Smart Sand(SND) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This part presents the company's comprehensive financial data and management's analysis of its performance and condition ITEM 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, inventory, property, debt, leases, segment reporting, income taxes, and commitments Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position at specific reporting dates Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change (k) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Cash and cash equivalents | $4,293 | $1,554 | $2,739 | 176.26% | | Total current assets | $83,120 | $75,525 | $7,595 | 10.06% | | Total assets | $345,849 | $341,546 | $4,303 | 1.26% | | Total current liabilities | $44,783 | $43,210 | $1,573 | 3.64% | | Long-term debt | $17,594 | $9,130 | $8,464 | 92.71% | | Total liabilities | $105,349 | $97,736 | $7,613 | 7.79% | | Total stockholders' equity | $240,500 | $243,810 | $(3,310) | -1.36% | Condensed Consolidated Statements of Operations This section details the company's revenues, expenses, and net income or loss over specific periods Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (k) | Change (%) | | :---------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Total revenue | $85,770 | $73,800 | $11,970 | 16.22% | | Gross profit | $8,957 | $13,073 | $(4,116) | -31.48% | | Operating (loss) income | $(77) | $3,528 | $(3,605) | -102.18% | | Net income (loss) | $21,396 | $(430) | $21,826 | 5075.81% | | Basic EPS | $0.55 | $(0.01) | $0.56 | -5600.00% | | Diluted EPS | $0.54 | $(0.01) | $0.55 | -5500.00% | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (k) | Change (%) | | :---------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total revenue | $151,328 | $156,852 | $(5,524) | -3.52% | | Gross profit | $11,729 | $24,884 | $(13,155) | -52.87% | | Operating (loss) income | $(7,127) | $4,312 | $(11,439) | -265.28% | | Net income (loss) | $(2,835) | $(646) | $(2,189) | 338.85% | | Basic EPS | $(0.07) | $(0.02) | $(0.05) | 250.00% | | Diluted EPS | $(0.07) | $(0.02) | $(0.05) | 250.00% | Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents the company's net income or loss and other comprehensive income or loss components Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (k) | Change (%) | | :------------------------ | :------------------------------- | :------------------------------- | :--------- | :--------- | | Net income (loss) | $21,396 | $(430) | $21,826 | 5075.81% | | Comprehensive income (loss) | $21,396 | $(457) | $21,853 | 4781.84% | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (k) | Change (%) | | :------------------------ | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net income (loss) | $(2,835) | $(646) | $(2,189) | 338.85% | | Comprehensive income (loss) | $(2,831) | $(699) | $(2,132) | 304.99% | Condensed Consolidated Statements of Changes in Stockholders' Equity This section outlines the changes in the company's equity accounts over the reporting period Changes in Stockholders' Equity (Six Months Ended June 30, 2025) (in thousands) | Item | Balance at Dec 31, 2024 | Net Loss/Income | Treasury Stock Purchases | Other Changes | Balance at Jun 30, 2025 | | :--------------------------------- | :---------------------- | :-------------- | :----------------------- | :------------ | :---------------------- | | Common Stock (Par Value) | $39 | — | — | $0 | $39 | | Treasury Stock (Amount) | $(14,671) | — | $(2,067) | $336 | $(17,109) | | Additional Paid-in Capital | $185,263 | — | — | $1,953 | $187,222 | | Retained Earnings | $73,239 | $(2,835) | — | — | $70,404 | | Accumulated Other Comprehensive Loss | $(60) | — | — | $4 | $(56) | | Total Stockholders' Equity | $243,810 | $(2,835) | $(2,067) | $2,000 | $240,500 | Condensed Consolidated Statements of Cash Flows This section reports on the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) (in thousands) | Cash Flow Activity | 2025 | 2024 | Change (k) | Change (%) | | :-------------------------------- | :-------- | :-------- | :--------- | :--------- | | Net cash provided by operating activities | $3,587 | $11,019 | $(7,432) | -67.45% | | Net cash used in investing activities | $(5,472) | $(2,998) | $(2,474) | 82.52% | | Net cash provided by (used in) financing activities | $4,624 | $(7,836) | $12,460 | -159.01% | | Net increase in cash and cash equivalents | $2,739 | $185 | $2,554 | 1380.54% | | Cash and cash equivalents at end of period | $4,293 | $6,257 | $(1,964) | -31.39% | Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements NOTE 1 — Organization and Nature of Business This note describes the company's operations as a fully integrated frac and industrial sand supply and services provider - Smart Sand, Inc. operates as a fully integrated frac and industrial sand supply and services company, offering mine-to-wellsite proppant solutions and diversifying into industrial uses (IPS) since late 2021[31] - The company's mining facilities include Oakdale, Wisconsin (5.5M tons annual capacity), Ottawa, Illinois (1.6M tons), and Blair, Wisconsin (2.9M tons), with strategic rail access[32][33][34] - Logistics solutions include transload terminals in North Dakota, Oklahoma, and the Appalachian Basin (Pennsylvania, Ohio), alongside SmartSystems for portable wellsite proppant storage[35][36][37][38] NOTE 2 — Summary of Significant Accounting Policies This note outlines the key accounting principles and estimates used in preparing the financial statements - The interim financial statements are unaudited and prepared in accordance with SEC rules for Form 10-Q, not including all GAAP information, and rely on significant management estimates for various financial items[42][43] - Geopolitical conflicts, changing trade policies, and OPEC output changes may affect oil and natural gas prices, creating volatility in the oilfield service sector, though current sales to Canada and Mexico are tariff-exempt (8% of Q2 2025 sand volumes)[44][45] - The company has $65,683k in unsatisfied performance obligations as of June 30, 2025, with $55,027k expected to be recognized in the remainder of 2025 and $10,656k in 2026[47] - Recent accounting pronouncements (ASU 2023-09 and ASU 2024-03) are being evaluated, with expected primary effects on note disclosures and disaggregation of cost of goods sold and SG&A[50][51] NOTE 3 — Inventory This note details the composition and valuation of the company's inventory Inventory Composition (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change (k) | Change (%) | | :-------------- | :------------ | :---------------- | :--------- | :--------- | | Raw material | $387 | $584 | $(197) | -33.73% | | Work in progress| $5,894 | $6,740 | $(846) | -12.55% | | Finished goods | $9,928 | $6,507 | $3,421 | 52.57% | | Spare parts | $12,451 | $11,213 | $1,238 | 11.04% | | Total inventory | $28,660 | $25,044 | $3,616 | 14.44% | NOTE 4 — Property, Plant and Equipment, net This note provides information on the company's property, plant, and equipment, including depreciation Property, Plant and Equipment, net (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change (k) | Change (%) | | :------------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total property, plant and equipment | $429,075 | $421,358 | $7,717 | 1.83% | | Less: accumulated depreciation and depletion | $198,348 | $184,666 | $13,682 | 7.41% | | Total property, plant and equipment, net | $230,727 | $236,692 | $(5,965) | -2.52% | - Depreciation expense for the three months ended June 30, 2025, was $7,026k, a slight increase from $6,997k in the prior year. For the six months, it was $14,024k in 2025, up from $13,978k in 2024[55] NOTE 5 — Accrued and Other Expenses This note details the various accrued liabilities and other expenses of the company Accrued and Other Expenses (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change (k) | Change (%) | | :------------------------------ | :------------ | :---------------- | :--------- | :--------- | | Employee related expenses | $1,545 | $1,630 | $(85) | -5.21% | | Accrued royalties | $2,831 | $3,224 | $(393) | -12.19% | | Accrued freight and delivery charges | $3,482 | $2,331 | $1,151 | 49.38% | | Sales tax liability | $517 | $158 | $359 | 227.22% | | Other accrued liabilities | $1,962 | $1,267 | $695 | 54.85% | | Total accrued liabilities | $13,976 | $12,561 | $1,415 | 11.26% | NOTE 6 — Debt This note provides details on the company's debt obligations, including credit facilities and maturity schedules Debt Overview (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change (k) | Change (%) | | :---------------------------- | :------------ | :---------------- | :--------- | :--------- | | Current portion of long-term debt | $4,041 | $3,554 | $487 | 13.70% | | Long-term debt | $17,594 | $9,130 | $8,464 | 92.71% | | Total Debt | $21,635 | $12,684 | $8,951 | 70.57% | - The FCB ABL Credit Facility provides up to $30,000k in revolving loans, with $9,000k outstanding and $21,000k available as of June 30, 2025. It matures in September 2029 and bears interest at SOFR plus 2.75%[63][65] - The VFI Equipment Financing, with a principal of $10,000k and a fixed interest rate of 8.56%, matures on May 8, 2028, and is collateralized by SmartSystems equipment[66] Debt Maturity Schedule (in thousands) | Year | FCB ABL Credit Facility | VFI Equipment Financing | Notes Payable | Finance Leases | Total Minimum Payments | | :---------------- | :---------------------- | :---------------------- | :------------ | :------------- | :--------------------- | | Remainder of 2025 | $— | $1,470 | $818 | $136 | $2,424 | | 2026 | $— | $2,940 | $1,603 | $262 | $4,805 | | 2027 | $— | $2,940 | $1,344 | $65 | $4,349 | | 2028 | $— | $1,225 | $1,002 | $7 | $2,234 | | 2029 | $9,000 | $— | $590 | $— | $9,590 | | 2030 and thereafter | $— | $— | $105 | $— | $105 | | Total | $9,000 | $8,575 | $5,462 | $470 | $23,507 | NOTE 7 — Leases This note outlines the company's lease arrangements, including right-of-use assets and lease liabilities Lease Liabilities and Assets (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change (k) | Change (%) | | :------------------------ | :------------ | :---------------- | :--------- | :--------- | | Total right-of-use assets | $26,925 | $23,735 | $3,190 | 13.44% | | Total lease liabilities | $27,791 | $25,084 | $2,707 | 10.80% | Lease Cost (Six Months Ended June 30) (in thousands) | Lease Cost Category | 2025 | 2024 | Change (k) | Change (%) | | :------------------ | :------ | :------ | :--------- | :--------- | | Finance lease cost | $139 | $149 | $(10) | -6.71% | | Operating lease cost| $6,439 | $6,780 | $(341) | -5.03% | | Short-term lease cost | $— | $18 | $(18) | -100.00% | | Total lease cost| $6,578| $6,947| $(369) | -5.31% | - The weighted average remaining lease term for operating leases is 2.9 years (2025) and 2.8 years (2024), with weighted average discount rates of 7.55% (2025) and 6.99% (2024)[72] Maturities of Lease Liabilities (as of June 30, 2025) (in thousands) | Year | Operating Leases | Finance Leases | Total Cash Lease Payments | | :---------------- | :--------------- | :------------- | :------------------------ | | Remainder of 2025 | $6,757 | $136 | $6,893 | | 2026 | $10,624 | $262 | $10,886 | | 2027 | $6,791 | $65 | $6,856 | | 2028 | $4,193 | $7 | $4,200 | | 2029 | $1,988 | $— | $1,988 | | Thereafter | $160 | $— | $160 | | Total | $30,513 | $470 | $30,983 | NOTE 8 — Asset Retirement Obligations This note details the company's obligations related to the retirement of long-lived assets Reconciliation of Asset Retirement Obligations (in thousands) | Item | Amount | | :------------------------- | :----- | | Balance at December 31, 2024 | $21,292 | | Accretion expense | $562 | | Balance at June 30, 2025 | $21,854 | NOTE 9 — Segment Reporting This note provides financial information for the company's operating segments: Sand and SmartSystems - The Company operates in two reportable segments: Sand (frac sand and Industrial Production Solutions) and SmartSystems (rental of wellsite proppant storage equipment and services)[75][79][80] Segment Revenue and Gross Profit (Three Months Ended June 30) (in thousands) | Segment | 2025 Revenue | 2025 Gross Profit | 2024 Revenue | 2024 Gross Profit | | :----------- | :----------- | :---------------- | :----------- | :---------------- | | Sand | $84,590 | $8,917 | $71,020 | $12,117 | | SmartSystems | $1,180 | $40 | $2,780 | $956 | | Total | $85,770 | $8,957 | $73,800 | $13,073 | Segment Revenue and Gross Profit (Six Months Ended June 30) (in thousands) | Segment | 2025 Revenue | 2025 Gross Profit | 2024 Revenue | 2024 Gross Profit | | :----------- | :----------- | :---------------- | :----------- | :---------------- | | Sand | $149,054 | $11,723 | $150,739 | $22,869 | | SmartSystems | $2,274 | $6 | $6,113 | $2,015 | | Total | $151,328 | $11,729 | $156,852 | $24,884 | NOTE 10 — Income Taxes This note explains the company's income tax provisions, including effective tax rates and deferred tax assets Effective Tax Rates | Period | 2025 Effective Tax Rate | 2024 Effective Tax Rate | | :-------------------------- | :---------------------- | :---------------------- | | Three Months Ended June 30 | 6643.1% | 122.6% | | Six Months Ended June 30 | 62.6% | 128.2% | - The statutory tax rate for both periods was 21.0%. The high effective tax rates are primarily driven by the depletion deduction calculation, which is not directly related to net income[94] - The Company does not expect to be a federal income tax payer in 2025 and anticipates an immaterial amount of state income taxes[94] - A liability for uncertain tax positions of $2,240k and a partial valuation allowance of $2,156k against deferred tax assets were recorded as of December 31, 2024, with no material change for the six months ended June 30, 2025[95][96] - The recently signed One Big Beautiful Bill Act (OBBBA) is being evaluated, but the Company does not expect a material impact on its results of operations[98] NOTE 11 — Concentrations This note discloses significant concentrations in customers, vendors, and geographic risks - As of June 30, 2025, three customers accounted for 50% of total accounts and unbilled receivables, compared to four customers for 84% as of December 31, 2024[99] - Customer revenue concentration for the three months ended June 30, 2025, was 39% from two customers (down from 72% from five customers in 2024). For the six months, it was 54% from three customers (up from 45% from two customers in 2024)[100] - Vendor concentration for accounts payable was 23% from two vendors as of June 30, 2025 (vs 17% from one vendor as of December 31, 2024). For cost of goods sold, two vendors accounted for 34% (Q2 2025) and 36% (YTD Q2 2025)[101][102] - The Company faces geographic risk due to its primary product (Northern White sand) and mining operations being limited to Wisconsin and Illinois[103] NOTE 12 — Commitments and Contingencies This note details the company's legal commitments, contingent liabilities, and performance bonds - A nuisance lawsuit (Cory Berg, et al. v. Hi-Crush Blair LLC, et al.) alleging excessive noise, light, and dust was settled and closed in February 2025[107] - Total aggregate principal amount of performance bonds outstanding was $19,727k as of June 30, 2025, for reclamation, permitting, and maintenance of public roadways[108] NOTE 13 — Subsequent Events This note reports on significant events that occurred after the balance sheet date - On July 23, 2025, the Board of Directors declared a special dividend of $0.10 per share of common stock, totaling approximately $4,354k, payable on August 14, 2025[109] 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 condition, operating results, liquidity, and cash flows, including an overview of the business, market trends, GAAP and non-GAAP financial performance analysis, and discussions on capital resources and material cash requirements Overview This section provides a general description of the company's business model and operational capabilities - Smart Sand, Inc. is a fully integrated frac and industrial sand supply and services company, offering mine-to-wellsite proppant solutions and diversifying into Industrial Products Solutions (IPS)[114][120] - The company produces high-quality Northern White sand and provides SmartSystems for wellsite proppant storage, leveraging strategic locations, rail access, and proprietary technology[114][116][119] - Total annual processing capacity across its operating facilities (Oakdale, Ottawa, Blair) is approximately 10.0 million tons, supported by five company-controlled in-basin transloading facilities[117][118] Market Trends This section discusses external factors and industry trends influencing the company's business and financial performance - Geopolitical conflicts, trade policy changes, and OPEC output adjustments may affect oil and natural gas prices, leading to volatility in the oilfield service sector[121] - Sand volumes increased in 2024, slowed in Q1 2025, and then increased in Q2 2025 due to higher customer activity. Frac sand demand is expected to moderately increase, driven by longer lateral wells and higher sand volumes per foot[122] - Demand in the IPS business is stable, influenced by macroeconomic factors, and is expected to diversify sales and mitigate price volatility from the oil and gas industry[124] - President Trump's executive orders signal a shift towards expediting conventional energy projects and deregulatory actions, though the impact on the company's financial position is currently unquantifiable[125] GAAP Results of Operations This section analyzes the company's financial performance based on Generally Accepted Accounting Principles Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 This subsection compares the company's financial results for the three-month periods ended June 30, 2025 and 2024 Key Financial Changes (Three Months Ended June 30) (in thousands) | Metric | 2025 | 2024 | Change (k) | Change (%) | | :---------------------- | :-------- | :-------- | :--------- | :--------- | | Total revenue | $85,770 | $73,800 | $11,970 | 16% | | Sand revenue | $84,590 | $71,020 | $13,570 | 19% | | SmartSystems revenue | $1,180 | $2,780 | $(1,600) | -58% | | Total cost of goods sold| $76,813 | $60,727 | $16,086 | 26% | | Gross profit | $8,957 | $13,073 | $(4,116) | -31% | | Operating (loss) income | $(77) | $3,528 | $(3,605) | -102% | | Net income (loss) | $21,396 | $(430) | $21,826 | 5076% | - Sand revenue increased due to higher volumes (1,424k tons vs 1,274k tons) and higher average sand prices, primarily driven by changes in delivery location mix[130] - SmartSystems revenue decreased due to lower utilization of the SmartSystems fleet[132] - Gross profit declined primarily due to higher freight and transloading costs related to delivery location, and increased mining costs[133][134] - Net income significantly improved due to an income tax benefit of $(21,723)k in 2025, compared to an expense of $2,330k in 2024, largely influenced by the depletion deduction calculation[137][139] Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 This subsection compares the company's financial results for the six-month periods ended June 30, 2025 and 2024 Key Financial Changes (Six Months Ended June 30) (in thousands) | Metric | 2025 | 2024 | Change (k) | Change (%) | | :---------------------- | :-------- | :-------- | :--------- | :--------- | | Total revenue | $151,328 | $156,852 | $(5,524) | -4% | | Sand revenue | $149,054 | $150,739 | $(1,685) | -1% | | SmartSystems revenue | $2,274 | $6,113 | $(3,839) | -63% | | Total cost of goods sold| $139,599 | $131,968 | $7,631 | 6% | | Gross profit | $11,729 | $24,884 | $(13,155) | -53% | | Operating (loss) income | $(7,127) | $4,312 | $(11,439) | -265% | | Net income (loss) | $(2,835) | $(646) | $(2,189) | 339% | - Total revenue declined due to lower sand volumes (2,493k tons vs 2,610k tons) and significantly lower SmartSystems utilization[144] - Cost of goods sold increased despite lower sales volumes, driven by higher logistics and production costs due to delivery location shifts, lost efficiencies from lower production, and increased mining costs[145] - Gross profit decreased substantially due to lower sales volumes, higher freight/delivery costs, and increased production costs[146] - Net loss increased, primarily due to non-cash deferred income taxes and lower gross profit, partially offset by reduced selling, general, and administrative expenses[151] Non-GAAP Financial Measures This section presents financial metrics not prepared in accordance with GAAP, providing additional insights into performance Contribution Margin This subsection defines and analyzes the company's contribution margin, a key non-GAAP profitability metric - Contribution margin is defined as total revenues less cost of goods sold, excluding depreciation, depletion, and accretion of asset retirement obligations[154] Contribution Margin (in thousands, except per ton amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (k) | Change (%) | | :-------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Contribution margin | $15,784 | $19,788 | $(4,004) | -20.23% | | Contribution margin per ton | $11.08 | $15.53 | $(4.45) | -28.65% | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (k) | Change (%) | | :-------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Contribution margin | $25,362 | $38,295 | $(12,933) | -33.77% | | Contribution margin per ton | $10.17 | $14.67 | $(4.50) | -30.67% | - The decline in contribution margin for both periods was primarily due to higher logistics costs related to frac sand sales delivery location, increased unit production costs from lower plant utilization, and higher mining costs[157] EBITDA and Adjusted EBITDA This subsection defines and analyzes EBITDA and Adjusted EBITDA, providing insights into operational profitability - EBITDA is defined as net income plus depreciation, depletion, amortization, income tax expense (benefit), and interest expense. Adjusted EBITDA further adjusts for non-recurring and non-cash items[160] EBITDA and Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (k) | Change (%) | | :-------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | EBITDA | $7,253 | $9,522 | $(2,269) | -23.83% | | Adjusted EBITDA | $7,751 | $11,853 | $(4,102) | -34.61% | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (k) | Change (%) | | :-------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | EBITDA | $7,567 | $17,609 | $(10,042) | -57.03% | | Adjusted EBITDA | $9,179 | $21,188 | $(12,009) | -56.68% | - The decrease in Adjusted EBITDA for both periods was primarily due to lower sales volumes, combined with higher logistics and production costs[165] Free Cash Flow This subsection defines and analyzes free cash flow, indicating the cash available for discretionary purposes - Free cash flow is defined as net cash provided by operating activities less purchases of property, plant and equipment[166] Free Cash Flow (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (k) | Change (%) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Net cash (used in) provided by operating activities | $(5,137) | $14,882 | $(20,019) | -134.52% | | Purchases of property, plant and equipment | $(2,676) | $(1,354) | $(1,322) | 97.64% | | Free cash flow | $(7,813) | $13,528 | $(21,341)| -157.76% | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (k) | Change (%) | | :-------------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $3,587 | $11,019 | $(7,432) | -67.45% | | Purchases of property, plant and equipment | $(6,212) | $(3,000) | $(3,212) | 107.07% | | Free cash flow | $(2,625) | $8,019 | $(10,644)| -132.73% | - Negative free cash flow in 2025 was primarily due to the timing of accounts receivable conversion to cash and higher capital expenditures[168] Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations - Primary liquidity sources are cash flow from operations and availability under the FCB ABL Credit Facility and other equipment financing[169] - As of June 30, 2025, the company had $4.3 million in cash and $21.0 million in undrawn availability on its FCB ABL Credit Facility[169] - Management believes the company has sufficient liquidity and capital resources to meet cash needs for the next twelve months[170] Material Cash Requirements This section outlines significant future cash outflows for dividends, share repurchases, and capital expenditures - A special dividend of $0.10 per share, totaling approximately $4.4 million, was declared on July 23, 2025, payable on August 14, 2025[171] - The company has an eighteen-month share repurchase program approved for up to $10.0 million, with $7.9 million remaining as of June 30, 2025, after repurchasing $2.1 million[174][175] - Expected capital expenditures for full year 2025 are between $13.0 million and $17.0 million, primarily for new mining areas, efficiency projects, and terminal expansions[177] Indebtedness This section details the company's various debt instruments and their outstanding balances - As of June 30, 2025, the VFI Equipment Financing had an outstanding balance of $7.5 million, with $1.5 million in minimum cash payments anticipated for the remainder of 2025[178] - Notes payable totaled $4.7 million as of June 30, 2025, with $0.8 million in minimum cash payments anticipated for the remainder of 2025[178] - The FCB ABL Credit Facility had $9.0 million outstanding as of June 30, 2025[178] Operating Leases This section provides information on the company's operating lease liabilities and future payment obligations - Operating lease liabilities amounted to $27.4 million as of June 30, 2025, with anticipated minimum cash payments of $6.8 million for the remainder of 2025[179] Mineral Rights Property This section describes the company's obligations related to mineral rights contracts - The company is obligated to make annual minimum payments of approximately $2.5 million for the next 12 years for mineral rights contracts[180] Off-Balance Sheet Arrangements This section discloses the company's off-balance sheet commitments, such as performance bonds - Outstanding performance bonds totaled $19.7 million as of June 30, 2025[181] Contractual Obligations This section summarizes the company's various contractual commitments and payment schedules - Contractual obligations include debt facilities (FCB ABL, VFI, notes payable), operating and finance leases, sand delivery, royalties, minimum mining payments, capital expenditures, asset retirement obligations, and municipal commitments[184] Environmental Matters This section discusses the company's compliance with environmental regulations and related expenditures - The company is subject to various federal, state, and local environmental laws and regulations and expects to incur future expenditures for compliance, though the full amount is unpredictable[185] Seasonality This section explains how seasonal weather patterns impact the company's operations and financial results - Seasonal weather impacts wet sand processing, leading to lower cash operating costs in Q1/Q4 and higher in Q2/Q3 due to overproduction for winter demand, which is capitalized into inventory[186] - Indoor wet processing facilities at two plant locations help mitigate seasonality by allowing year-round wet sand inventory production[186] - Severe weather in oil and natural gas producing basins can curtail drilling activities and reduce sales volumes[186] Customer Concentration This section identifies key customers that account for a significant portion of the company's revenue - For the six months ended June 30, 2025, Equitable Gas Corporation (28.4%), Encino Energy (14.9%), and Expand Energy Corporation (11%) collectively accounted for 54.3% of total revenue[187] - For the six months ended June 30, 2024, Equitable Gas Corporation (32.7%) and Encino Energy (12.2%) accounted for 44.9% of total revenue[187] Critical Accounting Policies and Estimates This section highlights the accounting policies and estimates that require significant management judgment - There have been no material changes to critical accounting policies and procedures during the six months ended June 30, 2025[188] - Significant estimates include impairment considerations, asset retirement obligations, fair values of acquired assets, deferred tax assets, inventory reserve, and collectability of receivables[189] - Future economic performance remains uncertain due to high inflation and other economic concerns, with the impact of future events on financial position and results of operations being unquantifiable[190][193] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk This section confirms that there have been no material changes to the company's exposure to market risks since the previous annual report - No material changes to market risk exposure occurred during the six months ended June 30, 2025, compared to the disclosures in the Annual Report on Form 10-K for the year ended December 31, 2024[195] ITEM 4. Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures and confirms no material changes to internal control over financial reporting - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of the end of the reporting period[196] - No changes occurred during the second quarter of fiscal year 2025 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[197] PART II OTHER INFORMATION This part includes additional information not covered in the financial statements, such as legal proceedings and risk factors ITEM 1. Legal Proceedings This section refers to the detailed disclosure of legal proceedings within the notes to the condensed consolidated financial statements - Information regarding legal proceedings is incorporated by reference from Note 12 - Commitments and Contingencies - Litigation of the notes to the condensed consolidated financial statements[198] ITEM 1A. Risk Factors This section states that there have been no material changes to the risk factors previously identified in the company's annual report - There have been no material changes to the risk factors described in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2024[199] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no unregistered sales of equity securities and details the company's share repurchase program activities during the quarter - No shares were sold by the Company without registration under the Securities Act of 1933 during the three months ended June 30, 2025[200] - Under the $10.0 million share repurchase program approved in October 2024, the company repurchased 854,779 shares for an average price of $2.06 during Q2 2025, leaving $7,933,034 available for repurchase as of June 30, 2025[201][202] ITEM 3. Defaults upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[203] ITEM 4. Mine Safety Disclosures This section outlines the company's commitment to mine safety, compliance with MSHA regulations, and the potential impact of health and safety standards on operations - The company prioritizes mine safety and is regulated by the U.S. Mining Safety and Health Administration (MSHA), which conducts at least two unannounced inspections annually[204][205] - Operations are subject to regulations regarding respirable silica exposure, with portions of MSHA's rule currently under legal challenge and stayed[206] - Compliance with the Federal Mine Safety and Health Act of 1977 is critical, as failure to adhere to stringent standards or changes in enforcement could materially affect the business[207] ITEM 5. Other Information This section indicates that there is no other information to report - None[208] ITEM 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including certifications, mine safety disclosures, and XBRL documents - Exhibits include certifications (31.1, 31.2, 32.1, 32.2), the Mine Safety Disclosure Exhibit (95.1), and various XBRL taxonomy extension documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[210] SIGNATURES This section contains the official certifications and signatures for the financial report Signatures This section contains the official signatures of the company's principal financial and accounting officers, certifying the filing of the Form 10-Q - The report was duly signed on August 12, 2025, by Lee E. Beckelman, Chief Financial Officer, and Christopher M. Green, Vice President of Accounting[215]