Smart Sand(US:SND)2021-03-03 17:46Financial Data and Key Metrics Changes - In Q4 2020, sales volumes increased by 98%, from 309,000 tons in Q3 to 612,000 tons in Q4 [9][27] - Total revenues for Q4 2020 were $25.3 million, compared to $23.4 million in Q3 2020 [28] - The company reported a loss of $2.9 million in Q4 2020, which included a $5.1 million impairment charge [32] - For the full year 2020, net income was $37.9 million, up from $31.6 million in 2019 [36] Business Line Data and Key Metrics Changes - Sand revenues increased in Q4 2020 primarily due to higher sand sales, offset by lower shortfall and logistics revenues [28] - Contribution margin for Q4 2020 was a loss of $5.2 million, compared to a contribution margin of $10.4 million in Q3 2020 [33] - Adjusted EBITDA for Q4 2020 was a loss of $7.7 million, down from a positive $6.1 million in Q3 2020 [33] Market Data and Key Metrics Changes - The frac sand market showed recovery in Q4 2020, with significant increases in sales volumes [9][20] - The company anticipates first quarter activity to be consistent with Q4 levels or slightly better, barring a dramatic drop in oil and gas prices [10] Company Strategy and Development Direction - The company aims to be the premium supplier of Northern White frac sand and is focused on maintaining a strong balance sheet and low leverage [8][16] - The acquisition of Eagle Materials proppants business is seen as a strategic move to expand capacity and market reach without taking on debt [15][16] - The company is exploring further consolidation opportunities in the sand industry but emphasizes that any acquisition must align with its financial principles [16][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving market conditions and increased customer inquiries [10][14] - The company is focused on generating free cash flow and maintaining operational efficiency in 2021 [11][20] - Management noted that while the market is still operating at lower levels than the previous year, there has been a positive uptick in volumes since the lows of Q2 2020 [20] Other Important Information - The company generated $17 million in free cash flow for the full year 2020 [11] - As of the end of 2020, the company had approximately $12 million in cash and $31 million in liquidity [12][39] - Capital expenditures for 2021 are expected to be in the range of $10 million to $15 million [40] Q&A Session Summary Question: Interest in Acquisitions and Consolidation - Management indicated that while there is interest in consolidation, any potential acquisition must not risk the balance sheet and should provide strategic long-term benefits [47][56] - There is a general level of dialogue in the industry, but many peers are still restructuring, which may delay fruitful discussions [56] Question: Preference for Geography in M&A - The company prefers to focus on Northern White but is open to other opportunities that complement its existing operations [71][72] Question: Balance Sheet and Liquidity - Management confirmed that they expect no borrowings against their ABL at the end of Q1 and emphasized maintaining low leverage levels [78][80] Question: Cost of Sales and Contribution Margin - Management explained that seasonality affects costs, with Q4 typically showing lower contribution margins due to higher inventory costs [91][92] - Startup costs from the Utica facility were approximately $1 million in Q4, but these are expected to stabilize as sales ramp up [96] Question: Pricing Outlook - Management noted that while volumes are improving, there has not yet been a material increase in pricing, but they expect prices to follow as activity increases [102]