Q2 2025 Intrepid Potash Inc Earnings Calls

Speaker #3: Thank you for standing by. This is the conference operator. Welcome to the Intrepid Potash Ink. Second quarter, 2025 results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded.

Speaker #3: After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad.

Speaker #3: 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.

Speaker #4: Good morning, everyone. Thank you for joining us to discuss and review Intrepid's second quarter 2025 results. With me today is Intrepid's CEO, Kevin Crutchfield, and CFO, Matt Preston.

Speaker #4: Our VP of Sales and Marketing, Zachary Adams, will also be available during the Q&A session. Please be advised that comments we'll make today include forward-looking statements as defined by U.S. Securities laws.

Speaker #4: These are based on information available to us today and are subject to risks and uncertainties that are more fully described in the reports we file with the SEC.

Speaker #4: These risks and uncertainties could cause Intrepid's actual results to differ from those currently anticipated, and we assume no obligation to update them. During today's call, we will also refer to certain non-GAAP financial and operational measures.

Speaker #4: Reconciliations to the most directly comparable GAAP measures are included in yesterday's press release. And along with our SEC filings, are available at intrepidpotash.com. I will now turn the call over to our CEO, Kevin Crutchfield.

Speaker #5: Thanks, Evan, and good evening, everyone. We really appreciate your interest in attendance for today's earnings call. Intrepid has been off to a great start to the year, and our second quarter results again exceeded our expectations.

Speaker #5: While we've experienced tailwinds from the broader Potash market, the focus executing our key initiatives throughout the business is paying off, and I'd like to congratulate the team on achieving strong performance across the board.

Speaker #5: In the second quarter, our results were highlighted by generating adjusted EBITDA of 16.4 million and adjusted net income of 6 million. Which compares to our prior year adjusted EBITDA of 9.2 million and adjusted net loss of about 40,000.

Speaker #5: At a level, our strong second quarter performance driven by a combination strong sales volumes where Potash and Trio improved pricing and solid unit economics, resulting from higher production.

Speaker #5: Through the second quarter in Potash, our year-to-date production of 137,000 tons was 8% higher than the same period in 2024, and our cost of goods sold per ton improved by 12% to $323.00 per ton.

Speaker #5: In Trio, our year-to-date production of 132,000 tons was 8% higher than the same period last year, and our cost of goods sold per ton improved by 18% to 234.00 per ton.

Speaker #5: Before getting into the market outlook, I want to first provide an update on our AMAX Cavern sample well project. We successfully drilled the well in July, but unfortunately, we did not find the brine pool that our imaging had showed us as being present.

Speaker #5: Given this outcome, we're continuing our evaluation of options to pursue an injection well and pipeline that would connect the AMAX mine to our HB injection system.

Speaker #5: Timing of construction will depend on further technical review and quantifying permitting requirements. But we'll keep the market informed as we progress our efforts on this front.

Speaker #5: As for the implications without the AMAX brine pool available for our 2026 evaporative season, we now expect a slightly overall brine grade into our HB ponds in 2026, as well as lower near-term Potash production.

Speaker #5: While this wasn't our anticipated outcome, given the complexity of drilling these wells, we're pleased to have successfully drilled into our intended target area and to have also had a well for future brine extraction at AMAX.

Speaker #5: In addition, potash fundamentals remain strong, and improving pricing from the start of the year will help offset some of the impacts related to our modestly lower production forecast.

Speaker #5: Which Matt will detail later in the call. Turning to market commentary, I want to highlight four key points as it relates to Potash. First, tight global supply and strong demand has outpaced supply additions so far in 2025.

Speaker #5: Second, key international contracts were settled at supportive levels that should help provide a pricing floor through year-end. Third, there was a successful summer field program where posted prices increased by $20.00 per ton following the conclusion of the order period.

Speaker #5: And lastly, the Jansen project that was set to come online late next year has been delayed six months to mid-2027 for first production. With the expectation of a multi-year ramp to full capacity.

Speaker #5: Project delays such as this one will help contribute to the continuation of a more balanced market over the next several years. As for agriculture markets, we've seen some weakness in corn and soybean futures over the summer, but there are positives that could help shift this narrative.

Speaker #5: A weak U.S. dollar has so far supported strong corn and soybean exports, which remain well ahead of last year's volumes. Moreover, recent trade deals with major partners have featured U.S. agriculture, which we expect will continue to provide support for exports.

Speaker #5: Looking at international markets, key crops like palm oil, cocoa, and coffee continue to trade at elevated levels as we always want to make re that we mention that non-corn and soybean crops comprise about 70% of global Potash consumption.

Speaker #5: So, relative agriculture weakness in the U.S. doesn't necessarily have significant implications for our potash prices. Overall, I've had a great start to the year and remain constructive on the outlook.

Speaker #5: As I've emphasized on previous calls, we remain focused on making our core operations more durable and more consistent and will prioritize investments that support higher production and lower costs over the long term.

Speaker #5: So that we can fully capitalize on our multi-decade reserve base. So with that, I'll now turn the call over to Matt. So please go ahead, Matt.

Speaker #5: Thank you.

Speaker #6: Thank ou, Kevin. Starting with our Potash segment, our second quarter results wrapped up a great first half of the year. Strong pricing with multiple moves higher after the January field program, led to a net realized sales price of $361.00 per ton in the second quarter.

Speaker #6: Which was up about $50.00 per ton compared the first quarter. Second quarter sales volumes of 69,000 tons were 25% higher than last year, and our segment gross margin of 4.9 million dollars was the best quarterly figure in over a ar.

Speaker #6: Second-quarter Potash production of 44,000 tons was 4,000 tons higher than the same prior year period. While our Potash segment cost of goods sold of $337.00 per ton was a 13% improvement compared to $386.00 per ton in the second quarter of last year.

Speaker #6: Looking ahead, and as we covered in yesterday's press release, poor weather at our HB facility and the lack of brine in AMAX have reduced our near-term potash production forecast.

Speaker #6: First on the weather, we've had above-average rainfall at our HB mine over the past few months, about 50% higher than average. This has resulted in below-average evaporation and reduced potash inventory in our ponds compared to last year.

Speaker #6: Assuming we have average evaporation for the remainder of the summer, our production outlook for the upcoming harvest year has decreased by approximately 20,000 tons. Given fewer tons in our ponds, we'll see this impact in the first half of 2026 due to reduced runtime and an earlier shutdown.

Speaker #6: In response to our lower pond inventory, we plan to shut down our HB mill for a few weeks in September so that we can maximize as much late-season evaporation as possible.

Speaker #6: This will shift 15,000 tons of calendar year 2025 production into the spring of 2026. We have sufficient inventory at our HB facility to meet expected demand for the second half of 2025, and do not expect any significant impacts to our forecasted sales volumes for the remainder of the year.

Speaker #6: Turning to AMAX, the lack of brine in this cavern will reduce our overall brine grades into our HB pond system in 2026, which we expect will decrease our production by an additional 25,000 tons compared to previous estimates.

Speaker #6: Putting this together, we now expect our potash production to be between 270,000 and 280,000 tons for both the 2025 and 2026 calendar years. Moving on to Trio, which remains a clear standout for Intrepid.

Speaker #6: In the second quarter, we sold 70,000 tons at an average net realized sales price of $368.00 per ton. Trio's icing continued to be supported by a tight domestic sulfate market and firm potash values, while an increase in corn acres supported an uptick in nutrient demand.

Speaker #6: Our mine production rates and mill recoveries continued to exceed our ectations with our Trio production totaling 70,000 tons in the second quarter. Trio's cost of goods sold per ton totaled 235.00 in Q2, which was flat sequentially in a 10% improvement from 261.00 per ton, in the second quarter of 2024.

Speaker #6: Overall, our segment gross margin totaled 8.1 million dollars, and we remain encouraged on the look for Trio. Finally, our oilfield solutions segment was again a steady contributor in the second quarter with revenue of 4.3 million dollars and gross margin of 1.3 million dollars, or 30% of revenue.

Speaker #6: Which is in line with our historical average. As for third quarter sales and pricing guidance in potash, we continue to see a stable market for the second half of the year, as evidenced by no change to pricing for the summer field program in June, which was followed by a $20.00 per ton increase after the order period.

Speaker #6: For Q3, we expect our potash sales volumes to be between 55,000 and 65,000 tons, at an average net realized sales price in the range of $375.00 to $385.00 per ton.

Speaker #6: For Trio, we expect our sales volumes to be between 27,000 to 37,000 tons, at an average net realized sales price in the range of $383.00 to $393.00 per ton.

Speaker #6: The third quarter is historically the slowest period for Trio sales, and we expect second-half volumes will be in line with historical averages of the last several years.

Speaker #6: For our 2025 capital program, given the result of our AMAX well, we've reduced our CapEx guidance to 32 to 37 million dollars, as we have deferred the remaining spend on the extraction well and pipeline, while we evaluate our options at HB.

Speaker #6: Overall, it's been a strong year for Intrepid on several fronts. I want to emphasize that our top priorities are setting the company up for long-term success and creating sustained value for our areholders.

Speaker #6: Which starts increasing our production to improve our unit economics. We've been quite successful since we began these efforts a few years ago, so while we hit a near-term speed bump with the AMAX news, as well as the poor weather in Carlsbad this summer, I want to end my remarks by helping frame the context.

Speaker #6: First, we've largely seen the increased production we anticipated when we began refocusing our core assets a couple of ago. Our strong project execution helped our 2024 production come in about 15% above our initial expectations.

Speaker #6: Which gives us confidence in our ability to execute on projects and get back to growing our production. Second, our performance so far this year has been strong, which shouldn't be overlooked.

Speaker #6: Particularly at our east mine, where Trio production costs and margins have improved significantly since the first quarter of 2024. Third, we continue to see improving Potash market fundamentals, and better than expected pricing.

Speaker #6: Which helps offset some of the impacts of lower near-term production. And finally, we remain in a strong financial position to navigate these near-term headwinds on production and execute on the projects necessary to position Intrepid for future sustained success.

Speaker #6: Operator, we're ready for the Q&A portion of the call.

Speaker #2: We will now begin the question and answer session. To join the question queue, you may press star, then the number one on your telephone keypad.

Speaker #2: You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then one.

Speaker #2: We will pause for a moment as callers join the queue. The first question comes from Lucas Beaumont with UBS. Please go ahead.

Speaker #7: Good afternoon. I just wanted to start on the changes to the production timing. Just kind of bear with me on different parts here.

Speaker #7: So, I mean, I think it's kind of clear that the temporary piece linked to rainfall, in the short term, has pushed 15,000 tons of production there into '26.

Speaker #7: But then you've also reduced '26 by 40,000 tons overall, which was the '25 on AMAX. Plus, another portion—I was just confused about out of the 15 that shifted into next year—is that netting off?

Speaker #7: against the change from this year, or is there a larger gap there given the timing shift as well? So I think maybe if you could ind of just walk me through the different parts there and, and how to kind of think about that, that'd be at.

Speaker #6: Yeah, happy do that, Lucas. no, you're right. The, the total impact is, is the 45,000 tons in 2026, but we are, you know, netting that against kind of the shift to 15,000 tons from '25.

Speaker #6: Into the 2026 calendar year, we are down 30,000 tons compared to previous forecasts for the calendar year 2026.

Speaker #7: Right. So, what I was trying to think about then was, what does that kind of mean on a multi-year kind of view?

Speaker #7: Going forward, the production and weather-related factors are temporary, and you would assume that in a normal year, you'd get something normal there.

Speaker #7: So that should reverse into the following year. so I would assume that would be a tailwind into '27. Of 15,000 tons is, is that right?

Speaker #7: And then it'll just be the $25,000 from the lack of the well being successful that will be the medium-term challenge, I guess, until you're able to kind of work on another strategy there.

Speaker #7: Is that right?

Speaker #6: Yeah, man. Yeah, no, if you're looking at it the right way, I an, you know, it's, it's pretty recent news for us on AMAX.

Speaker #6: We are actively evaluating the options to get brine into that AMAX mine longer term and get the resonance time underground.

Speaker #6: You know, as we look forward into, you know, late '26 and '27, you know, e, we do have our Wendover production, which will continue to increase with primary pond seven, you know, starting to ramp up here in the, in the back half of '25 and into 2026.

Speaker #6: And so, you know, as we evaluate options, and, and understand HB a little bit better, we'll tainly keep the market updated, , you know, how fast we can get into that AMAX mine and get brine under there, we'll, 'll start to dictate the, the longer-term forecasts.

Speaker #6: Yeah. Lucas, it's.

Speaker #7: Yeah, mentioned that, you know, our despite the fact that the, there wasn't any brine in, in AMAX, which was, you know, a little bit of a surprise to us based on all the recon that we've e, that it's still a very critical component of the long-term plan for Carlsbad.

Speaker #7: So it's just a function of, of finding the brine and the new injection well to, so we can start filling up that cavity and you'll e it show up in future forecasts.

Speaker #7: Yeah, so I mean, I guess maybe just another way to help frame that for people then. So I mean, you've obviously gone through the project here where you thought there was the brine, you've drilled the well, and, you know, unfortunately, there's success in this case.

Speaker #7: But, so I guess, how long was that sort of lead time of the period to kind of execute on that to help give a feel for what it would take to have another grow effectively?

Speaker #6: Yeah, and if I'm standing your, your question exactly, I mean, that's, that's what we're valuating, evaluating right now. We gotta look at the permit requirements to, to do an injection well and pipeline.

Speaker #6: You know, we had opined there was a brine, you know, that had been under there for a while, and we haven't extraction well and extraction pipeline we could tie into our AMAX system in the near term.

Speaker #6: But without that today, we've got to just kind of go through the necessary steps to look at injection, much like we have for all the other mines.

Speaker #6: at HB, you know, whether it's north, south, or any mine, I think it's important to remember that, you know, these were empty when we started our HB project and, you know, all these started with us injecting brine and having resonance time.

Speaker #6: And, and so, in many ways, AMAX will just be like what we've done before for HB. We hope to get a bit of a head start there, but, you know, unfortunately, that wasn't the case.

Speaker #7: Great. And then I guess just lastly, so I mean, you guys have made, solid progress on your lower production cost per ton the last, I guess a uple of years now.

Speaker #7: So, with the lower production outlook, I'd assume that's going to sort of be negative for cost absorption going forward. I mean, do you think it kind of just helped frame that up for us for the second half and then into 2026?

Speaker #7: That'd be great.

Speaker #6: Yeah, I don't see a huge impact to the second half. I mean, obviously, it's kind that cost of inventory starts to creep up with lower production.

Speaker #6: It, it's a bit progressive as you go. you know, go forward, you know, for 2026, it, it's kind of as simple as, you know, the 40,000 tons is about 12 to 13 percent of our overall Potash production.

Speaker #6: And so, I mean, given our, our larger fixed cost load, I mean, we need to look at ways to get our, our costs down in light of news, but, at face value, I mean, you could expect a, an 8 to 10 percent increase in our cost per ton.

Speaker #6: Unless we can find ways to cut back, which we're actively looking at, and mitigate it to some extent or at least a large extent by sort of the price deck and price ideas that we're seeing out there in the marketplace.

Speaker #6: So, net, net, net, hopefully the, the result that we generate is neutral, even despite of the, the downgrade in production guidance.

Speaker #7: Great. Thanks very much.

Speaker #2: Your next question comes from Jason, your senior with Bumbershoot Holdings.

Speaker #8: Hi. just maybe following up a little bit, on the production. I guess, can you try to frame, you know, all the CapEx that you did, a lot of that started with injection with the resonance time underground, y-you know, this balance between 2025 and 2026 calendar year.

Speaker #8: How does that kind of look versus maybe more of a longer-term view of where your injection rates are overall into the system? With some of that brine kind of getting, saturated over time, maybe over a, a slightly longer timeframe.

Speaker #6: Yeah, I'd do my best to, to answer that, ason. I mean, you ow, you're right. We've, really focused on investing back in ur core assets for HB.

Speaker #6: Our main focus has been keeping injection rates above our extraction rates to keep our caverns full and make sure that we're touching all that potash underground all the time.

Speaker #6: And so really maximizing the, the production out of each of our, our different caverns at HB. I an, going forward, it's, it's largely the same.

Speaker #6: We just wanna make re that, you know, we're, we're keeping our caverns as full as possible. Certainly, as we look to 2026, one of the impacts now is we'll have to just pull on those existing caverns a little bit harder than we otherwise would've liked.

Speaker #6: You know, hoping we'd had one more kind of straw down there at the AMAX mine for the 2026 production. But, man, we're encouraged by the trend.

Speaker #6: Obviously, the success we've had when we've focused on our core assets and, you know, getting that brine underground, we've seen the results.

Speaker #6: And so, like we said on the call, it's a bit a, a speed bump for us for sure, but, but confident in our, in our ability to execute at HB over the long term.

Speaker #8: And brine grade is that mostly the eddy shaft kind top depth tailing off or, or I ess what is, what would cause the brine grade to, to decline a bit?

Speaker #6: Well, we certainly hope AMAX, if there was brine under there, you know, would have had significant residence time, so it would have been a pretty strong brine grade.

Speaker #6: Much like we saw out of the Eddy mine when we got back in there, both from the Eddy shaft as well as the new extraction well we completed a while back.

Speaker #6: I mean, just given that we have one less cavern to pull out of, we'll pull a little harder, which just decreases resonance time overall.

Speaker #6: So, we'll just see a lower brine grade, given a general, you know, reduced resonance time in our existing caverns in 2026.

Speaker #8: Okay. And then, great quarter in terms of cash flow. I think, well, you gave the number as of August here with $87 million in cash.

Speaker #8: The outlook on pricing sounds, you know, relatively constructive. So in terms of the future going forward, it should be okay. At some point, you know, hopefully we’ll get some of the money from Exxon, maybe even the next round of money from Exxon. I think the last couple of calls have talked about oilfield, kind of non-core. So I guess at what point, you know, cash is.

Speaker #8: Accumulating pretty quickly on the balance sheet, and if you look out a year or two, you know, if things go right, there could be a pretty significant amount of CapEx relative to your market cap. I know I've asked about it a number of times, but I guess at what point does the capital allocation question sort of become a pretty clear focus, just given that you're going to have a significant portion of your market cap in cash?

Speaker #6: Yeah. Good, good, good question. Good, good points. We did, we are accumulating some cash, and you asked the question of at what point does the capital allocation discussion become relevant?

Speaker #6: Look, it's, it's always relevant. The board talks about it all the time. And, you know, historically what I've said is we need to continue to focus on the core operations, sort of a restoration plan, getting those things back to what I would refer to as an entitled level of performance.

Speaker #6: Where we're predictable, reliable, we're durable over the, over the long term. And having adequate cash on the balance sheet to see you through sort of volatile market periods.

Speaker #6: So, with that as a backdrop, to the extent that something happened with Exxon, again, we have no idea around that. They have no obligation to share with us their long-term plans, but that is hanging out there.

Speaker #6: And we've spoken to the South Ranch in the past. Then that would bring the capital allocation discussion to the fore with the board.

Speaker #6: And I don't wanna speculate on, on that, but, things are stacking up in favor of, a very robust discussion on, on that front. And what we've gotta do is just continue to execute so that that discussion remains rel-relevant at, at all times.

Speaker #6: So, hopefully 's responsive to your, your inquiry.

Speaker #8: No, I appreciate that. I mean, I think there's limits to what you can say, but it is becoming apparent, you know, the company is a significant cash generator and, uh, I don't know.

Speaker #8: It's a positive problem to have, I guess, at some point, but, appreciate it. And, thanks for answering the question.

Speaker #6: Yeah. Thank ou.

Speaker #2: This concludes the question-and-answer session. I would like to turn the conference back over to Kevin Crutchfield for any closing remarks.

Speaker #9: Thank you again for attending today, and I'd like to give one final thank you once again to our team for their hard work and dedication over the course of the last couple of quarters and for putting together solid levels of performance.

Speaker #9: So, we'll keep you posted in the coming quarters. Thank you again for attending today. Have a good one.