Darling Ingredients Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Derrick Whitfield - Texas Capital - Analyst : Good morning all and thanks for taking my questions. Maybe starting with the as I. Starting with the DGD, as I understand, DGD was not able to optimize feedstocks for 45Z policies in Q1. Looking forward, what is the value of an optimized feedstock slate and then more broadly, what's the composition of that slate as you see it today?

Question: Derrick Whitfield - Texas Capital - Analyst : Terrific, makes sense. And then with regard to feed, we can see your margin optimism and the spread between waste and SPO feeds as they materially tightened or turned positive to your benefit. Other than timing for the quarter, were there any other drivers for lower margins in one cue?

Question: Dushyant Ailani - Jefferies - Analyst : Hi, thank you for taking my question, sir. The first one, could you possibly quantify how much better feed was in March versus the first two months of the year and then how that translates to, core ingredients a bit for to you.

Question: Dushyant Ailani - Jefferies - Analyst : Yeah, and then just the second one, I guess could you quantify what the that the one time inventory impact was on feed?

Question: Dushyant Ailani - Jefferies - Analyst : Yeah.

Question: Dushyant Ailani - Jefferies - Analyst : Got it, thank you.

Question: Heather Jones - Heather Jones Research. - Analyst : Good morning. Thank you for the question. Randy, I wanted to start with, so you've seen all the Reuters rumours, and we've all heard different reports. What do you think a 2026 RVO would, that would be suitable would be like what is the number that You would be happy with and that would represent, you think upside to the $950 million to a $1 billion you gave us.

Question: Heather Jones - Heather Jones Research. - Analyst : Okay, thanks for that. And then my follow up is Not trying to belabour this point, but Randy, in the past you've told us that roughly every penny and fat pricing is worth roughly $12 million to $15 million EBITDA. And like if you look at Q1 fats pricing versus Q1 of '24, it was up several pennies and then you also didn't have that ward South Carolina issue, but yet the EBITDA for ee was roughly flat year on year. So just trying to Get a sense of Was y'all's feed and feed segment impacted by the dislocation at Diamond Green or was there something else that we're missing? I get the lag and pricing relative to Q3 and Q4 last year. I'm just having a hard time understanding. The year on year impact.

Question: Manav Gupta - UBS - Analyst : Hey Andy, congrats on the leverage taking down, going back to the guidance a little, you still probably need about $250 million or so from the RD business. So, help us understand a little bit what you expect besides the PTC. That you start getting into you any help that you think you'll probably get on the car front and then what could be the rent prices help us bridge the GAAP to that about $250 million of EBITDA that you will need from the renewable diesel business to get to your guide.

Question: Manav Gupta - UBS - Analyst : Perfect. And sometimes that doesn't get enough credit for the kind of innovation you bring to the market. So, recently you have launched some products, to control blood sugar, and you also have an attractive pipeline of projects and products you do plan to bring to the market. Can you help us walk us through some parts of that business which I think remains somewhat underappreciated.

Question: Tom Palmer - Citigroup, Inc. - Analyst : Good morning and thanks for the question. I guess just first I wanted to clarify on the guidance. You noted the expectation, that in the relative near term we could get some resolution on the RVO sounded like 5.25 billion gallons for 5MS based diesel was your expectation. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 1:00PM, DAR.N - Q1 2025 Darling Ingredients Inc Earnings Call I know it might be hard to be overly precise, but I just want to understand how much of this is baked into how you're thinking about the year versus if it does come through with this 5.25 level, that would be kind of upside versus how you're thinking about the year.

Question: Tom Palmer - Citigroup, Inc. - Analyst : Thanks for all that color. Maybe I could just follow up quickly on kind of the last point you noted, at least on, regeneration year-to-date, it is tracking below this year's mandate. What do you think is driving this at this point? And I guess any view on what might cause kind of a change other than obviously this RVO announcement for '26 maybe, making people more concerned about the rim bank. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 1:00PM, DAR.N - Q1 2025 Darling Ingredients Inc Earnings Call

Question: Ryan Todd - Piper Sandler - Analyst : Good, thanks. Good morning, everybody. Maybe a question first of all, you mentioned a little bit earlier in your comments, but I know there are a lot of moving pieces of volatility as it stands right now. Can you talk through the impacts of the current tariff regime on the various aspects of your business?

Question: Ryan Todd - Piper Sandler - Analyst : Good thanks. And then maybe shifting to staff, can you maybe provide a little more color in terms of what you said, I mean, you said the demand pool has been reasonable so far like. Can you walk through what sort of demand pool are you seeing? Is it, is that mostly coming from mandated markets or is it also the voluntary markets? And what would you need to see, at this point to think about moving forward with the second staff project?

Question: Pooran Sharma - Stephens. - Analyst : Hey, thanks for the question. Just wanted to get a sense of capital allocation priorities from here. Looks like you did do a little bit of deli deleveraging also with the share repurchases, but just wanted to talk about something you said on the last call. I think you mentioned your target is 2.5%. Wanted to get a sense of when you think, we could get there and what the pace of deleveraging. Investors can expect going forward.

Question: Pooran Sharma - Stephens. - Analyst : Okay, I appreciate that. And just really wanted to, I think everybody's asked good questions about DGD. Maybe I could focus in on the food segment here. A really good margins, much higher than anticipated. You kind of spoke to some of the strength here, but wondering if you could share some REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 1:00PM, DAR.N - Q1 2025 Darling Ingredients Inc Earnings Call incremental color and do you think that this is a level of gross margin performance that you can sustain here? I think last time on the last call you said you were working with CPG customers. To help them, better educate their customers on this product. So, I was just wondering if you could just give us an overview on food and next to there.

Question: Andrew Strelzik - BMO Capital Markets. - Analyst : Hey, good morning. Thanks for taking the questions. My first one is just on the comment you made that we could get the preliminary RVO in the next couple days, I guess what informs that view? Do you have some visibility to that? It sounds like there's, based on your comments, still some uncertainty around maybe the SRE, so could we get a preliminary number without a resolution around that? Just curious about that comment specifically.

Question: Andrew Strelzik - BMO Capital Markets. - Analyst : Got it. Okay. That makes sense and I appreciate you clarifying that my second question, I feel like we felt like the runway was there for, with all these drivers and better performance, for the last couple of quarters and so I guess I'm just Curious kind of how you handicap the risks. I know most of this is kind of industry related and macro related, but as you sit here today and taking the march and just kind of extrapolating that makes a lot of sense, how do you handicap the risks or what you're paying attention to on the risks on the guidance.

Question: Matthew Blair - Tudor Pickering Holt & Co LLC. - Analyst : Thank you and good morning. So, regarding the new LCFS standards in California, I think the comment period just ended a few days ago, and we're waiting for CARB to resubmit the new targets to the OAL. Is that you're understanding as well? And then perhaps more importantly, do you have a view on the implementation timing? For these new targets, do you think they'll be backdated to January 1, 2025, or is an implementation date in 2026 more reasonable at this point? Thank you.

Question: Matthew Blair - Tudor Pickering Holt & Co LLC. - Analyst : Great thank you and then. For DGD, your reported Q1 EBITDA was quite a bit different than what your partner reported. It sounds like there is at least some 45 contributions in in your number which may not be in your partner's reported number. But can I also clarify, is there any LCM impact in your, Q1 DGD EBITDA, and if so, how much?

Question: Betty Zhang - Scotiabank. - Analyst : Thanks. Good morning. Thanks for taking the question. I'm sorry to go back to this, but I was wondering for the PCC that was recognized in first quarter. Can you share how much of it was recorded?

Question: Betty Zhang - Scotiabank. - Analyst : Great, thank you. And for my follow up, so we saw there were some buybacks, and you also paid down some debt. I'm wondering, going forward, how do you see that split? How do you view, allocation, going forward?

Question: Jason Gabelman - TD Cowen Securities. - Analyst : Morning. Thanks for taking my questions. I was one of the people who thought there was a different PTC booking versus LCM with your DGD partner, so appreciate that clarification. The first question on the PTC monetization, and I guess it seems like some of, if not all of the distribution from DGD. A that you booked in one cu was related most likely to timing of blenders' tax credit, cash inflows. So as we look forward, I would suspect the distributions are tied to monetizing the producer tax credit. So with that in mind, I was hoping you could provide a little more context on the steps involved and what we should be looking out for in terms of progressing the ability to monetize that. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 1:00PM, DAR.N - Q1 2025 Darling Ingredients Inc Earnings Call

Question: Jason Gabelman - TD Cowen Securities. - Analyst : Any further guidance or anything from the, yeah.

Question: Jason Gabelman - TD Cowen Securities. - Analyst : Got it. Great. My follow up is just on the strength in feed prices, and I understand that it's a benefit to the feed business. You have the sensitivity $0.01 per pound is worth $15 million of EBITDA, but I would imagine all else equal those feed prices moving higher are actually a headwind to the DGD business that outweighs the feed business. So, is that correct? And then further to that point, if you just talk about what exactly is driving the waste oil strength. It seems like they're pricing above their carbon intensity difference to vegetable oil. So, if they're at kind of a sustainable premium to vegetable oil or if they need to come down a bit, thanks.

Question: Ben Kallo - Robert W. Baird & Co. Incorporated. - Analyst : Hi, good morning, if, Randy, everything stayed the same today, how would the core business, be in Q2? I'm just trying to figure out the cadence of EBITDA for the core business, not, DGD.