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Thank you, operator. Good morning and welcome to the Compass Minerals Fiscal Second Quarter Earnings Conference Call. Today, will discuss our recent results and provide an update our outlook for fiscal twenty twenty five. We will begin with prepared remarks from our President and CEO, Edward Dowling and our CFO, Peter Feldman. Joining in for the question and answer portion of the call will be Pat Marron, our Chief Operations Officer and Ben Nichols, our Chief Commercial Officer. Before we get started, I will remind everyone that the remarks we make today reflect financial and operational outlooks as of today's date, 05/08/2025. These outlooks entail assumptions and expectations that involve risks and uncertainties that could cause the company's actual results to differ materially A discussion of these risks can be found in our SEC filings located online at investors.compassminerals.com. Our remarks today also include certain non GAAP financial measures, You can find reconciliations of these items in our earnings release or in our presentation both of which are also available online. I will now turn the call over to Thank you, Brent. Good morning, everyone, and thank you for joining us on our call today. After a disappointing first quarter, the second quarter was much better in terms of winter weather.
12m 10s
This in turn has unlocked the benefits of the strategy we embarked upon a year ago. Last year, the company made the strategic pivot to refocus its efforts on the core business. Our goal is to improve the cash flow generating capability of our business by optimizing business practices and structures lowering capital intensity of our assets and improving the efficiency of our operations. Because of the nature of our seasonal business, the steps we take to achieve these goals sometimes take quarters to play out. Well, I'm pleased to share that we continue to make progress on our back to basic strategy. Almost exactly a year ago, we shared our plan on how we intended to rationalize North American highway deicing inventory levels that have grown too large after consecutive mild winters. The primary goal of this initiative was to free up cash that was hung up on working capital and use that cash to reduce debt Additionally, we knew that salt inventories across the broader system were high. Which has impact on the supply demand balance in the market. We didn't want to further exacerbate that dynamic. We decided to curtail production at Goderich Mine and to a lesser extent at Cote Blanche.
13m 22s
With the view that with some help from winter, we'd see a meaningful drawdown in our salt inventories and realize significant working capital release out of inventory. As a result of that curtailment, we knew that we'd experienced some short term margin compression due to higher fixed cost absorption but the rate was the right business decision for the long term success to move our business to lower inventory levels. Fast forward a year, you can see that we executed well on the plan. A few points to help that bear that out. North American highway deicing inventory values are down 47% year over year. North American highway deicing inventory volumes are down 59% year over year. Across our depot network, we saw a number of depots being fully depleted by the end of the highway deicing season and throughout the season, there are multiple media reports about shortages of salt in some of the markets which suggest there's some tightness in the market during the winter. The successful execution of our plan allowed us to realize $145,000,000 working capital release out of inventory alone, which in turn helped us reduce our total debt in the quarter by more than $170,000,000 The drawdown in inventory across our network was significant this season.
14m 39s
We also believe that competitors and customers saw similar drawdowns in their respective networks. Against this backdrop of a low system wide inventories, the company is well positioned to optimize production inventory levels as we approach the twenty five five-twenty six North American highway deicing bid season During the second quarter, 's obviously a lot of noise around tariffs. And we needed to see where these things landed before forming up our production plans for the coming year. The salt and fertilizer products that we produce in Canada are qualified under the USMCA trade agreement As a result, they're currently exempt from any tariffs that have been implemented or proposed. With that huge question mark seemingly addressed, the company is in the process of ramping up production which should have a favorable impact on our per unit cost all things being equal. From a pricing perspective, the setup is constructive as we enter North American bid season. There's a psychological component to the highway deicing business. It worked against us when we had mild winters for a couple of winters Customers could look in their sheds and see that they were full of salt. The recently completed deicing season was a good reminder that winners do in fact happen.
15m 53s
Not unreasonable to think, the pendulum could swing back in our favor this bid season allow for some stronger pricing. We could see positive impact on volume commitments in the coming season as well. Our efforts over a year ago are bearing fruit and position us well to maximize value of our highway deicing business in the coming year. We will continue to maintain flexibility in our operations and capital plans so that we can appropriately respond to the market conditions. I'll now move to actions we took during the second quarter that are expected to have benefits in future periods. In March, we announced that we're eliminating over 10% of our corporate workforce. This is an extension of our efforts to align our cost structure with our current business needs. We're working on advancing additional cost improvement projects as we continue to focus on driving down costs across the platform. We also announced that we'd begin to wind down Fortress North American business. These actions simplify our business allow the company to generate additional cash flow and accelerate deleveraging. With that, I'll turn the call over to Peter for a review of our quarterly results.
17m 1s
Thanks, Ed.
17m 2s
I'll comment briefly on the financial results for the quarter before turning the call over for Q and A. For the second quarter, consolidated revenue was $495,000,000 up 36% year over year. Operating loss for the quarter was 3,100,000.0 which was an improvement from the operating loss of $39,300,000 last year. Consolidated net loss was 32,000,000 compared to a net loss of $38,900,000 the prior period. These results include impairments taken on Fortress in both periods. As well as the impairment in the Plant Nutrition business last year. Adjusted EBITDA for the quarter was 84,100,000.0 which compares to $95,700,000 a year ago. As noted in our press release yesterday, the treatment of the contingent consideration liability for Fortress. Impacts the comparability of adjusted EBITDA between periods. When that is taken into account, modified adjusted EBITDA was $76,200,000 in the quarter compared to $71,900,000 in the second quarter of twenty twenty four.
18m 7s
In the Salt business, revenue in the second quarter was $433,000,000 compared to $310,000,000 a year ago. Pricing was down 5% year over year to approximately $85 per ton volumes up 47% compared to the prior period. Net revenue per ton, which accounts for distribution costs, decreased 4% to $57 On a per ton basis, operating earnings came in lower year over year at $13.1 per ton down 31% while adjusted EBITDA per ton decreased roughly 30% to $16.75 The decrease in margins primarily reflects the increase in production cost per ton due to the curtailment of the production at the Goderich mine last year and softer pricing for highway deoxing salt compared to last year. In the plant nutrition business, revenue for the second quarter was $58,000,000 which is up 16% year over year from 50,000,000 Sales volumes were up 26% from prior period while pricing down 8% for the same period.
19m 13s
Distribution cost per ton increased 13% to around $102 per ton and all in production costs per ton decreased by approximately 10% when adjusting for the impairment in the business last year.
19m 25s
As Ed mentioned, we executed on our plan to reduce North American highway deicing inventory levels harvest cash, and pay down debt. The value of North American highway de icing inventory declined 47% year over year and the volumes associated with that were down almost 60%. This allowed for a sequential decrease in total net debt $171,000,000 and an $81,000,000 decline from last year's second quarter. At quarter end, have liquidity of $329,000,000 comprised of $51,000,000 of cash and revolver capacity of around $279,000,000 From a guidance perspective, we increased our adjusted EBITDA guidance for the year. At the midpoint, we are now showing $188,000,000 for year, which is an increase from a midpoint of $173,000,000 coming out of Q1 twenty twenty five. The $188,000,000 includes a gain related to the write off of the fortress contingent consideration liability of approximately $8,000,000 Even adjusting for that item, we're showing improvements in guidance for SALT and corporate. I would also point out that our guidance for capital expenditures was unchanged at a range of $75,000,000 to $85,000,000 As we continue executing on our back to basic strategies, we will focus on controlling costs managing inventory and working capital and enhancing free cash flow.
20m 47s
I'll now open the floor for questions. Operator?
20m 55s
I'd like to remind everyone Your first question comes from David Silver with CL King.
21m 25s
Yeah. Hi. Good morning. Not used to being called first. Okay. Thank you very much. I do have a couple of questions. Regarding kind of the balance sheet and the cash flow statement. In particular. And I understand there's a number of relatively different events, kind of puts and takes Can I just ask you, unlike most March quarters, the accounts receivable level actually rose from December to March And overall, I mean, I think it's at a very high level relative to your sales or historical season ending [indiscernible] Is there something going on there? Or why shouldn't I think that this would be a significant source of incremental further incremental cash going forward. Just some comment on kind of the March end March month end level of accounts receivable, please?
22m 38s
Hi, David. This is Ed. Sometimes it's good to be first. But the anyway, good to hear your voice. Let me pass this off Peter Feldman to address your question about the balance sheet.
22m 49s
Sure. This is Peter.
22m 51s
There are a couple of insurance settlement matters within the AR and both the AEP balances. And so you'll see a site gross up to both. For the accounting. As well as as we continue to have a good quarter and we see those AR balances will continue to come down slightly related to just the natural flow of the inventory. [indiscernible] [indiscernible] Okay. Very good. And then maybe a business question, but I'm sure your team this has to do with the upcoming bid season. And I'm sure your team is very proficient at kind of reading the tea leaves, I guess. But what can you say or what what can you divulge divine, I guess, from the early requests for bids, in other words. Have the volume commitments re [indiscernible] customers are seeking? Have they noticeably increased versus the past year or two? Or the delivery points indicating, you know, areas of maybe the depot, you know, depletion, Ed, that maybe you cited in your remarks. Just I know it's early, but the bidding does start pretty early or at least the bid process starts pretty What what can you divine from from what's available to you at this point? [indiscernible] David, I'll make some general comments up front and then pass it off to Ben here.
24m 24s
It is very early in the bidding season. We do think that the market based on the difference between a year ago and now in terms of inventories in the winter that we served last year, is much more constructive than we've seen over the last several years. So that's by itself gives an indication of potential price increases and potential volume increases. But recognize that not all areas are the same. That some areas experience more snow than others. So those sort of things will be different depending on the sort of current situation and the different locales. It's a it's a it's a setup that we understand reasonably well. So pass that off to Ben Nichols here to see what else you might want to add Yes. Good morning, David. This is Ben. I think what Ed alluded to the regional nature of that is important to understand. I would also say we have some early data points on tender sizes, which is the municipal and state level indications of what they see their needs for the upcoming season. And I would tell you that those are ranging to slightly up to significantly up in some regions. So all things being equal, we think the dynamic is going to be positive year over year moving forward.
25m 43s
And I would tell you our team is very excited about that opportunity. Okay. Great. I'm just going to sneak in one more But this would be related to your SOP business. And I just as a note, I mean, to me that business is still has a lot of potential kind of improve the margins there. Especially given the pretty two consecutive quarters I think of pretty high shipment levels. Ed, you've I understand the SALT segment and particularly the icing inventories was job one here. But what do you see over the next few quarters or next year or so in terms of restoring kind of that cash cost or cash production cost performance level to, I know, more levels and maybe driving some incremental cash flow from that part of your business?
26m 45s
Yes. It's an important objective for us, David. [indiscernible] outlined efforts that we were initiating a year ago, and this it's a multiyear effort. And it really starts with the brine chemistries and controlling the brine chemistries better as we go into our evaporation ponds to sort of repair and restore these ponds back towards sort of historical levels. And we talked about sales to harvest ratios and harvest to production ratios, excuse me, and other things. The early indications are very good. In that regard. And you see that through the increased volumes that we're now producing in Utah. That's really just the first step. That will continue for some period of time, but it's really just the first step. The other big end of this is sort of the back end of the SOP production, which is related to what we call the dryer plant or the compaction plant which requires a capital project and modification [indiscernible] engineering work is well advanced. We want to make sure that we're really spot on and able to manage this really well. But between those different efforts, we believe that we will be able to materially reduce the cost of our SOP production.
28m 9s
I'll hand this off to Pat Barron a little bit to see if he'd like to add some additional comments there.
28m 15s
Thanks, Ed. Hi, David. This is Pat. I've had a chance to get to Ogden a couple of times now and certainly we have a fantastic team there and a very unique asset. On top of the projects that Ed has talked about, we certainly see some opportunities for us to drive improvements in how we run the business. But that's going to be incremental over time. But the two big projects that Ed has spoken about, the rest restoration of the ponds and the capital projects will give us a step function going forward while we continue to drive improvements at the business.
28m 57s
Okay. Thanks very much. I'm going to get back in queue. Appreciate it.
29m 1s
Okay.
29m 2s
Thank you, David.
29m 22s
There are no further questions at this time. I'll now turn the call back over to Edward Dowling, President and CEO.
29m 31s
Thank you, Carly, for the moderation here. Appreciate that. And thank you all again for your interest in Compass Minerals. We are focused on delivering on our back to basic strategy We're making good progress in that regard, and I'm excited about the steps the company is making. Please don't hesitate to reach out to Brent if you have any follow-up questions. We look forward to speaking to you in the next quarter. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Key Insights
Compass Minerals reported a strong fiscal Q2, with consolidated revenue of $495M (up 36% YoY) and a significant reduction in operating loss to $3.1M from $39.3M last year; net loss improved to $32M from $38.9M.
The company successfully executed its strategy to reduce North American highway deicing inventory, with values down 47% and volumes down 59% YoY, resulting in a $145M working capital release and a $171M reduction in total net debt for the quarter.
Salt business revenue rose to $433M (from $310M YoY), with volumes up 47%, but pricing was down 5% and per-ton margins compressed due to prior production curtailments; plant nutrition revenue increased 16% to $58M, with volumes up 26% but pricing down 8%.
The company increased its full-year adjusted EBITDA guidance to a midpoint of $188M (up from $173M after Q1), including an $8M gain related to the Fortress contingent consideration liability; capital expenditure guidance remains unchanged at $75M–$85M.
Early indications for the upcoming North American highway deicing bid season are positive, with tender sizes ranging from slightly up to significantly up in some regions, suggesting potential for stronger pricing and volume commitments; ongoing cost reduction initiatives and SOP production improvements are expected to further enhance cash flow and margins.
