“Smart Sand continued to deliver solid financial and operating results in the second quarter of 2023,” stated
We continue to take advantage of our high quality Northern White asset base and superior logistics service offerings to deliver strong financial returns for our shareholders. We started up operations at our
Second Quarter 2023 Results
Tons sold were approximately 1,084,000 in the second quarter of 2023, compared to approximately 1,195,000 tons in the first quarter of 2023 and 1,196,000 tons in the second quarter of 2022, a decrease of 9% both sequentially and over the comparable period in 2022.
Revenues were
Gross profit was
For the second quarter of 2023, we had net income of
Contribution margin of
Adjusted EBITDA was
Net cash provided by operating activities was
Free cash flow was
Liquidity
Our primary sources of liquidity are cash on hand, cash flow generated from operations and available borrowings under our ABL Credit Facility. As of
Conference Call
Smart Sand will host a conference call and live webcast for analysts and investors on
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, including the Company’s expectations regarding future sales. 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 the Company’s Annual Report on 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
Smart Sand is a fully integrated frac and industrial sand supply and services company, offering complete mine to wellsite proppant and logistic solutions to our frac sand customers, and a broad offering of products for industrial sand customers. The Company produces low-cost, high quality Northern White sand, which is a premium sand used as a proppant to enhance hydrocarbon recovery rates in the hydraulic fracturing of oil and natural gas wells. The Company’s sand is also a high-quality product used in a variety of industrial applications, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscaping, retail, recreation and more. The Company also offers logistics solutions to our customers through its in-basin transloading terminals and our SmartSystems wellsite storage capabilities. Smart Sand owns and operates premium sand mines and related processing facilities in
SMART SAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | |||||||||||
| June 30, 2023 | March 31, 2023 | June 30, 2022 | |||||||||
| (unaudited) | (unaudited) | (unaudited) | |||||||||
| Revenues: | |||||||||||
| Sand sales revenue | $ | 72,435 | $ | 78,098 | $ | 67,111 | |||||
| Shortfall revenue | — | 1,915 | — | ||||||||
| Logistics revenue | 2,341 | 2,337 | 1,603 | ||||||||
| Total revenue | 74,776 | 82,350 | 68,714 | ||||||||
| Cost of goods sold | 62,087 | 70,713 | 59,743 | ||||||||
| Gross profit | 12,689 | 11,637 | 8,971 | ||||||||
| Operating expenses: | |||||||||||
| Salaries, benefits and payroll taxes | 4,363 | 5,145 | 3,225 | ||||||||
| Depreciation and amortization | 629 | 592 | 563 | ||||||||
| Selling, general and administrative | 4,590 | 5,619 | 3,812 | ||||||||
| Loss (gain) on disposal of fixed asset, net | 24 | 1,889 | (16 | ) | |||||||
| Total operating expenses | 9,606 | 13,245 | 7,584 | ||||||||
| Operating income (loss) | 3,083 | (1,608 | ) | 1,387 | |||||||
| Other income (expenses): | |||||||||||
| Interest expense, net | (223 | ) | (441 | ) | (406 | ) | |||||
| Other income | 159 | 48 | 56 | ||||||||
| Total other income (expenses), net | (64 | ) | (393 | ) | (350 | ) | |||||
| Income (loss) before income tax (benefit) expense | 3,019 | (2,001 | ) | 1,037 | |||||||
| Income tax (benefit) expense | (3,288 | ) | 1,598 | 1,127 | |||||||
| Net income (loss) | $ | 6,307 | $ | (3,599 | ) | $ | (90 | ) | |||
| Net income (loss) per common share: | |||||||||||
| Basic | $ | 0.17 | $ | (0.09 | ) | $ | — | ||||
| Diluted | $ | 0.17 | $ | (0.09 | ) | $ | — | ||||
| Weighted-average number of common shares: | |||||||||||
| Basic | 37,968 | 41,272 | 42,181 | ||||||||
| Diluted | 37,968 | 41,272 | 42,181 | ||||||||
SMART SAND, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) |
December 31, 2022 | ||||||
| (in thousands) | |||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 5,492 | $ | 5,510 | |||
| Accounts receivable | 29,996 | 35,746 | |||||
| Unbilled receivables | 257 | 79 | |||||
| Inventory | 23,005 | 20,185 | |||||
| Prepaid expenses and other current assets | 1,554 | 6,593 | |||||
| Total current assets | 60,304 | 68,113 | |||||
| Property, plant and equipment, net | 256,790 | 258,843 | |||||
| Operating lease right-of-use assets | 25,055 | 26,075 | |||||
| Intangible assets, net | 6,272 | 6,669 | |||||
| Other assets | 214 | 303 | |||||
| Total assets | $ | 348,635 | $ | 360,003 | |||
| Liabilities and Stockholders’ Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 15,201 | $ | 14,435 | |||
| Accrued expenses and other liabilities | 12,691 | 13,430 | |||||
| Deferred revenue | 6,345 | 6,959 | |||||
| Current portion of long-term debt | 5,521 | 6,183 | |||||
| Current portion of operating lease liabilities | 11,014 | 10,910 | |||||
| Total current liabilities | 50,772 | 51,917 | |||||
| Long-term debt | 7,462 | 9,807 | |||||
| Long-term operating lease liabilities | 15,746 | 17,642 | |||||
| Long-term deferred tax liabilities, net | 16,490 | 18,238 | |||||
| Asset retirement obligations | 19,323 | 18,888 | |||||
| Other non-current liabilities | 40 | 40 | |||||
| Total liabilities | 109,833 | 116,532 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity | |||||||
| Common stock | 38 | 43 | |||||
| (14,000 | ) | (5,075 | ) | ||||
| Additional paid-in capital | 180,046 | 178,386 | |||||
| Retained earnings | 72,598 | 69,890 | |||||
| Accumulated other comprehensive income | 120 | 227 | |||||
| Total stockholders’ equity | 238,802 | 243,471 | |||||
| Total liabilities and stockholders’ equity | $ | 348,635 | $ | 360,003 | |||
SMART SAND, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended | |||||||||||
| June 30, 2023 | March 31, 2023 | June 30, 2022 | |||||||||
| (unaudited) | (unaudited) | (unaudited) | |||||||||
| (in thousands) | |||||||||||
| Operating activities: | |||||||||||
| Net income (loss) | 6,307 | (3,599 | ) | (90 | ) | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation, depletion and accretion of asset retirement obligations | 6,785 | 6,553 | 6,638 | ||||||||
| Amortization of intangible assets | 199 | 199 | 199 | ||||||||
| Loss (gain) on disposal of fixed assets | 24 | 1,889 | (16 | ) | |||||||
| Provision for bad debt | — | — | 1 | ||||||||
| Amortization of deferred financing cost | 27 | 26 | 27 | ||||||||
| Accretion of debt discount | 46 | 47 | 46 | ||||||||
| Deferred income taxes | (3,417 | ) | 1,669 | 911 | |||||||
| Stock-based compensation | 833 | 779 | 802 | ||||||||
| Employee stock purchase plan compensation | 8 | 7 | 6 | ||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable | 5,982 | (74 | ) | (5,563 | ) | ||||||
| Unbilled receivables | 1,027 | (1,363 | ) | (3,236 | ) | ||||||
| Inventories | (2,921 | ) | 101 | (3,291 | ) | ||||||
| Prepaid expenses and other assets | 4,871 | (676 | ) | (1,981 | ) | ||||||
| Deferred revenue | 444 | (1,058 | ) | (3,369 | ) | ||||||
| Accounts payable | (3,214 | ) | 1,165 | 3,422 | |||||||
| Accrued and other expenses | (933 | ) | (560 | ) | 3,207 | ||||||
| Net cash provided by (used in) operating activities | 16,068 | 5,105 | (2,287 | ) | |||||||
| Investing activities: | |||||||||||
| Purchases of property, plant and equipment | (5,227 | ) | (4,018 | ) | (1,369 | ) | |||||
| Proceeds from disposal of assets | 72 | 1 | — | ||||||||
| Net cash used in investing activities | (5,155 | ) | (4,017 | ) | (1,369 | ) | |||||
| Financing activities: | |||||||||||
| Repayments of notes payable | (5,937 | ) | (1,513 | ) | (1,805 | ) | |||||
| Payments under equipment financing obligations | (37 | ) | (86 | ) | (25 | ) | |||||
| Proceeds from revolving credit facility | 1,000 | 14,000 | 3,000 | ||||||||
| Repayment of revolving credit facility | (8,000 | ) | (7,000 | ) | — | ||||||
| Proceeds from equity issuance | — | 33 | — | ||||||||
| Purchase of treasury stock | (51 | ) | (4,428 | ) | (114 | ) | |||||
| Net cash (used in) provided by financing activities | (13,025 | ) | 1,006 | 1,056 | |||||||
| Net increase in cash and cash equivalents | (2,112 | ) | 2,094 | (2,600 | ) | ||||||
| Cash and cash equivalents at beginning of period | 7,604 | 5,510 | 4,698 | ||||||||
| Cash and cash equivalents at end of period | $ | 5,492 | $ | 7,604 | $ | 2,098 | |||||
Non-GAAP Financial Measures
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.
We believe that reporting contribution margin and contribution margin per ton sold provides useful performance metrics 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.
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 gross profit to contribution margin.
| Three Months Ended | |||||||||||
| June 30, 2023 | March 31, 2023 | June 30, 2022 | |||||||||
| (in thousands, except per ton amounts) | |||||||||||
| Revenue | $ | 74,776 | $ | 82,350 | $ | 68,714 | |||||
| Cost of goods sold | 62,087 | 70,713 | 59,743 | ||||||||
| Gross profit | 12,689 | 11,637 | 8,971 | ||||||||
| Depreciation, depletion, and accretion of asset retirement obligations included in cost of goods sold | 6,356 | 6,159 | 6,283 | ||||||||
| Contribution margin | $ | 19,045 | $ | 17,796 | $ | 15,254 | |||||
| Contribution margin per ton | $ | 17.57 | $ | 14.89 | $ | 12.75 | |||||
| Total tons sold | 1,084 | 1,195 | 1,196 | ||||||||
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 net (loss) income to EBITDA and Adjusted EBITDA for each of the periods indicated.
| Three Months Ended | |||||||||||
| June 30, 2023 | March 31, 2022 | June 30, 2022 | |||||||||
| (in thousands) | |||||||||||
| Net income (loss) | $ | 6,307 | $ | (3,599 | ) | $ | (90 | ) | |||
| Depreciation, depletion and amortization | 6,750 | 6,551 | 6,658 | ||||||||
| Income tax expense (benefit) | (3,288 | ) | 1,598 | 1,127 | |||||||
| Interest expense | 457 | 442 | 417 | ||||||||
| Franchise taxes | 102 | 336 | 131 | ||||||||
| EBITDA | $ | 10,328 | $ | 5,328 | $ | 8,243 | |||||
| Net loss (gain) on disposal of fixed assets | 25 | 1,889 | (16 | ) | |||||||
| Equity compensation | 802 | 736 | 636 | ||||||||
| Acquisition and development costs | — | 271 | — | ||||||||
| Cash charges related to restructuring and retention | 18 | — | 106 | ||||||||
| Accretion of asset retirement obligations | 235 | 200 | 190 | ||||||||
| Adjusted EBITDA | $ | 11,408 | $ | 8,424 | $ | 9,159 | |||||
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 net cash provided by (used in) operating activities to free cash flow.
| Three Months Ended | |||||||||||
| June 30, 2023 | March 31, 2023 | June 30, 2022 | |||||||||
| (in thousands) | |||||||||||
| Net cash provided by (used in) operating activities | $ | 16,068 | $ | 5,105 | $ | (2,287 | ) | ||||
| Purchases of property, plant and equipment, net | (5,227 | ) | (4,018 | ) | (1,369 | ) | |||||
| Free cash flow | $ | 10,841 | $ | 1,087 | $ | (3,656 | ) | ||||
Investor Contacts:Lee Beckelman Chief Financial Officer (281) 231-2660 lbeckelman@smartsand.com
Source: Smart Sand, Inc.
