Robert McGuire

Robert McGuire asked for projections on Customer Acquisition Cost (CAC) for year-end 2025 and the long term, as well as expectations for 2025 free cash flow and investment levels.

Answer

CEO Vijay Kotte declined to provide specific long-term guidance on CAC or free cash flow. He emphasized the company's focus on achieving a year-one cash-on-cash return, which necessitates driving down costs. For capital deployment, Kotte described a 'read and react' strategy, where cash will be invested in high-return opportunities like technology or marketing, or used to pay down debt if such opportunities are not present, with the overall goal of being accretive without increasing total debt.

Robert M. McGuire inquired about GoHealth's efforts to reduce customer acquisition costs (CAC), the expected CAC trend in Q4 and beyond, and whether the e-TeleQuote acquisition model is repeatable. He also asked about the anticipated mix of agency versus non-agency business.

Answer

CEO Vijay Kotte detailed that CAC reduction is driven by better marketing targeting, increased agent efficiency via AI and automation, and real-time supply-demand matching. He confirmed that GoHealth's platform creates unique synergy opportunities and the company is actively seeking similar acquisitions. Regarding the business mix, he explained that while initial contracts are based on predicted market stability, the final agency vs. non-agency mix is ultimately determined by consumer choice and finding the best plan for their needs.

Rob McGuire of Granite Research asked about the timing and pricing of the UAN summer fill program, the outlook for fall ammonia prices, and the reasons for increased Q2 direct operating costs. He also inquired about recent unplanned downtime, CEO Mark Pytosh's new dual role, views on industry consolidation, and the capacity impact of brownfield reliability projects.

Answer

President & CEO Mark Pytosh explained that the UAN summer fill was delayed by strong demand but would feature a smaller-than-typical seasonal discount. He noted fall ammonia prices should be similar to spring levels. Both Pytosh and CFO Dane Neumann attributed higher operating costs to repairs, inventory effects, and elevated utility prices. Pytosh confirmed downtime issues were resolved, discussed his commitment to his dual CEO role, and saw potential for industry consolidation. He also detailed that brownfield projects, funded by growth CapEx, could add ~100 tons/day of ammonia capacity at Coffeyville and over 5% at East Dubuque.

Rob McGuire of Granite Research inquired about the timing and pricing of CVR Partners' UAN summer fill program, the outlook for fall ammonia pricing, and the drivers behind increased Q2 direct operating costs. He also asked about the resolution of recent unplanned downtime, CEO Mark Pytosh's new dual role, views on industry consolidation, and specifics on capacity additions from brownfield reliability projects.

Answer

President & CEO Mark Pytosh explained that the UAN summer fill was delayed by strong demand but is expected soon with a smaller-than-usual seasonal discount. He noted fall ammonia pricing should be similar to the spring. Pytosh and CFO Dane Neumann attributed higher Q2 operating costs to repairs, inventory draws, and elevated electricity and gas prices, which are expected to continue into Q3. Pytosh confirmed downtime issues were resolved and discussed his commitment to his dual CEO role. He also shared a positive outlook on industry consolidation and detailed how brownfield projects, funded by growth capex reserves, will add significant, cost-effective production capacity at both plants.

Rob McGuire of Granite Research inquired about several operational and strategic topics, including the timing and pricing for the UAN summer fill program, the outlook for fall ammonia prices, and the reasons for the increase in Q2 direct operating costs. He also asked for clarification on recent unplanned downtime, the capacity impact of brownfield projects, and CEO Mark Pytosh's new dual role following the CVR Energy announcement.

Answer

President & CEO Mark Pytosh explained that the UAN summer fill was delayed by strong demand and that the typical seasonal price discount will be much narrower this year. He and EVP & CFO Dane Neumann attributed higher Q2 operating costs to repairs, inventory draws, and elevated electricity and gas prices, which are expected to persist into Q3. Pytosh confirmed that unplanned downtime issues were resolved and detailed how brownfield projects, funded by growth capex, will add significant capacity. He also affirmed his continued commitment to CVR Partners while taking on the CEO role at parent CVR Energy.

Robert McGuire asked for details on several topics, including the reason for lower Q2 2025 utilization guidance, the status and potential production increase from growth projects, and a cost estimate for the Coffeyville natural gas feedstock project. He also inquired about a specific cash reserve for future needs, the outlook for UAN pricing and summer fill discounting, the pricing divergence between ammonia and urea, and the potential market impact of China reducing its U.S. corn purchases.

Answer

CEO Mark Pytosh explained that the Q2 utilization step-down is due to planned downtime at the East Dubuque facility to install a new control system, a key reliability project. He stated that growth projects are aimed at reducing downtime and expanding nameplate capacity over the next 2-3 years but did not provide specific production percentages. For the Coffeyville project, he estimated a cost in the 'low double-digit millions' and confirmed its technical feasibility. Pytosh also affirmed that Q2 UAN pricing would be stronger, reflecting recent market increases, and that low system-wide inventories bode well for the summer fill season. He clarified that the widely cited Tampa ammonia price is not representative of their Midwest market, where prices are more aligned with urea and UAN. Regarding trade, he noted that Mexico is a more significant corn buyer than China and that global grain markets would likely readjust to shifting trade flows. CFO Dane Neumann added that the cash reserve in question was set aside to ensure funds are available for heavier CapEx later in the year.

Robert McGuire of Granite Research, LLC asked for an analysis of market trends, including the impact of urea prices on UAN demand, distributor inventory levels, and any application shift between UAN and ammonia. He also inquired about the forward-sold position for UAN and the outlook for 2025 capital expenditures.

Answer

CEO Mark Pytosh explained that tight global urea supply is increasing prices for both UAN and ammonia, making UAN appear attractively priced. He noted strong customer buying ahead of an anticipated increase in corn acreage, indicating a stronger market than the prior year. While not giving specific figures, he confirmed a 'solid book of business' for the spring. CFO Dane Neumann added that he does not expect a substantial change in capital reserves for 2025, as funds for growth projects have largely been set aside in prior periods.

Rob McGuire from Granite Research inquired about UAN import trends, the market impact from recent Ukrainian strikes on Russian fertilizer facilities, and the current status of the Leidos lawsuit.

Answer

CCO Damian Renwick explained that UAN imports were below last year, contributing to market tightness, and that potential tariffs would likely have a more material impact than the drone strikes. CEO Mark Behrman provided an update on the Leidos lawsuit, stating that the trial is currently scheduled to begin in late October 2025.

Rob McGuire of Granite Research asked about current UAN import trends, the market impact from Ukrainian strikes on Russian fertilizer plants, and requested an update on the status of the Leidos lawsuit.

Answer

EVP and CCO Damien Renwick stated that UAN imports were below last year, contributing to market tightness. He has seen no immediate impact from the drone strikes, suggesting future tariffs would be a more significant factor that could redistribute global trade. Chairman and CEO Mark Behrman provided an update on the Leidos lawsuit, stating the trial is currently scheduled to begin in late October.

Robert McGuire from Granite Research asked for the company's view on the European import dynamic between U.S. ammonia and LNG. He also sought updates on European legislation supporting blue ammonia, such as CBAM, and inquired if there was a significant pricing disparity between inland ammonia sales and the Tampa benchmark.

Answer

Chief Commercial Officer Damien Renwick explained that European ammonia producers face a 'make vs. buy' decision based on their natural gas costs versus import prices, a dynamic he expects to continue. He noted the CBAM transition is still on track for next year, despite rumors. Chairman and CEO Mark Behrman added that EU discussions on carbon intensity scores are not yet finalized. Regarding pricing, Renwick stated that inland ammonia prices are consistent with seasonal expectations and not out of the ordinary.

Robert McGuire of Granite Research asked about potential European legislative shifts towards low-carbon ammonia, the impact of U.S. carbon policy changes on customer demand, and the drivers behind strong Q4 ammonium nitrate sales.

Answer

Chairman and CEO Mark Behrman noted that Europe appears to be revisiting its policies to be more inclusive of low-carbon (blue) ammonia due to economic realities, and that customer interest is primarily driven by financial impact rather than politics. CCO Damien Renwick and CEO Mark Behrman attributed the strong AN sales to a combination of improved plant reliability and a successful commercial strategy to upgrade molecules to higher-value products.

Robert McGuire asked about the current purchasing behavior in the nitrogen market, the drivers for Q3 capital expenditures, the reason for the extended production timeline on the Houston Ship Channel project, and the performance improvements observed at the Pryor facility post-turnaround.

Answer

Chief Commercial Officer Damien Renwick described nitrogen purchasing as cautious and 'hand-to-mouth.' CFO Cheryl Maguire attributed higher Q3 CapEx to the major Pryor turnaround. CEO Mark Behrman explained the Houston project timeline reflects conservatism. Mr. Behrman also detailed significant performance gains at Pryor, including optimal ammonia rates and a 75,000-ton increase in annual UAN capacity.