DAR — Darling Ingredients Inc.

Summary of Darling Ingredients Inc. Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Combined Adjusted EBITDA: $406.8 million, up from $196 million in Q1 2025 and $336 million in Q4 2025.
• Core Ingredients EBITDA: $255.6 million, compared to $190 million in Q1 2025 and $278 million in Q4 2025.
• Total Net Sales: $1.6 billion, up from $1.4 billion year-over-year.
• Gross Margin: Improved to 26.1% from 22.6% in Q1 2025.
• Net Income: Approximately $134 million or $0.83 per diluted share, compared to a net loss of $26 million in Q1 2025.
• Total Debt: Approximately $4 billion, up from $3.8 billion at the end of Q4 2025, due to contributions to Diamond Green Diesel (DGD) and timing of tax credit payments.

2. Strategic Updates and Business Highlights

• Operational Excellence: Focus on improving throughput, cost reduction, and product quality led to stronger gross margins.
• Feed Ingredients Segment: Strong performance driven by global poultry volumes, offsetting stagnant North American cattle herd.
• Food Segment Growth: Notable growth in collagen and gelatin sales, particularly in Europe and Asia, with new applications for collagen.
• Renewable Volume Obligation (RVO): Favorable developments expected to support DGD and overall feed segment performance.
• Joint Venture: Progress on a joint venture with Tessenderlo to enhance collagen production capacity.

3. Forward Guidance and Outlook

• Q2 2026 Core Ingredients EBITDA Guidance: Expected to be between $260 million and $275 million.
• DGD Production: Anticipated to deliver approximately 320 million gallons in Q2, with expectations for stronger margins as feedstock prices increase.
• Long-term Outlook: Management is optimistic about improved earnings, cash flow, and debt reduction throughout 2026.

4. Bad News, Challenges, or Points of Concern

• Debt Increase: Total debt rose due to working capital needs for DGD, raising leverage ratio to 3.17x.
• Feedstock Price Volatility: The market remains volatile, and the lag in feedstock price adjustments could impact future margins.
• Regulatory Risks: Potential changes in RIN pricing and tariffs could affect profitability and feedstock availability.
• Operational Challenges: DGD faced a temporary shutdown at Port Arthur, impacting supply chain dynamics.

5. Notable Q&A Insights

• Hedging and LIFO Losses: Management indicated that the lower of cost or market benefits have been exhausted, and future LIFO gains/losses will depend on feedstock price movements.
• Biodiesel Production Lag: Factors such as higher working capital costs and the need for independent producers to restart operations could delay biodiesel production ramp-up.
• RIN Pricing Outlook: Management expects RIN prices to remain strong, supporting margins and incentivizing production to meet RVO requirements.
• International Feedstock Dynamics: The ability to import feedstocks may provide flexibility, but domestic supply is expected to meet biodiesel producers' needs without reliance on imports.

This summary encapsulates the key points from the earnings call, providing a clear overview of Darling Ingredients' financial performance, strategic initiatives, and outlook while highlighting potential challenges and insights from the Q&A session.