Smart Sand, Inc. (NASDAQ:SND) Q3 2021 Earnings Conference Call November 10, 2021 10:00 AM ET Company Participants Josh Jayne - Finance Manager Charles Young - Founder and Chief Executive Officer Lee Beckelman - Chief Financial Officer John Young - Chief Operating Officer Conference Call Participants Stephen Gengaro - Stifel, Nicolaus & Company, Inc. John Daniel - Daniel Energy Partners Samantha Hoh - Evercore ISI Operator Good day, and thank you for standing by. Welcome to the Third Quarter 2021 Smart Sand, ...

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 Q3 and 9M 2021 and 2020, including balance sheets, income statements, cash flows, and notes on business operations [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2021, total assets decreased to $383.4 million from $427.7 million, while cash and cash equivalents significantly increased to $36.7 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 (unaudited) (in thousands) | Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $36,678 | $11,725 | | Accounts receivable | $15,589 | $69,720 | | Total current assets | $82,666 | $112,086 | | Total assets | $383,368 | $427,677 | | **Liabilities & Equity** | | | | Total current liabilities | $39,989 | $37,263 | | Total liabilities | $131,148 | $138,870 | | Total stockholders' equity | $252,220 | $288,807 | [Condensed Consolidated Income Statements](index=5&type=section&id=Condensed%20Consolidated%20Income%20Statements) The company reported a net loss of $7.3 million for Q3 2021 and $38.4 million for 9M 2021, contrasting with net income in 2020 due to a bargain purchase gain and bad debt expense Income Statement Summary - Three Months Ended Sep 30 (in thousands) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Total revenue | $34,479 | $23,409 | | Gross profit (loss) | $(2,047) | $5,182 | | Operating (loss) income | $(8,756) | $(1,249) | | Gain on bargain purchase | $0 | $39,889 | | Net (loss) income | $(7,262) | $36,282 | | Basic EPS | $(0.17) | $0.91 | Income Statement Summary - Nine Months Ended Sep 30 (in thousands) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Total revenue | $91,568 | $97,003 | | Gross profit (loss) | $(9,384) | $25,782 | | Bad debt expense | $19,592 | $0 | | Operating (loss) income | $(48,492) | $7,940 | | Gain on bargain purchase | $0 | $39,889 | | Net (loss) income | $(38,441) | $40,839 | | Basic EPS | $(0.92) | $1.02 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly increased to $37.5 million for 9M 2021, leading to a $25.0 million net increase in cash and cash equivalents Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Activity | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $37,544 | $22,224 | | Net cash used in investing activities | $(6,898) | $(7,393) | | Net cash used in financing activities | $(5,692) | $(6,476) | | **Net increase in cash** | **$24,954** | **$8,355** | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes cover the company's frac sand business, the $39.6 million bargain purchase gain from the Eagle Proppants acquisition, revenue disaggregation, customer concentration, and a $19.6 million bad debt expense from a litigation settlement - The company operates as a fully integrated frac sand supplier with an annual processing capacity of approximately **7.1 million tons** from its Oakdale, WI and Utica, IL facilities[30](index=30&type=chunk) - The acquisition of Eagle Proppants Holdings in September 2020 resulted in a bargain purchase gain of **$39.6 million**, as the estimated fair value of net assets acquired (**$41.7 million**) exceeded the purchase consideration (**$2.1 million**)[46](index=46&type=chunk)[112](index=112&type=chunk) Revenue Disaggregation - Nine Months Ended Sep 30 | Revenue Type | 2021 Revenue (in thousands) | 2021 % of Total | 2020 Revenue (in thousands) | 2020 % of Total | | :--- | :--- | :--- | :--- | :--- | | Sand sales revenue | $83,291k | 91% | $50,809k | 52% | | Shortfall revenue | $4,421k | 5% | $22,148k | 23% | | Logistics revenue | $3,856k | 4% | $24,046k | 25% | | **Total revenue** | **$91,568k** | **100%** | **$97,003k** | **100%** | - For the nine months ended Sep 30, 2021, four customers (EQT, Halliburton, Liberty, Enerplus) accounted for **68%** of total revenues[90](index=90&type=chunk)[203](index=203&type=chunk) - The company settled a lawsuit with U.S. Well Services, receiving a **$35.0 million** cash payment, which resulted in a **$19.6 million** non-cash bad debt expense, representing the difference from the **$54.6 million** accounts receivable balance under litigation[100](index=100&type=chunk)[147](index=147&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2021 revenue growth driven by sand tons sold, offset by lower shortfall revenue and depressed prices, leading to gross loss and negative Adjusted EBITDA, while liquidity remains sufficient [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Q3 2021 revenue increased 47% due to higher sand tons sold, but a gross loss resulted from decreased shortfall and logistics revenue, with a significant bad debt expense impacting nine-month results - Tons of sand sold increased **156%** to approximately **790,000 tons** in Q3 2021 from **309,000 tons** in Q3 2020[125](index=125&type=chunk) - The increase in sand sales revenue in Q3 2021 was offset by a **$4.2 million** decrease in shortfall revenue and a **$3.7 million** decrease in logistics revenue compared to Q3 2020[124](index=124&type=chunk) - For the nine months ended Sep 30, 2021, a **$19.6 million** non-cash bad debt expense was recorded related to the settlement of litigation with a customer[147](index=147&type=chunk) [Non-GAAP Financial Measures](index=34&type=section&id=Non-GAAP%20Financial%20Measures) Key non-GAAP metrics, Contribution Margin and Adjusted EBITDA, showed significant declines for Q3 and 9M 2021, while free cash flow increased due to a litigation settlement cash receipt Contribution Margin Reconciliation (in thousands) | Period | Gross Profit (Loss) (in thousands) | Contribution Margin (in thousands) | Total Tons Sold (k) | Contribution Margin per Ton | | :--- | :--- | :--- | :--- | :--- | | **Q3 2021** | $(2,047) | $4,098 | 790 | $5.19 | | **Q3 2020** | $5,182 | $10,359 | 309 | $33.52 | | **9M 2021** | $(9,384) | $8,625 | 2,317 | $3.72 | | **9M 2020** | $25,782 | $41,133 | 1,273 | $32.31 | Adjusted EBITDA Reconciliation (in thousands) | Period | Net (Loss) Income (in thousands) | EBITDA (in thousands) | Adjusted EBITDA (in thousands) | | :--- | :--- | :--- | :--- | | **Q3 2021** | $(7,262) | $(740) | $(1,009) | | **Q3 2020** | $36,282 | $44,321 | $6,148 | | **9M 2021** | $(38,441) | $(23,830) | $(25,999) | | **9M 2020** | $40,839 | $64,698 | $28,123 | Free Cash Flow Reconciliation (in thousands) | Period | Net Cash from Ops (in thousands) | Purchases of PP&E (in thousands) | Free Cash Flow (in thousands) | | :--- | :--- | :--- | :--- | | **9M 2021** | $37,544 | $(6,976) | $30,568 | | **9M 2020** | $22,224 | $(7,393) | $14,831 | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2021, the company had $36.7 million in cash and $16.5 million available on its ABL facility, with working capital decreasing due to a receivable write-off - As of Sep 30, 2021, primary liquidity sources were **$36.7 million** in cash and **$16.5 million** in undrawn availability on the ABL Credit Facility[178](index=178&type=chunk) - Working capital decreased to **$42.7 million** at Sep 30, 2021 from **$74.8 million** at Dec 31, 2020, primarily due to the removal of **$19.6 million** of accounts receivable to bad debt expense and reduced inventory levels[181](index=181&type=chunk)[185](index=185&type=chunk) - Full year 2021 capital expenditures are expected to be between **$14 million** and **$16 million**, primarily for SmartSystems growth and the new Waynesburg terminal[197](index=197&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=43&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) There have been no material changes to the company's market risk exposure since the 2020 Annual Report on Form 10-K - There have been no material changes to the company's exposure to market risks from those described in the 2020 Annual Report on Form 10-K[211](index=211&type=chunk) [Controls and Procedures](index=43&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[212](index=212&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[213](index=213&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=44&type=section&id=ITEM%201.%20Legal%20Proceedings) Information on legal proceedings, including the $35.0 million settlement with U.S. Well Services, is incorporated by reference from Note 15 of the financial statements - Information regarding legal proceedings is incorporated by reference from Note 15 of the condensed consolidated financial statements[215](index=215&type=chunk) [Risk Factors](index=44&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes to the company's risk factors have occurred since the disclosure in the 2020 Annual Report on Form 10-K - There have been no material changes to the risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2020[216](index=216&type=chunk) [Mine Safety Disclosures](index=44&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The company's mining operations are subject to MSHA and OSHA regulations, including unannounced inspections and potential future rules on respirable silica - The company's sand mining operations are subject to regulation by the U.S. Mining Safety and Health Administration (MSHA), which performs at least two unannounced inspections annually for each above-ground facility[219](index=219&type=chunk) - The company is also subject to OSHA regulations and is monitoring potential MSHA rulemaking on respirable silica, which could require capital expenditures for equipment to reduce exposure if limits are lowered significantly[220](index=220&type=chunk) [Other Information](index=45&type=section&id=ITEM%205.%20Other%20Information) On November 9, 2021, the company entered an ATM offering agreement with Jefferies LLC to sell up to $25 million of common stock, with no proceeds from a major selling stockholder's shares - On November 9, 2021, the Company entered into an Open Market Sale Agreement (an "at-the-market" offering) with Jefferies LLC[223](index=223&type=chunk) - The agreement allows the Company to sell up to **$25 million** of its common stock and a Selling Stockholder to sell up to **10,920,445 shares**[223](index=223&type=chunk) - The Company will not receive any proceeds from the sale of shares by the Selling Stockholder[223](index=223&type=chunk)

Smart Sand, Inc. (NASDAQ:SND) Q2 2021 Earnings Conference Call August 4, 2021 10:00 AM ET Company Participants Josh Jayne - Finance Manager Charles Young - CEO Lee Beckelman - CFO Conference Call Participants Bill Austin - Daniel Energy Partners Stephen Gengaro - Stifel Samantha Hoh - Evercore ISI Operator Good day and thank you for standing by and welcome to the Sand Inc. Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation ...

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section details the company's financial performance, condition, cash flows, and related disclosures for the period [Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) The financial statements show increased cash from a litigation settlement, but a net loss due to a bad debt expense, lower sand prices, and reduced shortfall revenue [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and stockholders' equity decreased as of June 30, 2021, primarily due to reduced accounts receivable, despite an increase in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $39,278 | $11,725 | | Accounts receivable | $10,371 | $69,720 | | Total current assets | $81,666 | $112,086 | | Total assets | $387,458 | $427,677 | | **Liabilities & Equity** | | | | Total current liabilities | $34,585 | $37,263 | | Total liabilities | $128,646 | $138,870 | | Total stockholders' equity | $258,812 | $288,807 | [Condensed Consolidated Income Statements](index=5&type=section&id=Condensed%20Consolidated%20Income%20Statements) The company reported a net loss for both the quarter and six-month period ended June 30, 2021, primarily due to a significant bad debt expense and the absence of shortfall revenue Income Statement Summary (in thousands, except per share data) | Metric | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $29,639 | $26,106 | $57,089 | $73,594 | | Sand Sales Revenue | $28,801 | $7,375 | $51,948 | $38,362 | | Shortfall Revenue | $0 | $14,000 | $1,741 | $15,307 | | Gross Profit (Loss) | $(2,360) | $14,200 | $(7,337) | $20,599 | | Bad Debt Expense | $19,592 | $0 | $19,592 | $0 | | Net (Loss) Income | $(27,267) | $4,640 | $(31,179) | $4,556 | | Diluted EPS | $(0.65) | $0.12 | $(0.75) | $0.11 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities increased significantly due to strong collections including a litigation settlement, leading to a substantial rise in cash and cash equivalents Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $36,480 | $25,842 | | Net cash used in investing activities | $(5,041) | $(6,423) | | Net cash used in financing activities | $(3,886) | $(5,415) | | **Net increase in cash and cash equivalents** | **$27,553** | **$14,004** | | **Cash and cash equivalents at end of period** | **$39,278** | **$16,643** | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the company's business, accounting policies, debt structure, revenue disaggregation, and a significant litigation settlement impacting financial results - The company is a fully integrated frac sand supply and services company with an annual processing capacity of approximately **7.1 million tons** from its Oakdale, Wisconsin and Utica, Illinois facilities[32](index=32&type=chunk) - The company qualified for and recorded **$3.4 million** in employee retention credits during the first six months of 2021, which are recognized in other income[43](index=43&type=chunk)[132](index=132&type=chunk) - As of June 30, 2021, the company had no outstanding balance on its **$20.0 million** ABL Credit Facility, with **$12.9 million** available to be drawn[63](index=63&type=chunk)[177](index=177&type=chunk) - On June 28, 2021, the company settled its lawsuit with U.S. Well Services, receiving a **$35.0 million** cash payment, resulting in a **$19.6 million** non-cash bad debt expense representing the difference between cash received and the **$54.6 million** accounts receivable balance under litigation[102](index=102&type=chunk)[131](index=131&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the rebound in sand sales volume, but notes profitability was impacted by depressed prices, a bad debt expense, and reduced shortfall revenue, while liquidity remains strong due to a litigation settlement - The company sold approximately **767,000 tons** of sand in Q2 2021, a **269% increase** from **208,000 tons** in Q2 2020, indicating a rebound in activity[127](index=127&type=chunk) - The company expects full-year 2021 capital expenditures to be between **$10 million** and **$12 million**, primarily for SmartSystems growth and facility maintenance[196](index=196&type=chunk) - Despite increased sales volume, the company believes frac sand prices continue to be depressed due to oversupply in the market[117](index=117&type=chunk)[127](index=127&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Total revenue increased in Q2 2021 due to higher sand sales, but gross profit turned to a loss, primarily driven by a bad debt expense and reduced shortfall revenue Q2 2021 vs Q2 2020 (in thousands) | Metric | Q2 2021 | Q2 2020 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $29,639 | $26,106 | $3,533 | 14% | | Shortfall Revenue | $0 | $14,000 | $(14,000) | (100)% | | Gross Profit (Loss) | $(2,360) | $14,200 | $(16,560) | (117)% | | Bad Debt Expense | $19,592 | $0 | $19,592 | N/A | | Net (Loss) Income | $(27,267) | $4,640 | $(31,907) | (688)% | YTD 2021 vs YTD 2020 (in thousands) | Metric | YTD 2021 | YTD 2020 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $57,089 | $73,594 | $(16,505) | (22)% | | Shortfall Revenue | $1,741 | $15,307 | $(13,566) | (89)% | | Gross Profit (Loss) | $(7,337) | $20,599 | $(27,936) | (136)% | | Net (Loss) Income | $(31,179) | $4,556 | $(35,735) | (784)% | [Non-GAAP Financial Measures](index=33&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP metrics show a decline in Contribution Margin and Adjusted EBITDA due to a bad debt expense, but Free Cash Flow significantly increased, boosted by a litigation settlement Reconciliation of Net (Loss) Income to Adjusted EBITDA (in thousands) | Metric | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income | $(27,267) | $4,640 | $(31,179) | $4,556 | | EBITDA | $(18,786) | $14,273 | $(23,089) | $20,377 | | **Adjusted EBITDA** | **$(21,511)** | **$15,610** | **$(24,990)** | **$21,975** | Reconciliation of Net Cash from Operations to Free Cash Flow (in thousands) | Metric | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $32,566 | $13,781 | $36,480 | $25,842 | | Purchases of property, plant and equipment | $(2,830) | $(2,238) | $(5,043) | $(6,423) | | **Free cash flow** | **$29,736** | **$11,543** | **$31,437** | **$19,419** | [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity through cash and available credit, despite a decrease in working capital primarily due to a non-cash bad debt expense from a litigation settlement - Primary sources of liquidity as of June 30, 2021, include **$39.3 million** in cash, **$12.9 million** in undrawn ABL availability, and **$5.0 million** in undrawn availability on the Acquisition Liquidity Support Facility[177](index=177&type=chunk) - Working capital decreased from **$74.8 million** to **$47.1 million**, primarily due to the non-cash bad debt expense of **$19.6 million** related to the U.S. Well litigation settlement[182](index=182&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=41&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company states that there have been no material changes to its exposure to market risks from those described in its Annual Report on Form 10-K for the year ended December 31, 2020 - There have been no material changes in the company's exposure to market risks during the six months ended June 30, 2021[208](index=208&type=chunk) [Controls and Procedures](index=41&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2021 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[209](index=209&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[210](index=210&type=chunk) [PART II OTHER INFORMATION](index=42&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides disclosures on legal proceedings, risk factors, mine safety, and a comprehensive list of exhibits [Legal Proceedings](index=42&type=section&id=ITEM%201.%20Legal%20Proceedings) The company references its litigation disclosures in the financial statement notes, specifically regarding the settlement of the lawsuit against U.S. Well Services, LLC - The company's legal proceedings disclosure is incorporated by reference from Note 15 of the financial statements, which details the settlement with U.S. Well Services, LLC[212](index=212&type=chunk)[102](index=102&type=chunk) [Risk Factors](index=42&type=section&id=ITEM%201A.%20Risk%20Factors) The company reports that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020 - There have been no material changes to the risk factors described in the company's 2020 Form 10-K[213](index=213&type=chunk) [Mine Safety Disclosures](index=42&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The company is subject to regulation by the U.S. Mining Safety and Health Administration (MSHA) and the Occupational Safety and Health Administration (OSHA), emphasizing its commitment to safety and compliance - The company's sand mining operations are subject to safety regulations by MSHA, which performs at least two unannounced inspections annually per above-ground facility[216](index=216&type=chunk) - The company is also subject to OSHA regulations regarding workplace exposure to respirable silica and adheres to a respiratory protection program[217](index=217&type=chunk) [Exhibits](index=44&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, the U.S. Well Services settlement, CEO/CFO certifications, and XBRL data

Smart Sand, Inc. (NASDAQ:SND) Q1 2021 Earnings Conference Call May 5, 2021 10:00 AM ET Company Participants Josh Jayne - Finance Manager Charles Young - CEO & Director Lee Beckelman - CFO Conference Call Participants Stephen Gengaro - Stifel, Nicolaus & Company John Daniel - Daniel Energy Partners Samantha Hoh - Evercore ISI Luke Gittemeier - Nokomis Operator Good day. And thank you for standing by. Welcome to the first quarter, 2021 Smart Sand Inc. earnings conference call. [Operator Instructions]. I would ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION SMART SAND, INC. (Exact name of registrant as specified in its charter) 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 FORM 10-Q _____________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2021 Washington, D.C. 20549 ...

Financial Data and Key Metrics Changes - In Q4 2020, sales volumes increased by 98%, from 309,000 tons in Q3 to 612,000 tons in Q4 [9][27] - Total revenues for Q4 2020 were $25.3 million, compared to $23.4 million in Q3 2020 [28] - The company reported a loss of $2.9 million in Q4 2020, which included a $5.1 million impairment charge [32] - For the full year 2020, net income was $37.9 million, up from $31.6 million in 2019 [36] Business Line Data and Key Metrics Changes - Sand revenues increased in Q4 2020 primarily due to higher sand sales, offset by lower shortfall and logistics revenues [28] - Contribution margin for Q4 2020 was a loss of $5.2 million, compared to a contribution margin of $10.4 million in Q3 2020 [33] - Adjusted EBITDA for Q4 2020 was a loss of $7.7 million, down from a positive $6.1 million in Q3 2020 [33] Market Data and Key Metrics Changes - The frac sand market showed recovery in Q4 2020, with significant increases in sales volumes [9][20] - The company anticipates first quarter activity to be consistent with Q4 levels or slightly better, barring a dramatic drop in oil and gas prices [10] Company Strategy and Development Direction - The company aims to be the premium supplier of Northern White frac sand and is focused on maintaining a strong balance sheet and low leverage [8][16] - The acquisition of Eagle Materials proppants business is seen as a strategic move to expand capacity and market reach without taking on debt [15][16] - The company is exploring further consolidation opportunities in the sand industry but emphasizes that any acquisition must align with its financial principles [16][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving market conditions and increased customer inquiries [10][14] - The company is focused on generating free cash flow and maintaining operational efficiency in 2021 [11][20] - Management noted that while the market is still operating at lower levels than the previous year, there has been a positive uptick in volumes since the lows of Q2 2020 [20] Other Important Information - The company generated $17 million in free cash flow for the full year 2020 [11] - As of the end of 2020, the company had approximately $12 million in cash and $31 million in liquidity [12][39] - Capital expenditures for 2021 are expected to be in the range of $10 million to $15 million [40] Q&A Session Summary Question: Interest in Acquisitions and Consolidation - Management indicated that while there is interest in consolidation, any potential acquisition must not risk the balance sheet and should provide strategic long-term benefits [47][56] - There is a general level of dialogue in the industry, but many peers are still restructuring, which may delay fruitful discussions [56] Question: Preference for Geography in M&A - The company prefers to focus on Northern White but is open to other opportunities that complement its existing operations [71][72] Question: Balance Sheet and Liquidity - Management confirmed that they expect no borrowings against their ABL at the end of Q1 and emphasized maintaining low leverage levels [78][80] Question: Cost of Sales and Contribution Margin - Management explained that seasonality affects costs, with Q4 typically showing lower contribution margins due to higher inventory costs [91][92] - Startup costs from the Utica facility were approximately $1 million in Q4, but these are expected to stabilize as sales ramp up [96] Question: Pricing Outlook - Management noted that while volumes are improving, there has not yet been a material increase in pricing, but they expect prices to follow as activity increases [102]

Part I [Business](index=8&type=section&id=Item%201.%20Business) Smart Sand is an integrated Northern White frac sand supplier, operating mines with 9.0 million tons annual capacity and proprietary logistics solutions - Smart Sand is a fully integrated frac sand supply and services company producing high-quality Northern White frac sand, a premium proppant used in hydraulic fracturing[20](index=20&type=chunk) - The company owns and operates a frac sand mine and processing facility in Oakdale, Wisconsin, with approximately **315 million tons** of proven recoverable sand reserves and an annual processing capacity of **5.5 million tons**[20](index=20&type=chunk) - In September 2020, the company acquired Eagle Proppants Holdings, adding two frac sand mines in Illinois and Wisconsin with a combined annual processing capacity of **3.5 million tons**, and gaining access to the BNSF Class I rail line[21](index=21&type=chunk) - The company offers wellsite proppant storage and management solutions through its SmartSystems, which include portable silos (SmartDepot) and a mobile transloader (SmartPath)[23](index=23&type=chunk) Financial Performance (2018-2020, $ millions) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Net Income** | $38.0 | $31.6 | $20.1 | | **Adjusted EBITDA** | $20.5 | $87.1 | $67.8 | - The acquisition of Eagle Proppants Holdings resulted in a bargain purchase gain of **$39.6 million**, as the estimated fair value of net assets acquired (**$41.7 million**) exceeded the total consideration[29](index=29&type=chunk) - For the year ended December 31, 2020, three customers, Rice Energy (EQT), Liberty, and U.S. Well Services, accounted for **28.1%**, **21.7%**, and **14.0%** of total revenue, respectively[50](index=50&type=chunk) [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from oil and gas volatility, customer concentration, market competition, and environmental regulations - The business is highly dependent on the volatile oil and natural gas industry, where declining activity would reduce proppant demand[100](index=100&type=chunk)[102](index=102&type=chunk) - A substantial majority of revenues are generated from a limited number of customers under long-term take-or-pay contracts, posing counterparty risk[103](index=103&type=chunk) - The company faces significant competition from large national and smaller regional producers, with increased supply of regional sand impacting Northern White Sand sales and pricing[105](index=105&type=chunk)[106](index=106&type=chunk) - A substantial portion of accounts receivable (**$54.6 million** as of Dec 31, 2020) is from one customer currently subject to litigation over nonpayment[121](index=121&type=chunk) - Legislative and regulatory initiatives related to hydraulic fracturing could increase costs and operating restrictions for customers, potentially reducing frac sand demand[159](index=159&type=chunk)[162](index=162&type=chunk) - The company is subject to stringent health and safety regulations from MSHA and OSHA, including rules regarding workplace exposure to crystalline silica, which could lead to increased costs[167](index=167&type=chunk)[169](index=169&type=chunk) - Ownership is concentrated, with Clearlake Capital and the CEO beneficially owning approximately **25.1%** and **15.2%** of outstanding common stock, respectively, limiting other stockholders' influence[180](index=180&type=chunk) [Unresolved Staff Comments](index=39&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None[199](index=199&type=chunk) [Properties](index=39&type=section&id=Item%202.%20Properties) The company's primary operating facilities include frac sand mines in Oakdale, Wisconsin, and Utica, Illinois, with significant reserves and processing capacities Oakdale, Wisconsin Facility Characteristics | Facility Characteristic | Description | | :--- | :--- | | **Proven recoverable reserves** | 315 million tons | | **Annual processing capacity** | 5.5 million tons | | **Logistics capabilities** | Dual served by Canadian Pacific and Union Pacific rail lines | Utica, Illinois Facility Characteristics | Facility Characteristic | Description | | :--- | :--- | | **Proven and probable reserves** | 130 million tons | | **Annual processing capacity** | 1.6 million tons | | **Logistics capabilities** | Access to BNSF, CSX, NS rail lines and Illinois River barge terminal | - The company owns an idled mine in New Auburn, WI, a fully permitted site in Hixton, WI with **100 million tons** of proven reserves, and holds leases in the Permian Basin, though it has no immediate plans to develop these sites[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - A 56,000 square foot facility in Saskatoon, Saskatchewan, Canada is leased for the manufacturing of SmartSystems wellsite proppant storage solutions[204](index=204&type=chunk) [Legal Proceedings](index=41&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in litigation with U.S. Well Services, LLC, over alleged breach of contract for nonpayment, with a decision pending - The company filed a lawsuit against U.S. Well Services, LLC for breach of contract related to a long-term take-or-pay agreement, with a decision pending after trial completion in December 2020[535](index=535&type=chunk)[537](index=537&type=chunk) - As of December 31, 2020, accounts and unbilled receivables from U.S. Well Services totaled **$54.6 million**[538](index=538&type=chunk) [Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company's mining operations are subject to stringent health and safety standards enforced by MSHA and OSHA, including regulations on silica exposure - Operations are regulated by the U.S. Mining Safety and Health Administration (MSHA) under the Federal Mine Safety and Health Act of 1977, which imposes stringent health and safety standards[213](index=213&type=chunk)[215](index=215&type=chunk) - The company is also subject to OSHA regulations for workplace exposure to respirable silica, a known health hazard, with MSHA expected to adopt similar rules that could require capital expenditures for exposure reduction[214](index=214&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=42&type=section&id=Item%205.%20Market%20For%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20And%20Issuer%20Purchases%20Of%20Equity%20Securities) The company's common stock trades on NASDAQ under "SND," with 43.4 million shares outstanding, and no dividends are anticipated due to debt restrictions - The company's common stock has been publicly traded on the NASDAQ under the symbol "**SND**" since November 4, 2016[216](index=216&type=chunk) - As of February 24, 2021, there were **43,410,521 shares** of common stock outstanding[217](index=217&type=chunk) - The company has not paid any dividends and does not expect to in the foreseeable future, with its ability to do so restricted by its ABL Credit Facility[218](index=218&type=chunk) [Selected Financial Data](index=44&type=section&id=Item%206.%20Selected%20Financial%20Data) From 2018 to 2020, revenues decreased, but net income increased due to a bargain purchase gain, while Adjusted EBITDA and tons sold declined Selected Financial Data (2018-2020, in thousands) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Revenues** | $122,340 | $233,073 | $212,470 | | **Gross Profit** | $18,119 | $81,052 | $69,367 | | **Net Income** | $37,954 | $31,623 | $20,101 | | **Adjusted EBITDA** | $20,456 | $87,071 | $67,793 | | **Total Assets** | $427,677 | $363,403 | $320,292 | | **Long-term debt, net** | $22,445 | $28,240 | $47,893 | | **Tons Sold** | 1,886 | 2,462 | 2,995 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%207.%20Management's%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) In 2020, revenue fell 48% to $122.3 million due to lower volumes and logistics revenue, while net income rose to $38.0 million primarily from a bargain purchase gain and tax benefit - Key factors impacting 2020 results include the acquisition of Eagle Proppants Holdings (resulting in a **$39.6 million** bargain purchase gain), reduced demand from the COVID-19 pandemic and OPEC actions, and a **$5.1 million** impairment loss on Permian basin assets[231](index=231&type=chunk) Year-over-Year Results of Operations (2020 vs. 2019, in thousands) | Metric | 2020 | 2019 | Change % | | :--- | :--- | :--- | :--- | | **Total Revenue** | $122,340 | $233,073 | (48)% | | **Gross Profit** | $18,119 | $81,052 | (78)% | | **Operating (Loss) Income** | $(13,017) | $43,483 | (130)% | | **Net Income** | $37,954 | $31,623 | 20% | - The decrease in 2020 revenue was driven by lower sand sales volume, a **53% decrease** in shortfall revenue to **$23.3 million**, and a **62% decrease** in logistics revenue to **$28.2 million**[262](index=262&type=chunk)[263](index=263&type=chunk) - The increase in 2020 net income was primarily due to the **$39.6 million** gain on bargain purchase and a **$13.0 million** income tax benefit, which offset the decline in operating income[268](index=268&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk) Non-GAAP Financial Measures (2018-2020, in thousands) | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Adjusted EBITDA** | $20,456 | $87,071 | $67,793 | | **Contribution Margin** | $39,141 | $106,464 | $85,664 | | **Free Cash Flow** | $16,921 | $19,107 | $(45,181) | - As of December 31, 2020, the company had **$11.7 million** in cash, **$9.5 million** available under its ABL Credit Facility, and **$5.0 million** available under its Acquisition Liquidity Support Facility[305](index=305&type=chunk) - Working capital increased to **$74.8 million** at year-end 2020 from **$52.2 million** at year-end 2019, primarily due to cash collections and reduced spending[309](index=309&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%207A.%20Quantitative%20And%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces indirect commodity price risk from oil and gas fluctuations, limited interest rate risk, and significant credit risk due to customer concentration - The company is indirectly exposed to commodity price risk, as fluctuations in oil and natural gas prices impact drilling and completion activity, affecting demand for its products[371](index=371&type=chunk) - Interest rate risk is limited because the majority of debt is at fixed rates, and the variable-rate ABL Credit Facility had a zero balance as of December 31, 2020[372](index=372&type=chunk) - Significant credit risk exists due to customer concentration in the oil and gas industry, with receivables from a single customer involved in pending litigation amounting to **$54.6 million** as of December 31, 2020[373](index=373&type=chunk)[374](index=374&type=chunk) [Financial Statements and Supplementary Data](index=67&type=section&id=Item%208.%20Financial%20Statements%20And%20Supplementary%20Data) The 2020 consolidated financial statements show total assets of $427.7 million, net income of $38.0 million (boosted by a bargain purchase gain), and an unqualified audit opinion from Grant Thornton LLP Consolidated Balance Sheet Highlights (as of Dec 31, in thousands) | Account | 2020 | 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $112,086 | $92,177 | | **Total Assets** | $427,677 | $363,403 | | **Total Current Liabilities** | $37,263 | $40,018 | | **Total Liabilities** | $138,870 | $117,847 | | **Total Stockholders' Equity** | $288,807 | $245,556 | Consolidated Income Statement Highlights (Year Ended Dec 31, in thousands) | Account | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Total Revenue** | $122,340 | $233,073 | $212,470 | | **Gross Profit** | $18,119 | $81,052 | $69,367 | | **Operating (Loss) Income** | $(13,017) | $43,483 | $27,679 | | **Net Income** | $37,954 | $31,623 | $20,101 | - The independent registered public accounting firm, Grant Thornton LLP, issued an opinion that the financial statements present fairly, in all material respects, the financial position and results of operations in conformity with U.S. GAAP[379](index=379&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=100&type=section&id=Item%209.%20Changes%20In%20And%20Disagreements%20With%20Accountants%20On%20Accounting%20And%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on any accounting or financial disclosure matters - None[545](index=545&type=chunk) [Controls and Procedures](index=100&type=section&id=Item%209A.%20Controls%20And%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - Management, including 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[546](index=546&type=chunk) - Based on an assessment using the COSO 2013 framework, management determined that the company maintained effective internal control over financial reporting as of December 31, 2020[549](index=549&type=chunk) [Other Information](index=100&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[552](index=552&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=101&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20And%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2021 Proxy Statement - Information required by this item is incorporated by reference from the registrant's proxy statement for the 2021 Annual Meeting of Stockholders[554](index=554&type=chunk)[556](index=556&type=chunk) [Executive Compensation](index=101&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2021 Proxy Statement - Information required by this item is incorporated by reference from the registrant's proxy statement for the 2021 Annual Meeting of Stockholders[557](index=557&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=101&type=section&id=Item%2012.%20Security%20Ownership%20Of%20Certain%20Beneficial%20Owners%20And%20Management%20And%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management, as well as equity compensation plans, is incorporated by reference from the company's 2021 Proxy Statement - Information required by this item is incorporated by reference from the registrant's proxy statement for the 2021 Annual Meeting of Stockholders[558](index=558&type=chunk)[559](index=559&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=101&type=section&id=Item%2013.%20Certain%20Relationships%20And%20Related%20Transactions,%20And%20Director%20Independence) Information regarding certain relationships, related party transactions, and director independence is incorporated by reference from the company's 2021 Proxy Statement - Information required by this item is incorporated by reference from the registrant's proxy statement for the 2021 Annual Meeting of Stockholders[560](index=560&type=chunk) [Principal Accounting Fees and Services](index=101&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20And%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's 2021 Proxy Statement - Information required by this item is incorporated by reference from the registrant's proxy statement for the 2021 Annual Meeting of Stockholders[561](index=561&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=102&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including key agreements and Sarbanes-Oxley Act certifications - Lists key agreements filed as exhibits, including the Equity Purchase and Sale Agreement with Eagle Materials, Inc., the ABL Credit Agreement, and various Master Product Purchase Agreements with major customers[563](index=563&type=chunk)[564](index=564&type=chunk) - Includes required certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[565](index=565&type=chunk) [Form 10-K Summary](index=104&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports no summary for this item - None[567](index=567&type=chunk)

Smart Sand, Inc. (NASDAQ:SND) Q3 2020 Earnings Conference Call November 10, 2020 10:00 AM ET Corporate Participants Josh Jayne - Finance Manager Chuck Young - Founder and Chief Executive Officer Lee Beckelman - Chief Financial Officer John Young - Chief Operating Officer Conference Call Participants Stephen Gengaro - Stifel Dan Day - B. Riley FBR Samantha Hoh - Evercore ISI Jonathan Catlin - Catlin Capital Management Operator Ladies and gentlemen, thank you for standing by and welcome to the Smart Sand Thir ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________________________________ FORM 10-Q _____________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2020 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 SMART SAND, I ...