator Instructions] We'll move first to Eric Stine at Craig-Hallum.

Well, so at first, I just wanted to start with spreads. I mean obviously, spread management has been a big area of focus and you've been doing well there. Just curious, when you look at the market, I mean, how -- kind of how flexible is it when you talk about the charge-for-oil, pay-for-oil, that whole dynamic, given the pullback in oil prices? Just curious what you are seeing in the market currently.

Yes, that's a good question. There's a lot that has taken place in the first quarter this year, before this COVID-19 impact on just the energy markets in general, base oil prices actually got a lift. I mean there was a raise in base oil values, while fuel prices started to come off pretty hard. And what was interesting is we screen our bigger re-refiners of used motor, the base oil, go to the street with very aggressive pay-for-oil numbers, almost giving any increase in base oil prices back to the generators. So we was concerned that the re-refiners, as a whole would reset pricing for used motor oil versus the fuel markets and high-sulfur fuel that's really been the bigger driver for used oil value. So the lack of discipline are either the need for feedstock, one or the other, has really put the streets under pressure in the first quarter. But then here recently, base oil prices plummeted $0.40 a gallon, catching up with kind of what's going on in the energy markets. And now I think everybody's appear to be scrambling to get pay-for-oil back off the street and try to reset spreads properly. So we're just kind of following that bigger trend from our standpoint. I think our team has done a really good job of managing our spreads and staying out of the fray for the most part. But that's kind of what we're seeing.

Okay. And then just sticking with that, I mean, you mentioned in your commentary that you have some hedging in place, if you're able to quantify that, I mean, whether it's a meaningful amount of your production or not and just how we should think about that?

Yes. Let me just say it on a broad basis because obviously we -- we've been doing a good job, Chris has done a great job managing our exposure going forward. We got a big shot in the fourth quarter based on what our guidance was. So a lot of the spreads that we anticipated coming in, in the first quarter from IMO 2020, we were well prepared and captured -- like I said, we're 40% ahead of plan for the fourth quarter. So that's very positive. That kind of cushions what we may see in the first quarter, along with the hedging that Chris done for product inventories and kind of the forward curve on high-sulfur for the first quarter. So I think we are set and pretty good based on the work that we've done thus far. So -- and we anticipate high-sulfur fuel coming back down to historical levels, maybe a little bit better. So we're -- I think we're going to dial back in to lower feed costs at this point.

Got it. And so it sounds like -- I mean, that, that mitigates, to some extent, what we've seen in the market with spreads in the first quarter, that hedging, right? So this is more -- I mean, some first quarter, but more about what we could see, say, second and third quarter. Is that right?

Yes. So yes, I think that's right. And we're -- we continue to look forward as -- quarter-by-quarter as we run our business. So not just part of managing the spread of the business and trying to -- damper the volatility. So had we been exposed in the first quarter when this market turned upside down, we would have got -- where we got beat up pretty good. So I'm comfortable with the current hedging strategy and how we're managing the spread through a downturn. You still have byproducts and other products that -- like your asphalt and things like that, where the markets have gotten soft, but that's a small percentage of our output.

Okay. And then last one for me. So when we think about the guide and I can appreciate that there's just a great deal of uncertainty right now given what's going on in the market, coronavirus, all of that, but it does sound like that you feel, all things considered relatively good about things given that hedging strategy and given just the fact that -- I mean, this is more you not giving guidance on not to -- you just need more visibility rather than it -- right now, you're thinking that it's dramatically different from where your range is or where it was previously.

Yes, yes, absolutely. So just keep in mind that the guidance included our fourth quarter outcome and we were well prepared and really was able to grab that opportunity as it came in. So some of that was, we were able to get there in the fourth quarter that we did not anticipate being able to do. And then I think, like I said, first quarter -- with that, our first quarter, we're moving on plan. And so we think, by our May call, we should see this -- the whole energy market start to recover according to EIA's report and some of the information that we're looking at. So we're not in any kind of panic mode or anything about the business. And we'll have a good view on our next call that if it needs to be dampered, adjusted or whatever, we want to be able to provide clarity to the market to our investors of how we see the rest of the year playing out.

We'll go next to Amit Dayal at H.C. Wainwright.

Just following up on some of Eric's questions. On the margin front, the strong performance in the fourth quarter, was it all volume and pricing driven? Or was there anything sort of onetime benefits that you may have seen?

No. It was strictly volume and price driven.

Understood.

Yes. The -- and that's volume like on our collection side. So our cost for feedstock was favorable due to collection growth and to high-sulfur fuel pricing. And then our sales and our production performance at the refinery was very strong. So I think the team got everything right in the fourth quarter as we were executing the strategy.

Yes. So my follow-up question was going to be on the collection side, again, a pretty strong performance last year in terms of direct UMO collections. Can we continue sort of growing from those levels? Or we -- maybe in the near-term plateau over here at around 45%, 50%?

No, we're going to grow the business. We've always grown the business. And our growth rates have been fairly consistent between, Chris, 15% to 20% year-over-year growth?

That's right. Yes.

And so we've tacked on a lot of new growth organically. This is not acquisition growth. So it takes time to assimilate all that. We've got trucks that we need to replace and things this year that we want to do to continue to solidify our collection platform to have long-term sustainability. And so we're doing that. I think the market today should be in a margin recovery mode related to base oil prices falling and just kind of focusing on margin. So we're not out there pressing and in a volume-driven mode, at least for the first quarter and as we look into this year, but we've got natural growth planned for the business. So to say we're going to be all-out aggressive on collections, I don't think it's the right time in the market to do that, in my opinion.

Understood. And maybe just last one on the utilization levels. Fourth quarter, it looks like you're running max utilization. Has that come down a little bit? And how do you -- how are you planning for the rest of the year in terms of the visibility you have right now?

John?

Well, our goal is to run production in our budgets and I see us running the plants max all year.

Yes, but...

We won't be slowing down on running the plants because the feedstock's there, we just got to reset the feedstock cost, like Ben's talking about. That's all we've got to do.

Yes. And Amit, keep in mind, last year, we made some pretty long-term maintenance CapEx improvements through the Marrero refinery that we wanted to be ready when we come into 2020 and we didn't want to have to slow the plants down for some of that work. So all that was taken care of. And I think you can see the performance in the fourth quarter coming out of that work, just the benefit and impact that it had. So the plants are really in good shape and we don't anticipate anything other than normal this turnaround maintenance as we've already scheduled and planned out on.

We'll move next to Brian Butler with Stifel.

Just wanted to circle back on EBITDA and margins and thinking about 2020. I mean 2019 obviously, fourth quarter benefited huge from the spreads being up, I mean, 9% plus EBITDA margins, very good. But thinking through based on the forward data that you provided in the presentation versus what the forward data looked like back in 3Q, I mean, clearly, there's compression there. So that 9%, if I'm thinking about it correctly, it seems to be probably a peak number and then we're going to be seeing margins under pressure for the remainder of 2020 based on the current forward data. Obviously, that can change. But how do you -- again, I mean, based on the current forward, the forward that we had at the third quarter, I mean, that $15 million to $20 million outlook is definitely under pressure under those scenarios, correct? Or has something else changed that keeps it steady?

So I think if we were to maintain fourth quarter margins all the way through 2020 that guidance would be much higher than what we put out there. What we just didn't know at the time we put the guidance out, how 2020 was going to play out. And I'm glad because we've seen that sulfur come back in. What we use as the benchmark for spreads was $8 below WTI for high-sulfur fuel. Now you can see in the first quarter, you're going to be a little bit less than that towards the end of the first quarter and with the forward strips, the second quarter is going to be between $6 and $7 spread. So there's going to be a little compression and then I think it starts to open back up the third and fourth quarter, back out to around $9 a barrel. So we're still within the high-sulfur fuel pricing range other than this coronavirus impact and the energy market compression that we're looking at. So I think we're -- from a high-sulfur fuel index, as it relates to our spreads going forward, I think that we're still in line with what we had planned for. Now the diesel prices and the crude prices and all of that could compress our sale price margins just like base oil prices coming in related to our Heartland base oil business. So we've got to manage that part of the business as part of the spread as well. But I think all of that, on the forward curve, is pretty stable, differential to WTI as well as you look out.

Okay. So just to be clear, so the guidance you gave back in third quarter was on a conservative side, using that $8 spread, which is kind of where the market has now gone to. Is there any sensitivity that you can provide just if you think $8 at the midpoint of your guidance, if the spread moves to $2 versus goes up to $15, how to think about what that benefit could be?

Yes. It's -- here's a couple of wildcards that factor into that and that's where those Street prices go? Because we really don't control that. If the industry benchmark used oil values like they should off high-sulfur fuel, then it becomes more predictable. But if for some reason, base oil prices go materially higher than the rest of the energy market, like what just happened early in the first quarter, and then the re-refiners of used oil go out and do a full-court press on the streets, offering a lot more money than high-sulfur fuel prices support, then that changes the economic picture, the spread, immaterial to what high-sulfur's trading at. So I think those are challenges that it's hard for us to predict. Fortunately, base oil prices come back in pretty hard and the market's now forced to re-adjust street prices for used oil, but all that takes time and it is very disruptive.

Okay. And then just one quick modeling one. How should we think about interest expense for 2020?

Yes. I mean we're -- right now, we've got right at $6 million of debt outstanding with an average interest rate of right around 8%. So I think you can go ahead and model that out for the rest of the year.

We'll move next to Tom Bishop with BI Research.

I was just wondering if you can give me the price that you're getting for bunker fuel now and how that has trended lately. I mean that's 1/2 of the equation that's maybe a little bit more predictable relative to the prices.

No. Yes, I wish I could, Tom. That's pretty market-sensitive information. So definitely wouldn't want to share that information on a call like this.

Well, maybe just relative to the Houston order-borne price or whatever you can -- instead of what you're actually getting, if you can give us that?

Yes, so just think of it this way, it follows diesel pricing. So you can use like a ULSD or NYMEX heating oil index and then you can use a high-sulfur fuel index benchmark. And you can kind of see the spreads between the 2 indexes. So that generally is driving the spread movement in our business because we have a relative discount off high-sulfur that we try to maintain and we have a relative discount off of diesel prices that we try to maintain, if that's helpful.

Well, that leaves a lot of work for me to figure it out. I was hoping for some numbers.

Yes. Yes, there's a lot that goes on as it relates to the fee discounts, as we've been discussing here so.

What are the planned maintenance schedules for your plants in 2020?

The Heartland plant has a target plan for last week of March, which will be a 10-day front-end turnaround. And Marrero is planned for the yearly 10-day turnaround, the first week of May this year. And then at the end of the year, we'll have a turnaround at Heartland, somewhere probably in the October on the back end, somewhere in that area. And Marrero will have a like a 3- or 4-day turnaround somewhere in November -- October.

Okay. I worry that when it comes to the price of your input that -- and you've kind of been talking about it, that doesn't really -- if there is a high-sulfur price that -- you still got to pay your collectors -- third-party collectors whatever they want and whether they're really taking it down as much as prevailing prices would seem to indicate. And also for your own collections, I mean, all you can do is get a little bit off the pay-for-oil or whatever that is. But whether the actual prices are really reacting as much as we would expect.

Well, let me speak to third-party because that's probably more in our control and the fact that we index the purchase of third-party oil. So -- and we've been -- we've not had any trouble buying the used motor oil off the high-sulfur fuel index and that those discounts actually are coming down, not up. So I don't see any kind of concern, to your point, related to that. The question is just how to pass sulfur trade compared to the diesel index as far as our business. So the second component is your collection costs, that's -- I think our team is doing a great job managing the actual cost per gallon to collect the oil. And then the variable is, what does -- what's the high bid out on the street to car dealers, lube shops and garages and if someone wants to really go out there and drive that price up, they have the -- if they have the balance sheet and the money to go out there and do that, they can. And that's the part that we have to -- we're not the bigger player on the street. And that's just -- what we've seen in the first quarter was pretty shocking when the market seems to be oversupplied. So we haven't had any kind of inventory issue or in any kind of panic mode to go out there and press the street markets, but we've seen most of the bigger used oil re-refiners, get extremely aggressive in the first quarter. I know that there was a higher base oil price that they could work from. But it was very -- it really didn't make a lot of sense. So all that being said, to your point, that's a variable that we have to manage too, and fortunately, base oil prices plummeted here and that's had a damper on margins for anybody that's processing used motor oils. So I think we're heading back in the right direction for the industry as a whole and for our spreads.

Is the data you're getting -- or the information that you're getting sort of that this coronavirus will kind of fade away towards the summer, is that why you expect to improve pricing metrics?

Yes. No, I mean, our forward curves on all the products indicate that EIA has provided some guidance. But again, we're all dealing with something that is evolving every day. So all you can do is take all the research and guidance and forecasting and then set your plans based on that. So not an expert on the subject by any means.

Well, I was just wondering how EIA can make a forecast. They have to make some assumption on the coronavirus, right?

No. So they got to provide some guidance for the whole industry. So Noel, do you want to speak to that? Noel Ryan;Vallum Advisors;Senior Partner: Yes, they -- Tom, this is Noel Ryan. They used a 2003 study that basically correlated back to the SARS coronavirus, where essentially you saw a very similar pattern, where during the flu season, February, March was particularly impacted and they saw ratable improvements, April, May, June. And so they're using a similar model to draft their global liquids demand. And so obviously, that's a finger in the air, but it's really the only concrete estimate that the EIA has put out there. So that's something that we're looking to as well.

So hopefully, this coronavirus will somehow burn itself out as we move into the second quarter, I guess, is the assumption?

Yes. I think the whole idea is -- we'll be back on our conference call in May, wrapping up the first quarter. I think we'll all have a much better view on how this is playing out. So we're working from the best data we got at the moment and all the forward pricing for commodity products are aligned with that view. So I assume everybody's somewhat following that path to some degree.

Okay. Finally, I noticed that the collections were up about 19% or 20% and -- year-over-year and I was just sort of wondering, was that all organic growth or you made so much from acquisitions, half and half, or how that played out?

No, that was all organic, no acquisitions last year.

Good. Well, keep up the good work. What you're up to, about 45% collected now that you own?

That's correct. Yes.

And with no other questions holding, I'll turn the conference back to management for any additional or closing comments.

All right. Well, thank you, everybody, for joining us on the call. We appreciate your ongoing support of Vertex and look forward to hosting our investor meetings during March at the ROTH Capital conference in Dana Point, California; the Benchmark Industrials Conference in Chicago; and Sidoti Spring Conference in New York. In the interim, should you have any questions, please contact Noel Ryan with Vallum Advisors at IR@vertexenergy.com. Thank you, everyone, for joining us today. This concludes our call.

Ladies and gentlemen, we thank you for your participation. You may disconnect at this time, and have a great day.