Intrepid Potash, Inc

on your telephone keypad should you need assistance during the conference call you may signal an operator by pressing star and zero i would now like to turn the conference over to evan mates investor relations please go ahead good morning everyone thank you for joining us to discuss and review intrepid's first quarter 2025 results with me today is intrepid's ceo kevin crushfield and cfo matt preston also available to answer questions during the q a is our VP of Sales and Marketing, Zachary Adams, and VP of Operations, John Galassini. Please be advised that the remarks today include forward-looking statements as defined by U.S. securities laws. These forward-looking statements are subject to risks and uncertainties, which could cause Intrepid's actual results to be different from those currently anticipated, are based on information available to us today, and we assume no obligation to update them. These risks and uncertainties are described in the reports of the SEC, which are incorporated here by reference. During today's call, we will refer to certain non-GAAP financial and operational measures. Reconciliations to most directly comparable GAAP measures are included in yesterday's press release, and along with Intrepid's SEC filings are available at IntrepidPottage.com. I'll now turn the call to our CEO, Kevin Crutchfield.

Thanks, Evan, and good morning, everyone. We appreciate your interest and attendance for today's earnings call. I've now been with Intrepid for about six months, and have been very impressed with the skill, dedication, and quality of work our employees at all of our locations. I want to thank them for their efforts and congratulate them on helping us achieve strong safety, operational, and financial results to start 2025. In the first quarter, Intrepid generated adjusted EBITDA of $16.6 million and adjusted net income of $4.6 million. which compares to prior year adjusted EBITDA of 7.7 million and adjusted net loss of 3.1 million. The improvements in profitability are particularly impressive, given that these are our best figures since the first quarter of 2023, when potash prices were over 50% higher. The solid performance was attributable to several factors, but I want to start by highlighting how our focus on revitalizing Intrepid's core assets has positively impacted our business. Starting in potash, the capital investments we've made over the past few years have helped us achieve our goals of increasing our potash production and improving our unit economics, and we're pleased to share that this continued into the first quarter of 2025. In the first quarter, we produced 93,000 tons, and our COGS per ton came in at $313. which represents a 17% improvement from our 2023 baseline figure and a 25% improvement from our recent COGS per ton peak in the fourth quarter of 2023. In TRIO, which again was the clear standout, the higher efficiencies from our new miners, restart of our fine Langmanite recovery system, and focus on cost discipline have helped to drive sustained improvements to our production and unit economics over the past year. In the first quarter, our production totaled 63,000 tons and our COGS per ton totaled 235, which represents a 22% improvement compared to last year's first quarter. In the first quarter, TRIO also experienced positive market tailwinds, a strong early season demand, and a tight domestic sulfate market. And strengthening potash fundamentals led to a quarterly sales record of 110,000 tons, while our pricing increased to an average of $345 per ton. Quickly on oil field solutions, this segment remains a consistent contributor with high margin business lines. We continue to prioritize growing our brine sales, while oil field activity near our south ranch has so far remained resilient even with the lower oil prices. As for the ranch itself, we're keenly aware of the high demand for these types of assets in the Delaware Basin. It certainly has value to us, but as I said in the last earnings call, to the extent another party sees more value in it than we do, we're always up for a conversation. Before I pass the call to Matt, I'll end my remarks with some commentary on the broader potash and agriculture markets. Starting with potash, following January winterfield programs, The combination of strong demand and relatively tight supplies led to price increases of $55 per ton for potash and $40 per ton for trio during the first quarter, and we expect to realize a good portion of these increases in our second quarter results. As for the global market, third parties have estimated mine maintenance in Eastern Europe and a higher focus on domestic potash consumption in Russia has roughly removed 1.8 million tons from the market. On the demand side, the world market is returning to trendline growth of roughly 2% per year, and potash looks well-balanced heading into the second half of 2025. Moving on to agriculture markets, beneficial tariff treatment for U.S. MCA goods and a weakening dollar has helped support strong U.S. agriculture exports this year. Even with all the noise, year-to-date exports for corn are up by about 25%. while soybean exports have also been solid. This is projected to add further support for forecasts of relatively low crop inventories, and key futures are trading at higher levels compared to where they were during our last earnings call. In addition, we want to remind folks that about 70% of global potash is applied to non-corn and non-soybean crops, and key international crops like palm oil are still quite elevated compared to historical averages. Lastly, while there's concern on behalf of domestic farmers on the potential impact of tariffs, Canadian potash imports are currently exempt, and there seems to be more optimism for trade deals with key partners. Moreover, the current administration has made several comments about potentially offering extra monetary support for farmers for tariff relief, which we did see during their previous term. Putting this all together, we think the outlook for potash in agriculture markets remains constructive. So with that, I'll now turn it over to Matt.

Thank you, Kevin. Starting with our potash segment, in the first quarter, we produced 93,000 tons, an increase of 6,000 tons compared to last year. We've now had higher year-over-year production for four consecutive quarters and continue to see improvements in our unit economics. Solid demand in the first quarter, coupled with the higher production and inventory levels to begin the year, led to a 40% increase in potash tons sold, which helped partially offset the 20% decrease in our average net realized pricing when compared to last year. For 2025, we expect that our potash production will be pretty close to our 2024 results at 285,000 to 295,000 tons, and we look forward to seeing the benefits of our new primary pond in Wendover once our fall harvest begins later this year. Our Wendover potash has been our highest cost production in recent years, and improved production at this location is expected to help support our unit economics in the 2025-2026 production year. Moving on to TRIO, improved production and operational efficiencies and increased pricing have helped turn TRIO into a clear bright spot for Intrepid in the first quarter, where our gross margin of $10.4 million was our third best quarterly result in Intrepid's history. As Kevin mentioned, TRIO's COGS per ton have trended lower over the past year, and with about a year of producing at these rates and with an improved cost structure, the expected improvements in our unit economics are fully reflected in our cost of goods sold. Looking ahead, we expect our full year 2025 production to be in the range of 235,000 to 245,000 tons, about 5% lower than our prior year figures. Given the slightly lower production and general increase in cost levels, we do expect about a 5 to 10% increase in our unit economics in the back half of 2025, but believe TRIO remains well-positioned given the strength and underlying nutrient pricing. Our oil fuel solution segment was steady in the first quarter, with revenue of $4.4 million and gross margin of $1.7 million, or approximately 38% of revenue. While this business remains a solid contributor for folks new to our story, this segment has experienced a bit of quarter-to-quarter volatility due to the timing of water sales and other oilfield-related activity. For 2025, we don't expect any significant frac activity and associated water sales like we had in the third quarter of 2024, although we could still see some quarterly variability, particularly around surface use and easement revenue. Looking ahead, we see our first quarter results, both revenue and gross margin, as a good midpoint when modeling out the rest of the year. In terms of second quarter guidance in our potash and trio segments, we expect another solid quarter as spring application winds down and our potash facilities enter the summer evaporation season. For potash, we expect our sales volumes to be between 60,000 to 70,000 tons at an average net realized sales price in the range of $350 to $360 per ton. In TRIO, we expect our sales volumes to be between 57,000 to 67,000 tons at an average net realized sales price in the range of $365 to $375 per ton. For our 2025 capital program, we have no changes to our CapEx guidance of $36 to $42 million, where most of this will be spent on sustaining capital, including the sample well at our AMAX cavern at HB. We expect the permitting process to drill the sample well to be wrapped up in the second quarter, with commissioning of the sample well complete by the end of July. Overall, it's been a good start to 2025, and we're excited to see the initiatives we've put into place over the past couple years meaningfully pay off in the form of reduced COGS per ton for both potash and TRIO, and improved cash flow, even with lower potash prices compared to last year. While there's been broader market uncertainty, we think we remain very well positioned with a debt-free balance sheet and constructive potash fundamentals, and we look forward to continuing this positive momentum into the rest of 2025. Operator, we're now ready for the Q&A portion of the call.