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 raw frac sand and
provider of proppant logistics solutions through both our in-basin
transloading terminal and wellsite storage solutions, today
announced results for the fourth quarter and full year ended
December 31, 2019.
Charles Young, Smart Sand’s Chief Executive Officer, stated “In
spite of challenging market conditions, Smart Sand delivered
another solid quarter to finish out an impressive year. During
2019, we demonstrated the value of our mine to wellsite solutions
strategy by increasing activity through our Van Hook terminal and
beginning the buildup of our SmartSystems™ equipment. As of
today, we have nine SmartSystems fleets leased to customers.
Additionally, we refinanced our former credit facility with a
five-year bank financing and a five-year equipment lease
arrangement that provide Smart Sand with long-term capital to
support our ongoing operations. We believe that we have
established the foundation to support our long-term strategy to
provide sustainable sand supply and logistics solutions to our
customers for 2020 and beyond."
Full Year 2019 Highlights
Revenues of $233.1 million for the full year 2019 were the
highest in the history of the Company, representing a 10% increase
over full year 2018 revenues of $212.5 million. The
increase in revenues was primarily due to higher shortfall revenue
from customers that did not take their contractual minimum volumes
of sand and higher logistics revenue due to higher in-basin sales
and rentals of our SmartSystems equipment.
Overall tons sold were approximately 2,462,000 in the full year
2019, compared to full year 2018 volume of 2,995,000 tons. Tons
sold decreased by 18% due to decreased exploration and production
activity among some of our customers and in the oil and
natural gas industry in general.
Net income was $31.6 million, or $0.79 per basic share and $0.78
per diluted share for the full year 2019, compared with net income
of $18.7 million, or $0.46 per basic and diluted share, for the
full year 2018, an increase of 69% year over year. The
increase in net income was primarily due to higher shortfall
revenue from customers that did not take their contractual minimum
volumes of sand, increased volumes shipped through our Van Hook
terminal and leased SmartSystems equipment. Impairment losses
negatively impacted net income in 2019 and 2018 by $15.5 million
and $17.8 million, respectively.
Adjusted EBITDA was $87.1 million for the full year 2019
compared to Adjusted EBITDA of $66.0 million for the full year
2018, an increase of 32% year over year. The increase in
Adjusted EBITDA for the year ended December 31, 2019, as compared
to the prior year, was primarily due to higher shortfall and
logistics revenue, partially offset by increased transportation
charges and lower overall volumes of sand sold.
Fourth Quarter 2019 Highlights
Revenues were $47.7 million in the fourth quarter of 2019, a 27%
decrease compared to third quarter 2019 revenues of $65.7 million.
Fourth quarter 2019 revenues decreased by 9% compared to fourth
quarter 2018 revenues of $52.2 million. The decrease in revenues
over the previous quarter was primarily attributable to a decline
in total sales volumes. The decrease in revenue over the fourth
quarter of 2018 was primarily due to a decline in total sales
volumes, partially offset by high shortfall revenue in 2019.
Overall tons sold were approximately 462,000 in the fourth
quarter of 2019, compared to approximately 611,000 tons for the
third quarter of 2019 and approximately 610,000 tons in the fourth
quarter 2018, decreases of 24% for each comparable period. The
decline in volumes aligns with the overall decline in completion
activity and frac sand use in the industry for the fourth quarter
2019.
Net income was $2.4 million, or $0.06 per basic share and $0.05
per diluted share, for the fourth quarter of 2019, compared with
net income of $10.9 million, or $0.27 per basic and diluted share
for the third quarter of 2019, and net loss of $4.4 million, or
$(0.11) per basic and diluted share, for the fourth quarter 2018.
Net income in the fourth quarter of 2019 was negatively impacted by
an impairment charge of $7.9 million on our Hixton site, partially
offset by gross profit on sand sales, logistics and shortfall
revenue. Net income was also impacted by lower total volumes sold
in the fourth quarter 2019 compared to the previous quarter and the
same period in the prior year. Net income in the third
quarter of 2019 and net loss in the fourth quarter of 2018 were
primarily attributable to non-cash impairment charges of $7.6
million and $17.8 million, respectively. The impairment charges
were partially offset by strong in-basin sales generated from our
Van Hook terminal in each of the periods, respectively.
Adjusted EBITDA was $19.6 million for the fourth quarter of
2019, a decrease of 32% compared to third quarter 2019 Adjusted
EBITDA of $28.8 million and an increase of 5% from $18.7 million
during the same period last year. The decrease in Adjusted EBITDA
compared to the third quarter of 2019 was primarily due to lower
sales volumes which was partially offset by lower costs of sales
and continued high shortfall revenue recognized in the quarter. The
increase in Adjusted EBITDA compared to the fourth quarter 2018 was
primarily due to higher shortfall revenue.
Conference Call
Smart Sand will host a conference call and live webcast for
analysts and investors this morning, February 26, 2020 at
10:00 a.m. Eastern Time to discuss the Company’s fourth quarter and
full year 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
4665968. 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
4665968.
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, 2019,
filed by the Company with the U.S. Securities and Exchange
Commission on February 26, 2020.
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 to 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 raw 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 SmartSystems wellsite
proppant storage capabilities. We own and operate a frac sand mine
and related processing facility near Oakdale, Wisconsin, which is
capable of processing 5.5 million tons annually and has proven
recoverable reserves of approximately 316 million tons.
Availability of Information on Smart Sand's
Website
Smart Sand routinely announces 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 the Company posts to
the Smart Sand investor relations website is of a material nature,
some information could be deemed to be material. Accordingly, the
Company encourages investors, the media, and others interested in
Smart Sand to review the information that it shares at the
“Investors” link located at the top of the page on
www.smartsand.com.
SMART SAND, INC.
CONSOLIDATED INCOME
STATEMENTS
|
Three Months Ended |
|
December 31, 2019 |
|
September 30, 2019 |
|
December 31, 2018 |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(in thousands, except per share amounts) |
Revenues |
$ |
47,667 |
|
|
$ |
65,690 |
|
|
$ |
52,248 |
|
Cost of goods sold |
29,793 |
|
|
38,555 |
|
|
34,217 |
|
Gross profit |
17,874 |
|
|
27,135 |
|
|
18,031 |
|
Operating expenses: |
|
|
|
|
|
Salaries, benefits and payroll taxes |
3,094 |
|
|
2,958 |
|
|
2,448 |
|
Depreciation and amortization |
457 |
|
|
623 |
|
|
678 |
|
Selling, general and administrative |
3,045 |
|
|
2,693 |
|
|
2,617 |
|
Change in the estimated fair value of contingent consideration |
(515 |
) |
|
(1,215 |
) |
|
242 |
|
Impairment loss |
7,914 |
|
|
7,628 |
|
|
17,835 |
|
Total operating expenses |
13,995 |
|
|
12,687 |
|
|
23,820 |
|
Operating income |
3,879 |
|
|
14,448 |
|
|
(5,789 |
) |
Other income (expenses): |
|
|
|
|
|
Interest expense, net |
(678 |
) |
|
(968 |
) |
|
(828 |
) |
Loss on extinguishment of debt |
(561 |
) |
|
— |
|
|
— |
|
Other income |
42 |
|
|
15 |
|
|
48 |
|
Total other income (expenses), net |
(1,197 |
) |
|
(953 |
) |
|
(780 |
) |
Income before income tax expense
(benefit) |
2,682 |
|
|
13,495 |
|
|
(6,569 |
) |
Income tax expense (benefit) |
294 |
|
|
2,569 |
|
|
(2,136 |
) |
Net income |
$ |
2,388 |
|
|
$ |
10,926 |
|
|
$ |
(4,433 |
) |
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
Basic |
$ |
0.06 |
|
|
$ |
0.27 |
|
|
$ |
(0.11 |
) |
Diluted |
$ |
0.06 |
|
|
$ |
0.27 |
|
|
$ |
(0.11 |
) |
Weighted-average number of common
shares: |
|
|
|
|
|
Basic |
40,234 |
|
|
40,233 |
|
|
40,262 |
|
Diluted |
40,238 |
|
|
40,240 |
|
|
40,262 |
|
|
|
|
|
|
|
SMART SAND, INC.
CONSOLIDATED INCOME
STATEMENTS
|
Year Ended December 31, |
|
2019 |
|
2018 |
|
(audited) |
|
(audited) |
|
(in thousands, except per share amounts) |
Revenues |
$ |
233,073 |
|
|
$ |
212,470 |
|
Cost of goods sold |
152,021 |
|
|
144,903 |
|
Gross profit |
81,052 |
|
|
67,567 |
|
Operating expenses: |
|
|
|
Salaries, benefits and payroll taxes |
11,560 |
|
|
11,043 |
|
Depreciation and amortization |
2,411 |
|
|
1,843 |
|
Selling, general and administrative |
11,328 |
|
|
12,825 |
|
Change in the estimated fair value of contingent consideration |
(3,272 |
) |
|
(1,858 |
) |
Impairment loss |
15,542 |
|
|
17,835 |
|
Total operating expenses |
37,569 |
|
|
41,688 |
|
Operating income |
43,483 |
|
|
25,879 |
|
Other income (expenses): |
|
|
|
Interest expense, net |
(3,621 |
) |
|
(2,266 |
) |
Loss on extinguishment of debt |
(561 |
) |
|
— |
|
Other income |
131 |
|
|
197 |
|
Total other income (expenses), net |
(4,051 |
) |
|
(2,069 |
) |
Income before income tax
expense |
39,432 |
|
|
23,810 |
|
Income tax expense |
7,809 |
|
|
5,122 |
|
Net income |
$ |
31,623 |
|
|
$ |
18,688 |
|
Net income per common share: |
|
|
|
Basic |
$ |
0.79 |
|
|
$ |
0.46 |
|
Diluted |
$ |
0.78 |
|
|
$ |
0.46 |
|
Weighted-average number of common
shares: |
|
|
|
Basic |
40,135 |
|
|
40,427 |
|
Diluted |
40,337 |
|
|
40,449 |
|
|
|
|
|
|
|
SMART SAND, INC.
CONSOLIDATED BALANCE SHEETS
|
December 31, |
|
2019 |
|
2018 |
|
(in thousands, except share amounts) |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
2,639 |
|
|
$ |
1,466 |
|
Accounts receivable, net |
60,052 |
|
|
18,989 |
|
Unbilled receivables |
4,765 |
|
|
7,823 |
|
Inventories |
21,415 |
|
|
18,575 |
|
Prepaid expenses and other
current assets |
1,506 |
|
|
3,243 |
|
Total current assets |
90,377 |
|
|
50,096 |
|
Property, plant and equipment,
net |
230,461 |
|
|
248,396 |
|
Operating lease right-of-use
assets |
28,178 |
|
|
— |
|
Intangible assets, net |
9,046 |
|
|
18,068 |
|
Other assets |
3,541 |
|
|
3,732 |
|
Total assets |
$ |
361,603 |
|
|
$ |
320,292 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
3,961 |
|
|
$ |
11,336 |
|
Accrued and other expenses |
8,578 |
|
|
8,392 |
|
Deferred revenue, current |
7,654 |
|
|
4,095 |
|
Income taxes payable |
542 |
|
|
— |
|
Long-term debt, net, current |
6,175 |
|
|
829 |
|
Operating lease liabilities,
current |
13,108 |
|
|
— |
|
Total current liabilities |
40,018 |
|
|
24,652 |
|
Deferred revenue, net |
1,670 |
|
|
— |
|
Long-term debt, net |
28,240 |
|
|
47,893 |
|
Operating lease liabilities,
long-term |
15,469 |
|
|
— |
|
Deferred tax liabilities,
long-term, net |
24,021 |
|
|
17,898 |
|
Asset retirement obligation |
6,142 |
|
|
13,322 |
|
Contingent consideration |
1,900 |
|
|
7,167 |
|
Total liabilities |
117,460 |
|
|
110,932 |
|
Commitments and
contingencies |
|
|
|
Stockholders’ equity |
|
|
|
Common Stock |
40 |
|
|
40 |
|
Treasury stock, at cost |
(2,979 |
) |
|
(2,839 |
) |
Additional paid-in capital |
165,223 |
|
|
162,195 |
|
Retained earnings |
81,900 |
|
|
50,277 |
|
Accumulated other comprehensive loss |
(41 |
) |
|
(313 |
) |
Total stockholders’ equity |
244,143 |
|
|
209,360 |
|
Total liabilities and stockholders’ equity |
$ |
361,603 |
|
|
$ |
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 (benefit)
expense; (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, 2019 |
|
September 30, 2019 |
|
December 31, 2018 |
|
(in thousands) |
Net (loss) income |
$ |
2,388 |
|
|
$ |
10,926 |
|
|
$ |
(4,433 |
) |
Depreciation, depletion and
amortization |
7,250 |
|
|
6,992 |
|
|
5,780 |
|
Income tax (benefit) expense |
294 |
|
|
2,569 |
|
|
(2,135 |
) |
Interest expense |
679 |
|
|
969 |
|
|
832 |
|
Franchise taxes |
51 |
|
|
56 |
|
|
59 |
|
EBITDA |
$ |
10,662 |
|
|
$ |
21,512 |
|
|
$ |
103 |
|
(Gain) loss on sale of fixed
assets |
(1 |
) |
|
(15 |
) |
|
68 |
|
Equity compensation (1) |
708 |
|
|
663 |
|
|
721 |
|
Acquisition and development costs
(2) |
(315 |
) |
|
(1,208 |
) |
|
263 |
|
Non-cash impairment loss |
7,914 |
|
|
7,628 |
|
|
17,835 |
|
Cash charges related to
restructuring and retention |
55 |
|
|
— |
|
|
112 |
|
Accretion of asset retirement
obligations |
64 |
|
|
178 |
|
|
(356 |
) |
Loss on extinguishment of
debt |
561 |
|
|
— |
|
|
— |
|
Adjusted EBITDA |
$ |
19,648 |
|
|
$ |
28,758 |
|
|
$ |
18,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents the non-cash expenses for stock-based awards
issued to our employees and employee stock purchase plan
compensation expense.(2) Represents costs incurred related to the
business combinations and current development project activities.
The three months ended December 31, 2019 includes $515 fair value
adjustment partially offset by $200 related to development project
activities. The three months ended September 30, 2019 includes
$1,215 fair value adjustment of contingent consideration.
|
Year Ended December 31, |
|
2019 |
|
2018 |
|
(in thousands) |
Net income |
$ |
31,623 |
|
|
$ |
18,688 |
|
Depreciation, depletion and
amortization |
27,135 |
|
|
18,165 |
|
Income tax (benefit) expense |
7,809 |
|
|
5,122 |
|
Interest expense |
3,626 |
|
|
2,320 |
|
Franchise taxes |
285 |
|
|
442 |
|
EBITDA |
$ |
70,478 |
|
|
$ |
44,737 |
|
(Gain) loss on sale of fixed
assets |
(42 |
) |
|
321 |
|
Equity compensation (1) |
2,755 |
|
|
2,670 |
|
Acquisition and development costs
(2) |
(3,047 |
) |
|
(218 |
) |
Non-cash impairment loss |
15,542 |
|
|
17,835 |
|
Cash charges related to retention
and employee relocation |
137 |
|
|
674 |
|
Accretion of asset retirement
obligations |
687 |
|
|
(26 |
) |
Loss on extinguishment of
debt |
561 |
|
|
— |
|
Adjusted EBITDA |
$ |
87,071 |
|
|
$ |
65,993 |
|
|
|
|
|
|
|
|
|
(1) Represents the non-cash expenses for stock-based awards
issued to our employees and employee stock purchase plan
compensation expense.(2) Represents costs incurred related to the
business combinations and current development project activities.
The year ended December 31, 2019 includes $3,272 decrease in the
estimated fair value of our contingent consideration related to the
acquisition of Quickthree and $225 related to development project
activities. The year ended December 31, 2018 includes $1,858
decrease in the estimated fair value of our contingent
consideration related to the acquisition of Quickthree, partially
offset by $1,146 of costs related to the acquisition of Quickthree
and $494 related to development project activities.
_________________________
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.
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 |
|
December 31, 2019 |
|
September 30, 2019 |
|
December 31, 2018 |
|
(in thousands) |
Revenue |
$ |
47,667 |
|
|
$ |
65,690 |
|
|
$ |
52,248 |
|
Cost of goods sold |
29,793 |
|
|
38,555 |
|
|
34,217 |
|
Gross profit |
17,874 |
|
|
27,135 |
|
|
18,031 |
|
Depreciation, depletion, and
accretion of asset retirement obligations included in cost of goods
sold |
6,858 |
|
|
6,547 |
|
|
4,746 |
|
Contribution margin |
$ |
24,732 |
|
|
$ |
33,682 |
|
|
$ |
22,777 |
|
Contribution margin per ton |
$ |
53.53 |
|
|
$ |
55.13 |
|
|
$ |
37.34 |
|
Total tons sold |
462 |
|
|
611 |
|
|
610 |
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
2019 |
|
2018 |
|
(in thousands) |
Revenue |
$ |
233,073 |
|
|
$ |
212,470 |
|
Cost of goods sold |
152,021 |
|
|
144,903 |
|
Gross profit |
81,052 |
|
|
67,567 |
|
Depreciation, depletion, and
accretion of asset retirement obligations included in cost of goods
sold |
25,412 |
|
|
16,297 |
|
Contribution margin |
$ |
106,464 |
|
|
$ |
83,864 |
|
Contribution margin per ton |
$ |
43.24 |
|
|
$ |
28.00 |
|
Total tons sold |
2,462 |
|
|
2,995 |
|
|
|
|
|
|
|
Investor Contacts:
Josh JayneFinance Manager(281)
231-2660jjayne@smartsand.com
Lee Beckelman CFO (281) 231-2660
beckelman@smartsand.com
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