Smart Sand(US:SND)2019-08-07 17:44Financial Data and Key Metrics Changes - Smart Sand reported total revenues of $67.9 million in Q2 2019, an increase of $16.1 million from $51.8 million in Q1 2019 [19] - Adjusted EBITDA for Q2 2019 was $26.2 million, with net income of approximately $14.3 million, reflecting strong performance driven by increased sales volumes [24] - The company reduced total debt from $52.6 million at the end of Q1 to $46.6 million at the end of Q2 2019 [11] Business Line Data and Key Metrics Changes - Sales volume increased to approximately 741,000 tons in Q2 2019, a 14% increase over Q1 2019 [18] - Sand sales revenue rose to $31.4 million in Q2 from $25.6 million in Q1, while logistics revenue remained stable at approximately $20.3 million [19][20] - Contribution margin per ton increased to $41.80 in Q2 from $26.35 in Q1, primarily due to higher shortfall revenue [22] Market Data and Key Metrics Changes - Spot volumes represented 19% of total sales volumes in Q2 2019, with increased penetration in the Bakken, Marcellus, and Utica basins [10] - Approximately 50% of sales volumes are now directed to the Western United States, with about one-third to the Northeast and around 10% to Southern regions including the Permian basin [32] Company Strategy and Development Direction - The company focuses on supporting long-term contracted customers, extending spot market business, and maintaining low debt levels [6] - Smart Sand has rebranded its wellsite storage solutions as SmartSystems, which includes storage silos and aims to enhance logistics efficiency [7] - The company emphasizes the importance of quality and consistency in sand supply to meet customer needs [8] Management's Comments on Operating Environment and Future Outlook - Management expressed a conservative outlook for Q3 2019, expecting sales volumes between 625,000 to 725,000 tons, influenced by mixed customer expectations for activity levels [40] - The company anticipates continued positive cash flow from operations and plans to manage capital spending to minimize borrowings [25] Other Important Information - The company recognized $16.3 million in shortfall revenue in Q2, significantly higher than $5.8 million in Q1, providing a stable revenue source [20] - Capital expenditures for Q2 amounted to $5.4 million, with a total year-to-date spend of $13.9 million, primarily for SmartDepot silos and efficiency upgrades [24] Q&A Session Summary Question: Pricing trends for Northern White sand - Management noted that pricing for 100-mesh and 40/70 sands remains strong, with spot pricing flat to slightly down [29] Question: Status of shortfall payments from customers in litigation - Shortfall payments are included in receivables and have not yet contributed to cash flow; management remains confident in contract enforcement [31] Question: Breakdown of sales volumes by region - Approximately 50% of volumes are directed to the Western U.S., one-third to the Northeast, and around 10% to Southern regions [32] Question: Impact of shortfall revenue on EBITDA - Shortfall revenue is considered contractual payments owed, and while it contributes to EBITDA, management refrained from detailed comments due to ongoing litigation [34][35] Question: Outlook for completions activity in the second half - Management indicated mixed expectations from customers, leading to conservative guidance for Q3 [40] Question: Profitability of the extended EQT contract - Management did not disclose specific profitability details but stated it is consistent with existing agreements [42] Question: Operational status of SmartSystems - Three SmartSystems are currently operational, receiving positive feedback from customers, with plans for further deployment [43]