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® 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.

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, the following makes us a highly attractive provider of sand and logistics services: (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.

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. 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.

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 are currently expanding our terminal in Dennison, OH and expect this expansion to be completed in the third quarter of 2025. 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 enable customers to unload, store and deliver proppant at the wellsite, and rapidly set up, takedown and transport the entire system.

Current wording

We offer portable wellsite proppant storage and management solutions to our customers 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

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.

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 volatility in the oilfield service sector. Our sales into Mexico and Canada are currently exempt from tariffs. Although our sales into Canada were subject to tariffs earlier this year, a recent Surtax Remission Order eliminated such tariffs on our sand. Should the tariff rates change, we anticipate 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 give no assurances that these events will not have a material adverse effect on our financial position or results of operations.

Previous wording

We saw an increase in the volume of sand sold in 2024, which has been followed by a slowdown in the first quarter of 2025. We believe the slowdown in the first quarter of 2025 is largely cyclical following a strong fourth quarter and also impacted by seasonality. There have also been modest pricing fluctuations over the periods presented, but we believe the fluctuation is consistent with other commodities in the oilfield services sector. We believe 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.

Current wording

We experienced an increase in the volume of sand sold in 2024, which was followed by a slowdown in the first quarter of 2025. While the volume of sand sold was lower in the first quarter, we have seen an increase in the volume of sand sold in the second quarter of 2025 as customers increased their activity. There have also been modest pricing fluctuations over the periods presented, but we believe the fluctuation is consistent with other commodities in the oilfield services sector. We believe 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.

Previous wording

Since taking office on January 20, 2025, President Trump has issued a series of executive orders and memoranda signaling a shift in environmental and energy policy in the United States, including the revocation of approximately 80 Biden-era executive orders related to public health, the environment, climate change and climate-related financial risks. President Trump also declared a national energy emergency, directing agencies to expedite conventional energy projects, and several agencies have undertaken actions of a deregulatory nature in accordance with the executive orders, memoranda and emergency declaration. During the first quarter of 2025, there have been fluctuating tariffs that may directly or indirectly affect our results of operations. We 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.

Current wording

Since taking office on January 20, 2025, President Trump has issued a series of executive orders and memoranda signaling a shift in environmental and energy policy in the United States, including the revocation of approximately 80 Biden-era executive orders related to public health, the environment, climate change and climate-related financial risks. President Trump also declared a national energy emergency, directing agencies to expedite conventional energy projects, and several agencies have undertaken actions of a deregulatory nature in accordance with the executive orders, memoranda and emergency declaration. Though our products are not currently subject to tariffs, during the first half of 2025, there have been fluctuating tariffs that may directly or indirectly affect our results of operations. We 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.

Previous 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:

Current wording

Revenues were $85.8 million and tons sold were approximately 1,424,000 for the three months ended June 30, 2025. Revenues for the three months ended June 30, 2024 were $73.8 million, during which time we sold approximately 1,274,000 tons of sand. The key factors contributing to the revenues for the three months ended June 30, 2025 being higher, as compared to the three months ended June 30, 2024, were as follows:

Previous 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.

Current wording

We incurred $0.3 million and $0.4 million of net interest expense for the three months ended June 30, 2025 and 2024, respectively.

Previous 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.

Current wording

For the three months ended June 30, 2025 and 2024, our effective tax rate was approximately 6643.1% and 122.6%, 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

•Sand revenue declined to $64.5 million for the three months ended March 31, 2025 versus $79.7 million for the three months ended March 31, 2024. Total volumes declined by approximately 20% while sand pricing per ton was slightly higher in the current period. The volumes sold in the first quarter of 2024 were higher due to that period experiencing a recovery period following a steep decline in the fourth quarter of 2023. Additionally, activity in the fourth quarter of 2024 was high due to customers shifting some activity into the end of 2024 leading to lower activity in the first quarter of 2025.

Current wording

•Sand revenue declined to $149.1 million for the six months ended June 30, 2025 versus $150.7 million for the six months ended June 30, 2024. Total volumes declined by approximately 4% while sand pricing per ton was slightly higher in the current period. Lower activity in the first quarter of 2025 due to customer uncertainty of market fluctuations has led to lower sales for the first six months of 2025, compared to the same period in 2024.

Previous 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.

Current wording

•SmartSystems revenue was approximately $2.3 million for the six months ended June 30, 2025 compared to $6.1 million for the six months ended June 30, 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 $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.

Current wording

Cost of goods sold was $139.6 million and $132.0 million for the six months ended June 30, 2025 and June 30, 2024, respectively. Cost of goods sold increased despite our lower total sales volumes. Both logistics and production costs increased due to a shift in delivery location, lost efficiencies due to lower production volumes and higher mining costs.

Previous 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.

Current wording

Gross profit was $11.7 million and $24.9 million for the six months ended June 30, 2025 and June 30, 2024, respectively. The gross profit for the six months ended June 30, 2025 was lower, compared to the six months ended June 30, 2024, due primarily to lower sales volumes and higher freight and delivery costs as well as increased production costs.

Previous wording

Selling, general and administrative expenses were lower in total at $9.2 million for the three months ended March 31, 2025 compared to $10.4 million for the three months ended March 31, 2024. The decline in SG&A cost were driven by reduced wages and royalties on lower sales volumes as well as reduced banking and legal costs associated with debt refinancing in the prior year.

Current wording

Selling, general and administrative expenses were $18.4 million for the six months ended June 30, 2025 compared to $19.2 million for the six months ended June 30, 2024. The decline in selling, general and administrative costs were driven by reduced wages and royalties on lower sales volumes as well as reduced banking and legal costs associated with debt refinancing in the prior year. The gain on disposal of assets of $0.7 million for the six months ended June 30, 2025 was primarily related to the sale of vacant land that was part of a previous acquisition.

Previous wording

Net loss was $24.2 million for the three months ended March 31, 2025 as compared to net income of $0.2 million for the three months ended March 31, 2024. The higher net loss in the current period was primarily due to non-cash deferred income taxes. Income tax expense (benefit) often distorts our results of operations due to variances between amounts recorded for GAAP and the amount we pay in a reporting period. We calculate our income tax expense as required by GAAP, but we do not expect to be a payer of any material income taxes for the full year 2025. Additionally, we had lower gross profit from lower sales volumes and higher unit production costs, partially offset by lower operating expenses during the three months ended March 31, 2025. Because of the difference between income tax recorded on a GAAP basis and the cash taxes we expect to pay, we use non-GAAP measures of contribution margin, adjusted EBITDA, and free cash flow as measures of our performance.

Current wording

Net loss was $2.8 million for the six months ended June 30, 2025 as compared to net loss of $0.6 million for the six months ended June 30, 2024. The higher net loss in the current period was primarily due to non-cash deferred income taxes. Income tax expense (benefit) often distorts our results of operations due to variances between amounts recorded for GAAP and the amount we pay in a reporting period. We calculate our income tax expense as required by GAAP, but we do not expect to be a payer of any material income taxes for the full year 2025. Additionally, we had lower gross profit from lower sales volumes and higher unit production costs, partially offset by lower operating expenses during the six months ended June 30, 2025. Because of the difference between income tax recorded on a GAAP basis and the cash taxes we expect to pay, we use non-GAAP measures of contribution margin, adjusted EBITDA, and free cash flow as measures of our performance.

Previous wording

Contribution margin was $9.6 million and $18.5 million, or $8.96 and $13.85 per ton sold, for the three months ended March 31, 2025 and 2024, respectively. The decline in overall contribution margin for the three month period ended March 31,

Current wording

Contribution margin was $15.8 million and $19.8 million, or $11.08 and $15.53 per ton sold, for the three months ended June 30, 2025 and 2024, respectively. Contribution margin was lower compared to the same period in 2024 primarily due to higher logistics costs related to the delivery location of our frac sand sales. Contribution margin was $25.4 million and $38.3 million, or $10.17 and $14.67 per ton sold, for the six months ended June 30, 2025 and 2024, respectively. The decline in overall contribution margin for the six month period ended June 30, 2025, when compared to the same period in 2024, was primarily due to the increase in logistics costs due to delivery location, higher unit production costs due to lower utilization of our plant assets from lower volumes sold in the current period and higher mining costs.

Previous 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.

Current wording

Adjusted EBITDA was $7.8 million for the three months ended June 30, 2025 compared to $11.9 million for the three months ended June 30, 2024. The decrease in adjusted EBITDA for the three months ended June 30, 2025, compared to the same period in 2024, was primarily due to higher sales volumes of sand sold offset by the increase in logistics and production costs associated with those sales. Adjusted EBITDA was $9.2 million for the six months ended June 30, 2025 compared to $21.2 million for the six months ended June 30, 2024. The decrease in adjusted EBITDA for the six months ended June 30, 2025, compared to the same period in 2024, was primarily due to lower sales volumes of sand sold combined with higher logistics costs due to the delivery location of frac sand sales and higher unit production costs due to lower utilization of our plant assets.

Previous 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.

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 June 30, 2025, cash on hand was $4.3 million and we had $21.0 million in undrawn availability on our FCB ABL Credit Facility.

Previous wording

On October 3, 2024, the Smart Sand Board of Directors declared a special dividend of $0.10 per share of common stock, which was paid on October 28, 2024 to stockholders of record at the close of business on October 15, 2024. The initial dividend payment was approximately $3.9 million.

Current wording

On July 23, 2025, the Smart Sand Board of Directors declared a special dividend of $0.10 per share of common stock, which will be paid on August 14, 2025 to stockholders of record at the close of business on August 4, 2025. The dividend payment will return approximately $4.4 million to our shareholders.

Previous wording

On October 3, 2024, the Smart Sand Board of Directors also approved an eighteen-month share repurchase program under which we may purchase up to $10.0 million of our ordinary shares (the “Repurchase Program”). Pursuant to the Repurchase Program, we may repurchase our ordinary shares from time to time, in amounts, at prices and at such times as management deems appropriate, subject to market conditions and other considerations. Management may make repurchases in the open market, privately negotiated transactions, accelerated repurchase programs or structured share repurchase programs. The Repurchase Program will be conducted in compliance with applicable legal requirements and shall be subject to market conditions and other factors. The Repurchase Program does not obligate management to acquire any particular amount of ordinary shares and the Repurchase Program may be modified or suspended at any time.

Current wording

On October 3, 2024, the Smart Sand Board of Directors approved an eighteen-month share repurchase program under which we may purchase up to $10.0 million of our ordinary shares (the “Repurchase Program”). Pursuant to the Repurchase Program, we may repurchase our ordinary shares from time to time, in amounts, at prices and at such times as management deems appropriate, subject to market conditions and other considerations. Management may make repurchases in the open market, privately negotiated transactions, accelerated repurchase programs or structured share repurchase programs. The Repurchase Program will be conducted in compliance with applicable legal requirements and shall be subject to market conditions and other factors. The Repurchase Program does not obligate management to acquire any particular amount of ordinary shares and the Repurchase Program may be modified or suspended at any time.

Previous wording

During the three months ended March 31, 2025, we repurchased 135,196 shares of our common stock for $0.3 million. The remaining amount that may be repurchased as of March 31, 2025 is $9.7 million.

Current wording

Under the Repurchase Program, we have repurchased 989,975 shares of our common stock for $2.1 million. The remaining amount that may be repurchased as of June 30, 2025 is $7.9 million.

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 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.

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 June 30, 2025 was $7.5 million. Minimum cash payments on this facility for the remainder of 2025 are anticipated to be $1.5 million. Our various notes payable are primarily secured by heavy equipment. Total debt under these notes payable as of June 30, 2025 was $4.7 million. Minimum cash payments on these notes payable for the remainder of 2025 are anticipated to be $0.8 million. There was $9.0 million outstanding on our FCB ABL Credit Facility as of June 30, 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 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.

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 June 30, 2025 were $27.4 million. Minimum cash payments on operating leases for the remainder of 2025 are anticipated to be $6.8 million.

Previous 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.

Current wording

For the six months ended June 30, 2025, Equitable Gas Corporation, Encino Energy and Expand Energy Corporation accounted for 28.4%, 14.9%, and 11% of total revenue. For the six months ended June 30, 2024, revenue from Equitable Gas Corporation and Encino Energy accounted for 32.7% and 12.2% respectively, of total revenue.

Previous wording

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

Current wording

There have been no material changes in our critical accounting policies and procedures during the six months ended June 30, 2025.