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Presentation

Darling Ingredients Inc. misses on earnings expectations. Reported EPS is $-0.16 EPS, expectations were $0.2.

Randall Stuewe: Good morning. Thanks, Suann Guthrie, and thanks for joining us for our first quarter 2025 earnings call. As a reminder, Darling Ingredients Inc. is a global ingredients company that operates in 23 countries and repurposes over 15% of the world’s meat production and food waste. Our global presence and diversified portfolio enable us to navigate and manage through challenging times very effectively. Although tariffs challenged various supply chains, at this time, expect them to remain immaterial to our portfolio and frankly support increased prices of waste fats. In the first quarter of 2025, Darling’s business performed very well, with results accelerating throughout the quarter. This resulted in overall positive cash flow and demonstrated stability in an otherwise unpredictable global environment.

The positive narrative surrounding renewable fuels public policy is very encouraging, and margins have started to improve and normalize. Ultimately, we expect our core business to continue to perform well, generating cash, and allowing us to continue to delever the balance sheet and opportunistically repurchase shares throughout the balance of the year. In the first quarter, combined adjusted EBITDA came in at $195.8 million, and we saw the impact of higher fat prices really starting to move through the P&L in March. Specifically, during the first quarter, we paid down $146.2 million in debt, lowering our financial leverage ratio to 3.33 times, received $129.5 million in dividends from DGD, and also repurchased $35 million in common stock. Now turning to the feed ingredients segment.

Global rendering volumes remain strong. And despite several severe weather events in the Midwestern United States, from flooding to tornadoes to ice storms, our US rendering team adjusted well and managed operations very well in the first quarter of 2025. European and Brazilian operations also enjoyed improved performances in the latter part of the quarter. The uncertainty on tariffs is a minor headwind and specifically for specialty proteins. However, tariffs are generally supportive of higher domestic fat prices. With the renewables market having digested the mechanics of 45Gs, we expect to benefit through higher fat prices for the balance of the year. Now the food segment saw a nice improvement in sales and volumes, particularly during the latter part of the first quarter.

Collagen peptides have regained strength, and the demand for our library products is growing. NexTyta, our revolutionary natural glucose moderation collagen peptide, is gaining momentum, and other active peptide products are in clinical trials. We anticipate consistent and continued performance improvement in the food segment throughout the balance of the year. In our fuel segment, DGD had a challenging first quarter with lower than expected margins and volumes were affected by the turnarounds performed at DGD1 and DGD2. Receiving guidance on 45Z in late January created a choppy first quarter as supply chains had to be redirected, contracts had to be modified, and customers had to adjust. We are very encouraged about the sustainable aviation fuel market.

Interest remains strong, and premiums and volumes have met our expectations. While the transition from the blenders tax credit to the producers tax credit created some complications, DGD has made the necessary adjustments to optimize the tax credits available, and we anticipate we will book 100% of the producer’s tax credit for eligible feedstocks during the second quarter. The effects of 45Z are in full swing, with a sharp decline in imported biofuels during the first quarter. The sharp reduction in imports coupled with the rationalization of domestic production points to an improved outlook for renewable diesel and sustainable aviation fuel during the second quarter. Now I would like to hand the call over to Bob to take us through the financials.

I will come back at the end here and discuss my outlook for the balance of 2025. Bob?

Robert Day: Thank you, Randy. Good morning, everyone. As Randy mentioned, DGD’s results in the first quarter had more to do with macro events impacting the biofuel market than anything specific to DGD. Meanwhile, the core Darling Ingredients Inc. business performed very well and gained momentum as the quarter progressed. For the first quarter of 2025, Darling’s combined adjusted EBITDA was $195.8 million versus $280.1 million in the first quarter of 2024. And adjusting for DGD, first quarter 2025 EBITDA was $190 million versus approximately $165 million in the first quarter of 2024. Total net sales in the first quarter of 2025 were $1.38 billion versus $1.42 billion in the first quarter of 2024, while raw material volume was almost the same at 3.79 million metric tons and 3.8 million metric tons, and gross margins improved to 22.6% in the first quarter of 2025 versus 21.4% in the first quarter of 2024.

Looking at the feed segment, total net sales increase and EBIT EBITDA improved on relatively unchanged volumes and higher fat prices, increasing through the end of the quarter. Specifically, total sales for the first quarter of 2025 were $896.3 million versus $889.8 million in the first quarter of 2024. Feed raw material volumes were approximately 3.1 million metric tons for both quarters, while EBITDA increased to $110.6 million in the quarter of 2025 versus $106.8 million in the first quarter of 2024. Gross margins for the feed segment in quarter one 2025 were lower at 20.3% versus 20.7% in quarter one 2024, which was due to certain one-time items such as inventory adjustments. Moving to the food segment. We began to see noticeable improvement in margins as the industry continued destocking from the inventory buildup experienced over the past twelve to eighteen months.

While total sales for the first quarter of 2025 of $349.2 million were lower than the first quarter of 2024 at $391.3 million, margins and volumes increased with raw material at 329,400 metric tons, versus 299,800 metric tons, and EBITDA increased to $70.9 million versus $61.7 million. Looking at the fuel segment, sales for the first quarter of 2025 were $135.1 million, versus $139.2 million in the first quarter of 2024 of higher raw materials of 374,100 metric tons versus 900,356,000 metric tons, but slightly lower finished product sales volumes. Meanwhile, overall EBITDA and other metrics in the fuel segment were clouded by DGD’s results. Specifically, EBITDA was $24.2 million in the first quarter of 2025, versus $133.1 million in the first quarter of 2024, whereas net of DGD, EBITDA was approximately $18 million in both quarters.

Looking more closely at DGD, results were mainly impacted by four things. First, the transition from the blenders tax credit to the producers tax credit resulted in a lower value per gallon and a delayed reaction in RIN values as obligated party compliance has been slow to react. Second, this complexity of the producer’s tax credit and delayed guidance temporarily impacted both sales and feedstock eligibility for fuel types and destinations. Three, tariffs on imported feedstocks, and four, downtime related to catalyst at DGD1 and DGD2. Darling’s share of DGD EBITDA was approximately $6 million for the first quarter of 2025 versus approximately $115 million for the first quarter of 2024, a difference of approximately $109 million. These items had a bigger impact on DGD in quarter one than we expect will be the case going forward.

However, DGD was and remains ahead of the curve with respect to making changes to its supply chain and positioning the business for success in this environment. Overall, DGD has adjusted to supply chain requirements needed to maximize the value of tax credits, and we are pleased by the positive direction in the RIN market and overall margins for renewable diesel and SAF. While we faced some challenges during the quarter, we continued to improve the health of our balance sheet as we paid down approximately $146.2 million in debt and repurchased slightly more than 1 million shares for approximately $35 million. The company’s total debt net of cash as of 03/29/2025 was $3.84 billion versus $3.97 billion at 12/28/2024, leading to an improvement in our bank covenant preliminary leverage ratio of 3.33 times at quarter-end first quarter 2025 versus 3.93 times at quarter-end fourth quarter 2024.

In addition, capital expenditures totaled approximately $63 million in the first quarter of 2025, and we ended with approximately $1.27 billion available on our revolving credit facility. The company recorded an income tax benefit of $1.2 million for the three months ended 03/29/2025, yielding an effective tax rate of 4.6%. This is lower than the federal statutory rate of 21% due primarily to the producer’s tax credit. The effective tax rate, excluding the impact of the producer’s tax credit and discrete items, was 21.7% for the three months ended 03/29/2025. The company also paid $9.2 million of income taxes in the first quarter of 2025. For the full year 2025, we expect the effective tax rate to remain about the same at 5% and cash taxes to be approximately $60 million for the remainder of the year.

We are also in the early stages of monetizing Darling’s share of the producer’s tax credit and look forward to providing an update next quarter. Overall, the company had a net loss of $26.2 million for the first quarter of 2025 or negative 16¢ per diluted share compared to net income of $81.2 million or $0.50 per diluted share for the first quarter. Now I will turn the call back over to Randy.

Randall Stuewe: Thanks, Bob. As I said earlier, January and February started slow. But as fat prices continue to rise, we have great momentum for the remainder of the year. I am encouraged by the performance of our core business in March. March EBITDA contribution was strong, and we expect this trend to continue. This gives me great confidence that our core business is strong enough to consistently generate cash and enable us to delever. Effectively weathering any uncertainty that exists in the biofuels market. Looking at the March run rate, I think the core business will earn somewhere between $950 million and $1 billion of EBITDA for the year. As I mentioned, there has been a lot of noise in the renewables market. While DGD did not perform as we had hoped, we believe the worst is behind us.

We expect margins to improve and DGD to adjust accordingly. With that, I am reaffirming our guidance of $1.25 billion to $1.3 billion combined adjusted EBITDA for the balance of the year for fiscal 2025. With that, now let’s open it up to questions.

Operator: We will now begin the question and answer session. In the interest of time, we ask that everyone limit themselves to one question and one follow-up. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. Our first question comes from the line of Derrick Whitfield with Texas Capital. Your line is now open.

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

Matthew Jansen: Yeah. This is Matt. I would answer that at least initially and ask some of the others maybe to join in on that. But, you know, DGD typically processes a mix of feedstocks. And that is essentially margin driven. And so it is always procuring the best product that nets the highest margin. So that can be a mix of all types of oils and fats. And, frankly, we have all types in our recipe, so to speak. And so that will vary depending on the month of the quarter. But it is a traditional mix that is largely based on animal fat and cooking oil, as well as corn oil and different bean oil and other oils. So it is an ever-changing mix. But it is the usual suspects, let’s say, in the mix that are all margin driven.

Derrick Whitfield: I understand.

Robert Day: Hey, Derrick. This is Bob. It is going to depend in part on how hard we are running SAF. Obviously, the value of the PTC is higher for the potential value is higher for SAF. The feedstocks required to make SAF are generally lower carbon intensity, so that further enhances the value of 45Z. So we plan on fully maximizing the value of that. As Matt pointed out, some of this just depends on access to different feedstocks. Obviously, at Darling, we have an advantage in maximizing what we can pull through our own network to obtain low CI score feedstocks that are eligible for PTC. And so I think we are pretty optimistic about what the value of that is going to result in for DGD. But it is hard to tell you right now what is the average cents per gallon. I think what I would say is we would be on the very higher end of the curve for both RD and SAF as we go forward.

Randall Stuewe: Yeah. I think, Derrick, this is Randy, and I think Matt and Bob did a nice job there. I mean, the optimism that comes out of here is really the move from the noise that we had in Q1. Remember, we did not get guidance from Treasury until January 20. We had feedstocks en route that qualified, that did not qualify. There are various things as we noted in the script. You know? There are requirements under 45Z that required us to go back to our customers and rework contracts and get them to a degree. There were three basic requirements. We will not go through them, but they had to use it or it had to go to retail, and there was one other. But at the end of the day, there is just a lot of noise that went down that allowed us only to claim a portion of 45Z in Q1.

And what we are saying is in Q2, we have got the supply chain normalized. We have got the turnarounds behind us. And we expect to recognize a 100% PTC on the eligible feedstocks that we will process. And that is not to be slight of hand. Some of the feedstocks that may come in cheaper that do not need the PTC, you know? So it is really, as Matt said, it is a margin driven. But we see margins improving dramatically in Q2 versus Q1.

Derrick Whitfield: Terrific. Makes sense. And then with regard to feed, we can see your March optimism in 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 1Q?

Randall Stuewe: Well, I think yeah. I mean, there is yeah. With that, you know, if we compare it to first quarter 2024, it was a pretty significant improvement. But, you know, there were just some things that came into quarter four, end of year type things that were somewhat one-off items that clouded a little bit. I do not know, Matt, if you want to.

Matthew Jansen: Yeah. I think, you know, at the end of the day, sequentially, when you look at the quarter guys, you know, there were some one-offs. Brad noted in the script. We did have an insurance settlement in there. You know, we have got a bigger pipeline now headed to DGD than we have ever had. Because of the restrictions on imported feedstocks. And qualifications. And, you know, remember that the euro is up, remember, prices are up around the world for waste fats, and it made domestic fats now more attractive. So that flowed through. We said in the script, Jan, Feb, the typical weakness, that we see. And then March, what we have done now is taken the March run rate and divided it. You know, as I always tell people, this is an easy business to give you forward guidance on when you are either in a flat or a rising market.

The DGD given the amount of fat that comes out of the North American supply chain, is now it is a very, very transparent thing for us, and it is a rising market. We have a somewhere between a forty-five and a seventy-five day pipeline sold at any given time. And so you did not, you know, we had that done in November, December. And so now as January, February came in and March is when the prices are hitting. And, you will see that continue on. At the current pricing, that is where we are formulating the guidance that we are throwing out there. And I think, you know, prices have actually moved up since March even here. So it feels, you know, this business feels very, very solid going forward right now. Now barring any other craziness out of, you know, we are going to need a little help out of D.

Here, but I think we are okay.

Operator: Thank you for your questions. Our next question comes from the line of Dushyant Ailani with Jefferies. Your line is now open.

Dushyant Ailani: Hi. Thank you for taking my questions, guys. 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, you know, ingredients EBITDA for 2Q.

Randall Stuewe: Dushyant, you can do the math and look at the $1.95 for the first quarter $1.90 minus DGD, and then they come with the $9.50 to billion run rate, you can back into that. But, no, we do not break out a quarter.

Dushyant Ailani: That was the only question I understood. Okay. Yeah. And then just the second one, I guess, could you quantify what the one-time inventory impact was on feed?

Robert Day: The one-time inventory impact on feed? Yeah. But we do not, we are not calling those out. I think it is just there were some smaller one-time items. Some have been called out in the last quarter. On the insurance settlement so that that like, quarter on quarter comparison and to say it is sequentially lower. Obviously, the numbers are what the numbers are, but there are just some one-offs on both sides of this, but they are not calling over. They are not material. And I, you know, the guidance that we gave in February was that we, you know, that when as we were talking to folks, and we said, well, what do you see the year off of Q4? And we said, we ran two thirty-three in Q4. We said times four. What we did not say was it is not ratably spread over each quarter.

Because you have got a situation of rising prices now. So you will see an improved feed segment, you know, gross margin. You know, we look at all of it. If you look at all of the segments, even in the food segment, remember, while 20% 17 to 20% is a high-value collagen gelatin, 80% of it is feed and feed and fat. So you get a lift there. You get a lift in the fuel segment too because of the different products that are processed there. So, you know, focusing on the feed segment, in my opinion, focus on the nine fifty to billion run rate for the year, and that is what is important here.

Dushyant Ailani: Got it. Thank you.

Operator: Thank you for your questions. Our next question comes from the line of Heather Jones with Heather Jones Research. Your line is now open.

Heather Jones: Morning. Thank you for the question. Randy, I wanted to start with so you have seen all the Reuters rumors, and we have 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 $9.50 to a billion you gave us?

Matthew Jansen: Heather, this is Matt. I would say that the common RVO that is expected and hopeful will be coming out here in the next few days is 5.25 billion gallons. And that is something that, I would say across industries has been widely supported. And the feedback that we have so far is that that is gaining traction, and that is what we are looking forward to.

Heather Jones: Okay. Thanks for that. And then my follow-up is I am not trying to belabor this point, but, Randy, in the past, you have told us that roughly every penny in fats pricing is worth roughly $12 to $15 million EBITDA. And, like, if you look at Q1 VAT pricing versus Q1 of 2024, it was up several pennies, and then you also did not have that ward South Carolina issue. But yet, EBITDA per feed 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 are missing? I get the lag in pricing relative to Q3 and Q4 last year. I am just having a hard time understanding the year-on-year impact.

Matthew Jansen: Hi, Heather. It is Matt again. I would say about it this way. First of all, we have a forward sales book on almost all the time. Somewhere on average of sixty to ninety days. And so there is a lagging effect in this. And that is also partially, one of the reasons that gives us confidence when we look at how March improved over the first two months because some of that started to get traction. So I think you will see this shine through in the numbers as we go forward.

Randall Stuewe: And I would add to that, Heather. Remember, when you came out of, ’23, we came out in December of 2023, soybean oil was 55¢ a pound. And by the time we got to Q1 in ’24, you know, we were in a very much a deflationary market. So we were flowing through higher prices that were coming down in Q1 of 2024. And now we are back in an inflationary improving market. So they are not as, as I would say, they are kind of hard with the forward sales book to kind of, if you will, reconcile in what you are trying to do. What we are trying to do is say, we have got 100% visibility to the March run rate. Prices have started to flow through in March, they are probably going to improve a little bit in April. If you look at imported fats into the US today, they are closer to 60¢ a pound.

So they are almost, you know, a hundred bucks a ton over top. You know, what we are doing right now in the US, maybe a hundred and 20. So you know, like I said, this is not a difficult business once you are in a flat or an improving market to give forward looks to.

Operator: Thank you for your questions. Our next question comes from the line of Manav Gupta with UBS. Your line is now open.

Manav Gupta: Hey, Randy. Congrats on the leverage ticking 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 healthy that you start getting in February any help that you think you will probably get on the card front? And then what could be the RIN prices? Help us on bridge the gap to that about $250 million of EBITDA that you will need from the renewable diesel business to get to your guide?

Randall Stuewe: Yeah. Manav, good question. I and I think it sets the stage I will have Matt and Bob help me here. And we will kind of give a view on the balance of the year. I mean, clearly, the Jan, Feb, RIN production rate in the March suggests that, you know, the RINs have to improve. You have got capacity idled right now around the industry. The, you know, the industry is behaving like it should. It is showing discipline and says, I am not going to run and burn up Catalyst for zero margin. So where do the RINs have to go? The RINs have to go I do not know, a buck and a half, somewhere in there, you know, up $45.50 cents from where they are to restart the capacity. So when we talk about the forward look here, the one two five and one three, I think it is fairly conservative.

And if you look at it as we know on the Valero call here shortly, they will be telling you an adjusted run rate for the year is about $1.1 billion because of turnarounds that we had in the gallons. Total gallons. And you sit there and say, well, you know, we told you we are going to earn, you know, $55.65 cents a gallon on the PTC. It is not hard to back into how we come up with the additional $250 to 300 in within DGD to get to our guidance. What that says is we are not making a statement that DGD is going to run at zero for RD for the year and then get a PTC. We are saying RINs have to improve, and we are giving you a conservative forward look.

Robert Day: Yeah. So this is Bob. And I think, you know, with respect to RINs, the, you know, the run rate so far Jan, Feb, March, puts us on pace to produce about 12 billion RINs, D4 RINs. And, really, we need to make seven and a half in 2025 to meet the mandate. So we are still underproducing by quite a bit. We have seen RINs go up by over 40¢ equivalent to 65¢ a gallon. Since the start of the year. So there is a lot of momentum, you know, moving in the right direction. And it really comes down to when obligated parties feel the need for compliance as to when those RIN values get to where they ultimately need to be. So we see a lot of support there. As Randy mentioned in the PTC, you know, we were not able to realize a lot of the PTC in the first quarter due to the late guidance and, you know, having maybe not the best feedstocks in place.

And some of the sales qualifications that we needed to go through to get ready. So that is going to also be a real lift to the P&L as we go forward.

Matthew Jansen: You know, we were the other thing we have not talked a lot about is just the downtime. I mean, you can see, you know, the number of gallons we produced. We were less than two-thirds of total capacity. So, you know, that is another thing that is really going to provide a helpful lift as we go forward through the rest of the year. And then lastly, you know, there are a lot of positive discussions kind of going on behind the scenes around the RVO and also at CARB. And so I think pretty confident in what the outlook is without those things. But if those come to pass, then it certainly could change the picture in a positive way.

Manav Gupta: I would just also include this is Matt. I would also include that there is also the SaaS component I mean, so this is a continuous margin bill. With the PTC, with the RIN, with, obviously, flat price. All of these will then influence the margins. But with our with our staff, production, we are also that also gives us more confidence.

Operator: Perfect. Sometimes, dark does not get enough credit for the kind of innovation you bring to the market. So recently, you have launched some products, you know, to control blood sugar. 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?

Robert Day: So this is Bobby. I think, I think you are referring to Roussolo and our collagen business. Yep. And you point out, I mean, EBITDA increased pretty significantly, you know, this quarter. Versus a year ago and last quarter. Know, we are bringing some very innovative products to market. I think, you know, we have advertised as loudly as we can. The Nexidata portfolio of products and the NexData glucose control product that is currently on the market and undergoing, you know, additional trials to really get this out in a larger way. You know, we love talking about collagen and our ability to innovate through collagen. And put together peptide profiles that have targeted health benefits and really do amazing things for people.

What is exciting from the business standpoint is that margins are significantly higher in those products. And so as we continue to develop the NexData GC product and other products in the NexData portfolio, you know, we look to see earnings in that particular segment increase quite a bit.

Operator: Thank you for your questions. Our next question comes from the line of Thomas Palmer with Citigroup. Your line is now open.

Thomas Palmer: Good morning, 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 biomass-based diesel was your expectation. 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 are thinking about the year versus if it does come through at this 5.25 level that would be kind of upside versus how you are thinking about the year.

Randall Stuewe: Yeah. And this is Randy, Tom. You know, great question in the sense. I mean, you know, obviously, coming off of last year, we are a little bit snake bit, and then we are being k. With a pretty conservative view. I mean, DC is a bit hard to handicap right now. We have spent a lot of time there recently with our colleagues across the agriculture and energy. Feels like we have alignment on the 5.25 billion gallons. I mean, you know, clearly, the White House needs some wins here. And I think, you know, the American farmer has been singled out as somebody that the Trump administration gets and understands and wants to support. And so I think we are going to ride that momentum, and that is very positive. Now the good news is that the 5.25 billion gallons is that is a lot of demand that has not been there in the past.

You know, that gets friendly feedstocks. Whether you are soybean oil or whether you are animal fats and waste fats. So it is bullish the base business. That is not baked in yet. Because remember, that does not start until, you know, twenty-six. So that is number one. Number two, if you start moving feedstocks up, unless you are going to get help out of RINs you are going to get help out of LCFS, you know, there is still no margin in this. Until at the end of the day, those are going to have to move in order to fulfill the rent what I am going to call the RIN deficit that is building out there right now. So, you know, we are setting up, you know, right now for what I am going to call, you know, the fantastic finish in the back half of the year here as these things become a little more clear.

Bob, you want to add anything?

Robert Day: Yeah. I just one thing, I think that it is interesting that what we are hearing is talk about a gallon mandate when historically it has really been referred to as RINs. And so I think there is quite a lot of confusion actually between RINs and gallons. The reality is, a 5.25 billion gallon D4 mandate would effectively increase RIN demand by about 3 billion in 2026 versus 2025. So it is that that would be a substantial increase. We are not really baking that into this forward guidance. I think if that were to be clarified, we would probably see a pretty interesting market unfold. I mean, you have seen Tom, you have seen RINs move from 61¢ at the start of the year to a dollar 5, but capacity especially in the biomass-based diesel or biodiesel industry, is still fairly is idle to negative.

So you something has got to give. What the situation we are in right now is not sustainable. What we know is we have the two lowest cost operating assets in the best place in the world and they are profitable. And we know that as we were given that guidance in Q2 here. So but in order to restart the industry, and to fulfill the existing mandate before the new mandate, you have got you have got to bring back profitability. There just is not enough capacity to fill the RVO even as it stands today at the margins that exist.

Thomas Palmer: Thanks for all that color. Maybe I could just follow-up quickly on the last point you noted. At least on, you know, ring generation 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 you know, making people more concerned about the RIN Bank.

Randall Stuewe: Yeah. And we will the three of us will tag team this one because and there is not any differing views at the table. Remember, the obligated party has all year. It and Bob has always said in really not a futures market that anticipates the S&D here. So the obligated parties are still sitting here trying to figure out what is going on in DC. Are there going to be SREs? Is there going to be a bigger RVO? I can tell you that our colleagues in San Antonio, we see a tightness in RINs building very rapidly here. So we have got a universal view on this right now. But there is just so much noise. You know, it is you think about it, 61 to one zero five is a big move already. And but it is not enough to restart the industry.

There is very limited liquidity, if you will, if you wanted to go after and said, let’s go get long rims today, there is very limited liquidity and the obligated parties just, you know, until they get more transparency. I do not know. What do you think, Bob? Matt?

Robert Day: I think that is right. I think for some of the obligated parties, who do not have an immediate penalty for lack of compliance, they are looking at a pretty significantly increased RIN price in their they are sitting on the sidelines. But as time goes on, you know, that is going to be harder and harder to do.

Matthew Jansen: Tom, I would just say there is really there are two things to watch for. Number one is just the just the margin. In terms of what the what the renewable diesel and the biodiesel margin is. It would help will dictate the production and, therefore, the RIN generation. And then the other is imports. Whether it on importing on biofuels. So those two things I would watch for as indicators to look for some, you know, direction on RIN market.

Operator: Thank you for your questions. Our next question comes from the line of Ryan Todd with Piper Sandler. Your line is now open.

Ryan Todd: Good. Thanks. Good morning, everybody. Maybe a question. First of all, you mentioned a little bit earlier in your comments, but know there are a lot of moving pieces in volatility. As it stands right now, can you talk through the impacts of the current tariff regime on the various aspects of your business?

Randall Stuewe: Look. At a high level, let’s talk about the core business, it is probably a slight net positive for Darling. You know, one thing with tariffs coming in The United States, it limits availability of waste fats and so that has been supportive to the North American waste fat prices. So that is generally good. I think the, you know, the one the one area where it is not entirely positive is is in selling protein products to China. But that is less of a, like, a tariff hit and just it just takes a market that was available that needs to be redirected somewhere else. But the net net really is not a it really is not a negative for Darling’s core business. The question really is more about how does it affect the renewable fuel industry in The United States and, you know, tariffs on feedstocks and, you know, as we kind of reengineer supply chains, we are just finding ways around those things.

So we do not see it as a really negative thing for our business, fortunately.

Ryan Todd: Good. Thanks. And then maybe shifting to SaaS. Can you maybe provide a little more color in terms of what you said? I mean, said the demand pull has been reasonable so far. Like can you walk through what sort of demand pull are you seeing? Is it mostly coming from mandated markets? Or is it also the voluntary market? And what would you need to see at this point to think about moving forward with the second staff project?

Matthew Jansen: So this is Matt. So we have a mix between whether it is the demand, whether it is the obligated or the markets or the voluntary markets. It is pretty well balanced on that. We are running at an optimal rate to maximize the margin that we have. And, you know, our SaaS sales book started more than a year ago. As we were contracting SAP. So we have got a fair bit of book on, already. I would say quite a strong book, as a matter of fact, through the whole year. And so we are delivering on those contracts. And so to your question on a second staff line, I think right now, we need to let some of the storm clear on all of the all of these market dynamics that are going on. To make a final call on that. It is something that is on the table, and we have done some of the engineering work on that.

But we are holding off. For the time being to have more clarity on what the future holds. The other reality is that as the market evolves in the credit scenario, what we are seeing more and more interest in is the booking claim process. And so it is not necessarily contracts with airlines and the distributors, but there is a booking claim process that we are with the, some of the tech high energy users are buying the scope three credits.

Operator: Thank you for your questions, Ryan. Our next question comes from the line of Biren Sharma with Stephens. Your line is now open.

Biren Sharma: Thanks for the questions. Just wanted to get a sense of capital allocation priorities from here. Looks like you did do a little bit of 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.

Robert Day: Yeah. Thanks. Thanks. This is Bob. That is correct. I mean, first, I would just say that our plan has not changed. We are focused on continuing to pay down debt and, you know, delever our balance sheet. We have made a lot of progress to that end. Recently, and we will continue through the rest of the year. We will get pretty close to that 2.5 by the end of the year. You know, we may not quite get there, but it will happen early 2026 if it does not happen by the end of the year. That is really what we are seeing.

Biren Sharma: Okay. Appreciate that. And, just really wanted to I think everybody has asked good questions about DGD. Maybe I could focus in on the food segment here. Really good margins. Much higher than anticipated. You kind of spoke to some of the strength here, but wondering if you could share some incremental color. And do you think that 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, you know, better educate their customers on this product. So was just wondering if you could just give us an overview on food and Nextiva there.

Robert Day: Yeah. This is Bob again. So appreciate you bringing this segment up. It is an exciting one for us here. I think on a high level, what we have seen is an industry that has really gotten a little bit more healthy here as low let’s say, high-cost production around the world has stopped making product, and they have begun to destock inventories. We have seen some announcements that some of the higher-cost areas of the world have decided to shut production down, and that has just led to an overall, you know, better health in the gelatin market and the collagen market. So, you know, we think that we are in a pretty good spot as we go forward. As far as Nexidia, you know, we do have a product on the market under a brand called Caudaiage.

C o d e a g e, and the Nexidia glucose control product is inside that product. We are going through some trials that we should finish this summer and that is with a much larger sample size that would allow the larger CPG companies to be comfortable taking this product to market. So, really, what we are expecting is to get through that process, go through some, you know, commercial activities to be able to see this product in much higher volume as we kind of get near the end of 2025.

Operator: Thank you for your questions. Our next question comes from the line of Andrew Strelzik with BMO. Your line is now open.

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

Matthew Jansen: Well, let me if I did say next couple of days, I guess I would not try to be that exact on that. I really You did say next couple days. Said the next few days. Okay. Well, I think in the coming days is probably a better description of that. And I apologize if I came out too soon on that, but we are optimistic on that. But in terms of having, you know, special insight or anything that gives us any confidence more than what other people who are industry participants. I would say we do not have any extra knowledge in that regard, but we do have we remain optimistic about the volume as well as the timing.

Randall Stuewe: Yeah. Andrew, the, you know, the discussions are clearly happening. In DC. We are part of them with a larger group. There is a the first time in my career since 02/2007 that we have absolute alignment amongst a high majority, if not the, you know, 90% of the trade groups in this on what should happen here. And we have a president that also is now realizes that the American farmer is important. So, you know, my view is that I think you will see something out of DC here somewhere in the next, you know, forty-five, sixty days, maybe sooner. But they are all working on it. And, you know, it is just a lot of different moving parts there, but everybody at least is reading off of the same song sheet right now.

Andrew Strelzik: Got it. Okay. That makes sense. 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, you know, for the last couple of quarters. And so I guess I am 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 are paying attention to on the risks around the guidance?

Robert Day: Look. This is Bob. I think guidance around the core business is the risks are relatively low. You know, what the market that we are seeing today, you know, certainly things could change. But, you know, typically, these are sort of momentum-driven markets, and they are pointed in the right direction. So I think it would be pretty low there. As it relates to biofuels, you know, there is certainly going to be more uncertainty there just because so influenced by policy, and there is so much going on behind the scenes. You know, we give guidance today based on what we are seeing and, you know, all the things that we have explained. But that is one that could be affected more by things outside of our control than core business.

Operator: Thank you for your questions. Our next question comes from the line of Matthew Blair with TPH. Your line is now open.

Matthew Blair: Thank you, and good morning. So regarding the new LCFS standard in California, I think the comment period just ended a few days ago. And we are waiting for CARB to resubmit the new targets to the OAL. Is that your 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 will be backdated to 01/01/2025 or is an implementation date in 2026 more reasonable at this point? Thank you.

Matthew Jansen: Hey. Good morning, Matthew. I would say that particular to your question on the timing, the yes. The comment period ended on Monday. And we understand there are thirty working days to provide some analysis. They have to go through a process in order to address the comments. We understand that is ongoing. And we remain optimistic that this is on track, and we are going to see something come out definitively, you know, in the reasonably near future. I do not want to get the get the extra. You are not going to get too high on that. Very true. Yeah. So we think that is on track. And so now whether that is going to be retroactive or effective, you know, in sometime midyear or first year, that is a question we continue to ask. I think we are prepared no matter what. But I think in my view, a worst-case scenario would be January one of twenty-six. But there is a chance from what we understand of having something there.

Matthew Blair: 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 45Z contribution in your number, which may not be in your partner’s reported number. But could I also clarify is there any LCM impact in your Q1 DGD EBITDA? And if so, how much?

Robert Day: Hey, Matt. This is Bob. Yeah. I mean, we are, you know, we see a pretty big difference there. I think one thing just want to make really clear is that none of the difference has anything to do with recognition of 45Z. You know, historically, we have shown, you know, we report LCM differently. So I think that is the way to look at it. In particular, the first quarter had a lot of volatility in both LIFO and LCM. The big difference between our number and what Valero is showing is with the LCM.

Operator: Thank you for your questions, Matthew. Our next question comes from the line of Betty Jiang with Scotiabank. Your line is now open.

Betty Jiang: Thanks. Good morning. Thanks for taking the question. I am sorry to go back to this, but I was wondering for the PTC that was recognized in the first quarter, can you share how much of it was recorded?

Robert Day: You know, I think we would sort of roughly say that we will show this in more clarity in the 10-Q. Will come out in a couple of weeks. But, you know, we were roughly able to realize PTC on about a third of the volume that we had in the quarter.

Betty Jiang: Great. Thank you. And for my follow-up, so we saw there were some buybacks, and you also paid down some debt. I am wondering, going forward, how do you see that split? How do you view, you know, allocation going forward?

Robert Day: So it is Bob again. We are focused on paying down debt. I mean, we will opportunistically look at buying shares back when we can. We want to buy back our dilution, you know, we did some of that in the first quarter, but the lion’s share of the capital we spent that way was towards debt pay down, and we will continue to focus more on that.

Operator: Thank you for your question. Our next question comes from the line of Jason Gabelman with TD Securities. Your line is now open.

Jason Gabelman: 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 is on the PTC monetization. And I guess it seems like some of, if not all of, the distribution from DGD that you booked in one queue 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.

Robert Day: Yeah, Jason. This is Bob again. So, you know, just to kind of touch on something you said, the distribution from DGD. I mean, certainly, the PTC, you know, realization, monetization of PTC is one source of revenue that we, you know, we will realize. But, you know, whether it is bigger or smaller than distributions for DGD, ultimately, it is going to depend on the size of renewable diesel and sustainable aviation fuel margins. You know, would not rule that out that we get more that way, but we will see how that plays out. As far as the process around monetizing the PTC, it is moving forward, I would say, very efficiently. As it is with these types of processes. There are a number of steps. Brokerage firms involved, counter, you know, lining up counterparties, getting contracts kind of ironed out, terms of legal terms ironed out.

And we are going through that process to be able to set up for, you know, let’s call it, some sort of an auction to be able to sell those credits and monetize those in the latter half of the second quarter. But we can stick it going forward.

Jason Gabelman: Need further guidance or anything from the yeah.

Robert Day: No. No. No. And going forward, we would expect to capture 100% of the qualified feedstock PTC.

Jason Gabelman: Got it. Great. My follow-up is just on the strength in feed prices, and I understand that it is a benefit to the feed business. You have the sensitivity 1¢ 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, you just talk about what exactly is driving the waste oil strength. It seems like their pricing above their carbon intensity difference to vegetable oil. So, you know, if they are at kind of a sustainable premium to vegetable oil or if they need to come down a bit. Thanks.

Matthew Jansen: That is a great question. There is an inherent premium in the waste fat compared to soybean oil that you can even see it in the CI scores. And so that is reflected in the pricing. And so let me that is the simple answer to that question. The other reality is there is only a certain amount of US-produced animal facets available in the market, and so it is in demand right now. For good reason. And so that is also part of the price differentiation that we are seeing between that. So if you know.

Robert Day: Yeah. And this is Bob. Just that, you know, one of the other reasons is crop oils are not eligible for all types of biofuels. So there is that element as well where I use cooking oil, verified used cooking oil, certified used cooking oil is eligible for pretty much any type of fuel, whether it is, you know, biodiesel, renewable diesel, standard aviation fuel regardless of the destination. So some feedstocks just do have more versatility, and then they therefore, may trade above their carbon intensity adjusted value.

Operator: Thank you for your questions. Our next question comes from the line of Ben Kallo with Baird. Your line is now open.

Ben Kallo: Hi. Good morning. If Randy, if everything stayed the same today, how would the core business be in Q2? I am just trying to figure out the cadence of EBITDA for the core business, not DGD. Thank you.

Robert Day: Hey. Hey, Ben. This is Bob. I think, you know, what I would probably do is I would just say that we do not expect quarter two to look a lot different from quarter three and four. And so, you know, if you just take quarter one, subtract that from the guidance, you know, that is probably the best way to do the math on that.

Ben Kallo: Okay. Thanks.

Operator: Thank you for your question. That concludes our Q&A portion for today. I would now like to pass the conference back to the management for closing remarks.

Randall Stuewe: All right. Thanks, everyone. Thanks, Victoria. Thank you for your questions today. If you have any other questions, please reach out to Suann Guthrie. Thanks for taking the time to be with us today. Stay safe, and have a great day. And talk to you here next quarter.

Operator: That concludes today’s call. Thank you for your participation, and have a wonderful rest of your day.