Core Insights - Smart Sand, Inc. reported a total tons sold of approximately 1.2 million in Q3 2024, with revenues of $63.2 million, a net loss before income taxes of $(5.2) million, and adjusted EBITDA of $5.7 million [1][5][9]. Financial Performance - Tons sold in Q3 2024 were approximately 1,189,000, representing a 7% decrease sequentially and a 2% decrease year-over-year [4]. - Revenue for Q3 2024 was $63.2 million, down from $73.8 million in Q2 2024 and $76.9 million in Q3 2023, primarily due to lower sales volumes and average selling prices [5]. - The company experienced a net loss before income tax of $(5.2) million in Q3 2024, compared to a net income of $1.9 million in Q2 2024 and $4.8 million in Q3 2023 [6]. - Adjusted EBITDA decreased to $5.7 million in Q3 2024 from $11.9 million in Q2 2024 and $13.2 million in Q3 2023, mainly due to lower contribution margin per ton sold [9]. Cash Flow and Capital Management - Net cash provided by operating activities was $5.8 million in Q3 2024, down from $14.9 million in Q2 2024 and $12.5 million in Q3 2023 [10]. - Free cash flow for Q3 2024 was $3.7 million, with capital expenditures of $2.1 million [11]. - The company declared a special dividend of $0.10 per share and announced a share buyback plan of up to $10 million [12][13]. Strategic Initiatives - Smart Sand established a new five-year $30 million ABL credit facility with First Citizens Bank, providing flexible funding for future opportunities [2]. - The company is revamping its SmartSystem fleet configuration to enhance operational efficiency, with a rollout expected in early 2025 [7]. Market Outlook - The company remains optimistic about the long-term fundamentals of the oil and gas industry, anticipating strong demand for natural gas in the US and Canada, and increased oil activity in the Utica basin [3].

Core Viewpoint - The article emphasizes the importance of value investing and highlights Smart Sand (SND) as a strong value stock based on its financial metrics and Zacks ranking system [1][2][7] Company Overview - Smart Sand (SND) currently holds a Zacks Rank of 1 (Strong Buy) and has a Value grade of A, indicating strong potential for value investors [4] - The stock has a P/E ratio of 8.06, significantly lower than the industry average of 11.67, suggesting it may be undervalued [4] - SND's Forward P/E has fluctuated between a high of 41.69 and a low of -5,657.50 over the past year, with a median of 18.26 [4] Valuation Metrics - The P/S ratio for SND is 0.3, compared to the industry average of 0.81, reinforcing the notion of undervaluation [5] - SND has a P/CF ratio of 2.64, which is much lower than the industry's average of 7.26, indicating strong cash flow relative to its price [6] - Over the past 52 weeks, SND's P/CF has ranged from a high of 2.93 to a low of 1.76, with a median of 2.25 [6] Investment Outlook - The combination of SND's favorable valuation metrics and strong earnings outlook positions it as an impressive value stock currently [7]

Core Insights - The article emphasizes the importance of earnings estimates and revisions in identifying winning stocks, while also acknowledging the diverse strategies investors may adopt [1] - Value investing is highlighted as a particularly popular and successful strategy across various market conditions, utilizing established valuation metrics [2] Company Analysis - Smart Sand (SND) is identified as a strong candidate for value investors, currently holding a Zacks Rank of 1 (Strong Buy) and an A grade in the Value category [3] - SND has a Price-to-Sales (P/S) ratio of 0.32, significantly lower than the industry average of 0.86, indicating potential undervaluation [4] - The company also has a Price-to-Cash Flow (P/CF) ratio of 2.81, compared to the industry average of 7.86, further suggesting that SND may be undervalued based on its cash flow outlook [5] - The analysis indicates that SND's stock is likely undervalued, supported by a strong earnings outlook, making it an impressive value stock at present [6]

Core Viewpoint - Smart Sand reported better than expected performance in Q2 2024, with strong volumes, revenues, margins, EBITDA, and free cash flow despite a backdrop of weakening U.S. oilfield activity levels [1][3] Sales and Financial Performance - Tons sold in Q2 2024 reached 1.274 million, an 18% year-over-year growth, although sequentially it was down from a record 1.336 million in Q1 2024 [2] - Revenue for Q2 2024 was $73.8 million, reflecting a slight 1% decrease year-over-year and an 11% decrease sequentially [2] - Contribution margin per ton was $15.53, exceeding guidance and showing improvement from previous quarters [2] - EBITDA for Q2 2024 was $11.9 million, with an EBITDA margin of 16%, marking a 27% sequential growth [2] - Free cash flow for Q2 2024 was $13.5 million, a significant recovery from negative free cash flow in previous quarters [2] Operational Efficiency - The company implemented several efficiency measures that led to improved production costs and administrative expenses, positively impacting contribution margin, adjusted EBITDA, and free cash flow [3][7] - Management noted that they are operating at just over 50% of capacity, indicating potential for increased production as demand rises [2][7] Market Outlook - Smart Sand continues to see strong demand in its main operating basins, despite potential slowdowns in natural gas basins in the second half of the year [3][4] - The company is preparing to adjust operations in response to any slowdown in activity levels [3][4] - Long-term fundamentals for natural gas activity are viewed as strong, with expectations for increased activity in 2025 driven by LNG exports and power demand [4][9] Strategic Developments - Smart Sand plans to begin sales into the Ohio Utica in Q3 2024, targeting the oil window of the Utica [5] - The company is also expected to provide updates on sales volumes from the Bakken and Canada during the upcoming call [5] Financial Health - The balance sheet shows a low net debt to annualized EBITDA ratio of 0.1x, indicating ample liquidity [6] - There are discussions about potential return of capital, with a projected upturn in activity in 2025 possibly leading to a base dividend [6]

2Q 2024 total tons sold of approximately 1.3 million 2Q 2024 revenue of $73.8 million 2Q 2024 net income before income taxes $1.9 million 2Q 2024 adjusted EBITDA of $11.9 million YARDLEY, Penn., Aug. 13, 2024 /PRNewswire/ -- Smart Sand, Inc. (NASDAQ: SND) (the "Company" or "Smart Sand"), a fully integrated frac and industrial sand supply and services company, a low-cost producer of high quality Northern White frac sand, a proppant logistics solutions provider through both its in-basin transloading terminals ...

Core Viewpoint - Smart Sand, Inc. will release its first quarter financial results on August 13, 2024, and will hold a conference call for investors on August 14, 2024, to discuss these results and recent events [1]. Company Overview - Smart Sand is a fully integrated frac and industrial sand supply and services company, providing complete mine to wellsite proppant and logistics solutions [5]. - The company produces low-cost, high-quality Northern White sand, which is utilized as a proppant to enhance hydrocarbon recovery rates in hydraulic fracturing [5]. - Smart Sand's products are also used in various industrial applications, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscaping, and recreation [5]. - The company operates premium sand mines and processing facilities in Wisconsin and Illinois, with access to four Class I rail lines, enabling product delivery across the United States and Canada [5].

Financial Data and Key Metrics Changes - In Q1 2024, the company sold 1.3 million tons of sand, a 31% increase from 1 million tons in Q4 2023 [27] - Total revenues for Q1 2024 were $83.1 million, up from $61.9 million in Q4 2023, primarily due to higher sand sales volumes and improved smart system revenues [27][28] - Contribution margin improved to $18.5 million in Q1 2024, compared to $9.2 million in Q4 2023, with adjusted EBITDA increasing to $9.3 million from $0.7 million [35][43] Business Line Data and Key Metrics Changes - The company has made significant investments in hydraulic mining to improve efficiency and reduce costs, which is expected to enhance yield by $1 to $2 per ton [7][40] - Changes in the wet plant process have allowed the company to wash out less demanded sand sizes, improving overall efficiency [5][6] Market Data and Key Metrics Changes - The company is optimistic about the long-term fundamentals of the natural gas market, despite short-term fluctuations due to lower natural gas prices [19][24] - The company expects the Utica basin to provide growth opportunities due to increasing oil drilling activities [21][38] Company Strategy and Development Direction - The company aims to expand its Northern White sand franchise, which is considered superior for energy and industrial applications [36] - Investments in new terminals in Northeast Ohio are intended to enhance market presence in the Utica shale basin [37] - The company is focused on organizational improvements to increase efficiency and sustainability in mining, processing, and logistics operations [40] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that while there may be a pullback in demand in the Marcellus due to lower natural gas prices, increased activity in the Bakken and Canada may mitigate this [47] - The company expects to be free cash flow positive for the year despite a negative cash flow in Q1 due to increased working capital investments [49] Other Important Information - The company ended Q1 2024 with $14 million in borrowings on its credit facility and approximately $4.6 million in cash and cash equivalents [45] - The company plans to formalize its approach to returning value to shareholders later in 2024 [22][23] Q&A Session Summary Question: Can you discuss the capital improvements to improve yield in your plants? - Management highlighted significant investments in hydraulic mining to reduce equipment needs and improve efficiency [4] Question: Are there still opportunities to grow your asset base? - The company currently has 10 million tons of Northern White capacity and is exploring terminal access to enhance sand movement [9][11] Question: How do you see the dynamics of the supply-demand in the US sand market? - The Northern White market remains in relative supply-demand balance, with stable pricing expected [60][62] Question: What percentage of the business is currently industrial sand, and how do you see it evolving? - Currently, industrial sand accounts for about 5% of total volumes, with a goal to grow it to at least 10% over the next few years [67]

Smart Sand, Inc. Announces First Quarter 2024 Results YARDLEY, Pennsylvania, May 13, 2024 – Smart Sand, Inc. (NASDAQ: SND) (the "Company" or "Smart Sand"), a fully integrated frac and industrial sand supply and services company, a low-cost producer of high quality Northern White frac sand, a proppant logistics solutions provider through both its in-basin transloading terminals and SmartSystems products and services and a provider of industrial product solutions, today announced results for the first quarter ...

PART I FINANCIAL INFORMATION [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) This section presents Smart Sand, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows, with detailed notes on business, accounting policies, debt, leases, revenue, income taxes, and concentrations for the period ended March 31, 2024 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Item | March 31, 2024 | December 31, 2023 | Change | % Change | | :--------------------------------- | :------------- | :---------------- | :----- | :------- | | Cash and cash equivalents | $4,598 | $6,072 | $(1,474) | -24.3% | | Accounts receivable | $37,698 | $23,231 | $14,467 | 62.3% | | Total current assets | $71,169 | $61,904 | $9,265 | 15.0% | | Total assets | $349,261 | $346,300 | $2,961 | 0.9% | | Accounts payable | $9,935 | $16,041 | $(6,106) | -38.1% | | Accrued expenses and other liabilities | $15,402 | $11,024 | $4,378 | 39.7% | | Current portion of long-term debt | $22,045 | $15,711 | $6,334 | 40.3% | | Total current liabilities | $59,311 | $54,466 | $4,845 | 8.9% | | Total liabilities | $106,733 | $104,033 | $2,700 | 2.6% | | Total stockholders' equity | $242,528 | $242,267 | $261 | 0.1% | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change | % Change | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------- | | Sand revenue | $79,719 | $80,019 | $(300) | -0.4% | | SmartSystems revenue | $3,333 | $2,331 | $1,002 | 43.0% | | Total revenue | $83,052 | $82,350 | $702 | 0.9% | | Total cost of goods sold | $71,241 | $70,713 | $528 | 0.7% | | Gross profit | $11,811 | $11,637 | $174 | 1.5% | | Total operating expenses | $11,027 | $13,245 | $(2,218) | -16.7% | | Operating income (loss) | $784 | $(1,608) | $2,392 | 148.8% | | Net loss | $(216) | $(3,599) | $3,383 | 94.0% | | Basic net loss per common share | $(0.01) | $(0.09) | $0.08 | 88.9% | | Diluted net loss per common share | $(0.01) | $(0.09) | $0.08 | 88.9% | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(216) | $(3,599) | | Foreign currency translation adjustment | $(26) | $(66) | | Comprehensive loss | $(242) | $(3,665) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Changes in Stockholders' Equity (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Balance at December 31 | $242,267 | $243,471 | | Stock-based compensation | $642 | $779 | | Employee stock purchase plan issuance | $25 | $33 | | Restricted stock buy back | $(170) | $(3) | | Net loss | $(216) | $(3,599) | | Balance at March 31 | $242,528 | $231,772 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(3,863) | $5,105 | | Net cash used in investing activities | $(1,645) | $(4,017) | | Net cash provided by financing activities | $4,034 | $1,006 | | Net (decrease) increase in cash and cash equivalents | $(1,474) | $2,094 | | Cash and cash equivalents at end of period | $4,598 | $7,604 | [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on the company's organization, accounting policies, inventory, property, debt, leases, asset retirement obligations, revenue, income taxes, concentrations, and contingencies, offering essential context to the unaudited financial statements [NOTE 1 — Organization and Nature of Business](index=9&type=section&id=NOTE%201%20%E2%80%94%20Organization%20and%20Nature%20of%20Business) - **Smart Sand, Inc.** operates as a fully integrated frac and industrial sand supply and services company, offering mine-to-wellsite proppant solutions and industrial sand[30](index=30&type=chunk) - The company's operating facilities (Oakdale, Utica, Blair) have a total annual processing capacity of approximately **10.0 million tons**, with the Blair facility commencing operations in April 2023[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[91](index=91&type=chunk) - Smart Sand provides proppant logistics solutions through a network of in-basin transloading terminals, including new terminals in Minerva, Ohio, and Dennison, Ohio, expected to commence operations in Q2 2024[34](index=34&type=chunk)[92](index=92&type=chunk) - The company offers proprietary **SmartSystems™** for wellsite proppant storage and management, including **SmartDepot** silos, **SmartPath** transloaders, and **SmartBelt** conveyors, designed for efficiency, safety, and dust suppression[35](index=35&type=chunk)[93](index=93&type=chunk) - Smart Sand has expanded its **Industrial Product Solutions (IPS)** to diversify its customer base and markets, with blending and cooling assets installed at its Utica facility in 2023[30](index=30&type=chunk)[94](index=94&type=chunk) [NOTE 2 — Summary of Significant Accounting Policies](index=10&type=section&id=NOTE%202%20%E2%80%94%20Summary%20of%20Significant%20Accounting%20Policies) - The company reclassified prior year revenue line items: '**Sand revenue**' now includes sand sales, shortfall, railcar rental, and transportation, while '**SmartSystems revenue**' covers equipment rental and related services, with no change in revenue recognition methods[39](index=39&type=chunk) - Management relies on significant estimates for financial reporting, including asset impairment, asset retirement obligations, fair value of acquired assets, deferred tax assets, inventory reserves, and collectability of receivables[41](index=41&type=chunk) - Global events (Ukraine, Middle East conflicts) and policy changes (LNG permits) may affect oil and natural gas prices, leading to volatility in the oilfield service sector, with an uncertain material adverse effect on the company's financial position or results[42](index=42&type=chunk) - Recent FASB ASUs on Segment Reporting (**ASU 2023-07**, effective 2024/2025) and Income Taxes (**ASU 2023-09**, effective 2025/2026) are expected to primarily affect note disclosures upon adoption[44](index=44&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) [NOTE 3 — Inventory](index=11&type=section&id=NOTE%203%20%E2%80%94%20Inventory) Inventory Breakdown (in thousands) | Inventory Type | March 31, 2024 | December 31, 2023 | | :--------------- | :------------- | :---------------- | | Raw material | $1,509 | $467 | | Work in progress | $6,076 | $9,391 | | Finished goods | $9,237 | $8,244 | | Spare parts | $8,762 | $8,721 | | Total inventory | $25,584 | $26,823 | [NOTE 4 — Property, Plant and Equipment, net](index=11&type=section&id=NOTE%204%20%E2%80%94%20Property,%20Plant%20and%20Equipment,%20net) Property, Plant and Equipment, net (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :--------------------------------- | :------------- | :---------------- | | Machinery, equipment and tooling | $41,748 | $40,632 | | SmartSystems | $31,127 | $30,651 | | Plant and building | $215,098 | $213,756 | | Total gross PP&E | $417,436 | $414,230 | | Less: accumulated depreciation and depletion | $166,052 | $159,138 | | Total property, plant and equipment, net | $251,384 | $255,092 | - Depreciation expense for the three months ended March 31, 2024, was **$6,981 thousand**, up from **$6,342 thousand** in the prior year period[50](index=50&type=chunk) [NOTE 5 — Accrued and Other Expenses](index=12&type=section&id=NOTE%205%20%E2%80%94%20Accrued%20and%20Other%20Expenses) Accrued and Other Expenses (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :--------------------------------- | :------------- | :---------------- | | Employee related expenses | $2,128 | $1,767 | | Accrued freight and delivery charges | $3,226 | $2,066 | | Accrued real estate tax | $1,703 | $1,044 | | Accrued utilities | $1,217 | $604 | | Other accrued liabilities | $2,040 | $58 | | Total accrued liabilities | $15,402 | $11,024 | [NOTE 6 — Debt](index=12&type=section&id=NOTE%206%20%E2%80%94%20Debt) Debt Breakdown (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :--------------------------------- | :------------- | :---------------- | | Current portion of long-term debt: | | | | ABL Credit Facility | $14,000 | $8,000 | | Oakdale Equipment Financing | $6,854 | $6,462 | | Notes payable | $983 | $1,011 | | Finance leases | $208 | $238 | | Total current portion of long-term debt | $22,045 | $15,711 | | Long-term debt, net of current portion: | | | | Oakdale Equipment Financing | $0 | $1,388 | | Notes payable | $1,972 | $1,519 | | Finance leases | $473 | $542 | | Total long-term debt | $2,445 | $3,449 | - The ABL Credit Facility had **$14.0 million** outstanding and **$6.0 million** available as of March 31, 2024, with a weighted average interest rate of **8.25%** for Q1 2024. The company is in the process of refinancing this facility[57](index=57&type=chunk)[134](index=134&type=chunk) - The Oakdale Equipment Financing bears a fixed interest rate of **5.79%**, with an outstanding balance of **$6.9 million** as of March 31, 2024[58](index=58&type=chunk)[134](index=134&type=chunk) - Notes payable, primarily for heavy equipment and SmartSystems, bear interest rates between **3.99%** and **7.49%**, totaling **$3.0 million** as of March 31, 2024[59](index=59&type=chunk)[134](index=134&type=chunk) [NOTE 7 — Leases](index=14&type=section&id=NOTE%207%20%E2%80%94%20Leases) Lease Liabilities and Right-of-Use Assets (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :--------------------------------- | :------------- | :---------------- | | Total right-of-use assets | $21,145 | $24,173 | | Total lease liabilities | $22,305 | $25,372 | | Operating lease cost (Q1 2024) | $3,387 | $3,195 | | Finance lease cost (Q1 2024) | $75 | $110 | - The weighted average remaining lease term for operating leases was **2.7 years** (March 31, 2024) with a weighted average discount rate of **6.53%**[65](index=65&type=chunk) [NOTE 8 — Asset Retirement Obligations](index=15&type=section&id=NOTE%208%20%E2%80%94%20Asset%20Retirement%20Obligations) Asset Retirement Obligations (in thousands) | Item | Amount | | :--------------------------------- | :----- | | Balance at December 31, 2023 | $19,923 | | Accretion expense | $249 | | Balance at March 31, 2024 | $20,172 | [NOTE 9 — Revenue](index=16&type=section&id=NOTE%209%20%E2%80%94%20Revenue) Revenue Disaggregation (in thousands) | Revenue Type | Q1 2024 Revenue | % of Total | Q1 2023 Revenue | % of Total | | :------------- | :-------------- | :--------- | :-------------- | :--------- | | Sand revenue | $79,719 | 96% | $80,019 | 97% | | SmartSystems revenue | $3,333 | 4% | $2,331 | 3% | | Total revenue | $83,052 | 100% | $82,350 | 100% | - Unsatisfied performance obligations as of March 31, 2024, totaled **$184.180 million**, with **$98.950 million** expected in the remainder of 2024 and **$85.230 million** in 2025[72](index=72&type=chunk) [NOTE 10 — Income Taxes](index=16&type=section&id=NOTE%2010%20%E2%80%94%20Income%20Taxes) - The effective tax rate for Q1 2024 was approximately **155.2%**, compared to **(79.9)%** in Q1 2023, based on the annual effective tax rate net of discrete federal and state taxes[74](index=74&type=chunk) - The company recorded a liability for uncertain tax positions of **$2.240 million** and a partial valuation allowance against gross deferred tax assets of **$874 thousand** as of December 31, 2023, with no material change in Q1 2024[75](index=75&type=chunk)[76](index=76&type=chunk) [NOTE 11 — Concentrations](index=16&type=section&id=NOTE%2011%20%E2%80%94%20Concentrations) - Four customers accounted for **63%** of total accounts receivable as of March 31, 2024 (down from **70%** at Dec 31, 2023)[78](index=78&type=chunk) - Three customers accounted for **60%** of total revenues for Q1 2024 (up from **57%** in Q1 2023). Specific customers for Q1 2024 were Equitable Gas Corporation (**37.4%**), Halliburton Energy Services (**11.4%**), and Encino Energy (**11.2%**)[78](index=78&type=chunk)[141](index=141&type=chunk) - Two vendors accounted for **29%** of accounts payable as of March 31, 2024, and two vendors accounted for **35%** of cost of goods sold for Q1 2024[81](index=81&type=chunk) - The company faces geographic risk due to its primary product (**Northern White sand**) and mining operations being limited to Wisconsin and Illinois[82](index=82&type=chunk) [NOTE 12 — Commitments and Contingencies](index=17&type=section&id=NOTE%2012%20%E2%80%94%20Commitments%20and%20Contingencies) - The company is involved in litigation regarding negligence and nuisance claims at its Blair facility, with HCR agreeing to indemnify for pre-acquisition actions; the outcome is uncertain[84](index=84&type=chunk) - Total aggregate principal amount of performance bonds outstanding was **$19.727 million** as of March 31, 2024[85](index=85&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance for the three months ended March 31, 2024, covering business overview, market trends, GAAP results, non-GAAP measures, liquidity, and critical accounting policies, highlighting increased SmartSystems revenue and reduced net loss amid market volatility and inflation [Overview](index=18&type=section&id=Overview) - **Smart Sand, Inc.** is a fully integrated frac and industrial sand supply and services company, offering low-cost, high-quality **Northern White sand** and comprehensive logistics solutions[89](index=89&type=chunk) - The company operates mining and processing facilities in Oakdale, Utica, and Blair, with a combined annual processing capacity of approximately **10.0 million tons**, and access to all Class I rail lines[91](index=91&type=chunk) - Smart Sand controls five in-basin transloading facilities and offers **SmartSystems™** wellsite proppant storage and management solutions, including **SmartDepot** silos, **SmartPath** transloaders, and **SmartBelt** conveyors, to enhance efficiency and safety[92](index=92&type=chunk)[93](index=93&type=chunk) - The company is expanding its **Industrial Product Solutions (IPS)** to diversify its customer base and markets, with blending and cooling assets installed at its Utica facility in 2023[94](index=94&type=chunk) [Market Trends](index=19&type=section&id=Market%20Trends) - During Q1 2024, the **Northern White Sand** market experienced a relative balance of supply and demand, with increased volumes (approximately **12%**) but lower average sand prices compared to Q1 2023[96](index=96&type=chunk)[105](index=105&type=chunk) - Sand pricing moderated in the second half of 2023 and stabilized in Q1 2024, while high levels of inflation continued to increase operating expenses[96](index=96&type=chunk) - Geopolitical events (Ukraine, Middle East) and policy changes (LNG permits) could impact oil and natural gas prices, leading to demand and pricing volatility, and customer reluctance for long-term contracts, favoring spot market purchases[96](index=96&type=chunk)[99](index=99&type=chunk) - The **IPS** business offers relative stability due to diverse macroeconomic drivers and is expected to help diversify sales and mitigate price volatility from the oil and gas industry[101](index=101&type=chunk) [GAAP Results of Operations](index=21&type=section&id=GAAP%20Results%20of%20Operations) GAAP Results of Operations (in thousands, except per share amounts) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change | % Change | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------- | | Total revenue | $83,052 | $82,350 | $702 | 0.9% | | Sand revenue | $79,719 | $80,019 | $(300) | -0.4% | | SmartSystems revenue | $3,333 | $2,331 | $1,002 | 43.0% | | Total cost of goods sold | $71,241 | $70,713 | $528 | 0.7% | | Gross profit | $11,811 | $11,637 | $174 | 1.5% | | Total operating expenses | $11,027 | $13,245 | $(2,218) | -16.7% | | Operating income (loss) | $784 | $(1,608) | $2,392 | 148.8% | | Net loss | $(216) | $(3,599) | $3,383 | 94.0% | | Basic net loss per common share | $(0.01) | $(0.09) | $0.08 | 88.9% | - Total volumes sold increased by approximately **12%** (**1,336,000 tons** in Q1 2024 vs. **1,195,000 tons** in Q1 2023), but average sand prices were lower, while **SmartSystems** revenue grew due to higher utilization and expanded **SmartBelt** technology[105](index=105&type=chunk) - Operating expenses decreased significantly due to cost reduction measures and a non-recurring **$1.9 million** net loss on disposal of fixed assets in Q1 2023[109](index=109&type=chunk)[113](index=113&type=chunk) - The effective tax rate was **155.2%** in Q1 2024, compared to **(79.9)%** in Q1 2023, influenced by income tax credits, tax depletion deduction, and state apportionment changes[111](index=111&type=chunk) [Non-GAAP Financial Measures](index=22&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP financial measures like Contribution Margin, EBITDA, Adjusted EBITDA, and Free Cash Flow to offer supplemental insights into operational performance, liquidity, and debt servicing ability, complementing GAAP financial statements [Contribution Margin](index=23&type=section&id=Contribution%20Margin) Contribution Margin (in thousands, except per ton amounts) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Gross profit | $11,811 | $11,637 | | Depreciation, depletion, and accretion of ARO | $6,697 | $6,159 | | Contribution margin | $18,508 | $17,796 | | Contribution margin per ton | $13.85 | $14.89 | | Total tons sold | 1,336 | 1,195 | - Overall contribution margin increased due to higher tons sold and increased **SmartSystems** utilization, while contribution margin per ton decreased due to lower average sand sales prices[121](index=121&type=chunk) [EBITDA and Adjusted EBITDA](index=23&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) EBITDA and Adjusted EBITDA Reconciliation (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(216) | $(3,599) | | Depreciation, depletion and amortization | $7,200 | $6,551 | | Income tax expense and other taxes | $607 | $1,845 | | Interest expense | $496 | $442 | | EBITDA | $8,087 | $5,239 | | Net loss on disposal of fixed assets | $3 | $1,889 | | Equity compensation | $581 | $736 | | Acquisition and development costs | $308 | $271 | | Cash charges related to restructuring and retention of employees | $107 | $0 | | Accretion of asset retirement obligations | $249 | $200 | | Adjusted EBITDA | $9,335 | $8,335 | - **Adjusted EBITDA** increased primarily due to higher sales volumes, increased **IPS** sales, and higher utilization of the **SmartSystems** fleet[126](index=126&type=chunk) [Free Cash Flow](index=24&type=section&id=Free%20Cash%20Flow) Free Cash Flow Reconciliation (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(3,863) | $5,105 | | Purchases of property, plant and equipment | $(1,646) | $(4,018) | | Free cash flow | $(5,509) | $1,087 | - The decrease in **free cash flow** was primarily due to a decrease in net cash provided by operating activities, attributed to an increase in working capital to support higher sales volumes[130](index=130&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2024, the company had **$4.6 million** in cash and cash equivalents and **$6.0 million** in undrawn availability on its ABL Credit Facility, which is currently being refinanced[131](index=131&type=chunk) - Expected capital expenditures for full year 2024 are between **$15.0 million** and **$20.0 million**, primarily for process improvement, equipment upgrades, and the build-out of new Ohio terminals[133](index=133&type=chunk) - Debt facilities include the Oakdale Equipment Financing (**$6.9 million** outstanding) and various notes payable (**$3.0 million** outstanding) as of March 31, 2024[134](index=134&type=chunk) - Operating lease liabilities totaled **$21.6 million** as of March 31, 2024, with anticipated minimum cash payments of **$8.3 million** for the remainder of 2024[135](index=135&type=chunk) - The company has **$19.7 million** in outstanding performance bonds as of March 31, 2024, and annual minimum payments of approximately **$2.5 million** for mineral rights contracts over the next **13 years**[136](index=136&type=chunk)[137](index=137&type=chunk) - The business is affected by seasonality, with wet sand processing capacity historically limited during winter months, leading to lower cash operating costs in Q1/Q4 and higher in Q2/Q3 due to inventory build-up[140](index=140&type=chunk) - For Q1 2024, Equitable Gas Corporation, Halliburton Energy Services, and Encino Energy accounted for **37.4%**, **11.4%**, and **11.2%** of total revenue, respectively[141](index=141&type=chunk) [Critical Accounting Policies and Estimates](index=27&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - There have been no material changes in the company's critical accounting policies and procedures during the three months ended March 31, 2024[143](index=143&type=chunk) - Management continues to rely on significant estimates for financial reporting, acknowledging that actual results could differ materially due to additional information or future economic uncertainties[144](index=144&type=chunk)[145](index=145&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=28&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the company's market risk exposure, primarily interest rate risk from its ABL Credit Facility, which management deems non-material, confirming no other significant changes since the prior annual report - The company's primary market risk is interest rate risk, mainly from its ABL Credit Facility, which had **$14.0 million** outstanding at March 31, 2024, bearing a variable interest rate. This is not considered a material interest rate risk[146](index=146&type=chunk) - There have been no additional material changes to the company's exposure to market risks from those described in its Annual Report on Form 10-K for the year ended December 31, 2023[147](index=147&type=chunk) [ITEM 4. Controls and Procedures](index=28&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting during the quarter - The company's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2024[148](index=148&type=chunk) - There have been no changes in internal control over financial reporting for the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[149](index=149&type=chunk) PART II OTHER INFORMATION [ITEM 1. Legal Proceedings](index=29&type=section&id=ITEM%201.%20Legal%20Proceedings) This section incorporates by reference the disclosure regarding legal proceedings from Note 12 – Commitments and Contingencies – Litigation, within Part I, Item 1 of this Form 10-Q - Disclosure regarding legal proceedings is incorporated by reference from Note 12 of the condensed consolidated financial statements[151](index=151&type=chunk) [ITEM 1A. Risk Factors](index=29&type=section&id=ITEM%201A.%20Risk%20Factors) The company states there have been no material changes to the risk factors previously outlined in its Annual Report on Form 10-K for the year ended December 31, 2023 - There have been no material changes to the risk factors described in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2023[152](index=152&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the three months ended March 31, 2024, the company did not engage in any unregistered sales of equity securities - No shares were sold by the company without registration under the Securities Act of 1933, as amended, during the three months ended March 31, 2024[153](index=153&type=chunk) [ITEM 3. Defaults upon Senior Securities](index=29&type=section&id=ITEM%203.%20Defaults%20upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period covered by this report - There were no defaults upon senior securities[154](index=154&type=chunk) [ITEM 4. Mine Safety Disclosures](index=29&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The company maintains a strong commitment to mine safety, operating under stringent MSHA and OSHA regulations, including those for respirable silica exposure, with compliance detailed in Exhibit 95.1 - The company's mining operations are subject to safety regulations by the U.S. Mining Safety and Health Administration (**MSHA**) and the U.S. Occupational Safety and Health Administration (**OSHA**)[155](index=155&type=chunk)[156](index=156&type=chunk) - Workplace exposure to respirable silica is closely monitored, and potential future stricter exposure limits could necessitate capital expenditures for equipment[156](index=156&type=chunk) - The company complies with the **Federal Mine Safety and Health Act of 1977**, and information concerning mine safety violations is included in **Exhibit 95.1**[157](index=157&type=chunk) [ITEM 5. Other Information](index=30&type=section&id=ITEM%205.%20Other%20Information) This section indicates no other information to report for the period - No other information is reported in this section[158](index=158&type=chunk) [ITEM 6. Exhibits](index=31&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including various certifications, the Mine Safety Disclosure Exhibit, and XBRL interactive data files - The report includes certifications pursuant to **Rule 13a-14(a)** of the Securities Exchange Act of 1934 and **18 U.S.C. 906** of the **Sarbanes-Oxley Act of 2002**[159](index=159&type=chunk) - Mine Safety Disclosure **Exhibit 95.1** is filed with the report[159](index=159&type=chunk) - **XBRL** Instance Document and Taxonomy Extensions (Schema, Calculation, Definition, Label, Presentation Linkbases) are included as exhibits[159](index=159&type=chunk) SIGNATURES [Signatures](index=32&type=section&id=Signatures) The report was officially signed on May 13, 2024, by Lee E. Beckelman, Chief Financial Officer, and Christopher M. Green, Vice President of Accounting, confirming its submission - The report was signed on **May 13, 2024**, by Lee E. Beckelman, Chief Financial Officer, and Christopher M. Green, Vice President of Accounting[164](index=164&type=chunk)

Smart Sand, Inc. (NASDAQ:SND) Q4 2023 Earnings Conference Call March 12, 2024 10:00 AM ET Company Participants Christopher Green - Vice President of Accounting Charles Young - Chief Executive Officer Lee Beckelman - Chief Financial Officer William John Young - Chief Operating Officer Conference Call Participants Stephen Gengaro - Stifel Luke Lemoine - Piper Sandler Jim Kostell - Cuyahoga Capital Blake McLean - Daniel Energy Partners Operator Good morning, ladies and gentlemen, and welcome to the Smart Sand, ...