Darling Ingredients Inc. (DAR) Earnings Call Transcript & Summary

Okay. Thanks, everybody, for joining us today. We'll go ahead and get started. I'm Ben Bienvenu. I cover the food and agri business sector here at Stephens. Darling Ingredients is here with us today to talk about their business. Darling, as you know, is a leading render and recycler of inedible animal byproducts and use cooking oil with a rapidly growing renewable diesel joint venture that we're seeing the most recent iteration of here with volume growing underway in this third extension of the project. I'm delighted to introduce from the company, Randy Stuewe, Chief Executive Officer, who will take our questions and enlighten us on the business. Looking forward to the discussion today. And Randy, thanks for your time.

Good to be here, Ben. Let's have some fun.

Okay. So maybe let's kick things off, what's happened over the last year. Let's talk about -- to start just to set context kind of the evolution of the business over the last year. And then the decisions that you all take around acquisitions in particular, and how that fits in the -- to both the financial and strategic outlay of the business as we move forward?

Okay. Yes, for -- I look out here and I know many of the insights, I'll try to keep a lot of it at a higher level. 10 years ago, as we looked at our business model, we were processing, I don't know, 8 million -- 7 million, 8 million tons of animal byproducts in the world, basically making fats and proteins. Proteins could be isolated into human proteins for gelatin or collagen and then an animal feed. But animal fats really had one use that we produced, and that was to go back as a caloric substitute in animal feed. And so as the different Green Energy programs in the world evolved, that's when we decided to make our first investment in the renewable diesel business as one of the first movers in the world. And as we build out the scale of the platform, our thesis has always been very, very simple. It's at the kindergarten level, more people, more well, what do you need, food and energy. And really, at the end of the day, we looked at each continent that we operated on and said, what can we do to grow and be a bigger part of the global food chain. And so today, about 1 out of every 6.5 animals goes through 1 of our 270 factories in, I think, 21 or 22 countries now, and we make simply fats and proteins. And it's very -- while it appears to be a very complicated business, it really isn't. And at the end of the day, we are the largest collector and transporter of animal byproduct in the world. We'll probably have to change our tagline because some of it is edible, and that's the Food segment. And if you can't feed it to a human, then it still hasn't been condemned by an inspector, it can go to feed an animal, that's the Feed segment. And then if it can't go to either segment, it has to be converted into energy, and that's the Fuel segment, really that simple. We married up the RD business with this with our partner Valero, started courting a partner back in 2009 because it is a petroleum process. Hydrocracking, everybody knows about to make it. A little bit of a black box. All fats aren't created equal. Everyone is just a little bit different out there. And so it takes special technology and know-how to make the product. And so today, as you look at the business, you now have the largest vertical in the world in the Green Energy business, us, with our partner, Valero. We're the largest processor of animal byproduct in the world, 15% of the world goes through our factories. And so we've built a model now that is a significant cash-generating model as we go forward. The build-out, I'm not here to declare victory or say pause again, that got me in trouble a little bit, but was to -- but we've built out the model now to where this year, we've given guidance of $1.5 billion to $1.6 billion, combined adjusted EBITDA. And next year, we're still generating the plan. But right now, it would look like that number should be [ one eight ] and higher depending on where the markets are as we go forward here. And so it's really -- for me, as I shared in front of you, it's probably the most underappreciated food, ag and energy business in the world today from a valuation perspective. But at the end of the day, that will take care of itself.

Can we talk a little bit about DGD3, the production ramp that's underway. I know in prior iterations of that, we've had startup costs that have been a part of the equation. So if you could talk about that. And then kind of thinking longer term, should we expect this to be kind of the last extension of that production? And what do you think the future holds for kind of the production volume of the DGD business?

Well, I think number one and number two, we're operating somewhere between at 750 million and 800 million-gallon rate. Boilerplate on number three is listed at 470 million gallons, but suspect it has known the design engineers that are behind, it will have a little creep on it eventually. On spec product was made 2 days ago. We are ramping up to rate it, started at 10,000 barrels a day. 2 hours ago, it was at 22,000 barrels a day. It's going to hold through the weekend. We'll see where it goes from there. It should go on up to, I think, 35,000 barrels within early next week, if all the equipment is working as it's expected to. It really is #3, it's biggie size from number two, but really some of the same layout. I wouldn't say there's any real life-changing transformative learnings that went into this that have risk attached to them probably just the opposite, some additional redundancies of the challenges that we've had at operating number two. As we went through, if everybody remembers, number two was about ready to come online when we took a direct Cat 5 hurricane hit on it, and it dropped us back a couple of weeks, but it screwed up the energy grid down there in New Orleans pretty bad. And then the latest coming up and then the redundancy of keeping electricity to that facility has been a bit of a challenge here. But hopefully, [indiscernible] gets that worked out. So number three is up, what's next? For Brad's in mind, Ran's perspective, we want to show the believers and the doubters in the room that you'll have dividends and margins or margins and dividends that come out of it. We're studying hard SAF. It was part of the IRA package that's out there. We can talk more about that, Ben, if you want to. We believe that SAF will play a role in the decarbonization in the U.S. But the economics, we don't want to cannibalize our economics, so we have on road diesel today. And SAF is getting closer to working. Without a national mandate, it's kind of hard to make it work. But we'll see if somebody is either a cargo carrier or a passenger carrier really wants to step up and pay what it costs here. But that would be -- that's on the drawing board for next year. It's in the engineering phase, really not sure what the final cost is of it, but it's just a module that cooks on could hook on #3 or #2 if we wanted to, but I think it will be in Port Arthur, would be where I lean to. And now after that, part of the world is -- and always, we try to stay out of the feedstock discussion with people because that's who we are. We're the biggest producer in the world. There isn't room for a lot of people here. And then we want to stay out of the food versus fuel. I want to stay off the front page of the Wall Street Journal and taking a food oil to make fuel. And I think with some of these announcements that are out there that, a, haven't really -- they haven't broke ground or have permits to do yet. They're going to find themselves in the food oil world, and that's just not a place we want to be. We think that's probably not the place to be.

[indiscernible] it sounds like you're going up quickly to the full utilization on DGD3. Where do you sell [indiscernible] the market? Could you -- kind of a big [indiscernible], right? The big supply had increased [indiscernible] going broad, looking to say how you market all this...

We -- there's a customer base underneath this thing that's been with us for 10 years. And I would tell you, for the most part, it's largely committed around the world, split between here and Canada and Europe. There really aren't many secrets out there. The beauty of our location is to being able to load boats versus just having to load a railcar. And so it will move around the world. I think it's fair to keep in mind, we're -- as we're looking margins are holding in that low $1.10 to $1.25 range right now, it's a pretty darn good business still. The demand side is solid. Europe is open back up, The decarbonization moves continue to happen out there with a little bit of growth here and there. And then probably more important, the rest of these plants that everybody that even Ben likes to write about, they're not running. And so it's hard to buy something from somebody that isn't running today. So at least for now, I think -- but will we have an impact on the LCFS with another, call it, 500 million gallons, plus or minus there? Probably. But, yes...

I want to ask a follow-up to that comments that you throw me onto the bus there, Randy. On the renewable...

It's early. It's early.

What do you think? I mean there's substantial announcements. You talked about this not being quite as straightforward as maybe some of the legacy businesses that these operators have participated in. How much of that future production do you think is real? What's your view on it? And what do you think are like the pinch points or the decision trees around how much of it comes on or not?

Yes, it's 3 or 4 optics out there to kind of contemplate. Number one, you saw United Airlines step out there yesterday with NEXT in somewhere in Oregon. And it said British Petroleum is going to be the feedstock originator. When is the last time BP was in the feedstock business. They have a guy with a telephone. So give me a break. That's one. Number two, the cost of capital is going up, as you guys know. We're seeing if we had to rebuild number three today, I suspect the cost to be up anywhere from 20% to 30% between equipment and labor. So that's got a little bit of pressure on it. Number three, all feedstocks, you heard me saying that, are not created equal. The -- probably say, what's the most valuable asset we have, it's our intellectual knowledge of every feedstock in the world that we process in the 270 plants and then also our competitors that we procure from, because I'll give you an example of these CVR and some of these others that are trying to play in this arena are planning to do 3 and 4 catalyst turnarounds a year. That -- I mean that changes your economics so dramatically that it's not profitable. And then the final optic is, you started to hear a little less noise, Ben, when the cracks got really nice again and petroleum guys could be the dinosaurs that they really are. So at the end of the day, they went back into the cave and maybe we'll see what happens. When we look at the 2 big plants out in California by P66 and Marathon, those are great companies. Those are stranded assets. They were in the wrong place, the first time, why are they in the right place this time? I don't know. And those are under what we call sequel challenges, California Environmental Quality Act, and they have to resolve that. I don't think those are even going to be heard until spring or maybe summer of next year and then it will be appealed. So at the end of the day, an earlier question is, where are you going to sell this? There really aren't any gallons of magnitude that are meaningful coming on around the world right now.

Additional follow-up, I guess [indiscernible] collect the credit and you don't make any more [indiscernible]?

Yes. It keeps me awake at night a little bit. When -- I wake up in the morning trying to make you guys more money and make the decisions to do that. And when you start running for compliance, which -- and I'll give you an example, Marathon had all kinds of problems with their technology up in Dickinson, North Dakota, 3 or 4 catalyst change-outs the first year, but they were talking about it on their earnings call. You don't even hear them talk about it on the earnings call now. So they say we avoided compliance costs of X, which is code for we didn't make any money over here, but we didn't have to buy a rent. And so at the end of the day, it's not as green a pasture, when $1 a gallon, is that a good number? You guys keep getting angry at me $1 a gallon. We did the financial investment decision off of $0.79 a gallon. That was a 2000 to 2009 average heating oil, minus waste fats, minus $0.50 a gallon, plus $0.22 for co-product credits or something like that. And so $0.79 on a $3.23 build-out. So now I just built DGD3 and I think final number is $1.4 billion, $1.450 billion on 500 million gallons, I know $2.75, $2.85 a gallon, it's still a 37% cash return at $1 a gallon. Now if you're going to run bean oil, you're -- you may not even be breakeven depending on where you are. So you get a lot of noise out there. Pretreatment is 3 different things. It is, for us, pretreatment is the removal both of impurities of nitrogen and of metals. When you hear a pretreatment unit going into Martinez or Rodeo, that is a centrifuge to degum soybean oil. And so that's a very different situation of economics. And then every time you have to transport this stuff, you're adding $0.03, $0.04, $0.05 a pound. And just the logistical move of the raw material is the competitive advantage that Norco or St. Charles, Louisiana and Port Arthur have, we believe, is $1 a gallon. So we say, okay, if you want to bring on or end of the day, we'll be the last guy standing with the best economics, and it's still a pretty darn good return.

You mentioned the inflation Reduction Act earlier. Can you talk about what do you think that means for you all? How that plays into kind of the decision around SAF? And how set [indiscernible] there's a comment period that's still to be determined. Can you talk about kind of the variability of what we all have seen in the initial...

Yes, I think we spent a lot of time in D.C. to -- we are a highly regulated business on the animal side, as you can imagine. So we spend a lot of time there. And so we also spent a lot of time in the energy area. And really, at the end of the day, you have to remember that Green Energy in North America is really farm policy. And I know some people look at it a little differently. But if we did not have the renewable programs, the price of corn would be $1 a bushel and the price of soybeans would be $6. So 40% of those crops go into bioenergy today, and we're going to continue to produce more through precision agriculture, regenerative agriculture as we go forward. So for us, the most important thing was getting that Blenders Tax Credit extended for a couple of years, Ben. Did we need it? Not really. But it certainly given the shopping spree I went on, it was going to help. So we thought it'd be really nice to have for a couple of years. And then we knew through -- this is our last chance with the Chairman Grassley before he retires here in a few years to get it extended, and then Ron Wyden wanted to step it down as they do with the ethanol. And that's where you get into transitioning from a blenders to a producer. So if you do the analysis, 24 -- 23, 24 is the dollar a gallon, 25, 6 and 7 now step down based on carbon intensity or around, I don't know, $0.75 a gallon. So it's a little bit of a phase out step down, but it's a producer's credit. So at the end of the day, any competitor in the world, whether it's European, Asian, Singapore, wherever you want to call, Neste, you can't import material in here because they won't get that credit now. So that change is the playing field once again protecting our asset base. So the -- that's just the RD side. The SAF piece, we lobbied hard for a bigger number. Bigger number, at $2, $2.25 a gallon, didn't get it. While it's $1.75, you can't attain that CI. So given our product mix, maybe 1.5 is there. Now here's the challenge in the SAF business. The technology that's been developed today, I'm going to guess Neste is using and that we're finishing up here is basically you make renewable diesel. And then you do one more processing step and you make jet fuel. So what you do is if Port Arthur has an SAF unit, you can only make half road and half jet. So any belief that jet is going to be this giant big billion, multibillion gallon number out there it's pretty -- I don't know, it's pretty hard for me to see a pathway to get there. And so -- but what I'm sharing with you is that if we're going to produce jet, it's not going to be because we're running a charity, it's going to be because it makes economic sense. And right now, the buyers of that product have all been very open to sign a nonbinding MOU with somebody that says they'll eventually sell them. But the economics to do it or a substantial premium to [indiscernible]. And so that's a pretty big decision. I can't remember what -- I think we were told fuel costs within Southwest Airlines are approximately 20%. So you start moving that around in a bigger blend. That's a big number per seat mile that's out there. So in there is the $1.55 or $1.50, Ben, and then it turns to a producer's credit again. So we think the '25, '26, '27 will be a good time to have an SAF module or plant online. That's the good news. The bad news of it is, I don't think that's long enough to incent new capacity to convert to that because just when you're getting your plant up, you don't know what the political winds are going to be, although I think the horse has left the barn there, and I think it's pretty safe, but Washington can be unpredictable the. Now the other piece is, there were 2 things in there. It eliminated subsidy for co-processing. So BP in Cherry Point or wherever it is, blending fat in Kern, in Bakersfield or whatever, they don't get that, so that's gone. And then the final piece is it converts from a tax credit or Blenders Tax Credit, which in our sense is we make -- we produce a gallon, sell a gallon and we turn in the gallons and the documentation to the government, they send us the dollar. And so that goes as a credit against, if you will, cost of goods sold today, and it's in your, if you will, in that side. So it's reported today as EBITDA. As you go into '25, '26 and '27, it's now going to drop below the line. It will be an excise tax credit against taxable income. So if you're going to be in the business for that credit to be meaningful, you better have profitable business. That's a whole different deal again. And so for us, then it would make as we go forward, Ben, I'm going to screw you up again here, you're going to have to transition from a combined adjusted EBITDA guide to an EPS guy, and that's a different way to think of the business because it will be below the line for us. But that's really -- we think that's to the next steps. We're not hearing really any issue that we're asking for bigger SAF number in longer, but I really don't have a feel of where that would be.

Okay. One more for me and then I'll check and see if there are questions from the group. There have been so many positives in the business, but it is a dynamic operating environment. If you look out to the next year, what are some of the potential risks that you are mindful of? And kind of what's the strategic and operational plan that the team puts together to try to mitigate some of those risks?

Yes. So I mean, very, very, very fair question. I mean, it's -- when you get to sit in my seat, you get to see 22 countries every day, and you guys forgot to call me and tell me that the euro was going to parity again. You wake up and see what's going on in the world. the Ukraine situation keeps me awake at night from 2 standpoints. One, I mean, it's the fourth largest exporter in the world. And if Vladimir does something really, really stupid there, it could really screw up trade economics and trade flows of grains and oilseeds in the world. And so I worry a little about that. Labor around the world. It is still hard to get people in factories. And what I mean by that is the slaughterhouses are still running 6 days a week instead of 5. So you say, what's that mean to you? Well, it means we have to run 6 days a week. While we're seeing better availability of labor, we're not seeing a lot of it yet. And then, of course, drivers are really difficult to have. So energy in Europe, while we've met with the German government and they gave us the total support that we're a critical service industry. And for the food chain, if it's between their house and our plant, I don't know. So far, so good. So pray for a warm winter in Europe. Long term, energy costs. I mean we're a huge user of electricity, natural gas for creating heat and steam. And so that -- but so now you're saying, what are you doing about it? We spent about 3 or 4 years ago structuring all of our raw material contracts around the world to pass those on. So as long as meat production is profitable, which kind of still is in most cases, that's just being passed on. And so we're holding firm on where we're at. Our tonnage is up substantially in the world right now, and it's really -- the world's eating well is what I tell you. And then animal disease would be my last one. China hasn't really been able to eradicate either avian influenza or African swine fever. They just learned to live with it. And really, that drove a lot of our underlying thesis on Brazil is -- China just can't get out of its own way, even the smart people, and they're doing a lot of right things there, but it's just really when 2/3 of the animals are still in the backyard, it's hard to eradicate that disease issue there. So we believe that they still are quietly and they are coming to market around the world to buy meat and they're going to -- Brazil and Argentina and South America going to be that breadbasket of the world to feed China as we go forward and that supported our investments there. So summary, it's a challenging world. Margins are good. Earnings are solid. We're looking forward to even a better year next year.

Great. I do want transition to the Food business Before I do, maybe I'll see if there's questions...

Can you explain this one more time, the issue in the [indiscernible] again and what else needs to be fixed [indiscernible] ?

Yes. So here's your experiment to night, go out and take a package of meat, put it in your closet, come back in a week and try to see what you can do with that. So now it's always fascinating. If you think about it, we're hauling truckloads, 48,000-pound loads of bones and guts and hogs and heads. And when it's 100 degrees outside, whether it's here or in Europe, that product degrades rapidly. It's a perishable. What happens then you think, we said, what business are we in, collecting, transporting and separating. You can't separate the fat from the protein very well. So you make a really nasty protein. Doesn't go through your plant very well, doesn't separate as the waters evaporate and it's even dirtier water now or the condensate, if you will, harder to treat in your wastewater plants. So summertime rendering is not for amateurs. It's -- this was as hot as summer. Now it's straight to the Valley issue. We knew going in, and we tried to -- I've always been transparent about it. The family chose not to reinvest in that business about the last 3 or 4 years to -- they built locker rooms and truck washes and they didn't replace critical equipment. And it was a run-to-fail business and then the poultry processors in the Southeast kept expanding. And so they were running at, if you will, 110% of boilerplate-rated capacity. And then as avian influenza hit, we're unable to export some of those things, you guys don't eat the chicken bao and they start putting 2% more back in the rendering truck. And so you start seeing 2% on 350 million pounds a week. It's big. And so now we've got too much material, plants run into fail, one of them sneezes and we get the pneumonia. And that's -- we have rebuilt 7 of the 15 plants now. We got 8 more scheduled for next year, and then we'll be out of the way. And then we were working on a wastewater issue and liquid Maryland that was -- it's all public out there, and they got up -- the brothers got upside down with the Maryland DEQ and some activists, environmentalists and just kind of curtailed us from being able to run at capacity there. So we had a lot of headwind there. The final thing in summer was, I said, fat and protein. The fat we're making up in the Midwest was much less quality. I don't know how to describe it to you, higher free fatty acid with Diamond Green Diesel 3, not online, that had to be pushed and downgraded into the feed market. So those are behind us in better run rate and momentum into Q4 and into next year.

Right. Are there any [indiscernible]...

We do, but there's just not enough of them. I mean, it's just not enough. And I mean, it's just really -- the stuff -- it's a 24-hour to process or through process business. But when you -- when a plant breaks down, then you're moving stuff around and it's on the road for another 8 or 10 hours, it's our fault. I mean we own the problem and then we're fixing the problem. We know what we got into.

Can you just talk about just kind of the CapEx spending next year, [indiscernible] impact for paying down debt after all acquisitions. But can you just talk about the next 3 years, 5 years, whatever the time period is in the organic opportunities that you have [indiscernible] CapEx opportunity that you have in the business?

Yes. And so there's 3 or 4 embedded questions there. Number one, if you say if we continue at a current run rate year-to-date of $1.09, $1.10, then you got $1.3 billion coming out of DGD next year at the entity level, [ 6.50s ] are, let's say, we leave $100 million in there for cash and turnarounds. So split that. So the low end dividend should be $500 million, $600 million out of DGD. Our financial policy is to delever below 2.5x as quick as we can. That's my pinky shake with the Board. So we'll be there by the end of '23. Ongoing business, so when you've got -- if you say on the base business, whatever number when I threw out at the current run rates, $1.2 billion, $650 out of DGD, that was $1.850 billion. I know some were looking for 2. It's too early to call $2 billion yet. I mean -- and so that's if we're at $1.6 billion this year and $1.550 billion to $1.6 billion this year and a little bit more next year with FASA and Valley. And then you start to take off the [ Brad's ] interest bill. The cash flow in these things, $800 million-ish for next year free cash. And so big CapEx program next year, $350 million to probably maintain the business now, given all the new facilities and the Valley build-out. Around the world, what are we looking at? We got an expansion, going to happen at [indiscernible] and Antwerp, Belgium. That's our Green Energy plant that will be full underway next year. We've got a second line being put in Boise, Idaho. Next year, we got a second line being put in Turlock, California. These are for all known customers, expansion, 2 more plants being built in Brazil next year. So -- and then we build out the -- finish up the Epitacio, Brazil spray dryer for collagen and then you got the Gelnex inclusion into the assets that should close at the end of next year. So really, as we look forward, I don't see -- and when I use the word after the Gelnex deal will pause, I don't see big deals out there. But always have to remind people this stuff comes every 5 years. When it comes, as I've said in my 20-year career, truly the only thing you can really manage from my seat is the balance sheet. Had the capacity to do it? The criteria was. Is it a good business? Are the plants in the right place? Do they have a management team? And can you make a return? And we were able to accomplish all of that without putting Brad's balance sheet. I mean a big number, 4 point, whatever $3 billion or $4 billion of debt. It's a big number for a company when that was the revenue here a few years ago. But at the end of the day, it's very, very manageable as we go forward. So delever, opportunistic buybacks. We will defend the value of the equity here. Hopefully, the marketplace will understand the vertical in circular that we've built and give us the value and then long term, and as the cash builds, we'll have to see what we can do with it.

Great. Before -- actually, before we leave kind of talking about DGD, can we talk about LCFS market having coming under pressure -- having come under pressure. What is the release valve for that? Or is there one? And how do you guys think about kind of back to the question earlier about where you send the product, how do you think about like managing -- optimizing those types of revenue streams?

Well, clearly, it's kind of hard to think we're going to manage something with another $500 million gallon, so -- I think we're trying to be kind of both practical and realistic about it and give the opposite of -- if we were at $200 a ton than any of the rest of the states, whether it's Oregon or Washington or New Mexico or the Tri-State area of Pennsylvania, New Jersey, New York, would say, gee, the kind of the carbon credit system doesn't really work. And so I think where it's at now, it will give these other states and municipalities, the incentive to move forward. So we think that when we'd like to make more money at it. At the end of the day, it's not a bad thing. Number two, since we're already here, it probably helps discourage additional capacity because it doesn't pencil it well. I'm not sure what changes it in the near term other than just a continued acceleration of the decarbonization, I think we got -- I think yesterday, they published what their scoping plan. I don't know if you've read all 268 pages?

I was doing this.

Yes. And so we haven't gone through it. What we did see is they're going to hold a vote on RD and off-road vehicles, which would be -- it's a few more gallons, nothing but we also think that California will go to a more accelerated decarbonization here in some time in '24, '25, and that will help. And really, as we look at the world, the LCSF program is working. I know they talk about electric forklifts on that. But at the end of the day, I think we're in good shape there. I mean it makes the fuel more affordable around the world now. And then at the end of the day, it's -- we should -- I think it's all good, to be honest with you. And I'm just trying to think of a different way of saying it.

Okay. On the other side of the credit equation, we're due relatively soon for an RVO update. Do you think the posture there is still supportive for advanced biofuels? And what's your view on kind of RIN markets?

Yes. I was a little puzzled and the noise out of Washington is no one could give me a real answer why they didn't publish yesterday. I think they -- the OMB stood down, at least the plausible explanation I got was they said, well, there's no risk in standing down for a few days. I think they thought they were going to have several, if not many elections under some type of scrutiny recount -- recall, and they didn't want to do anything that would distract from that. Now they didn't and don't have many, if any, that matter. And so I think you'll get it published. I remind people, if you look at what was put out there, the number for next year and the number for 2 years out, very, very friendly for Darling in biomass-based diesel demand. So I think it will all come out fine. And also, as I said earlier in a comment, it's farm policy. No one wants to do anything to offend the farmer right now with now another 700 days till another election.

Okay. Great. If we could pivot a little bit to the food business, there's been so much focus on feed and DGD because of the performance, but food has been kind of the quieter here that's been just delivering fantastic results really over the last several years. Can you talk about the continued trajectory of that business? And then also Gelnex and how that fits into the equation?

Yes. And I had Suann in the earnings call deck, published the quarterly 2018 forward trajectory. I mean it's a pretty fabulous story. I challenge you don't find any other food company that can show that kind of growth in year-over-year, quarter-over-quarter. And so for you guys, when you say, well do you call it food, well, and an animal goes into slaughter, [indiscernible] has to walk in alive, meaning. And the first portion after you remove the hide or the feathers or the skin, then is deemed edible. And so we pick up edible fat. We have the largest edible fat business in Europe from animals. And then the casings out of the porcine side, the hog side, make sausage casings. And then the skins and hides can be turned into -- and bones can be turned into the gelatin. So there's a natural fit for us. Our proposition to our suppliers, raw material suppliers in the world will take everything. And we have an economic proposition of creating value to them that no one else can give in the world. We can, if you will, no pun intended horse trade a little bit between bones and skins and guts and feathers and blood. And so end of the day, it allows us to be then the raw material collector of choice for them. And we can also make them more competitive. And if they grow, we grow. So that's the rationale behind the food, the feed and the fuel and the food side there. The gelatin business -- so first off, when you extract the product, you produce 3 things, about 15% to 20% collagen and about 80% animal feed. So it's also another natural fit and animal feed and fat out of the skin. So everything starts out as collagen and then you bring it down the factory and the reactor and you can either, as we say rotate it, chill it and belt dry it and that's gelatin. And gelatin, as everybody knows, is a thickening agent, an emulsifier, binds water and other ingredients together. And if it's made out of bones, then that encapsulates and that's where if anybody took [indiscernible] you have -- took your TYLENOL or Advil gel cap today, chances are -- 1 in 4 chances that it came from one of our gelatin factories. So that's -- the gelatin goes to pharmaceutical and confectionery. We operate 11 plants in the world, 3 in China, 2 in Brazil today, 2 in the U.S. and 4 in Europe. If we send it through a different reactor as it comes out of the main plant to hydrolyze it, then we make a water-soluble product and that's called collagen peptides. Peptides have been identified with both health and wellness, joint lubricity, skin, hair, nail growth. And while it falls in that supplement category, it has a lot of clinical research under it. We backstopped a company 9 years ago to enter the market with the first collagen product out there called Valley Proteins, the big blue jar, bovine grass fed that is our product made in Brazil today, and they are our partner, our best friends and Randy should have invested in that company, and he didn't. And so it's now been bought out by Neste. And it is truly an amazing product that -- because it has water solubility applications, the applications are much greater than basically gel caps and thickening emulsification. So you're seeing Gatorade, [indiscernible]. You're seeing pet foods now with collagen. I mean the health benefits are really pretty tremendous that -- what makes me nervous is when you say, well, you're in that nutraceutical supplement category, do you stay there only as long as someone doesn't find a better mousetrap. And so 3 years ago, we went to Boston Consulting Group, Bain, Frost & Sullivan and independently said tell us if this is real or not before we put another 4 to the board and put more money into it. And They're pretty convinced from working with the big CPG companies that it is real and that it's going to have a lasting staying power in both food and in wellness. And so that's when we built out our fourth or fifth conversion unit. Spray dryer basically for particle size and one in Ghent, Belgium, one in Angouleme, France and 3 of them in Brazil with the fourth one coming online in Brazil here in Q1. So now that takes you up to -- we were -- in 2015, when I bought that business, we were 100,000 tons of gelatin. And today, we're probably 80,000 tons of gelatin and 20,000, 25,000 tons of collagen. And so it's a product mix shift, slightly better margins because of the applications that can go in. But we also changed and got rid of the low-end, low-margin customers. So it's really an optimization play for us. Now as Neste stepped in and acquired a significant amount of Valley Proteins, I don't know exactly what the percentage is, 70-plus percent. Once the Neste marketing machine gets behind this thing, it's going to go worldwide. It's just being launched in Europe today. There's some product, cheap product being made in China today. And so we're out of capacity. We were out of extraction capacity. Time to build extraction capacity is probably 3 to 4 years and 100 million plus a copy if you can find the right place to build it or you can go acquire. And Gelnex has -- well they do have some peptide production, it's not of the quality that's needed by our customer base. And so they are -- they have 4 plants in South America -- or 4 in Brazil, 1 in Paraguay and then 1 in Portage, Indiana. And so the concept was 1.5 years ago, I reached out to the owner and said we'd like to make you part of the Darling family, let us know when there's a chance to do that. And that's kind of how those deals unwind. Unfortunately, the award has made his world a little dark with dimension and the family had to start to move the business and brought in an investment banker, it would have been what I consider to be a typical family deal that we do without i-bankers involved. And so it's done, waiting on regulatory approval. It will move our production up to about 146,000 tons in the world. We'll carry global market share of around 1/3 of it in the world. And the plan is then to convert a couple of these plants with our technology over the next couple of years, not giant money and then make -- once again, be able to backstop both Neste and other customers in their growth ambitions. And so the Food segment, if you go back to whatever, I think it was like Page 8 or whatever it was in the earnings call deck, shows this line, be in the mid-2s this year and next year, and once we roll in Gelnex you can add a solid $100 million, $140 million before we retrofit those plants over the next couple of years. So we see the Food segment as a 400-plus business over the next 3 years.

Okay. Great. I think that's a good place to leave it, Randy. Thanks so much for your time.

Beautiful. Thank you.