Smart Sand, Inc. Announces First Quarter 2024 Results
Smart Sand, Inc. (NASDAQ: SND) reported its first quarter 2024 financial results, highlighting a significant increase in sales volumes and revenues. The company sold 1.3 million tons of sand, generating $83.1 million in revenue, a 31% increase from the previous quarter. However, the company reported a net loss of $0.2 million, an improvement from the $4.8 million loss in Q4 2023. Adjusted EBITDA rose to $9.3 million, driven by higher sand sales and better utilization of the SmartSystems fleet. Despite the improved operational metrics, free cash flow was negative at $(5.5) million due to increased working capital needs. Smart Sand expects positive free cash flow for the full year 2024 and has earmarked $15-$20 million for capital expenditures.
- Sales volumes increased by 31% sequentially to 1.3 million tons.
- Revenue rose to $83.1 million, up from $61.9 million in Q4 2023.
- Net loss improved to $0.2 million from a $4.8 million loss in Q4 2023.
- Adjusted EBITDA increased to $9.3 million, compared to $0.7 million in Q4 2023.
- Contribution margin doubled from the previous quarter to $18.5 million.
- Company expects positive free cash flow for the full year 2024.
- Free cash flow was negative at $(5.5) million for Q1 2024.
- Net cash used in operating activities was $(3.9) million, compared to $(2.7) million in Q4 2023.
- Lower average selling prices offset revenue gains from higher sales volumes.
- Capital expenditures are estimated to be between $15-$20 million for 2024.
Insights
Smart Sand, Inc. has delivered mixed results in its first quarter of 2024. Although the company reported a slight net loss of
The company's adjusted EBITDA rose sharply to
However, the dip in free cash flow to
For retail investors, while the company’s performance shows promising signs of recovery, the increased operating costs and the slight net loss might seem concerning. The company’s strategy to improve efficiency and cost structure is important for sustained financial health.
From a market perspective, Smart Sand’s improvement in sales volumes across major basins indicates a strong market demand for frac sand. The 31% sequential rise in tons sold, reaching approximately 1.3 million tons, underscores robust activity in the oil and gas sectors, particularly in shale formations. This demand is pivotal as it reflects the broader industry trends and could be a precursor to sustained growth.
The company's strategy of increasing the utilization of its SmartSystems™ products and services is a key highlight. These advanced logistics solutions not only enhance operational efficiency but also offer a competitive edge in a highly commoditized market. The reported contribution margin increase to
However, the decline in average selling prices poses a challenge as it might squeeze margins in the future. Investors should keep an eye on how Smart Sand manages this aspect amidst fluctuating market conditions.
Overall, the company's market positioning remains strong and the increased volumes and improved margins provide a solid foundation for potential future growth.
- 1Q 2024 total tons sold of approximately 1.3 million
- 1Q 2024 revenue of
$83.1 million - 1Q 2024 net loss of
$(0.2) million - 1Q 2024 adjusted EBITDA of
$9.3 million
"Smart Sand had a strong first quarter," stated Charles Young, Smart Sand's Chief Executive Officer. "Compared to the fourth quarter of 2023, sales volumes increased by over
"Free cash flow was negatively impacted by the increase in working capital needed in the quarter to support the higher sales levels. We expect working capital growth to moderate beginning in the second quarter and currently we expect free cash flow to be positive for 2024. We are focused on being more efficient in our operations and in the utilization of our combined assets to improve our cost structure which should allow us to generate positive cash flow through the operating cycles in our industry."
First Quarter 2024 Highlights
Tons sold were approximately 1,336,000 in the first quarter of 2024, compared to approximately 1,016,000 tons in the fourth quarter of 2023 and 1,195,000 tons in the first quarter of 2023, an increase of
Revenues were
For the first quarter of 2024, we had net loss of
First quarter 2024 contribution margin of
Adjusted EBITDA was
Net cash used in 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 March 31, 2024, cash on hand was
Conference Call
Smart Sand will host a conference call and live webcast for analysts and investors on May 14, 2024 at 10:00 a.m. Eastern Time to discuss its first quarter 2024 financial results. Investors are invited to join the conference by dialing (646)-357-8785 or 1-800-836-8184 and referencing "Smart Sand" when connected to the operator. Additionally, the call may also be streamed via webcast at https://app.webinar.net/r5vOQAPdGzN or within the "Investors" section of the Company's website at www.smartsand.com. A replay will be available shortly after the call and can be accessed on the "Investors" section of the Company's website.
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, delays in the completion of certain expansion and improvement projects at our existing facilities or failure to recognize the anticipated benefits of such projects, 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 Annual Report on Form 10-K for the year ended December 31, 2023, filed by the Company with the U.S. Securities and Exchange Commission ("SEC") on March 11, 2024, and in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed by the Company with the SEC on May 13, 2024.
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. | |||||
Three Months Ended | |||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||
(unaudited) | (unaudited) | (unaudited) | |||
Revenues: | |||||
Sand revenue | $ 79,719 | $ 60,148 | $ 80,019 | ||
SmartSystems revenue | 3,333 | 1,799 | 2,331 | ||
Total revenue | 83,052 | 61,947 | 82,350 | ||
Cost of goods sold: | |||||
Sand cost of goods sold | 68,967 | 57,865 | 68,738 | ||
SmartSystems cost of goods sold | 2,274 | 1,251 | 1,975 | ||
Total cost of goods sold | 71,241 | 59,116 | 70,713 | ||
Gross profit | 11,811 | 2,831 | 11,637 | ||
Operating expenses: | |||||
Selling, general and administrative | 10,350 | 10,088 | 10,764 | ||
Depreciation and amortization | 674 | 667 | 592 | ||
Loss (gain) on disposal of fixed asset, net | 3 | (19) | 1,889 | ||
Total operating expenses | 11,027 | 10,736 | 13,245 | ||
Operating income | 784 | (7,905) | (1,608) | ||
Other income (expenses): | |||||
Interest expense, net | (489) | (332) | (441) | ||
Other income | 96 | 119 | 48 | ||
Total other expenses, net | (393) | (213) | (393) | ||
Income (loss) before income tax expense (benefit) | 391 | (8,118) | (2,001) | ||
Income tax expense (benefit) | 607 | (3,332) | 1,598 | ||
Net loss | $ (216) | $ (4,786) | $ (3,599) | ||
Net loss per common share: | |||||
Basic | $ (0.01) | $ (0.12) | $ (0.09) | ||
Diluted | $ (0.01) | $ (0.12) | $ (0.09) | ||
Weighted-average number of common shares: | |||||
Basic | 38,555 | 38,339 | 41,272 | ||
Diluted | 38,555 | 38,499 | 41,272 | ||
SMART SAND, INC. | |||
March 31, 2024 | December 31, 2023 | ||
(unaudited) | |||
(in thousands) | |||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ 4,598 | $ 6,072 | |
Accounts receivable | 37,698 | 23,231 | |
Unbilled receivables | 79 | 2,561 | |
Inventory | 25,584 | 26,823 | |
Prepaid expenses and other current assets | 3,210 | 3,217 | |
Total current assets | 71,169 | 61,904 | |
Property, plant and equipment, net | 251,384 | 255,092 | |
Operating lease right-of-use assets | 20,472 | 23,265 | |
Intangible assets, net | 5,678 | 5,876 | |
Other assets | 558 | 163 | |
Total assets | $ 349,261 | $ 346,300 | |
Liabilities and Stockholders' Equity | |||
Current liabilities: | |||
Accounts payable | $ 9,935 | $ 16,041 | |
Accrued expenses and other liabilities | 15,402 | 11,024 | |
Deferred revenue | 2,375 | 1,154 | |
Current portion of long-term debt | 22,045 | 15,711 | |
Current portion of operating lease liabilities | 9,554 | 10,536 | |
Total current liabilities | 59,311 | 54,466 | |
Long-term debt | 2,445 | 3,449 | |
Long-term operating lease liabilities | 12,070 | 14,056 | |
Deferred tax liabilities, net | 12,697 | 12,101 | |
Asset retirement obligations | 20,172 | 19,923 | |
Other non-current liabilities | 38 | 38 | |
Total liabilities | 106,733 | 104,033 | |
Commitments and contingencies | |||
Stockholders' equity | |||
Common stock | 39 | 39 | |
Treasury stock | (14,419) | (14,249) | |
Additional paid-in capital | 182,646 | 181,973 | |
Retained earnings | 74,323 | 74,539 | |
Accumulated other comprehensive loss | (61) | (35) | |
Total stockholders' equity | 242,528 | 242,267 | |
Total liabilities and stockholders' equity | $ 349,261 | $ 346,300 | |
SMART SAND, INC. | |||||
Three Months Ended | |||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||
(unaudited) | (unaudited) | (unaudited) | |||
(in thousands) | |||||
Operating activities: | |||||
Net loss | (216) | (4,786) | (3,599) | ||
Adjustments to reconcile net income to net cash provided by | |||||
Depreciation, depletion and accretion of asset retirement | 7,241 | 7,113 | 6,553 | ||
Amortization of intangible assets | 199 | 197 | 199 | ||
Loss (gain) on disposal of fixed assets | 3 | (19) | 1,889 | ||
Amortization of deferred financing cost | 26 | 26 | 26 | ||
Accretion of debt discount | 47 | 46 | 47 | ||
Deferred income taxes | 596 | (2,041) | 1,669 | ||
Stock-based compensation | 642 | 1,035 | 779 | ||
Employee stock purchase plan compensation | 6 | 4 | 7 | ||
Changes in assets and liabilities: | |||||
Accounts receivable | (9,344) | 784 | (74) | ||
Unbilled receivables | (2,640) | (2,396) | (1,363) | ||
Inventory | 1,240 | (868) | 101 | ||
Prepaid expenses and other assets | (240) | (2,860) | (676) | ||
Deferred revenue | 1,220 | (863) | (1,058) | ||
Asset retirement obligation settlement | — | (197) | — | ||
Accounts payable | (6,730) | 5,845 | 1,165 | ||
Accrued and other expenses | 4,087 | (3,679) | (560) | ||
Net cash (used in) provided by operating activities | (3,863) | (2,659) | 5,105 | ||
Investing activities: | |||||
Purchases of property, plant and equipment | (1,646) | (6,905) | (4,018) | ||
Proceeds from disposal of assets | 1 | 6 | 1 | ||
Net cash used in investing activities | (1,645) | (6,899) | (4,017) | ||
Financing activities: | |||||
Repayments of notes payable | (1,340) | (1,483) | (1,513) | ||
Payments under equipment financing obligations | (56) | (71) | (86) | ||
Payment of deferred financing and debt issuance costs | (425) | — | — | ||
Proceeds from revolving credit facility | 6,000 | 8,000 | 14,000 | ||
Repayment of revolving credit facility | — | — | (7,000) | ||
Proceeds from equity issuance | 25 | — | 33 | ||
Purchase of treasury stock | (170) | (125) | (4,428) | ||
Net cash provided by financing activities | 4,034 | 6,321 | 1,006 | ||
Effect of exchange rate changes on cash and cash equivalents | |||||
Net increase in cash and cash equivalents | (1,474) | (3,237) | 2,094 | ||
Cash and cash equivalents at beginning of period | 6,072 | 9,309 | 5,510 | ||
Cash and cash equivalents at end of period | $ 4,598 | $ 6,072 | $ 7,604 | ||
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 | |||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||
(in thousands, except per ton amounts) | |||||
Revenue | $ 83,052 | $ 61,947 | $ 82,350 | ||
Cost of goods sold | 71,241 | 59,116 | 70,713 | ||
Gross profit | 11,811 | 2,831 | 11,637 | ||
Depreciation, depletion, and accretion of asset retirement | 6,697 | 6,381 | 6,159 | ||
Contribution margin | $ 18,508 | $ 9,212 | $ 17,796 | ||
Contribution margin per ton | $ 13.85 | $ 9.07 | $ 14.89 | ||
Total tons sold | 1,336 | 1,016 | 1,195 | ||
EBITDA and Adjusted EBITDA
We define EBITDA as net income, plus: (i) depreciation, depletion and amortization expense; (ii) income tax expense (benefit) and other results of operations based taxes; and (iii) interest expense. 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 (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 | |||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||
(in thousands) | |||||
Net loss | $ (216) | $ (4,786) | $ (3,599) | ||
Depreciation, depletion and amortization | 7,200 | 7,078 | 6,551 | ||
Income tax expense (benefit) and other taxes | 607 | (3,332) | 1,845 | ||
Interest expense | 496 | 329 | 442 | ||
EBITDA | $ 8,087 | $ (711) | $ 5,239 | ||
Net loss (gain) on disposal of fixed assets | 3 | (19) | 1,889 | ||
Equity compensation | 582 | 1,003 | 736 | ||
Acquisition and development costs | 308 | 204 | 271 | ||
Cash charges related to restructuring and retention | 107 | 14 | — | ||
Accretion of asset retirement obligations | 249 | 234 | 200 | ||
Adjusted EBITDA | $ 9,336 | $ 725 | $ 8,335 | ||
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 | |||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||
(in thousands) | |||||
Net cash (used in) provided by operating activities | $ (3,863) | $ (2,659) | $ 5,105 | ||
Purchases of property, plant and equipment | (1,646) | (6,905) | (4,018) | ||
Free cash flow | $ (5,509) | $ (9,564) | $ 1,087 | ||
Investor Contacts:
Lee Beckelman
Chief Financial Officer
(281) 231-2660
lbeckelman@smartsand.com
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SOURCE Smart Sand, Inc.
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