Thank you for standing by. This is the conference operator. Welcome to the Intrepid Potash, Inc. Fourth Quarter 2024 Results Conference Call. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Should you need assistance during the conference call, you may signal an operator by pressing star and then zero. I would now like to turn the conference over to Evan Mapes, Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining us to discuss and review Intrepid's fourth quarter 2024 results. With me today is Intrepid's CEO, Kevin Crutchfield, and CFO, Matt Preston. Also available to answer questions is our VP of Sales and Marketing, Zachary Adams, and our VP of Operations, John Galasini. Please be advised that the remarks 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, or based upon information available to us today, and we assume no obligation to update them. These risks and uncertainties are described in the reports filed with the SEC, which are incorporated here by reference. During today's call, we refer to certain non-GAAP financial and operational measures. Reconciliations to the most directly comparable GAAP measures are included in yesterday's press release, and along with the Intrepid SEC filings, are available at intrepidpotash.com. I'll now turn the call over to our CEO, Kevin Crutchfield.

Thank you, Evan, and good morning, everyone. We appreciate your interest and attendance for our fourth quarter earnings call this morning. Since joining the company, I've had the pleasure of visiting all of our operating sites, meeting many of our key stakeholders, and speaking with a number of our investors. I want to take this opportunity to quickly introduce myself. My background prior to Intrepid has been spent working for over three decades with and leading various management teams in the extractive industries and most recently in a complementary role as CEO for a company operating in the specialty plant nutrition and sodium and magnesium chloride space. I'm happy to be part of the Intrepid team and I look forward to building on recent accomplishments in driving long-term value creation for our shareholders. Moving on to our results. In the fourth quarter, Intrepid generated adjusted EBITDA of $8.6 million and had an adjusted net loss of $1.4 million, which compares to prior year adjusted EBITDA of $7.1 million and adjusted net loss of $5.2 million respectively. This year's improvements were primarily driven by higher production, and the corresponding benefit to our unit economics, as well as from strong operational execution and cost discipline across the business. Related to these efforts, I'd like to thank our site leadership and all of our employees for their focus and encourage them to maintain the positive momentum. The positive impact from higher production and better unit economics was most pronounced in the back half of 2024. When looking at just the second half of the year, our adjusted EBITDA of $18.5 million was roughly double the same prior year figure. Being able to improve our EBITDA by maintaining the focus on our core assets, even with the backdrop of a lower potash price environment,…

Thank you, Kevin. Before getting into our segment results, I want to touch briefly on the valuation allowance we recorded against our deferred tax assets. Since we are projected to be in the three-year pre-tax book loss within the next year, largely due to the impairment we recorded at our East Mine in 2023, we recorded a valuation allowance against the balance of our deferred tax assets at year-end. You can find more information about this in our 10-K, which we plan to file later today. Now for segment results. In potash, in the fourth quarter, we produced 117,000 tons, an increase of almost 50% compared to last year's fourth quarter. Driven by the higher production, our fourth quarter potash COGS per ton improved by 24% versus last year, leading to a modest improvement in our gross margin even with the lower price environment. As we mentioned in our last earnings call and in yesterday's earnings press release, an accelerated harvest at HB did shift about 15,000 tons into 2024 that we previously expected to produce in the first half of 2025. Accordingly, we anticipate that our calendar year 2025 production will be roughly flat year-over-year, right in line with the guidance we gave one year ago. And as Kevin mentioned, we expect to drill a sample well at our HB AMEX cavern in the first half of 2025 to test the brine chemistry and stay on track with the developments of the HB solution mining capers. Moving on to Trio. It was one year ago that we announced we were evaluating all options to improve our operational and financial performance at our East Mine, and we saw continued improvement throughout the year, capped off with fourth quarter gross margin of $2.8 million, a more than $5 million improvement compared…

Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then one. Our first question comes from Lucas Beaumont with UBS. Please go ahead.

Thank you. Yes. I just wanted to ask about product pricing. I mean, it's moved up a bit the last couple of weeks. Potentially, that could be on the pull forward of demand ahead of the tariffs that look like they're coming in, or it could also be sort of on a stronger supply-demand setup. So I wanted to sort of get your thoughts on how you see the dynamic there. And then to the extent that the prices have sort of moved a bit higher and stay higher, what's sort of your order book forward sales like currently? So should we see any of that benefit in the tail end of the first quarter or into the second quarter if that's just? Thank you.

Yeah. Thanks, Lucas. The first part of your question around potash pricing, certainly, we've seen prices globally move up the last several weeks, and think that's just an indication of continued supportive dynamics in the market. There's been about 1.3 million tons that's come off the market, mainly out of Eastern Europe for first-half production. And we continue to see demand in all the major consuming regions be very steady through the first half of this year. So with that said, we expect price to remain firm on the potash side. As it relates to kind of where we will see that in our results, we saw a really heavy subscription to the winter fill program. So our first-quarter volumes are mostly contracted at that level. We would expect the recent price increases on the potash market that you've seen to be more fully realized as you get into our second-quarter volumes.

Great. Thanks. I guess. And just you sort of mentioned that you obviously had the benefit of the production uplift in 2024, which is gonna pull some of that forward. Looking at 2025, that's gonna be sort of more flat. I mean, at the same time, you made really good progress this year on the cash cost. So I'm getting that down. So in a flat production environment into 2025, I assume maybe we get a little bit more kind of leverage that sort of flows through there on the cost side. Or just how could you would you frame sort of how you sort of set up there on the cost side this year?

Thanks. Yeah. Good question, Lucas. You know, we came in fourth quarter around just under $320 per ton. We'll certainly continue to see a little bit of improvement into 2025, but largely flat year-over-year. I will remind you that, you know, our Wendover facility is still kind of waiting to see that uplift in their potash production due to the new primary POND seven. Expect to see that in the 2025, 2026 harvest season. So as we get into the third and fourth quarter, particularly of 2025, we expect to see another step improvement in our unit cost as we get that facility back up in that 75,000 to 80,000 ton range.

Alright. Thanks. And then I just wanted to ask you about the Canadian tariffs. So, I mean, Intrepid is one of the few companies that may actually benefit from this if domestic potash prices rise as you capture the margin. Have you done any work kind of internally to work out sort of how much of a dollar impact you think that's gonna have? So is that 25% that they're gonna levy? What sort of a wholesale price do you think that's gonna be on versus, say, a market price? I was assuming it would be something below the market price of in the $300 range. So I just wanna kinda get your feel for how you guys are assessing that internally and what sort of the price impact in the market could be. Thanks.

Yeah. Thanks, Lucas. You know, I think it's early at this point as to kind of what that impact would be specific to us. You know, as I mentioned previously, you know, most of our first-quarter volume is already contracted at this point. And so really any impact we would see would be beginning in the second quarter. We're like everyone else right now gathering information on this and trying to understand, you know, what that means and what the market reaction is gonna be. And certainly, as we see that, we'll know more.

Alright. Thanks very much.

Your next question comes from the line of Jason Ursaner with Bumbershoot Holdings. Please go ahead.

Good afternoon. Thanks for taking the question. This one probably more for Matt, but to follow-up on the unit economics. I guess, just looking at the way you guys are kind of presenting it now, the total cost including the byproducts and everything. So we went from, like, $415 to $420 a ton last year to, I think, you're saying, $315 to $320 this year. So it's kind of a 20% to 25% improvement, which, I guess, from my perspective, is based on the tail end of 2024's production cycle, which benefited a lot from access to the brine pool and the Eddy shaft, and maybe a little bit of the early commissioning from the IP30B well. So I guess I'm just trying to understand, do I have that right for what's kind of reported in the cost in Q4? And if you're getting the full benefit of the extraction well for the production year, you know, the 2024 to 2025 production cycle, you know, why would you're I guess, you're saying kind of flat production, but on a production year, not a calendar year. Still improving. So I guess why would that kind of be trending flat versus continuing to drop out?

Yeah. I mean, I think the good you got the capital investments right. I mean, I think the important thing to remember there is, you know, we put laid those tons down in the pond in the summer of 2024. So we started to see that benefit in Q3 and Q4. We're not carrying a lot of inventory. So we kind of certainly the potash side see that turnover a little bit quicker. You know, as we like I said, we get into the back half of 2025. We'll think we'll see that kind of another step change down as Wendover starts to really contribute to our improving COGS. They get back up to that productive capacity of 75,000 to 80,000 tons.

Okay. And just in terms of the brine grades that you are seeing or expected to put in thought, where are those sort of trending at this point? Versus where they had been. And then maybe, you know, 2026 and beyond with the injection rates that you're seeing, I guess, any anticipation on brine grades kind of longer term?

Yeah. I mean, you touched on it. The Eddy Shaft project was a great little kind of stopgap to, you know, extract brine from the Eddy cavern until we could get IP30B drilled. So we really got the benefit of higher brine grade really all throughout the entirety of the 2024 evaporation season. You know, we're just starting off kind of the spring, you know, evaporation here in 2025, and so we'll see where brine grades trend, but you'll continue to extract heavy out of our Eddy cavern from IP30B and really pleased with the brine grades we've seen so far.

Okay. And then in the oilfield segment, yeah, obviously, the operational results bounce around and yeah, maybe this quarter didn't hit quite like Q3 or last year, but maybe just in terms of the asset itself, not so much what's reported in the numbers, but there have been a few transactions of surface acreage at pretty substantial premiums to where you acquired Dinwiddie, which is now the South Ranch. So, you know, obviously, I know every ranch is different. It depends on proximity to, you know, drilling activity and all that. But I guess my perception is your proximity is as good as any. And, you know, this is just strictly surface acreage. So maybe fair to say the four corners strategy, you know, never materialized quite how we envisioned. So I guess just what do you make of those asset sales? You know, is this a sign that maybe will start to show up more in the numbers, or is there also a potential where you could kind of wipe the slate clean and maybe still wind up coming out of it with a pretty significant profit?

Hey, Jason. Good morning. It's Kevin. I'll take that one. To your point, there's an extraordinary amount of interest down in that neck of the woods, both on the New Mexico side and West Texas side, and you know, we're looking at that asset. It certainly has value to us, but to the extent that another party sees more value in it than we do, we're always up for a conversation. So given the level of interest that's occurred down there over the past few months, even prior to my arriving here, it's something that's certainly on our radar screen and more to come on that in the coming weeks and quarters.

Okay. And I guess just in terms of the capital allocation, the kind of the message was sort of wanna wait on forgot exactly how you word it, but wait on, you know, kind of seeing various things before doing things on the capital side. I guess between, you know, the cash on the balance sheet, maybe some of the different assets you have, all that. I guess, what is the thought process of waiting versus kind of being more active at this point?

I think it going back to the remarks we made, the number one priority here is to reestablish our focus on core fertilizer assets and get those assets performing at their either, you know, previous potential or current potential. And get in a position of being a steady free cash flow generator. And then in my opinion, and again, I don't wanna front-run the board here because this is ultimately a board discussion, but in order to have any sort of capital return plan in place, that is the first order of business. And so that is our goal is to establish a, you know, these are durable long-term sets of assets, and there's no reason why we can't optimize the production and the cost side so that these assets routinely and predictably generate free cash flow. And at that point, that's when I think you could envision the board having a very earnest discussion around a capital return policy.

Okay. Great. Appreciate all the commentary. Thanks.

Yeah. Thank you.

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

Thanks for everybody's participation today. I just wanted to reiterate how excited I am to be part of the team and look forward to meeting more of our investors as 2025 progresses. Thank you.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.