DARLING INGREDIENTS INC

Three Months Ended March 29, 2025 Compared to Three Months Ended March 30, 2024

Operating Performance Metrics

Operating performance metrics which management routinely monitors as an indicator of operating performance include:

•Finished product commodity prices

•Segment results

•Foreign currency exchange

•Corporate activities

•Non-U.S. GAAP measures

These indicators and their importance are discussed below.

Finished Product Commodity Prices

Prices for finished product commodities that the Company produces in the Feed Ingredients segment are reported each business day on the Jacobsen Index (the “Jacobsen”), an established North American trading exchange price publisher. The Jacobsen reports industry sales from the prior day's activity by product. Included on the Jacobsen are reported prices for finished products such as protein (primarily meat and bone meal (“MBM”), poultry meal (“PM”) and feather meal (“FM”)), hides, fats (primarily bleachable fancy tallow (“BFT”) and yellow grease (“YG”)) and corn, which is a substitute commodity for the Company’s bakery by-product (“BBP”), as well as a range of other branded and value-added products, which are products of the Company’s Feed Ingredients segment. In the United States and South America, the Company regularly monitors the Jacobsen for MBM, PM, FM, BFT, YG and corn because it provides a daily indication of the Company’s U.S. and Brazilian revenue performance against business plan benchmarks. In Europe and South America, the Company regularly monitors Thomson Reuters (“Reuters”) to track the competing commodities palm oil and soy meal.

Although the Jacobsen and Reuters provide useful metrics of performance, the Company’s finished products are commodities that compete with other commodities such as corn, soybean oil, palm oil complex, soybean meal and heating oil on nutritional and functional values. Therefore, actual pricing for the Company’s finished products, as well as competing products, can be quite volatile. In addition, neither the Jacobsen nor Reuters provides forward or future period pricing for the Company’s commodities. The Jacobsen and Reuters prices quoted below are for delivery of the finished product at a specified location. Although the Company’s prices generally move in concert with reported Jacobsen and Reuters prices, the Company’s actual sales prices for its finished products may vary significantly from the Jacobsen and Reuters because of production and delivery timing differences and because the Company’s finished products are delivered to multiple locations in different geographic regions which utilize alternative price indexes. In addition, certain of the Company’s premium branded finished products may sell at prices that may be higher than the closest product on the related Jacobsen or Reuters index. During the first quarter of fiscal 2025, the Company’s actual sales prices by product trended with the disclosed Jacobsen and Reuters prices.

Average Jacobsen and Reuters prices (at the specified delivery point) for the first quarter of fiscal 2025, compared to average Jacobsen and Reuters prices for the first quarter of fiscal 2024 are as follows:

The following table shows the average Jacobsen and Reuters prices for the first quarter of fiscal 2025, compared to average Jacobsen and Reuters prices for the fourth quarter of fiscal 2024:

Segment Results

Segment operating income for the three months ended March 29, 2025 was $28.4 million, which reflects a decrease of $(108.8) million or (79.3)% as compared to the three months ended March 30, 2024.

(1) Cost of sales and operating expenses includes the cost of raw materials, collection costs of the raw materials and factory expenses including direct labor.

(2) Selling, general and administrative expenses include payroll related costs including incentive pay and stock compensation, insurance related costs, professional fees, IT related costs, travel costs and other costs.

(1) Cost of sales and operating expenses includes the cost of raw materials, collection costs of the raw materials and factory expenses including direct labor.

(2) Selling, general and administrative expenses include payroll related costs including incentive pay and stock compensation, insurance related costs, professional fees, IT related costs, travel costs and other costs.

Feed Ingredients Segment

Raw material volume. In the three months ended March 29, 2025, the raw material processed by the Company’s Feed Ingredients segment totaled approximately 3.09 million metric tons. Compared to the three months ended March 30, 2024, overall raw material volume processed in the Feed Ingredients segment decreased 1.6%.

Sales. Total net sales increased in the Feed Ingredients segment primarily due to the following (in millions of dollars):

Margins. In the Feed Ingredients segment for the three months ended March 29, 2025, the gross margin percentage decreased to 20.3% as compared to 20.7% for the comparable period of fiscal 2024.

Segment operating income. Feed Ingredients operating income for the three months ended March 29, 2025 was $21.0 million, a decrease of $(23.5) million or (52.8)% as compared to the three months ended March 30, 2024. The decrease was primarily due to a contingent consideration liability increase or loss as compared to the prior year liability decrease or gain that more than offset a decrease in selling, general and administrative expenses as compared to fiscal 2024.

Food Ingredients Segment

Raw material volume. In the three months ended March 29, 2025, the raw material processed by the Company’s Food Ingredients segment totaled approximately 329,000 metric tons. Compared to the three months ended March 30, 2024, overall raw material volume processed in the Food Ingredients segment increased approximately 9.7%. The increase was primarily due to increased raw material volumes in China, Europe and South America.

Sales. Total net sales decreased in the Food Ingredients segment primarily due to a decrease in collagen sales volumes and prices.

Margins. In the Food Ingredients segment for the three months ended March 29, 2025, the gross margin percentage increased to 29.3% as compared to 23.8% for the comparable period of fiscal 2024. The increase in margin was primarily due to the impact of an out of period inventory expense adjustment of approximately $25.1 million to prior years cost of sales and operating expenses.

Segment operating income. Food Ingredients operating income was $41.4 million for the three months ended March 29, 2025, an increase of $8.6 million or 26.2% as compared to the three months ended March 30, 2024. The increase in operating income was primarily due to the impact of an out of period inventory expense adjustment to prior years cost of sales and operating expenses that more than offset the impact of lower sales volumes and prices in the current year.

Fuel Ingredients Segment

Raw material volume. In the three months ended March 29, 2025, the raw material processed by the Company’s Fuel Ingredients segment totaled approximately 374,000 metric tons. Compared to the three months ended March 30, 2024, overall raw material volume processed in the Fuel Ingredients segment increased approximately 4.8%.

Sales. Total net sales decreased in the Fuel Ingredients segment primarily due to lower finished product sales volumes.

Margins. In the Fuel Ingredients segment for the three months ended March 29, 2025, the gross margin percentage increased to 19.7% as compared to 19.0% for the comparable period of fiscal 2024. The increase was primarily due to higher finished product prices.

Segment operating income. The Company’s Fuel Ingredients segment operating loss (inclusive of the equity contribution from the DGD Joint Venture) for the three months ended March 29, 2025 was $(20.9) million, a decrease of $(108.7) million or (123.8)% as compared to the same period in fiscal 2024. The decrease in earnings is due to a combination of factors. Most importantly, the renewable fuel industry experienced a significant change in the regulatory environment including issues related to the change from the blenders tax credit (BTC) to the producers tax credit (PTC) in the United States and tariffs on imported feedstocks, leading to a reduction in incentives and a decrease in margins. In addition, the DGD Joint Venture underwent two catalyst turnarounds at the two St. Charles plants in the first quarter of fiscal 2025, lowering total volumes versus the same period in fiscal 2024. Finally, the market mechanisms designed to counterbalance these challenges, including Renewable Identification Numbers (“RINs”), created through the RFS program and state LCFS programs were slow to react and were unable to offset the decrease in value due to the change from the BTC to the PTC.

Foreign Currency Exchange

During the first quarter of fiscal 2025, the euro, the Brazilian real and Canadian dollar weakened against the U.S. dollar as compared to the same period in fiscal 2024. Using actual results for the three months ended March 29, 2025 and using the prior year's average currency rate for the three months ended March 30, 2024, foreign currency translation would result in an increase in operating income of approximately $4.8 million. The average rates for the three months ended March 29, 2025 were €1.00:$1.05, R$1.00:$0.17 and C$1.00:$0.70 as compared to the average rates for the three months ended March 30, 2024 of €1.00:$1.09, R$1.00:$0.20 and C$1.00:$0.74, respectively.

Corporate Activities

Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $10.0 million during the three months ended March 29, 2025, compared to approximately $21.5 million during the three months ended March 30, 2024, a decrease of $(11.5) million. The decrease was primarily due to a decrease in the Company's incentive based compensation.

Acquisition and Integration costs. Acquisition and integration costs were approximately $1.5 million during the three months ended March 29, 2025 as compared to $4.1 million for the same period in fiscal 2024.

Depreciation and Amortization. Depreciation and amortization charges were approximately $1.6 million for the three months ended March 29, 2025 as compared to $2.4 million for the three months ended March 30, 2024.

Interest Expense. Interest expense was $58.0 million during the three months ended March 29, 2025, compared to $62.9 million during the three months ended March 30, 2024, a decrease of $(4.9) million. The decrease in interest expense was primarily due to lower interest paid on revolver borrowings as a result of the reduction of revolver balances outstanding as compared to the same period in fiscal 2024.

Foreign Currency Gain/(Loss). Foreign currency losses were $(1.4) million for the three months ended March 29, 2025 as compared to foreign currency gains of $0.2 million for the three months ended March 30, 2024. The change was due primarily to a decrease in gains on the revaluation of non-functional currency assets and liabilities as compared to the same period of fiscal 2024.

Other Income, net. Other income was $3.3 million in the three months ended March 29, 2025, compared to other income of $8.7 million for the three months ended March 30, 2024. The decrease in other income was primarily due to a decrease in casualty insurance gains that was partially offset by an increase in interest income and other expenses as compared to the same period in fiscal 2024.

Equity in Net Income in Investment of Other Unconsolidated Subsidiaries. The change in this line item is not significant and primarily represents the Company’s pro rata share of the net income from foreign unconsolidated subsidiaries.

Income Taxes. The Company recorded an income tax benefit of $1.2 million for the three months ended March 29, 2025, compared to an income tax expense of $3.9 million recorded in the three months ended March 30, 2024, a decrease in tax expense of $5.1 million, which was primarily due to decreased pre-tax earnings of the Company. The effective tax rate was 4.6% for the three months ended March 29, 2025 and March 30, 2024. The effective tax rate for the three months ended March 29, 2025 differed from the federal statutory rate of 21% due primarily to biofuel tax incentives, the relative mix of earnings among jurisdictions with different tax rates (including foreign withholding taxes and state income taxes), certain taxable income inclusion items in the U.S. based on foreign earnings, certain losses that provided no tax benefit and discrete items including settlement of stock-based compensation awards. The effective tax rate for the three months ended March 30, 2024 differed from the federal statutory rate of 21% due primarily to biofuel tax incentives, the relative mix of earnings among jurisdictions with different tax rates (including foreign withholding taxes and state income taxes) and certain taxable income inclusion items in the U.S. based on foreign earnings. The Company’s effective tax rate excluding the impact of the biofuel tax incentives and discrete items was 21.7% for the three months ended March 29, 2025, compared to 25.4% for the three months ended March 30, 2024.

Non-U.S. GAAP Measures

Adjusted EBITDA is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity. It is presented here not as an alternative to net income, but rather as a measure of the Company's operating performance. Since EBITDA (generally, net income plus interest expense, taxes, depreciation and amortization) is not calculated identically by all companies, the presentation in this report may not be comparable to EBITDA or Adjusted EBITDA presentations disclosed by other companies. Adjusted EBITDA is calculated below and represents for any relevant period, net income/(loss) plus depreciation and amortization, restructuring and asset impairment charges, acquisition and integration costs, change in fair value of contingent consideration, foreign currency loss/(gain), net income/(loss) attributable to non-controlling interests, interest expense, income tax provision, other income/(expense) and equity in net (income)/loss of unconsolidated subsidiaries. Management believes that Adjusted EBITDA is useful in evaluating the Company's operating performance compared to that of other companies in its industry because the calculation of Adjusted EBITDA generally eliminates the effects of financing, income taxes, non-cash and certain other items that may vary for different companies for reasons unrelated to overall operating performance and also believes this information is useful to investors.

The Company’s management uses Adjusted EBITDA as a measure to evaluate performance and for other discretionary purposes. In addition to the foregoing, management also uses or will use Adjusted EBITDA to measure compliance with certain financial covenants under the Company’s Senior Secured Credit Facilities, 6% Notes, 5.25% Notes and 3.625% Notes that were outstanding at March 29, 2025. However, the amounts shown below for Adjusted EBITDA differ from the amounts calculated under similarly titled definitions in the Company’s Senior Secured Credit Facilities, 6%

Notes, 5.25% Notes and 3.625% Notes, as those definitions permit further adjustments to reflect certain other nonrecurring costs, non-cash charges and cash dividends from the DGD Joint Venture. Additionally, the Company evaluates the impact of foreign exchange on operating cash flow, which is defined as segment operating income (loss) plus depreciation and amortization.

Pro forma Adjusted EBITDA to Foreign Currency is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity. It is presented here not as an alternative to net income, but rather as a measure of the Company's operating performance. Management believes Pro forma Adjusted EBITDA to Foreign Currency is useful in evaluating the Company’s operating performance on a constant currency basis and also believes this information is useful to investors.

DGD Adjusted EBITDA is not reflected in the Adjusted EBITDA or the Pro forma Adjusted EBITDA to Foreign Currency. DGD Adjusted EBITDA is not a recognized accounting measure under GAAP; it should not be considered as an alternative to net income or equity in net income of Diamond Green Diesel, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity and is not intended to be a presentation in accordance with GAAP. The Company calculates DGD Adjusted EBITDA by taking DGD’s operating income plus DGD’s depreciation, amortization and accretion expense. Management believes that DGD Adjusted EBITDA is useful in evaluating the Company’s operating performance because the calculation of DGD Adjusted EBITDA generally eliminates non-cash and certain other items at DGD unrelated to overall operating performance and also believes this information is useful to investors. The Company calculates Darling’s Share of DGD Adjusted EBITDA by taking DGD Adjusted EBITDA and then multiplying by 50% to get Darling’s Share of DGD’s Adjusted EBITDA.

Combined Adjusted EBITDA is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity. It is presented here not as an alternative to net income, but rather as a measure of the Company’s operating performance. Combined Adjusted EBITDA consists of Adjusted EBITDA plus DGD Joint Venture Adjusted EBITDA (Darling’s share). Management believes that Combined Adjusted EBITDA is useful in evaluating the Company's operating performance compared to that of other companies in its industry because the calculation of Adjusted EBITDA generally eliminates the effects of financing, income taxes, non-cash and certain other items that may vary for different companies for reasons unrelated to overall operating performance and also believes this information is useful to investors.

Reconciliation of Net Income/(Loss) to (Non-GAAP) Adjusted EBITDA to (Non-GAAP) Pro Forma Adjusted EBITDA to Foreign Currency and to (Non-GAAP) Combined Adjusted EBITDA

First Quarter 2025 as compared to First Quarter 2024

(1) The average rates for the three months ended March 29, 2025 were €1.00:$1.05, R$1.00:$0.17 and C$1.00:$0.70 as compared to the average rates for the three months ended March 30, 2024 of €1.00:$1.09, R$1.00:$0.20 and C$1.00:$0.74, respectively.