Smart Sand(SND) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third quarter volumes reached 790,000 tons, representing a 156% increase from Q3 2020 and a 3% increase from Q2 2021 [7] - Total revenues for Q3 2021 were $34.5 million, up from $29.6 million in Q2 2021 [23] - The company reported a net loss of $7.3 million for Q3 2021, an improvement from a net loss of $23.7 million in Q2 2021 [26] - Contribution margin for Q3 2021 was $4.1 million, compared to $3.5 million in Q2 2021 [27] Business Line Data and Key Metrics Changes - Sand revenues increased by $2.5 million sequentially, which helped offset a slight decline in logistics revenue [23] - The company sold approximately 2.3 million tons in the first nine months of 2021, on track for the highest sales volumes in company history [22] Market Data and Key Metrics Changes - The company anticipates that higher commodity prices and increased spending by exploration and production (E&P) companies will lead to improved sales volumes in 2022 [8][19] - The company is focusing on expanding its presence in the Appalachian Basin through a new terminal, which is expected to be operational by the end of 2021 [11][12] Company Strategy and Development Direction - The company is pursuing opportunities to lower its cost structure and increase asset utilization while expanding its business through strategic acquisitions [9][10] - The company is diversifying its business into industrial sands products to reduce volatility and improve margins [21][15] - The company is committed to maintaining a strong balance sheet and generating positive free cash flow [21][28] Management's Comments on Operating Environment and Future Outlook - Management noted that underinvestment in oil and gas supply has negatively impacted availability, but demand is returning to pre-pandemic levels [8] - The company expects to see improved pricing and margin opportunities in 2022 due to supply constraints and growing demand for Northern White sand [30][31] Other Important Information - The company ended Q3 2021 with approximately $37 million in cash and $50 million in available liquidity [29] - The company is building a new terminal in Waynesburg, Pennsylvania, which is expected to drive incremental sales [13][34] Q&A Session Summary Question: Impact of higher product and logistics costs on profitability - Management acknowledged increased cost pressures, particularly from utilities and logistics, but expects costs to remain relatively flat going into Q4 [39][40] Question: Share gain in the frac sand market - Management indicated that competitors have struggled with maintenance and investment, leading to potential share gains for the company [46][48] Question: Industrial sand market potential - Management expressed excitement about the industrial sand market and the expertise of the newly hired leader for this segment [56][57] Question: Supply chain issues with rail logistics - Management reported no significant issues with rail logistics, as their model is designed around unit train service [58][59] Question: Customer contract discussions - Management noted increased interest from customers in securing contracts, but they are being cautious about pricing [71][72]