10-Q: Smart Sand Reports Net Loss in Q1 2025 Amidst Revenue Decline

Smart Sand, Inc. reports a net loss of $24.231 million for Q1 2025, driven by lower sales volumes and a decrease in SmartSystems revenue.

Summary

• Smart Sand, Inc. reported a net loss of $24.231 million for the first quarter of 2025, compared to a net loss of $216 thousand for the same period in 2024.
• Total revenue decreased by 21% to $65.558 million from $83.052 million in Q1 2024.
• Sand revenue declined to $64.464 million from $79.719 million, with total volumes decreasing by approximately 20%.
• SmartSystems revenue decreased to $1.094 million from $3.333 million due to lower utilization of the SmartSystems fleet.
• Cost of goods sold decreased to $62.786 million from $71.241 million, reflecting lower sales volumes.
• Gross profit decreased to $2.772 million from $11.811 million due to lower sales volumes and higher variable production costs per ton.
• Selling, general, and administrative expenses decreased to $9.243 million from $10.350 million.
• The company's effective tax rate was (233.6)% for Q1 2025, compared to 155.2% for Q1 2024.
• Adjusted EBITDA was $1.426 million for Q1 2025, compared to $9.335 million for Q1 2024.
• Free cash flow was $5.188 million for Q1 2025, compared to $(5.509) million for Q1 2024.

Sentiment

Score: 3

Explanation: The document presents a negative outlook due to decreased revenue, a net loss, and decreased profitability. While there are some positive aspects, such as reduced operating expenses and positive free cash flow, the overall tone is pessimistic.

Positives

• Selling, general, and administrative expenses decreased to $9.243 million from $10.350 million due to reduced wages, royalties, banking and legal costs.
• Free cash flow was positive at $5.188 million, driven by management's focus on managing operating expenses and capital expenditures.
• The company has $30.0 million in undrawn availability on its FCB ABL Credit Facility as of March 31, 2025.
• The company repurchased 135,196 shares of its common stock for $0.3 million during the three months ended March 31, 2025.

Negatives

• The company reported a net loss of $24.231 million, a significant decrease compared to the $216 thousand net loss in Q1 2024.
• Total revenue decreased by 21% year-over-year, falling from $83.052 million to $65.558 million.
• Sand revenue decreased to $64.464 million, with a 20% decline in total volumes sold.
• SmartSystems revenue experienced a substantial decrease, dropping from $3.333 million to $1.094 million.
• Gross profit decreased significantly to $2.772 million from $11.811 million.
• Adjusted EBITDA decreased to $1.426 million from $9.335 million.

Risks

• Events such as the ongoing conflicts in Ukraine and the Middle East, rapidly changing trade policies between the United States and other countries, and recent output changes by the Organization of the Petroleum Exporting Countries may affect oil and natural gas prices and create significant volatility in the oilfield service sector.
• Sales into Canada and Mexico are currently subject to tariffs, set at 25%, which may result in customers sourcing their sand needs from other suppliers within their own countries.
• Fluctuating tariffs may directly or indirectly affect the company's results of operations.
• The company's primary product is Northern White sand, and its mining operations are limited to Wisconsin and Illinois, creating a risk of loss if there are significant environmental, legal or economic changes to these geographic areas.
• Five customers accounted for 73% of the company's total accounts and unbilled receivables as of March 31, 2025, indicating a high level of customer concentration.

Future Outlook

The company expects full year 2025 capital expenditures to be between $13.0 million and $17.0 million, primarily to open new mining areas, efficiency projects, expansion of Ohio terminals, and potential investment in new terminals. The company believes that it has sufficient liquidity and other available capital resources, to meet its cash needs for the next twelve months.

Industry Context

The report notes that events such as the ongoing conflicts in Ukraine and the Middle East, rapidly changing trade policies between the United States and other countries, and recent output changes by the Organization of the Petroleum Exporting Countries may affect oil and natural gas prices and create significant volatility in the oilfield service sector. The company 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. Additionally, demand may increase over the next five years, due to potential increased export capacity of LNG and increased power demand for data centers.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• Without specific competitor data or industry benchmarks, it's difficult to assess whether Smart Sand's performance is above or below average.
• A more comprehensive analysis would require comparing Smart Sand's financial metrics (e.g., revenue growth, profitability, efficiency ratios) to those of its peers, such as U.S. Silica Holdings, Inc., Fairmount Santrol (now Covia Holdings Corporation), and Hi-Crush Inc. (now a private company).
• Additionally, comparing Smart Sand's operational metrics (e.g., production costs, sales volumes, utilization rates) to industry averages would provide a more complete picture of its relative performance.

Legal Proceedings

• In late August, several of the defendants, including Blair, agreed to settlement terms with the Plaintiffs in the Cory Berg, et al. v. Hi-Crush Blair LLC, LLC et al., Case No. 2019-cv-65, Trempealeau County, Wisconsin and Leland Drangstveit, et al. v. Hi-Crush Blair, LLC, et al., Case No. 2019-cv-66, Trempealeau County, Wisconsin cases.
• The parties finalized settlement paperwork in February 2025 and the matter is closed.

Stakeholder Impact

• Shareholders will be impacted by the net loss and decreased profitability.
• Employees may be affected by potential cost-cutting measures.
• Customers may experience changes in pricing or service levels due to market conditions.
• Suppliers may be affected by changes in the company's production levels and purchasing patterns.
• Creditors will be monitoring the company's financial performance and liquidity.

Next Steps

• The company expects full year 2025 capital expenditures to be between $13.0 million and $17.0 million.
• The company will continue to monitor current events and their potential impact on its financial position and results of operations.
• The company will continue to actively monitor current events, but we are unable to estimate the magnitude of their effect on our future financial position, results of operations or cash flows, or give any assurances that these events will not have a material adverse effect on our financial position, results of operations, or cash flows.

Key Dates

Keywords

frac sand, proppant, SmartSystems, sand, revenue, EBITDA, net loss, financial results, Smart Sand, mining