Financial Data and Key Metrics Changes - Adjusted EBITDA for Q1 2023 was $8.1 million, a significant improvement compared to Q1 2022, despite seasonal production cost impacts [6] - Total revenues for Q1 2023 were $82.4 million, up from $73.8 million in Q4 2022, driven by improved average sales prices and $1.9 million in contractual shortfall revenue [15][17] - Contribution margin per ton increased to $14.89 in Q1 2023 from $14.77 in Q4 2022, with a total contribution margin of $17.8 million [18][34] Business Line Data and Key Metrics Changes - Sales volume for Q1 2023 was 1.195 million tons, a 40% increase compared to Q1 2022 and a slight increase from Q4 2022 [14] - The SmartSystems last-mile offering showed improvement, contributing positively in Q1 2023, with expectations for continued operational profitability growth [11][12] Market Data and Key Metrics Changes - The Canadian market is currently 80% supplied by Northern White sand, indicating strong long-term growth potential for this market [8] - Strong demand was noted in the Appalachian Basin, although some moderation is expected due to low natural gas prices [24][35] Company Strategy and Development Direction - The company is focused on generating higher returns from its existing asset base while maintaining prudent leverage levels [13] - Strategic investments in the Blair mine and processing facility are aimed at establishing the company as a premier provider of Northern White sand and logistics services [29][30] Management's Comments on Operating Environment and Future Outlook - Management anticipates that production costs will moderate in Q2 2023, with expected sales volumes in the range of 1 million to 1.2 million tons [45][48] - The company remains optimistic about long-term natural gas fundamentals, driven by increased LNG export activity in North America [24] Other Important Information - The company ended Q1 2023 with $7 million outstanding on its revolver and approximately $7.6 million in cash, with available liquidity exceeding $25 million [47] - Capital expenditures for the year are expected to be in the range of $20 million to $25 million, with higher expenditures anticipated in Q2 due to the Blair facility startup [49] Q&A Session Summary Question: Current frac sand price environment? - Management has not seen any deterioration in frac sand pricing to date, despite concerns about natural gas demand [50] Question: Any slowdown in demand from the Marcellus region? - There is a slight moderation in the Marcellus, but the company maintains good long-term contracts and logistical advantages in the region [52]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________________________________ FORM 10-Q _____________________________________________________ OR ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2023 Commission file number 001-37936 SMART SAND, INC. (Exact name of registrant as specified in ...

Smart Sand, Inc. (NASDAQ:SND) Q4 2022 Earnings Conference Call March 1, 2023 10:00 AM ET Company Participants Chris Green - Principal Accounting Officer Chuck Young - Founder and Chief Executive Officer Lee Beckelman - Chief Financial Officer Conference Call Participants Operator Good day and thank you for standing by. Welcome to the Q4 2022 Smart Sand, Inc. Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answe ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________________ FORM 10-K __________________________________________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Annual Period Ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ___ to ___ Commission file number 001-37936 __________________________ ...

Financial Data and Key Metrics Changes - In Q3 2022, Smart Sand reported sales volumes of 1.1 million tons, a 7% decrease from 1.196 million tons in Q2 2022 [23] - Revenues increased to $71.6 million in Q3 2022 from $68.7 million in Q2 2022, driven by improved average sales prices and increased utilization of SmartSystems [24] - Contribution margin reached $17.8 million and adjusted EBITDA was $11.3 million, up from $15.3 million and $9.2 million in Q2 2022 respectively [26] - Net income for Q3 2022 was $2.7 million, compared to a net loss of $90,000 in Q2 2022 [25] - Free cash flow for the quarter was $6.4 million after capital expenditures of $4.4 million [27] Business Line Data and Key Metrics Changes - Industrial Product Solutions division saw a 28% increase in sales volume during the quarter [14] - SmartSystems last mile offering is gaining momentum, generating positive contribution margin year-to-date [12] Market Data and Key Metrics Changes - Sales volume into the Bakken Basin increased by approximately 40% sequentially [11] - Pricing improved in Q3 2022, with expectations to maintain current pricing levels due to strong market supply and demand fundamentals [9] Company Strategy and Development Direction - Smart Sand aims to diversify its business beyond oil and gas through its Industrial Product Solutions division, which is expected to grow significantly in 2023 and beyond [15] - The company is focused on maintaining a strong balance sheet and disciplined capital spending while pursuing long-term value-generating projects [16] - Smart Sand has over 400 million tons of Northern White sand reserves and the capability to flex annual processing capacity from 5.5 million tons to 10 million tons [17][18] Management's Comments on Operating Environment and Future Outlook - Management noted that Northern White supply and demand fundamentals remain positive, with growing demand particularly in the Appalachian basins [36] - The company expects to achieve record sales volumes for the full year 2022, with contribution margin per ton remaining in the double-digit range in Q4 2022 [30] Other Important Information - The company ended Q3 2022 with approximately $10.4 million in cash and cash equivalents, and $23 million in available liquidity [28] - Management is evaluating the timing of opening the Blair facility and expects to provide updates in the year-end earnings call [18] Q&A Session Summary Question: Perspective on supply-demand fundamentals for frac sand in 2023 - Management indicated that Northern White supply and demand fundamentals are positive, with growing demand in the Appalachian basins and steady activity in the Bakken [36][38] Question: Contribution margin per ton in Q4 - Management explained that consistent volumes and stable pricing are expected to help maintain contribution margin per ton at levels seen in Q2 and Q3 [39][41] Question: Contracts and visibility into future volumes - Management confirmed the addition of smaller contracts and good visibility with spot customers regarding future volumes [47] Question: Shareholder return program - Management stated that while evaluating shareholder return options, the focus remains on maintaining positive free cash flow before making decisions [48][49]

PART I FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the company as of and for the periods ended September 30, 2022 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly increased to $375.4 million as of September 30, 2022, while total liabilities also saw a minor increase to $135.8 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 (Unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | **$72,588** | **$73,863** | | Cash and cash equivalents | $10,371 | $25,588 | | Accounts receivable | $32,902 | $17,481 | | Inventory | $20,618 | $15,024 | | Property, plant and equipment, net | $267,210 | $262,465 | | **Total Assets** | **$375,398** | **$374,019** | | **Total Current Liabilities** | **$54,861** | **$48,550** | | Long-term debt | $16,289 | $15,353 | | Asset retirement obligation | $25,006 | $16,155 | | **Total Liabilities** | **$135,837** | **$132,859** | | **Total Stockholders' Equity** | **$239,561** | **$241,160** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net income of $2.7 million in Q3 2022, a significant turnaround from a net loss in Q3 2021, driven by a 108% revenue increase Statement of Operations Summary (in thousands, except per share amounts) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$71,592** | **$34,479** | **$181,911** | **$91,568** | | Sand sales revenue | $66,663 | $31,343 | $172,063 | $83,291 | | **Gross Profit (Loss)** | **$11,429** | **($2,047)** | **$18,419** | **($9,384)** | | Operating Income (Loss) | $3,777 | ($8,756) | ($4,784) | ($48,492) | | **Net Income (Loss)** | **$2,683** | **($7,262)** | **($3,330)** | **($38,441)** | | Diluted EPS | $0.06 | ($0.17) | ($0.08) | ($0.92) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $0.2 million for the nine months ended September 30, 2022, a sharp decline from cash provided in the prior year Cash Flow Summary for the Nine Months Ended September 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($169) | $37,544 | | Net cash used in investing activities | ($15,087) | ($6,898) | | Net cash provided by (used in) financing activities | $39 | ($5,692) | | **Net decrease in cash and cash equivalents** | **($15,217)** | **$24,954** | | Cash and cash equivalents at end of period | $10,371 | $36,679 | [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail the company's business, the $6.5 million Blair facility acquisition, revenue sources, debt structure, and significant customer concentrations - The company is a fully integrated frac and industrial sand supply and services company, offering mine-to-wellsite proppant solutions and logistics[30](index=30&type=chunk) - On March 4, 2022, the company acquired the Blair, Wisconsin facility for approximately **$6.5 million in cash**, with the potential to add **2.9 million tons of annual processing capacity**[43](index=43&type=chunk)[44](index=44&type=chunk) Revenue Disaggregation for the Nine Months Ended Sep 30 (in thousands) | Revenue Type | 2022 | 2021 | | :--- | :--- | :--- | | Sand sales revenue | $172,063 | $83,291 | | Shortfall revenue | $4,596 | $4,421 | | Logistics revenue | $5,252 | $3,856 | | **Total revenue** | **$181,911** | **$91,568** | - The company exhibits **significant customer concentration**, with four customers accounting for **65% of total revenues** and three customers accounting for **67% of total accounts receivable** for the nine months ended September 30, 2022[90](index=90&type=chunk)[91](index=91&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses improved financial results driven by higher sand volume and prices, highlights non-GAAP metrics, and confirms sufficient liquidity [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Revenues and gross profit significantly increased in Q3 and the first nine months of 2022 compared to 2021, reflecting stronger market demand Q3 2022 vs Q3 2021 Performance (in thousands) | Metric | Q3 2022 | Q3 2021 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$71,592** | **$34,479** | **$37,113** | **108%** | | Tons Sold | 1,110 | 790 | 320 | 41% | | Gross Profit (Loss) | $11,429 | ($2,047) | $13,476 | 658% | | Net Income (Loss) | $2,683 | ($7,262) | $9,945 | 137% | Nine Months 2022 vs 2021 Performance (in thousands) | Metric | 9M 2022 | 9M 2021 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$181,911** | **$91,568** | **$90,343** | **99%** | | Tons Sold | 3,158 | 2,317 | 841 | 36% | | Gross Profit (Loss) | $18,419 | ($9,384) | $27,803 | 296% | | Net Loss | ($3,330) | ($38,441) | $35,111 | 91% | [Non-GAAP Financial Measures](index=26&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP metrics like Contribution Margin and Adjusted EBITDA showed substantial improvement, reflecting stronger operational performance in Q3 2022 Contribution Margin Reconciliation (in thousands) | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :--- | :--- | :--- | :--- | :--- | | Gross profit (loss) | $11,429 | ($2,047) | $18,419 | ($9,384) | | Add: Dep, Dep & Acc | $6,340 | $6,145 | $18,854 | $18,009 | | **Contribution margin** | **$17,769** | **$4,098** | **$37,273** | **$8,625** | | Contribution margin per ton | $16.01 | $5.19 | $11.80 | $3.72 | Adjusted EBITDA Reconciliation (in thousands) | Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $2,683 | ($7,262) | ($3,330) | ($38,441) | | EBITDA | $10,727 | ($740) | $15,869 | ($23,830) | | **Adjusted EBITDA** | **$11,291** | **($1,009)** | **$18,550** | **($25,999)** | [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity through cash and its ABL Credit Facility, with 2022 capital expenditures projected at $20.0 to $25.0 million - Primary sources of liquidity are cash from operations and the ABL Credit Facility, with **$10.4 million in cash** and **$13.0 million available** on the ABL facility as of September 30, 2022[165](index=165&type=chunk) - Full-year 2022 capital expenditures are projected to be between **$20.0 million and $25.0 million**, including the $6.5 million acquisition of the Blair facility[167](index=167&type=chunk) - Total debt outstanding as of September 30, 2022, was approximately **$22.5 million**[168](index=168&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=32&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's market risk, primarily from interest rates, is considered minimal due to its fixed-rate debt structure - The majority of the company's debt is financed under **fixed interest rates**, mitigating interest rate risk[183](index=183&type=chunk) - The ABL Credit Facility has a variable interest rate, but with an outstanding balance of only **$6.0 million**, this is not considered a material risk[183](index=183&type=chunk) [Controls and Procedures](index=32&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of the end of the period covered by the report[185](index=185&type=chunk) - **No material changes** to the internal control over financial reporting occurred during the quarter ended September 30, 2022[186](index=186&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=33&type=section&id=ITEM%201.%20Legal%20Proceedings) Routine legal proceedings are not expected to have a material adverse effect on the company's financial statements - The company is subject to various legal proceedings in the normal course of business, but management **does not expect them to have a material adverse effect** on its financial statements[95](index=95&type=chunk)[188](index=188&type=chunk) [Risk Factors](index=33&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes were reported to the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K - **No material changes** to the risk factors from the Annual Report on Form 10-K for the year ended December 31, 2021, were reported[189](index=189&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The company's mining operations are subject to stringent MSHA and OSHA regulations, particularly concerning respirable silica exposure - Operations are subject to stringent health and safety standards from the **U.S. Mining Safety and Health Administration (MSHA)** and the **Occupational Safety and Health Administration (OSHA)**[192](index=192&type=chunk)[193](index=193&type=chunk) - The company closely monitors airborne respirable silica and may be required to incur capital expenditures if workplace exposure limits are lowered significantly[193](index=193&type=chunk) [Exhibits](index=34&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications, agreements, and interactive data files - Lists all exhibits filed with the quarterly report, including certifications required by the Sarbanes-Oxley Act and interactive data files (XBRL)[197](index=197&type=chunk)

Smart Sand, Inc. (NASDAQ:SND) Q2 2022 Earnings Conference Call August 10, 2022 10:00 AM ET Company Participants Josh Jayne - Director, Finance & Treasurer Chuck Young - Founder & Chief Executive Officer Lee Beckelman - Chief Financial Officer John Young - Chief Operating Officer Conference Call Participants Stephen Gengaro - Stifel Operator Hello. Thank you for standing by and welcome to the Second Quarter Smart Sand Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Af ...

[PART I FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This part details Smart Sand's unaudited financial statements, management's analysis, market risks, and internal controls [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) Presents Smart Sand, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flow statements, with detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Summarizes Smart Sand, Inc.'s financial position, detailing assets, liabilities, and equity at specific reporting dates Summary Balance Sheet (in thousands) | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total current assets | $65,145 | $73,863 | $(8,718) | -11.8% | | Total assets | $373,968 | $374,019 | $(51) | -0.01% | | Total current liabilities | $53,715 | $48,550 | $5,165 | 10.6% | | Total liabilities | $137,456 | $132,859 | $4,597 | 3.5% | | Total stockholders' equity | $236,512 | $241,160 | $(4,648) | -1.9% | - Cash and cash equivalents decreased significantly from **$25,588 thousand** at December 31, 2021, to **$2,098 thousand** at June 30, 2022, representing a **91.8% decrease**[11](index=11&type=chunk) - Accounts receivable increased by **84.3%** from **$17,481 thousand** at December 31, 2021, to **$32,224 thousand** at June 30, 2022[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details Smart Sand, Inc.'s revenues, costs, and net income or loss over specific reporting periods Summary Statements of Operations for Three Months Ended June 30 (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Total revenue | $68,714 | $29,639 | $39,075 | 131.8% | | Cost of goods sold | $59,743 | $31,999 | $27,744 | 86.7% | | Gross profit | $8,971 | $(2,360) | $11,331 | -480.1% | | Operating income (loss) | $1,387 | $(28,669) | $30,056 | -104.8% | | Net loss | $(90) | $(27,267) | $27,177 | -99.7% | | Basic EPS | $0.00 | $(0.65) | $0.65 | -100.0% | Summary Statements of Operations for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Total revenue | $110,319 | $57,089 | $53,230 | 93.2% | | Cost of goods sold | $103,329 | $64,426 | $38,903 | 60.4% | | Gross profit | $6,990 | $(7,337) | $14,327 | -195.3% | | Operating income (loss) | $(8,561) | $(39,736) | $31,175 | -78.4% | | Net loss | $(6,013) | $(31,179) | $25,166 | -80.7% | | Basic EPS | $(0.14) | $(0.75) | $0.61 | -81.3% | [Condensed Consolidated Statements of Comprehensive (Loss) Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income) Presents Smart Sand, Inc.'s net loss and other comprehensive income items, reflecting total comprehensive loss for the periods Summary Statements of Comprehensive (Loss) Income for Three Months Ended June 30 (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net loss | $(90) | $(27,267) | $27,177 | -99.7% | | Foreign currency translation adjustment | $(74) | $44 | $(118) | -268.2% | | Comprehensive loss | $(164) | $(27,223) | $27,059 | -99.4% | Summary Statements of Comprehensive (Loss) Income for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net loss | $(6,013) | $(31,179) | $25,166 | -80.7% | | Foreign currency translation adjustment | $(58) | $169 | $(227) | -134.3% | | Comprehensive loss | $(6,071) | $(31,010) | $24,939 | -80.4% | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Outlines changes in Smart Sand, Inc.'s equity components, including retained earnings and additional paid-in capital Summary Statements of Changes in Stockholders' Equity (in thousands) | Metric (in thousands) | Balance at Dec 31, 2021 | Balance at June 30, 2022 | Change | % Change | | :-------------------- | :---------------------- | :----------------------- | :----- | :------- | | Total Stockholders' Equity | $241,160 | $236,512 | $(4,648) | -1.9% | | Retained earnings | $70,593 | $64,580 | $(6,013) | -8.5% | | Additional paid-in capital | $174,486 | $176,150 | $1,664 | 1.0% | - The company recorded a net loss of **$5,923 thousand** for the period ending March 31, 2022, and **$90 thousand** for the period ending June 30, 2022, contributing to the decrease in retained earnings[20](index=20&type=chunk) - Stock-based compensation and employee stock purchase plan activities contributed to an increase in additional paid-in capital[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Reports Smart Sand, Inc.'s cash inflows and outflows from operating, investing, and financing activities Summary Statements of Cash Flows for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net cash (used in) provided by operating activities | $(10,949) | $36,480 | $(47,429) | -130.0% | | Net cash used in investing activities | $(11,684) | $(5,041) | $(6,643) | 131.8% | | Net cash used in financing activities | $(857) | $(3,886) | $3,029 | -78.0% | | Net decrease in cash and cash equivalents | $(23,490) | $27,553 | $(51,043) | -185.3% | | Cash and cash equivalents at end of period | $2,098 | $39,278 | $(37,180) | -94.7% | - Operating cash flow shifted from a significant inflow of **$36,480 thousand** in H1 2021 to an outflow of **$10,949 thousand** in H1 2022, primarily due to changes in accounts receivable and unbilled receivables[29](index=29&type=chunk) - Investing activities saw a substantial increase in cash outflow, mainly due to the acquisition of the Blair facility for **$6,547 thousand** in H1 2022[29](index=29&type=chunk) [NOTE 1 — Organization and Nature of Business & Market Update](index=10&type=section&id=NOTE%201%20%E2%80%94%20Organization%20and%20Nature%20of%20Business%20%26%20Market%20Update) Describes Smart Sand, Inc.'s business, operations, and market position as a frac and industrial sand supplier - Smart Sand, Inc. is a fully integrated frac and industrial sand supply and services company, offering mine-to-wellsite proppant solutions for oil and natural gas, and industrial sand for various uses (glass, foundry, building products, etc)[32](index=32&type=chunk) - The company's annual processing capacity is approximately **7.1 million tons** from its Oakdale and Utica facilities, with potential expansion to **10.0 million tons** by bringing the acquired Blair facility online[32](index=32&type=chunk) - Smart Sand provides logistics solutions through unit train capable transloading terminals in North Dakota and Pennsylvania, and proprietary SmartSystems products (SmartDepot silos, SmartPath transloader, SmartSystem Tracker software) for wellsite proppant storage and management[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&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) Outlines Smart Sand, Inc.'s key accounting principles and significant estimates used in financial statement preparation - The interim financial statements are unaudited and prepared in accordance with SEC rules for Form 10-Q, not including all GAAP-required information, but all necessary adjustments for fair presentation are included[37](index=37&type=chunk) - Significant estimates include asset impairment, asset retirement obligations, fair value of acquired assets, deferred tax asset recoverability, inventory reserves, and collectability of receivables[40](index=40&type=chunk) - The company qualified for federal employee retention credits, with **$4,317 thousand** included in prepaid expenses and other current assets as of June 30, 2022[42](index=42&type=chunk) [NOTE 3 — Acquisition](index=12&type=section&id=NOTE%203%20%E2%80%94%20Acquisition) Details Smart Sand, Inc.'s acquisition of Hi-Crush Blair LLC, including purchase price and accounting treatment - On March 4, 2022, Smart Sand acquired Hi-Crush Blair LLC (Blair facility) for **$6,450 thousand cash**, subject to adjustments, which was accounted for as an asset acquisition[44](index=44&type=chunk)[47](index=47&type=chunk) - The Blair facility is an idle frac sand mine with approximately **2.9 million tons** of annual processing capacity and unit train access to the Canadian National Railway[45](index=45&type=chunk) - The acquisition resulted in an **$8,281 thousand** increase to asset retirement obligations and a corresponding increase in property, plant, and equipment[46](index=46&type=chunk) [NOTE 4 — Inventory](index=13&type=section&id=NOTE%204%20%E2%80%94%20Inventory) Provides a breakdown of Smart Sand, Inc.'s inventory components, including raw materials, work in progress, and finished goods Inventory Breakdown (in thousands) | Inventory Type (in thousands) | June 30, 2022 | December 31, 2021 | Change | % Change | | :---------------------------- | :------------ | :---------------- | :----- | :------- | | Raw material | $727 | $293 | $434 | 148.1% | | Work in progress | $3,063 | $3,082 | $(19) | -0.6% | | Finished goods | $8,349 | $7,269 | $1,080 | 14.9% | | Spare parts | $4,736 | $4,380 | $356 | 8.1% | | Total inventory | $16,875 | $15,024 | $1,851 | 12.3% | [NOTE 5 — Property, Plant and Equipment, net](index=13&type=section&id=NOTE%205%20%E2%80%94%20Property,%20Plant%20and%20Equipment,%20net) Details Smart Sand, Inc.'s property, plant, and equipment, including changes and depreciation expense Property, Plant and Equipment, Net (in thousands) | Asset Category (in thousands) | June 30, 2022 | December 31, 2021 | Change | % Change | | :---------------------------- | :------------ | :---------------- | :----- | :------- | | Total property, plant and equipment, net | $270,593 | $262,465 | $8,128 | 3.1% | | Railroad and sidings | $33,622 | $27,703 | $5,919 | 21.4% | | Land and land improvements | $40,172 | $35,652 | $4,520 | 12.7% | | Asset retirement obligation | $28,818 | $20,536 | $8,282 | 40.3% | - Depreciation expense increased to **$6,449 thousand** for the three months ended June 30, 2022, from **$6,037 thousand** in the prior year, and to **$12,810 thousand** for the six months ended June 30, 2022, from **$12,213 thousand** in the prior year[51](index=51&type=chunk) [NOTE 6 — Accrued and Other Expenses](index=14&type=section&id=NOTE%206%20%E2%80%94%20Accrued%20and%20Other%20Expenses) Summarizes Smart Sand, Inc.'s accrued liabilities and other expenses, including employee-related costs and freight Accrued and Other Expenses (in thousands) | Expense Category (in thousands) | June 30, 2022 | December 31, 2021 | Change | % Change | | :------------------------------ | :------------ | :---------------- | :----- | :------- | | Total accrued liabilities | $14,146 | $14,073 | $73 | 0.5% | | Employee related expenses | $1,615 | $806 | $809 | 100.4% | | Accrued freight and delivery charges | $3,818 | $2,164 | $1,654 | 76.4% | | Income tax payable | $0 | $2,332 | $(2,332) | -100.0% | [NOTE 7 — Debt](index=14&type=section&id=NOTE%207%20%E2%80%94%20Debt) Details Smart Sand, Inc.'s debt obligations, including current and long-term portions and credit facilities Debt Summary (in thousands) | Debt Category (in thousands) | June 30, 2022 | December 31, 2021 | Change | % Change | | :--------------------------- | :------------ | :---------------- | :----- | :------- | | Current portion of long-term debt | $6,869 | $7,127 | $(258) | -3.6% | | Long-term debt, net | $14,783 | $15,353 | $(570) | -3.7% | | ABL Credit Facility | $3,000 | $0 | $3,000 | N/A | - As of June 30, 2022, **$3,000 thousand** was outstanding under the ABL Credit Facility, with **$16,000 thousand** available to be drawn[59](index=59&type=chunk) - The Oakdale Equipment Financing, secured by equipment at the Oakdale facility, bears a fixed interest rate of **5.79%**[60](index=60&type=chunk) [NOTE 8 — Leases](index=15&type=section&id=NOTE%208%20%E2%80%94%20Leases) Outlines Smart Sand, Inc.'s lease assets and liabilities, along with associated lease costs and cash flows Lease Metrics (in thousands) | Lease Metric (in thousands) | June 30, 2022 | December 31, 2021 | Change | % Change | | :-------------------------- | :------------ | :---------------- | :----- | :------- | | Total right-of-use assets | $30,979 | $30,090 | $889 | 3.0% | | Total lease liabilities | $33,495 | $33,070 | $425 | 1.3% | Lease Cost for Three Months Ended June 30 (in thousands) | Lease Cost (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :------------------------ | :--------------------------- | :--------------------------- | :----- | :------- | | Total lease cost | $3,231 | $2,954 | $277 | 9.4% | - Operating cash flows used for operating leases increased significantly to **$6,384 thousand** for the six months ended June 30, 2022, from **$4,693 thousand** in the prior year[67](index=67&type=chunk) [NOTE 9 — Asset Retirement Obligation](index=17&type=section&id=NOTE%209%20%E2%80%94%20Asset%20Retirement%20Obligation) Details changes in Smart Sand, Inc.'s asset retirement obligations, including additions and accretion expense Asset Retirement Obligation (in thousands) | Metric (in thousands) | Amount | | :-------------------- | :----- | | Balance at December 31, 2021 | $16,155 | | Additions and revisions of prior estimates | $8,282 | | Accretion expense | $379 | | Balance at June 30, 2022 | $24,816 | - The asset retirement obligation increased by **53.6%** from **$16,155 thousand** at December 31, 2021, to **$24,816 thousand** at June 30, 2022, primarily due to additions and revisions of prior estimates[69](index=69&type=chunk) [NOTE 10 — Revenue](index=18&type=section&id=NOTE%2010%20%E2%80%94%20Revenue) Disaggregates Smart Sand, Inc.'s revenue by type, including sand sales, logistics, and shortfall revenue Revenue by Type for Three Months Ended June 30 (in thousands) | Revenue Type (in thousands) | 3 Months Ended June 30, 2022 | % of Total Revenue | 3 Months Ended June 30, 2021 | % of Total Revenue | | :-------------------------- | :--------------------------- | :----------------- | :--------------------------- | :----------------- | | Sand sales revenue | $67,111 | 98% | $28,801 | 97% | | Logistics revenue | $1,603 | 2% | $838 | 3% | | Total revenue | $68,714 | 100% | $29,639 | 100% | Revenue by Type for Six Months Ended June 30 (in thousands) | Revenue Type (in thousands) | 6 Months Ended June 30, 2022 | % of Total Revenue | 6 Months Ended June 30, 2021 | % of Total Revenue | | :-------------------------- | :--------------------------- | :----------------- | :--------------------------- | :----------------- | | Sand sales revenue | $105,400 | 95% | $51,948 | 91% | | Shortfall revenue | $1,915 | 2% | $1,741 | 3% | | Logistics revenue | $3,004 | 3% | $3,400 | 6% | | Total revenue | $110,319 | 100% | $57,089 | 100% | - Of the **$16,270 thousand** deferred revenue at December 31, 2021, **$5,493 thousand** was recognized in the six months ended June 30, 2022, with **$4,556 thousand** expected to be recognized by December 31, 2022[73](index=73&type=chunk) [NOTE 11 — Stock-Based Compensation](index=18&type=section&id=NOTE%2011%20%E2%80%94%20Stock-Based%20Compensation) Describes Smart Sand, Inc.'s stock-based compensation plans and related expenses - The 2016 Omnibus Incentive Plan was amended on April 22, 2022, to increase authorized common stock for issuance by an additional **3,900 shares**[74](index=74&type=chunk) Compensation Expense for Restricted Stock (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Compensation expense for restricted stock | $802 | $572 | $230 | 40.2% | - Unrecognized compensation expense related to unvested stock awards totaled **$7,155 thousand** at June 30, 2022, to be recognized through 2026[75](index=75&type=chunk)[78](index=78&type=chunk) [NOTE 12 — Income Taxes](index=19&type=section&id=NOTE%2012%20%E2%80%94%20Income%20Taxes) Presents Smart Sand, Inc.'s effective and statutory tax rates and details on deferred tax assets and liabilities Effective and Statutory Tax Rates for Three Months Ended June 30 | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | | :----- | :--------------------------- | :--------------------------- | :----- | | Effective tax rate | 108.7% | (6.0)% | 114.7% | | Statutory tax rate | 21.0% | 21.0% | 0.0% | Effective and Statutory Tax Rates for Six Months Ended June 30 | Metric | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | | :----- | :--------------------------- | :--------------------------- | :----- | | Effective tax rate | 34.1% | 16.0% | 18.1% | | Statutory tax rate | 21.0% | 21.0% | 0.0% | - The company recorded a partial valuation allowance against gross deferred tax assets and a liability for uncertain tax positions related to its depletion deduction methodology[82](index=82&type=chunk)[83](index=83&type=chunk) [NOTE 13 — Concentrations](index=20&type=section&id=NOTE%2013%20%E2%80%94%20Concentrations) Identifies Smart Sand, Inc.'s customer concentrations and geographical risks related to its primary product - As of June 30, 2022, three customers accounted for **69%** of total accounts receivable, compared to two customers accounting for **59%** at December 31, 2021[87](index=87&type=chunk) - For the three months ended June 30, 2022, three customers generated **72%** of total revenues, while for the six months ended June 30, 2022, three customers generated **57%** of total revenues[88](index=88&type=chunk) - The company's primary product is Northern White sand, with mining operations limited to Wisconsin and Illinois, posing risks related to environmental, legal, or economic changes in these regions or the basins they serve[91](index=91&type=chunk) [NOTE 14 — Commitments and Contingencies](index=20&type=section&id=NOTE%2014%20%E2%80%94%20Commitments%20and%20Contingencies) Outlines Smart Sand, Inc.'s legal proceedings and performance bond commitments - The company is subject to various legal proceedings in the normal course of business, but management believes the ultimate resolution will not materially affect financial statements[92](index=92&type=chunk) - Total aggregate principal amount of performance bonds outstanding increased to **$17,651 thousand** as of June 30, 2022, from **$8,600 thousand** at December 31, 2021, primarily due to the Blair facility acquisition[93](index=93&type=chunk)[165](index=165&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of Smart Sand, Inc.'s financial condition, operating results, liquidity, and cash flows, including GAAP and non-GAAP measures [Overview](index=21&type=section&id=Overview) Provides a business overview of Smart Sand, Inc., its products, services, and operational capacity - Smart Sand is a fully integrated frac and industrial sand supply and services company, providing Northern White sand and logistics solutions (transloading terminals, SmartSystems wellsite storage)[98](index=98&type=chunk) - The company's current annual processing capacity is **7.1 million tons**, with potential to expand to **10.0 million tons** by bringing the Blair facility online[100](index=100&type=chunk) - The Industrial Products Solutions (IPS) business, started in late 2021, aims to diversify sales into more stable, consumer-driven markets like glass, foundry, and building products[103](index=103&type=chunk) [Market Trends](index=22&type=section&id=Market%20Trends) Analyzes market trends impacting Smart Sand, Inc., including frac sand demand, oil and gas prices, and regional demand - Frac sand demand declined significantly in 2020 due to COVID-19, rebounded in late 2020 and 2021, and prices began recovering in the first six months of 2022 due to improved supply-demand fundamentals[106](index=106&type=chunk) - The ongoing conflict in Ukraine has contributed to dramatic swings and volatility in oil and natural gas prices and the oilfield service sector[109](index=109&type=chunk) - Demand for high-quality Northern White sand is expected to continue, particularly in the Appalachian and Bakken basins, supported by increased proppant usage per well and the efficiency of SmartSystems logistics solutions[110](index=110&type=chunk) [GAAP Results of Operations](index=24&type=section&id=GAAP%20Results%20of%20Operations) Presents Smart Sand, Inc.'s detailed GAAP financial results for the reported periods [Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021](index=24&type=section&id=Three%20Months%20Ended%20June%2030,%202022%20Compared%20to%20Three%20Months%20Ended%20June%2030,%202021) Compares Smart Sand, Inc.'s GAAP operating results for the three months ended June 30, 2022, versus 2021 Summary GAAP Results for Three Months Ended June 30 (in thousands) | Metric (in thousands) | 2022 | 2021 | Change | % Change | | :-------------------- | :--- | :--- | :----- | :------- | | Total revenue | $68,714 | $29,639 | $39,075 | 131.8% | | Sand sales revenue | $67,111 | $28,801 | $38,310 | 133.0% | | Logistics revenue | $1,603 | $838 | $765 | 91.3% | | Cost of goods sold | $59,743 | $31,999 | $27,744 | 86.7% | | Gross profit | $8,971 | $(2,360) | $11,331 | -480.1% | | Operating expenses | $7,584 | $26,309 | $(18,725) | -71.2% | | Operating income (loss) | $1,387 | $(28,669) | $30,056 | -104.8% | | Net loss | $(90) | $(27,267) | $27,177 | -99.7% | - Sand sales volume increased by approximately **56%** (from **767,000 tons** to **1,196,000 tons**), driven by higher demand and average sale prices[117](index=117&type=chunk) - Operating expenses decreased significantly due to a non-cash bad debt expense of **$19.6 million** recorded in Q2 2021 that did not recur in Q2 2022[121](index=121&type=chunk) [Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021](index=26&type=section&id=Six%20Months%20Ended%20June%2030,%202022%20Compared%20to%20Six%20Months%20Ended%20June%2030,%202021) Compares Smart Sand, Inc.'s GAAP operating results for the six months ended June 30, 2022, versus 2021 Summary GAAP Results for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 2022 | 2021 | Change | % Change | | :-------------------- | :--- | :--- | :----- | :------- | | Total revenue | $110,319 | $57,089 | $53,230 | 93.2% | | Sand sales revenue | $105,400 | $51,948 | $53,452 | 103.0% | | Shortfall revenue | $1,915 | $1,741 | $174 | 10.0% | | Logistics revenue | $3,004 | $3,400 | $(396) | -11.6% | | Cost of goods sold | $103,329 | $64,426 | $38,903 | 60.4% | | Gross profit | $6,990 | $(7,337) | $14,327 | -195.3% | | Operating expenses | $15,551 | $32,399 | $(16,848) | -52.0% | | Operating income (loss) | $(8,561) | $(39,736) | $31,175 | -78.4% | | Net loss | $(6,013) | $(31,179) | $25,166 | -80.7% | - Sand sales volume increased by approximately **34%** (from **1,527,000 tons** to **2,048,000 tons**), contributing to the **103%** increase in sand sales revenue due to higher average sale prices[131](index=131&type=chunk) - Logistics revenue decreased due to a shift from mine gate sales to in-basin sales, partially offset by higher SmartSystems fleet utilization[133](index=133&type=chunk) [Non-GAAP Financial Measures](index=28&type=section&id=Non-GAAP%20Financial%20Measures) Reconciles and analyzes Smart Sand, Inc.'s non-GAAP financial measures, including Contribution Margin, EBITDA, and Free Cash Flow [Contribution Margin](index=28&type=section&id=Contribution%20Margin) Analyzes Smart Sand, Inc.'s contribution margin and contribution margin per ton, highlighting drivers of change Contribution Margin for Three Months Ended June 30 (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Contribution margin | $15,254 | $3,491 | $11,763 | 337.0% | | Contribution margin per ton | $12.75 | $4.55 | $8.20 | 180.2% | | Total tons sold | 1,196 | 767 | 429 | 55.9% | Contribution Margin for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Contribution margin | $19,504 | $4,527 | $14,977 | 330.8% | | Contribution margin per ton | $9.52 | $2.96 | $6.56 | 221.6% | | Total tons sold | 2,048 | 1,527 | 521 | 34.1% | - The increase in contribution margin and contribution margin per ton was primarily due to higher sales volumes and higher average sale prices relative to production and delivery costs[147](index=147&type=chunk) [EBITDA and Adjusted EBITDA](index=29&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) Presents and reconciles Smart Sand, Inc.'s EBITDA and Adjusted EBITDA, explaining key performance drivers EBITDA and Adjusted EBITDA for Three Months Ended June 30 (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | EBITDA | $8,243 | $(18,786) | $27,029 | -143.9% | | Adjusted EBITDA | $9,159 | $(21,511) | $30,670 | -142.6% | EBITDA and Adjusted EBITDA for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | EBITDA | $5,141 | $(23,089) | $28,230 | -122.3% | | Adjusted EBITDA | $7,258 | $(24,990) | $32,248 | -129.0% | - The significant increase in Adjusted EBITDA was primarily driven by higher sales volumes and improved average sale prices of sand, relative to costs[152](index=152&type=chunk) [Free Cash Flow](index=30&type=section&id=Free%20Cash%20Flow) Details Smart Sand, Inc.'s free cash flow, including operating cash flows and capital expenditures Free Cash Flow for Three Months Ended June 30 (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net cash (used in) provided by operating activities | $(2,287) | $32,566 | $(34,853) | -107.0% | | Free cash flow | $(3,656) | $29,736 | $(33,392) | -112.3% | Free Cash Flow for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net cash (used in) provided by operating activities | $(10,949) | $36,480 | $(47,429) | -130.0% | | Free cash flow | $(22,633) | $31,437 | $(54,070) | -172.0% | - The decrease in free cash flow for the six months ended June 30, 2022, was primarily due to the **$6.5 million** acquisition of the Blair facility, an increase in accounts receivable, and a repayment of a tax refund[158](index=158&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses Smart Sand, Inc.'s liquidity, capital resources, projected capital expenditures, and seasonal impacts - As of June 30, 2022, the company had **$2.1 million** in cash and **$16.0 million** available under its ABL Credit Facility, which are its primary sources of liquidity[159](index=159&type=chunk) - Full-year 2022 capital expenditures are projected to be between **$20.0 million** and **$25.0 million**, focusing on efficiency projects and the Waynesburg terminal[161](index=161&type=chunk) - The company's business is affected by seasonal fluctuations in weather, impacting wet sand processing capacity and leading to higher cash operating costs in Q2 and Q3 due to overproduction for winter demand[168](index=168&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=33&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Discusses Smart Sand, Inc.'s market risk exposure, primarily interest rate risk, noting fixed-rate debt and immaterial variable-rate borrowings - The majority of the company's debt is financed under fixed interest rates, mitigating interest rate risk[177](index=177&type=chunk) - Borrowings under the ABL Credit Facility are variable, but the **$3.0 million** outstanding balance as of June 30, 2022, does not represent a material interest rate risk[177](index=177&type=chunk) - No additional material changes to market risk exposure were identified during the six months ended June 30, 2022, compared to the Annual Report on Form 10-K for 2021[178](index=178&type=chunk) [ITEM 4. Controls and Procedures](index=33&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management evaluated Smart Sand, Inc.'s disclosure controls and procedures, concluding effectiveness with no material changes in internal control - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2022[179](index=179&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2022[180](index=180&type=chunk) [PART II OTHER INFORMATION](index=34&type=section&id=PART%20II%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits [ITEM 1. Legal Proceedings](index=34&type=section&id=ITEM%201.%20Legal%20Proceedings) Details Smart Sand, Inc.'s routine legal proceedings, with management expecting no material adverse effect on financial statements - The company is subject to various legal proceedings in the normal course of business[182](index=182&type=chunk) - Management believes the ultimate resolution of these legal matters will not materially affect the financial statements[182](index=182&type=chunk) [ITEM 1A. Risk Factors](index=34&type=section&id=ITEM%201A.%20Risk%20Factors) Reports no material changes to Smart Sand, Inc.'s risk factors since the prior annual report - No material changes to risk factors were reported since the Annual Report on Form 10-K for the year ended December 31, 2021[183](index=183&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during the quarter ended June 30, 2022 - No unregistered sales of equity securities occurred during the quarter ended June 30, 2022[184](index=184&type=chunk) [ITEM 3. Defaults upon Senior Securities](index=34&type=section&id=ITEM%203.%20Defaults%20upon%20Senior%20Securities) Reports no defaults upon senior securities - There were no defaults upon senior securities[185](index=185&type=chunk) [ITEM 4. Mine Safety Disclosures](index=34&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) Details Smart Sand, Inc.'s mine safety regulations by MSHA and OSHA, emphasizing compliance with health and safety standards - Smart Sand's mining operations are regulated by MSHA, which performs at least two unannounced inspections annually[186](index=186&type=chunk) - The company is subject to regulations on respirable silica exposure by OSHA, with MSHA expected to adopt similar rules, potentially requiring capital expenditures for compliance[187](index=187&type=chunk) - Compliance with the Federal Mine Safety and Health Act of 1977, as amended, is crucial, as non-compliance or changes in standards could materially impact the business[188](index=188&type=chunk) [ITEM 5. Other Information](index=34&type=section&id=ITEM%205.%20Other%20Information) No other information was reported in this section - No other information was disclosed[189](index=189&type=chunk) [ITEM 6. Exhibits](index=36&type=section&id=ITEM%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including corporate documents, incentive plan amendments, and certifications - Exhibits include corporate organizational documents, amendments to the 2016 Omnibus Incentive Plan, and various certifications (Rule 13a-14(a), Section 302, Section 906)[191](index=191&type=chunk) - Mine Safety Disclosure Exhibit (95.1) and XBRL Interactive Data Files (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104) are also included[191](index=191&type=chunk) [SIGNATURES](index=37&type=section&id=SIGNATURES) The report was signed by the CEO and CFO on August 9, 2022, as required by the Securities Exchange Act - The report was signed by Charles E. Young, CEO, and Lee E. Beckelman, CFO, on August 9, 2022[196](index=196&type=chunk)

Financial Data and Key Metrics Changes - First quarter volumes of 852,000 tonnes increased by 12% compared to the first quarter of 2021 but were flat compared to the previous quarter due to logistics and weather issues [7] - Total revenues for Q1 2022 were $41.6 million, up from $35.1 million in Q4 2021, with sand revenues increasing by 12% sequentially to $38.3 million [22] - The company reported a net loss of $5.9 million or $0.14 per share for Q1 2022, an improvement from a net loss of $12.2 million or $0.29 per share in Q4 2021 [24] - Contribution margin for Q1 2022 was $4.3 million, with a negative adjusted EBITDA of $1.9 million, compared to a contribution margin of $1.9 million and a negative adjusted EBITDA of $4.5 million in the previous quarter [25] Business Line Data and Key Metrics Changes - The Industrial Product Solutions division is expanding quickly, with a growing product list and geographical reach [13] - The company plans to broaden service capabilities with blending, packaging, and finer-grade products in the second half of 2022 [14] Market Data and Key Metrics Changes - Commodity prices remain strong, with expectations of record volumes in 2022 [9] - The company has less than 15% of its capacity signed under long-term contracts, allowing for potential price increases due to improved market fundamentals [10] Company Strategy and Development Direction - The company completed the purchase of a sand mining and processing facility in Blair, Wisconsin, with a processing capacity of 2.9 million tonnes per year [9] - The new transloading terminal in Waynesburg, Pennsylvania, is expected to drive higher margins and expand the company's presence in the Appalachian Basin [12] - The company aims to achieve a long-term contracted volume of 60% to 70% [36] Management's Comments on Operating Environment and Future Outlook - Management expects improved operating and financial results starting in the second quarter due to increased sales volumes and pricing [10][28] - The company anticipates sales volumes to increase by more than 25% from Q1 levels in the second quarter [28] - Management highlighted the importance of logistics and rail capacity in meeting market demand [45][47] Other Important Information - The company has a strong balance sheet with $5 million in cash and approximately $24 million in liquidity [17] - Capital expenditures for the year are expected to be in the range of $25 million to $30 million, focusing on efficiency projects and supporting the growing IPS business [29] Q&A Session Summary Question: Current pricing trends and willingness to lock up volumes - Management noted that pricing has increased from low to mid-20s to well into the 30s as they exit Q1 [32] - There is an appetite for contracts due to the tight market for sand [34] Question: Contribution margin per tonne and future expectations - Management indicated that contribution margins should approach $10 per tonne in the second half of the year, driven by improved pricing and volumes [43] Question: Sustainable volume potential given acquisitions - Management expects to achieve over 1 million tonnes per quarter, with potential for higher volumes if market conditions remain favorable [46][48] Question: Working capital and receivables management - Management anticipates a buildup in working capital due to increased sales activity, with cash conversion expected in the second half of the year [50] Question: Impact of industrial sales on volumes and margins - Industrial sales are expected to grow significantly over the next year or two, with a more meaningful impact anticipated in late 2022 or early 2023 [52][54]

[PART I FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for Smart Sand, Inc [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Smart Sand, Inc., including balance sheets, statements of operations, comprehensive (loss) income, changes in stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, acquisitions, debt, leases, and other financial commitments for the three months ended March 31, 2022, and comparative periods [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $4,698 | $25,588 | | Total current assets | $56,125 | $73,863 | | Total assets | $366,570 | $374,019 | | Total current liabilities | $48,200 | $48,550 | | Total liabilities | $130,588 | $132,859 | | Total stockholders' equity | $235,982 | $241,160 | - Total assets decreased by **$7.4 million**, primarily driven by a significant reduction in cash and cash equivalents[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, costs, and net loss over a specific period, reflecting operational performance | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Sand sales revenue | $38,289 | $23,147 | 65% | | Shortfall revenue | $1,915 | $1,741 | 10% | | Logistics revenue | $1,401 | $2,562 | (45)% | | Total revenue | $41,605 | $27,450 | 52% | | Cost of goods sold | $43,586 | $32,427 | 34% | | Gross profit | $(1,981) | $(4,977) | (60)% | | Operating loss | $(9,948) | $(11,067) | (10)% | | Net loss | $(5,923) | $(3,912) | 51% | | Basic EPS | $(0.14) | $(0.09) | 56% | - Total revenue increased by **52%** year-over-year, primarily driven by a **65%** increase in sand sales revenue[14](index=14&type=chunk) - Despite improved gross profit (loss decreased by **60%**), net loss increased by **51%** to **$(5.9) million**[14](index=14&type=chunk) [Condensed Consolidated Statements of Comprehensive (Loss) Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income) This section presents the total comprehensive loss, including net loss and other comprehensive income or loss components | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(5,923) | $(3,912) | | Comprehensive loss | $(5,907) | $(3,787) | - The comprehensive loss for Q1 2022 was **$(5.9) million**, an increase from **$(3.8) million** in Q1 2021, reflecting the higher net loss[17](index=17&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section outlines the changes in the company's equity accounts, including net loss and stock-based compensation | Metric (in thousands) | December 31, 2021 | March 31, 2022 | | :-------------------- | :---------------- | :------------- | | Total Stockholders' Equity | $241,160 | $235,982 | | Net loss | | $(5,923) | | Stock-based compensation | | $826 | - Total stockholders' equity decreased by **$5.2 million** from December 31, 2021, to March 31, 2022, primarily due to the net loss incurred during the period, partially offset by stock-based compensation[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section categorizes cash inflows and outflows from operating, investing, and financing activities, showing liquidity changes | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(8,662) | $3,914 | | Net cash used in investing activities | $(10,315) | $(2,215) | | Net cash used in financing activities | $(1,913) | $(2,007) | | Net decrease in cash and cash equivalents | $(20,890) | $(308) | | Cash and cash equivalents at end of period | $4,698 | $11,417 | - The company experienced a significant net decrease in cash and cash equivalents of **$(20.9) million** in Q1 2022, primarily due to cash used in operating activities and a substantial increase in investing activities, including the **$6.5 million** acquisition of the Blair facility[29](index=29&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the financial statements, covering accounting policies, acquisitions, and other financial commitments [NOTE 1 — Organization and Nature of Business & Market Update](index=10&type=section&id=NOTE%201%20%E2%80%94%20Organization%20and%20Nature%20of%20Business%20%26%20Market%20Update) This note describes Smart Sand's business operations, market position, and recent strategic developments, including diversification and capacity expansion - Smart Sand, Inc. operates as a fully integrated frac sand supply and services company, offering mine-to-wellsite proppant, logistics, and storage solutions for the oil and natural gas industry[32](index=32&type=chunk) - The company diversified its customer base by creating the Industrial Products Solutions (IPS) business in late 2021, offering sand for industrial uses such as glass, foundry, and building products[32](index=32&type=chunk) - Current annual processing capacity is approximately **10.0 million tons**, following expansions and acquisitions, including the Blair, Wisconsin mine and processing facility in March 2022[32](index=32&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) This note outlines the key accounting principles and estimates used in preparing the interim financial statements - The unaudited interim financial statements are prepared in accordance with SEC rules for Form 10-Q and GAAP, relying on management's estimates for items like asset impairment, asset retirement obligations, and deferred tax assets[37](index=37&type=chunk)[40](index=40&type=chunk) - The company qualified for federal government assistance through employee retention credit provisions, with **$1.18 million** included in prepaid expenses and other current assets as of March 31, 2022[42](index=42&type=chunk) [NOTE 3 — Acquisition](index=11&type=section&id=NOTE%203%20%E2%80%94%20Acquisition) This note details the acquisition of the Blair facility, including the purchase price and accounting treatment - On March 4, 2022, Smart Sand acquired Hi-Crush Blair LLC (Blair facility) for **$6.45 million** in cash[44](index=44&type=chunk) - The Blair facility is an idle frac sand mine and processing facility in Blair, Wisconsin, with approximately **2.9 million tons** of total annual processing capacity and unit train rail access[45](index=45&type=chunk) - The transaction was accounted for as an asset acquisition, with acquired assets allocated to property, plant and equipment, net, and an **$8.281 million** increase to asset retirement obligations[46](index=46&type=chunk) [NOTE 4 — Inventory](index=12&type=section&id=NOTE%204%20%E2%80%94%20Inventory) This note provides a breakdown of the company's inventory by type and its valuation | Inventory Type (in thousands) | March 31, 2022 | December 31, 2021 | | :---------------------------- | :------------- | :---------------- | | Raw material