10-Q: Smart Sand Q3 2025 Earnings Surge on Volume, Pricing Gains

Smart Sand, Inc. reported a significant increase in net income and revenue for the third quarter of 2025, driven by higher sand volumes and improved pricing, despite a decline in SmartSystems revenue year-to-date.

Summary

• Total revenue for the three months ended September 30, 2025, increased by 47% to $92.8 million, up from $63.2 million in the prior year period.
• Sand revenue rose 47% to $91.6 million, primarily due to higher sand volumes sold (1,472,000 tons vs. 1,189,000 tons) and higher average sand prices, including $4.4 million from contractual charges for excess tons sold in a prior period.
• SmartSystems revenue increased 23% to $1.1 million for the three months ended September 30, 2025, driven by higher fleet utilization.
• Gross profit for the third quarter of 2025 significantly improved by 130% to $14.9 million, compared to $6.5 million in the same period last year.
• Net income for the three months ended September 30, 2025, was $3.0 million, a substantial improvement from a net loss of $0.1 million in the prior year period.
• Basic and diluted net income per common share for Q3 2025 was $0.08, up from $0.00 in Q3 2024.
• Adjusted EBITDA for the third quarter of 2025 increased by 138% to $13.6 million, compared to $5.7 million in Q3 2024.
• Free cash flow for the three months ended September 30, 2025, was $14.8 million, a 302% increase from $3.7 million in the prior year period.
• For the nine months ended September 30, 2025, total revenue increased 11% to $244.1 million, with sand volumes up 4% to 3,965,000 tons.
• Net income for the nine months ended September 30, 2025, was $0.2 million, a turnaround from a net loss of $0.7 million in the same period of 2024.
• SmartSystems revenue for the nine months ended September 30, 2025, declined 52% to $3.4 million due to lower fleet utilization.
• Gross profit for the nine months ended September 30, 2025, decreased 15% to $26.7 million, primarily due to lower SmartSystems utilization and increased logistics and mining costs.
• Adjusted EBITDA for the nine months ended September 30, 2025, decreased 15% to $22.8 million.
• Cash and cash equivalents increased to $5.1 million as of September 30, 2025, from $1.6 million at December 31, 2024.
• The company declared a special dividend of $0.10 per share, totaling approximately $4.4 million, paid on August 14, 2025.
• Under its share repurchase program, the company repurchased 1,003,602 shares for $2.1 million, with $7.9 million remaining as of September 30, 2025.

Sentiment

Score: 8

Explanation: The company demonstrated strong financial performance in Q3 2025 with significant increases in revenue, gross profit, net income, Adjusted EBITDA, and free cash flow. The nine-month period also saw a return to net income, despite some declines in gross profit and Adjusted EBITDA due to higher costs. The company is actively returning capital to shareholders through dividends and share repurchases, and maintains strong liquidity. The outlook for frac sand demand is positive, though industry volatility and cost pressures remain factors.

Positives

• Net income for the three months ended September 30, 2025, significantly improved to $3.0 million from a net loss of $0.1 million in the prior year.
• Total revenue for Q3 2025 increased by 47% to $92.8 million, driven by higher sand volumes and improved average sand prices.
• Gross profit for Q3 2025 surged by 130% to $14.9 million.
• Operating income for Q3 2025 was $5.4 million, a substantial turnaround from an operating loss of $4.9 million in Q3 2024.
• Adjusted EBITDA for Q3 2025 increased by 138% to $13.6 million.
• Free cash flow for Q3 2025 dramatically increased by 302% to $14.8 million.
• Net income for the nine months ended September 30, 2025, turned positive at $0.2 million, compared to a net loss of $0.7 million in the prior year period.
• Cash and cash equivalents increased significantly to $5.1 million as of September 30, 2025, from $1.6 million at December 31, 2024.
• The company has $30.0 million in undrawn availability on its FCB ABL Credit Facility as of September 30, 2025.
• A special dividend of $0.10 per share was paid, returning approximately $4.4 million to shareholders.
• The company is actively repurchasing shares under a $10.0 million program, with $7.9 million remaining as of September 30, 2025.
• Legal proceedings related to Cory Berg, et al. and Leland Drangstveit, et al. have been settled and closed.

Negatives

• SmartSystems revenue for the nine months ended September 30, 2025, declined by 52% to $3.4 million due to lower fleet utilization.
• Gross profit for the nine months ended September 30, 2025, decreased by 15% to $26.7 million, primarily due to lower SmartSystems utilization and increased logistics and mining costs.
• Operating loss for the nine months ended September 30, 2025, widened to $1.8 million from $0.6 million in the prior year period.
• Adjusted EBITDA for the nine months ended September 30, 2025, decreased by 15% to $22.8 million.
• The cost per ton to produce sand was higher in Q3 2025 due to increased mining costs and increased freight and transloading costs.

Risks

• Ongoing geopolitical conflicts in Ukraine and the Middle East may affect oil and natural gas prices and create volatility in the oilfield service sector.
• Rapidly changing trade policies between the United States and other countries, and recent output changes by OPEC, could impact oil and natural gas prices.
• Potential re-imposition of tariffs on sand sales to Canada and Mexico could lead customers to source from other suppliers, despite current exemptions.
• Significant customer concentration exists, with three customers accounting for 58% of Q3 2025 revenues and two customers for 40% of 9M 2025 revenues.
• Vendor concentration is also present, with two vendors accounting for 27% of Q3 2025 cost of goods sold and 31% of 9M 2025 cost of goods sold.
• Risk of loss due to significant environmental, legal, or economic changes in the geographic areas of the company's mines (Wisconsin and Illinois), the oil and natural gas producing basins they serve, or transportation routes.
• Mine safety regulations and compliance, including MSHA oversight and potential exposure to respirable silica, pose ongoing operational and financial risks.
• The company is subject to various federal, state, and local environmental laws and regulations, requiring ongoing expenditures for compliance.
• Seasonality due to weather impacts production levels for wet sand processing capacity, potentially leading to higher overall production costs in certain quarters.
• Future economic performance is uncertain due to current high inflation and other economic concerns, which could materially affect financial position and results of operations.

Future Outlook

The company anticipates a moderate increase in demand for frac sand, driven by longer lateral well lengths and increased sand volumes per linear foot. Demand may also increase over the next five years due to potential growth in LNG export capacity and increased power demand for data centers, leading to more natural gas well drilling. The Industrial Product Solutions (IPS) business is expected to continue expanding and diversifying into more stable, consumer-driven markets, aiming to mitigate price volatility from the oil and gas industry. Full year 2025 capital expenditures are projected to be between $15.0 million and $17.0 million, focused on new mining areas, efficiency projects, terminal expansions, and potential new terminals.

Management Comments

• Management believes the demand for frac sand will continue to moderately increase, driven by increased lateral well lengths and increased volume of sand per linear foot of lateral well.
• Management expects demand to increase over the next five years, due to potential increased export capacity of LNG and increased power demand for data centers leading to increased drilling and completions of natural gas wells.
• Management believes that as the IPS business grows, it may provide the ability to diversify a portion of sales into more stable, consumer-driven products to help mitigate price volatility in the oil and gas industry.
• Management expects to fund 2025 capital expenditures with existing cash from operations, equipment financing options, or borrowings under the FCB ABL Credit Facility.
• Management believes that the company has sufficient liquidity and other available capital resources to meet cash needs for the next twelve months.

Industry Context

The frac sand industry is experiencing moderate demand growth, influenced by drilling efficiencies such as increased lateral well lengths and higher sand volumes per linear foot. Broader energy trends, including potential growth in LNG exports and power demand for data centers, are expected to further drive natural gas well completions. The industrial sand market, in contrast, is characterized by relative stability, driven by macroeconomic factors like consumer demand and population growth across diverse industries. The political landscape, particularly with the current administration's focus on expediting conventional energy projects and deregulatory actions, could create a more favorable operating environment for the oilfield services sector, though global conflicts and trade policies continue to introduce volatility.

Legal Proceedings

• The lawsuits Cory Berg, et al. v. Hi-Crush Blair LLC, LLC et al. and Leland Drangstveit, et al. v. Hi-Crush Blair, LLC, et al. were settled in late August and finalized in February 2025, with the matters now closed. HCR has agreed to indemnify the company for pre-acquisition actions.

Stakeholder Impact

• Shareholders benefit from a special cash dividend of $0.10 per share and an ongoing share repurchase program, indicating management's confidence and commitment to returning capital.
• Employees are impacted by the Employee Retention Credit, which is included in prepaid expenses and other current assets.
• Customers benefit from increased sand volumes and improved SmartSystems utilization, though some may face higher costs due to delivery location mix.
• Creditors are positively impacted by the company's compliance with all financial requirements of its FCB ABL Credit Facility and sufficient liquidity to meet cash needs.
• Local communities and the environment are impacted by ongoing mine safety regulations and environmental compliance efforts, including asset retirement obligations.

Next Steps

• Recognize remaining unsatisfied performance obligations of $22.6 million in the remainder of 2025 and $10.7 million in 2026.
• Execute planned capital expenditures for full year 2025, estimated between $15.0 million and $17.0 million, for new mining areas, efficiency projects, terminal expansion/customization, and potential new terminals.
• Continue repurchasing shares under the approved $10.0 million program, with $7.9 million remaining as of September 30, 2025.
• Monitor the impact of the One Big Beautiful Bill Act (OBBBA) on income taxes, though no material impact is currently expected.
• Prepare for the adoption of ASU 2023-09 (Income Taxes) for annual reporting in 2025 and interim periods in 2026, and ASU 2024-03 (Income Statement) for annual financial statements in 2027.

Key Dates

Recommendation

The company demonstrated a strong turnaround in Q3 2025, with significant year-over-year growth in revenue, gross profit, net income, Adjusted EBITDA, and free cash flow. While the nine-month results show some mixed metrics, the shift to positive net income for the period is a key indicator of improving financial health. The company's commitment to shareholder returns through a special dividend and an active share repurchase program, coupled with a positive outlook for frac sand demand driven by industry trends, suggests a favorable investment opportunity. The strong liquidity position and strategic capital expenditures further support a 'buy' recommendation for investors looking for growth in the industrial and energy services sector, despite ongoing market volatility and cost pressures.

Keywords

Frac sand, proppant, SmartSystems, industrial sand, oilfield services, logistics, mining, Q3 2025 earnings, revenue growth, net income, EBITDA, cash flow, share repurchase, special dividend