Financial Data and Key Metrics Changes - Combined adjusted EBITDA for Q2 2025 was $249.5 million, down from $273.6 million in Q2 2024, while year-to-date combined adjusted EBITDA totaled $445.3 million compared to $553.7 million for the same period in 2024 [13][14] - Total net sales in Q2 2025 were $1.48 billion, slightly up from $1.46 billion in Q2 2024, with raw material volume remaining nearly unchanged at approximately 3.74 million metric tons [14] - Gross margins improved to 23.3% in Q2 2025 from 22.5% in Q2 2024, with year-to-date gross margins at 23% compared to 21.9% in the first half of 2024 [14][17] Business Line Data and Key Metrics Changes Feed Ingredients Segment - Total net sales for Q2 2025 were $936.5 million, up from $934.1 million in Q2 2024, with gross margins improving to 22.9% from 21% [15][16] - Raw material volumes remained approximately 3.1 million metric tons for both quarters, with year-to-date volumes at roughly 6.2 million metric tons [16] Food Segment - Total sales for Q2 2025 were $386.1 million, compared to $378.8 million in Q2 2024, with gross margins unchanged at 26.9% [18] - Year-to-date gross margins improved to 28.1% from 25.3% in the same period a year ago [18] Fuel Segment - Darling's share of DGD EBITDA was approximately $42.6 million in Q2 2025, down from $76.6 million in Q2 2024, with year-to-date EBITDA at $48.7 million compared to $191.7 million in 2024 [19][20] - Overall fuel segment sales for Q2 2025 were $158.8 million, up from $142.3 million in Q2 2024 [20] Market Data and Key Metrics Changes - The renewable fuel environment remains challenging, with small refinery exemptions and delayed compliance enforcement impacting margins [11][12] - Tariff volatility and increased domestic oilseed crush have pressured protein prices, particularly in Asia, but rising fat prices are expected to support the Feed segment [8][10] Company Strategy and Development Direction - The company announced the formation of NexTata, a joint venture focused on health and wellness, aligning with its strategy to diversify into high-margin markets [6] - The company is focused on operational discipline and strategic timing to position itself for improved margins in the future [12][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the core ingredients platform, anticipating sequential improvement driven by rising fat prices [24] - The company expects full-year combined adjusted EBITDA in the range of $1.05 billion to $1.1 billion, reflecting optimism about market conditions [25] Other Important Information - The company successfully refinanced its Eurobond and replaced its revolving credit facility, enhancing financial flexibility [21][22] - Total debt net of cash decreased to $3.89 billion as of June 28, 2025, from $3.97 billion at the end of 2024, lowering the leverage ratio to 3.34 times [22] Q&A Session Summary Question: Discussion on policy benefits for domestic renewable diesel - Management highlighted the evolving domestic market and the expected drop in imported raw materials, benefiting U.S. fat pricing [28][30] Question: Outlook for LCFS prices - Management indicated a positive trend in carbon prices and anticipated potential increases, although exact estimates were challenging [34][35] Question: Impact of lower UCO pricing - Management explained the fluid dynamics of the UCO market and the lag effect in pricing, which impacted margins [39][41] Question: Opportunities for DGD outside California - Management confirmed significant exports to Europe and the UK, with growing demand for renewable diesel globally [50][51] Question: Expectations for SREs - Management expressed uncertainty regarding the timing and impact of SRE announcements, emphasizing the need for clarity in the market [53][56] Question: CapEx plans and capital discipline - Management committed to maintaining CapEx at $400 million or lower for the year, focusing on debt reduction [101]

Financial Data and Key Metrics Changes - Combined adjusted EBITDA for Q2 2025 was $249.5 million, down from $273.6 million in Q2 2024, while year-to-date combined adjusted EBITDA totaled $445.3 million compared to $553.7 million for the same period in 2024 [13][14] - Total net sales in Q2 2025 were $1.48 billion, slightly up from $1.46 billion in Q2 2024, with raw material volume remaining nearly unchanged at approximately 3.74 million metric tons [14] - Gross margins improved to 23.3% in Q2 2025 from 22.5% in Q2 2024, with year-to-date gross margins at 23% compared to 21.9% in the first half of 2024 [14][16] Business Line Data and Key Metrics Changes - In the Feed Ingredients segment, total net sales increased to $936.5 million in Q2 2025 from $934.1 million in Q2 2024, with gross margins improving to 22.9% from 21% [15][16] - The Food segment saw total sales rise to $386.1 million in Q2 2025 from $378.8 million in Q2 2024, with gross margins unchanged at 26.9% [17] - The Fuel segment's sales for Q2 2025 were $158.8 million, up from $142.3 million in Q2 2024, but the share of DGD EBITDA dropped to $42.6 million from $76.6 million year-over-year [19][20] Market Data and Key Metrics Changes - The regulatory environment has shown signs of improvement, particularly in the Feed segment, which is expected to enhance performance into 2026 [6] - Tariff volatility and increased domestic oilseed crush have pressured protein prices, especially in Asia, but rising fat prices are expected to support the Feed segment [7][11] - The renewable fuel environment remains challenging, with DGD facing near-term pressure but expected to benefit from policy support in the long term [11][12] Company Strategy and Development Direction - The company announced the formation of NexTata, a joint venture focused on health and wellness, aligning with its strategy to diversify into high-margin markets [6] - The company is focused on operational discipline and strategic timing to position itself for improved margins in the future [12] - The outlook for the core ingredients platform remains strong, with expectations for sequential improvement driven by rising fat prices [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the core ingredients business, anticipating a more constructive market environment ahead [24][25] - The company expects full-year combined adjusted EBITDA in the range of $1.05 billion to $1.1 billion, reflecting optimism about market recovery [26] - Management acknowledged challenges in the renewable fuel sector but highlighted the potential for margin recovery as policy rules clarify [12][24] Other Important Information - The company successfully refinanced its Eurobond and replaced its revolving credit facility, enhancing financial flexibility [21][22] - Total debt net of cash decreased to $3.89 billion as of June 28, 2025, from $3.97 billion at the end of 2024, lowering the leverage ratio to 3.34 times [22] - The effective tax rate for Q2 2025 was 22.2%, slightly above the federal statutory rate, with expectations for a full-year effective tax rate around 15% [23] Q&A Session Summary Question: Discussion on policy benefits for domestic renewable diesel - Management noted that evolving domestic markets are expected to reduce reliance on imported raw materials, benefiting U.S. fat pricing and production [28][30] Question: Outlook for LCFS prices - Management indicated that carbon prices are moving positively, with expectations for further increases in the coming years [34] Question: Impact of lower UCO pricing - Management explained that pricing dynamics in a rising market can lead to temporary impacts on margins, but they expect improvements as prices stabilize [37][41] Question: Opportunities for DGD outside California - Management confirmed that while California is a significant market, they also export renewable diesel to Europe and other states, with demand growing globally [48][50] Question: Expectations for SREs - Management expressed uncertainty regarding the timing and impact of SREs but indicated that they expect an announcement soon [51][55] Question: CapEx plans and capital allocation - Management emphasized a commitment to maintaining capital discipline, with plans to keep CapEx below $400 million for the year while focusing on debt reduction [102][104]

Financial Performance - Total Net Sales increased by 1.8% to $1,481.5 million in Q2 2025 compared to $1,455.3 million in Q2 2024[4] - Gross Margin increased by 5.8% to $345.9 million in Q2 2025 compared to $326.9 million in Q2 2024[4] - Net Income decreased significantly by 83.9% to $12.7 million in Q2 2025 compared to $78.9 million in Q2 2024[4] - EPS Diluted decreased by 83.7% to $0.08 in Q2 2025 compared to $0.49 in Q2 2024[4] - Total combined adjusted EBITDA decreased by 8.8% to $249.5 million in Q2 2025 compared to $273.6 million in Q2 2024[4] Segment Performance - Feed segment adjusted EBITDA increased by 11.3% to $135.9 million in Q2 2025 compared to $122.1 million in Q2 2024[4] - Food segment adjusted EBITDA decreased by 4.5% to $69.9 million in Q2 2025 compared to $73.2 million in Q2 2024[4] - Fuel segment adjusted EBITDA decreased by 29.1% to $61.3 million in Q2 2025 compared to $96.8 million in Q2 2024[4] Balance Sheet - Cash and cash equivalents were $95 million as of June 28, 2025, compared to $76 million as of December 28, 2024[5] - Total debt was $3,980 million as of June 28, 2025, compared to $4,042 million as of December 28, 2024[5]

Group 1: Earnings Performance - Darling Ingredients reported quarterly earnings of $0.09 per share, missing the Zacks Consensus Estimate of $0.12 per share, and down from $0.49 per share a year ago [1] - The earnings surprise was -25.00%, and the company previously reported a loss of $0.16 per share, resulting in a surprise of -180% [2] - Over the last four quarters, Darling has surpassed consensus EPS estimates only once [2] Group 2: Revenue Performance - The company posted revenues of $1.48 billion for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 0.32%, and up from $1.46 billion year-over-year [3] - Darling has topped consensus revenue estimates just once over the last four quarters [3] Group 3: Stock Performance and Outlook - Darling shares have increased approximately 9.4% since the beginning of the year, compared to the S&P 500's gain of 8.1% [4] - The current consensus EPS estimate for the upcoming quarter is $0.44 on revenues of $1.55 billion, and for the current fiscal year, it is $0.95 on revenues of $6.01 billion [8] Group 4: Industry Context - The Zacks Industry Rank for Food - Miscellaneous is currently in the bottom 32% of over 250 Zacks industries, indicating potential challenges for stock performance [9] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor decisions [6]

[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]