Darling Ingredients Inc Aktie

All right. We're going to get started with our next presentation. CEO, Randall Stuewe has developed and executed a strategy over more than a decade that has positioned Darling as a global leader across rendering, biofuels and food ingredients through strategic acquisitions, capacity expansions and its Diamond Green Diesel joint venture. As a perfect complement to Randy, Bob Day has reinforced Darling's strategy with his disciplined approach to capital allocation, balance sheet deleveraging and returns since becoming CFO early last year.

Darling is an exciting opportunity to demonstrate its earnings potential, leveraging improved operations against the stronger fundamental backdrop. We're pleased to have Randy and Bob with us today to expand on its outlook and strategy. We thank you both for being here.

Thank you.

Great to be here.

Maybe where I would start is with some comments that you made at the recent Investor Day. You talked about the current operating environment maybe has accelerated a bit more than you had previously articulated. Can you talk about where you're seeing that momentum? What has been maybe a little bit stronger than you expected?

Well, clearly, the -- as we came out of '25, the world was waiting for some clarity of the renewable fuel standard or RVO as everybody knows, and you still didn't have it here until April 1. And so the different movements that happen for demand, whether it's of oilseeds or whether it's demand of animal-based products had not really started. So you just kind of carried forward.

First quarter was a wonderful quarter, always, always a little difficult because of winter in North America and in Europe. But when we did our earnings call and obviously, when we did Investor Day a couple of days ago, we hadn't really started to see or we didn't have in front of us the Q2 run rate. For those that do [ Randy ] math, you look at what March did and it's a 5-week period for us, you divide by 5 and multiply it times 13, and that's our run rate for Q2.

Since we hadn't seen April, it's the first time we'd ever reported without seeing the first period of the next quarter, which always gives us -- kind of gives us a pretty good feeling of what confidence in to give to try to guide this. I mean, number one, you got to be insane to try to guide a commodity business. But in flat to up markets, you can't be too far from wrong. So what we've seen is with the announcement of the RVO, we've seen biofuel plants around the world restarting, in the U.S. as well. We brought back on a plant we basically had mothballed for most of last year and ramped on up to capacity. And ultimately, we saw fat prices come into the year $0.45, $0.50. I saw a product yesterday being sold $0.75 FOB plant for some of our lower-grade products.

So that is starting to flow through. What we were trying to articulate in Investor Day was that we weren't sure how much was going to come through in April and then how -- obviously, May will be better and June will even be better. I think if pet prices have capped off, I don't really think so yet. But we're seeing the acceleration in earnings there. Probably the other contributor that wasn't fully understood or we weren't prepared to step out in front of was the resurgence of exports of poultry meal.

And really, the proteins that come out of this country, there's a significant amount that have to leave. And with low ash poultry meal or chicken meal as it's referred to it as no bones in it. It's the world's aquaculture feed. And when our President puts tariffs on, tariffs off, it makes buyers pretty uncomfortable around the Asia countries to step forward and buy it.

And as we look back last year, those tariffs probably impacted performance by probably over $100 million because we had to downgrade material and sell it to alternative markets rather than where it should go. So the protein side is really kicking in and contributing along with the fats now. And I think it's safe to say we're hitting on all cylinders in the rendering business. The biofuel margins are what we thought they would be. We try not to guide out there because there's a lot of volatility. And then our food businesses, the collagen business is really starting to take hold out there. That's been a 5-, 10-year product mix shift, and then we're seeing the acceleration there along with new products.

And it's just -- the stars are aligning for us now. We feel very, very proud about it. And Bob reflected here earlier this morning, if you look back in July of 2013 when we made the initial investment into Diamond Green Diesel. And then for the next 12 years, we just continued to reinvest the capital there. That stage has changed, that's the inflection point. Diamond Green Diesel will provide dividends this year, and it will provide the PTC. So all of a sudden from reinvestment to outflows, and that doubles up with a really nice core business that's operating well.

I wanted to go back to a comment you just made. I mean there's so much focus on Diamond Green Diesel. There's so much focus on the Feed segment, but the Food segment, which I generally think of as reasonably steady. You've seen it in the first quarter, and you made the comments about April and May kind of accelerating. What is -- why is that the case? What is changing there?

Well, I think an interesting dynamic in the Food segment and just for everyone's understanding around 85% of EBITDA in our Food segment is represented by the collagen business. So collagen and gelatin is the 2 primary products. We're continuing to see significant growth in water soluble collagen across the world. And the way to make water soluble collagen is to take extraction capacity, which is what you use to make gelatin and put a spray dryer on top of it. Every time you do that, you take capacity out of gelatin production.

And so essentially, what's happening is due to the increase in demand for collagen, we are also tightening up the supply and demand for gelatin it's creating a very nice dynamic for the business globally, and we're seeing margins in both products increase.

One of the things that I think the market is struggling with a little bit is we got the RVO. We also had a war that has obviously changed the dynamic around energy prices here, kind of coinciding to a certain degree. So how do you think about the impact that the war with Iran is having or the durability should that there be a ceasefire not go away?

I mean I think the margins that we're seeing today in renewable diesel and sustainable aviation fuel, we absolutely expected as a result of the RVO. When we look at the at the obligation itself, the demand that comes with that production, the opportunity for imports, these margins make sense.

I think we probably would have thought that they would have materialized a little bit later, closer to when compliance obligations are due, and we have convergence in the market for that reason. I think the conflict in the Middle East, what it's done is it's helped bridge that gap which is really healthy for the industry because it's promoting production earlier than it probably would have otherwise and it will move us closer to being able to meet the obligation, which I think a lot of people have been concerned about.

And I think, Andrew, I think what's fascinating to me and stepping back up to 30,000 feet, if you will, is once again, the world figured out how fragile the supply chain is on fossil fuels, and as I get to see our trucking companies in different parts of the world, diesel fuel in the Netherlands is $12 a gallon right now. Diamond Green Diesel, about $8.50 a gallon. We haven't seen that. And so you're seeing lots of different confluences that are happening because of the higher crude oil price right now.

And it's an industry in the world. And as we look forward, we say it once again sends at least a light narrative back to that biofuels or green fuels have a place in the portfolio of energy going forward, and that's where we're positioned.

When I think forward a little bit to next year, and you guys showed the kind of RIN balance math that had 2027 at a deficit. How do we work through that? I mean how -- as we get closer to that environment, how does that change trade flows? How does it change the operating environment? Is the answer that margins have to go higher to solve for that? Or I guess, how do you see that playing out?

I think we do need to change some trade flows. Specifically, I think last year, we exported -- the United States exported around 1 billion gallons of advanced biofuels. So those are barrels that could stay in the United States to help satisfy the obligation. In order for that to happen and in order to incentivize some imports, margins probably need to continue to increase somewhat. And that's an encouraging backdrop.

I mean clearly, the policy is working right now. Farm prices are improving. And so ultimately, what's interesting is when you can run this thing and say, on the S&Ds, they always have a way of balancing themselves and Clearly, the administration believed that, okay, we might tighten up the RIN bank or we might go to a small deficit, but that's okay because then it will write itself either through price, which what's happening price means either more imports or less exports. And so it should play a pretty nice balance for '27.

Are we seeing if feedstocks flow into the United States, can you maybe help us understand the competitiveness of foreign feedstocks versus the U.S. today at these prices?

It's obviously -- it's very dynamic, changes day to day. And so it's just -- yes, it depends. But I think we are seeing foreign feedstocks imported into the United States. I think U.S. or let's say, NAFTA or USMCA based feedstocks have the advantage of 45Z. They've got freight advantages. And international feedstocks have discounted themselves in certain cases so that they can compete to move into this market. But we are seeing a lot of support and price increase for U.S.-based feedstocks, which really was the intention of the policy.

So who's the marginal producer today? I've always thought about it as the biodiesel industry with the need for imports has that changed? Is it -- I guess how do you think about it?

I think it depends a little bit on just where -- what's going on with the market prices all around the world and who that marginal producer is. And I'll give you an example. If the best -- if the most competitive feedstock is an imported tallow from Brazil, then your marginal producer is going to be a Midwestern biodiesel company because they're not going to have access to that feedstock. They're going to need to make a margin using a different feedstock and different economics.

If the most competitive feedstock is soybean oil in the United States, then the marginal producer is probably somebody else. But I think the bottom line is we need a significant amount of production from the biodiesel industry to satisfy this obligation. We need a lot of production from renewable diesel as well. And so whoever that marginal producer is, they've got to be up and running, and that suggests good margins.

Can you maybe level set with your perspective on -- especially on the demand side, I guess. Where are we from an RD industry utilization rate perspective? Have we kind of -- I mean you said it's happened kind of quicker than you anticipated for a variety of reasons. Have we kind of maxed out yet? Is there more room to go from a demand perspective?

Margins today would suggest if you can run, you're running. There was a lot of catalyst change out that happened in Q4, and so you'd be ready to run. And so ultimately, obviously, we watch the other 3 or 4 public companies release some earnings on their RD plants, and we're significantly above our performance is way better than theirs. And so that's the feedstock mix, but they all are saying they're running full. So I -- and then I think the other thing is I'm not sure that there would be any more capacity in the U.S. put under construction, maybe debottlenecked a little bit, but I don't see -- do you see anything different?

No, I think that's right. And we'll see as the April numbers come out, but it certainly looks like we had a pretty good step up in April from where we were.

Okay. At the Investor Day, you talked about $150 million to $300 million of potential internal improvement opportunities in the Feed segment. What are the buckets and the time line for that opportunity?

Bob is forever known as Slide 55. So that's our internal joke now. And there's a lot of things that go into that. And so as we've had the last couple of years that when you get into deflationary ingredient business out there, and then you get a little bit of biofuel headwinds.

You spend a lot of time in [ Donnie's ] words over here, turning over every rock. And so that's from market contracts. To build a new rendering plant, $100 million now, 3 years, the replacement value is escalated by not only construction costs, equipment costs. So we're trying to pass on as much as we can with people always not the easiest conversation with your suppliers, but ultimately, these are plants that have to be maintained. You can't capital starve them or run to fail.

We look at we've stopped the world and said, okay, I call it the One Darling approach now. Let's give you an example, if Brazil is producing animal fats, and they've got a bid that's $10 a ton above what Diamond Green Diesel's bidding today. That fat should still come to Diamond Green Diesel because we're going to make $300 a ton as a company. But that's the One Darling approach that we're bringing now -- and so we're looking at it every day with what's best for the shareholder, not that we weren't in the past, but when you run a decentralized company, your P&L drives more behavior than you want.

So trying to get alignment. Looking -- and we brought on some additional talent, Carlos Paz and Carlos is leading the -- looking at the world and just saying where should trade flows go? And used to be that some of our plants had wake up. And the European plants looked at exports, if they couldn't keep it in within the continent, they would dump product into the world. Now we're trading products with the One Darling view.

What else do you want to add to that?

I mean you've covered a lot of like what is included and what's going to get us to these higher margins. But I think what I would add is that the competitive dynamics in our industry, they're different than what we see in other commodity industries. As a lot of people know, the raw materials that we bring in are 60% moisture and so if a competitor is going to do something irrational, it's going to cost more than what you tend to see in other industries. So the result of that is we should be able to continue to increase the fees that we charge based on the replacement cost of assets and essentially act as an inflation hedge against the cost of construction.

That's harder to do on shorter time periods in other commodity industries, but we should be able to do that just because of those dynamics.

So I guess how much visibility do you have to that? How much of the $150 million to $300 million, how -- what portion of your contracts have you already kind of executed some of that versus what's still left to be done?

We have -- so I think as everyone is aware, we acquired Valley Proteins in 2022. That was a significant move into the poultry rendering space into the United States. Contracts in the U.S. tend to be pretty long in nature, 3 to 5 years. As we reset price, it's difficult to do all of that in one negotiation. And so some of that work has been done. Certainly, some of the work around identifying the best commercial end markets and getting the maximum value for our products. Some of that's been done. But there's still more opportunity. And I think that, that estimate that we gave at Investor Day was one that we think we can achieve in the next 2 to 3 years.

Okay. You made a comment about at the Investor Day about the footprint being in all the places that you want to be, but maybe you want it to look a little different, I think, it was kind of the quote. Can you elaborate on how you'd like to see that evolve?

Well I think if you look historically about every 5 years since the start of 2000, we've doubled the size. And not only do you focus on integrating and paying down debt, but then you start to identify the holes in the map of where you can logistically, as Bob said, it's 50%, 60% water where you need to build a new plant. And so we've done that globally now, and so what we're looking at over the next 3 to 5 years is somewhere between 20, 30 new plants around the world that have to go in. Our system today it's amazing is we're at capacity. And so when we look at it as the poultry consumption, our general thesis that we've always worked under is population growth, wealth creation, center-of-the-plate dining will include protein, and we want to be part of that with the meat industry globally.

We don't see that slowing down. And so while we may be mature in a lot of our different areas, what we do look at is the Eastern Shore is going to continue to expand the poultry side in the U.S. The beef cycles down, as I'm sure you heard from the Tyson folks, it will come back. It always does. Brazil continues to just explode up 14% in production now. They have what the world needs, land water people. And that's not into the deforestation discussion. That's just they can grow more and more. You're starting to see more grain-fed beef down in South America, which is really amazing because you -- they'll take an animal to slaughter at about 2/3 the weight of what we do in the U.S. And so you immediately say that, well, that's almost a 50% increase in rendering capacity needed down there.

So we'll continue to reinvest there. never did I think that we'd be in a discussion now in Europe of starting to talk about Eastern Europe, going east. There just weren't the animal numbers, but as Germany and the Netherlands have environmental challenges and from animal production, it's going to go east China, still not much there to render as we say, but we continue to look hard there. And ultimately, I'm a fan of the Ukraine if we can ever get the war settled.

Is there a way -- I mean, obviously, fat prices have a big impact on profits in the Feed segment. But if I kind of were to hold that constant, is there a way to think about with your internal projects and things like that, what kind of EBITDA growth rate for your earnings power in the Feed segment, what that could look like kind of over, I don't know, a 5-year period or what have you that you'd like to achieve?

You're going to have to own this one.

Yes. Look, I think -- well, you're really asking the question about as we generate cash, invest that capital in new projects, what kind of EBITDA is that going to generate. So what we've said so far is when it comes to our capital allocation, we're committed to paying down our debt below $3 billion, getting our debt leverage ratio down below 2.5 in a downside environment. That we've been really clear about that. we think we're going to be able to achieve that probably by the end of the calendar year.

And at that time, that puts us in a position, if the outlook doesn't change to really look at a lot of different options, things we could consider shareholder investment type opportunities as well as potential growth. The extent to which that growth opportunity is, it's going to depend on what the cash outlook is at the time. What we haven't really done has gone public with what are exactly the projects, what are the expected returns from those things.

As Randy said, I think one of the big changes that we see going forward is we will be more organic investment focused versus heavily acquisitive like Darling's history has represented. What's nice about those opportunities, though, is even though they take a little longer to develop, we're able to do that, building assets in places where they're complementary to our broader network, where 1 plus 1 can equal 3. And so we're confident that we're going to have opportunities to invest capital and get great returns from it. We just haven't outlined exactly what that's going to look like and how we expect it.

But I would say this as well, we also have opportunities to invest in the collagen business. And that's a really exciting area of growth for Darling.

So I want to ask about that in 1 second. But first, I had a question on SAF and maybe how that has played out relative to your expectations? And then there was a comment about -- I know you're always asked about SAF 2, what have you, that you would need more market commitments. So I guess, -- can you kind of give us an update on the current SAF market and what you would need to see from here?

Yes. So we've got very different dynamics around SAF margins, whether it's to the European market versus the U.S. market. I think the European market is a mandated market. The U.S. market is a voluntary market. As a result of that, what we see in Europe is a lot of fluctuation between margin attractiveness comparing renewable diesel versus SAF, and that just depends on what the mandate is, what available supply is and how prices react to that. We've seen plenty of situations or periods of time where renewable diesel margins into Europe are more attractive than SAF.

The United States is very different. It's a voluntary market. More than half of our sales are made into the United States. That is a market that prices at a premium to renewable diesel. So the margin attractiveness is more of a fixed position. We're happy with the volumes that we're selling today. And I think as it relates to future investment in SAF capacity at Diamond Green Diesel, we just -- we're interested in doing it, but it's -- the outlook is different than it was in the past, and we would need some assurances from an offtaker that they're there to take it at premiums that make sense to justify the investment.

You want to talk about book and claim and how that's developing a little bit.

Yes. And this is -- it's a nice evolution to the business. And what has been exciting to us is the buyers of SAF they're not airline, they're not you're -- who you typically think it would be. They're really large tech companies, companies that want to offset Scope 3 emissions. And so that opens up a much bigger market as those companies think about investing in anywhere in their business that requires energy consumption, they're looking to offset that with green energy or something else.

And so that allows us to enter into more strategic discussions about how we can be a solution for them. And that's -- that would be our goal is that we have something that's longer in nature and more committed.

Yes, I would have thought 3 years ago that SAF was just really going to take off in the world. But when you look at an airline's cost structure, fuel is a big component of that variable cost, even a bigger one today. And so ultimately, we went ahead and kind of pre-engineered out some expansions there, spent some money, not a lot of money, but got them ready to where we -- if SAF did develop. And now what Bob's talking about is you're seeing a different discussion on book and claim, which would then put the fuel into the Jet A pool and the credit would be sold over here. And so that's a different thing.

But RD margins today are very, very attractive along with the SAF, we're still getting the premium that we said we would and the return on the SAF unit that we built.

You've talked about $1 to $2 margins, which I understand kind of how you approach like, hey, wide range volatile we get it. We're not trying to guide really to DGD margins. But when we think about the cost position of DGD and those advantages and maybe how you think about framing for people, the margin potential in this kind of environment or the ranges, at least this level of that kind of thing. What -- how has that evolved maybe versus history? And where -- how do you think about that? How do you frame that?

And Bob and I'll kind of tag team this. It's -- like we said, it's a very volatile business, our partner doesn't guide in this area. It's not really material to them, but to our shareholders, it's very important. And so what we've always looked at when we built the system the investment case was about $0.79 a gallon. And so -- and clearly, with cost increases now that would probably move it into the 90s is what we would think.

But as we look at the marketplace out there. When we saw a balanced system 3, 4 years ago, we ran margins in the $2.25 a gallon. And so then when we -- then you transition to the PTC and that takes a little bit of a way. And that's kind of where we said, given the RVO and where we see the industry having to run to fulfill it, and seeing our logistical advantage to both import and export, put it in the pipeline, make SAF, the arbitrages. We look at that thing and said, it should generate between $1 and $2 this year. And I suspect we'll see margin acceleration as we go through the year as the obligated parties and the compliance dates start to really align. I mean, you'll have to probably call Valero after this, but that's...

Okay. That was helpful. Shifting to Nextida. You've discussed some lofty goals on volumes and margins or mix by 2030. Can you maybe level set where that business stands today in terms of trials, the preparedness to start to accelerate towards those goals?

Yes. And once again, Bob can help me out here. I mean you're talking of the collagen peptides and then breaking the molecule down, everybody that goes to the grocery store and they see the word collagen out there and we're the leader in it globally. What we've done is separate the molecule down for targeted health and wellness applications.

And we hold several patents on it, more patents to come in clinical trials, and it's nutrition, science-backed nutrition and wellness. The trajectory is pretty long. The portfolio is very broad. We've got a glucose control product out there today. Lots of different brands and orders in there. It's developing nicely. The -- and ultimately, when you start to operate in that health and wellness, you've now stepped down the supplement aisle, and that's pretty confusing down there. And in the world of unregulated supplements, you can pretty much say what you want to say.

And so trying to differentiate yourself, I'll give you an example, Prevagen has been out there for 10 years. Our second product coming online now is going to be a brain health product. That should launch here later this summer, early next year. All backed by lots of science and very sophisticated clinical trials, and then there's a women's health and then there's hair, nail type products that will over the next 5 to 10 years.

What's important to us is that, as we said, Bob talked about the product mix shift. 10 years ago, we were about 95% gelatin. Typical margin in gelatin is about $1 a kilogram or EUR 1 a kilogram, depending on what continent you're on. Hydrolyzed collagen. And if you think through the product line, Bob said water soluble. Gelatin is a thickener or a emulsifier used in food, pharmaceutical type of applications, then you get into water soluble. The breadth of application opportunities is just unbelievable. So you get into -- now you can go into bars, sports drinks, foods, et cetera.

And now you take to the next level, what we call Nextida it for those, the peptide applications. But the margin structure because of the demand of the universe of opportunity is about 3x better. And then when you get into these targeted applications, you can be 7 to 11x better in different pricing. So as we move more of our product mix there, that's where we get really excited about what the collagen business can do for us globally. And we always get the question, where the hell does that fit with an animal byproducts company? Well, you got to remember, comes from a bone and a skin. And we're kind of the biggest in the bone and the skin business in the world.

And ultimately, 80% of that extraction process then goes back to animal feed and animal fat. So you get the super high-value product and then you've got the other core ingredients. So ultimately, Andrew, we look at somewhere in the next 3 to 5 years, that will lead if we're successful, which I believe we will. We will lead to doubling the value or the earnings in the Food segment.

Have you been able to prove out that margin delta on -- at this early stage? Or is that like, hey, as we grow and -- sorry, go ahead.

Yes. I mean, we make a product today that's called Nextida GC, glucose control. That margin difference is proven today. But I just want to comment on something Randy said because he brought it back to kind of what makes this a simple story. We get we're told a lot that Darling is a really complex business, hard to understand. When you start talking about active peptides and molecules, that sounds pretty complicated.

But as Randy said, it's really -- we're talking about animal byproducts. We are -- our raw materials at Darling, our animal byproducts and used cooking oil. There's more than 100 million metric tons of commercially available animal products, byproducts and used cooking oil in the world. And so there's a lot of supply. It starts with that. And then we add a lot of value through our different product mix. In this case, with collagen, there's a lot of science and R&D that's going into it. And yes, those margins that sort of 7 to 11x a gelatin margin that's already been proven out.

Doubling the Food segment, EBITDA is obviously very material. What needs to happen to start to see that mix shift really accelerate? Is it more products? Is it just kind of time? I guess, how should we think about that glide path, which I'm sure is not perfectly ratable, but how should we think about it?

I'll start with that. So...

You're going to own this one, too.

Yes, I guess. Yes. Thanks for that. with these types of products, typically, what we see is you start supplying a number of different consumer packaged goods companies, smaller, more entrepreneurial companies that are out there really pushing hard to get product on the market, educate consumers. That takes a bit of time. but it's a groundswell. And as the momentum develops, it moves quickly as time goes on. And so the answer to your question is, we need time. We also need a breadth

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The companies as Bob talks about really are relying on these accelerator incubator companies now to do the kind of the little lift or the heavy lift and then to go.

And we're just starting to see that right now with the GC product and when one of your biggest customers is basically a repacker in Boca Raton, Florida, but they're continuing to put orders in. And we're watching -- I think we had like 27 customers and 22 of them put second orders in now.

And so we're getting the acceleration we want there. What we're seeing is the big CPG companies wanted more clinical data, more science back and we're providing that. So it's just -- it's a matter of time. I think we've gone to outside consultants to help us think through. We're pretty good at animal byproducts taking these type of specialty products into these markets is a little foreign to us.

And so we're building the organization right now for those that are aware, we're moving the headquarters out of the Netherlands into Irving, Texas. And we'll be staffed out of there with brand managers and product line managers over the and it's already starting right now during Investor Day, we brought in one of our brand and marketing managers and just the number of products that we had on the table there to show people these applications is really exciting. I go back to the day of vital proteins, as everybody knows, that's been a very successful product.

It was a start-up in Chicago. It was basically a product that we made in our Amparo, Brazil plant, a bovine grass fed collagen shipped in Super Saks to Chicago repack. They put the label on it. and the business grew dramatically. And it was -- the science behind it was the scientist Kurt was a runner from a NASA scientist and Kurt loved it to run and his joint started [ hurting ] he called and said, "Can I -- I've done my homework, can I get some collagen?" Came from us, and he built the company, and the rest is history now, and I watch that. And I go back, I can't -- it's hard for me. That was 10 years ago.

And we've shifted our product mix now to where we're about almost 60-40 collagen where we're 95-5 over 10 years. I'm just trying to give a trajectory of what Nextida can do, and I think it will get some really, really good trajectory here over time.

Okay you talked a little bit about the inflection contributing cash to DGD now starting to get some of the distributions, the earnings environment, obviously getting much better. When you think about capital deployment, you've talked about cash returns to shareholders is kind of where does that sit in the priority set relative to organic growth? And do you have a preference for dividend, share repurchase? I guess, how do you think about that?

Yes. And what -- I think if we want people to leave today with one thought, okay, the reinvestment into the DGD over the last 10 years, that's done now. The marketplace is set up nicely with the RVO for the next couple of years. The core business is operating well. We've rightsized and fixed and the assets that were underperforming, protein market is strong in the world. The collagen business is strong. We are a cash generating unit now.

The debt is coming down rapidly. It would -- depending on which one of our cycles you want to pick here. We've always said that we wanted to get below $3 billion. I think it's very doable by the end of the year. We want to have a strong financial policy at 2.5x. And then it's Bob's and my job to be with our Board and say, here's the next 3 to 5 years that we look out and say, okay, buybacks absolutely, we'll buy back our dilution every year, maybe return more, get comfortable doing that.

Does it make sense to put a small dividend underneath this thing, 1.5% maybe. And then the organic growth, we can't -- we can do all of it. On the organic growth side, there's only so much you can do because of resources being people, time and equipment and permit to build a plant today is 3 years. It's not an immediate. If it's a plant is $100 million, it's $30 million, $30 million, $30 million. And so it allows us the flexibility now that we haven't had in the past.

And as you look back, Andrew, what's different today than it was we did a slurry of about $3.5 billion, $4 billion of acquisitions. We didn't dilute anybody and issue equity because we said the balance sheet and our confidence in the business was going to be able to delever it. Maybe we didn't do it as quick as we wanted to because of the lapse in the RVO, but that's passed. And so it's different times for the company now.

Maybe I'll squeeze one more question in here. You talked about the current environment kind of implying something closer to the up cycle range currently based on based on where we are today, my comment would be it seems like over the next 2 years, it seems like fundamentals are pretty well set up to not materially fall off from there. So I guess what prevents that from playing out that way? What do you think is maybe the biggest risk that we should be on the lookout for?

Right now, I don't -- I'm looking at the world and we've digested the Iranian war unless something really happens there. What's Trump going to do with 301 tariffs, again, that just screws up trade flows. God willing, this Hantavirus thing goes away. But right now, the table is set. We're hitting on all cylinders. And clearly, we're on the up cycle or the high cycle of this thing. I don't like to call it a cycle because I think it's -- we're just really set up nicely here for the next several years.

You start to say, well, 28th and then we get into another election year, we get into ultimately another RVO discussion. But I don't see there's any going back for the farm community now.

Great. We'll end it there. Thank you very much.

[Presentation]

Good morning. Thank you for joining us at the 2026 Darling Ingredients Investor Day. I'm Suann Guthrie, I'm the Senior Vice President Investor Relations and Global Affairs. During this Investor Day, we will be making forward-looking statements, which are predictions, projections or statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results can materially differ because of the factors and cautionary statements discussed in this Investor Day and in the accompanying slide presentation and in the Risk Factors section of our Form 10-K, 10-Q and other reported filings with the Securities and Exchange Commission.

We do not undertake any duty to update any forward-looking statement. For historical non-GAAP financial measures referenced during this Investor Day, reconciliations to the most directly comparable GAAP financial measures are available on the slide presentation, which can be found on our website. Reconciliations and forward-looking non-GAAP measures are not provided for the reasons stated in the slide presentation.

Again, thank you for joining us here at the New York Stock Exchange, and thank you for all of those who are on the webcast. We have a great couple of hours planned for you guys. Very excited to be here. Let me just give you an overview of what we're doing today.

I'll give you a quick overview on Darling Ingredients, who we are, what we do, for those of you who don't know us, I'm going to turn over the floor to Randy. Randy is our Chairman and Chief Executive Officer. He's going to talk to you about the foundation we've built over the last couple of decades and how that foundation has built the strength for our business and what that does to unlock our future. Randy is going to turn over the floor to Carlos Paz. Carlos is our Executive Vice President, Renewables, North American Specialties and Global Risk Management.

Carlos is going to spend some time talking to you about Diamond Green Diesel, how that is a proven model, and it's a resilient model, no matter the commodity markets or public policy.

He's then going to turn the floor over to Dave Van Dorselaer. Dave is our Executive Vice President in Sales and Marketing for Rousselot. That's our collagen and gelatin business. He's going to talk to you about the next era of collagen. What does that market look like and the growth we see there.

And finally, we're going to wrap it up with Bob. He's going to talk to you about how we're going to put our strength and scale to work and a little bit about our capital allocation plans.

At the end, we'll leave some time for Q&A for those of you in the room with us today and then we'll go from there.

So with that, I'm going to turn the floor over no, I'm not talked about Darling first. Sorry, again, Darling Ingredients, who we are, what we do. For those of you who don't know what rendering is, about 50% of the animal that is eaten is not consumed. It goes to waste. So what rendering does is it takes about 99% of that animal and up cycles that into something else that reduces Greenhouse Gas emissions by about 90% compared to composting.

Our process is quite simple. We collect -- we have one of the biggest trucking fleets in the U.S. And we collect that raw material from abattoirs and slaughter houses. That goes to 1 of our 260 factories across the world, and we processed that into fats and proteins. Proteins primarily go back into animal feed and pet food, fats go into primarily now renewable diesel and sustainable aviation fuel. And of course, we're creating value from all of those products that we have.

Now I'm going to turn over the floor to Randy.

Thanks, Suann. Good morning, everybody, and thank you for taking time out of your day to come spend it with myself and my team. And today, I'm really excited to showcase my team that and kind of what we're looking at for Darling. As I walked in this morning, no different than you my head snapped when I saw they had a picture of me on the leaderboard.

And I didn't know, but I do know for at least about another 2 hours, I'm bigger than Buffett. And I always have to start by telling people my 1 interaction with Warren Buffett in my life. Yes, I've been 3 tables over and tried to eavesdrop on a conversation. But Jamie Dimon invited me to an event he had at their old building and Warren was there and he said, "Randy, come on and meet Warren. So Warren took me off to the corner. And I said, Warren, I'm Randy Stuewe. I run Darling Ingredients. He goes, "Oh, I know all about Darling.

And Bob, we went on for no more than probably 2 or 3 minutes. He goes, I'm very proud of what you've built. And I said, well, does it fit in the Berkshire platform anywhere. And his answer to me that time was -- it's a really interesting business, but he says it takes too much capital. And that stayed with me, that's probably 10 years ago. And it's -- for me, it was a fascinating moment of it's a capital-intensive business. And then as I can always end all conversations to get the last laugh, I said, well, don't you own a railroad? And so that's my opening line of -- you'll learn a lot today about how capital is deployed, how capital is used and ultimately, how we're going forward with it. And I think you're going to come away today with Carlos and Bob and especially Bob at the end.

We're trying to bridge where we are to where we think we can be. So I'll talk to you a little bit about the foundation built and then I'm going to talk to you about what we've unlocked for the future. You're going to get a real deep look today at the collagen business and where that fits in our portfolio. And I think ultimately, we've got our marketing and sales team here, take some products home. It's a very -- it's a long trajectory to make critical scale in that business around the world. But we're the biggest, and we've got the most unique product portfolio of anybody out there in the collagen space. And in today's world of trying to find health and wellness. We have a solution that I think is really world class.

So as we go forward, I always like to tell people, real quick, what built the business. And for many of you that know the company, you can say Blah, blah, blah, but for this team, I'm still transitioning my learnings along the way. And we operate under 3 primary principles entrepreneurship. We're decentralized. There's 260 P&Ls out there.

The authority relies on that manager at that location. And yes, we provide capital planning and legal and treasury, but decisions are made at the lowest level to execute on the business plan.

Transparency. We don't go to the balance sheet to make numbers. I've been in a company that's done that. I don't like it. And there's no surprises. We call it transparency. We call it no surprises. We share the good with the bad. And ultimately, we try to be accountable in a disciplined execution way. And then integrity, it's not the most glamorous business in the world. Maybe it gets a little bit of narrative of green and climate change and all of that. But at the end of the day, we're an essential service, the process is some stuff that doesn't really smell very good. And so it's hard to be a good citizen all the time. And so ultimately, the integrity piece for us is being part of a community, doing the right thing.

Social media has made it so difficult to not be on the defense. You're always being attacked constantly for something, whether it's an employee, whether it's an environmental or it's just an upset conditions. So integrity is key. I'm proud of the history of this team and of our company and especially from an accounting perspective, have not joined in the wall of shame of significant deficiencies and material weaknesses out there. And that's a very bold statement to say and it's for me because of the number of acquisitions that we've done, and we'll talk about that.

So today, I get to talk to you about, we built a global foundation. You guys have ridden through the ups and downs of this business. It had some headwinds, policy. It had headwinds of global ingredient over production. We've spent the last couple of years transforming the business, fixing some assets that needed fix, disposing of some assets that needed to be let go. And we've invested to strengthen additional capabilities. What Bob is going to talk to you about is we are fundamentally poised for accelerated returns. We're going to show you how we think about that, how we calculate it, how do you communicate it, teach it and get and own the outcome, if you will, at the lowest level.

Remember, 260 facilities and a decision-maker down in Brazil, in China, in Australia, how do they think of the business and make the right capital allocation, capital investment decisions.

Now I think really, this is kind of a history lesson real quick for those that haven't seen it. We started in 2003, I took over the company with 600 employees, about 20 locations. We had a grand total EBITDA at that time of about $24 million. We had a CapEx budget of $24 million. We were using duct tape and baling wire to hold the company together.

As we went forward, we found someone else kind of in the same shape called National byproducts. National byproducts was part of the Holly Farms, which Tyson acquired and then Tyson decided to spin off national byproducts or Holly Farms did in order to get the Tyson deal done. And so we basically doubled our scale of plants. We took two $25 million EBITDA numbers and synergistically through rerouting turned it to $100 million. And so that kind of became the foundation as we started.

We then held off another 5 years, acquired the Griffin business and ultimately entered the species-specific or chicken poultry processing business and doubled our scale. And ultimately, that started to transform the company.

Now we both had beef, we had chicken, but we were still a North American processor. As we went forward, we bought the Rothsay that was part of the Maple Leaf Foods. Maple Leaf had an activist in there that wanted to break up the company and spin Rothsay off focus on consumer products.

So we were lucky enough to win that auction and picked up the #1 position in Canada. At the same time, we were making that initial investment of $423 million into Diamond Green Diesel on a technology never proven, never done. A career bet for us. And ultimately, we all know this history there. As we go forward, then oops, we got Diamond Green Diesel under construction. We just bought Rothsay and here comes the only international rendering platform in the world called VION. A lot of history, a lot of noise underneath that one, but it gave us a position in Europe, gave us the #1 position there, gave us a position in China, gave us a small position in Brazil.

And so ultimately, that's the last time, if you will, for the first time that we put a massive amount of debt on the balance sheet. But we also did a follow-on offering to finance and take out some of the risk. The foundation build goes forward. And as we look here, we like Diamond Green Diesel. For those that don't know, we invested in Diamond Green Diesel, not to be in the energy business. We don't know anything about energy. We built it as a transformation unit for waste fats and oils not to put an age on me today, but when I entered this business, waste fats and oils had a trading range of $0.08 to $0.15 a pound. The April P&L shows that they're trading somewhere between $0.68 and $0.77, FOB plants now.

We have transformed this business because we created a machine that can value add this equivalent with the other big food oils and fuel oils in the world. Then 2022, we came out of it one more time. The balance sheet looked good. My job has always been not only to be the steward of capital, but to also help a chance to create relationships. And it's the funnest part of my job is building this relationship. You don't know when the founder is going to decide to transition and they're all under different circumstances, but here came the #1 chicken render or poultry render in North America, Valley proteins, 18 plants, been close to the family, and we created a deal to do that.

And oh, by the way, here came 16 plants in Brazil at the same time, much smaller. But still, we fundamentally I'll show you why we have invested in Brazil. And then we like green energy and green energy is not only renewable diesel, green energy is in the Benelux countries, we're the largest green energy provider from biomethane and that's food waste recycling. And if you see a picture out there, that's Uitbeker and Callewaert, Belgium, '22 goes by and then '23, we're bringing on Diamond Green Diesel 3. I originally said we weren't in the energy business. When we built Diamond Green Diesel 3, we entered the energy business. And what I mean by that is we now consume more fat than the Darling global system produced. And that was quite a learning curve for us as we went there.

Now we had the biggest quarter in the history of the business in '23, we felt pretty smart. Here comes Gelnex succession plan. Patriarch 84-year-old father of the founder, developed dementia and the children didn't want anything to do with the business. #1 producer of bovine grass-fed collagen in the world out of Brazil, great position, great factories really built in the last 10 years. And so we looked at each other and we said, "Boy, we got -- we still got quite a bit of debt out of there from Valley and FASA, you think we can do it and we said, yes, we think we can do it, we'll do it with all debt. And ultimately, we did.

That put us in a pretty tough position because what happened and not only did we buy that, we bought a small plant. It's a couple of plants in Miropasz. We'd invested $500 million in the SAF production. And the story there was we decided not to use any equity at the time because we had the confidence in the business and the strength of the balance sheet and the ability to risk manage through these scenarios in a deflationary time. What we didn't envision at the time was having a policy environment where as you'll hear the renewable fuel standard or renewable volume obligation just kind of vaporized for a year. And we went to overproduction in the green energy business. And that put us in a pretty challenged position.

So today, as we move forward, you're going to learn about those headwinds are gone. They're blowing pretty strong from the south right now, feeling pretty good. And Carlos will teach you how long that will last and what we see in the future going there. And then I'm going to try to teach you with the help of Bob about what we're looking at for the future. So as Suann already covered this, basically 1 out of every 6, 7 animals in the world goes through one of our factories after the meat goes to the consumer.

The gelatin collagen market, we won't spend a lot of time talking about our joint venture with Tessenderlo. It's still an antitrust review. We're making lots of progress there. We're confident it's going to close. We're hoping to close it here yet this summer. It allows us to grow our position significantly in areas where raw material is available and we're not.

So we're at capacity today in our rendering business globally. We're at capacity today in our collagen business globally. We see the collagen business growing rapidly over the next 5 to 10 years. David is going to help you understand why. I'm always going to remind you that remember in the collagen business, 80% of that process is animal feed and animal fat. And so not only in these tailwind markets now, the deflation or of the commodity markets, the Rousselot business is getting a nice uplift from that.

And then the fuel business, Carlos, as I said, we'll try to take you through. We're going to try to show you the S&D. We're going to use the Bloomberg, ran S&D. We've got our own version of it, but we'll talk to you about what we think that can be. I mean everybody wants me to forward guide that business, very difficult to forward guide, but it's doing quite well, and we'll talk more about that, especially during Q&A.

So you've seen that. We don't need to talk about that again. But I want to talk to you about why Global scale where it matters. And this is, I think, one of the more powerful maps that we can put out there in the world, more facilities than ADM you start to think about it. Maybe we're not handling grain and crushing millions of tons of soybeans but ultimately, we're where the animals are.

The U.S., as we look forward here, continues to grow. Poultry is is growing very, very rapidly. Chain speeds are going up, demand for the other white meat chicken is really doing well, beef is in a down cycle. We've never seen a down cycle like this in beef for 75 years. Herd replacement, probably still a couple of years out, but that's okay. At the end of the day, we've got -- it gives us a little time to get ready for that, and we'll talk a little more about that. This is why we went to Brazil. The numbers are unbelievable down there, the amount of, as I always say, land, water and people, they have it all there and they can continue to produce beef, but they're moving rapidly into poultry and also pork.

Europe, this is the impact of climate change. This is green initiatives. I mean this is where somebody went over with an aerial map and measured nitrogen levels from 20 years ago and said, they've got too much manure. Well, what happens? Well, it doesn't mean they're not going to eat. It means that Poland, it means Spain, they're producing more animals. It means it's now moving east. We're moving east. We've got joint ventures already in the Czech Republic and other areas in the East. The numbers will move east there.

China came back sharply after ASF. It's still growing, huge importer of soybeans, huge importer of meat, Brazil beef to there, it's -- we don't see that slowing down. What we do see slowing down, ultimately, we'll talk about with China is their production. They're out of land. They're out of water. They can't buy more proteins and other things. So it's -- really end of the day, it's a U.S., Brazil production system is what we're building.

So today, before I turn it over to Carlos here, we're going to talk to you about a road map. We'll look at it at a 3- to 5-year road map. Yes, there can be lots of different things that happen in that 3-year window. You've got an RVO for the next 2 years. It's very solid. What happens after that? Hard to say, but it's hard to believe that we'll go backwards from where we are. You're going to see that the road map that Bob lays out that's already out in that presentation took Q1 of 2026 and then kind of multiplied times 4. That doesn't mean that's what we believe. That just means that's the point in time we chose. What we're seeing when we did our earnings call a week or so ago was this is the first time that we've done an earnings call before we've seen the first period of the next quarter.

The first, April, as we call it, or period 4 now is starting to come in, and it's materially stronger than what we told you. And I think that -- so that will be the one headline on Bloomberg, Sabrina. It is materially stronger. That's driven by higher prices, strong volumes, fuel demand, fuel margins. It's really, really hitting on all cylinders. And then we're going to get to show you some scenarios in the balance sheet. And I haven't forgot that I was probably giving this presentation 3 or 4 years ago when I thought I'd be debt-free by right now, I thought I'd be paying Jeff Gates a dividend. He'll never forgive me for that one. But I get one more shot at it. And I think you'll get to see how we're thinking about it and ultimately, the flexibility, as I referred to it there.

From an M&A front, we're not done growing, but we're not M&A focused. We own the big items that are out there, and we have built the foundation. But over the next 3 to 5 years, there's no less than probably 20, maybe up to 30 new factories that are going to have to be built around the world to meet the growing demand of meat. And so we'll show you all of that. And then we'll let David kind of woo you with the collagen product line, and you kind of start to ask a lot of questions about that, what it can be. And we've always said, if we're half as successful in our Nextida wellness program, over the next 5, 7 years, we'll double the earnings in the Food segment.

So half as successful as our prior collagen, which most would know at the time was vital proteins underneath this company. So we're excited about these products. He'll tell you what's in the pipeline. So not only do we have a strong balance sheet to give us financial flexibility, we've got new plants and products and new opportunities around the world.

So with that, Carlos, I will turn it over to you.

Thank you very much, Randy.

And good morning, everyone, and thank you for being here. Really appreciate you coming and listening to us. My name is Carlos Paz, and I will be talking about our Diamond Green Diesel business. But first of all, I want to talk to you about what a great story Darling is. And as Randy alluded to it, but I think to me, the brilliance of Darling and Diamond Green Diesel as an early adopter was our ability transforming waste fats into a global opportunity, okay? The waste fat markets were driven by feed dynamics in the past. Margins were constrained and the business was very cyclical.

As Randy alluded to, in those times, early 2000s, we have a chart here over the last 25 years of the value of fats and corn. In the early 2000s, the value of fat was somewhere between $0.07 and $0.10 and look what has transpired since. The value of fat in 2022 got all the way to above $0.80 a pound. So that is a transformational game that Darling has brought to the market. And as the largest animal waste animal producer in the world and as the largest used cooking oil collector in North America, Darling captures this massive upside in the market.

Now I'm going to talk about our used cooking oil collection business. This is a great map that shows our facilities in the U.S., our rendering facilities and our used cooking oil facilities in the U.S. and Canada. We run a very much an integrated business. We leverage our rendering facilities to maximize the value of our used cooking oil processing and collection facilities. We leverage this by creating synergies between the 2 businesses. And how do we create the synergies? We maximize the economies of scale, and we take full advantage of the logistical advantages that provides by running these businesses as an integrated business rather than a separate business.

A used cooking oil business is a fantastic business. We own over 90 facilities in the Continental U.S. and Canada. We serve the population centers of 90% in the U.S. and Canada. something that I'm very proud of. We collect from over 160,000 restaurants in this geography. How do we do that? By using over 2,100 fleet units to be able to accomplish this job. And we serve over 8 industries in this space between restaurants, groceries, et cetera.

And where does all this global fat and the used cooking oil business that we aggregate around the world and North America goes. The great majority goes to our Diamond Green Diesel business. We are truly a global industry leader in this space. We're a profitable entity. As Randy showed, we started in July of 2013, and we've had positive cash flow since year 1.

We've invested over $6 billion in this entity and what is impressive that is having self-funded, and Bob will expand on that. It's strategically positioned where we have world-leading size, scale and location. It's one of the largest renewable fuel producers in the world. We produce roughly 1.2 billion gallons of renewable diesel. Including in that is 235 million gallons of sustainable aviation fuel or SAF. We're very proud that we're very nimble, and we have an agile supply chain. What does that mean? We have extremely versatile inbound and outbound logistics. We can buy feedstocks from anywhere in the world. We can buy it by water, either by vessel or barges. We can buy it by type. We can buy it by rail, we can buy a truck.

In the same token, we can execute ourselves in the same mode of transportation to make sure we're maximizing the margins of the entity. We have massive pretreatment unit, and this allows us to handle all types of feedstocks from virgin veg oils to the more complex fats that we can buy around the world. This paints a pretty good picture how well positioned is Diamond Green Diesel in the world in the international markets of supply and demand. We are located in the Gulf of Mexico or Gulf of America, whichever you prefer, and we buy feedstocks from the centers of production.

As Randy alluded, our rendering plants are where animals are and DGD buys its feedstocks where those get produced, mainly from the United States and Canada, South America, from Brazil, Argentina, Uruguay, even Colombia. We buy from all over Europe, and we also originate from Southeast Asia. Everything goes to our 2 facilities, one in Norco, Louisiana and the other one in Port Arthur, Texas and it gives us efficient access to the demand centers.

This year, especially in the U.S., mainly the West Coast, Canada and obviously, when the market determines itself, we go to Europe as well.

Talking about demand, it is something that has been in everyone's mind is the RVO. The renewable volume obligation, which became essentially law in April 1, 2026. The much anticipated RVO did not disappoint. It was quite robust. The 2026 and 2027 annual demand is 5.4 billion gallons compared to the 3.35 billion gallons of a year ago. So the delta is over 2 billion gallons of increased demand. It favors definitely domestic feedstocks, which is extremely supportive to Darling's core business.

The global demand right now for renewables is solid. As you've seen, Indonesia, Brazil and Europe are increasing the potential demand for renewables. And in crude oil tightness because of what's going on in Iran today is making renewables very attractive, very economic. When we're paying $6.50 for a gallon of gas in Chicago or $12 in Europe, renewables become a very economic and attractive option.

I can tell you today, DGD is operating at a high capacity utilization because the margin after the RVO is a very attractive environment. And as Randy alluded to, how do we view this picture of the current RVO. And I think how do you -- especially with my trading background, the easiest way to do it is to put in a supply and demand. And I want to thank Sabrina and the Bloomberg team for providing this to us.

But I think, obviously, in the top -- you all probably have seen this, but the top side of the table essentially looks at the demand side of the equation. The middle part looks at the supply side of the equation, how are we going to be able to meet that demand. But the most important part is the lower line, which shows the balances. As Randy mentioned, the RVO from last year wasn't a robust one. So what it implies that we have a oversupply of RINs in 2025, and the balance is almost 2.8 billion RINs, which obviously are going to be used and consumed in 2026, given the increased demand that we have from the current RVO.

And we agree with the scenario that Bloomberg paints here, which essentially balances the S&D in 2026. There's an increased supply, the margins are there. We're going to meet the higher demand, and we're going to more than likely balance the S&D. RIN value should continue to support margins as they are the great equalizer, but Bloomberg shows some potential deficits as the demand increase in 2027. We believe those deficits can be addressed mainly by higher production. Engineers and plants when there's sustained higher margins, good returns, find ways to produce more internally. This tend to happen in every industry. That's the beauty of capitalism.

Also with this increased demand, imports of biofuels to the U.S. should increase. The U.S. should become the high-price islands for renewables in the world, which means imports need to come to the U.S., the best margins in the world should happen to the U.S. and what gets exported out of the U.S. should be very small. And this is how we believe there's a potential to balance the deficit that is growing in 2027. When you put all of this together, it's extremely supportive for DGD margins.

With that, I will pass it on to David. He's going to talk about a great collagen business.

Thank you, Carlos. I appreciate it. Good morning. My name is Dave Van Dorselaer. I lead sales and marketing for Rousselot. And I'm honored to be here today and represent our global Rousselot team and share a little bit about how we are going to help our customers lead in the next era of wellness through collagen.

And so for the next few minutes, I'm going to cover 3 things. I'm going to talk about the current trends that are happening in the collagen space, how Rousselot is poised to be able to help support and lead over the next few years, several years as we go forward and capture those trends. And then we've got something special with Nextida as a platform. And I'm excited to share that with you as we go throughout the presentation here.

So let's jump into it. We had had this conversation 10 years ago, we would be talking about collagen as a niche type product, right, the hair, skin and nails. You can see back in 2016, there was about 600 products around the world that had some collagen in the functional food and beverages and supplements that were brought to market. And today, we're at over 1,800 products globally around the world that have collagen in them. And that is a 50% increase in just the last 3 years.

So as I walk a little bit more into the trends coming up, I'll walk through what's happening there and what started to happen in 2022 and into 2023. But some of you may have already seen what's happening because we've got some good samples in the back with John and Louise in the back, and I see some of you have already got your collagen drinks in different applications. So you can see that the application trends are also changing, right, from the powder to mixed ingredients with hydration with electrolytes and collagen as well as sports nutrition and overall wellness.

So let's jump into it and keep moving. Let's start -- take a step back just for a second and talk about what collagen is. And collagen is the most abundant protein in human. Think of it as the glue for our body, our skin and our joints and our structure. And as we get older, we lose just a little bit every year. And that is where the ability to have supplements like collagen that are bioactive, bioavailable allow us to be able to consume those supplements and support reinvigorating the collagen in our system. There are 28 types of collagen that are in the -- that are developed. There are 3 that are the most common, that's type 1, type 2 and type 3 collagen. And collagen has been used for ages, right? So collagen has been around for several hundred years. If you think about our other businesses that we have, we have a gelatin business and the collagen business is how we go to market in Rousselot.

The gelatin manufacturing process, you can create gelatin or you can create collagen by adding hydrolysis and spray drying. And that's how we create collagen in our manufacturing facilities.

So jump in and start moving into the trends. Consumer trends, they're all in on wellness, and that is driving the collagen boom. There are 3 things that we see, and you can see that with the variety of the applications that we have on the screen. There is an aging population that wants preventative health and nutrition. There is the rise of food as medicine. So we want to consume more natural ingredients, right, to be able to help us in our overall health journey. And then there's an increased demand in protein.

So that's where you start to see in that 2022, 2023 time frame, the protein craze and the GLP-1 drugs that are out there, people need the protein to be able to support their diet and collagen is an opportunity there. So this is one ingredient that is positioned for growth across multiple industries.

I'll talk a bit about applications. I think this is an area where Rousselot can really help and stand out in the market.

You can see a wide range of applications here from cookies to beauty products, coffees, traditional powders and gummies that are out there for our consumers. But our application labs that we have, that is pretty unique. We have 3 global application labs around the world. And this is where customers can bring their applications to us, their ideas, and we partner with them to help solve some of the complexities that come up as you introduce new applications in the market. And that gives us that deep partnership and long history that we have with our customers to be able to support them as they bring new ideas to market.

Yes, we work with large global multinational companies. We also work with innovative start-ups and founder-led companies that have an idea that they want to bring to market. And that's where Rousselot can help our customers. And we have several examples here on this slide and also in the back. So if you haven't had time to try some of the collagen samples that we have, please feel free just after the session.

So as I start to talk -- move from the second point around collagen and how Rousselot can help and start to transition into our Nextida platform, there's a few things I'd like to highlight here. You need the expertise of collagen, the history that we have. We have the scientific expertise with our science and innovation team that can help lay the foundation for us to build Nextida.

We've got the process control. I'll talk a little bit more about why that matters in a second. We have the global scale that we need. Collagen is a trend that is happening around the world. I was just in Spain last week, work talking with our European customers. This is a global initiative right now with collagen that is growing around the world. And we bring that deep industry knowledge. And I was going to talk a little bit about something Randy, you talked about, about entrepreneurship and our team.

We have something really special at Rousselot, and it's our people. And they're the people that are working on Nextida because they want to help people live better. And Nextida is a platform. It is not a product. And this team and this company is really passionate about that, and we're provided with the resources we need to be able to develop these entrepreneurial ideas like Nextida.

And so we're really excited about what Nextida can bring in the market. We start with the industry knowledge, right, the history that we have with collagen. Collagen is a long chain protein. It's got a broad peptide mix. So we take that collagen and we unlock the code, unlock the code of collagen with Nextida. So that's where we control the process, we can define the outcomes. And that gives us the targeted functionality that we need and that our customers are looking for to differentiate in products in the market.

And Nextida GC is just the first product under the Nextida platform. This one is focused on glucose control. So it reduces your post-meal blood sugar spike. It also naturally increases the body GLP-1, and it leads us to feeling fuller longer. And this is just the first example that we brought to market. We're very proud of Nextida GC, and this is just the beginning.

So with Nextida, it brings us the opportunity to have accelerated revenue growth with margin expansion potential. There's higher pricing power when you have products like Nextida GC that give differentiated experiences and outcomes in the market. That gives us improved margins and premium segment expansion. I would also say when customers are formulating with us in the application labs and they're introducing Nextida into their products, it really creates a stickiness with that customer for a long time. And you mirror that with our co-branding from a marketing standpoint, where we work with customers, we actually are co-branded with them with the Nextida platform on the products that they bring to market. It really helps us to accelerate the brand recognition around the world.

So invest in the collagen transformation with us. These are clinically validated products that we're bringing to market with Nextida GC. As I mentioned, this is just the first one. Our next focus will be in the cognitive space. And so we are well positioned to be able to excel in this new era. And again, this is a platform. We have a long library of peptide chains that we're studying around the world that we believe that will be -- keep us quite busy for years to come.

And before I wrap up here, I would like to just add one of the things that we need to help us accelerate that growth and to make sure that we can compete long term in the broader health and wellness sector is the announcement that we made with the joint venture opportunity between Darling Ingredients and Tessenderlo Group. This is where Darling is contributing Rousselot to a new joint venture company and Tessenderlo will bring in PB Leiner.

As Randy mentioned, we entered into a definitive agreement in December, and that's going through the process. But we're excited about what this opportunity can bring for us. I think for me, the diversified global portfolio in attractive regions will help us as well as the gelatin solutions that are really important for the pharmaceutical industry.

So thank you very much for the opportunity to be here. I'll now turn it over to Bob, who'll give you an update on the financials.

Thank you, David. Good morning, everyone, and thank you for the opportunity today. I speak to a lot of you frequently and -- but I'm excited about the opportunity today to talk about the business from a slightly different perspective. I'm going to really summarize our value proposition. I'll talk a little bit about our balance sheet, our debt position, the cash picture, how we see the outlook of the business from a number of different perspectives. And as Randy said, talk a little bit about how we see the future and what those plans are.

Before I do that, though, I want to just come back to talking about Darling and explaining Darling. We hear consistently that Darling is a complicated company. And for some people, it's hard to understand. And so we're going to try to demystify that as we go forward. From our perspective, it's really quite simple. We are -- our raw materials that make up 98% of Darling's adjusted EBITDA come from animal byproducts and used cooking oil. There are over 100 million metric tons of supply of these products. 90% of it is animal byproducts. That's a lot of supply in the world. And animal numbers are animal production continues to increase.

So I think when a lot of people think about Darling, they kind of think, well, how long is it going to last? What's your supply picture? We're in a very stable position as it relates to supply. And when it comes to the processes that we have to run our business, there are 2 primary processes, we have collagen extraction that we're extracting from animal skins and bones. And then we have animal and rendering and used cooking oil processing. And as Carlos pointed out, we do those things as an integrated business.

Pretty straightforward what we're doing. We're taking animal byproducts, used cooking oil. We are processing those things, and we're adding value to those products. And that's where it gets complex. And so I think it's complex in the right way from our perspective. The reason why that is attractive to us and to the market is because we're doing things as a P&L center that other companies are doing as a cost center, which means that these are businesses that are core to us. We're reinvesting in these. We're investing in innovation. We're investing in efficient operations.

And so we can be a leader in the industry at creating all kinds of value-added products from these core processes. And then as we -- as Carlos explained and Randy explained, the fuel segment is essentially an extension of the Feed segment. It makes sense for us to be invested in that segment because at the end of the day, we can be in that space and we can compete in that space, and we can control the outcome better if we are in that space. So that's just another way to look at Darling and hopefully simplify that picture a little bit.

The value proposition. So Randy said this when he started, we are an essential service. We're an essential service for 2 reasons, 100 million metric tons of product that's a lot of biomethane emissions that the world would experience if we didn't do something with it. It's essential that we do, and that's the role that we play.

We also have a really important role in the broader meat and food industry. The value of what we do gets passed back to the producers of human meat production, and that ultimately leads to a decrease in the cost of meat for people around the world. So our -- what we do is essential, and that's an important part. We've got a scale global footprint. We talked about it. And I'll talk a little bit about kind of the history over the last several years and how we've been able to complete that global footprint. But that global footprint gives us certain advantages and stability that we didn't have before.

We consistently generate cash, and that's a result of making good acquisitions, being in the right place, running a good business, but also because of the competitive dynamics in our industry that we believe are more attractive than what you might see in some other commodity-based businesses. And then operational best practices and product innovation. This is who we are, and this is what we do. We'll talk about all those things.

I'm going to fast forward to this one first, and we'll come back to the others. A short history. Randy gave you the long history, but just kind of an update on the short history. The acquisitions of '22 and '23 were really important acquisitions for us. We bought Valley Proteins. We bought FASA in Brazil, and we bought Gelnex in Brazil. We also bought Op de Beck and we had Miropasz, there has been some others. But those 3 were really critical at rounding out our Global Feed segment and our Global Foods segment, which essentially is our global rendering business and our global collagen business. Those acquisitions put us in the right places for the right reasons, and we'll talk a little bit more about that. We funded those acquisitions with cash flow and debt. The expectation was that we would pay that debt down relatively quickly.

And as Randy talked about, we experienced somewhat of a down cycle in our markets at a time when we were integrating businesses and integrating businesses and companies is hard, and it takes a little while. And so we went through that process. Despite that in '24 and '25 and despite being in a down cycle, we generated positive cash. And if you looked at the run rate from the first quarter of 2026 and you extrapolate that out through the year, we are poised to generate over $800 million in cash in 2026.

And as Randy started with, really, our environment is looking better than what we saw in the first quarter. We come back to our debt and our leverage ratio. So consistent with the picture that you saw in the last graph, as we took on debt to make these acquisitions, our leverage ratio increased. Our debt was high, relatively high. But if we look at the first quarter and extrapolating that out for the year, this -- the bar chart assumes a $700 million of debt paid down. We get our debt down pretty close to $3 billion by the end of the year, and our leverage ratio is below 2.

So we're feeling pretty good about where we are today as far as this goes. As I said, it might have taken a little bit longer than expected, but I think now it's accelerating at a rate that may end up surpassing expectations. When we look at our overall debt and our obligations there and where we sit, we're really comfortable with that picture. If we end up -- if we are -- if we do get our debt paid down to near $3 billion by the end of the year, that implies that almost all or all of the $2 billion Term A revolver line that we have would be paid down. And when we get to April of 2027, that's the expiration of a $500 million bond.

I think we've been really clear on calls and one-on-one discussions that our plan A is to pay that bond down, and we can either do it with cash on the balance sheet or taking money from the revolver to pay that down. We've got quite a lot of flexibility as to how we handle that, and that would -- is what we think would make sense to do at that point in time.

In addition, once that's done, we've got quite a lot of flexibility in time. We don't have anything that comes due until 2030. We have a lot of flexibility and headroom with the $2 billion line that we've got. And so we really like our position once we get to that point where we've got our debt paid down to around $3 billion.

So I want to shift a little bit to giving some insights on some of the operating metrics that we use to run our business and really emphasize the focus that we have on performance of the 260-plus assets around the world and the priority in our company to generate cash -- positive cash in all those locations. We talk a lot about adjusted EBITDA. Adjusted EBITDA is an easy number to understand. It's an easy number to use to compare different companies.

But at the end of the day, what really matters to us is, are we generating cash? Are we generating cash in all these different locations that we can use to reinvest in the business? That is -- we use a very simple metric to come up with what we define as implied net cash. So every -- whether it's an asset or whether it's a business, we can use it for different purposes. But we start with the adjusted EBITDA. We deduct a cost of debt. That's a combination of a term debt allocation based on the book value of the asset in question and total term debt that we have.

And then there's a maintenance cap or a working capital debt charge based on actual use of working capital. And then we also deduct maintenance capital. The Warren Buffett story that Randy told and the significant amount of capital that's required to run this company. It's true. I think we've forecasted that we'll spend around $400 million in maintenance capital this year. That's cash that we don't have access to at the end of the day. And so we want to see what our assets and business performances look like after paying for that maintenance capital.

I will say later, I'll talk a little bit about how that high cost of investment is actually an advantage for us and not a disadvantage, but I wish Warren was here. And then we take that implied net cash number. It's a great number for us to use to have our P&L managers focused on. But we also then will divide that by different things so that we can compare that performance on a relative basis. We do look at invested capital as a way to do that. But what I really wanted to emphasize today was how we use that number as it relates to replacement value of our assets. And this is especially important for the rendering and used cooking oil business.

But the calculation is also very simple. We take that implied net cash. We divide it by the replacement value of the assets or the business that we're talking about, and that gives us an implied return on replacement value. So why is that important? First, let me just point out, 95% of adjusted EBITDA in the Feed segment is rendering and used cooking oil. So when we talk about feed, we're essentially talking about that. The reason why one of the reasons why implied return on replacement value is so important for that business is because of the inflation period that we went through over the COVID era. The cost of industrial construction from 2019 to '26, it increased 65%, 70%. We've got a lot of fixed assets. We put a lot of money into our fixed assets.

And therefore, we need to increase the fees that we charge for the use of those fixed assets to keep up with what replacement cost is. That ensures good discipline. If we're able to do this, and the reason why this is important as well is because of the competitive dynamics in our industry. We have the luxury of having a lot of raw material -- a lot of moisture in the raw materials that we source. So what that means is if we're bringing in product from someone and we are a certain distance away and if our supplier wants to go somewhere else, that added water in the freight is going to cost money.

And so what it does is it prevents some of the irrational behavior from competitors that you see in other industries. The example I go back to is I lived in China for a while, and I worked in the oilseed crush industry. And this is back in 2010, 2011 when state-owned companies in China were coming into the industry and building out capacity and everyone was competing for market share. And we were generating a negative $40 a metric ton loss before variable costs. That was completely irrational behavior. We don't see that in our business because, again, if someone wants to try to do that, they're going to have to decrease the fees they charge or even pay someone to take the product just to try to get market share that probably isn't sustainable on a long-term basis because they're not close enough to where they are.

So this is a reality of our business. It provides stability in terms of the margins that we earn and the cash we can generate. And so it's really important then with the inflationary period that we went through that our teams are disciplined about the way we're pricing our contracts. We're getting paid a fair value. This methodology of implied return on replacement value, it ensures discipline on one hand. But on the other hand, it also ensures fairness for the supplier. If you're generating a return on replacement value that's too high, well, then you're just incentivizing a competitor to come in and compete with you.

And so what we really use this for is to help our teams really focus on the market, what's the right thing to do. What we're -- one of the things we're really excited about is with the acquisitions that we've made with Valley Proteins and FASA, we have made changes to our contracts. We have made improvements in the operations. We have increased the implied return on replacement value in those businesses. But we still see opportunities for improvement. And we believe that over the next 2 to 3 years, we can increase the implied return on replacement value by 2% to 3%, and that implies an additional $150 million to $300 million of EBITDA from the Feed segment. So we're very excited about that.

The way we do that is Operational efficiency. One of the things that Carlos and his team is focused on is now that with this Valley Protein acquisition, we have entered the poultry rendering industry on a large scale. We are working with those proteins that we make and identifying the best destination markets for that product, and we're getting more from it. That's an example of that.

The commercial optimization, price risk management is another one. I think with our global footprint that we now have, we've got a line of sight into what's happening with world oils and fats that other companies don't see. That helps us understand and determine when a supply and demand analysis is loose or tight and how we should manage our commercial plans as a result of that and be much more strategic and precise about how we do that.

The contract management, that happens over time. In some regions of the world, contracts are renewed once every 3 to 5 years. In some regions of the world, they're renewed every 3 months. In the cases where there's a long time line for the contracts, it's tough to adjust the prices all at one time. But over time, we're able to get that fair value and ultimately generate what we consider to be a modest return on the replacement value of assets.

Market conditions is the one thing there that's outside of our control. And certainly, when we're in an environment like we are today, those are tailwinds at our back. But I think the message here is that there's a lot that we can control that is outside of any influence from the market because we're an essential business, because of the competitive dynamics, we see much more consistency in financial results and cash as we go forward.

Shifting to the Food segment, which, again, the over 80% of the EBITDA -- adjusted EBITDA in the Food segment is collagen and the collagen business. We have a similar opportunity in terms of getting more value out of our existing footprint and infrastructure, but for very different reasons. And I mean, David really highlighted these things, and it's -- and we're very excited about it.

The track record here is that over the last 5 years, we've increased the mix of collagen gelatin from 20%-80% to 30%-70%. If you look at the -- on the left -- bottom left part of the screen, if gelatin margins are a factor of one, Hydrolyzed collagen margins are 2.5x to 3x that and the targeted ingredients or the active peptide collagen is 7x to 11x that.

So Randy made the comment that if our Nextida business or our target ingredients business could sell half as much volume as our normal hydrolyzed collagen business, then we would double the EBITDA in the entire collagen business, gelatin included. That's the opportunity. And so what we're focused on is developing the Nextida portfolio of products. If they can represent 3% of our volume, that would represent 15% of our EBITDA.

The beauty of this is we can make those products through our existing infrastructure. The only difference is we use different enzymes to cut the amino acids and create peptide profiles that have those targeted health benefits. That's really the only difference. And that's, again, one of the reasons why we're so excited about the potential opportunity with forming a joint venture with Tessenderlo. And that's because this is technology that we have that no one else has. We innovate in collagen more than anyone else does in the world. If we can bring that innovation to their asset footprint, then we believe we can get significantly more value from that footprint than what they're getting today. And there's some underutilized capacity there that will allow us to continue to grow. As Randy said earlier, we are at capacity today in our collagen business.

So when we kind of look at trying to imagine a post-2026 picture and we're sort of thinking about, well, what would -- what do we consider to be down cycle, mid-cycle, up cycle. This isn't worst case, best case. I want to be clear about that. But it does sort of paint a picture around how we see ranges, and I want to give a little context to this.

First of all, the down cycle. So what would cause a down cycle? Right here, it says DGD, $0.33 a gallon average margins. We don't -- certainly don't expect that through 2027. We have an RVO in place that's very robust, as Carlos showed. We just don't -- we don't see that. But beyond that, I mean, who knows? I would say we think it's unlikely that it looks like this, but we want to be respectful of what's possible. And so when we always do that when we think about our balance sheet, we think about what opportunities we have and what commitments we want to make in terms of capital investment, we have to go through that process and look at what a down cycle looks like.

I will say that we went through a down cycle in '24 and the beginning of '25. And despite making the acquisitions that we did in 2022 and 2023, our balance sheet withstood that just fine. And so that down cycle analysis was done then. We continue to do that today. And this is what it looks like for us.

So at $0.33 a gallon would imply a pretty disappointing RVO '28 and beyond. And we're not really expecting that. One of the reasons why is because, hey, the policy has worked. This policy was announced on April 1. One of the real intentions of that was to improve soybean prices at the farm. Soybean futures are above $12 a bushel and climbing. And so I think this policy has achieved and is achieving the objectives of this administration. So we don't expect in 2028 an RVO to be completely disappointing. But if it was, this is what that picture looks like.

Global oilseed crops, veg oil protein, I mean, let's just say, less than $0.50 a pound for fat and lower protein prices would mean that there's a problem with demand in the world and an abundance of supply. And then the tariff environment. The tariff environment has not been particularly negative to Darling. But there's a lot of different forms that, that can take. And if it were somewhat negative, then that's kind of what describes the downside scenario.

The nice thing about that is if we assume, again, $3 billion in debt, and that's sort of what's assumed in the debt cost number here, reasonable CapEx, reasonable taxes, we would still be generating $400 million in cash even in a down cycle as we go forward. And that's in part because of this global infrastructure that we have and the reliability of that infrastructure.

When we look at a mid-cycle or an up cycle, I mean, we can go through all these different versions. We could come up with 10 different versions. The bottom line is the external environment is going to shape what some of these things look like. We've given some examples. I mean, in the mid-cycle, that really takes -- that would suggest that our first quarter run rate is kind of a mid-cycle type of an environment. That's an $875 million of potential cash generation. So still very healthy in a mid-cycle environment. And in an up-cycle environment, it starts to get pretty exciting.

So positioned for significant cash generation as we go forward. And I do want to make a distinction here. Carlos shared some information about Diamond Green Diesel, and this is where things are a little bit different for us than they have been in the past. So Diamond Green Diesel officially founded 2013. Obviously, the idea started a bit before that, $423 million invested by Valero and Darling together. In total, that's -- there has been about $6.5 billion of cash either invested in the business or provided to the business for working capital. Over the history of the Diamond Green Diesel business, there's been almost as much money taken out as dividends as there has been contributed.

So when investments have been required, each parent company contributes capital when they generate surplus cash, they get dividends back. Roughly $1.3 billion have been put in, taken out and then the rest has been self-funded. So if you look back at the history of this investment, it's really been an incredible story. $400 million invested upfront, $6.5 billion have been invested in total. And outside of the initial $200 million investment from each company, it hasn't cost either company anything to do that. And so a start-up that really has generated cash.

Now what's different is as Diamond Green Diesel generates cash, we're not really planning to put the cash back into Diamond Green Diesel. We've got the footprint that we want. We may someday add more sustainable aviation fuel capacity to make some more of the renewable diesel capacity agile and flexible, so it can switch between the 2. But we need some market commitments to do that.

But now as we joke a little bit, this is like being able to go to the Pink Pony Club. I mean we are free and clear. We can take this money and we can use it to reinvest in any way that we see fit for what's in the best interest of Darling and Darling shareholders. And so this outlook shows what that picture looks like given those 2 different -- those 3 different cycles.

The down cycle, we're assuming doesn't exist in 2027 just because of the RVO that's in place and what we're seeing right now. If it happens '28 and beyond, then we're still generating over $2 billion in cash over the next 5 years. And the mid-cycle and the up cycle starts to generate a pretty exciting amount of cash, $4 billion to $6 billion. And what would we do with that? Randy talked about the organic growth that needs to happen in the company. We've built these and bought and put together this global footprint. And so we now have the luxury of not having to say yes to something new that's on the market that's for sale. We are in all the places that we want to be. Sure, we'd like to maybe have it look a little bit differently here and there.

When we think about what our opportunities are, there's opportunities to organically invest, and I'll talk about that more in just a second. Certainly, additional debt paydown is possible, share buybacks, dividends is a possibility. And I think what this demonstrates is that those are all things that now we can consider that we really just we considered a little bit in the past, but then when you thought about strategically what was the right thing to do long term for Darling shareholders, it made sense to add pieces that we didn't have.

Because we've got these things in place now, we can consider some things that, quite frankly, we just really weren't in a position to do in the past. And so those are things that we just wanted to give insight around. We're going to be looking at that as we get this balance sheet to where our debt is down to $3 billion or below. And then we'll see what the outlook is for cash at that time and decide what to do.

Growth, and this is just, again, some of the things -- sometimes Suann and I will be talking to some of you all and others and people will say, well, gosh, you guys -- are there any other big things out there? Are you going to be done growing? Like what's -- what more is there to do? There's still a lot more to do. When you think about the different segments and what we have and some of the things that we have going on, I mean, I won't read this list, but the bottom line is there's still plenty of runway for Darling. We are ahead of the pack when it comes to our industries, whether it's rendering used cooking oil or collagen. And there are things that we can do to continue to stay out in front, and we intend to do that.

And so in summary, if I could leave you with this from a financial perspective, we are committed to solidifying our position financially. That means reducing our debt down to below $3 billion, below a 2.5x leverage ratio even in a down cycle type of an environment. We are committed to optimizing this portfolio, and we are positioned to generate $4 billion to $6 billion in cash over the next 5 years, and we're going to do everything we can to make that happen and then delivering long-term shareholder value. This balance sheet is in a really solid place. We're excited about what it's going to look like when we get to the end of this year and what that may allow us to do in terms of funding shareholder value initiatives and continuing to methodically grow to maintain the strategic advantage we have.

So with that, I don't know, Randy, if you have any last words or we open it up to questions.

Let's go ahead and open it up to questions, and then I'll have some closing statements when we're done.

Great. Questions up here already.

Tom we'll get you a mic here in just a second here.

Tom Palmer, JPMorgan.

Thanks for the presentation -- very efficient, too. Wanted to maybe follow up on a comment you made, Randy, about April coming in stronger than you expected. Maybe just an update on what areas of the business kind of drove that upside versus when we were speaking a couple of weeks ago, what you thought it might look like? And then I guess, any additional commentary you might want to provide on kind of how you see the rest of the year evolving at this point?

Yes. So like I said, traditionally, historically, we've always kind of seen period 1 of the next quarter. Given that we wanted to mirror Valero in their announcement on the 29th or 30th, we did not have those numbers ready to go. The good news of having 260 facilities, you have 260. The bad news is consolidating that is a task. And I said, you obviously want to stay off the wall of shame. So we're very -- the team to get there, I just got to give them time. I can't push them in the sense I want to make sure the numbers we turn out are real.

So all we did was basically divide March by 5 and took at times 13. And I looked at [indiscernible] with that a little bit. And let me talk about what a little bit means. We've seen commodity cycles in the past that have caused fat prices to move up, typically driven either by a hemispheric drought or policy change in the moment. We've never seen fat prices move up like they've moved.

So to be honest, we're still not sure how those are flowing through. How does that translate back to the raw material contracts, the timing. Our entire portfolio in North America is headed to Diamond Green Diesel. That wasn't the way a year or 2 ago because of all the imports. So there's a lot of moving parts there. But it's flowing through. We started to see it. So that's true of the, we'll call it the feed segment. The collagen or Food segment, we've got some major customers there that started to -- that Jan, Feb and the consumer products markets have always been let's pull inventories down from last year and the orders started to come in. So Q1 was a little stronger than we had anticipated for the collagen business, but the orders are coming in strong. We saw them in April here, and they're even stronger in May. So confidence level picks up.

Diamond Green Diesel, I know everybody wants guidance there. And you're not going to like the number. I'm going to give you $1 to $2 a gallon. We're running strong there. Carlos said, we're running very, very strong right now. Feedstock prices are moving up rapidly. RINs are doing a lot of the work. I mean, clearly, the run rate in Bob's up cycle there is probably much closer to where we're at, at this point in time. Q2 looks absolutely fabulous as I look going forward. Q3, summertime rendering, a little bit of downturn there, as always.

But right now, the prices, if you look at what DGD's bids are out there, they're in the mid-80s delivered. Take a nickel off to go FOB, North America. We've never seen this before. And so ultimately, as we're originating cooking oil, as we've got price sharing contracts, as we've got all this stuff going on, how it flows through what I think I would be -- Bob can echo on this. I think I'm pretty sure April is really darn good even though it's not final. I'm going to tell you May is going to be better. And then it should probably level off after that unless we go higher. Margins at Diamond Green are as we expected. And really -- just think about it, the RVO didn't kick in until April 1. So end of the day, it's -- the environment is way different than what we saw 2 weeks ago.

Certainly, thanks for your time for this presentation. Very informative. Maybe just speaking to Slide 55. And the reason I wanted to start there was it sounds like there's a lot of opportunity to really make that business more efficient, the feed business more efficient. Just could you speak to where you are in terms of operational efficiency gains? Like what's the kind of P10 to P90 type spreads that you're seeing across the operations today? And then just on the commercial optimization side, maybe just speak to where you are in that process as well.

Yes, I can start, and Carlos, feel free to jump in. I think I said in the presentation, with the Valley acquisition, we jumped really heavy into the poultry rendering business. And Darling has always known poultry rendering, but I would say not to the degree and scale that we do now. And the implication there is there's a lot of different types of raw materials that we can take from a supplier. And ultimately, the proteins that we make, the qualities are different. They're different by plant, and it's just due to the nature of that raw material supply that's coming in.

Our understanding today of what that quality is, our operational uptime, our ability to mix and blend if it may make sense, is something that we're doing much better today with that, and we see opportunities to continue to improve and get more value from as we go forward. So I think that's one of the areas. By being able to do those things, we're able to reach certain export destination markets that pay significant premiums for certain qualities of proteins and also some high-value pet markets in the United States that we just weren't able to hit when we first made the acquisition. So that's an example.

Another one is with contract management. So I talked about that. When you're talking to a supplier and you want to increase the processing fee by 75% versus the last contract that was negotiated 5 years ago, that's a tough discussion. They're not always prepared for that. We can't always get all of that just out of -- in order to preserve and manage the relationship with the supplier. And so I think as time goes on and we continue to renegotiate contracts on the basis of replacement value of assets and getting what we consider to be a fair return on that basis, there's still some opportunity there.

And then the outside the United States with FASA as an example, that's a very, very different set of dynamics. In Randy's slide, he showed the growth rate of animal production in Brazil. Keeping up with that growth is critical in order to maintaining good quality of our products and our processes. And we've learned some things in the couple of years that we've owned that business that I think going forward is going to allow us to extract a higher average margin from it. So those are some examples. I hope that answers your question.

Yes. I think, Derrick, and then I'll have Carlos. I mean, some of the -- if we look back, I take the ownership on the outcome of purchasing the Valley assets. We have them fixed now. And I do declare victory. Now we're in that optimization phase of, as Bob was alluding to, if you're processing 2-day old poultry, you're making byproduct of meal. If you can get it through your plant the same day, you're making chicken meal. So very different market condition profiles. It has nothing to do with commodity swings, ups and downs. It's just me which market are you serving.

The Trump tariffs were a punch in the nose because one day China is open, one day, China is closed, one day, Vietnam is open, closed. And so we've got all the plants now re-permitted, if you will, to ship into China. That -- those numbers alone just off the Eastern Shore plants is $100 million. That's the differential in making good product and being able to export it or making lower-grade product and having to consume it domestically. What else you want to add, Carlos?

I would say when you integrate companies, you've seen the growth that we experienced you integrate it physically, but you've got to integrate commercially. And I think that's a big part of my job. How do we run these businesses like global product lines, not like isolated business. We want to leverage the bigger Darling to make sure we're executing to the right markets around the globe. We're shipping the right qualities. We're originating the right qualities. There's a lot of margin to have on the qualities that you produce and how aligned we are as a global business.

So that's a key part of what I do about managing risk. It's not just buying low, selling high, but how do we maximize margins with our global product line that we have.

And that's really speaking to the earlier comments of entrepreneurship and a number of facilities. Getting 260 facility managers to agree on what's best for mother Darling or the mothership is a challenge. Carlos is pulling that together. Examples of Bob talked to Brazil for you here that were capacity down there. That doesn't mean they stop killing animals. It's coming at you. We're having to run Saturday. And then you're making lower grade quality fat because of the aging raw material.

And then here comes a Trump tariff. And so once again, the first slide Carlos showed you is if you have to go back to animal feed, it's worth so much less than biofuel. And so that feed fuel arbitrage and trying to pull it together as a team is really what Carlos is doing around the world for us.

Where do you want to go?

Matthew Blair from TPH. I have a few questions on the Nextida product line. First, I think you mentioned that clinical trials are now complete. Could you talk about the next steps here? What is the timing on new products look like? And how many partners are you working with?

And then second, for future Nextida products, I think you said they would go into the cognitive space. Maybe you could talk a little bit about the opportunities there.

And then finally, I'm not sure what slide it is, but there is a slide that shows 15% of EBITDA in 2030 coming from targeted ingredients. Is that the Nextida line? Or is that something else?

Do you want to take that one?

Yes. I mean I can answer your last question first. That is the implication. So when we talk about target ingredients, we are talking specifically about the Nextida portfolio of products. And then again, that's that -- if the gelatin margin is a factor 1, the margin with those products is 7x to 11x. So if we can get 3% of our volume from those, then it extrapolates out to 15% of EBITDA.

And for Nextida GC, we have completed an additional clinical study on that. So that is something that we are taking to our customers today. We're sharing that with them, that information. It has validated the first study. So if you talked about the things that I mentioned in my presentation around the post-meal blood sugar spikes, the increase in the GLP-1 and then making you feel fuller for longer. That's been -- that work has been done. And so now we're sharing that with our customers. And we plan to have a new Nextida, I would say, every 18 to 24 months is the current road map and the cognitive space is the next Nextida.

Talk a little bit about the trajectory, I mean, of initial customers of Nextida GC repeat orders and what the pipeline looks like, maybe not quantity or whatever, but just...

Sure. Yes. So I think one of the key KPIs that I'm looking at for the success of our sales business in this space is the number of repeat orders that we're getting. So the goal is we try to get this out into the customers and get as many seeds planted as we can, right, to have them launch products under the Nextida platform. And then we look to see where those reorders are coming, which means those SKUs are starting to be sold in the market. And we're starting to see that take place now this year. So that's really been positive for us that the success of GC, the glucose control product is picking up. And now I think that's just about us continuing to find those new customers.

And oftentimes, they're not the same customers that we've always been working with. So I mentioned earlier that we work with a lot of entrepreneurs, a lot of start-ups that are starting with us, and that's where our application labs come into play and help them solve those problems.

This is Dushyant from Jefferies. Just going back to that Slide 45. I know that you guys have talked about the different levers in terms of contract management, price risk management. Could you maybe talk a little bit about what the time line is to get -- to start realizing that $150 million to $300 million? When can we start seeing that?

So Slide 55. Yes. we've been on that time line. I think if you were -- and again, if we were to go through a down cycle environment like we talked about, we don't -- we think our results would be better than what they looked like the last time we went through that type of an environment. So we're on that trajectory today. I think to get this additional $150 million to $300 million of EBITDA, assuming all other things equal in terms of market environment, we think over the next 2 to 3 years that's achievable.

It's $1 million a plant. When you put it in scale, it's very achievable.

Jason Gabelman from TD Cowen. It looks like a lot of your growth is focused on margin expansion. Obviously, you have this slide in the collagen and target ingredients opportunity as well. But you also talk about the volume growth you're seeing in Brazil and East Asia as well. So how much do you think about upside from additional capacity expansions or other volume opportunities? What does that factor into the plan? And maybe kind of tied to that, you went through some of the large acquisitions you've made in the past. Once again, you're seeing a lot of volume growth in some of your core markets. Are there large packages out there still of things you would like to own as you look into the future and the balance sheet kind of improves over the next couple of years?

No, it's a good question. I told Bob, I said, I'm going to have a group of people out here that might know that every time I get a little extra cash in the cookie jar to go buy something. I don't -- I know the world pretty well out there. We know the world pretty well. What we've identified as a management team, a global management team is 25 to 30 really targeted specific opportunities to grow. It's pretty simple on the next type of product line to see that. It's pretty simple to see the Tessenderlo growth, what that will help with and give us a platform there. I just approved expansion in Paraguay. I've approved an expansion into Wenzhou, China. That's in David's business, and that's because we're out of capacity.

We're seeing the same thing in Brazil. There's no less than a half a dozen plants in the U.S. right now that have to expand over the next 3 to 5 years. Why do we say 3 to 5? Why not tomorrow? Permitting is 1 year, construction is about 1.5 years and then half a year of commissioning. So that's what we're looking at. It doesn't -- but we're also limited in resources. And what I mean by that, there's anybody out here that does this. And when I say this, this is construction.

So we build our own equipment, we use our sites, permitting for wastewater and air, it just -- it's a process. And so ultimately, we've got some onesie, twosies. We call them tuck-in acquisitions out there. We still got some aging families that are facing the same environmental hurdles we do that they've got to decide whether they want to stay in or not. I think that's true in the U.S.A. That's true in North America. It's true in Eastern Europe. I didn't think I'd be talking about moving east into Europe, but we are.

South America, there's 1 or 2 tuck-ins that could be bought that have 2 or 3 plants, but there's no 18 or 20 plant systems left out there. So I don't see anything. And the SAF decision -- it's engineered for out there. If that market continues to grow, we'll see. So the portfolio is there. But I just want to articulate to what Bob and we've got the team focused over the last couple of years, disciplined capital allocation, fancy word for saying spending money where we needed to spend money.

We know very much from history that if we don't reinvest, you have real problems in this business. That happened in a couple of places. They decided the capital, not -- we lead those decisions down there. I can't tell you if you need to replace an air condenser in Bastrop, Texas or the wastewater is at limits. Those are things that we kind of work through when they happen. But so we're playing a little defense there. We'll clean that up. But ultimately, we know what it takes to maintain the business. The flexibility is do we peel a little bit of that off and keep reinvesting? We have to for our customers today. I mean, we woke up here a month or 2 ago, something that we've known for years, but the chain speed of the chicken plant. That's how quick the birds hung and goes by to be deboned, if you will, cut up. They just gave us another 25%, 30% speed and give us any more rendering capacity. Now it takes -- that doesn't happen tomorrow. You got to build that feed mill. You got to build the hatchery and then you got to have the labor and all of that in place. So -- but that's what we're talking about. And we just see -- and Bob, do you want to clean up my mess that I just started?

That's pretty good. I mean maybe, if you go -- I think it's Slide 50, maybe 8 or so. And it just kind of highlights some of these -- the one right before that. Yes, some of the growth opportunities. And like Randy said earlier, we are focused on organic growth. We've got massive growth in the poultry sector in the United States. We're going to need more capacity. The cheapest way to add per metric ton of image capacity is to expand a plant when you've got wastewater treatment capacity available. Beyond that, we may have to build a plant. And so greenfielding a few things here and there is probably in order.

Similarly, in Brazil, we may need to greenfield or consolidate. We've got with the FASA acquisition, not all rendering plants in that acquisition were made equal. And the bigger ones are more efficient. And so we have an opportunity to increase scale and consolidate. Collagen is a similar story. So I think that's really the focus and then the tuck-in acquisitions.

We are in a very different world than we were at the start of this year. Your partner is actually making high [indiscernible] diesel and sending it all across to Europe to make most profits. What I'm trying to get to is that is there an inherent demand pull on renewable diesel in the U.S. market to offset the amount of ultra-low sulfur diesel we are exporting. And then globally, 6 million barrels of refining capacity is offline. So you're not even making that much ultra-low sulfur diesel out there.

So can U.S. actually fulfill some of its transportation needs by making more renewable diesel just because there's not much ultra-low sulfur diesel out there spare?

I could start. But look, I'm glad you brought that up, Manav. I mean, the value proposition for renewable diesel and quite frankly, ethanol as well has never been stronger, I don't think, than what we're experiencing today. Imagine a world where we took out 6% of the diesel supply in the United States and 10.5% of the gas supply. Prices would be a lot higher than where they are today. So ultimately, then cost of production and competitiveness and all that, it matters a lot less when you really understand what the impact of the lack of that supply would have.

Specifically, I want to talk just a little bit about the conflict and what that's done for the business because I think a lot of people jump to the conclusion that, oh, the margins are great because oil prices are so high. And if that changed, it wouldn't be that great.

Well, we always expected the margins that we're seeing today that we would see those margins because of the renewable volume obligation that we got. What we didn't necessarily expect is that it would happen so quickly because we expected it would happen when there's ultimately compliance dates that require the buying of RINs so that we have convergence between actual demand and supply. What this conflict has done is it somewhat bridge that gap, and it's gotten us there, and it sort of highlighted the value proposition of those fuels. I think the answer to your question is yes. We can do a lot for this economy and fill in a lot of gaps, and we're seeing that all around the world. Carlos, I don't know if you...

I think you covered very well, and that is what I tried to allude. Right now, renewables are very attractive, not only in the U.S. and the rest of the world because of what's going on. They're an attractive option of inclusion.

I mean that's -- I think Carlos said it up there and maybe renewable diesel made at Diamond Green Diesel today is cheaper than fossil diesel in Denmark and the continent. I mean, who would have thought that. And so that's -- what that's doing is dislocating capacity, keeping it home versus here and trying to pull from here now.

Ben?

Just maybe adding on to Manav's question. How has the response been just on the supply side to the RVO? Is everything running full out now? And just how does that impact the next short term, I guess, until more capacity comes back online?

I would say it's been gradual. But as Bob alluded to, we expect a kind of a gradual increase in margins, but what's going on in the Middle East and Iran has accelerated that. So I think, obviously, there's some biodiesel plants that were not operating. Eventually, our margins stay up here, they're going to have to come online. There's too much incentive to be idle. And that's why we said by 2027, there's probably more capacity that does come online. And the plants that are operating will probably operate as much as they can for as long as they can. As people get used to running plants, they get better as well. And those marginal increases when you aggregate everything creates higher supply.

But I don't think, Ben, I don't think it's going to restart investment in the Houston Ship Channel and the $9 billion of plants that were planned down there. So clearly, the Neste plant coming on in Rotterdam is '27 sometime. Shell is trying to sell their Rotterdam, whatever is there and BP abandoned RD business. So...

Jeff Gates from Gates Capital Management. We appreciate your commitment to finally deleverage the company in an up cycle. I think the market appreciates that as well. But I'm wondering on the operational side, are there businesses that you might consider exiting that aren't integrated that would reduce the commodity volatility in the next down cycle?

I want to take that. Yes. I mean, look, it's not by accident that we focus today's presentation very much on rendering used cooking oil and collagen. I think Darling has been a very successful company. Certainly, the investment in Diamond Green Diesel, like I talked about, has generated a lot of cash. It's given a lot of opportunities and options. There was some experimentation kind of getting into ancillary businesses and doing some things. And what we've looked back and see is that when we stick to our core, we're really successful. And we've got some other businesses that have been successful, but maybe they aren't as strategic. In our last K, we made it clear that we've got some assets that are held for sale in the Q that went out last Friday.

Friday.

We announced that we sold the majority of our trap business for $90 million. And so that's a good example of a business that we didn't -- we were good at and generated some decent EBITDA. But quite frankly, that becomes a financial transaction if it makes sense relative to expected returns. And so we've got some more of those kinds of opportunities that we think could generate some cash. It's -- when you look at the expected cash generation for the next 5 years, it's not necessarily extremely material. It's nice, but it's more the focus and the lack of distraction. And I think that we've got a couple more of those types of things.

Andrew Strelzik from BMO. Just wanted to clarify again on the operational improvements in the Feed business that you articulated. Is that embedded in those assumptions? Or does it change kind of the fat prices that you would need to get there? And then my other question is just on the priority uses of cash. I guess where does M&A actually kind of like stack up? I know you said you'll evaluate that as you get there, but you'll have a lot of cash. It was listed first. Is it the #1 priority? I guess, how do you kind of tick off the cash use priorities?

So first question first. Those assumptions are not really built into the mid-cycle we're kind of -- that was more of a bit of an as is take where we are today, pay down debt to $3 billion, what does it look like kind of a mid-cycle. If we get continued improvement from the Feed segment, then that should change the outlook of that.

As far as cash priorities, again, I think what we want to be really clear about is that we want to get our debt down to $3 billion or below. And that has been our focus. Randy referred to it as an M&A holiday. You can see it with the history of where we managed our capital. Once we get to that point, it's going to depend upon the outlook. I would say this, though. We want to continue to maintain a strong balance sheet with a great leverage ratio. That's always important in a business that is subject to commodity market forces. So that's critical.

Second, we recognize that our peers are doing things related to shareholder value initiatives that now where we are as a company, we need to consider. And so we're going to evaluate that, and that's a priority to take a serious look at that. That's a discussion with our Board, and we'll evaluate that.

And then I think the next priority is really on some of these organic investments that we have. In order for 1 plus 1 to equal 3, it's really to round out this infrastructure that we've built and make it more and more efficient. We can either do that by investing in image capacity per metric ton at a lower cost because we're expanding something or there's just a lower-cost way to do it with the existing infrastructure or there are commercial synergies because of the location that we have, the contracts we already have in place, the commercial destinations we can serve. And so we want to really take advantage of the low-hanging fruit that's been created by buying and building out the global network that we have.

Yes, Andrew, Bob says it so eloquently. And the reality is we are the buyer of last resorts in the M&A world. We started the presentation with the foundation has built value to be unlocked. And clearly, organic investment now as we optimize our global footprint is a far better return. The challenge with it is you got to go -- you got to start now, and it's got to be continuous because the capacity gets added, not rendering or Rousselot capacity, capacity in the meat production business just doesn't ever stop right now.

Conor Fitzpatrick from Bank of America. One of the most defined uses of cash that you outlined is the transition from gelatin to collagen within the food ingredients business. And to help demonstrate that, could you give us an idea of per ton or per facility CapEx and research and development intensity for that growth and expansion?

Okay. So per ton, it's probably lower than you might expect. And so look, I will -- before I answer the question, I will say this that we continually ask ourselves if there's an opportunity to invest more capital to accelerate the rate of development of these products and the innovation of these products. The cost per metric ton annually that we put back to the business is I want -- I don't want to be 1 digit off. So I'm just going to run the math quickly. It's roughly $100 a ton.

Alexa Petrick, Goldman Sachs. I wanted to follow up on the market scenarios that you outlined, maybe a 2-parter there. Can you talk a little bit about some of the macro assumptions that are running into your adjusted EBITDA per gallon? And then also notably, as we think about the capital spend in each of those scenarios, it right now looks pretty constant. But can you talk about how you would think of adjusting that in those different environments?

That's a fair -- yes, it's a fair question. I think certainly, in an up cycle type of environment, we might be a little more aggressive about CapEx. But I think what we wanted to show with this slide is what's that maintenance CapEx obligation that we feel in order to keep our assets running in top shape. What is it that we need to do? And honestly, when it comes to this kind of CapEx, maintenance CapEx, we're committed to keeping our assets at a Darling level condition irrespective of the cycle that we're in. So there isn't a lot of fluctuation there.

I would say maybe there's more investment in some newer innovation things or some -- we might try some things more additional things that we may not do in an environment where we're trying to be lean, but there isn't a big difference as far as that goes.

As far as the Diamond Green Diesel environment that kind of gets us to $0.92 versus $1.50, at the end of the day, it's very hard to predict. I mean I can't sit here today and tell you where our margin is going in the renewable diesel industry in the next 1.5 years, even though we've got an RVO that's clear because there's just so many uncertainties still around what's the industry's ability to make product and how much are they going to make and what are imports going to be like and what are other markets outside the United States going to be. There's a lot of questions there.

But this just assumes a reasonable RVO with reasonable production obligations in the United States from both the renewable diesel sector and the biodiesel sector. And our understanding of where Diamond Green Diesel's margins are when a reasonable amount of biodiesel production needs to exist in the United States, and we kind of back into this sort of a scenario.

Yes. I think it's another little macro point that's out there. I think the world learned here in the last 30 days in the Iranian conflict, how fragile the S&D still is in global fossil. And so the -- while the narrative on climate change and green may have moderated, I think a little bit of a wake-up call here that where green fuels need to play a role in the portfolio going forward. And that was reassuring to me because the longer you listened to our President, the more you thought all these programs were going to be dead, even though we knew that the RVO's farm policy.

So the '28 cycle is the one. If you think of what could happen in the EPA right now, where is Lee Zeldin going to be is he taking Bondi's job where his 2 lieutenants that did the program are going back to the private sector. So now we start over then with legacy staff. But I don't think they ever go -- they've proven they never go backwards to what they've done for the farmer here.

And clearly, the whole world woke up when you realize you're not exporting soybeans to China. So it looks pretty solid. But once again, just to Bob's comment on the down cycle, I mean, as we talked in the boardroom, and we could roll the movie back 3 years and show you charts that said Darling stock was never going below $60 again and Diamond Green Diesel would never have margins below $0.80 a gallon, boy, were we wrong.

And at the end of the day, we hit a couple of cycles there. So the down or the down cycle here is actually what the business ran pretty much last year. And that was with no RVO out there, and that was with some plant problems around the world that have all been fixed. So that's why we -- Bob said it's not worst case, it isn't, but it feels pretty solid. And then we should get uplift from there with the new products and then clearly an improved biofuel environment globally.

Pooran Sharma from Stephens. It sounds like you qualitatively took up your guidance on the business. April sounds really good. Does that mean we've started to see imports roll in now? Or do we need some more margin to see that?

You guys want to take that?

And you're talking about renewable fuels.

Renewable fuels side.

Do you want to talk about that? I'm happy to jump.

I mean feedstock imports for sure are coming in. And to an extent, renewable fuels should come in. It's a margin environment that will drive that. So I think -- and obviously, the data that we have today is as of March, right? So there's -- it was right when the RVO was getting implemented. So the actual import data is not out there. So -- but imports, especially for feedstocks are taking place.

Yes. I would just say, I think if you take a look at Sabrina and the Bloomberg team's numbers on imports for the SMB, we need to accelerate that relative to where we are today. And it would suggest either margins need to get better here for that to happen or they need to get worse somewhere else where that product is otherwise going. And so we do think there's continued uplift opportunity there.

Jackson [indiscernible] Citadel. Thank you very much for putting this event together. If we can go back for the fifth time to Slide 57, where you show the different scenarios. So this shows even in a down cycle, you're generating very healthy cash flow, something that you've demonstrated over the last 2 years. So we appreciate and understand the commitment to deleveraging before considering your alternative uses of cash. But once we're through that, what would prevent you from initiating a dividend or resuming larger share repurchases? Because this math would say even in very difficult industry conditions, you can afford to pay $1 to $2 a share dividend.

And then my second question, on the $150 million to $300 million of upside in feed earnings as you reprice your your contracts over time. Should investors think about that as a onetime reset? Or should longer-term investors think about this as a business that can compound earnings over time as you offset inflation?

I'll take the first part of that, Bob, and then I'll give you the second part of that. It comes down to one word, Jackson, confidence. And our ability as a management team to stand in front of our Board and have the same discussion we're having with you today and to get them comfortable. And I'm telling you from my standpoint, the last -- the meeting just wrapped up last week, the confidence level is much greater. It was kind of -- I think the verbiage was we're from Missouri, show me. And so it gives us a whole different narrative.

But what we wanted to show you was that's possible now, exactly what you said and articulated. Bob is now -- I'm a less than $3 billion guy, and there's nothing magical about that. And you look at the mid-cycle and up cycle this year, you're going to blow past that is kind of what's underneath it. So it gives the Board the chance. And then we kind of kind of weigh the -- what do we have in the pipeline? Do we have to invest 3 new plants? Can we do it all? And I think the answer is the flexibility to do it all is way different than it's been in the past.

Let me go back to the return on replacement value slide, and I appreciate the question, Jack. So I think there's some of this that's sort of a onetime improvement. I mean that's certainly when it comes to the operational efficiency, the commercial optimization as we sort of figure out what the best destination markets are for our products, and we're hitting all those and we're mixing and blending and optimizing and all that. I mean, you get to a point when you've maximized what you can do, and that's sort of what that $150 million to $300 million speaks to.

But you bring up a point that I didn't emphasize probably enough and that is even more important. And that is because of the competitive dynamics that I explained earlier, talking about the high moisture and raw materials and comparing it to oilseed crush in China in 2011, '12, this business essentially, if it's run well and we're disciplined about the way we operate it, it acts as an inflation hedge against the cost of construction.

And the nice thing about that, and maybe the power of that doesn't jump out on the slide because we don't have actual numbers on there. But as EBITDA increases, dollar for dollar cash increases. So that's exciting. That means the numerator in the calculation on returns is increasing. And when we compare that on an invested capital basis against book value of assets, the denominator is decreasing. And so while we want to get to an appropriate return on replacement value and stay there and stay there even as we live through more and more inflation in the future, the implication there is that on assets that we've acquired in the past, we are going to be significantly accelerating return on invested capital.

That doesn't come out in this slide, but you gave me an opportunity to say that. So I appreciate it. But I don't think that a lot of agriculture-based commodity-based businesses are able to say that about their business.

Any other questions? Okay.

I guess I'll close it up. And as we started the foundation built, the future is unlocked. I showed you the 3 values, core values. There were 2 that I left off, and I'll leave you with a smile here. It's called family and fun. Bob and I are both honored to have our children in the back of the room today. Bob was also given a challenge today by his daughter that if he could sneak in a line, I would pay him $100. And I believe you heard something about the Pink Pony Club. That was a bet. So the values carry forward, and there's nothing more honoring than to have you guys and our children in the audience today. And thank you for your trust and support in Darling Ingredients.

For those of you here with us in New York, we do have lunch available for you. Feel free to grab some and come back in here. Great. Thank you.

Good morning, and welcome to the Darling Ingredients Inc. conference call to discuss the first quarter 2026 financial results. [Operator Instructions] Today's call is being recorded.

I would now like to turn the call over to Ms. Suann Guthrie, Senior Vice President of Investor Relations. Please go.

Thank you for joining the Darling Ingredients First Quarter 2026 Earnings Call. Here with me today are Mr. Randall C. Stuewe, Chairman and Chief Executive Officer; and Mr. Bob Day, Chief Financial Officer.

Our first quarter 2026 earnings news release and slide presentation are available on the Investor page of our corporate website and will be joined by a transcript of this call once it is available.

During this call, we will be making forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's press release and the comments made during this conference call and in the Risk Factors section of our Form 10-K, 10-Q and other reported filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements.

Now I will hand the call over to Randy.

Thanks, Suann. Good morning, everyone, and thanks for joining us.

Over the last few years, public policy uncertainty and deflationary and volatile commodity markets created a challenging operating environment. During that time, Darling Ingredients remained laser-focused on controlling what we could control. We prioritized operational excellence and maintained strict, disciplined capital allocation with a goal to achieve a meaningful debt reduction.

Headwinds have now shifted, and the results we share today confirm a much more favorable operating environment. We are moving forward with significantly improved earnings power, stronger cash flow potential and a more robust foundation for long-term value creation.

For the first quarter of 2026, we saw the operating environment allow for expected EBITDA growth and sequential gross margin improvement. Darling's core ingredients business really delivered this quarter, with improved global operations, margin expansion and focused commercial execution. Combined adjusted EBITDA for first quarter was $406.8 million, including $255.6 million from our global ingredients business and $151.2 million from Diamond Green Diesel.

Our Feed Ingredients segment had a fantastic quarter. We saw steady volumes with a strong global poultry volumes offsetting stagnant North American cattle herd. Operational excellence remained a key focus this quarter, driving improvements in throughput, cost reduction and product quality, that translated into stronger gross margins. At the same time, our commercial agility allowed us to pivot sales to higher-priced markets. While fat prices were softer earlier in the quarter, our disciplined risk management approach combined with spot sales helped us mitigate the typical lag impacts we would see in that environment.

The renewable volume obligation announced at the end of March has been extremely constructive for Darling and DGD. We are already seeing a favorable movement on fat prices as renewable diesel demand grows. DGD overcame a shutdown at Port Arthur that briefly interrupted our supply chain. As those dynamics continue to play out, we anticipate this to be a nice tailwind for our Feed segment for the remainder of 2026.

Turning to our Food segment. We are seeing nice growth in collagen, particularly in Europe and Asia. Sales in both collagen and gelatin improved year-over-year, reflecting not only increased customer demand, but new applications for collagen in food, nutrition and health products.

Our Nextida glucose control product is currently pending a patent in both in the U.S. for production processes and the use of Nextida as a dietary supplement ingredient, offering a nonpharmaceutical option targeting lower blood glucose. With an interest in food as medicine and increased demand for protein, collagen continues to be positioned well for growth.

Now as you can see in our results, our Fuel segment is at an inflection point as renewables margins turned a corner with finalization of the renewable volume obligation. With a very constructive RVO and now a clear path forward, we expect DGD's results to continue to strengthen throughout the year.

Diamond Green Diesel delivered a strong quarter with $151.2 million of EBITDA or around $1.11 EBITDA per gallon. Our non-DGD Green Energy businesses continue to deliver stable earnings and will have the opportunity for a slight tailwind due to increased energy prices in Europe.

Now with that, I'd like to hand the call over to Bob to take us through some financials. Then I'll come back and discuss my thoughts on the second quarter. Bob?

Thank you, Randy. Good morning, everyone. As Randy said, first quarter was very strong across all measures, and the Darling platform is poised to move forward with significantly improved earnings power.

For the quarter, combined adjusted EBITDA was $407 million, versus $196 million in first quarter 2025 and $336 million last quarter. Core ingredients, non-DGD, improved both year-over-year and sequentially. For first quarter 2026, core ingredients EBITDA was $256 million, versus $190 million in first quarter 2025 and $278 million last quarter.

Total net sales were $1.6 billion, versus $1.4 billion. Raw material volume was 3.8 million metric tons, essentially unchanged. Meanwhile, gross margins for the quarter improved to 26.1%, compared to 22.6% in the first quarter last year and from 25.1% last quarter.

Looking at the Feed segment for the quarter, EBITDA improved to $169 million from $111 million a year ago, while total sales were $985 million versus $896 million, and raw material volume was flat at approximately 3.1 million metric tons. Gross margins relative to sales improved nicely to 25.3% in the first quarter, versus 20.3% in the first quarter from last year and 24.6% in the fourth quarter of 2025.

In the Food segment, total sales for the quarter were $405 million, compared to $349 million in the first quarter of 2025. Gross margins for the Food segment were 28.9% of sales, compared to 29.3% a year ago. And raw material volumes were flat at around 330,000 metric tons compared to the same time last year. EBITDA for first quarter 2026 was $81 million, versus $71 million in the first quarter of 2025.

In the Fuel segment, starting with Diamond Green Diesel, Darling's share of DGD EBITDA for the quarter was $151 million, which includes a favorable LCM inventory valuation adjustment of $97 million at the DGD entity level and sales of around 272 million gallons, an average EBITDA margin of $1.11 per gallon.

Darling contributed approximately $190 million to DGD during the quarter, mainly to provide short-term working capital, most or all of which is expected to be returned in subsequent quarters. In addition, during the quarter, Darling monetized $45 million in production tax credit sales, the proceeds of which will be paid in the coming quarters.

Other Fuel segment sales not including DGD were $160 million for the quarter versus $135 million in 2025, on strong energy and biogas prices in Europe and relatively flat volumes of around 370,000 metric tons. Combined adjusted EBITDA for the full Fuel segment including DGD was roughly $180 million for the quarter, versus $24 million in the first quarter of 2025.

As of quarter-end, total debt net of cash was approximately $4 billion, versus $3.8 billion ending fourth quarter 2025. The increase in debt results from contributions to DGD mentioned earlier and timing of production tax credit payments, some of which will come in the second quarter.

Capital expenditures totaled $95 million in the quarter. Our bank covenant preliminary leverage ratio was 3.17x as of quarter-end, versus 2.9x at year-end 2025. In addition, we ended the quarter with approximately $1.1 billion available on our revolving credit facility.

We recorded an income tax expense of $38.6 million for the quarter, yielding an effective tax rate of 22%. That rate excluding the impact of the production tax credit and discrete items was 32%, and we paid $20.5 million in income taxes in the first quarter. For 2026, we expect the effective tax rate to be around 25% and cash taxes of approximately $60 million for the remainder of the year.

Overall, net income was approximately $134 million for the quarter or $0.83 per diluted share, compared to a net loss of $26 million or negative $0.16 per diluted share for the first quarter of 2025.

Last quarter, we mentioned that we have some assets held for sale that are not considered strategic for our business. Those asset sales continue to move forward but have not yet closed. Of those, we have signed an agreement to sell the majority of our grease trap environmental service assets. The sale is pending some permitting transfers, which we expect to be completed in the next few months. We'll have more to say about the trap and other businesses for sale at a later date.

With that, I will turn the call back over to Randy.

Thanks, Bob. In closing, the progress we shared with you today reflects the discipline and focus we have maintained through a challenging cycle. By controlling what we can control, driving operational excellence, prioritizing capital and focusing on balance sheet strength, we position Darling Ingredients to emerge stronger. With improved but volatile market conditions and a much improved regulatory framework, we believe the company is entering its next phase with momentum that we expect to build as the year progresses.

We believe that as the year progresses, we'll drive improved earnings, stronger cash flow, additional debt reduction and long-term value creation for our shareholders. Ultimately, our improved performance will once again provide the company with many opportunities. This confidence is reflected in our core ingredients EBITDA guidance for Q2, which we are now setting at $260 million to $275 million for the quarter.

With that, we'll go ahead and open it up to Q&A.

[Operator Instructions] Our first question comes from the line of Heather Jones with Heather Jones Research LLC.

I was just wondering on, first of all, on Diamond Green. Should we expect the hedging and LIFO losses, do you expect that to reverse in Q2? Or will that take longer throughout the year?

Heather, this is Bob. So we did realize a lower of cost or market benefit in the first quarter. And I think just to make sure everyone is aware, in order to have the opportunity to realize the benefit in lower of cost or market, you have to have previously taken a loss from that. This quarter, that $97 million at the DGD entity level, that exhausts all available lower of cost or market. So going forward, as long as the business is profitable, we do not anticipate any lower of cost or market benefits.

And so then to your question of LIFO, the LIFO will be based on an average cost paid for feedstock during the period. And as the average price increases, if it increases, then we would realize a LIFO loss that is embedded inside of the results. If feedstock prices on average decrease, then there would be a LIFO gain. So really the answer to your question depends on your view of feedstock prices as the average cost of feedstocks paid in the period in question relative to the period prior.

And hedges...

And what about on the hedging side? Yes.

Yes. So hedges, I guess what I can say about that is, at DGD, we do hedge. We're very disciplined about hedging. There is some flexibility in terms of which instruments we use to hedge our risk, and we don't disclose that for competitive reasons.

I think what you can point to this quarter is that clearly we had a significant increase during the period in heating oil futures, in crude oil futures, in soybean oil, whatever sort of instrument you're looking at. And we managed to absorb the cost of whatever hedges we had and still put out a very positive result. And I think it just speaks to the risk management capabilities of the business.

Okay. And then my follow-up is just given the volatility we're seeing in the energy markets and the feedstock markets, this question seems pretty particularly relevant. So I was wondering if you could update us on how we should be thinking about the lags in your model, both core DAR and Diamond Green. I remember at one point, it was more like 30 to 60 days and then I think it increased to 60 to 90. But if you could just update us on how we should be thinking about that.

Heather, this is Randy. So clearly, you've kind of framed it pretty well. I mean what we saw in Q1, remember, as we came out of Q4, if you remember, we had forward sales into DGD getting ready to run full that were put on in October as we anticipated the RVO. And then we saw prices soften as the RVO kept getting kind of delayed and delayed.

And so ultimately, as we came into Q1, cash prices, FOB, most of the North American factories were actually flat or lower than Q4. Those have now accelerated. They started to accelerate in, really, here in March for us. That will start to flow through very nicely in Q2.

When we look at our global rendering business, what we've seen is the tariffs have impacted Brazil pretty sharply. We've had to adjust all of our formulaic or our pricing models down there, what we procure raw material from. That takes 30 to 60 days. So I think we've righted that now.

So overall, the ingredients business will have a stronger Q2. How much of the acceleration in prices flow through, that would be reflected in kind of our conservative approach to guidance there. Remember, as I was telling the team here, this is the first call we've done where we haven't ever seen period 1 of the next quarter. And we won't see those numbers here for another week or 2, 1.5 weeks. And ultimately, so really, we're looking at basically a March run rate and extrapolating that with some improvement. And so you'll see that.

Conversely, as DGD has done a very nice job of getting out in front of this, I mean we've had a strong bias that feedstock prices would accelerate once the industry wakes up, and so that should flow through in much better margins in DGD as we go through Q2 and through the balance of the year.

Our next question comes from the line of Tom Palmer with JPMorgan.

Maybe start out with an industry question, especially when we, I think, think about the biofuel side, there's probably a good amount of idle capacity. I wonder what you think the U.S. biofuels industry is capable of producing currently and then once kind of it fully ramps, and whether that's going to be enough to kind of fulfill mandates or if we do need to kind of shift to imports even with the maybe less favorable tax treatment.

Tom, this is Bob. I mean, look, the first thing I'd say is we do believe that quite a bit of biofuel capacity is back online. Margins are attractive enough to bring a lot of that back. There's still an opportunity to bring some more.

Ultimately, to answer your question about what we're capable of, it's going to depend a lot on run rates as well as just kind of bringing idle capacity back on the market. And I think as everyone knows, keeping a renewable diesel unit up and running is -- it's got its own challenges to it and circumstances. So it's going to depend a lot on that.

Bottom line is we think that the industry is capable of meeting the mandate of the -- or the demand of the RVO. It probably is a combination of some of the things you talked about. It will include some imports of fuel, probably fewer exports as the U.S. market margins need to just incentivize U.S. production to stay in the United States. When you put all those things together and adding capacity and running hard as an industry, and you look at what we did in 2024, it's reasonable to expect that we can meet the demands of the RVO.

And a follow-up on second quarter expectations. When we think about 2Q, what are kind of the key drivers of the increase in terms of EBITDA in the base business? Is it mainly just higher market prices in terms of fat? And does that range contemplate where prices are today or that there are any changes relative to that run rate?

Yes. There's always a bit of seasonality in the business here. I've always said when the ball park's open, at least in North America, that's -- you'll see a few more in barbecue season. So really, at the end of the day, raw material volumes globally are strong and very strong in South America.

Poultry volumes in the U.S. are exceedingly strong, while the downside of that is the cattle herd is really stagnant and at a 75-year low. What's relevant about that, Tom, is that, remember, there's -- it's just like the red meat, white meat discussion here. Red meat has more fat. And so we can process more poultry and still not make as much fat as we were when we were making -- running all the beef. So a little less fat into the discussion.

As far as the modeling of guidance here, like I said, that's really March extrapolated with some improvement that's out there. Clearly, towards the -- fat prices are exceedingly much higher than they were in Q1 cash prices right now, and we're out there selling it. So you'll see that flow through. How much goes into Q2 versus Q3, we will see, but we're clearly picking up some speed there.

The Rousselot business is doing quite well around the world right now. Gelatin and collagen margins are good. Remember, that business -- remember, 80% of that byproduct that comes out of that business is fat and protein, and so it's feeling a benefit. We're seeing the tariffs had their impacts on our -- what we're going to call our specialty proteins business, and those markets are back open again with the lower tariffs. And so we're seeing a nice improvement in protein prices.

But clearly, fat prices that are -- I think the DGD bid right now today is close to $0.80 a pound. Those are big numbers that are down there right now. And those are up anywhere from $0.20, $0.25 from where they were in October, November. So that will start flowing through very nicely here as we get towards the end of the quarter.

Our next question comes from the line of Pooran Sharma with Stephens.

Congrats on posting really strong results. Maybe just on Fuel here, and DGD and really just RD. What are your thoughts on kind of diesel prices in regards to kind of what extent you think there are structural constraints, whether infrastructure, refining capacity or even just intermediate-term logistics that could keep diesel markets tighter for maybe longer than people were anticipating?

It sounds like a question for our partner, Valero, than us. But Bob, you'll take a shot at it.

Yes. I mean -- and I -- look, I think we're not really qualified to answer questions about diesel capacity and constraints and things like that. But I think what we can point to is just an increased cost of the raw material inputs that everyone is using to make fuel energy products.

I think what's interesting from our perspective is just how much tighter today renewable fuels are and total cost relative to conventional fuels, and sort of what this conflict has done in terms of bridging the compliance gap in the RVO. I mean, ultimately, I think we fully expected that we would see the margins that we're seeing today in the market. But we thought that it would perhaps take a little bit more time until compliance dates sort of force convergence and cause that margin to occur.

This conflict and the higher energy prices underlying all of this is allowing margins in renewable fuels to sort of move to what they probably should be as a result of a strong RVO, and it's just allowing it to happen more quickly. It's also I think showing the world that renewable fuel is an important component of total supply. And without it today, we'd have much higher prices of conventional fuels.

Yes. I think the other thing that Bob highlights there is, I mean, as most of you know, I mean, fossil diesel or conventional diesel in Scandinavia is $10 a gallon, and in the Netherlands, it's $12 a gallon. And RD is actually cheaper by almost 25% today. So the industry is going to run as hard as it can. And what's special about RD is it can be used in either at 100%. So you're going to see anybody that can produce RD running at full capacity right now.

You're also seeing a lot of other countries in the world that have -- or producers of fats and oils that can use fats and oils within their energy system, meaning the palm oil. You magically start to see palm oil disappear back into energy when the price per barrel gets to where it's at right now. Usually, it starts when it's about $80 a barrel. And clearly, there's a huge incentive right now globally to continue to move fats into energy. And that's going to keep the world feedstock markets pretty constructive until things back off.

Appreciate the color. And maybe just shifting to the balance sheet, I wanted to understand with -- I know you're not guiding to DGD, but just kind of the implied step-up in EBITDA, in just the overall business. I think that leverage should just come down naturally. And so I wanted to get a sense of how you're thinking about actively deleveraging versus allocating capital elsewhere.

Yes, this is Bob. So I think we've been pretty clear in recent quarters that we're focused on paying down debt. We've talked a lot about trying to get our debt down below $3 billion. We're still committed to that. We do have an Investor Day on May 11. And at that time, we're going to be able to talk more about what our capital plans are.

But I think what I'll just summarize right now is just to say that we're focused on getting that debt number down to about $3 billion. At that point in time, that opens up a lot of potential options for Darling in terms of what we do going forward. It will depend on what our outlook is when we get there. But we're certainly very encouraged by the EBITDA run rate that we see from the first quarter and what we're expecting for the balance of the year. And we think we'll get down to that $3 billion number relatively quickly. And at that point in time, we think the outlook is still going to be very strong.

[Operator Instructions] Our next question comes from the line of Manav Gupta with UBS.

I actually wanted to ask a little bit of a policy question. So you know how EPA is proposing starting 2028 you get 50% RIN on foreign feedstock. And I'm just trying to understand whether it's positive for DAR if that goes through. I mean your domestic UCO and tallow would price higher. Also I think some of the other competitor facilities which are overly dependent on foreign feedstock might be forced to quit the business. But at the same time, I think you are also importing a little bit of tallow through FASA for some of your plants.

So I'm just trying to understand the puts and takes if this policy change does go through and you only get 50% RIN for foreign feedstock.

Manav, this is Bob. I think the answer -- to be able to answer that question, we'd also need to understand what the tariff structure is at that point in time. I think if we're looking at a 50% RIN and there are no tariffs -- no origin tariffs on any of the feedstocks that we're importing, then it's going to depend on what is the demand for those feedstocks outside the United States and does the value of those international feedstocks adjust for that 50% RIN and the 45Z credit.

Ultimately, if the U.S. is the strongest market at that point in time and international feedstocks discount themselves so they can be competitive coming into the United States, then we see all of it as a pretty big positive for Darling because it would be very supportive to our U.S. and Canadian feedstock prices and the DAR core business. But it would also give DGD access to international feedstocks to be able to make fuels, sell those into the United States or re-export for anywhere else.

So it's going to really depend on the dynamics and what's happening with fuel markets and feedstock markets outside the United States. But overall, we don't see it as a negative.

Perfect. My second quick question, on 2Q guidance and where the Street is. When we look at the Street numbers, which I think are closer to 440, and your guidance, to get to that guidance, Street estimates versus your guidance, DAR -- DGD would have to give you about 170 million. That's roughly my calculation. And given where their margins are on DGD, it seems very possible that DGD could easily give you 170 million. So if you could talk a little bit about your guidance versus where the Street is on 2Q, I'd be very grateful.

I think, Manav, we won't guide DGD. I think we did say we expect 320 million gallons for the quarter. We are willing to say that we think that second quarter at DGD will be stronger than the first quarter. So if you kind of put all that together, I think what you're saying and backing into doesn't sound unreasonable. But there isn't a lot more we can say about that in DGD's numbers.

Yes. I mean, Manav, this is Randy. Bob said it really well, I mean, the DGD margin environment is constructive right now. It's still sorting its way out. We're running at capacity. 320 million is the gallon that we're going to put out there for Q2. And then I suspect Q2 earnings power is greater than Q1 and Q3 will even be stronger. But life is pretty good there right now, but we've just kind of opted to kind of stay away from trying to guide because it's very, very difficult because of timing, et cetera, of sales and then feedstocks.

Our next question comes from the line of Derrick Whitfield with Texas Capital.

Congrats on a strong quarter. For my first question, I wanted to start with Feed. Since March, we've seen a near $0.20 per pound increase in waste FOGs, as I think you highlighted earlier, Randy. While I understand your rendering contracts include purchase price considerations for downstream value, how should we think about the strength of waste FOG realizations flowing through to higher EBITDA from a price sensitivity perspective over the course of the year if prices remain elevated?

Yes. I think we've kind of, Derrick, tried to address that. I mean, clearly, obviously, I'm reverting back to I haven't seen April yet, so to see how it's truly flowing through. But what I can tell you around the world is Europe has been truly lagging from where the U.S. run-up has happened because it's now a domestic feedstock game. South America got impacted very hard due to the tariffs, and also higher ocean freight.

And so that's trying to -- we always look back. We've always tried -- why we built DGD was to own the arbitrage between animal feed and fuel. Animal feed value today is less than $0.30 a pound and fuel prices are north of $0.70 a pound FOB. So clearly, we've made the right decision there.

What we're going to see is as we go into May and June, you will start to see a lot of that flow through. I think we're calling a bottom now in Brazil. We've kind of figured that one out. We had to adjust our spreads. It's a spread management game.

In Europe, much more resilient, but it's starting to move up. I've seen South America move, in the last 3 or 4 sales up $50, $100 a ton from the start or mid -- really start of April. So that will start to flow through. That's where I would categorize the guidance that we're putting out there on the core business as potentially somewhat and very conservative right now. But how we see how it flows through, it's kind of hard to call right now.

Protein prices have improved. Rousselot, because the tariffs are down. So we're having some improvement all across the line. Our biogas businesses in Europe are very strong right now. So I mean, it's really the tailwinds are building right now. We're just trying to -- maybe we were a little gun shy, would be what I'd say right now, from the last couple of years. So we'll see what they flow through here.

Perfect. And then maybe shifting over to DGD. Given the higher diesel and jet crack spreads we're seeing, really outside of the U.S. but across the world, how are you viewing the international markets relative to what you can get in the U.S.? And if favorable, what degree of flexibility does DGD have to further increase sales into those markets?

Yes. Derrick, this is Bob. DGD has always maintained a lot of flexibility and agility in terms of markets it can sell to. We have seen very attractive opportunities all around. I think DGD has been a consistent exporter. We expect that to continue.

But I think when you look -- looking forward, and the strength of the RVO in the U.S., it really points to a U.S. market that should continue to increase in margins and keep barrels inside the United States. And I think over time, we'll see the market create that. It won't be because of -- it will be market-driven, and that's what we're expecting to see.

Our next question comes from the line of Dushyant Ailani with Jefferies.

Congrats on a strong quarter, guys. I know the focus has been on RVOs. I just want to pivot a little bit to LCFS where pricing has been weak. It's starting to trend a little higher. Want to just get your thoughts on how you're seeing the California market evolve through the course of the year maybe.

Yes, Dushyant, this is Bob. So LCFS, it's an interesting market. It's dynamic and hard to understand, quite frankly. But I think what we saw initially immediately after the RVO was an increased amount of production and more sales into California. So on a very short-term basis, we created some more credits there than -- at least at a rate that was a little bit higher than what we had.

But the reality is California has only got around 3.6 billion gallons of total diesel demand. 300 million or 400 million of that is going to be satisfied with biodiesel. And there's probably a little bit of conventional diesel that's going to always stay there. So you're looking at kind of a 3 billion gallon demand market for renewable diesel. And the RVO essentially mandates more production than that.

And so if you add up all the LCFS programs in the United States, there's -- the RVO is larger. And certainly, when you include imports as well, it's larger than all those LCFS programs.

So we do think we're going to have a lot of supply into those states. But we can't satisfy all of the requirements from the California Air Resources Board just with renewable diesel. So what we expect is we're going to see LCFS credits continue to increase in value. And we'll probably see renewable diesel trading at a discount into California because it's going to be offset by LCFS premiums. So it's a complicated one though, but it's a long way of saying we think LCFS credit premiums are going to increase.

Got it. And then my follow-up, maybe just going back to the core business. I know you guys have been -- your margins have been strong in 1Q, you guys gave some thoughts there. But maybe how do we think about -- obviously, pricing expectations are expected to be elevated. But how do we think about margins across the board, Feed, Food as well? How does that kind of shake out? And maybe operationally, if there are any tweaks that you guys are making, if you can talk to that.

Yes. If you look across the ingredient portfolio and kind of a little bit right to left, in the Fuel segment, non-DGD, very much an annuity business, but it's going to get a little bit of lift from the biogas business in Europe as we move forward through the year.

Rousselot, very much predictable, more closer to consumer-type business, some where we're getting some tailwind there now as global collagen demand is really picking up. And when you make -- when you do the extraction, you make a raw material or a feedstock, then you can make gelatin or collagen. And as you defer -- directed to the collagen pipeline, you then take it away from the gelatin.

And so ultimately, we're seeing some improvement there because gelatin margins came under some pretty significant pressure in the last couple of years due to some capacity additions in South America and China. So ultimately, we look at that segment as pretty stable, maybe a little bit of improvement.

Clearly, the Feed segment has the most commodity exposure. It's really just, as we say, a timing exercise right now and how the better proteins and fats on the 3 big rendering continents of North America, Europe and South America all start to flow through. So you'll see some additional, what I'm going to call, margin expansion there.

I think that that's really the thing that Bob and I feel so proud about is, is that the businesses in the rendering side are really operating at a high level of capacity and efficiency right now. Any of the challenges that we had in the prior years I think are behind us now, or I believe, I know they're behind us, and we're really starting to do well.

The only downside, if we look back at years when there were commodity uplifts like this, we've got less beef in our system today than we've had in the past. And like I said, a chicken is less fat than red meat. So that -- you won't get 100% of what -- if you're trying to extrapolate prior years, but it's still going to be darn good. And it should accelerate throughout the year here.

Our next question comes from the line of Andrew Strelzik with BMO Capital.

I just wanted to follow up on the point that you were just making on kind of the internal improvements in the base business. Is there a way to kind of frame or quantify how much better your plants are running, how much more margin opportunity there is relative to the last time we saw fat prices at these levels kind of net of what you're saying on beef versus chicken?

Andrew, yes, this is Bob. I think probably when you think about like the operations of our business and you point back to 2022 and 2023 and the large acquisitions that Darling made with Valley Proteins, FASA and Gelnex, the operations and sort of understanding how these assets all fit together are probably manifesting themselves most right now in the form of the high-quality proteins that we're making and the premiums we're able to capture because of the markets we're able to reach, whether it's high-end pet markets or high-end international markets. As those operations have come together and we understand the quality and demonstrate the consistency that we're able to produce, we're able to hit those markets more consistently.

Same is true for the Gelnex acquisition and Rousselot. This is a very complex global supply chain. And our ability now really to leverage the value of these assets by consistently meeting customer needs, moving product internationally from Brazil or wherever in the world to Europe and the United States, we've really been able to identify what are the right origins and destinations, and get maximum value out of that.

The value that you see, it's really incremental quarter-to-quarter. But a lot of what's sort of underpinning the strong results that we've had and what we're expecting as we go forward is improvement in our own operations and coordination. It isn't just market tailwinds.

Okay. That's helpful. And then I also wanted to ask on kind of the RIN outlook generally, and I appreciate that there's a lot of focus in the market on the near term right now. I would just be curious to kind of get your perspective on the RIN landscape beyond '26 now that we have the RVOs, and kind of how you're thinking about comparing what the environment could look like then versus what we're seeing today, how much of a kicker that could be versus kind of where we stand today now that we have a formal policy in place.

I mean right now, what we can see out as far as through to the end of 2027, that's the RVO that's in place, a lot of the answer to your question, it's going to depend on global prices of fuel energy, conventional energy. It's going to depend on tariffs. It's going to depend on how well the industry performs in the United States and the amount of production and supply that we create for the market. All of those things are -- I'd really have to know the answers to those to answer the question about where RINs are going to go.

But what we do see when we look at this RVO through 2027 is that the industry needs to produce, it needs to run really hard. And even when it does, margins need to remain very strong in order to continue to incentivize all of the players to make enough product to meet that RVO. That's the picture we see. And so bottom line is RINs need to play their role in all that to be the great equalizer that creates a good renewable diesel and sustainable aviation fuel margin.

Our next question comes from the line of Ben Kallo with Baird.

Just a couple of questions on the Food business. Could you just talk about progress there with JV and then just like with a larger partner for the peptide side of the business?

And then Randy or Bob, just on the acquisition front, you guys commented last quarter there are some smaller acquisitions. But just use of proceeds of cash, if you could give us an update there?

Yes. So starting with the joint venture agreement that we've signed with Tessenderlo and we're hoping to close sometime soon, I think we've been pretty clear that we're in an antitrust review process. And that's really what we need to get through before we're able to close on that deal.

Look, we haven't been -- we've never been more excited about the potential of forming that joint venture than we are right now. We continue to see significant increase in demand for hydrolyzed collagen. We continue to develop science and technology around the Nextida portfolio of products. What PB Leiner, the Tessenderlo business, would bring the overall Darling collagen business is added capacity that enables us to really efficiently utilize what they have and be very cost effective in production and continue to increase sales to really feed into this strong and growing collagen market. They also offer the opportunity to originate product and raw materials in a couple of countries where we don't have presence.

And so it allows us to continue our growth without having to invest a lot of new capital and which also takes time to add that capacity. So that's still going forward. We're still in this process. And we hope to conclude it sometime soon.

The proceeds that we used before that I think you're referring to, is we participated in an auction to buy 3 rendering assets from the Patense Group in Brazil, which was a really fantastic opportunity, through a Chapter 11 process for us to add assets that fit very well with the FASA network of assets that we previously acquired in 2022. Those are the kinds of things that we really look forward to and hope will continue to arise, essentially buying assets at a discount to full value, that fit very well with our network.

Our next question comes from the line of Conor Fitzpatrick with Bank of America.

Feed prices continue to run up. Forward soybean oil is in the mid-70s right now. And I guess the question is, how much more room do feed prices have to run up from here? And to answer that, I think we need to know why the ramp in biodiesel utilization appears to be lagging a bit in March. It's possible that higher pricing for physical delivery in parts of the Midwest or cash constraints on realizing 45Z credits or general hesitancy to restart facilities could explain it. Are you seeing any of those factors weighing on marginal biodiesel production and overall feed consumption in the market?

Yes. I think Bob and I can tag-team this. I mean, clearly, on the Gen 1 biodiesel business, restarting those plants coming out of winter just takes a little bit of time here. There's a seasonality of demand of that product. Trying to rebuild supply chains that have been shut down for 1.5 years take a little bit of time. So I think you'll see that industry start to ramp up from where it was.

Interest rates are higher too. So working capital, people forget that when you don't have that blenders' tax credit, you've got to have a working capital line to run those plants. Clearly, the integrated guys, that's an easy switch for them, and you're seeing that. But the free-stander takes just a little bit longer to get there, would be my read on it. I don't know, what do you think, Bob?

Yes. I think the other thing a lot of people miss on this one is for the small, independent biodiesel producer, they really don't have access to the production tax credit, practically speaking. Ultimately, they can get it. They certainly can generate the credit, they can eventually find a way to sell the credit, it would come at a pretty big discount to 100 cents on the dollar. But in the near term, they're not going to have access to that revenue.

And so margins need to really increase from where we are today in order to incentivize all of these guys to come back online. It's just going to take a little bit more time. But eventually, that capacity is going to be valuable, in our opinion, because margins are going to move to levels that cause it to be.

Okay. Great. And I guess relatedly, since a lot of those biodiesel producers are kind of constrained on the feed optionality side, not having pretreaters, what's kind of the split between opportunity for veg oils which require less pretreating and fat oils and greases that Feed Ingredients produces? The entire complex should run up, but veg oils might have a chance to run up a bit more.

Yes. I mean, look, I think the reality is there's enough demand out there that can now utilize the non-veg oil feedstocks where we're probably going to just continue to trade at sort of their CI score adjusted values. So we're not really expecting to see veg oil run up relative to the other products just because, like I said, there's enough capacity that can utilize that.

The thing with biodiesel is that it doesn't -- as long as it can buy refined oil or it's able to pretreat or clean the oil from that standpoint, then it doesn't need as much pretreat capability and biodiesel can run on 100% soybean oil.

Our next question comes from the line of Matthew Blair with TPH.

Could you talk about the feedstock slate at DGD? I know in the past you ran 100% low CI feed. Has that changed? Are you running more soybean oil in 2026 with just some of the changing credit values around 45Z and providing more of a subsidy for veg oil based feeds?

Yes, Matthew. DGD is well setup to maximize opportunities depending on what is the lowest cost, net of CI score, feedstock and run for that barrel. That implies that there's an increase in the utilization of veg oils into the mix. I think that -- it's fair to say that that's occurring. But it's just going to depend on -- these markets are -- they move around quite a lot. And so they're just going to be able to take advantage of the opportunity, whichever it is.

Sounds good. And then the comments earlier I thought were pretty interesting. You mentioned that the RVO will basically require more RD than what the West Coast LCFS markets can handle. And so the implication to us is that the marginal U.S. producer will actually have to sell into non-LCFS markets. But of course, the market will still need the RINs from those marginal producers. So overall, it just seems like a steepening of the cost curve is something that should continue to be pretty supportive for margins, probably likely come through in stronger RIN prices. Is that your take as well? Do you agree?

Yes. I think that is how we see it. Ultimately, yes, I think that's how we see it. RIN, at the end of the day, like I said earlier, RINs will need to be the great equalizer that creates the margin that we need to make enough volume to satisfy the RVO. And the extent to which it needs to go is going to depend on all these other factors: feedstock costs, global fuel prices. Certainly, the environment that we're in today eases the burden of the RIN. But even with that, we're seeing very strong RIN values.

Our next question comes from the line of Betty Zhang with Scotiabank.

I wanted to ask on DGD, the 2Q guide is 320 million gallons. Is that essentially you're running at maximum levels? And if not, is there any reason to not run at max?

Betty, it's close to max. I think right now, yes, you look at the margin environment, we are incentivized to run as hard as we can. 320 million is pretty close to max. I don't know what else there is to say.

You're being slightly positive, Bob, but it's -- that it's pretty close to full out.

Yes. I mean we're going to do our best to run full out in this environment.

Okay. Perfect. And then I wanted to ask on kind of the differential between SAF and renewable diesel. I know in the past, SAF has had a bit of a premium over RD. But given a lot of moving pieces, including the RVO and so on, can you just speak to maybe the economics of producing SAF versus RD currently?

Yes. So I think the short answer is for sales into the United States and the voluntary markets, there's more of a fixed premium to RD, where SAF continues to be a better opportunity and better margin. In Europe, it is more dynamic than that. Europe is based on mandates, and we see times when margins in Europe for RD are better than SAF. We expect that to continue to be kind of volatile or up and down.

But we're really happy with the voluntary market we have in the U.S. and the premiums that we can consistently get from SAF. So overall, we're still meeting our commitments from the investment we made in SAF at Port Arthur.

Our next question comes from the line of Jason Gabelman with TD Securities.

Given Darling is uniquely positioned running domestic feedstocks and then not only producing but importing feedstocks to DGD from the international market, I was wondering if you could provide some color on if RIN prices today are sufficient enough to attract those international feedstocks to be run in the U.S. market, especially given those feedstocks no longer qualify for the producer tax credit?

Yes. Good question. So the answer to that is going to depend on who's making the fuel. For Diamond Green Diesel and given our cost of production, the efficiency, the logistics that are available to us when it comes to importing those international feedstocks, we can make renewable diesel with those products and sell into the United States and make a good margin.

I don't think everyone is able to say that. And so for that reason, we do think we'll continue to see margins strengthen. And we expect to see a difference in feedstock prices in North America relative to the rest of the world.

And do you expect that biodiesel producers are going to ultimately need to rely on international feedstocks as well in order for the industry to meet the RVO?

No. I don't. I think biodiesel producers should see a sufficient amount of U.S. veg oil -- or U.S. and Canadian veg oil to supply their needs.

There are currently no more questions waiting at this time. So I would like to pass the call back over to the management team for any closing remarks.

All right. Thanks, everybody, for your questions today. As you know, we'll be hosting an Investor Day on May 11 in New York. It will be simultaneously webcast. It's an exciting time for us as Suann, Bob, Carlos, myself and David van Dorselaer will lay out a lot of these topics that we discussed today in addition to what our future looks like and the 3-year road map as we see it today.

So if you have any questions, follow up with Suann. And stay safe and have a great day. Thanks again.

Thank you. That will conclude today's conference call. Thank you for your participation. You may now disconnect your lines.

Good morning, and welcome to the Darling Ingredients Inc. conference call to discuss the company's fourth quarter and fiscal year 2025 financial results. [Operator Instructions] Today's call is being recorded, and I would now like to turn the call over to Ms. Suann Guthrie, Senior Vice President Investor Relations. Please go ahead.

Fourth Quarter and Fiscal Year 2025 Earnings Call. Here with me today are Mr. Randall C. Stuewe, Chairman and Chief Executive Officer; and Mr. Bob Day, Chief Financial Officer. Our fourth quarter and fiscal year 2025 earnings news release and slide presentation are available on the Investor page of our corporate website and will be joined by a transcript of this call once it is available. .

During this call, we will be making forward-looking statements, which are predictions, projections and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results can materially differ because of factors discussed in today's press release and the comments made during this conference call and in the Risk Factors section of our Form 10-K, 10-Q and other reported filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.

Now I will hand the call over to Randy.

Thanks, Suann. Good morning, everyone. As we close out 2025, I want to acknowledge our employees for continuing to execute on our vision of being the world's largest, most profitable and most respected processor of animal byproducts. For every end, we believe there is a new beginning as 2025's performance clearly demonstrates. Our 2025 results reflected the uncertainties created by evolving renewables public policy along with a turbulent globalization related to tariffs and trade, yet our team remained committed to the fundamentals that matter the most.

We meaningfully improved our debt leverage, took steps to rationalize and improve our portfolio and focused on our core strengths and advanced our operational excellence. These actions throughout the year strengthened our platform, assisted in generating concrete results and position us for continued growth and profitability in the future.

In the fourth quarter, we delivered solid EBITDA growth and sequential gross margin improvement. Despite a challenging year for Diamond Green Diesel, our best-in-class operations led the industry in results. Darling's combined adjusted EBITDA for Q4 was $336.1 million, and our Global Ingredients business performed strong with $278.2 million of EBITDA.

In our Feed Ingredients segment, exceptional operational execution drove meaningful margin expansion for the fourth quarter in a row, a clear sign of the momentum our operations team continues to build as they remain laser-focused on driving efficiency and delivering strong results each quarter. The additional week in our fiscal year, combined with a favorable lag in fat prices, supported higher volumes and sales in the fourth quarter for the year.

In the U.S. Demand for domestic fats remains robust as we continue to operate within agricultural and energy policy direction that is increasingly favorable to Darling to American agriculture and to American energy independence. Internationally, our Global Rendering business in Europe, Canada and Brazil delivered solid year-over-year growth.

Turning to our Food segment. Global collagen and gelatin demand continues to rebound and our previously announced joint venture with PB Liner and Tessenderlo is advancing as planned with regulatory reviews now underway. Across the business, we're seeing positive global demand trends that give us a very encouraging outlook for 2026.

In our Fuel segment, Diamond Green Diesel delivered its strongest quarter of the year with $57.9 million of EBITDA or $0.41 per gallon. For the full year 2025, DGD earned $103.7 million of EBITDA or $0.21 EBITDA per gallon and sold approximately 1 billion gallons. This performance reinforces DGD's position as the lowest cost operator with an unmatched supply chain and superior logistics. Even in an uncertain time for the industry, DGD continued to generate positive EBITDA and consistent operations, highlighting the strength of our people and the deep expertise behind our operations.

Now looking ahead, we are increasingly optimistic the policy backdrop is moving in a direction that we believe will soon enhance DGD's earning potential and create a more constructive environment for domestic renewable fuels.

Now as I mentioned earlier, we have taken steps to sharpen our portfolio and focus on our core strengths, which may result in some asset sales in the near future. At the same time, we are open to opportunities that strengthen and expand our core business where it makes sense. Darling was identified as a stocking horse bidder in the bankruptcy proceedings for 3 rendering facilities from the [ Potenza ] Group in Brazil, the second largest rendering company in Brazil. Bob will share more details on the financials and timing, but these are high-quality assets with strong operational capability and fits naturally alongside our existing footprint. This is an incredibly strategic acquisition of assets that offers important synergies with the rest of our network in Brazil.

Now with this, I'd like to hand over the call to Bob to take us through the financials, then I'll come back and discuss my thoughts for 2026. Bob?

Thank you, Randy. Good morning, everyone. As Randy mentioned, third quarter momentum continued nicely into the fourth quarter as combined adjusted EBITDA was $336 million versus $289 million in fourth quarter 2024 and $245 million last quarter. Core Ingredients improved both year-over-year and sequentially. For fourth quarter 2025, Core Ingredients EBITDA was $278 million versus $230 million in fourth quarter of 2024 and $248 million last quarter. And for all of 2025, Core Ingredients EBITDA was $922 million versus [indiscernible] million in 2024.

While 2025 was a 53-week year for Darling, the added weeks impact added only around $20 million EBITDA. So by in measure, 2025 for the Core business realized significant improvement over the previous year. For the fourth quarter 2025, total net sales were $1.7 billion versus $1.4 billion in 2024. Raw material volume was 4.1 million metric tons versus 3.8 million tons from the fourth quarter a year ago. And for the full year, raw material volume was 15.4 million metric tons versus 15.2 million tons in 2024.

Meanwhile, gross margins for the quarter improved to 25.1% compared to 23.5% in the fourth quarter of last year.

Looking at the Feed segment for the quarter. EBITDA improved to $193 million from $150 million a year ago, while total sales were $1.13 billion versus $924 million and raw material volume was approximately 3.4 million tons compared to 3.1 million tons. Gross margins relative to sales improved nicely to 24.6% in the quarter versus 22.6% in the fourth quarter from 2024.

As Randy mentioned earlier, we successfully participated in an auction to acquire 3 assets formerly owned by the [ Potenza ] Group in Brazil. We are currently working through terms in the purchase agreement and expect to close later this quarter. The cost of acquiring those assets translates to around $120 million, and we expect to fund that with cash flows generated in first quarter of this year.

In the Food segment, total sales for the quarter were $429 million, a significant increase over fourth quarter 2024 at $362 million. Gross margins for the segment were 27.2% of sales compared to 25.7% a year ago and raw material volumes increased to 350,000 metric tons versus 320,000 tons. EBITDA for fourth quarter 2025 was up significantly compared to the fourth quarter of 2024 at $82 million versus $64 million.

Moving to the Fuel segment, specifically Diamond Green Diesel. Darling's share of DGD EBITDA for the quarter was $58 million, which includes an unfavorable LCM inventory valuation adjustment of $24 million at the DGD entity level. This was the best quarter of the year for DGD as confidence in policy and more disciplined market behavior led to an improved margin environment. For fiscal year 2025, Darling's share of DGD EBITDA was approximately $104 million which included a favorable LCM inventory valuation adjustment of $140 million at the entity level.

Darling contributed approximately $328 million to DGD in 2025 and -- these contributions were offset by $368 million in dividends received, a significant amount of which came from $285 million in production tax credit sales, $255 million of which were paid during 2025, and the balance will be paid in 2026.

Other Fuel segment sales, not including DGD, were $153 million for the quarter versus $132 million in 2024 and relatively flat volumes of around 390,000 metric tons. Combined adjusted EBITDA for the full fuel segment, including DGD, was $85 million for the quarter versus $84 million in the fourth quarter 2024. For fiscal year 2025, combined adjusted EBITDA was $192 million versus $374 million a year ago.

As of January 3, 2026, Total debt net of cash was approximately $3.8 billion versus $4 billion ending December 28, 2024. Capital expenditures totaled $156 million in the fourth quarter of 2025 and $380 million for the fiscal year. Our bank covenant preliminary leverage ratio at year-end was 2.9x versus 3.9x at year-end 2024. In addition, we ended the year with approximately $1.3 billion available on our revolving credit facility.

For the 3 months ended January 3, 2026, we recorded an income tax benefit of $11 million primarily due to the net impact of production tax credits, and we paid $6.9 million of income taxes during the quarter. For the 12 months ended January 3, 2026, the company recorded an income tax benefit of $9.4 million. Similar to last year, the company's effective tax rate when including production tax credit sales was negative 15.3%, and we paid a total of $58.4 million of income taxes in 2025.

Overall, net income was $57 million for the quarter or $0.35 per diluted share compared to net income of $102 million or $0.63 per diluted share for the fourth quarter of 2024. As we continue to evaluate each business and position the company to maximize value, we restructured and impaired some of the portfolio in the quarter resulting in charges of $58 million. Adjusting for the restructuring and impairment charges and to provide some perspective regarding earnings per share in the fourth quarter from 2025 and 2024, an adjusted non-GAAP earnings per share would have been $0.67 per diluted share in the fourth quarter of 2025 and $0.66 per diluted share in the fourth quarter of 2024.

With that, I will turn the call back over to Randy.

Thanks, Bob. In 2025, we focused on executing for today so we can build for tomorrow. That discipline has put us in a strong position as we move into a period of meaningful opportunity. We're beginning to see tailwinds forming across our markets and public policy is on the cusp of becoming tangible and beneficial for our businesses. We believe we are at an inflection point, one where the foundation we have built and the momentum we have created will move us forward. We're excited about 2026 and believe we are well positioned to deliver long-term value for our shareholders.

Now looking forward to first quarter, we estimate that DGD will produce about 260 million gallons at improved margins. For the Core business, when you adjust for our fourth quarter performance for the 13-week period and excludes some minor year-end cleanup, the quarter was solid. In January, severe weather in the Southeast and Eastern Shore created some moderate operational challenges. Even with that, when considering fat prices and volumes, we only expect a modest pullback relative to Q4. As a result, I'm estimating our Core ingredients adjusted EBITDA to fall in the range of around $240 million to $250 million for first quarter.

Now with that, let's go ahead and open it up to questions.

[Operator Instructions]

The first question comes from the line of Derrick Whitfield with Texas Capital.

Congrats on a strong close to the year. So maybe just starting now with guidance. So while I understand why you're not guiding DGD for 1Q, it seems like to us that the margins are materially stronger than where you were in 4Q given the strength of recent credit prices and the softness of fat in UCO relative to SPO. So that's kind of part one.

And part 2 is, as you guys look forward and let's assume we get a constructive would you likely then put DGD back in guidance at that point? I would love your thoughts on those 2.

Derrick, this is Bob. I guess to answer the first -- the last question directly, it's going to depend. I mean I think that there's -- it's just going to depend on the kind of clarity and certainty we have. But as we look at the first quarter, first of all, we saw strong results in the second quarter. Fourth quarter of 2025, much better. And we continue to see that momentum carry forward into the first quarter. But yes, we aren't providing guidance, and we'll reconsider that after we get a final ruling on the RVO.

Terrific. And then maybe just 1 follow-up, perhaps for you, Bob. When we think about the Feed business, it is clearly sensitive to the final absolute RVO. But how would you characterize your business's potential sensitivity to the half RIN concept for imported products and feedstocks? .

Yes. I think it's hard to answer as it relates specifically to the half RIN concept because there are so many other factors. We've got origin tariffs on feedstocks that are already having a big impact. I think, the bottom line is if policy is supportive to U.S. or even just broader North American feedstock values, that's certainly constructive to our rendering businesses in the United States and Canada. And based on what we've heard, we're likely to see it manifest in some way that's supportive like that.

The next question comes from the line of Thomas Palmer with JPMorgan.

Given where you sit in the biofuels supply chain, I wondered if you might have some insight into what's happening still far in 2026 versus maybe how it might evolve here as we get clarity on the RVO. And specifically, to what extent maybe we're starting to see more production from biofuels operators that maybe had pulled back? And to what extent you're starting to see increased pull in terms of feedstocks from the biofuels industry? .

So if I didn't understand the correct question correctly, Tom, let me know. This is Bob again. I think we haven't seen a significant increase in biofuel production yet in the United States. And despite better margins, which suggests to us that margins need to get better in order to incentivize more. And so if we have an RVO, ultimately, that results in an increase in demand, we're going to need to see better margins in order for that to happen. But if I -- let me know if I didn't answer your question.

No, you understood it right. I was really just trying to understand if we're seeing anything kind of happening in the background versus what we're seeing with pricing so far.

Second, I did just want to touch on the Food business. There was some constructive commentary in the prepared remarks. This is maybe less tethered to the RVO. So I wondered if you would be comfortable maybe talking at a high level about expectations for EBITDA as we think about the coming year?

Yes. Tom, this is Randy. I mean the collagen and gelatin business globally is performing very nicely, had a really nice fourth quarter, carries that momentum into Q1 right now. As we look around the world, the demand -- a year ago today, we were talking of destocking of people that have built too much inventory, the industry had added quite a bit of capacity through new players, and the only thing the new players knew how to do was to was to reduce price to try to move the product and have built inventories. Those have been worked through pretty much around the world.

And so ultimately, we look for a year similar to this year, if not better. It will depend on really how -- it really comes down to trade flows again. Keep in mind, there's still lots of tariff issues around the world, and we're a heavy Brazilian producer. And at the end of the day, we were able to navigate that with our customers and suppliers. And I think we'll be in better shape as we come on into the year 2026 year. Also, our next tide of product line has been launched. The GLP-1 alternative glucose moderation product is getting a lot of repeat orders now, building momentum. And then this spring, we are hoping some were to bring on our green hill next tier product.

So we're getting momentum with the higher-value products here. And then the commodity gelatin part as, what I'd say, leveled off and improved from where it was a year ago.

The next question comes from the line of Manav Gupta with UBS.

My first question is going to go a little bit on the policy side first. As this RVO comes out, net of SREs, what would be looked as a constructive number from the perspective of Darling, like is there an absolute number, 5 plus or whatever, which if it's the net number, you would say, okay, that is constructive. And then on the LCFS part, finally, things are moving in absolutely the right direction. And I'm just trying to understand, based on the revised the mandate going in, where you actually see that carbon bank deplete, which will be a major positive for you?

Thanks, Manav. This is Bob. So I'll go on record saying we support an RVO for advanced biofuels that translates to 5.25 billion gallons or 5.61 billion gallons. Those are kind of the numbers that have been thrown out there. We'll go on record continuing to support those numbers. I think what we would add to that is just anything that resembles, anything close to that is extremely supportive, and we believe results in higher margins than what we see in the market today. So I guess I'll leave it at that. .

On the LCFS question, it's an interesting situation because we have the greenhouse gas emission requirements that are more stringent than they were. We're seeing the bank come down considerably. And we expect that we'll continue to see that happen. One interesting aspect about that market is over the last several quarters, we've actually seen less renewable diesel going into California despite better margins. And so that tells us that in order for California to satisfy its mandates, either LCFS credit prices have to go up or RIN prices have to go up, but it's got to incentivize more domestic production to eventually go into California, so the rate at which we're drawing that bank down starts to slow down. We haven't talked about it in those terms for a long time, but so it's absolutely constructive what we're seeing there.

Perfect, Bob. I'm just going to quickly ask a question on the food JV side. Obviously, you've highlighted multiple benefits of that JV, but you've also in the past said, look, once the JV really takes off, there could be a re-rating for the stock, right? Can you talk about the multiple expansions that can happen as the JV comes to fruition and some of those benefits which will lead to a higher rerating for Darling Ingredients?

Yes. Thanks, Manav. So I think, first of all, we're in a process there. We've signed definitive agreements. We've done our regulatory filings, and we can't predict exactly when this joint venture will close. But it's sometime, we expect in the next 12 months or so. Once that happens, we will focus on integrating plants, maximizing synergies and opportunities, and then as Randy talked about, throughout all of this, we are very focused on increasing the sales volume of the [indiscernible] portfolio of products, which really move that business into the health and nutrition and wellness segment of the market that trades at significantly higher multiples.

We believe this is a business that can move into a space that's trading 12 to 16x EBITDA. And if we accomplish that and when we accomplish that, we'll have to evaluate what's the best way for us to monetize that if we're not being recognized for that kind of a multiple for that business.

The next question comes from the line of Heather Jones with Heather Jones Research.

Thanks for the question. So just thinking about the RVO and the probable impact on Dar's Feed business, was just setting up the expectations for 26. Have there been any changes and how you price the lags, et cetera, that we should be aware of as we're thinking about the potential impact later in the year?

Heather, just to clarify the question. So how we price the -- you say the lags or the legs. .

The lag. So like in the past, it's been like a 60-day lag between what we -- have there been any changes in that? Or how you pay your suppliers as far as like your formulas? Not to give us specifics but just things like that, that we should be aware of as we're trying to figure out the impacts for Darling.

No, not at all, Heather. I mean what we saw in fourth quarter was as the team executed well. They had some forward sales on. Prices came down here, and we benefited it. As the -- we were kind of lagging all the way up all year in '25 here. And so we've got a little bit of a downturn. That was kind of the reason for the guidance in -- for Q1 here at $2.40 to $2.50, fat prices are lower, it's wintertime. But they're going to come back sharply here as the industry powers back up.

Bean oil is back showing near $0.58 on the Board today. And I'm starting to see sales now back of fat's FOB the plants with -- in a 50-plus range now. So it's coming back for us right now. But there's no change in how we do business there.

Okay. Awesome. And then I was wondering, just given the recent 45(G) proposals from the treasury and then just, I guess, a more liquid market as far as monetizing those credits -- is there any change -- any update that you would give as far as what we should be assuming for the average credit value for Diamond Green?

Yes, this is Bob. I would say we've seen a maturation somewhat of that market where there's recognition of the validity of the credit. It's making it easier to have discussions and make sales. There are some -- there is some more supply on the market, so that maybe counters that a little bit. All in all, we don't expect any significant change to the value of the credits that we're able to sell in 2026 versus what it looked like in '25.

The next question comes from the line of Pooran Sharma with Stephens, Inc.

Thanks for the question and congrats on posting some strong results here. I wanted to maybe start off and get a sense as to Q1 Fuel production, I think in the deck, you have it at 260 million gallons. It seems kind of low, just given your capacity utilization. And I thought you're going to have DGD 1 back online. So I was hoping to maybe get some color on the volume expectations for fuel?

I guess we are -- we've been opportunistic in terms of the way we've managed capacity at Diamond Green Diesel over the last several quarters. In certain cases, we've been able to run at less than full capacity and increase our distillate yields there. We've seen wider spreads, in some cases, and so a benefit to doing that. I think that as we look at the first quarter and what we're really doing is anticipating ultimately a final ruling on the RVO, which would impact the market's second quarter and beyond. So we just really want to position the business to maximize production as we get into the second quarter and through the end of the year.

Okay. Makes sense. And in the past, I think you've given a percentage split on the core business guide. Of that $245 million at the midpoint, are you able to give us a rough sense on on the split between Feed, Food and Fuel for the Core business?

So this is Randy. So let's do Randy math here. if you were $278 million in Q4, remember, there was an extra week in there. So you got to divide by 14 and times 13. So you come up with $25 million something there, $258 million, $259 million. We had a few balance sheet cleanup items that you always do at year-end. So that's where we kind of came in at the $250 million mark for the quarter, $240 million, $250 million.

Remember, that does not include DGD. DGD margins are improving from Q4. Volumes are pretty steady, down a little bit here as we get ready to run harder for the balance of the year. So that's really but trying to split it between food and feed kind of impossible at this time. Food for the most part, is very, very consistent. So you can kind of back into it yourself.

The next question comes from the line of Conor Fitzpatrick with Bank of America.

In fourth quarter Feed ingredients processing volumes set a record and Feed revenue per ton and gross margin percentage were the best print since 2023. Could you maybe break down what has been driving this momentum in the Feed Ingredients segment and help us understand which drivers are more ratable?

Yes. Conor, this is Randy and Bob can help me on here if I leave something out. I mean, clearly, tonnage around the world, raw material tonnage is very strong. If we look at it, there's no surprise, B tonnage in the U.S. is at a relatively low point in my career right now, but it feels like it's rebuilding but offsetting that is very, very strong poultry tons in the East and Southeast.

Now you go south to Brazil, beef tonnage is is large, very large now. We're extremely full at all plants down there. Europe is very consistent as we look around Orange. So tonnage is really kind of as expected and doing very, very well. Margin management is what we pride ourselves on in the business and really spread management to try to deliver returns that reflect what it costs to both operate and replace these plants. And so it was a 25% kind of focus for us, and it was one that it's kind of hard to talk about to get out there because there's no specific thing.

It's each customer, whether it's freight, whether it's the products we're making at plants, the markets that we're selling, the '25 year was very challenging because especially on the protein side, you didn't know was China open, was China closed. And so it becomes very difficult for some of the high-end proteins of fats. Remember, a lot of fat was moving up out of Brazil. to Diamond Green Diesel. And with the Trump tariffs, that makes it pretty much impossible now at this time. So we've had to move spreads and raw material costs around there. So it's a whole bunch of little things that are out there that the team really executed well on.

And going back to the LCFS, you talked about credit prices needing to rise in order to redirect renewable diesel and biodiesel supply back into California. But maybe could you help us understand what credit price would be required for DGD specifically to redirect product toward California and away from other current end markets?

Yes. Conor, this is Bob. It's hard to answer that because all these markets around the world that we're selling into are consistently changing. And so it's really a relative question. What I would say is in -- I guess, in a static environment, how much would the credit price have to increase into California for us to sell into California. I'm not really sure exactly. I think that -- but it would have to be -- I can't -- it's hard to answer that exactly just because the markets are so dynamic and they're moving around so much.

But what it has demonstrated is that, it's just -- it's going to have to be higher than where we are in order for it to happen. There are better alternatives today for Diamond Green Diesel at least in order to sell into California.

The next question comes from the line of Dushyant Ailani with Jefferies.

My first one is I just wanted to touch on the Brazil rendering facility, the stocking hosted. Can you talk about the rationale for that some more? And then maybe -- how do you think of deals like these going forward? Is it going to be a onetime thing that is an opportunity? Or could we see more of these? And then also just one last piece on that is also, how do you think that could add to the capacity and the margin profile for the Feed segment change going forward?

Yes. Dushyant, this is Randy. The [ Potenza ] group, the Concave family has -- we worked closely with over the years. they found that we had them acquired years ago and it fell apart. It's somebody we've always had our eyes on. These are really first rate world-class facilities that long story short is he spent too much money and was unable to maintain its balance sheet, which is the most important thing in this business through the volatility that happened and happens in Brazil.

So these 3 -- we're doing a combination of things in Brazil. As I said, the tonnage is very large. We're doing a lot of organic expansion and debottlenecking at our current facilities. And these facilities were just perfect within our footprint to bolt on and give us some arbitrage and margin enhancement opportunities. So we were excited to get these, and we're excited to get them closed and integrated.

Awesome. And then just a quick follow-up. I think in your prepared remarks, you talked about potential for incremental asset sales. Could you maybe talk a little bit about the magnitude of those asset sales and then from which segment we could see that?

Yes. Thanks, Dushyant. This is Bob. We're intentionally vague about that as we negotiate different options. I think that what we've said previously is that when we look back at where we've been most successful, it's clearly in areas that -- where we've got core capabilities in our core business and some of the peripheral areas where we're operating, we can look at it a bit more opportunistically with some of the impairment that we did. It just -- it repositions our balance sheet so that we're really valuing things based on fair market value, and that allows us to be more agile if we choose to do so.

But we're not forced to do anything in any case. And I think that's an important position that we need to have as we look at different opportunities.

The next question comes from the line of Andrew Strelzik with BMO.

My first one, Randy, I appreciate you're not giving the annual guidance and certainly understand that. But -- so I'm not looking for numbers. But I guess I'm just wondering -- when you think about kind of a post RVO environment, is there anything -- any analogous year that, that setup kind of feels like? Is there anything from your career in the past from a supply-demand perspective that maybe kind of feels like the setup we could get into a kind of a post RVO environment?

Yes. we look historically at DGD is having a first-mover capability and the success that it had. I mean, I think everybody knows that the the machine is capable of making 1.3 billion gallons plus out there. As I look back at '25, as Bob and I sat here and tried to give what we thought the business would do, we looked at it and said, "Well, we don't think '25 can be any worse than '24." And we were very, very wrong with that belief and assumption. We didn't get an RVO soon enough. We didn't get an LCFS increased guidance soon enough. We think of this time last year, to kind of give the courage in the industry.

And then we had some competitors -- oil company competitors out there. Some have shut down now that decided to, as I call it, run for fun. And so pretty interesting environment that we were in last year. Clearly, people are tempering their kind of behavior now which you would expect. I mean, in all business school things when you get a variable cost, it just takes longer for rationalization and improved behavior.

As we look at '26 here, clearly, we can make you a case for an easy $0.50 a gallon. We can make you a case for $1 a gallon at that. But it all hinges on, like we said, on the RVO which we, as Bob said, 5.2 to 5.6. So we think anything with a 5 is very, very positive and constructive. And ultimately, you got the drawdown in the LCFS coming back and you've got robust world demand for R&D right now. So it's a hard thing to sit here and say you can say $0.50 a gallon or $1 a gallon. We ran 41 in Q4. We said we think Q1 is better. And so that's the [indiscernible] million. And then to go on up to $1, we'll see what happens. It's going to take behavior in the industry, and it's also going to take a very robust RVO around the world.

Okay. That's helpful perspective. And then I just wanted to ask a capital allocation question. You've done a nice job from a leverage perspective. this past year, not too far off from some of the targets. I guess how are you thinking about the time line to achieving the leverage targets and then kind of capital allocation priorities once you get there?

Thanks, Andrew. Let me say first, I think capital allocation priority continues to be paying down debt. How quickly we sort of achieve our goals is is going to depend in large part on how much cash DGD generates. And so we'll see what that picture looks like once we get a final ruling on the RVO. And once that happens, I think we can be a bit more specific about what our plans are. But as we sit here today, we like the trend and the direction we're headed. We're going to continue to pay down debt. we'll reassess as we have a little bit more clarity on what the cash flow situation looks like going forward.

The next question comes from the line of Matthew Blair with TPH.

Hopefully, you can hear me okay. I had a question on the [ SAF ] market. So one of your major European competitors talked about how European [ SAF ] prices are actually below European RD prices, and they're kind of pulling back on their staff production. What's the picture like on [ SAF ] for DGD? Do you have term contracts to to, I guess, essentially like stabilized that [ SAF ] contribution. What are you seeing on U.S. [ SAF ] prices versus U.S. RD prices? .

Yes. Matthew, this is Bob. I think to answer the first part of your question first. In Europe, we've seen [ SAF ] trade at a premium. We've seen it trade at a discount. It's kind of -- it's fluctuated -- as I think everyone knows, DGD has some countervailing duties in order to get into that market. So it isn't as readily accessible to us, although we do have sales into Europe, and we can be opportunistic when that market is good, and we've been able to take advantage of that.

We still have sales on the books in 2026 that we had made previously. Our book is healthy. The market, I think, is starting to -- well, it is starting to rebound a bit in the United States. In the United States, it's primarily a voluntary credit market. And we've seen more and more interest materialize, and we think we're going to continue to see that as just overall demand for energy continues to increase. So our book is solid today. There's room to make more sales. We're having really good constructive discussions about that. And I don't think that -- I think [ SAF ] will -- we'll be happy with SAF sales volumes and margins as we look at' '26.

Sounds good. And then regarding the contributions to DGD, I believe in 2025, Sterling DGD, $328 million, which, of course, was more than fully offset by the dividends received back. I think 2025 was a pretty heavy turnaround year for DGD. But do you have an estimate in 2026, how much Darling might be spending DGD? Would it be lower than the 2025 number? .

Yes, it's a good question. we don't have a precise estimate, but I would say, we expect it will be less. And you're right, we had 3 catalyst turnarounds in 2025. We did some design work. There were some things that some cost items that needed to be paid for. As we look at 2026, yes, we anticipate that the contributions will be less. It's going to depend a little bit on the market environment. But based on where we sit here today in the first quarter, we expect it would be considerably less than what it was in 2025.

The next question comes from the line of Brian Todd with Piper Sandler.

Maybe just a couple of follow-ups on I don't know the comments or questions. I mean we're getting closer to some hopefully, we're getting closer to some regulatory clarity on some of the renewable fuels issues. Randy, can you maybe talk about -- are you hearing anything on timing of the RVO or any of the -- anything you might be hearing out of Washington on some of the gives and takes that may be going on in that discussion.

And then maybe on the 45[G), the preliminary rules that we saw come out. Can you -- it's really positive and maybe mix in some regards in terms of SAF at the relative benefit to running advantage in OCI. Can you talk about kind of what you see in the pluses and minuses for you of the proposal?

Ryan, this is Bob. I think first question around timing. We've spent a lot of time in D.C. I think that our perspective is that all key stakeholders had to get comfortable with what the plans and policies were. In our view, that's happened. The EPA has a heavy administrative administrative burden to get through as it pertains to responding to comment letters, prior to them sending over a proposal, a final proposal to OMB. We believe that's likely to happen soon. And so hard to say exactly what that means, but probably it's got a February date to it, in our view.

As far as 45(G), what we're seeing from that, there's really nothing that was unexpected. We expected some positive things and we're seeing those positive things. So we've got to do our due diligence and get our legal opinions and make sure that everything is as it's perceived. But as far as it relates to Darling and Diamond Green Diesel, we're seeing what we thought there, and that's positive. I think the biggest thing that could affect us is just what determines a qualified buyer. DGD was the fastest in the market to convert to producing R100 so that it ensured that it was selling to qualified buyers. And that was one of the things that allowed us to sell the production tax credits faster than everyone else and at a higher sense on the dollar.

If we can go back to making R99 and qualify, that just creates some flexibility that we appreciate, but we don't depend on. So all in all, we see the changes as positive, but either way, not having a significantly -- it wouldn't have a negative impact on our business.

Our next question comes from the line of Ben Kallo with Baird.

Just a follow-up on a couple of things. One, in the prepared remarks, you talked about maybe M&A opportunities outside of Brazil. Could you just talk to us about kind of what your -- if you have a size limit on them and how you'd see a limit to adding down the balance sheet for that. .

And then you talked about SAF a bit, but can you just talk about any more you can on volumes that you're seeing there and any kind of pricing trends there?

Thanks, Ben. This is Randy. From an M&A perspective, I think we're -- I would still say we're on an M&A holiday. We're working the world. We see what's out there. nothing that really turns us on at this time per se. The Potenza opportunity was 1 we were very, very familiar with. And given that it was a forced liquidation, it was something we couldn't turn down. I think more of our focus around the world is on organic expansion, whether it's in Brazil, Paraguay, China in the U.S. with the construction of the Mount Olive new rendering plant and then some additional expansion.

The poultry side continues to expand here, and we're going to have to use our capital dollars to debottleneck and expand some of our facilities here. So not much there. Bob, do you want to comment on the SAF?

Yes. I think one interesting development in the SAF market in the United States is -- at the end of the day, the buyers for staff credits are large companies, often tech times tech companies, banks. The airlines act more as a broker in that case. And so the discussions that we have -- we are having are really about how a tech company obtains Scope 3 credits through the acquisition of SAF that obviously goes through an airline.

So the discussions are more strategic in nature, long term, potentially higher volume. They take longer to put together. It's harder to predict exactly when they come together. But as those discussions continue to advance, it's exciting because there's a potential for more of capacity to be dedicated towards future contracts. And it's hard to say more than that right now today other than the discussions are constructive and we're encouraged by the direction they're going.

The next question comes from the line of Betty Zhang with Scotiabank.

I wanted to ask about expectations for core EBITDA for the rest of the year. First quarter is looking a little bit softer, but then it seems 2Q is set up to be better with SAF prices recovering -- what about in the second half, what could that look like?

Betty, this is Randy. So I did the math earlier. First quarter is not looking softer because of 13 weeks. Wintertime rendering is always a challenge in North America and to a degree, Europe has had some challenges. South America is in the midst of a hot summer. So we're very solid for Q1.

We're still trying, if you sit there, we think that the year will improve as we go forward. We're being a bit cautious because until we see that RVO, it's hard to really put your finger on it. But at the end of the day, you're seeing the futures market for soybean oil really try to project a very strong RVO here. So that will only provide us tailwinds as we go forward. So hopefully, Q1 is -- we built momentum through the year -- and so hopefully, we'll continue to build momentum and even have a better year than we had last year.

Okay. Great. And then if you could give us a bit more color on the restructuring and impairments. Does that reflect a change in your strategy? And would you say there are other businesses that could also be reviewed?

No, I wouldn't say a change in operating strategy. I would say that every so often, we look at our portfolio and say, can we deliver the returns that we want to in different businesses. Do we have the #1 or 2 position in it. And we have a couple of businesses out there where we don't have that position, and we can't get to that position. And so the challenge in this business is always that we're the largest and biggest and best in the world is finding them a fair price to let go of an asset we can't be the best at. And so that just takes time. And I think I'd just say stay tuned and be patient and you'll see them materialize here over the -- hopefully, here in the first quarter, if not very early second quarter.

The next question comes from the line of Jason Gabelman with TD Securities.

The first one, just on CapEx. 4Q was a step-up from 3Q. Wondering what drove that and then your expectations on spend for 2026>

Thanks, Jason. This is Bob. It's not unusual to see a higher spend in the fourth quarter. Some of this is just the teams wanting to make sure that they get certain things done by the end of the year and paying for the cost of doing that as those come due. So that's really -- it's really not more than that. As we look at next year, we think it might be a slight increase in terms of total maintenance capital versus this year, but it would be consistent with sort of the range of normal on that. So I'll call it in that ballpark of $400 million. .

Got it. And then my follow-up is just on the international renewable diesel markets. And you mentioned there are other markets that are advantageous to sell into versus California. So wondering what you're seeing out of places like Canada and Europe and other markets that are making them more attractive at the moment?

Yes. I think that just generally speaking, we're seeing year-on-year increases in demand in those markets. We really haven't seen a lot of increase in in supply and capabilities come online to compete for that. So it's just proven to be -- proven to be good markets for DGD and we think that we'll be able to continue to do that. We also think that we're going to have a good market here in the United States. And we'd love to supply more into that market as well.

So it's hard to say more than that. The SMDs are balanced and strong and that's the case for a lot of these markets outside the United States.

This now concludes the Q&A session. I would now like to pass the call back to Randy for any closing remarks.

Thanks to everybody for all your questions today. I think we feel very good about how we finished the year, and we feel really good about the momentum we carry into 2026. And if you have additional questions, feel free to reach out to Suann. Stay safe. Have a great day, and thanks again for joining us for the call. .

Ladies and gentlemen, thank you for attending today's conference call. This now concludes the conference. Please enjoy the rest of your day. You may now disconnect.

Good morning, and welcome to the Darling Ingredients, Inc. conference call to discuss the company's third quarter 2025 fiscal results. [Operator Instructions] Today's call is being recorded.

I would now like to turn the call over to Ms. Suann Guthrie, Senior Vice President of Investor Relations. Please go ahead.

Thank you, and thank you for joining the Darling Ingredients Third Quarter 2025 Earnings Call. Here with me today are Mr. Randall Stuewe, Chairman and Chief Executive Officer; and Mr. Bob Day, Chief Financial Officer. Our third quarter 2025 earnings news release and slide presentation are available on the Investor page of our corporate website, and it will be joined by a transcript of this call once it is available.

During this call, we will be making forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's press release and the comments made during this conference call and in the risk section of our Form 10-K, 10-Q and other reported filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.

Now I will hand the call over to Randy.

Okay. Thanks, Suann. Good morning, everyone, and thanks for joining us for third quarter earnings call. Our core ingredients business delivered its strongest performance in 1.5 years fueled by robust global demand and exceptional execution across all operations. While the renewables market is facing some short-term uncertainty as we wait for clarity on the renewable volume obligation, we're confident that momentum is building. We believe we're on the verge of a shift that will highlight the strength of Darling's integrated model, a competitive advantage that is unmatched in the industry. Our combined adjusted EBITDA for third quarter was $245 million as our Global Ingredients business performed strong with $248 million of EBITDA.

As I mentioned, the renewables business continues to be challenged as we posted negative $3 million EBITDA for DGD, which included a lower of cost or market expense of $38 million at the entity level. Bob is going to discuss more details later in the call. But I will say that both LIFO and LCM were negative in the third quarter, which is unusual and does not typically happen for extended periods. In addition, uncertainty and continued delays getting a final RVO ruling had a negative impact on the overall biofuel environment in the U.S. during the quarter. Now Fed segment, in our Feed Ingredients segment, global rendering volumes margins were up both sequentially and year-over-year, driven by strong demand for fats and proteins and solid execution by our global operations and marketing teams.

In the U.S., robust demand for domestic fats, supported by a strong national agriculture and energy policy helped boost revenue and margins. elsewhere in the world, our global rendering business, particularly in Brazil, Canada and Europe demonstrated stronger year-over-year performance. Export protein demand is showing signs of recovery with slightly firmer pricing trends emerging. Tariff implications, primarily China and APAC countries clearly have impacted our value-added poultry protein products, which serve to meet the needs of global pet food and aquaculture customers.

Turning to our Food segment. Performance remained steady quarter-over-quarter sales dipped slightly in the quarter as customers responded to ongoing tariff volatility, but we offset that with strong raw material sourcing and disciplined margin management. We continue to see repeat orders for our next [indiscernible] glucose control product and early studies on new formulations look promising. We're on track to launch our new next [indiscernible] product in the back half of 2026. In our fuel segment, the renewables market continues to face headwinds. This quarter, we saw higher feedstock costs, lower RINs and LCFS pricing, which ultimately impacted margins. A scheduled turnaround of DGD3 led to reduced volumes of renewable diesel and sustainable aviation fuel and DGD1 remains idled until margins improve.

We believe these pressures are temporary. As mentioned earlier, we're approaching the rollout of thoughtful public policy aimed at strengthening American Agriculture and energy leadership, a shift that we believe will significantly enhance DGD's earnings potential.

Now with that, I'd like to hand the call over to Bob to take us through some financials, and I'll come back at the end and give you my thoughts for the balance of 2025. Bob?

Thank you, Randy. Good morning, everyone. As Randy mentioned, core business results for third quarter improved as expected, while DGD faced some challenges that we'll explain later in the call. Specifically, third quarter combined adjusted EBITDA was $245 million versus $237 million in third quarter 2024 and $250 million last quarter. Adjusting for DGD, the quarter was very solid at $248 million versus $198 million in 2024 and $207 million last quarter. Total net sales in the quarter were $1.6 billion versus $1.4 billion while raw material volume remains steady at 3.8 million metric tons and gross margins improved to 24.7% for the quarter compared to 22.1% last year.

Looking at the Feed segment for the quarter, EBITDA improved to $174 million from $132 million a year ago. Total sales were $1 billion versus $928 million, Feed raw material volumes were approximately 3.2 million tons compared to 3.1 million tons and gross margins relative to sales improved nicely to 24.3% versus 21.5%. In the Food segment, total sales for the quarter were $381 million, higher than third quarter 2024 at $357 million while gross margins for the segment were 27.5% of sales compared to 23.9% a year ago, and raw material volumes increased to 314,000 metric tons versus 306,000 EBITDA for third quarter 2025 was up significantly compared to 2024 at $72 million versus $57 million.

Moving to the Fuel segment, specifically Diamond Green Diesel, Darling's share of DGD EBITDA was negative $3 million for the quarter versus positive $39 million in the third quarter of 2024. While the environment for renewable fuels has been challenging, results were further impacted by 2 items. First, a catalyst turnaround at DGD 3, Port Arthur, which included a pause in operations for approximately 30 days, limited staff production and the higher average margins associated with that product. And second, end of quarter market dynamics led to negative impacts on earnings from both LIFO and LCM which, in most cases, would move in the opposite direction and have an offsetting impact.

Regarding LIFO, rising feedstock prices throughout the quarter and higher quarter ending values resulted in a negative impact to EBITDA, while LCM was impacted by lower heating oil and RIN values in the days after quarter end, resulting in an LCM loss of around $38 million at the entity level. After 3 quarters, the combination of LIFO and LCM has resulted in a wider than normal loss that should reverse course over time. In addition to those 2 items, the biofuel market in the U.S. has been challenged by policy delays, specifically delays in RVO enforcement dates for 2024 obligations, clarity around small refinery exemptions, SREs reallocations and the final RVO ruling for '26 and '27.

However, the EPA made a supplemental proposal on September 18, that would be very constructive. In the first page of the appendix in the shareholder deck that we provided, we've shown a picture of the 2025 RIN supply versus demand, showing how these policy issues have led to an oversupply for 2025 and also showing what the balance looks like considering the EPA's proposal comparing 50% SRE reallocations and 100% reallocations for '26 and '27. In either case, a significant amount of additional U.S. biofuels would be needed to satisfy that RVO, suggesting higher prices for feedstocks, farm products and wider margins for biofuels.

With lower biofuel margins and late in the year timing related to receiving production tax credit PTC payments, we contributed $200 million to DGD during the quarter. a total of $245 million year-to-date, which includes a $5 million contribution subsequent to quarter close. These contributions are offset by the $130 million dividend received first quarter 2025 and payments from expected sales of around $250 million of PTCs that we expect to receive in the fourth quarter. To further clarify regarding PTC, we expect to generate a total of around $300 million in 2025.

During the third quarter, we agreed to the sale of $125 million. We anticipate an additional $125 million to $170 million of sales in the fourth quarter and we estimate receiving payment for around $200 million of the total $300 million we will expect to generate by year-end 2025, the balance of which we expect to monetize in early 2026. I Overall, we are very pleased with how the market has developed for production tax credits. Demand is robust as potential buyers have become more familiar with the details surrounding the credit. Other fuel segment sales, not including DGD, were $154 million for the quarter versus $137 million in 2024 despite lower volumes of 351,000 metric tons versus 391,000 metric tons which were affected by animal disease in Europe.

Combined adjusted EBITDA for the fuel segment was $22 million in the quarter versus $60 million in the third quarter of 2024. The difference was primarily due to lower earnings at DGD. As of September 27, 2025, total debt net of cash was $4.01 billion versus $3.97 billion ending December 28, 2024. The increase from year-end is minimal despite contributions made to DGD and a $53 million earn-out payment related to the Fasa acquisition from 2022. Capital expenditures totaled $90 million in the third quarter and $224 million for the first 9 months of 2025. We expect total debt to decrease by year-end as we generate cash from the core business and receive payments from selling PTC credits. Our bank covenant preliminary ratio at the end of third quarter was 3.65x versus 3.93x at year-end 2024. In addition, we ended quarter 3 2025, with approximately $1.7 billion available on our revolving credit facility.

The company recorded an income tax benefit of $1.2 million for the 3 months ended September 27, 2025. And yielding an effective tax rate of minus 6.3%, which differs from the federal statutory rate of 21% due primarily to recognition of revenue from the production tax credits. The company paid $19 million of income taxes in the third quarter and $52 million year-to-date and expects to pay approximately $20 million more in the fourth quarter. Overall, net income was $19.4 million for the quarter or $0.12 per diluted share compared to net income of $16.9 million or $0.11 per diluted share for the third quarter of 2024.

Now I will turn the call back over to Randy.

Thanks, Bob. I couldn't be more excited about what's ahead for Darling Ingredients. And our conversations with the Trump administration, they followed through on everything they've committed to the renewable volume obligation they've drafted is thoughtful and designed to support American agriculture and energy leadership. And we believe it will be a major catalyst for Diamond Green Diesel. The pieces are in place, and we believe it's only a matter of time before Darling's unmatched position in the industry becomes even more clear.

As we look ahead, we remain focused on what we can control, given the current uncertainty around public policy and its impact on the fuel segment, we'll now provide financial guidance exclusively for our core ingredients business. For the full year 2025, we expect the core ingredients business EBITDA, excluding DGD to be in the range of $875 million to $900 million. With that, let's go ahead and open it up to questions.

[Operator Instructions] The first question comes from the line of Thomas Palmer with JPMorgan.

Maybe just to start out, you gave some helpful scenario analysis for RIN balances and how that might proceed over the next couple of years in the earnings presentation. I wondered about what you think the most likely time line is that we might start to get clarity on some of these outstanding regulatory items, the RVO, the exemptions and then the reallocation.

Thanks, Tom. This is Bob. Obviously, a difficult question to answer. As everyone is aware, the government has shut down. At the same time, we've heard that the RVO is considered an essential process. We have people there at the EPA that are working on this. So we're optimistic based on that view and the things that we're hearing, we expect sometime in the month of December to have the comment period closed or the EPA to submit to the office of management and budget their proposal and to have something approved by the end of the year. But like I said, that's amid a lot of things going on, but that's our view.

Okay. I know it's a unique situation. And then I just wanted to clarify on the fee outlook for the fourth quarter. The midpoint of the core ingredients EBITDA guidance implies for the kind of 3 combined segments that 4Q is comparable to what we saw in 3Q. At the same time, it does look like the price of waste fats and oils have dipped a bit in September. So do we need prices to rebound in order for 4Q to look similar to 3Q? Or are there other things we should be considering as we move from 3Q to 4Q?

Yes. I mean, Tom, this is Randy. I mean the $875 million to $900 million, the reason we put the range on there was exactly as you laid out. We have seen, given the uncertainty on policy waste fat prices come down a little bit here most of our material in North America is going to DGD. But remember, there's still Brazil and Canada and prices remain strong there. So ultimately, it's kind of -- it's a fairly narrow range for the business. As I look around the horn on DGD, I expect the Food segment to be stronger a little bit in maybe a little consistent, maybe a little on the feed segment. But I think we'll come in close to that range. And hopefully, we can surprise you 1 day and be above it. .

The next question comes from the line of Conor Fitzpatrick with Bank of America.

It looks like your RIN supply and demand table in the slides calls for significant biomass-based diesel feed imports through 2027. As a coastal operator, DGD may import feed and receive the RINs penalty on those gallons but could you maybe walk through the benefits to RINs policy protectionism on the feed side and maybe explain how that nets out within your U.S. fuel and feed businesses?

Yes. Thanks, Conor. This is Bob. If I don't answer your question directly, let me know. I think the first thing I would say is it's still not totally clear how the EPA is going to treat foreign feedstocks. That's a part of this process. As to whether foreign feedstocks are needed to meet the production and the obligations. It's going to depend on a lot of things. We do have a lot of crop crops and crop oils in the United States and overall North America that could be used as feedstock for biofuels. So until some of the rules around what if there are penalties for foreign feedstocks and how some of the crop oils are going to be treated, it's really hard to answer that question.

I will say that I think when you look at overall supply and demand for fats and oils in North America and you include biofuels and food and this picture and this proposed RVO from the than probably some foreign feedstocks will be required to meet that mandate. And we're just not clear yet on how that will be accommodated.

The next question comes from the line of Dushyant Ailani with Jefferies.

Congrats on the quarter. I also wanted to note that we really appreciate the change in guidance approach that does help us. My first question was on the 3Q DGD margins. The cap was significantly better than expected. What are some of the drivers there?

The third quarter capture was better. Is that what you said?

Yes. Yes. For the DGD margins, it just given better than expected. Was it like staff production or any export ARP that we can think of?

Yes. I think the -- so I'm not sure I fully understand the question because the DGD result was maybe not as good as we hope.

I'll help Bob here a little bit. I think, Dushyant, you're referring to the capture that Valero reports. And keep in mind here, this is a bit awkward in that they met their LCM against their other segments. So they had the same LCM we have. They just didn't put it against the renewables or DGD segment. So that's what makes the capture rate look better.

Got it. Okay. That's helpful. And then maybe just staying on topic for the 4Q DGD margins. But we understand the nuance on removing the DGD guidance. It seems like fundamentals are still improving nicely. Indicator margins are up, again, Valero's indicator margins seem to be up $0.36 quarter-over-quarter. What are you seeing in 4Q? And how do you kind of think about that? What are some of the puts and takes, if you can share?

Yes. I mean this is kind of the challenge that's out there. I mean clearly, the 2 big units in Port Arthur and Norco are going to be operating at capacity. SAF is going to be at capacity yes, the capture indicator is stronger right now. The challenge for us is we thought by this time, we would have RIN values kind of starting to reflect the restarting of the industry. and really have it yet. So it's kind of hard. I mean we're the low-cost operator. We have enough feedstock to run our units. Our SAS margins are better than classic renewable diesel. And what else you want Bob?

Well, I think we have seen an improvement in margins so far in the quarter. The question is just -- or the point here is until we get clarity on the final ruling on the RVO for '26 and '27, it's hard to it's hard to say with certainty that those margins are going to continue. But thus far in the quarter, yes, we've seen some improvement. That's for sure.

The next question comes from the line of Manav Gupta with UBS.

My first question is we saw a good improvement in your feed segment margins. I think Randy, over the years, you had indicated that eventually those acquisitions coming in you would be able to drive improvement in those fronts. So help us understand some of the factors that drift help you drive a movement in the Feed segment margin? And also to an earlier question, yes, imported feedstocks might be needed, but domestic feedstocks will price at a higher premium because they'll get 100% win. So what would be the outlook for the Feed segment going into 2026. If you could talk a little bit about that?

Yes. I mean, clearly, as we've talked in Q1 and Q2, we've used the word building momentum. We were seeing feedstock prices come up what we've seen mostly is feedstock prices are flowing through now, although they've come off a little bit for Q4, but we're seeing protein prices in Peru around the world. It's -- I call it there's a tariff on 1 day, a tariff off 1 day. China needs to buy poultry proteins to feed aquaculture and whether it's China or Vietnam when the window opens, they trade. And so we've seen a pretty nice improvement.

You can look sequentially, you can look year-over-year in the appendix of the supplier or the shareholders' debt there. and ultimately see the pricing movement. Clearly, fat prices were up sharply. The products we use at DGD and -- but premium prices were up 10%. So I think we're going to carry into Q4, remember, we're always about 60 days sold ahead. And so we'll carry some pretty strong prices into Q4. And I'm hoping that as we move into next year, we'll have kind of the same momentum. There's always a little bit of seasonality here, but really, that's kind of what I'm expecting as I look out there.

Perfect. My quick question on the table that you have created. It's very helpful. But help me understand, here you're assuming a flattish capacity. We know there are facilities which are heavily dependent on foreign feedstocks at this point of time, and they are still struggling I think they will struggle even more next year if you decide to give only 50% RIN to imported feedstocks. So is there a possibility this RIN balance would look even more attractive if some of those facilities that are heavily dependent on imported feedstock actually decided to call it a day and shut down.

Yes. I think Bob and I will tag team this. My answer is we went into 2025 with the belief that the DGD margins would be no lower than they were in 2024. And we were wrong. And where were we wrong? Well, we didn't understand that the big oil guys would actually run at such significant losses to produce their own RINs. We believe that's changing as we come into 2026 and 2027. The losses at those plants are substantial. I mean it clearly shows how efficient and operationally effective DGD is the RIN balance that Bob will talk about here in a minute, yes, it actually gets even more constructive if people behave rationally. .

Yes. And I'll just add, I think all of that is true. In addition, the proposed RVO for '26 and '27 is substantially larger than 2025. So even if we had similar production, as you noticed from the grid that we provided, then we ultimately have a deficit in '26 and '27. And what this is intending to show is specifically that. And then beg the question, how much do margins need to improve in order for production to increase so that we can satisfy the mandate '26 and '27. You add a layer of complexity when you -- with the imported feedstock and if imported feedstock only generates half of RIN.

I think that some of that is going to depend on what is the origin tariff placed on that feedstock -- if a feedstock, if a foreign feedstock only is penalized by getting half a RIN and then not being eligible for the PTC, then it's reasonable to expect a decent amount of foreign feedstocks to competitively come into the United States. It would just come in at a discount to the U.S. feedstock prices which, again, is constructive to the feed business and our core rendering business in the United States, but it would allow for satisfying the mandate for the -- but it would -- again, it suggests that margins need to go up quite a bit in renewable diesel are for that to happen.

The next question comes from the line of Pooran Sharma with Stephens Inc.

I just wanted to maybe just peel into to that last answer you gave there, Bob. I know in the past, you have kind of walked through different RIN pricing scenarios and there are a little moving pieces here just with how foreign feedstocks will get counted. But just as it stands now, no PTC half a rent for the foreign need stocks. Are you able to quantify like what range RINs should be at in order for the industry to run to meet the mandate in 2026?

So this is going to be somewhat of a swag here because like you said, there are a lot of moving pieces. And if we assume that there's we have access to our origin feedstocks that don't face a significant tariff. And the primary source of the penalty is the half rent and lack of access to a PTC. Then we probably need RINs to go up $0.40 or so in order to incentivize enough production to satisfy the mandate for '26. If the SRE reallocation is only 50%.

Great. Great. Appreciate that. My follow-up, I just kind of wanted to focus on the balance sheet more specifically your debt and leverage. I wanted to revisit what your plans are to pay off debt. And I also wanted to ask, what are your restrictions? Like what leverage ratios do your debt restrictions, the covenants start kicking in at?

We're nowhere near breaking any covenants. I think we've said before, we're committed to paying down debt. We've got a lot of headroom in our revolver due to circumstances around receiving cash payments from selling production tax credits we will be receiving more cash in the fourth quarter, and we didn't receive any cash from production tax credits in the third quarter. And so by the end of the year, we expect our debt coverage ratio as it's viewed by the banks, to be right around 3x. So that's really -- that's our position on that.

And long term, Pooran, we've got a financial policy agreed in the board room to go down to 2.5x. And it doesn't take much for the restart of DGD to start to do that. We've not been in a capital deprivation or starvation mode of any of the factories globally. So we're in good shape here to continue to build this thing out and grow and delever at the same time. .

The next question comes from the line of Ryan Todd with Piper Sandler.

Sorry, I know you talked a lot about this, but maybe one more follow-up on some of the regulatory uncertainty. I mean the as we wait for the final RVO, I mean, you've talked about the uncertainty around reallocation and a couple of other things. What are some of the other topics that you think are still being kicked around. Is there a possibility of any change in the approach to import of for biofuels? Are they still -- is there still a consideration in terms of the treatment of domestic feedstocks in terms of carbon intensity, like land use penalties and stuff like that? And what are some of the potential risks or positive things you think could come out of the final ruling there outside of just kind of the high-level RVO and the reallocation?

Well, I think, Ryan, this is Randy and Bob and I'll kind of tag it again here if I leave anything out. I mean, clearly, American agriculture is at the forefront of the discussions in D.C. right now. Clearly, when you lose your largest customer for soybeans, when you get beef prices as high as they are, you've got a lot of people in the room that have ideas on how to fix the situation. And so what we've been part of as many of these discussions is what's the easy button. The easy button here is a large SPO for RVO with a 100% reallocation. Now if you go back and you look, really, the ETA gave you a multiple choice test.

It's at either 50% or 100%, but if you're really inclined, you can talk about something else you'd like. And so they've set the table there. Clearly, the PTC out there is -- doesn't encourage foreign feedstocks. So I mean that's a block in itself with a tariff on top of that even makes it more difficult. We've had discussions in D.C. and we said, well, the easy button is that, just remember, if you don't allow foreign feedstocks in here because they can't generate a credit then, oh, by the way, where are those feedstocks going to go and the room goes silent. They finally got it. They realize those stocks are going to go back to other processors, you can probably name who they are around the world in Singapore and Rotterdam and Porvo, Finland. And then they're going to move finished RD on top of us and that's disruptive to what they're trying to accomplish.

So they're trying to figure out right now how to manage that under the tariff code. So you've got the U.S. trade along with the EPA collaborating, trying to figure out how to put this together to accomplish the needs that are going to produce energy and be constructed to the U.S. farm community.

Yes. And I'll just add that as we sit here today, the EPA has already proposed a 50% RIN generated for form biofuel, no access to PTC. So -- that in and of itself makes it more difficult. But as Randy said, there's a lot of momentum to preventing foreign biofuels to come in and participate in U.S. support programs. So we're pretty confident that, that's going to work out well as it relates to feedstocks, that is another thing that we're waiting for clarity on and whether they're going to enforce the 50% RIN concept or if we're foreign feedstocks are simply going to be limited by origin tariffs.

Okay. And then maybe just -- I mean you talked about -- you provided a little bit of clarity around PTC monetization. You've had a couple -- you're a couple of quarters into the experience of a few quarters in the experienced production under the PTC regime you're getting more consistency. Can you talk about how the monetization market seems to be working there? Have the discounts been fairly stable? And how should we think about the general ratability of the process at this point? Is the $15 million this quarter, $150 million at the midpoint next quarter? Is that like a -- are you in a fairly ratable place now in terms of monetizing the majority of your production? .

Yes, I think so. I think the context here is that there were 2 things that made it difficult earlier in the year to sell production tax credits. One is that not many counterparties were familiar with the credit itself. So there was lots of questions. The value of the credit is determined in part by carbon intensity. So you can just imagine for industries looking to buy tax credits that aren't familiar with our biofuel industry trying to understand all that is not an easy thing. And then the other is that most companies had -- it was pretty cloudy what their tax liabilities were going to look like at the end of '25 because of the big beautiful bill and a lot of things that went on around that.

So early in the year, it was difficult to get a lot of traction. That's obviously changed significantly. Both of those pictures are a lot more clear. And so yes, I think that for us, we're confident in our ability to sell a majority of the credits that we'll generate in 2025 and then it should be a pretty ratable process through 2026.

Yes. I think just one last piece to that is I would characterize the environment is there is more interested parties now. than there were earlier in the year. So it's now getting a chance to define terms, refine terms and pick the counterparty that we want to do with timing respective to when to receive the cash. So it's a very constructive environment now. .

The next question comes from the line of Derrick Whitfield with Texas Capital.

Regarding guidance, I appreciate the position you guys are taking with the more volatile DGD business segment. With that said, we are seeing better stop margins in 4Q for most feedstocks and specifically for [indiscernible]. Would it be fair to highlight that DGD could post the best quarter in 2025 at current margins which, again, will be a positive development as you enter 2026?

Yes. Thanks, Derrick. I think that would be fair. I think one of the things we're sensitive to is just how uncertain policy has been and the impact that, that's had on margins. I mean, look, we're very optimistic about improvement in the fourth quarter and the outlook for next year. But we realized that the market at large really wants to see proof of that before estimates believing a lot of what estimates are out there. So I think that we are encouraged by what we've seen so far in the quarter, and we think the outlook is good, but we're just hesitant to define that with a lot of precision, just given the lack of clarity around policy that we're still facing.

Bob, can you comment on what it takes to trigger RIN and obligations and when that would happen?

So with the enforcement dates and -- yes. I mean, I think one thing that has caused a real delay in the reaction of the RIN, has been the movement of the 2024 enforcement date from March 31 to December 1. Until we get the final ruling on the '26 and '27 RVO and clarification as to when the 2025 enforcement date is going to be. It's difficult for obligated parties to feel that they're incentivized to go and buy all their RINs, especially when so many small refinery exemptions were granted for the small refineries out there that are wondering whether they should buy RINs they have an incentive to wait when the obligation date is set at a later time in the event that they get an exemption.

And so what Randy is alluding to is until some of those things are clarified, which we do think is going to happen around the end of the year. But until those things are clarified, the incentive to buy RINs and tighten up the RIN S&D doesn't exist the way that it's intended. And so it's just -- it gets a little bit difficult to forecast. But we -- to your point, Derrick, we have seen an improvement in margins so far in the quarter. The outlook is better, and we're very optimistic about 2026.

Great. Understood. And as my follow-up, we've seen the RD market in Europe strengthen in recent mine if you guys work through the complex math of spreads, shipping and tariffs, to what extent could you access this market if it remains robust?

We can access that market, but we pay a duty to access that market. So -- and that duty can fluctuate a bit, but it's typically over $1 a gallon. So we are selling consistently to that market. Our Diamond Green is. But it's just -- it's -- we're looking at it as a net of duties and comparing that to other markets we have available.

The next question comes from the line of Matthew Blair with TPH.

I was hoping you could talk a little bit about the feedstock mix at DGD. And I know that you're always looking to optimize and some of this is commercially sensitive. But just on a big picture basis, it looks like some of the indicator margins for RD made from vegetable oil are trending a little bit better than RD made from low CIP. So -- just overall, has DGD shifted to more of a veg oil mix? Or is it still pretty much all low CIP? .

Yes. Thanks, Matthew. This is Bob. So I wouldn't -- DGD hasn't materially shifted its mix as I think you're aware, DGD-1 is still down if DGD 1 were to go back up and run, then that mix would shift more towards soybean oil. But as we sit here today, the mix hasn't changed a lot. Our best margins are on Eco and Yellow grease and animal fats. And so we're going to maximize the opportunity we have to use those products.

Yes. The only thing that I would add, Matthew, is that clearly, in Q1 and Q2 as we were trying to figure out the rules around the PTC and 45 C redomesticating our supply chain was a pretty significant challenge. DGD is heavily reliant now on [indiscernible] and animal fat supply. And so we've got that up and running full speed now, and it's really visible now that you can see it in the earnings of our core ingredients business. And ultimately, it will translate into a better sales value within DGD.

That's helpful. And then apologies if I missed this, but the contributions that Darling is making to DGD is that to help fund the DGD 3 turnaround? Or why is Darling sending money back to DGD? .

Yes. And it's hard. So the answer to that question, some of that's timing, some of that is turnaround. Some of that is just the margin structure. So remember, that the PTC revenue that we will get a darling that flows directly to the partners. So that money doesn't stay inside of Diamond Green Diesel. That's number one. The other is, as you pointed out, in 2025, we've completed 3 catalyst turnarounds. And so our maintenance CapEx is higher in 2025 than normal. So it's really the timing of all those things that's led to the contributions that we've made.

The next question comes from the line of Jason Gabelman with TD Securities.

I wanted to go back to something else that Bob had mentioned just around companies complying with their RIN obligations and that perhaps catalyzing stronger RIN prices. Can you talk about, I guess, more specifically the time line around that I think 2024 RINs are due December 1. And then at that time, the balances for 2025 should become more visible to the market. So do you expect that December 1st deadline to hold? And do you think that could be an initial catalyst to move in prices higher before we get the final RVO for '26 and '27?

Yes. Thanks, Jason. So I do think that, that deadline will hold. I don't know that it will have much of an impact on RIN prices because all the RINs that have been procured so far in 2025 can ultimately be used to satisfy the obligation for 2024. And that's quite a long time and a lot of RINs. There may be some refiners who are waiting until the last moment to buy their RINs. But because we've had so much time in 2025 to do that, we're not expecting that, that's going to result in a significant lift to RIN prices at that time. If we have clarity around enforcement dates for 2025, going back to the March 31, 2026, as they normally would be. That would be a time when we would expect RIN values to probably see a lift.

Got it. That's helpful. And then my second one is hopefully a simple question. Just given on the screen, DGD margins have improved. It seems like it could be the margin signal could be there to restart DGD1, so wondering what exactly you need to see to have confidence to restart DGD 1?

So we've talked about this before. DGD 1 went down for a catalyst around early in 2025. A given the changes in the PC and the origin tariffs on so many of the feedstocks, our view is that only makes sense to restart at least in the current environment with the current RVO under the current rules when soybean oil can be profitable and profitable means a margin that's good enough for a long enough outlook that justifies burning up a catalyst. And so I think, certainly, we're a lot closer to that than we have been. We may get there, but it definitely looks a lot better than it did a few months ago.

The next question comes from the line of Andrew Strelzik with BMO.

This is Ben on for Andrew. My first question is around the Food segment. And just a commentary there that when it's maybe some weakness exiting third quarter and into fourth quarter. So I was just hoping you could -- just walk us through your outlook for the next few months in the food segment.

Yes, I think what we were trying to put in the narrative is clearly tariff on tariff up to 50, pentanol tariffs, trying to figure out the supply chain was very confusing for our customers in Q3 and so the choice was to pull down domestic inventories. So remember, most of our Brazilian production comes into the U.S. that's in the hydrolyzed collagen peptide form, very successful product for us. And so we had some delays in orders there. We think it will pick up and be a stronger Q4. That's about all the color that I can give you today on it. And what we've seen is a continued rebound of the hydrolyzed collagen business. And while our new next Tide products are making a foothold in the industry, they're still relatively minor in the contribution of that segment.

But they are as we quoted in there, we're getting repeat orders, which is a great thing. By next summer, we're going to launch what I think will be called next tide brain and that will be a brain hill product and it's got a really great outlook, too.

Well, that's great to hear. And then on my next question, something that kind of I think gets lost in the weeds sometime or at least lately, California LCFS credit value, they've been generally stable at weak levels. Can you remind us of the expected time line of triggers that should propel these values higher eventually?

Thanks, Andrew, this is Bob. I think as we know, there was quite a bit of a delay in the implementation of their step down to increase the greenhouse gas obligation, reduction obligation in California. And so -- as a result of that, that bank got built up so large that most of the obligated parties from our perspective had a sufficient number of credits where they -- even with the change in the ruling they didn't need to go out and immediately buy credits. Our view is that they are working their way through those credits and that sometime in 2026, we'll start to see that S&D come more into balance and steady increases in the LCFS credit premium. But it's hard to -- I think we believe it will be more steady than sort of a step-up in value.

The next question comes from the line of Heather Jones with Heather Jones Research.

I had a question on your feed segment and just thinking about the protein pricing. I know in the past that you have put in place and some of your fat pricing contracts, you had like minimum levels and if it went below that, what Darling received, what can go below that? And I was just wondering if you all had put any of those kind of things in place for your protein business in the U.S.

This is Bob. So all of our every contract is somewhat unique, and it really has to do with our approach towards accommodating our suppliers and trying to work with them on terms that make sense for their business as you're -- I think what you're pointing out is that we do have some contracts where Darling collects a minimum processing fee. And if prices get above a certain threshold, then we participate in some of the value of those prices. There are certain instances where protein prices are part of that as fat prices are. I think generally speaking, though, we see -- as you're well aware, we see a lot more volatility in fat prices and a lot more upside from time to time in fat prices. And so we tend to focus more on that than we do on the volatility in the protein markets.

Yes, I think to [indiscernible] what Bob said is the thing that happened is the United States was heavily reliant on shipping low-ash poultry meal into the Asia countries for dominantly China for aquaculture. The offset was a strong domestic pet food demand in the U.S. And what we've seen twofold is, one, with the tariffs on, tariffs off with China and Vietnam, they're unable to take the risk, if you will, to buy that product. So it has to find as all commodities do the next best market. What you're seeing in the pet food business is post COVID, you've seen fluffy back to the shelter. And then you're not seeing a growth that's very significant right now on the pet food side. .

And then you're seeing that the consumer -- the CPG companies took prices up pretty drastically making those bags of brand name products with meat in them, really, really pricey and you're watching strong growth now in the green-based alternatives, namely old Roy. So it's essentially a disruption scenario right now, Heather, and we're off from where traditionally poultry high-end, low-ash poultry products have traded, although they're coming back. The second -- Trump relieve the tariff on Vietnam for days or whatever, big shipments and sales went out of here. That's our Eastern Seaboard plant that are heavily reliant on those products. So I think we've got a pretty good outlook. They've come back now and have improved quarter-over-quarter. And I think we're cautious on next year, but we think it's -- we think everything looks much better.

Okay. And then my follow-up is on Europe. So recently, they extended the tariffs on imports and biodiesel in [indiscernible] extended the staff. So as we're thinking about Q4, you'll have a full quarter of SAP production and SAP pricing in Europe is really strong. So will having a full quarter production more than offset the impact of them now imposing these tariffs on U.S. staff? Just wondering how to think about those moving pieces.

Yes. Thanks, Heather. I think the way to look -- think about that is it will have if it's going to have an impact, the impact is going to be felt a bit later on. Staff is not -- we aren't selling [indiscernible] market. The staff that we're producing today was sold a while ago, and most of the staff that we will produce in 2026 is already sold. So the tariff impacts will affect new contracts as they come about. We'll just have to see what those markets look like and supply and demand. But we still have access to voluntary markets in the United States. So we're optimistic about where we stand with SAF and SaaS sales.

The question comes from the line of Betty Zhang with Scotiabank.

For my first question, I wanted to ask about broadly the core EBITDA guidance. It's been updated to that $875 million to $900 range, and that's a bit lower versus the first number that you gave out at the beginning of the year, so I'm wondering if you could reflect on how the year played out and where it didn't quite meet your earlier expectations. And looking forward to 2026, do you think that this year's 12% to 13% growth is somewhat comparable to what you're seeing for next year?

Yes, Betty, this is Randy. I mean the $875 million to $900 million is the imagination of all 3 segments, net of DGD. Clearly, we're 2/3 of the way through October, we don't know really where October is going to finish. We don't have that type of visibility on a day-to-day basis here. So it's just -- this business when prices are steady, and volumes are steady around the world, you can give some guidance there. What we have tried to do is it's just too difficult to put a number out on DGD either for Q4 or next year. The core ingredients right now looks similar to stronger in 2026. But we won't know that and be able to give guidance on that until around tell an RVO is published and then when we do our -- probably our February earnings call.

Okay. Fair enough. And my follow-up question, I want to ask about the Fuel Ingredients business, the portion, excluding DGD. The margin there looks a bit the gross margin looked a bit higher quarter-over-quarter and also the segment earnings came in higher versus what we saw in the first half. Could you please share maybe some of the drivers there?

Yes, that business is made up, while Bob described it in his comments, a disease, it's really mortality destruction predominantly in Europe today. And then that's our green gas business, remind people that the green gas or green certification business in Europe, we're the one of the largest in all of Europe today producing gas over there. And then those are our digester businesses, and we added a small one in Poland now. So ultimately, that business ebbs and flows with what we call the Rendac business predominantly, and that's the 7 rendering plants in Europe that are geared towards mortality destruction. Anything you want to add there, Bob? .

I mean I think it's -- what you're alluding to is just sometimes the inputs, the price, the cost will change for the inputs energy prices and that we're selling there remains strong. And so that's what you're seeing with these gross margins.

There are no additional questions left at this time. I will hand it back to the management team for any further or closing remarks.

Thank you again for all the questions, Dave. As always, if you have additional questions, feel free to reach out to Suanne. Stay safe. Have a great holiday season, and we look forward to talking to you after the first of the year. .

That concludes today's conference call. Thank you. You may now disconnect your lines.

Good morning, and welcome to the Darling Ingredients Inc. conference call to discuss the company's second quarter 2025 financial results. [Operator Instructions] Today's call is being recorded.

I would now turn the call over to Ms. Suann Guthrie, Senior Vice President of Investor Relations. Please go ahead.

Thank you for joining the Darling Ingredients Second Quarter 2025 Earnings Call. Here with me today are Mr. Randall C. Stuewe, Chairman and Chief Executive Officer; Mr. Bob Day, Chief Financial Officer; and Mr. Matt Jansen, Chief Operating Officer, North America. Our second quarter 2025 earnings news release and slide presentation are available on the Investor page of our corporate website and will be joined by a transcript of this call once it is available.

During this call, we will be making forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's press release and the comments made during this conference call and in the Risk Factors section of our Form 10-K, 10-Q and other reported filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.

Now I will hand the call off to Randy.

Good morning. 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 continued 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 5-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 Nextida, 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 the second half of 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 recent 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. Tariff volatility and increased domestic oilseed crush has put pressure on protein prices, especially on our sales into Asia. However, fat prices are outweighing higher protein supply and softer prices.

Now turning to our Food segment. As I mentioned, we signed a nonbinding term sheet with Tessenderlo to form Nextida. We are concluding due diligence and expect to sign a definitive agreement in this quarter. We believe this platform already as a meaningful contributor to earnings 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 Nextida 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 itself 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. DGD1, however, will remain off-line until margins show some meaningful improvement. Meanwhile, DGD3 is scheduled for a turnaround starting here in third quarter. The timing aligns well with our outlook position us for full utilization as policy rules are clarified 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. Now 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?

Thank you, Randy. Good morning, everyone. For 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 the second quarter of 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 for 2024. Gross margins improved to 23.3% for the second quarter of 2025 compared to 22.5% in the second quarter of 2024. We also saw a nice gross margin improvement year-to-date at 23.0% for the first 6 months of '25 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 the second quarter of 2025 were $936.5 million versus $934.1 million in the second quarter of 2024. For the 6 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 second quarter 2025, gross margins improved nicely to 22.9% versus 21.0% 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. And 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 6 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 the second quarter of 2025 were $386.1 million, higher than second quarter 2024 at $378.8 million. Second quarter 2025 gross margins for the Food segment were unchanged from quarter 2 of 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 metric 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 the second quarter of 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 the second quarter of 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 6 months of 2024.

In 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 $293.9 million versus $281.5 million in 2024. Raw material volumes in the second quarter of 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 the second quarter of 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 5 to 7 years. First, we've refinanced and upsized our Eurobond from EUR 515 million to EUR 750 million for 7 years at a fixed rate of 4.5%. Second, we paid off our revolving credit facility and the 4 remaining Term Loan A facilities, replacing them with $2.9 billion in credit facilities through 2 senior secured debt agreements. First, a 5-year $2 billion revolver, and second, a 6-year $900 million farm credit Term Loan A. While the Eurobond at 4.5% replaced the previous Eurobond at [ 3 and 5/8% ], the 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 June 28, 2025 was $3.89 billion versus $3.97 billion on December 28, 2024, helping lower the preliminary leverage ratio to 3.34x at the end of quarter 2, 2025 from 3.93x at the year-end 2024. In addition, we ended the second quarter of 2025 with approximately $1.27 billion available on our revolving credit facility.

Capital expenditures totaled $71 million in the second quarter of 2025 and $134 million for the 6 months of 2025. The company recorded an income tax expense of $4.1 million for the 3 months ended June 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 producers tax credit. The effective tax rate, excluding the impact of the producers tax credit and discrete items, was [ 3.4% ] for the 3 months ended June 28, 2025. The company also paid $22.8 million of income taxes in the second quarter and $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 of 2025 or $0.08 per diluted share compared to net income of $78.9 million or $0.49 per diluted share for the second quarter of 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.

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 [ seeing ] 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 Instructions] Our first question comes from the line of Manav Gupta with UBS.

My first question is when we look at the revised RVO much higher, coupled with 50% RINs for foreign feedstock and no PTC for imported RD, this makes DAR 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?

Manav, is Matt. I'll start off and then maybe ask Randy or Bob to kick in. But you're absolutely right in terms of the -- we see this going forward and it's 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 U.S. [ fat ] pricing. And through the quarter, fat prices were moved up significantly. And we see that continued trend and fat price is maintaining being well supported. So our focus right now in the U.S. is on reliability and making sure our processing plans that the -- on the raw material side can run as planned and as expected so we can continue to maximize the production of the U.S. fat to supply the RD market.

This is Bob. So I agree with Matt. It is very supportive to U.S. or North American fat values. That's great for Darling. It doesn't really hurt us so much outside of the U.S. because 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 kind of waiting to see, but 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 we see those things as positive. The 50% RIN, an interesting policy dynamic if we see that hole, and it would support those things that would eliminate access to foreign feedstocks, which is some flexibility we like, but the other positive impacts outweigh the negative impact of that.

Perfect. My quick follow-up here is amended LCFS has gone into effect. Carbon prices are already moving up. I think we're close to [ $55 ]. The prices were higher before OAL stepped and kind of blocked it. So I'm just trying to understand, 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 2026. So your outlook for LCFS prices and again, how it benefits Darling Ingredients?

So I think the first thing I'd say is the what we view as very positive is now that with the increased greenhouse gas obligation or elimination of greenhouse gas obligation in California, we're starting to see the bank finally coming down. And that's a very positive sign. Based on where we are today and what we see playing out, that will -- this bank will continue to decrease how that results exactly in price per ton of LCF credits. It's very hard to estimate that. That's going to depend on obligated parties in California. The sense of urgency they feel that they need as far as procuring those credits. But we agree that it's moving in a positive direction and likely they had higher.

Our next question comes from the line of Heather Jones with Heather Jones Research.

Thanks for the question. My first one is on UCO. So in your slide deck, you talked about -- I think it was roughly $13 million year-on-year hit from lower UCO pricing, whereas spot pricing for the last 2 to 3 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 expect to see the current pricing we're seeing come through?

Yes. 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. The dynamics of that market are -- 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 of 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.

What tends to -- what we expect is as prices flatten at a higher level where we are today, 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 higher than what it was at the time we sold. And so that's the biggest impact that we had on that.

Yes, 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 price is really -- you got to look at yellow grease and UCO 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 $0.10 to $0.14 a pound over Q2.

In Q2, you really only saw versus Q1, about a $60 a ton or a $0.03 a pound price rise between the UCO and the yellow grease as it flowed through the P&L. And that's just the typical lag factor.

Okay. 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 wanted to know, is there anything unusual in this quarter's results, whether it be inventory adjustment, insurance recoveries or whatever that would affect the comparability for Q3 and later quarters to this quarter. I'm just like wondering if this is like, I guess, a clean quarter for us to build on going forward?

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

Other than that, we did have some deferred profit losses that will come back in the third quarter from related party sales.

The contingent valuation, Heather, is related to the Brazilian acquisition that had an earnout attached to it that completed or will complete here at the end of July, and that's just an adjustment, and that's representative of that business operating now really well.

Thank you for your questions. Our next question comes from the line of Dushyant Ailani with Jefferies.

Maybe the first one, could you talk to the opportunities for Darling -- or for DGD, rather, outside of California? Margins in Canada, Oregon, EU also seem to be forming up some. So could you kind of share how much of RD you are exporting outside of California, shipping outside of California versus within California? And how that's going to evolve?

Hi, Dushyant. 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 products on an ongoing basis in various other states that are here in the U.S., but we also export quite a bit and predominantly to the U.K. and Europe. And so we're -- as these tariffs and all the different moving parts, let's say, that have come about continue to play out, that mix may shift from one to the other, but we continue to be a significant exporter of RD to Europe and the U.K.

Yes. And I think the other thing I would add to what Matt is saying here that's spot on is, I think this morning, you saw the Neste release. And the positive takeaway for me there is there's always been some consternation 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.

Got it. And then just my next one, and I think you guys have also touched on it some on just the SREs. How -- what are your expectations for what the EPA could do with these SREs, I mean, just based on the conversation that you guys have been having with folks in the industry?

That's the million-dollar question. This is Matt again. That's the million-dollar question. The SREs, we expect will come sometime in the next, let's say, 60 days. Don't know exactly when that announcement will become public. But 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 number is going to be. So we're anxiously awaiting that and how they -- it's not only the number, but also how they get treated, whether they are, 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 anxiously awaiting that.

Yes. And I would add to what Matt is saying there. I mean, at the end of the day, we've modeled the 2 or 3 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 a 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 going to react, meaning RINs and LCFS to whatever the SRE adjustment is going to be.

Our next question comes from the line of Derrick Whitfield with Texas Capital.

Beginning on 45Z, the policy as 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?

Yes. Thanks, Derrick. This is Bob. So ultimately, when DGD is looking at selling SAF, they add all components to inputs and sales price when they negotiate the price that they're selling and ultimately, the margin that we're shooting for. Today, it's made up of many different things. The support we get from 45Z today starts at $1.75 max, it lands somewhere, $1, in that range. Just with the change, probably around $0.35, $0.40 less would come from the PTC, which then means if we're still shooting for the same margin, we're going to have to get it in the premium that SAF sells that relative to renewable diesel.

And 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 not really uncomfortable with the change so much. We just are more focused on the overall supply and demand for SAF and getting fair value for the product and the margin.

And I would just add that one flexibility that we have -- and we're not there yet. But we do have the flexibility to choose between whether we produce RD or SAF at in our line. And so right now, we're running SAF as much as we can, and we expect that to continue. But we do have that additional flexibility.

Great. Then with respect to food and your plans to advance the Nextida 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?

Yes, I think -- so yes, thanks. This is Bob. We're really excited about it. And we're encouraged by what we're seeing. There's really -- we're limited in what we can say today because we haven't signed definitive agreements, and the next step will be filing for antitrust. So we just want to be really cautious there.

But I think what we see with the 2 different companies is very complementary geographic spread. So they're in some countries that we're not. That diversifies our portfolio, and that's especially helpful in, let's say, the current environment where 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 also just kind 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 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.

Our next question comes from the line of Ryan Todd with Piper Sandler.

Maybe first, 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 in the second half 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've seen to date that provides confidence in that number?

Yes. Ryan, this is Randy. And 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 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, let's call it, low ash chicken meal that goes to aquaculture, that was -- you had a tariff on 1 day, a tariff off 1 day, whether it's Vietnam or China and just trying to adjust markets and customers was really a negative in there. We see that kind of steady now. 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 as my comments were earlier, I mean, we're going to have DGD3 off-line here in August. It will be on, ready to run in September, I believe, is the timing. So we'll have all plants with new catalysts ready to rock and roll September 1, if you will. If that RIN market starts to normalize and reflect what it's going to take from a variable profitability perspective, the guidance that we threw out there could be extremely conservative. Or if it delays until 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 minimal but some type of contribution from DGD, especially the SAF side through the end of the year here.

Maybe that's a good segue to a follow-up question on SAF. I mean, you're, what, 7, 8-plus months in the operations there. Can you maybe talk about what you've learned so far, how would you characterize demand? Is there anything that's been surprising on the SAF front in terms of geographic mix of demand or pricing, et cetera? And then it's still a pretty young market. What -- as you look out, what kinks or challenges do you think still remain that may need to get ironed out over the coming months or years?

Yes. Ryan, this is Matt. I would say from what we've learned, we started off running in last November. And operationally, we have, I would tell you, as expected, and done well. The thing that I would say is surprising, for example, for the reduction in the PTC was something that wasn't necessarily in the cards when we plan this. But we've learned logistically, 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 quieter 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 have slowed things down a little bit, but we continue to see solid, let's say, demand. We're running well, making deliveries on contracts. We've got a good sales book on. So where the returns are meeting or exceeding the expectations of the project. So we're very satisfied with it.

Our next question comes from the line of Matthew Blair with TPH.

Maybe circling back to Nextida, could you talk a little bit more about what the scientific studies are showing here? We've run some of our own tests, and it appears to be quite impactful, quite an improvement. And then also, I appreciate that you probably can't talk too much about what the EBITDA contribution is going to look like and what the potential there is. But I guess in terms of timing, do you think that Nextida would start to make a material impact in 2026? Or is this a longer-dated time frame?

Yes. 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 pushing it on to market. We're seeing the same thing that you talked about.

So ultimately, what that product does is that it stimulates GLP-1 secretion into the blood. That leads to a controlling the post-meal sugar spike and the symptoms around that are curved appetite and just more stable blood sugar. Those are really positive. We're seeing the same thing with all the trials. The time line on when we could see a big impact would be as we finish these trials in the summer, we kind of go out and we present all this to the large CPG companies. And hopefully, by the end of the year, we're talking about much more significant volumes.

So in 2026, it can have a much bigger impact on EBITDA. It's really just going to depend on kind of what this next round of trials shows and how compelling it is. But like you pointed out in the tests that you've done yourself, it is really powerful, and we're seeing great results.

Bob, do you want to talk about the [ brain ] side real quick?

Yes. And I guess the interesting thing here is we -- 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 combination looks like in order to help with memory retention, gut health, women's health and all these products are in different stages of development. But it's a great process that our R&D team has been able to iron out. And so we're excited about Nextida GC, but we're really excited about what the portfolio of products can mean for the company over the next several years.

And Matt, I think you -- one of your question was contribution. Clearly, '26, we're going to get some acceleration here. We were requested this health and wellness sector in the world is a very, very large piece out there, $60 billion 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 reorders now of the GLP-1 or Nextida GC product now, which is really, really good news.

We're excited about it. If you look at the history -- and I've always said in the Suann's deck is that the history of the Food segment, which is really anchored by Rousselot/Nextida here. And that business has been built off of the hydrolyzed collagen business out there that we develop. And this is really hydrolyzed collagen 2.0 now. And if we're half as successful in volume there, we can double the earnings in that segment. Now that's probably a 3- to 5-year window to get there. '26 should accelerate, '27 should be really meaningful.

Great. Thanks for all the helpful commentary. And then I guess, turning to the Brazil rendering outlook. There's been a lot of chatter that -- but the U.S. rendering outlook is excellent after the RVO and the 45Z tax changes. But could you talk about what you're expecting for Brazil? Do you think there will be pressure from things like the RVO and tariffs? And do you expect to kind of reorient your exported rendering volumes from Brazil to other markets? And then finally, could you remind us just the overall split between U.S. rendered volumes and Brazil rendered volumes for Darling? Is it, I don't know, like roughly 80-20?

Yes. Good question. Number one. The Brazil for us in the rendering side has been a truly wonderful experience. The challenge here has been taking a private company and making it public and making profits versus tax avoidance a priority here, getting raw material procurement, margin management as part of the culture. I'd say we checked the box now and we're doing very, very well there on that.

Brazil is an incredible place because right now, as the U.S. cattle numbers are down, although cattle feedlot margins are way up, Brazil's numbers are moving sharply up. And so 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, the percentage inclusion, I suspect, will rise again here in 2026. I mean, there's no lack of tension here right now between the U.S. and Brazil, and we acknowledge that. But there's no problem with that being a domestic-oriented business. Matt, anything you want to add there?

I would just say that the market is going to dictate where these products flow. And from a quality standpoint, the Brazilian quality for RD is actually very good and preferred. But at the same time, Brazil, they can -- as Randy mentioned, their biodiesel program inside the U.S. can change. Even with 1% change in that, which is expected, that can shift a whole lot more of the volume just to stay at home there. So that will continue to play out. And the market is going to dictate where the flow goes on what gets exported. Historically, a fair bit of that has come to the U.S., but maybe that shifts towards Europe.

Our next question comes from the line of Andrew Strelzik with BMO.

My first one, I was curious if you could comment on what you're seeing in terms of biofuels industry utilization rates and demand for feedstocks. It seems from the feedstock pricing like things are moving in the right direction, but you've talked about DGD1 still being offline. I'm sure there are others 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?

Yes. Thanks, Andrew. This is Bob. I think 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 moved slightly higher month-to-month through the year. I think our view on that is that's more about 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 the 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 -- 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 up month-to-month. And we'll probably continue to see that at least until we get final clarification on SREs and what the actual mandate is.

The RVO holds, we're going to see -- we're going to need the capacity to return online to meet that obligation.

Yes, Andrew, this is Randy. That was Matt. This is Randy. I think it's going to be interesting, at least from my chair, over the next 10 days to see some reporting of second quarter earnings for some of these RD plants that have been running. And that will kind of tell you, are they running for fun or not.

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

Yes. I mean, look, I think we've been really clear about this, Andrew, that we're committed to paying down debt and getting our debt coverage ratio down below 3.0 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. Winter projects are slowed down because of weather. But we're committed to keeping our CapEx at $400 million or lower for the year, and we'll see where we are and 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 our goal is to continue to pay down debt.

Yes. And this is Randy. I mean, the reality is -- I want to be clear about a couple of things. One, we are not capital 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, I think we're focused on getting below 3.0. We're waiting for the sun to shine in '26 here.

Our next question comes from the line of Benjamin Kallo with Baird.

Just following up on that last question. In the past, you guys have talked about maybe having a dividend or repurchasing shares. Just trying to think -- and then also SAF 2. Just thinking about the capital allocation as we move into '26 and you hit your debt targets? And then I have a follow-up.

Well, yes, thanks, Ben. This is Bob. I think SAF 2, we need much more clarity around the market before we move down that path. So 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 there today. So as we look at 2026, it's not currently in the plans to move forward. Those things can change.

As we look at everything else, we want to -- I mean, I think that -- first of all, if I look at the Food segment, we have a great plan there with the formation of Nextida and the joint venture that will allow us to continue to move -- to grow in that industry and space. And that's a noncash transaction that provides access to that new capacity. So 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 there are opportunities for us to continue to grow our platform globally in the Feed segment. 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 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 continue to be focused on paying down debt.

Okay. Great. And just going back to the Food segment. Just in the interim between -- when we get to next slide and the growth there. Last year, there was some weakness in collagen sales. It looks like it had bottomed out there. Is that the trend? Or could you just talk more about the trend in collagen sales that you're seeing and how we should look forward to the second half of the year? Thank you.

Yes, I think so. I just kind of -- I would sort of rephrase it a little bit from last year. What we saw was a slight oversupply in the market, more so of gelatin. We did see some collagen. I think what's important to understand is, in order to make hydrolyzed collagen, you have to have, let's call it, gelatin extraction capacity that you're building it on top of.

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. 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 got to have the extraction capacity behind it. 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, 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 with PB Leiner, that's going to give us access to more capacity.

Thank you for your questions. Our next question comes from the line of Pooran Sharma with Stephens.

Thanks for the question. I just wanted to start off and hone in on guidance just a tad a bit more. I think in prior calls, you've given us a split of the core business versus DGD. Wanted to understand, second half DGD doesn't sound like there's too much benefit in there. As you mentioned, you'll be offline for 3Q. You did mention that you'll be running in September. So I just wanted to understand, is it -- are you baking in more of a margin uplift in 4Q from the current environment? Just wanted to understand guidance with a bit finer detail.

Pooran, this is Randy. Yes, I think you framed it okay. But I think what I want to clarify for you is, clearly, the core ingredients business is accelerating all the way through the end of the year here. I mean if you look at the cash prices and you back into them, we were up about $0.03 a pound in fat in the mid-40s versus the low 40s in Q1. We're now well above $0.55 a pound on most FOB plants in North America now. That's a big number.

Now you've got to kind of balance that with the raw material price rise that happens during that process. Proteins has stabilized. Demand for global collagen is really consistent. It feels like the destocking is done that we've talked about in prior quarters. The big unknown in the guidance here is do we get a RIN boost once that SRE announcement's out there, 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 dynamic futures market that's out there that reflects daily views and guidance and delivery and et cetera, et cetera.

So the reality in our guidance here as we went forward was we said we're confident in our core business and we love it. And we prefer to always talk about our core business. I think for the last 5 years, all I've done is talk of DGD. And we'll see if DGD becomes a meaningful contributor. The table is set with the RVO, there's no doubt about it. The question is timing here. The guys always look 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 now above the 5-year average. I mean this is a pretty darn good set up now as we enter fourth quarter. Q3, you said off-line. No, we're down in August, and we're ready to run full September 1 if margins are there. We're not going to run for fun and burn up catalyst until the time is ready.

Got it. Got it. Appreciate that color. I guess just real quickly on the follow-up wanted to understand the SAF opportunity kind of in Europe. Obviously, 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 wanted to understand if there's any regulations in process that would make feedstock -- U.S. product a little bit easier to get into those markets.

I'll jump in quick, and Matt, add to this. I think you're highlighting something that's important here, and that's 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. These have presented challenges 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 feedstocks 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 when we look at Diamond Green Diesel and 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 in reserve, all these kinds of things. And so 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 chains coming in the door. And -- but all that takes time to put in place.

Thank you for your questions. Our next question comes from the line of Betty Zhang with Scotiabank.

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?

Yes. I mean I think that -- thank you, Betty, for asking that because that's what everybody has been trying to ask, but you ask it straight up here. It's very funny. I'm going to give you $900 million to $1 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, we go way above that because the profitability of DGD will be much more than it's been today.

Perfect. Very clear. And thanks for the scenarios. Actually, I will just leave it there. All my questions have been covered. Thank you very much.

Thank you for your questions. Our final question comes from the line of Jason Gabelman with TD Securities.

I wanted to go back to the RVO proposal, and I understand there'll be more clarity once the small refinery exemptions get announced. But there's probably some conservatism among investors, just given they have been burned in recent past on regulation. So I imagine they'd want to see the proposal finalized. And 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?

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

Now the SREs is -- I think I mentioned we're expecting that to come in the next few weeks and then the RVO to be finalized in October. So that's the time line. 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 a long-term basis.

Yes, Jason, this is Bob. I just -- I would -- I think when you read the tea leaves, it seems like the priority is -- and we're encouraged by this is that one is this policy needs to support U.S. farm prices. That's first and foremost. Second, it's got to minimize cost to the federal government. So those are some of the important changes. And then third is protecting U.S. industry, U.S. biofuel industry. Some of these things, the announced policies probably could change. But ultimately, we believe they're going to try to achieve those 3 goals. And whatever that outcome is, we think it's going to be positive.

Bob, we've got the 2 issues, the SRE and then the 2024. You want to comment about that?

Yes. I guess the other is that normally, 2024 RIN compliance would be obligated as of March 31 of this year. And until they formally revised the D3 RIN numbers from 2024, that date is not fixed. Whether that's going to be October 1 or November 1, it's unclear, but that's the other piece to this is that compliance is required in order -- in our view, in order for the real RIN S&D for 2024 to kind of to show itself and then 2025 as well.

And our view of the RIN S&D, when you look at the D6, D4, D5 altogether is we're at a deficit for '25 and certainly will be at '26. And so as long as compliance is enforced, we believe we'll see higher RINs and that will result in a decent margin for renewable diesel.

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

This is Randy. I'll take that. So we are very close to where we thought we would be right now. 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. In the land of lawyers, there's too many involved.

Thank you for your question, Jason. That will be all the questions in our Q&A session today. I would now like to turn the call back to Randy for final remarks.

Thank you. Thank you, everybody. Great questions today. Leave you with a couple of thoughts. Number one, we appreciate the interest in the company. We 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 10 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 in 2026.

So be safe. We look forward to talking to you again here, I believe, in October.

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