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Smart Sand, Inc. Announces First Quarter 2022 Results
Source: Nasdaq GlobeNewswire / 11 May 2022 15:05:01 America/Chicago
- 1Q 2022 revenue of $41.6 million
- 1Q 2022 total tons sold of approximately 852,000
- 2Q 2022 total tons sold expected to be up at least 25% over Q1 2022 results
THE WOODLANDS, Texas, May 11, 2022 (GLOBE NEWSWIRE) -- Smart Sand, Inc. (NASDAQ: SND) (the “Company” or “Smart Sand”), a fully integrated sand supply and services company, a low-cost producer of high quality Northern White frac sand and provider of industrial product solutions and proppant logistics solutions through both its in-basin transloading terminal and SmartSystems™ products and services, today announced results for the first quarter 2022.
Charles Young, Smart Sand’s Chief Executive Officer, stated “While we faced operational and logistical challenges due to weather and rail supply chain issues during the quarter, we were able to deliver solid sales volumes of 852,000 tons, which were in line with our fourth quarter 2021 results. We ended the quarter strong with our March sales volumes equaling approximately 43% of total sales volumes in the quarter. Market activity continues to improve. We currently expect our sales volumes to be up at least 25% in the second quarter from first quarter levels. Revenue, net loss, contribution margin and adjusted EBITDA improved compared to fourth quarter 2021 results and we expect this trend to continue. We will continue to stay focused on increasing the utilization of our asset base, managing our operating costs and improving our operating and financial results.”
First Quarter 2022 Results
Revenues were $41.6 million in the first quarter of 2022, compared to $35.1 million in the fourth quarter of 2021 and $27.5 million in the first quarter of 2021. Revenues increased in the first quarter, compared to the fourth quarter of 2021, primarily due to higher sand sales revenues resulting from higher in-basin sales volumes, higher shortfall revenue and a higher average sales price for our sand. The increase in revenue in the first quarter of 2022, as compared to the first quarter of 2021, was primarily due to an increase in total volumes sold and higher average sales price for our sand.
Gross profit was $(2.0) million in the first quarter of 2022, compared to $(6.5) million in the fourth quarter of 2021 and $(5.0) million in the first quarter of 2021. Gross profit improved in the first quarter of 2022 compared to the fourth quarter of 2021 primarily due to higher average sales price of our sand relative to the cost to produce and deliver products to our customers. Gross profit increased in the first quarter of 2022 compared to the same period in 2021 primarily due to higher sales volumes, higher average sales price of our sand relative to the cost to produce and deliver products to our customers and increased efficiencies that come with producing higher volumes of sand.
Net cash used in operating activities was $(8.7) million in the first quarter of 2022, compared to net cash used in operating activities of $(5.1) million in the fourth quarter of 2021 and net cash provided by operating activities of $3.9 million in the first quarter of 2021. Higher net cash used in operating activities in the first quarter of 2022 compared to the fourth quarter of 2021 was primarily due to a higher volume of sales occurring late in the first quarter of 2022 which were not converted to cash before the period end, leading to an increase in working capital at the end of the first quarter of 2022. Net cash used in operating activities was higher in the first quarter of 2022 compared to the net cash provided by operating activities in the same period in 2021 primarily due to a increase in accounts receivable, prepaid expenses and other assets, and a decrease in accounts payable.
Tons sold were approximately 852,000 in the first quarter of 2022, compared to approximately 872,000 tons in the fourth quarter of 2021 and 760,000 tons in the first quarter of 2021, a decrease of 2% and increase of 12%, respectively. Sales volumes were down slightly sequentially due primarily to weather and logistical issues the Company experienced early in the first quarter and were up year-over-year primarily due to increased market activity. We expect the market to continue to improve in 2022.
For the first quarter of 2022, the Company had a net loss of $5.9 million, or $(0.14) per basic and diluted share, compared to a net loss of $12.2 million, or $(0.29) per basic and diluted share, for the fourth quarter of 2021 and a net loss of $3.9 million, or $(0.09) per basic and diluted share, for the first quarter of 2021. The improvement in the net loss in the first quarter of 2022 compared to the fourth quarter of 2021 was primarily due to higher average sales prices on our sand and lower operating expenses due to higher wages in the fourth quarter related to, among other things, variable compensation expense. The prior quarter also included a $2.2 million impairment due to estimated waste product in inventory at year-end. The increase in net loss year-over-year was primarily due to discrete income items that created a lower tax benefit in the first quarter of 2022 relative to the prior period, partially offset by improved gross profit due to higher sales volumes and higher pricing in the current quarter compared to the same period a year ago.
Contribution margin was $4.3 million, or $4.99 per ton sold, for the first quarter of 2022 compared to $1.9 million, or $2.18 per ton sold for the fourth quarter of 2021, and $1.0 million, or $1.36 per ton sold, for the first quarter of 2021. The increase in contribution margin and contribution margin per ton in the first quarter of 2022 compared to the fourth quarter of 2021 was primarily due to higher average prices on sand sold. The increase in contribution margin and contribution margin per ton in the first quarter of 2022 compared to the same period in the prior year was due primarily to higher sales volumes and higher average sales prices.
Adjusted EBITDA was $(1.9) million for the first quarter of 2022, compared to $(4.5) million for the fourth quarter of 2021 and $(3.5) million for the first quarter of 2021. The improvement in Adjusted EBITDA in the first quarter of 2022 compared to the prior quarter was primarily due to higher average prices on sand sold. The improvement in Adjusted EBITDA in the first quarter of 2022 compared to the same period in 2021 was primarily due to higher sales volumes and higher average sales prices of our sand.
Free cash flow was $(19.0) million for the first quarter of 2022, with net use of $8.7 million from operating activities, driven primarily by a 45% increase in accounts receivable, $3.8 million on investments in capital improvements and approximately $6.5 million related to the acquisition of the Blair facility.
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, 2022, cash on hand was $4.7 million and we had $16.9 million in undrawn availability on our ABL Credit Facility, with no borrowings outstanding. For the three months ended March 31, 2022, we had approximately $10.3 million in capital expenditures, including approximately $6.5 million related to the acquisition of the Blair facility. We currently estimate that full year 2022 capital and acquisition expenditures, including amounts relating to the acquisition of the Blair facility, will be between $25.0 million and $30.0 million, with capital expenditures for the remainder of 2022 primarily being used to support efficiency projects at our Oakdale and Utica facilities. We continue to remain focused on maintaining a strong balance sheet and low leverage, as evidenced by our repayment of approximately $1.8 million in debt during the first quarter of 2022.
Conference Call
Smart Sand will host a conference call and live webcast for analysts and investors on May 12, 2022 at 10:00 a.m. Eastern Time to discuss its first quarter 2022 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 8748066. 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 8748066.
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 our 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, 2021, filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on March 8, 2022, and in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed by the Company with the SEC on May 11, 2022.
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 sand supply and services company, offering complete mine to wellsite proppant and logistic solutions to our customers. We produce low-cost, high quality Northern White sand, which is a premium proppant used to enhance hydrocarbon recovery rates in the hydraulic fracturing of oil and natural gas wells. Our 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. We also offer logistics solutions to our customers through our in-basin transloading terminals and our SmartSystems wellsite storage capabilities. We own and operate premium sand mines and related processing facilities in Wisconsin and Illinois, which have access to four 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, 2022 December 31, 2021 March 31, 2021 (unaudited) (unaudited) (unaudited) (in thousands, except per share amounts) Revenues: Sand sales revenue $ 38,289 $ 34,111 $ 23,147 Shortfall revenue 1,915 — 1,741 Logistics revenue 1,401 969 2,562 Total revenue 41,605 35,080 27,450 Cost of goods sold 43,586 39,432 32,427 Impairment loss — 2,170 — Gross profit (1,981 ) (6,522 ) (4,977 ) Operating expenses: Salaries, benefits and payroll taxes 3,392 4,108 2,375 Depreciation and amortization 527 490 561 Selling, general and administrative 4,048 3,873 3,154 Total operating expenses 7,967 8,471 6,090 Operating loss (9,948 ) (14,993 ) (11,067 ) Other income (expenses): Interest expense, net (427 ) (452 ) (547 ) Other income 212 316 198 Total other expenses, net (215 ) (136 ) (349 ) Loss before income tax benefit (10,163 ) (15,129 ) (11,416 ) Income tax benefit (4,240 ) (2,896 ) (7,504 ) Net loss $ (5,923 ) $ (12,233 ) $ (3,912 ) Net loss per common share: Basic $ (0.14 ) $ (0.29 ) $ (0.09 ) Diluted $ (0.14 ) $ (0.29 ) $ (0.09 ) Weighted-average number of common shares: Basic 42,087 41,869 41,629 Diluted 42,087 41,869 41,629 SMART SAND, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2022
(unaudited)December 31, 2021 (in thousands) Assets Current assets: Cash and cash equivalents $ 4,698 $ 25,588 Accounts receivable 26,661 17,481 Unbilled receivables 1,515 1,884 Inventory 13,583 15,024 Prepaid expenses and other current assets 9,668 13,886 Total current assets 56,125 73,863 Property, plant and equipment, net 273,312 262,465 Operating lease right-of-use assets 29,506 29,828 Intangible assets, net 7,263 7,461 Other assets 364 402 Total assets $ 366,570 $ 374,019 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 7,534 $ 8,479 Accrued expenses and other liabilities 12,599 14,073 Deferred revenue, current 11,470 9,842 Long-term debt, net, current 7,171 7,127 Operating lease liabilities, current 9,426 9,029 Total current liabilities 48,200 48,550 Deferred revenue, net 3,627 6,428 Long-term debt, net 13,258 15,353 Operating lease liabilities, long-term 22,576 23,690 Deferred tax liabilities, long-term, net 18,259 22,434 Asset retirement obligation 24,626 16,155 Other non-current liabilities 42 249 Total liabilities 130,588 132,859 Commitments and contingencies Stockholders’ equity Common stock 42 42 Treasury stock (4,662 ) (4,535 ) Additional paid-in capital 175,342 174,486 Retained earnings 64,670 70,593 Accumulated other comprehensive (loss) income 590 574 Total stockholders’ equity 235,982 241,160 Total liabilities and stockholders’ equity $ 366,570 $ 374,019 SMART SAND, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2022 December 31, 2021 March 31, 2021 (unaudited) (unaudited) (unaudited) (in thousands) Operating activities: Net loss $ (5,923 ) $ (12,233 ) $ (3,912 ) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and accretion of asset retirement obligation 6,568 6,371 6,375 Impairment loss — 2,170 — Amortization of intangible assets 199 199 198 Loss (gain) on disposal of assets — 332 2 Amortization of deferred financing cost 26 26 26 Accretion of debt discount 47 43 47 Deferred income taxes (4,175 ) (3,004 ) (7,691 ) Stock-based compensation 826 1,030 678 Employee stock purchase plan compensation 5 10 7 Changes in assets and liabilities: Accounts receivable (5,411 ) (1,892 ) 3,062 Unbilled receivables (3,399 ) (898 ) (88 ) Inventories 1,441 (1,813 ) 1,590 Prepaid expenses and other assets 3,835 2,637 1,140 Deferred revenue (1,173 ) (179 ) 2,191 Accounts payable (193 ) 2,944 1,332 Accrued and other expenses (1,335 ) (848 ) (1,043 ) Net cash (used in) provided by operating activities (8,662 ) (5,105 ) 3,914 Investing activities: Acquisition of Blair facility (6,547 ) — — Purchases of property, plant and equipment (3,768 ) (4,244 ) (2,213 ) Proceeds from disposal of assets — — (2 ) Net cash used in investing activities (10,315 ) (4,244 ) (2,215 ) Financing activities: Repayments of notes payable (1,776 ) (1,602 ) (1,672 ) Payments under equipment financing obligations (35 ) (31 ) (31 ) Proceeds from equity issuance 25 — 17 Purchase of treasury stock (127 ) (108 ) (141 ) Net cash used in financing activities (1,913 ) (1,741 ) (2,007 ) Net increase in cash and cash equivalents (20,890 ) (11,090 ) (308 ) Cash and cash equivalents at beginning of period 25,588 36,678 11,725 Cash and cash equivalents at end of period $ 4,698 $ 25,588 $ 11,417 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, 2022 December 31, 2021 March 31, 2021 (in thousands, except per ton amounts) Revenue $ 41,605 $ 35,080 $ 27,450 Cost of goods sold 43,586 39,432 $ 32,427 Gross profit (1,981 ) (4,352 ) (4,977 ) Depreciation, depletion, and accretion of asset retirement obligations included in cost of goods sold 6,231 6,249 6,013 Contribution margin $ 4,250 $ 1,897 $ 1,036 Contribution margin per ton $ 4.99 $ 2.18 $ 1.36 Total tons sold 852 872 760 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, 2022 December 31, 2021 March 31, 2021 (in thousands) Net loss $ (5,923 ) $ (12,233 ) $ (3,912 ) Depreciation, depletion and amortization 6,568 6,554 6,460 Income tax benefit (4,240 ) (2,896 ) (7,504 ) Interest expense 434 460 555 Franchise taxes 60 53 98 EBITDA $ (3,101 ) $ (8,062 ) $ (4,303 ) (Loss) gain on sale of fixed assets — 332 2 Equity compensation(1) 674 883 685 Acquisition and development costs 337 11 23 Non-cash impairment loss — 2,170 — Accretion of asset retirement obligations 190 182 114 Adjusted EBITDA $ (1,900 ) $ (4,484 ) $ (3,479 ) Non-cash impairment loss (1) Represents the non-cash expenses for stock-based awards issued to our employees and employee stock purchase plan compensation expense.
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, 2022 December 31, 2021 March 31, 2021 (in thousands) Net cash (used in) provided by operating activities $ (8,662 ) $ (5,105 ) $ 3,914 Acquisition of Blair facility (6,547 ) $ — $ — Purchases of property, plant and equipment (3,768 ) (4,244 ) (2,213 ) Free cash flow $ (18,977 ) $ (9,349 ) $ 1,701 Investor Contacts:
Josh Jayne Lee Beckelman Director of Finance, Treasurer Chief Financial Officer (281) 231-2660 (281) 231-2660 jjayne@smartsand.com lbeckelman@smartsand.com 
