MicroCapClub Invitational: Vertex Energy (VTNR)


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Vertex Energy (VTNR) is a vertically integrated hydrocarbon recovery company that has profitably grown revenues from $38m in 2009 to $110m in 2011. The company owns and operates a network of used motor oil collectors and aggregators, and then refines this feedstock using the company’s proprietary TCEP technology into higher value end products. The company has been expanding organically and by way of strategic acquisitions to broaden its footprint. Recovering, recycling and reusing hydrocarbons, plastics, and chemicals, has been a very hot area for investors the last couple of years. Several mergers and acquisitions in the space have made Vertex Energy a potential target. Heckmann (HEK) acquired Thermal Fluids in 2011, followed by Clean Harbor’s (CLH) acquisition of Safety-Kleen a few months ago. Heritage-Crystal Clean (HCCI), an industry comparable trades at over 20x 2013 EPS estimates. Vertex Energy has flown under the radar even while producing a more impressive growth curve then its larger peers. While the peer group trades at 20x 2013 analyst estimates, Vertex trades at 5x 2013 estimates, and that's the opportunity. Listen to CEO Ben Cowart as he tells the story.

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MicroCapClub Invitational: Vertex Energy (VTNR)

  1. 1. Business Overview NASDAQ: VTNR February 2013 recovering tomorrow’s energy
  2. 2. DisclaimerThis document may contain forward-looking statements including words such as “may,” “can,”“could,” “should,” “predict,” “aim,” “potential,” “continue,” “opportunity,” “intend,” “goal,”“estimate,” “expect,” “expectations,” “project,” “projections,” “plans,” “anticipates,” “believe,”“think,” “confident,” “scheduled,” or similar expressions, as well as information aboutmanagement’s view of Vertex Energy’s future expectations, plans and prospects, within the safeharbor provisions under The Private Securities Litigation Reform Act of 1995. These statementsinvolve known and unknown risks, uncertainties and other factors which may cause the results ofVertex Energy, its divisions and concepts to be materially different than those expressed orimplied in such statements. These risk factors and others are included from time to time indocuments Vertex Energy files with the Securities and Exchange Commission, including but notlimited to, its Form 10-Ks, Form 10-Qs and Form 8-Ks. Other unknown or unpredictable factorsalso could have material adverse effects on Vertex Energy’s future results. The forward-lookingstatements included in this presentation are made only as of the date hereof. Vertex Energycannot guarantee future results, levels of activity, performance or achievements. Accordingly, youshould not place undue reliance on these forward-looking statements. Finally, Vertex Energyundertakes no obligation to update these statements after the date of this presentation, except asrequired by law, and also takes no obligation to update or correct information prepared by thirdparties that are not paid for by Vertex Energy. recovering tomorrow’s energy 2
  3. 3. Company Overview Vertex Energy is a leading environmental services company focused on recycling petroleum-based waste streams The Company Recently completed a strategic acquisition of substantially all of the assets of Vertex Holdings The Acquisition creates a vertically integrated business which spans the entire petroleum recycling value chain » Collection: Collect and purchase used oil directly from generators such as Jiffy Lube and car dealerships › Approximately 9 million gallons collected during the 12-month period ended September 30, 2012 » Aggregation: Purchase used oil, transmix, and off-specification commercial chemical products from an established network of local and regional collectors › Approximately 58 million gallons aggregated during the 12-month period ended September 30, 2012 » Logistics: Manage the transportation, storage and delivery of aggregated feedstock and re-refined products » Re-refining: Process waste streams into higher-value feedstocks or end products using in-house proprietary TCEP technology or 3rd party outsourcing for transmix and chemical byproducts » Sales: Sell used oil and re-refined products to re-refineries & fuel blenders Headquartered in Houston, Texas, with approximately 90 employees recovering tomorrow’s energy 3
  4. 4. Vertex’s Role in the Petroleum Recycling Value Chain Generators Collectors Aggregators Processors End Users  Third parties  Collect used oil  Purchase used oil  Process used oil  End product is used Generate used oil from generators from collectors as an industrial fuel,  Technology through core ship fuel, base oil, or Overview business  Typically local or  Sell and deliver it upgrades input refinery feedstock regional as feedstock for into higher value  Jiffy Lube, car processors end products  Highly fragmented dealerships, etc.Vertex Energy Historical Refining & Black Oil Div. Marketing Div. AcquiredBusinesses* TCEP * EBITDA for 2011 was $6 million & 9 months ending 9/30/2012 was $4 million recovering tomorrow’s energy 4
  5. 5. Markets for Used OilBurners (paper mill, asphalt kiln) High Value Fuel (TCEP) USED OILRe-refineries (Base Stock) Export (utility blends) Vacuum Gas Oil (VGO) recovering tomorrow’s energy 5
  6. 6. Compelling Business Model Used Oil Pipeline Transmix & Chemical Byproduct Black Oil Division Refining & Marketing Refining & Marketing Historically, an aggregator Thermal Chemical  Aggregator and logistics manager of transmix and and logistics manager of used Extraction Process – byproduct feedstocks oil feedstock TCEP  Oversee 3rd party re-refining Acquisition gives Vertex  Patent pending technology process Energy collection capabilities developed by Vertex  Sell re-refined products Used oil sold to third-party  Converts used motor oil into a Re-refineries, VGO, Export or refining feedstock or transferred to Refining & cutterstock-diesel Marketing Division replacement. Fuel Blenders Fuel Blenders Fuel Blenders Re-refineries Refiners Chemical-Refiners recovering tomorrow’s energy 6
  7. 7. FacilitiesCMT – TCEP facility KMTEX – Port Arthur Location recovering tomorrow’s energy 7
  8. 8. Map of Black Oil Division and Distribution recovering tomorrow’s energy 8
  9. 9. Volumes & Financials FYE FYE FYE 9 Months Ending 9/30, 2009 2010 2011 2011 2012 Volume (in bbls. sold) 906,452 921,422 1,175,829 855,854 1,061,515 YoY % Change 0.96% 1.65% 27.61% 27.13% 24.03% Revenue $ 38,703,847 $ 58,140,985 $ 109,740,257 $ 78,401,089 $ 102,316,702 YoY % Change (40.7%) 50.2% 88.7% 84.8% 30.5% Gross Profit 2,729,552 4,239,944 8,074,070 6,769,022 6,819,441 Gross Margin % 7.1% 7.3% 7.4% 8.6% 6.7% Adjusted EBITDA 174 1,474,935 4,281,413 3,953,057 3,400,349 EBITDA Margin % 0.0% 2.5% 3.9% 5.0% 3.3% Net Income (609,384) 1,228,426 5,753,515 3,680,750 3,520,916 Net Income % (1.6%) 2.1% 5.2% 4.7% 3.4% Diluted EPS $ (0.08) $ 0.09 $ 0.39 $ 0.25 $ 0.25 NOL’s of ~$35mm from reverse merger 1) Includes only one month of financial results from Vertex Holdings 2) Adjusted EBITDA excludes merger related expenses 3)Net Income includes a deferred income tax benefit of $1.9M relating to decrease in the Company’s valuation allowance on net operating losses. recovering tomorrow’s energy 9
  10. 10. Strong Financial Performance Revenue Gross Profit $120 $9.0 $109.7 $8.1 $102.3 $8.0 $100 $6.8 $6.8 $7.0 $78.4 $80 $6.0 $58.1 $5.0 $4.2 $60 $4.0 $38.7 $2.7 $40 $3.0 $2.0 $20 $1.0 $0 $0.0 FY FY FY 9 Months 9 Months FY FY FY 9 Months 9 Months 2009 2010 2011 9/30/11 9/30/12 2009 2010 2011 9/30/11 9/30/12 Adjusted EBITDA Net Income $4.5 $4.3 $7.0 $4.0 $4.0 $6.0 $5.8 * $3.4 * $3.5 $5.0 $3.0 $4.0 $3.7 $3.5 * $2.5 $3.0 $2.0 $1.5 $2.0 $1.5 $1.2 $1.0 $1.0 $0.5 $0.0 $0.0 $0.0 ($1.0) ($0.6) FY FY FY 9 Months 9 Months FY FY FY 9 Months 9 Months 2009 2010 2011 9/30/11 9/30/12 2009 2010 2011 9/30/11 9/30/12Note: All $ figures in millions* Includes $1.8 million tax adjustment recovering tomorrow’s energy 10
  11. 11. Gross Profit Mix Successfully leveraging our history Percentage of Gross Profit By Division as a value-added feedstock 100% logistics provider to become a leading re-refiner of used 32% petroleum products 80% 54% TCEP contribution ramping up 75% 70% 60% 78% dramatically and should aid 100% margin improvement 40% 68% 46% 20% 30% 25% 22% 0% FY FY FY FY 9 Months 9 Months 2008 2009 2010 2011 9/30/11 9/30/12 Black Oil Refining & Marketing recovering tomorrow’s energy 11
  12. 12. Growth Strategy Expand Feedstock Supply Volume » Grow street collections and aggregation operations » Expand existing relationships with suppliers Replicate and rollout additional TCEP facilities » Locate new TCEP facility sites at marine ports to capitalize on feedstock availability » Expand existing Baytown capacity Acquire Collectors » Partner with or acquire collection and aggregation assets Vertical Integration » Leverage existing process technologies in the market » Expand other recycling and processing technologies for bi-products such as oil filters and antifreeze » End Product sales to Consumers » Direct Fuel Blending recovering tomorrow’s energy 12
  13. 13. Investment Highlights  Estimated $2.3 billion market opportunity Strong Position in  Services span the entire petroleum recycling value chain from collection to end product salesGrowing Petroleum  Well positioned to capitalize on growth trends through scale, technology, and key strategicRecycling Industry relationships with feedstock generators and aggregators Proprietary TCEP  Own the intellectual property rights to patent pending TCEP process Re-refinement  TCEP upgrades used oil into higher-value feedstock and diesel replacement fuel Technology  TCEP refinery capital expenditures are significantly less than conventional re-refineries  Diverse network of feedstock generators and collectors covering 13 states Key Strategic  Insulated from commodity price risk through supplier and customer contracts Relationships  Aggregated 58 million gallons of feedstock in during the twelve months ended September 30, 2012  Expand feedstock aggregation volumes and geographic footprintCompelling Growth  Acquire used oil collectors and pursue other vertical integration opportunities Opportunities  Develop or acquire technologies to upgrade TCEP finished product into base oil  Expand TCEP capacity – 30 million gallon run-rate at first TCEP processing facility Proven Financial  Demonstrated growth in revenue, gross profit, EBITDA and net income Performance &  Acquisition of Vertex Holdings expected to be accretive to earnings and improve marginsManagement Team  Proven, highly experienced management team averaging 20 years of industry experience recovering tomorrow’s energy 13
  14. 14. Management TeamBenjamin P. Cowart | Chief Executive Officer, Chairman of the Board, Founder26+ years petroleum recovery industry, pioneering the reclamation industry by developing recycling optionsfor many hydrocarbon residual materials once managed as hazardous wastesMatthew Lieb | Chief Operating Officer17+ years business leadership, operations, consulting expertise, 3 startups and public company experienceChris Carlson | Chief Financial Officer12+ years financial management, energy, commodity, treasury and risk managementJohn Strickland | Manager of Supply & Trading27+ years management and marketing of fuels and petroleum blending operationsGreg Wallace | Manager of Refining & Marketing22+ years processing, trading and marketing of petroleum and chemicalsMike Stieneker| General Manager of H&H Oil Collections20+ years management and operations of Used Oil CollectionsMike Carter| General Manager of Operations and Regulatory Compliance20+ years management and terminal operations recovering tomorrow’s energy 14
  15. 15. Contact Information Ben Cowart CEO (281) 486-4182 benc@vertexenergy.comwww.vertexenergy.com recovering tomorrow’s energy 15
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