Q1 2025 Montauk Renewables Inc Earnings Call
Okay.
Speaker Change: today, everyone. And thank you for participating in today's conference call. I'd like to turn the call over to Mr. John Ciroli as he provides some important cautions regarding forward-looking statements and non-GAAP financial measures contained in the earnings materials or made on this call. John , please go ahead.
Speaker Change: Thank you, and good day, everyone. Welcome to Montauk Renewables' earnings conference called to review the first quarter, 2020-25 financial and operating results in development. I'm Josh Rolley, Chief Legal Officer and Secretary at Montauk.
Speaker Change: Joining me today are Sean McClain, Montauk's president and chief executive officer to discuss business developments and Kevin Van Asdalan, chief financial officer to discuss our first quarter 2025 financial and operating results.
Speaker Change: At this time, I would like to direct your attention to our forward-looking disclosure state.
Speaker Change: During this call, certain comments we made constitute forward-looking statements and as such involve a number of assumptions, risks, and uncertainties that could cause the company's actual results or performance to differ materially from those expressed in or implied by such forward-looking statements.
Speaker Change: These risk factors, and uncertainties, are detailed in Montauk Renewables SEC violence.
A remarks thing may also include non-GAAP financial measures.
Speaker Change: We present EBITDA and adjusted EBITDA metrics because we believe the measures assist investors in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.
Speaker Change: These non-GAAP financial measures are not prepared in accordance with generally accepted accounting
Speaker Change: Additional details regarding these non-GAF financial measures including reconciliation to the most directly comparable GAF financial measures can be found in our slide presentation in our first year 2025 earnings press release in forums and YouTube.
Sean McClain: Issues and filed on May 8th, 2025. These are available on our website at ibar.montauk Renewables.com. Now, Peter Williams, we will open the call to questions. We do ask that you please keep one question to accommodate as many questions as possible. And with that, I will turn the call over to Sean.
Sean McClain: Thank you, John . Good day, everyone, and thank you for joining our call.
Sean McClain: On March 7, 2025, the Environmental Protection Agency announced its delay of the 2024 Renewables fuel-fuel standard compliance deadline for all categories.
Sean McClain: The EPA has yet to decide on a proposed partial waiver of the 2024 cellulosic biofuel volume requirements for the timing of its decision on this matter since its origination in their December 5th, 2024 EPA announced.
Speaker Change: As we have solved all of our D3 RINs associated with our 2024 R&G production, we have zero exposure to the timing and resolution of this 2024 proposed compliance waiver.
Speaker Change: We have entered into commitments to transfer the majority of our rents in inventory related to 2025 RG production and prices approximating the D3 ren index.
Speaker Change: The EPA Biogas Regulatory Reform Rule became effective in 2025, requiring the separation of rent after dispensing, which is delayed approximately by one additional month, the ability to have rents available for sale from current year production.
Speaker Change: Additionally, we believe the EPA extending the compliance period for 2024 has further delayed the timing of obligated party purchases of rents from 2025 R&G production.
Speaker Change: The regulatory uncertainty continues to impact the renewable natural gas industry in a variety of ways.
Speaker Change: We believe our overall financial position, our proven operational and commercial practices, and our capacity under our existing 200 million credit facility provides us the ability to maintain stability through this period of economic ambiguity.
Speaker Change: Our development efforts in North Carolina continue in full force with an expectation to commence significant production and revenue generation activities in 2026.
Speaker Change: As previously noted, the favorable change in swine renewable energy credit generation enacted by the state of North Carolina in 2024 has us engaged in various stages of negotiations with obligated utilities to provide regs from our expected 2026 production.
Speaker Change: Correspondingly, we continue to negotiate with utilities to purchase the power we intended generate from the conversion of swung waste to energy starting in 2026.
Speaker Change: Our collection and transportation of feedstocks wine waste continues to be further fine to maximize feedstocks' solid and caloric value to minimize the transportation of low-energy liquid waste and the publicize the stable odorless fuel supply for our patented reactor process.
Speaker Change: We are in the final commissioning stages of our second facility at our apex site and expect completion in the second quarter of 2025. As previously discussed throughout 2024, we continue to expect a period of excess production capacity while the landfill hosts increases their
Speaker Change: We continue to work with the landfill hosts as well as alternative gas transportation, off-take and equipment providing partners to evaluate alternatives to develop our Blue Granted
Speaker Change: As previously discussed, we have received notice from the utility in February 2025 that it will no longer accept R&B from any producer into its distribution systems. A statement in direct opposition to the letter of intense day issued when we were awarded the gas rights to that site.
Speaker Change: We have prioritized our attempts to feed a location as the first of our biogenic CO2 projects to be developed related to our previously announced agreement with your energy.
Speaker Change: As previously announced, we are also progressing with our design and construction plans to incorporate CO2 processing at our Rookie R&G project location.
Speaker Change: with an expected commissioning of Q3 in 2027 and expected volumes of approximately 50,000 metric tons per year of food grade CO2 to be monetized independently from our agreement
in October 2024.
Speaker Change: We announced a collaboration with Embaulon to transform methane emissions from waste-stream biogas and to high-value carbon negative fuel. Leveraging Embaulon's patented technology, the initial pilot is a small-scale demonstration of recovering and converting biogas into grain methanol.
Speaker Change: The pilot project at our task to speed a facility in Houston, Texas, continues with M-B-1, having installed their patented containerized processing technology.
Speaker Change: We do not expect short-term financial benefits from this demonstration nor are these disruptions to our operations.
Kevin: And with that, I will turn the call over to Kevin.
Kevin: Thank you, Sean. I will be discussing our first quarter of 2025 financial and operating results. Please refer to our earnings press release and the supplemental slides that have been posted to our website for additional information.
Kevin: Our profitability is highly dependent on the market price of environmental attributes, including the market price for prints, as we self-market a significant portion of our rent, a strategic decision not to commit to transfer available rents during a period will impact our revenue and operating costs.
Kevin: We saw approximately 9.9 million rims representing all rims from 2024 gas production.
Kevin: Additionally, the impact of EPA bullmaking associated with the implementation of B-Triple RK-2 and the extension of the 2024 RK blind period has temporarily impacted our entrance into Grinch Mutants
for the 2025 R&G Production.
Kevin: As a result, we had approximately 3.9 million rents in inventory from 2025 R&G production
Kevin: Also related to the new EPAV trip to our rules, we have approximately 1.5 million range generated but not yet separated to be available for sale.
Kevin: We have subsequently entered into commitments to transfer the majority of our range in inventory as of March 31, 2025 at prices approximating the Z3 RAN index.
Kevin: The average second quarter to day D3 ring index price was approximately $2.47 $2.47.
Kevin: Total revenues in the first quarter of 2025 were 42.6 million and increased the 3.8 million or 9.8% at the 38.89 in the first quarter of 2020.
Kevin: The primary driver for this increase relates to an increase of 2.0 million rents sold in the first quarter of 2025 compared to the first quarter of 2024 due to the monetization of prior period rents of approximately 6.8 million that were carried into 2025.
Kevin: All 9.9 million rents sold within 1st quarter of 2025 related to 2024 are in need.
Kevin: personally offsetting this impact with a decrease in real life run pricing during the first quarter of 2025 to $2.46 compared to $3.25 in the first quarter of 2020
Kevin: Total general and then illustrated expenses were 8.89 for the first quarter of 2025, it increased of 0.79 or 7.1% compared to 9.49 at the first quarter of 2024.
Kevin: Employee-related costs, including stock-based compensation, were 5.09 for the first quarter of 2025, a decrease of 0.79 for 12.5% compared to 5.79 in the first quarter of 2024.
Turning to our second operating measures.
I'll begin by reviewing our renewable natural gas thing.
Kevin: We produce approximately 1.4 million MMVTU of R&G during the first quarter of 2025, but it's compared to the approximate 1.4 million during the first quarter of 2024.
on Feet Facility Produced 39 [inaudible]
Kevin: 1000 and then the few more in the first quarter of 2025 compared to the first quarter of 2024 as a result of previously disclosed plant processing equipment failure that occurred in the first quarter of 2024.
Kevin: All setting this in breach with our APEC facility that produced 57,000 fewer NABTU in the first quarter of 2025, compared to the first quarter of 2024, has the result of all weather conditions impacting gas-based off-evalability.
Well-built extraction of environmental factors and by processing equipment failures.
Kevin: Revenues from the Renewable Macroguestines run 1st quarter, 2025 for 38.5 million, and increased to 4.5 million for 13.1 percent, compared to 34.09 to run 1st quarter, 2024.
Kevin: During the first quarter of 2025, we felt market at $9 9 million, representing a 2.0 night increased 14, 3% compared to $7 9 million South market is around the first quarter of 2024.
Kevin: Average realized <unk>.
Kevin: Average pricing realizing rate sales during the first quarter of 2025 with $3.46 as compared to $3 25 during the first quarter of 2021.
Kevin: A decrease of 24, 3%.
Kevin: This compares to the average <unk> index price for the first quarter of 2025 of approximately $2 43, being approximately 22, 1% lower than the average the <unk> index price for the first quarter of 2020 for a free option as well.
Kevin: At March 31, 2025, we had approximately <unk> 4 million <unk> available for <unk>.
Kevin: $5 $5 million range generated on separately and $3 $9 million being separated and unsold at.
Kevin: At March 31.
Kevin: We had approximately $4 million <unk> available.
Kevin: And $3 4 million Rins generated an unsold at.
Kevin: At March 31 2020.
Kevin: 2024, there were no returns generated by them separate.
Kevin: Operating and maintenance expenses for our R&D facility during the first quarter of 2025 for $14 1 million, an increase of $1 9 million or 61% compared to $12 1 million during the first quarter of 2024.
Kevin: The primary drivers of this increase were timing of preventative maintenance media chain and.
Kevin: Well, good operational enhancement programs and our apex Martie <unk>.
Second.
Kevin: We produced approximately 46000 megawatt hours of renewable electricity during the first quarter of 2020.
Kevin: A decrease of approximately 8000 megawatt hours or 14, 8% compared to 54000 megawatt hours during the first quarter of 2020.
Kevin: Sure.
Kevin: <unk> 6000 of this deal.
Kevin: <unk> in the first quarter of 2025 compared to the first quarter of 2020.
Kevin: Resulting from our seating operation by our security facility in the first quarter of 2024, resulting from the sale of the gas right back to the landfill.
Kevin: Revenues from renewable electricity facility during the first quarter of 2025 were $4 2 million a decrease of <unk> 6 billion or 13, 5% compared to $4 8 million during the first quarter of 2020.
Kevin: The decrease was primarily driven by the aforementioned cessation of operations at our security summit.
Kevin: Our renewable electricity generation operating and maintenance expenses during the first quarter of 2025 with $3 4 million, an increase of $1 1 million or 46, 2% compared to $2 3 million during the first quarter I'm sorry.
Kevin: The increase was primarily driven by an increase in non capitalized costs, our minds on AG renewables.
Kevin: Goodbye.
Kevin: Our Tulsa facility operating and maintenance expenses increased approximately <unk> 3 million primarily related losses.
Kevin: <unk>.
Kevin: During the first quarter of 2025, we recorded an impairment of $2 zero and increase and increase of one 5 million compared to <unk> $5 million in the first quarter of 2024, the increase primarily relates to specifically identified impairment of R&D equipment design at our Blue granite R&D pilot.
Kevin: Project.
Kevin: Gas utility informed us that it would no longer be exciting R&D into their distribution system, which is a change to the letter of intent on the <unk>.
Kevin: From the utility reported the gas price per site.
We did not record any impairment related to our assessment of future cash flows.
Kevin: Operating income for the first quarter of 2025 was <unk> 4 million a decrease of two points a year ago.
Kevin: Operating income $2 4 million in the first quarter.
Kevin: R&D operating income for the first quarter of 2025 was $10 4 million a decrease of $1 2 million.
Kevin: 5% compared to operating income of $11 6 million for the first quarter of 2024.
Kevin: Renewable electricity generation operating loss for the first quarter of 2025, one points year on year decrease of $1 4 million compared to an operating income of <unk> 4 million for the first quarter of 2024.
Kevin: Turning to our balance sheet at March 31, 2025, $53 million outstanding under our term loan as of March 31, 2025, the company's capacity available for borrowing under our existing revolving credit facility remains at $117 8 million.
Kevin: During the first quarter of 2025, we generated $9 $1 million of cash from operating activities, a 36% decrease from the prior year fiscal period ended March 31, 2024 cash provided by operating activities of $14 3 million.
Kevin: Based on our estimate of the present value of <unk> earn out obligation we reported a decrease of zero point Gordon.
Kevin: At March 31st 2015.
Kevin: This decrease was recorded through our R&D segment royalty expense.
Kevin: In the first quarter of 2025 capital expenditures.
Kevin: Ultimately 11, six nine was approximately $6 $1 million and $5 9 million were related to our ongoing development that mark <unk> and our second apex.
Kevin: Got it.
Kevin: As of March 31, 25, we had cash cash equivalents net of restricted cash of approximately $4 1 million.
Kevin: We had accounts receivable was up approximately eight 5 million. We don't believe we have any collectibility issues with our receivables balance.
Kevin: Adjusted EBIT.
Kevin: For the first fiscal quarter of 2025 with $8 8 million a decrease of <unk> 7 million or seven 3% compared to adjusted EBITDA of $9 5 million for the first quarter of 2020.
Kevin: EBIT for the first quarter of 2025 was approximately $6 7 million a decrease of $2 1 million or 24, 1% compared to EBITDA of $8 9 million for the first quarter of 2020.
Kevin: Net loss for the first quarter of 2025 with <unk> 5 million a decrease of $2 3 million as compared to net income of $1 9 million for the first quarter of 2020 are ranked one tax expense decreased approximately zero point $6 million for the first quarter of 2025 as compared to the first quarter of 2020.
Kevin: The difference in the effective tax rate between 20 to 25 first quarter and a 2024 first quarter primarily related to decrease in pretax income for the first quarter explains Mackay as compared to the first quarter of 2020.
Sean McClain: And with that I'll now turn the call back over to Sean.
Sean McClain: Thank you Kevin.
Speaker Change: Closing and though we don't provide guidance as to our internal expectations on the market price of environmental attributes, including the market price of <unk> rents. We are reaffirming our full year 2025 outlook provided in March 2025.
Speaker Change: For 2025, we expect our R&D production volumes to range between five eight and cyclically, maybe to use a corresponding R&D revenues to range between $150 $170 million.
Speaker Change: We expect our 2025 renewable electricity production volumes to range between 178, and 186000 megawatt hours with a corresponding renewable electricity revenues to range between 17, and 18 months and with that we will pause for any questions.
Speaker Change: As a reminder, if you'd like to ask a question at this time. Please press star one to one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Sami Jain: Our first question comes from Sami Jain with UBS.
Sami Jain: Hi, good morning.
Can you provide more color on.
Sami Jain: Jean Marc.
Sami Jain: The opportunities are.
Sami Jain: Gentlemen, how are you guys.
Sami Jain: Alright.
Sami Jain: Yes.
Speaker Change: Earlier, this year, we announced an exciting opportunity to convert.
Speaker Change: We're actually to build and construct an R&D processing facility at the American environmental landfill in Tulsa, Oklahoma. Currently if that is the location of our smaller renewable electricity facility that will continue to be in operation as we are constructing that facility and we will.
Speaker Change: We remain on the completion of that facility.
Speaker Change: The decision to expand and to add the RMG facility as a product.
Speaker Change: A measurable amount of the increase in available gas feedstock.
Speaker Change: Associated with the collaboration with the landfill.
Speaker Change: And some very targeted well field investment over the past six to nine months, so very excited to announce that project.
Speaker Change: And to have another project in the portfolio that will have.
Speaker Change: Dual capacity for different production of commodity statues.
Speaker Change: Our next question comes from Matthew Blair with Tudor Pickering Holt.
Matthew Blair: Alright, Thank you and good morning, Kevin and John do you have any more details on why you are having to relocate your rump key site is this something that the landowner is requiring and if so why and then it sounds like the new site will be up in 2028 will be existing room key.
Matthew Blair: R&D plant and be able to produce up until then or should we expect a gap in production at some point.
Speaker Change: Thanks, Matthew those are all those are all excellent questions working in reverse no you will not expect any hiccups or pauses in production as we are taking the technology that exists there right now which is really scattered across three separate facilities in different <unk>.
Speaker Change: <unk> technologies and generations of it into a consolidated facility that will have the capacity to now add.
Speaker Change: Food grade Cotwo processing is born out of a contractual requirement associated with the gas rates.
Speaker Change: It is a great opportunity as we have discussed in previous earnings releases. Some of the challenges that we've had at that facility. It is one of our older technology deployments in our portfolio and to have the ability to two targets a refresh of that equipment as well as add.
Speaker Change: What is hopefully going to be a very exciting.
Speaker Change: Food grade Cotwo facility alongside of that is.
Speaker Change: It's a great opportunity that has come out of that required change.
Betty Jang: Our next question comes from Betty Jang with Scotiabank.
Speaker Change: Yes.
Betty Jang: Thanks, Good morning.
Speaker Change: Could I ask in the first quarter did you record any 45 credits.
Betty Jang: No we have not as of yet.
Betty Jang: Okay.
Speaker Change: As a reminder, if you'd like to ask a question at this time. Please press star one one on your Touchtone phone.
Speaker Change: Our next question comes from Tim Moore with clear Street.
Speaker Change: Yes, hi during their conference call last week waste management mentioned they are advancing construction of additional.
Speaker Change: Additional LNG facility is on track for completion. This year are you seeing any slowdown in R&D.
Speaker Change: Landfills or any of your customers.
Speaker Change: Partners.
Speaker Change: We are seeing Tim a slowdown in some of the acquisition opportunities that have come into the market space.
Speaker Change: One can only speculate that that is due to some of the uncertainty is the EPA is has delayed the compliance periods for the renewable fuel standard.
Speaker Change: And.
Speaker Change: New projects.
Speaker Change: May or may not get delayed depending on how those projects are deployed by individual businesses work, where <unk> is focused on its current development projects and getting ahead of the curve on long lead time items, particularly those that are sourced externally to the United States and trying to reposition.
Speaker Change: As much of the equipment that is necessary for these development projects to be sourced domestically I think a lot of folks are also taking.
Speaker Change: Some form of pause as they are trying to evaluate the impacts that things like tariffs can have on their projects to say that it's been a widespread delay or that it would be unusual for waste management to disclose that work for others in the space we.
Speaker Change: We do have a significant amount of development going on internally to date.
Speaker Change: So I see it is.
Speaker Change: Cautiously optimistic.
Speaker Change: We have a follow up question from Matthew Blair with Tudor Pickering Holt.
Speaker Change: Alright, great. Thank you.
Speaker Change: North Carolina Swine project is a little unique in the space, we don't see many swine projects.
Speaker Change: And so I was hoping you could just provide.
Speaker Change: Some rules of thumb in a little bit more.
Speaker Change: Clarity on on the project.
Speaker Change: Especially in regards to how it compares to your opportunities on the dairy side. It looks like the North Carolina Square project in terms of total size is going to be pretty comparable to a typical dairy project, but how does it stack up versus dairy on things like that.
Speaker Change: Score operating costs, and just overall capital efficiency.
Speaker Change: Matt that is a very complicated but exciting question.
Speaker Change: The North Carolina project that we are developing.
Speaker Change: Is definitively one of the most exciting projects that we have.
Speaker Change: Designed and constructed to date.
Speaker Change: It does differ significantly not only from our landfill projects, but also from projects that we have done previously and the agriculture space the.
Speaker Change: The differences band just about every aspect of it the.
Speaker Change: The approach that you are collaborating with the farming community.
Speaker Change: It's a much broader spoken hub process.
Speaker Change: Dozens of farms potentially.
Speaker Change: Potentially more than that the.
Speaker Change: The number of hogs spaces that you're servicing the turnover factor associated with that animal counts.
Speaker Change: You are serving as a waste remover for the farming community as opposed to traditional landfill gas to energy projects, where youre getting.
Speaker Change: Traditional structures for the rights to that gas you are providing a service which in turn provides you an opportunity to monetize on that feedstock.
Speaker Change: The <unk>.
Speaker Change: Centralization of that project.
Speaker Change: Has the capability of expanding to multiple sizes of a traditional even though a large dairy cluster projects.
Speaker Change: This first phase, where we will have seven of our patented reactor trains.
Speaker Change: Is legitimately the first phase the ability to expand that multiple times just on the location that we have secured a Turkey North Carolina.
Speaker Change: Truly an exciting opportunity the diversification of what you produce out of that project everything from the notion as to how we're going to create that feedstock you create a stable odorless storable pelletize fuel source.
Speaker Change: And to be able to use that fuel source in our patented reactor process to be able to generate methane that can be converted to RMG to be able to create a number of non methane gasses, which inclusive of methane can be used for electric generation the ability.
To take advantage of the renewable electric credit program that is in North Carolina, specifically for swine waste.
Speaker Change: The ability to expand that ultimately to pipeline quality RMG to create char products that can serve either as a <unk>.
Speaker Change: Amendment to soil for rehabilitation or a meaningful component into mass production for fertilizer products.
Speaker Change: And.
Speaker Change: <unk> ability to attract a theoretical ci score, which is significantly lower than what the best agriculture projects are out there due to the fact that it isn't entirely closed loop system.
Speaker Change: All of those projects features make this a very attractive.
Speaker Change: The hedge in our portfolio that allows you to diversify not only the commodities that you're going to produce.
Speaker Change: But everything from how you approach your feedstock collection to the rights to it to what you do with it in terms of commodity and attributes. It gives you an opportunity to be very patient in terms of how do we deploy the capital.
Speaker Change: Wow, you to choose how and when you expand.
Speaker Change: Targeting the farming community, specifically to maximize the efficiency of transportation and the.
Speaker Change: So called liquid management features of the waste. So hopefully that gives you a little bit of a flavor for it in 2026, we'll be very excited to.
Speaker Change: Showcase this project and to be able to.
Speaker Change: Expand in the analyst community to be able to really come on site and see what it is all about.
Speaker Change: We have a follow up question from Tim Moore with clear Street.
Tim Moore: Thanks, My follow up question is around the operating and maintenance expense as a percentage of revenue.
Tim Moore: I know it was a bit high in the December quarter in the March quarter, you mentioned, the apex and the AG facility and some one off expenses. So how should we how should we think about that maybe as a percentage of revenues. The rest of the year I mean should we model closer to maybe 40% of revenue.
Tim Moore: And that's always a challenge.
Tim Moore: Sorry, if I ever worked stochastic modeling our operating expenses as a percent revenue given our especially in 2025 first and second quarter with this be triple our impact and may be a temporary pause in obligated properties.
Tim Moore: Purchasing obligations rental rain standpoint, so we try not to focus on our operating costs as a function of revenues and I know that.
Tim Moore: And I'll, let the analysts here, we do a lot of work around focusing our operating costs as a unit of production and to the extent that you're able to do that from a modeling standpoint, you might be able to do more.
Tim Moore: I don't want say accurately, but better sort of project, where our sponsor colleagues you go and then that normal caveat with.
Tim Moore: Are those smaller portion our operating costs in our electric side or obviously, you don't want to be.
Tim Moore: Some timing differences on.
Tim Moore: In Asia and James for example, our broader.
Tim Moore: Our plan has been in service now for a number of years that as we get to sort of.
Tim Moore: The upper end of those of those Brian times on those engines.
Tim Moore: Expense over the next year or so.
Tim Moore: But generally start increasing as the year overhaul and maintenance on the original equipment manufacturer.
Tim Moore: Alrighty increase when the R&D side.
Tim Moore: We try to manage our timing for preventative maintenance areas.
Tim Moore: And then whenever we're having a normal day or two outage, but as Steve software environmental factors change.
Tim Moore: That could impact forward.
Tim Moore: Timing problems from.
Tim Moore: I need a maintenance or change in some some more minor commodity immediate change outs, but long winded way of saying, we do all of our internal modeling when operating costs by stagnate.
Tim Moore: From a base is up for adoption as opposed to a percentage of revenue and again I know that that's not a good answer for you. We do all of our modeling from a production thats right.
Tim Moore: The timing it seems that we have around selling or not selling brands in a given quarter.
Tim Moore: That concludes today's question and answer session I would like to turn the call back to Shawn Mcclain for closing remarks.
Tim Moore: Thank you all for taking the time to join US on the conference call. Today, we look forward to speaking with you when we present, our second quarter results.
25.
This concludes today's conference call. Thank you for participating you may now disconnect.
Tim Moore: [music].