“Although the market was challenging last year, we were able to generate positive free cash flow and reduce our debt levels. Additionally, we were able to acquire the Eagle Materials proppants business at a very attractive price. This acquisition provides us incremental capacity to serve the market as it recovers and increased logistics capabilities through the access to another Class I railroad. We believe the acquisition combined with existing low cost operations and our low leverage levels will allow us to continue to compete effectively in the market to provide sustainable sand supply and logistics solutions to our customers in 2021 and beyond.”
Full Year 2020 Highlights
Revenues were
Overall tons sold were 1,886,000 for the full year 2020, compared to full year 2019 volume of 2,462,000 tons, a decrease of 23%. Due to the decreased demand from the COVID-19 coronavirus pandemic, sales volumes dropped dramatically in the second and third quarters of 2020 before rebounding in the fourth quarter. The increased activity in the fourth quarter was not enough to overcome the reduced demand earlier in the year leading to sales volume dropping in 2020, compared to 2019 levels.
Income tax benefit was
Net income was
Net cash provided by operating activities was
Adjusted EBITDA was
Contribution margin was
Fourth Quarter 2020 Highlights
Revenues were
Overall tons sold were 612,000 for the fourth quarter of 2020, compared to 309,000 tons for the third quarter of 2020 and 462,000 tons in the fourth quarter 2019, increases of 98% and of 32%, respectively. Sales volumes improved substantially in the fourth quarter 2020, compared to the third quarter 2020, due to improved oil prices from increased demand as the economy began to show some improvement from the depressed levels caused by the start of the pandemic earlier in 2020. Due to this increase in activity later in the year, sales volume for the fourth quarter 2020 were higher than the same period a year ago which had lower volumes due to normal year end spending reductions to drill and complete new wells.
Income tax benefit was
For the fourth quarter of 2020, the Company had a net loss of
Adjusted EBITDA was
Capital and Liquidity
For the full year 2020, we generated
Business Combination
On
We believe that this acquisition broadens our mine to wellsite capabilities by adding high quality sand mining and processing assets coupled with enhanced logistics options which provide direct access to an additional Class I rail line. We believe that these additional mining and logistics resources help secure its ability to be the preferred provider of
Conference Call
Smart Sand will host a conference call and live webcast for analysts and investors this morning,
Forward-looking Statements
All statements in this news release other than statements of historical facts are forward-looking statements that contain our Company’s 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 our 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, continued effects of the global pandemic, changes in economic or political conditions, and such other factors discussed or referenced in the “Risk Factors” section of our 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 Smart Sand
We are a fully integrated frac sand supply and services company, offering complete mine to wellsite proppant logistics, storage and management solutions to our customers. We produce low-cost, high quality Northern White frac sand and offer proppant logistics, storage and management solutions to our customers through our in-basin transloading terminal and our SmartSystems wellsite proppant storage capabilities. We provide our products and services primarily to oil and natural gas exploration and production companies and oilfield service companies. We own and operate premium frac sand mines and related processing facilities in
Availability of Information on Smart Sand’s Website
We routinely announce material information using
SMART SAND, INC.
CONSOLIDATED INCOME STATEMENTS
Three Months Ended | |||||||||||
December 31, 2020 | September 30, 2020 | December 31, 2019 | |||||||||
(unaudited) | (unaudited) | (unaudited) | |||||||||
(in thousands, except per share amounts) | |||||||||||
Revenues: | |||||||||||
Sand sales revenue | $ | 20,093 | $ | 12,445 | $ | 22,960 | |||||
Shortfall revenue | 1,133 | 6,842 | 11,600 | ||||||||
Logistics revenue | 4,111 | 4,122 | 13,107 | ||||||||
Total revenue | 25,337 | 23,409 | 47,667 | ||||||||
Cost of goods sold | 32,999 | 18,227 | 29,793 | ||||||||
Gross (loss) profit | (7,662 | ) | 5,182 | 17,874 | |||||||
Operating expenses: | |||||||||||
Salaries, benefits and payroll taxes | 2,878 | 2,058 | 3,094 | ||||||||
Depreciation and amortization | 557 | 440 | 457 | ||||||||
Selling, general and administrative | 5,134 | 3,933 | 3,045 | ||||||||
Change in the estimated fair value of contingent consideration | (390 | ) | — | (515 | ) | ||||||
Impairment loss | 5,115 | — | 7,914 | ||||||||
Total operating expenses | 13,294 | 6,431 | 13,995 | ||||||||
Operating income loss | (20,956 | ) | (1,249 | ) | 3,879 | ||||||
Other (expenses) income: | |||||||||||
Gain on bargain purchase | (289 | ) | 39,889 | — | |||||||
Interest expense, net | (515 | ) | (497 | ) | (678 | ) | |||||
Loss on extinguishment of debt | — | — | (561 | ) | |||||||
Other income | 320 | 80 | 42 | ||||||||
Total other (expenses) income, net | (484 | ) | 39,472 | (1,197 | ) | ||||||
(Loss) income before income tax (benefit) expense | (21,440 | ) | 38,223 | 2,682 | |||||||
Income tax (benefit) expense | (18,556 | ) | 1,941 | 294 | |||||||
Net (loss) income | $ | (2,884 | ) | $ | 36,282 | $ | 2,388 | ||||
Net (loss) income per common share: | |||||||||||
Basic | $ | (0.07 | ) | $ | 0.91 | $ | 0.06 | ||||
Diluted | $ | (0.07 | ) | $ | 0.91 | $ | 0.06 | ||||
Weighted-average number of common shares: | |||||||||||
Basic | 41,324 | 39,973 | 40,234 | ||||||||
Diluted | 41,324 | 39,973 | 40,238 | ||||||||
SMART SAND, INC.
CONSOLIDATED INCOME STATEMENTS
Year Ended |
|||||||
2020 | 2019 | ||||||
(in thousands, except per share amount) | |||||||
Revenues: | |||||||
Sand sales revenue | 70,902 | 109,621 | |||||
Shortfall revenue | 23,281 | 49,259 | |||||
Logistics revenue | 28,157 | 74,193 | |||||
Total revenue | $ | 122,340 | $ | 233,073 | |||
Cost of goods sold | 104,221 | 152,021 | |||||
Gross profit | 18,119 | 81,052 | |||||
Operating expenses: | |||||||
Salaries, benefits and payroll taxes | 9,993 | 11,560 | |||||
Depreciation and amortization | 1,911 | 2,411 | |||||
Selling, general and administrative | 15,527 | 11,328 | |||||
Change in the estimated fair value of contingent consideration | (1,410 | ) | (3,272 | ) | |||
Impairment loss | 5,115 | 15,542 | |||||
Total operating expenses | 31,136 | 37,569 | |||||
Operating (loss) income | (13,017 | ) | 43,483 | ||||
Other income (expenses): | |||||||
Gain on bargain purchase | 39,600 | — | |||||
Interest expense, net | (2,091 | ) | (3,621 | ) | |||
Loss on extinguishment of debt | — | (561 | ) | ||||
Other income | 482 | 131 | |||||
Total other income (expenses), net | 37,991 | (4,051 | ) | ||||
Income before income tax (benefit) expense | 24,974 | 39,432 | |||||
Income tax (benefit) expense | (12,980 | ) | 7,809 | ||||
Net income | $ | 37,954 | $ | 31,623 | |||
Net income per common share: | |||||||
Basic | $ | 0.94 | $ | 0.79 | |||
Diluted | $ | 0.94 | $ | 0.78 | |||
Weighted-average number of common shares: | |||||||
Basic | 40,260 | 40,135 | |||||
Diluted | 40,260 | 40,337 | |||||
SMART SAND, INC.
CONSOLIDATED BALANCE SHEETS
2020 | 2019 | ||||||
(in thousands) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 11,725 | $ | 2,639 | |||
Accounts receivable, net | 69,720 | 58,925 | |||||
Unbilled receivables | 127 | 4,765 | |||||
Inventories | 19,136 | 21,415 | |||||
Prepaid expenses and other current assets | 11,378 | 4,433 | |||||
Total current assets | 112,086 | 92,177 | |||||
Property, plant and equipment, net | 274,676 | 230,461 | |||||
Operating lease right-of-use assets | 32,099 | 28,178 | |||||
Intangible assets, net | 8,253 | 9,046 | |||||
Other assets | 563 | 3,541 | |||||
Total assets | $ | 427,677 | $ | 363,403 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 3,268 | $ | 3,961 | |||
Accrued expenses and other liabilities | 13,142 | 8,578 | |||||
Deferred revenue, current | 6,875 | 7,654 | |||||
Income taxes payable | — | 542 | |||||
Long-term debt, net, current | 6,901 | 6,175 | |||||
Operating lease liabilities, current | 7,077 | 13,108 | |||||
Total current liabilities | 37,263 | 40,018 | |||||
Deferred revenue, net | 3,482 | 1,670 | |||||
Long-term debt, net | 22,445 | 28,240 | |||||
Operating lease liabilities, long-term | 27,020 | 15,469 | |||||
Deferred tax liabilities, long-term, net | 32,981 | 24,408 | |||||
Asset retirement obligation | 14,996 | 6,142 | |||||
Contingent consideration | 180 | 1,900 | |||||
Other non-current liabilities | 503 | — | |||||
Total liabilities | 138,870 | 117,847 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity | |||||||
Common stock | 42 | 40 | |||||
(4,134 | ) | (2,979 | ) | ||||
Additional paid-in capital | 171,209 | 165,223 | |||||
Retained earnings | 121,267 | 83,313 | |||||
Accumulated other comprehensive income (loss) | 423 | (41 | ) | ||||
Total stockholders’ equity | 288,807 | 245,556 | |||||
Total liabilities and stockholders’ equity | $ | 427,677 | $ | 363,403 | |||
SMART SAND, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended |
Three Months Ended | ||||||||||
2020 | 2019 | December 31, 2020 | |||||||||
(audited) | (audited) | (unaudited) | |||||||||
(in thousands) | |||||||||||
Operating activities: | |||||||||||
Net income (loss) | $ | 37,954 | $ | 31,623 | $ | (2,884 | ) | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation, depletion and accretion of asset retirement obligation | 22,130 | 26,425 | 6,038 | ||||||||
Impairment loss | 5,115 | 15,542 | 5,115 | ||||||||
Amortization of intangible assets | 793 | 1,394 | 197 | ||||||||
Asset retirement obligation settlement | — | (2,753 | ) | — | |||||||
Loss (gain) on disposal of assets | 237 | (42 | ) | (62 | ) | ||||||
Loss on extinguishment of debt | — | 561 | — | ||||||||
Amortization of deferred financing cost | 105 | 212 | 26 | ||||||||
Accretion of debt discount | 185 | 649 | 47 | ||||||||
Deferred income taxes | (2,573 | ) | 6,123 | (2,811 | ) | ||||||
Stock-based compensation | 3,831 | 2,909 | 922 | ||||||||
Employee stock purchase plan compensation | 34 | 41 | 5 | ||||||||
Change in contingent consideration fair value | (1,410 | ) | (3,272 | ) | (390 | ) | |||||
Gain on bargain purchase, net of cash acquired | (39,291 | ) | — | 289 | |||||||
Changes in assets and liabilities: | 0 | ||||||||||
Accounts receivable | (10,719 | ) | (41,063 | ) | (3,690 | ) | |||||
Unbilled receivables | 4,638 | 3,058 | 9,129 | ||||||||
Inventories | 4,738 | (1,021 | ) | 4,432 | |||||||
Prepaid expenses and other assets | (5,327 | ) | 1,879 | (9,078 | ) | ||||||
Deferred revenue | 1,032 | 5,229 | (2,880 | ) | |||||||
Accounts payable | (370 | ) | (4,680 | ) | (165 | ) | |||||
Accrued and other expenses | 4,981 | 1,277 | 5,587 | ||||||||
Income taxes payable | (542 | ) | 542 | (6,510 | ) | ||||||
Net cash provided by operating activities | 25,541 | 44,632 | 3,317 | ||||||||
Investing activities: | |||||||||||
Purchases of property, plant and equipment | (8,620 | ) | (25,525 | ) | (1,176 | ) | |||||
Proceeds from disposal of assets | 61 | 100 | 10 | ||||||||
Net cash used in investing activities | (8,559 | ) | (25,425 | ) | (1,166 | ) | |||||
Financing activities: | |||||||||||
Proceeds from the issuance of notes payable | 952 | 31,202 | — | ||||||||
Repayments of notes payable | (4,802 | ) | (2,808 | ) | (1,275 | ) | |||||
Payments under equipment financing obligations | (123 | ) | (103 | ) | (36 | ) | |||||
Payment of deferred financing and debt issuance costs | (20 | ) | (2,262 | ) | — | ||||||
Proceeds from revolving credit facility | 6,000 | 52,750 | — | ||||||||
Repayment of revolving credit facility | (8,500 | ) | (94,750 | ) | — | ||||||
Payment of contingent consideration | (310 | ) | (1,995 | ) | — | ||||||
Proceeds from equity issuance | 62 | 71 | — | ||||||||
Purchase of treasury stock | (1,155 | ) | (140 | ) | (109 | ) | |||||
Net cash used in financing activities | (7,896 | ) | (18,035 | ) | (1,420 | ) | |||||
Net increase in cash and cash equivalents | 9,086 | 1,173 | 731 | ||||||||
Cash and cash equivalents at beginning of period | 2,639 | 1,466 | 10,994 | ||||||||
Cash and cash equivalents at end of period | $ | 11,725 | $ | 2,639 | $ | 11,725 | |||||
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 (benefit); (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, contingent consideration obligations and other acquisition and development costs; 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 ABL 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 tables present a reconciliation of EBITDA and Adjusted EBITDA to net income for each of the periods indicated:
Three Months Ended | |||||||||||
December 31, 2020 | September 30, 2020 | December 31, 2019 | |||||||||
(in thousands) | |||||||||||
Net (loss) income | $ | (2,884 | ) | $ | 36,282 | $ | 2,388 | ||||
Depreciation, depletion and amortization | 6,070 | 5,529 | 7,250 | ||||||||
Income tax (benefit) expense | (18,556 | ) | 1,941 | 294 | |||||||
Interest expense | 524 | 506 | 679 | ||||||||
Franchise taxes | 63 | 63 | 51 | ||||||||
EBITDA | $ | (14,783 | ) | $ | 44,321 | $ | 10,662 | ||||
Gain on sale of fixed assets | (11 | ) | (27 | ) | (1 | ) | |||||
Equity compensation (1) | 831 | 832 | 708 | ||||||||
Acquisition and development costs (2) | (514 | ) | 823 | (315 | ) | ||||||
Gain on bargain purchase | 289 | (39,889 | ) | — | |||||||
Non-cash impairment of long-lived and intangible assets | 5,115 | — | 7,914 | ||||||||
Cash charges related to restructuring and retention | — | — | 55 | ||||||||
Accretion of asset retirement obligations | 157 | 88 | 64 | ||||||||
Loss on extinguishment of debt | — | — | 561 | ||||||||
Sales tax audit settlement | 1,250 | — | — | ||||||||
Adjusted EBITDA | $ | (7,666 | ) | $ | 6,148 | $ | 19,648 | ||||
(1) Represents the non-cash expenses for stock-based awards issued to our employees and employee stock purchase plan compensation expense.
(2) Represents costs incurred related to the business combinations and current development project activities. The three months ended
Year Ended |
|||||||
2020 | 2019 | ||||||
(in thousands) | |||||||
Net income | $ | 37,954 | $ | 31,623 | |||
Depreciation, depletion and amortization | 22,536 | 27,135 | |||||
Income tax (benefit) expense | (12,980 | ) | 7,809 | ||||
Interest expense | 2,129 | 3,626 | |||||
Franchise taxes | 275 | 285 | |||||
EBITDA | $ | 49,914 | $ | 70,478 | |||
Loss (gain) on sale of fixed assets | 237 | (42 | ) | ||||
Equity compensation (1) | 3,431 | 2,755 | |||||
Acquisition and development costs (2) | (369 | ) | (3,047 | ) | |||
Gain on bargain purchase | (39,600 | ) | — | ||||
Non-cash impairment loss(3) | 5,115 | 15,542 | |||||
Cash charges related to restructuring and retention of employees | 82 | 137 | |||||
Accretion of asset retirement obligations | 396 | 687 | |||||
Loss on extinguishment of debt | — | 561 | |||||
Sales tax audit settlement | 1,250 | — | |||||
Adjusted EBITDA | $ | 20,456 | $ | 87,071 | |||
(1) Represents the non-cash expenses for stock-based awards issued to employees and employee stock purchase plan compensation expense.
(2) Represents costs incurred related to the business combinations and current development project activities. The year ended
(3) The year ended
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 its financial and operating performance. Contribution margin excludes other operating expenses and income, including costs not directly associated with the operations of the Company’s 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.
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 the 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 | |||||||||||
December 31, 2020 | September 30, 2020 | December 31, 2019 | |||||||||
(in thousands) | |||||||||||
Revenue | $ | 25,337 | $ | 23,409 | $ | 47,667 | |||||
Cost of goods sold | 32,999 | 18,227 | 29,793 | ||||||||
Gross profit | (7,662 | ) | 5,182 | 17,874 | |||||||
Depreciation, depletion, and accretion of asset retirement obligations included in cost of goods sold | 5,671 | 5,177 | 6,858 | ||||||||
Contribution margin* | $ | (1,991 | ) | $ | 10,359 | $ | 24,732 | ||||
Contribution margin per ton* | $ | (3.25 | ) | $ | 33.52 | $ | 53.53 | ||||
Total tons sold | 612 | 309 | 462 | ||||||||
* A previously furnished version of this press release contained an inadvertent typographical error. The Depreciation, depletion, and accretion of asset retirement obligations included in cost of goods sold was incorrectly listed as $2,468 for the three months ended December 31, 2020 instead of $5,671. This has been corrected in the table above and this correction has resulted in a change in the Contribution margin for the three months ended December 31, 2020 from ($5,194) to ($1,991) and a change in the Contribution margin per ton for the three months ended December 31, 2020 from ($8.49) to ($3.25).
Year Ended |
|||||||
2020 | 2019 | ||||||
(in thousands) | |||||||
Revenue | $ | 122,340 | $ | 233,073 | |||
Cost of goods sold | 104,221 | 152,021 | |||||
Gross profit | 18,119 | 81,052 | |||||
Depreciation, depletion, and accretion of asset retirement obligations included in cost of goods sold | 21,022 | 25,412 | |||||
Contribution margin | $ | 39,141 | $ | 106,464 | |||
Contribution margin per ton | $ | 20.75 | $ | 43.24 | |||
Total tons sold | 1,886 | 2,462 | |||||
Free Cash Flow
Free cash flow, which we define as net cash provided by operating activities less purchases of property, plant and equipment, is used as a supplemental financial measure by our management and by external users of our financial statements, such as investors and commercial banks, to measure the liquidity of our business.
Net cash provided by operating activities is the GAAP measure most directly comparable to free cash flow. Free cash flow should not be considered an alternative to net cash provided by operating activities presented in accordance with GAAP. Because free cash flows may be defined differently by other companies in our industry, our definition of free cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. The following table presents a reconciliation of free cash flow to net cash provided by operating activities.
Year Ended |
Three Months Ended | ||||||||||
2020 | 2019 | December 31, 2020 | |||||||||
(in thousands) | |||||||||||
Net cash provided by operating activities | $ | 25,541 | $ | 44,632 | $ | 3,317 | |||||
Purchases of property, plant and equipment | (8,620 | ) | (25,525 | ) | (1,176 | ) | |||||
Free cash flow | $ | 16,921 | $ | 19,107 | $ | 2,141 | |||||
Investor Contacts:
Director of Finance, Assistant Treasurer (281) 231-2660 jjayne@smartsand.com |
CFO (281) 231-2660 lbeckelman@smartsand.com |
|
Source: Smart Sand, Inc.