Smart Sand, Inc.

Hello, thank you for standing by, and welcome to the second quarter SmartSand, Inc. earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Josh Jane, Director of Finance and Treasurer. Please go ahead.

Good morning, and thank you for joining us for SmartSend's second quarter 2022 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, August 10, 2022. 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 of 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. We delivered a great second quarter with sales volume of 1.2 million tons and a return to positive adjusted EBITDA. Second quarter volumes are up 40%, quarter over quarter, and 1.2 million tons sold represent the most frac sand we have ever sold in a single quarter. Given strong commodity prices and our ability to continue to deliver sand to multiple basins across the U.S., we are confident we will sell record volumes in 2022. Our second quarter results reflected continued improved pricing in our business. Pricing remains strong, and we expect prices to remain at these levels for the foreseeable future. We have been able to overcome increased costs caused by the shortages of labor and inflation in the second quarter by increasing our sales volume and pricing. We are focused on being the best in class in terms of our cost structure at our operating facilities, and we'll continue to look for ways to reduce our costs and maximize our profitability. We are very pleased with the results we have seen at our unit train capable transloading terminal in Waynesburg, Pennsylvania. Tons shipped through the terminal were up 26% from the first quarter, and we expect volumes to grow in the third quarter. We also saw substantial volume growth during the second quarter through our Van Hook terminal where volumes more than doubled sequentially. As we've said many times in the past, we believe that bulk commodities belong on rail and that sustainable logistics must include terminals close to our customers' drilling activity. Our mind-to-well-site rail, terminal, and last-mile approach provides our customers a safer, cost-efficient, and more reliable supply chain. We continue to see an acceleration in our industrial product divisions, We doubled our time sold from the first quarter and expect volumes to grow each quarter for the balance of the year. We continue to add new customers and brought up the product offering we can provide. We are expanding our services and capabilities with blending and packaging, as well as adding finer grade products in the second half of this year. We believe this sets us up for a very strong growth in 2023 and beyond. Utilization of smart systems remains at an all-time high for the company. We saw utilization increase during the second quarter, and we're seeing increased momentum as we start to penetrate the market with our SmartPath technology. By using our SmartPath, our customers can reduce the number of trucks needed to deliver sand to the well site by more than 30% versus our customers' equipment, providing our customers with substantial cost savings for sand delivered to the wellhead. Additionally, by taking trucks off the road, we benefit our communities by reducing accidents, carbon emission, noise, and dust. ESG goals are important to SmartSand and its customers, and smart systems help achieve these goals by improving efficiency and reducing impact. Our balance sheet remains strong. Today, we have approximately $5 million in cash on our balance sheet and approximately $18 million in liquidity. We will continue to remain disciplined with capital spending while pursuing projects that will generate long-term value. We are excited about our future for a number of reasons. Our balance sheet remains in great shape and we have the assets in place to generate free cash flow over time during an up cycle. With mine situated on four class one railroads and access to all class one railroads, we have the logistics in place to more efficiently deliver sand to our customers wherever they are operating. The sand market remains tight, which will allow us to generate strong financial results in the third quarter and beyond. Having operated SmartPath successfully for more than a year, We look forward to expanding it to deployment in the field and increasing our last mile market share. Industrial product solutions continues to grow rapidly, diversifying our business with strong margins that will provide diversification up to our earnings profile. As always, we will continue to keep our eye on the future and we'll always keep our employees and shareholders' interests in mind in everything we do. And with that, I'll turn the call over to our CFO, Lee Beckleman.