We’ve now completed our first fleet of silos and we’re looking to have our first wellsite storage systems operating in the field in late Q4 2018 or early Q1 2019.
Our
Regarding the share repurchase, we believe the current share price doesn’t accurately reflect Smart Sand’s present value or its long-term growth potential. Therefore, repurchasing the Company’s shares now represents an excellent investment opportunity for both the Company and our shareholders.”
Third Quarter 2018 Highlights
Revenues were
Overall tons sold were approximately 823,000 in the third quarter of 2018, just short of our record 839,000 tons sold last quarter and a 26% increase over the 653,000 tons sold in the third quarter 2017.
Net income was
Adjusted EBITDA was
Capital Expenditures
Smart Sand’s capital expenditures totaled
Share Repurchase
Smart Sand’s board of directors has authorized a share repurchase program pursuant to which the Company may repurchase up to 2,000,000 shares of the Company’s common stock through the twelve month period following the announcement of such program. As of
Conference Call
Forward-looking Statements
All statements in this news release other than statements of historical facts are forward-looking statements that contain our current expectations about our future results. We have attempted to identify any forward-looking statements by using words such as “expect,” “will,” “estimate,” “believe” and other similar expressions. Although we believe that the expectations reflected and the assumptions or bases underlying our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Such statements are not guarantees of future performance or events and are subject to known and unknown risks and uncertainties that could cause the Company’s actual results, events or financial positions to differ materially from those included within or implied by such forward-looking statements.
Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, but are not limited to, fluctuations in product demand, regulatory changes, adverse weather conditions, increased fuel prices, higher transportation costs, access to capital, increased competition, changes in economic or political conditions, and such other factors discussed or referenced in the “Risk Factors” section of the Company’s Form 10-K for the year ended
You should not place undue reliance on our forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.
About
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
Three Months Ended | |||||||||||
September 30, 2018 | June 30, 2018 | September 30, 2017 | |||||||||
(unaudited) | (unaudited) | (unaudited) | |||||||||
(in thousands, except per share amounts) | |||||||||||
Revenues | $ | 63,146 | $ | 54,448 | $ | 39,329 | |||||
Cost of goods sold | 40,595 | 34,678 | 26,297 | ||||||||
Gross profit | 22,551 | 19,770 | 13,032 | ||||||||
Operating expenses: | |||||||||||
Salaries, benefits and payroll taxes | 3,232 | 2,790 | 1,838 | ||||||||
Depreciation and amortization | 501 | 476 | 148 | ||||||||
Selling, general and administrative | 3,512 | 3,595 | 2,275 | ||||||||
Gain on contingent consideration | (2,100 | ) | - | - | |||||||
Total operating expenses | 5,145 | 6,861 | 4,261 | ||||||||
Operating income | 17,406 | 12,909 | 8,771 | ||||||||
Other income (expenses): | |||||||||||
Interest expense, net | (758 | ) | (500 | ) | (114 | ) | |||||
Other income | 90 | 25 | 76 | ||||||||
Total other income (expenses), net | (668 | ) | (475 | ) | (38 | ) | |||||
Income before income tax expense | 16,738 | 12,434 | 8,733 | ||||||||
Income tax expense | 4,613 | 2,413 | 1,686 | ||||||||
Net income | $ | 12,125 | $ | 10,021 | $ | 7,047 | |||||
Net income per common share: | |||||||||||
Basic | $ | 0.30 | $ | 0.25 | $ | 0.17 | |||||
Diluted | $ | 0.30 | $ | 0.25 | $ | 0.17 | |||||
Weighted-average number of common shares: | |||||||||||
Basic | 40,541 | 40,499 | 40,384 | ||||||||
Diluted | 40,551 | 40,550 | 40,416 | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
September 30, 2018 | December 31, 2017 | ||||||
(unaudited) | (audited) | ||||||
(in thousands) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,186 | $ | 34,740 | |||
Restricted cash | - | 487 | |||||
Accounts receivable | 29,666 | 23,377 | |||||
Unbilled receivables | 1,424 | 1,192 | |||||
Inventories | 16,402 | 9,532 | |||||
Prepaid expenses and other current assets | 4,867 | 3,849 | |||||
Total current assets | 53,545 | 73,177 | |||||
Property, plant and equipment, net | 233,181 | 171,762 | |||||
Intangible assets, net | 19,398 | - | |||||
Goodwill | 16,935 | - | |||||
Deferred financing costs, net | 388 | 892 | |||||
Other assets | 3,455 | 971 | |||||
Total assets | $ | 326,902 | $ | 246,802 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 10,798 | $ | 26,123 | |||
Accrued and other expenses | 16,394 | 7,576 | |||||
Deferred revenue | 4,030 | - | |||||
Current portion of equipment financing obligations | 8 | 572 | |||||
Current portion of notes payable | - | 288 | |||||
Total current liabilities | 31,230 | 34,559 | |||||
Revolving credit facility, net | 44,190 | - | |||||
Deferred tax liabilities, long-term, net | 20,497 | 13,239 | |||||
Asset retirement obligation | 8,654 | 8,982 | |||||
Contingent consideration | 7,100 | - | |||||
Total liabilities | 111,671 | 56,780 | |||||
Stockholders’ equity | |||||||
Common stock | 40 | 40 | |||||
Treasury stock, at cost | (840 | ) | (666 | ) | |||
Additional paid-in capital | 161,375 | 159,059 | |||||
Retained earnings | 54,710 | 31,589 | |||||
Accumulated other comprehensive loss | (54 | ) | - | ||||
Total stockholders’ equity | 215,231 | 190,022 | |||||
Total liabilities and stockholders’ equity | $ | 326,902 | $ | 246,802 | |||
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA
We define EBITDA as net income, plus: (i) depreciation, depletion and amortization expense; (ii) income tax expense; (iii) interest expense; and (iv) franchise taxes. We define Adjusted EBITDA as EBITDA, plus: (i) gain or loss on sale of fixed assets or discontinued operations; (ii) integration and transition costs associated with specified transactions; (iii) equity compensation; (iv) acquisition and development costs; (v) non-recurring cash charges related to restructuring, retention and other similar actions; (vi) earn-out and contingent consideration obligations; and (vii) non-cash charges and unusual or non-recurring charges. Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors and commercial banks, to assess:
- the financial performance of our assets without regard to the impact of financing methods, capital structure or historical cost basis of our assets;
- the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities;
- our ability to incur and service debt and fund capital expenditures;
- our operating performance as compared to those of other companies in our industry without regard to the impact of financing methods or capital structure; and
- our debt covenant compliance, as Adjusted EBITDA is a key component of critical covenants to the Credit Facility.
We believe that our presentation of EBITDA and Adjusted EBITDA will provide useful information to investors in assessing our financial condition and results of operations. Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA should not be considered alternatives to net income presented in accordance with GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. The following table presents a reconciliation of EBITDA and Adjusted EBITDA to net income for each of the periods indicated.
The following table presents a reconciliation of EBITDA and Adjusted EBITDA to net income for each of the periods indicated:
Three Months Ended | |||||||||
September 30, 2018 | June 30, 2018 | September 30, 2017 | |||||||
(in thousands) | |||||||||
Net income | $ | 12,125 | $ | 10,021 | $ | 7,047 | |||
Depreciation, depletion and amortization | 4,929 | 4,296 | 1,756 | ||||||
Income tax expense | 4,612 | 2,413 | 1,686 | ||||||
Interest expense | 760 | 509 | 172 | ||||||
Franchise taxes | 54 | 109 | 70 | ||||||
EBITDA | $ | 22,480 | $ | 17,348 | $ | 10,731 | |||
Loss on sale of fixed assets (1) | 253 | - | 30 | ||||||
Integration and transition costs (2) | - | - | 16 | ||||||
Equity compensation (3) | 791 | 668 | 516 | ||||||
Acquisition and development costs (4) | (1,723 | ) | 914 | 79 | |||||
Cash charges related to restructuring and retention (5) | 198 | 270 | 239 | ||||||
Non-cash charges (6) | 139 | 57 | 20 | ||||||
Adjusted EBITDA | $ | 22,138 | $ | 19,257 | $ | 11,631 | |||
- Includes losses related to the sale and disposal of certain assets in property, plant and equipment.
- Includes integration and transition costs associated with specified transactions.
- Represents the non-cash expenses for stock-based awards issued to our employees and employee stock purchase plan compensation expense.
- Represents costs incurred related to the business combinations and current development project activities. The three months ended
September 30, 2018 includes$2.1 million gain on contingent consideration, the three months endedJune 30, 2018 includes$0.8 million of costs related to the acquisition of substantially all of the assets ofQuickthree Solutions, Inc. - Represents costs associated with the retention and relocation of employees.
- Represents accretion of asset retirement obligations.
Contribution Margin
We also use contribution margin, which we define as total revenues less costs of goods sold excluding depreciation, depletion and accretion of asset retirement obligations, to measure our financial and operating performance. Contribution margin excludes other operating expenses and income, including costs not directly associated with the operations of our business such as accounting, human resources, information technology, legal, sales and other administrative activities.
Historically, we have reported production costs and production cost per ton as non-GAAP financial measures. As we expand our logistics activities and continue to sell sand closer to the wellhead, our sand production costs will only be a portion of our overall cost structure.
We believe that a transition to reporting contribution margin and contribution margin per ton sold will provide a better performance metric to management and external users of our financial statements, such as investors and commercial banks, because these metrics provide an operating and financial measure of our ability, as a combined business, to generate margin in excess of our operating cost base. As such, we believe that it is no longer relevant to report production costs or production costs per ton on a standalone basis.
Gross profit is the GAAP measure most directly comparable to contribution margin. Contribution margin should not be considered an alternative to gross profit presented in accordance with GAAP. Because contribution margin may be defined differently by other companies in our industry, our definition of contribution margin may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. The following table presents a reconciliation of contribution margin to gross profit.
Three Months Ended | |||||||||
September 30, 2018 | June 30, 2018 | September 30, 2017 | |||||||
(in thousands) | |||||||||
Revenue | $ | 63,146 | $ | 54,448 | $ | 39,329 | |||
Cost of goods sold | 40,595 | 34,678 | 26,297 | ||||||
Gross profit | 22,551 | 19,770 | 13,032 | ||||||
Depreciation, depletion, and accretion of asset retirement obligations | 4,567 | 3,878 | 1,628 | ||||||
Contribution margin | $ | 27,118 | $ | 23,648 | $ | 14,660 | |||
Contribution margin per ton | $ | 32.95 | $ | 28.19 | $ | 22.45 | |||
Total tons sold | 823 | 839 | 653 | ||||||
Investor Contacts:
Phone: (281) 231-2660
E-mail: lbeckelman@smartsand.com
Smart Sand, Inc.