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Smart Sand Inc. First Quarter 2022 Results

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   |    Wednesday,May 11,2022

Smart Sand, Inc. announced results for the first quarter 2022.

Highlights:

• 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

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.