|Bid||1.9900 x 800|
|Ask||2.0900 x 2200|
|Day's Range||1.8100 - 2.0600|
|52 Week Range||0.5500 - 2.6800|
|Beta (5Y Monthly)||1.77|
|PE Ratio (TTM)||1.92|
|Earnings Date||Nov 10, 2020|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||2.13|
It's been a good week for Smart Sand, Inc. (NASDAQ:SND) shareholders, because the company has just released its latest...
Smart Sand (SND) delivered earnings and revenue surprises of 18.18% and 34.59%, respectively, for the quarter ended September 2020. Do the numbers hold clues to what lies ahead for the stock?
* 3Q 2020 Revenue of $23.4 million * 3Q 2020 total tons sold of approximately 309,000 * 3Q 2020 Net Income of $36.3 million * 3Q 2020 Adjusted EBITDA of $6.1 million * 3Q 2020 Contribution Margin of $10.4 million THE WOODLANDS, Texas, Nov. 09, 2020 (GLOBE NEWSWIRE) -- Smart Sand, Inc. (NASDAQ: SND) (the “Company” or “Smart Sand”), a fully integrated frac sand supply and services company that is a low-cost producer of high quality Northern White frac sand and provider of proppant logistics and storage solutions through its in-basin transloading terminal and SmartSystemsTM products and services, today announced results for the third quarter 2020.Charles Young, Smart Sand’s Chief Executive Officer, stated “While these continue to be difficult times to operate in, Smart Sand continued to demonstrate its ability to manage successfully through volatile operating cycles for our industry. I want to thank all of our employees for their continued diligence and efforts to support the company through challenging times.” “We continue to stay focused on enhancing our mine to wellsite solutions capabilities to provide sustainable and efficient sand supply and logistics services to our customers. The acquisition of Eagle Materials’ proppant business is a great example of our strategy to acquire strategically complementary assets at attractive valuations to enhance our capabilities to be a premier, long-term provider of northern white sand in the market place.”Business CombinationOn September 18, 2020, we acquired the Oil and Gas Proppants Segment of Eagle Materials Inc, which includes frac sand mines and related processing facilities in Utica, Illinois and New Auburn, Wisconsin, with approximately 3.5 million tons of total annual processing capacity, 1.6 million tons of which has access to the BNSF Class I rail line through the Peru, Illinois transload facility. The transaction is considered a bargain purchase whereby we purchased total net assets with a fair value of $41.9 million for total consideration of $2.1 million, resulting in a bargain purchase gain of $39.9 million, recorded in net income for the three months ended September 30, 2020. In connection with our acquisition we entered into a Liquidity Support Loan Agreement, whereby we may draw loans in an aggregate amount up to $5.0 million during the twelve month period ending September 18, 2021 and repay those amounts over the subsequent three years.We believe this acquisition broadens our mine to wellsite capabilities by adding high quality sand mining and processing assets coupled with enhanced logistics options which provide direct access to an additional Class I rail line. We believe these additional mining and logistics resources help secure our ability to be the preferred provider of Northern White Sand in the proppants market. With this acquisition we believe we will be able to expand our footprint into new basins, gain access to new and enhanced logistics options, broaden our customer base and complement our mine to wellsite supply and logistics capabilities. Third Quarter 2020 ResultsRevenues were $23.4 million in the third quarter of 2020, compared to $26.1 million in the second quarter of 2020 and $65.7 million in the third quarter of 2019. Included in revenues were $6.8 million, $14.0 million, and $15.6 million of shortfall revenues for each respective period. Revenue in the third quarter of 2020 was negatively impacted by depressed oil prices driven by continued oversupply relative to the decreased demand due to the COVID-19 coronavirus pandemic. Tons sold were approximately 309,000 in the third quarter of 2020, compared with approximately 208,000 tons in the second quarter of 2020 and 611,000 tons in the third quarter of 2019. Total volumes sold improved sequentially, though they continue to be negatively impacted by depressed oil prices driven by Organization of the Petroleum Exporting Countries (“OPEC”) oversupply and decreased demand due to the COVID-19 coronavirus pandemic. Net income was $36.3 million, or $0.91 per basic and diluted share, for the third quarter of 2020, compared with net income of $4.6 million, or $0.12 per basic and diluted share, for the second quarter of 2020 and net income of $10.9 million, or $0.27 per basic and diluted share, for the third quarter of 2019. The bargain purchase gain was the primary driver for the increase in net income and amounts per share, partially offset by lower shortfall revenue and continued low total volumes sold.Adjusted EBITDA was $6.1 million for the third quarter of 2020, compared with $15.6 million for the second quarter of 2020 and $28.8 million during the same period last year. The decrease in Adjusted EBITDA compared to the second quarter of 2020 was primarily due to lower shortfall revenue. The decrease in Adjusted EBITDA compared to the third quarter of 2019 was due to both lower shortfall revenue and lower total volumes sold due to depressed oil prices and decreased demand. Contribution margin was $10.4 million, or $33.52 per ton sold, for the third quarter of 2020 compared to $19.3 million, or $92.62 per ton sold, for the second quarter of 2020 and $33.7 million, or $55.13 per ton sold, for the third quarter of 2019. The decrease in contribution margin compared to the second quarter 2020 was primarily due to both lower shortfall revenue partially offset by higher total volumes sold. Lower overall contribution margin compared to the same period last year was primarily due to lower total volumes sold in the current period due to depressed oil prices and decreased demand and lower shortfall revenue.Capital ExpendituresOur primary sources of liquidity are cash on hand, cash flow generated from operations and available borrowings under the ABL Credit Facility and the Acquisition Liquidity Support Facility. As of September 30, 2020, cash on hand was $11.0 million and we had $9.6 million in undrawn availability on our ABL Credit Facility, with no borrowing outstanding under our ABL Credit Facility. For the nine months ended September 30, 2020, we spent approximately $7.4 million on capital expenditures. We estimate that full year 2020 capital expenditures will be less than $10.0 million. Market UpdateWe generally expect the price of frac sand to correlate with the level of drilling and completions activity for oil and natural gas and we generally expect the level of drilling and completions activity to correlate with long-term trends in commodity prices. Earlier in 2020, oil prices declined to all-time lows as a result of decreased demand for oil from the COVID-19 coronavirus pandemic, as well as an increase in global oil supply driven by disagreements with respect to oil pricing between Russia and members of OPEC, particularly Saudi Arabia. The COVID-19 coronavirus pandemic has caused a global decrease in all means of travel, the closure of borders between countries and a general slowing of economic activity worldwide, which has decreased the demand for oil. In early March, discussions between Russia and Saudi Arabia deteriorated and the countries ended a three-year supply level agreement, which resulted in each country increasing its oil production. Subsequently, Russia and OPEC agreed to certain production cuts to mitigate the decline in the price of oil; however, such cuts may not be sufficient to stabilize the oil market if the decline in demand due to the COVID-19 coronavirus pandemic continues. While oil and natural gas prices have improved from their recent lows, they are expected to continue to be at depressed levels as a result of the increase of near-term supply and the decrease in overall demand caused by these events, and we cannot predict when prices will improve or stabilize.In response to these market conditions, we implemented several cost cutting measures ealier in 2020, including reducing our capital expenditure budget, primarily as a reduction to our SmartSystems manufacturing plans. Additionally, we put in place several cost-cutting measures, including headcount reductions at our Oakdale and Saskatoon, Canada operating facilities, salary reductions and suspension of certain variable cash compensation programs for all employees, and reduced compensation for board members. We have also taken steps to limit cash outflows in the near-term by negotiating for deferred payments on certain of our operating leases, debt and minimum royalty payments. We have put in place multiple initiatives to protect the health and well-being of our workforce, including work-from-home arrangements for all employees that are able to do so and implementing social distancing requirements as prescribed by the federal, state and local government authorities.Conference CallSmart Sand will host a conference call and live webcast for analysts and investors on November 9, 2020 at 10:00 a.m. Eastern Time to discuss the Company’s first quarter 2020 financial results. Investors are invited to listen to a live audio webcast of the conference call, which will be accessible on the “Investors” section of the Company’s website at www.smartsand.com. To access the live webcast, please log in 15 minutes prior to the start of the call to download and install any necessary audio software. An archived replay of the call will also be available on the website following the call. The call can also be accessed live by dialing (888) 799-5165 or, for international callers, (478) 219-0056. The passcode for the call is 6763985. A replay will be available shortly after the call and can be accessed by dialing (855) 859-2056 or, for international callers, (404) 537-3406. The conference ID for the replay is 6763985.Forward-looking StatementsAll statements in this news release other than statements of historical facts are forward-looking statements that contain our current expectations about our future results. The Company has attempted to identify any forward-looking statements by using words such as “expect,” “will,” “estimate,” “believe” and other similar expressions. Although the Company believes that the expectations reflected and the assumptions or bases underlying its forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Such statements are not guarantees of future performance or events and are subject to known and unknown risks and uncertainties that could cause the Company’s actual results, events or financial positions to differ materially from those included within or implied by such forward-looking statements.Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, but are not limited to, the severity and duration of the COVID-19 coronavirus pandemic, operational challenges relating to the COVID-19 coronavirus pandemic and efforts to mitigate the spread of the virus, the current significant surplus in the supply of oil, fluctuations in product demand, regulatory changes, adverse weather conditions, increased fuel prices, higher transportation costs, access to capital, increased competition, changes in economic or political conditions, and such other factors discussed or referenced in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on February 26, 2020, and the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed by the Company with the SEC on November 9, 2020.You should not place undue reliance on our forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.About Smart SandWe are a fully integrated frac sand supply and services company, offering complete mine to wellsite proppant logistics, storage and management solutions to our customers. We produce low-cost, high quality Northern White frac sand and offer proppant logistics, storage and management solutions to our customers through our in-basin transloading terminal and our SmartSystems™ wellsite proppant storage capabilities. We provide our products and services primarily to oil and natural gas exploration and production companies and oilfield service companies. We own and operate premium frac sand mines and related processing facilities in Wisconsin and Illinois, which have access to three Class I rail lines, allowing us to deliver products substantially anywhere in the United States and Canada. For more information, please visit www.smartsand.com.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended September 30, 2020 June 30, 2020 September 30, 2019 (unaudited) (unaudited) (unaudited) (in thousands, except per share amounts) Revenues$23,409 $26,106 $65,690 Cost of goods sold18,227 11,906 38,555 Gross profit5,182 14,200 27,135 Operating expenses: Salaries, benefits and payroll taxes2,058 2,155 2,958 Depreciation and amortization440 461 623 Selling, general and administrative3,933 2,930 2,693 Change in the estimated fair value of contingent consideration— — (1,215) Impairment loss— — 7,628 Total operating expenses6,431 5,546 12,687 Operating (loss) income(1,249) 8,654 14,448 Other income (expenses): Gain on bargain purchase39,889 — — Interest expense, net(497) (607) (968) Other income80 63 15 Total other income (expenses), net39,472 (544) (953) Income before income tax expense38,223 8,110 13,495 Income tax expense1,941 3,470 2,569 Net income$36,282 $4,640 $10,926 Net income per common share: Basic$0.91 $0.12 $0.27 Diluted$0.91 $0.12 $0.27 Weighted-average number of common shares: Basic39,973 39,644 40,233 Diluted39,973 39,644 40,240 CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2020 December 31, 2019 (unaudited) (in thousands) Assets Current assets: Cash and cash equivalents$10,994 $2,639 Accounts receivable, net66,029 58,925 Unbilled receivables9,256 4,765 Inventories23,568 21,415 Prepaid expenses and other current assets1,534 4,433 Total current assets111,381 92,177 Property, plant and equipment, net281,142 230,461 Operating lease right-of-use assets32,198 28,178 Intangible assets, net8,451 9,046 Other assets3,417 3,541 Total assets$436,589 $363,403 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable$3,338 $3,961 Accrued expenses and other liabilities7,735 8,578 Deferred revenue, current8,192 7,654 Income taxes payable6,510 542 Long-term debt, net, current6,423 6,175 Operating lease liabilities, current8,783 13,108 Total current liabilities40,981 40,018 Deferred revenue, net4,789 1,670 Long-term debt, net23,899 28,240 Operating lease liabilities, long-term24,536 15,469 Deferred tax liabilities, long-term, net35,523 24,408 Asset retirement obligation14,805 6,142 Contingent consideration570 1,900 Other non-current liabilities759 — Total liabilities145,862 117,847 Commitments and contingencies Stockholders’ equity Common stock42 40 Treasury stock(4,025) (2,979) Additional paid-in capital170,282 165,223 Retained earnings124,152 83,313 Accumulated other comprehensive income (loss)276 (41) Total stockholders’ equity290,727 245,556 Total liabilities and stockholders’ equity$436,589 $363,403 Non-GAAP Financial MeasuresEBITDA and Adjusted EBITDAWe define EBITDA as net income (loss), plus: (i) depreciation, depletion and amortization expense; (ii) income tax expense; (iii) interest expense; and (iv) franchise taxes. We define Adjusted EBITDA as EBITDA, plus: (i) gain or loss on sale of fixed assets or discontinued operations; (ii) integration and transition costs associated with specified transactions; (iii) equity compensation; (iv) acquisition and development costs; (v) non-recurring cash charges related to restructuring, retention and other similar actions; (vi) earn-out, contingent consideration obligations and other acquisition and development costs; and (vii) non-cash charges and unusual or non-recurring charges. Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors and commercial banks, to assess: * the financial performance of our assets without regard to the impact of financing methods, capital structure or historical cost basis of our assets; * the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities; * our ability to incur and service debt and fund capital expenditures; and * our operating performance as compared to those of other companies in our industry without regard to the impact of financing methods or capital structure;We believe that our presentation of EBITDA and Adjusted EBITDA will provide useful information to investors in assessing our financial condition and results of operations. Net income (loss) is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA should not be considered alternatives to net income (loss) presented in accordance with GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. The following table presents a reconciliation of EBITDA and Adjusted EBITDA to net income for each of the periods indicated.The following table presents a reconciliation of EBITDA and Adjusted EBITDA to net income for each of the periods indicated: Three Months Ended September 30, 2020 June 30, 2020 September 30, 2019 (in thousands) Net income$36,282 $4,640 $10,926 Depreciation, depletion and amortization5,529 5,450 6,992 Income tax expense1,941 3,470 2,569 Interest expense506 619 969 Franchise taxes63 94 56 EBITDA$44,321 $14,273 $21,512 (Gain) loss on sale of fixed assets(27) 275 (15) Equity compensation (1)832 842 663 Acquisition and development costs (2)823 144 (1,208) Non-cash impairment loss— — 7,628 Gain on bargain purchase(39,889) — — Accretion of asset retirement obligations88 76 178 Adjusted EBITDA$6,148 $15,610 $28,758 (1) Represents the non-cash expenses for stock-based awards issued to our employees and employee stock purchase plan compensation expense. (2) Includes acquisition cost of $819 for the three months ended September 30, 2020. The three months ended September 30, 2019 include an adjustment to the fair value of contingent consideration of $1,215. _________________________Contribution MarginWe also use contribution margin, which we define as total revenues less costs of goods sold excluding depreciation, depletion and accretion of asset retirement obligations, to measure our financial and operating performance. Contribution margin excludes other operating expenses and income, including costs not directly associated with the operations of our business such as accounting, human resources, information technology, legal, sales and other administrative activities. We believe that reporting contribution margin and contribution margin per ton sold provides useful performance metrics to management and external users of our financial statements, such as investors and commercial banks, because these metrics provide an operating and financial measure of our ability, as a combined business, to generate margin in excess of our operating cost base.Gross profit is the GAAP measure most directly comparable to contribution margin. Contribution margin should not be considered an alternative to gross profit presented in accordance with GAAP. Because contribution margin may be defined differently by other companies in our industry, our definition of contribution margin may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. The following table presents a reconciliation of contribution margin to gross profit. Three Months Ended September 30, 2020 June 30, 2020 September 30, 2019 (in thousands) Revenue$23,409 $26,106 $65,690 Cost of goods sold$18,227 11,906 $38,555 Gross profit5,182 14,200 27,135 Depreciation, depletion, and accretion of asset retirement obligations included in cost of goods sold5,177 5,065 6,547 Contribution margin$10,359 $19,265 $33,682 Contribution margin per ton$33.52 $92.62 $55.13 Total tons sold309 208 611 Investor Contacts Josh Jayne Finance Manager (281) 231-2660 email@example.com Lee Beckelman CFO (281) 231-2660 firstname.lastname@example.org