Smart Sand, Inc. (NASDAQ: SND) (the “Company” or “Smart Sand”), a
fully integrated frac sand supply and services company, is a
low-cost producer of high quality Northern White frac sand and
provider of proppant logistics solutions through both our in-basin
transloading terminal and wellsite storage solutions, today
announced results for the first quarter 2019.
Charles Young, Smart Sand’s Chief Executive Officer, stated,
“Smart Sand had another good quarter. We began to see the
turnaround in the market that we’ve been forecasting and by
sticking to our long-term plan for success, we were able to
capitalize on the turnaround and once again deliver positive
results.”
First Quarter 2019 Highlights
Revenues were $51.8 million in the first quarter of 2019, flat
compared to fourth quarter 2018 revenues of $52.2 million. First
quarter 2019 revenues of $51.8 million increased by 21% compared to
first quarter 2018 revenues of $42.6 million. The increase in
revenue over the first quarter 2018 was primarily attributed to
higher volumes from our in-basin Van Hook terminal, which sell at a
higher average selling price per ton than sales at the
minegate.
Overall tons sold were approximately 648,000 in the first
quarter of 2019, compared with approximately 610,000 tons in the
fourth quarter 2018 and 723,000 tons for the first quarter of
2018.
Net income was $4.0 million, or $0.10 per basic and
diluted share, for the first quarter of 2019, compared with a net
loss of $(4.4) million or $(0.11) per basic and diluted share, for
the fourth quarter of 2018 and net income of $1.0 million, or $0.02
per basic and diluted share, for the first quarter of 2018. The net
income in the first quarter of 2019 is primarily attributable to
strong in-basin sales generated primarily from our Van Hook
terminal and low operating costs as we worked to right size our
operations to match current sales volumes.
Adjusted EBITDA was $12.4 million for the first quarter of 2019
compared to $5.9 million during the same period last year, an
increase of 112% year over year, and a decrease of 34% compared to
fourth quarter 2018 Adjusted EBITDA of $18.7 million. The increase
in Adjusted EBITDA year-over-year is primarily attributable to tons
sold through our Van Hook terminal in 2019 at higher average
selling prices. The sequential decrease in Adjusted EBITDA was
primarily due to lower contract and spot sales prices as the
decrease in completions persisted through the first half of the
first quarter of 2019 coupled with seasonally higher operating cost
of sales in the first quarter as previously capitalized inventory
is expensed as it is sold.
Capital Expenditures
Smart Sand’s capital expenditures totaled $8.5 million for the
first quarter ended March 31, 2019, primarily for the manufacturing
of our wellsite storage solutions and maintenance and efficiency
upgrades at our Oakdale facility. We estimate that full year 2019
capital expenditures will be approximately $30 million to $40
million, excluding any additional acquisitions. This range of
investment gives consideration to investment in the build up of our
wellsite storage solutions. Our primary sources of liquidity are
cash flow generated from our operations, our Credit Facility and
other equipment financing arrangements. At March 31, 2019, we had
approximately $2.4 million of cash on hand and $12.5 million
available under our Credit Facility.
Conference Call
Smart Sand will host a conference call and live webcast for
analysts and investors this morning, May 7, 2019 at 10:00 a.m.
Eastern Time to discuss the Company’s first quarter 2019 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 7077368. 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 7077368.
Forward-looking Statements
All statements in this news release other than statements of
historical facts are forward-looking statements that contain our
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 the Company’s 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, changes in economic or political conditions, and such
other factors discussed or referenced in the “Risk Factors” section
of the Company’s Form 10-K for the year ended December 31,
2018, filed by the Company with the U.S. Securities and
Exchange Commission on March 14, 2019.
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 sand supply and services
company, offering complete mine to wellsite solutions for our
customers. We produce low-cost, high quality Northern White frac
sand and provide our customers with proppant logistics solutions
from the mine to the wellsite. Northern White frac sand is a
premium proppant used to enhance hydrocarbon recovery rates in the
hydraulic fracturing of oil and natural gas wells. We also offer
logistics solutions to our customers through our Van Hook
transloading terminal in the Bakken and wellsite storage
capabilities. We own and operate a frac sand mine and related
processing facility near Oakdale, Wisconsin, at which we have
approximately 317 million tons of proven recoverable sand reserves
as of December 31, 2018. We began operations with 1.1 million
tons of annual nameplate processing capacity in July 2012. After
several expansions, our current annual nameplate processing
capacity at our Oakdale facility is approximately 5.5 million tons
of frac sand per year. For more information, please visit
www.smartsand.com.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
Three Months Ended |
|
March 31, 2019 |
|
December 31, 2018 |
|
March 31, 2018 |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(in thousands, except per share
amounts) |
Revenues |
$ |
51,775 |
|
|
$ |
52,248 |
|
|
$ |
42,628 |
|
Cost of goods sold |
40,605 |
|
|
34,217 |
|
|
35,413 |
|
Gross
profit |
11,170 |
|
|
18,031 |
|
|
7,215 |
|
Operating expenses: |
|
|
|
|
|
Salaries,
benefits and payroll taxes |
2,710 |
|
|
2,448 |
|
|
2,573 |
|
Depreciation
and amortization |
676 |
|
|
678 |
|
|
188 |
|
Selling,
general and administrative |
2,800 |
|
|
2,617 |
|
|
3,101 |
|
Change in
the estimated fair value of contingent consideration |
(967 |
) |
|
242 |
|
|
— |
|
Impairment
of goodwill and indefinite-lived intangible asset |
— |
|
|
17,835 |
|
|
— |
|
Total
operating expenses |
5,219 |
|
|
23,820 |
|
|
5,862 |
|
Operating income
(loss) |
5,951 |
|
|
(5,789 |
) |
|
1,353 |
|
Other income
(expenses): |
|
|
|
|
|
Interest
expense, net |
(981 |
) |
|
(828 |
) |
|
(180 |
) |
Other
income |
37 |
|
|
48 |
|
|
34 |
|
Total other
income (expense), net |
(944 |
) |
|
(780 |
) |
|
(146 |
) |
Income before income tax
expense (benefit) |
5,007 |
|
|
(6,569 |
) |
|
1,207 |
|
Income tax
expense (benefit) |
974 |
|
|
(2,136 |
) |
|
232 |
|
Net income (loss) |
$ |
4,033 |
|
|
$ |
(4,433 |
) |
|
$ |
975 |
|
Net income (loss) per
common share: |
|
|
|
|
|
Basic |
$ |
0.10 |
|
|
$ |
(0.11 |
) |
|
$ |
0.02 |
|
Diluted |
$ |
0.10 |
|
|
$ |
(0.11 |
) |
|
$ |
0.02 |
|
Weighted-average number of
common shares: |
|
|
|
|
|
Basic |
39,997 |
|
|
40,262 |
|
|
40,412 |
|
Diluted |
39,997 |
|
|
40,262 |
|
|
40,441 |
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
March 31, 2019 |
|
December 31, 2018 |
|
(unaudited) |
|
|
(in thousands) |
Assets |
|
|
|
Current
assets: |
|
|
|
Cash and cash
equivalents |
$ |
2,369 |
|
|
$ |
1,466 |
|
Accounts
receivable, net |
31,434 |
|
|
18,989 |
|
Unbilled
receivables |
8,081 |
|
|
7,823 |
|
Inventories |
13,571 |
|
|
18,575 |
|
Prepaid
expenses and other current assets |
2,170 |
|
|
3,243 |
|
Total
current assets |
57,625 |
|
|
50,096 |
|
Property,
plant and equipment, net |
249,133 |
|
|
248,396 |
|
Operating
right-of use assets |
34,329 |
|
|
— |
|
Intangible assets, net |
17,640 |
|
|
18,068 |
|
Other
assets |
3,613 |
|
|
3,732 |
|
Total
assets |
$ |
362,340 |
|
|
$ |
320,292 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
8,488 |
|
|
$ |
11,336 |
|
Accrued
and other expenses |
11,003 |
|
|
8,392 |
|
Deferred
revenue |
5,005 |
|
|
4,095 |
|
Current
portion of long-term debt |
1,332 |
|
|
829 |
|
Current
portion of operating lease liabilities |
13,354 |
|
|
— |
|
Total
current liabilities |
39,182 |
|
|
24,652 |
|
Long-term
debt, net of current portion |
51,296 |
|
|
47,893 |
|
Long-term
operating lease liabilities, net of current portion |
21,539 |
|
|
— |
|
Deferred
tax liabilities, long-term, net |
18,216 |
|
|
17,898 |
|
Asset
retirement obligation |
12,253 |
|
|
13,322 |
|
Contingent consideration |
5,500 |
|
|
7,167 |
|
Total
liabilities |
147,986 |
|
|
110,932 |
|
Commitments and contingencies |
|
|
|
Stockholders’ equity |
|
|
|
Common
stock |
40 |
|
|
40 |
|
Treasury
stock |
(2,862 |
) |
|
(2,839 |
) |
Additional paid-in capital |
163,034 |
|
|
162,195 |
|
Retained
earnings |
54,310 |
|
|
50,277 |
|
Accumulated other comprehensive loss |
(168 |
) |
|
(313 |
) |
Total
stockholders’ equity |
214,354 |
|
|
209,360 |
|
Total
liabilities and stockholders’ equity |
$ |
362,340 |
|
|
$ |
320,292 |
|
Non-GAAP Financial Measures
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 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, 2019 |
|
December 31, 2018 |
|
March 31, 2018 |
|
(in
thousands) |
Net income (loss) |
$ |
4,033 |
|
|
$ |
(4,433 |
) |
|
$ |
975 |
|
Depreciation, depletion
and amortization |
6,303 |
|
|
5,780 |
|
|
3,160 |
|
Income tax expense
(benefit) |
974 |
|
|
(2,135 |
) |
|
232 |
|
Interest expense |
981 |
|
|
832 |
|
|
219 |
|
Franchise taxes |
85 |
|
|
59 |
|
|
220 |
|
EBITDA |
$ |
12,376 |
|
|
$ |
103 |
|
|
$ |
4,806 |
|
(Gain) loss on sale of
fixed assets |
(25 |
) |
|
68 |
|
|
— |
|
Equity compensation
(1) |
699 |
|
|
721 |
|
|
490 |
|
Acquisition and
development costs (2) |
(947 |
) |
|
263 |
|
|
328 |
|
Non-cash impairment of
goodwill and other intangible asset (3) |
— |
|
|
17,835 |
|
|
— |
|
Cash charges related to
restructuring and retention |
41 |
|
|
112 |
|
|
94 |
|
Accretion of asset
retirement obligations |
279 |
|
|
(356 |
) |
|
134 |
|
Adjusted EBITDA |
$ |
12,423 |
|
|
$ |
18,746 |
|
|
$ |
5,852 |
|
- Represents the non-cash expenses for stock-based awards issued
to our employees and employee stock purchase plan compensation
expense.
- Includes $967 fair value adjustment of contingent consideration
in 2019 and costs incurred related to the business combinations and
current development project activities in 2019 and 2018.
- An impairment charge of $17,835 related to goodwill and an
indefinite-lived intangible asset was recorded in the fourth
quarter of 2018. The impairment charge relates primarily to the
decline in our stock price in 2018 and the relationship between the
resulting market capitalization and the equity recorded on our
balance sheet._________________________
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 our
financial and operating performance. Contribution margin excludes
other operating expenses and income, including costs not directly
associated with the operations of our 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.
We believe that a transition to reporting contribution margin
and contribution margin per ton sold will provide a better
performance metric 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. As such, we believe that it is no
longer relevant to report production costs or production costs per
ton on a standalone basis.
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 our 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, 2019 |
|
December 31, 2018 |
|
March 31, 2018 |
|
(in thousands) |
Revenue |
$ |
51,775 |
|
|
$ |
52,248 |
|
|
$ |
42,628 |
|
Cost of goods sold |
40,605 |
|
|
34,217 |
|
|
35,413 |
|
Gross
profit |
11,170 |
|
|
18,031 |
|
|
7,215 |
|
Depreciation,
depletion, and accretion of asset retirement obligations included
in cost of goods sold |
5,906 |
|
|
4,746 |
|
|
3,106 |
|
Contribution margin |
$ |
17,076 |
|
|
$ |
22,777 |
|
|
$ |
10,321 |
|
Contribution margin per ton |
$ |
26.35 |
|
|
$ |
37.34 |
|
|
$ |
14.28 |
|
Total tons sold |
648 |
|
|
610 |
|
|
723 |
|
Investor Contacts
Josh JayneFinance Manager(281) 231-2660jjayne@smartsand.com
Lee BeckelmanCFO(281) 231-2660lbeckelman@smartsand.com
Smart Sand (NASDAQ:SND)
Historical Stock Chart
From Aug 2024 to Sep 2024
Smart Sand (NASDAQ:SND)
Historical Stock Chart
From Sep 2023 to Sep 2024