Q1 2025 Intrepid Potash Inc Earnings Call
Thank you for standing by. This is the conference operator. Welcome to the Intrepid Potash Inc. First quarter, 2025 results conference skull. As a reminder, all participants are in listen on the mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.
Speaker Change: To join the question, too, you may press far than one 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 Mapes, Investor Relations. Please go ahead.
Evan Mapes: Good morning everyone. Thank you for joining us to discuss and review Intrepid's first quarter 2025 results.
Speaker Change: With me today is Intrepid CEO , Kevin Crushfield, and CFO Map Preston
Speaker Change: Also available to answer questions during the Q&A, is there VP of Sales and Marketing, Zachry Adams, and VP of Operations, John Gell
Speaker Change: Please be advised that there are marks today in good fordling statements as defined by U.S.
Speaker Change: These four-looking statements are subject to risks and uncertainties, which could cause and trap its actual results to be different from those clearly anticipated, are based on information available to us today, and we assume no obligation to update them.
Speaker Change: These risk-land uncertainties are to scrap and report about the SEC, which are incorporated here by reference.
Speaker Change: During today's call, we will refer to certain non-GAAP financial and operational measures. Reconciliation to the most directly comparable GAAP measures are included in the yesterday's press release, and along with the trepid SEC filings, our blood and trepid potash.com. All now turn the call to our CEO , Kevin Crutchfield.
Kevin Crutchfield: 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.
Speaker Change: I want to thank them for their efforts and congratulate them on helping us achieve.
Strong Safety, Operational and Financial Results to start 2025
Speaker Change: In the first quarter, Intrepid generated the adjusted evadav 16.6 million and adjusted net income of 4.6 million, which compares to prior year adjusted evadav of 7.7 million and adjusted net loss of 3.1 million.
Speaker Change: The improvements and profitability are particularly impressive, given that these are our best figures since the first quarter of 2023 when Potash prices were over 50% higher.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: In the first quarter, we produced 93,000 tons and our cogs per ton came in at $313 $1.
Speaker Change: which represents a 17% improvement from our 2023 baseline figure and a 25% improvement from our recent cogs Preston Peak in the fourth quarter of 2023.
Speaker Change: In Trio, which again was the clear standout, the higher efficiencies from our new minors, restart of our fine line-by-night recovery system, and focus on cost discipline have helped drive sustained improvements to our production and unit economics over the past year.
Speaker Change: 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.
Speaker Change: A strong early season demand and a tight domestic sulfate market.
Speaker Change: 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.
Speaker Change: Quickly on oil field solutions, this segment remains a consistent contributor with high margin business lines.
Speaker Change: We continue to prioritize growing our brine sales while oil field activity near our South Ranch has so far remain 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.
Speaker Change: 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.
Speaker Change: Before I pass the code of mad, I'll end my remarks with some commentary on the broader pot-action agriculture markets.
Starting with Potash [inaudible]
Following January Winterfield programs
Speaker Change: The combination of strong demand and relatively tight supplies led to price increases of $55 per tonne for Potash and $40 per tonne for Trio during the first quarter and we expect to realize a good portion of these increases in our second quarter results.
Speaker Change: As for the global market, third parties have estimated mind maintenance in Eastern Europe and a higher focus on domestic potash consumption in Russia has roughly removed 1.8 million tons from the market.
Speaker Change: On the demand side, the world market is returning to trend-line growth of roughly 2% per year and Potash looks well balanced heading into the second half of 2025.
Moving on to agriculture markets.
Speaker Change: Beneficial tariff treatment for US MCA goods and a weakened dollar has helped support strong US agriculture exports this year.
Speaker Change: Even with all the noise, your-to-date exports for corn are up by about 25 percent, while soybean exports have also been solid.
Speaker Change: 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.
Speaker Change: In addition, we want to remind folks that about 70 percent 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.
Speaker Change: Lastly, while there's concern on behalf of domestic farmers on the potential impact of terrorists.
Speaker Change: Canadian Potash imports are currently exempt, and there seems to be more optimism for trade deals with key partners.
Speaker Change: Putting this all together, we think the outlook for Potash and agriculture markets remains constructive to the end of the day.
So with that I'll now turn it over to Matt
Matt Preston: 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.
Matt Preston: 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 tonsill, which helped partially offset the 20% decrease in our average net realized pricing when compared to last year.
Matt Preston: For 2025, we expect that our potash production will be pretty close to our 2024 results at 285 to 295,000 tons, and we look forward to seeing the benefits of our new primary pond and wind over once our fall harvest begins later this year.
Matt Preston: Our Wendover Potash has been our highest cost production in recent years and improved production at this location is expected to help support our Union Economics in the 2025-2026 production year.
Matt Preston: 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.
Matt Preston: As Kevin mentioned, Trio's cogs for Tom have trended lower over the past year, and with about a year of producing at these rates with an improved cost structure, the expected improvements in our unit economics are fully reflected in our cost of goods sold.
Matt Preston: Looking ahead, we expect our full year 2025 production to be in the range of 235 to 245,000 tons.
Matt Preston: 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 in underlying nutrient pricing.
Matt Preston: Our Earlfield 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.
Matt Preston: 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 oil field related activity.
Matt Preston: For 2025, we don't expect any significant frack 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.
Matt Preston: 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.
Matt Preston: 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 of Apparations season.
Matt Preston: For Potash, we expect our sales volumes to be between 60 to 70,000 tons at an average net-realized sales price in the range of $350 to $360 per ton.
Matt Preston: Intrio, we expect our sales volumes to be between 57 to 67,000 tons at an average net realized sales price in the range of $365 to $375 per ton.
Matt Preston: For our 2025 capital program, we have no changes to our capex guidance of $36 to $42 million For most of this will be spent on sustaining capital, including the sample well at our AMACs cavern at HP
Matt Preston: We expect a permitting process to drill the sample weld to be wrapped up in the second quarter with commissioning of the sample weld complete by the end of July
Matt Preston: Overall, it's been a good start to 2025, and we're excited to see the initiatives we put into place over the past couple of years, meaningfully pay off in the form of reduced cost per ton for both Potash and Trio and improve cash flow, even with lower potash prices compared to last year.
Matt Preston: 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.
Speaker Change: Thank you. We will now begin the question-and-answer session to join the question here. Again, as a reminder, you may press star then one on your telephone keypad. You will hear a ton of calls during your requests. If you are using a speaker phone, please pick up your handset before pressing any keys. To withdraw your question, please press star then one.
Matt Preston: Your first question comes from the line of Flutus Beaumont with UBS Financial, please go ahead.
Lucas Beaumont: Good morning. Yeah, I just wanted to start with the potash pricing expectations are too cute so
Matt Preston: At kind of the 350 sides, you're going to be kind of roughly $10 above we were in the fourth quarter.
Matt Preston: at the same time benchmarks have kind of moved off about $60 a ton. So I just kind of wanted to understand what the timing difference was there on pricing and
Matt Preston: There's something sort of driving while you guys haven't really seen a uplift in the realization there to the same degree that the benchmarks, I guess, would have pointed to, thanks.
[inaudible]
Zachary: Yeah, Lucas. So this is Zachry and kind of specific to that question.
Matt Preston: You know, one piece of that is in the fourth quarter of last year, particularly in the second half of last year, we had a big contract that were priced at a higher differential.
Matt Preston: So those made our overall pricing be higher than it would have been necessarily that we reflected where the ag market was at that time.
Matt Preston: And when we look at where Q2 pricing is projected at for right now versus Q1 pricing with those $55 of increases we talked about we're showing a differential about $43 a ton.
Matt Preston: So we're realizing almost all of that uptake that we saw during first quarter plus we've already kind of captured a little bit of that uptake in first quarter in some of our results there.
Matt Preston: Great, and then I guess just on the production volume side, I mean it seems like it's applicable to kind of both.
Matt Preston: Potash and Trio this year, something based on your production targets for the year and where you are to date for both of them.
Matt Preston: It's implying a year-on-year decline, basically, over a two-year to four-year for the year, so I just wanted to maybe get some context on why you sort of think that'll be softer in the rest of the year, or there may be a...
Matt Preston: A degree of conservatism built in there, and you think you might be able to do a little better when we get to the actual results. Thanks.
Matt Preston: Yeah, thanks for the question. This is John Gellissini and our production profile is based on the last couple of years projects coming online.
Matt Preston: Also, the Windover, as Matt mentioned earlier, the Windover project with our primary pond will see an increase in production.
Matt Preston: from that facility. With Mother Nature, it's difficult to sometimes predict that, but we have a good handle on it, and we feel our forecasts are in line with the projects that we recently put in place.
and no worse.
Speaker Change: Stan Mega just wanted to go on to the Trio Cost Cut of Improvement.
Speaker Change: So that's obviously like improved really strongly, especially this quarter given you're coming up the high production year and you're having sort of record, look like record what sounds volumes are over the past 10 years at least.
Speaker Change: So I'm just wondering if you could kind of help us fry and sort of how we should think about the...
Cost Outlook, they're going forward.
Speaker Change: So beyond this year, so I mean you mentioned the 5 to 10% improvement in the second half, so that's going to get slowed down a little bit.
Speaker Change: which you'd expect is the volume improvement motor rights. If you guys are kind of looking to stabilize your production in sales levels around this year, around this set of levels, should we see any further improvement into 2026 or is 2025 kind of the end of the benefits there? Thanks.
Speaker Change: Yeah, as I said in the prepared remarks, Lucas, I mean, we're really pleased with the results we have so far at 235% but that really fully reflects the improvement not just in our production rates, but also the change in our operating schedule and we removed roughly that 10 to 12 million dollars of annualized production costs that we talked about on prior quarters.
Speaker Change: But you know the 235 to 245,000 tons of trio production is a good steady state for us right now looking forward
Lucas Beaumont: Great, and then just lastly for Kevin, I guess now that you've been here six months, just sort of get your assessment of what you think is going well with the company and where your focus is going to be to drive improvement over the next one to two years.
Thanks. Yeah. Hey, Lucas, good morning. Yeah.
Kevin Crutchfield: You know, first kudos to the teams out in the field for delivering a solid quarter. I think the work that, you know, Intrepid's been doing well before I got here for the last couple years in terms of sort of renewed focus on core assets.
focus on capital investment.
Kevin Crutchfield: in the core assets is really starting to pay dividends. Our focus obviously will be to continue that level of focus on the core assets.
making sure that we are resilient, we're predictable.
Kevin Crutchfield: And we keep the trends going in the right direction. What we don't want is what you know a high beta where we're inconsistent so
Kevin Crutchfield: The focus now is being able to be very consistent, very predictable and maintaining these trend lines. So again, one of our primary focuses is going to be on, you know, volume is the biggest driver that we have to
Control Cost [inaudible]
Kevin Crutchfield: on the trajectory that we would like. So there's going to be an intense focus on that as well as maintaining our cost structure going forward. So hopefully that gives you some context.
Alright, thanks very much [inaudible]
Thank you.
Speaker Change: Your next question comes from the line of Jason Ursaner with Bumbersha told him, please go ahead
Speaker Change: Thank you for taking the questions and congratulations on a really strong quarter. I just wanted to ask, I guess, the cash figure for the end of April versus the end of the quarter is...
Speaker Change: Pretty significant hospital generation in the month of April , just wondering if maybe you could help frame
Speaker Change: Some of the shape of the spring season or kind of catch conversion timing versus the accounting of the catch costs on tons and whether some of the costs can drop out as the season goes along just because it's...
Speaker Change: It's pretty big number in April , is what it seems like.
Matt Preston: Yes, thanks Jason, this is Matt, you know, certainly with the spring season, it's no secret Q2 is our best cash flow generation quarter and this year is no exception. Jason Ursaner, Lucas Beaumont, Matthew Preston, Evan Mapes, Joel Jackson, Evan
Matt Preston: You know, roughly $66 million at the, it's chart May here.
Matt Preston: Yeah, that's probably pretty close to a high point for the year and that's really just normal with our general trend So I think we'll be pretty steady there through Q2 and then you'll pull down a bit as we continue to invest capital here in the second half of the year We just have a natural slowdown certainly from our on the trio sales side
Speaker Change: Okay. And in terms of the commentary on oil field kind of sounded steady as it goes in terms of what you guys do, but that the activity down there sounds pretty resilient. Any update on the next tranche of money from XCO and where the BLM is in the process of evaluating some of it.
Speaker Change: Now, unfortunately, we don't really have any insight on XTO's plans to the extent we do. We promised that you'll be the second to know, or everybody on the call will second to know, but we don't have any insight into Exxon's near term drilling plans, which we did.
Okay.
Speaker Change: And just kind of maybe following up on Lucas' question on capital allocation, just I guess with the cash balance growing obviously you have the capex spend to get through for the year but...
Speaker Change: You know, even with that, I guess just, you know, update the thoughts on on where you're headed.
Speaker Change: with that given that you're going to have kind of a Nikash Malachi for foreseeable future until you decide kind of what you want to do there.
Speaker Change: Yeah, I think we addressed this a little bit last quarter, but it's worth re-emphasizing that our goal is to
Speaker Change: butters the core assets in such a way that they are predictable, they're resilient, they perform consistently and generate cash flows throughout the cycle. We've got enough cash on the balance sheet to get us through.
Speaker Change: It's difficult times, but once we establish that kind of track record, I think the capital allocation discussion becomes a very real discussion with the board on to the extent there is excess free cash flow beyond what we can.
Speaker Change: You know, redeploy internally, then what's the right answer for that? And, you know, we get lots of recommendations and thoughts on that which we greatly appreciate but it's something that's becoming more and more poignant for our board here with the passage of time as our performance continues to improve. Thank you.
Speaker Change: Okay, awesome. Appreciate the answers and congrats again on the on the corner.
Thank you.
Speaker Change: Any seeds that we have no further questions? That concludes the question in answer session. I would like to turn the conference back over to Kevin Crutchfield for any closing remarks.
Kevin Crutchfield: Thank you. I'd like to thank our team just one more time because we can't do this without them. Thank them for their hard work and dedication over the course of the quarter in the last few years. And thank you all for patching in today to listen to our comments and we look forward to keeping you updated as the quarters progress. Have a great day everyone.
Speaker Change: Discused today's conference call, you may disconnect your lines. Thank you for participating and have a pleasant day.