Earnings call transcript: LandBridge Co LLC Q1 2025 sees revenue growth

LandBridge Co LLC reported its Q1 2025 earnings, showcasing a robust financial performance with significant revenue growth. The company achieved revenues of $44 million, reflecting a 20% sequential increase and a 131% year-over-year rise. With a market capitalization of $5.96 billion and an impressive 237.88% return over the past year according to InvestingPro, LandBridge has demonstrated strong momentum. Despite the positive revenue results, the company’s stock price experienced a decline of 5.26% following the earnings release, closing at $77.99, which is down from its recent highs.

Key Takeaways

• Revenue increased by 131% year-over-year, reaching $44 million.
• Adjusted EBITDA was recorded at $38.8 million, with an 88% margin.
• Stock price dropped by 5.26% post-earnings announcement.
• The company declared a dividend of $0.10 per Class A share.
• New projects and acquisitions are driving significant growth.

Company Performance

LandBridge Co LLC demonstrated strong performance in Q1 2025, driven by strategic acquisitions and expanding infrastructure projects. The company’s revenue growth outpaced industry trends, reflecting its strategic positioning and diversified revenue streams. InvestingPro analysis reveals a strong financial health score of 2.68 (rated as GOOD), with particularly high marks in cash flow management. The acquisition of Wolfbone Ranch significantly contributed to increased water handling capacity, enhancing the company’s revenue from non-oil and gas streams. InvestingPro subscribers have access to 13 additional key insights about LandBridge’s financial health and growth prospects through the comprehensive Pro Research Report.

Financial Highlights

• Revenue: $44 million, up 20% sequentially and 131% year-over-year.
• Adjusted EBITDA: $38.8 million, representing an 88% margin.
• Free Cash Flow: $15.8 million, with a 36% margin.
• Total Liquidity: $84.9 million.
• Dividend declared: $0.10 per Class A share.

Earnings vs. Forecast

LandBridge Co LLC reported an actual earnings per share (EPS) of $0.3837. The revenue of $44 million indicates a strong performance, though the EPS figures were not directly compared to analyst forecasts in the available data.

Market Reaction

Following the earnings announcement, LandBridge’s stock price fell by 5.26%, closing at $77.99. This decline contrasts with the company’s strong revenue growth, suggesting that investors may have had higher expectations or concerns about future profitability. According to InvestingPro data, analyst price targets range from $65 to $88, with the stock trading at a notably high P/E ratio of 946.19. The stock remains within its 52-week range, which peaked at $84.7, and appears slightly overvalued based on InvestingPro’s Fair Value analysis.

Outlook & Guidance

Looking ahead, LandBridge Co LLC is optimistic about its growth prospects, particularly in water handling and infrastructure development. The company maintains a healthy financial position with a current ratio of 3.7, indicating strong liquidity to fund its growth initiatives. The company plans to bring the first phase of its Speedway pipeline project online by Q4 2025, which is expected to generate over $30 million in annual cash flow. Future guidance suggests continued growth in water volume, potentially outpacing oil volume growth, with InvestingPro analysts anticipating significant sales growth in the current year.

Executive Commentary

CEO Jason Long stated, "We had a strong start to the year, delivering triple-digit revenue and adjusted EBITDA growth." CFO Scott Runealy added, "We are in a fantastic spot to navigate this year going forward," highlighting the company’s strategic positioning and growth potential.

Risks and Challenges

• Potential slowdown in Permian production could impact future growth.
• Market volatility and investor sentiment may affect stock performance.
• Dependence on infrastructure projects for revenue growth.
• Competition from other infrastructure and energy companies.
• Regulatory changes impacting water handling and infrastructure.

Q&A

During the earnings call, analysts inquired about the stability of Permian activity levels and the company’s exploration of desalination opportunities. Executives emphasized the stable development plans of producers and the potential for growth in digital infrastructure and power generation projects.

Full transcript - LandBridge Co LLC (LB) Q1 2025:

Desiree, Conference Operator: Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Landbridge First Quarter twenty twenty five Results. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer I would now like to turn the conference over to Jake Rometra, Vice President of Finance.

You may begin.

Jake Rometra, Vice President of Finance, Landbridge: Good morning, everyone, and thank you for joining the Landbridge first quarter twenty twenty five earnings call. I’m joined today by our CEO, Jason Long and our CFO, Scott Runealy. Before we begin, I’d like to remind you that in this call and related presentation, we will make forward looking statements regarding our current beliefs, plans and expectations, which are not guarantees of future performance and which are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from results and events contemplated by such forward looking statements. You are cautioned not to place undue reliance on forward looking statements. Please refer to the risk factors and other cautionary statements included in our filings with the SEC.

I would also like to point out that in our investor presentation and today’s conference call, we’ll contain discussions on non GAAP financial measures, which we believe are useful in evaluating our performance. These supplemental measures should not be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. Reconciliations to the most directly comparable GAAP measures are included in our earnings release and the appendix of today’s accompanying presentation. I’ll now turn over the call to our Chief Executive Officer, Jason Long. Thank you, Jake.

We had

Jason Long, CEO, Landbridge: a strong start to the year, delivering triple digit revenue and adjusted EBITDA growth year over year of 131129%, respectively, while maintaining an adjusted EBITDA margin of 88%. Since we last reported results, the broader economy has experienced growing macroeconomic volatility. Against that backdrop, I want to begin today by reiterating the core elements of our business model that give us confidence in our ability to continue delivering strong revenue growth and profitability across economic cycles and market variability. First, we benefit from diversified revenue streams, the majority of which are not directly tied to oil and gas prices. We believe this dynamic greatly insulates our exposure to periodic market and macro volatility.

In fact, non oil and gas royalty revenue streams, including surface use royalties and revenues and resource sales and royalties accounted for approximately 92 of overall revenue during the first quarter, up from approximately 88% last quarter. As we have highlighted before, our surface acreage is strategically located for a broad range of critical land uses, and this allows us to be somewhat agnostic to the quarter to quarter volatility that is common with crude and gas prices. Second, a key attribute of our business model is entering into agreements under which our customers bear responsibility for substantially all operating and capital expenditures related to their operations and development projects on our land. With limited OpEx and CapEx, we are well positioned to continue generating strong EBITDA margins and robust cash flow. Finally, the need for water handling infrastructure in the Delaware Basin continues to be an important driver of business for us through our affiliate company Waterbridge.

And we have seen near to medium term demand for those services to continue to grow. In April, Waterbridge announced an open season process for a new large diameter gathering and transportation pipeline, the Speedway pipeline, which will connect Eddy and Lee Counties in New Mexico to our out of basin pore space in the Central Basin Platform. Speedway will provide operators in the Northern Delaware Basin access to our contiguous pore space, a key resource for the sustainable handling of produced water in the Northern Delaware Basin. Based on these factors, we are confident in the resilience of our business model and we will continue to advance our active land management strategy in 2025. We are already seeing strong growth driven by the acquisition of the Wolfbone Ranch in late twenty twenty four.

In fact, the Wolfbone Ranch contributed to a greater than 70% quarter over quarter increase in produced water royalty volumes. As a reminder, the Wolfbone Ranch is underpinned by a minimal annual revenue commitment of $25,000,000 for each of the next five years. In short, we are pleased with our momentum and we look forward to continuing to deliver strong results based on the success of our active land management strategy. I’ll now hand things over to Scott to walk through the financials in greater detail. Scott?

Scott Runealy, CFO, Landbridge: Thanks, Jason, and welcome to everyone on the call this morning. As Jason mentioned, we had a great start to 2025. Our first quarter revenues increased to approximately $44,000,000 up 20% sequentially and 131% year over year. Sequential revenue growth for the quarter was driven by resource sales and royalties, which increased 118% attributable to increased brackish water sales and royalty volumes from our newly acquired acreage. Revenue from surface use royalties and revenues increased 3% sequentially driven by a 72% sequential increase in surface use royalty volumes across both legacy and newly acquired acreage.

As a reminder, in the fourth quarter of twenty twenty four, we received an $8,000,000 payment related to the lease development agreement for a data center on our land that drove a significant increase in our surface use revenues. Oil and gas royalties declined 24% sequentially, which was driven by a decrease in net royalty production with volumes falling from $11.99 BOE a day in Q4 twenty twenty four to nine twenty three BOE a day in Q1 twenty twenty five. We delivered strong adjusted EBITDA with $38,800,000 in Q1, representing a sequential increase of 22129% year over year with an 88 adjusted EBITDA margin. We generated free cash flow of approximately $15,800,000 and free cash flow margin of 36%. The quarter over quarter compression in free cash flow and free cash flow margin was a result of higher accounts receivable.

This was directly attributable to significantly increased surface use royalties, resource sales and resource royalties that collectively increased $14,600,000 or approximately 85% in the first quarter twenty twenty five as compared to the fourth quarter twenty twenty four. Timing of collection of those revenues resulted in a short term impact of free cash flow and free cash flow margin. We ended the quarter with total liquidity of $84,900,000 including cash and cash equivalents of $14,900,000 and $70,000,000 available under our revolving credit facility. Our capital allocation priorities remain the same for 2025, and we continue to execute on these priorities, which, as a reminder, include maintaining a strong balance sheet to maximize financial flexibility over time and identifying and pursuing value enhancing land acquisitions. Alongside our first quarter results, we are pleased to announce that our Board has declared a dividend of $0.10 per Class A share, payable on June 19 to shareholders of record as of June 5.

To conclude, we’re excited by the strong quarter and start to the year, and we remain confident in our growth as we continue to benefit from our diversified, highly resilient revenue streams. And now we’d like to open up the line for questions. Operator?

Desiree, Conference Operator: Thank you. We will now begin the question and answer If you dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speakerphone in your device, And our first question comes from the line of Jackie Cauleyta with Goldman Sachs. Your line is open.

Jackie Cauleyta, Analyst, Goldman Sachs: Hi, good morning. Thank you so much for

Scott Runealy, CFO, Landbridge: morning, Jackie.

Jackie Cauleyta, Analyst, Goldman Sachs: So you touched on it a little bit, but just wanted to talk, we’re starting to see Permian activity levels start to change. How do you think about the broader macro and more specifically how a slowdown in production could impact your produced water handling growth across your acreage?

Scott Runealy, CFO, Landbridge: Yes. No, good morning, Jackie. Thanks for the question. I mean, to start to reiterate what Jason said in the opening remarks, I mean, we’re in a very fortunate position where the vast amount of our business is insulated from any direct commodity price exposure. And we spoke to that having 92% of our business now being those nonmineral royalties, I think, really puts us in a strong spot.

I think the second point that we’d make, when you look at the, call it, the inside look we have on producer activity through our co management of Waterbridge and you couple that with a lot of the public statements that have been made from our major customers along the state lines, so the Devon’s, the ConocoPhillips, the EOG’s and so on, the overarching narrative has been, at least at this immediate moment in time, no change in production expectations or de minimis change in production expectations with a real focus on navigating the current environment through capital and cost synergies. And from our seat, at the moment, we have not heard of any changes to development plans whatsoever. We continue to see a substantial amount of demand for services on Waterbridge side, which would obviously flow through to Landbridge. And that’s true for the near term kind of through the medium term. And so we haven’t any changes in expectations this year on our footprint, again, the most lucrative area for upstream kind of in the Lower 48 here.

So we feel really confident in navigating the current environment. And like everyone else, we’re keeping an eye on things. But based on our strong producer kind of customer base, based on the location geographically we’re in and kind of based on the business model, we think we’re in a really healthy spot, to continue to grow going forward.

Jackie Cauleyta, Analyst, Goldman Sachs: No. Got it. That makes sense. And then pivoting, also touched on the open season and the Speedway pipeline with Waterbridge. I believe that recently closed.

Could you provide us with any details on specifically what the demand for that pipeline looks like? And how you expect the project to drive growth for LB? Any timing or specifically, again, like the produced water handling royalty growth we could see from that outside?

Scott Runealy, CFO, Landbridge: Yes. Mean, the contracts there are getting firmed up now. We would expect to be able to kind of announce the formal outcome of that here in the coming weeks. Generally speaking, I think there’s I mean, as you would expect, a great outcome for Landbridge here. I mean, the pipeline itself kind of stretching from Eddy to Lee County over to the Speed Ranch in the Northeastern part of our footprint It could be up to roughly 500,000 barrels a day of incremental water handling capacity, which would just generate, call it, approximately $30 plus million a year of cash flow once it’s all up and running.

Now that will get sequenced in over time here. We could expect the first, call it, phase of that to come online around year end, so in fourth quarter. So from Lambridge’s perspective, we’d start to see some of those initial surface damage payments kind of get made the back half of this year with volume royalties coming on in fourth quarter and ratcheting up through the first half of next

Desiree, Conference Operator: question comes from the line of Kevin McCarthy with Pickering Energy Partners. Your line is open.

Kevin McCarthy, Analyst, Pickering Energy Partners: Guys. A JPMorgan company recently came out and said they thought oil production in the Permian was rolling over. I guess my question is if Permian oil production across the whole basin is rolling over, what do you think that means for both oil production and then water production, in your part of the world and then the Northern Delaware?

Scott Runealy, CFO, Landbridge: Yeah. It’s a fair question. I mean, I think, again, I’d reiterate some of the answers I just kind of relayed to Jackie. I mean, I think we’re really fortunate where our surface really overlays some of the best rock in the Lower 48. And even the chatter out there at the moment would suggest that a lot of the development is kind of being consolidated here in these more economic areas away from the fringier areas.

And so I would say, by design, we are in a fantastic fantastic spot to navigate this year going forward. I mean so from a produced water perspective, we can like I said, we continue to see very strong demand in that core area here for the near term through the medium term. And so producers certainly haven’t backed off of their development plans through kind of ’twenty seven and ’twenty eight at this point in time, so we would expect to continue to see growth there. So some of the more fringier areas may start to see the impact here, but, I think, fortunately, again, by design, we’re not in those areas, so we feel pretty comfortable, you know, navigating navigating that dynamic should it play out.

Kevin McCarthy, Analyst, Pickering Energy Partners: Gotcha. And then, second question is just any update on, you know, the data centers in West Texas? And maybe just, can

Derrick Whitfield, Analyst, Texas Capital: you talk about, what you’re working on there? Thanks.

Scott Runealy, CFO, Landbridge: Yeah. Yeah. You know, like I mentioned, in November when we signed that initial deal, you know, it’ll be about twelve to eighteen months from that point in time before we come back with, with an update. That that hasn’t changed. I would say traction, you know, remains as strong as it has been.

I would say the the sense that that there is an arms race out there continues to be very real. As you would expect, given the scope of these projects, there’s just a lot of scrutiny going into the underwriting of these locations. I mean, we’re talking $10 plus billion capital projects. And they take a little time, but we continue to see just kind of great momentum in that space, continue to have a lot of discussions despite some of the macro chatter in the background. But I think taking a step back and what’s probably just as attractive to us is a lot of the discussions around around, in basin power at the moment.

I mean, there is this huge demand in West Texas right now for power generation. There’s been a lot of talk about that and how it relates to data centers, but the need really transcends digital infrastructure and touches everywhere. And so we’re having a lot of discussions just more generally on the power side. As you would imagine, those folks need land. Those folks need water.

You know, we’re well positioned to deliver both in a very sophisticated way. And, again, you know, despite how attractive and how enthusiastic we are about the digital infra play, we continue to see more and more momentum more broadly on power and would expect to see some more positive updates on that here, in the near term.

Derrick Whitfield, Analyst, Texas Capital: Appreciate the answers. Thanks, guys. Our

Desiree, Conference Operator: next question comes from the line of Derrick Whitfield with Texas Capital. Your line is open.

Derrick Whitfield, Analyst, Texas Capital: Hey, good morning all. Good morning, Derrick. Perhaps, just wanted to reframe an earlier macro question just to kind of properly think about where how water is going in the basin. Do you have a sense on the underlying growth and produced water volumes across the basin before any activity adjustments? And and where I’m going is if you kind of set aside water oil ratio, the the increase in water oil ratio within a well over time, we are broadly seeing an industry shift to deeper intervals with dermal water wet.

So it seems to me there’s quite a bit of momentum there with water growth preactivity adjustments.

Scott Runealy, CFO, Landbridge: Yeah. No. It’s it’s a great, great flag and a good observation, Derek. I think that that dynamic really holds true, especially if you look at, like, the core area of the state lines, Northern Loving County, kind of South Southwestern through Centralwestern, you know, Lee County as well. I mean, the dynamic we’ve seen over the last few years, is an increase in kind of water oil ratios in that area, over time, and that’s largely due to flatter PDP declines.

And if you look at those wells kind of by vintage, you’ll you can observe that dynamic. And so when you think of kind of those shallower PDP declines in that core area and you couple that with what you just pointed out, which is focus on deeper benches, which are inherently more volumetric on the water standpoint, you’re gonna see water growth meaningfully eclipse, oil growth. Now, you know, I think we’re we haven’t resolved ourselves to, like, the, you know, the growth percentage is x because I think a lot of that does depend on ultimately how producers develop out these deeper benches and at which pace and at what mix. But I think we are comfortable saying that we would expect to see, again, kind of in that core development area, water growth that would eclipse oil growth here for the foreseeable future.

Derrick Whitfield, Analyst, Texas Capital: Terrific. And then, as my follow-up, wanted to ask how you guys are thinking about the desalination opportunities your peers are pursuing? I’m really thinking about this more from the standpoint of a Waterbridge perspective and the power opportunities you just referenced in an earlier question.

Scott Runealy, CFO, Landbridge: Yeah. So, you know, Waterbridge would be the one that kind of really looks into that in partnership with with Five Point, you know, their their capital sponsor. And so, I mean, we have we’ve got a number of pilot projects that we coordinate with Five Point on. Five Point has a strong relationship with Bechtel, which is obviously a big engineering firm that is a thought leader in a lot of this. And so we kind of collectively, Landbridge, Waterbridge, Five Point, continue to really kind of push the envelope, so to speak, to look for solutions that would work here.

Now I know we’ve spoken about it previously as some of our peers out there. While the cost curve continues to improve, there’s a bit more wood to chop, I think, before we get to the point where that’s really feasible at scale. But yes, I mean, at the end of the day, I think from Landbridge’s perspective, you know, the point the point I’d obviously make is, you know, we are ultimately agnostic. I think we’re we’re strong supporters, obviously, if we need these efforts. But at end of the day, all of those efforts are gonna need land, and we would get, you know, the royalty stream, you know, from those efforts.

So it’s more of a Waterbridge thing, but I think Landbridge, obviously happy to accommodate it, would be economically beneficial for us. And obviously, I think it’d be good for the industry and the region as a whole.

Desiree, Conference Operator: That concludes the question and answer session. I would like to turn the call back over to Scott McMinni for closing remarks.

Scott Runealy, CFO, Landbridge: Yes. Thanks again for everyone joining us this morning. Again, another great quarter. Despite the macro noise, we feel really solid heading into the second quarter here and kind of through 2025. Great momentum commercially, great momentum on the M and A front.

We look forward to sharing more news with you all here in a few months on second quarter earnings. But as always, if any incremental follow-up would be helpful, please feel free to reach out. We are happy to hop on the phone. But otherwise, thanks again, have a good weekend.

Desiree, Conference Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you all for joining, and you may now disconnect.

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