Smart Sand(US:SND)2020-08-05 18:52Financial Data and Key Metrics Changes - The second quarter of 2020 saw historic low sales volume of 208,000 tons and revenue of $26.1 million, a significant drop from $47.5 million in the first quarter [8][22] - Cost of sales decreased to $11.9 million from $41.1 million in the previous quarter, although some costs like non-cash depreciation could not be easily reduced [23] - Contribution margin for the second quarter was $19.3 million, with adjusted EBITDA at $15.6 million, up from $11.5 million and $6.4 million respectively in the first quarter [24] Business Line Data and Key Metrics Changes - The primary driver for the results in the second quarter was the reduced sales volume, which significantly impacted revenue [21] - The company managed to cut costs effectively in response to the market slowdown, which helped maintain cash balances and reduce debt [10][20] Market Data and Key Metrics Changes - The COVID-19 pandemic led to an unprecedented drop in drilling and completions activity, affecting the overall oil industry [7] - There are signs of a pickup in activity from the lows experienced in the second quarter, although the market remains volatile [20] Company Strategy and Development Direction - The company is focused on maintaining a strong balance sheet with low leverage levels and is prepared to navigate through market uncertainties [17][18] - Smart Sand aims to be a pivotal player in the upcoming recovery, emphasizing the importance of Northern White sand for better long-term well results [14][18] - The company is open to consolidation opportunities that add long-term value, focusing on expanding its operating footprint and customer base [16][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the pandemic but expressed confidence in the company's preparedness and ability to recover [11][18] - There is uncertainty regarding the timing and nature of the recovery, making it difficult to predict pricing momentum [38][39] - The company expects to see increased activity in 2021 if market demand returns to pre-pandemic levels [69] Other Important Information - The company ended the quarter with approximately $17 million in cash and $25 million in available liquidity [26] - Capital expenditures for the year are expected to be less than $10 million, excluding any acquisition activity [26] Q&A Session Summary Question: Contribution margin expectations for the second half of the year - Management indicated that contribution margin per ton could be flat or slightly down in the second half, assuming consistent or slightly higher volumes [34] Question: Trends in Northern White volumes - Most volumes are still directed towards the Northeast, which has maintained relative consistency in activity [35][36] Question: Pricing momentum post-bankruptcies - Management noted that predicting pricing momentum is difficult until there is clarity on activity levels in the second half of the year [38][39] Question: Revenue related to logistics - Logistics revenue was minimal in the second quarter, primarily driven by sand sales [48] Question: Asset sales during the quarter - The gain on asset sales was minor, involving some minor equipment, and no significant future asset sales are anticipated [52] Question: Working capital outlook - Working capital is expected to be neutral, with potential growth in receivables if sales increase [57] Question: CapEx guidance and acquisition opportunities - Management is open to acquisition opportunities that align with their strategic goals, particularly in light of current market conditions [58][60] Question: Current state of mines and future demand - The state of mines varies, with some facing challenges in returning to operation due to maintenance issues, while demand in 2021 is hard to predict but could increase if production returns to normal levels [63][69]