DALLAS, TX -- April 29th, 2025 -- Alliance Resource Partners, L.P. (NASDAQ: ARLP): Stonegate Capital Partners updates coverage on Alliance Resource Partners, L.P. ARLP reported a resilient 1Q25, with lower coal sales volumes and pricing partially offset by oil & gas royalty revenues. Total revenues for the quarter decreased by 17.1% year-over-year to $540.5M, primarily due to a 10.4% decline in coal sales volumes. Net income for the quarter was down to $74.0M compared to $158.1M in 1Q24, primarily due to lower revenues and a decrease in the fair value of digital assets, buoyed in part by a reduction in operating expenses. Adj. EBITDA came in at $159.9M, a 29.0% increase sequentially. Despite macroeconomic uncertainties, ARLP updated its FY25 guidance, buoyed by expectations for higher domestic sales volumes, operational cost efficiencies, and solid contracted commitments. Although near-term pressures on pricing persist, efficiency gains are anticipated to sustain margins comparable to FY24. 

Company Updates:

• Quarterly Results – ARLP reported revenue, adj EBITDA, and adj EPS of $540.5M, $170.4M, and $0.66, respectively. This compares to our/consensus estimates of $581.9M/$556.3M, $159.8M/$152.0M, and $0.55/$0.51, respectively. Pricing decreased from the sequential quarter due to churn in the order book, which is expected to continue as contracts signed in 2022 continue to roll off. Outside coal purchases were significantly lower y/y, down 19.4% to $7.3M. OPM increased to 16.9% due to favorable cost management.
• Coal Operations – ARLP reported coal sales revenue of $468.5M. Coal sales volumes totaled 7.8 million tons, down 10.4% y/y, while pricing decreased by 6.9% to $60.29 per ton. The Illinois Basin segment saw coal sales volumes decrease by 6.1% y/y to 6.04 million tons, largely due to timing of committed sales at the Hamilton mine, while Appalachia coal sales volumes dropped significantly by 22.7% y/y to 1.73 million tons due to challenging mining conditions and increased longwall move days at Tunnel Ridge. Pricing per ton sold decreased by 4.2% in the Illinois Basin to $55.15 and by 8.5% in Appalachia to $78.24, driven by lower domestic and export price realizations.
• Royalty Business – Total royalty revenues for the quarter were down 6.0% y/y, totaling $52.7M. O&G royalties reported a slight decline in BOE volumes sold by 2.0% y/7 to 0.88 million BOE, although the average sales price per BOE was relatively stable, decreasing marginally by 0.5% to $41.00. Coal royalty tons sold decreased by 8.0% to 5.07 million tons, with average revenue per royalty ton declining by 8.3% to $3.11.
• Strong Liquidity and Cash Flow Position – ARLP ended 1Q25 with solid liquidity, holding $514.3M in total liquidity, including $81.3M in cash and $433.0M available under its credit facilities. Free cash flow for the quarter was $52.7M. The Company maintained a consistent quarterly cash distribution of $0.70 per unit, or $2.80 per unit on an annualized basis. Overall, cost initiatives and a growing order book position the company well for the remainder FY25.
• Valuation – We are using an EV/EBITDA framework to inform our ARLP valuation. We are using our F26 expected EBITDA, and an EV/EBITDA range of 6.0x to 6.5x with a midpoint of 6.25x. This arrives at a valuation range of $29.41 to $32.12 with a mid-point of $30.76.

About StonegateStonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking, equity research and capital raising for public and private companies.

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