SND - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Q1 2018 Smart Sand Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions].

As a reminder this conference is being recorded. to Manager. conference like Cerniglia, to now Relations Investor would turn over the Phil I ahead. go Please

Phil Cerniglia

Good day, this Instructions]. gentlemen, we will Sand are ladies be and a will Earnings XXXX the in that session Conference Smart conduct QX given a Call. and mode. at At listen-only time, question-and-answer participants and all Later, welcome instructions to [Operator time.

Manager. Phil to conference go Relations As recorded. like Smart for conference being XXXX Cerniglia this Phil for morning, Please call. quarter earnings now is thank turn a Cerniglia, over Good to reminder would I the Sand's you first Investor us ahead. and joining

Chuck Lee On the Officer; Young, Financial have and Officer. Chief John Young, Beckelman, we Chief Executive Officer; call and today, Operating Founder Chief

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

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

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

our many questions question-and-answer time your I ensure as to to so during have to turn like plus CEO, that to to enough we Chuck ask limit you please the would questions Young. now we to a answer Finally, today's over session, one follow-up possible. call

Charles Young

Thanks Phil. a the good pleased posted has another we're that for report Sand year. to I'm positive off and quarter to start Smart

sales Here's We trends up supply, average some expanded to by was be and XX% pricing highest exceeded to continue selling footprint. quarterly highlights the last our ever, quarter, positive, further price had it volume our in quarter. increases of we our logistics compared fact demand

Here it, if some Smart position company, of frac North headlines. Absolutely. an second sales Smart we new deal in make this we're the innovative Dakota. take to storage A to adding quarter. we Is sell in sand can can it, running capacity demand, growing market? Sand new product strong up buy terminal where and and A advantage continuing Sand

Northern take low to long White. for A balance to big We demand results. term have these. of continually cost portfolio logistics workforce assets support some strategic pay term structure, especially We're solid meet long contracts, a consistently produces dedicated initiatives a that and investments strong sheet growth the a our in gearing operating up increasing including or infrastructure,

exposure toward capacity of Part operational wellhead term plan fully moving We're expanding basins. becoming that Our our goal operating the should is fully the supplier. mine quickly in our be more quarter. to second sales integrated in a direct opportunities the long and

last of basins, site, outside locations growth development of the storage three in investments pursuing and primarily areas, mile at in sand solutions we're well for transloads So the Oakdale. operating mine

more Williston a delivery definitive able on it basin. exploration This transaction is sand well options customers efficient geared entered as to the That expand train acquire and Pacific our Van operate Quickthree April. elements in production at this into the Hook of and just a a the operational of portable acquired the to We will agreement Solutions. solutions that Quickthree gas offer storage base. terminal vertical America. deal can manufacturer terminal frac Bakken be unit Solutions basins of stand rights became Hook, to included Canadian service strategy. wellsite. It upfront, offer I'll our close and give end Dakota. March, in by serve customers. we're to up logistics Here products me some Quickthree but will key In the services CP say North excited This in the later We part in long should about the transloading capable as Railway, customer of Van we will North quickly, it let the of we May. portfolio term more agreement directly, comments, new the oil With with my terminal, other having formation. we detail as

minimum position we leases desirable acreage. The upfront royalties year very the provide than future. sand the and low. less also on announced in leases the to term directly signed the $X previously, a low to two As us These XX long us leases in basin. These customers Permian million are economical locations give to in was access Permian cost

and a a the low to locations. in potential of demand before fully time entry, side. cost initial at We mine. one to the already design permitting invest To on is can are market committing phase monitor these facility carefully in We our of

our progress about talk in Oakdale. let's Now,

of from get complete to basically of initiatives. with in annual pleased new top million is The the operational. smartly be other quarter. Oakdale. expanded The should already drying new also we're fully second the capacity tons construction and Things fully I'm Our nameplate along progress operational facility in new are dryers. moving our producing growth X.X full here on the the priority capacity is sand

new should attract contracted other to in the with major out a signed with out start and Let's base? April. We've term customers customers. with in long long as will there sand agreement rolling in It's to loaded a of Trucks a are invest soon E&P sand There Van of operating Why Hook. tenant that large operator delivering translators Van start benefits. the terminal be Hook. anchor we chance three term

Our own sand directly will able to be locally. market wanting needs to to source companies terminals their

own [X:XX:XX]want can While and we've of probably rail not And price. quality cost only looking all can supply keep manage costumers many basins, sand analyzing opportunities sales, and the company provide will margin down and as year. sand the We're terminal unanticipated add invasion spot so needs location capacity, want. Marcellus a this sell that With at the high one what find the that [indiscernible] terminal Permian, more more we our into can directly least We but farther cost outstanding We invasive terminal the an an can the or sand of sale that to company buy into sand, sand, meet that Solutions. effectively transload incremental sand customer developing agreement operations. entered such we blender our an and can at With deployed the efficiently we probably we on Quickthree deliver chain. way all in capture site. other Canadian opportunity fast for can in our at mind, well we acquiring forward the

company's We innovative system develop, wellhead. the a the at end expect transaction and addresses by this stored has service close Quickthree integrate a well to other to wellhead sand our The market, the solutions solution total of of patented the sand deployed month. the now unique our to will breakthrough sized shortcomings technology into and to plan deliver storage customers. the on of Quickthree provide

busy a was start one a it Looking the to good but year. quarter a and good back,

opportunities. trends take continue ahead, include industry. Looking for advantage positioned I frac Sand in these to and for demand Smart sand our of see pricing. to increasing positive momentum They well positive is

shareholders. and team management it. the and and our term have We Smart customers, operations our deliver growing to value industry poised Sand grow is The for is our to employees long with

look Sand's a quarter first up turn Beckelman call Smart I'll CFO, the Lee at to Now our over results. for closer

Lee Beckelman

Chuck. Thanks

going logistics results quarter increase in the initiatives and the XXXX. Chuck the on with capabilities. of XXXX fourth quarter volumes. volumes we and be to Starting primarily we We highlighted, the X% expand on sold continue first XXXX quarter, As comments had to results. I to will be stated record several a our quarter XXX,XXX first compared over will financial progress quarter to approximately first sales in the fourth my focused comparing our

of to quarter primarily ton to to quarter quarter. sales versus which $XX.XX of XX% to to approximately increase in the last approximate over with quarter, higher our revenues, due contracted first quarter quarter selling contract revenues approximately price sequentially to The an XXXX. pricing, this our primarily to changes versus last $XX.X per average reduction the In million. $XX.XX in oil first revenues due due in one the was $XX.X million self sales sales first quarter with pass-through. mix Transportation Average decrease quarter. quarter in Sand average shipments $XX.X slight for for were sales price primarily total compared revenue in increased $XX.X sales freight for contracted the which due to increased the XX% first higher we in partially compared pricing increased revenues volume sales adjustments prices. the per due year. total time quarter, of spot the million, million were less revenue in in sales volumes freight car the rail last million of price sales a prices to and and XX% the prices customers $XX of quarter fourth XX% to fourth Our partially The of ton rental per compared quarter approximately the our $XX.X was invasion XX% core. train XXXX up ramped shipped fourth were last regards the of quarter unit in via with includes was transportation to in In freight which

compared last quarter cost the were for million sales Our quarter. to $XX.X million $XXX.X to

of we higher first As production the earnings cost. primarily last to on sales we our higher expected cost call, in quarter, due highlighted

being course. during operations the conditions had in into in periods inventory the these higher during the less to during and discussed as past, As our higher leads to weapon expenses winter capitalized due which we we cost leads overall to absorbed these cost reduced reported months, weather

of we the in to utility expenses utilizing quarter. fuel have to interim At the the plan personnel operations higher a and higher higher been and second we expanded added provide Additionally, which from that capacity we labor leads quarter for colder expenses preparation contract during had weather labor start-up higher support. our usage

while to we utilize labor new training as the quarter, in ready were directly. our needed we this on hires work During some be to to had take staffing overlap contract we

$XX.XX $XX.XX ton last during compared cost the $XX.XX than ton $XX for increased in quarter. ton quarter our have per production per The higher range due higher in to contract call Our earnings labor per we last of anticipated $XX the to than ton, primarily guided twenty was to quarter. per ton to expense the

over XX% primarily profit, for expenses. needs wet $XXX,XXX in in and believe XXXX. staffing $X.X million have Operating a in we quarter, full expansion expect higher million, to decrease been due As ramping our to due we quarter to trained, to on from With cost. higher in line second going royalty the our quarter the this per the the labor higher expanded should to still levels, average activity our expenses quarter, production fourth primarily guidance new quarter Gross our of the we $XX now the we year the in in XXXX $XX increased for was and back quarter, second dollars getting up can increase and expense production lead was and fully $X.X plant so and this contract ton volume sales cost utilization reduced to range. reach capacity gross able reduce the a be our for profit fourth operations is

of to related into the range We differed at of fourth in production million quarter benefit quarter. was expense U.S. quarter EBITDA which to of million due currently quarter assets costs and to to the fourth the from $XX.X re-measurement due For rate had previously law compared This adjusted positive the to primarily $XXX,XXX liabilities. sequentially, to due we effective forward the in quarter. booked net income which tax in was going an of XX% cost higher Most EBITDA due benefit million the compared rate the facilities. federal this the In income $X.X recognized of in primarily was to capital of our a the quarter anticipate be EBITDA in had a our decreased in U.S. tax and the that XX% $X.X of quarter. and the adjusted changes the primarily went Net we fourth quarter benefit million quarter, was tax led the tax reduction our the had due production XX% We the tax in we million in first expenditures. net Adjusted in income quarter. expansion to spent tax XXXX, last of to a corporate last to to $XXX,XXX capital quarter, lower approximately primarily impact of $X.X the higher approximately $XX.X and %X.X effect

the Additionally, in in we spent terminal quarter million Van Hook, Dakota. the to $XX.X acquire North

budget be $XX range in any capital expected to excluding million to XXXX currently still Our million $XX additional for is acquisitions. the

we As starting up Chuck speak. capacity are we're discussed, as our to starting we expanded

As facilities, with fully expanded getting any operational it start startup to production the get levels. some capacity benefit full time of of new take will and this to the

the the until not and quarter, increased to at or in So for start we expect full remain continue getting market sales do anticipate assuming current while levels of we quarter, conditions demand second better. expansion do the benefit fracking volumes third our the

cell For to in range. be XXX,XXX currently XXX,XXX to the the second quarter, expect volumes we

production As million quarter we XXXX. currently and highlighted trend expect $XX the volume beginning the the and adjusted million our EBITDA we quarter to for in changed. not start cost EBITDA year or expectations our Four sales range be second earlier, lower in anticipate the full to $XX XXXX, have second a to adjusted

Assuming market should in ton to XXXX, sales in volumes million the have X XXXX X.X with year EBITDA range. current range for XX activity million condition consistent adjusted throughout the million the and for stay million XX to we

have Solutions by we the to our for definitive plan solution signed in-house last develop discussed and which agreement acquire to Quickthree yesterday announced our of be we assets storage miles to customer As Chuck, base. a

and our it's remainder for operations our closest acquisition. to XXXX. business be guidance any acquiring the deployment give is the the expect for this business us acquisition early We're of how will by systems this the over strategy close Therefore, Storage transaction month. the We we impact end of once for primary the formulating to Quickthree too technology to this will of

of provide will an up and for earnings quarter Quickthree a million $XX for closing payment, paywall or $XX.XX more to provides second to in three are million at potential detail $XX.XX period. built as available up We earn-out price sale The purchase our on lease transaction and of over systems call. year consisting million aggregate made

acquisition prepared We our was compared do available cash our pay reduction This currently of questions. up $XX cash As $X in currently remaining expect of the in million facility We on to to available our related XX, Quickthree of capital the fund call year-end concludes down utilized our this March XXXX, Oakdale. quarter fund our needs. on million first million. This to approximately expenditures, second for along facility comments $X.X we'll balance the now terminal. sheet of open liquidity cash. Hook at we $XX to the we had quarter. and facility million In Van have We do approximately Currently, purchase of facility expansion XXXX. to the with primarily the million million in cash support to April, credit have drawn for on we the $XX the the expanded to $XX

Operator

Instructions] of And our comes Rice. Malloy Martin [Operator Johnson question from first

Your line is open. now

Martin Malloy

morning. Good

Charles Young

Good morning, Martin.

Martin Malloy

$XX you Could per us average price that producing $XX average are basis and pricing work if net how the as for on is escalators tons ton remind across you the an your average crude?

Charles Young

little basis $X a on every contracts barrel weighted quarter actually different for a current volumes beginning little a pricing $XX a will our a ton. contracted on of but not, first It's be about the adjustment average we above and

in covered prices would adjustment $XX. in quarter The at again current be volumes. per for to all be the will roughly $XX ton $X that So being $XX and our ton row on contracted get second $X on next ton, about the another above volumes an incremental contracted per

Martin Malloy

And unit strategy deployed Great. utilized is feel already? a I appreciate for just call on you has give the acquisition, information basin? the these better and Okay. for for unit Sand been on their Quickthree just to Smart that get this then, just Already by but customers Are going more this what next to trying be in here. -

Charles Young

they some across most would first our Quickthree that we now but in been like be and Canada And utilize has concentration pretty basins, strategy will to open to put is operational with our and this units heavy have So, for time the and the much of that foremost sands that through Marcellus. we technology. in

dump today what's to benefit is as ability trucks this gravity and this I of there think that a out true technology to trucking above quickly marketplace. unload as feel thing in complicated, their gets step the really up be we more that the is

going and don't down and from Smart us customers have it. our that their think from buy help we're costs, bring no trucking to sand we other Sand they problem So only people, if so that deploy they to having it go that and we sand want buy through deploying not

Martin Malloy

Okay. Thank you.

Operator

you. Thank Simmons. next Watson from John question our And comes of

now line Your open. is

John Watson

Good Hey, morning. guys.

Charles Young

Good morning, John.

John Watson

on can few it could provide you business to the feel ones color legacy Quickthree sell have the A and of rent tell you an number me answer currently? quick systems for some if rented to systems these and model Quickthree on, was maybe sold the or or but them to on move free

Charles Young

silos they and was out place. think systems totals, in selling in of a Quickthree I number roughly the about Primarily, have XX

of for want or is the marketplace trucking, head But are people the partner Now which needs the going well looking and we of But sharing much with we invest work of and with to great but what's also get way able a to tons this think head we're to of we strategy the what guys day, not and in be one, companies amount lease little those doing doing well we some to to with critical share - to we're trucking has partner the likes profit - again silos different. to going feel in too every we're systems. tons the distance need that's to is well you to sand trucking, since trucking, be but nobody kind in our also up we've of X,XXX looking the be them is head. to of X,XXX us; it's think business doing a our going include the that We're the happened in trucking gone up. a on allow X,XXX hard wealth some benefit truckers, hope to per marketplace this gone strategy from the two,

John Watson

helpful. XX silos a Okay. silo That's super that one frac And is per or per well?

Charles Young

- we roughly, X it's in our to X silos be model head. per well going to So,

John Watson

Okay.

Charles Young

a That's good number.

John Watson

Okay. Canada And know historically? U.S. versus do silos you XX for Perfect. the split

Charles Young

It's probably…

Lee Beckelman

Yes, it's north of XX% Canada

Charles Young

Okay.

John Watson

Okay.

change That's Sand with can, this historically super me one more of I the from hasn't helpful. perfect. is Canada, sold And acquisition? into if Smart started ton to that sand Okay,

William John Young

this moment. which What south focus sold that's So, we've indications players is further There opens are they coming Canada, here. making sand the up actually just there. we have bit origin into good some Rail, market of not in the business destinations a into John Canada that our to Pacific at on - have are primary the a the

in an evaluate. sand to involved spoken our mind Right be will so where get point for pretty for opportunity on and in to at heavy National market that lower the time to any think focused that does Canadian my I the heat that the producing now, ready should also XX all really though, Canada up develop in we want we're market. to Keep Canadian is on asset have we which state. continue Rail be we

John Watson

guys. appreciate color. much, so Thanks the Sure. I

Charles Young

Thanks, John.

Operator

Janney. question Instructions] comes [Operator Akil from next you. Marsh of Thank And our

Your line open. is now

Akil Marsh

question. taking for thanks Hi,

the Quickthree generating but if at cash? answer EBITDA Another and moment one can you is on this and/or free understand Quickthree

Lee Beckelman

Yeah, we're now. not into to get going right numbers

systems I before, think our said business our going how and it's still we evaluating As we're fit to into model. in

Also on they're any going model business not generating going today. what data to the we're changing. So to be really give is real really

planning XX they how of than months different is were and over terms be little selling in what to business. the Quickthree we're with next to to a do the XX we're promoting So

Akil Marsh

to a like the Texas, activity more regards in bit leases And sounds it Okay. West there's little there.

definitively So is or West of forward you we forward still option Texas should that if it move future? is to the think way do view an want you're in to as to moving about the kind

Lee Beckelman

West right stand they that Yeah, our today already permitting now towards project the and start what that's we're the Texas is strategy phase. design have with and in working the

Charles Young

with mines to down get come as place And in additionally, some We component. our trucks to terms as that rail think it require are of short on challenges West Texas belong believe we the going area, Texas in and the a going possible that take to operation will real trucking. relates to are sand as

Lee Beckelman

add options capacity. to really get you And three remember to we have additional

We develop, have to ability West and we Hixton Texas have have which can expand the now we Oakdale additional leases. is we

we for capacity, we're So we're going value get at to going when to basically makes the the look best - it where sense that. most to look

as And relates should look add and so a capacity consider now we at of our and next our to and support have be our business. we where options to lot can

Akil Marsh

questions. Thanks taking Great. my

Operator

Thank you. Rice. our Martin next And from Malloy, comes Johnson question

line Your open. now is

Martin Malloy

Thank you.

follow-up had Just questions. two

about and CapEx liquidity on the and you are amount liquidity have with your one you spend given how can you funding? talk Quickthree comfortable the guidance, remaining to acquisition, First

Lee Beckelman

So, million to Quickthree. $XX currently we're with our comfortable, again capacity we've expanded

up and our we be at additional$XX us We $XX third be capacity levels could around and the funding ramping give second liquidity expect will up in that million the we million million in will $XX to are - of and which facility quarter the to to four. higher into

support we have we to. of some our credit we and equipment sources help, other needs. to also pick eye going expected a up volumes delay close start ability we're So more our that's to have tap cash need is assuming expanding the on that a keeping to Oakdale operations facility, that generating to, relatively as from if need our and lot flow our financing But look capital some we start to quickly to

today liquidity. So are on feel we we comfortable

Martin Malloy

we about back forward ton, I And to your weighted? full-year. half guidance cost look ton the in just cost per Should appreciates the be decline thinking for per the Okay. the

Lee Beckelman

when Well, that labor yeah, cost think there to support be expansion wrapping cost you to it quarter, lot of a about for the about cost. the first ton, ready think the should, I up per we our mean had volumes without if having you extra

to we're level the in the ramping will our be expanding up can they to support. that be increasing second quarter, going So but volumes of what full be capacity will

already as get dryers of third and our moderate quarter cost and a we and utilizations the for more a total ready up and down per volumes quarter in don't that expanded of third as four first get the our we as and that fourth cost higher And we've up. bring So getting the fourth to that five in cost the help overall facility utilize us and lot fully quarter capacity. should should great our as move move ton that born

Martin Malloy

Great. very Thank helpful. you,

Operator

Thank question [X:XX:XX.X]. from And next [indiscernible] our comes you.

now Your line open. is

Unidentified Analyst

very balance performing about company permitted then quite following I year a at bit, and is balance while and profitability production, or looking your a the fundamental since the with strong with ago I've of under seen and a stock there very is industry higher a good and peers. started look I sheet so company this Hi. your sheet has deteriorate the

profitability making next the what and on where quarters? to you limits, flection in know I like with is So investments are kind over borrowing few against to going point to it want those going guess be the is look going of all I the

Lee Beckelman

against very strong. only million balance balance a have We still our actually sheet. sheet again of $XXX Well, million $XX debt

and anticipation sheet up that frankly, had of up capacity our built again still due So, our to our the that were very high costs quarter to our to is volumes the manage that that actually it. increase capital was in volumes specific been second have but guidance little to to year. improved, debt And yes, provide the get we balance do spend we expansion half able strong, guided that to first of cost, with the basically we've to

cash offerings we that done from equity our generated flow. primarily cash So we've from and

our up is profitability our the think done I start the managing Yes, So pretty to cost assuming should want We year, this through think stay Yes, good the in job consistent. it sales improve we've a over showing conditions structure of want be. to volumes year. ramping we and market improvements we in half as where our start we second that. course of profitability of

Charles Young

we one how would we capacity is new other are that being it's to for started ground plants just get as thing And doubling up in Permian and on essentially these have gear easy and Yeah, and in you train people as almost we run place sands plants. the are add bring stop of made the people I the to see not the new in this our so. from and have them two can to

be X already do we which that we making done sand. we've but plants the and have are So cost, that to for and because the ready first that had reflects quarter to X

Unidentified Analyst

you. Thank Okay.

Charles Young

you. Thank

Operator

our for the session to like any that closing Chuck Thank to turn you. And concludes conference Young back question-and-answer today. over I'd for remarks.

Charles Young

for joining the frac We for advantage sand look XXXX. demand our Thank you, again, call everyone forward strong of to in taking earnings today.

Operator

does program. gentlemen, and the today's participating in conclude This you for thank conference. Ladies

You may now disconnect. day. a Everyone, great have

Smart Sand (SND) 10 May 182018 Q1 Earnings call transcript