DAR — Darling Ingredients Inc.

Summary of Darling Ingredients Inc. Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Combined Adjusted EBITDA: $406.8 million, up from $196 million in Q1 2025 and $336 million in Q4 2025.
• Net Sales: $1.6 billion, compared to $1.4 billion in Q1 2025.
• Gross Margins: Improved to 26.1%, from 22.6% in Q1 2025 and 25.1% in Q4 2025.
• Net Income: Approximately $134 million, or $0.83 per diluted share, compared to a net loss of $26 million in Q1 2025.
• Debt: Total debt net of cash was approximately $4 billion, up from $3.8 billion at the end of Q4 2025, primarily due to contributions to Diamond Green Diesel (DGD).
• Effective Tax Rate: 22% for the quarter, with expectations to be around 25% for the year.

2. Strategic Updates and Business Highlights

• Core Ingredients Business: Strong performance with improved global operations and margin expansion. Feed Ingredients segment saw EBITDA increase to $169 million from $111 million a year ago.
• Food Segment: Growth in collagen and gelatin sales, particularly in Europe and Asia. The Nextida glucose control product is pending patent approval.
• Fuel Segment: DGD delivered $151.2 million in EBITDA, with an average EBITDA margin of $1.11 per gallon. The renewable volume obligation (RVO) has positively impacted fat prices.
• Operational Excellence: Focus on controlling costs and improving throughput has led to stronger gross margins.

3. Forward Guidance and Outlook

• Q2 2026 Guidance: Core ingredients EBITDA is projected to be between $260 million and $275 million.
• Long-Term Outlook: Management is optimistic about continued earnings improvement, stronger cash flow, and debt reduction throughout the year.

4. Bad News, Challenges, or Points of Concern

• Debt Increase: The rise in debt due to working capital contributions to DGD and timing of production tax credit payments is a concern, although management aims to reduce debt below $3 billion.
• Feedstock Market Volatility: There are ongoing concerns about the volatility in energy and feedstock markets, which could impact margins and operational performance.
• Regulatory Risks: Potential changes in RIN policies and tariffs may affect feedstock pricing and availability.

5. Notable Q&A Insights

• Diamond Green Diesel (DGD): Management indicated that while Q2 is expected to be strong, they are cautious about providing specific guidance due to market volatility.
• Feedstock Pricing: There is an expectation of continued strength in feed prices, but the mix of fats and proteins may be impacted by lower cattle herd numbers.
• RIN Prices: The outlook on RIN prices is contingent on global fuel prices and domestic production levels, with expectations that RINs will play a critical role in maintaining margins.
• Biodiesel Production: There are challenges for independent biodiesel producers due to access to production tax credits, which may delay their ramp-up in production.

Overall, Darling Ingredients reported strong financial results in Q1 2026, driven by improvements across its core business segments, while also navigating challenges related to debt levels and market volatility. The company remains optimistic about its growth trajectory and operational efficiency moving forward.