Smart Sand(SND) - 2025 Q1 - Quarterly Report

Filing Information This section details the quarterly report filing specifics, including the registrant, filer status, and common stock outstanding - This is a Quarterly Report on Form 10-Q for the period ended March 31, 2025[2] - Registrant: SMART SAND, INC. (Commission file number 001-37936)[2] - Filer Status: Non-accelerated Filer and Smaller reporting company[3] Common Stock Outstanding as of May 6, 2025 | Shares Outstanding | | :----------------- | | 44,083,342 | PART I FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Certain Definitions This section provides key definitions used throughout the quarterly report, including terms for the Company itself, its common stock, and specific financial agreements like the FCB ABL Credit Facility and VFI Equipment Financing, as well as regulatory and accounting acronyms - The Company is defined as Smart Sand, Inc., a Delaware company, and its subsidiaries[9] - FCB ABL Credit Facility refers to a new five-year senior secured asset-based credit facility entered into on September 3, 2024, with First-Citizens Bank & Trust Company[9] - VFI Equipment Financing is a four-year Master Lease Agreement (May 9, 2024) structured as a sale-leaseback of SmartSystems wellsite proppant storage equipment, treated as a financing arrangement for accounting purposes[9] ITEM 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Smart Sand, Inc., including the balance sheets, statements of operations, comprehensive loss, changes in stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, inventory, property, plant and equipment, debt, leases, segment reporting, income taxes, and commitments Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity as of March 31, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--------------------------------- | :------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $5,108 | $1,554 | | Accounts receivable | $27,966 | $40,981 | | Inventory | $28,309 | $25,044 | | Total current assets | $67,231 | $75,525 | | Property, plant and equipment, net | $233,345 | $236,692 | | Total assets | $326,908 | $341,546 | | Liabilities & Equity | | |\ | Accounts payable | $12,441 | $16,988 | | Total current liabilities | $38,399 | $43,210 | | Total liabilities | $106,999 | $97,736 | | Total stockholders' equity | $219,909 | $243,810 | | Total liabilities and stockholders' equity | $326,908 | $341,546 | - Cash and cash equivalents increased significantly from $1,554 thousand at December 31, 2024, to $5,108 thousand at March 31, 2025[11] - Accounts receivable decreased from $40,981 thousand to $27,966 thousand, while inventory increased from $25,044 thousand to $28,309 thousand[11] Condensed Consolidated Statements of Operations This section outlines the company's financial performance, including revenues, costs, gross profit, operating income/loss, and net loss for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (2025 vs 2024) | | :------------------------ | :-------------------------------- | :-------------------------------- | :-------------------- | | Sand revenue | $64,464 | $79,719 | $(15,255) | | SmartSystems revenue | $1,094 | $3,333 | $(2,239) | | Total revenue | $65,558 | $83,052 | $(17,494) | | Total cost of goods sold | $62,786 | $71,241 | $(8,455) | | Gross profit | $2,772 | $11,811 | $(9,039) | | Operating (loss) income | $(7,050) | $784 | $(7,834) | | Net loss | $(24,231) | $(216) | $(24,015) | | Basic net loss per common share | $(0.62) | $(0.01) | $(0.61) | | Diluted net loss per common share | $(0.62) | $(0.01) | $(0.61) | - Total revenue decreased by 21% from $83.1 million in Q1 2024 to $65.6 million in Q1 2025, primarily due to a 19% decline in Sand revenue and a 67% decline in SmartSystems revenue[14] - The company reported a significant net loss of $24.2 million in Q1 2025, compared to a net loss of $0.2 million in Q1 2024, largely driven by a substantial increase in income tax expense[14] Condensed Consolidated Statements of Comprehensive Loss This section details the company's comprehensive loss, including net loss and other comprehensive income/loss items for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss | $(24,231) | $(216) | | Foreign currency translation adjustment | $4 | $(26) | | Comprehensive loss | $(24,227) | $(242) | - Comprehensive loss significantly increased to $24.2 million in Q1 2025 from $0.2 million in Q1 2024, mirroring the increase in net loss[16] Condensed Consolidated Statements of Changes in Stockholders' Equity This section presents the changes in the company's stockholders' equity, reflecting net loss, stock-based compensation, and treasury stock transactions for the three months ended March 31, 2025 and 2024 Changes in Stockholders' Equity (in thousands, except share amounts) | Metric | Balance at Dec 31, 2024 | Net Loss | Stock-based Compensation | Treasury Stock Purchases | Balance at Mar 31, 2025 | | :--------------------------------- | :---------------------- | :--------- | :----------------------- | :----------------------- | :---------------------- | | Common Stock (Par Value) | $39 | — | — | — | $40 | | Treasury Stock (Amount) | $(14,671) | — | — | $(641) | $(15,312) | | Additional Paid-in Capital | $185,263 | — | $934 | — | $186,229 | | Retained Earnings | $73,239 | $(24,231) | — | — | $49,008 | | Accumulated Other Comprehensive Loss | $(60) | — | — | — | $(56) | | Total Stockholders' Equity | $243,810 | $(24,231) | $934 | $(641) | $219,909 | - Total stockholders' equity decreased from $243.8 million at December 31, 2024, to $219.9 million at March 31, 2025, primarily due to the net loss of $24.2 million and treasury stock repurchases[19] - The company repurchased 135,196 shares of treasury stock for $305 thousand and 151,386 shares for $336 thousand related to restricted stock buy back during Q1 2025[19] Condensed Consolidated Statements of Cash Flows This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $8,724 | $(3,863) | | Net cash used in investing activities | $(3,535) | $(1,645) | | Net cash (used in) provided by financing activities | $(1,635) | $4,034 | | Net increase (decrease) in cash and cash equivalents | $3,554 | $(1,474) | | Cash and cash equivalents at end of period | $5,108 | $4,598 | - Net cash provided by operating activities significantly improved to $8.7 million in Q1 2025 from a use of $3.9 million in Q1 2024, despite a higher net loss[26] - Cash and cash equivalents increased by $3.6 million in Q1 2025, ending the period at $5.1 million, compared to a decrease of $1.5 million in Q1 2024[26] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, inventory, property, debt, leases, and other financial commitments NOTE 1 — Organization and Nature of Business This note describes Smart Sand, Inc.'s operations as a fully integrated frac and industrial sand supply and services company, including its mining facilities and logistics solutions - Smart Sand, Inc. operates as a fully integrated frac and industrial sand supply and services company, offering mine-to-wellsite proppant solutions and industrial sand for various uses[29] - The company operates multiple sand mines and processing facilities in Wisconsin (Oakdale, Blair) and Illinois (Ottawa), with a total annual processing capacity of approximately 10.0 million tons[30][31][32] - Smart Sand provides transload and logistics solutions through company-controlled terminals in North Dakota, Oklahoma, Pennsylvania, and Ohio, and offers SmartSystems for wellsite proppant storage[33][34][35] NOTE 2 — Summary of Significant Accounting Policies This note outlines the key accounting policies and estimates used in preparing the interim financial statements, addressing areas like asset impairment, revenue recognition, and the impact of market conditions - The interim financial statements are prepared in accordance with SEC rules for Form 10-Q and GAAP, relying on management estimates for items like asset impairment, asset retirement obligations, and deferred tax assets[40][41] - Ongoing global conflicts, trade policies, and OPEC output changes may affect oil and natural gas prices, creating volatility in the oilfield service sector. Sales to Canada and Mexico are subject to 25% tariffs, impacting approximately 10% of Q1 2025 sand volumes[42] - The company had $118,787 thousand in unsatisfied performance obligations as of March 31, 2025, with $108,131 thousand expected to be recognized in the remainder of 2025 and $10,656 thousand in 2026[44] NOTE 3 — Inventory This note provides a detailed breakdown of the company's inventory components, including raw material, work in progress, finished goods, and spare parts Inventory Breakdown (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :--------------- | :------------- | :---------------- | | Raw material | $805 | $584 | | Work in progress | $4,182 | $6,740 | | Finished goods | $11,367 | $6,507 | | Spare parts | $11,955 | $11,213 | | Total inventory | $28,309 | $25,044 | - Total inventory increased from $25.0 million at December 31, 2024, to $28.3 million at March 31, 2025, driven primarily by increases in finished goods and spare parts[49] NOTE 4 — Property, Plant and Equipment, net This note details the company's property, plant, and equipment, net of accumulated depreciation, across categories like machinery, plant, land, and construction in progress Net Property, Plant and Equipment (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :------------------------------- | :------------- | :---------------- |\ | Machinery, equipment and tooling | $44,188 | $43,041 | | Plant and building | $219,398 | $218,546 | | Land and land improvements | $40,627 | $40,627 | | Construction in progress | $4,385 | $3,216 | | Total property, plant and equipment, net | $233,345 | $236,692 | - Net property, plant and equipment decreased slightly from $236.7 million at December 31, 2024, to $233.3 million at March 31, 2025[52] - Depreciation expense was $6,998 thousand for the three months ended March 31, 2025, consistent with $6,981 thousand in the prior year period[52] NOTE 5 — Accrued and Other Expenses This note presents a breakdown of accrued liabilities and other expenses, including employee-related costs, royalties, and freight charges Accrued and Other Expenses (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :--------------------------------- | :------------- | :---------------- | | Employee related expenses | $2,099 | $1,630 | | Accrued royalties | $2,934 | $3,224 | | Accrued freight and delivery charges | $3,205 | $2,331 | | Total accrued liabilities | $13,618 | $12,561 | - Total accrued liabilities increased from $12.6 million at December 31, 2024, to $13.6 million at March 31, 2025, primarily due to increases in employee-related expenses and accrued freight and delivery charges[53] NOTE 6 — Debt This note details the company's debt obligations, including current and long-term portions, and provides information on its credit facilities and equipment financing arrangements Debt Breakdown (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :------------------------------ | :------------- | :---------------- | | Current portion of long-term debt | $3,519 | $3,554 | | Long-term debt | $8,488 | $9,130 | | Total Debt | $12,007 | $12,684 | - The company has a $30.0 million FCB ABL Credit Facility with no outstanding borrowings as of March 31, 2025, and $30.0 million available to be drawn[60][62] - The VFI Equipment Financing, with a principal of $10.0 million, had an outstanding balance of $7.8 million as of March 31, 2025, bearing a fixed interest rate of 8.56% and maturing in May 2028[63][149] NOTE 7 — Leases This note provides information on the company's lease arrangements, including right-of-use assets, lease liabilities, lease costs, and cash flows related to operating and financing leases Lease Liabilities and Right-of-Use Assets (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :---------------------------- | :------------- | :---------------- | | Operating right-of-use assets | $20,402 | $23,153 | | Financing right-of-use assets | $582 | $582 | | Total right-of-use assets | $20,984 | $23,735 | | Operating lease liabilities | $20,593 | $24,539 | | Financing lease liabilities | $490 | $545 | | Total lease liabilities | $21,083 | $25,084 | Lease Costs and Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Total lease cost | $3,232 | $3,471 | | Operating cash flows used for operating leases | $4,457 | $3,553 | - Weighted average remaining lease term for operating leases is 2.8 years with a weighted average discount rate of 7.31% as of March 31, 2025[69] NOTE 8 — Asset Retirement Obligations This note details the company's asset retirement obligations, primarily related to post-closure reclamation and site restoration costs for its mining operations Asset Retirement Obligations (in thousands) | Metric | Amount | | :--------------------------- | :------ | | Balance at December 31, 2024 | $21,292 |\ | Accretion expense | $293 | | Balance at March 31, 2025 | $21,585 | - The post-closure reclamation and site restoration obligation increased to $21.6 million as of March 31, 2025, from $21.3 million at December 31, 2024, due to accretion expense[70][71] NOTE 9 — Segment Reporting This note presents financial information for the company's two reportable segments: Sand (frac sand and industrial production solutions) and SmartSystems (wellsite proppant storage equipment and services) - The Company operates in two reportable segments: Sand (frac sand and Industrial Production Solutions) and SmartSystems (rental of wellsite proppant storage equipment and services)[76][77] Segment Revenue and Gross Profit (Three Months Ended March 31, 2025, in thousands) | Segment | Revenue | Gross Profit | | :----------- | :------ | :----------- | | Sand | $64,464 | $2,791 | | SmartSystems | $1,094 | $(19) | | Total | $65,558 | $2,772 | Segment Revenue and Gross Profit (Three Months Ended March 31, 2024, in thousands) | Segment | Revenue | Gross Profit | | :----------- | :------ | :----------- | | Sand | $79,719 | $10,752 | | SmartSystems | $3,333 | $1,059 | | Total | $83,052 | $11,811 | NOTE 10 — Income Taxes This note explains the company's income tax position, including its effective tax rate, deferred tax assets and liabilities, and the impact of valuation allowances - The effective tax rate for Q1 2025 was approximately (233.6)% compared to 155.2% for Q1 2024, with the statutory rate at 21.0%. The depletion deduction calculation is a significant driver of the effective tax rate[84][123] - The Company recorded a partial valuation allowance against gross deferred tax assets due to uncertainty in realizing tax benefits from certain deductions, included in long-term deferred tax liabilities[86][124] NOTE 11 — Concentrations This note discloses significant concentrations of credit risk with customers and vendors, as well as geographic risks related to the company's mining operations and product sales - As of March 31, 2025, five customers accounted for 73% of total accounts and unbilled receivables, and four customers accounted for 74% of total revenues for the three months ended March 31, 2025[88] - Two vendors accounted for 35% of accounts payable as of March 31, 2025, and 40% of cost of goods sold for the three months ended March 31, 2025[91] - The company faces geographic risk due to its primary product being Northern White sand and mining operations limited to Wisconsin and Illinois, serving oil and natural gas basins[92] NOTE 12 — Commitments and Contingencies This note outlines the company's commitments and contingencies, including legal proceedings, performance bonds, and other contractual obligations - The company is subject to various legal proceedings in the normal course of business, including a class action lawsuit (Cory Berg, et al. v. Hi-Crush Blair LLC) which was settled in February 2025[93][94] - Total aggregate principal amount of performance bonds outstanding was $19,727 thousand as of March 31, 2025[95] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, liquidity, and cash flows, including an overview of its business, market trends, detailed analysis of GAAP and non-GAAP financial results, and a discussion of liquidity and capital resources Overview This section provides an overview of Smart Sand's business model, operational capacity, and market trends influencing the frac and industrial sand industry - Smart Sand is a fully integrated frac and industrial sand supply and services company, producing Northern White sand for hydraulic fracturing and industrial applications, and offering SmartSystems wellsite logistics[99][105] - The company's total annual processing capacity from its operating facilities (Oakdale, Ottawa, Blair) is approximately 10.0 million tons, supported by five company-controlled in-basin transloading facilities[102][103] - Market trends indicate a slowdown in sand volumes in Q1 2025 due to cyclical and seasonal factors, but long-term demand for frac sand is expected to moderately increase due to longer lateral wells and increased sand per linear foot[107] GAAP Results of Operations This section analyzes the company's financial performance based on Generally Accepted Accounting Principles (GAAP), detailing revenue, cost of goods sold, gross profit, operating income/loss, and net loss Key GAAP Financial Results (Three Months Ended March 31, in thousands) | Metric | 2025 | 2024 | Change (Dollars) | Change (Percentage) | | :------------------------ | :--------- | :--------- | :--------------- | :------------------ | | Total revenue | $65,558 | $83,052 | $(17,494) | (21)% | | Gross profit | $2,772 | $11,811 | $(9,039) | (77)% | | Operating (loss) income | $(7,050) | $784 | $(7,834) | (999)% | | Income tax expense | $16,968 | $607 | $16,361 | 2,695% | | Net loss | $(24,231) | $(216) | $(24,015) | 11,118% | - Sand revenue decreased by 19% to $64.5 million, and SmartSystems revenue declined by 67% to $1.1 million, primarily due to lower volumes and reduced SmartSystems fleet utilization[116][118] - Cost of goods sold decreased by 12% to $62.8 million, but per-ton logistics and production costs increased due to a shift in delivery locations and lost efficiencies from lower production volumes[119] Non-GAAP Financial Measures This section presents and reconciles non-GAAP financial measures such as Contribution Margin, EBITDA, Adjusted EBITDA, and Free Cash Flow, used by management to evaluate performance - The company uses non-GAAP measures like Contribution Margin, EBITDA, Adjusted EBITDA, and Free Cash Flow to assess financial performance, as GAAP income tax expense can distort results[128][127] Contribution Margin (Three Months Ended March 31, in thousands, except per ton) | Metric | 2025 | 2024 | | :---------------------------------------------- | :------ | :------ | | Revenue | $65,558 | $83,052 | | Cost of goods sold | $62,786 | $71,241 | | Gross profit | $2,772 | $11,811 | | Depreciation, depletion, and accretion of asset retirement obligations | $6,805 | $6,697 | | Contribution margin | $9,577 | $18,508 | | Contribution margin per ton | $8.96 | $13.85 | | Total tons sold | 1,069 | 1,336 | Adjusted EBITDA (Three Months Ended March 31, in thousands) | Metric | 2025 | 2024 | | :-------------------------------------- | :--------- | :------ | | Net loss | $(24,231) | $(216) | | Depreciation, depletion and amortization | $7,205 | $7,200 | | Income tax expense and other taxes | $16,968 | $607 | | Interest expense | $372 | $496 | | EBITDA | $314 | $8,087 | | Adjusted EBITDA | $1,426 | $9,335 | Liquidity and Capital Resources This section discusses the company's financial liquidity, cash position, available credit facilities, share repurchase program, and planned capital expenditures - As of March 31, 2025, the company had $5.1 million in cash and $30.0 million in undrawn availability under its FCB ABL Credit Facility, believing it has sufficient liquidity for the next twelve months[143][144] - The Board approved an eighteen-month share repurchase program for up to $10.0 million on October 3, 2024; $0.3 million was repurchased in Q1 2025, leaving $9.7 million remaining[146][147] - Expected full-year 2025 capital expenditures are between $13.0 million and $17.0 million, primarily for new mining areas, efficiency projects, and terminal expansions, to be funded by cash from operations, equipment financing, or the FCB ABL Credit Facility[148] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk The company reported no material changes to its exposure to market risks during the three months ended March 31, 2025, compared to those described in its Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes in market risk exposure were identified for the three months ended March 31, 2025[163] ITEM 4. Controls and Procedures Management, with the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2025, concluding they were effective. There were no material changes in internal control over financial reporting during the first quarter of fiscal year 2025 - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2025[164] - No material changes occurred in internal control over financial reporting during the first quarter of fiscal year 2025[165] PART II OTHER INFORMATION This part includes additional information such as legal proceedings, risk factors, equity sales, defaults, mine safety disclosures, and a list of exhibits ITEM 1. Legal Proceedings The company is involved in routine litigation arising from its operations, with outcomes generally not expected to materially affect financial statements. Specific details on legal proceedings are incorporated by reference from Note 12 of the financial statements - Information on legal proceedings is incorporated by reference from Part I, Item 1. Note 12 - Commitments and Contingencies - Litigation of the notes to the condensed consolidated financial statements[166] ITEM 1A. Risk Factors There have been no material changes to the risk factors previously described in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported compared to the Annual Report on Form 10-K for the year ended December 31, 2024[167] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the three months ended March 31, 2025. The company repurchased 135,196 shares of common stock for $0.3 million under its $10.0 million share repurchase program approved in October 2024, with $9.7 million remaining available - No shares were sold by the Company without registration under the Securities Act of 1933 during the three months ended March 31, 2025[168] Share Repurchase Program Activity (Q1 2025) | Month | Total Shares Purchased | Average Price Paid per Share | Remaining Value for Repurchase | | :----------- | :--------------------- | :--------------------------- | :----------------------------- | | January 2025 | — | $— | $9,694,780 | | February 2025| — | $— | $9,694,780 | | March 2025 | 135,196 | $2.22 | $9,694,780 | | Total | 135,196 | $2.22 | | - As of March 31, 2025, the maximum number of shares that could be repurchased under the current repurchase authority was 4,143,068 shares[170] ITEM 3. Defaults upon Senior Securities The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[171] ITEM 4. Mine Safety Disclosures The company prioritizes mine safety and is subject to MSHA regulations, which include unannounced inspections and standards for health and safety, particularly regarding respirable silica exposure. Compliance is critical, and failure to adhere to standards or changes in enforcement could materially affect the business - Smart Sand's mining operations are regulated by the U.S. Mining Safety and Health Administration (MSHA), which conducts at least two unannounced inspections annually per above-ground facility[173] - The company monitors airborne respirable silica closely, a known health hazard, and is subject to MSHA rules on permissible exposure limits and medical surveillance[174] - Information concerning mine safety violations is included in Exhibit 95.1 to this Report, as required by the Dodd-Frank Act[175] ITEM 5. Other Information No other information was reported in this section - No other information was disclosed in this section[176] ITEM 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, certifications under the Sarbanes-Oxley Act, mine safety disclosures, and XBRL interactive data files - Exhibits include certifications pursuant to Rule 13a-14(a) and 18 U.S.C. 1350 (Sections 302 and 906 of Sarbanes-Oxley Act)[178] - Mine Safety Disclosure Exhibit 95.1 is filed herewith[178] - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, Presentation Linkbase, and Cover Page Interactive Data File are included[178] SIGNATURES This section contains the official signatures of the company's Chief Financial Officer and Vice President of Accounting, certifying the accuracy of the report - The report was signed on May 13, 2025, by Lee E. Beckelman, Chief Financial Officer, and Christopher M. Green, Vice President of Accounting[183]