Montauk Renewables, Inc.

Good day, everyone, and thank you for participating in today's conference call. I would like to turn the call over to Mr. John Cerulli as he provides some important cautions regarding forward-looking statements and non-GAAP financial measures contained in the earnings materials or made on this call. John, please go ahead.

Thank you, and good day, everyone. Welcome to Montauk Renewables Earnings Conference Call to review the first quarter of 2026 financial and operating results and developments. I'm John Suoli, Chief Legal Officer and Secretary at Montauk. Joining me today are Sean McClain, Montauk's President and Chief Executive Officer, to discuss business developments, and Kevin Van Aslen, Chief Financial Officer, to discuss our first 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 in our first quarter 2026 earnings press release, and Form 10-Q, issued and filed on May 6, 2026. These are available on our website at ir.montaukrenewables.com. After our remarks, we will open the call to investor questions. We ask that you please keep the one 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. I am pleased to announce that we have commissioned our Montauk Ag Renewables Project in Turkey, North Carolina, and are producing syngas. We expect the production and sale of renewable electricity from our syngas to commence in May 2026, with revenue generation triggered upon the calibration of the sales meter from the interconnection utility. We have operated the full production line as part of the commissioning process and expect to be able to produce our targeted first phase of 47,000 megawatts and 120,000 RECs annually with approximately 50% of our installed reactor capacity. Our capital investment expectation for this first phase of the project remains unchanged at $200 million. We 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 by offering third-party RNG volumes access to exclusive, unique, and proprietary transportation pathways. During the first quarter of 2026, GreenWave matched available dispensing capacity with available third-party R&G volumes, separated RINs, and distributed RINs to the partners of GreenWave. We received approximately $1.4 million in separated RINs and distributed from GreenWave in the first quarter of 2026. In April 2026, We sent a letter confirming termination of our contract with European Energy North America, EENA, for the delivery of biogenic carbon dioxide. The termination was due to EENA's failure to provide certain contractual assurances and notices related to the construction of their Texas-based e-methanol facility. We are currently exploring alternative offtake arrangements with interested parties at our Atascosita location. The timing of capital expenditures will be synchronous with the finalization of replacement offtake agreements. We continue to anticipate a capital investment of between $30 million and $40 million. While we continue to diversify the company, our production of renewable energy from landfill feedstock remains a priority focus. The U.S. EPA issued the final rules for the 2026 and 2027 Renewable Fuel Standard on March 27, 2026. the 2025 cellulosic volume requirement was reduced from 1,376,000,000 to 1,210,000,000 D3 RINs, with cellulosic waiver credits also having been made available for 2025 compliance. Final cellulosic biofuel volume requirements for 2026 and 2027 were established at 1,360,000,000 and 1,430,000,000 D3 RINs, respectively. These volumes also represent an increase of $60 million and $70 million, respectively, from the preliminary RVO previously issued by the EPA. These volumes reflect the EPA's assessment of expected wind generation capacity and the related pathway constraints of the end-use demand for CNG LNG transportation fuels derived from biogas. The EPA did not provide reallocations of D3 RINs as part of the 2026 and 2027 RBO in the final rule. This is primarily due to the statutory conditions on cellulosic biofuel volume requirements, which do not allow the EPA to set the total applicable volume of cellulosic biofuel at a volume that is greater than the projected volume available, which necessarily excludes carryover cellulosic RINs. And with that, I will turn the call over to Gavin.

Thank you, Sean. I will be discussing our first quarter 2026 financial and operating results. Please refer to our earnings press release, Form 10-Q, and the supplemental slide 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 of that low RINs during a period will impact our revenue and operating profits. We sold all of our 3.9 million RINs generated and available for sale from our 2025 RNG production in the first quarter of 2026 at a realized price of approximately $2.42. We will not be impacted by the EPA making available cellulosic waiver credits from 2025 production. We have entered into commitments to sell approximately 60% of our expected RIN volumes in the 2026 second quarter. Total revenues in the first quarter of 2026 were $46.4 million, an increase of $3.8 million, or 9%, compared to $42.6 million in the first quarter of 2025. The increases related to environmental attribute revenue were approximately $4.2 million from RINs sold related to the RINs distributed from Green Wave and the RINs related to pathway dispensing. We had no such RINs in the first quarter of 2025. Our first quarter of 2026 RNG volume sold under fixed floor price contracts decreased approximately 82.1% as compared to first quarter of 2025 as a result of the expiration of fixed price pathway contracts. Our RNG commodity revenue decreased approximately 49.3%, which is offset by an increase in rent sold of 25.5%. Total general and administrative expenses decreased For $8 million in the first quarter of 2026, a decrease of $0.7 million or 8.4% compared to $8.7 million in the first quarter of 2025. The decrease was primarily driven by vesting of certain restricted share awards in 2025. Turning to our segment operating metrics, I'll begin by reviewing our renewable natural gas segment. We produced 1.4 million MMBTU during the first quarter of 2026, flat compared to 1.4 million MMBTU during the first quarter of 2025. Our Galveston facility produced 41,000 MMBTU fewer in the first quarter of 2026 compared to the first quarter of 2025 as a result of the landfill host assuming responsibility of well-filled operations and maintenance beginning in the first quarter of 2026. Our Atacacita facility produced 43,000 MMBTU more in the first quarter of 2026 compared to the first quarter of 2025 as a result of landfill host well-filled operational collection system enhancement. Our Apex facility produced 37,000 MMBTU more in the first quarter of 2026 as compared to the first quarter of 2025 as a result of the June 2025 commissioning of our second Apex facility and increased feedstock gas from improvements we are making to the landfill collection system. Our McCarty facility produced 88,000 MMBTU fewer in the first quarter of 2026 compared to the first quarter of 2025 as a result of landfill host wellfield bifurcation and changes to the wellfield collection system. Revenues from the renewable natural gas segment during the first quarter of 2026 were $38.1 million, a decrease of $0.4 million, or 1%, compared to $38.5 million during the first quarter of 2025. Average commodity pricing for natural gas for the first quarter of 2026 was 38.1% higher than the first quarter of 2025. In the first quarter of 2026, we self-marketed 12.4 million RIMs, representing a $2.5 million increase, or 25.5%, compared to 9.9 million RIN self-marketed during the first quarter of 2025. Average pricing realized on RIN sales during the first quarter of 2026 was $2.42, compared to $2.46 during the first quarter of 2025, a decrease of 1.6%. This compares to the average D3 RIN index price for the first quarter of 2026 of $2.41, compared being approximately 0.6% lower than the average D3 RIN index price for the first quarter of 2025, up $2.43. On March 31, 2026, we had approximately 0.4 million MMVTU available for RIN generation, 0.2 million RINs generated but unseparated, and 79,000 RINs separated and unsold. On March 31, 2025, we had approximately 0.3 million MMVTU available for RIN generation, 1.5 million RINs generated but unseparated, and 3.9 million RINs separated and unsold. Our operating and maintenance expenses for our RNG facilities during the first quarter of 2026 were $14.4 million, an increase of $0.3 million, or 1.8%, compared to $14.1 million during the first quarter of 2025. Our RUC-E facility operating and maintenance expenses increased approximately $0.4 million, primarily related to preventative maintenance media changes. Our APEX facility operating and maintenance expenses increased approximately $0.3 million, primarily related to increased utility expense, which was partially offset by decreased preventative maintenance media changes. Our ATACCACETA facility operating and maintenance expenses increased approximately $0.2 million, primarily related to well-filled operational enhancements. Our Dowerston facility operating and maintenance expenses decreased approximately $0.6 million, which was primarily related to the timing of maintenance of gas processing equipment and preventative maintenance media changes. We produced approximately 43,000 megawatt hours in renewable electricity during the first quarter of 2026, a decrease of approximately 3,000 megawatt hours, or 6.5%, compared to 46,000 megawatt hours during the first quarter of 2025. Our PECO facility produced approximately 2,000 megawatt hours, fewer in the first quarter of 2026 compared to the first quarter of 2025. The decrease is primarily related to the decommissioning of one of our engines in the second quarter of 2025 due to the shift towards boiler heat for digestion process. Our power facility produced approximately 1,000 megawatt hours fewer in the first quarter of 2026 compared to the first quarter of 2025. The decrease is primarily related to original equipment manufacturer required life cycle maintenance of all one-hour engines beginning in the first quarter of 2026. Revenues from renewable electricity facilities during the first quarter of 2026 were 4.1 million, a decrease of 0.1 million, or 0.8%, compared to 4.2 million in the first quarter of 2025. The decrease is primarily driven by the decrease in production volumes. Our renewable electricity generation operating and maintenance expenses during the first quarter of 2026 were 4.5 million, an increase of 1.1 million, or 33.8%, compared to 3.4 million during the first quarter of 2025. The increase is primarily driven by an increase in non-capitalizable costs of $0.8 million at our Montauk Ag Renewables project. Our Bowerman Facility operating and maintenance expenses increased approximately $0.4 million, which was related to the timing of gas processing preventative maintenance. We reported approximately $4.2 million in the first quarter of 2026 related to the cost of rinse distributed from Green Wave when sold and the cost related to pathway dispensing associated with the dispensing of R&D. There were no such expenses incurred during the first quarter of 2025. During the first quarter of 2026, we reported impairments of $0.4 million, a decrease of $1.6 million compared to $2.0 million in the first quarter of 2025. The decrease primarily relates to the first quarter of 2025 impairment of an RNG development project for which the local utility no longer accepted RNG into its distribution system. We did not record any impairments related to our assessment of future cash flows. Operating loss for the first quarter of 2026 was $1.6 million compared to operating income of $0.4 million in the first quarter of 2025. R&D operating income for the first quarter of 2026 was $8.7 million, a decrease of $1.7 million or 15.7% compared to $10.4 million for the first quarter of 2025. Renewable electricity generation operating loss for the first quarter of 2026 was $2.2 million, an increase of $1.2 million compared to $1 million for the first quarter of 2025. Other income in the first quarter of 2026 was $1.3 million, an increase of $2.5 million compared to other expenses of $1.2 million in the first quarter of 2025. In the first quarter of 2026, we recorded approximately $3.3 million in income related to our joint venture investment in Greenway. There was no such income reported during the first quarter of 2025. We received approximately $1.4 million in rents distributed from Greenway in the first quarter of 2026, of which approximately $0.4 million remain unsold. We sold approximately 1 million RINs and recorded revenues from those RINs sold of approximately $2.4 million. Additional information on GreenWave can be found in the supplemental slides that have been posted to our website. On March 9, 2026, we entered into a five-year new security credit facility with a wholly owned subsidiary, Hannah Armstrong Capital LLC, HAZI, that consists of up to $200 million in senior indebtedness. These proceeds were used to repay all our outstanding debt. We expect to have an additional $45 million in proceeds drawn upon the conclusion of certain engineering review and operational requirements of our Montauk Ag Renewables project in North Carolina. As a result of this refinancing, in the first quarter of 2026, we recorded debt distinguishment costs of $1 million. We are only required to make interest payments during the first two years of the agreement, which matures in March 2031. We expect to work with HAZE in the future to secure additional project-based financing for our current and future development projects. Turning to the balance sheet, on March 31, 2026, $155 million was outstanding in our new security credit facility with HAZE. For the first three months of 2026, our capital expenditures were $38.6 million, of which $33.1 million and $1.8 million, respectively, were related to the ongoing development of Montauk Ag Renewables in our Bowerman R&G facility. We had approximately $19.6 million in capital expenditures included within our accounts payable at March 31, 2026. As of March 31, 2026, we had cash and cash equivalents, net restricted cash of approximately $25.9 million. Our new senior credit facility with Hadley requires us to meet liquidity and have quarterly minimum cash balances as defined in the agreement. We had accounts and others receivables of approximately $5.2 million. We do not believe we have any collectability issues within our receivables balance. As of March 31, 2026, we held approximately $0.4 million in rents distributed from Green Wave and inventory on our balance sheet. Adjusted EBITDA for the first quarter of 2026 was $10.8 million, an increase of $2 million or 22.8% compared to adjusted EBITDA of $8.8 million for the first quarter of 2025. EBITDA for the first quarter of 2026 was $9.4 million, an increase of $2.7 million or 40.3% compared to EBITDA of $6.7 million in the first quarter of 2025. Net income for the first quarter of 2026 was $5,000, an increase of $0.5 million as compared to a net loss of $0.5 million for the first quarter of 2025. The difference in effective tax rates between the first quarter of 2026 and the first quarter of 2025 primarily relate to the change in our free tax book loss for the first three months of 2026 as compared to the first three months of 2025. I'm now turning the call back over to Sean. Thank you, Kevin.

In closing... And though we don't provide guidance as to our internal expectations in the market price of environmental attributes, including the market price of B3 RINs, we would like to provide a full year 2026 outlook. We are reaffirming our RNG production volumes to range between 5.8 and 6 million MMBTU, with corresponding RNG revenues to range between 175 and 190 million. we are reaffirming our renewable electricity production volumes to range between 195 and 207,000 megawatt hours, with updated corresponding renewable electricity revenues to range between 33 and 37 million. It reflects our current expectations of production at our Montauk Ag Renewables facility in Turkey, North Carolina. And with that, we will pause for any questions.

Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you would need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Please stand by while we compile the Q&A roster. Our first question comes from Matthew Blair at TPH.

Thank you, and good morning. Let's hope you can talk a little bit about this fixed price contract that appears to have rolled off. I think there was a mention of that in the release. You know, is there any prospect for renewing that contract? And can you say if that contract was above, you know, current market rates? Like, should we think of that roll-off as being dilutive to your ongoing margins? Thank you.

Thanks, Matthew. In short, I'm going to point you to our operating highlights table within our 10Q. The rolling off of the fixed price contract is consistent with our moving and our ability to find homes for our R&G volumes in the transportation markets. It's in concert with a quarter-over-quarter reduction in RINs that we're sharing with counterparties through our pathway. That has come down in the first quarter of 2026, yielding increases in RINs sold in 2026 over 2025. That's sort of a general understanding of a product mix moving away from fixed pricing. into a more commodity and merchant availability of RINs generated from the production that we're getting as we are dispensing volumes in the transportation space and retaining more RINs and able to sell more RINs related to the roll-off of those fixed-price contracts.

Our next question comes from Betty Zhang at Scotiabank.

Thanks. Good morning. Can you talk about the Montauk Ag Renewables? It looks like the revenue generation seems to be pushed out by about a month, and that's also factored into your annual guidance. Can you just speak to what may have contributed to that?

Yes, thanks, Betty. The adjustment to the revenue guidance is solely attributed to the timing of the commissioning at the end of April as opposed to the end of the first quarter with revenue commencement activities starting in May instead of April. So, that's the month shift that's reflected in that updated guidance.

Our next question comes from Richard Adios at UBS.

Hi, thanks for taking our question. With the North Carolina project coming online and production expected to begin this month, can you help us think about the RAMP profile from here? I know you mentioned in your opening remarks and in the press release that you expect RAMP up in production volumes throughout 2026, but can you give us additional color into that? Thank you.

Thanks, Richard. As we've alluded, you know, we have a certain amount of hog spaces that we're targeting to support our production expectations under a first year. We had announced that there were some weather delays on our hog at the end of the year in March, that some weather delays have delayed some installation of the own farm facilities. collection equipment, as well as delaying some of our ability to timely assemble our dewatering equipment. Related to those sort of weather delays and installment of our feedstock collection and dewatering equipment, our ramp throughout 2026 is contingent upon us getting caught up in meeting some of our internal expectations. associated with our own farm installation related to feedstock collection and transportation to our production facility.

Okay. I'm showing no further questions at this time. I would now like to turn it back to Sean for closing remarks.

Thank you. And thank you for taking the time to join us on the conference call today. We look forward to speaking with you again when we present our second quarter 2026 results.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect.