Smart Sand, Inc. Q1 FY2024 earnings call

• Focused on expanding Northern White sand franchise, leveraging its properties for energy and industrial applications.
• Looking to open new markets, with investments in 2 new terminals in Northeast Ohio and access to Canadian markets via rail lines.
• Focused on organizational improvements to increase efficiency in mining, processing, and logistics, including ERP system investment and process evaluations.
• Focused on cost structure management, reducing staffing and extending hydraulic mining at Oakdale facility.
• Long-term vision includes 4 components: expanding Northern White franchise, opening new markets, organizational improvements, and cost structure focus.

Sales volumes in the first quarter increased by approximately 31% to 1.3 million tons, a quarterly record. Contribution margin improved to $18.5 million and adjusted EBITDA increased to $9.3 million. SmartSystems revenue is a separate line item, currently purely the wellsite storage business. Sales volumes in Q1 were 1.3 million tons, contributing to a 31% increase from Q4 2023. Contribution margin was $18.5 million, adjusted EBITDA $9.3 million, with SmartSystems revenue being the wellsite storage component.

• Sales volumes expected to be in 1 million to 1.2 million ton range for Q2.
• Contribution margin per ton expected to be in $13 to $16 per ton range for Q2.
• Capital expenditures expected to be in $15 million to $20 million range for 2024.
• Expect to be free cash flow positive for the year despite negative free cash flow in Q1 due to working capital investment, with working capital needs moderating in remainder of 2024.

• Fluctuations in oil and gas demand, particularly lower natural gas prices may impact sales volume in Marcellus market in short term.

Q: Chuck talked about capital improvements to improve yield on plants. Could you talk about those capital investments and expected return?

A: John Young explained investments in hydraulic mining to reduce yellow iron and changes in wet plant processing to improve yield, with Lee Beckelman noting it's driven by volumes and scale, potentially leading to $1 to $2 per ton or more savings.

Q: Stephen Gengaro asked about SmartSystems revenue breakdown and U.S. sand market dynamics. Lee Beckelman clarified SmartSystems revenue is purely wellsite storage. William Young discussed Northern White market being in relative supply and demand balance, with potential tailwind from new markets like Canada and Ohio, and Stephen Gengaro asked about industrial business percentage and evolution, with Lee Beckelman stating it's currently ~5% and aiming to grow to at least 10% in next 2-3 years