Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Compass Minerals third quarter fiscal 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question, simply press star, followed by the number 1 on your telephone keypad. To withdraw your question, press star 1 again. It is now my pleasure to turn the call over to Brent Collins, Treasurer. You may begin.

Thank you, Operator. Good morning and welcome to the Compass Minerals Fiscal Third Quarter Earnings Conference Call. Today we will discuss our most recent quarterly results and provide an update of our outlook for fiscal 2025. We will begin with prepared remarks from our President and CEO, Edward Dowling, and our CFO, Peter Fellman. Joining in for the question and answer portion of the call will be Pat Barron, 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, August 12, 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 available online. And with that, I will now turn the call over to Ed.

Thank you, Brent. Good morning, everyone, and thank you for joining us today. I'm pleased to report that we had a solid third quarter. I'll begin by commenting on the plant nutrition business. We talked in the past about needing to improve the cost structure at Ogden and a plan to do so. We're making good progress on that front. An added benefit of the work we've been doing in Utah is we're seeing a more consistent and higher productivity at the plant, allowing us to confidently serve businesses beyond our core market in the Western U.S. These efforts have resulted in strong sales volumes, complemented by lower production costs this quarter that more than offset, lower pricing, and higher per-unit distribution costs.

The net result is we saw improvements in a per-unit operating earnings and adjusted EBITDA for the quarter.

In the SALT business, on a per-ton basis, we saw distribution costs hold flat and production costs decrease by 2%. This allowed us to realize improvements in both segment operating earnings and adjusted EBITDA on a per-ton basis. Bid season is a big focus for the salt business in the third quarter. Presently, approximately 70% of the company's North American highway de-icing bid process has been completed. We expect contracted selling price for the coming season to be up 2% to 4% year-over-year and committed bid volumes to be up 3% to 5%. As a reminder, bid volumes establish of service levels for certain customers and sales volumes will ultimately be driven by winter weather. Coming out of this year's de-icing season, we expected to see increases in both price and commitments, so things are playing out generally how we thought they would. An important step we completed in the third quarter was the refinancing that we've discussed over the last couple of quarters. That exercise improves our financial flexibility, enhances our liquidity extends our maturity profile, all of which helps strengthen our ability to continue executing on our back-to-basic strategy. Our financial position was further augmented in a quarter with the sale of the majority of fortress assets and intellectual property for net proceeds of approximately $20 million.

It's worth reiterating what we're fundamentally working to achieve with our back-to-basic strategy.

Our focus is to improve cash flow-generated capability of the company by optimizing business practices and structures, lowering capital intensity of our assets, and improving the efficiency of our operations. I'm pleased with the progress we are making. With disciplined execution, we'll continue to unlock intrinsic value of the company. With that, I'll turn the call over to Peter for a review of our third quarter results.

Thanks, Ed. I'll make a few comments about the quarter, and then we'll turn the call over to Q&A. For the third quarter, consolidated revenue was $215 million, up approximately 6% year-over-year. Operating income for the quarter was $15.9 million, which is an improvement from operating income of $5.9 million last year. Consolidated net loss of $17 million, compared to a net loss of $43.6 million in the prior year period. Adjusted EBITDA for the quarter increased by 25% to $41 million, which compares to $32.8 million a year ago. In the thought business, revenue in the third quarter was $166 million compared to $160.6 million a year ago. Pricing was down 1% year-over-year to approximately $108 per ton, with volumes up 4% compared to the prior year period. Net revenue per ton, which accounts for distribution costs, decreased 1% to $75. On a per ton basis, operating earnings came in 4% higher year-over-year at $18.20 per ton, while adjusted EBITDA per ton increased by 6% to $29.66. The increase in per ton margins reflects the decrease in production costs compared to last year, as price and distribution costs were more or less flat year-over-year. In the plant nutrition business, revenue for the third quarter was $45 million, which is up 15% year-over-year from $39 million. Sales volume was 21% from prior year period, while pricing was down 5% for the same period. Distribution costs per ton increased 10% to around $98 per ton, and all-in production costs per ton decreased approximately 23%. Turning to the balance sheet, I'll comment on inventory and our financial position briefly. North American highway de-icing inventory value and volumes increased sequentially by 28% and 27% respectively. This is a normal seasonal build as we prepare for the coming de-icing season. We remain mindful of past challenges with excess inventory and are committed to avoiding similar issues. As of the end of June, North American highway deicing inventory levels are approximately 50% lower than last year. We are taking a disciplined approach to production planning and inventory management and will continue to refine our strategy as we complete the bid season. Regarding our financial position at quarter end, we had liquidity of $388 million, comprised of $79 million of cash and revolver capacity of around $309 million. These amounts reflect the cash from the fortress asset sale and the refinancing activity that Ed referred to in his remarks. The amendment to our credit facility that occurred contemporaneously with the new note issuance had two important changes. First, it locked in the commitment level of the facility at $325 million through the life of the facility and eliminated the setdowns that were scheduled in the prior agreement. Second, it moved the leveraged covenant from a total net debt calculation to a net first lien debt measure. These changes enhance our liquidity and provide additional financial flexibility. Total net debt as of June 30th, 2025 was $746 million, which is down $116 million, or 13% year-over-year. Reducing leverage is a key component to our back-to-basics strategy, and we're making solid progress towards that goal. It was a strong quarter for the company from a financial perspective. Despite increasing inventory levels, we were free cash flow positive, and that is before including the proceeds from the Fortress Divestiture. From a guidance perspective, we've increased our adjusted EBITDA guidance slightly for the year. At the midpoint, we are now showing $193 million for the year, which is an increase from a midpoint of $188 million dollars coming out of 2q25 the increase is being driven by plant nutrition business where the stronger sales and effective cost management ed referred to are translating to better financial performance we also have a slight uptick in our projection for salt even done our guidance for capital expenditures remains unchanged at a range of 75 to 85 million dollars i'll now open the floor for questions operator thank you at this time i would like to remind everyone to ask a question simply press star followed by the number one on your telephone keypad and we'll pause for

just a moment to compile the q a roster our first question comes from the line of joel jackson with bmo capital markets please go ahead hi good morning everyone i'm gonna ask a few questions maybe one by one if that's okay um can you help us understand you know if you get two to four percent so a few a few percentage points of higher hybrid icing pricing close pricing you know and when you factor in inflation does that suggest your net backs for next winter the upcoming winter are going to be the same higher or lower on this uh results out of bid season yeah good morning joel this is ed how are you um look appreciate the question in our focus on the the sales side

for the upcoming season is really consistent with our back to basic strategy where it's value over volume. You know, what you're really asking is, does the net margin of the plan result in better or worse financial results? And as you know, you know, we're in the middle of our budgeting season working hard. You see that our costs are coming down. I think that's an important thing. but we do guidance once our budgets are done and through our board and do that guidance generally on November call.

Okay. And then maybe following up on that, I think there were a lot of people out there that thought that this could be a very strong bid season. Results came in 2% to 4%, which as you probably appreciate is pretty average historical results of those never an average in season of winter but pretty average two to four percent um can you talk about as the big season has played out what what happened versus maybe what you might have thought might you have thought you'd get higher prices did you think you might win more share from cargill or american rock salt because issues they have it seems like there wasn't that much volume shift between the major players maybe talk about you know how the markets have been playing out in the icing pricing being how it played out things?

Well, you know, the volumes are up across the board. The pricing, as you know, is transparent. It's all these bids are public documents. So you can take a look at that. You know, our big back-to-basic strategy is value over volume and competing, where we can drive value into the business. You know, you can take a look at what some of the competitors are doing, but that's really not our business. That's their business in terms of, you know, what they're setting out to accomplish. But generally, coming into a season like this, it generally takes, if you go back and look at history, two years to really clear the market, to really see sort of the full impacts of a year like we had last year. Ben, you want to add anything to that?

Yeah, sure. Yeah. Good morning, Joel. I think, you know, what Ed is alluding to as well is the last season, while stronger than the prior two, which were quite light, was really just a return to more average weather. And so, to the degree that that impacted the overall supply and demand picture, maybe wasn't as great as people had hoped moving into the bid season. And that may have played out a bit in the dynamics with the competition.

But again, we stayed focused to our strategy i was proud of the way the team moved through a very dynamic situation and i think we're delivering the type of value we committed to okay final question um it looks like your plant nutrition costs on a per-time basis were very good in q3 you had you know some decent volumes um looks like maybe your best per quarter excuse me pretend quarter pretend costs in years when they look at your guidance though it looks like then costs go back in q4 to kind of where they've been maybe even higher than the first half of the year so were there some unique thing and the volumes of similar in q3 versus q4 were there some unique things going on in q3

and or q4 how should we think about it for plant nutrition no not really the um um plant nutrition and we you know we've been talking about this for a year or so it's a multi-year uh recovery plan starting with the ponds um and you know ultimately working our way through uh improvements in the dry plant you know the big good news here is that um our recovery on the ponds is ahead of where we thought it would be there's a number of things that are contributing to that um one is management of the solutions and two really having you know hot and dry weather um out in utah we've been able to deposit more so achieving our our production and really at the right grade remember we talked about the harvest production ratio has worked out really quite well for us and we're trying to take advantage of that sort of going forward. We're doing some things in the wet plant to improve overall recovery. We'll talk about that at some point in the future and ultimately the capital project in the dry plant. You know, I think the outlook is really just, you know, we had a good quarter i think we would expect to see something similar in the uh the fourth quarter now we're we're yeah the plant's down right now so the volume you know that's planned and scheduled um um so you know what you're probably seeing a little bit of this compression on that i'll turn maybe pat would have uh uh some comments on that as well hi joel it's it's pat um one other thing to to keep in mind is um kcl is a big um input factor for us and so our costs uh are driven

by the the cost of kcl on the open market so um that also can impact um what our overall costs are going forward so we're projecting into that as opposed to what what we've seen in the past Could I be greedy and just sneak in a question on that?

Does that mean that maybe in Q3 your mix was more straight harvest and Q4 the mix shifts a little more towards augmented with purchase KCL?

No, I wouldn't say that. As Ed spoke about, the improvement of health of the ponds, which then improves the input into the plant, over time allows us to use less KCL. so there's going to be some some impact of that but the the you know the long-term trend some of the cost is just what we have to purchase kcl at and so i think we see leading into next year higher kcl prices based on what the market is telling us they expect those prices to be thank you again to ask a question simply press star followed by the number one on your telephone

keypad your next question comes from the line of patrick golf with jp morgan hi guys thanks for taking the question um i missed part of the prepared remarks and i had a question or a clarification question on your comment regarding north american highway de-icing inventories down 50 percent relative to last year i assume that's your inventory levels or that's industry inventory levels yeah patrick good morning you know this is ed i mean that's our inventory levels uh do you know uh peter you want to add more to that no again back to basics just managing those

through yeah we'll be managing that uh working capital um very carefully going forward it'll it'll flex up and down depending on what happens at any given year. We'll manage the business flexibly as we've talked about in the past, but we're not going to find ourselves in a circumstance like we did a year ago, you know, where it was just way too much inventory coming into a season and just produce to make earnings look good, but basically putting cash in the inventory. We're not going to do that anymore. That makes sense.

Can I follow on a couple quick ones uh do you have do you have a sense i guess i'll put them both in there do you have a sense as to where um broader industry inventory levels are and then i guess the other question would be just when you think about your balance sheet where are you trying to get to with regard to you know leverage on maybe a normalized basis um going forward yeah patrick i'll have ben address the first thing in terms of uh industry-wide inventories and i'll address um you know sort of balance sheet targets good morning patrick it's been um it would be a bit of speculation i think

it's um prudent to say that industry inventories would be down year over year being that going into last season we were coming off at two very light winters and i think it was widely known that inventories were pretty heavy um to the degree that that they're down with our competitors i i I would be speculating, so I'm going to speak to that.

In terms of our balance sheet, Patrick, ultimately, we'd like to work ourselves to be investment grade, which implies a debt-to-equity ratio or EBITDA ratio of, you know, between two and three, you know, kind of roughly two and a half. You know, I've talked about that in the past. You know, how we manage cash and work our way down, and, you know, pleased that our debt is coming down. That's the plan is make cash and retire debt. But, you know, as we move our way through there, we'll, you know, start thinking more and more about the potential capital returns and things like that in the future, but no decision at this point. You know, we need to get our debt down a bit more before we start thinking about that.

And then, and sorry, one last one. So would the thought with the stub of the 27s be to pay that down with cash flow or to refi that?

100 uh our we've announced our intention is to use cash flow to pay down the uh the sub left over on the 27 bonds got it thank you so much i appreciate it you bet thanks patrick again to ask a question press star 1 on your telephone keypad and with no further questions in queue i will now hand the call back over to ed dowling for closing remarks okay thank you operator really appreciate it and thanks everybody for joining the call today uh well you know we've got some events coming up here over the next sort of two months and look forward to seeing you uh seeing you then thank you again for joining us today this does conclude today's conference call you may now disconnect