Smart Sand, Inc. Announces Fourth Quarter 2023 and Full Year 2023 Results

4Q 2023 and full year 2023 revenue of $61.9 million and $296.0 million, respectively.
4Q 2023 and full year 2023 total tons sold of approximately 1,016,000 and 4,514,000, respectively.
4Q 2023 and full year 2023 net cash (used) provided by operating activities of $(2.7) million and $31.0 million, respectively.
4Q 2023 and full year 2023 free cash flow of $(9.6) million and $8.0 million, respectively.

SPRING, Texas, March 11, 2024 /PRNewswire/ — 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 sand, and a proppant logistics solutions provider through both its in-basin transloading terminals and SmartSystems™ products and services, today announced results for the fourth quarter and full year ended December 31, 2023.

“Smart Sand delivered strong operating and financial results for the full year 2023” stated Charles Young, Smart Sand’s Chief Executive Officer.  “Sales volumes for the year were a record for the Company.  During the year we gained access to the Canadian frac sand market through the commencement of operations at our Blair, Wisconsin facility. We improved our logistics capabilities in the Marcellus and Utica formations of the Appalachian Basin by expanding our Waynesburg, Pennsylvania terminal . We invested in cooling and blending capabilities at our Utica, Illinois facility to support increased industrial sand opportunities and expanded our last mile service presence in the Bakken and Appalachian Basins. Additionally, we recently obtained the rights to operate two additional terminals in Northeast Ohio, which we believe will support growing activity in the Appalachian Basin.”

“Lower sales volumes, due primarily to seasonal weather-related issues and a general slowdown in overall market activity from lower customer spending due to year-end budget exhaustion, negatively impacted our operating and financial results in the fourth quarter.  However, market activity has picked up considerably since the start of 2024 with current monthly sales volumes trending back to third quarter 2023 levels or better and we expect to see improved operating and financial results in the first quarter 2024.”

Full Year 2023 Highlights

Total revenue was $296.0 million for the full year 2023, compared to $255.7 million for the full year of 2022. Sand sales revenue in 2023 was $283.2 million compared to $243.2 million in 2022. Total revenue and sand sales both increased by 16% year-over-year, as a result of increased sand sales volumes and higher prices primarily driven by increased market activity in the operating basins that the Company serves.

Total tons sold were 4,514,000 for the full year 2023, compared to full year 2022 total tons sold of 4,333,000, an increase of 4% year-over-year.

Net income was $4.6 million, or $0.12 per basic and diluted share, for the full year 2023, compared with net loss of $(0.7) million, or $(0.02) per basic and diluted share, for the full year 2022. The increase in net income was primarily from increased total volumes sold and higher average sales prices for our sand.

Net cash provided by operating activities was $31.0 million for the year ended December 31, 2023, derived from net income of $4.6 million, which includes net non-cash items of $27.8 million and $(1.4) million in changes in operating assets and liabilities. The net cash provided by operating activities in 2022 was $5.4 million. The increase in net cash provided by operating activities in 2023, compared to 2022, was primarily due to higher net income and reduced use of cash from changes in assets and liabilities.

Contribution margin was $67.0 million, or $14.85 per ton sold, for the full year 2023 compared to $54.6 million, or $12.61 per ton sold, for the full year 2022. Adjusted EBITDA was $34.1 million for the full year 2023 compared to Adjusted EBITDA of $29.3 million for the full year 2022.  The increase in contribution margin and Adjusted EBITDA for the year ended December 31, 2023, as compared to the prior year, was primarily due to an increase in pricing and higher overall tons sold in the current period.

Fourth Quarter 2023 Highlights

Total revenue was $61.9 million in the fourth quarter of 2023, compared to third quarter of 2023 revenue of $76.9 million. Total revenue decreased 19% sequentially due to lower sand sales volumes and lower shortfall revenue. Fourth quarter 2023 total revenue decreased by 16% compared to fourth quarter 2022 revenues of $73.8 million. Lower revenue year-over-year was due primarily to lower tons sold.

Tons sold in the fourth quarter of 2023 were 1,016,000, a 17% decrease compared to third quarter 2023 tons sold of 1,219,000. Tons sold in the fourth quarter of 2023 decreased by 14% compared to 1,175,000 tons sold in the fourth quarter of 2022. Sales volumes were lower in the current period due primarily to lower market activity from weather-related slowdowns and reduced customer spending as accelerated spending earlier in the year led to reduced activity in the fourth quarter.

For the fourth quarter of 2023, the Company had a net loss of $(4.8) million, or $(0.12) per basic and diluted share, compared to net income of $6.7 million, or $0.18 per basic and diluted share, for the third quarter of 2023, and net income of $2.6 million, or $0.06 per basic share and diluted share for the fourth quarter 2022.

Contribution margin was $9.2 million, or $9.07 per ton sold, for the fourth quarter of 2023 compared to $21.0 million, or $17.20 per ton sold, for the third quarter of 2023 and $17.4 million, or $14.77 per ton sold, for the fourth quarter of 2022. Adjusted EBITDA was $1.0 million for the fourth quarter of 2023, compared to $13.3 million for the third quarter of 2023 and $10.7 million for the fourth quarter of 2022.

Lower net income, contribution margin and adjusted EBITDA sequentially and year-over-year were primarily due to lower revenue from decreased tons sold, partially offset by lower cost of goods sold.

Capital and Liquidity

For the full year 2023, we had positive free cash flow of $8.0 million, generating $31.0 million in cash flow from operations while spending $23.0 million on capital expenditures. For the fourth quarter of 2023, we had negative $9.6 million in free cash flow, spending $2.7 million in cash flow on operations and $6.9 million on capital expenditures.  As of December 31, 2023, we had cash on hand of $6.1 million and $12.0 million in undrawn availability on our existing credit facility.

Conference Call

Smart Sand will host a conference call and live webcast for analysts and investors on March 12, 2024 at 10:00 a.m. Eastern Time to discuss the Company’s fourth quarter and full year 2023 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/2LBqwEV8z34 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.  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 December 31, 2023, to be filed by us with the U.S. Securities and Exchange Commission on March 11, 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 logistics 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 offers logistics solutions to our customers through its in-basin transloading terminals and SmartSystems™ wellsite storage and sand management 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.

Availability of Information on Smart Sand’s Website

We routinely announce material information using U.S. Securities and Exchange Commission filings, press releases, public conference calls and webcasts and the Smart Sand investor relations website. While not all of the information that we post to the Smart Sand investor relations website is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others interested in Smart Sand to review the information that we share at the “Investors” link located at the top of the page on www.smartsand.com.

SMART SAND, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

December 31, 2023

September 30, 2023

December 31, 2022

(unaudited)

(unaudited)

(unaudited)

(in thousands, except per share amounts)

Revenues:

Sand sales revenue

$                60,147

$                72,480

$                71,099

Shortfall revenue

2,389

414

Logistics revenue

1,800

2,031

2,316

Total revenue

61,947

76,900

73,829

Cost of goods sold

59,116

62,502

62,657

Gross profit

2,831

14,398

11,172

Operating expenses:

Salaries, benefits and payroll taxes

4,509

4,292

3,309

Depreciation and amortization

667

647

598

Selling, general and administrative

5,579

4,625

5,421

        Loss (gain) on disposal of fixed assets, net

(19)

(92)

188

Total operating expenses

10,736

9,472

9,516

Operating (loss) income

(7,905)

4,926

1,656

Other income (expenses):

Interest expense, net

(332)

(276)

(364)

Other income

119

198

412

Total other income (expenses), net

(213)

(78)

48

(Loss) income before income tax benefit

(8,118)

4,848

1,704

Income tax benefit

(3,332)

(1,879)

(923)

Net (loss) income

$                (4,786)

$                  6,727

$                  2,627

Net (loss) income per common share:

Basic

$                  (0.12)

$                    0.18

$                    0.06

Diluted

$                  (0.12)

$                    0.18

$                    0.06

Weighted-average number of common shares:

Basic

38,339

38,253

42,833

Diluted

38,499

38,412

42,862

SMART SAND, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31,

2023

2022

(in thousands, except per share amount)

Revenues:

Sand sales revenue

$              283,160

$              243,162

Shortfall revenue

4,304

5,010

Logistics revenue

8,509

7,568

Total revenue

295,973

255,740

Cost of goods sold

254,418

226,149

Gross profit

41,555

29,591

Operating expenses:

Salaries, benefits and payroll taxes

18,309

13,480

Depreciation and amortization

2,535

2,244

Selling, general and administrative

20,413

17,288

Loss (gain) on disposal of fixed assets, net

1,802

(294)

Bad debt expense

1

Total operating expenses

43,059

32,719

Operating loss

(1,504)

(3,128)

Other (expenses) income:

Interest expense, net

(1,272)

(1,608)

Other income

524

828

Total other (expenses) income, net

(748)

(780)

Loss before income tax benefit

(2,252)

(3,908)

Income tax benefit

(6,901)

(3,205)

Net income (loss)

$                  4,649

$                   (703)

Net income (loss) per common share:

Basic

$                    0.12

$                  (0.02)

Diluted

$                    0.12

$                  (0.02)

Weighted-average number of common shares:

Basic

38,948

42,408

Diluted

39,046

42,408

SMART SAND, INC.

CONSOLIDATED BALANCE SHEETS

December 31,

2023

2022

(in thousands of U.S. dollars)

Assets

Current assets:

Cash and cash equivalents

$                  6,072

$                  5,510

Accounts receivable

23,231

35,746

Unbilled receivables

2,561

79

Inventory

26,823

20,185

Prepaid expenses and other current assets

3,217

6,593

Total current assets

61,904

68,113

Property, plant and equipment, net

255,092

258,843

Operating lease right-of-use assets

23,265

26,075

Intangible assets, net

5,876

6,669

Other assets

163

303

Total assets

$              346,300

$              360,003

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$                16,041

$                14,435

Accrued expenses and other liabilities

11,024

13,430

Deferred revenue

1,154

6,959

Current portion of long-term debt

15,711

6,183

Current portion of operating lease liabilities

10,536

10,910

Total current liabilities

54,466

51,917

Long-term debt

3,449

9,807

Long-term operating lease liabilities

14,056

17,642

Deferred tax liabilities, long-term, net

12,101

18,238

Asset retirement obligation

19,923

18,888

Other non-current liabilities

38

40

Total liabilities

104,033

116,532

Commitments and contingencies

Stockholders’ equity

Common stock

39

43

Treasury stock, at cost

(14,249)

(5,075)

Additional paid-in capital

181,973

178,386

Retained earnings

74,539

69,890

Accumulated other comprehensive (loss) income

(35)

227

Total stockholders’ equity

242,267

243,471

Total liabilities and stockholders’ equity

$              346,300

$              360,003

SMART SAND, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

December 31, 2023

September 30, 2023

December 31, 2022

(unaudited)

(unaudited)

(unaudited)

(in thousands)

Operating activities:

Net (loss) income

$                  (4,786)

$                    6,727

$                  2,627

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation, depletion and accretion of asset retirement
obligation

7,113

7,021

6,584

Amortization of intangible assets

197

198

196

Loss (gain) on disposal of assets

(19)

(92)

188

Amortization of deferred financing cost

26

26

26

Accretion of debt discount

46

47

46

Deferred income taxes

(2,041)

(2,348)

(1,412)

Stock-based compensation

1,035

860

748

Employee stock purchase plan compensation

4

5

7

Changes in assets and liabilities:

Accounts receivable

784

5,980

(4,027)

Unbilled receivables

(2,396)

92

2,398

Inventories

(868)

(2,950)

433

Prepaid expenses and other assets

(2,860)

661

3,452

Deferred revenue

(863)

(4,328)

(2,946)

Asset retirement obligation settlement

(197)

Accounts payable

5,845

(1,822)

2,460

Accrued expenses and other liabilities

(3,679)

2,400

(5,191)

Net cash provided (used) by operating activities

(2,659)

12,477

5,589

Investing activities:

Purchases of property, plant and equipment

(6,905)

(6,881)

(3,196)

Proceeds from disposal of assets

6

50

75

Net cash used in investing activities

(6,899)

(6,831)

(3,121)

Financing activities:

Repayments of notes payable

(1,483)

(1,502)

(1,851)

Payments under equipment financing obligations

(71)

(200)

(28)

Proceeds from revolving credit facility

8,000

4,000

Repayment of revolving credit facility

(10,000)

Proceeds from equity issuance

23

Royalty stock issuance

639

Purchase of treasury stock

(125)

(150)

(89)

Net cash provided by (used in) financing activities

6,321

(1,829)

(7,329)

Net increase in cash and cash equivalents

(3,237)

3,817

(4,861)

Cash and cash equivalents at beginning of period

9,309

5,492

10,371

Cash and cash equivalents at end of period

$                    6,072

$                    9,309

$                  5,510

 SMART SAND, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

2023

2022

(audited)

(audited)

(in thousands)

Operating activities:

Net income (loss)

$                    4,649

$                      (703)

Adjustments to reconcile net income to net cash provided by operating
activities:

Depreciation, depletion and accretion of asset retirement obligation

27,472

26,488

Amortization of intangible assets

793

792

(Gain) loss on disposal of assets

1,802

(294)

Provision for bad debt

1

Amortization of deferred financing cost

105

105

Accretion of debt discount

186

186

Deferred income taxes

(6,137)

(4,196)

Stock-based compensation, net

3,507

3,184

Employee stock purchase plan compensation

24

25

Changes in assets and liabilities:

Accounts receivable

12,672

(18,265)

Unbilled receivables

(2,640)

1,805

Inventories

(6,638)

(5,161)

Prepaid expenses and other assets

1,996

6,524

Settlement of asset retirement obligation

(197)

Deferred revenue

(5,805)

(9,311)

Accounts payable

1,974

5,244

Accrued and other expenses

(2,772)

(1,004)

Net cash provided by operating activities

30,991

5,420

Investing activities:

Acquisition of businesses, net of cash acquired

(6,547)

Purchases of property, plant and equipment

(23,031)

(12,731)

Proceeds from disposal of assets

129

1,070

Net cash used in investing activities

(22,902)

(18,208)

Financing activities:

Repayments of notes payable

(10,435)

(7,325)

Payments under equipment financing obligations

(394)

(116)

Proceeds from revolving credit facility

23,000

10,000

Repayment of revolving credit facility

(15,000)

(10,000)

Proceeds from equity issuance

56

52

Royalty stock issuance

639

Purchase of treasury stock

(4,754)

(540)

Net cash used in financing activities

(7,527)

(7,290)

Net increase in cash and cash equivalents

562

(20,078)

Cash and cash equivalents at beginning of period

5,510

25,588

Cash and cash equivalents at end of period

$                    6,072

$                    5,510

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

December 31, 2023

September 30, 2023

December 31, 2022

(in thousands)

Revenue

$                61,947

$                76,900

$                73,829

Cost of goods sold

59,116

62,502

62,657

      Gross profit

2,831

14,398

11,172

Depreciation, depletion, and accretion of asset retirement obligations
     included in cost of goods sold

6,381

6,573

6,184

      Contribution margin

$                  9,212

$                20,971

$                17,356

      Contribution margin per ton

$                    9.07

$                  17.20

$                  14.77

Total tons sold

1,016

1,219

1,175

Year Ended December 31,

2023

2022

(in thousands)

Revenue

$              295,973

$              255,740

Cost of goods sold

254,418

226,149

      Gross profit

41,555

29,591

Depreciation, depletion, and accretion of asset retirement obligations included in cost of
     goods sold

25,469

25,038

      Contribution margin

$                67,024

$                54,629

      Contribution margin per ton

$                  14.85

$                  12.61

Total tons sold

4,514

4,333

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, 2023

September 30, 2023

December 31, 2022

(in thousands)

Net (loss) income

$                (4,786)

$                  6,727

$                  2,627

Depreciation, depletion and amortization

7,078

6,985

6,590

Income tax benefit

(3,332)

(1,879)

(923)

Interest expense

329

304

379

Franchise taxes

300

66

85

EBITDA

$                   (411)

$                12,203

$                  8,758

Loss (gain) on sale of fixed assets

(19)

(92)

188

Equity compensation

1,003

850

706

Royalty stock issuance

639

Acquisition and development costs (1)

204

70

241

Cash charges related to restructuring and retention

14

Accretion of asset retirement obligations

234

235

189

Adjusted EBITDA

$                  1,025

$                13,266

$                10,721

(1)

Represents costs incurred related to the business combinations and current development project activities.

Year Ended December 31,

2023

2022

(in thousands)

Net (loss) income

$                  4,649

$                   (703)

Depreciation, depletion and amortization

27,363

26,521

Income tax benefit

(6,901)

(3,205)

Interest expense

1,532

1,661

Franchise taxes

804

353

EBITDA

$                27,447

$                24,627

(Gain) loss on sale of fixed assets

1,802

(294)

Equity compensation

3,391

2,729

Royalty stock issuance

639

Acquisition and development costs (1)

545

675

Cash charges related to restructuring and retention of employees

32

137

Accretion of asset retirement obligations

904

758

Adjusted EBITDA

$                34,121

$                29,271

(1)

Represents costs incurred related to the business combinations and current development project activities.

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

December 31, 2023

September 30, 2023

December 31, 2022

(in thousands)

Net cash provided by (used in) operating activities

$                (2,659)

$                12,477

$                  5,589

      Purchases of property, plant and equipment

(6,905)

(6,881)

(3,196)

Free cash flow

$                (9,564)

$                  5,596

$                  2,393

Year Ended December 31,

2023

2022

(in thousands)

Net cash provided by (used in) operating activities

$                30,991

$                  5,420

Acquisition of Blair facility

(6,547)

Purchases of property, plant and equipment

(23,031)

(12,731)

Free cash flow

$                  7,960

$              (13,858)

Investor Contacts:Lee Beckelman
Chief Financial Officer
(281) 231-2660
[email protected]  

SOURCE Smart Sand, Inc.

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