Darling (DAR) Q2 2025 Earnings Call Transcript

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DATE

Thursday, July 24, 2025 at 9 a.m. ET

CALL PARTICIPANTS

Chairman & Chief Executive Officer — Randall Stuewe

Chief Operating Officer — Matthew Jansen

Executive Vice President & Chief Financial Officer — Robert Day

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RISKS

Fuel segment decline: Darling's share of Diamond Green Diesel (DGD) EBITDA dropped to $42.6 million from $76.6 million year over year, with year-to-date 2025 down to $48.7 million from $191.7 million, signaling persistent margin pressure.

Net income deterioration: Reported net income fell to $12.7 million ($0.08 per diluted share) from $78.9 million ($0.49 per diluted share) in Q2 2024; Year-to-date, the company reported a net loss of $13.5 million (negative $0.09 per diluted share) (GAAP).

Guidance uncertainty: Management cited timing of RIN recoveries and SRE announcements as unresolved, contributing to caution and lowering of full-year guidance primarily due to external regulatory factors, not core operational issues.

"Robert Day said, 'one thing we're seeing is a lower capacity utilization rate for biodiesel across the board about half the capacity roughly, and that hasn't changed very much throughout the year.'"

TAKEAWAYS

Combined Adjusted EBITDA: $249.5 million, down from $273.6 million in the second quarter of 2024, with DGD-adjusted EBITDA was $207 million versus $197 million in the second quarter of 2024, indicating core improvement absent renewables headwinds.

Total Net Sales: $1.48 billion, up from $1.46 billion in the second quarter of 2024, with Raw material volumes were nearly flat at 3.74 million metric tons versus 3.76 million metric tons in Q2 2024.

Gross Margins: Gross margins improved to 23.3% compared to 22.5% in the second quarter of 2024; year-to-date gross margin improved to 23% from 21.9%.

Feed Segment Sales: Feed raw material volumes were approximately 3.1 million metric tons for both periods, and materially unchanged year over year; Gross margins improved to 22.9% versus 21% in the second quarter of 2024.

Food Segment Sales: $386.1 million, up from $378.8 million in the second quarter of 2024, with Gross margin remained steady at 26.9%; Raw material volumes increased to 323,900 metric tons versus 304,700 metric tons in the second quarter of 2024.

Food Segment EBITDA: EBITDA was $69.9 million, down from $73.2 million in the second quarter of 2024; Year-to-date EBITDA was $140.9 million, up from $134.9 million in the prior year.

Fuel Segment Combined Adjusted EBITDA: $61.3 million, down from $96.8 million in the second quarter of 2024; Fuel segment sales were $158.8 million versus $142.3 million in the second quarter of 2024, while Raw material volume fell to 337,600 metric tons from 362,000 metric tons in Q2 2024.

Debt and Leverage: Net debt was reduced to $3.89 billion as of 06/28/2025 from $3.97 billion as of 12/28/2024, with a leverage ratio of 3.34x at the end of Q2 2025 versus 3.93x at year-end 2024 post-refinancing.

Liquidity: $1.27 billion was available on the revolving credit facility as of Q2 2025.

Guidance: Management projects full-year combined adjusted EBITDA (non-GAAP) in the range of $1.05 billion to $1.1 billion.

Planned JV and R&D: Announced intent to form the NexTata joint venture in health and wellness during Q2 2025; nearing completion of scientific studies for NexTyta GC glucose control product with repeat orders now emerging.

Capital Expenditures: $71 million in the quarter, $134 million in year-to-date capital expenditures for the first six months of 2025, with spending emphasized at $400 million or less for the year.

Tax Rate: Effective tax rate was 22.2% for Q2 2025, with a projected full-year rate of ~15% and total 2025 cash taxes forecast at ~$72 million.

Operational Updates: DGD One will remain offline pending margin improvement; DGD Three is scheduled for turnaround in Q3 2025, with the expectation to run at full capacity in 2026.

SUMMARY

Darling Ingredients Inc. (NYSE:DAR) delivered year-over-year gross margin gains and maintained stable core business volumes while renewables headwinds, continued regulatory ambiguity, and one-time operational lags weighed on aggregate profitability metrics. Management highlighted a favorable policy-driven pricing setup in feed fats, ongoing resilience in global collagen demand supporting the food segment, and set expectations for materially better market conditions as 2026 approaches due to policy clarity and operational resets. Strategic execution included early repeat orders and scientific progress for new health-focused ingredients and completion of a major refinancing, improving financial flexibility and extending debt maturities by up to seven years.

Chairman Stuewe said, "we've positioned ourselves to invest confidently in long-term growth." after successful debt restructuring and capital discipline efforts.

The company disclosed "contingent valuation" earnings adjustments stemming from a Brazilian acquisition earn-out, which was completed or will be completed in July, as related operating trends stabilize.

Policy shifts, including increased tariffs and LCFS requirements in California, are generating margin and pricing benefits for domestic feedstock and supporting positive outlooks in the feed segment.

Fuel segment utilization remains lower, with management noting ongoing margin challenges related to delayed SRE and RIN policy finalization, as well as supply chain and pricing lags.

In Q&A, management reported strong operational momentum in Brazil driven by rising cattle numbers and a robust domestic biofuel market, while remaining adaptive to evolving international trade flows and biofuel mandates.

Future capital allocation priorities center on debt reduction below a 3x leverage ratio in 2025, with further investment, share repurchases, or dividends contingent on market visibility and policy resolution in 2026.

INDUSTRY GLOSSARY

DGD (Diamond Green Diesel): Darling's major renewable diesel joint venture, a central driver of its Fuel Ingredients segment EBITDA.

RIN (Renewable Identification Number): U.S. compliance credit used to track renewable fuel production and enforce mandated biofuel use, impacting segment margins.

RVO (Renewable Volume Obligation): Annual regulatory mandate specifying minimum renewable fuel blending targets—key variable for margin realization.

SRE (Small Refinery Exemption): EPA waiver permitting certain refineries to opt out of RFS mandate, with timing and allocation directly impacting demand and price benchmarks.

LCFS (Low Carbon Fuel Standard): California environmental policy requiring reduced lifecycle greenhouse gas emissions in fuels, influencing market premiums for qualified products.

LIFO (Last-In, First-Out): Inventory accounting method influencing segment earnings during periods of feedstock price movement, as referenced in the quarter.

LCM (Lower of Cost or Market): Inventory valuation approach where assets are recorded at the lower of acquisition cost or market value, contributing to quarterly earnings swings.

SAF (Sustainable Aviation Fuel): Renewable fuel product parallel to RD (Renewable Diesel), with dedicated policy incentives and margin structure distinct from other fuels.

GLP-1: Peptide hormone relevant for appetite regulation; basis for Darling's new NexTyta GC product clinical validation narrative.

Full Conference Call Transcript

Randall Stuewe: Thanks, Suann, and thanks, everybody, for joining us for our second quarter 2025 earnings call. This quarter, we saw early signs of momentum building across our businesses. Even as we continue to navigate a complex renewable fuel environment. We delivered positive earnings, maintained strict capital discipline, and enhanced our financial flexibility through a successful refinancing. We locked in our borrowing costs for the next five plus years and we've positioned ourselves to invest confidently in long-term growth. We also advanced our strategic agenda with the announcement of our intention to form NexTata, our new joint venture focused in the health and wellness space.

This move aligns with our strategy to diversify and grow in high margin, high growth like health and wellness. Combined adjusted EBITDA for the quarter came in at $249.5 million. While the regulatory environment has been a headwind in recent quarters, we are now seeing signs of clarity and constructive market changes, particularly in our feed segment, setting us up for a stronger performance in 2025 and into 2026. DGD continues to face near-term pressure but we remain confident in its long-term value as policy support begins to take hold. Across the board, we're focused on execution and believe the fundamentals are now moving in the right direction. Now turning to the feed ingredients segment.

Global rendering volumes are steady and in line with our expectations. We saw margin expansion both quarter over quarter and year over year, reflecting focused execution, operational efficiency, and improved premium ingredient pricing. Rising fat prices supported by public policy that favors domestic sources are creating a favorable pricing environment, which we expect to continue and expand. As a result, a larger portion of our domestic fat portfolio is now headed to DGD. Carrot volatility and increased domestic oilseed crush has put pressure on protein prices, especially on our sales into Asia. However, fat prices are outweighing the higher protein supply and softer prices. Now turning to our food segment.

As I mentioned, we signed a nonbinding term sheet with the sender load to form NexTata. We are concluding due diligence and expect to sign a definitive agreement in this quarter. We believe this platform already is a meaningful contributor to earnings and has the potential to grow at an accelerated rate as we increase our presence in the health and wellness and nutrition market. Global demand for collagen and gelatin continues to strengthen driven by health, wellness, and functional nutritional needs. We are advancing scientific validation for NexTyta GC, our glucose control product. These studies are near complete, and early results are showing strong potential. And we are beginning to see repeat orders for this product as well.

In our fuel segment, the renewables environment remains difficult. The overhang on small refinery exemptions and delayed 2024 RIN compliance enforcement is preventing mandates from reflecting real demand and continuing to put pressure on renewable fuel margins. However, DGD remains a leader consistently delivering best-in-class performance. SAF volumes continue to demonstrate flexibility and resilience and are helping us to balance the difficult market dynamics. We are seeing the feedstock supply chain rebalance due to tariffs and regulatory and tax changes, all benefiting Darling's core business. In addition, changes implemented by CARB to increase mandated greenhouse gas reductions in California as of July 1 and we expect LCFS premiums will strengthen and support margin recovery over time.

Meanwhile, the proposed RVO framework represents a major tailwind for the renewables market and RINs as long as mandated volumes net of SREs, are anywhere close to what has been proposed it will reinforce long-term demand and support a healthy margin environment. DGD one, however, will remain offline until margins show some meaningful improvement. Meanwhile, DGD three is scheduled for a turnaround starting here in the third quarter. The timing aligns well with our outlook, positioning us for full utilization as policy rules are later in 2025 and enabling DGD to run full in 2026 when we anticipate a significantly stronger margin environment.

We believe the groundwork we're laying now through operational discipline, and strategic timing positions us well when the margin environment improves. With that, I'd like to hand the call over to Bob to take us through the financials and I'll come back and give you my thoughts on the balance of 2025. Bob?

Robert Day: Thank you, Randy. Good morning, everyone. For the second quarter of 2025, Darling's combined adjusted EBITDA was $249.5 million versus $273.6 million in the second quarter of 2024. And adjusting for DGD, second quarter 2025 EBITDA was approximately $207 million versus approximately $197 million in the second quarter of 2024. Year to date, combined adjusted EBITDA totaled $445.3 million as compared to $553.7 million for the same period of 2024. Total net sales in 2025 were $1.48 billion versus $1.46 billion in the second quarter of 2024, while raw material volume was almost the same at 3.74 million metric tons and 3.76 million metric tons.

Year to date volumes for 2025 were 7.53 million metric tons compared to 7.56 million metric tons for the same period first 2024. Gross margins improved to 23.3% for 2025 compared to 22.5% in the second quarter of 2024. We also saw a nice growth margin improvement year to date at 23% for the first six months of 2025 compared to 21.9% for the first half of 2024. Looking at the feed segment, total net sales increased and EBITDA improved on relatively unchanged volumes. Total sales for 2025 were $936.5 million versus $934.1 million in the second quarter of 2024.

For the six months of 2025, total sales were $1.83 billion compared to $1.82 billion for the same time in 2024. Feed raw material volumes were approximately 3.1 million metric tons for both quarters and materially unchanged year over year at roughly 6.2 million metric tons. For the second quarter of 2025, gross margins improved nicely to 22.9% versus 21% in the second quarter of 2024.

Meanwhile, lower protein values created a slight headwind that will alleviate as we continue to find better markets for premium protein products, and while fat prices moved considerably higher during the second quarter, the lag between raw material procurement and finished fat sales resulted in lower margins than we expect to see as prices flatten. All things considered, we are pleased with the improvement in gross margins for the quarter, as Randy said, the outlook is very positive. Year to date, gross margins were also better at 21.6% compared to 20.9% in the first six months of 2024. Moving to the food segment.

The margin environment continued to show healthy signs as we were able to maintain gross margins per unit sold while increasing sales volumes. Total sales for 2025 were $386.1 million higher than the second quarter of 2024 at $378.8 million. Second quarter 2025 gross margins for the food segment were unchanged from 2024 at 26.9%. Year to date gross margins for 2025 were 28.1% versus 25.3% from the same time a year ago. Raw material volumes increased to 323,900 tons versus 304,700 metric tons. Year to date, raw material volumes for the food segment were 653,400 metric tons compared to 604,400 metric tons reflecting an increase in global demand.

EBITDA for 2025 was slightly down at $69.9 million versus $73.2 million in the second quarter of 2024. While year to date 2025 EBITDA was $140.9 million versus $134.9 million from the same period a year ago. Looking at the fuel segment, as Randy mentioned, the renewable fuel environment continued to be challenging. Darling's share of DGD EBITDA was approximately $42.6 million for 2025 versus approximately $76.6 million of EBITDA for the second quarter of 2024. Year to date 2025, Darling's share of DGD EBITDA was $48.7 million, versus $191.7 million for the first six months of 2024.

The second quarter of 2025, the impact to Darling for LIFO was negative $31.1 million, and it included a lower of cost or market or LCM benefit of $55.6 million. Year to date, LIFO for Darling's half of DGD was negative $59.5 million, while LCM generated a positive $101.1 million. Overall fuel segment sales for the second quarter of 2025, which does not include DGD, were $158.8 million versus $142.3 million in the second quarter of 2024. Year to date sales in 2025 were $193.9 million versus $281.5 million in 2024. Raw material volumes in 2025 were 337,600 metric tons versus 362,000 metric tons in the second quarter of 2024.

Year to date raw material volumes in 2025 were 711,700 metric tons versus 718,900 metric tons for the same period in 2024. Combined adjusted EBITDA for the full fuel segment was $61.3 million in 2025 versus $96.8 million in the second quarter of 2024. And year to date, 2025 fuel segment combined adjusted EBITDA was $85.5 million compared to $229.9 million in 2024. During the second quarter, we accomplished several important objectives related to our credit and balance sheet, providing the company with a significant amount of flexibility and stability for the next five to seven years. First, we've refinanced and upsized our Eurobond from €515 million to €750 million for seven years at a fixed rate of 4.5%.

Second, we paid off our revolving credit facility and the four remaining term loan A facilities replacing them with $2.9 billion in credit facilities through two senior secured debt agreements. First, a five-year $2 billion revolver, and second, a six-year $900 million farm credit term loan A. While the Eurobond at 4.5% replaced the previous Eurobond at 3.625%, upsizing of the bond allowed us to maintain an average cost of borrowing materially unchanged while ensuring a stable financial position for many years.

The company's total debt net of cash and other items as of 06/28/2025 was $3.89 billion versus $3.97 billion on 12/28/2024, helping lower the preliminary leverage ratio to 3.34 times at the end of quarter two 2025 from 3.93 times at the year end 2024. In addition, we ended 2025 with approximately $1.27 billion available on our revolving credit facility. Capital expenditures totaled $71 million in the second quarter of 2025, $134 million for the six months of 2025.

The company recorded an income tax expense of $4.1 million for the three months ended 06/28/2025, yielding an effective tax rate of 22.2%, which is slightly higher than the federal statutory rate of 21%, due primarily to certain losses that provided no tax benefit offset by the producer's tax credit. Effective tax rate excluding the impact of the producer's tax credit and discrete items, 3.4% for the three months ended 06/28/2025. The company also paid $22.8 million of income taxes in the second quarter, $32 million year to date.

For 2025, we expect the effective tax rate to be around 15% and cash taxes of approximately $40 million for the remainder of the year, for a projected total of around $72 million. Overall, the company's net income was $12.7 million for the second quarter 2025, $0.08 per diluted share compared to net income of $78.9 million or $0.49 per diluted share for 2024 and year to date 2025, Darling had a net loss of $13.5 million or negative $0.09 per diluted share. Now I will turn the call back over to Randy.

Randall Stuewe: Thanks, Bob. Now as we look ahead, we remain confident in the strength of our business particularly our core ingredients platform, which continues to benefit from a favorable public policy outlook. We expect sequential improvement across the board with rising fat prices supporting our feed segment, while premium proteins remain a modest headwind, we're studying signs of stabilization. At DGD, although the current environment remains challenging and volumes will be lower in the third quarter due to a planned turnaround, we believe this sets us up well for full utilization in 2026. While the timing of RIN recoveries remains uncertain, due to ongoing small refinery exemption issues, we anticipate a more constructive market environment ahead.

Based on what we see today, we expect full year combined adjusted EBITDA in the range of $1.05 billion to $1.1 billion. With that, now let's go ahead and open it up to questions.

Operator: Of course. We will now begin the question and answer session. We ask that all participants only ask one question and one follow-up. If you'd like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. Our first question comes from the line of Manav Gupta with UBS. Your line is now open. Good morning, guys. My first question is when we look at the revised

Manav Gupta: RVO much higher, coupled with 50% rents for foreign feedstock, and no PTC for imported RD, this makes Dial a real winner. Can you talk about some of the policy benefits which want more domestic renewable diesel made for more domestic feedstock and how that really benefits Darling Ingredients.

Matthew Jansen: Hi. Hi, Manav. Good morning. This is Matt. I'll start off and then and maybe ask Randy or Bob to kick in. But you're absolutely right in terms of this. We see this going forward in, as more of an evolving into a domestic oriented market more so than what we have seen in the past. We expect a drop in imported raw material And as a result, we're seeing the benefit of that in our US fat pricing. And through the quarter, VAT prices were moved up significantly. And we see that continued trend in that price is maintained being well supported.

So focus right now in The US is on reliability and making sure our processing plants that the on the raw material side can run as planned and as expected. So we can continue to maximize the production of The US fat to supply the RD market.

Robert Day: Yeah. I'll just add this is Bob. So I agree with Matt. It is very supportive to US or North American fat values. Know, that's great for Darling. It doesn't really hurt us so much outside of The US. Of the dynamics of the regional markets there. So overall, that's good for the feed segment.

It's also if the RVO and the stated mandate holds as a mandate, net of SREs, which we're all, you know, kinda waiting to see, But if it if it does hold as a mandate, then it's very positive in our view for renewable diesel margins just based on the supply and demand and capacity availability to produce renewable diesel and biodiesel in The United States relative to that demand number. So you know, we still see those things as positive. The 50% RIN, an interesting policy dynamic if we see that hole, and it would it would support those things. It would eliminate access to foreign feedstocks, which is some flexibility we like.

But, you know, the other positive impacts outweigh negative impact of that.

Manav Gupta: My quick follow-up here is amended LCFS has gone into effect. Carbon prices are already moving up. I think they're close to $55. No. Prices are higher before OAS stepped in and kind of blocked it. I'm just trying to understand. We you guys still expect that we could get to, like, $70 a ton by year end. And if everything is right, then maybe even $80 in '26. So your outlook for LCFS prices and, again, how it benefits Darling Ingredients? Thank you.

Matthew Jansen: So I think, the first thing I'd say is the what we view as very positive is we're now that with the increased greenhouse gas obligation elimination of greenhouse gas obligation in California. We're starting to see the bank finally coming down, and that's, that's a very positive sign. Based on where we are today and what we see playing out, that will you know, this bank will continue to decrease. How that results exactly in, you know, price per ton of LCF credits it's it's very hard to estimate that. That's gonna depend on obligated parties in California. The sense of urgency, they feel that they need as far as, procuring those credits.

But you know, we agree that it's moving in a positive direction and likely to head higher.

Operator: Thank you for your question. Our next question comes from the line of Heather Jones with Heather Jones Research. Your line is now open. Good morning. Thanks for the question. My first one is on EUCO. So in your slide deck, you talk about, I think it was a roughly 13,000,000 year on year hit from lower UCO pricing.

Heather Jones: Whereas

Operator: know, spot pricing for the last two to three quarters would suggest it would have been higher. So just wondering if you could explain to us what happened in the quarter and maybe the year ago quarter comparison. That would have caused that and when we should see expect to see the current pricing we're seeing come through?

Robert Day: Yeah. Thanks, Heather. I'm trying to get to that slide in the deck. I think the let me just address the last part of your question first. You know, the dynamics of that market are it's it's very fluid. And so as we are pricing with suppliers, the timing at which we're pricing relative to the indication we use or, let's say, the timing at which we sell product relative to the timing at which we price for suppliers, those can be different. And in a rising market like we've had in the last quarter, that can work against us.

You know, what tends to what we expect is as prices flatten at a higher level where we are today, then, then the then the margin is higher because of our percentage that we keep of the total price. But I think during the quarter, what we saw was we're selling out in front. Fixing prices. As the index continues to go higher when we set the price that we're paying, it's it's higher than what it was at the time we sold. And so that's

Randall Stuewe: that's the biggest impact that we had on that. Yeah. That's well said, Bob. I mean, really, in what you're looking at, Heather, is in a rising raw material procurement market, which we're in with forward sales it's always the lag effect as things go accelerate here. I think what's most important today is as we lay the outlook is Q3 fat prices Really, you gotta look at yellow grease and YUCO as both of those go to Diamond Green Diesel. A bigger share of our mix now in North America is going to Diamond Green Diesel. And the prices are up anywhere From 10 to 14¢ a pound over Q2.

In Q2, you really only saw versus Q1 about a $60 a ton or a 3¢ a pound price rise between the Yuko and the yellow grease. As it flowed through the p and l, and that's just that's just a typical lag factor.

Operator: K. Thank you. My second question is with the exception of that change in fair value of contingent consideration that was noted in the press release in the feed segment. Just wanting to know, is there anything unusual in this quarter's results, whether it be inventory adjustments, shares, recoveries, or whatever that would affect the comparability for Q3 and later quarters to this quarter. I'm just, like, wondering if this is, a I guess, a clean quarter for us to build on going forward.

Robert Day: Yeah. Thanks, Heather. I think, you know, the flat the price lag in fats, it affected us across all the fats in the segment. So know, I would say it wasn't a you know, to use your term, a clean quarter from that standpoint. I think as we get into the third quarter here, we are we are sort of operating in a in a higher level environment. We're not you know, we're not seeing a situation so far where we're we're pricing our suppliers at a higher value than what we would we had to sell. And so this will probably be more reflective of that.

But that was a that was a pretty significant you know, impact in the second quarter. Other than that, you know, we did have some deferred profit losses that will come back in the third quarter from, related party sales.

Randall Stuewe: The contingent valuation, Heather, is related to the Brazilian acquisition that had an earn out attached to it that completed or will complete here at the July, and that's just an adjustment. And then that's representative of that business operating now. Really well.

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

Matthew Jansen: Hi, Dean. Good morning. Thanks for taking my questions.

Manav Gupta: Maybe the first one, could you talk about the opportunities for Darling of a DGD rather outside of California? Margins in Canada, Oregon, EU also seem to be forming up some. So could you kinda share how much of you know, RD you are exporting outside of California, shipping outside of California versus within California, and how that's gonna evolve?

Matthew Jansen: Hi. Hi, Gishaw. Gishawat, this is Matt. I would say that California is a big market. In the RD Space, But It's By Far Not The Only Market. And We Sell A Lot Of Our Product On An Ongoing Basis. In Various Other States, That Are Here In The US, but we also export quite a bit and predominantly to The UK and Europe. And so we're as these tariffs and all the different moving parts, let's say, that if have come about continue to play out, that makes me shift from one to the other, but we continue to be a significant exporter of RD to Europe and The UK.

Randall Stuewe: Yeah. And I think the other thing I would add to what Matt saying there that's spot on is I think this morning you saw the Nest A release And the positive takeaway for me there is there's always been some constant that demand is diminishing out there, and it's absolutely not. It's growing for RD around the world, and it's growing for SAF, and margins are improving.

Operator: Thank you. And then just my next one, and I think you guys have also touched on it some

Derrick Whitfield: on just the SREs. How are, what are your expectations for what the EPA could do with these SREs? I mean, just based on the conversation that you guys have having with folks in the industry.

Matthew Jansen: If you can help us out there. That's the million dollar question. This is Matt again. That's the million dollar question. We the SREs we expect will come sometime in the next, let's say, sixty days. Don't know exactly when that announcement will, will become public. But, you know, frankly, we don't have a clear view on what that number is going to be. There's lots of chatter out there. But, frankly, as far as I'm concerned, no one really knows. What that what that number's gonna be. So we're anxiously awaiting that.

And how they it's not only the number, but how they get treated, whether they are let's let's say, reallocated back or not And so that's still to come. And like I mentioned, we think that's imminent here in the next few weeks. But we're we're anxiously awaiting that. Yeah. And I would add to what Matt saying there.

Randall Stuewe: I mean, they're at the end of the day, we've modeled two or three different scenarios here. And, really, the RVO is big enough to accept and adapt to whatever avenue they take. And so end of the day, it is a bit of hangover out there, and I think that's why we, in a sense, just to clarify for everybody on the call, why we lowered guidance. It's not because of the core ingredient business. Core ingredient business is as exciting as it's ever been. It's just we don't know the timing of when the marketplace is gonna react meaning RINs and LCFS to whatever the SRE adjustment is going to be.

Operator: Thank you for your questions. Our next question comes from the line of Derrick Whitfield with Texas Capital.

Derrick Whitfield: Your line is now open. Good morning, all, and thanks for taking my questions. Beginning on forty five z, the policy is approved places a cap on SAF at the $1 per gallon level. As you guys think about this, how does it impact your view on margins relative to RD? Given the state of the voluntary markets and the likely environment where we'll see less SAF supply. Yeah. Thanks, Derek. This is Bob. So, ultimately, when DGD is looking at selling SaaS, they add all components to inputs and sales price when they negotiate the price that they're selling and ultimately the margin that they're shooting for. Today, you know, it's made up of many different things.

The support we get from 45 z today, you know, starts at dollar 75 max. It lands somewhere, you know, a dollar or in that range. Just with the change, probably around $35.40 cents less would come from the PTC, which then means if we're still shooting for the same margin, we're gonna have to get it in the premium that SAF sells at relative to renewable diesel. And you know, we'll just see how that all plays out. Ultimately, SAF, really, the price of SAF and the margins for SAF should be determined based on the supply and demand for SAF. And so we're we're not really uncomfortable with the change so much.

We just you know, are more focused on the overall supply and demand for staff. And getting fair value for the product and the margin.

Matthew Jansen: And I would just add that one flexibility that we have, and we're not we're not there yet. But we do have the flexibility to choose between whether we produce RD or SAP. In our line. And so right now, we're we're running set as much as we can, and we that for that to continue. But we do have that additional flexibility.

Derrick Whitfield: Great. Then with respect to food and your plans to advance the next site at JV this quarter, it appears your conversations are progressing better than expected. I guess, could you offer some color on the degree of synergy and growth acceleration you're seeing across the combined company? Yeah. I think, you know so yeah. Thanks. This is Bob. We're we're really excited about it, and we're encouraged by what we're seeing. There's there's really we're limited in what we can say today because we haven't signed definitive agreements, and you know, the next step will be filing for antitrust. So we just wanna be really cautious there.

But I think you know, what we see with the two different companies is very complementary geographic spread. So they're they're in some countries that we're not. That diversifies our portfolio, and that's especially helpful in say, the current environment where, you know, the cost of trading between countries differs from country to country, and so that diversification is worth more than what it might otherwise have been. And then there's a there's also just of a practical capacity access that comes with that transaction. That we're really excited about. They bring some very important extraction capacity and some hydrolyzed collagen capacity that's important in the in the fast growing hydrolyzed collagen market.

So when we put all those things together, there are some really exciting synergies. There's always sort of the cost side of it. That's more straightforward, but the more exciting part is sort of the increased revenue opportunity.

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: Thanks. Good morning. Maybe first, can you can you maybe walk through what's assumed in your updated EBITDA guidance for 2025? I mean, I think it implies roughly 25% improvement in quarterly EBITDA on the second compared with what we saw in the second quarter. So what do you see as the primary drivers of improvement? Can you maybe walk through what you seen today that provide confidence in that number?

Randall Stuewe: Yeah. Ryan, this is Randy. And, you know, obviously, the number is a reflection of an improvement in the core ingredient business as related to flow through of higher fat prices in a sense catching up and leveling off relative to raw material prices moving up, the, you know, the higher pay to the slaughterhouses. The challenge in Q2 was while the higher fat prices even though de minimis were flowing through, we were playing catch up. But the higher premium proteins as we refer to them, let's call it low ash chicken meal that goes to aquaculture.

That was you know, you had a had a tariff on one day, a tariff off one day, whether it was Vietnam or China, and just trying to adjust markets and customers was really a negative in there. We see that kind of steadying now. I'm I'm not telling you a giant improvement there, but it feels like the disruption is less than it was in Q2 now. So higher flow through of fat prices, And then the as my comments were earlier, I mean, it you know, we're gonna have DGD three offline here in August. It'll be on ready run-in September, I believe, is the timing.

So we'll have all plants with new catalysts ready to rock and roll. You know, September 1, if you will. You know? If that RIN market starts to normalize and reflect what it's gonna take from a variable profitability perspective, you the guidance that we threw out there could be extremely conservative Or if it delays till January 1, the market doesn't react, and then I think we're really pretty much in the fairway here saying that we'll have, you know, minimal but you know, some type of contribution from DGD, especially the SAS side through the end of the year here.

Ryan Todd: Good. Thanks. Maybe that's a good segue to a the follow-up question on SAS.

Operator: Mean, your

Randall Stuewe: you know, what

Matthew Jansen: seven, eight,

Operator: eight plus months in the operations there. Can you maybe talk about

Ryan Todd: what you've learned so far? How would you characterize demand? Is there anything that's been surprising on the staff front? In terms of geographic mix of demand or pricing, etcetera? And then it's still a pretty young market. Market. You know? What as you look at, what kinks or challenges do you think still remain that may need to get ironed out over the coming months or years?

Matthew Jansen: Yeah. Hi. Hey, Matt. This is Ryan. This is Matt. I would say from what we've learned, you know, we started off with running in last November. And, operationally, we have I would tell you as expected, and done well, The thing that I would say surprising, for example, may the reduction in the in the PTC was something that wasn't necessarily in the cards when we when we planned this. But we've learned logistically. We've we've moved the product around again, as expected. I would say over the last few months, maybe some of the conversations have gone a little bit quiet.

In terms of new business just because of all of the associated noise related to the things that we all know about with the RVOs and the PTCs and the tariffs and all those things. Slow things down a little bit, but we continue to see solid lithium demand. We're running well, making deliveries on contracts. I've got a good sales book on. So we're the returns are meeting or exceeding the expectations of the project, so we're very satisfied with it.

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

Matthew Blair: Hey. Good morning, and thanks for taking my question. Maybe circling back to Nexidia. Could you talk a little bit more about what the scientific studies are showing here? We've run some of our own tests,

Randall Stuewe: it appears to be quite impactful, quite an improvement.

Operator: And then also,

Matthew Blair: you know, I appreciate that you probably can't talk too much about

Randall Stuewe: what the EBITDA contribution you know, it's going to look like and what the potential there is. But I guess in terms of timing, do you think that Nexidia would start to make a material impact in 2026, or is this a longer dated

Robert Day: time frame? Thank you. Yeah. Thanks, Matthew. This is Bob. So the status of the trials are we're completing this summer a second round of trials with a much larger sample size That is what the larger CPG companies have asked for in order for them to get comfortable marketing the product and really, you know, pushing it on to market. We're we're seeing the same thing that you talked about. So, ultimately, what that product does is it stimulates GLP one secretion into the blood. It that leads to a the post meal sugar spike. And you know, the symptoms around that are curbed appetite and just, you know, more stable blood sugar. Those are those are really positive.

We've know, we're seeing the same thing with all the all the trials. The timeline on when we could see a big impact would be, as we've finish these trials in the summer, we kind of go out and we know, we present all this to the large CPG companies. And, hopefully, by the end of the year, you know, we're talking about much more significant volume. So in 2026, it can have a much bigger impact on EBITDA. It's really just gonna depend on kinda what the what this next round of trials shows and how compelling it is.

But you know, like you pointed out in the tests that you've done yourself, it is a really, it is really powerful, and, you know, we're seeing great results. Bob, you wanna talk about the brain side

Randall Stuewe: real quick?

Robert Day: Yeah. And I guess, you know, the interesting thing here is we you know, we're rolling out a portfolio of products. Ultimately, what our team is able to do is they identify what's the molecule that would cause the body to have a natural reaction that generates a helpful, targeted health benefit. And so by using a different mix of enzymes in the collagen, we can create a peptide profile that's unique and one that we can patent, and it causes that natural reaction in the human body.

So we've identified what that what that combination looks like in order to help with memory retention, gut health, women's health, and, you know, all these products are in different stages of development. But it's a it's a great process that our r and d team has been able to iron out. And so as know, we're we're excited about, NextDyta GC, but we're really excited about, you know, what the portfolio of products can mean for the company over the next several years. And, Matt, the you know, I think your one of your question was,

Randall Stuewe: contribution. You know, clearly, '26 we're gonna get some acceleration here You know, we were requested, you know, that this health and wellness sector in the world is a very, very large piece out there, 60 or $80 billion. You don't need much for it to be significant into your portfolio here. The clinicals are key on that. We're seeing, you know, reorders now of the of the GLP one or NexTyta GC product now, which is really, really good news. You know, we're we're excited about it. If you look at the and I've always said, you know, in the Suann's deck is that the history of the food segment, is really anchored by Rousselot slash NexTyre here.

And that business has been built off of the hydrolyzed collagen business out there that we developed. And, you know, this is know, really hydrolyzed collagen two point o now. And if we're half as successful in volume there, we can double the earnings in that segment. Now that's probably a three to five year window to get there. '26 should accelerate '27 should be really meaningful.

Operator: Great.

Randall Stuewe: Thanks for all the helpful commentary. And then guess, turning to the Brazil rendering outlook, You know, there's been a lot of chatter that The US rendering Outlook is excellent after the RVO and the '45 c tax changes. But could you talk about what you're expecting for Brazil Do you think there'll be pressure from things like the RVO and tariffs and you know, do you expect to kinda reorient your exported rendering volumes from Brazil to other markets? And then finally, could you remind us just the overall split between

Robert Day: US rendered volumes and Brazil rendered volumes for Darling? Is it I don't know, like, roughly in the 8020 Thank you.

Matthew Jansen: Yeah. Good question, number one.

Randall Stuewe: You know, the Brazil for us in the rendering side has been a truly wonderful experience. You know, the challenger has been taking a company and making it public and making profits versus tax avoidance a priority here. Getting raw material procurement margin management as part of culture, I'd say we check the box now and we're doing very, very well there.

Manav Gupta: On that.

Randall Stuewe: You know, Brazil is an incredible place because right now, as The US cattle numbers are down, although cattle feedlot margins are way up, Brazil's numbers are moving sharply up. And so, you know, we've we've got a pile of raw material as we call it down there. So life is pretty good. The reality of the arbitrage of fats out of there is Brazil has really developed a very strong biofuel market. And, ultimately, I you know, the percentage inclusion I suspect, will rise again here in 2026. I mean, they're they're there's no lack of tension here right now between The US and Brazil, and we acknowledge that.

But there's no problem with that being a domestic oriented business. Matt, anything you wanna add there? I would just say, the market's going to dictate

Matthew Jansen: where these products flow. And, you know, from a quality standpoint, the Brazilian quality for RD is actually very good. Preferred. But at the same time, you know, Brazil, they can they as Randy mentioned, their biodiesel program inside The US can change. Even with 1% change in that, which is expected. That, you know, that can shift a whole lot more of the volume just to stay at home there.

Manav Gupta: So

Matthew Jansen: that will continue to play out, and the market's going to dictate where the flow goes on what gets exported. Historically, a bit of that has come to The US, but maybe that shifts towards Europe.

Operator: Thank you for your questions. Our next question with Client is now open.

Andrew Strelzik: Hey, good morning. Thanks for taking the questions. My first one, I was curious

Matthew Jansen: could comment on what you're seeing in terms of biofuels utilization rates and demand for feedstocks. It seems from the feedstock pricing, like, things are moving in the right direction, but

Randall Stuewe: you've talked about DGD one still being offline. I'm I'm sure there are others

Matthew Jansen: as well. So just curious to what extent you've actually seen production utilization rates pick up across the industry and kind of related to that, where do RINs need to get to in order to encourage production to ramp more materially?

Robert Day: Yeah. Thanks, Andrew. This is Bob. I think, you know, one thing we're seeing is a lower capacity utilization rate for biodiesel across the board about half the capacity roughly, and that hasn't changed very much throughout the year. And we're seeing renewable diesel capacity utilization move slightly higher month to month through the year. You know, I think our view on that is that's more about you know, the market's view of where RINs are going than where they are today. And so if you think about it, if you're an obligated party and you can generate RINs, and you believe that RINs are going higher, you'll use this opportunity to make more RINs.

And so while margins aren't great for renewable diesel, there's, you know, we've got enough information about future policy to suggest that margins and RIN value should be higher in the future. And so that is what we believe is encouraging the production of renewable diesel today to slightly go month to month. And, you know, we'll probably continue to see that at least until we get you know, final clarification on SREs and what the actual mandate is.

Randall Stuewe: Okay. And if the audio holds,

Matthew Jansen: the RVO holds, we're going to see we're going to need the addition the capacity to return on online meet that obligation.

Randall Stuewe: Yeah, Andrew. This is Randy. That was Matt. This is Randy. I think it's gonna be interesting, at least from my chair, over the next ten days to see some reporting of second quarter earnings for some of these RD plants that have been running. And we'll that'll kinda tell you, are they running for fun? Or not?

Andrew Strelzik: Got it. Okay. That makes sense. And then my other question was just around your CapEx plans. Your tracking solidly below last year so far this year. It seems like from your commentary, you know, there's greater focus on capital discipline So how should we be thinking about CapEx, for your business for, you know, the remainder of this year, maybe even into next year? Is there any reason that should accelerate, or how should we be thinking about that? Thanks.

Robert Day: Yeah. I mean, look. I think we've been really clear about this. Andrew, that, you know, we're we're committed to paying down debt and getting our debt coverage ratio down below three point zero, by the end of the year. What you see in the form of our CapEx year to date is exactly that. We will see it go higher here in the summer. You know, winter projects slowed down because of weather.

But know, we're committed to keeping our CapEx at $400 million or lower for the year, and we'll see where we are and what you know, what our markets look like when we achieve our goals as far as debt coverage ratios and decide what to do at that point. But you know, our goal is to continue to pay down debt.

Randall Stuewe: Yeah. And this is Randy. I mean, the reality is I wanna be clear about a couple things. One, we're not cap starving any of the assets out there today by any means. We have delayed some growth projects here Nothing that's material. But at the end of the day, you know, I think we're we're focused on getting below three point o, You know, we're waiting for the sun to shine in '26 here.

Operator: Thank you for your question. Our next question comes from the line of Benjamin Kalla with Baird. Line is now open.

Benjamin Kallo: Hey. Good morning, guys.

Randall Stuewe: Just following up on that. Last question. In the past, you guys have talked about having a dividend or repurchasing shares. Just kind of thinking then also s a f two SAP two. Just thinking about the capital allocation as we move in the '26. And you hit your debt targets.

Robert Day: Well, yeah, thanks, Ben. This is Bob. I think SAF two, you know, we need more much more clarity around the market before we move down that path. So, you know, whether we get that or not in 2026, and whether we would move towards that in 2026 is entirely dependent on clarification of policies and near term margin environment that would be required to justify something like that. We're not we're not there today. So as we look at 2026, it's not currently you know, in the plans to move forward. Those things can change.

As we look at everything else, you know, we wanna I mean, I think the first of all, if I look at the food segment, you know, we have a great plan there. With the formation of Nexidia and the joint venture. That will allow us to continue to move know, to grow in that industry and space. And that's a noncash transaction. That provides access to that new capacity. So that's that's very convenient at a time like this where we can continue growing and it doesn't require capital. So that really leaves us with the feed segment. And you know, there's there are opportunities for us to continue to grow our platform globally in the feed segment.

You know, we're we're we're focused on getting to the right leverage ratios and getting our balance sheet in the right place before we move on any of those things. But you know, we'll we'll we'll get to that point and then look at those opportunities. And but right now, I think 2026 is likely to be maybe not as conservative as '25, but, you know, continue to be focused on paying down debt.

Benjamin Kallo: Okay. Great. And just going back

Randall Stuewe: to the food segment, just in the interim between when we get to next side and the growth there, You know, last year, there was some, you know, some weakness in calls and sales. It looks like it's it bottomed out there. Is that the trend or could you talk more about the trend in collagen sales that you're seeing and how we should look forward the second half of the year?

Operator: Thank you.

Robert Day: Yeah. I think so. You know, I just kinda you know, I'd I'd I would sorta rephrase it a little bit from last year. You know, what we saw was a slight oversupply in the market, more so of gelatin. We did see some collagen. You know, I think what's important to understand is in order to make hydrolyzed collagen, you have to have you know, let's call it gelatin extraction capacity that you're building it on top of. What we what we've experienced throughout this entire period is a consistent increase in demand for hydrolyzed collagen.

What we saw, last year was just a lot of our competitors putting capacity in the market short on a short term basis, there was a bit more supply of hydrolyzed collagen relative to demand than there had been. Prior to that. But now very quickly, we're starting to reverse that trend. And what's exciting about collagen going forward is the investment required to add new hydrolyzed collagen capacity is significant because you've gotta have the extraction capacity behind it. That's a that's a that's a very large investment to make. So overall, what we see is a tightening of the gelatin supply and demand. Gelatin is not a fast growing category, but it sort of grows at population rates.

Hydrolyzed collagen, on the other hand, is continuing to grow at very strong rates. And so we're encouraged by that. And ourselves, you know, we're well positioned with all of the hydrolyzed collagen capacity that we have to continue to grow into that market. And as we form the joint venture, you know, with PV Liner, that's gonna give us access to more capacity.

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

Biren Sharma: Thanks for the question. I just wanted to start off and hone in on guidance

Operator: just a tad bit more.

Biren Sharma: I think in prior calls, you'd you'd given us a split of you know, the core business versus DGD. Wanted to understand, you know, second half DGD doesn't doesn't sound like there's too much benefit in there. As you mentioned, you'll be off offline. For March. You did mention that you know, you'll you'll be running in September. So I just wanted to understand is it are you baking in more of a margin uplift in April from the current environment. Just wanted to understand guidance with the with a bit finer detail.

Randall Stuewe: Ron, this is Randy. Yeah. I think you framed it okay, but I think what I wanna clarify for you is clearly, the core ingredients business is accelerating all the way through the end of the year here. I mean, you know, if you look at the at the cash prices and you back into them, we were up about 3¢ a pound in fat the mid forties. Versus the low forties in Q1. We're now well above 55¢ a pound on most FOB plants North America now. That's that's a big number. Now you gotta you gotta, you know, kinda balance that with the raw material price rise that happens during that process. Proteins have stabilized.

Demand for global collagen is really consistent. Feels like the destocking's done. That we've talked about in prior quarters. Know, the big unknown in the in the guidance here is you know, do we get a RIN boost once that SRE announcement's out there? You know, when does the market wake up? I think we use a lot of discussion around the table here with the team that the RIN market, the LCFS market, because of the number of obligated parties, does not react like a, you know, dynamic futures mark that's out there that reflects daily views and guidance and delivery and etcetera, etcetera.

So, you know, the reality in our guidance here as we went forward was we said, we're confident in our core our core business, and we love it. And we prefer to always talk about our core business. I think for the last five years, all I've done is talk about DGD. And we'll we'll see we'll see if DGD becomes a meaningful contributor The table is set with the RVO. There is no doubt about it. The question is timing here. You know, the guy's always looking at me and they know what line I'm about to bring you here, and that is I've never made a bad trade, but I've lost a fortune in timing.

And so right now, it's really a timing issue as to when this kicks in and all starts to react. I mean, you're seeing the bean oil complex You're seeing crush margins react. They're they're they're now above the five year average. I mean, this is a pretty darn good set up now as we enter fourth quarter. You know, Q3, you said offline. No. We're down in August, and we're ready to run full September one. If margins are there. We're not gonna run for fun and burn up catalyst until the time's ready.

Biren Sharma: Got it. Got it. Appreciate that color.

Operator: I guess just real quickly on the follow-up. Wanted to understand the SaaS opportunity kind of in Europe. Obviously, you know, they have a really strong mandate but wanted to understand it operationally. I think there's some nuances with the classifications. That they allow. Could you help me understand that with a little bit finer detail and also just wanna understand if there's any regulations in process that would make feedstock, you know, US product a little bit easier to get into those markets.

Robert Day: I'll I'll jump in quick and, Matt, you know, add to this. I think, you know, you're you're highlighting one you know, something that's important here, and that's know, all these different destination markets, they have different requirements as far as the feedstocks you can use in order to make the fuel, the certification body that's required in order to do that. You know, these have presented challenges since the since sort of the implementation of the policies that we're seeing because it takes time to get those certifications in place and also to sort of get your supply chain sorted so you've got the right feed stocks coming in the door.

I think one thing I would say, and this is a bit of an add on to the last answer Randy gave, is we look at Diamond Green Diesel and, you know, you know, turning around Catalyst in Port Arthur, that really allows us to position that business well in the fourth quarter. Because we can use that as an opportunity to put the right feedstocks in place that allow us to maximize destination markets that we're going to, earn duty drawbacks, that we've got, you know, in reserve, all these kinds of things. And so, you know, as time goes on, all of that gets better and better because you've got those certifications in place.

You've got the right supply chain. Supply chains, you know, coming in the door and but all that takes time to put in place.

Operator: Thank you for your questions. Our next question comes from the line of Betty Zhang with Scotiabank. Your line is now open. Thank you. Hi. Good morning. Thanks for taking my questions. My first question, you've kind of covered this but I wanted to ask, is there a number you could or a range you could provide for the core business EBITDA for this year?

Randall Stuewe: Yeah. I mean, you know, I think that's the that thank you, Betty, for asking that because that's what everybody's been trying to ask, but you asked it straight up here. You know? It's very funny. I'm gonna give you a 900 to billion. So on the billion side, that's the fat prices flowing through, and that means the RINs don't react. If the RINs react, you know, we go way above that because profitability of DGD will be much more than it's been today.

Operator: Perfect. Very clear. Thank you, and thanks for the scenarios.

Betty Jiang: Actually, I will just leave it there. All my questions have been covered. Thank you very much.

Operator: Thank you for your questions. Our final question comes from the line of Jason Gabelman with CDC Securities. Your line is now open. Hi.

Jason Gabelman: Hey. Morning. Thanks for taking my questions. I wanted to go back to the RVO proposal, and I understand you know, there'll be more clarity once the small refinery exemptions get announced.

Randall Stuewe: But

Jason Gabelman: you know, there's probably some conservatism among investors just given

Operator: they have

Jason Gabelman: been burnt in recent past on regulations. So I imagine they'd wanna see the proposal finalized. And to that end, know, there's a lot in that RVO proposal In your views and conversations with the administration, have there been are there things within the proposal that you think are sacred cows more firm versus items that you think are more trial balloons that could be that could not make it into the final, rule. They Jason. This is Matt. Good morning. I would say quickly that

Matthew Jansen: first of all, if there was the public comment period is still ongoing. And it's gonna run through the, the first the early days of August. And so that is the when there was a virtual in person comment, that went on in there a few weeks ago. A lot of written comments are being submitted as we speak. So it's it's hard to say, from that. If anything, comes out. You know, I would say at the at the headline level, the administration remains very supportive of, the RVO and the RVO process. Is looking for something that is going to support the industries. And the ag community. And so that's the headline.

Now what the SREs is think I mentioned, you know, we're we're expecting that to come in the next few weeks. And then the RVO to be finalized in October. So that's the timelines. Are there things in play there? I'm sure. Which ones and to what extent that remains to be open other than the fact that our view is that the administration is very supportive of a solid RVO and on the long term basis?

Robert Day: Yeah. Jason, this is Bob. I just I would I think you know, when we when you read the tea leaves, you know, it seems like the priorities and we're encouraged by this. Is that, you know, one is this policy needs to support US farm prices. That's first and foremost. Second, gotta minimize cost to the federal government. So those are some of the important changes. And then third is protecting, you know, US industry. US biofuel industry. You know, some of these things, the announced policies, could change, but, ultimately, we believe they're gonna try to achieve those three goals. And whatever that outcome is, you know, we think it's gonna be positive.

Randall Stuewe: Bob, we've got the two issues here, SRE and then the 2024. You wanna comment about it? Yeah. I guess the other is that normally,

Robert Day: 2024 RIN compliance would be obligated as of March 31. And until they formally revise the d three RIN numbers from 2024 That date is not fixed. You know, whether that's gonna be October 1 or November 1, it's unclear, but, know, that's the other piece to this is that compliance is required in order in our view, in order for the real RIN for 2024 to kinda to show itself and then 2025 as well. And, you know, our view of the RIN S and D, when you look at the d six d four, d five altogether, is, is we're at a deficit for '25 and certainly will be at 26.

And so as long as compliance is enforced, you know, we believe we'll see higher RINs, and that'll result in a in a decent margin for renewable diesel.

Jason Gabelman: Got it. Thanks. Appreciate that. And my follow-up is just on status of the monetization of 45Z. I think on the last call, were optimistic you would have something in place by this time. Just wondering how those conversations are going. Thanks.

Randall Stuewe: Oh, this is Randy. I'll take that. So, the we are very close to where we thought we would be right now. You know, these are somewhat new, and it's kind of unchartered waters out there, but I would just tell you to stay tuned. There's nothing that's changed on our side that doesn't say that won't be accomplished here very shortly. You know, in the land of lawyers, there's too many involved.

Operator: Thank you for your questions, Jason. That'll be all the questions in our Q and A session today. I would now like to turn the call back to Randy for final remarks.

Randall Stuewe: Hey. Thank you. Thank you, everybody. Great questions today. Leave you with a couple thoughts. Number one, we appreciate the interest in the company. We're appreciate your patience. We have a positive outlook for the balance of the year, especially in the core ingredients. Some timing unknowns in Diamond Green Diesel but that asset, as you'll see over the next ten days, as other people release, is still what I believe to be the best in class out there and poised to really deliver for us 2026. So be safe. We look forward to talking to you again here, I believe, in October.

Operator: That concludes today's call. Thank you for your participation, and enjoy the rest of your day.

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