Montauk Renewables, Inc. (MNTK) Earnings Call Transcript & Summary

Good day, everyone, and thank you for participating in the Montauk Renewables Second Quarter 2026 Conference Call today. I'd like to turn the call over to to Mr. John Ciroli, Chief Legal Officer and Secretary as he provides some important cautions regarding forward-looking statements and non-GAAP financial measures contained in the earnings materials made on this call. John, please go ahead.

Thank you, and good day, everyone. Welcome to Montauk Renewables earnings conference call to review the second quarter 2026 financial and operating results and developments. I'm John Ciroli, Chief Legal Officer and Secretary of Montauk. Joining me today are Sean McClain, Montauk's President and Chief Executive Officer, to discuss business developments and Kevin Van Asdalan, Chief Financial Officer, to discuss our second quarter 2026 financial and operating results. At this time, I would like to direct your attention to our forward-looking disclosure statement. During this call, certain comments we make constitute forward-looking statements and as such, involve a number of assumptions, risks and uncertainties that could cause the company's actual results or performance to differ materially from those expressed in or implied by such forward-looking statements. These risk factors and uncertainties are detailed in Montauk Renewables SEC filings. Our remarks today may also include non-GAAP financial measures. We present EBITDA and adjusted EBITDA metrics because we believe the measures assist investors in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. Additional details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures can be found in our slide presentation and our second quarter 2026 earnings press release and Form 10-Q issued and filed on August 5, 2026, and which is available on our website at ir.montaukrenewables.com. After our remarks, we will open the call to analyst questions. We ask that you please keep to 1 question to accommodate as many questions as possible. And with that, I will turn the call over to Sean.

Thank you, John. Good day, everyone, and thank you for joining our call. In July 2026, we began generating power for sale from our Turkey, North Carolina facility. This production of power is expected to be eligible to generate both swine RECs and enhance RECs in subsequent months. As we work to increase the volumes of power and RECs that are able to be generated from our volume of produced syngas. We have identified specific programming modifications to our installed electrical switch gear. The installation of these modifications will provide for both the increase in production volumes as well as enhanced protection for our processing equipment and electrical transformers. We expect to have all programming completed by mid-August and consistently generate power in RECs from all available collected feedstock volumes. We continue to progress negotiations with entities that are required to purchase RECs under the Nordic Carolina Clean Energy and portfolio standard in addition to our existing REC contract with Duke. We also continue to progress our installation of feedstock collection in our contracted farming locations. As of the end of July, we have entered into long-term agreements with over 50 separate farming locations, providing us access to over 350,000 of the 400,000 to 450,000 hog spaces we are targeting to fully supply our first phase of development. We are currently able to collect for more than 250,000 hog spaces and will continue farms -- collection equipment installations during the second half of 2026. Our capital investment expectation for the first phase of this project remains unchanged at $200 million, and we continue to expect a ramp-up in production volumes throughout 2026 directly related to additional feedstock collection. Our joint venture, GreenWave, continues to address the limited capacity of RNG utilization for transportation offering by third-party RNG volumes access to unique and proprietary transportation pathways. GreenWave Match is available dispensing capacity with available third-party volumes and [indiscernible] distribute wins to the partners of GreenWave. As a result, we received approximately $1.5 million in separated RINs distributed from GreenWave in the second quarter of 2026. While our recent development focus has been prioritized on achieving and increasing production and revenue at our Turkey, North Carolina facility, we continue thoughtful and measured progress with our other announced development opportunities and expect to share those progress updates throughout the second half of 2026. And with that, I will turn the call over to Kevin.

Thank you, Sean. I will be discussing our second quarter 2026 financial and operating results. Please refer to our earnings press release, Form 10-Q and the supplemental slides that have been posted to our website for additional information. Our profitability is highly dependent on the market price of environmental attributes, including the market price for RINs. As we self-market a significant portion of our RINs, a decision not to commit to transfer available RINs during a period will impact our revenue and operating profit. We have entered into commitments to transfer the majority of RINs generated and available for sale from our expected 20 26 3rd quarter RNG production at an average RINs of [ $2.66. ] This compares to the average D3 index price for the month of July 2026 of $2.64. Total revenues in the second quarter of 2026 were $54.0 million, an increase of $8.9 million or 19.7% compared to $45.1 million in the second quarter of 2025. The increase is primarily related to environmental attribute revenues of approximately $8.4 million from RINs sold related to the distribution of RINs from our GreenWave joint venture and RINs related to pathway dispensing. We had no RINs distributed and sold from GreenWave in the second quarter of 2025. Our second quarter of 2026 R&D volumes sold under fixed lower-price contracts decreased approximately 80% as compared to our second quarter of 2025 as a result of the expiration of these contracts. Our RNG commodity revenue decreased approximately 63.7%. These decreases were offset by an increase in RINs sold of 29.1%. Our RINs generated and unseparated decreased approximately 95.4% as a result of the transition to the biogas regulatory reform rule in 2025. Total general and administrative expenses were $7.7 million for the second quarter of 2026. The a decrease of $1.3 million or 15.2% compared to $9.0 million in the second quarter of 2025, driven primarily by a onetime accelerated vesting of approximately $1.6 million from certain restricted share awards in 2025 due to the termination of an employee. Turning to our segment, operating metrics. I'll begin by reviewing our Renewable Natural Gas segment. we produced $1.5 million MMBtu of RNG during the second quarter of 2026, an increase of 43,000 or 3% compared to 1.4 million MMBtu during the second quarter of 2025. Our McCarty facility produced 53,000 MMBtu more in the second quarter of 2026 compared to the second quarter of 2025 as a result of landfill host wellfield operational and collection system enhancements. Our Apex facility produced 39,000 MMBtu more in the second quarter of 2026 as compared to the second quarter of 2025 as a result of increased feedstock gas from our improvements related to the landfill collection system. Our Galveston facility produced 26,000 MMBtu fewer in the second quarter of 2026 compared to the second quarter of 2025 and as a result of landfill host -- as a result of the landfill host assuming responsibility of wellfield operations and maintenance beginning in 2026. Our Atascocita facility produced 37,000 MMBtu in the second quarter of 2026 compared to the second quarter of 2025 as a result of landfill host wellfield operational and collection system enhancement project timing as well as planned facility maintenance. Revenues from the Renewable Natural Gas segment during the second quarter of 2026 were $40.9 million, an increase of $0.1 million or 0.3% compared to $40.8 million during the second quarter of 2025. Average commodity pricing for natural gas for the second quarter of 2026 was 15.7% lower than the second quarter of 2025. In the second quarter of 2026, we self marketed 14.3 million RINs, representing a $3.2 million increase or 29.1% compared to $11.1 million RINs self marketed during the second quarter of 2025. Average pricing realized on RIN sales during the second quarter of 2026 was $2.45 as compared to $2.42 during the second quarter of 2025, an increase of 1.2%. This compares to the average D3 RIN index price for the second quarter of 2026 of $2.54 being approximately 7.6% higher than the average D3 index price for the second quarter of 2025 of $2.36. At June 30, 2026, we had approximately 0.4 million MMBtu available for RIN generation, 0.1 million RINs generated but unseparated and no RIN separated and unsold. At June 30, 2025, we had approximately 0.3 million MMBtu available for RIN generation, 3.0 million RINs generated but unseparated, and 0.1 million RINs separated and unsold. Our operating and maintenance expenses for our R&D facilities during the second quarter of 2026 were $15.6 million, a decrease of $1.4 million or 8.2% compared to $17.0 million during the second quarter of 2025. Our McCarty facility operating and maintenance expenses decreased approximately $0.9 million, primarily related to the timing of maintenance related to gas processing equipment. Our Apex facility operating and maintenance expenses decreased approximately $0.5 million primarily related to timing of the gas processing preventative maintenance. We produced approximately 44,000 megawatt hours in renewable electricity during the second quarter of 2026, an increase of approximately 2,000 megawatt hours or [indiscernible] compared to 42,000 megawatt hours during the second quarter of 2025. Our Bowerman facility produced approximately 3,000 megawatt hours more in the second quarter of 2026 compared to the second quarter of 2025. The increase is primarily related to increased gas flows due to landfill host wellfield improvements. Revenues from renewable electricity facilities during the second quarter of 2026 were $4.5 million, an increase of $0.2 million or 4.8% compared to $4.3 million in the second quarter of 2025. The increase was primarily driven by the increase in production volumes. Our renewable electricity generation operating and maintenance expenses during the second quarter of 2026 were $5.1 million, an increase of $0.3 million or 5.3% compared to $4.8 million during the second quarter of 2025. The increase was driven by an increase in noncapitalizable costs of approximately $1.2 million at our Montauk Ag Renewables project in Turkey, North Carolina. Our Bowerman facility operating and maintenance expenses decreased approximately $0.7 million, primarily related to decreased wellfield operational costs and timing of gas processing preventative maintenance. We recorded within operating and maintenance expenses, approximately $8.3 million in the second quarter of 2026 related to the cost of RINs distributed from Greenwave when sold and the cost related to pathway dispensing associated with the dispensing of RNG. There were no such expenses incurred during the second quarter of 2025. During the second quarter of 2026, we recorded impairments of $0.7 million, an increase of $0.3 million compared to $0.4 million in the second quarter of 2025. The increase relates specifically to identified, discrete or non-offerable assets. We did not record any impairments during the second quarter of 2026 related to our estimate of future cash flows. Operating loss for the second quarter of 2026 was $75,000, a decrease of $2.3 million or 96.8% compared to an operating loss of $2.4 million for the second quarter of 2025. RNG operating income for the second quarter of 2026 was $9.6 million, an increase of $0.4 million or 4.5% compared to operating income of $9.2 million for the second quarter of 2025. Renewable Electricity generation operating loss for the second quarter of 2026 was $2.1 million, a decrease of $0.2 million or 9.2% compared to an operating loss of $2.3 million for the second quarter of 2025. Other income in the second quarter of 2026 was $2.3 million, an increase of $3.6 million compared to other expenses of $1.3 million in the second quarter of 2025. In the second quarter of 2026, we recorded approximately $3.8 million in income related to our joint venture investment in Greenway. There was no such income reported during the second quarter of 2025. We received approximately $1.5 million in RIN distributed from Greenwave in the second quarter of 2026. We sold approximately $1.9 million RIN and recorded revenues from those RINs sold of approximately $4.8 million. Additional information on GreenWave can be found in the supplemental slides that have been posted to our website. Turning to the balance sheet. June 30, 2026, $155 million was outstanding under our new senior credit facility with Haze .Our financial debt covenant commenced June 30, 2026, and as of June 30, 2026, we are in compliance with all applicable financial covenants under this facility. For the first 6 months of 2026, our capital expenditures were $61.3 million, of which $49.8 million and $3.6 million were related to our ongoing development of Montauk Ag Renewables and our Bowerman RNG facility, respectively. We had approximately $17.3 million in capital expenditures included within our accounts payable or accrued liabilities at June 30, 2026. As of June 30, 2026, we had cash and cash equivalents net of restricted cash of approximately $15.8 million. Our new senior credit facility with Haze requires us to meet quarterly liquidity balances as defined in the underlying agreement. We had accounts and other receivables of approximately $5.6 million as of June 30, 2026. We do not believe we have any collectibility issues within our receivables balances. As of June 30, 2026, we held no RINs distributed from GreenWave inventory on our balance sheet. Adjusted EBITDA for the second quarter of 2026 was $12.3 million, an increase of $7.3 million or [ 154.5% ] compared to adjusted EBITDA of $5.0 million for the second quarter of 2025. EBITDA for the second quarter of 2026 was $11.7 million, an increase of $7.1 million or 151.4% compared to EBITDA of $4.6 million for the second quarter of 2025. Net income for the second quarter of 2026 was $0.2 million, an increase of $5.7 million as compared to a net loss of $5.5 million for the second quarter of 2025. I'll now turn the call back over to Sean.

Thank you, Kevin. In closing, and although we don't provide guidance as to our internal expectation on the market price of environmental attributes, including the market price of D3 RINs, we would like to provide our full year 2026 outlook. We are reaffirming our RNG production volumes to range between 5.8 million and 6 million MMBtus with corresponding R&D revenues to range between $175 million and $190 million. . We expect our renewable electricity production volumes to range between 185,000 and 195,000 megawatt hours with corresponding revenue -- electricity revenues to range between $23 million and $26 million, which is reflective of our current expectations of production at our Montauk Ag Renewables facility in Turkey, North Carolina. And with that, we will pause for any questions.

[Operator Instructions] Our first question comes from Tim Moore from Clear Street.

Congratulations on the progress. RINs pricing seems to have stabilized in the past 6 or 7 months. It was nice to hear your commentary on the sequential increase in the third quarter. Can you just -- just from your own visibility and what you're seeing, is there just improved transparency in the marketplace for that compared to last year? I know the EPA website stopped posting in January last year, but just kind of what are you seeing and kind of the behaviors around RIN purchases?

Yes, Tim, I'll handle the first section, and then maybe Sean can offer some guidance -- or not guidance, some clarity in regards to our obligated party process. But while we have seen some RINs stability here in the first, call it, 5 or 6 months, we think some of that stability was coming through -- there was an extended year settlement for 2025 that completed itself in the second quarter. And I believe getting on the other side of sort of completing the 2025 vintage period and moving into 2026 with a, I guess, a settled RVO and obligated parties getting into their 2026 obligated purchases, we believe that's contributed to the historical path of RIN lack of volatility here in 2026.