Delek Logistics(DKL) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Delek Logistics reported strong Q2 2025 performance, marked by operational achievements, financial growth, and increased distributions President's Commentary President highlighted strong Q2 2025 execution, Libby 2 completion, and reaffirmed full-year Adjusted EBITDA guidance of $480 million to $520 million - Completed construction of new Libby 2 plant and several crude & water gathering projects, expanding processing capacity for producer customers in Lea County, New Mexico[3][9] - Achieved 50th consecutive increase in distribution, with expectations for continued future increases[3][9] - Expressed increasing confidence in full-year Adjusted EBITDA guidance of $480 million to $520 million[3][9] - Making progress on adding AGI & sour gas treating capabilities at the Libby Complex and plans to further expand overall processing capacity[3] Key Financial Highlights Delek Logistics reported strong Q2 2025 financial performance with significant year-over-year growth in Adjusted EBITDA and operating cash flow Q2 2025 Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | | :-------------------------------- | :------ | :------ | | Net Income | $44.6 million | $41.1 million | | Reported Adjusted EBITDA | $120.9 million | $102.4 million | | Net Cash Provided by Operating Activities | $107.4 million | $87.6 million | | Distributable Cash Flow, as adjusted | $72.5 million | $67.8 million | | Diluted EPS | $0.83 | $0.87 | | Quarterly Cash Distribution per unit | $1.115 | $1.090 | | Distribution Increase (YoY) | 2.3% | - | | Distribution Increase (QoQ) | 0.5% | - | - Reported Adjusted EBITDA of $120.9 million, up 18% year over year[9] - Successfully executed $700.0 million debt offering maturing in June 2033, improving total liquidity to over $1 billion and reinforcing growth efforts as an independent company[9] Distribution and Liquidity Delek Logistics declared a higher Q2 2025 cash distribution, marking its 50th consecutive increase, while maintaining healthy liquidity Q2 2025 Distribution and Liquidity | Metric | Value | | :-------------------------------- | :---------------- | | Q2 2025 Quarterly Cash Distribution per unit | $1.115 | | Increase from Q1 2025 | 0.5% | | Increase from Q2 2024 | 2.3% | | Total Debt (as of June 30, 2025) | ~$2.2 billion | | Cash (as of June 30, 2025) | $1.4 million | | Leverage Ratio (as of June 30, 2025) | ~4.32x | | Additional Borrowing Capacity | $1.1 billion (under $1.2 billion facility) | Consolidated Financial Performance Q2 2025 consolidated performance showed increased net income and Adjusted EBITDA, driven by strong operational cash flow despite non-recurring costs Net Income and EPS Net income increased for Q2 2025, while diluted EPS slightly decreased, primarily due to transaction costs Net Income and EPS (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :-------------------------------- | :------ | :------ | | Net Income | $44.6 million | $41.1 million | | Diluted EPS | $0.83 | $0.87 | | Transaction Costs (Q2 2025) | $2.5 million | - | - Net income for Q2 2025 included $2.5 million of transaction costs[4] EBITDA and Adjusted EBITDA Reported EBITDA decreased in Q2 2025, but Adjusted EBITDA significantly increased year-over-year, reflecting acquisitions and adjustments EBITDA and Adjusted EBITDA (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :-------------------------------- | :------ | :------ | | EBITDA | $90.1 million | $102.4 million | | Adjusted EBITDA | $120.9 million | $102.4 million | | Transaction Costs (Q2 2025) | $2.5 million | - | | DPG Inventory Impact (Q2 2025) | $0.9 million | - | | Sales-type Lease Accounting Impacts (Q2 2025) | $27.4 million | - | Cash Flow from Operations Net cash provided by operating activities and distributable cash flow, as adjusted, both significantly increased in Q2 2025 Cash Flow from Operations (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :-------------------------------- | :------ | :------ | | Net Cash Provided by Operating Activities | $107.4 million | $87.6 million | | Distributable Cash Flow, as adjusted | $72.5 million | $67.8 million | Segment Operating Results Segment results show strong growth in Gathering and Processing, stable Storage and Transportation, and increased pipeline joint venture income Consolidated Adjusted EBITDA Overview Consolidated Adjusted EBITDA for Q2 2025 increased by $18.5 million year-over-year, driven by H2O Midstream, Gravity, and W2W dropdown Consolidated Adjusted EBITDA (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :---------------- | :------ | :------ | :----- | | Adjusted EBITDA | $120.9 million | $102.4 million | +$18.5 million | - Increase in Adjusted EBITDA reflects results from H2O Midstream and Gravity operations, W2W dropdown impacts, and increased wholesale margins[8] Gathering and Processing Segment The Gathering and Processing segment saw a substantial increase in Adjusted EBITDA for Q2 2025, primarily from Gravity and H2O Midstream acquisitions Gathering and Processing Segment Adjusted EBITDA (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :---------------- | :------ | :------ | | Adjusted EBITDA | $78.0 million | $54.7 million | - The increase was primarily due to incremental EBITDA from the Gravity and H2O Midstream acquisitions[10] Wholesale Marketing and Terminalling Segment Adjusted EBITDA for Wholesale Marketing and Terminalling decreased in Q2 2025 due to Big Spring marketing agreement assignment Wholesale Marketing and Terminalling Segment Adjusted EBITDA (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :---------------- | :------ | :------ | | Adjusted EBITDA | $23.3 million | $30.2 million | - Decrease primarily due to assignment of Big Spring refinery marketing agreement to Delek Holdings, partially offset by an increase in wholesale margins[11] Storage and Transportation Segment The Storage and Transportation segment maintained stable Adjusted EBITDA performance in Q2 2025, showing minimal year-over-year change Storage and Transportation Segment Adjusted EBITDA (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :---------------- | :------ | :------ | | Adjusted EBITDA | $16.9 million | $16.8 million | Investments in Pipeline Joint Ventures Segment Income from equity method investments for Q2 2025 increased, primarily due to the impacts of the W2W dropdown Income from Equity Method Investments (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :-------------------------------- | :------ | :------ | | Income from Equity Method Investments | $10.5 million | $7.9 million | - The increase was primarily due to the impacts of the W2W dropdown[13] Corporate Segment The Corporate segment reported a slightly larger Adjusted EBITDA loss in Q2 2025 compared to Q2 2024 Corporate Segment Adjusted EBITDA (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :---------------- | :------ | :------ | | Adjusted EBITDA | ($7.9 million) | ($7.1 million) | Recent Developments & Accounting Notes Recent developments include the DPG dropdown and reclassification of certain embedded leases to sales-type leases impacting revenue recognition DPG Dropdown Delek Holdings transferred its Delek Permian Gathering business to the Partnership, involving crude oil purchase obligations and receivable cancellation - Delek Holdings transferred the Delek Permian Gathering purchasing and blending business to the Partnership on May 1, 2025[21] - The Partnership assumed Delek Holdings' rights and obligations for crude oil purchases under certain contracts related to the Midland Gathering System[21] - Line fill inventory amounting to $6.9 million was transferred to the Partnership[21] - Total consideration included the cancellation of $58.8 million in existing receivables owed to the Partnership by Delek Holdings[21] Sales-Type Leases Renewed commercial agreements reclassified certain embedded leases as sales-type, shifting minimum volume commitment recording from revenues to interest income - Renewed and amended commercial agreements in Q3 2024 required reassessment of embedded leases under ASC 842, Leases[22] - Certain agreements now meet criteria for sales-type lease accounting[22] - Portions of minimum volume commitments are now recorded as interest income and a reduction in net investment in leases, rather than as revenues (as they were under operating leases)[22] Non-GAAP Financial Measures Delek Logistics uses non-GAAP measures like EBITDA and Distributable Cash Flow to assess performance and liquidity, acknowledging limitations Definitions of Non-GAAP Measures Delek Logistics utilizes non-GAAP measures such as EBITDA, Adjusted EBITDA, and Distributable Cash Flow to provide additional insights into performance - EBITDA: Net income before interest, income taxes, depreciation, and amortization (including customer contract intangibles)[25] - Adjusted EBITDA: EBITDA adjusted for significant, infrequently occurring transaction costs and throughput/storage fees from sales-type lease accounting[25] - Distributable Cash Flow: Net cash flow from operating activities adjusted for changes in assets/liabilities, maintenance capital expenditures, sales-type lease receipts, and other non-cash adjustments[25] - Distributable Cash Flow, as adjusted: Distributable cash flow adjusted to exclude significant, infrequently occurring transaction costs[25] Management's Use and Limitations Management uses non-GAAP measures to assess performance and cash flow, but acknowledges their limitations and potential lack of comparability - Non-GAAP measures are used to assess operating segment performance, evaluate past performance, and prospects for the future[23] - They help assess operating performance compared to peers, ability to generate cash flow for distributions, incur and service debt, fund capital expenditures, and evaluate investment opportunities[25] - Non-GAAP measures should not be considered alternatives to GAAP measures (net income, operating income, cash flow from operating activities) and have limitations due to exclusions and potential lack of comparability with other partnerships[24] Financial Statements The financial statements present consolidated balance sheets, income statements, and cash flows, reflecting Q2 2025 changes in assets, liabilities, and cash generation Consolidated Balance Sheets The consolidated balance sheet shows a significant increase in total assets and liabilities from December 2024 to June 2025 Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total Current Assets | $409,847 | $145,892 | | Property, Plant and Equipment, net | $1,403,842 | $1,064,321 | | Total Assets | $2,752,889 | $2,041,559 | | Total Current Liabilities | $442,604 | $88,778 | | Long-term Debt, net of current portion | $2,211,426 | $1,875,397 | | Total Liabilities | $2,720,898 | $2,006,031 | | Total Equity | $31,991 | $35,528 | Consolidated Statement of Income and Comprehensive Income For Q2 2025, net revenues decreased, while net income increased due to lower non-operating expenses, despite declining operating income Consolidated Statement of Income Highlights (in thousands, except per unit data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net Revenues | $246,350 | $264,628 | | Total Operating Costs and Expenses | $193,914 | $196,167 | | Operating Income | $52,436 | $68,461 | | Total Non-Operating Expenses, net | $7,617 | $27,346 | | Net Income | $44,574 | $41,058 | | Diluted Net Income Per Unit | $0.83 | $0.87 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased in Q2 2025, while investing activities saw higher cash usage, and financing shifted to net cash provision Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net Cash Provided by Operating Activities | $107,423 | $87,639 | | Net Cash Used in Investing Activities | ($112,916) | ($5,560) | | Net Cash Provided by (Used in) Financing Activities | $4,822 | ($86,640) | | Net (Decrease) Increase in Cash and Cash Equivalents | ($671) | ($4,561) | | Cash and Cash Equivalents at End of Period | $1,436 | $5,111 | Reconciliation of Non-GAAP Measures This section reconciles net income to EBITDA and Adjusted EBITDA, and details Distributable Cash Flow and its coverage ratio, highlighting adjustments Reconciliation of Net Income to EBITDA Reported EBITDA decreased in Q2 2025, but Adjusted EBITDA significantly increased due to adjustments for sales-type leases and transaction costs Reconciliation of Net Income to EBITDA (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net Income | $44,574 | $41,058 | | Add: Income tax expense | $245 | $57 | | Add: Depreciation and amortization | $27,097 | $24,207 | | Add: Amortization of marketing contract intangible | — | $1,802 | | Add: Interest expense, net | $18,173 | $35,268 | | EBITDA | $90,089 | $102,392 | | Add: Throughput and storage fees for sales-type leases | $27,406 | — | | Add: DPG Inventory Impact | $900 | — | | Add: Transaction costs | $2,496 | — | | Adjusted EBITDA | $120,891 | $102,392 | Distributable Cash Flow and Coverage Ratio Distributable Cash Flow and DCF, as adjusted, both increased in Q2 2025, though coverage ratios slightly decreased due to higher partner distributions Distributable Cash Flow and Coverage Ratio (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net Cash Provided by Operating Activities | $107,423 | $87,639 | | Distributable Cash Flow | $70,038 | $67,809 | | Transaction costs | $2,496 | — | | Distributable Cash Flow, as adjusted | $72,534 | $67,809 | | Distributions to partners of Delek Logistics, LP | $59,612 | $51,263 | | Distributable cash flow coverage ratio | 1.17x | 1.32x | | Distributable cash flow coverage ratio, as adjusted | 1.22x | 1.32x | Segment Financial and Operating Data This section provides detailed segment financial performance, capital spending, and operating data, highlighting growth and changes Segment Financial Performance (Adjusted EBITDA, Revenue) Gathering and Processing showed strong growth in Q2 2025 revenue and Adjusted EBITDA, while Wholesale Marketing and Terminalling declined Segment Total Revenue (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Gathering and Processing | $117,767 | $92,643 | | Wholesale Marketing and Terminalling | $104,615 | $135,600 | | Storage and Transportation | $23,968 | $36,385 | | Consolidated Total Revenue | $246,350 | $264,628 | Segment Adjusted EBITDA (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Gathering and Processing | $77,984 | $54,680 | | Wholesale Marketing and Terminalling | $23,307 | $30,205 | | Storage and Transportation | $16,928 | $16,752 | | Investments in Pipeline Joint Ventures | $10,536 | $7,882 | | Corporate and Other | ($7,864) | ($7,127) | | Consolidated Adjusted EBITDA | $120,891 | $102,392 | Segment Capital Spending Consolidated capital spending significantly increased in Q2 2025, primarily driven by a substantial rise in growth capital in Gathering and Processing Segment Capital Spending (in thousands) | Segment / Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Gathering and Processing | | | | Sustaining capital spending | $2,627 | $171 | | Growth capital spending | $114,591 | $7,180 | | Segment capital spending | $117,218 | $7,351 | | Wholesale Marketing and Terminalling | | | | Sustaining capital spending | $65 | $6 | | Segment capital spending | $65 | $105 | | Storage and Transportation | | | | Regulatory capital spending | $799 | $322 | | Sustaining capital spending | $1,107 | $2,409 | | Segment capital spending | $1,906 | $2,731 | | Consolidated Total Capital Spending | $119,189 | $10,187 | Segment Operating Data (Throughputs) Gathering and Processing saw mixed throughputs with growth in Crude Oil Gathering, while Wholesale Marketing declined in Big Spring due to contract assignment Gathering and Processing Segment Throughputs (average bpd, except Mcfd) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Crude pipelines (non-gathered) | 71,220 | 73,320 | | East Texas Crude Logistics System | 33,101 | 23,259 | | Midland Gathering System | 207,183 | 206,933 | | Natural Gas Gathering and Processing (Mcfd) | 60,940 | 76,237 | | Crude Oil Gathering | 137,167 | 123,927 | | Water Disposal and Recycling | 116,504 | 116,499 | | Midland Water Gathering System (Water Disposal and Recycling) | 600,891 | — | Wholesale Marketing and Terminalling Segment Throughputs (average bpd) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | East Texas - Tyler Refinery sales volumes | 67,516 | 71,082 | | Big Spring marketing throughputs | — | 81,422 | | West Texas marketing throughputs | 10,757 | 11,381 | | West Texas gross margin per barrel | $4.12 | $2.99 | | Terminalling throughputs | 150,971 | 159,260 | - Big Spring marketing agreement terminated on August 5, 2024, upon assignment to Delek Holdings, resulting in zero throughputs for Q2 2025[34] Additional Information This section provides conference call details, an overview of Delek Logistics, safe harbor provisions, and investor relations contact information Conference Call Information Delek Logistics scheduled a conference call for August 6, 2025, to discuss Q2 2025 results, with live access and archived replay available - Conference call to discuss Q2 2025 results held on Wednesday, August 6, 2025, at 11:30 a.m. Central Time[15] - Investors can listen live and access an archived replay for 90 days on www.DelekLogistics.com[15](index=15&type=chunk) About Delek Logistics Partners, LP Delek Logistics is a midstream energy MLP providing various services primarily in the Permian and Delaware Basins, with Delek US Holdings as a key partner - Delek Logistics is a midstream energy master limited partnership headquartered in Brentwood, Tennessee[16] - Provides gathering, pipeline, transportation, storage, wholesale marketing, terminalling, and water disposal/recycling services[16] - Operations are primarily in and around the Permian Basin, Delaware Basin, and other select Gulf Coast regions[16] - Delek US Holdings, Inc. owns the general partner interest, a majority limited partner interest, and is a significant customer[16] Safe Harbor Provisions Regarding Forward-Looking Statements The press release contains forward-looking statements subject to risks and uncertainties, not guarantees of future performance, with no obligation to update - Statements concerning future results, performance, prospects, opportunities, plans, actions, and events are forward-looking statements[17] - Key factors that may affect these statements include reliance on Delek US revenue, political/regulatory developments, operational hazards, ability to realize cost reductions, market conditions, acquisition risks, and exposure to Permian Basin crude oil[18] - Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially[19][20] - Delek Logistics undertakes no obligation to update or revise any forward-looking statements, except as required by applicable law or regulation[20] Investor Relations and Media Contact Contact information for investor relations and media inquiries is provided, along with links to Delek Logistics' website and social media - Investor Relations and Media/Public Affairs Contact: investor.relations@delekus.com[35] - Information available on www.deleklogistics.com, investor relations webpage, news webpage, and X account (@DelekLogistics)[35]