Montauk (MNTK) Q1 2026 Earnings Call Transcript

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Date

Thursday, May 7, 2026 at 8:30 a.m. ET

Call participants

• President and Chief Executive Officer — Sean McClain
• Chief Financial Officer — Kevin Van Asdalan

Takeaways

• Total Revenue -- $46.4 million, up $3.8 million or 9%, driven by new environmental attribute revenue from RINs sold related to GreenWave and pathway dispensing.
• Adjusted EBITDA -- $10.8 million, a $2 million or 22.8% increase from $8.8 million, with margin improvement versus the comparable period.
• EBITDA -- $9.4 million, a rise of $2.7 million or 40.3% relative to $6.7 million.
• Net Income -- $5,000, an increase of $0.5 million compared to a net loss of $0.5 million.
• RNG Segment Revenue -- $38.1 million, down $0.4 million or 1% from $38.5 million, with lower RNG commodity revenue offset by a 25.5% rise in RINs sold.
• RNG Volumes Sold Under Fixed Floor Price Contracts -- Decreased by 82.1%, attributed to the expiration of fixed-price pathway contracts.
• Average Commodity Pricing for Natural Gas -- Increased 38.1%, demonstrating higher realized prices despite volume and contract mix changes.
• RINs Sold -- 12.4 million, up 25.5% from 9.9 million, with an average realized price of $2.42 compared to $2.46, down 1.6%.
• Renewable Electricity Segment Revenue -- $4.1 million, down $0.1 million or 0.8%, primarily due to lower production volumes.
• Operating Loss -- $1.6 million compared to operating income of $0.4 million, reflecting cost and revenue shifts.
• RNG Operating Income -- $8.7 million, fell $1.7 million or 15.7% from $10.4 million.
• Renewable Electricity Generation Operating Loss -- $2.2 million, an increase of $1.2 million over the prior year.
• GreenWave JV Contributions -- $3.3 million in equity income and $1.4 million in RINs, with $0.4 million unsold at quarter-end.
• New Senior Credit Facility -- $200 million facility initiated, $155 million outstanding as of March 31, 2026; used to repay all outstanding debt, with $45 million to be drawn after engineering reviews.
• Montauk Ag Renewables Project -- Commissioned in Turkey, North Carolina; $200 million capital investment unchanged; syngas revenue expected to begin upon sales meter calibration.
• Guidance Updates -- RNG production guidance reaffirmed at 5.8-6 million MMBtu and RNG revenues at $175 million-$190 million; renewable electricity revenue range updated to $33 million-$37 million, reflecting later revenue start.
• EPA Renewable Fuel Standard -- Final 2026 and 2027 cellulosic volume requirements set at 1.36 billion and 1.43 billion D3 RINs, up from previous proposals, but no D3 RIN reallocations for carryovers.

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Risks

• Renewable electricity generation operating loss increased by $1.2 million to $2.2 million, driven by higher non-capitalizable costs and maintenance expenses.
• The expiration of fixed-price RNG contracts resulted in an 82.1% decline in volumes sold under such contracts, impacting revenue stability.
• Operating loss of $1.6 million replaced prior-year operating income of $0.4 million, reflecting margin pressures and cost increases across segments.
• Timing of capital expenditures and revenue at the Montauk Ag Renewables Project remains contingent on offtake arrangements and utility calibration, which could delay expected cash flows.

Summary

Montauk Renewables (NASDAQ:MNTK) produced a 9% increase in total revenues, supported by new RIN revenue streams from its GreenWave joint venture and changes in the contract mix. The company commissioned its Montauk Ag Renewables project in North Carolina, with commencement of syngas-based electricity revenues dependent on meter calibration in May. Capital investment guidance for ongoing and new projects remains intact, including an unchanged $200 million for North Carolina and continued progress at Bauerman-RNG. A $200 million credit facility refinanced all outstanding debt, boosting liquidity, with $45 million in additional draws expected after project validation. EPA final rules increased 2026-2027 D3 RIN requirements, which could influence mid- to longer-term market conditions for biogas-derived transportation fuel credits.

• Management reaffirmed annual production and revenue guidance for both RNG and renewable electricity, reflecting expectations for steady operational performance despite a one-month commissioning delay.
• The GreenWave JV generated equity income and provided additional RINs, adding incremental value and diversification to environmental attribute revenues.
• RNG segment's average commodity pricing increased by 38.1%, but overall commodity revenue was weighed down by sharply lower volumes from expiring fixed-price contracts.
• First-quarter operating loss and segment margin declines were offset at the earnings level by higher adjusted EBITDA and net income, aided by favorable RIN sales and contributions from joint ventures.

Industry glossary

• RIN (Renewable Identification Number): A credit used for compliance with EPA Renewable Fuel Standards, representing a quantity of renewable fuel blended or sold.
• MMBtu: One million British thermal units, a standard measurement of energy used for natural gas volumes.
• REC (Renewable Energy Certificate): A certificate that proves electricity was generated from an eligible renewable energy source.
• RVO (Renewable Volume Obligation): Annual EPA-mandated renewable fuel blending targets for transportation fuel.
• D3 RIN: A type of RIN corresponding to cellulosic biofuel, generally considered the highest value environmental credit under the EPA RFS.

Full Conference Call Transcript

Sean McClain, Montauk's President and Chief Executive Officer, to discuss business developments; and Kevin Van Asdalan, Chief Financial Officer, to discuss our first quarter 2026 financial and operating results. At this time, I would like to direct your attention to our forward-looking disclosure statement. During this call, certain comments we make constitute forward-looking statements, and as such, involve a number of assumptions, risks and uncertainties that could cause the company's actual results or performance to differ materially from those expressed in or implied by such forward-looking statements. These risk factors and uncertainties are detailed in Montauk Renewables' SEC filings. Our remarks today may also include non-GAAP financial measures.

We present EBITDA and adjusted EBITDA metrics because we believe the measures assist investors in analyzing our performance across reporting periods on a consistent basis excluding items that we do not believe are indicative of our core operating performance. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. Additional details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures can be found in our slide presentation and our first quarter 2026 earnings press release and Form 10-Q issued and filed on May 6, 2026. These are available on our website at ir.montaukrenewables.com. After our remarks, we will open the call to investor questions.

We ask that you please keep the one question to accommodate as many questions as possible. And with that, I will turn the call over to Sean.

Sean McClain: Thank you, John. Good day, everyone, and thank you for joining our call. I am pleased to announce that we have commissioned our Montauk Ag renewables project in Turkey, North Carolina and are producing gas. We expect the production and sale of renewable electricity from our syngas to commence in May 2026 with revenue generation triggered upon the calibration of the sales meter from the interconnection utility. We have operated the full production line as part of the commissioning process and expect to be able to produce our targeted first phase of 47,000 megawatts, and 120,000 recs annually with approximately 50% of our installed reactor capacity.

Our capital investment expectation for this first phase of the project remains unchanged at $200 million. We expect a ramp up in production volumes throughout 2026 directly related to additional feedstock collection. Our joint venture, GreenWave continues to address the limited capacity of R&G utilization for transportation by offering third-party RNG volumes, access to exclusive, unique and proprietary transportation pathways. During the first quarter of 2026, GreenWave's matched available dispensing capacity with available third-party R&D volumes, separated RINs and distributed RINs to the partners of GreenWave. We received approximately $1.4 million in separated RINs and distributed from GreenWave in the first quarter of 2026.

In April 2026 we sent a letter confirming termination of our contract with European Energy North America, EENA, for the delivery of biogenic carbon dioxide. The termination was due to EENA failure to provide certain contractual assurances and notices related to the construction of their Texas-based methanol facility. We are currently exploring alternative offtake arrangements with interested parties at our [indiscernible] location. The timing of capital expenditures will be [indiscernible] with the finalization of replacement offtake agreements. We continue to anticipate a capital investment of between $30 million and $40 million. While we continue to diversify the company, our production of renewable energy from landfill feedstock remains a priority focus. The U.S.

EPA issued the final rules for the 2026 and 2027 renewal fuel standard on March 27, 2026. The 2025 cellulosic volume requirement was reduced from $1.376 billion to $1.210 billion D3 rents with cellulosic waiver credits also having been made available for 2025 compliance. Hinocellulosic biofuel volume requirements for 2026 and 2027 were established at $1.360 billion and $1.430 billion D3 RINs, respectively. These volumes also represent an increase of $60 million and $70 million, respectively, from the preliminary RVO previously issued by the EPA. These volumes reflect the EPA's assessment of expected regeneration capacity and the related pathway and strengths of the end-use demand for CNG LNG transportation fuels derived from biogas.

The EPA did not provide reallocations of D3 RINs as part of the 2026 and 2027 RVO in the final rule. This is primarily due to the statutory conditions on cellulosic biofuel volume requirements which do not allow the EPA to set the total applicable volume of cellulosic biofuel at a volume that is greater than the projected volume available, which necessarily excludes carryover cellulosic rents. And with that, I will turn the call over to Kevin.

Kevin Van Asdalan: Thank you, Sean. I will be discussing our first quarter 2026 financial and operating results. Please refer to our earnings press release Form 10-Q in the supplemental slides that have been posted to our website for additional information. Our profitability is highly dependent on the market price of environmental attributes, including the market price for RINs. As we sell market a significant portion of our RINs, a decision not to commit the transfer of their low RINs during a period will impact our revenue and operating profit. . We sold all of our 3.9 million RINs generated and available for sale from our 2025 RNG production in the first quarter of 2026 at a realized price of approximately $2.42.

We will not be impacted by the EPA making available cellulosic waiver credits from 2025 production. We have entered into commitments to sell approximately 60% of our expected RIN volumes in the 2026 second quarter. Total revenues in the first quarter of 2026 were $46.4 million, an increase of $3.8 million or 9% compared to $42.6 million in the first quarter of 2025. The increase is related to environmental attribute revenue of approximately $4.2 million from RINs sold related to RINs distributed from Green Wave and the RINs related to pathway dispensing. We had no such RINs in the first quarter of 2025.

Our first quarter of 2026 RNG volumes sold under fixed floor price contracts decreased approximately 82.1% as compared to first quarter of 2025 as a result of the expiration of fixed-price pathway contracts. Our RNG commodity revenue decreased approximately 49.3%, which was offset by an increase in RINs sold of 25.5%. Total general and administrative expenses were $8 million in the first quarter of 2026, a decrease of $0.7 million or 8.4% compared to $8.7 million in the first quarter of 2025. The decrease was primarily driven by vesting of certain restricted share awards in 2025. Turning to our segment operating metrics. I'll begin by reviewing our renewable natural gas segment.

We produced MMBtu during the first quarter of 2026, flat compared to 1.4 million MMBtu during the first quarter of 2025. Our Galveston facility produced 41,000 MMBtu fewer in the first quarter of 2026 compared to the first quarter of 2025 as a result of the landfill host assuming responsibility of wellfield operations and maintenance beginning in the first quarter of 2026. Our [indiscernible] facility produced 43,000 MMBtu more in the first quarter of 2026 compared to the first quarter of 2025 as a result of landfill host well food operational and collection system enhancements.

Our Apex facility produced 37,000 MMBtu more in the first quarter of 2026 as compared to the first quarter of 2025 as a result of the June 2025 commissioning of our second Apex facility and increased feedstock gas from improvements we are making to the landfill collection system. Our McCarty facility produced 88,000 MMBtu fewer in the first quarter of 2026 compared to the first quarter of as a result of landfill host well-filled bifurcation and changes to the wellfield collection system. Revenues from the Renewable Natural Gas segment during the first quarter of 2026 were $38.1 million, a decrease of $0.4 million or 1% compared to $38.5 million during the first quarter of 2025.

Average commodity pricing for natural gas for the first quarter of 2026 was 38.1% higher than the first quarter of 2025. In the first quarter of 2026, we self marketed 12.4 million RINs, representing a $2.5 million increase or 25.5% compared to 9.9 million RIN self marketed during the first quarter of 2025. Average pricing realized on RIN sales during the first quarter of 2026 was $2.42 compared to $2.46 during the first quarter of 2025, a decrease of 1.6%. This compares to the average D3 RIN index price for the first quarter of 2026 of $2.41 being approximately 0.6% lower than the average D3 RIN index price for the first quarter of 2025 of $2.43.

At March 31, 2026, we had approximately $0.4 million MMBtu available for RIN generation, 0.2 million RINs generated but unseparated to 79,000 RINs separated and unsold. At March 31, 2025, we had approximately 0.3 million MMBtu available for RIN generation, 1.5 million RINs generated but unseparated and 3.9 million RINs separated and unsold. Our operating and maintenance expenses for our RNG facilities during the first quarter of 2026 were $14.4 million, an increase of $0.3 million or 1.8% compared to $14.1 million during the first quarter of 2025. Our Rumpke facility operating and maintenance expenses, operating and maintenance expenses increased approximately $0.4 million, primarily related to preventive maintenance media changes.

Our Apex facility operating and maintenance expenses increased approximately $0.3 million, primarily related to increased utility expense, which was partially offset by decreased preventative maintenance media changes. Our Itasca site facility operating and maintenance expenses increased approximately $0.2 million, primarily related to wellfield operational enhancements. Our Dowerston facility operating and maintenance expenses decreased approximately $0.6 million, which was primarily related to the timing of maintenance of gas processing equipment and preventative maintenance media changes. We produced approximately 43,000 megawatt hours in renewable electricity during the first quarter of 2026, a decrease of approximately 3,000 megawatt hours or 6.5% compared to 46,000 megawatt hours during the first quarter of 2025.

Our PECO facility produced approximately 2,000 megawatt hours fewer in the first quarter of 2026 compared to the first quarter of 2025. The decrease is primarily related to the decommissioning of one of our engines in the second quarter of 2025 due to the shift towards boiler heat digestion process. Our Bowerman facility produced approximately 1,000 megawatt hours fewer in the first quarter of 2026 compared to the first quarter of 2025. The decrease is primarily related to original equipment manufacturer required life cycle maintenance of 1 hour engines beginning in the first quarter of 2026.

Revenues from renewable electricity facilities during the first quarter of 2026 were $4.1 million, a decrease of $0.1 million or 0.8% compared to $4.2 million in the first quarter of 2025. The decrease was primarily driven by the decrease in production volumes. Our renewable electricity generation operating and maintenance expenses during the first quarter of 2026 were $4.5 million, an increase of $1.1 million or 33.8% compared to $3.4 million during the first quarter of 2025. The increase is primarily driven by an increase in noncapitalizable costs of $0.8 million at our Montauk Ag renewables project. Our [indiscernible] facility operating and maintenance expenses increased approximately $0.4 million, which was related to the timing of gas processing preventive maintenance.

We recorded approximately $4.2 million in the first quarter of 2026 related to the cost of RINs distributed from GreenWave when sold and the cost related to pathway dispensing associated with the dispensing of R&D. There were no such expenses incurred during the first quarter of 2025. During the first quarter of we recorded impairments of $0.4 million, a decrease of $1.6 million compared to $2.0 million in the first quarter of 2025. The decrease primarily relates to the first quarter of 2025 impairment of an R&D development project for which the local utility no longer accepted RNG into its distribution system. We did not record any impairments related to our assessment of future cash flows.

Operating loss for the first quarter of 2026 was $1.6 million compared to operating income of $0.4 million in the first quarter of 2025. R&D operating income for the first quarter of 2026 was $8.7 million, a decrease of $1.7 million or 15.7% compared to $10.4 million for the first quarter of 2025. Renewable electricity generation operating loss for the first quarter of 2026 was $2.2 million, an increase of $1.2 million compared to $1 million for the first quarter of 2025. Other income in the first quarter of 2026 was $1.3 million, an increase of $2.5 million compared to the first -- compared to other expenses of $1.2 million in the first quarter of 2025.

In the first quarter of 2026, we recorded approximately $3.3 million in income related to our joint venture investment in GreenWave. There was no such income reported during the first quarter of 2025. We received approximately $1.4 million in RINs distributed from GreenWave in the first quarter of 2026, of which approximately $0.4 million remain unsold. We sold approximately 1 million RINs in recorded revenues from those RINs sold of approximately $2.4 million. Additional information on GreenWave can be found in the supplemental slides that have been posted to our website.

On March 9, 2026, we entered into a 5-year new security credit facility with a wholly owned subsidiary, Hannon Armstrong Capital LLC, HASI that consists of up to $200 million in senior indebtedness. These proceeds were used to repay all our outstanding debt. We expect to have an additional $45 million in proceeds drawn upon the conclusion of certain engineering review and operational requirements of our Montauk Ag renewables project in North Carolina. As a result of this refinancing in the first quarter of 2026, we recorded debt extinguishment cost of $1 million. We are only required to make interest payments during the first 2 years of the agreement, which matures in March 2031.

We expect to work with has in the future to secure additional project-based financing for our current and future development projects. Turning to the balance sheet. On March 31, 2026, $155 million was outstanding on our new security credit facility with [indiscernible]. For the first 3 months of 2026, our capital expenditures were $38.6 million, of which $33.1 million and $1.8 million, respectively, were related to the ongoing development of Montauk Ag Renewables and our Bauerman-RNG facility. We had approximately $19.6 million in capital expenditures included within our accounts payable at March 31, 2026. As of March 31, 2026, we had cash and cash equivalents net of restricted cash of approximately $25.9 million.

Our new senior credit facility with [indiscernible] requires us to meet liquidity and have quarterly minimum cash balances as defined in the agreement. We had accounts and other receivables of approximately $5.2 million. We do not believe we have any collectibility issues within our receivables balance. As of March 31, 2026, we held approximately [indiscernible] distributed from GreenWave in inventory on our balance sheet. Adjusted EBITDA for the first quarter of 2026 was $10.8 million, an increase of $2 million or 22.8% compared to adjusted EBITDA of $8.8 million for the first quarter of 2025.

EBITDA for the first quarter of 2026 was $9.4 million, an increase of $2.7 million or 40.3% compared to EBITDA of $6.7 million in the first quarter of 2025. Net income for the first quarter of 2026 was $5,000, an increase of $0.5 million as compared to a net loss of $0.5 million for the first quarter of 2025. The difference in effective tax rates between the first quarter of 2026 and the first quarter of 2025, primarily relate to the change in our pretax book loss for the first 3 months of 2026 as compared to the first 3 months of 2025. I'll now turn the call back over to Sean.

Sean McClain: Thank you, Kevin. In closing, and though we don't provide guidance as to our internal expectations in the market price of environmental attributes, including the market price of D3 RINs we would like to provide a full year 2026 outlook. We are reaffirming our RNG production volumes to range between $5.8 and $6 million MMBtu with corresponding R&D revenues to range between $175 million and $190 million. We are reaffirming our renewable electricity production volumes to range between 195,000 and 207,000 megawatt hours, with updated corresponding renewable electricity revenues to range between $33 million and $37 million. that reflects our current expectations of production at our Montauk renewables facility in Turkey, North Carolina.

And with that, we will pause for any questions.

Operator: [Operator Instructions] Our first question comes from Matthew Blair at TPH.

Matthew Blair: I was hoping you could talk a little bit about this fixed price contract that appears to have rolled off. And I think there was a mention of that in the release is there any prospects for renewing that contract? And can you say if that contract was above current market rates? Like should we think of that roll off as being dilutive to your ongoing margins?

Kevin Van Asdalan: Thanks, Matthew. In short, if you -- I'm going to point you to our operating highlights table within our 10-Q the rolling off of the fixed price contract is consistent with our moving and our ability to find homes for our RNG volumes in the transportation market. It's in concert with a quarter-over-quarter reduction in RINs that we're sharing with counterparties through our pathway. That has come down in the first quarter of 2026 yielding increases in RINs sold in 2026 over 2025.

That's sort of a general understanding of a product mix moving away from fixed pricing into a more commodity and merchant availability of RINs generated from the production that we're getting as we are dispensing volumes in the transportation space and retaining more RINs and able to sell more RINs related to the roll-off of those fixed price contracts.

Operator: Our next question comes from Betty Zhang at Scotiabank.

Y. Zhang: Can you talk about the Montauk ag renewables? It looks like the revenue generation seems to be pushed out by about a month and that's also factored into your annual guidance. Can you just speak to what may have contributed to that?

Sean McClain: Yes. Thanks, Betty. The adjustment to the revenue guidance is solely attributed to the timing of the commissioning that was completed at the end of April as opposed to the end of the first quarter with revenue commencement activity starting in May instead of April. So that's the month shift that's reflected in that updated guidance.

Operator: Our next question comes from [indiscernible] at UBS.

Unknown Analyst: With the North Carolina project coming online and production expected to begin this month. Can you help us think about the ramp profile from here? I know you mentioned in your opening remarks and in the press release that you expect ramp up in production volumes throughout 2026. But can you give us additional color into that?

Kevin Van Asdalan: Thanks, Richard. As we've alluded, we have a certain amount of hog spaces that we're targeting to support our production expectations under a first year. We had announced that there were some weather delays on our call in our first -- at the end of the year in March. Some weather delays have delayed some installation of the own arm collection equipment as well as delaying some of our ability to timely assemble our dewatering equipment related to those sort of weather delays in installment of our feedstock collection and dewatering equipment.

Our ramp throughout 2026 is contingent upon us getting caught up and meeting some internal expectations associated with our own farm installation related to feedstock collection and transportation to our production facility.

Operator: Okay. I'm showing no further questions at this time. I would now like to turn it back to Sean for closing remarks.

Sean McClain: Thank you, and thank you for taking the time to join us on the conference call today. We look forward to speaking with you again when we present our second quarter 2026 results.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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