DAR - NYSE

Good morning, and welcome to the Darling Ingredients Inc. conference call to discuss the company's fourth quarter and fiscal year 2025 financial results. After the speakers' prepared remarks, there will be a question and answer period, and instructions to ask a question will be given at that time. Today's call is being recorded, and I would now like to turn the call over to Suann Guthrie, Senior Vice President, Investor Relations. Please go ahead.

Thank you, and welcome to the fourth quarter and fiscal year 2025 earnings call. Here with me today are Randall C. Stuewe, Chairman and Chief Executive Officer, and Robert W. 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. We 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 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 of our Form 10-Ks, 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 Randall C. Stuewe.

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 the 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 strength 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 $336,100,000 and our global ingredients business performed strong with $278,200,000 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. 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 Ingredients Inc., 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 Leiner and Tessenderlo is advancing as planned with regulatory reviews now underway. Across the business, we are seeing positive global demand trends that give us a very encouraging outlook for 2026. Our Fuel segment, Diamond Green Diesel, delivered its strongest quarter of the year with $57,900,000 of EBITDA, or $0.41 per gallon. For the full year 2025, DGD earned $1,037,000,000 of EBITDA, or $0.21 EBITDA per gallon, and sold approximately 1,000,000,000 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 Ingredients Inc. was identified as a stalking horse bidder in the bankruptcy proceedings for three rendering facilities from the Potense Group in Brazil, the second-largest rendering company in Brazil. Robert W. Day will share more details on the financials and timing, but these are high-quality assets with strong operational capability and fit 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 would like to hand over the call to Robert W. Day, take us through the financials, then I will come back and discuss my thoughts on 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 $336,000,000 versus $289,000,000 in fourth quarter 2024, and $245,000,000 last quarter. Core ingredients improved both year over year and sequentially. For fourth quarter 2025, core ingredients EBITDA was $278,000,000 versus $230,000,000 in fourth quarter 2024, and $248,000,000 last quarter. For all of 2025, core ingredients EBITDA was $922,000,000 versus $790,000,000 in 2024. While 2025 was a 53-week year for Darling Ingredients Inc., the added week's impact added only around $20,000,000 EBITDA. So by any measure, 2025 for the core business realized significant improvement over the previous year. For the fourth quarter 2025, total net sales were $1,700,000,000 versus $1,400,000,000 in 2024. Raw material volume was 4,100,000 metric tons versus 3,800,000 tons from the fourth quarter a year ago, and for the full year, raw material volume was 15,400,000 metric tons versus 15,200,000 tons in 2024. Meanwhile, gross margins for the quarter improved to 25.1% compared to 23.5% in fourth quarter of last year. Looking at the Feed segment for the quarter, EBITDA improved to $193,000,000 from $150,000,000 a year ago, while total sales were $1,130,000,000 versus $924,000,000, and raw material volume was approximately 3,400,000 tons compared to 3,100,000 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 three assets formerly owned by the Potense 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 $120,000,000, 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 $429,000,000, a significant increase over fourth quarter 2024 at $362,000,000. 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 2024 at $82,000,000 versus $64,000,000. Moving to the Fuel segment, specifically Diamond Green Diesel, Darling Ingredients Inc.'s share of DGD EBITDA for the quarter was $58,000,000, which includes an unfavorable LCM inventory valuation adjustment of $24,000,000 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. Fiscal year 2025, Darling Ingredients Inc.'s share of DGD EBITDA was approximately $104,000,000, and included a favorable LCM inventory valuation adjustment of $140,000,000 at the entity level. Darling Ingredients Inc. contributed approximately $328,000,000 to DGD in 2025. These contributions were offset by $368,000,000 in dividends received, a significant amount of which came from $285,000,000 in production tax credit sales, $255,000,000 of which were paid during 2025 and the balance will be paid in 2026. Other Fuel segment sales, not including DGD, were $153,000,000 for the quarter versus $132,000,000 in 2024, on relatively flat volumes of around 390,000 metric tons. Combined adjusted EBITDA for the full Fuel segment, including DGD, was $85,000,000 for the quarter, versus $84,000,000 in the fourth quarter 2024. For fiscal year 2025, combined adjusted EBITDA was $192,000,000 versus $374,000,000 a year ago. As of 01/03/2026, total debt net of cash was approximately $3,800,000,000 versus $4,000,000,000 ending 12/28/2024. Capital expenditures totaled $156,000,000 in the fourth quarter 2025 and $380,000,000 for the fiscal year. Our bank covenant preliminary leverage ratio at year end was 2.9 times versus 3.9 times at year end 2024. In addition, we ended the year with approximately $1,300,000,000 available on our revolving credit facility. For the three months ended 01/03/2026, we recorded an income tax benefit of $11,000,000, primarily due to the net impact of production tax credits. We paid $6,900,000 of income taxes during the quarter. For the twelve months ended 01/03/2026, the company recorded an income tax benefit of $9,400,000. 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 $58,400,000 of income taxes in 2025. Overall, income was $57,000,000 for the quarter, or $0.35 per diluted share, compared to net income of $102,000,000, or $0.63 per diluted share for 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 $58,000,000. Adjusting for the restructuring and impairment charges, and to provide some perspective regarding earnings per share in the fourth quarters for 2025 and 2024, an adjusted non-GAAP earnings per share would have been $0.67 per diluted share in 2025 and $0.66 per diluted share in 2024. With that, I will turn the call back over to Randy.

Hey. 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. 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 are 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 260,000,000 gallons at improved margins. For the core business, when you adjust for our fourth quarter performance for the 13-week period and exclude 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 am estimating our core ingredients adjusted EBITDA to fall in the range of around $240,000,000 to $250,000,000 for first quarter. Now with that, let us go ahead and open it up to questions.

Certainly. If you are using a speakerphone, please pick up the handset before using the keypad. Once again, if you would like to ask a question, please press star followed by one. First question comes from the line of Derrick Lee Whitfield with Texas Capital. You may proceed.

Hey. Good morning all, and congrats on a strong close to the year. So maybe just starting with guidance. So while I why you are 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 tallow and UCO relative to SBO, that is kind of part one. And then part two is as you guys look forward and let us assume we get a constructive RVO, would you likely then put DGD back in guidance at that point? Would love your thoughts on those two.

Yeah. Hey, Derrick. This is Bob. I guess to answer the last question directly, it is going to depend. I mean, you know, I think that there is just going to depend on the kind of clarity and certainty we have. But as we look at the first quarter, you know, we first of all, we saw strong results in 2025, much better. And we, you know, we continue to see that momentum carry forward into the first quarter. But, yeah, we are not providing guidance and will reconsider that after we get a final ruling on the RVO.

Terrific. And then maybe just one 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?

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

Thank you. The next question comes from the line of Thomas Palmer with JPMorgan. You may proceed.

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

So if I did not understand the question correctly, Tom, let me know. This is Bob again. I think, you know, we have not seen a significant increase in biofuel production yet in the United States. And, you know, 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 are going to need to see, you know, better margins in order for that to happen. But let me know if I did not answer your question.

No. No. You understood it right. I was really just trying to understand if we are seeing anything kind of happening in the background versus, you know, what we are seeing with pricing so far. Second, I did just want to touch on the Food business. There was some constructive commentary in 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. It had a really nice fourth quarter, carries that momentum into Q1 right now. You know, as we look around the world, demand, you know, a year ago today, we were talking of destocking of, you know, 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 reduce price to try to move the product and it built inventories. Those have been worked through pretty much around the world. And so ultimately, we look for it will depend on really a year similar to this year, if not better. You know, how it really comes down to trade flows again. You know, keep in mind, there are still lots of tariff issues around the world, and we are a heavy Brazilian producer. And at the end of the day, you know, we were able to navigate that with our customers and suppliers. And I think we will be in better shape as we come on into the year 2026 here. Also, our NexData 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 summer to bring on our Brain Health Nex product. So we are getting momentum with the higher value products here. And then the commodity gelatin part has, what I would say, leveled off and improved from where it was a year ago.

Next question comes from the line of Manav Gupta with UBS. You may proceed.

Good morning, guys. 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 Ingredients Inc.? Like, is there an absolute number, five plus or whatever, which if it is 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 am just trying to understand based on the revised, you know, the mandate going in, you actually see that carbon bank deplete, which will be a major positive for you.

Thanks, Manav. This is Bob. So I will go on record saying we support an RVO for advanced biofuels that translates to 5,250,000,000 gallons or 5,610,000,000 gallons. Those are kind of the numbers that have been thrown out there. You know, we will 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, you know, we believe results in higher margins than what we see in the market today. But I guess I will leave it at that. On the LCFS question, it is an interesting situation because we have the greenhouse gas emission requirements that are, you know, more stringent than they were. We are seeing the bank come down considerably, and we expect that we will continue to see that happen. One interesting aspect about that market is over the last several quarters, we have 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 has got to incentivize more domestic production to eventually go into California so the rate at which we are drawing that bank down starts to slow down. We have not talked about it in those terms for a long time, but it is absolutely constructive what we are seeing there.

Perfect, Bob. I am just going to quickly ask a question on the Food JV side. Obviously, you have highlighted multiple benefits of that JV, but you have also in the past said, look, once the JV really takes off, there could be a rerating 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 Inc.?

Yes. Thanks, Manav. So I think, first of all, you know, we are in a process there. We have signed definitive agreements. We have, you know, done our regulatory filings, and we cannot predict exactly when this joint venture will close. But it is sometime, we expect, in the next twelve months or so. Once that happens, you know, we will focus on integrating plants, maximizing, you know, synergies and opportunities. And then as Randy talked about, throughout all of this, we are very focused on increasing the sales volume of the NexData 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. You know, we believe this is a business that can move into a space that is trading 12 to 16 times EBITDA. And if we accomplish that, and when we accomplish that, we will have to evaluate what is the best way for us to monetize that if we are not being recognized for that kind of a multiple for that business.

Thank you. The next question comes from the line of Heather Lynn Jones with Heather Jones Research. You may proceed.

So just thinking about the RVO and the probable impact on DAR's Feed business, which is setting up the expectations for '26. Have there been any changes in how you price the lags, etcetera, that we should be aware of as we are thinking about the potential impact later in the year?

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

The lags. So, like, in the past, it has been, like, a 60 to 90 day lag between what we say. 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 are trying to figure out the impacts for Darling Ingredients Inc.

No. Not at all, Heather. I mean, what we saw in fourth quarter was the team executed well. They had some forward sales on. Prices came down here, and, you know, we benefited. As the, you know, we were kind of lagging all the way up all year in '25 here, and so got a little bit of a downturn. That was kind of the reason for the guidance for Q1 here at $240,000,000 to $250,000,000. Fat prices are lower. It is wintertime. But they are 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 am starting to see, you know, sales now back of fats, FOB the plants, in a $0.50 plus range now. So, you know, it is coming back for us right now, but there is no change in how we do business there.

Okay. Awesome. And then I was wondering, just given the recent 45

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

Thank you. The next question comes from the line of Pooran Sharma with Stephens Inc. You may proceed.

Good morning, thanks for the question. 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 260,000,000 gallons. It seems kind of low just given your capacity utilization, and I thought you were going to have DGD 1 back online. So hoping to maybe get some color on the volume expectations for Fuel.

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

Okay. Makes sense. Thanks for the color there. And, in the past, I think you have given a percentage split on the core business guide. Of that $245,000,000 at the midpoint, are you able to give us a rough sense on the split between Feed, Food, and Fuel? For the core business?

So this is Randy. So let us, you know, let us do Randy math here. You know, if you were $278,000,000 in Q4, remember there was an extra week in there. So you have got to divide by 14 and times 13. So you come up with $250,000,000-something there, $258,000,000, $259,000,000. We had a few balance sheet cleanup items that you always do at year end. So that is where we kind of came in at the $250,000,000 mark for the quarter, $240,000,000 to $250,000,000. 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 is really it. But trying to split it between Food and Feed, kind of impossible at this time. You know, 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. You may proceed.

Good morning. Thanks for taking my question. In fourth quarter, Feed Ingredients processing volume set a record, and Feed revenue per ton and gross margin percentage were the best prints 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?

Yeah. Conor, this is Randy. And Bob, help me out here if I leave something out. I mean, clearly, tonnage around the world, raw material tonnage, is very strong. If we look at it, you know, there is no surprise. Beef tonnage in the U.S. is at a relatively low point in my career right now, but it feels like it is rebuilding. But offsetting that is very, very strong poultry tonnage in the East and Southeast. Now you go south to Brazil, beef tonnage is large, very large now. We are extremely full at all plants down there. Europe is very consistent as we look around. 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, you know, it was a 2025 kind of focus for us, and it was one that it is kind of hard to talk about to get out there because there is no specific thing. It is each customer, whether it is freight, whether it is, you know, the products we are making at plants, the markets that we are selling. The 2025 year was very challenging because, especially on the protein side, you did not know, was China open, was China closed? You know? And so it becomes very difficult for some of the high-end proteins. The 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 have had to move spreads and raw material costs around there. So it is a whole bunch of little things that are out there that the team really executed well on.

Okay. Thanks. 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?

Yeah. Hey, Conor. This is Bob. It is hard to answer that because all these markets around the world that we are selling into are consistently changing. And so it is really a relative question. You know, what I would say is in, I guess, a static environment, you know, how much would the credit price have to increase into California for us to sell into California? I am not really sure exactly. You know, I think that it would have to be—yeah. I cannot—it is hard to answer that exactly just because the markets are so dynamic and they are moving around so much. But, you know, what it has demonstrated is that it is going to have to be higher than where we are in order for it to happen. You know, there are better alternatives today for Diamond Green Diesel at least in order to sell into California.

Thank you. The next question comes from the line of Dushyant Ajit Ailani with Jefferies. You may proceed.

Good morning, guys. Thanks for taking my question. My first one is just wanted to touch on the Brazil rendering facility, the stalking horse bid. 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 one-time thing that is an opportunity, or could we see more of these? And then also just one last piece on that is also how much do you think that could add to the capacity and the margin profile for the Feed segment changing going forward?

Yeah. Dushyant, this is Randy. The Potense Group, the Goncalves family, we have worked closely with over the years. They found a buyer that we had them acquire years ago, and it fell apart. It is somebody we have always had our eyes on. These are really first-rate, world-class facilities that, long story short, he spent too much money and was unable to maintain his balance sheet, which is the most important thing in this business, through the volatility that happened and happens in Brazil. So these three—you know, we are doing a combination of things in Brazil. As I said, the tonnage is very large. We are 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 are excited to get them closed and integrated.

Awesome. Thank you. 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?

Yeah. Thanks, Dushyant. This is Bob. We are intentionally vague about that as we negotiate different options. I think that, you know, what we have said previously is that when we look back at where we have been most successful, it is clearly in areas where we have got core capabilities in our core business, and some of the peripheral areas where we are operating, you know, we can look at it a bit more opportunistically. With some of the impairment that we did, it just repositions our balance sheet so that we are really valuing things based on fair market value, and that allows us to be more agile if we choose to do so. But we are not forced to do anything in any case, and I think that is an important position that we need to have as we look at different opportunities.

Thank you. Next question comes from the line of Andrew Strelzik with BMO. You may proceed.

Hey. Good morning. Thanks for taking the questions. My first one, Randy, I appreciate you are not giving the usual guidance and certainly understand that. But so I am not looking for numbers. But I guess I am just wondering, you know, when you think about kind of a post-RVO, 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 feels like the setup we could get into in a kind of a post-RVO environment?

Yeah. We look historically at DGD as, you know, having a first mover capability and the success that it had. I mean, I think everybody knows that the machine is capable of making 1,300,000,000 gallons plus out there. You know, as I look back at 2025, as Bob and I sat here and tried to give what we thought the business would do, you know, we looked at it and said, well, we do not think '25 could be any worse than '24. And we were very, very wrong with that belief and the assumption. We did not get an RVO soon enough. We did not get an LCFS increase guidance soon enough. You know, if 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 below variable cost, it just takes longer for rationalization and improved behavior. You know, as we look at '26 here, you know, clearly, we can make you a case for an easy $0.50 a gallon. We can make you a case for $1.00 a gallon at that. But it all hinges on, like we said, on the RVO, which we, as Bob said, you know, 5.02 to 5.6. So we think anything with a five is very, very positive and constructive. And, ultimately, you know, you have got the drawdown in the LCFS coming back, and you have got robust world demand for RD right now. So, you know, it is a hard thing to sit here and say you can say $0.50 a gallon or $1.00 a gallon. You know, we ran $0.41 in Q4. We have said we think Q1 is better. And so, you know, that is the $0.50. And then to go on up to $1.00, we will see what happens. It is going to take, you know, behavior in the industry, and it is also going to take a very robust RVO around the world.

Okay. That is helpful perspective. And then I just wanted to ask a capital allocation question. You have 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 timeline to achieving the leverage targets and then capital allocation priorities once you get there? Thanks.

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 going to depend in large part on how much cash DGD generates. And so we will see what that picture looks like once we finally 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 we sit here today, you know, we like the trend and the direction we are headed. We are going to continue to pay down debt. We will reassess as we have a little bit more clarity on what the cash flow situation looks like going forward.

Thank you. The next question comes from the line of Matthew Blair with TPH. You may proceed.

Thanks, and good morning. Hopefully, you can hear me okay. Had a question on the SAF market. So one of your major European competitors talks about how European SAF prices are actually below European RD prices, and they are kind of pulling back on their SAF production. You know, what is the picture like on SAF for DGD? Do you have term contracts to, I guess, essentially stabilize that SAF contribution? You know, what are you seeing on U.S. SAF prices versus U.S. RD prices? Thank you.

Yeah, Matthew. This is Bob. I think, you know, to answer the first part of your question first, in Europe, we have seen SAF trade at a premium. We have seen it trade at a discount. It has fluctuated, you know, as I think everyone knows. DGD has some countervailing duties in order to get into that market, so it is not as readily accessible to us, although we do have sales into Europe, and we can be opportunistic when that market is good. And we have been able to take advantage of that. We still have sales on the books in 2026 that we had made previously. The book is healthy. The market, you know, I think it is starting to—well, is starting to rebound a bit in the United States. In the United States, it is primarily a voluntary credit market, and we have seen more and more interest materialize, and we think we are going to continue to see that as just overall demand for energy continues to increase. So, you know, our book is solid today. There is room to make more sales. We are having really good, constructive discussions about that. And, you know, I do not think that—I think we will be happy with SAF sales, you know, volumes and margins as we look at '26.

Sounds good. And then regarding the contributions to DGD, I believe in 2025, Darling Ingredients Inc. sent DGD $328,000,000, 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 Ingredients Inc. might be sending DGD? Would it be lower than the 2025 number? Thanks.

Yeah. It is a good question. We do not have a precise estimate, but I would say, you know, we expect it will be less. And you are right. We had three catalyst turnarounds in 2025. You know, we did some design work. There were some things that—some cost items that, you know, needed to be paid for. As we look at 2026, yeah, we anticipate that the contributions will be less. It is going to depend a little bit on the market environment, but based on where we sit here today and the first quarter, we expect it would be considerably less than what it was in 2025.

Thank you. The next question comes from the line of Ryan M. Todd with Piper Sandler. You may proceed.

It is maybe just a couple follow-ups on earlier comments or questions. I mean, we are getting closer to some—well, at least, hopefully, we are getting closer to some regulatory clarity on some of the renewable fuel issues. Randy, can you maybe talk about, you know, are you hearing anything on timing of the RVO or 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

Hey, Ryan. This is Bob. I think, you know, first question around timing. We have spent, you know, a lot of time in D.C. I think that, you know, our perspective is that all key stakeholders had to get comfortable with what the plans and policies were. And in our view, that has happened. The EPA has a heavy administrative burden to get through as it pertains to responding to comment letters prior to them sending over a final proposal to OMB. We believe that is likely to happen soon, and so, you know, hard to say exactly what that means, but probably, you know, it has got a February date to it, in our view. As far as 45

Okay. Thanks.

Next question comes from the line of Benjamin Joseph Kallo with Baird. You may proceed.

Hey, guys. Thanks for taking my question. Just to 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, you know, how you would see a limit to adding debt on the balance sheet for that. And then you talked about SAF a bit, but could you just talk about, you know, any more you can on volumes you are seeing there and any kind of pricing trends there? Thank you.

Thanks, Ben. This is Randy. On an M&A perspective, I would still say we are on an M&A holiday. You know, we are working the world. We see what is out there. Nothing that really turns us on at this time per se. The Potense opportunity was one we were very, very familiar with, and given that it was a forced liquidation, it was something we could not turn down. I think more of our focus around the world is on organic expansion, whether it is in Brazil, Paraguay, China, and 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 are going to have to use our capital dollars to debottleneck and expand some of our facilities here. So not much there. Bob, you want to comment on the SAF?

Yeah. I think, you know, one interesting development in the SAF market in the United States is, at the end of the day, the buyers for SAF credits are large companies, often tech companies, banks. The airlines act more as a broker in that case. And so the discussions that we are having are really about how a tech company obtains Scope 3 credits through the acquisition of SAF that, you know, 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 is harder to predict exactly when they come together. But as those discussions continue to advance, it is exciting because there is a potential for, you know, more of capacity to be dedicated towards future contracts. And it is hard to say more than that right now today other than the discussions are constructive and we are encouraged by, you know, the direction they are going.

Thank you, guys.

Thank you. Next question comes from the line of Y.

Hi, good morning. Thanks for taking my question. 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 fat prices recovering. What about in the second half? What could that look like?

Betty, this is Randy. So, you know, 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 are very solid for Q1. We are still trying—if you sit there, we think that the year will improve as we go forward. We are being a bit cautious because until we see that RVO, you know, it is hard to really put your finger on it. But at the end of the day, you are seeing the futures market for soybean oil really try to project a very strong, you know, RVO here. So that will only provide us tailwinds as we go forward. So, you know, hopefully, one is we build momentum through the year. And so, hopefully, we will 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 would not say a change in operating. I would say that every so often, we look at our portfolio and say, do we deliver the returns that we want to in different businesses? Do we have the number one or two position in it? And we have a couple businesses out there where we do not have that position. And we cannot get to that position. And so the challenge in this business is always that we are the largest and biggest and best in the world, is finding then a fair price to let go of an asset we cannot be the best at. And so that just takes time, and I think, you know, I would just say stay tuned and be patient, and you will see them materialize here over the—hopefully here in the first quarter, if not very early second quarter.

Thank you. The next question comes from the line of Jason Daniel Gabelman with TD Securities. You may proceed.

Yes. Hey, good morning. Thanks for taking my questions. 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.

Yeah. Thanks, Jason. This is Bob. It is 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 bills come due. So that is really—it is really not more than that. As we look at next year, you know, 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 would call it in that ballpark of $400,000,000.

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

Yeah. I think that just generally speaking, we are seeing year-on-year increases in demand in those markets. We really have not seen a lot of increase in supply and capabilities come online to compete for that. So it has just proven to be—you know, those have proven to be good markets for DGD, and we think that we will be able to continue to do that. We also think we are going to have a good market here in the United States. And we would love to supply more into that market as well. So hard to say more than that. The SMBs are balanced and strong, and that is the case for a lot of these markets outside the United States.

Thank you. 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.