Alliance Resource Partners(ARLP) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q3 2025 were $571.4 million, down from $613.6 million in Q3 2024, primarily due to lower coal sales prices and transportation revenues, partially offset by higher coal sales volumes [4] - Average coal sales price per ton decreased by 7.5% year-over-year to $58.78, but increased by 1.5% sequentially [4] - Net income attributable to the company was $95.1 million, including a $3.7 million increase in the fair value of digital assets and $4.5 million in investment income [10] - Adjusted EBITDA for the quarter was $185.8 million, up 9% year-over-year and 14.8% sequentially [10] - Distributable cash flow for Q3 2025 was $106.4 million, up 17% sequentially, leading to a distribution coverage ratio of 1.37x [11] Business Line Data and Key Metrics Changes - Total coal production in Q3 2025 was 8.4 million tons, an 8.5% increase compared to Q3 2024, while total coal sales volumes increased by 3.9% to 8.7 million tons [5] - In the Illinois Basin, coal sales volumes increased by 10.8% year-over-year but decreased by 0.8% sequentially [6] - Coal sales volumes in Appalachia decreased by 13.3% year-over-year but increased by 21.8% sequentially due to improved mining conditions [7] - Segment-adjusted EBITDA expense per ton sold in Appalachia improved by 11.7% year-over-year [7] - Total revenues from royalties segments were $57.4 million, up 11.9% year-over-year, driven by higher coal royalties tons and revenue per ton sold [8] Market Data and Key Metrics Changes - Year-to-date utility coal consumption increased by 15% in MISO and 16% in PJM, reflecting strong demand fundamentals [16] - Analysts project 4%-6% annual growth in electricity demand in PJM and other markets over the next several years [17] - The recent PJM capacity auction cleared at maximum allowable prices, indicating a need for coal-fired power plants [17] Company Strategy and Development Direction - The company is focused on maintaining a strong balance sheet, investing prudently in core operations, and positioning for long-term growth while delivering attractive returns to unitholders [18] - The company has secured additional contract commitments for 2025, with a total of 32.8 million tons committed and priced [12] - The company is actively pursuing disciplined growth opportunities in its oil and gas royalties business [19] Management's Comments on Operating Environment and Future Outlook - Management noted that significant infrastructure investments in coal operations are beginning to pay off, with improved productivity expected from automation [14] - The company anticipates that coal demand will continue to grow due to favorable federal energy policies and rising electricity demand [16] - Management expressed confidence in the ability to increase production at Tunnel Ridge and in the Illinois Basin to meet anticipated demand [17] Other Important Information - The company held approximately 568 Bitcoin valued at $64.8 million at the end of Q3 2025 [10] - The company expects full-year 2025 segment-adjusted EBITDA expense per ton to be in a range of $60-$62 per ton in Appalachia and $34-$36 per ton in the Illinois Basin [13] Q&A Session Summary Question: Can you provide more details on the supply contracts being signed? - Most contracts are for two to three years, with a preference for fixed pricing, and some include tariff protection [24] Question: What index should be monitored for pricing? - The Illinois Basin index is relevant, but pricing may vary based on customer specifics [25] Question: What is the expectation for pricing in 2026? - Pricing is expected to decline around 5% year-over-year due to contracts rolling off, but improved conditions at Tunnel Ridge may help maintain margins [31] Question: How will the recent DOE investments impact the business? - Increased engagement from utilities and the DOE is expected to enhance demand for coal as utilities seek to extend the life of coal plants [34] Question: What is the outlook for equity method investment income? - Modestly positive numbers are anticipated for Q4, with some investments starting to yield distributions [40] Question: What is the expected CapEx for the full year? - CapEx is expected to be closer to the midpoint of guidance, with higher spending anticipated in Q4 [69] Question: Will there be a need for more staffing to increase production? - No additional staffing is anticipated; existing personnel will be utilized more effectively [55] Question: What is the confidence level for selling uncommitted met tons? - The company is confident in placing uncommitted met tons, although pricing will depend on market conditions [57] Question: How does the company view the coal vs. gas competition? - The competition is less significant now due to strong electricity demand growth, and all sources of generation are needed [64]