Prepared remarks
Ladies and gentlemen, thank you for joining us and welcome to the LandBridge second quarter 2026 results call. I will now hand the conference over to Mae Herrington, Director of Investor Relations. Mae, please go ahead.
Good morning and thank you for joining LandBridge's second 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 about 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're 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 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.
Thanks, Mae, and good morning, everyone. We are pleased to have delivered another strong quarter of operational and fiscal performance, featuring record-setting revenues and growth across key business categories. Our results reinforce the durability of our business model and the commercial execution we bring to bear across over 325,000 surface acres, strategically located in the heart of the Delaware Basin. Our differentiated strategy remains centered on maximizing the economic output of our surface position through active land management with a diversified revenue stream that drives long-term value and substantial free cash flow. We actively seek and capitalize on opportunities to collaborate with companies across oil and gas development, produced water handling and disposal, and a host of other critical industrial uses, including the long-term digital infrastructure opportunity where momentum is building quickly. Since well before our initial public offering in 2024, we've been focused on West Texas as a future hub of digital infrastructure in the U.S. LandBridge uniquely aggregates the critical elements of data center development that hyperscalers need. Namely, large contiguous sites with favorable permitting, proximity to power, including high-voltage transmission infrastructure, and reliable low-cost natural gas, access to current and planned fiber connectivity, and reliable long duration and diversified water supply at scale. To put an even finer point on the importance of water, LandBridge has unparalleled access to both brackish and treated produced water, as well as ample pore space for responsible disposal, which provides economic upside for data center projects, both on and off our footprint. Due to our vast surface portfolio, we have access to approximately 13.4 million acre-feet of brackish groundwater today, which is more than sufficient to meet long-term water needs for multi-gigawatt data center projects. Our forward-looking approach to digital infrastructure is gaining significant commercial traction, reflecting the quality of our offering and breadth of opportunity in West Texas. Since our last public update, we have continued to bring more high-quality counterparties into the diligence phase as data center momentum continues to build in the Delaware Basin specifically. While we have shared that we generally do not intend to make detailed announcements regarding non-binding agreements, we do think it's important to share with the market that LandBridge is currently under LOI, option, or in late-stage negotiations with seven power and digital infrastructure counterparties, representing more than 10 gigawatts of power generation and data center potential across our footprint. As we continue to work through diligence on these and other opportunities, we expect to share milestones with the market that represent firm and binding agreements as they materialize. While we look forward to capitalizing on these compelling opportunities and others, we expect to continue strategically scaling the LandBridge platform underpinned by our core business segments which have collectively delivered significant shareholder value since our IPO. This quarter we celebrate our second full year as a publicly traded company. And since that time, LandBridge has grown revenue, free cash flow, and adjusted EBITDA by over 150%. All while delivering a total shareholder return of approximately 360%. While that track record speaks for itself, we're more excited about the opportunities ahead of us. Digital infrastructure, expanding pore space demand, and power generation represents some of the very promising tailwinds we see in the compounding industrial ecosystem of West Texas. One final item before turning things over to Scott. Our board has announced unanimous approval for the conversion and redomicile of LandBridge from a Delaware limited liability company to a Texas corporation based on the positive recommendation of the previously announced special committee of independent directors. Scott will discuss the rationale in greater detail, as we believe the conversion has the potential to further expand our investor base and support long-term shareholder value creation. Now I'll turn the call over to Scott.
Thank you, Jason, and good morning. Our second quarter results demonstrate the continued strength and scalability of the LandBridge model. We are delivering on the growth we anticipated and expect to continue this momentum in the second half of the year. We are reaffirming our full year 2026 guidance, which we raised last quarter with expected adjusted EBITDA between $210 million and $230 million for the full fiscal year. Revenue in the second quarter was a record $66.8 million, representing growth of 41% year-over-year and 31% sequentially. This quarter's performance was underpinned by strong contributions across each of our core business segments. Surface use royalties and revenue increased 41% sequentially, driven by an increase in produced water handling volumes as well as an increase in commercial activity across our acreage. Resource sales and royalties rose 1% supported by an increase in water sales on our legacy acreage. Oil and gas royalties posted a 20% sequential increase, primarily driven by higher oil prices during the quarter. It's important to note that our direct exposure to commodity prices remains limited, with oil and gas royalties representing only approximately 5% of our Q2 revenues. Adjusted EBITDA for the quarter was $59.8 million, an increase of 33% sequentially and 41% year-over-year, with a margin of 89%. Cash flow from operations totaled $41.4 million and free cash flow was $40.2 million, an increase of 11% year-over-year with a free cash flow margin of 60%. Our reliably strong cash flow, high margins, and capital-light structure reflect the fundamental strength of our business model. The vast majority of LandBridge revenues are generated through fee-based royalties, leases, and service-related revenues that require minimal capital investment from us. As commercial activity on our acreage intensifies, we participate in that growth through long-duration revenue streams without the need to fund underlying development. To that end, our capital requirements remain modest, with capital expenditures totaling $1.1 million and net cash used in investing activities was $11.3 million, including $10.2 million for a number of bolt-on acquisitions executed in the quarter. We continue to operate with a very disciplined capital allocation strategy, underpinned by the following three elements. First, we continue pursuing accretive acquisitions that strengthen and expand our fee surface position. We continue to leverage our asset scale, identifying opportunities to acquire positions that expand our strategic pore space footprint, enable produced water infrastructure growth, and facilitate scale power and digital infrastructure projects. Our proven active land management strategy is anticipated to create value above underwriting targets over time. Second, we maintain a strong balance sheet with an optimal capital structure, targeting a net leverage ratio of 2x to 2.5x. At quarter end, total liquidity was $269.8 million, including $39.8 million in cash, and $230 million of available borrowing capacity under our revolving credit facility. Total borrowings outstanding were $545.2 million, nearly flat from the $545.5 million at the end of Q1, with no debt maturities until 2030. Our net leverage ratio was 2.5x at the end of the second quarter, compared to 2.7x last quarter. Subsequent to quarter end, we further strengthened our liquidity position increasing our revolving credit facility from $275 million to $375 million with the ability to expand to $475 million and we reduced our borrowing costs by 25 basis points across the pricing grid. That additional capacity combined with no near-term maturities gives us ample flexibility to fund growth while maintaining our target leverage range. Finally, we maintain our ability to return capital to shareholders sustainably. This quarter we declared a $0.12 per share dividend. The Board has also previously approved a $50 million share repurchase program, which we're able to deploy opportunistically through December 2027. As Jason mentioned, our board recently unanimously approved the conversion of LandBridge from a Delaware limited liability company to a Texas corporation. A key factor in this decision is potential for broader index eligibility over time, as many benchmarks, including certain S&P, Russell, and CRSP indexes, are limited to corporations. We believe inclusion in these indexes will expand our eligible investor base, improve trading liquidity, and increase visibility among investors. Collectively, we believe these benefits support our long-term growth strategy and will create value for shareholders over time. To close, this quarter demonstrates exactly what the LandBridge model is designed to do. Grow revenues across diversified recurring revenue streams, convert that growth into outsized free cash flow at an 89% adjusted EBITDA margin and 60% free cash flow margin, and reinvest that cash flow to expand our acreage position, compounding value for shareholders over time. Our core business is strong and growing. Our balance sheet is conservative and now more liquid. Our board has taken a deliberate step towards index eligibility. In our digital infrastructure pipeline, seven counterparties and more than 10 gigawatts of potential is real and progressing. We are confident in the outlook and excited about the opportunities ahead. Thank you. Operator, please open the line for questions.
Questions and answers
Your first question comes from the line of Nicholas Armato with Texas Capital. We plan to expand our acreage position, compounding value for shareholders over time. Our core business is strong and growing. Our balance sheet is conservative and now more liquid. Our board has taken a deliberate step toward index eligibility. In our digital infrastructure pipeline, seven counterparties and more than 10 gigawatts of potential are real and progressing. We are confident in the outlook and excited about the opportunities ahead. Thank you. Operator, please open the line for questions.
Regarding the Delaware landfill deal, can you provide some color on the potential economic impact you expect from the acquisition and, taking a step back, how should we think about the opportunity set for similar waste management acquisitions going forward? Are those opportunities generally tied to WaterBridge? Or does LandBridge have an interest in pursuing acquisitions independently of WaterBridge as the operator?
Yes, good question. This is a fantastic opportunity for both companies. For LandBridge, the acquisition of the surface for $20 million implies a high single-digit run rate going forward with certainly room to blend that down with growth over time, in addition to the option value that exists on the surface outside of just the landfill royalties today. This is 100% a deal that we would do with any other third party. This falls right in the middle of the fairway for us. And so as...
A reminder to mute yourselves locally as needed.
Nick, did we lose you? So I'll start from the top quickly. Ultimately, this is a deal that we're excited about, one that we'd be happy to work through with any third party, whether or not it's WaterBridge. As we view the economics, high single-digit multiple on a go-forward basis, obviously the ability to blend that down as WaterBridge grows its cash flow streams on the site, as well as having some option value on the surface beyond the landfill that's in place today. So again, I think one that we would do with any third party. In this particular case, it sets the royalty rate equal to the other sites that WaterBridge operates on LandBridge, and so there's no asymmetry, which was also important to us here. Yes, yes, sorry for the technical difficulty.
Yes, I did. Just a quick follow-up. On M&A, can you give color on the market today and compare that from an accounting today basis? Are you seeing the wait-and-see execution raise expectations for integration that's not necessarily accretive or native to your development but would otherwise be a good strategic fit within the portfolio?
The M&A pipeline remains incredibly robust, and I think that'll be evident as we work through a few opportunities that are potentially larger in the back half of this year. From our perspective, you've certainly seen probably more of a focus on it since both our success at LandBridge as well as some other activity in the market. That said, we haven't really seen meaningful movement in prices on the opportunities that certainly excite us. You know, we think there's an easier ability to have conviction around some opportunities today that allows us to have a few more conversations that would have been tougher to do pre-IPO, but we don't see a meaningful impact on the economic potential.
Your next question comes from the line of Charles Meade with Johnson Rice. Your line is open. Please go ahead.
I'd like to ask a question about the seven power and digital infrastructure counterparties that you're speaking to. That number is higher than I would have guessed, and so I think that's a positive. But I wonder if you could frame it up a bit more for us. How would that fit versus your expectations, say, 12 months ago for the number of different counterparties you'd be talking to? And if you'd venture, what would you consider success in a year as far as landing or finalizing some projects, some subset of those seven conversations that are currently happening?
Yes, good morning, Charles. Appreciate the thoughtful question. Commercial momentum continues to grow quarter-over-quarter. We've added several to the list just since last quarter, and over the last 12 months it's been incredibly constructive from a commercial standpoint. Even relative to the investor day earlier this year, we've seen substantial momentum. From our seat, we want to continue to be thoughtful in terms of what we provide the market and we don't want to lean into any particular non-binding opportunity. We look forward to circling back as some of these start to firm up. That said, we did think it was important to substantiate our confidence in where we're at today, which was what we were going for with this update. And I'd wrap up by saying we think that there's plenty of room to add to this number even over the next few months. To the second part of your question, what does success look like 12 months from now? I think having multiple of these LOIs and options flipped to firm leases with revenues kicking on by the end of next year is very realistic. There is a lot of enthusiasm for folks getting capacity online quickly. There have been a lot of counterparties who have figured out ways to enable the kickoff of that power ramp quickly, and they look to us as a counterparty that can enable rapid deployment. I would not be surprised if 12 months from now we're discussing several of these successes behind us with likely more in the pipeline.
The follow-up question, more on the historical core of your business, the produced water disposal. You had a big uptick in 2Q versus 1Q, I think it was around 15% sequentially. We were looking for something more like 5%. I'm curious—was this a big number for 2Q? Was that kind of pulling forward the 3Q number, or are you still looking for another big increment up in 3Q?
There was a bit of an acceleration in the second quarter. Kudos to the WaterBridge team for getting some of those assets online earlier than expected. There's ample demand both at WaterBridge and LandBridge for produced water handling infrastructure and pore space, and we were able to see some of that generate a bit sooner than expected, which is great when it happens. We still expect to see a ramp in the back half of this year. It won't be as pronounced as Q1 to Q2 necessarily, although we still expect to see Speedway ramp up its volumes, which will serve as a driver to LandBridge from a royalty perspective.
Your next question comes from the line of Alexander Goldfarb with Piper Sandler.
So, it's good to see this expansion of the data center pipeline discussions. Maybe you can provide more framework around these. Are these final stage, close to being signed? Are these midway? I'm trying to get a sense for how intense the conversations are. And were these being discussed at the beginning of this year, or have these come about in the past few months? Just trying to get a sense of timing from gestation.
Good morning, Alex. These projects are either already signed and being worked through from a diligence perspective or we're in the process of negotiating final documents. This is not just us exchanging emails to see if there's something there. We have signed documents or documents being exchanged at the moment. Some of these recent adds were early-year conversations that hadn't materialized to the point they're at today. We continue to see the momentum and traction we hoped for, and there are more conversations happening beyond these seven. This number can continue to go up over time; we view this as very positive and an incremental addition of several new opportunities relative to one quarter ago.
Are these deals, to the best that you understand, one-stop—meaning they come with their own power plant and their own water solution? And are they pre-leased, meaning they already have users for the data centers, or are some speculative?
The counterparties are a mix of the hyperscalers themselves, the EPCs, and the power generation companies. We have agreements in place with all varieties and more discussions behind that. The demand and value proposition on the LandBridge side will vary by counterparty. There are situations where we are bringing power partners for either the EPC or the hyperscaler as part of the discussion. The land is a critical piece of the discussion, and virtually every discussion includes enabling a water solution, which is a critical point. This is an opportunity set that both WaterBridge and LandBridge can address, depending on the end specification for the user.
Your next question comes from the line of Ben Lund with Goldman Sachs.
There's been the recent directive halting new data center approvals pending the ERCOT audit. How are you thinking about the impact on overall commercial momentum? Does this change the pace at which you'd expect to convert the 10-plus gigawatt pipeline? Or are your conversations largely insulated, given your behind-the-meter power optionality and water access?
The governor's effort is more of an audit and disclosure exercise than an outright moratorium. Much of the large ERCOT queue today is speculative, and this exercise is designed to separate committed and compliant projects from the speculative ones. The governor's focus on grid impact, water sourcing plans, and community impact aligns directly with our platform. All of our contemplated projects are behind the meter, co-located typically, and oftentimes will have net export to the grid, which can reduce ERCOT demand rather than add to it. All current projects plan to use brackish or treated produced water for cooling, so they won't compete with local municipalities for water. Lastly, our sites are large blocks of contiguous acres in areas with massive community support, and we've done the local and broader stakeholder engagement. We feel good about our position. Projects that don't have our value proposition could be extended, but projects like ours will continue to move through quickly, not more slowly.
In the presentation, you show royalty rates have trended higher over time for customers outside of WaterBridge, with new contracts running around $0.14 to $0.15 a barrel. How do you see that $0.15 evolving? Is there room to keep drifting higher as pore space and disposal capacity tighten along the state line? And as your non-WaterBridge volumes grow as a share of the mix, how should we think about that blended rate migrating over the next couple of years?
Both good and connected questions. We expect royalty rates to continue to increase as pore space scarcity plays out. Our thesis has been that access to high-quality pore space along the state line, without the pore pressure concerns seen in many areas, will become increasingly valuable. We've seen increases in royalty rates over the last several years. $0.15 is the prevailing rate today, but we believe there's room for that to go up as produced water volumes, particularly in New Mexico, grow and need an outlet along the state line where we offer much of the solution. On the blended rate side, rates with third parties and WaterBridge should grow above these averages over time. The prevailing rate for new facilities today is $0.15 a barrel; that's what WaterBridge and third parties are paying. WaterBridge does have legacy sites that lower its average today, but overall the average will go up as royalty rates increase.
Your next question comes from the line of Michael Thurow with Pickering Energy Partners.
I'd like to follow up on the digital opportunity set. It sounds like the company is inching closer to some meaningful announcements after outlining the seven customers and commenting that payments could come later next year. What do you see as the main gating items for converting these opportunities into announced projects and revenues? Is it power availability, interconnection times, financing needs, or simply agreements on commercial terms?
Good morning, Michael. It can be a mix, and the discussion points vary by counterparty. Commercial terms are not typically the most contentious items. The time required is often for all parties—power providers, EPCs, hyperscalers—to complete diligence and get comfortable deploying capital in this new market. We're making concerted efforts to get everyone moving quickly, and there is no shortage of interest or effort on either side. There will be a continued focus on ensuring power can be delivered on the expected timeline, which complements diligence. That involves discussions among the power provider, the EPC, and the hyperscaler to ensure the power availability ramp is real and actionable; those discussions are happening in parallel with other diligence.
As a quick follow-up, how would you describe the 10 gigawatts in terms of concentration? Are we talking seven 1- to 1.5-gigawatt opportunities, or is it more nuanced with some larger projects and some smaller ones?
We've intentionally tempered that number to eliminate over-concentration risk. The actual queue today is larger than the number we disclosed, but we are being conservative in how we're voicing that.
There are no further questions at this time. I will now turn the call back to Scott McNeely for closing remarks.
Yes, thanks again for taking the time today on our earnings call. We appreciate everyone's ongoing effort and attention to LandBridge. We're very excited coming out of such a strong quarter with so much momentum stepping into the back half of the year. As always, please feel free to reach out with any follow-up questions. We're happy to stay synced up.
This concludes today's call. Thank you for attending. You may now disconnect.