SND - Earnings call transcript Q4 2023

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Operator

Good morning, ladies and gentlemen, and welcome to the Smart Sand, Inc. Q4 and Full Year 2023 Earnings Call.

[Operator Instructions] This call is being recorded on Tuesday, March 12, 2024.

I would now like to turn the conference over to Chris Green. Please go ahead.

Christopher Green

you Full us Year thank Fourth Smart and and Quarter XXXX morning, for for joining Sand's Good Earnings Call.

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

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

discussion on For and please the complete risks a of release uncertainties, refer such press company's and SEC. to file the our documents with

conference Sand financial contains is and only or projections Smart of time-sensitive obligation as any statements accurate live broadcast of forward-looking XXXX. or The whether XX, because revise events intention today, call any or future March new information to disclaims information, the update otherwise. or

These and better combination us adjusted investors will business. flow during we contribution of useful and Additionally, margin, call. when to measures our refer free to results, information provide cash financial with our GAAP non-GAAP measures, used EBITDA, understand our the this with in

call profit refer to to contribution to Please most release gross press our margin, over Chuck filings flow. I by cash our free to for cash of the reconciliations our net like recent public income flow and turn adjusted our activities EBITDA, or provided to to operating Young. now would CEO,

Charles Young

and improvements revenue both in volume XXXX operating revenues. of Sand had million had strong record Smart good EBITDA, and results million sales Chris, Thanks, over we adjusted solid contribution million morning. in We X.X million. tons results. We In and delivered achieved margin $XX for financial and $XX.X levels $XXX of sold and XXXX. XXXX,

year XXXX, we in For the generated cash million flow. free $X full

overall, from budget general market and XXXX in exhaustion. quarter to activity expected, the than and dropped a were fourth customer activity reduction slowdowns an fourth we had overall quarter results lower great due our While seasonal

advantage the we However, we quarter. And as associated fact, in at to what of be we of and the to record seeing largely paying of planning levels. months that to a Activity fourth that first XX% expect our off. fourth costs in than maintained during off strong strong expect are started has year, into results. March. our we workforce in XXXX, quarter take and is part X demand the higher first plan record-setting at first be volume sales been XX% least continue Demand quarter XXXX Currently, to quarter

our We that and we We in initiatives cycles. have be made operating are to continuing producer. understand sand our production financial yields improve results to as staff costs. our to we this to processes With possible our cost-effective we're operating low-cost levels and need to as deliver product commitment operating the mind, a adjustments to waste and efficient implementing throughout able to efficient, being more positive and in drive reduce and to be administrative our down be

a cost-effective in we markets in efficient XXXX, to operating and focused continue growing and target we remain strategic philosophy. true market for While key on core opportunities plan we business to our manner. In we serve, remain our share principles operating to

be We for and our Northern be efficiently sustainable sand high-quality, continues sand and providing but of their supply. only efficient, of services goal to in supplier premier strive a White North in provider partner environmentally-friendly be sand primary logistics Our to America. customers, the to long-term not

Blair Oakdale, goal Utica, expand the and Our of and operating share continue basin every utilization serve. X increase mines to is in our in market to to we our

industrial the X sand White directly capacity sand railroads. Class available and capacity tons frac serve We XX into I is million have Northern approximately This of markets. high-quality to tied

well-positioned delivered and We manner. sand to we can third-party Appalachian a and best-in-class in technology, logistics We serving the can the SmartSystems every North our safe demands for of America meet serve key Bakken increasing volume low-cost our high-quality, terminal through footprint. With blender terminals and efficient of efficient partners. in network the the have of basins higher market looking a customers

We continue logistics in Ohio, White penetration strategically Ohio increase to idle and to Denison, our of markets. Northern invest late capabilities to XXXX in sand to we gained key and access X January Minerva, in one in X expand northeast Ohio. market our In year, December terminals this

are terminals approximately these for bring million these $X acquired XXXX online. the We $X.XX terminals and to in investing rights to million

available terminals basin. We becoming the first quarter provide Minerva operational only but of the quarter. These in Marcellus, expect our our location to second Shale into increase also to by us not the with end Utica the entry Denison be access

increasing seeing are oil which the is and an in activity opportunity. liquids primarily Utica, from We E&Ps

are prospects of to our broad X terminals. our the us into of new network These about basins States. region, in sand of to one and We frac excited allow will combined share continue the of market volumes be leading our with in expanding terminal Waynesburg the these through northeast United suppliers the the sales terminals Appalachian in Pennsylvania terminals, third-party the Southwest new

Wisconsin up Our well, to as in is facility and this we double quarter-over-quarter. Blair of out ramping expect facility volumes

our facility to We significant forward. going a at to White expect the contributor franchise are it and excited Blair about Northern progress sand our be

to slowdown do be see the Bakken. in we in see positive, not including sand continue low fundamentals for We time. We are gas serve, activity and over current natural demand Canada to Thus, pricing. will demand the continued Marcellus. gas basins Northern United States White we natural durable the confident for in in notwithstanding and expect strong supply the any be long-term expect is to foundation the believe the that demand We

seeing Basin basins. starting also drilling and in we in up Utica With are Permian are and seeing in activity Northeast well the Shale oil-driven reduction pick increasing E&P Utica Both Bakken activity well-documented a in the Ohio. their We to basins. are completions performance, other oil

of in this shift the outside advantage oil take market Permian. basins to into positioned well are activity We of

We system solutions. cooler on Illinois product sales at volumes Utica, XXXX, are increase our blending industrial make Currently, XXXX, sand continues by X% completed the forward sand. and over in and XXXX to We now The we our projects, for the our plant. industrial continue sales bagging markets industrial X% in our of of volume sand XX% overall were In to transitioning a and our volume. to progress. industrial facility installing sales to the expect more effectively compete of be to we move approximately sales expanding levels range

make to continue market. penetrating progress We last-mile the

per proprietary on load response customers delivering faster maximizing system offering includes to now demand, of introduction our the times. and our the With SmartSystems to what our to fracs, truck, want, customer transloader. minimizing SmartBelt In and blender technology, SmartPath trucking through we payload they conveyor our are direct fleet SmartBelt less

are We mile for We last-mile last margin service contribution about for positive results prospects offering. XXXX. growing the business in XXXX, In year. of operating best excited achieved we the our our delivered

expect silo-only For this activity these our in remain continue of business fleets operate Oklahoma levels SmartSystems the consistently grow and XXXX, we to expect expand X XXXX. to fleets. We as we utilization to in at

For monthly operating X X fleets our to XXXX, fleets, SmartSystems we basis. on a averaged in

site, increase the of demand to in higher expect on significantly XXXX service our last-mile increase the currently an With XX% to well volumes SmartBelt of we handle SmartSystems the utilization expect revenues of to we at sand addition Currently, With is our ability average contribution operate SmartSystems, increasing. X for a or to X our fleets systems expected margins more month and results. XXXX. by this in over and

of In XX% we our shares. We shareholder will bought back increase continue approximately value. to look XXXX, for ways to

allows We have new a quickly one advantage the in business leverage strong throughout to the of industry, effectively cycles balance of market. which with the opportunities lowest the the sheet and us provides us the to in in manage to move take levels ability energy

to business. of cash to still positive Our consistently, flow deliver is taking while goal the opportunities grow free advantage

flow. We positive on are generating focused cash free

of XXXX in a will to of which have value dividends potentially the expect both positive stages discuss and the in free stock on to hope believe are to to continue and shareholders, further key early call. We to the a we buybacks, for and Northern sand Sand return a White through to these was flow cash all leading delivered be our future ways couldn't work without support energy Smart product exploring Smart We of sand dedication continued thank for of We our Sand. hard to dedication is employees want markets, have XXXX provider results sand. White the for and Smart Sand. year and industrial committed to our their I Northern strong a being employees. and

do. interest mind CFO, in always, our we the everything turn with in to employee our call As that, And over Lee I'll and Beckelman. keep shareholders' we'll

Lee Beckelman

Chuck. Thanks,

over third Bakken. a X tons quarter the Now a through volumes. volumes highlights and in X.X sales seasonal of the some decline slowdown quarter, due weather-related the Starting on the and to We of as full I'll in fourth delays fourth some expected approximately of million tons go sold million quarter year.

tons full compared year the were Sand. increase XXXX, million a For for total million record and to X.X XXXX, year year-over-year a in X.X% X.X Smart sold

$XX.X and sales third XXXX sales $XXX.X due for average expected sales compared million for were market Total primarily increase we XXXX staffing were Sand. at as lower the to were same in million Higher year-over-year. Cost in $XX.X X% we of considerably volumes higher volumes. anticipation Total IPS the As to reduction that the were contributing utilization quarter. fourth which activity to in to in of $XXX in the record $XX.X activity of reflects volumes the quarter, factors XXXX. a not Chuck XX% million did the drop in and to fourth sequentially lower in the up for Revenues highlighted, revenues due rate $XX.X were quarter, the quarter picked SmartSystems in normal maintaining first in first activity sales XXXX pricing, revenue fleets pickup in sales all compared a compared a sales Cost million of million Smart seasonal sequentially. to quarter, volumes last while million quarter. experienced drop the quarter has revenues the our for

The expenses the and sequentially, compared fairly million primarily due and last quarter. to of accounting expenses $XX.X with in remaining were cash quarter higher million volumes in freight primarily operating due XXXX costs. Total was cost sold were consistent. of the to to $X.X to sales Operating higher fourth adjustments increase Our costs full production noncash related was million year compared million increase the $XXX.X $XXX.X for in XXXX. year-over-year

sold and higher income For XXXX to beginning to were ended sales also the $XX.X was higher increase due December The in ended loss primarily due taxes, for in IPS the and the expenses primarily in of $X.X million one seed. of reconfigured assets million for for prices partially we payroll increases SmartSystems income salaries, to additional had loss by the of Wisconsin with driver quarter This from had sales total compared expenses. our We higher the royalties volumes $X.X write-off offset noncash XXXX along $X.X quarter we XXXX. an increase the in of operating as of of well and $X.X activity. In our primarily at year income $XX.X as opening some the the related was and XX, the net XXXX, million was to reduced for attributable support December our million million compared was benefits to The costs, was fourth XXXX. included XXXX, year increased benefits, XXXX. administrative average full third decline a net the million to operations headcount Blair, wages net management of year, $X.X also total million and plants. Net to operating Blair. In compared year-over-year net to facility. volumes operating XX, higher of as for

million in expenses income previously with $X.X XXXX included was write-off the discussed, a current benefit that operating Additionally, recorded larger period. the from along taxes

to fourth $X XXXX, For adjusted $XX adjusted was of of margin $XX.X million. and margin EBITDA was compared $X.X third quarter EBITDA the of million million contribution and quarter contribution million

revenues results quarter included Third as higher shortfall XXXX volumes. approximately $X.X well of higher sales million as

higher contribution of margin adjusted year over year and adjusted higher EBITDA XXXX, compared contribution cost $XX.X million in adjusted the sales margin operating EBITDA volumes, increase and and million, was full prior million margin average primarily sales $XX by year the higher sales of expenses. due The XXXX full to was $XX.X offset price, to EBITDA the million. contribution and partially $XX.X of was For

the to requirements the cash and and negative cash sales quarter. For to flow increased cash million working due to of lead million of working in currently to free quarter. free negative due in capital capital the sales higher the the first flow early we XXXX, $X.X use of XXXX capital volumes fourth operating in of operations million cash to and have had in could pressure volumes, expect decline The use led $X.X in the We quarter $X.X expenditures. which

activities, over expect However, free course net we operating from cash currently for in for the flow spend $XX in cash full the by positive the operating positive which XXXX $X ultimately million, our generated generate provided million million flow we to improve year. of to of year for cash activities supported free year resulting year, $XX cash of XXXX. The CapEx expect and the

million our million We expect to XXXX, our million equivalents ABL results. approximately cash ended XXXX and XXXX stock, $XX XXXX or approximately X.XX outstanding. facility. than of million cash cash in free of shares and equal repurchased XX% $X.X shares be flow higher drawn We common representing $X with we on In

can XXXX X.XX volumes be our return going in million X.X to to currently million forward. We continue first we to value quarter XXXX. the and expect on be sales how in range in the We shareholders focused to

As activity quarter. Chuck the so strong highlighted, far been market in has first

the are We in up a have prices later We gas keeping gas activities second on quarter. in pick currently basins year. Bakken and to may that on the expect the close drilling what activity and in eye impact natural

opening Our play, Canadian and to Ohio terminals inroads up is which opportunities liquids new and the market. make continue Utica are into in Basin, we us an primarily for in oil the northeast new

be believe the XXXX, year mid-teens to of our per XX% than margin to in in expect full XXXX We be levels. ton the contribution will the quarter currently currently For range first higher X% volumes sales XXXX. we that

XXXX questions. the to $XX our open to concludes expect in for range. synergies million call and comments, be $XX We will capital the million This prepared now for we

Operator

Instructions] [Operator

question Stephen from Gengaro first Your with Stifel. comes

Stephen Gengaro

the Excuse noise background because I'm outside.

of me. couple a for So questions

you -- think variable is a between of biggest big of product I on disclose on about -- like of of kind you new of an the ranges outcomes including sort impact, specific impact talk volumes you of how general? the know of for specifics The gave the around commentary 'XX? can a color won't basis. first, But of lot gas, on kind you in impact some that but Like your

Lee Beckelman

you're gas you. asking of think I correct? gas Steve, natural the natural had general time hearing Yes. in about course hard and activity Is XXXX. that in We prices a

Stephen Gengaro

that's gas. delta natural Yes, guidance asking and sort in about the I'm yes. your by of whether driven

Lee Beckelman

Yes.

little of I of think the ship delta year the XX-XX Historically, that a our good Basin. in natural of we're our Marcellus guidance bit volumes we do our oil-based. for in a is kind gas terms proportion volumes into the

of in are on close the so And gas. natural terms half back of eye the keeping a very year, we

the And could so volume we second of half some that activity in year. the our impact -- of

gas. supply. But our a quarter. it Again, of we yet. by volumes seen natural haven't that A be is that being will lot that in the we There very first activities have driven the in We is strong pullback out. gas in balanced basins natural

quarter, northeast liquids with well. the terminals be which into And our are going the new that's going third our Basin, and Utica Bakken, in -- driven more is to is typically, the oil-driven. Second oil more quarters and into as strongest

So that in out still, balance gas. potential may help we still natural the short-term strong. are long-term pullback fundamentals any of believe gas And

and drilling this there advantage the be take overall, going so into in might fundamentals for and and we're year, natural the to strong, And development some second of positioned half we that 'XX gas well think beyond. while pullback of are

Stephen Gengaro

Yes.

you contracted I give wouldn't the XXXX, kind into price background -- color I for One X you have think other of of ones. kind market it Sorry, that? what you hear when I the us more X open noise, muted, versus now so can right spot had and you on had about me. is, but wouldn't

William Young

Yes. Steve, I mean, it's John here.

good seen about volumes contracted. -- flat a of volumes of We're are pricing now. haven't a is about right We got our half We've amount contracted. our are

has over pricing so. We So stable of we're coming or or not the pretty past year pricing think whatever. down exposed overly to kind the been

we that, continue. will so would anticipate And that

that answers hopefully, question. So your

Stephen Gengaro

valuations thoughts sort M&A for valuations. seen question, other -- the on in-basin we and value but math relative bigger on do and paid the M&A kind sand Yes, on side, of to great. me, triangulate the in-basin a obviously all the Northern means the of think about you people's How trying businesses. White we've excuse about kind delivers? it's And final of picture that White kind sand for plans. your for curious being Northern data some do the then and me, for one what that I'm of recent I'm just recently

Lee Beckelman

But how believe good and believe answer White demand. balance, demand going White in we to I mean, strong are very so in pretty provides that Stephen. question, and a and And reality know serve to is to that a franchise is then to we that quite markets to the I very in Northern the Well, Northern White going benefit. is overall, have strong built continue the we've Northern we demand Northern supply White in be only any increase don't relatively

in terms little markets and to White. growth of the diminish a Northern take there's And is I continue value bit of proposition profit to that. that that been Northern positioned stay will to those Northern in market. And of have view, believe we think we'll of going in the markets overall a our primarily we're to continue rates good advantage the So terms in view White White well in

but has we in been on activity the White consistent the is to very is there the undervalued and percentage markets. that that so maybe And the White Northern primarily good relative U.S., markets activity yes, Permian Northern Texas largest is And the in there think focused I serve. and market because the of still regional

is, for to going have competition potential which market some, we they're while the at have And on we it White. markets And they available and that, majority volumes Northern regional, to we that, do spend our a opportunity depending think those which some stay grow. lot to capacity of those increase markets, grow to money that the primarily grow is have, we available able with as with with market be to the have don't

Operator

with from Lemoine Your Sandler. comes question Piper Next Luke

Luke Lemoine

then in you your best industrial can your into? of in kind you end next if the few and industrial uptake on kind as 'XX and out of in mean, kind commented in -- and years. far look about a maybe how you of us what selling of Chuck, are a you're X% growing lot 'XX. playing as I wondering longer there, what where end But what's also, give kind being just see this the but of industrial demand you seeing markets? And markets different business

Charles Young

Yes.

a industrial out frac had are sand of space opportunities margin industrial in the into that we attractive. the mean, we space. got the But by time. over is the volume going is frac something company Sand because byproduct be I primarily to Smart space So

we we produce a percentage through. margin the percentage, side And we've our certainly complementary of from and to a be to serve a to got in see of frac for where technology give some place to from a to the us in a blending cooling products X valuable it's going out on And going been Utica so in of the but at us standpoint other We've industrial are We're piece continuing in hard general, mine. going with as view our do Oakdale. Look, term business of Blair kind and our think we -- investing what that. it's industrial house. long volume from steadily very mines

a think of of So we how gives little on about kind industrial. hopefully, bit that you color

Luke Lemoine

all stable, on Or too? or prices And the be rest got contribution as we should there the upward if the that stable Lee, the guidance margin, Okay, pretty then, But the fairly should for usual. margin are for about think contribution an of it. thanks that? is bias to how year,

Lee Beckelman

pull to and in margin quarter contribution fourth think in then typically, it how for lower is about Well, We because there works quarter Luke, the our inventory accounting are I inventories. out think we of traditionally, inventory the and way quarters first build winter adjustment the summer. the the

flat probably a in little the feel So year, the should of get relatively right guided second, if improve then now, the see our where third think volume pricing for stays margins we fourth I bit pullback little activity in you to we might range. mid-teens a kind the but quarter. But and consistent in third quarter, quarter, that in overall, we second,

we've overall the Assuming we relative of will that fluctuation you quarter-to-quarter should activity in because we get accounting But inventory. that be that see we guided that the some meet mid-teen expect to for to range. in year adjustments to,

Luke Lemoine

of $XX Okay. on directed? the And little just you million the where then guidance for question, more, year unpack $XX spending Lee. million, that to Can CapEx just last of the help is a being kind

Lee Beckelman

we part of million new said, to terminals like on spending, $X the specifically going Well, we is the have.

have support you of to volume is what I also, spending mining for just be improvements improve activity call, sure investments normal what Some of making we of basically where kind our you down you're the to need make in also to bring really call cost to we the plants the capital, activity. And investments kind in mining and our investing able available sustainable of maintenance production. to efficiency are your activity

money and that into this as sustainability of investment at in types but primarily number. Blair. There going year a investments. into of the those our most that's of the efficiencies incremental support most of so a Utica, well, primarily But And relatively and low is is our little SmartSystems operations going Oakdale, is investment

Operator

[Operator Instructions]

Gengaro Your with next Stephen question Stifel. comes from

Stephen Gengaro

Can us that and when total update everything capacity current operational? where at to just goes on you is completely nameplate your

William Young

Marcellus, the Utica, is current goes the our So Canada. and capacity tons million to basically the Bakken, nameplate XX

Lee Beckelman

United sell the to but from the not do go Western And well in and as volumes down of part Powder big the markets, a time Basin into River Texas Basin. into it's today. time business DJ some States And we our

Stephen Gengaro

the is of growth. on And for for that right of you kind now? 'XX I know evolving? been a Canada for I And outlook How 'XX playing what's a just market level? kind how guys opportunity high mean, and is out that's

William Young

Yes.

-- we're now I Bakken Blair, were we're mind, in little North a picking until I Canada our asset serving and was think optimistic we But Canada. kind about a of they call bit, we in small very Canada, mean, keep on player in up Canadian CN Rail, pretty North the Blair a business of being relatively that picked be up what of -- we're up So very fashion has there U.S. right? got part long wants. think complementary exciting, is portfolio. The taken the is kind that our are a going a seeing of a that products products we term Canada good to in grow our and to that business are Dakota.

market So tends a example, you to than be the an sand give just Canada coarser U.S. to

And tend so like we for to like U.S. hunter products, be a things sand coarse say, the and the make able to Canadian mesh market, the finer for mesh find we those that, that when in home

assets of kind the how off at it the the optimistic pretty market, other Oakdale both Canadian built we've the Utica. and So development dovetails that years, and on over

Stephen Gengaro

just U.S. And one final Is between Canadian the and there for me. difference any market? pricing market the one

William Young

of out ground. The lower -- of they the activity up the is It's a there, the is depending a that the the which in of Canadian market, what Canadian time call coming year breakup has right? market market, matters frost as period

than So you at the U.S. more pricing market, in a much pricing on see different the is certain that times but variability bit not the

Operator

with question McLean comes Blake next Daniel Partners. from Energy Your

Blake McLean

in the provide a have what of I I And guys bit like more does going could you color last-mile build are this been business. kind look additional to Most on business? just there's thought of there but maybe know planning units answered, utilization you year? questions some capital but the there, that my

Lee Beckelman

Yes.

seen business, we've that We're pretty fleets have that's probably been quarter. in our a good increase going XXX% utilization on in Oklahoma. utilization first there on that. X the consistent There's fleets our into So so last-mile activity silo-only --

X X X X on year of have which utilization year. our be to up kind and in of SmartPath, the that's X this averaging We will they from course we of average of of which those the last from SmartSystems includes year, to believe

and existing be So current of potentially and activity utilization the -- plan, our to side is based increase activity. double SmartSystems could on our our on our fleet in looking

really lot is around add we're of not around a really SmartPath. -- incremental potentially capacity. looking one adding one potential It's to investment might maybe we some really fleet. more adding conveyors Our and add But

Our there to real increase X assets of is operating return by is and we a the assets then on have reducing secondly, areas utilization the our get those really focus better expenses.

William Young

allows of to drag sales also fully greater using I on last-mile of And systems, of that the that. like our things road are trucking side, and the that on the the seeing objective appreciate is that long the out too, Yes. which in is using would -- that things primary customers of kind trailers, so able the the this our throughput they fewer one that and with on systems, bottom-dump are sand throughput add we deployments capable one these market are trucks right? of the those systems to offer we're

pretty So exciting sand part a perspective. that's good sales And from as that. last we're we're and take-up seeing the of business mile, trying on the leverage to

Operator

further are Please questions There no proceed. time. at this

Christopher Green

on joining our earnings call. look to May. you Thank talking us We again you forward for to in

Operator

call Ladies disconnect for thank please We and your gentlemen, that your lines. and this ask you concludes for conference today. you participating

Smart Sand (SND) 12 Mar 242023 Q4 Earnings call transcript