[Darling Ingredients Inc. Second Quarter 2025 Results](index=1&type=section&id=Darling%20Ingredients%20Inc.%20Second%20Quarter%202025%20Results) [Financial and Operational Highlights](index=1&type=section&id=Financial%20and%20Operational%20Highlights) Darling Ingredients reported a significant drop in Q2 2025 net income to $12.7 million, primarily due to lower DGD earnings, with net sales flat at $1.5 billion Q2 & H1 2025 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $1.5 billion | $1.5 billion | $2.9 billion | $2.9 billion | | **Net Income/(Loss)** | $12.7 million | $78.9 million | ($13.5 million) | $160.0 million | | **Diluted EPS** | $0.08 | $0.49 | ($0.09) | $0.99 | | **Combined Adj. EBITDA** | $249.5 million | $273.6 million | $445.3 million | $553.7 million | - The company's 2025 outlook for Combined Adjusted EBITDA has been revised to **$1.05-$1.10 billion**, citing uncertainty around small refinery exemptions and its impact on RIN pricing[7](index=7&type=chunk) - Strategic initiatives in Q2 included a successful debt refinancing to lock in borrowing costs and the launch of Nextida, a new joint venture aimed at accelerating growth in the global collagen business for health and wellness markets[4](index=4&type=chunk) Financial Position as of June 28, 2025 | Metric | Value | | :--- | :--- | | Cash and cash equivalents | $95.0 million | | Total debt outstanding | $3.98 billion | | Revolver availability | $1.27 billion | | Preliminary Leverage Ratio | 3.34x | [Consolidated Financial Statements](index=2&type=section&id=Consolidated%20Financial%20Statements) Consolidated financial statements reveal a significant decline in Q2 and H1 2025 profitability, primarily due to reduced DGD equity income [Consolidated Statements of Operations](index=2&type=section&id=Consolidated%20Statements%20of%20Operations) Q2 2025 operating income fell to $75.9 million, driven by a sharp decrease in DGD equity income to $6.0 million Consolidated Statement of Operations Highlights (in thousands) | Account | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total net sales | $1,481,518 | $1,455,292 | $2,862,112 | $2,875,591 | | Operating income | $75,868 | $148,502 | $104,268 | $285,671 | | Equity in net income of DGD | $6,000 | $44,197 | ($24,523) | $122,616 | | Net income/(loss) attributable to Darling | $12,661 | $78,866 | ($13,499) | $160,023 | [Balance Sheet Disclosures](index=7&type=section&id=Balance%20Sheet%20Disclosures) As of June 28, 2025, the company held $94.6 million in cash, with total debt at $3.98 billion and $1.27 billion revolver availability Key Balance Sheet Data (in thousands) | Account | June 28, 2025 | December 28, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $94,577 | $75,973 | | Property, plant and equipment, net | $2,786,827 | $2,713,669 | | Current portion of long-term debt | $51,637 | $133,020 | | Long-term debt, net of current portion | $3,928,689 | $3,908,978 | [Segment Performance](index=3&type=section&id=Segment%20Performance) Q2 2025 saw improved Feed Ingredients profitability, stable Food Ingredients, and a significant decline in Fuel Ingredients due to lower DGD contribution [Feed Ingredients](index=3&type=section&id=Feed%20Ingredients) Feed Ingredients segment reported a Q2 2025 Adjusted EBITDA increase to $135.9 million, despite relatively flat net sales Feed Ingredients Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total net sales | $936,532 | $934,147 | $1,832,815 | $1,823,995 | | Segment operating income | $39,900 | $68,734 | $60,911 | $113,223 | | Segment Adjusted EBITDA | $135,902 | $122,056 | $246,484 | $228,865 | [Food Ingredients](index=3&type=section&id=Food%20Ingredients) Food Ingredients segment's Q2 2025 Adjusted EBITDA slightly decreased to $69.9 million, with modest net sales increase Food Ingredients Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total net sales | $386,142 | $378,841 | $735,382 | $770,123 | | Segment operating income | $42,555 | $45,828 | $83,925 | $78,647 | | Segment Adjusted EBITDA | $69,946 | $73,200 | $140,878 | $134,887 | [Fuel Ingredients](index=3&type=section&id=Fuel%20Ingredients) Fuel Ingredients' Q2 2025 Combined Adjusted EBITDA dropped significantly to $61.3 million due to lower DGD contribution Fuel Ingredients Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total net sales | $158,844 | $142,304 | $293,915 | $281,473 | | Segment operating income/(loss) | $15,876 | $55,599 | ($5,045) | $143,435 | | DGD Adj. EBITDA (Darling's Share) | $42,648 | $76,642 | $48,683 | $191,702 | | **Combined Adjusted EBITDA** | **$61,287** | **$96,767** | **$85,513** | **$229,911** | [Diamond Green Diesel (DGD) Joint Venture Performance](index=8&type=section&id=Diamond%20Green%20Diesel%20(DGD)%20Joint%20Venture%20Performance) DGD joint venture experienced a sharp decline in Q2 2025 net income to $16.3 million, driving Darling's overall earnings decrease DGD Operational Metrics | Metric | Q2 2025 | YTD 2025 | | :--- | :--- | :--- | | Renewable Fuel Sold (million gallons) | 248.6 | 467.8 | | Average EBITDA per gallon | $0.36 | $0.22 | [DGD Statement of Operations](index=8&type=section&id=DGD%20Statement%20of%20Operations) DGD's Q2 2025 operating revenues decreased to $1.10 billion, with Adjusted EBITDA falling to $89.6 million DGD Statement of Operations Highlights (in thousands) | Account | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating revenues | $1,097,831 | $1,184,076 | $1,997,740 | $2,595,191 | | Operating income/(loss) | $28,102 | $91,373 | ($25,563) | $256,204 | | Net income/(loss) | $16,334 | $88,394 | ($42,974) | $245,232 | | DGD Adjusted EBITDA | $89,631 | $153,283 | $103,438 | $383,404 | [DGD Balance Sheet](index=9&type=section&id=DGD%20Balance%20Sheet) As of June 30, 2025, DGD had total assets of $5.38 billion, total debt of $822 million, and cash decreased to $163.8 million DGD Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $163,846 | $353,446 | | Total assets | $5,384,440 | $5,460,517 | | Total long term debt (incl. current) | $722,232 | $736,967 | | Total members' equity | $4,279,107 | $4,386,667 | [Non-GAAP Reconciliations and Disclosures](index=10&type=section&id=Non-GAAP%20Reconciliations%20and%20Disclosures) This section details non-GAAP financial measures and cautionary statements regarding forward-looking information and significant risk factors - The company uses non-GAAP measures like Segment Adjusted EBITDA and Combined Adjusted EBITDA to evaluate operating performance by excluding items like depreciation, interest, taxes, and other non-recurring or non-cash charges[28](index=28&type=chunk)[32](index=32&type=chunk) - The report includes forward-looking statements that are not guarantees of future performance and are subject to numerous risks and uncertainties[37](index=37&type=chunk) - Key risk factors identified include: volatility in biofuel and commodity prices, changes in government regulations (e.g., renewable fuel standards), raw material availability, risks associated with the DGD joint venture, and international trade barriers[38](index=38&type=chunk)[39](index=39&type=chunk)

Core Viewpoint - Analysts expect Darling Ingredients (DAR) to report quarterly earnings of $0.09 per share, reflecting a significant year-over-year decline of 81.6%, while revenues are projected to be $1.48 billion, indicating a slight increase of 1.5% from the previous year [1]. Earnings Estimates - Over the past 30 days, there has been a 7% downward revision in the consensus EPS estimate for the quarter, indicating a collective reassessment by analysts of their initial forecasts [2]. - Changes in earnings estimates are crucial for predicting investor reactions, as empirical research shows a strong correlation between earnings estimate revisions and short-term stock price performance [3]. Revenue Projections - Analysts estimate that 'Net Sales- Feed Ingredients' will reach $997.05 million, representing a year-over-year increase of 6.7% [5]. - 'Net Sales- Fuel Ingredients' is projected to be $138.21 million, suggesting a decline of 2.9% year over year [5]. - 'Net Sales- Food Ingredients' is expected to be $366.46 million, indicating a decrease of 3.3% from the same quarter last year [5]. EBITDA Estimates - 'Segment Adjusted EBITDA- Food Ingredients' is anticipated to be $68.51 million, down from $73.20 million in the previous year [6]. - 'Segment Adjusted EBITDA- Feed Ingredients' is projected at $163.61 million, compared to $122.06 million reported in the same quarter last year [6]. - 'Segment Adjusted EBITDA- Fuel Ingredients' is expected to reach $19.79 million, slightly lower than the $20.13 million reported in the same quarter last year [7]. Stock Performance - Over the past month, shares of Darling have declined by 6.4%, contrasting with the Zacks S&P 500 composite's increase of 5.9% [7]. - Currently, DAR holds a Zacks Rank 3 (Hold), suggesting that its performance may align with the overall market in the near future [7].

Core Viewpoint - Darling Ingredients (DAR) has shown a significant price increase of 23.2% over the past four weeks, with a mean price target of $52.69 indicating a potential upside of 38.9% from the current price of $37.94 [1] Price Targets and Analyst Estimates - The mean estimate consists of 13 short-term price targets with a standard deviation of $18.88, suggesting variability in analyst predictions. The lowest estimate is $34.00 (10.4% decline), while the highest is $110.00 (189.9% increase) [2] - Analysts' price targets can often mislead investors, as empirical research indicates that these targets rarely reflect actual stock price movements [7][10] - A low standard deviation among price targets indicates a high degree of agreement among analysts regarding the stock's price direction, which can serve as a starting point for further research [9] Earnings Estimates and Analyst Sentiment - Analysts are optimistic about DAR's earnings prospects, as indicated by a strong consensus in revising EPS estimates higher, which correlates with potential stock price increases [11] - Over the last 30 days, the Zacks Consensus Estimate for the current year has increased by 1.4%, with one estimate moving higher and no negative revisions [12] - DAR holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates, suggesting a solid potential upside [13] Conclusion on Price Movement - While the consensus price target may not be a reliable indicator of the extent of DAR's potential gains, the implied direction of price movement appears to be a useful guide for investors [14]

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Group 1 - Darling Ingredients (DAR) shares increased by 9.2% to close at $36.01, following a notable trading volume that exceeded typical levels, contrasting with a 6.6% loss over the past four weeks [1][2] - The rise in DAR's stock is linked to optimism regarding proposed increases in biofuel blending mandates, which may enhance margins and performance in its renewable diesel and sustainable fuel operations [2] - The company is projected to report quarterly earnings of $0.40 per share, reflecting an 18.4% year-over-year decline, while revenues are expected to reach $1.55 billion, marking a 6.4% increase from the previous year [3] Group 2 - The consensus EPS estimate for Darling has remained stable over the last 30 days, indicating that stock price movements typically do not sustain upward trends without changes in earnings estimate revisions [5] - Darling Ingredients holds a Zacks Rank of 3 (Hold), indicating a neutral outlook, while another company in the same industry, Lamb Weston (LW), has also maintained a Zacks Rank of 3 [6][7]

Summary of Darling Ingredients Conference Call Company Overview - Darling Ingredients is a global leader in rendering biofuels and food ingredients, with significant transformations in its business model through strategic acquisitions, capacity expansions, and the Diamond Green Diesel joint venture [1] Industry Insights - The regulatory environment is currently in a transition phase, with potential changes in decarbonization policies and support for the agriculture community [2][3] - The Renewable Volume Obligation (RVO) is expected to return, with projections around 5.25 billion gallons, which is constructive for both Darling and American agriculture [5][6] - The company processes approximately 15% to 18% of the world's slaughtered animal byproducts into fats and proteins, indicating a strong position in the market [9] Key Regulatory Developments - The 45Z tax credit is being extended, which is beneficial for producers and the agriculture sector [4] - The RVO is anticipated to increase significantly, which will require additional feedstock supply, potentially impacting prices positively [12][18] - Concerns about imports affecting domestic prices and the RINs market were raised, emphasizing the need for careful management of feedstock regulations [22][24] Financial Performance and Projections - The first quarter results were weaker than expected, but the company remains optimistic about future performance, particularly in the second half of the year [41][65] - The feed segment is expected to see improved margins as fat prices recover, with projections of $950 million in run rate without further price increases [41][66] - The company anticipates a core business EBITDA of approximately $1.8 to $2 billion, excluding future growth from new initiatives [73][74] Strategic Initiatives - The company is focusing on the development of Sustainable Aviation Fuel (SAF), which is expected to be a significant growth driver [30][38] - A joint venture in the food segment aims to enhance product offerings and market reach, with a focus on high-margin specialty ingredients [47][56] - The NexTata platform is being developed to capitalize on health and wellness trends, with a strong growth trajectory anticipated [60][62] Market Dynamics - The company is optimistic about the long-term demand for animal-based protein, particularly in emerging markets like South America [68] - M&A activity is viewed as opportunistic, with a focus on improving the balance sheet before pursuing acquisitions [70][71] Conclusion - Darling Ingredients is well-positioned to leverage regulatory changes and market dynamics to enhance its growth potential, particularly through its SAF initiatives and strategic partnerships in the food segment [1][30][56]

Group 1 - Darling Ingredients is a volatile company that combines three separate businesses into one, presenting unique investment opportunities [1] - The management emphasizes the company's focus on cash flow and growth prospects, particularly in the oil and natural gas sector [1] - Crude Value Insights provides an investing service that includes a stock model account and in-depth cash flow analyses of exploration and production firms [2]

Summary of Darling Ingredients Inc. Conference Call Company and Industry - **Company**: Darling Ingredients Inc. - **Industry**: Collagen and Gelatin Production, Health and Wellness Sector Key Points and Arguments 1. **Joint Venture Announcement**: Darling Ingredients announced a nonbinding term sheet with the Centrelo Group to form a new joint venture called NexTita, with Darling holding an 85% stake and Centrelo holding 15% [4][5][21] 2. **Revenue Expectations**: The new company is projected to generate annual revenue of approximately $1.5 billion, with significant growth potential and attractive margins [5][21] 3. **Production Capacity**: NexTita will have gelatin and collagen production capacity of around 200,000 metric tons annually across 23 facilities in nine countries [5][6] 4. **Market Position**: The joint venture aims to create a leading company in the collagen-based health, wellness, and nutrition market, which is still in its early stages of development [6][7] 5. **Focus on Innovation**: Darling Ingredients has nearly a dozen product concepts in development, emphasizing science and innovation in the health and wellness sector [7][8] 6. **Financial Strategy**: The merger is designed to optimize shareholder value without leveraging debt, potentially leading to deleveraging [9][21] 7. **Market Dynamics**: The food segment's contribution to margins and growth potential has not been fully recognized, and the merger aims to highlight this value [8][9] 8. **Supply Chain Management**: The combined entity will enhance supply chain management capabilities, which is crucial for maintaining consistent margins [13][14] 9. **Future Growth**: The joint venture is expected to diversify the portfolio and enhance growth in hydrolyzed collagen, which has seen significant demand [39][41] 10. **Regulatory Considerations**: The joint venture will undergo regulatory approvals, and the companies believe they will not dominate the market share significantly [58][59] Additional Important Content 1. **Market Size**: The global collagen market is estimated to be between $60 billion, with the joint venture representing a minor player in this space [59][60] 2. **Capital Allocation**: There are no expected significant changes in capital allocation for the joint venture, as both companies have maintained their assets well [41][61] 3. **Potential IPO**: There is a possibility of taking the joint venture public in the future, depending on market conditions and growth [24][62] 4. **Raw Material Sourcing**: The joint venture will benefit from diversified sourcing of raw materials, reducing risks associated with supply chain bottlenecks [68][71] 5. **Strategic Relationships**: The merger will leverage existing relationships and technologies from both companies to enhance market reach and product development [66][67] This summary encapsulates the key discussions and insights from the Darling Ingredients Inc. conference call, focusing on the formation of the joint venture and its implications for the company and the industry.

Financial Data and Key Metrics Changes - In Q1 2025, combined adjusted EBITDA was $195.8 million, down from $280.1 million in Q1 2024. Adjusted EBITDA, excluding DGD, was $190 million compared to approximately $165 million in Q1 2024 [13][22] - Total net sales for Q1 2025 were $1.38 billion, a decrease from $1.42 billion in Q1 2024. Raw material volume remained stable at approximately 3.79 million metric tons [13][22] - Gross margins improved to 22.6% in Q1 2025 from 21.4% in Q1 2024 [13] Business Line Data and Key Metrics Changes Feed Ingredients Segment - Total net sales increased to $896.3 million in Q1 2025 from $889.8 million in Q1 2024. EBITDA rose to $110.6 million from $106.8 million [14] - Gross margins for the feed segment decreased slightly to 20.3% from 20.7% due to one-time items [14] Food Segment - Total sales decreased to $349.2 million in Q1 2025 from $391.3 million in Q1 2024, but EBITDA increased to $70.9 million from $61.7 million [15] - Raw material volume increased to 329,400 metric tons from 299,800 metric tons [15] Fuel Segment - Sales for the fuel segment were $135.1 million in Q1 2025, down from $139.2 million in Q1 2024. EBITDA dropped significantly to $24.2 million from $133.1 million [16][18] Market Data and Key Metrics Changes - The renewable diesel and sustainable aviation fuel markets are expected to improve due to a reduction in imported biofuels and adjustments in domestic production [11][19] - The transition from the blenders tax credit to the producers tax credit has created challenges but is anticipated to optimize tax credits in the upcoming quarters [10][17] Company Strategy and Development Direction - The company aims to continue generating cash flow, deleveraging the balance sheet, and opportunistically repurchasing shares throughout the year [4][24] - Management is optimistic about the core business's performance, expecting to achieve between $950 million and $1 billion in EBITDA for the year [24][26] Management's Comments on Operating Environment and Future Outlook - Management noted that the worst challenges related to DGD's performance are behind them, with expectations for improved margins and operational adjustments [24][26] - The company is optimistic about the sustainable aviation fuel market and anticipates a positive impact from the 45Z tax credit [10][19] Other Important Information - The company paid down $146.2 million in debt, reducing the financial leverage ratio to 3.33 times [5][20] - The effective tax rate for Q1 2025 was 4.6%, primarily due to the producer's tax credit [21] Q&A Session Summary Question: What is the value of an optimized feedstock slate for DGD? - Management indicated that DGD processes a mix of feedstocks driven by margins, including animal fat and various oils, and they are optimistic about maximizing the value of feedstocks eligible for the producer's tax credit [30][34] Question: What were the drivers for lower margins in Q1? - Management acknowledged that there were one-time items affecting margins and noted that the market dynamics have improved since March [40][41] Question: What is the expected RVO for 2026? - Management expects a common RVO of 5.25 billion gallons, which would significantly increase demand for feedstocks [59][88] Question: How does the current tariff regime impact the business? - The company views the tariff regime as a slight net positive, as it limits the availability of waste fats, supporting North American prices [103][105] Question: What are the capital allocation priorities moving forward? - The company plans to continue paying down debt and aims to reach a leverage ratio of 2.5% by the end of the year or early 2026 [112][113]

Group 1 - The conference call is focused on discussing Darling Ingredients Inc.'s Q1 2025 financial results [2][3] - Key participants in the call include the Chairman and CEO, CFO, and COO of North America [3] - The earnings news release and slide presentation are available on the company's investor relations page [3] Group 2 - The call will include forward-looking statements regarding future events, based on current expectations and assumptions [4]