Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Compass Minerals Third Quarter Fiscal Year 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. It is now my pleasure to turn today’s call over to Valerie Tymosko. Please go ahead.

Thank you, operator. Good morning, and welcome to the Compass Minerals fiscal 2022 third quarter earnings conference. Today, we will discuss our recent results and our outlook for the remainder of fiscal 2022. We will begin with prepared remarks from our President and CEO, Kevin Crutchfield; and our CFO, Lorin Crenshaw. Joining in for the question-and-answer portion of the call will be George Schuller, our Chief Operations Officer; Jamie Standen, our Chief Commercial Officer; and Chris Yandell, our Head of Lithium. Before we get started, I will remind everyone that the remarks we make today reflect financial and operational outlook as of today's date, August 5, 2022. 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. The results in our earnings release issued last night and presented during this call reflect only the continuing operations of the business other than amounts pertaining to the condensed consolidated statements of cash flows or unless noted otherwise. The company's fiscal 2022 third quarter results and fiscal 2022 outlook in the earnings release and discussed during this earnings call reflects the previously announced change in fiscal year-end from December 31 to September 30. All year-over-year comparisons to fiscal 2022 third quarter results refer to the corresponding period ending June 30, 2021. I will now turn the call over to Kevin.

Thanks, Valerie and good morning, everyone. Thanks for joining the call today and for your continued interest in the Compass Minerals transformation. Over the last couple of years we’ve embarked on a journey to expand our position as a premier essentials minerals company by moving into select, high return adjacent markets, leveraging our core competencies which includes safe and productive mineral extraction, experience an optimizing mining and manufacturing assets and logistics and supply chain expertise. At the same time we continue to focus on safety and transforming our internal culture, building execution muscle, increasing our focus on diversity and inclusion, and staying true to our core progress of helping to keep people safe, feeding the world and enriching lives. We made progress in several of these areas this year-to-date and this past quarter. First, we finished year-to-date with a total case incident rate or TCIR of just under 1, reflecting a roughly 58% improvement year-over-year. I want to express my gratitude and congratulations to each of our employees around the world for this outstanding safety performance with a particular call out to those who lend their experience, talent and hard work at one of our underground mining operations where on a daily basis they can face complex and challenging circumstances. I appreciate the level of care, focus, discipline and collaboration, essential to operating safely and ensuring that each employee returns home to their family in the same condition as they live. Even with this world class safety performance, our team has delivered year-to-date, we are maintaining a vigilant focus on the engineering solutions and behavior based safety training to continue minimizing risks and to ensure a safe and healthy work environment. From a portfolio management perspective, very early this quarter in April we closed on the sale of our South…

Thank you, Kevin. Consolidated revenue was $214.7 million for the third quarter of fiscal 2022, up 8% year-over-year, primarily driven by favorable Salt segment average pricing up 8%. The favorable price impact on revenue was partially offset by lower plant nutrition sales volumes year-over-year due to constrained inventory levels and subpar production yields. Despite the revenue increase, our consolidated operating earnings decline $4.4 million to an operating loss of $3.5 million and adjusted EBITDA declined by the same amount reflecting continued pressure on production and distribution costs within the Salt segment. Operating and adjusted EBITDA margins compressed year-over-year by 210 and 324 basis points respectively. On a segment basis, Salt revenue totaled $156.2 million for the third quarter of fiscal 2022, up 10% year-over-year driven by 2% growth in sales volumes and an approximate 8% increase in price. Both the highway and consumer and industrial businesses reflected modest growth in sales volumes. Highway average selling price was up 7% year-over-year, primarily due to product and regional mix. C&I pricing rose roughly 9% year-over-year, reflecting our efforts to implement broad based price increases within most product categories in response to the high inflation environment, enabling us to recover a portion of the overall inflation impact on our profitability without significant delay. Despite higher revenue, Salt operating earnings declined 35% year-over-year to $12.4 million, while EBITDA declined 25% to $27.7 million, primarily reflecting higher production and distribution costs. EBITDA per ton declined by $6 year-over-year, despite higher pricing, driven by higher production and distribution costs. From a cost perspective, roughly two-thirds of the increase was driven by higher cash costs, which rose 22% to roughly $45 per ton and one-third by higher shipping and handling costs, which rose 16% to roughly $31 per ton. The increase in per unit cash costs was…

Your first question comes from the line of Joel Jackson with BMO Capital Markets. Your line is open.

Hi. Yes, this is Alex on for Joe Jackson. Thanks for taking my questions. I'm going to ask them one by one. Could you help, on 14% higher season pricing, could you help us quantify the impact on the net Salt margins in fiscal 2023? Whether that be in percentage terms or per ton terms and would you expect this number to be closer to the $15 per ton or the $20 per ton of adjusted EBITDA that you mentioned for fiscal 2023?

Yes, good morning. This is Kevin. Let me take a shot at that and maybe Lorin or Jamie would want to add a little color. I mean, I think there are two components that are important to remember, one is price, the other is our mix. And as we said, last quarter, one of the things we wanted to do this quarter was not only move price up, but to have a portfolio where we can take advantage of natural competitive advantages, but from a logistic standpoint and supply and handling and that sort of thing. But on a year-over-year basis, 14% up, we believe puts us back in that zip code of where we were in 2021. I'm not going to get too specific on it because we're still working through our internal plans, but it's a significant move towards restoration of margins that have been more typical and historical here at Compass on the Salt side. Jamie, Lorin, anything to add to that?

I would just remind you of that when you think about the tons we're talking about, if you take the midpoint of our Salt segment volume, you would back out the C&I of about 2 million, then you'd back out another 2 million for chemicals, mag chloride UK. And so you're really talking about that 8 million of tons that would be down the 13% and that we'd enjoy the 14% increase in average selling price. So just want to make sure you're focused on the right numbers.

Perfect.

Your next question?

And yes, I have one on lithium. So for the Ford and LG MOU’s it would seem that previously that you're looking to secure a upfront capital offtake given that LG seems to be signing these MOUs with other people as well, why not hold up for deals with upfront capital?

So nothing that we are in discussions around would preclude any member of the value chain from participating in any way with respect to an upfront capital payment or investment at the asset level. As we think about moving forward prudently with lithium there’s a variety of options that are on the table. The first one would be free cash flow and Jamie and his team have done a great job so far in terms of taking the first step towards restoring the profitability of the Salt business and that's going to allow us to deleverage and that cash flow is one source of capital. Prepaid capital in connection with an offtake agreement is another option that we might consider. What's also common within the mining sector, our streaming contracts where you part with some fraction of the volume in exchange for an upfront payment, then there's equity at the asset level, which would be an option and obviously equity at the Compass level. All of these options are options that are on the table and as we advance discussions we'll hear more with the passage of time.

All right. That makes sense. And just a follow up to that, what do you think are some of the key requirements that will be needed to kind of convert some of these MOUs to like binding offtakes?

Yes, so this is Chris. I think when you look at the MOUs for binding perspective, one of the things is making sure you have compliments in the project. There's always due diligence that goes on prior to signing binding agreements. And it's just a relationship that you develop with the customer base as well, making sure that it's a good fit for both of you. Once you get past those things, it's similar to any other contracts we deal in.

Your next question comes from the line of Seth Goldstein with Morningstar. Your line is open.

Thanks for taking my questions. It seems like the bids strategy has changed a little bit in the past couple years, maybe last year you prioritized volumes and this year's prices and profits. How should we think about the bid strategy going forward in future years?

Yes, good morning Seth. It’s Kevin. Before what we were trying to do was just grab back market share that we lost kind of post strike et cetera. And we approached this year with very much a value over volume strategy, and we maintain a lot of discipline throughout the bid season. And I think a worthy data point to note too, is if you look at the average wins across our served market, we're up at least 500 basis points over the average of all of our competitors. So I think it was a very focused strategy, both on being -- maintaining price discipline, but also a focus on natural geographic markets. So what I would say you could expect going forward is a strategy very similar to that. And to the extent we have to adjust on the production side we will make those adjustments, but we want our assets to run pretty hard as well. So finding that balance I think will be a key part of the strategy going forward.

That makes sense. Thank you. And then can you provide an update on the Plant Nutrition business? It seemed like the challenges remained. Is there your path forward towards the restorational volumes and cost reductions from here?

George, is here. I'll let George take that one.

dykes: So again, there's a lot of pieces to this. I've spoken in the past about the use of KCl in regards to supplementing our production there. Again, the price of KCl does not allow that to take place at this point in time. But again, there's a lot of effort going into our entire process out at all and so I'm confident, but it's going to still take us some time to get to that point.

Okay. I'll pass it on from there. Thank you.

Thank you.

Your next question is from the line of Chris Shaw with Monness, Crespi. Your line is open.

Hey, good morning everyone. How are you doing?

Good morning.

So with Salt, I know you said that you expect margins to come back with the strong pricing you're getting in the bid season, but the lower volumes, I always, I remember sort of thinking about Goderich in particular that, you were pursuing some volumes to leverage the product coming out of there and it's a high cost asset. So if you're losing say 13% volumes, is that detrimental to margin. So is that all factored in I assume to the sort of guides you're giving on margins, so it's, sort of limited guides, but I just worried about that when I saw the number initially.

Yes, this is Jamie; I'll take that one, Kevin. We don't expect to even need to slow Goderich down. Given our platform and the location of our mine in Louisiana and our mine up there in Goderich, we can actually make shifts. And while yes, we're taking our volume back, the tons we are reducing are low margin tons that are kind of leaving our portfolio where we've added high margin tons, and we've jettisoned low margin tons. We can also adjust how we serve. We call it moving our north, south line, north or south and so we can keep Goderich running. We can move that line a bit south. Inventories are very tight and lean in the south, so we can push that line down and still run our both sites optimally.

Okay and to continue on Salt, I know the, so much of the issue on the cost side was transportation, the higher energy shipping. How are you contracted for that for the upcoming season? I mean, if -- you know oil is coming down already, I assume the shipping rates might well do the same. So are you locked in at a higher rate going into the season? Is that flexible? Was it surcharges? I can't remember, because I just, I don't want, I was worried that again, thinking that you might be locked into a higher level because just to make sure you had some sort of certainty on the transportation costs?

Yes, so we are exposed to oil primarily. We have multi-year transportation agreements on the barge side and on the vessel side as well as rail. So we've made it -- we've made our estimate of what Brent oil looks like as we look out into 2023 to the extent it's lower than we expected, which it's, it's now lower than it was two months ago at $94. That would accrete to us. And if it's, where we expected, then it's going to be at that level. And if it were to go higher, we could leak some value there. But again, just as we're doing this year, the industry in general tends to recapture that. It's just that timing difference. So we are mostly impacted by oil as it relates to transportation.

So if it continues to go down, you'll benefit definitely heading into next year, next season?

Correct, yes.

All right. That's all I have. Thank you.

Your next question comes from the line of Roger Spitz with Bank of America. Your line is open.

Thanks and good morning. First, I just wanted to make sure I understood correctly. When you said that your Salt for the coming season was up 500 bps over your competitors, are you saying that your price were up 14%, your competitor's prices in your view are up maybe 9%? Is that what you meant by that or did I misunderstand that?

Exactly. That's exactly what we meant.

Perfect. Regarding the of 24, I see the tension on both sides. You've got rising rates on the one hand, perhaps may -- having you think goes opportunistically moving forward, I suspect you wouldn't mind seeing some recovered EBITDA as you expect for the 2023 winter season. How do you think that's going to come down? Do you think you might wait for the time after you see that EBITDA recovery, but before the bonds go current to refine or do you think you might come sooner?

I see. So today, given the extent to which credit spreads have gapped out, we’d probably be looking to convert that senior note to term debt. It's just less expensive and it also gives us debt to pay off. Is that your question?

Yes, that's a great answer. That's perfect answer, but thank you very much for that.

Okay, thank you.

There are no further questions at this time. I will now turn the call back over to Mr. Kevin Crutchfield.

I certainly appreciate everybody tuning in today and appreciate your continued interest and support of Compass Minerals and we look forward to keeping you updated in the coming quarters. Thank you everyone. Have a good day.

Ladies and gentlemen, thanks for participating. This concludes today's conference call. You may now disconnect.