- 2Q 2023 total tons sold of approximately 1.1 million
- 2Q 2023 revenue of $74.8 million
- 2Q 2023 net income of $6.3 million
- 2Q 2023 adjusted EBITDA of $11.4 million
- 2Q 2023 net cash provided by operating activities of $16.1 million
- 2Q 2023 free cash flow of $10.8 million
SPRING, Texas, Aug. 08, 2023 (GLOBE NEWSWIRE) -- Smart Sand, Inc. ( 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 second quarter of 2023.
“Smart Sand continued to deliver solid financial and operating results in the second quarter of 2023,” stated Charles Young, Smart Sand’s Chief Executive Officer. Second quarter net income and Adjusted EBITDA were higher than comparable results for the first quarter of 2023 and the second quarter 2022. Our net cash provided by operating activities has been strong leading to almost $11 million in free cash flow in the second quarter of 2023. We had increased frac sales volumes into the Bakken through our Van Hook, North Dakota terminal in the quarter and higher industrial product solutions sales.
We continue to take advantage of our high quality Northern White asset base and superior logistics service offerings to deliver strong financial returns for our shareholders. We started up operations at our Blair, Wisconsin facility and delivered our first sand shipments into the Canadian market. This is a key Northern White frac sand market that we can now compete in. We also put our first belt system to work in our SmartSystems last mile operations. This belt allows much higher delivery of frac sand into the blender of the pressure pumping equipment while reducing our fleet maintenance expense. Additionally, our Industrial Products Solutions business had its best quarter to date, with sales volumes increasing by 70% over first quarter 2023 results. We generated approximately $12 million in free cash flow and paid down approximately $12 million in debt in the first six months of 2023. Going into the third quarter, we believe the market fundamentals for Northern White sand continue to be positive and we plan to continue to build on the positive momentum we have achieved in the first six months of 2023.”
Second Quarter 2023 Results
Tons sold were approximately 1,084,000 in the second quarter of 2023, compared to approximately 1,195,000 tons in the first quarter of 2023 and 1,196,000 tons in the second quarter of 2022, a decrease of 9% both sequentially and over the comparable period in 2022.
Revenues were $74.8 million in the second quarter of 2023, compared to $82.4 million in the first quarter of 2023 and $68.7 million in the second quarter of 2022. Revenues decreased in the second quarter of 2023, compared to the first quarter of 2023, due to lower tons sold in the second quarter of 2023 and contractual shortfall revenue recognized in the first quarter of 2023. While tons sold were marginally lower in the second quarter of 2023 compared to the second quarter of 2022, revenues increased as a result of higher average sales prices for our sand. Supply and demand fundamentals for Northern White sand have improved due to consistent demand for oil and natural gas leading to increased well completion activity, which has helped to support higher pricing for our sand.
Gross profit was $12.7 million in the second quarter of 2023, compared to $11.6 million in the first quarter of 2023 and $9.0 million in the second quarter of 2022. Gross profit improved in the second quarter of 2023 compared to the first quarter of 2023 primarily due to lower seasonal production costs in spring and summer months and lower freight expenses due to a shift in the sales mix of the basins we delivered into. Gross profit improved for the second quarter of 2023 compared to the second quarter of 2022 primarily due to higher average sales prices for our sand.
For the second quarter of 2023, we had net income of $6.3 million, or $0.17 per basic and diluted share, compared to a net loss of $3.6 million, or $(0.09) per basic and diluted share, for the first quarter of 2023 and a net loss of $0.1 million, or $0.00 per basic and diluted share, for the second quarter of 2022. Although we had lower sales volume sequentially, we achieved higher net income in the second quarter of 2023 compared to the first quarter of 2023 due to higher average sales prices for our sand and lower operating expenses. In the first quarter of 2023, operating expenses included a $1.9 million net loss on disposal of fixed assets and year end 2022 bonuses that were paid in the first quarter. The improvement in net income in the current year period relative to the prior year period was primarily due to higher average sales prices as increased demand caused a positive shift in sand prices, partially offset by an increase in operating expenses.
Contribution margin of $19.0 million, or $17.57 per ton sold, for the second quarter of 2023 was an increase compared to $17.8 million, or $14.89 per ton sold for the first quarter of 2023, and second quarter 2022 contribution margin of $15.3 million, or $12.75 per ton sold. The increase in contribution margin and contribution margin per ton in the second quarter of 2023, compared to the first quarter of 2023, was due primarily to lower production costs and improved contribution margin from our SmartSystem fleet. The increase in contribution margin and contribution margin per ton in the second quarter of 2023 compared to the second quarter of 2022 was primarily due to higher average sales prices and increased utilization of our SmartSystems fleet.
Adjusted EBITDA was $11.4 million for the second quarter of 2023, compared to $8.4 million for the first quarter of 2023 and $9.2 million for the second quarter of 2022. The increase in Adjusted EBITDA in the second quarter of 2023 compared to the prior quarter was primarily due to lower production and freight expenses in the second quarter and lower operating expenses. The improvement in Adjusted EBITDA in the second quarter of 2023 compared to the same period in 2022 was primarily due to higher average sales prices of our sand along with increased Industrial Products Solutions sales and higher utilization of our SmartSystems fleet.
Net cash provided by operating activities was $16.1 million in the second quarter of 2023, compared to net cash provided by operating activities of $5.1 million in the first quarter of 2023 and net cash used in operating activities of $2.3 million in the second quarter of 2022. The improvement in net cash provided by operating activities in the second quarter of 2023 compared to the first quarter of 2023 was primarily due to having positive net income this quarter compared to a net loss in prior quarter, along with the timing of collections from customers and payments to vendors. The increase in net cash provided by operating activities in the second quarter of 2023 compared to the second quarter of 2022 was primarily due to higher net income in the current period and higher working capital investments in the comparable period in 2022 as sales were increasing.
Free cash flow was $10.8 million for the second quarter of 2023. Net cash provided by operating activities was $16.1 million and capital expenditures were $5.2 million in the second quarter of 2023. We currently estimate that full year 2023 capital expenditures will be between $20.0 million and $25.0 million.
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 June 30, 2023, cash on hand was $5.5 million and we had $19.0 million in undrawn availability on our ABL Credit Facility.
Conference Call
Smart Sand will host a conference call and live webcast for analysts and investors on August 9, 2023 at 10:00 a.m. Eastern Time to discuss its second 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, 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, 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 June 30, 2023, filed by the Company with the SEC on August 8, 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 | |||||||||||
| June 30, 2023 | March 31, 2023 | June 30, 2022 | |||||||||
| (unaudited) | (unaudited) | (unaudited) | |||||||||
| Revenues: | |||||||||||
| Sand sales revenue | $ | 72,435 | $ | 78,098 | $ | 67,111 | |||||
| Shortfall revenue | — | 1,915 | — | ||||||||
| Logistics revenue | 2,341 | 2,337 | 1,603 | ||||||||
| Total revenue | 74,776 | 82,350 | 68,714 | ||||||||
| Cost of goods sold | 62,087 | 70,713 | 59,743 | ||||||||
| Gross profit | 12,689 | 11,637 | 8,971 | ||||||||
| Operating expenses: | |||||||||||
| Salaries, benefits and payroll taxes | 4,363 | 5,145 | 3,225 | ||||||||
| Depreciation and amortization | 629 | 592 | 563 | ||||||||
| Selling, general and administrative | 4,590 | 5,619 | 3,812 | ||||||||
| Loss (gain) on disposal of fixed asset, net | 24 | 1,889 | (16 | ) | |||||||
| Total operating expenses | 9,606 | 13,245 | 7,584 | ||||||||
| Operating income (loss) | 3,083 | (1,608 | ) | 1,387 | |||||||
| Other income (expenses): | |||||||||||
| Interest expense, net | (223 | ) | (441 | ) | (406 | ) | |||||
| Other income | 159 | 48 | 56 | ||||||||
| Total other income (expenses), net | (64 | ) | (393 | ) | (350 | ) | |||||
| Income (loss) before income tax (benefit) expense | 3,019 | (2,001 | ) | 1,037 | |||||||
| Income tax (benefit) expense | (3,288 | ) | 1,598 | 1,127 | |||||||
| Net income (loss) | $ | 6,307 | $ | (3,599 | ) | $ | (90 | ) | |||
| Net income (loss) per common share: | |||||||||||
| Basic | $ | 0.17 | $ | (0.09 | ) | $ | — | ||||
| Diluted | $ | 0.17 | $ | (0.09 | ) | $ | — | ||||
| Weighted-average number of common shares: | |||||||||||
| Basic | 37,968 | 41,272 | 42,181 | ||||||||
| Diluted | 37,968 | 41,272 | 42,181 | ||||||||
SMART SAND, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2023 (unaudited) | December 31, 2022 | ||||||
| (in thousands) | |||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 5,492 | $ | 5,510 | |||
| Accounts receivable | 29,996 | 35,746 | |||||
| Unbilled receivables | 257 | 79 | |||||
| Inventory | 23,005 | 20,185 | |||||
| Prepaid expenses and other current assets | 1,554 | 6,593 | |||||
| Total current assets | 60,304 | 68,113 | |||||
| Property, plant and equipment, net | 256,790 | 258,843 | |||||
| Operating lease right-of-use assets | 25,055 | 26,075 | |||||
| Intangible assets, net | 6,272 | 6,669 | |||||
| Other assets | 214 | 303 | |||||
| Total assets | $ | 348,635 | $ | 360,003 | |||
| Liabilities and Stockholders’ Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 15,201 | $ | 14,435 | |||
| Accrued expenses and other liabilities | 12,691 | 13,430 | |||||
| Deferred revenue | 6,345 | 6,959 | |||||
| Current portion of long-term debt | 5,521 | 6,183 | |||||
| Current portion of operating lease liabilities | 11,014 | 10,910 | |||||
| Total current liabilities | 50,772 | 51,917 | |||||
| Long-term debt | 7,462 | 9,807 | |||||
| Long-term operating lease liabilities | 15,746 | 17,642 | |||||
| Long-term deferred tax liabilities, net | 16,490 | 18,238 | |||||
| Asset retirement obligations | 19,323 | 18,888 | |||||
| Other non-current liabilities | 40 | 40 | |||||
| Total liabilities | 109,833 | 116,532 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity | |||||||
| Common stock | 38 | 43 | |||||
| Treasury stock | (14,000 | ) | (5,075 | ) | |||
| Additional paid-in capital | 180,046 | 178,386 | |||||
| Retained earnings | 72,598 | 69,890 | |||||
| Accumulated other comprehensive income | 120 | 227 | |||||
| Total stockholders’ equity | 238,802 | ||||||
