Good morning, and welcome to the Darling Ingredients Inc. conference call to discuss the company's third quarter 2025 fiscal 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, and thank you for joining the Darling Ingredients Third Quarter 2025 Earnings Call. Here with me today are Mr. Randall C. Stuewe, Chairman and Chief Executive Officer; and Mr. Bob Day, Chief Financial Officer. Our third quarter 2025 earnings news release and slide presentation are available on the Investor page of our corporate website, and it will be joined by a transcript of this call once it is available. During this call, we will be making forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's press release and the comments made during this conference call and in the risk section of our Form 10-K, 10-Q and other reported filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. Now I will hand the call over to Randy.

Okay. Thanks, Suann. Good morning, everyone, and thanks for joining us for the third quarter earnings call. Our core ingredients business delivered its strongest performance in 1.5 years fueled by robust global demand and exceptional execution across all operations. While the renewables market is facing some short-term uncertainty as we wait for clarity on the renewable volume obligation, we're confident that momentum is building. We believe we're on the verge of a shift that will highlight the strength of Darling's integrated model, a competitive advantage that is unmatched in the industry. Our combined adjusted EBITDA for the third quarter was $245 million as our Global Ingredients business performed strongly with $248 million of EBITDA. As I mentioned, the renewables business continues to be challenged as we posted negative $3 million EBITDA for DGD, which included a lower of cost or market expense of $38 million at the entity level. Bob is going to discuss more details later in the call. But I will say that both LIFO and LCM were negative in the third quarter, which is unusual and does not typically happen for extended periods. In addition, uncertainty and continued delays in getting a final RVO ruling had a negative impact on the overall biofuel environment in the U.S. during the quarter. Now in our feed segment, global rendering volumes and margins were up both sequentially and year-over-year, driven by strong demand for fats and proteins and solid execution by our global operations and marketing teams. In the U.S., robust demand for domestic fats, supported by a strong national agriculture and energy policy helped boost revenue and margins. Elsewhere in the world, our global rendering business, particularly in Brazil, Canada and Europe demonstrated stronger year-over-year performance. Export protein demand is showing signs of recovery with slightly firmer pricing trends emerging. Tariff implications, primarily in China and APAC countries, clearly have impacted our value-added poultry protein products, which serve to meet the needs of global pet food and aquaculture customers. Turning to our Food segment. Performance remained steady quarter-over-quarter; sales dipped slightly in the quarter as customers responded to ongoing tariff volatility, but we offset that with strong raw material sourcing and disciplined margin management. We continue to see repeat orders for our Nextida Glucose Control product, and early studies on new formulations look promising. We're on track to launch our new Nextida product in the back half of 2026. In our fuel segment, the renewables market continues to face headwinds. This quarter, we saw higher feedstock costs, lower RINs and LCFS pricing, which ultimately impacted margins. A scheduled turnaround of DGD3 led to reduced volumes of renewable diesel and sustainable aviation fuel, and DGD1 remains idled until margins improve. We believe these pressures are temporary. As mentioned earlier, we're approaching the rollout of thoughtful public policy aimed at strengthening American agriculture and energy leadership, a shift that we believe will significantly enhance DGD's earnings potential. Now with that, I'd like to hand the call over to Bob to take us through some financials, and I'll come back at the end and give you my thoughts for the balance of 2025.

Thank you, Randy. Good morning, everyone. As Randy mentioned, core business results for the third quarter improved as expected, while DGD faced some challenges that we'll explain later in the call. Specifically, third-quarter combined adjusted EBITDA was $245 million versus $237 million in third quarter 2024 and $250 million last quarter. Adjusting for DGD, the quarter was very solid at $248 million versus $198 million in 2024 and $207 million last quarter. Total net sales in the quarter were $1.6 billion versus $1.4 billion, while raw material volume remains steady at 3.8 million metric tons and gross margins improved to 24.7% for the quarter compared to 22.1% last year. Looking at the Feed segment for the quarter, EBITDA improved to $174 million from $132 million a year ago. Total sales were $1 billion versus $928 million. Feed raw material volumes were approximately 3.2 million tons compared to 3.1 million tons, and gross margins relative to sales improved nicely to 24.3% versus 21.5%. In the Food segment, total sales for the quarter were $381 million, higher than the third quarter 2024 at $357 million, while gross margins for the segment were 27.5% of sales compared to 23.9% a year ago, and raw material volumes increased to 314,000 metric tons versus 306,000. EBITDA for the third quarter 2025 was up significantly compared to 2024 at $72 million versus $57 million. Moving to the Fuel segment, specifically Diamond Green Diesel. Darling's share of DGD EBITDA was negative $3 million for the quarter versus positive $39 million in the third quarter of 2024. While the environment for renewable fuels has been challenging, results were further impacted by two items. First, a catalyst turnaround at DGD3, Port Arthur, which included a pause in operations for approximately 30 days, limited staff production and the higher average margins associated with that product. And second, end-of-quarter market dynamics led to negative impacts on earnings from both LIFO and LCM, which, in most cases, would move in the opposite direction and have an offsetting impact. Regarding LIFO, rising feedstock prices throughout the quarter and higher quarter-ending values resulted in a negative impact on EBITDA, while LCM was impacted by lower heating oil and RIN values in the days after the quarter end, resulting in an LCM loss of around $38 million at the entity level. After three quarters, the combination of LIFO and LCM has resulted in a wider than normal loss that should reverse course over time. In addition to those two items, the biofuel market in the U.S. has been challenged by policy delays, specifically delays in RVO enforcement dates for 2024 obligations, clarity around small refinery exemptions, SREs, SRE reallocations, and the final RVO ruling for '26 and '27. However, the EPA made a supplemental proposal on September 18 that would be very constructive. In the first page of the appendix in the shareholder deck that we provided, we've shown a picture of the 2025 RIN supply versus demand, showing how these policy issues have led to an oversupply for 2025 and also showing what the balance looks like considering the EPA's proposal, comparing 50% SRE reallocations and 100% reallocations for '26 and '27. In either case, a significant amount of additional U.S. biofuels would be needed to satisfy that RVO, suggesting higher prices for feedstocks, farm products, and wider margins for biofuels. With lower biofuel margins and late in the year timing related to receiving production tax credit PTC payments, we contributed $200 million to DGD during the quarter, a total of $245 million year-to-date, which includes a $5 million contribution subsequent to quarter close. These contributions are offset by the $130 million dividend received in the first quarter 2025 and payments from expected sales of around $250 million of PTCs that we expect to receive in the fourth quarter. To further clarify regarding PTCs, we expect to generate a total of around $300 million in 2025. During the third quarter, we agreed to the sale of $125 million. We anticipate an additional $125 million to $170 million of sales in the fourth quarter, and we estimate receiving payment for around $200 million of the total $300 million we will expect to generate by year-end 2025, the balance of which we expect to monetize in early 2026. Overall, we are very pleased with how the market has developed for production tax credits. Demand is robust as potential buyers have become more familiar with the details surrounding the credit. Other fuel segment sales, not including DGD, were $154 million for the quarter versus $137 million in 2024, despite lower volumes of 351,000 metric tons versus 391,000 metric tons, which were affected by animal disease in Europe. Combined adjusted EBITDA for the fuel segment was $22 million in the quarter versus $60 million in the third quarter of 2024. The difference was primarily due to lower earnings at DGD. As of September 27, 2025, total debt net of cash was $4.01 billion versus $3.97 billion ending December 28, 2024. The increase from year-end is minimal despite contributions made to DGD and a $53 million earn-out payment related to the FASA acquisition from 2022. Capital expenditures totaled $90 million in the third quarter and $224 million for the first nine months of 2025. We expect total debt to decrease by year-end as we generate cash from the core business and receive payments from selling PTC credits. Our bank covenant preliminary ratio at the end of the third quarter was 3.65x versus 3.93x at year-end 2024. In addition, we ended the third quarter 2025 with approximately $1.7 billion available on our revolving credit facility. The company recorded an income tax benefit of $1.2 million for the three months ended September 27, 2025, yielding an effective tax rate of minus 6.3%, which differs from the federal statutory rate of 21% due primarily to recognition of revenue from the production tax credits. The company paid $19 million of income taxes in the third quarter and $52 million year-to-date and expects to pay approximately $20 million more in the fourth quarter. Overall, net income was $19.4 million for the quarter, or $0.12 per diluted share compared to net income of $16.9 million, or $0.11 per diluted share for the third quarter of 2024. Now I will turn the call back over to Randy.

Thanks, Bob. I couldn't be more excited about what's ahead for Darling Ingredients. And our conversations with the Trump administration have followed through on everything they've committed to. The renewable volume obligation they've drafted is thoughtful and designed to support American agriculture and energy leadership. And we believe it will be a major catalyst for Diamond Green Diesel. The pieces are in place, and we believe it's only a matter of time before Darling's unmatched position in the industry becomes even more clear. As we look ahead, we remain focused on what we can control. Given the current uncertainty around public policy and its impact on the fuel segment, we'll now provide financial guidance exclusively for our core ingredients business. For the full year 2025, we expect the core ingredients business EBITDA, excluding DGD, to be in the range of $875 million to $900 million. With that, let's go ahead and open it up to questions.

The first question comes from Thomas Palmer with JPMorgan.

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

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

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

Yes. I mean, Tom, this is Randy. I mean the $875 million to $900 million, the reason we put the range on there was exactly as you laid out. We have seen, given the uncertainty on policy, waste fat prices come down a little bit here most of our material in North America is going to DGD. But remember, there's still Brazil and Canada, and prices remain strong there. So ultimately, it's kind of a fairly narrow range for the business. As I look around the horn on DGD, I expect the Food segment to be stronger a little bit in Q4, maybe a little consistent, maybe a little on the Feed segment. But I think we'll come in close to that range. And hopefully, we can surprise you one day and be above it.

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

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

Yes. Thank you, Conor. This is Bob. If I don't address your question fully, just let me know. The first point I want to make is that it is still unclear how the EPA will handle foreign feedstocks. This is a crucial factor. Whether foreign feedstocks will be necessary to meet production requirements will depend on various factors. We have plenty of crops and crop oils in the U.S. and North America that can serve as feedstock for biofuels. Until we have clarity on the rules regarding potential penalties for foreign feedstocks and the treatment of crop oils, it's difficult to provide a definitive answer. However, when examining the overall supply and demand for fats and oils in North America, including biofuels and food, it seems likely that some foreign feedstocks will be needed to meet the mandate outlined in the proposed RVO. We're still waiting to understand how this will be addressed.

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

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

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

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

Yes, I think I may not fully understand the question because the DGD result was perhaps not as good as we had hoped.

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

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

Yes. I mean this is kind of the challenge that's out there. I mean clearly, the two big units in Port Arthur and Norco are going to be operating at capacity. SAF is going to be at capacity. Yes, the capture indicator is stronger right now. The challenge for us is we thought by this time we would have RIN values kind of starting to reflect the restarting of the industry and they really haven't yet. So it's kind of hard. I mean we're the low-cost operator. We have enough feedstock to run our units. Our SAS margins are better than classic renewable diesel. And what else do you want to add, Bob?

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

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

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

Yes, we've mentioned in the first and second quarters that we're building momentum. Feedstock prices have been increasing; however, they've decreased a bit for the fourth quarter. We're observing improvements in protein prices globally. It seems like tariffs fluctuate—sometimes in effect and sometimes not. China needs to purchase poultry proteins for aquaculture, and when the opportunity arises, they engage in trade, as seen with both China and Vietnam. This has led to a notable improvement in prices. You can analyze this sequentially or year-over-year in the appendix provided for suppliers or shareholders, indicating pricing trends. Fat prices have risen sharply, and while we've seen a ten percent increase in protein prices, we anticipate carrying strong prices into the fourth quarter since we typically sell about 60 days in advance. I expect to maintain similar momentum as we head into next year. There will always be some seasonality, but that's the outlook I foresee.

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

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

Yes, I think all of that is accurate. Additionally, the proposed RVO for 2026 and 2027 is significantly larger than for 2025. So even if our production remains similar, as shown in the grid we provided, we will ultimately face a shortfall in 2026 and 2027. This highlights the question of how much margins need to improve for production to increase, allowing us to meet the mandates for those years. There’s added complexity with imported feedstock; if it only generates half a RIN, the impact will largely depend on the tariff applied to that feedstock. If foreign feedstock is penalized by receiving only half a RIN and is ineligible for the PTC, we can reasonably expect a substantial amount of foreign feedstock to enter the U.S. market at a discount compared to domestic prices. This would be beneficial for our feed and core rendering businesses in the United States, but it also indicates that renewable diesel margins must rise significantly for this to occur.

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

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

This is going to be somewhat of an estimate because there are many factors at play. If we consider that we have access to our origin feedstocks without facing significant tariffs, and the main issue is the partial rent and lack of a PTC, we likely need RINs to increase by about $0.40 to promote enough production to meet the mandate for 2026, assuming the SRE reallocation is only 50%.

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

We're not close to violating any covenants. As we've mentioned before, we are focused on reducing our debt. There is significant room in our revolver because we are expecting to receive cash from the sale of production tax credits, which will occur in the fourth quarter, while we did not receive any cash from production tax credits in the third quarter. By the end of the year, we anticipate our debt coverage ratio, as assessed by the banks, to be around 3x. That summarizes our position on the matter.

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

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

Sorry, I know you've discussed this extensively, but could you provide another update on the regulatory uncertainty? As we await the final Renewable Volume Obligation, you've mentioned the uncertainty regarding reallocation and other aspects. What other topics are still under consideration? Is there any chance of a change in the approach to importing foreign biofuels? Is there still a focus on how domestic feedstocks are treated concerning carbon intensity, like land use penalties? Additionally, what potential risks or benefits do you see arising from the final ruling, aside from the overall Renewable Volume Obligation and reallocation?

Well, I think, Ryan, this is Randy and Bob, and I'll kind of tag it again here if I leave anything out. I mean, clearly, American agriculture is at the forefront of the discussions in D.C. right now. Clearly, when you lose your largest customer for soybeans, when you get beef prices as high as they are, you've got a lot of people in the room that have ideas on how to fix the situation. And so what we've been part of, as many of these discussions, is what's the easy button. The easy button here is a large SPO for RVO with a 100% reallocation. Now if you go back and you look, really, the ETA gave you a multiple-choice test. It's at either 50% or 100%, but if you're really inclined, you can talk about something else you'd like. And so they've set the table there. Clearly, the PTC out there doesn't encourage foreign feedstocks. So, I mean, that's a block in itself with a tariff on top of that even makes it more difficult. We've had discussions in D.C. and we said, well, the easy button is that. Just remember, if you don't allow foreign feedstocks in here because they can't generate a credit, then, oh, by the way, where are those feedstocks going to go? And the room goes silent. They finally got it. They realize those stocks are going to go back to other processors, you can probably name who they are around the world in Singapore and Rotterdam and Porvoo, Finland. And then they're going to move finished RD on top of us, and that's disruptive to what they're trying to accomplish. So they're trying to figure out right now how to manage that under the tariff code. So you've got the U.S. trade along with the EPA collaborating, trying to figure out how to put this together to accomplish the needs that are going to produce energy and be constructive to the U.S. farm community.

Yes. As we discuss this, the EPA has already suggested a 50% Renewable Identification Number generation for foreign biofuels without access to the Production Tax Credit. This situation complicates matters. However, as Randy mentioned, there is significant momentum to restrict foreign biofuels from benefiting from U.S. support programs. We are quite optimistic that this will work out positively regarding feedstocks. We are currently awaiting more clarity on whether the 50% RIN rule will be enforced or if foreign feedstocks will simply face limitations due to origin tariffs.

Okay. You mentioned providing some clarity around PTC monetization. After a few quarters under the PTC regime, you’re seeing more consistency. Can you discuss how the monetization market is functioning? Have the discounts been relatively stable? How should we view the general reliability of this process at this stage? Does the $125 million this quarter and $150 million at the midpoint next quarter indicate that you’re in a reliable position regarding the monetization of most of your production?

Yes, I believe so. The context is that there were two main challenges earlier this year regarding the sale of production tax credits. First, many potential buyers were unfamiliar with the credit, leading to numerous questions. The value of the credit partly depends on carbon intensity, which made it difficult for industries unfamiliar with our biofuel sector to grasp the concept. Second, many companies were uncertain about their tax liabilities heading into 2025 due to the Big Beautiful Bill and various related factors. This made it hard to gain traction early in the year. However, both situations have become much clearer, and we are now confident in our ability to sell most of the credits we generate in 2025, with a steady process anticipated through 2026.

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

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

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

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

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

So with the enforcement dates, I think one factor that has significantly delayed the response of the RIN is the rescheduling of the 2024 enforcement date from March 31 to December 1. Until we receive the final ruling on the 2026 and 2027 Renewable Volume Obligations and clarification on the 2025 enforcement date, it's challenging for obligated parties to feel motivated to purchase their RINs. This is particularly true given the numerous small refinery exemptions granted, leaving small refineries uncertain about whether they should be buying RINs, as they may have an incentive to wait if their obligation date is postponed due to exemptions. As Randy mentioned, until these issues are clarified—which we anticipate will occur towards the end of the year—the incentive to purchase RINs and adjust the RIN supply and demand isn't functioning as intended. This complicates forecasting. However, to your point, Derrick, we have observed an improvement in margins this quarter. The outlook is positive, and we are quite optimistic about 2026.

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

We can access that market, but we pay a duty to do so, which typically exceeds $1 a gallon. We are consistently selling to that market through our Diamond Green. However, we are evaluating this in light of the duties and comparing it to other markets we have available.

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

I was hoping you could discuss the feedstock mix at DGD. I understand that you're always looking to optimize and some of this information is commercially sensitive. However, it seems that the margins for renewable diesel made from vegetable oil are trending slightly better than those made from low carbon intensity products. Overall, has DGD transitioned to a greater reliance on vegetable oil, or is it still primarily utilizing low carbon intensity products?

Yes, thank you, Matthew. This is Bob. DGD hasn't significantly changed its feedstock mix as you might know; DGD1 is still down. If DGD1 were to increase and operate again, the mix would shift more towards soybean oil. However, as things stand now, the mix has not changed much. Our strongest margins are with UCO, yellow grease, and animal fats, and we aim to make the most of the opportunity to use those products.

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

That's helpful. And then apologies if I missed this, but the contributions that Darling is making to DGD is that to help fund the DGD3 turnaround? Or why is Darling sending money back to DGD?

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

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

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

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

I think we've observed a bit of a delay in that area, so we wouldn't be surprised if the RIN market begins to tighten as we approach the December due date.

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

So we've talked about this before. DGD1 went down for a catalyst turnaround early in 2025. Given the changes in the PTC and the origin tariffs on so many of the feedstocks, our view is that DGD1 only makes sense to restart at least in the current environment with the current RVO under the current rules when soybean oil can be profitable, and profitable means a margin that's good enough for a long enough outlook that justifies burning up a catalyst. And so I think we're certainly, we're a lot closer to that than we have been. We may get there, but it definitely looks a lot better than it did a few months ago.

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

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

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

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

Thanks, Andrew. This is Bob. There was quite a bit of a delay in increasing the greenhouse gas reduction obligation in California. As a result, the bank of credits built up significantly, so most obligated parties have enough credits that they don't need to buy more immediately. We believe they are working through those credits, and by 2026, we should start to see a better balance in supply and demand, leading to steady increases in the LCFS credit premium. However, we think this will be a more gradual increase rather than a sudden jump in value.

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

I had a question on your Feed segment and just thinking about the protein pricing. I know in the past that you have put in place and some of your fat pricing contracts, you had like minimum levels and if it went below that, what Darling received, it wouldn't go below that? And I was just wondering if you all had put any of those kinds of things in place for your protein business in the U.S.?

Heather, this is Bob. All of our contracts are unique, and they reflect our efforts to accommodate our suppliers by working together on terms that benefit their businesses. As you mentioned, we do have contracts where Darling collects a minimum processing fee. If prices exceed a certain level, we share in some of the value of those prices. Certain instances include both protein and fat prices. Generally, we observe more volatility in fat prices, which also present more opportunities for gain at times. Therefore, we tend to focus more on fat prices rather than the fluctuations in the protein markets.

Yes, I agree with what Bob mentioned. The situation is that the United States has been heavily dependent on shipping low-ash poultry meal to Asian countries, mainly China, for aquaculture. However, there has been a strong domestic demand for pet food in the U.S. We've observed two key trends: first, because of the tariffs imposed and then lifted on China and Vietnam, these countries are hesitant to buy the product, so it must find alternative markets, as all commodities do. In the pet food market, post-COVID, we’ve seen an increase in pet adoptions, but there isn't significant growth on the pet food side currently. Additionally, consumer packaged goods companies have raised prices sharply, making brand-name products containing meat quite expensive, which has led to an increase in demand for plant-based alternatives, like Old Roy. We're in a disruption phase right now, and poultry products are trading lower than usual, although they are starting to recover. Once the tariffs on Vietnam were temporarily lifted, there was a surge in shipments and sales from our Eastern Seaboard plant that relies heavily on these products. Overall, we have a positive outlook as things have improved quarter over quarter. While we remain cautious about next year, the situation looks much better.

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

Yes. Thanks, Heather. The way to approach this is to understand that if there is going to be an impact, it will be felt a bit later. We are not currently selling SAF in the market; the SAF we are producing now was sold some time ago, and most of the SAF we will produce in 2026 is also already sold. The effects of the tariffs will only apply to new contracts as they arise. We will have to see how the markets evolve in terms of supply and demand. However, we still have access to voluntary markets in the United States, so we remain optimistic about our position with SAF and SAF sales.

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

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

Yes, Betty, this is Randy. The $875 million to $900 million figure reflects the combination of all three segments, excluding DGD. We're currently two-thirds of the way through October, and we don't have clarity on how the month will conclude. Our visibility on a daily basis is limited. This business allows for some forecasting when prices and volumes are stable globally. However, it's challenging to provide a specific estimate for DGD for either the fourth quarter or next year. The core ingredients now appear similar, possibly stronger in 2026. We will be able to provide more guidance once an RVO is published, likely during our February earnings call.

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

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

I believe what you're hinting at is that sometimes the input costs, specifically energy prices, fluctuate, but the prices we are selling remain strong. That's what you are observing in these gross margins.

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

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

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