Operator
Thank you for standing by. This is the Conference Operator. Welcome to Intrepid Potash Incorporated First Quarter 2026 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad.
Should you need assistance during the conference call, you may signal an operator by pressing star and zero i would now like to turn the conference over to ryan schultz interim investor relations manager please go ahead good morning everyone thank you for joining us to discuss and review intrepid's first quarter 2026 results with me today's intrepid ceo kevin crutchfield our chief accounting officer chris engold our vp of sales and marketing zachary adams and our vp of operations rickham 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, are subject to risk and uncertainties that are described in the reports we file with the SEC and could cause our 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 today's press release and, along with our SEC filings, SEC filings are available at intrepidpotash.com. I'll now turn the call over to our CEO, Kevin Crutchfield.
Thank you, Ryan, and good morning, everyone. We appreciate your interest and attendance for today's earnings call. I'm pleased to report that 2026 is off to a strong start with solid first quarter results. Our adjusted net income from continuing operations for the first quarter of $8.2 million and adjusted EBITDA of $19 million is a significant improvement from last year's first quarter adjusted net income of $3.9 million and adjusted EBITDA of $14.6 million. And we're looking forward to capitalizing on this momentum for the rest of the year. Our performance is a reflection of the hard work of all of our employees, and I'd like to thank our entire team for their commitment to safety and consistent execution across our core fertilizer business. Our first quarter performance was driven by several factors. First, supportive pricing and resilient demand across our fertilizer products. In the first quarter, our average potash net realized sales price was $353 per ton, and our average trio net realized sales price was $387 per ton. This represents a 13% increase year-over-year for potash, up from $312 a ton, and a 12% increase for Trio, up from $345 per ton. Second, sales volumes remain strong with our second-highest quarterly sales total since idling the West mine in 2016. Combined potash and TRIO sales volumes were 211,000 tons in the first quarter, with potash sales volumes of 105,000 tons and TRIO sales volumes of 106,000 tons. Finally, successful execution on key projects and operational efficiencies supported improved cost margins. TRIO delivered its highest quarterly segment margin since 2022 and per ton cost improved 5% compared to the fourth quarter. Before I pass the call to Zach, I want to highlight a few key developments and operational updates. On April 1, 2026, we sold the majority of the assets of the Intrepid South Ranch to Hydrosource Logistics LLC for total consideration of $70 million dollars which included the eight million dollar deposit we received in december 2025. we were able to transact on the ranch at a favorable valuation unlocking decades worth of cash flows in a single transaction that will allow us to refocus our efforts exclusively on our fertilizer assets the sale will also allow us to utilize a portion of our sizable deferred tax assets to offset the tax impact of the one-time gain. On lithium, our partners continue to advance FeO3 engineering and associated permitting. We remain confident in this project and look forward to sharing further details of the project economics as they develop. Overall, we're looking forward to a strong year. Continued steady support for our core business and solid cash position will allow us to capitalize on our unique position in the market and capture additional upside from opportunities like lithium among others i'll now pass the call to zach to provide some commentary on the market go ahead zach thanks kevin potash saw good subscription during the winter fill program with customer securing orders to meet most of their first quarter requirements following the closure of the order window posted potash prices increased by 20 per ton a change reflected in second-quarter spot transactions.
Trio demand remains resilient as customers value the individual components, particularly sulfate, due to ongoing disruptions in raw sulfur supply from the Middle East, along with the low chloride potassium component. Trio pricing was increased by $15 per ton in late March, with this adjustment realized on spot second-quarter sales. Globally, potash fundamentals have been supported by consistent production, broadly stable pricing, and solid demand. Brazil and China imported potash at record levels in the first quarter, contributing to a balanced market and reinforcing a constructive outlook for the second half of the year. Turning to agriculture markets, U.S. corn exports are on track to reach record levels for the 25-26 marketing year. Commodity prices for corn, soybeans, and cotton have strengthened in recent weeks, driven by weather concerns, supportive demand, and geopolitical tensions affecting market stability. We do recognize the concerns regarding the financial health of growers within the U.S. market, particularly as affordability challenges have been intensified by volatility and input costs arising from the conflict in the Middle East. We anticipate growers will continue to make the input decisions carefully. Hot ash, whose prices have stayed comparatively stable relative to other nutrients remains a critical input as growers look to maximize yields. I will now turn the call over to Rick Kim for an operations update.
Thanks, Zach. In our trio segment, the commissioning of a new continuous miner has already increased our tons per operating hour and increased operational efficiency. Additional improvements in our mill have boosted recovery and increased operating hours per shift continues to drive higher production of both granular and premium products. We benefited from these improvements in the first quarter and we expect to continue realizing further improvements through the rest of the year in our pot ass segment we've seen promising returns this spring from the hb mine with higher mill recoveries and improved pond deposition extending our expected run time before our summer shutdown moab also continues to see improvements in overall plant efficiency driving higher throughput and recovery early season evaporation looks promising and we We anticipate making up the tons lost due to last year's late season rain events. It went over. We expect to commence construction on Primary Pond 8 this summer, which will expand our evaporative area, and we anticipate increased production in 2028 as a result. We also expect Primary Pond to start contributing more production this year. Overall, our focus on operational improvements and execution have resulted in higher production and reduced unit costs year-over-year in both potash and trio. I'll now turn the call over to Chris.
Thank you, Rick. To echo Kevin's remarks, Intrepid delivered a strong first quarter. Our continued focus on driving production to increase revenues and improve unit economics is visible in our first quarter results. Potash production was 104,000 tons in the first quarter compared to 93,000 tons in the first quarter of 2025. As Kevin and Rick mentioned, this production is due to operational improvements across our minds. First quarter potash sales were $46.1 million, up $2.5 million from the prior quarter, driven primarily by higher realized pricing. Potash gross margin was $3.1 million versus $2.5 million last year as a result of higher realized pricing partially offset by higher costs on a similar volume. We sold 105,000 tons at an average net realized sales price of $353 per ton compared to $312 per ton in the first quarter of 2025. Higher production from higher cost sites increased our average potash segment cost of goods sold to $334 per ton in the first quarter of 2026 compared to $313 per ton in the first quarter of 2025 and $332 per ton in the fourth quarter of 2025. For 2026, we expect our annual potash production to be at the upper end of our guidance of 270 to 285,000 tons given recent improvements at HV. Turning to TRIO, first quarter production was 69,000 tons, a 10% increase versus last year. This increase is largely attributed to the new continuous miner, commission during the quarter, and ongoing plant optimization projects. Sales were $52.5 million, up $2.7 million from the prior year, driven by a 12% increase in our average net realized sales price per ton. This offset a 4% decline in tons sold. Overall, TRIO margin was $14.8 million for the quarter, up $4.4 million from last year. This was the highest quarterly segment margin since 2022 due to higher realized pricing and an improvement in COGS, offsetting the slight decline in sales volume. COGS per ton saw an improvement year over year and quarter over quarter with $229 per ton versus $235 per ton in Q1 last year and versus $242 per ton in the fourth quarter of 2025. For 2026 TRIO production, we are expecting to reach 285 to 300 000 tons with cogs of around 230 dollars per ton this is the expected result from our improvements with the new miner increased recoveries and more operating hours per shift in terms of second quarter guidance we expect another solid quarter as spring application winds down and our potash facilities enter the summer evaporation season for potash we expect our sales volumes to be between 50 to 60,000 tons at an average net realized sales price in the range of $380 to $390 per ton. In TRIO, we expect our sales volumes to be between 70 to 80,000 tons at an average net realized sales price in the range of $390 to $400 per ton. For our 2026 capital program we expect to spend 40 to 50 million dollars with most of our spend related to sustaining capital specifically at our East mine and for the beginning of a new primary pond at Windover which we expect will begin contributing to Windover's production in 2028. We continue to consider investment opportunities that will upgrade our assets and optimize future production and efficiency. We are currently evaluating a number of additional high return growth and productivity investment initiatives over the next 18 to 24 months. In summary, 2026 is off to a strong start and we're excited to see the results from the initiatives we put in place to meaningfully pay off in the form of increased production and improving costs. Operator, we are now ready for the Q&A portion of our call.
Operator
Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then one. We will pause for a moment as callers join the queue. Your first question comes from the line of Lucas Bauman from UBS. Please go ahead.
Hi, good morning. Thanks very much. I just wanted to start on kind of the sale of the South Branch. I mean, it sounded like you were sort of indicating that potentially you get the full 70 million cash that are net of the sort of DTA benefits. I guess one, is that sort of correct? And then two, what are you kind of intending to do with the price tags?
I'm sorry, Lucas, what was the last part of your question? What are we going to do with the cash?
Exactly. Yeah, yeah. So should we assume you're getting a full 70 million and then what are your intentions and chance of deploying it? Are you going to sit on it to sort of put towards projects going forward? I mean, do you see repurchases as attractive at a current level or where would you like to use that?
Yeah, look, it's a good question. And let me just give you some context on how we're thinking about that right now. As I've mentioned a bunch of times before since I joined, this is a regular conversation amongst our board, i.e. how to think about capital allocation. And frankly, it's becoming even more topical given the improved performance that we've seen over the last 18 months of the cash build that we're experiencing on the balance sheet at the moment. So let me just kind of reiterate some priorities that I've discussed before, just so we're clear and you get a sense of how we think about this. As I laid out early in my tenure here, the first order of business was to reestablish an intense focus on the core assets. The goal was to make them more predictable, more reliable, more resilient. I think we can all agree that we've seen improvements on that front, but we're not done there, and I'll address that momentarily. From there, we wanted some time to look at our sustaining capital needs for the business over a reasonable period of time, say five years or so. So we're pretty much through that process now and believe long-term core operations should require something on the order of $35 to $40 million a year of sustaining capital, with an add-on every few years for larger sustaining items like making a new cavern or building a new pond like we're doing at Wendover right now. So notably, I'll just give you a heads up that 2027 is expected to be one of those years, and we can talk about that a little later. and then next and also importantly we're really focused on across the company on ways we can increase volumes and reduce our cost uh this effort's being ingrained into the culture of Intrepid as simply the way we need to think about our business and to be frank we don't see any silver bullets to increase production substantially in the short term but we do see numerous opportunities to add incremental tons to the portfolio with attendant effects on costs and efficiencies. And I think a good example of that is what's happening at Carlsbad now. You can see that result improved over the past several quarters. And then, as I've also mentioned in the past, we wanted to review our portfolio to determine if there were assets that we held that might make sense in the hands of somebody else, and the South Ranch fit that bill. And as you saw, we monetized that asset and brought forward decades of cash flows, and frankly put that asset into a better set of hands than than us given the dynamics of what's happening with water in the permian basin so now that the assets core assets are performing better and we've taken a look out into the future and assessed our capital needs we want to be thoughtful about maintaining an adequate amount amount of dry powder for organic projects or opportunities that exist across our portfolio and through continued performance to frankly earn the right to consider adjacency opportunities that might make strategic sense for the company. And then last but not least, we want to retain adequate liquidity to buoy us through any rough times that might come our way. And for those of you that have been around this sector for a while, you'll know exactly what I'm talking about. I know, Lucas, that was a lot I realized, but I thought it was important for you and others to hear how we think about capital allocation priorities. And suffice it to say I think we've made great progress over the year and a half and I want what I want to leave you with today is the following been a lot of a lot of requests that we return capital to shareholders we hear you loud and clear we always have we simply had some work to do before this conversation could be had and in earnest and our board's convening later this month to discuss a variety of matters, and what I'll leave you with is just know that this topic is chief among them. So I'll just leave it at that for now, and hopefully that gives you some nuggets, at least on how we think about it and what might be on the near-term time frame.
Right, thanks. Yeah, I mean, that's very helpful. And then I guess just on the, I just wanted to of talk to you about the uh how the trio market's going to kind of go uh as we look forward here so i mean you're kind of pointing to like a 10 to 15 dollar kind of sequential improvement and pricing into 2q um the i mean software markets have been impacted uh significantly globally for the middle east disruption um and that's kind of raising uh production costs and raising the cost of synthetic production on that side how do you kind of see that flowing into the trio market and impacting pricing is there more of an impact to come as 2026 progresses or do you believe that's
kind of incorporated in what you're sort of expecting for 2q now thanks lucas for the question so you know it's important to remember that customers typically lock in the majority of their spring requirements pretty early to start the year for trio and potash and so most of those commitments were made uh ahead of the uh iran conflict beginning and certainly before the full extent of it was realized um so we expect to start seeing more and more of that realization and certainly as we kind of see those spot opportunities here in in second quarter and for the balance of the year we expect trio to benefit from a constructive outlook amid a tightening global supply environment on sulfur which should keep sulfate values firm and you should see that kind of roll through our realized pricing as we kind of move through the rest of the year.
Great thanks and then just Kevin I mean you kind of mentioned I guess the further efforts to kind of incrementally lift production progressively so I guess switching over to potash How do you kind of see the trajectory beyond this year to kind of push back above 300,000 tons over time?
Hey, Lucas, this is Rick. You know, we see a number of different incremental opportunities at the core assets. You know, as Kevin mentioned, kind of the past 12 to 18 months have really been focused in on operational improvements, identifying those and executing on them. so um you know continue to see uh opportunities at hb we're starting to realize those already as i mentioned in the earlier comments um and we're seeing similar opportunities around wendover and in moab as well the addition of the new primary pond at wendover it will start contributing in 2028 primary pond seven which was commissioned a couple of years ago will really start to see its full productive capacity coming online throughout this year and with the intent of getting that operation back up in the 75,000, 80,000 ton per year run rate that it's historically operated at.
Just one more little point, Lucas, in addition to what Rick said, as we talked about before you know we have the amax cavern it still needs more work we want to be very thoughtful about how we approach that and to the extent that that you know proves out that's a mean that would represent a meaningful upside opportunity for us but we still have work work to do there and we'll keep you posted in the in the coming quarters on that project right thanks and then i guess just on the uh lithium project um could you maybe just kind of share how you sort of see the timeline on the milestones there as we sort of move through
this year and beyond and then um i mean investors are very keen to kind of get an understanding of like how you think the uh sort of unit cost economics are going to look there um i mean i think the sort of production target and the revenue side is sort of more well understood sort of depending on sort of whatever i'm doing with market pricing but um to kind of I really understand what it could mean to you guys in the medium term, you know, we sort of need a better view on the cost side. So I don't know if there's anything you can kind of share there now or I guess when you sort of think you'll be able to have a better view of that as we sort of work through the process there.
Yeah, good question. And look, I don't want to front run our partners. You know, the key milestone that's coming, you know, early this summer will be FEL3. And then, you know, that's when you have a pretty high degree of precision around your engineering, the build, the cost of the build, and where your operating costs are going to come out. We have a sense of what those are, but it'd be way premature for me to start talking about that. But, you know, given the concentrations that we have of the, you know, the lithium ion relative to a lot of these other brine projects, we've kind of got a head start really when it comes down to it. So we feel good about the initial volumes coming out of the project in a couple years, 5,000 tons LCE, and continue to work very closely with our partners on, you know, assisting them from the, you know, the footprint of their operation, assisting with permitting, you know, getting through the regulatory hurdles, et cetera, all of which is actually going pretty well. So I think the big milestone, again, is FEL3, and once that's done, that's when we'll be prepared to talk to the market about more precision around timing, cost of the build, and cash operating and full operating costs. So hopefully that's incrementally helpful, Lucas.
And then maybe just one on sort of the cost side. So I just wanted to sort of understand how you're seeing sort of any cost pressures flowing through the business from the, I guess, the inflationary environment that we're in right now. Just is that sort of impacting either Potash or Trio? And I guess how would you sort of see that evolving as the year progresses? And then just lastly, is there any – I mean, I think there's a small residual of the – there's some small residual impacts left, I guess, even after the South Ranch sale. So I just kind of wanted to understand, are there any kind of straining costs associated with that or just anything we should think about there going forward as well?
Thank you. um maybe hitting the last part of your question first to the extent i understood it properly um you know we had we had an oil field services segment when we had south ranch we'll still have some oil field services activity but that'll get subsumed into the other segment and we'll discontinue the oil field services segment and in terms of kind of cleanup post post deal I'm looking at Chris to see if I'm going to get this right, but I think it's pretty clean, and you're not going to see any sort of tail effects permeating through the P&L or the balance sheet after the sale was concluded. Did I do okay there, Chris? You did. There's a very minimal cost left behind that'll be absorbed into the other parts of the business there and then i'll take a shot at the sort of the cost question lucas i mean yeah i mean we're seeing that kind of all over the place it's not like radical radical or anything but you know fuel clearly is is the biggest nemesis and it's highly volatile it's bouncing all over the place um you know we have some natural gas exposure uh over time that's actually behaving pretty well kind of given the natural gas that winter always pretends for you know a potential
potential spike but beyond that we're not seeing anything that i would characterize as material unless rick has information to the contrary no i i agree with kevin i think you know one of the things that's probably important to call out is is while we do see the fluctuations in fuel If you look at the nature of our mining processes, we're probably not as impacted or exposed to those fuel fluctuations as traditional surface underground miners. Our solution mining process does insulate us a bit from that.
Operator
Your next question comes from the line of Vincent Andrews from Morgan Stanley. Please go ahead.
Hi, and thank you for all the color on that wide pool of questions there. We really appreciate it. I just wanted to – oh, and this is Justin Pellegrino on for Vincent. I just wanted to double-click on some of those, first being, you know, well-understood on the capital allocation priorities. In the meantime, should we expect that the cash kind of generates some interest income on your P&L?
Yes. Yes, it will. Well, those cash balances are placed in very safe federal types of securities. So, yeah, you will see some interest income start to leak through the P&L as we move ahead. We've built up a pretty hefty balance. I know we've reported as of the end of the first quarter, but clearly the incremental $62 million for the ranch transaction came in after the end of the quarter. and we've built some additional cash too. So I think current cash balance stands on the order of $170 million or so. So definitely you'll start to see some interest flow through.
Okay, perfect. And then one more on COGS for the rest of the year. Can you just kind of give us some cadence for COGS per ton and potash throughout the balance of the year? I know the press release kind of mentioned some higher cost mix in production towards some higher cost sites. So can you just kind of give us some cadence for the balance of the year?
Yeah, so, Justin, typically our cogs will fluctuate throughout the year, especially at our solar sites, largely due to production volumes. So we're actually finishing up our harvest season here within the next few weeks. And each of the sites will go into their summer shutdown. So, that does have an impact on the COGS that we will report for the next two quarters, or we anticipate to see that. But once we get latter in the year, I mean, we do expect to see some of those operational efficiencies that we've talked about starting to realize in both production and cost. So, I think, you know, especially in the latter half of the year, we'll start to see those materialized. Great.
Thank you. That's all the questions I had.
Operator
Your next question comes from the line of Jason Yersander from Bumbershoot Holding. Please go ahead.
Good afternoon. Thanks for taking my questions. Congrats on the quarter and the sale of oil fields. I think I've asked you about capital allocation pretty much every quarter since you joined Kevin. I appreciate the answers to Lucas. I'm not going to hammer too much on it, but just the the last question or you said that the cash balance as of the end of april is around 170 million yeah plus or minus okay correct um any i guess what was the any rationale why we didn't include it in the press release for this quarter to kind of let algorithms and whatever pick up on that just given we've included it pretty much every quarter kind of that month and cash balance the last year or two?
Yeah, look, that's a fair question. I mean, obviously, the press release pertains to the first quarter, and the deal on the ranch didn't close until the day after the first quarter. So, you know, technically, you know, we took the view that we're going to just discuss everything inside the first quarter. perhaps it would have made sense to address cash on hand and liquidity more poignantly actually in the in in the press release but we weren't trying to hide from it it was just focused on the quarter okay um and just any update on kind of the xto exxon permitting process any update on where uh where the BOM stands with that?
We actually don't have any, like, information that's useful. We see kind of what's going on in that part of the world where we operate. It's super busy, lots of activity, but we don't have any insights as to Exxon's near-term plans. I mean, we continue to be bullish on, you know, their big eddy development process and, it it's going to come we just don't know exactly exactly when okay um i think that's it for me then appreciate all the the color that you gave uh on the capital allocation side yeah thank you jason a reminder if you would like to ask a question please press star then one on your telephone keypad at this time there are no further questions i would like to turn the conference back over to kevin crutchfield for any closing remarks uh i'd like to give one final thank you today before we conclude to our team here in Denver, our teams in Utah and New Mexico for their hard work and dedication over the last quarter and frankly the last couple of years. And also those of you who attended the call today, thank you for patching in. And we look forward to keeping you posted in the future. Thank you, everybody.
Operator
Have a great day. this concludes today's conference call thank you for participating and have a pleasant day you may now
