Q4 2022 Smart Sand Inc Earnings Call
And adjusted EBITDA was $10 7 million compared to the third quarter contribution margin of $17 8 million and adjusted EBITDA of $11 3 million.
Third quarter of 2022 results included higher shortfall revenues of approximately $2 3 million.
For the full year 2020 to contribution margin was $54 6 million and adjusted EBITDA was $29 3 million.
Compared to full year 2021 contribution margin of $10 5 million and adjusted EBITDA of negative $35 million.
The increase in contribution margin and adjusted EBITDA year over year was primarily due to the increase in higher average sales price and higher overall volumes sold.
For the fourth quarter of 2022, we generated $5 6 million in net cash provided by operating activities.
Leading to $2 4 million and free cash flow. After we spent $3 2 million on capital expenditures.
For the full year 2022, we generated $5 4 million in net cash provided by operating activities.
Leading to negative $13 9 million in free cash flow. After we spent $19 3 million on capital expenditures and the acquisition of Blair.
We currently have 11 million and undrawn availability and our existing credit facility. We ended the year of approximately $5 5 million in cash and cash equivalents and currently have approximately $8 million in cash on hand.
Between cash and our availability availability on our credit facility. We currently have approximately $19 million and available liquidity.
As Chuck highlighted we purchase Clearlake 518 million shares for approximately 885 million of which $4.
For $2 million was paid in cash and the remainder financed in an unsecured promissory note provided by clear Lake that will mature in December 2023.
We're committed to delivering long term value to our shareholders and we believe this is a good investment in the future of Smart city.
We are moving forward with opening our Blair facility in the second quarter of 2023, which opens up the Canadian market for us.
We expect sales volumes to be in the 1 million to $1 $2 million range in the first quarter of 2023.
We currently believe the contribution margin per ton will remain in the low double digit digit range in the first quarter of 2023.
Expect capital expenditures for 2023 to be in the 20% to $25 million range, which includes approximately $5 million of capital related to the startup of Blair.
This concludes our prepared comments and we will now open up the call for questions.
Thank you.
Okay.
Alright.
Thank you for joining us for the call.
We look forward to speaking with you again in May.
Yes.
This will conclude today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Good day.
And thank you for standing by welcome to the Q4 2022, Smart Sand Inc. Earnings Conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your phone you will then hear an automated method advising and has raised to withdraw. Your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to.
The conference over to your Speaker today, Mr. Chris Green Principal accounting officer.
Mr. Green. Please go ahead.
Good morning, and thank you for joining us for smart Sand's fourth quarter and full year 2022 earnings call on the call today, we have Chuck Young founder and Chief Executive Officer, Lee back women, Chief Financial Officer, and John Young Chief Operating officer before we begin I'd like to remind all participants.
In our comments made today will include forward looking statements, which are subject to certain risks and uncertainties that could cause actual results or events to materially differ from those anticipated.
For a complete discussion of such risks and uncertainties. Please refer to the company's press release and our documents on file with the SEC.
Smart sand disclaims any intention or obligation to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
This conference call contains time sensitive information that is accurate only as of the live broadcast today March one 2023.
Additionally, we will refer to non-GAAP financial measures the contribution margin adjusted EBITDA and free cash flow. During this call. These measures when used in combination with our GAAP results provide us and our investors with useful information to better understand our business. Please.
Please refer to our most recent press release or our public filings for our reconciliations of gross profit contribution margin net income to adjusted EBITDA and cash flow provided by operating activities to free cash flow.
I would now like to turn the call over to our CEO shutdown.
Thanks, Chris and good morning.
Before getting into our fourth quarter and year end 2022 results I wanted to highlight our buyback of Clearlake capital as equity ownership position in smartphone.
As announced yesterday, we purchased from clear Lake 518 million shares for approximately $885 million. This share buyback amount represents approximately 11, 3% of the company's outstanding shares.
I want to thank clear lake for its long term commitment to smartphone Clearlake provided us with our initial capital in 2012 to begin developing our oakdale facility and it's been a good partner for the company over the last 11 years.
This transaction demonstrates our continued commitment to deliver long term value for our shareholders. We believe this buyout acrylics equity position demonstrates our focus on shareholder returns is a good investment in the future of smart sand to our financial results.
Smart sand delivered strong operating and financial results in the fourth quarter and for the full year 2022.
In the fourth quarter, we sold just under $1 2 million times and for the full year of 2022, we delivered $4 3 million tonnes, an annual record for the company.
Our acquisitions and development activities over the last few years has contributed to our strong results in 2022, our Utica facility acquired in late 2020 represented approximately 22% of our sand sales volumes last year.
Our Waynesboro terminal in Pennsylvania was a key driver in our increased sales activity in the second half of 2022.
We could have not achieved these results without the dedication and hard work of our employees I want to thank our employees for their efforts and continued commitment to smart Jay.
The fourth quarter was our third consecutive quarter of positive adjusted EBITDA and our second consecutive quarter of positive free cash flow for the quarter, we generated $10 7 million and.
And adjusted EBIT, and $2 $4 million of free cash flow for 2022, our adjusted EBITDA was $29 3 million, which was a substantial improvement over 2021 results.
Activity continues to be strong and we expect it to continue.
Im happy to announce that we just signed an expansion of our contract with the Marcellus customers extending the contract term and increasing volumes, which demonstrates continued strong demand for northern white sand in the Marcellus.
We continue to demonstrate the value of our business model to deliver high quality, northern white sand sustainably and efficiently from the minds of the well site.
Northern White sand continues to be the primary source of Frac sand in the eastern and Western basin of the United States and in Canada.
Canada being a major northern white sand market was the main driver for our investment last year and the Blair mine and processing facility in Wisconsin.
Pleased to announce that we are moving forward to <unk>.
Sir your investments in the first quarter to bring Blair online, we will expand approximately $5 million maple are operational.
Since our initial contract to deliver sand in the Canadian market and we expect to start selling standard with the Canadian market beginning in the second quarter.
With Blair opening we now can effectively compete in all primary northern white sand markets.
We are committed to the northern white sand market, we have made strategic investments over the last few years to establish smart sand at the premier provider of northern White sand and logistics services in the market and those investments all contributing to our improved financial performance.
Our key operating strengths are our high quality reserve base of majority of finer mesh sands.
Our efficient mining and processing facilities at Oakdale, Utica and Blair.
Our direct access to four class one rail lines and strong connections to all class one rail lines are high volume in basin terminals in North Dakota and Pennsylvania.
And our efficient well site sand storage and delivery fleets and services through our smart systems product offering.
While we remain focused on our primary northern white sand markets, we're seeing renewed interest in northern white sand in the Permian and mid continent basis, well performance in the Permian and other southwestern basins has been declining we believe northern white sand leads to better long term well results as E&ps continue to focus on gen.
<unk> positive free cash flow, we believe wells completed with northern White sand will lead to better production over the life of the well leading to higher overall cash flow generation for the producer.
We don't expect these markets to turn away from regional sand completely but we do believe we can opportunistically sell northern white sand into these markets to add incremental value to our business.
Our unit train capable trans loading terminals in Waynesboro, Pennsylvania in van Hook, North Dakota continue to demonstrate the value of our long term focus of delivering bulk commodities on rail and it's sustainable and sufficient fashion to our customers.
Our volumes translated through our Wayne's from terminal increased in the fourth quarter and activity through this terminal continues to be strong volumes through our van Hook North Dakota terminal typically slow down in the winter months due to weather, what we expect activity through van hook to pick up starting in March.
Utilization of our smart systems last mile offerings continue to improve we are gaining momentum as we start to penetrate the market with our smart path technology.
Smart systems generated positive contribution margin in the fourth quarter and for the full year of 2022 going forward, we expect to deliver improving financial performance.
Our industrial product solutions Division continues to grow our industrial sales volume increased by 30% in the fourth quarter.
<unk> product solutions as a long term commitment to diversify our business beyond oil and gas and to move more effectively utilize our asset base.
We're taking the time to build this business for long term success, we expect to see this business segment continue to grow in 2023 and beyond.
As always we will continue to keep our eye on the future. We are focused on generating higher returns from our existing quality asset base and logistics capabilities, while maintaining prudent leverage levels that allow us to operate through operating cycles in our industry.
As demonstrated by our buyback of clear lakes equity position, we are committed to creating long term shareholder value and we'll continue to evaluate and look opportunistically for ways to deliver value to our shareholders going forward.
And we always keep our employees and shareholders interests in mind, everything we do and with that I'll turn the call over to our CFO Lee at Goldman.
Thanks, Chuck now I will go through the highlights of the fourth quarter 2022, and full year 2022 financial results.
Starting with sales volume, we sold approximately 1.1 dollars 75 million times in the fourth quarter 2022.
A 6% increase over third quarter volumes of approximately $1 1 million tons of coal.
For the full year 2022 overall tons sold were $4 three 3 million compared to $3, one 9 million in 2021.
36% increase year over year.
Activity levels continue to be strong.
Total revenues for the fourth quarter, 2022, or $73 8 million compared to $71 6 million in the third quarter.
Total revenues for the 2022 year or 255.
<unk> 7 million compared to $126 6 million in 2021.
Total revenues were higher in the fourth quarter and full year 2022, as a result of increased sales sand sales volumes and higher average prices, primarily driven by increased market activity in the operating basis. The company serves.
Our cost of sales for the quarter were $62 7 million compared to $68 2 million last quarter remaining relatively consistent sequentially.
Our cost of sales for the full year 2022.
<unk> $226 1 million compared to $144 million in 2021.
The increase was primarily due to higher production costs and freight costs related to the increased sales volumes, along with higher labor maintenance and utilities cost in 2022.
Total operating expenses were $9 5 million in the fourth quarter compared to $7 7 million last quarter.
Operating expenses were higher sequentially, primarily due to startup cost at Blair.
Total operating expenses were $32 7 million for 2022 compared to $47 6 million for the for 2021 2021, we recorded $19 6 million as noncash bad debt expense, which is the difference between $54 6 million accounts receivable balance that was subject to litigation.
And the $35 million cash payment, we received under our settlement agreement.
Net income was basically flat quarter over quarter net.
Net income was $2 6 million for the fourth quarter of 2022.
<unk> <unk> per basic and diluted share, which was slightly lower than third quarter 2022, net income of $2 7 million or <unk> per basic and diluted share.
For 2022 net loss increased substantially compared to 2021 results net loss for 2022 was neck.
Negative <unk> 7 million or a negative <unk> <unk> per basic and diluted share compared to a net loss of negative $57 million or a negative $1 21 per basic and diluted share for 2021.
The increase in net loss is due to an increase in total volume sold and higher average sales prices for our sand in addition to the noncash.
Bad debt expense recorded in 2021.
For the fourth quarter of 2022 contribution margin was $17 4 million.
And adjusted EBITDA was $10 7 million compared to the third quarter contribution margin of $17 8 million and adjusted EBITDA of $11 3 million.
Third quarter 2020 results included higher shortfall revenues of approximately $2 3 million.
For the full year 2020 to contribution margin was $54 6 million and adjusted EBITDA was $29 3 million.
Compared to full year 2021 contribution margin of $10 5 million and adjusted EBITDA of negative $35 million.
The increase in contribution margin and adjusted EBITDA year over year.
Similarly, due to the increase in higher average sales price and higher overall volume sold.
For the fourth quarter of 2022, we generated $5 6 million in net cash provided by operating activities.
Leading to $2 4 million and free cash flow. After we spent $3 2 million on capital expenditures.
For the full year 2022, we generated $5 4 million in net cash provided by operating activities.
Leading to negative $13 9 million in free cash flow. After we spent $19 3 million on capital expenditures and the acquisition of Blair.
We currently have $11 million.
And undrawn availability and our existing credit facility. We ended the year approximately $5 5 million in cash and cash equivalents and currently have approximately $8 million in cash on hand.
Between cash and our availability.
<unk> on our credit facility, we currently have approximately $19 million in available liquidity.
As Chuck highlighted we purchase clear lakes 518 million shares for approximately 885 million of which four four.
For $2 million was paid in cash and the remainder financed at an unsecured promissory note provided by clear Lake that will mature in December 2023.
We are committed to delivering long term value to our shareholders and we believe this is a good investment in the future of Smart city.
We are moving forward with opening our Blair facility in the second quarter of 2023, which opens up the Canadian market for us.
We expect sales volumes to be in the 1 million to $1 $2 million range in the first quarter of 2023.
We currently believe the contribution margin per ton will remain in the low double digit digit range in the first quarter of 2023.
We expect capital expenditures for 2023, eight at the end of 20% to $25 million range, which includes approximately $5 million in capital related to the startup of Blair.
This concludes our prepared comments and we will now open up the call for questions.
Thank you.
Okay.
Alright.
Thank you for joining us for the call wed.
We look forward to speaking with you again in May.
Yes.
This will conclude today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.