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News Release

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Smart Sand, Inc. Announces First Quarter 2021 Results

05/04/21
  • 1Q 2021 revenue of $27.5 million 
  • 1Q 2021 total tons sold of approximately 760,000, a 24% sequential increase
  • 1Q 2021 net cash provided by operating activities of $3.9 million
  • 1Q 2021 free cash flow of $1.7 million

THE WOODLANDS, Texas, May 04, 2021 (GLOBE NEWSWIRE) -- Smart Sand, Inc. (NASDAQ: SND) (the “Company” or “Smart Sand”), a fully integrated frac sand supply and services company, a low-cost producer of high quality Northern White raw frac sand and provider of proppant logistics solutions through both its in-basin transloading terminal and SmartSystemsTM products and services, today announced results for the first quarter 2021.

Charles Young, Smart Sand’s Chief Executive Officer, stated, “Despite challenging weather conditions for the industry in February, we delivered a strong sequential increase in volumes, with tons sold increasing by 24% compared to the fourth quarter 2020. The Utica facility acquired last September was fully operational this quarter, which contributed to the increased volumes sequentially. We are pleased with the level of activity we achieved at Utica during the quarter. As anticipated, the acquisition of Utica and access to a third Class I rail line is opening up new markets for us to compete in.” Mr. Young continued, “We also commenced the first deployment of our SmartPath transloader, and we are pleased with the way it is operating in the field. We are getting increased interest in the SmartPath and anticipate additional deployments in the second quarter. As always, we remain committed to providing low cost sand sourcing and delivery solutions for our customers while generating free cash flow and maintaining prudent debt levels. Thank you to all of our employees who continue to work diligently and safely as our industry continues to recover from the downturn.”

First Quarter 2021 Results

Revenues were $27.5 million in the first quarter of 2021, compared to $25.3 million in the fourth quarter of 2020 and $47.5 million in the first quarter of 2020. Revenues were up in the first quarter, compared to the fourth quarter of 2020, due to higher sand sales revenues resulting from increased volumes, partially offset by a decrease in logistics revenues. Logistics revenue decreased in the first quarter of 2021, as compared to the fourth quarter 2020, due to increased in-basin shipments, which include transportation and other handling services, rather than mine gate shipments. The decrease in revenue in the first quarter of 2021, as compared to the first quarter of 2020, was primarily due to higher logistics revenues in 2020 and a lower average sales price of our sand in 2021.

Tons sold were approximately 760,000 in the first quarter of 2021, compared with approximately 612,000 tons in the fourth quarter of 2020 and 757,000 tons in the first quarter of 2020, increases of 24% and 0%, respectively. Sales volumes improved substantially in the first quarter of 2021, compared to the fourth quarter 2020, due to increased demand as the economy began to show some improvement from the depressed levels caused by the pandemic in 2020, as well resets of our customers’ annual budgets.

For the first quarter of 2021, the Company had a net loss of $3.9 million, or $(0.09) per basic and diluted share, compared to net loss of $2.9 million, or $(0.07) per basic and diluted share, for the fourth quarter of 2020 and net loss of $0.1 million, or $0.00 per basic and diluted share, for the first quarter of 2020. The higher net loss in the first quarter of 2021, as compared to the fourth quarter of 2020, is due to the income tax benefit recognized in the fourth quarter 2020 related to the anticipated benefit to be received from the carryback of net operating losses, including those related to depletion deductions, to tax years with a 35% corporate tax rate, offset by an increase in sales volumes in the first quarter of 2021. The increase in net loss for the first quarter of 2021 as compared to net loss for the same period in the prior year was primarily due to lower average sale prices of our sand recognized on similar tons sold and lower logistics revenues as our sales shifted to more in-basin shipments rather than mine gate shipments.

Contribution margin was $1.0 million, or $1.36 per ton sold, for the first quarter of 2021 compared to $(2.0) million, or $(3.25) per ton sold, for the fourth quarter of 2020 and $11.5 million, or $15.20 per ton sold, for the first quarter of 2020. The sequential increase in contribution margin and contribution margin per ton in the first quarter of 2021 compared to the fourth quarter of 2020 is due to the 24% increase in tons sold. The decrease in overall contribution margin and contribution margin per ton in the first quarter of 2021 compared to the same period in the prior year was due primarily to lower average sale prices of our sand recognized in the current period on similar volume levels and lower logistics revenues as our sales shifted to more in-basin shipments rather than mine gate shipments.

Adjusted EBITDA was $(3.5) million for the first quarter of 2021, compared with $(7.7) million for the fourth quarter of 2020 and $6.4 million for the first quarter of 2020. Adjusted EBITDA improved for the first quarter of 2021 compared to the fourth quarter of 2020 as a result of the 24% increase in tons sold. The decrease in Adjusted EBITDA compared to the first quarter of 2020 was primarily due to lower average sale prices of our sand recognized in the current period on similar volume levels and lower logistics revenues as our sales shifted to more in-basin shipments rather than mine gate shipments.

Liquidity

Our primary sources of liquidity are cash on hand, cash flow generated from operations and available borrowings under our ABL Credit Facility and the Acquisition Liquidity Support Facility from our recent acquisition. As of March 31, 2021, cash on hand was $11.4 million and we had $10.3 million in undrawn availability on our ABL Credit Facility, with no borrowings outstanding under our ABL Credit Facility or the Acquisition Liquidity Support Facility. For the three months ended March 31, 2021, we spent approximately $2.2 million on capital expenditures. We estimate that full year 2021 capital expenditures will be between $10.0 million and $15.0 million.

Conference Call

Smart Sand will host a conference call and live webcast for analysts and investors on May 5, 2021 at 10:00 a.m. Eastern Time to discuss the Company’s first quarter 2021 financial results. Investors are invited to listen to a live audio webcast of the conference call, which will be accessible on the “Investors” section of the Company’s website at www.smartsand.com. To access the live webcast, please log in 15 minutes prior to the start of the call to download and install any necessary audio software. An archived replay of the call will also be available on the website following the call. The call can also be accessed live by dialing (888) 799-5165 or, for international callers, (478) 219-0056. The passcode for the call is 6763985. A replay will be available shortly after the call and can be accessed by dialing (855) 859-2056 or, for international callers, (404) 537-3406. The conference ID for the replay is 6763985.

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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on March 3,2021, and in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed by the Company with the SEC on May 4, 2021.

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 Wisconsin and Illinois, which have access to three Class I rail lines, allowing us to deliver products substantially anywhere in the United States and Canada. For more information, please visit www.smartsand.com.

SMART SAND, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

  Three Months Ended
  March 31, 2021   December 31, 2020   March 31, 2020
  (unaudited)   (unaudited)   (unaudited)
   
  (in thousands, except per share amounts)
Revenues:          
Sand sales revenue $ 23,147       20,093       30,008    
Shortfall revenue 1,741       1,133       1,307    
Logistics revenue 2,562       4,111       16,173    
Total revenue 27,450       25,337       47,488    
Cost of goods sold 32,427       32,999       41,089    
Gross (loss) profit (4,977 )     (7,662 )     6,399    
Operating expenses:          
Salaries, benefits and payroll taxes 2,375       2,878       2,902    
Depreciation and amortization 561       557       453    
Selling, general and administrative 3,154       5,134       3,530    
Change in the estimated fair value of contingent consideration       (390 )     (1,020 )  
Impairment loss       5,115          
Total operating expenses 6,090       13,294       5,865    
Operating (loss) income (11,067 )     (20,956 )     534    
Other income (expenses):          
Gain on bargain purchase       (289 )        
Interest expense, net (547 )     (515 )     (472 )  
Other income 198       320       19    
Total other expenses, net (349 )     (484 )     (453 )  
(Loss) income before income tax (benefit) expense (11,416 )     (21,440 )     81    
Income tax (benefit) expense (7,504 )     (18,556 )     165    
Net loss $ (3,912 )     $ (2,884 )     $ (84 )  
Net loss per common share:          
Basic $ (0.09 )     $ (0.07 )     $    
Diluted $ (0.09 )     $ (0.07 )     $    
Weighted-average number of common shares:          
Basic 41,629       41,324       40,091    
Diluted 41,629       41,324       40,091    

SMART SAND, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

       
    March 31, 2021              
    (unaudited)         December 31, 2020    
                   
  (in thousands)
Assets      
Current assets:      
Cash and cash equivalents $ 11,417       $ 11,725    
Accounts receivable 66,658       69,720    
Unbilled receivables 215       127    
Inventories 17,546       19,136    
Prepaid expenses and other current assets 10,960       11,378    
Total current assets 106,796       112,086    
Property, plant and equipment, net 272,197       274,676    
Operating lease right-of-use assets 29,697       32,099    
Intangible assets, net 8,055       8,253    
Other assets 548       563    
Total assets $ 417,293       $ 427,677    
Liabilities and Stockholders’ Equity      
Current liabilities:      
Accounts payable $ 4,816       $ 3,268    
Accrued expenses and other liabilities 12,326       13,142    
Deferred revenue, current 5,563       6,875    
Long-term debt, net, current 7,073       6,901    
Operating lease liabilities, current 7,480       7,077    
Total current liabilities 37,258       37,263    
Deferred revenue, net 6,984       3,482    
Long-term debt, net 20,651       22,445    
Operating lease liabilities, long-term 25,080       27,020    
Deferred tax liabilities, long-term, net 25,290       32,981    
Asset retirement obligation 15,925       14,996    
Contingent consideration       180    
Other non-current liabilities 503       503    
Total liabilities 131,691       138,870    
Commitments and contingencies      
Stockholders’ equity      
Common stock 42       42    
Treasury stock (4,274 )     (4,134 )  
Additional paid-in capital 171,931       171,209    
Retained earnings 117,355       121,267    
Accumulated other comprehensive income 548       423    
Total stockholders’ equity 285,602       288,807    
Total liabilities and stockholders’ equity $ 417,293       $ 427,677    

SMART SAND, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

  Three Months Ended
  March 31, 2021   December 31, 2020   March 31, 2020
  (unaudited)   (audited)   (unaudited)
   
  (in thousands)
Operating activities:          
Net loss $ (3,912 )     $ (2,884 )     $ (84 )  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation, depletion and accretion of asset retirement obligation 6,375       6,038       5,363    
Impairment loss       5,115          
Amortization of intangible assets 198       197       199    
Loss (gain) on disposal of assets 2       (62 )        
Amortization of deferred financing cost 26       26       26    
Accretion of debt discount 47       47       45    
Deferred income taxes (7,691 )     (2,811 )     1,264    
Stock-based compensation 678       922       1,025    
Employee stock purchase plan compensation 7       5       13    
Change in contingent consideration fair value       (390 )     (1,020 )  
Gain on bargain purchase, net of cash acquired       289          
Changes in assets and liabilities:          
Accounts receivable 3,062       (3,690 )     1,095    
Unbilled receivables (88 )     9,129       4,536    
Inventories 1,590       4,432       3,642    
Prepaid expenses and other assets 1,140       (9,078 )     (1,933 )  
Deferred revenue 2,191       (2,880 )     (2,575 )  
Accounts payable 1,332       (165 )     2,048    
Accrued and other expenses (1,043 )     5,587       (1,471 )  
Income taxes payable       (6,510 )     (112 )  
Net cash provided by operating activities 3,914       3,317       12,061    
Investing activities:          
Purchases of property, plant and equipment (2,213 )     (1,176 )     (4,185 )  
Proceeds from disposal of assets (2 )     10          
Net cash used in investing activities (2,215 )     (1,166 )     (4,185 )  
Financing activities:          
Repayments of notes payable (1,672 )     (1,275 )     (1,192 )  
Payments under equipment financing obligations (31 )     (36 )     (32 )  
Payment of deferred financing and debt issuance costs             (20 )  
Proceeds from revolving credit facility             6,000    
Repayment of revolving credit facility             (2,500 )  
Payment of contingent consideration (180 )           (280 )  
Proceeds from equity issuance 17             46    
Purchase of treasury stock (141 )     (109 )     (1,014 )  
Net cash (used in) provided by financing activities (2,007 )     (1,420 )     1,008    
Net increase in cash and cash equivalents (308 )     731       8,884    
Cash and cash equivalents at beginning of period 11,725       10,994       2,639    
Cash and cash equivalents at end of period $ 11,417       $ 11,725       $ 11,523    

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. 

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
  March 31, 2021   December 31, 2020   March 31, 2020
   
  (in thousands)
Revenue $ 27,450       $ 25,337       $ 47,488  
Cost of goods sold $ 32,427       32,999       $ 41,089  
Gross profit (4,977 )     (7,662 )     6,399  
Depreciation, depletion, and accretion of asset retirement obligations included in cost of goods sold 6,013       5,671       5,109  
Contribution margin $ 1,036       $ (1,991 )     $ 11,508  
Contribution margin per ton $ 1.36       $ (3.25 )     $ 15.20  
Total tons sold 760       612       757  

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 table presents a reconciliation of EBITDA and Adjusted EBITDA to net income for each of the periods indicated:

  Three Months Ended
  March 31, 2021   December 31, 2020   March 31, 2020
   
  (in thousands)
Net loss $ (3,912 )     $ (2,884 )     $ (84 )  
Depreciation, depletion and amortization 6,460       6,070       5,487    
Income tax (benefit) expense (7,504 )     (18,556 )     165    
Interest expense 555       524       480    
Franchise taxes 98       63       56    
EBITDA $ (4,303 )     $ (14,783 )     $ 6,104    
Loss (gain) on sale of fixed assets 2       (11 )        
Equity compensation(1) 685       831       926    
Acquisition and development costs(2) 23       (514 )     (822 )  
Gain on bargain purchase       289        
Non-cash impairment of long-lived and intangible assets       5,115          
Cash charges related to restructuring and retention             82    
Accretion of asset retirement obligations 114       157       75    
Sales tax audit settlement       1,250          
Adjusted EBITDA $ (3,479 )     $ (7,666 )     $ 6,365    
           



(1) Represents the non-cash expenses for stock-based awards issued to our employees and employee stock purchase plan compensation expense.
(2) The three months ended March 31, 2021 includes acquisition and development costs of $23. The three months ended December 31, 2020 includes fair value adjustment of contingent consideration of $390, and acquisition costs of $74. The three months ended March 31, 2020 includes $1,020 fair value adjustment of contingent consideration.


_________________________

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.

  Three Months Ended
  March 31, 2021   December 31, 2020   March 31, 2020
   
  (in thousands)
Net cash provided by operating activities $ 3,914       $ 3,317       $ 12,061    
Purchases of property, plant and equipment (2,213 )     (1,176 )     (4,185 )  
Free cash flow $ 1,701       $ 2,141       $ 7,876    

Investor Contacts:

Josh Jayne Lee Beckelman
Director of Finance, Assistant Treasurer CFO
(281) 231-2660 (281) 231-2660
jjayne@smartsand.com lbeckelman@smartsand.com

 


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Source: Smart Sand, Inc.