Smart Sand, Inc.

Previous wording

We are a fully integrated frac and industrial sand supply and services company. We offer complete mine to wellsite proppant supply and logistics solutions to our frac sand customers. We produce low-cost, high quality Northern White sand, which is a premium sand used as proppant to enhance hydrocarbon recovery rates in the hydraulic fracturing of oil and natural gas wells and for a variety of industrial applications. We also offer proppant logistics solutions to our customers through our in-basin transloading terminals and our SmartSystems™ wellsite storage capabilities. In recent years, we have expanded our product line to offer Industrial Products Solutions (“IPS”) in order to diversify our customer base and markets we serve by offering sand for industrial uses. We market our products and services to oil and natural gas exploration and production companies, oilfield service companies, and industrial manufacturers. We sell our sand through long-term contracts, short-term supply agreements or spot sales in the open market. We provide wellsite proppant storage solutions services and equipment under flexible contract terms custom tailored to meet the needs of our customers. We believe that, among other things: (i) the size and favorable geologic characteristics of our sand reserves; (ii) the strategic location and logistical advantages of our facilities; (iii) our proprietary SmartDepot™ portable wellsite storage silos, SmartPath® transloader and SmartBelt™ conveyor;

Current wording

We are a fully integrated frac and industrial sand supply and services company. We offer complete mine to wellsite proppant supply and logistics solutions to our frac sand customers. We produce low-cost, high quality Northern White sand, which is a premium sand used as proppant to enhance hydrocarbon recovery rates in the hydraulic fracturing of oil and natural gas wells and for a variety of industrial applications. We also offer proppant logistics solutions to our customers through our in-basin transloading terminals and our SmartSystems™ wellsite storage capabilities. In recent years, we have expanded our product line to offer Industrial Products Solutions (“IPS”) in order to diversify our customer base and markets we serve by offering sand for industrial uses. We market our products and services to oil and natural gas exploration and production companies, oilfield service companies, and industrial manufacturers. We sell our sand through long-term contracts, short-term supply agreements or spot sales in the open market. We provide wellsite proppant storage solutions services and equipment under flexible contract terms custom tailored to meet the needs of our customers. We believe that, among other things: (i) the size and favorable geologic characteristics of our sand reserves; (ii) the strategic location and logistical advantages of our facilities; (iii) our proprietary SmartDepot™ portable wellsite storage silos, SmartPath® wellsite proppant management system and SmartBelt™ conveyor; (iv) access to all Class I rail lines; and (v) the industry experience of our senior management team make us as a highly attractive provider of sand and logistics services.

Previous wording

We incorporated in Delaware in July 2011 and began operations at our Oakdale, Wisconsin facility with 1.1 million tons of annual processing capacity in July 2012. After several expansions, our current annual processing capacity at our Oakdale facility, which has access to both the Canadian Pacific and Union Pacific rail networks, is approximately 5.5 million tons. In 2020, we acquired our Ottawa, Illinois mine and processing facility, which has an annual processing capacity of approximately 1.6 million tons and access to the Burlington Northern Santa Fe rail network. In March 2022, we acquired our Blair, Wisconsin facility, which has approximately 2.9 million tons of total annual processing capacity and contains an onsite, unit train capable rail terminal with access to the Class 1 Canadian National rail network. We commenced operations at the Blair facility in the second quarter of 2023. Our total annual processing capacity of our operating facilities is approximately 10.0 million tons.

Current wording

We incorporated in Delaware in July 2011 and began operations at our Oakdale, Wisconsin facility with 1.1 million tons of annual processing capacity in July 2012. After several expansions, our current annual processing capacity at our Oakdale facility, which has access to both the Canadian Pacific and Union Pacific rail networks, is approximately 5.5 million tons. In 2020, we acquired our Ottawa, Illinois mine and processing facility, which has an annual processing capacity of approximately 1.6 million tons and access to the Burlington Northern Santa Fe rail network. In March 2022, we acquired our Blair, Wisconsin mine and processing facility, which has approximately 2.9 million tons of total annual processing capacity and contains an onsite, unit train capable rail terminal with access to the Class I Canadian National rail network. We commenced operations at the Blair facility in May 2023. Our total annual processing capacity of our operating facilities is approximately 10.0 million tons.

Previous wording

We directly control five in-basin transloading facilities and have access to third party transloading terminals in all operating basins. We operate a unit train capable transloading terminal in Van Hook, North Dakota to service the Bakken Formation in the Williston Basin. We also serve the Appalachian Basin through three company-controlled terminals. In January 2022, we began operations at a unit train capable transloading terminal in Waynesburg, Pennsylvania, which we expanded in 2023. In December 2023, we acquired the right to operate a terminal in Minerva, Ohio and in January 2024, we acquired the right to operate a terminal in Dennison, Ohio. The Minerva terminal became operational in the second quarter of 2024 and the Dennison terminal became operational in the third quarter of 2024. We also have the right to use a rail terminal located in El Reno, Oklahoma. These terminals allow us to offer more efficient and sustainable delivery options to our customers. Additionally, we have longstanding relationships with third party terminal operators that provide us with access to all oil and natural gas exploration production basins of North America.

Current wording

We directly control five in-basin transloading facilities and have access to third party transloading terminals in all operating basins. We operate a unit train capable transloading terminal in Van Hook, North Dakota to service the Bakken Formation in the Williston Basin. We also serve the Appalachian Basin through three company-controlled terminals. In January 2022, we began operations at a unit train capable transloading terminal in Waynesburg, Pennsylvania, which we expanded in 2023. In December 2023, we acquired the right to operate a terminal in Minerva, Ohio and in January 2024, we acquired the right to operate a terminal in Dennison, Ohio. These two Ohio terminals became operational in 2024. We also have the right to use a rail terminal located in El Reno, Oklahoma. Additionally, we have longstanding relationships with third party terminal operators that provide us with access to substantially all oil and natural gas exploration production basins of North America.

Previous wording

We offer to our customers portable wellsite proppant storage and management solutions through our SmartSystems products and services. Our SmartSystems provide our customers with the capability to unload, store and deliver proppant at the wellsite, as well as the ability to rapidly set up, takedown and transport the entire system. This capability creates efficiencies, flexibility, enhanced safety and reliability for customers. Through our SmartSystems wellsite proppant storage solutions, we offer the SmartDepot and SmartDepotXL™ silo systems, SmartPath transloader, SmartBelt conveyor, and our rapid deployment trailers. Our SmartDepot silos include passive and active dust suppression technology, along with the capability of a gravity-fed operation. Our SmartPath transloader is designed to work with bottom dump trailers and features a drive over conveyor, surge bin, and dust collection system. Our SmartBelt conveyor is designed to work with our SmartPath transloader to directly feed sand into the blender. Our rapid deployment trailers are designed for quick setup, takedown and transportation of the entire SmartSystem, which allows for efficient removal from the wellsite during operation. We believe the system has the ability to keep up with any hydraulic fracturing operation. We have also developed a proprietary software program, the SmartSystem Tracker™, which allows our SmartSystems customers to monitor silo-specific information, including location, proppant type and proppant inventory. We believe that our SmartSystems reduce trucking and related fuel consumption for our customers, helping them reduce their carbon footprint in their daily operations.

Current wording

We offer to our customers portable wellsite proppant storage and management solutions through our SmartSystems products and services. Our SmartSystems enable customers to unload, store and deliver proppant at the wellsite, and rapidly set up, takedown and transport the entire system.

Previous wording

We have expanded our product line to offer industrial sand through IPS. In 2023, we completed the installation of blending and cooling assets at our Ottawa, Illinois facility that we believe will provide new opportunities to increase our customer base in the IPS business. While sales of IPS to customers were a small portion of our overall sand sales in 2022 and 2023, going forward, we expect to continue to expand and diversify to serve the major industrial markets throughout North America, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, recreation and more.

Current wording

In 2021, we expanded our product line to offer Industrial Sand through IPS. In 2023, we completed the installation of blending and cooling assets at our Ottawa, Illinois facility that we believe provides additional opportunities to increase our customer base in the IPS business. While sales of IPS to customers have been a small portion of our overall sand sales, we expect to continue to expand and diversify to serve the major industrial markets throughout North America, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, recreation and more.

Previous wording

Our historical results of operations and cash flows may not be indicative of results of operations and cash flows to be expected in the future.

Current wording

Our historical results of operations and cash flows may not be indicative of results of operations and cash flows to be expected in the future. 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. Our sales into Canada and Mexico are currently subject to tariffs, set at 25%. During the first quarter 2025, approximately 10% of our sand sold went to Canada and Mexico. We expect that our customers would be responsible for the increased cost, which may result in customers sourcing their sand needs from other suppliers within their own countries. We are currently unable to estimate the effect of current or future events on our future financial position and results of operations. Therefore, we can give no assurances that these events will not have a material adverse effect on our financial position or results of operations.

Previous wording

Demand in the IPS business is relatively stable as customers are spread over a wide range of industries including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, recreation and more. The IPS business is primarily influenced by macroeconomic drivers such as consumer demand and population growth. We believe that as this business grows, it will provide us with the ability to diversify our sales into more stable, consumer-driven products to help mitigate price volatility in the oil and gas industry.

Current wording

Demand in the IPS business is relatively stable as customers are spread over a wide range of industries including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, recreation and more. The IPS business is primarily influenced by macroeconomic drivers such as consumer demand and population growth. We believe that as this business grows, it may provide us with the ability to diversify a portion our sales into more stable, consumer-driven products to help mitigate price volatility in the oil and gas industry.

Previous wording

Revenues were $63.2 million and tons sold were approximately 1,189,000 for the three months ended September 30, 2024. Revenues for the three months ended September 30, 2023 were $76.9 million, during which time we sold approximately 1,219,000 tons of sand. The key factors contributing to the revenues for the three months ended September 30, 2024 being lower, as compared to the three months ended September 30, 2023 were as follows:

Current wording

Revenues were $65.6 million and tons sold were approximately 1,069,000 for the three months ended March 31, 2025. Revenues for the three months ended March 31, 2024 were $83.1 million, during which time we sold approximately 1,336,000 tons of sand. The key factors contributing to the change in revenues for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 were as follows:

Previous wording

•SmartSystems revenue was approximately $0.9 million for the three months ended September 30, 2024 compared to $2.0 million for the three months ended September 30, 2023. The decrease in SmartSystems revenue was due to lower utilization of our SmartSystems fleet.

Current wording

•SmartSystems revenue was approximately $1.1 million for the three months ended March 31, 2025 compared to $3.3 million for the three months ended March 31, 2024. The decline in SmartSystems revenue was due to lower utilization of our SmartSystems fleet in early 2025.

Previous wording

Cost of goods sold was $188.6 million and $195.3 million for the nine months ended September 30, 2024 and September 30, 2023, respectively. Cost of goods sold remained relatively flat with reduced freight on a per ton basis due to a shift in delivery location and more tons sold at the minegate, partially offset by higher total cost of production due to higher volumes sold.

Current wording

Cost of goods sold was $62.8 million and $71.2 million for the three months ended March 31, 2025 and March 31, 2024, respectively. Cost of goods sold declined as a result of lower total sales volumes. Both logistics and production costs increased on a per ton basis due to a shift in delivery location and lost efficiencies due to lower production volumes.

Previous wording

Gross profit was $31.4 million and $38.7 million for the nine months ended September 30, 2024 and September 30, 2023, respectively. The gross profit for the nine months ended September 30, 2024 was lower, compared to the nine months ended September 30, 2023, due primarily to lower average sales prices of our sand relative to the cost to produce and deliver products to our customers.

Current wording

Gross profit was $2.8 million and $11.8 million for the three months ended March 31, 2025 and March 31, 2024, respectively. The gross profit for the three months ended March 31, 2025 was lower, compared to the three months ended March 31, 2024, due primarily to lower sales volumes and the higher variable production cost per ton on those lower sales volumes.

Previous wording

We incurred $0.3 million and $0.3 million of net interest expense for the three months ended September 30, 2024 and 2023, respectively.

Current wording

We incurred $0.3 million and $0.5 million of net interest expense for the three months ended March 31, 2025 and March 31, 2024, respectively.

Previous wording

For the three months ended September 30, 2024 and 2023, our effective tax rate was approximately 98.1% and (38.8)%, respectively. To estimate the interim period income tax expense (benefit), the company calculates the estimated effective tax rate for the full year and applies that rate to the net income for the period. The computation of the effective tax rate includes modifications from the statutory rate such as income tax credits, tax depletion deduction, carrybacks, and state apportionment changes, among other items that are specific to our Company.

Current wording

For the three months ended March 31, 2025 and March 31, 2024, our effective tax rate was approximately (233.6)% and 155.2%, respectively. We are required to record our interim period income tax expense (benefit) in accordance with GAAP, which requires that we estimate our full year effective tax rate and apply that rate to the net income for the period. Our effective tax rate includes modifications from the statutory rate for items such as income tax credits, tax depletion deduction, carrybacks, and state taxes, among other items. The biggest driver of our income tax benefit (expense) is our depletion deduction calculation, which is not directly related to the net income of our Company. This tax deduction has an equally large effect on our income tax rate, which is the basis for the quarterly income tax expense (benefit) calculation. We do not expect to be a payer of federal income tax in 2025 and we expect to pay an immaterial amount of state income taxes in 2025. Because of the difference between income tax recorded on a GAAP basis and the cash taxes we expect to pay, we use additional non-GAAP performance measures of contribution margin, adjusted EBITDA, and free cash flow to evaluate our results of operations.

Previous wording

EBITDA and net cash provided by operating activities is the GAAP measure most directly comparable to free cash flow. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measures. Each of these non-GAAP financial measures has important limitations as analytical tools because they exclude some but not all items that affect the most directly comparable GAAP financial measures. You should not consider contribution margin, EBITDA, adjusted EBITDA or free cash flow in isolation or as substitutes for an analysis of our results as reported under GAAP. Because contribution margin, EBITDA, adjusted EBITDA and free cash flow may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

Current wording

Contribution margin, EBITDA, adjusted EBITDA and free cash flow are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial condition and results of operations. Gross profit is the GAAP measure most directly comparable to contribution margin, net income is the GAAP measure most directly comparable to EBITDA and adjusted EBITDA and net cash provided by operating activities is the GAAP measure most directly comparable to free cash flow. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measures. Each of these non-GAAP financial measures has important limitations as analytical tools because they exclude some but not all items that affect the most directly comparable GAAP financial measures. You should not consider contribution margin, EBITDA, adjusted EBITDA or free cash flow in isolation or as substitutes for an analysis of our results as reported under GAAP. Because contribution margin, EBITDA, adjusted EBITDA and free cash flow may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

Previous wording

•our debt covenant compliance, as adjusted EBITDA is a key component of critical covenants to the ABL Credit Facility.

Current wording

•our debt covenant compliance, as adjusted EBITDA is a key component of critical covenants to the FCB ABL Credit Facility.

Previous wording

Adjusted EBITDA was $5.7 million for the three months ended September 30, 2024 compared to $13.2 million for the three months ended September 30, 2023. The lower Adjusted EBITDA for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 was due to the combination of lower sales volumes and lower average sales prices of our sand. Adjusted EBITDA was $26.9 million for the nine months ended September 30, 2024 compared to $32.6 million for the nine months ended September 30, 2023. The decrease in adjusted EBITDA for the nine months ended September 30, 2024, compared to the same period in 2023, was primarily due to lower average sales prices of our sand.

Current wording

Adjusted EBITDA was $1.4 million for the three months ended March 31, 2025 compared to $9.3 million for the three months ended March 31, 2024. The decrease in adjusted EBITDA for the three months ended March 31, 2025, compared to the same period in 2024, was primarily due to lower sales volumes of sand sold.

Previous wording

Free cash flow was $3.7 million for the three months ended September 30, 2024 compared to $5.6 million for the three months ended September 30, 2023. Free cash flow was $11.7 million for the nine months ended September 30, 2024 compared to $17.5 million for the nine months ended September 30, 2023. The positive free cash flow for the three and nine months ended September 30, 2024 was primarily due to management’s focus on reducing operating expenses and focus on lower capital expenditures. The decline in average selling prices in 2024 has negatively affected free cash flow.

Current wording

Free cash flow was $5.2 million for the three months ended March 31, 2025 compared to $(5.5) million for the three months ended March 31, 2024. The positive free cash flow for the three months ended March 31, 2025 was primarily due to management’s continued focus on managing operating expenses and capital expenditures to be in line with current market activity and expected trends as well as higher working capital conversion into cash.

Previous wording

In September 2024 we refinanced our former $20.0 million ABL facility to a new $30.0 million FCB ABL facility. Our primary sources of liquidity are cash flow generated from operations and availability under our FCB ABL Credit Facility and other equipment financing sources. As of September 30, 2024, cash on hand was $7.2 million and we had $30.0 million in undrawn availability on our FCB ABL Credit Facility.

Current wording

Our primary sources of liquidity are cash flow generated from operations and availability under our FCB ABL Credit Facility and other equipment financing sources. As of March 31, 2025, cash on hand was $5.1 million and we had $30.0 million in undrawn availability on our FCB ABL Credit Facility.

Previous wording

We expect full year 2024 capital expenditures to be between $8.0 million and $10.0 million. Our expected capital expenditures for 2024 are primarily for process improvement and efficiency projects at our mine sites, upgrading mining equipment and the build out of our new Ohio terminals. We expect to fund these capital expenditures with cash from operations, equipment financing options available to us or borrowings under the FCB ABL Credit Facility.

Current wording

We expect full year 2025 capital expenditures to be between $13.0 million and $17.0 million. Our expected capital expenditures for 2025 are primarily to open new mining areas for development, efficiency projects at Oakdale, Blair and Ottawa facilities, expansion and customization of our newly acquired Ohio terminals and potential investment in one or more new terminals. We expect to fund these capital expenditures with existing cash from operations, equipment financing options available to us or borrowings under the FCB ABL Credit Facility.

Previous wording

Our debt facilities include the VFI Equipment Financing, various notes payable and our FCB ABL Credit Facility. Our VFI Equipment Financing is secured by a substantial portion of the Company’s SmartSystems equipment. The outstanding balance under the VFI Equipment Financing as of September 30, 2024 was $9.2 million. Minimum cash payments on this facility for the remainder of 2024 are anticipated to be $0.7 million. Our various notes payable are primarily secured by heavy equipment. Total debt under these notes payable as of September 30, 2024 was $3.8 million. Minimum cash payments on these notes payable for the remainder of 2024 are anticipated to be $0.3 million. There were no outstanding borrowings on our FCB ABL Credit Facility as of September 30, 2024.

Current wording

Our debt facilities include the VFI Equipment Financing, various notes payable and our FCB ABL Credit Facility. Our VFI Equipment Financing is secured by a substantial portion of the Company’s SmartSystems equipment. The outstanding balance under the VFI Equipment Financing as of March 31, 2025 was $7.8 million. Minimum cash payments on this facility for the remainder of 2025 are anticipated to be $2.0 million. Our various notes payable are primarily secured by heavy equipment. Total debt under these notes payable as of March 31, 2025 was $3.7 million. Minimum cash payments on these notes payable for the remainder of 2025 are anticipated to be $0.9 million. There were no outstanding borrowings on our FCB ABL Credit Facility as of March 31, 2025.

Previous wording

We use leases primarily to procure certain office space, railcars and heavy equipment as part of our operations. The majority of our lease payments are fixed and determinable. Our operating lease liabilities as of September 30, 2024 were $23.5 million. Minimum cash payments on operating leases for the remainder of 2024 are anticipated to be $2.6 million.

Current wording

We use leases primarily to procure certain office space, railcars and heavy equipment as part of our operations. The majority of our lease payments are fixed and determinable. Our operating lease liabilities as of March 31, 2025 were $20.6 million. Minimum cash payments on operating leases for the remainder of 2025 are anticipated to be $7.1 million.

Previous wording

The Company is obligated under certain contracts for minimum payments for the right to use land for extractive activities. The annual minimum payments under these contracts are approximately $2.5 million per year in the aggregate for the next 13 years.

Current wording

The Company is obligated under certain contracts for minimum payments for the right to use land for extractive activities. The annual minimum payments under these contracts are approximately $2.5 million per year in the aggregate for the next 12 years.

Previous wording

For the nine months ended September 30, 2024, EQT Corporation, Encino Energy and Liberty Oilfield Services accounted for 53.9% of total revenue. For the nine months ended September 30, 2023, revenue from EQT Corporation and Liberty Oilfield Services accounted for 27.6%, and 12.9% respectively, of total revenue.

Current wording

For the three months ended March 31, 2025, Equitable Gas Corporation, Encino Energy, Expand Energy Corporation and CNX Resources Corporation accounted for 35.5%, 13.2%, 12.9% and 12.6% of total revenue. For the three months ended March 31, 2024, revenue from Equitable Gas Corporation, Halliburton Energy Services and Encino Energy accounted for 37.4%, 11.4% and 11.2% respectively, of total revenue.

Previous wording

There have been no material changes in our critical accounting policies and procedures during the nine months ended September 30, 2024.

Current wording

There have been no material changes in our critical accounting policies and procedures during the three months ended March 31, 2025.