Smart Sand(SND) - 2022 Q3 - Quarterly Report

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