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LC

LandBridge Co LLC (LB)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered strong growth on core land economics: revenue $47.5 million (+83% YoY, +8% QoQ) and adjusted EBITDA $42.5 million (+81% YoY, +9% QoQ), sustaining exceptional margins (Adj. EBITDA margin 89%) .
  • Mix shifted further toward fee-based, capital-light surface use royalties; Surface Use Royalties and Revenue set a quarterly record at $34.2 million (+31% QoQ), while resource sales/royalties and oil & gas royalties declined sequentially on lower brackish water sales and net royalty production .
  • FY2025 adjusted EBITDA guidance was updated to $160–$180 million (from $170–$190 million), primarily due to DBR Solar revenue timing; dividend maintained at $0.10 per share (payable Sept 18) .
  • Strategic wins underpin the medium-term growth vector: 10-year pore space reservation with Devon, IPP CCGT option for in-basin power, and a power solutions partnership; management emphasized regulatory tailwinds for distributed, sustainable pore space solutions .
  • Free cash flow rebounded sharply (FCF margin 76% vs 36% in Q1) as working capital compression reversed, supporting liquidity of $95.3 million and lower debt quarter-over-quarter .

What Went Well and What Went Wrong

What Went Well

  • Record surface use royalties and revenue ($34.2 million) drove sequential growth; CFO cited several large renewal payments, new projects (WaterBridge, Desert Environmental), and increased commercial activity on LB lands .
  • High-margin, capital-light model persisted: adjusted EBITDA margin 89% with minimal capex ($1.2 million), and FCF margin expanded to 76% as Q1 working capital headwinds reversed .
  • Strategic agreements reinforce multi-year visibility: 10-year Devon pore space reservation (300,000 bpd capacity starting 2027, 175,000 bpd MVC), IPP CCGT option tied to future data center load, and a power partnership to deliver long-term, low-cost power; “We are the solution to the issue these regulations aim to address” (CEO) .

What Went Wrong

  • Sequential declines in resource sales/royalties (-26%) and oil & gas royalties (-19%) on lower brackish water volumes and net royalty production falling from 923 boe/d (Q1) to 814 boe/d (Q2) .
  • FY2025 adjusted EBITDA guidance lowered to $160–$180 million due to DBR Solar revenue recognition shifting beyond year-end 2025, delaying previously expected near-term uplift .
  • Consensus comparisons: S&P Global shows Q2 revenue and EPS below Street (see Estimates Context) and EBITDA (GAAP) below consensus; the mix shift and timing of renewals/lumpiness create near-term variability versus quarterly run rates .*

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$26.0 $44.0 $47.5
Net Income ($USD Millions)$(57.7) $15.5 $18.5
EBITDA ($USD Millions)$(49.1) $27.6 $31.0
Adjusted EBITDA ($USD Millions)$23.4 $38.8 $42.5
Net Income Margin (%)(222%) 35% 39%
Adjusted EBITDA Margin (%)90% 88% 89%
Cash from Operations ($USD Millions)$16.0 $15.9 $37.3
Free Cash Flow ($USD Millions)$15.7 $15.8 $36.1
Free Cash Flow Margin (%)60% 36% 76%

Segment revenue mix

Revenue Stream ($USD Millions)Q2 2024Q1 2025Q2 2025
Surface Use Royalties & Revenue$14.4 $26.2 $34.2
Resource Sales & Royalties$7.0 $14.4 $10.6
Oil & Gas Royalties$4.5 $3.4 $2.7

KPIs and balance sheet

KPIQ4 2024Q1 2025Q2 2025
Net royalty production (boe/d)1,199 923 814
Total liquidity ($USD Millions)$107.0 $84.9 $95.3
Cash & equivalents ($USD Millions)$37.0 $14.9 $20.3
Debt outstanding ($USD Millions)$385.0 $379.3 $374.3
Net leverage (x)–2.5x 2.4x

Notes:

  • Adjusted EBITDA excludes $9.0 million non-cash incentive unit charges and $2.2 million RSU non-cash charges in Q2; reported net income includes non-cash share-based compensation ($11.3 million) primarily tied to LandBridge Holdings LLC incentive units, which are not dilutive to public ownership .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($USD Millions)FY 2025$170–$190 $160–$180 Lowered (timing of DBR Solar revenue recognition beyond 2025)
Dividend per shareQ3 2025$0.10 (ongoing quarterly) $0.10 payable Sept 18; record Sept 4 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Digital infrastructure/data centersSigned first lease development agreement; $8M deposit; multi-year ramp expected; additive to core land story Hyperscalers’ step-out into Permian seen as “inevitability” but timing uncertain; power and water fundamentals remain compelling Steady interest; timing elongated; still supportive
In-basin power generationEarly-stage discussions on power; need transcends data centers Option with large public IPP for grid-connected CCGT to service prospective data center load; joint release forthcoming Advancing to executable options
Produced water & pore spaceSpeedway pipeline open season; potential 500kbpd capacity and ~$30M annual cash flow when fully online; distributed injection value 10-year Devon pore space reservation (300kbpd; 175kbpd MVC from 2027); regulatory changes favor distributed, sustainable pore space Strengthening strategic moat
Regulatory/macroTX legislative focus on recycling; LB well-positioned via contiguous surface Texas RRC injection pressure guidelines supportive; LB “solution,” not part of the problem Regulatory tailwinds
Revenue mix & margin profileCapital-light model; Adj. EBITDA ~88%; fee-based share ~90% Fee-based revenue at ~94%; Adj. EBITDA margin 89%; record surface royalties Improving mix & resilience
M&A/land footprintExpanded to ~276k acres incl. Wolf Bone Ranch; accretive, contiguous blocks Continued evaluation of value-enhancing acquisitions; Five Point ecosystem as enabler Ongoing pipeline

Management Commentary

  • “LandBridge is executing on a highly diversified and low capex business model, resulting in high EBITDA and cash flow margins.” — CFO Scott McNeely .
  • “We are proud of our performance… LandBridge’s differentiated pore space solution enhances long-term asset value by enabling scalable, distributed water management solutions that align with the Delaware Basin’s evolving regulatory framework.” — CEO Jason Long .
  • “We are the solution to the issue these regulations aim to address, not part of the problem.” — CEO Jason Long on Texas RRC updates .
  • “Today, [fee-based arrangements] account for a record 94% of total revenues.” — CFO Scott McNeely .

Q&A Highlights

  • DBR Solar timing: Management lowered FY2025 adjusted EBITDA guidance as revenue recognition for the DBR Solar opportunity shifted beyond 2025; the opportunity remains intact with partner selection underway .
  • Devon pore space reservation: 10-year agreement securing 300,000 bpd capacity (175,000 bpd MVC) commencing 2027; reflective of operators proactively securing distributed pore space; complementary to WaterBridge’s Speedway project .
  • Speedway pipeline economics: Target up to 500,000 bpd; at full run-rate implies roughly ~$30 million annual royalty cash flow plus surface activity; phasing dependent on FID and ramp .
  • Regulatory stance: Texas injection pressure guidance endorsed; contiguous surface enables distributed injection and lower pressures, aligning with longevity of basin operations .
  • Data center narrative: Fundamentals (land, power, water) are compelling; hyperscaler step-out into Permian viewed as inevitable though first-mover timing and underwriting are rigorous .

Estimates Context

How results compared to S&P Global consensus for Q2 2025:

MetricConsensusActualSurprise
Revenue ($USD)$49,334,700*$47,533,000 Miss (~$1.8M, ~3.6%)*
Primary EPS ($)$0.376*$0.232*Miss (~$0.144)*
EBITDA ($USD)$43,372,490*$31,047,000 Miss (~$12.3M)*
  • FY2025: S&P Global EBITDA consensus $173,890,240* versus company guidance $160–$180 million .
  • Street likely revises near-term quarterly EPS/EBITDA trajectories lower to reflect DBR Solar timing shift and quarterly lumpiness in easement renewals and resource volumes; medium-term EBITDA trajectory should still reflect strengthening fee-based surface economics and strategic projects (Devon pore space, Speedway, IPP CCGT).*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Capital-light model continues to convert revenue into cash at exceptional rates; FCF margin rebounded to 76% as Q1 receivables normalized, bolstering liquidity and deleveraging .
  • Mix shift toward fee-based surface revenues enhances resilience and reduces commodity exposure; adj. EBITDA margin held at 89% despite sequential weakness in resource sales and oil & gas royalties .
  • Guidance reset is timing-driven (DBR Solar) rather than demand-driven; strategic deals (Devon, IPP CCGT, power partnership) support multi-year growth and optionality across energy, water, and digital infrastructure .
  • Near-term trading: Expect scrutiny on quarterly run-rate and Street revisions given Q2 misses versus S&P consensus; watch for Speedway FID and joint IPP release as potential catalysts .
  • Medium-term thesis: Distributed pore space becomes more valuable under evolving Texas rules; contiguous acreage and WaterBridge symbiosis should compound fee-based royalties and surface economics .
  • Dividend discipline maintained at $0.10/share while liquidity stays ample; debt trimmed QoQ and net leverage improved to 2.4x .
  • Monitor execution milestones: Speedway phasing, Devon MVC start in 2027, IPP CCGT project specifics, and additional land acquisitions to densify the footprint .