Smart Sand, Inc. Announces Third Quarter 2023 Results
- Smart Sand delivered strong operating and financial results in the third quarter of 2023
- Tons sold increased by 10% sequentially and 12% over the comparable period in 2022
- Revenues increased due to higher sales volumes and contractual shortfall revenue recognized
- Gross profit improved primarily due to contractual shortfall revenue and lower freight expenses
- Net income was higher compared to the third quarter of 2022
- Adjusted EBITDA increased in the third quarter of 2023 compared to the prior quarter
- The increase in contribution margin and contribution margin per ton was primarily due to higher sales volumes and lower freight expenses
- Net cash provided by operating activities increased due to higher net income in the third quarter of 2023
- None.
- 3Q 2023 total tons sold of approximately 1.2 million
- 3Q 2023 revenue of
$76.9 million - 3Q 2023 net income of
$6.7 million - 3Q 2023 adjusted EBITDA of
$13.3 million - 3Q 2023 net cash provided by operating activities of
$12.5 million - 3Q 2023 free cash flow of
$5.6 million
SPRING, Texas, Nov. 07, 2023 (GLOBE NEWSWIRE) -- Smart Sand, Inc. (NASDAQ: SND) (the “Company” or “Smart Sand”), a fully integrated frac and industrial sand supply and services company, a low-cost producer of high quality Northern White frac sand, a proppant logistics solutions provider through both its in-basin transloading terminals and SmartSystems™ products and services and a provider of industrial product solutions, today announced results for the third quarter of 2023.
“Smart Sand delivered strong operating and financial results in the third quarter of 2023,” stated Charles Young, Smart Sand’s Chief Executive Officer. “Sales volumes increased sequentially as we saw strong demand in both the Bakken and Marcellus basins and had our first full quarter of operations at our Blair facility, leading to increased sales volumes into the Canadian market.”
“In the third quarter we increased the number of Smartpath fleets utilizing our new Smartbelt technology and we continue to add new industrial sand sales customers” continued Charles Young. “We continue to look for ways to expand our presence in key markets and broaden our customer base. In the fourth quarter, we expect to complete an expansion of our Waynesburg terminal in Pennsylvania to allow us to handle increased sales volume into the Marcellus Basin. Additionally, we anticipate completing improvements at our Utica, Illinois facility to add cooling and blending capabilities to support our industrial sand business. We continue to invest strategically to drive increased sales volumes from our three operating facilities. Our focus continues to be on increasing our free cash flow and delivering strong returns for our shareholders”
Third Quarter 2023 Results
Tons sold were approximately 1,219,000 in the third quarter of 2023, compared to approximately 1,084,000 tons in the second quarter of 2023 and 1,110,000 tons in the third quarter of 2022, an increase of
Revenues were
Gross profit was
For the third 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 September 30, 2023, cash on hand was
Conference Call
Smart Sand will host a conference call and live webcast for analysts and investors on November 8, 2023 at 10:00 a.m. Eastern Time to discuss its third quarter 2023 financial results. Investors are invited to join the conference by dialing (412)-317-0790 or 1-877-870-4263 and referencing “Smart Sand” when connected to the operator. Additionally, the call may also be streamed via webcast at https://app.webinar.net/1ZrWVRQqaAD 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, 2022, filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on February 28, 2023, and in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, filed by the Company with the SEC on November 7, 2023.
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 Wisconsin and Illinois, which have access to four Class I rail lines, allowing the Company 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 | |||||||||||
| September 30, 2023 (unaudited) | June 30, 2023 (unaudited) | September 30, 2022 (unaudited) | |||||||||
| Revenues: | |||||||||||
| Sand sales revenue | $ | 72,480 | $ | 72,435 | $ | 66,663 | |||||
| Shortfall revenue | 2,389 | — | 2,681 | ||||||||
| Logistics revenue | 2,031 | 2,341 | 2,248 | ||||||||
| Total revenue | 76,900 | 74,776 | 71,592 | ||||||||
| Cost of goods sold | 62,502 | 62,087 | 60,163 | ||||||||
| Gross profit | 14,398 | 12,689 | 11,429 | ||||||||
| Operating expenses: | |||||||||||
| Salaries, benefits and payroll taxes | 4,292 | 4,363 | 3,554 | ||||||||
| Depreciation and amortization | 647 | 629 | 556 | ||||||||
| Selling, general and administrative | 4,625 | 4,590 | 4,008 | ||||||||
| (Gain) loss on disposal of fixed asset, net | (92 | ) | 24 | (466 | ) | ||||||
| Total operating expenses | 9,472 | 9,606 | 7,652 | ||||||||
| Operating income | 4,926 | 3,083 | 3,777 | ||||||||
| Other income (expenses): | |||||||||||
| Interest expense, net | (276 | ) | (223 | ) | (411 | ) | |||||
| Other income | 198 | 159 | 148 | ||||||||
| Total other expenses, net | (78 | ) | (64 | ) | (263 | ) | |||||
| Income (loss) before income tax (benefit) expense | 4,848 | 3,019 | 3,514 | ||||||||
| Income tax (benefit) expense | (1,879 | ) | (3,288 | ) | 831 | ||||||
| Net income | $ | 6,727 | $ | 6,307 | $ | 2,683 | |||||
| Net income per common share: | |||||||||||
| Basic | $ | 0.18 | $ | 0.17 | $ | 0.06 | |||||
| Diluted | $ | 0.18 | $ | 0.17 | $ | 0.06 | |||||
| Weighted-average number of common shares: | |||||||||||
| Basic | 38,253 | 37,968 | 42,522 | ||||||||
| Diluted | 38,412 | 37,968 | 42,524 | ||||||||
| SMART SAND, INC. CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
| September 30, 2023 (unaudited) | December 31, 2022 | ||||||
| (in thousands) | |||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 9,309 | $ | 5,510 | |||
| Accounts receivable | 24,015 | 35,746 | |||||
| Unbilled receivables | 165 | 79 | |||||
| Inventory | 25,955 | 20,185 | |||||
| Prepaid expenses and other current assets | 712 | 6,593 | |||||
| Total current assets | 60,156 | 68,113 | |||||
| Property, plant and equipment, net | 255,644 | 258,843 | |||||
| Operating lease right-of-use assets | 24,448 | 26,075 | |||||
| Intangible assets, net | 6,074 | 6,669 | |||||
| Other assets | 185 | 303 | |||||
| Total assets | $ | 346,507 | $ | 360,003 | |||
| Liabilities and Stockholders’ Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 10,439 | $ | 14,435 | |||
| Accrued expenses and other liabilities | 15,461 | 13,430 | |||||
| Deferred revenue | 2,018 | 6,959 | |||||
| Current portion of long-term debt | 5,691 | 6,183 | |||||
| Current portion of operating lease liabilities | 11,139 | 10,910 | |||||
| Total current liabilities | 44,748 | 51,917 | |||||
| Long-term debt | 6,895 | 9,807 | |||||
| Long-term operating lease liabilities | 14,978 | 17,642 | |||||
| Long-term deferred tax liabilities, net | 14,142 | 18,238 | |||||
| Asset retirement obligations | 19,558 | 18,888 | |||||
| Other non-current liabilities | 40 | 40 | |||||
| Total liabilities | 100,361 | 116,532 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity | |||||||
| Common stock | 38 | 43 | |||||
| Treasury stock | (14,124 | ) | (5,075 | ) | |||
| Additional paid-in capital | 180,934 | 178,386 | |||||
| Retained earnings | 79,325 | 69,890 | |||||
| Accumulated other comprehensive income | (27 | ) | 227 | ||||
| Total stockholders’ equity | 246,146 | 243,471 | |||||
| Total liabilities and stockholders’ equity | $ | 346,507 | $ | 360,003 | |||
| SMART SAND, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
| Three Months Ended | |||||||||||
| September 30, 2023 (unaudited) | June 30, 2023 (unaudited) | September 30, 2022 (unaudited) | |||||||||
| (in thousands) | |||||||||||
| Operating activities: | |||||||||||
| Net income | 6,727 | 6,307 | 2,683 | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation, depletion and accretion of asset retirement obligations | 7,021 | 6,785 | 6,698 | ||||||||
| Amortization of intangible assets | 198 | 199 | 198 | ||||||||
| (Gain) loss on disposal of fixed assets | (92 | ) | 24 | (466 | ) | ||||||
| Provision for bad debt | — | — | — | ||||||||
| Amortization of deferred financing cost | 26 | 27 | 26 | ||||||||
| Accretion of debt discount | 47 | 46 | 47 | ||||||||
| Deferred income taxes | (2,348 | ) | (3,417 | ) | 480 | ||||||
| Stock-based compensation | 860 | 833 | 808 | ||||||||
| Employee stock purchase plan compensation | 5 | 8 | 7 | ||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable | 5,980 | 5,982 | (3,264 | ) | |||||||
| Unbilled receivables | 92 | 1,027 | 6,042 | ||||||||
| Inventories | (2,950 | ) | (2,921 | ) | (3,744 | ) | |||||
| Prepaid expenses and other assets | 661 | 4,871 | 1,218 | ||||||||
| Deferred revenue | (4,328 | ) | 444 | (1,823 | ) | ||||||
| Accounts payable | (1,822 | ) | (3,214 | ) | (445 | ) | |||||
| Accrued and other expenses | 2,400 | (933 | ) | 2,315 | |||||||
| Net cash provided by operating activities | 12,477 | 16,068 | 10,780 | ||||||||
| Investing activities: | |||||||||||
| Purchases of property, plant and equipment | (6,881 | ) | (5,227 | ) | (4,398 | ) | |||||
| Proceeds from disposal of assets | 50 | 72 | 995 | ||||||||
| Net cash used in investing activities | (6,831 | ) | (5,155 | ) | (3,403 | ) | |||||
| Financing activities: | |||||||||||
| Repayments of notes payable | (1,502 | ) | (5,937 | ) | (1,893 | ) | |||||
| Payments under equipment financing obligations | (200 | ) | (37 | ) | (28 | ) | |||||
| Proceeds from revolving credit facility | — | 1,000 | 3,000 | ||||||||
| Repayment of revolving credit facility | — | (8,000 | ) | — | |||||||
| Proceeds from equity issuance | 23 | — | 27 | ||||||||
| Purchase of treasury stock | (150 | ) | (51 | ) | (210 | ) | |||||
| Net cash (used in) provided by financing activities | (1,829 | ) | (13,025 | ) | 896 | ||||||
| Net increase in cash and cash equivalents | 3,817 | (2,112 | ) | 8,273 | |||||||
| Cash and cash equivalents at beginning of period | 5,492 | 7,604 | 2,098 | ||||||||
| Cash and cash equivalents at end of period | $ | 9,309 | $ | 5,492 | $ | 10,371 | |||||
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 | ||||||||
| September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||
| (in thousands, except per ton amounts) | ||||||||
| Revenue | $ | 76,900 | $ | 74,776 | $ | 71,592 | ||
| Cost of goods sold | 62,502 | 62,087 | 60,163 | |||||
| Gross profit | 14,398 | 12,689 | 11,429 | |||||
| Depreciation, depletion, and accretion of asset retirement obligations included in cost of goods sold | 6,573 | 6,356 | 6,340 | |||||
| Contribution margin | $ | 20,971 | $ | 19,045 | $ | 17,769 | ||
| Contribution margin per ton | $ | 17.20 | $ | 17.57 | $ | 16.01 | ||
| Total tons sold | 1,219 | 1,084 | 1,110 | |||||
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 | |||||||||||
| September 30, 2023 | June 30, 2023 | September 30, 2022 | |||||||||
| (in thousands) | |||||||||||
| Net income | $ | 6,727 | $ | 6,307 | $ | 2,683 | |||||
| Depreciation, depletion and amortization | 6,985 | 6,750 | 6,705 | ||||||||
| Income tax expense (benefit) | (1,879 | ) | (3,288 | ) | 831 | ||||||
| Interest expense | 304 | 457 | 431 | ||||||||
| Franchise taxes | 66 | 102 | 77 | ||||||||
| EBITDA | $ | 12,203 | $ | 10,328 | $ | 10,727 | |||||
| Net loss (gain) on disposal of fixed assets | (92 | ) | 25 | (466 | ) | ||||||
| Equity compensation | 850 | 802 | 713 | ||||||||
| Acquisition and development costs | 70 | — | 97 | ||||||||
| Cash charges related to restructuring and retention | — | 18 | 31 | ||||||||
| Accretion of asset retirement obligations | 235 | 235 | 189 | ||||||||
| Adjusted EBITDA | $ | 13,266 | $ | 11,408 | $ | 11,291 | |||||
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 | |||||||||||
| September 30, 2023 | June 30, 2023 | September 30, 2022 | |||||||||
| (in thousands) | |||||||||||
| Net cash provided by (used in) operating activities | $ | 12,477 | $ | 16,068 | $ | 10,780 | |||||
| Purchases of property, plant and equipment, net | (6,881 | ) | (5,227 | ) | (4,398 | ) | |||||
| Free cash flow | $ | 5,596 | $ | 10,841 | $ | 6,382 | |||||
Investor Contacts:
Lee Beckelman
Chief Financial Officer
(281) 231-2660
lbeckelman@smartsand.com
FAQ
What are Smart Sand, Inc.'s (NASDAQ: SND) key financial results for the third quarter of 2023?
What were the reasons for the increase in revenues for Smart Sand, Inc. (NASDAQ: SND) in the third quarter of 2023?
What expansion and improvement plans did Smart Sand, Inc. (NASDAQ: SND) announce for its facilities?
When will Smart Sand, Inc. (NASDAQ: SND) host a conference call to discuss its third quarter 2023 financial results?
