SND - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Smart Sand third quarter 2017 earnings conference call. [Operator Instructions] As a reminder, this conference is being recorded. I'd like to introduce your host for today's conference, Mr. Phil Cerniglia, Investor Relations Manager. Sir?

Phil Cerniglia

you earnings us call. thank third Smart and XXXX quarter morning, for for joining Sand's Good

Chief John On Chuck Sales Chief Beckelman, Young, call and Founder Officer the today, and Executive we Logistics. Officer; President Executive Vice Young, will have Financial of and Lee

differ comments are could Before begin, materially subject events risks uncertainties that our to actual like will results include to all participants to certain those we today remind forward-looking cause or would that I anticipated. made from statements, which and

a complete such events is or the This information update intention of on and XXXX. or contains discussion time-sensitive any November only broadcast accurate refer any to call risks to otherwise. because with projections financial forward-looking please future For our revise and statements, the conference and SEC. file release disclaims or of obligation X, uncertainties, Smart whether Sand company's today, the press as or live documents information, of new

Chuck public our refer Additionally, GAAP to results measures turn cost the of call. investors used and to for our with combination production to business. I costs better of in to now These like us our measures of Instructions] Young. Please would CEO, we press and this information release production cost and the with provide goods to call net most our recent during to or a reconciliation may understand to EBITDA full filings EBITDA adjusted when income sold. our [Operator adjusted financial useful refer non-GAAP over

Chuck Young

quarter. other Sales our effectively possible hard the would its and had Sand the movements, founding also matter, pleased quarter. not There to dramatically, managing both and This on since year-to-date were dedication operating Good work quarter production safe morning. a have volumes I'm efficient the our focus while up Smart Phil. that Thanks, the been led were report positives six without sales years railcar and volume record in employees, and ago. year-over-year. maximizing in best their of for to

program remained highlights. resulted highly quarter strong favorable. during tons increase along volumes along. the like improvements quality financial continues from product and frac remarks, quarter on Our Northern a you current demand on our high to of customer fourth expect Also third over represents results details sand XXX% of third we White quarter, EBITDA touch our you $XX.XX expansion demand facility. to will move I'd on Those frac our for first, approximately on over trend This Lee but increase at adjusted and and projected volumes we sales give sand the during into details ton. some into his we XX.X remarks. more Lee to volume activity his quarter will XXXX and record with sold base, generated fourth XXXX. In million prepared second more continue dialogs the operational Based this provide our with quarter XXXX. sales of XXX,XXX and of a XX% pricing or

nameplate efficient facility tons XXXX. the look by out originating year. X.X the that X.X Union sand another expansion in Also bring lowest Oakdale railyard. to at start tons us our ship increase expansion it rail the Pacific I'll of Oakdale. by we and Oakdale, This can of and move previously annual produced million of Sand. Pacific Smart end will the via most of million train Pacific with every at of carrier. now the the Canadian This And train to capable to end capacity ability expect unit via year online Oakdale, unit Let's At plans ensures the processing our gives Oakdale of track on our on quarter plans. of the first of capacity we're announced our future the per completion railroads and cost Union ton both

to pricing. current product Now, demand and

our their sand demand to delivered for experiment mesh. XX/XX basins particular, XX% in XX/XX. the Currently, Permian. demand of in of we've in of for improve. our sales there Spot Permian. supply sold basins the customers and improving continues majority XXX XX/XX start the XX/XX And We continuing product frac continue some date, coarser There with outside is be to in to grades strong volumes and is other for and has in overall also to improving seen than terms designs. Year demand With our see about to particular tightest been demand pricing sand, spot. XX/XX and of of actually the are balance, to more

For price the second per ton by over X% quarter, increased our approximately sales results. quarter average

spot foresee improvement XX% strong For we sales. to X% mine of at and QX, spot pricing we for expect ongoing opportunities for in gate demand the

add We We contracted volumes over we'll the long-term several contracts. capacity new continue Oakdale pursue strategically believe next to months. for

the in wants exposure I've business this, opportunities said to delivery evaluating will Sand sand the it that business? effectively, the efficiently we're basins. operating view, question the in can frac model three logistics long and mind, cost We're to our sand goal head. key Smart provide As sales in opportunities before, run looking who high be have footprint. industry quality in In expand our will With to A product and the areas. its geographic in way is that grow all and be well companies mining to more winners the direct and

risk, as the lease move environmental the advantages year upfront lease to related and compared preserving our projects First, on to to the ability locations payments been royalties both minimize forward in of region. these These expect distinct I expansion. announced while appear the many by existing future These options to well and of we've other to have Basin. one and for Permian signed as in have options structured auctions acreage minable end.

for will facility. However, sign anchor to before committing our contract new construction, goal capital an that be to

access believe of discussions these of potential want outside the surety basins opportunities We're will customers can in chain. location. demand sand specific available We're in active incremental provide the transloads in spot exploring opportunity We and in Marcellus. on margin and investing at sales. as a in new these we're facilities. acquire for That of supply Permian. customers, that in the We for will more the attract opportunity discussions contracting sale basins down customers have capture to the farther develop on to the with and/or transloads to thus Second, allow anchor the supply our Bakken basins such currently sand the

to or partner a last evaluate opportunities Finally, mile in solution. to invest we continue

for delivering commonly all so efficient that to the believe solutions product is technically quality also buy be term customers with sand wellhead. a Our cost-effective to Smart marketplace. the the sand, appear in there's used at well multiple stand and our to to Sand this goal customers a want provide alternatives head. sand we're service way be many solutions provide area, We today able think that We but option the of evaluating from superior the company more being high offer can only that in the long to innovation lot to not directly

ways and call than now Beckelman CFO, incremental closer turn competitors. on to As third over develop opportunities the company's our look cost identified move we've efficiently for we We selective. We'll margins our long-term effectively we analyze forward believe we'll only believe to that more our value. Lee and opportunities evaluate a and the opportunities, I'll remain these providing customers, benefit will results. at shareholder the these both while quarter

Lee Beckelman

Thanks, Chuck.

to our both XXXX with As quarter XXXX had volume. focused My our XX% Chuck to were start comments quarter-over-quarter the quarter second on increase XXX,XXX sales financials Sales quarter date, volumes. second volumes and results I'll the with comparing year-over-year. increasing highlighted, a quarter, results. approximately the tons we third XXXX best in will substantially with be quarter third compared

As was focus and result a operating and a efficient railcar effectively on managing discussed manner. by safe while this maximizing in production of movements, Chuck, our

shipped approximately mix XX% sales and sales. XX.X which XX.X per million, primarily increase quarter sequentially per third in range XX% XX% consistent higher to pricing. the revenues sales sales be volume by ton in sales was quarter currently sale the revenues, being approximately the unit with XXXX In The price spots million equal sales in and ton, approximately second sales X.X quarter, in increase an higher second XXX,XXX million to quarter being fourth and higher average over primarily approximately the regard X% our quarter. in revenue XX% due sale quarter. improved the volumes last the XX% of in XX.X from sand million as third quarter volume results. of We train were to approximately improvement in our to to sales to quarter included average via tons Reservation to second which with spot to increased quarter XXXX, quarter revenue, quarter, third is compared driven Sand a spot were In the a quarter was the third part contracted increase sales levels. second total our XXX,XXX second $XX a expect price, of Our was sales of customers in volumes over for revenues results, results.

XXXX, which freight matures frac is volumes car through last customer's XX.X rail from X.X to customers. in quarter compared in in During payments the includes shortfall to improvement relates overall revenue, we rental, as shortfall customer's year activity higher not has we under XXXX, This million revenue shipments to up during quarter. and market. payment that based contracts due consistent million recognized a the XX.X in of majority the to taken pass picked expenses in the third The this contract Transportation our related freight in million quarter contract on with contractual which quarter, to the annual customer. sand one shortfall this was

sales, due sales in compared million XX.X for primarily revenue quarter expense the Most quarter, shipments to reimburse was us. due and expense Our of cost revenue. of higher freight in expense sale accounted XX.X shipments But customers also to pays customers to some for in higher spot the increase primarily also for basin which as pass-through in basin maintenance the to these last credit in Smart million, was in directly. expense The to Sand quarter due the associated which the higher higher and of is the unplanned is million in a for some X.X sales The maintenance. quarter. and car quarter primarily freight with rail cost related includes in sand it contracted

in production Our quarter compared per $XX.XX ton to ton ton the $XX.XX second decreased to cost the per per for quarter.

shortfall production average we in first inventory our operations should quarters. into costs fourth the the XX% earning in of gross the the a sales of the expensed during gross per due we inventory calendar primarily current ton higher, first wet from wet consistent year and quarters material As as during The profit down XX was period quarter, over these second million over increase the fourth wet periods. draw year to Historically, volumes higher lower winter second months the Gross production our historically sold in course quarter each profit. relative and calendar experienced used levels payment ton $XX winter quarter. year, sand utilization sand the plant higher to and to in we calls, the the costs sand in when stated profit quarter revenues, In of produce we on costs to in drying third be range. production drive or be the over XX% months these is quarter with during and the and of previous was and increase capitalize costs to our shut believe of per

the primarily Our quarter bonus the due were million, an our to to year. from X.X slight operating adjustment expenses decrease in accrual a for the quarter second

We XX% For the currently. to to X.X expense our going had in anticipate tax income quarter, effective of be XX% we forward rate million. tax

in amendments had depletion our of had share XXXX quarter. Both cost. of $X.XX third per and volume We discrete net items that some and for we and the related income prior production increase share lower adjusted our income quarter average provision price approximately EBITDA X.X year sequentially returns. selling adjusted to EBITDA higher million, XX.X sales including the and adjustments increased During impacted and deduction approximately of to primarily net to earnings due million in one-time per tax

capital we As XX, and highlighted projects some XXXX, X.X impacted one third EBITDA the and million quarter, adjusted our XXXX operational contractual shortfall projects. in primary expansion replacement September through an were by efficiency positively XX.X earlier, net million. year-to-date in spend expenditures, approximately payment annual customer income to from of related and for

continue on train our cable to schedule million projects to bring in are drive facility in per nameplate to Wisconsin online to expansion and at to plants move to XXXX bring X.X XXXX, on year unit our facility We and capacity forward our rail into - early tons Byron. late currently service increase

plant second in Our wet mid operations began October.

budget In and fourth expect quarter we be spend Our the for XX XXXX, we million was in in original currently XX range currently total the capital to year expect capital a expenditures to million. XXXX million range. XX of

quarter first by the this spent project end capital still budget end next the operational by the this of still XX with and the fourth XXXX. should expansion of is remaining year. of the quarter scheduled line in quarter The Our to of be in Oakdale facility year of original it's the be million first of

approximately As balance and in cash million have in sheet we our on million we of approximately September cash. had currently XX XX XX,

Our fully draw to $XX us million to as additional revolver of needed down liquidity. available sources is as

sheet operation may plain in now continue outstanding our growth We open concludes initiatives. maintain debt balance prepared with a operator to for no to the remarks, and liquidity line especially you ample questions. support This clean

Operator

question first of [Operator Instructions] Johnson Our Rice. Martin is from Malloy

Martin Malloy

getting costs quarter. production up down the and Congratulations on during the volumes

that the I applies percent how mechanics you some question price your be regarding $XX. contracting long what above that of have how and works, in the is has XX of WTI place. of some this there WTI first escalators around Could contracts is about believe you above The the to contracts being your talk in of that to?

Lee Beckelman

WTI look to And the work get it the or of quarter. or contracts would contract of our $XX have than about that to Every in But XX% applies of average and contract the average WTI different. are at If pricing. our capacity. contracted The contracted per a we a escalator contracts breakpoint back an works $XX it's Well most ton. of higher WTI all currently little way was would higher, we is current a $XX. to mechanism average on increase be is around if previous at that $X

Martin Malloy

first So quarter possible it's that would that the 'XX. apply of during

Lee Beckelman

oil see XX, 'XX, yes. beginning where if start quarter Potentially, some benefit prices above there of that could were today and the are - in stay to we they of first consistent see

Martin Malloy

the Permian you're you down you've could And then the that Basin. there and in terms properties us Any the options of that that reception commentary you discussions have give down for the that getting. customers had the with

John Young

you making same, there there's So With Oakdale demand a site. But the of for the at out have scalability bit that an option. are looked again with both Permian looking customer existing mines for and at, that looked customer mentioned, customers our project. to customers as that definitely the base scalable, we for the at from got had looking And for mechanisms new built when yeah, that that and base. additional Chuck us demand work we've plant. out there at are start you tenant anchor be going anchor, to there some at we reserve are to down regard know, we looking know, an we contracted same we've that to we'd look size, logistics us the from existing for sure We're is

Chuck Young

that anybody I down this our of that important capacity point kind think entry in been class mention best it's there has out to of adding is on.

also going are their to there. from think see we there. mines. We're what about really feel to looking logistics the far what those good as protect trucking to invasive looking how to work as railroads; And see the the we've is going also down problem railroads we we're So market the done share

we're to So we're and see that how looking to out all plays ready pivot.

Operator

question next from & is Company. Simmons John of Our Watson

John Watson

design because XX/XX change XX/XX, to who looking any it multiple on XX/XX. customers XX/XX one a could are due of of that? is a instead of on in and Quick color give well that there shortage you are now Is more for or

Lee Beckelman

diner XXX and XX/XX on is Certainly the mesh, demand. mesh demand the very XX/XX. that is still heaviest happy is product the

as, you where trouble I mechanism so their we're If then of far of kind bit think customers either point may or to XX/XX. getting XX/XX, in can't a know, XX/XX. are, pivot have they they As little XXX may a pivot get mesh, XXX mesh they

thought. on to think these want it's of hold get And to kind they sand probably ability of I just up an pumping wells. don't overall shortage

know, lot than kind interesting of a So being it point know just XX/XX do is XX/XX, all of it's now perspective I taken. you don't XX/XX our long-term benefit. our if that was more a From make we we an XX/XX,

Chuck Young

add that. to I'd

If now you're this in you're playing probably the spot being market rationed business, right sand.

need they're change don't pressure sand bumpers when not, they rationed if not if So they're sand your designs, the you're you'll sand, the have working.

running a been is of that story, is haven't Permian that's So of and as stuff of they sand think the the has all there additional right. up about talk mines yet. in that north, I come people into And lot Permian a And quite all lot one's development really, capacity. honestly no a that. are XXX-mesh the the developed really And on

completed. So have and mixes to playing doing with they there's stuff people different to different a what get of pumping and do their lot wells

John Watson

percentage of XX/XX expectation of gap XX/XX XX% the the expectations spot for to pricing between moving by for and points. grades move pricing all and the XX/XX higher on And is pricing due in a general to was higher like QX, pricing by front, for a just that for is maybe or part X% that to couple grades shrinking higher

Lee Beckelman

some XXs we've seeing into stock. the into ranges now have cases across and John, the advertise up on price Right board absorb now. And the from pricing, there. seen the of continue depending so product and it's in know improvement kind market we general. you the XXs to seen changes to price We're

you case And down really much sand of, as anytime any doesn't soon. a we making are that know, indication seem to So it's know slowing you there now. again right selling as we're of

Chuck Young

We have many right. more orders have then we sand,

and just So, you sand enough. capacity get we requests it's can't it's, the for know, soon this - lot new - it's on and of

Operator

turn [Operator remarks. I questions queue. no management other Instructions] closing I'll for in see to

Chuck Young

us Thank for joining quarter earnings for our call. you concludes That third the call.

Operator

concludes participation This your gentlemen, thank your have you Everyone today's conference. great Ladies may disconnect. for day. a you and in now program,

Smart Sand (SND) 9 Nov 172017 Q3 Earnings call transcript