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HE

HALLADOR ENERGY CO (HNRG)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 was solid operationally despite seasonality and a planned unit outage: revenue rose 10% YoY to $102.9M, net income was $8.2M ($0.19 EPS), and operating cash flow was $11.4M .
  • Results meaningfully beat Wall Street consensus: Revenue $102.9M vs $91.7M*, EPS $0.19 vs -$0.15*, and EBITDA far above the $0.3M* consensus; management cited stronger late‑June pricing, cost efficiency in coal, and resilient baseload dispatch as offsets to the outage and spring softness .
  • Liquidity and balance-sheet flexibility improved via a $35M prepaid energy sale and a June credit amendment deferring a scheduled Oct-25 payment to Jan-26 and adjusting covenants; bank debt ended Q2 at $45M and total liquidity at $42M .
  • Strategic catalysts: active long-term PPA discussions broadened beyond the prior data center developer to include utilities with larger volume appetite; management expects utilities to offer longer terms and stronger capacity economics, though no timeline was committed .
  • Near-term trading focus: unit returning to full dispatch in H2, potential PPA announcement (special 8‑K expected if executed), and lighter 2H capex due to ELG timing could support cash generation and sentiment .

What Went Well and What Went Wrong

What Went Well

  • Demand/pricing resilience and operational execution: “We delivered a strong second quarter highlighted by gains across the P&L… [and] higher-than-expected market pricing in late June helped offset [headwinds]” .
  • Commercial momentum: broadened PPA counterparty scope beyond a hyperscaler to include utilities with “compelling scale and execution benefits,” in a market “ramping [in] demand for accredited capacity and resilient baseload power” .
  • Balance sheet and liquidity actions: executed $35M prepaid firm energy sale; amended credit agreement to defer the scheduled Oct-25 payment to Jan-26 and refine covenants; $19M cash collateralization on term loan increased optionality for refinancing .

What Went Wrong

  • Seasonality and planned outage headwinds: one Merom unit was offline most of Q2, and spring shoulder-season softness reduced electric sales vs Q1 ($60.0M in Q2 vs $85.9M in Q1) .
  • Inventory build due to slowed internal shipments during outage; management expects normalization as both units return to full dispatch and shipments accelerate .
  • Lower operating cash flow vs Q1 ($11.4M vs $38.4M) as the outage and softer pricing reduced cash generation, and prior-year Q2 benefited from a larger PPA prepay .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$93.825 $94.8 $117.787 $102.889
Diluted EPS ($USD)-$0.27 —$0.23 $0.19
Net Income ($USD Millions)-$10.204 -$215.8 $9.979 $8.248
Operating Income ($USD Millions)-$7.286 —$13.938 $11.870
EBITDA ($USD Millions)$4.169 —$28.679 $17.609
Operating Cash Flow ($USD Millions)$23.5 $32.5 $38.419 $11.4

Segment revenue breakdown

SegmentQ2 2024Q4 2024Q1 2025Q2 2025
Electric Sales ($USD Millions)$59.979 $69.7 $85.943 $59.976
Coal Sales – 3rd Party ($USD Millions)$32.801 $23.3 $30.185 $38.147
Other Revenue ($USD Millions)$1.045 $1.8 $1.659 $4.766

KPIs and balance sheet

KPIQ4 2024Q1 2025Q2 2025
Total Bank Debt ($USD Millions)$44.0 $23.0 $45.0
Total Liquidity ($USD Millions)$37.8 $69.0 $42.0
Capital Expenditures ($USD Millions)$53.4 (FY24) $11.7 $13.1
Contracted Power Revenue (Energy+Capacity) ($USD Millions, forward book)$685.67 $630.41 $619.73
Total Contracted Revenue – Consolidated ($USD Millions, forward book)$1,146.32 $1,053.09 $991.27

Consensus vs actual (Q2 2025)

MetricConsensus (Q2 2025)Actual (Q2 2025)
Revenue ($USD Millions)$91.731*$102.889
EPS ($USD)-$0.153*$0.19
EBITDA ($USD Millions)$0.338*$17.609

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
CapExFY 2025Initially expected higher (timing incl. ELG work) Full-year similar to 1H; lighter due to ELG-related delays Lowered (timing)
Credit Agreement / Debt RepaymentOct 2025 vs Jan 2026Scheduled Oct-25 repayment Deferred to Jan-26; covenants redefined for 2H 2025 Deferred/terms amended
Prepaid Energy Sale2025–2026 deliveriesN/A$35.0M prepaid firm energy sale; $19.0M deposited as compensating balance to term loan Liquidity enhanced
Long-term PPAMulti‑yearPrior exclusivity with data center developer (Jan–early Jun ‘25) Broadened to utilities and developers; multiple bids under evaluation; no timeline Strategy broadened; timeline not provided

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 & Q1’25)Current Period (Q2’25)Trend
Long-term PPA / Data center demandNon-binding term sheet; exclusivity Jan–early Jun ’25; partner funding up to $5M during exclusivity Exclusivity ended; now engaging utilities + developers; utilities more aggressive on term/volume; special 8‑K likely upon execution Broadening counterparties; capacity economics strengthening
Dispatchable generation valueTransition to IPP; reliability vs intermittent renewables emphasized “Value of reliable baseload assets” highlighted; considering acquisition of additional dispatchable assets Reinforced; acquisitive stance
Gas co‑firing initiativeEvaluating dual‑fuel capabilities Pipeline ~5 miles away; easements work done; economics dependent on PPA structure; will not publish costs until actionable Under evaluation; contingent on PPA
Liquidity/refinancingDebt reduction in FY24; strong operating cash flow $35M prepay; credit amendment defers payment; CFO discussing refinance over 2026 Improved flexibility; active planning
Coal operations efficiencyRestructuring lowered costs; production optimization Improved cost performance and recoveries; inventories elevated due to outage; potential to scale if pricing strengthens; ~3.7M tons FY25 target Efficiency gains; optionality to ramp
CapEx / ELG timingOngoing capex; FY24 $53.4M CapEx lighter in 2H due to ELG delays; full-year similar to 1H Lower near-term capex

Management Commentary

  • “We delivered a strong second quarter highlighted by gains across the P&L… The strength of our remaining unit and higher-than-expected market pricing in late June helped offset [spring softness and a scheduled outage], while our coal operations benefited from improved cost efficiency and stronger recovery rates.” — Brent Bilsland, CEO .
  • “We’re also seeing increased momentum in our commercial strategy to secure a long-term PPA… engaged with a broader slate of potential partners, including utilities whose proposals offer compelling scale and execution benefits.” — CEO .
  • “In late June, we executed a $35,000,000 prepaid firm energy sale… and made minor amendments to our credit agreement, including moving a required principal payment from October 2025 to January 2026.” — CEO .
  • “Electric sales in Q2 were subdued due to typical spring seasonality… and a planned maintenance outage… [but] third-party coal shipments increased, and consolidated revenue was $102.9M.” — CFO .

Q&A Highlights

  • Counterparty diversification and exclusivity: Management views it as a seller’s market, prefers multiple bids, and is unlikely to re‑enter exclusivity; a PPA would be disclosed via special 8‑K upon signing .
  • Gas co‑firing economics: Technically feasible (pipeline proximity, easements groundwork); decision and funding depend on PPA specifics; costs not disclosed until actionable to avoid misleading .
  • Liquidity/refinancing: Potential for additional prepays; CFO expects ability to refinance within/beyond the current bank group over 2026 .
  • CapEx run-rate: 2H 2025 capex expected lighter than initially planned due to ELG timing; full-year similar to 1H .
  • Acquisition appetite: Actively evaluating dispatchable generation assets; sees niche value in coal-fired assets with potential deals moving from slow to fast .

Estimates Context

  • Q2 2025 results vs consensus: Revenue $102.9M vs $91.7M*; EPS $0.19 vs -$0.15*; EBITDA $17.6M vs $0.3M* — broad-based beats driven by stronger late‑June pricing, resilient baseload dispatch, and improved coal cost efficiency despite outage .
  • Coverage depth: 3 EPS estimates, 2 revenue estimates*; expectations likely to adjust upward for FY25 profitability and H2 revenue as units return to full dispatch and shipments accelerate .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • H2 setup is favorable: both units returning to full dispatch, coal shipments to accelerate; watch for improved electric sales and operating cash flow vs Q2 .
  • Strategic catalyst: potential long-term PPA with utilities/data centers; any definitive agreement likely announced via special 8‑K and could rerate the equity .
  • Capacity economics strengthening: utility interest rising and appetite for longer terms/bigger volumes; underscores value of accredited capacity .
  • Liquidity optionality enhanced: $35M prepay, $19M cash collateralization, and covenant deferrals support refinancing flexibility into 2026 .
  • Near-term capex relief: ELG-related timing reduces 2H capex, preserving cash while strategic options evolve .
  • Forward sales visibility: contracted power revenue remains robust ($619.7M), with consolidated forward revenue near $1.0B through 2029, anchoring multi‑year cash flows .
  • Risk watch: seasonality and outage timing can pressure quarterly variability; monitor inventory normalization, spot pricing, and any delays in PPA execution .