Sign in

You're signed outSign in or to get full access.

AR

ALLIANCE RESOURCE PARTNERS LP (ARLP)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered sequential improvements with revenue $571.4M, EPS $0.73, and Adjusted EBITDA $185.8M; year-over-year revenue declined but EPS and Adjusted EBITDA increased due to lower costs and investment income .
  • Results modestly beat Wall Street consensus: EPS $0.73 vs $0.67 and revenue $571.4M vs $567.0M; EBITDA also outperformed internally guided cost metrics, driven by Tunnel Ridge cost resets and Illinois Basin productivity gains (consensus values from S&P Global)* .
  • Guidance tightened for 2025: total sales tons narrowed to 32.50–33.25M (lower high-end), Appalachia tons lowered, total coal pricing range raised at the low end; DD&A raised; oil royalty volumes lowered to reflect Permian timing .
  • Contracting momentum is strong: 2026 committed/priced increased to 29.1M tons (27.5M domestic/1.6M export) vs 26.6M last quarter, improving visibility into 2026 volumes .
  • Potential reaction catalysts: visible margin tailwinds from Tunnel Ridge and lower per-ton costs, DOE coal-plant support programs, and the PJM capacity auction clearing at max prices, all supporting baseload economics and multi-year contracts .

What Went Well and What Went Wrong

What Went Well

  • Tunnel Ridge longwall transition materially improved mining conditions and cut Appalachia cost/ton 11.7% YoY and 12.1% sequential; segment Adjusted EBITDA rose to $54.1M (+44% YoY, +84% sequential) .
  • Illinois Basin productivity improvements and reduced longwall move days supported lower cost/ton (-6.4% YoY) and sustained strong volumes (6.61M tons, +10.8% YoY) .
  • CEO emphasized structurally stronger domestic coal fundamentals tied to AI/data center-driven electricity demand and supportive policy, citing PJM’s capacity auction and normalized utility inventories (~78 days of burn) .

What Went Wrong

  • Coal sales prices remained lower YoY (total $58.78/ton vs $63.57/ton), and Illinois Basin prices declined 9.9% YoY on roll-off of higher-priced legacy contracts .
  • Oil & gas royalties faced weaker commodity pricing (average sales price/BOE $35.68, -10.5% YoY), reducing segment EBITDA to $27.7M (-3.4% YoY) despite volume strength .
  • Appalachia volumes were down 13.3% YoY in Q3 on shipment timing, and management flagged a near-term Q4 cost uptick at Mettiki due to specific geology before resuming cost improvements in 2026 .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$613.6 $540.5 $547.5 $571.4
EPS ($/unit)$0.66 $0.57 $0.46 $0.73
Adjusted EBITDA ($USD Millions)$170.4 $159.9 $161.9 $185.8

Segment breakdown (selected operational KPIs and profitability):

Segment / KPIQ3 2024Q2 2025Q3 2025
Illinois Basin – Tons Sold (M)5.967 6.665 6.611
Illinois Basin – Price ($/ton)$56.61 $51.59 $51.03
Illinois Basin – Adj. EBITDA ($M)$114.6 $114.2 $105.4
Appalachia – Tons Sold (M)2.412 1.717 2.092
Appalachia – Price ($/ton)$80.78 $82.49 $83.28
Appalachia – Adj. EBITDA ($M)$37.5 $29.4 $54.1
Total Coal – Tons Sold (M)8.379 8.382 8.703
Total Coal – Price ($/ton)$63.57 $57.92 $58.78
Total Coal – Adj. EBITDA ($M)$149.3 $141.9 $157.5
Oil & Gas Royalties – BOE Sold (M)0.864 0.880 0.899
Oil & Gas Royalties – Avg Price ($/BOE)$39.87 $40.30 $35.68
Oil & Gas Royalties – Adj. EBITDA ($M)$28.7 $29.9 $27.7
Coal Royalties – Royalty Tons (M)5.109 5.492 7.055
Coal Royalties – Adj. EBITDA ($M)$11.1 $11.8 $17.1

KPIs and balance sheet/cash flow:

KPIQ1 2025Q2 2025Q3 2025
Coal Inventory (M tons)1.4 1.2 0.9
Total Liquidity ($M)$514.3 $499.2 $541.8
Cash ($M)$81.3 $55.0 $94.5
Debt & Finance Leases ($M)$484.1 $477.4 $470.6
Leverage (Debt/TTM Adj. EBITDA)0.76x / 0.63x net 0.77x / 0.69x net 0.75x / 0.60x net
Bitcoins Held (units/$M)513 / $42.3 542 / $58.0 568 / $64.8
Free Cash Flow ($M)$52.7 $79.0 $151.4
Distribution ($/unit)$0.70 $0.60 $0.60
Distribution Coverage (x)0.93x 1.00x 1.37x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Illinois Basin Sales Tons (M)FY202525.00–25.75 25.00–25.50 Tightened (lower high-end)
Appalachia Sales Tons (M)FY20257.75–8.25 7.50–7.75 Lowered
Total Sales Tons (M)FY202532.75–34.00 32.50–33.25 Lowered/tightened
Coal Price/ton – Total ($)FY2025$57–$61 $58–$60 Raised low end/tightened
Seg. Adj. EBITDA Expense/ton – Total ($)FY2025$39–$43 $40–$42 Tightened (higher low end)
Oil Royalty Volumes (000 bbl)FY20251,650–1,750 1,575–1,625 Lowered (Permian timing)
Natural Gas (000 MCF)FY20256,300–6,700 6,300–6,500 Lowered top end
Liquids (000 bbl)FY2025825–875 825–875 Maintained
DD&A ($M)FY2025$280–$300 $295–$305 Raised
Net Interest Expense ($M)FY2025$38–$42 $38–$40 Tightened lower high-end
Total Capex ($M)FY2025$285–$320 $285–$320 Maintained
Maintenance Capex ($M)FY2025$280–$310 $280–$310 Maintained
2025 Committed/Prized (M tons)FY202529.5/2.8/32.3 29.8/3.0/32.8 Raised
2026 Committed/Prized (M tons)FY202625.3/1.3/26.6 27.5/1.6/29.1 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/data center-driven demandAdmin executive orders highlighting AI/data centers and 16% 5-year demand growth; domestic fundamentals strengthening; PJM record peak demand in June Management cites 15–16% YoY utility coal consumption growth across MISO/PJM; analysts project 4–6% annual electricity demand growth; PJM capacity auction cleared at max prices Strengthening
Regulatory/policy supportOBBBA and executive orders seen as supportive of coal baseload; DOE resource adequacy report reinforcing coal’s role DOE coal plant support program engagement described as robust; potential for more funds; utilities actively pursuing upgrades Supportive momentum
Cost execution (Tunnel Ridge/IB)Tunnel Ridge challenges in H1; move completed, expected cost declines in H2 Tunnel Ridge realized improved conditions; Appalachia cost/ton -11.7% YoY and -12.1% QoQ; IB cost/ton -6.4% YoY Improving
Contracting/book visibilityAdded 35.1M new commitments YTD through Q2; 2025 >96% committed 2026 book increased to 29.1M tons; domestic customers prefer 2–3 year fixed price contracts Improving
Oil & gas royalties pricingWeaker crude prices pressure royalties but volumes up in H1 Avg price/BOE fell 10.5% YoY; BOE volumes up; Permian pad now expected early 2026 Mixed (volume strong, pricing softer)
Energy infrastructure investmentsNo coal M&A expected; focus on minerals and plant/infrastructure investments $22.1M invested in LP indirectly owning PJM coal plant; expected attractive cash yields in 2026+ Executing

Management Commentary

  • “Adjusted EBITDA of $185.8 million increased 9% year-over-year and 15% sequentially, reflecting higher sales volumes and lower costs per ton as our operations performed well across the board.” — Joseph W. Craft III, Chairman, President and CEO .
  • “Our contracted position for 2026 is now 29.1 million sales tons, up 9% from last quarter… with utility stockpiles normalizing at approximately 78 days of burn coverage.” — Joseph W. Craft III .
  • “Total coal inventory at quarter end was approximately 950,000 tons, down 1.1 and 0.2 million tons compared to the 2024 quarter and sequential quarter.” — Cary P. Marshall, CFO .
  • “We expect the operating and financial results for the fourth quarter to equal our outstanding 2025 quarter results.” — Joseph W. Craft III .

Q&A Highlights

  • Contract tenors and pricing: Utilities typically sign 2–3 year, fixed-price agreements with escalation in years two/three; some spot or one-year deals remain; indexes are directionally useful but pricing can exceed index .
  • 2026 volumes outlook: Management preliminarily expects ~+2M tons vs 2025, with increases at Tunnel Ridge and Illinois Basin, subject to contracting and basin mix .
  • M&A focus: Prioritized minerals and infrastructure-type investments (e.g., Gavin-like plant deals), not coal mine expansion M&A .
  • DOE program for coal plants: Robust utility interest; potential funding exceeds initial $625M allocation; could extend coal plant lives and increase future demand .
  • Appalachia costs near term: Expect Q4 cost uptick at Mettiki due to geology, not systemic; 2026 outlook for sustained lower Appalachia costs remains intact .

Estimates Context

MetricQ1 2025 Consensus*Q1 2025 ActualQ2 2025 Consensus*Q2 2025 ActualQ3 2025 Consensus*Q3 2025 Actual
EPS ($/unit)0.523*0.57 0.613*0.46 0.670*0.73
Revenue ($USD Millions)556.3*540.5 583.9*547.5 567.0*571.4
  • Q3 2025: EPS beat and revenue beat; prior quarters saw revenue misses and an EPS miss in Q2.
  • Where applicable, EPS and revenue results are likely to prompt upward revisions to H2 cost assumptions and 2026 volume forecasts given contracting momentum, while price per ton expectations may remain conservative due to legacy roll-offs .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Tunnel Ridge and regional cost resets drove margin resilience despite lower YoY pricing; sustained cost benefits should support 2026 margin maintenance even as some Appalachia contracts reprice .
  • Contract book strength (2026 now 29.1M tons) plus PJM auction clearing at max prices align with improving baseload economics; expect continued multi-year fixed-price contracting .
  • Guidance tightening signals operational stability: total tons narrowed, low-end pricing raised, and expenses per ton tightened; DD&A raised reflecting assets placed into service .
  • Royalties: commodity price softness weighed on BOE pricing; volumes remain solid; Permian pad delay shifts volumes to early 2026 — a modest near-term headwind with medium-term upside .
  • Balance sheet and cash generation: low leverage (0.75x; net 0.60x), liquidity $541.8M, and Q3 FCF $151.4M underpin $0.60/unit distribution with 1.37x coverage .
  • Strategic plant investment: $22.1M in a PJM coal plant LP positions ARLP to benefit from tightening power markets; expect attractive cash yields beginning 2026 .
  • Near-term trading setup: potential positive sentiment from estimate beats, visible cost tailwinds, and DOE support momentum; watch Q4 Mettiki geology update and incremental 2026 contracting disclosures at the next call .