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ALLIANCE RESOURCE PARTNERS LP (ARLP)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $547.5M and EPS $0.46; Adjusted EBITDA $161.9M. Versus Q2 2024, revenue declined 7.7% and EPS fell from $0.77; sequentially, revenue rose 1.3% while EPS decreased due to a $25.0M impairment and higher depreciation .
  • Wall Street consensus (S&P Global) expected $583.9M revenue and $0.61 EPS; ARLP missed both, driven by lower realized coal pricing and the impairment; Adjusted EBITDA was roughly in line with consensus* .
  • Guidance mix shifted: Illinois Basin coal sales volumes were raised; Appalachia volumes lowered due to Tunnel Ridge issues and a customer default; oil & gas BOE volume guidance midpoint increased ~5%; total coal price guidance for Appalachia lifted, and total cost per ton guidance reduced .
  • Capital allocation pivot: quarterly distribution reduced to $0.60 from $0.70 to strengthen balance sheet and increase flexibility amid supportive regulatory developments and contracting momentum—likely a near-term stock reaction catalyst for yield recalibration and debate on growth optionality .

What Went Well and What Went Wrong

What Went Well

  • Illinois Basin execution: tons sold +15.2% YoY; segment Adjusted EBITDA expense/ton -7.1% YoY on lower maintenance and improved recoveries; monthly shipping records at Hamilton and River View in June .
  • Contracting momentum: added 17.4M committed and priced sales tons for 2025–2029 (incl. 1.1M option tons), bringing YTD new commitments to 35.1M tons since January .
  • Royalty volumes strength: Oil & Gas BOE +7.7% YoY; coal royalty tons +10.4% YoY; total Royalties Segment Adjusted EBITDA grew sequentially .
    “Coal shipments of 8.4 million tons were up 6.8% YoY and up 7.9% sequentially…Hamilton and River View mines achieving monthly shipping records in June” — CEO Joe Craft .

What Went Wrong

  • Pricing headwind and impairment: coal sales price/ton down 11.3% YoY; non‑cash $25.0M impairment on a battery materials investment; higher D&A impacted EPS .
  • Appalachia underperformance: tons sold -16.8% YoY; Segment Adjusted EBITDA -35.1% YoY; mining challenges at Tunnel Ridge persisted (albeit with expected improvement post longwall move) .
  • Distribution coverage compressed: DCF of $90.7M vs distributions paid $90.7M (1.00x coverage) even as free cash flow remained positive; hence distribution reset to $0.60 to prioritize flexibility .

Financial Results

Headline metrics vs prior periods and estimates

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$593.350 $540.468 $547.463
EPS ($)$0.77 $0.57 $0.46
Adjusted EBITDA ($USD Millions)$181.442 $159.935 $161.924

Consensus vs actual (Q2 2025)

MetricConsensusActual
Revenue ($USD)$583,910,330*$547,463,000
EPS ($)$0.61333*$0.46
EBITDA ($USD)$168,586,970*$161,924,000

Values marked with * retrieved from S&P Global.

Segment breakdown (Coal)

MetricQ2 2024Q1 2025Q2 2025
Illinois Basin tons sold (MM)5.787 6.042 6.665
Illinois Basin price ($/ton)$57.37 $55.15 $51.59
ILB EBITDA exp/ton ($)$37.35 $34.75 $34.69
ILB Segment Adjusted EBITDA ($MM)$118.0 $126.2 $114.2
Appalachia tons sold (MM)2.064 1.729 1.717
Appalachia price ($/ton)$87.54 $78.24 $82.49
Appalachia EBITDA exp/ton ($)$66.26 $69.73 $65.71
Appalachia Segment Adjusted EBITDA ($MM)$45.3 $15.6 $29.4
Total Coal tons sold (MM)7.851 7.771 8.382
Total Coal price ($/ton)$65.30 $60.29 $57.92
Total Coal Segment Adj. EBITDA ($MM)$160.2 $140.2 $141.9

KPIs and Royalties

KPIQ2 2024Q1 2025Q2 2025
Total tons sold (MM)7.851 7.771 8.382
BOE sold (MM)0.817 0.880 0.880
Oil % of BOE43.6% 43.7% 48.6%
Total royalty revenues ($MM)$53.0 $52.7 $53.1
Coal royalty tons sold (MM)4.973 5.072 5.492

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Illinois Basin Sales Tons (MM)FY202524.00–25.50 25.00–25.75 Raised
Appalachia Sales Tons (MM)FY20258.75–9.25 7.75–8.25 Lowered
Total Sales Tons (MM)FY202532.75–34.75 32.75–34.00 Narrowed/lower top end
Appalachia Coal Sales Price ($/ton)FY2025$76–$82 $79–$83 Raised
Total Segment EBITDA Expense ($/ton)FY2025$40–$44 $39–$43 Lowered
Oil volumes (000 bbl)FY20251,550–1,650 1,650–1,750 Raised
Natural gas (000 Mcf)FY20256,100–6,500 6,300–6,700 Raised
Liquids (000 bbl)FY2025775–825 825–875 Raised
Net interest expense ($MM)FY2025$39–$43 $38–$42 Lowered
Distribution per unit ($)Q2 2025$0.70 (Q1) $0.60 Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI/data center driven demandPJM capacity price spike; baseload need; domestic market strengthening; utilities extending coal plant lives “Most encouraging outlook since early 2023”; administration actions to support grid reliability and accelerate data centers Strengthening
Regulatory/policy backdropFavorable environment expected under new administration; executive orders on grid reliability OBBBA law and executive orders cited as tailwinds for baseload, coal plants, and data center infrastructure More supportive
Tunnel Ridge operationsChallenging conditions; expected improvement mid‑2025; longwall moves scheduled Longwall move completed mid‑July; new district with better yields expected 2H 2025 Improving
Pricing vs costs2025 prices trending lower than 2024; cost improvements to maintain margins Appalachia price guide raised; total cost/ton guidance lowered, maintaining margins near 2025 levels Mixed pricing, better costs
Export marketWeakness in high‑sulfur export netbacks; prioritizing domestic Some inbound export inquiries; domestic still prioritized; potential to flex tons Stabilizing
Royalties businessRecord 2024 volumes; disciplined capital deployment BOE guidance midpoint +~5%; segment EBITDA expense ~14% of revenue Incremental growth
Digital assetsPositive mark‑to‑market impacts; fleet upgrades +$12.9M fair value change in Q2; 542 BTC ($58M) on balance sheet Ongoing

Management Commentary

  • “All operations performed well during the quarter, with the exception of Tunnel Ridge…outlook…improved following the recent completion of a longwall move…higher productivity rates and higher in‑seam yields going forward” — Joe Craft, CEO .
  • “We committed an additional 17.4 million tons…bringing total new commitments secured this year to 35.1 million tons” — Joe Craft .
  • “We are seeing the most encouraging outlook for domestic coal since early 2023, supported by the most favorable regulatory environment in decades…distribution reflects a proactive step to strengthen our balance sheet and increase financial flexibility” — Joe Craft .
  • “Segment adjusted EBITDA expense per ton…decrease…driven by lower maintenance…improved recoveries at River View and Hamilton” — Cary Marshall, CFO .

Q&A Highlights

  • Distribution reset rationale: management emphasized sustainability, flexibility for growth (e.g., data center energy infrastructure, minerals, Gavin Power Plant fund), and stronger after‑tax yields under OBBBA—no immediate deployment announced .
  • 2026 sales visibility: 97% committed for 2025 and 80% for 2026 (up from 61%); potential +0.75–1.0MM tons capacity recovery at Tunnel Ridge; optional 1.0MM+ in IL Basin if markets warrant .
  • Export dynamics: high‑sulfur netbacks remain inferior to domestic; will flex to domestic unless pricing improves; some stabilization and inquiries emerging .
  • Inventory and demand: utilities near equilibrium; purchases aligning with burns vs pile draws; favorable natural gas curve supports coal consumption .
  • Royalties capital allocation: focus on Permian/Delaware; disciplined underwriting; competitive market anticipated with ample auction opportunities .

Estimates Context

  • Q2 2025 reported revenue $547.5M vs S&P Global consensus $583.9M* (miss); EPS $0.46 vs $0.61* (miss). Adjusted EBITDA $161.9M was close to EBITDA consensus of $168.6M* .
  • Drivers of variance: lower realized coal pricing (total coal price/ton $57.92, -11.3% YoY), reduced transportation revenues, and a $25.0M non‑cash impairment; partially offset by higher volumes and +$12.9M change in fair value of digital assets .
  • Implication: Street models likely to reduce Appalachia volumes and price/mix assumptions and reflect a lower distribution rate; cost/ton improvements and increased IL Basin volumes support margin stability in 2H .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Volume resilience with cost discipline: IL Basin led performance; total tons sold +6.8% YoY; cost per ton improving, supporting stable coal margins despite lower pricing .
  • Appalachia recovery in 2H: Tunnel Ridge’s longwall move and better geology expected to lower costs and lift productivity—monitor quarterly cadence .
  • Strong contracting and book visibility: 35.1M YTD commitments; 2025 ~97% committed and 2026 ~80% committed—reduces near‑term price/volume uncertainty .
  • Capital flexibility and distribution reset: $0.60 quarterly distribution and 1.00x Q2 coverage prioritize optionality for growth (e.g., energy infrastructure, minerals) and de‑risk payout amid policy shifts .
  • Policy tailwinds: OBBBA and executive orders bolster baseload generation and data center electrification—constructive for domestic coal demand and pricing stability .
  • Royalty segment steady growth: BOE volumes up and guidance raised; expense ~14% of revenue—accretive, capital‑light growth vector .
  • Watch list: export market netbacks (potential upside), coal price realization trajectory, execution at Tunnel Ridge/Hamilton, and any announced capital deployments (e.g., power assets/data center infrastructure) .