Intrepid Potash(IPI) - 2024 Q2 - Quarterly Results

Q2 2024 Performance Overview The company experienced a significant downturn in Q2 2024, marked by decreased sales, a net loss, and key leadership changes, while maintaining a strong liquidity position Key Financial & Operational Highlights The company reported a significant downturn in Q2 2024 results, with decreased sales and a net loss driven by lower product volumes and prices Q2 2024 vs Q2 2023 Financial Performance | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Sales | $62.1 million | $81.0 million | | Net (Loss) Income | ($0.8 million) | $4.3 million | | (Loss) Earnings Per Share | ($0.06) | $0.33 | | Gross Margin | $7.6 million | $15.4 million | | Adjusted EBITDA | $9.2 million | $15.8 million | | Cash Flow from Operations | $27.7 million | $30.5 million | Q2 2024 vs Q2 2023 Product Sales Metrics | Product | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Potash | Sales Volume (k tons) | 55 | 79 | | | Avg. Price/ton | $405 | $479 | | Trio® | Sales Volume (k tons) | 63 | 63 | | | Avg. Price/ton | $314 | $333 | Management & Board of Directors Update The company announced significant leadership changes, including a new Board Chair and the initiation of a search for a successor to the CEO - Barth Whitham, formerly Lead Independent Director, was elected as Chair of the Board[3] - A search process has been initiated to find a successor for CEO Bob Jornayvaz, who is on extended medical leave[3] - CFO Matt Preston will continue as acting principal executive officer during the CEO search[3] Consolidated Results and Outlook Sales fell 23% year-over-year, leading to a net loss, though management focuses on strategic improvements in potash production and Trio® segment efficiency - The company's strategic focus is on improving potash production, with an expected 15% increase in 2024 production compared to 2023[9] - The Trio® segment's gross margin increased by $1 million year-over-year to $2.2 million, driven by significant improvements in production costs[10] - The company believes the broader potash market is approaching its mid-cycle pricing floor and remains focused on improving unit economics through higher production[10] Capital Expenditures and Liquidity The company maintains a strong liquidity position with significant cash reserves, no outstanding debt, and a clear capital expenditure plan for 2024 Capital Expenditures | Period | Amount | | :--- | :--- | | Q2 2024 | $11.3 million | | First Six Months 2024 | $23.0 million | | Full-Year 2024 (Est.) | $40 - $50 million | - As of July 31, 2024, the company had approximately $51.1 million in cash and cash equivalents[8] - There were no outstanding borrowings on the $150 million revolving credit facility as of July 31, 2024[8] Operational and Project Updates Key operational projects are advancing across multiple mine sites to enhance production efficiency for brine, potash, and lithium HB Solar Solution Mine (New Mexico) Key projects at the HB Solar Solution Mine are progressing, including a new extraction well and a pipeline cleaning system to improve brine flow - The IP30B replacement extraction well was completed in June 2024 and is now the primary brine source for the current evaporation season[4] - Phase Two of the HB Injection Pipeline Project is expected to be commissioned in Q3 2024, which will help ensure more consistent flow rates[4] Brine Recovery Mine (Utah) The Wendover mine has completed a new pond to increase production and is advancing a project for potential lithium carbonate production - Construction of Primary Pond 7 (PP7) is complete, with production benefits expected to be realized in the fall of 2025[5] - The company is advancing its lithium project, which could support approximately 2,000 tons of lithium carbonate production annually, and is currently reviewing partner proposals[5] Intrepid South and East Underground Trio Mine The sand project is paused due to market conditions, while the East Underground Trio® Mine has achieved significant cost reductions through operational efficiencies - The sand project at Intrepid South is paused due to softening conditions in the oilfield services market[6] - The East Underground Trio® Mine has improved operational efficiency, reducing the cost of goods sold per ton from $320 to $284 in the first six months of 2024[7] Segment Performance Analysis The analysis reveals mixed segment performance, with a significant decline in Potash, improved margins in Trio®, and growth in Oilfield Solutions Potash Segment The Potash segment experienced a significant decline in Q2 2024, with sales dropping 41% due to lower sales volume and prices Potash Segment Performance (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Sales | $30.0M | $47.3M | | Gross Margin | $3.3M | $12.9M | | Sales Volume (k tons) | 55 | 79 | | Production Volume (k tons) | 40 | 12 | | Avg. Net Realized Price/ton | $405 | $479 | - Sales decreased by $17.2 million, primarily due to a 15% drop in average net realized sales price and a 30% reduction in sales volume[11] - A lower of cost or net realizable value inventory adjustment of $1.4 million was recorded in Q2 2024[12] Trio® Segment The Trio® segment reported a slight sales decrease but achieved higher gross margin due to significant improvements in production costs Trio® Segment Performance (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Sales | $26.5M | $28.7M | | Gross Margin | $2.2M | $1.2M | | Sales Volume (k tons) | 63 | 63 | | Production Volume (k tons) | 68 | 58 | | Avg. Net Realized Price/ton | $314 | $333 | - Cost of goods sold decreased by 18% despite flat sales volumes, thanks to improved production rates which lowered per-unit costs[14] Oilfield Solutions Segment The Oilfield Solutions segment saw increased sales and significantly improved gross margin, driven by strong demand and lower labor costs Oilfield Solutions Segment Performance (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Sales | $5.5M | $5.1M | | Gross Margin | $2.1M | $1.3M | - Sales increased by $0.4 million due to strong demand from oil and gas operators in the Permian Basin[15][16] - Cost of goods sold decreased by 11% due to using less contract labor compared to the prior year[16] Financial Statements The consolidated financial statements detail the company's operating loss, balance sheet position, and cash flow activities for the period Consolidated Statements of Operations The company reported a net loss of $0.8 million in Q2 2024, a sharp reversal from the $4.3 million net income in the prior-year quarter Consolidated Statements of Operations (Three Months Ended June 30) | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Sales | $62,055 | $81,035 | | Gross Margin | $7,624 | $15,382 | | Operating (Loss) Income | ($1,628) | $7,268 | | Net (Loss) Income | ($833) | $4,305 | | Diluted (Loss) Earnings Per Share | ($0.06) | $0.33 | Consolidated Balance Sheets The balance sheet reflects a significant increase in cash and cash equivalents, contributing to a rise in total assets as of June 30, 2024 Key Balance Sheet Items (as of June 30, 2024 vs Dec 31, 2023) | (in thousands) | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $51,663 | $4,071 | | Total current assets | $183,187 | $152,040 | | Total Assets | $796,991 | $768,570 | | Total current liabilities | $33,439 | $46,564 | | Total Liabilities | $114,743 | $84,142 | | Total Stockholders' Equity | $682,248 | $684,428 | Consolidated Statements of Cash Flows Net cash from operating activities increased significantly in the first half of 2024, driving a substantial net increase in cash for the period Cash Flow Summary (Six Months Ended June 30) | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $69,278 | $38,948 | | Net cash used in investing activities | ($16,407) | ($38,752) | | Net cash used in financing activities | ($5,275) | ($1,547) | | Net Change in Cash | $47,596 | ($1,351) | Non-GAAP Financial Measures This section provides reconciliations for non-GAAP metrics, including adjusted net income, adjusted EBITDA, and average net realized sales prices Reconciliation of Adjusted Net (Loss) Income After excluding certain items, the adjusted net loss for Q2 2024 was $40 thousand, compared to an adjusted net income of $4.3 million in Q2 2023 Reconciliation of Net (Loss) Income to Adjusted Net (Loss) Income (Q2) | (in thousands) | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net (Loss) Income | ($833) | $4,305 | | Total adjustments | $793 | ($5) | | Adjusted Net (Loss) Income | ($40) | $4,300 | Reconciliation of Adjusted EBITDA Adjusted EBITDA decreased to $9.2 million for Q2 2024 from $15.8 million in the prior-year quarter Reconciliation of Net (Loss) Income to Adjusted EBITDA (Q2) | (in thousands) | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net (Loss) Income | ($833) | $4,305 | | Total adjustments | $10,068 | $11,523 | | Adjusted EBITDA | $9,235 | $15,828 | Reconciliation of Average Net Realized Sales Price The average net realized sales price per ton for both Potash and Trio® decreased in Q2 2024 compared to the prior-year period Average Net Realized Sales Price Per Ton (Q2) | Product | 2024 | 2023 | | :--- | :--- | :--- | | Potash | $405 | $479 | | Trio® | $314 | $333 | Supplementary Information This section provides an overview of the company's business, outlines forward-looking statements and associated risks, and gives conference call details Company Overview and Forward-Looking Statements Intrepid is the sole U.S. producer of muriate of potash and faces various risks related to commodity prices, operations, and regulations - Intrepid is the only U.S. producer of muriate of potash and also produces the specialty fertilizer Trio®[20] - The company utilizes solar evaporation for potash production, which is a lower-cost and more environmentally friendly method[20] - Key risks identified include changes in product price and demand, challenges to water rights, ability to execute strategic projects, and adverse weather events[21][22] Conference Call Information The company will host a conference call on August 6, 2024, to discuss its second-quarter financial results - A conference call to discuss Q2 2024 results is scheduled for August 6, 2024, at 12:00 p.m. Eastern Time[18]