LB earnings call transcript, November 4, 2026

If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to May Harrington, Director of Investor Relations. May, please go ahead.

Good morning and thank you for joining Lambridge's third quarter 2026 earnings call. I'm joined today by our Chief Executive Officer Jason Long and our Chief Financial Officer Scott McNeely. Before we begin, I'd like to remind you that in this call and the related presentation we will make forward-looking statements regarding our current beliefs, plans, and expectations, which are not guarantees of future performance and 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 our investor presentation and today's conference call will contain discussions of 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 a... 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 the call over to our CEO, Jason Long.

Thank you, May, and good morning, everyone. Delivered another record-setting quarter, reflecting strong performance across each of our core revenue streams and the continued scalability of our business model. This momentum, together with the expected contribution from recent acquisitions, gives us the confidence to raise our full year 2026 adjusted EBITDA. Our strategy has not changed. We actively manage our land to maximize what happens on it, and we collect long-term fee-based revenue from the companies that build and operate there. This quarter showed that model working in three ways. First, we continued to grow our acreage position through acquisitions. During the quarter, we added significant new acreage to our land position, totaling approximately 25,000 service acres across our position. This brings our total acreage to more than 350,000 service acres. The new acreage includes fee surface and mineral-classified surface interest, which enables the surface owner to participate in the upside of the mineral's production. More importantly, these acquisitions add attractive, undeveloped core space positioned outside the overpressured injection zones. Close to the state line. That is exactly what the EMP operators need as a responsible long-term alternative to produce water disposal, and we are already in active discussions with operators about it. Our approach to acquisitions is consistent.

Thank you, Jason, and good morning, everyone. Our results this quarter underscore the continued strength and scalability of our high margin asset light business model and the expected contribution from recent acquisitions beginning in the fourth quarter supports our decision to raise our full year 2026 guidance. We now expect adjusted EBITDA between 220 and 235 million for the full fiscal year compared with our prior range. of 210 to 230 million which raises the midpoint to 227.5 million. Revenue in the third quarter was a record 70.9 million representing growth of 39% year-over-year and 6% sequentially. Given the acquisition discussed by Jason closed at the end of the third quarter, our outperformance was driven by organic growth across all of our key revenue streams. Surface use royalties and revenues were 54.3 million, an increase of 2.1 million sequentially driven by higher produced water handling volumes across our acreage, including increased volumes from the ramping Speedway Phase 1 pipeline, as well as an increase in pipeline easement revenue. Resource sales and royalties were 12.5 million, an increase of 1.4 million sequentially, primarily driven by higher leachian water sales, as well as an increase in sand royalties. Oil and gas royalties were 4.1 million, an increase of 0.5 million sequentially, as net royalty production rose from 773 barrels of oil equivalent per day in the second quarter.

...the opportunities ahead of us. Thank you. Operator, you may now open the line for questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please... Press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking your question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by. While we compile the Q&A roster.

Your next question comes from a line of John McKay of Goldman Sachs. Your line is open. Please go ahead.

Hey, team.

Thank you for the time.

Maybe we'll start on the recent M&A. Appreciate the color on kind of the multiples and where you can get that kind of multiple down to over time. I'm just curious if you can talk about kind of the broader opportunities set here when you're looking at all the, you know, incremental potential M&A you can do on the acreage side, you know. How do we think about what can get you to a $3,000 revenue per acre in terms of like how much acreage is out there that could be of that quality versus, you know, maybe something a little lower said differently if you're guiding to. You know, if you did 10 times on the acquisition price, put your points to three times eventually. How deep is that opportunity set? Thank you. Yeah.

Hey, good morning, John.

So, I mean, obviously very excited about acquisitions. You know, we have a very active ground game and continue to see that M&A pipeline just very robust ahead of us here. When you think through the economics, you know, still able to get deals done at a blended average around this 10 times. When you think through what does it take to get that down to three times? You know, just monetization of the poor space alone could achieve those numbers, both the multiple number, as well as the SUI figure that you just referenced. You know, being intentionally conservative, we think through the timing of monetizing that. But the obvious kind of takeaway is. When we look at all of these ancillary revenue opportunities that exist on the surface, that would just further drive that acquisition multiple down sub three times in addition to the opportunity set delivered by by just the poor space alone. We think there's still just a very deep market in terms of action. Actionable M&A. You know, there's obviously a variety of strategies we're pursuing from the poor space piece to more traditional enablement of oil and gas to even broader power and digital infrastructure and just the broader industrial ecosystem that's needed to support that. So it is it is truly a sprint for us right now, you know, but we remain incredibly thoughtful about the commercial opportunities that exist on each one of these targets that we're looking at to ensure they meet our underwriting criteria. But we think again.

The the opportunity sets robust and we plan to continue working through that. That's great. Thank you. Second one for me is just maybe a clarification on Alpha Digital. Understand, you know, it's not a ton of detail you guys can share right now, but what would it be fair to assume that, you know, if they're executing this lease with you and are comfortable moving forward, they're at least, you know, close to the finish line on kind of signing their anchor customer and maybe that's something we could hear about relatively soon. Yeah, I would expect that to be a more near term announcement. You know, my expectation there would be not converting this to a lease unless there was a healthy amount of confidence that they're closed. Understood.

Thank you for the time.

Thanks, John.

Your next question comes from a line.

Good morning, guys, and congrats on a very strong quarter update.

Hey, good morning.

Morning to start. on the water disposal side of your business. Given the changes we've seen at the Texas Railroad Commission, do you anticipate any changes in the regulatory environment on water disposal? And then just another comment on you to speak to as well. But as I recall, you guys have largely led regulatory tightening within that body. So effectively, a new administration could strengthen your competitive position in the market. Is that a fair assessment? Yeah.

Hey, morning again, Derek.

You know, a great kind of joint land bridge water bridge question there. You know, we we don't expect any abrupt change. Now, produce water is regulated. But your point, if anything, this is going to. Further strengthen our position here, and that's largely due to our historically conservative approach to permitting and then on the water bridge side, constructing infrastructure. I mean, if you just go through just a real quick handful of very relevant points, I mean, first. When you look at how these Texas regulatory bodies are actually structured, I mean, they're built for continuity. They're built for stability. And so even an election like we just saw is really not going to lead to some kind of drastic change in policy at all within the near term, whether that's within the. Railroad Commission, the TCQ or any other state regulatory bodies that it takes time for change to happen. And we're still a long ways away from even knowing if there's change coming. But second, and I think just as important is, you know, we have both Lammers and Waterbridge have built an. Outstanding relationship with all of these regulators and all of these regulatory bodies. And we don't see that changing as a result of an election. You know, we will continue to stay transparent. You'll continue to work with them and coordinate with them. And that has typically led to great results for us. You know, but third.

And most importantly, we've always been very conservative about how we thought poor space should be managed and how ultimately operators should permit site and build their infrastructure. And I think to your point, you know, spreading rather forcing operators to spread their footprint across a wide. Geographic footprint is just a responsible way to go about business. You avoid introducing risks such as poor pressure and other risks. And ultimately, we see just much more responsibility and longevity that comes with that approach. And, you know, when the railroad community. Commission last year even tightened its permitting guidelines. We put out very public support endorsing that change because it already really reflects how we have both water bridge and land bridge operate. I mean, so, you know, to summarize still too early to know whether there's any change coming, but to the extent it does come. I think we're incredibly well positioned relative to other operators who have just been towing the line and have much more exposure to even small changes in policy. You know, given that we operate so well inside those limits, it should ultimately drive, I think, more success to land. Bridge, you know, as it is just delivering candidly a much more responsible platform for water disposal relative to other options. Great. And then on my follow up, I wanted to focus on the recent surface acquisitions while I realize you're holding.

Back the exact location for competitive reasons. Maybe if you could just speak to when you might be in a position to discuss the growth initiatives you have from that surface and further the market opportunity for additional surface acquisitions. In the Delaware. Yeah, I'll start with the second. I mean, as I mentioned to John's question, you know, we still see just a very robust M&A opportunity set ahead of us and are continuing to move down that as quickly and prudently. As we can, which is what's leading us to being somewhat sensitive in terms of the success that we've had so far. Now, when will we divulge or disclose more information? I think that's something we're just going to have to evaluate on a quarter by quarter basis. You know, I think we're very eager to share our success and be transparent with the market about everything related to our business with the caveat that we need to remain mindful of just commercials and students. And the last thing we want to do is hinder the success of our business by over disclosing. Not necessarily. And so it's a bit of a balancing act, but we understand the market's desire to learn more. We're excited to share that. Appreciate that.

Thanks for your time.

Thanks, Derek.

Your next question.

Hey, morning down there.

And I guess maybe I'll say welcome to living in New York, given how the election went there. Uh, so sorry, just a little, little, little New York. Uh, so two questions here. The first one just goes to the election. Uh, appreciate your responses on the data centers and, and. Poor space. But if we think about like potential for a windfall tax or, you know, tougher regulations on oil companies, et cetera, are you concerned at all that? Like, you know, the activity in the Permian dials back and therefore. There's less demand for water for what you guys provide. I'm just sort of curious on that. Obviously, I'm taking sort of an extreme, but, you know, the way the market is reacting, I think that's the way the market is thinking. So just trying to understand. Sort of what a worst case could be. And maybe if you frame it on what you've seen historically under prior, you know, heavy Democrat administrations, whether it's locally or out of out of Washington. Yeah.

Hey, good morning, Alex.

You know, obviously it's been a bit here in Texas since we've had a different, you know, political party at the helm, but can point to some analogs, I think, in Washington. I mean, at the end of the day, you know, I think. Texas is an oil and gas company through and through. I don't think that is a partisan issue necessarily. You know, we're obviously keeping a close eye on how all of the various impacts of this recent election could ultimately flow through, but we don't see any kind of reaction from any of our customers. At this point, I appreciate in early discussions to suggest any concerns about things slowing down. And so we will, you know, we will continue to watch, you know, obviously closely there, you know, but historically speaking, I mean. These E&P operators, which obviously, you know, we are ultimately exposed to their activity volumetrically, are going to be driven by economics. And so as long as the commodity price environment is constructive and, you know, that's going to be a byproduct of demand and other factors, I think we'll continue. To see activity in the Delaware in particular continue to improve. And I think there's there's a reason we're in the Delaware. Right. I mean, it is the best economics in the U.S. as it relates to oil and gas production. And so I think. You know, unlike some other basins, which may be a little bit more exposed to, you know, changes in the commodity price environment or deterioration of the macro in the Delaware, you know, even when commodity prices were soft and softening last year.

We still had fantastic success at land purchase. So, I mean, that's what I would wrap up with is ultimately look at the success we've had at our company through varying commodity price cycles, even over the last few years. And I think of the 10 or so quarters we've been public. We've had quarter over quarter growth, nine of those 10. And that includes the first six or so quarters after being public and commodity prices declined following our IPO. So, I mean, I think we still feel incredibly optimistic kind of stepping into next year. You know, again, keeping a close eye on what could or could not change. But as of today, I mean, I think we're still in a fantastic position to execute across all aspects of our business. Okay. So just to follow up there. So if I understand you correctly, it doesn't sound like this year because of where oil went, the Iran war that. There was a flood of activity that you're worried about unwinding. Is that the case? That's what you're saying? I think that's a very big piece of it. I mean, we haven't seen, I would say, an irrational rampant activity in a reaction to near-term commodity. prices this year for a number of reasons. And so any kind of unwind, as you put it, next year, I think is just not an accurate way to look at it because there's nothing massive to unwind. It has been largely a status quo year for us here. Okay. And then the second question is, I understand you don't want to provide the actual details on the alpha economics, so just sort of big picture. You said it falls within, I think you said a 10 million to 20 million per gig.

framework. So that would sound like if it's a two gig project, there's a potential for 20 or 40 million. Just trying to understand one, if that's the correct interpretation, then two, is there some initial ground rent that is paid? Or is that really immaterial and it's not until the facility is fully up and running that we'll see this, I guess, what would be an aggregate 20 to 40 million in total? I'm assuming that's an annual payment. Just trying to understand sort of big picture. Yeah, we expect to see ground rents starting to come in next year. As you think through the ability to scale this site to two gigawatts, those numbers that you put out, I think, are the right way to think about it.

Okay. Okay. So my 20 to 40 million per year, is that sort of a correct range, right? That's right. But I don't want to give you the impression that is going to be a next year, you know, as we've spoken to kind of the timing, initial timing of the ramp. But yeah, as we think through the facility. You know, an aggregate kind of scaling up over the next several years. That is that is the target. That is the expectation on our side. OK, thank you. Thank you.

There are no further questions at this time. I will now turn the call back to Scott McNeely.

for closing remarks. Again, we appreciate everyone's time today. It's an exciting time at our business. We've got a lot of really great things going on. We look forward to sharing more details with you all. But in the interim, please feel free to reach out. We can be helpful. Thank you.

This concludes today's call.

Thank you for attending.

You may now disconnect.