Smart Sand, Inc.

This conference is scheduled to begin shortly. Please continue to stand by. Thank you for your patience. Thank you. Good day and thank you for standing by. Welcome to the first quarter 2021 SmartSAN Inc. Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker today, Josh Jane, Director of Finance and Assistant Treasurer. Please go ahead.

Good morning, and thank you for joining us for SmartSAN's first quarter 2021 earnings call. On the call today, we have Chuck Young, Founder and Chief Executive Officer, Lee Beckelman, Chief Financial Officer, and John Young, Chief Operating Officer. Before we begin, I would like to remind all participants that our comments made today will include forward-looking statements which are subject to certain risks and uncertainties that could cause actual results or events to materially differ from those anticipated. For a complete discussion of such risks and uncertainties, please refer to the company's press release and our documents on file with the SEC. SmartSAN disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 5, 2021. Additionally, we may refer to the non-GAAP financial measures of contribution margin, EBITDA, adjusted EBITDA, and free cash flow during this call. We believe that these measures, when used in combination with our GAAP results, provide us and our investors with useful information to better understand our business. Please refer to our most recent press release or our public filings for our reconciliations of contribution margin to gross profit, EBITDA, and adjusted EBITDA to net income. and free cash flow to cash flow provided by operating activities. I would now like to turn the call over to our CEO, Chuck Young.

Thanks, Josh, and good morning. After a challenging year in 2020, we are very encouraged by the recovery we have witnessed to begin 2021. We successfully managed the downturn and remain uniquely positioned to keep pursuing our long-term strategy to be the premium supplier of northern white frac sand from the mine to the well site. Our volumes in the first quarter were up on a quarter-to-quarter basis and a year-over-year basis. We increased volumes despite frack activity remaining well below last year's first quarter levels and rig counts being down 50% in Q1 2021 from Q1 2020 levels. So, we are gaining market share in the operating basins that we are targeting, in addition to increasing activity in the Bakken and the Marcellus, With the addition of Utica, we are now competing very effectively in the western basins in Colorado and Wyoming. Despite weather challenges for the industry in February, the frac sand market continued to rebound as sales volumes increased by 25% from 612,000 tons in the fourth quarter 2020 to 762,000 tons in the first quarter. March volumes were up significantly following the February weather disruption. and we expect volumes to continue to grow as the market is strengthening. We continue to focus on maintaining financial flexibility and generating free cash flow. Today, we have $10 million in cash on our balance sheet and approximately $30 million in liquidity. We couldn't have managed through these difficult times without the effort of our employees. I want to thank all of our employees once again for their continued commitment to SmartSand. As we discussed on last quarter's call, We believe the SmartPath transloader is unlike anything in the industry. It's a self-contained system designed to work with bottom dump trailers. It features a drive-over conveyor, surge bin, and dust collection system, so it's well-suited to perform any frac job. And we can now report we have successfully deployed our first SmartPath during the first quarter. The transloader completed several multi-well pads and continues to work into the second quarter. We are receiving incremental inquiries about this technology and believe we will have further deployments as we move through the rest of the year. By the end of this year, we expect to have 10 fleets equipped with the SmartPath. We continue to believe the focus on ESG by our customers will drive adoption of our smart systems product offerings. Built-in dust control on silos and improved dust control throughout the completion process are vital to health, safety, and regulatory compliance. We also believe the smaller footprint that we offer on the well site with our smart system sand storage systems compared to our peers will be well received. We estimate that by using our smart systems fleet equipped with a smart path, rather than competing silo and box options, we can reduce the number of trucks needed to deliver sand to the well site by more than 30%. This is a significant opportunity for our customers to reduce their ESG footprint and GHG emissions. As we emerge from the downturn, we'll continue to work closely with our customers to deliver sand to the well site in a reliable, cost-efficient, safe, and environmentally responsible fashion. We're excited about our future for a number of reasons. Sales volumes have increased meaningfully from the bottom and continue to trend positively. We have expanded our customer base and the operating basins we are serving over the last 12 months. Our Utica plant has exceeded our expectations thus far, and we remain excited about driving higher volumes from this location. We continue to improve the efficiencies and cost structures at our Oakdale mine to make it one of the most efficient frac sand mines and processing plants in the industry. And with our first successful deployment of the SmartPath behind us, we are looking forward to building market share with our Last Mile Solutions product offering. As always, we'll continue to keep an eye on the future, and we'll always keep our employee and shareholders' interests in mind in everything we do. And with that, I'll turn the call over to our CFO, Lee Beckelman.