Compass Minerals(CMP) - 2025 Q2 - Quarterly Results

Fiscal 2025 Second-Quarter Results Management Commentary Management highlighted progress on its 'back-to-basics' strategy, optimizing operations, significantly reducing salt inventory, cutting net debt by 18%, and streamlining costs through workforce reduction and winding down Fortress North America - The company is executing a 'back-to-basics' strategy focused on optimization to become more efficient and profitable[2] - Successfully executed a plan to curtail salt production, resulting in a working capital release of nearly $150 million from inventory in Q2[2] - Reduced net total debt by approximately $170 million, or 18%, during the second quarter[2] - Year-over-year, North American highway deicing inventory value and volumes decreased by 47% and 59%, respectively[2] - Actions to optimize the cost structure include eliminating over 10% of the corporate workforce and winding down the Fortress North America fire retardant business[2] Quarterly Financial Highlights Q2 FY2025 saw revenue increase to $494.6 million from $364.0 million year-over-year, with net loss improving to $32.0 million, though adjusted net earnings decreased to $25.7 million Q2 Fiscal 2025 Financial Summary (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $494.6 | $364.0 | | Operating loss | $(3.1) | $(39.3) | | Net loss | $(32.0) | $(38.9) | | Net loss per diluted share | $(0.77) | $(0.94) | | Adjusted EBITDA* | $84.1 | $95.7 | | Adjusted net earnings* | $25.7 | $74.2 | | Adjusted net earnings per diluted share* | $0.63 | $1.78 | *Non-GAAP financial measure. - Reported results were significantly impacted by the performance and wind-down of the Fortress North America business, including non-cash impairments of $53.0 million in Q2 2025 and $47.6 million in Q2 2024[4] Business Segment Performance The Salt business experienced a 39% revenue increase and 47% volume surge due to stronger winter, while Plant Nutrition revenue grew 16% on higher volumes despite declining adjusted EBITDA from lower prices and higher distribution costs Salt Business Q2 2025 Salt Segment Performance vs. Q2 2024 | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $432.7M | +39% | | Sales Volume | 5.1M tons | +47% | | Avg. Sales Price | $84.76/ton | -5% | | Adjusted EBITDA | $85.5M | +4% | | Adjusted EBITDA per ton | $16.75 | -30% | - The 30% decline in Adjusted EBITDA per ton was a deliberate result of selling higher-cost inventory produced during a period of curtailed production, a strategy aimed at reducing overall inventory levels[7][8] - Highway deicing sales volumes increased 51% due to stronger winter weather conditions, while Consumer and Industrial (C&I) volumes grew 24%[9] Plant Nutrition Business Q2 2025 Plant Nutrition Segment Performance vs. Q2 2024 | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $58.3M | +16% | | Sales Volume | 93k tons | +26% | | Avg. Sales Price | $626/ton | -8% | | Adjusted EBITDA | $5.6M | -23% | - The operating loss improved to $1.8 million from $53.0 million in the prior-year quarter; however, the prior-year period included a significant non-cash goodwill impairment charge[12] - Per-unit distribution costs increased 13% year-over-year due to an increase in sales to markets farther from the company's core California markets[11] Cash Flow and Financial Position Operating cash flow significantly improved to $182.8 million for the first six months of FY2025, driven by salt inventory reduction, supporting $109.8 million in net debt payments and ending the quarter with $328.6 million liquidity Six Months Ended March 31, Cash Flow Summary (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $182.8 | $33.9 | | Net cash used in investing activities | $(35.9) | $(79.7) | | Net cash used in financing activities | $(116.8) | $45.3 (provided) | - The significant improvement in operating cash flow was primarily driven by a large reduction in North American salt inventory levels[13] - The company ended the quarter with $328.6 million of liquidity, consisting of $49.5 million in cash and $279.1 million available under its revolving credit facility[15] Updated Fiscal 2025 Outlook Compass Minerals revised its FY2025 outlook, increasing the Salt segment forecast due to strong highway deicing sales, maintaining Plant Nutrition guidance, and projecting total adjusted EBITDA between $173 million and $202 million Fiscal 2025 Full-Year Guidance | Segment | Metric | 2025 Range | | :--- | :--- | :--- | | Salt | Revenue | $975M - $1,050M | | | Adj. EBITDA | $215M - $230M | | Plant Nutrition | Revenue | $180M - $200M | | | Adj. EBITDA | $17M - $24M | | Total Company | Adj. EBITDA | $173M - $202M | | | Capital Expenditures | $75M - $85M | - The Salt segment outlook was revised upward to reflect the completion of a strong North American highway deicing season, which boosted sales volume forecasts[18] - Guidance for the Plant Nutrition segment is unchanged from the outlook provided in February 2025[19] Financial Statements and Reconciliations This section presents detailed consolidated financial statements, including Statements of Operations, Balance Sheets, and Cash Flows, alongside segment performance data and comprehensive reconciliations of GAAP to non-GAAP measures like Adjusted EBITDA and Adjusted Net Earnings Consolidated Statements of Operations Three Months Ended March 31, (in millions) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Sales | $494.6 | $364.0 | | Gross Profit | $76.8 | $71.8 | | Operating Loss | $(3.1) | $(39.3) | | Net Loss | $(32.0) | $(38.9) | Condensed Consolidated Balance Sheets Balance Sheet Summary (in millions) | Line Item | March 31, 2025 | Sept. 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $49.5 | $20.2 | | Inventories, net | $220.7 | $414.1 | | Total Assets | $1,531.9 | $1,640.1 | | Long-term debt, net | $797.6 | $910.0 | | Total stockholders' equity | $236.5 | $316.6 | Condensed Consolidated Statements of Cash Flows Six Months Ended March 31, (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $182.8 | $33.9 | | Net cash used in investing activities | $(35.9) | $(79.7) | | Net cash (used in) provided by financing activities | $(116.8) | $45.3 | Reconciliation of Non-GAAP Measures - Adjustments from GAAP Net Loss to Adjusted EBITDA for Q2 2025 include adding back $18.0 million in interest expense, $26.5 million in D&A, $53.0 million in impairment losses, and $4.0 million in restructuring charges[45] - Major adjustments impacting comparability include impairments related to the exit of the Fortress business, restructuring and severance charges, and costs related to a food-grade salt product recall[34][41]