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Smart Sand(SND) - 2023 Q4 - Annual Results
Smart SandSmart Sand(US:SND)2024-03-11 20:49

Executive Summary & Business Overview Full Year 2023 Highlights Smart Sand achieved strong operational and financial results in fiscal year 2023, with record sales volume, 16% revenue growth, a return to profitability with $4.6 million net income, and significantly increased operating cash flow - Fiscal year 2023 sales volume reached a company record high1 Key Financial Metrics for Fiscal Year 2023 (Year-over-Year) | Metric | FY 2023 (Millions) | FY 2022 (Millions) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $296.0 | $255.7 | +16% | | Sand Sales Revenue | $283.2 | $243.2 | +16% | | Total Volume Sold (Thousands of Tons) | 4,514 | 4,333 | +4% | | Net Income (Loss) | $4.6 | $(0.7) | Switched from Loss to Profit | | Basic and Diluted EPS (Loss) | $0.12 | $(0.02) | Switched from Loss to Profit | | Net Cash Provided by Operating Activities | $31.0 | $5.4 | +474% | | Contribution Margin | $67.0 | $54.6 | +22.7% | | Contribution Margin Per Ton | $14.85 | $12.61 | +17.8% | | Adjusted EBITDA | $34.1 | $29.3 | +16.4% | Fourth Quarter 2023 Highlights Smart Sand's Q4 2023 operational and financial performance was negatively impacted by seasonal weather and slower customer spending, resulting in sequential and year-over-year declines in revenue and volume, and a net loss - Fourth quarter sales volume decreased primarily due to seasonal weather issues and a slowdown in market activity, as customers reduced spending due to year-end budget exhaustion18 Key Financial Metrics for Fourth Quarter 2023 (Sequential and Year-over-Year) | Metric | Q4 2023 (Millions) | Q3 2023 (Millions) | Sequential Change | Q4 2022 (Millions) | Year-over-Year Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $61.9 | $76.9 | -19% | $73.8 | -16% | | Total Volume Sold (Thousands of Tons) | 1,016 | 1,219 | -17% | 1,175 | -14% | | Net Income (Loss) | $(4.8) | $6.7 | Loss | $2.6 | Loss | | Basic and Diluted EPS (Loss) | $(0.12) | $0.18 | Loss | $0.06 | Loss | | Contribution Margin | $9.2 | $21.0 | -56.2% | $17.4 | -47.1% | | Contribution Margin Per Ton | $9.07 | $17.20 | -47.3% | $14.77 | -38.6% | | Adjusted EBITDA | $1.0 | $13.3 | -92.5% | $10.7 | -90.7% | | Net Cash Provided by (Used in) Operating Activities | $(2.7) | N/A | N/A | N/A | N/A | | Free Cash Flow | $(9.6) | N/A | N/A | N/A | N/A | Strategic Initiatives and Outlook Smart Sand enhanced its market position and logistics capabilities in 2023 through strategic expansion and investments, anticipating improved performance in the first quarter of 2024 - The company entered the Canadian frac sand market through operations at its Blair, Wisconsin facility1 - Logistics capabilities in the Appalachian Basin's Marcellus and Utica formations were improved through the expansion of the Waynesburg, Pennsylvania terminal1 - Investment in cooling and blending capabilities at the Utica, Illinois facility supports industrial sand business growth1 - Last-mile service coverage was expanded in the Bakken and Appalachian Basins1 - Rights were secured to operate two additional terminals in Northeast Ohio, supporting increased activity in the Appalachian Basin1 - Operating and financial results are expected to improve in Q1 2024, with monthly sales volumes already recovering to Q3 2023 levels or higher1 Financial Statements Consolidated Statements of Operations This section details Smart Sand's quarterly and annual operating results for 2023 and 2022, presenting key financial data including revenue, costs, and net income (loss) Quarterly Operating Results In Q4 2023, the company experienced sequential and year-over-year declines in total revenue and sand sales, leading to reduced gross profit and operating income, and ultimately a net loss Consolidated Statements of Operations (Quarterly) | Metric (Thousands) | December 31, 2023 | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | :--- | | Sand Sales Revenue | 60,147 | 72,480 | 71,099 | | Deficiency Revenue | - | 2,389 | 414 | | Logistics Revenue | 1,800 | 2,031 | 2,316 | | Total Revenue | 61,947 | 76,900 | 73,829 | | Cost of Sales | 59,116 | 62,502 | 62,657 | | Gross Profit | 2,831 | 14,398 | 11,172 | | Operating Expenses | 10,736 | 9,472 | 9,516 | | Operating (Loss) Income | (7,905) | 4,926 | 1,656 | | Pre-tax (Loss) Income | (8,118) | 4,848 | 1,704 | | Income Tax Benefit | (3,332) | (1,879) | (923) | | Net (Loss) Income | (4,786) | 6,727 | 2,627 | | Basic (Loss) Earnings Per Share | (0.12) | 0.18 | 0.06 | | Diluted (Loss) Earnings Per Share | (0.12) | 0.18 | 0.06 | Annual Operating Results In fiscal year 2023, the company achieved significant growth in total revenue and sand sales, improved gross profit, reduced operating loss, and returned to net income profitability Consolidated Statements of Operations (Annual) | Metric (Thousands) | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Sand Sales Revenue | 283,160 | 243,162 | | Deficiency Revenue | 4,304 | 5,010 | | Logistics Revenue | 8,509 | 7,568 | | Total Revenue | 295,973 | 255,740 | | Cost of Sales | 254,418 | 226,149 | | Gross Profit | 41,555 | 29,591 | | Operating Expenses | 43,059 | 32,719 | | Operating Loss | (1,504) | (3,128) | | Pre-tax Loss | (2,252) | (3,908) | | Income Tax Benefit | (6,901) | (3,205) | | Net Income (Loss) | 4,649 | (703) | | Basic Earnings (Loss) Per Share | 0.12 | (0.02) | | Diluted Earnings (Loss) Per Share | 0.12 | (0.02) | Consolidated Balance Sheets As of December 31, 2023, Smart Sand's total assets slightly decreased, cash and cash equivalents increased, total liabilities reduced, and stockholders' equity remained relatively stable Consolidated Balance Sheets (Thousands) | Metric | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and Cash Equivalents | 6,072 | 5,510 | | Accounts Receivable | 23,231 | 35,746 | | Inventory | 26,823 | 20,185 | | Total Current Assets | 61,904 | 68,113 | | Property, Plant, and Equipment, Net | 255,092 | 258,843 | | Total Assets | 346,300 | 360,003 | | Liabilities and Stockholders' Equity | | | | Accounts Payable | 16,041 | 14,435 | | Current Portion of Long-Term Debt | 15,711 | 6,183 | | Total Current Liabilities | 54,466 | 51,917 | | Long-Term Debt | 3,449 | 9,807 | | Total Liabilities | 104,033 | 116,532 | | Total Stockholders' Equity | 242,267 | 243,471 | | Total Liabilities and Stockholders' Equity | 346,300 | 360,003 | Consolidated Statements of Cash Flows This section details Smart Sand's quarterly and annual cash flows for 2023 and 2022, outlining cash flow from operating, investing, and financing activities Quarterly Cash Flow Analysis In Q4 2023, the company reported $2.7 million cash outflow from operations and $6.9 million from investing, partially offset by $6.3 million from financing, leading to a net decrease in cash Consolidated Statements of Cash Flows (Quarterly, Thousands) | Activity | December 31, 2023 | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | (2,659) | 12,477 | 5,589 | | Net Cash Used in Investing Activities | (6,899) | (6,831) | (3,121) | | Net Cash Provided by (Used in) Financing Activities | 6,321 | (1,829) | (7,329) | | Net Increase (Decrease) in Cash and Cash Equivalents | (3,237) | 3,817 | (4,861) | | Cash and Cash Equivalents, End of Period | 6,072 | 9,309 | 5,510 | Annual Cash Flow Analysis In fiscal year 2023, net cash from operating activities significantly increased to $31.0 million, with $22.9 million used in investing and $7.5 million in financing, resulting in a net increase in cash Consolidated Statements of Cash Flows (Annual, Thousands) | Activity | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 30,991 | 5,420 | | Net Cash Used in Investing Activities | (22,902) | (18,208) | | Net Cash Used in Financing Activities | (7,527) | (7,290) | | Net Increase (Decrease) in Cash and Cash Equivalents | 562 | (20,078) | | Cash and Cash Equivalents, End of Period | 6,072 | 5,510 | Non-GAAP Financial Measures Contribution Margin Contribution Margin is a non-GAAP metric for financial and operational performance, defined as total revenue less cost of sales (excluding depreciation, depletion, and asset retirement obligation amortization) - Contribution Margin is defined as total revenue less cost of sales, excluding depreciation, depletion, and amortization of asset retirement obligations29 Reconciliation of Contribution Margin to Gross Profit (Thousands) | Metric | December 31, 2023 (Quarterly) | September 30, 2023 (Quarterly) | December 31, 2022 (Quarterly) | December 31, 2023 (Annual) | December 31, 2022 (Annual) | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 61,947 | 76,900 | 73,829 | 295,973 | 255,740 | | Cost of Sales | 59,116 | 62,502 | 62,657 | 254,418 | 226,149 | | Gross Profit | 2,831 | 14,398 | 11,172 | 41,555 | 29,591 | | Depreciation, Depletion, and Amortization of Asset Retirement Obligations Included in Cost of Sales | 6,381 | 6,573 | 6,184 | 25,469 | 25,038 | | Contribution Margin | 9,212 | 20,971 | 17,356 | 67,024 | 54,629 | | Contribution Margin Per Ton | $9.07 | $17.20 | $14.77 | $14.85 | $12.61 | | Total Volume Sold (Thousands of Tons) | 1,016 | 1,219 | 1,175 | 4,514 | 4,333 | EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA are supplementary non-GAAP metrics for evaluating financial condition and operating results; EBITDA adds back depreciation, amortization, income tax, and interest to net income, with Adjusted EBITDA further adjusting for non-recurring or non-cash items - EBITDA is defined as net income plus depreciation, depletion, and amortization expense; income tax expense (benefit); interest expense; and franchise tax33 - Adjusted EBITDA further adjusts EBITDA for loss (gain) on disposal of property, plant, and equipment, stock-based compensation, acquisition and development costs, non-recurring cash costs related to restructuring and retention, and amortization of asset retirement obligations33 Reconciliation of EBITDA and Adjusted EBITDA (Thousands) | Metric | December 31, 2023 (Quarterly) | September 30, 2023 (Quarterly) | December 31, 2022 (Quarterly) | December 31, 2023 (Annual) | December 31, 2022 (Annual) | | :--- | :--- | :--- | :--- | :--- | :--- | | Net (Loss) Income | (4,786) | 6,727 | 2,627 | 4,649 | (703) | | Depreciation, Depletion, and Amortization | 7,078 | 6,985 | 6,590 | 27,363 | 26,521 | | Income Tax Benefit | (3,332) | (1,879) | (923) | (6,901) | (3,205) | | Interest Expense | 329 | 304 | 379 | 1,532 | 1,661 | | Franchise Tax | 300 | 66 | 85 | 804 | 353 | | EBITDA | (411) | 12,203 | 8,758 | 27,447 | 24,627 | | Loss (Gain) on Disposal of Property, Plant, and Equipment | (19) | (92) | 188 | 1,802 | (294) | | Stock-based Compensation | 1,003 | 850 | 706 | 3,391 | 2,729 | | Acquisition and Development Costs | 204 | 70 | 241 | 545 | 675 | | Amortization of Asset Retirement Obligations | 234 | 235 | 189 | 904 | 758 | | Adjusted EBITDA | 1,025 | 13,266 | 10,721 | 34,121 | 29,271 | Free Cash Flow Free Cash Flow is a supplementary non-GAAP metric for assessing business liquidity, defined as net cash provided by operating activities less purchases of property, plant, and equipment - Free Cash Flow is defined as net cash provided by operating activities less purchases of property, plant, and equipment38 Reconciliation of Free Cash Flow (Thousands) | Metric | December 31, 2023 (Quarterly) | September 30, 2023 (Quarterly) | December 31, 2022 (Quarterly) | December 31, 2023 (Annual) | December 31, 2022 (Annual) | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | (2,659) | 12,477 | 5,589 | 30,991 | 5,420 | | Purchases of Property, Plant, and Equipment | (6,905) | (6,881) | (3,196) | (23,031) | (12,731) | | Free Cash Flow | (9,564) | 5,596 | 2,393 | 7,960 | (13,858) | Company Information & Disclosures About Smart Sand Smart Sand is a fully integrated frac and industrial sand supply and services company, offering mine-to-wellsite proppant and logistics solutions, and producing low-cost, high-quality Northern White sand from its Wisconsin and Illinois facilities with major rail access - Smart Sand is a fully integrated frac and industrial sand supply and services company17 - The company provides complete mine-to-wellsite proppant and logistics solutions, along with a broad range of industrial sand products17 - It produces low-cost, high-quality Northern White sand for hydraulic fracturing and various industrial applications17 - Logistics solutions are offered through in-basin transload terminals and SmartSystems wellsite storage and sand management capabilities17 - The company owns and operates premium sand mines and processing facilities in Wisconsin and Illinois, with access to four Class I railroads, serving the US and Canada17 Forward-looking Statements This report contains forward-looking statements about future performance, which are not guarantees and are subject to risks and uncertainties that could cause actual results to differ materially; the company undertakes no obligation to update these statements unless legally required - Forward-looking statements contain the company's current expectations for future results but are not guarantees of future performance14 - Actual results may differ materially from forward-looking statements due to factors such as fluctuations in product demand, regulatory changes, adverse weather, increased fuel prices, higher transportation costs, capital access, increased competition, and changes in economic or political conditions15 - The company undertakes no obligation to publicly update or revise any forward-looking statements unless required by law16 Conference Call & Investor Information Smart Sand will host a conference call and webcast on March 12, 2024, to discuss Q4 and full-year 2023 financial results, encouraging investors to access important information via its investor relations website - Smart Sand will host a conference call and webcast on March 12, 2024, at 10:00 AM ET, to discuss Q4 and full-year 2023 financial results13 - Investors can participate by dialing in or accessing the webcast via the 'Investors' section of the company's website13 - The company disseminates important information through SEC filings, press releases, public conference calls and webcasts, and its investor relations website, encouraging investors to review these sources18 - Investor Contact: Lee Beckelman, Chief Financial Officer, at (281) 231-2660 or lbeckelman@smartsand.com41