Thank you for standing by. This is the conference operator. Welcome to the Intrepid Potash, Inc. Second Quarter 2025 Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions]. 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 second quarter 2025 results. With me today is Intrepid's CEO, Kevin Crutchfield; and CFO, Matt Preston. Our VP of Sales and Marketing, Zachry Adams, will also be available during the Q&A session. Please be advised that comments we will make today include forward-looking statements as defined by U.S. securities laws. These are based upon 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. These risks and uncertainties could cause Intrepid's actual results to be different 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. 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.

Thanks, Evan, and good morning, everyone. We really appreciate your interest and 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. While we've experienced tailwinds from the broader potash market, the focus on 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. 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. At a high level, our strong second quarter performance was driven by a combination of strong sales volumes for potash and Trio, improving pricing and solid unit economics resulting from higher production. 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 per ton. 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 per ton. 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. Given this outcome, we're continuing our evaluation of options to pursue an injection well and pipeline that will connect the AMAX mine to our HB injection system. Timing of construction will depend on further technical review and quantifying permitting requirements, but we'll…

Thank you, 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 fill program led to a net realized sales price of $361 per ton in the second quarter, which was up about $50 per ton compared to 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 was the best quarterly figure in over a year. 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 per ton was a 13% improvement compared to $386 per ton in the second quarter of last year. Looking ahead, and as we covered in yesterday's press release, poor weather at our HB facility and the lack of brine and AMAX has reduced our near-term potash production forecast. First, on the weather. We've had above-average rainfall at our HB mine over the past few months, about 50% higher than average, resulting in below average evaporation and reduced potash inventory in our ponds compared to last year. 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 run time and an earlier shutdown. 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. This will shift 15,000 tons of calendar year 2025 production into the spring of 2026.…

[Operator Instructions] The first question comes from Lucas Beaumont with UBS.

So I just wanted to kind of start on the changes to the production timing. Just to kind of bear with me on the different parts here. So I mean, I think it's kind of clear that the temporary piece linked to rainfall in the short term. So you sort of pushed 15,000 tonnes of production there into '26. But then you've also reduced '26 by 40,000 tonnes overall, which was the 25,000 on AMAX plus another portion. I was just confused about out of the 15,000 that shifted into next year, is that netting off against the change from this year? Or is there a larger gap there given the timing shift as well? I mean maybe if you could kind of just walk me through the different parts there and how to kind of think about that, that would be great.

Yes, happy to do that, Lucas. No, you're right. The total impact is the 45,000 tonnes in 2026, but we are netting that against kind of the shift of 15,000 tonnes from '25 into the '26 calendar year. So compared to previous forecast, we're down 30,000 tonnes for the calendar year '26.

Great. So what I was trying to think about then was what does that kind of mean on a multiyear kind of view going forward. So I mean, the production weather-related factors are temporary. And I mean, you would assume in a normal year that you get something normal there, so that should reverse into the following year. So I would assume that would be a tailwind into '27 of 15,000 tonnes. Is that right? And then it will 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. Is that right?

Yes. No, you're looking at it the right way. I mean it's pretty recent news for us on AMAX. We got actively evaluating the options to get brine into that AMAX mine longer term and get the residence time underground. As we look forward into late '26 and '27, we do have our Wendover production, which will continue to increase with primary pond 7 starting to ramp up here in the back half of '25 and into 2026. And so as we evaluate options and understand HB a little bit better, we'll certainly keep the market updated. But how fast we can get into that AMAX mine and get brine under there will start to dictate the longer-term forecast.

Yes. Lucas, this is Kevin. Despite the fact that the -- there wasn't any brine in AMAX, which was a little bit of a surprise to us based on all the recon that we've done, that's still a very critical component of the long-term plan for Carlsbad. So it's just a function of finding the brine and the new injection well so we can start filling up that cavity and you'll see it show up in future forecasts.

Yes. 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 unfortunately, it was unsuccessful in this case. So I guess how long was that sort of lead time in the period to kind of execute on that to help give us a feel for like what it would take to have another grow effectively.

Yes. And if I'm understanding your question exactly. I mean that's what we're evaluating right now. We've got to look at the permit requirements to do an injection well and pipeline we had hoped there was a brine that had been under there for a while, and we have an extraction well and extraction pipeline we could tie into our AMAX system in the near term. 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 at HP, whether it's North, South or Eddy mine, I think it's important to remember that these were empty when we started our HB project and all these started with us injecting brine and having residence time. 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 unfortunately, that wasn't the case.

Great. And then I guess just lastly, I mean, you guys have made solid progress on your lower production cost per tonne in the last a couple of years now. So just with the lower production outlook, I assume that's going to sort of be negative for cost absorption going forward. I mean if you could kind of just help frame that up for us for the second half and then into '26, that would be great.

Yes. I don't see a huge impact to the second half. I mean, obviously, it's kind of that cost of inventory starts to creep up with lower production, it's a bit progressive as you go forward. For 2026, it's kind of as simple as the 40,000 tons is about 12% to 13% of our overall potash production. And so I mean, given our larger fixed cost load, I mean, we need to look at ways to get our cost down in light of this news. But at face value, I mean, you could expect an 8% to 10% increase in our cost per tonne unless we can find ways to cut back, which we're actively looking at.

And mitigated 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. So net-net-net, hopefully, the result that we generate is neutral even despite of the downgrade in production guidance.

Your next question comes from Jason Ursaner with Bumbershoot Holdings.

Just maybe following up a little bit on the production. I guess, can you try to frame all the CapEx that you did, a lot of that started with injection with the residence time underground this balance between 2025 and 2026 calendar year, 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 slightly longer time frame?

Yes. I do my best to answer that, Jason. I mean you're right. We've really focused on investing back in our core assets for HB. Our main focus has been keeping injection rates above our extraction rates to keep our caverns full, make sure that we're touching all that potash underground all the time. And so really maximizing the production out of each of our different caverns at HB. I mean, going forward, it's largely the same. We just want to make sure that 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 have liked. Hoping we'd had one more kind of straw down there at the AMAX mine for the 2026 production. But we're encouraged by the trend. Obviously, the success we've had when we've refocused on our core assets and getting that brine underground, we've seen the results. And so like we said on the call, it's a bit of a speed bump for us for sure, but confident in our ability to execute at HB over the long term.

And brine grade, is that mostly the Eddy Shaft kind of tailing off? Or I guess, what is -- what would cause the brine grade to decline a bit?

Well, we certainly hope AMAX, if there was brine under there, it would have had significant residence time. So it would have been a pretty strong brine grade, 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. I mean just given that we have one less cavern to pull out of, we'll pull a little bit harder, which just decreases residence time overall. So we'll just see a lower brine grade given a general reduced residence time in our existing caverns in 2026.

Okay. And then great quarter in terms of cash flow. I think you gave the number as of August here with $87 million of cash. The outlook on pricing sounds relatively constructive. So in terms of future going forward, should be okay at some point, hopefully get some of the money from Exxon, maybe even the next round of money from Exxon. And I think the last couple of calls have talked about oilfield kind of noncore. So I guess at what point cash is accumulating quickly on the balance sheet. And if you look out a year or 2, if things go right, there could be a pretty significant amount of cash 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.

Yes. Good question. Good points. We did -- we are accumulating some cash. And you asked the question at what point does the capital allocation discussion become relevant. Look, it's always relevant. The Board talks about it all the time. And 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 entitled level of performance where we're predictable, reliable, we're durable over the long term and having adequate cash on the balance sheet to see you through sort of volatile market periods. So with that as a backdrop, then 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, 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. I don't want to speculate on that, but things are stacking up in favor of a very robust discussion on that front. And what we've got to do is just continue to execute so that, that discussion remains relevant at all times. So hopefully, that's responsive to your inquiry.

No, I appreciate that. I mean I think there's limits to what you can say, but it is becoming apparent. The company is a significant cash generator and I don't know -- it's a positive problem to have, I guess, at some point. But I appreciate it.

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

Thank you again for attending today, and I'd like to give one final thank you again to our team for their hard work and their dedication over the course of the last couple of quarters and putting together solid levels of performance. So we'll keep you posted in the coming quarters, and thank you again for attending today. Have a good one.

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