OPAL Fuels Inc. Q1 FY2025 earnings call

Key Points

• First quarter results were in line with expectations, with adjusted EBITDA over 30% higher than the same period last year.
• Fuel station services segment EBITDA was approximately $12.5 million, 80% higher versus the first quarter of 2024.
• RNG fuel production for the quarter was 1.1 million MMBtus, up nearly 40% versus the same period last year.
• The company maintains full-year guidance provided in March, expecting adjusted EBITDA between $90 million and $110 million supported by RNG production of 5.0 to 5.4 million MMBtus.
• Focus on vertical integration, strategic and operational priorities, and managing regulatory environments.

In the first quarter of 2025, OPAL Fuels' Fuel Station Services segment had an EBITDA of approximately $12.5 million, which was 80% higher compared to the first quarter of 2024. RNG fuel production for the quarter was 1.1 million MMBtus, up nearly 40% versus the same period last year. Revenue for the quarter was $85 million and adjusted EBITDA was $20.1 million, compared to $64.9 million and $15.2 million in the same period last year. Net income was $1.3 million, up from $700,000 in Q1 2024. The Fuel Station Services segment continues to show strong growth, and RNG production is ramping up with newer projects.

Guidance Details

• Maintains full-year 2025 guidance with adjusted EBITDA expected between $90 million and $110 million, supported by RNG production of 5.0 to 5.4 million MMBtus.
• Guidance assumes D3 RIN pricing of $2.60 per gallon for the entire 2025.
• Maintains 2025 RNG production guidance of 5 million MMBtu to 5.4 million MMBtu, a 37% increase versus 2024. Guidance to grow fuel station services 2025 adjusted EBITDA 30% to 50% versus 2024.

Risks Identified

• Regulatory uncertainties: Waiting for clarity on 45z implementation, EPA rulings, and set rule two; trade policy uncertainties causing delays in investment decisions by customers and partners.
• Tariffs: Potential impact on future projects, but current in-construction projects not significantly affected as equipment is already ordered and contracts executed.

Q: Discuss production trajectory and tariff impact on in-construction projects A: Jonathan Maurer stated production is expected to have sequential growth through the year with improvements at existing projects like landfill gas collection expansions. Kazi Hassan mentioned tariffs are not significantly impacting current operations or capital for in-construction projects as equipment is already ordered and contracts executed.

Q: RIN pricing drivers and replication in Q2 A: Adam Comora said the average realized RIN price in Q1 was about $2.71. He noted the second quarter RIN price is likely lower, but the company's position is supported by its guidance.

Q: Return of capital to shareholders and electric power segment A: Adam Comora mentioned flexibility in deploying capital, considering M&A, deleveraging, or share buybacks. Jonathan Maurer stated the renewable power segment revenues were down due to terminated ISCC pathway contracts in the fourth quarter.

Q: Biogas policy and RNG EBITDA per MMBtu A: Adam Comora discussed broad bipartisan support for tax policies like 45z and the RNG incentive act. Kazi Hassan explained EBITDA per MMBtu is affected by RIN price and production growth.

Q: Renewable power segment drivers and income tax benefit A: Jonathan Maurer said revenues in the renewable power segment were down due to terminated contracts. Adam Comora mentioned the income tax benefit came from the sale of section 48 ITC tax credits.

Q: RNG margin outlook and conversion of biofuel power projects A: Adam Comora said there is room to accelerate conversion of biofuel power projects depending on regulatory certainty, with the company balancing acceleration and prudent capital management.

Q: Downstream strength and CMI engine uptake A: Adam Comora noted downstream looks strong, but CMI engine uptake has been slower due to product availability and macro factors, but long-term economic incentives for CNG vs diesel remain attractive