Gevo (NASDAQ:GEVO) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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View the webcast at https://events.q4inc.com/attendee/341485152
Summary
Gevo Incorporated reported a 7% increase in revenue for Q2 2026 compared to the previous quarter, with a 70% increase in gross profit over the past six months year-over-year.
The company is on track with its three-stage expansion plan at the Gevo North Dakota facility, aiming to increase low-carbon ethanol capacity to 75 million gallons per year by the end of 2026.
Gevo received approval for its Canada Clean Fuel Regulation pathway, opening access to a large compliance market and diversifying cash flows.
A $176 million non-cash impairment charge was recognized due to the discontinuation of the ATJ 60 project in South Dakota.
The company's non-GAAP adjusted EBITDA target for 2026 is more than $60 million, doubling the previous estimate, driven by new market access and cost efficiencies.
Gevo's carbon business is projected to deliver over $30 million in annual revenue, excluding banked CFR credit sales.
The company exited non-core project activities to focus on the more strategically valuable Gevo North Dakota complex.
Gevo is advancing its ATJ 30 synthetic aviation fuel project, with FEL3 engineering estimates refined and favorable results reported.
The company plans to maintain a non-dilutive financing approach for expansions and projects, ensuring a controlling interest in the Gevo North Dakota expansion.
Management highlighted ongoing improvements in adjusted EBITDA and cash flow generation, with significant growth expected in the second half of 2026.
Full Transcript
OPERATOR
Thank you for standing by. My name is Greg and I will be your conference operator today. At this time I would like to welcome everyone to today's Gevo Incorporated Q2 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Once again, star one.
And if you'd like to withdraw your question, simply press star one again. Thank you. I would now like to turn the call over to Eric Frey.
Eric Frey, Vice President of Finance and Strategy
Good afternoon everyone and thank you for joining us on today's call to discuss Gevo's second quarter results. I'm Eric Frey, Vice President of Finance and Strategy at Gevo. With me today we have Paul Bloom, our Chief Executive Officer, and Leike Aguirre, our Chief Financial Officer. We also have Kyle James, our Chief Commercial Officer, and Greg Hanselman, our Executive Vice President of Operations and Engineering. Earlier today we issued a press release that outlines our second quarter 2026 results and some of the topics we plan to discuss.
Copies of the press release are available on our website at www.gevo.com. Please be advised that our remarks today, including answers to your questions, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those statements include projections about the timing, development, engineering, financing and construction of our potential expansion and debottlenecking of our Gevo North Dakota plant, our expected future cash flows and adjusted EBITDA, our expected carbon business revenues, our expected future tax credit monetizations and other activities described in our filings with the Securities and Exchange Commission, which are incorporated by reference. We disclaim any obligation to update these forward-looking statements. In addition, we may provide certain non-GAAP financial information on this call. The relevant definitions and GAAP reconciliations may be found in our earnings release, which can be found on our website at www.gevo.com in the Investor Relations section.
Following the prepared remarks, we'll open the call for questions. I'd like to remind everyone that this conference call is open to the media and we're providing a simultaneous webcast to the public. A replay of this call and other past events will be available via the company's Investor Relations page at www.gevo.com. I'd now like to turn the call over to the CEO of Gevo, Paul Bloom.
Paul Bloom, Chief Executive Officer
Good afternoon everyone. Gevo is a strong, growing business. Our operating results this quarter demonstrate that our company is set to deliver revenue growth and positive cash flow from operations. Our carbon strategy is working well and we are positioning the business for three stages of expansion that build on our existing operations and capture near and medium-term opportunities. Long term, we believe the businesses we are building today will serve as the blueprint for future growth.
Our results also demonstrate that Gevo is not just a future story. Revenue increased 7% compared to the last quarter and gross profit increased 70% in the past six months compared to the same period last year. Some of that increase reflects six full months of benefit from the Red Trail assets we acquired instead of five months during the same period last year. But the majority of that increase reflects a durable strengthening of our core low-carbon ethanol and renewable natural gas businesses.
In the second quarter, our team continued to deliver on critical milestones we communicated previously. Our debottlenecking activities in our Gevo North Dakota facility remain on target to increase our low-carbon ethanol capacity to 75 million gallons per year by the end of 2026. We also advanced new carbon market pathways, identified new cost efficiencies and optimized the sale of carbon attributes. As a result, we now expect full-year 2026 non-GAAP adjusted EBITDA of more than $60 million, which is double our previous estimate.
These developments are significant and they reflect a disciplined execution to unlock new revenue opportunities. A particularly important milestone is our recent Canada Clean Fuel Regulation, or CFR, pathway approval for low-carbon ethanol with carbon capture and sequestration, which was granted in the second quarter. This pathway gives Gevo access to a more than 1 billion gallon per year compliance market for our low-carbon ethanol beginning in the third quarter and further diversifies our cash flows internationally.
It also gives us another lever to improve returns from our carbon business by directing carbon value to the markets where it is worth the most, whether bundled with our fuels in compliance markets or sold separately in voluntary markets. Importantly, the approval also applies retroactively to credits we banked for low-carbon ethanol sold into Canada beginning in 2025, and we've already sold approximately $17 million of these banked credits to be recognized in the third quarter.
Going forward, we believe our carbon business, based on current capacity and market conditions, can deliver over $30 million per year in revenue on a run-rate basis excluding our banked CFR credit sales. We're not simply producing low-carbon ethanol, co-products and RNG. Those commodity products are a means to deliver energy that drops into supply chains today while also driving down carbon intensity, producing more efficiently, capturing and storing carbon, and selling high-quality credits into compliance and voluntary carbon markets.
And importantly, we believe the carbon business model we are building today will be the same durable model we use in the future for SAF, isobutanol and other renewable fuels and chemicals. Powered by our Verity Carbon Accounting digital solutions platform, we expect to grow with discipline by scaling the businesses we have today and delivering the products and solutions our customers and markets demand. At Gevo North Dakota we are focused on growing our low-carbon fuel and carbon businesses through a three-stage plan: first, debottlenecking the plant; second, expanding capacity to double low-carbon ethanol and carbon capture; and third, producing SAF. Stage one is our debottlenecking initiative to increase low-carbon ethanol, co-products, carbon capture and associated incentive volumes by approximately 10% to 15% by the end of this year. Meaningful progress was made during the second quarter and we remain on track and on budget to deliver this anticipated extra capacity, thereby enhancing revenues, growing adjusted EBITDA and expanding our margins in 2027.
This near-term expansion is fully funded and budgeted for this year and builds on our asset we already own and operate. We believe our Gevo North Dakota complex can create more value in the near term while also supporting longer-term growth. Stronger cash generation from Gevo North Dakota helps us reduce risk and enhances our future financing flexibility. Our Gevo North Dakota complex is better suited to support a strategic platform growth than the Lake Preston, South Dakota site we were previously developing.
Gevo North Dakota combines one of the strongest active on-site carbon capture and sequestration capabilities in the world with access to advantaged local feedstocks, established rail and truck logistics, an experienced operating workforce, available land and pore space, capacity for future growth, and it's in a business-friendly state that supports agriculture, energy and carbon management. Given the strengths of the Gevo North Dakota complex and other business factors we considered, we have finalized our decision to exit our ATJ 60 project activities in South Dakota and formally discontinued other non-core project activities.
As a result, we recognized a $176 million one-time non-cash impairment charge. Leike will talk more about this non-cash charge. Continuing with our growth plans. Stage two at Gevo North Dakota targets doubling our capacity to about 150 million gallons per year of low-carbon ethanol with the associated carbon capture and sequestration and tax incentive opportunities. Financing efforts for this expansion are on track and are targeted to be completed in the second half of 2026.
Consistent with our previously announced arrangement and timeline with Arra Energy, engineering, permitting and initial equipment procurement for the expansion project are underway. We anticipate completion of the expansion in 2028 once financing is complete and construction commences. This expansion is expected to result in meaningful revenue and gross profit growth. Stage three of our growth plan contemplates the conversion of approximately one-third of Gevo North Dakota's expanded low-carbon ethanol capacity into higher-value synthetic aviation fuel through Project Northstar, also known as ATJ 30, which is our 30 million gallon per year alcohol-to-jet development project. We are making good progress on this medium-term, multi-year effort and provided details on our milestones in our recent business update. The team delivered our FEL3 engineering estimates on schedule in the second quarter. As we moved from FEL2 to FEL3, the capital estimate was refined based on substantially more detailed engineering, vendor engagement and execution planning. The updated estimate of $600 million remains within the expected range and accuracy associated with an FEL2 estimate and we believe it provides a much higher level of confidence as we approach FID.
FEL3 showed very favorable results for the underlying alcohol-to-jet process modules, which were within 2% of the previous estimates. That's a good sign for enabling the development in a repeatable fashion at other locations in the future. The site-specific engineering and equipment logistics cost increased in FEL3, but we believe that the project's ROI remains attractive. Securing additional financeable offtake agreements is needed to reach FID and remains a gating item.
These are complex multi-year economic commitments and we are making progress advancing these agreements from the current term sheet stage. We remain committed to advancing our ATJ 30 initiative in a disciplined way, sequencing capital based on customer demand, project financeability and policy support, and as a reminder, we are currently pursuing non-dilutive, project-level financing for the project. We do not have to choose between becoming a cash-generating low-carbon fuels and carbon management business and building future ATJ projects.
The Gevo North Dakota site and its near-term cash generation are expected to support ATJ in the future. We continue to target final investment decision for this initiative by the end of the year. I will now turn the call over to Leike to discuss our financial results and outlook in more detail.
Leke Agiri, Chief Financial Officer
Thank you, Paul. This last quarter was an important one for Gevo. We delivered solid operating performance and completed planned maintenance and debottlenecking activities to expand capacity at our flagship North Dakota site. During the second quarter we reported revenue of 47 million compared to 43 million in the same quarter last year. This 7% year-over-year growth reflects consistent operations of our low-carbon businesses, even with modest impact of planned downtime at our Gevo North Dakota site for maintenance and debottlenecking activities.
In comparison to the first half of 2025, revenue during the first half of 2026 grew by 23% to 89 million, reflecting a full six months of the benefit of our Red Trail Energy acquisition compared to just five months last year. Coupled with continued solid performance in our carbon business, gross profit was 20 million in the second quarter, representing a gross margin of 43%, compared to gross profit of 19 million and gross margin of 44% in the same quarter last year.
Relative to revenues alone, we believe that gross profit is a meaningful barometer of business performance. It captures not only our revenue performance but also the impact of optimizing carbon commodities and incentives that are monetized as part of our business model. During the first half of 2026, gross profit was 36 million, an increase from 21 million in the first half of 2025, reflecting a full six months of the benefit of our Red Trail Energy acquisition coupled with dynamic efforts to optimize 45Z tax credit generation from our assets.
Note that we recognize the benefit of 45Z tax credit as a reduction to cost of goods sold. Operating expenses in the second quarter included a one-time non-cash impairment charge of 176 million. This was related to capitalized development and engineering expenses previously incurred, which was primarily associated with prior ATJ 60 project in Lake Preston, South Dakota and other prior initiatives that are no longer in alignment with our strategic priorities.
This non-cash impairment charge does not impact our cash position, liquidity, or operating cash flow outlook. It does not trigger additional cash payment obligation or affect the underlying economics of Gevo North Dakota or ability to execute our development plan there as our core growth platform. Excluding the non-cash impairment charge, operating expenses in the second quarter were up 18% over the second quarter of 2025, which reflects an increase in G&A expenses primarily due to non-recurring employee severance and accelerated equity award charges.
On a GAAP basis, net loss attributable to Gevo was 177 million or $0.75 per share in the second quarter. On a non-GAAP basis, adjusted net loss attributable to Gevo was 1 million or $0.01 per share. A reconciliation of this amount to the GAAP measure is included in today's earnings release. Non-GAAP adjusted EBITDA for the second quarter was 11 million. Note that the second quarter results did not include revenue related to our recently approved CFR pathway, which is expected to show up in the third quarter.
We believe that this quarter's adjusted net loss, coupled with the growing adjusted EBITDA, reflect an ongoing improvement in the underlying earnings power of our business. This quarter establishes a strong foundation from which we expect meaningful adjusted EBITDA and operating cash flows during the second half of the year. As we look to the full year, we now expect 2026 adjusted EBITDA of more than 60 million, which is more than double our prior outlook of 30 million.
This is a meaningful acceleration from our first half 2026 operating performance and is supported by four main drivers. First, the recently approved Canada CFR pathway and associated sales. We expect to begin realizing those sales in the third quarter. Second, our assets are on track to generate more than 70 million of 45Z tax credits that we expect to monetize in 2026 compared to 52 million last year. This is driven by updated policy guidance and our operational efficiencies this year that improve the carbon intensity of our operating assets.
Third, continued operational execution of low-carbon fuel sales, including revenue growth from our specialty fuels. And fourth, further fiscal discipline of the more than 70 million in 45Z monetization we expect to achieve this year. We have already closed on the sale of 20 million in 45Z credit after the end of the second quarter. With our current engagement with seasoned tax credit buyers, we expect to monetize the remaining approximately 50 million of credits and receive the associated proceeds by year end.
A reminder that our 45Z tax credit incentives are generated ratably each quarter based on the volume and carbon intensity of our low-carbon ethanol and RNG production. These credits show up as a reduction in our cost of goods sold on our income statement and are a benefit to our adjusted EBITDA. Note that the cash proceeds from 45Z can lag behind the quarter in which the credit is generated. This results in some quarter-to-quarter variability in our cash flow from operations.
While we continue to expect operating cash flow to be neutral to positive for full year 2026, we also expect meaningful positive operating cash flow in the second half of the year. This further demonstrates the underlying cash-generating power of our businesses continue to strengthen. Turning to liquidity, we ended the quarter with cash, cash equivalents, and restricted cash of 58 million. Importantly, this does not include approximately 16 million of cash proceeds from the monetization of 45Z credits that we have collected since the end of the second quarter.
We're also excited about our performance in 2027 and beyond. Our debottlenecking project remains on track and on budget. We expect 2027 adjusted EBITDA to be broadly in line with our current 2026 full-year target, after we factor in some non-recurring revenue this year and the debottlenecking production uplift starting at the end of this year. Our expansion of Gevo North Dakota to double its production capacity is advancing, with financing on track for completion in the second half of 2026.
This is consistent with our previously announced arrangement with our financing partner, ERA Energy. And as Paul mentioned earlier, we also continue to push forward on securing bankable offtake contracts to enable securing accretive financing of our ATJ 30 project. We are engaged with various project-level capital providers and remain focused on moving forward to FID by year end. In closing, we are seeing continued improvement in adjusted EBITDA and cash flow generation, supported by the strong underlying fundamentals of our business.
We are confident in our ability to sustain our positive momentum as our near-term growth projects at Gevo North Dakota continue to mature on schedule. Today's results anchor Gevo's growth trajectory, further strengthening our capacity to execute our long-term objectives while delivering sustainable value to our shareholders. With that, I will turn the call back to Paul.
Paul Bloom, Chief Executive Officer
Thanks, Leke. We strengthened our financial position, doubled our expected 2026 adjusted EBITDA outlook, and are starting to show that Gevo North Dakota can serve as a scalable blueprint for profitable growth. We've talked before about the potential for a capital-light licensing or franchise-type model, and that opportunity is becoming more tangible as we demonstrate how our technology, operating model, and carbon capabilities can be deployed to meet customer demand and capture value across markets.
We'll have more to share as these initiatives advance. For now, I want to thank our employees, partners, customers, and shareholders for their continued support. We are building Gevo with discipline, focus, and a clear path to creating long-term value. With that we'll open the call for questions.
OPERATOR
All right, thank you very much. At this time I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Once again, star one. And we will pause just a moment to compile the Q&A roster. All right, looks like our first question today comes from the line of Jeff Gramp with Northland. Jeff, please go ahead.
Jeff Gramp, Analyst at Northland
Afternoon, guys. Thanks for the time.
Paul Bloom, Chief Executive Officer
Hey Jeff, how are you?
Jeff Gramp, Analyst at Northland
Hey Paul, good, thanks. I wanted to dive into the $60 million EBITDA target that you guys have refreshed here lately. I just wanted to understand some of the moving parts with respect to the approval to reach the Canadian markets. It sounded like some of that 60 million is a little bit of a one-time bump related to some volumes prior to getting that approval, like a retroactive credit, if you will. Can you help us understand how much of a windfall that might be, just to kind of level set, I guess, kind of what the true earnings power of the business is in ’26?
Paul Bloom, Chief Executive Officer
Yeah, sure thing. And that's a perfect question, right? Because, you know, we're really excited that the carbon business itself has grown now to what we think is a run rate of about $30 million a year going forward. So that's going to be the part that goes forward into 2026. When we think about the CFR credits, this is a big part of what we wanted to get done because we had made a bet that we were going to be able to capture the value from these CFR credits once we got the approval.
And, you know, we had sold a lot of fuel in 2025 and the first half of 2026 here. So we haven't been able to monetize those credits yet. But about 40%, a little more than 40%, are actually credits that were realized this year. So when we think about that, there's a big component of those banked credits that really are in a run rate for 2026. So that is a big component going forward. But I would say that when you think about the 60 million that we're talking about going forward, remember we're going to be completing the debottlenecking by the end of the year.
So we believe that this is really the upside of that minus maybe these one-time events. We're really kind of flattish going into 2027. So we think most of the 60 million is going to be a repeatable run rate on the forward basis. I don't know, Leke, if you get any other comments on that.
Leke Agiri, Chief Financial Officer
Thanks, Paul. Generally agree with the description there. So the way to think about it is what Paul just mentioned: as we complete the debottlenecking, there's going to be uplift in terms of production volume that increases just our revenue profile. And then, when we subtract out the non-recurring basis from 2026, effectively, we end up at that flattish projection as to what we offer 2026.
Paul Bloom, Chief Executive Officer
Yeah, and remember, this is like we're really thinking about how are we going to grow this EBITDA nicely. It's also about the increase in the 45Z tax credits that we've got, right? So we're kind of putting all of these different levers together to make sure that we can have this durable business going forward that hits, that exceeds that 60.
Jeff Gramp, Analyst at Northland
Got it. Thanks for the details. And for my follow-up, just sticking in the Canadian market, what percent—do you guys have like an estimate? I know this changes as market prices and dynamics change, but, like round numbers, how much of your ethanol do you expect to send to Canada in the second half of this year? I mean, seeing some of the pricing points, it seems like that's the most economic market for you. But perhaps there's some other factors at play that might, I don't know, make sense to send to other markets, or if there's any constraints to how much you can send to Canada.
Paul Bloom, Chief Executive Officer
Yeah, no, again, great question. And this is the whole point of our business on carbon arbitrage, right? So we want to make sure that we've got all the levers that we can pull to maximize the returns for Gevo and our shareholders. And so having this new lever that we can send, as you know, as Canada is a very strong market over, you know, a billion-gallon opportunity for us, obviously we're a lot smaller than that. So we want to continue to maximize the volumes to where we're going to get the highest returns.
So really no limitations there on how much we can send. We're going to continue to make sure that we've got the right certifications and everything in place to do that. But then we have to look at the other markets. We have to take a look at, you know, how's the voluntary market developing? That's something that we talked about because we've got more interest in that side. You saw that in our business update. We talked about Nasdaq, you know, as a second year that they bought carbon from us on a substantial-size buy.
So we're always weighing, you know, how do we place the carbon in either a compliance market or a voluntary market. What's going to give us the total return that we're looking for? How do we diversify our business too? Because we don't want all our eggs in one basket. I think that's the thing that we've learned about being in the fuels and carbon markets, that we want a good mix there and be able to play these off of each other.
Jeff Gramp, Analyst at Northland
That makes a lot of sense. I appreciate the details. I'll turn it back.
OPERATOR
All right, thank you, Jeff. And our next question comes from the line of Amit Dayal with HC Wainwright. Amit, please go ahead.
Amit Dayal, Analyst at H.C. Wainwright
Thank you. Good afternoon, everyone. Thanks for taking my questions. Congrats on all the progress, you know. Hi, Paul. On the ethanol expansion, Paul, can you remind us what the CAPEX requirements are going to be, please, on this project?
Paul Bloom, Chief Executive Officer
Yeah, so we haven't disclosed the capital requirements on the ethanol expansion. You know, we—if you flip back to the debottlenecking, we said we were deploying about $24 million of capital in that range. About half of that was going to operational reliability. The other half was going to the actual debottlenecking to improve the output from 67 million gallons to 75 million gallons. So we'll have more details as we get further along here, but it's really about getting this done and getting our deal done with our energy.
We're feeling really good about that and expect to get this done within the next few months because we want to then move directly into the execution. As we mentioned, we're moving quickly on this and looking at permitting. We're looking at a lot of the other engineering things. All that's well underway because it essentially doubles what we're already doing today at Gevo, North Dakota. And because the carbon business is working, because we're able to monetize and kind of firing on all cylinders, monetizing tax credits, this is the most accretive project that we have in the hopper.
We want to get this to the finish line.
Amit Dayal, Analyst at H.C. Wainwright
Understood. So we'll have maybe more color on this in the 3Q earnings call,
Paul Bloom, Chief Executive Officer
Most likely. You know, I mean, I think the biggest thing—and Greg, you can jump in here too. So Greg Hanselman's on the line with us. So, Greg, I mean, you want to talk about what your expectations are on—
Greg Hanselman, Chief Operating Officer
Yeah. Capital—we don't know the exact timing, but the engineering team is working hard on designing an integrated plant. This isn't like two separate facilities. We really want to optimize the CAPEX and the OPEX to drive the best synergies for the long term. And we don't have all those answers yet, but we're working hard to solidify that so we have the answer when the time is right and we bring that together later in H2.
Paul Bloom, Chief Executive Officer
And very much like what we're doing on ATJ, working through an FEL2, FEL3, we're refining these estimates. So today we're not there yet on refining that estimate to where we want to be, but we'll keep moving that forward. So we have a much finer point on this when we're able to communicate that.
Amit Dayal, Analyst at H.C. Wainwright
Okay, understood. No, thank you for that. So for ATJ 30, would you potentially go with Aira or are you looking at other financing options and partners?
Paul Bloom, Chief Executive Officer
Yeah. I'll let Leke chime in here on some of the updates we've got on financing. But you know, this has been something that we've been working on for a long time. So the key thing again is that we've, you know, completed the FEL3 estimates like we talked about. We're working on these financeable offtakes. And really when we think about financing, you need to make sure you've got a bankable project. And the discipline that we're putting in this is making sure that we not only have the offtakes, but we've got the right customers—the right customers who are going to be there because it's going to take us a few years to build this plant and then have long-term, very complex, multi-year, you know, financial arrangements that are going to support this project. So it's a mix of making sure that we've got the offtakes and that we've really got the right set of customers who see us. And then, you know, the financing at that point it kind of falls into place because then you can start to look at what's your risk profile on the overall project. But we are working through that de-risking today. Leke, I don't know if you want to make comments on the other—
Leke Agiri, Chief Financial Officer
Yeah, I think just to probably sum it up in terms of capital raise profile, we're engaged with multiple, you know, project-level lenders and equity providers. So just not Aira at this point, but also just to express really the excitement that we have is as we look to the development of ATJ 30, what's also very important is to highlight our existing operations, the cash flows that we're generating now. Those actually enable the ability for us to fund ATJ 30 from a development perspective, but also fund our portion of the construction capital as well.
So that's the really exciting part. I think the engagement with the project-level capital is on the right track. And as Paul mentioned, as we secure the bankable offtakes with the right partners, with the right economics, then the puzzle comes together in terms of just moving forward with the project at the right time.
Paul Bloom, Chief Executive Officer
Yeah. Just to maybe close the loop with Arrow, we're really laser focused on the expansion today. That's what we need to get done. And like Greg was saying, you know, move that forward so we can get, you know, 2028 will be here before you know it. So we've got a full-court press on making sure that we can, you know, get that project executed.
Amit Dayal, Analyst at H.C. Wainwright
Thank you guys for the color. Just last one for me, maybe just on Verity. Any updates on progress with commercialization, et cetera, for that offering?
Paul Bloom, Chief Executive Officer
Yeah, great question. Verity, one of my favorite topics. So, you know, with Verity, I think the thing we're really learning more than anything else is as we get to this run rate of 30 million on our carbon business, Verity is just a key component of how we put all that together. It goes back to the original reasons of why did we build this platform? And it was because we can take one source of data from, you know, multiple areas, whether that comes from the farm inputs, whether that's from the energy inputs, carbon capture, tie it all together, and then use that tool to basically be able to substantiate and track our claims and carbon accounting into multiple markets—whether that's Canadian CFR, whether that's 45Z, whether that's a voluntary market. So it's becoming, I would say, a much bigger part of what we see as a key component of the carbon business for us. The other thing with that is that we're just getting to this point now in the development phase, but not only can we track, but we can optimize. So you start to think about now, how do we use Verity as an optimization tool? So I think internally, we're very optimistic about how Verity is contributing value to the carbon business results that you're seeing today.
Externally, we've got a number of customers, I would say a little bit slower on the uptake of external development, mostly because we still don't have good clarity on things like 45Z benefits. Those are kind of some of the big things that we've looked at. And we're still trying to figure out how much are we going to be able to pull in from a compliance-type tool. Right. And as we look at this, not everybody's running a carbon business. I think we're actually the only ones running a carbon business like us.
So I think as this catches on, there'll be more demand for Verity out there. But, you know, we still have the eight customers that we've had in the past and continue to develop that portfolio. But the external development's definitely been a little slower on the uptake.
Amit Dayal, Analyst at H.C. Wainwright
Understood. Well, I appreciate all the color, guys. Thank you so much. I'll step back in queue.
OPERATOR
All right, thank you, Amit. And our next question comes from the line of Derek Whitfield with Texas Capital. Derek, please go ahead.
Derek Whitfield, Analyst at Texas Capital
Thanks. Good afternoon and congrats on the quarter and the updated outlook.
Paul Bloom, Chief Executive Officer
Well, thanks, Derek.
Derek Whitfield, Analyst at Texas Capital
Got two questions for you guys, both on ethanol. So with respect to the ethanol expansion to 150, could you speak to the expected capital structure for the expansion and second stand on the ethanol facility. It's clear that you guys operate a very low CI plant based on efficiency in CCUS. But given that you operate in a more progressive region for CSA practices, how are you thinking about the benefit of expected CSA policy on your 45Z credits?
Paul Bloom, Chief Executive Officer
Yeah, both great questions, thanks. You know, I'll start with the first one. So on the capital structure, right—as we work through the details with ARA on the expansion, you know we'll stay in the lead, right. So we're going to have a controlling interest in the plant. Obviously we will operate the plant and as we work through that, everything's going to be consolidated on our balance sheet. That's the plan going forward. I don't know, Leke, you want to jump in there?
Leke Agiri, Chief Financial Officer
The only thing to add to that is there's going to be project-level debt that we also use to optimize the financing strategy. So as Paul mentioned, we are targeting a controlling interest. We'll consolidate the expansion project and then the rest of the capital stack is going to be provided by us and ARA, which again it goes back to the point I was raising earlier. Our existing operations generating the right level of EBITDA on a recurring basis—cash is coming in for us to be able to fund our ownership interest of the expansion project.
Paul Bloom, Chief Executive Officer
Yeah. And then again just to be clear, right—again, a non-dilutive financing approach at that project level.
Leke Agiri, Chief Financial Officer
That's right.
Paul Bloom, Chief Executive Officer
That Leke's talking about. Moving on to your second part of the question, we do have one of the lowest CI scores out there. And so, you know, from a 45Z ag benefits perspective, the question is always how much lower can you go? So we do have a little bit, but that's going to be—you know, Greg can chime in here too, but we've got more energy optimization. When you think about CI, carbon intensity, it's kind of a proxy for a lot of good things that happen. The best one is called efficiency, right. So as you continue to do more with less or have more output with less input, you drive down the carbon intensity. You also drive your economics in a favorable way for your projects. So we're laser-focused on that. Again, we already have a low CI score. So probably compared to a lot of others, we've got a smaller amount that we can take advantage of like a CSA or, you know, the ag benefits, regen ag benefits that are coming in, because you can't go lower than zero, right.
And so we're already getting pretty close. So it could be a few million dollars that we're going to be trying to, you know, pull out of that. But it's really going to come to that, you know, we're going to need more bushels. We've got an expansion coming, so we think that this is just a bigger deal. And again, we're optimistic that this is the right way to go because climate-smart agriculture, or regen agriculture, all of those things help to also enrich the carbon in the soil.
They make soils more robust, you know, to weather events. And so we think that this is just the right way to move forward so farmers can do more with less too. It's just, it's a good practice to have. I don't know, Greg, if you want to talk about anything else.
Greg Hanselman, Chief Operating Officer
No, I just add on the CI score, we do have a little room to go, and volume is a nice lever to dilute out fixed, obviously. But also energy is—there’s less consumption as you get that next unit at the top end of a big facility. And so working and solving for that in our modeling and our design is a key part of what we're working on, not only in the debottlenecking but also the expansion project. Yeah, I think the other thing that we're really focused on is reliability, because we can't get time back.
So our operational excellence—we're laser-focused on making sure that we're a great operator and the only downtime we have is the planned downtime. And so that's the thing that gives me a lot of optimism about this growth plan that we have, is we're already demonstrating this. We've been doing the debottlenecking now this year and thinking about that. Take a look at our website when you get a chance. We've got some time-lapse photography of everything that we've been doing.
I mean, it's fantastic. The team's really been executing well. We've been building and growing while operating, right. It's not an easy thing to do, and we need to do that safely. We need to make sure that that's at the top of our list and continue to be focused on that. But then we're going to move into the next phase. We're really going to be doing the expansion, and then we'll move into the third phase beyond that, where we've got the ATD project.
So I think my confidence level is really building with the entire team because they're able to execute on this. And you can see it, right. So again, go to the website, check out our photos—it's pretty cool stuff.
Derek Whitfield, Analyst at Texas Capital
Thank you guys, and congratulations on all your progress.
Paul Bloom, Chief Executive Officer
Thank you.
OPERATOR
All right, thank you, Derek. And it looks like our final question today comes from the line of Peter Gastric with Water Tower Research. Peter, please go ahead.
Peter Gastric, Analyst at Water Tower Research
Thank you very much and congratulations on the results, and thanks for taking my question. Just a couple questions. First of all, for Frontier Infrastructure and CarbonFuture, they announced a new partnership a few days ago to market CDRs from ethanol CO2. That's a parallel initiative, right? Does that have any implications to you in terms of advancing the strategy, and what can you share about that?
Paul Bloom, Chief Executive Officer
So, Peter, I think CDRs just in general—this is what we're selling today, right? The CDR is the voluntary side of the carbon market, and CDR stands for carbon dioxide removal. We've been certified from the very beginning through Puro.earth, and that's the business that we continue to look at growing. You know, we sold 8,500 tons to Nasdaq overall. We're actually just finalizing some more transactions around the carbon business on the voluntary side.
We think this is great. If you look at the overall macros on that business, about $12 billion has been committed in CDR purchases, but only about 3.3% of that has been delivered. That comes from a website called cdr.fyi. I think that is a really good place to look. We're actually number five on the leaderboard on cdr.fyi as a supplier. So the thing that I think is great about what we're doing is we're one of the handful of companies who can actually not only just talk about CDRs and sell CDRs, but we can deliver those CDRs.
So we're becoming, I would say, as you work through the quality requirements—we have very high-quality carbon, and we're going to stay focused on delivering that high-quality product—that we're a trusted supplier in this space.
Peter Gastric, Analyst at Water Tower Research
Okay, great. Thank you. Just a second question. On the EBITDA Challenge, which you discussed in the Q1 results, have you thought about where some of the low-hanging fruit could lie? And also, with respect to South Dakota, are there any other benefits to your cost that could be reflected, for example, in the GEVO business segment or other that could come up in subsequent quarters?
Paul Bloom, Chief Executive Officer
Yeah, look, we're very happy with how we've been progressing the EBITDA Challenge. So there's a lot in the hopper we've gone through. I'll let Leke provide the details—he's the champion of the EBITDA Challenge here at Gevo—but we've identified quite a number of opportunities and started to execute on those. So I'll let Leke give some of the good news.
Leke Agiri, Chief Financial Officer
Yeah, no, absolutely. So great question. In terms of the EBITDA Challenge, we're at a place where we've identified over three dozens of opportunities in front of us, which are really—probably half of it is low-hanging fruit. To date, we've actually implemented about 50% of those identified items, which is not necessarily related to ATJ 60 or the South Dakota project. This is actually recurring operational efficiencies that we can, that we can actually just implement this year.
During the second half of this year is what we expect to see some of those executions and implementation start manifesting in our financial performance for the year as well. So where we are tracking today is our Q3 and Q4 results are going to be reflecting our focus and implementation of the EBITDA Challenge, and we're on the right trajectory to see some very, very groundbreaking milestones on that as well.
Paul Bloom, Chief Executive Officer
Yeah, and it's really the combination of how do we continue to unlock revenue through new pathways, things like the CFR. I mean, we were focused on that. That was part of the EBITDA Challenge, and we've got more pathways to unlock. And then the other part is just how do we really manage and control our costs going forward and really have a disciplined approach to these are the things we need to accomplish, and making sure that we understand what that's going to return for us and our shareholders as we do that.
Peter Gastric, Analyst at Water Tower Research
Okay, that's great. Thank you very much.
OPERATOR
Thank you, Peter. And ladies and gentlemen, that does conclude our question-and-answer session. I will now turn the call back over to CEO Paul Bloom for closing remarks. Paul, thank you.
Paul Bloom, Chief Executive Officer
Hey. This quarter shows that Gevo is really executing. We've got stronger adjusted EBITDA, we're improving our cash generation, we have a working carbon business, and a disciplined growth plan centered on Gevo, North Dakota. And that's the platform that we intend to scale. So again, I just want to thank all our colleagues, our partners, our customers, and our shareholders for all the support. Thank you very much.
OPERATOR
Thanks, Paul. And ladies and gentlemen, that concludes today's call. Thank you so much for joining, and you may now disconnect. Have a great day, everyone.
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