Montauk Renewables, Inc. (NASDAQ:MNTK) Q3 2025 Earnings Call Transcript

Montauk Renewables, Inc. (NASDAQ:MNTK) Q3 2025 Earnings Call Transcript November 6, 2025

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

John Ciroli: Thank you, and good day, everyone. Welcome to Montauk Renewables earnings conference call to review the third quarter 2025 financial and operating results and development. I’m John Ciroli, Chief Legal Officer and Secretary at Montauk. Joining me today are Sean McClain, Montauk’s President and Chief Executive Officer, to discuss business development and Kevin Van Asdalan, Chief Financial Officer, to discuss our third quarter 2025 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 may 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 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 performances 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 in our third quarter 2025 earnings press release and Form 10-Q issued and filed on November 5, 2025.

These are available also on our website at ir.montaukrenewables.com. After our remarks, we will open the call to questions from our analysts. [Operator Instructions] And with that, I’ll turn the call over to Sean.

Sean McClain: Thank you, John. Good day, everyone, and thank you for joining our call. On August 22, 2025, the EPA issued decisions on 175 million small refinery exemption or SRE petitions. The SRE decisions exempted corresponding volumes of gasoline and diesel for the 2023 and 2024 compliance years and increased the number of RINs available for obligated parties to use for compliance with the renewable fuel standard or RFS obligations. On September 16, 2025, the EPA proposed supplemental rule options that seek to offset these recent SRE decisions for increases in future renewable volume obligations by either a complete 100% reallocation or partial 50% reallocation of the SREs granted. The EPA had indicated the intention to finalize both the supplemental rule and the RVOs for 2025, 2026 and 2027 by the end of this year.

However, the duration of the most recent U.S. federal government shutdown and any residual impacts on EPA staffing after the shutdown concludes, may extend finalization of these items into 2026. Growth of any future decision to reallocate obligated volumes associated with the recent SRE grants, the proposed cellulosic biofuel volume requirements for 2026 and 2027 are $1.300 billion and $1.360 billion D3 RINs, respectively. We note purchasing activity of 2025 D3 RINs by obligated parties has continued during the current U.S. federal government shutdown. In our August 2025 earnings call, we announced our agreement with Pioneer Renewables Energy Marketing to form a joint venture, GreenWave Energy Partners, LLC. The primary goal of the joint venture is to help address the limited capacity of RNG utilization for transportation by offering third-party RNG volumes access to exclusive, unique and proprietary transportation pathways.

We have begun to match available RNG capacity to dispensing opportunities through GreenWave’s transportation pathways and have separated RINs for a limited amount of volumes. We expect the benefits from this partnership to increase in the fourth quarter of 2025 and have made additional cash contributions to GreenWave during the third quarter of 2025 and have not directly recognized any significant share of profits from GreenWave. We continue our development efforts in North Carolina and continue to expect our production and revenue generation activities to commence in the first quarter of 2026. Alongside our construction efforts for this first phase, for which total investment continues to be projected between $180 million and $220 million, we continue to progress our negotiations with obligated utilities to monetize all remaining uncontracted renewable energy credits RECs from our projected first phase production volumes.

Given the historically limited swine REC market in North Carolina, we’ve been negotiating our REC agreements with individually based on a variety of factors. While many of these agreements contain competitive details and there remains a limited active swine REC market in North Carolina, we believe the prices we are negotiating will be market-based. While we do not believe our negotiated rent prices will be based on solar REC prices seen in other U.S. markets, we do believe those indices are more illustrative of our expectations of North Carolina swine REC prices, versus the pricing for wind RECs across the United States market. Depending on a variety of factors, including but not limited to geographic region, we believe our negotiated swine REC prices could fall in the ranges experienced by solar REC indices at $200 to $450 per REC.

In September 2025, a joint motion was filed with the North Carolina Utility Commission, the NCUC, by various entities seeking to modify and delay the 2025 requirements of certain aspects of North Carolina clean energy and portfolio, specifically the portfolio standards related to swine RECs. We note this filing is not dissimilar to historical annual filings in response to the historically limited swine REC market in North Carolina. In October 2025, we filed our response comments to this joint motion with the NCUC, requesting that they grant modifications or delays only to individual power suppliers that have demonstrated need and compliance best efforts, that they require power suppliers that have not achieved 100% compliance in 2025 to apply cumulatively acquired swine RECs to the suppliers unsatisfied 2025 pro rata obligation and modify swine REC set aside for 2026 and beyond to match the requirement as set by North Carolina in 2018.

We are awaiting the response from the NCUC in regards to these filings. Our other announced development initiatives for new RNG facilities, CO2 development and biomethanol development remain active, and we expect to provide progress disclosures in our upcoming releases. And with that, I will turn the call over to Kevin.

Kevin Van Asdalan: Thank you, Sean. I will be discussing our third quarter 2025 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. The impact of EPA rulemaking associated with the implementation of what we refer to as BRRR K2 separation has impacted our commitment timing in the 2025 year of adoption. We expect this timing between RINs generated but unseparated and RINs available for sale to only impact [ 2025 ], which is the year BRRR became effective.

Also, the EPA indicated their intention to analyze the supplemental rule and the RVOs for 2025, ’26 and ’27 by the end of 2025. However, the duration of the U.S. federal government shutdown and any impact on EPA staffing after the U.S. federal government shutdown may extend this intended deadline into 2026, as Sean referenced. The average D3 index price for the third quarter of 2025 was approximately $2.19, a decrease of approximately 34.8% compared to $3.36 in the third quarter of 2024. At September 30, 2025, we had approximately 0.7 million RINs generated and unseparated. We had approximately 10,000 RINs in inventory from 2025 RNG production as of September 30, 2025. Total revenues in the third quarter of 2025 were $45.3 million, a decrease of $20.6 million or 31.3% compared to $65.9 million in the third quarter of 2024.

The decrease is related to a decrease in the number of RINs we self marketed from 2025 RNG production in the third quarter of 2025. Our decision to sell an increased amount of our production under fixed or floor price arrangements contributed to our having less RINs in the third quarter of 2025 compared to the third quarter of 2024. Notably, we did not experience an appreciable increase in environmental attributes shared with our pathway providers during the third quarter of 2025. More information on these metrics are included in our 2025 third quarter Form 10-Q. Our average realized RIN price in the third quarter of 2025 was $2.29, which though approximately $0.10 higher than the average D3 index price, decreased approximately 31.4% compared to $3.34 in the third quarter of 2024.

Total general and administrative expenses were $6.5 million in the third quarter of 2025, a decrease of $3.5 million or 35.1% compared to $10 million in the third quarter of 2024. The decrease was driven by accelerated vesting of certain restricted share awards as a result of the termination of an employee in the third quarter of 2024. Turning to our segment operating metrics. I’ll begin by reviewing our Renewable Natural Gas segment. We produced 1.4 million MMBtu during the third quarter of 2025 and increased 53,000 MMBtu or 3.8% compared to $1.4 million MMBtu during the third quarter of 2024. Our Rumpke facility produced 50,000 MMBtu more in the third quarter of 2025 compared to the third quarter of 2024 as a result of higher inlet feedstock supply.

Our Apex facility produced 25,000 MMBtu more in the third quarter of 2025 as a result of the June 2025 commissioning of the second Apex RNG facility. Offsetting this increase was the fourth quarter of 2024 sale of our Southern facility, which produced 69,000 MMBtu during the first 9 months of 2024. Revenues from the Renewable Natural Gas segment during the third quarter of 2025 were $39.9 million, a decrease of $21.9 million or 5.1% compared to $61.8 million during the third quarter of 2024. Average commodity pricing for natural gas for the third quarter of 2025 was 42.1% higher than the third quarter of 2024. Offsetting this impact during the third quarter of 2025, we self marketed 12.4 million RINs, representing a $3.4 million decrease or 21.2% compared to 15.8 million RINs self marketed during the third quarter of 2024.

Average pricing realized on RIN sales during the third quarter of 2025 was $2.29 as compared to $3.34 during the third quarter of 2024, a decrease of 31.4%. This compares to the average D3 RIN index price for the third quarter of 2025, up $2.19 being approximately 34.8% lower than the average D3 RIN index price for the third quarter of 2024 of $3.36. At September 30, 2025, we had approximately 0.3 million MMBtu available for RIN generation, 0.7 million RINs generated but unseparated and 10,000 RINs separated and unsold. At September 30, 2024, we had approximately 0.3 million MMBtu available for RIN generation and 0.1 million RINs generated and unsold. At September 30, 2024, there were no RINs generated but unseparated. Our operating and maintenance expenses for our RNG facilities during the third quarter of 2025 were $13.9 million, an increase of $1.3 million or 10.6% compared to $12.6 million during the third quarter of 2024.

The primary drivers of the third quarter of 2025 increase were timing of preventive maintenance, media change-out maintenance, well-filled operational enhancement programs and utility expenses at our Rumpke, Atascocita and Apex facilities, respectively. Excluding utilities, many of these expenses can be nonlinear in nature and timing can fluctuate by period. We produced approximately 44,000 megawatt hours in renewable electricity during the third quarter of 2025, an increase of approximately 3,000 megawatt hours or 7.3% compared to 41,000 megawatt hours during the third quarter of 2024. Our Bowerman facility produced approximately 2,000 megawatt hours more in the third quarter of 2025 compared to the third quarter of 2024. The increase is primarily related to the timing of processing equipment maintenance in the third quarter of 2024.

Revenues from renewable electricity facilities during the third quarter of 2025 were $4.2 million, an increase of $0.1 million or 1.9% compared to the third quarter of 2024. The increase was primarily driven by the aforementioned increase in our Bowerman facility production volumes. Our renewable electricity generation operating and maintenance expenses during the third quarter of 2025 were $2.6 million, a decrease of $0.1 million or 4.3% compared to $2.7 million during the third quarter of 2024. Our Tulsa facility operating and maintenance expenses decreased approximately $0.1 million, primarily related to timing of annual engine maintenance. During the third quarter of 2025, we recorded impairments of $48,000, a decrease of $485,000 compared to $533,000 in the third quarter of 2024.

The decrease primarily relates to specified — specifically identified assets deemed obsolete or nonoperable in the third quarter of 2024 compared to the third quarter of 2025. We did not report any impairments related to our assessment of future cash flows. Operating income for the third quarter of 2025 was $4.4 million, a decrease of $18.3 million or 80.4% compared to $22.7 million for the third quarter of 2024. RNG operating income for the third quarter of 2025 was $11 million, a decrease of $22.6 million or 67.2% compared to $33.6 million for the third quarter of 2024. Renewable electricity generation operating loss for the third quarter of 2025 was $0.2 million, a decrease of $0.4 million or 73.1% compared to the $0.6 million operating loss for the third quarter of 2024.

Turning to the balance sheet. At September 30, 2025, $47 million was outstanding under our term loan, and we had $20 million outstanding borrowings under our revolving credit facility. As of September 30, 2025, we had capacity available for borrowing under our revolving credit facility of approximately $96.7 million. For the first 9 months of 2025, we generated $30 million of cash from operating activities, a decrease of 30.4% compared to $43.1 million for the first 9 months of 2024. Based on our estimate of the present value of our Pico earn-out obligation, we recorded an expense of $0.3 million at September 30, 2025. This was recorded through our RNG segment royalty expense. During the third quarter of 2025, we made our first payment under the earn-out agreement to the former owners of the Pico site totaling approximately $0.2 million.

For the first 9 months of 2025, our capital expenditures were $75.1 million, of which $51.9 million, $8.5 million and $7.5 million were related to the ongoing development of Montauk Ag Renewables, our Turkey project in North Carolina, our contractually obligated Rumpke RNG relocation project in Cincinnati, Ohio and our second Apex facility in Ohio as well. As of September 30, 2025, we had cash and cash equivalents net of restricted cash of approximately $6.8 million. We had accounts and other receivables of approximately $6 million. We do not believe we have any collectability issues within our receivables balance. Adjusted EBITDA for the third quarter of 2025 was $12.8 million, a decrease of $16.6 million or 56.5% compared to adjusted EBITDA of $29.4 million for the third quarter of 2024.

EBITDA for the third quarter of 2025 was $12.8 million, a decrease of $16.1 million or 55.7% compared to EBITDA of $28.9 million for the third quarter of 2024. Net income for the third quarter of 2025 was $5.2 million, a decrease of $11.8 million as compared to $17 million for the third quarter of 2024. Our income tax expense decreased approximately $5.8 million for the third quarter of 2025 as compared to the third quarter of 2024. The difference in effective tax rates between the 2025 third quarter and the 2024 third quarter primarily relates to the change from pretax income to pretax loss for the third quarter of 2025. With that, I’ll now turn the call back over to Sean.

Sean McClain: Thank you, Kevin. In closing, and although we don’t provide guidance on our internal expectations on the market price of environmental attributes, including the market price of D3 RINs, we would like to provide our full year 2025 outlook. We expect our RNG production volumes to remain unchanged and range between 5.8 million and 6 million MMBTus with corresponding RNG revenues also unchanged to range between $150 million and $170 million. We expect our 2025 renewable electricity production volumes to range between 175,000 and 180,000 megawatt hours with unchanged corresponding renewable electricity revenues ranging between $17 million and $18 million. And with that, we will pause for any questions.

Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Matthew Blair of TPH.

Matthew Blair: You maintained your 2025 RNG production guide, which would imply a step-up quarter-over-quarter in the fourth quarter even at the low end of the guide. Could you talk about the drivers of the step up? Is this just better operations? Or is there any sort being that would push things up. And then thinking about your RNG production for 2026, I think most of your new projects are really more for 2027. So at this stage, would it be appropriate to think of 2026 RNG production is probably pretty similar to 2025?

Kevin Van Asdalan: Thanks, Matthew. Thanks for joining our call. Yes, we continue to maintain our production ranges for RNG for the full 2025 year, which implies an expected step-up to hit the low end in the fourth quarter. It’s a combination of a variety of factors, improvement in feedstock supply, which is also being beneficial at our Apex facility that we mentioned associated with some improvements in a newer plan. We continue to work with our rum landfill site to work through those wealth field challenges that we’ve been experiencing. So yes, we do believe we expect a continued uplift in our quarter-over-quarter production as we’ve been experiencing in 2025. Notably, in 2026, we have a policy not to provide other than current operating year guidance expectations. We’ll look to release those expectations at our full year results release that next year in 2026 in March but we expect to continue to expect our normal growth rate in going into 2026 as well.

Operator: Our next question comes from the line of Tim Moore of Clear Street.

Tim Moore: I know the RIN pricing is out here control EPA and such. I just want to switch gears to something that improved in the quarter that was nice to see it seems like the maintenance CapEx wave might be hopefully done, there was some catch up there in the last 12 months for overhauled engines and things like that. Can you just kind of speak to that a bit? The OpEx looked good, do you expect any more kind of catch-up maintenance spending in the next couple of quarters? Or are you past it?

Sean McClain: Thanks, Tim. I appreciate the question. I would view the shift in the operating expenses as less of a catch-up and more of some nonlinear expense items that correspond to the life cycle of the equipment. There is a component of it that although it’s bundled in your operating expenses, it is directed towards noncapitalizable investment into some of the debottlenecking of feedstock volumes for well field production. And so you’re seeing that corresponding lift in your production volumes as you’re moving quarter-to-quarter. Kevin’s explanation of your expected growth rate. We do not see any meaningful increase as we go into the outlook of operating expenses other than onboarding, obviously, our new Turkey Creek facility in 2026. And so you have to compare that to the revenue and the EBITDA lift that we get from commissioning that project in the first quarter.

Operator: Our next question comes from Betty Zhang of Scotiabank.

Y. Zhang: My question, I wanted to ask about G&A. I understand you talked about the variance versus a year ago. but curious what the drivers were for the difference versus last quarter? It seems like this quarter was quite a bit lower versus your run rate. So curious if you could just give a bit of color there.

Kevin Van Asdalan: Yes. The vast majority with that Betty is associated with timing of various professional fees, items like that. We are noticing a nominal increase in audit fees and auditor fees. As a reminder, this is our final year of EGC status. So there’s some additional work as we’re prepping for our first year in 2026 of a fully integrated audit. Last year, as we noted, there was the uplift in stock-based compensation associated with an employee termination. And then if you remember, there was another employee termination in the second quarter of 2024. That also was a onetime increase to G&A. So there are some blips in the third quarter of last year, second quarter of this year that we’re getting through as we get back into a more normalized G&A run rate.

Operator: This concludes the question-and-answer session. I would now like to turn it back to Sean McClain for closing remarks.

Sean McClain: Thank you for taking the time to join us on the conference call today. We look forward to speaking with you in 2026.

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.