Good morning, and welcome to the Darling Ingredients Inc. Conference Call to discuss the company's second quarter 2025 financial results. 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 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 statements. 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 continue 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 areas 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 the higher protein supply and softer prices. Now turning to our Food Segment. As I mentioned, we signed a non-binding 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 is 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. DGD-1, however, will remain offline until margins show some meaningful improvement. Meanwhile, DGD-3 is scheduled for a turnaround starting here in the third quarter. The timing aligns well with our outlook, positioning 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.

Thank you, Randy. Good morning, everyone. For the second quarter of 2025, Darling's combined adjusted EBITDA was $249.5 million versus $273.6 million in the second quarter of 2024. 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 in 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. 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 four remaining Term Loan A facilities, replacing them with $2.9 billion in credit facilities through two 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 3.8%, 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 the second quarter of 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 producer's tax credit. The effective tax rate, excluding the impact of the producer's tax credit and discrete items, was 30.4% for the 3 months ended June 28, 2025. The company also paid $22.8 million of income tax 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.

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?

Hi, Manav, good morning. This is Matt. I'll start off and then maybe ask Randy or Bob to join in. You're absolutely right about the future outlook; we see it evolving into a more domestically focused market compared to the past. We anticipate a decrease in imported raw materials, which is benefiting our U.S. fat pricing. Throughout the quarter, we've seen significant increases in fat prices, and we expect this trend to continue with fat prices remaining well supported. Our current focus in the U.S. is on ensuring reliability and making sure our processing plants are running as planned, so we can keep maximizing U.S. fat production to supply the renewable diesel market.

I'll just add. This is Bob. So I agree with Matt. It is very supportive of 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 hold, and it would support those things. It 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 the amended LCFS has gone into effect. Carbon prices are already moving up. I think we are close to $55. The prices were higher before OAL stepped in 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?

I believe the most encouraging aspect is that with the changes in greenhouse gas obligations in California, we are finally seeing a decrease in the bank. This is a promising development. Looking ahead, we anticipate this trend will continue. However, predicting the exact impact on the price per ton of LCF credits is challenging, as it will depend on how obligated parties in California perceive the urgency around acquiring these credits. We agree that the situation is improving and prices are likely to rise.

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

My first one is on UCO. So in your slide deck, you talked about, I think it was a 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?

Thank you, Heather. I'm looking for that slide in the presentation. Let me first address the last part of your question. The market dynamics are quite fluid. As we set prices with suppliers, the timing of our pricing can differ from when we sell the product. In a rising market like the last quarter, this can work against us. Typically, we expect that as prices stabilize at a higher level, our margins increase due to the percentage we retain of the total price. However, during the last quarter, we found ourselves selling ahead while fixing prices, and as the index continued to rise, the price we had to pay was higher than what we had set when we made those sales. This had the most significant impact on our results.

Yes, that's a good point, Bob. What you're referring to, Heather, is the current increase in the raw material procurement market. With forward sales, there is always a lag effect as things start to pick up. It's important to note that in our outlook for Q3, the fat prices, particularly for yellow grease and UCO, are crucial since both are contributing significantly to Diamond Green Diesel. A larger portion of our North American mix is now directed towards Diamond Green Diesel, and prices have risen by $0.10 to $0.14 a pound compared to Q2. In Q2, there was only about a $60 a ton or $0.03 a pound increase for UCO and yellow grease from Q1 as it impacted the profit and loss statement. This pattern is typical due to the 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 wanting 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 a, I guess, a clean quarter for us to build on going forward.

Yes, I appreciate it, Heather. I believe the fat price lag impacted us across all fats in the segment. So, I would say it wasn't a completely straightforward quarter in that regard. As we move into the third quarter, we are operating in a more elevated environment. So far, we haven't encountered a situation where we're pricing our suppliers higher than what we were selling at. This will likely be more indicative going forward. However, the second quarter was significantly affected by that. In addition, we had some deferred profit losses that will be realized in the third quarter from related party sales.

The contingent valuation, Heather, is related to the Brazilian acquisition that had an earn-out 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.

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 firming 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. California is a significant market in the RD space, but it is not the only one. We consistently sell our products in various other U.S. states, and we also export a considerable amount, mainly to the U.K. and Europe. As tariffs and other factors continue to evolve, this distribution may change. However, we remain a substantial exporter of RD to Europe and the U.K.

Yes. And I think the other thing I would add to what Matt is saying there is 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. 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.

This is Matt again. That's the million-dollar question. We expect the SREs to be announced within the next 60 days. I can't say exactly when this announcement will be made public. Honestly, we don't have a clear idea of what that number will be. There's a lot of speculation, but no one really knows for sure what that figure will be. We're eagerly awaiting that. It's not just about the number; it's also about how they will be treated, whether they will be reallocated or not. That information is still pending. As I mentioned, we believe it will happen soon in the coming weeks, and we're looking forward to it.

Yes. And I would add to what Matt is saying there. I mean, at the end of the day, we've modeled two or three 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. The 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 they're shooting for. Today, it's made up of many different things. The support we get from 45Z today starts at $75 max, it lands somewhere at $1 or 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 at 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 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, thanks. This is Bob. We're really excited about the developments and encouraged by what we're observing. We're somewhat limited in what we can disclose at this time since we haven't finalized any agreements, and the next step will involve filing for antitrust. We want to proceed with caution. However, we believe the two companies have a complementary geographic presence, filling in gaps in our portfolio by being present in countries where we currently aren't. This diversification is particularly beneficial in the current climate, as trading costs can vary significantly between nations. Thus, this diversification adds more value than it typically would. Additionally, there are practical benefits related to capacity that we find very promising. They provide key extraction capabilities and important hydrolyzed collagen capacity, crucial for the rapidly expanding hydrolyzed collagen market. When we consider all these aspects together, we see some truly exciting synergies. While cost efficiencies are a more straightforward aspect to address, the heightened revenue potential is the more thrilling component.

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 a 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? And can you maybe walk through what you've seen to date that provide confidence in that number?

Yes, Ryan, this is Randy. The number reflects an improvement in the core ingredient business due to the flow-through of higher fat prices, which are catching up and leveling off compared to rising raw material costs and increased payments to slaughterhouses. In Q2, although we saw some benefit from the higher fat prices, we were still playing catch-up. The premium proteins, like low ash chicken meal for aquaculture, faced challenges due to fluctuating tariffs from countries like Vietnam and China, which negatively impacted our ability to adjust to market and customer demands. However, we see things stabilizing now. While I won't claim a significant improvement, the disruption is less than what we experienced in Q2. With higher fat price flow-through on the horizon and the DGD-3 unit scheduled to come online in September, all our plants will be ready with new catalysts. If the RIN market begins to normalize and reflects the necessary variable profitability, our guidance may be quite conservative. On the other hand, if delays push things until January 1 and the market does not react, we feel we are positioned fairly well, anticipating minimal contributions from DGD, particularly from the SAF side, through the end of the year.

Maybe we can transition to a follow-up question about SAF. You have been in operations for about 7 or 8 months now. Can you share what you've learned so far and how you would describe the demand? Have there been any surprises regarding geographic demand or pricing in the SAF sector? Also, considering it's still a relatively new market, what challenges or issues do you think still need to be addressed in 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 planned 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 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 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 is 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 it stimulates GLP-1 secretion into the blood. That leads to controlling the post-meal sugar spike and the symptoms around that curb appetite and just more stable blood sugar. Those are really positive. We're seeing the same thing with all the trials. The timeline 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 volume. 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 trial 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'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 as 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.

Matt, I believe one of your questions was about contribution. Clearly, in 2026, we anticipate some acceleration. The health and wellness sector is a significant market, valued between $60 billion and $80 billion, and even a small presence can have a meaningful impact on our portfolio. The clinical data is crucial. We are currently receiving reorders for the GLP-1 or Nextida GC product, which is very encouraging. Historically, the Food Segment has been strongly supported by Rousselot/Nextida, and that business has been founded on the hydrolyzed collagen sector we developed. We are now entering what we call Hydrolyzed Collagen 2.0. If we achieve even half of our projected volume, we could potentially double earnings in that segment. This is likely a 3- to 5-year timeline to reach those goals, with significant growth expected in 2026 and even more in 2027.

Great. Great. And then I guess turning to the Brazil rendering outlook. There's been a lot of chatter that 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'll 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 there 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 incredible 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?

The market will determine the flow of these products. In terms of quality, Brazilian quality for RD is actually very good and preferred. However, as Randy mentioned, Brazil's biodiesel program in the U.S. can change with even a 1% adjustment, which is anticipated. This could significantly affect the volume that remains domestic. The market will ultimately influence the export flow. Historically, a substantial portion of this has been directed to the U.S., but this may shift 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 DGD-1 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. One thing we're noticing is that the capacity utilization rate for biodiesel is around half across the board, and this has remained fairly stable throughout the year. In contrast, renewable diesel capacity utilization has been increasing slightly month-to-month. We believe this trend is more influenced by market expectations regarding RINs rather than their current status. If you're an obligated party able to generate RINs and expect their value to rise, you will take advantage of this by producing more RINs. Although margins for renewable diesel aren't particularly strong at the moment, we have enough information regarding future policies to suggest that both margins and RIN values should improve going forward. This belief is likely driving the gradual increase in renewable diesel production month-to-month, and we expect this trend to continue, at least until we receive final clarification on SREs and the actual mandate.

If the RVO holds, 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 R&D plants that have been running. And that will kind of tell you, are they running for fun or not.

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