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spk05: Good morning and welcome to the U.S. Silica second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to one of our hosts, Mr. Don Merrill, Executive Vice President and Chief Financial Officer.
spk02: Thank you, Operator. I'd like to take the opportunity this morning to announce the latest addition to our team. I'm very happy to report that Patricia Gill has joined us as the new vice president of investor relations at U.S. Silica. Patricia has over 15 years of financial experience, including investor relations and sell side equity research. She also brings ESG consulting experience and is a fundamentals of sustainability accounting credential holder from SASB. Welcome to our company, Patricia. And with that, I'll turn the call over to her.
spk08: Thank you, Don, and good morning, everyone. I'd like to thank you for joining us today for U.S. Silica's second quarter 2021 earnings conference call. Leading the call today are our Chief Executive Officer, Brian Shin, and Don Merrill, our Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you of our standard cautionary remarks regarding the forward-looking nature of some of the statements that will be made today. Such forward-looking statements may include comments which are subject to certain risks and uncertainties. For a complete discussion of these risks and uncertainties, we encourage you to read the company's press release and our documents on file with the SEC. Additionally, we may refer to the non-GAAP measures of adjusted EBITDA and segment contribution margin during this call. Please refer to today's press release or our public filings for a full reconciliation of adjusted EBITDA to net income and the definition of segment contribution margin. And with that, I would like to turn the call over to our CEO, Mr. Brian Shin. Brian?
spk01: Thanks, Patricia. Welcome to the U.S. Silica team, and good morning, everyone. I'm very pleased with our strong operational and financial performance during the second quarter. Our results exceeded expectations and were supported by the broader market recovery coupled with constructive commodity prices and outstanding execution by our team. Before discussing our operating results in detail, I want to give a bit of color on a recent agreement to settle a customer dispute. In late June, we came to an agreement with a customer regarding fees related to minimum purchase commitments that dated from 2014 to 2020. As a result of this resolution, we received approximately $128 million of consideration including $90 million in cash. Half of the cash was received in the second quarter with the balance received in July. This settlement, along with the organic free cash flow generated during the quarter, has reduced our net debt by approximately 10%. Further, last week we used a portion of the settlement proceeds to pay off our $25 million outstanding revolver balance as we continue to deliver on our strategy to de-lever the balance sheet. Turning now to second quarter operating results, we reported strong performance across the company with sequential volumes and recurring adjusted EBITDA up 15% and 42% respectively. In our industrial and specialty product segment, volumes of 1.1 million tons were up 10% versus Q1, while contribution margin dollars increased 15% sequentially due to pricing improvements manufacturing efficiency gains, and increased new product sales. In our oil and gas segment, we experienced robust demand during the second quarter as we continued to leverage our supply chain strengths and numerous high-quality customer relationships to take advantage of improved commodity prices and strong U.S. completions activity. We reported profit sales volumes of 3 million tons, a 17% sequential increase. Sandbox delivered loads were up 16% versus the prior quarter. Revenue and contribution margin dollars in this segment were positively impacted by the previously mentioned customer settlement, various price increases, and reduced manufacturing and distribution expenses. Excluding the customer settlement, revenues increased 19% and contribution margin dollars increased 57% sequentially. Also during the quarter, our Permian operations team completed their first full-service simulfrac setting a record for both Sandbox and the customer with 222 loads or nearly 5,000 tons delivered in a 24-hour period. Overall, the second quarter was very strong for U.S. silica across the board, and Don will discuss more specifics in just a few minutes. With the rest of my time this morning, I want to cover three additional topics. I'll start by discussing our growing industrial portfolio, then I'll turn to the markets and our outlook And then finally, I'll review the steps we're taking to maximize cash flow. So let's dive right into industrials first. At U.S. Silica, we offer a broad portfolio of industrial and specialty products that are rooted in a rich 121-year history. We've made strategic investments in new technology and solutions, and we're a leader in the industrial minerals market, serving critical industries such as construction, food and beverage production, biopharma, glass, and energy. As societies aspire to transition to cleaner energy, we have focused on high-value industrial mineral offerings to help our customers meet their ESG goals. I'd like to highlight a few of our specialty products that are essential components of the clean energy supply chain. Our rare low-iron silica sands are highly effective for maximizing light transmission in solar panel glass. We believe that our products are now used in approximately 50% of U.S. solar glass production, and we're very well positioned to capture new business as the domestic solar panel industry expands. We're also the sole supplier to most large U.S. producers of composite fiberglass used for wind turbine blade fabrication, and we estimate that our products are used in over 80% of U.S.-produced fiberglass composites for wind turbine blades. Current forecasts project that wind energy production will grow to over 10% of U.S. electricity generation by the end of 2021. Another important product that we sell into the clean energy supply chain is our Minucil ultrafine silica, which is used in the production of gas and diesel particulate filters that help vehicles meet stringent European and Asian emission regulations. We're proud to support the growth in these environmentally important areas. Additionally, U.S. silica should be a beneficiary of proposed U.S. government infrastructure spending plans through our commercial construction, foundry, concrete additives, and highway construction offerings. Development of our industrial products portfolio is ongoing and on track. During the second quarter, we signed four new customer contracts, further speccing in our high-quality raw materials. The contract terms vary up to five years in length and further solidify our customer relationships. These contracts have put us on track to realize continued growth in 2021 and strong growth in 2022 and beyond. Given the increased activity at our manufacturing locations, our commitment to safety remains paramount. We're happy to report very strong safety and environmental performance again this year, along with minimal unplanned facility downtime, and our maintenance costs have remained within budget. In a May investor presentation, we further outlined our compelling product development pipeline with more than $200 million in estimated annual contribution margin potential from new innovative products under development for targeted markets. We expect new products to contribute $20 million to our 2021 run rate contribution margin, growing to $90 million by 2024. This represents a compound annual growth rate of between 10% to 15% in our industrial profits over that three-year time period. Let's turn now to our new product pipeline. I'm pleased to report that the pipeline is very strong and that we continue to make progress as expected during the quarter. For example, we commenced sales of our new limestone product line. We entered the fourth round of customer testing for our new reinforced filler products. We won business to treat pistachio crops in California with our new desect organic insecticide We qualified a new Cristobalite product at a key customer, and in response to customer demand, in fact, very strong customer demand, we completed an expansion project at our Millen, Georgia plant, which tripled production capacity for our Cool Roof Granules product line. Lastly, for industrials, earlier this month, we announced our third price increase for this year. Price increases will range up to 15%, depending on the product and grade, and are effective for shipments beginning September 1st. These price increases will help offset recent significant cost increases in energy, transportation, materials, and manufacturing costs. Let me now turn to our business and market outlook for the second half of 2021 and 2022. For the remainder of this year, we see stable or growing customer demand for most product lines. Q3 is off to a good start, and industrial demand is strong and almost back to pre-pandemic levels in many sectors. Profit demand continues to be robust and Q3 volumes should be approximately flat sequentially. With drilled and uncompleted well inventories down over 30% in the first half of 2021 and the current supportive commodity prices, we believe that U.S. activity moves slightly higher with drilling outpacing completions as operators build up well inventory for 2022. We're also continuing to increase pricing in sandbox and expect that we will see higher profitability per delivered load for the rest of the year. Looking forward to 2022, we are well positioned for strong industrial and specialty products growth, driven by GDP expansion, new opportunities in several fast-growing end uses, including quartz solid surfaces, energy-efficient roofing, blood plasma filtration, green diesel, and many others, as well as continued gains in supply chain efficiency. Given that, we expect to deliver 10% to 15% sequential growth in 2022 annual ISP contribution margin dollars as planned. In oil and gas, we forecast very strong profit demand for the first half of 2022 as energy company budgets reset and completions activity increases to higher levels consistent with supportive commodity prices. Finally, we remain committed to capital efficiency as we continue to execute on our long-term growth strategy. For 2021, we anticipate capital spending to be within our operating cash flow, and we expect to deliver free cash flow leading to consistent net debt reduction. We believe that we are well positioned to reduce and manage our debt with an expectation to reduce net leverage to between three and four times by 2024. And with that, I will turn the call over to our CFO, Don Merrill, who will discuss our financial results in more detail and provide an update regarding our use of proceeds from the recent customer settlement. Don?
spk02: Thanks, and good morning, everyone. As Brian stated, we delivered strong operational and financial results in the second quarter, which exceeded our guidance and were incrementally aided by the customer settlement. In addition, this quarter was impacted by charges due to weather and costs related to facility closures, as discussed in our press release. During the second quarter, we reported adjusted EBITDA of $103.3 million, or $54.4 million, excluding the customer settlement. Compared to the prior quarter, our reported adjusted EBITDA increased 170% sequentially, or 42% excluding the customer settlement. Our strong second quarter results were the product of the broader market recovery, constructive commodity prices, new products, and increased pricing in both of our segments. Selling general and administrative expenses for the quarter increased 5% sequentially to $27.5 million, driven mostly by recent hiring due to the market recovery. Depreciation, depletion, and amortization expense totaled $41.2 million in the second quarter, which is flat when compared to the prior quarter. Our effective tax rate for the quarter ended June 30, 2021, with 31%, including discrete items. Now let me begin with a detailed review of our operating segment results. Our industrial and specialty product segment reported revenue of $124 million in the second quarter, an increase of 10% versus the first quarter. Second quarter revenue growth for the segment exceeded GDP growth and was driven by the economic recovery along with increased new product sales and recently implemented price increases as volumes grew 10% and contribution margin expanded 15% versus the prior quarter. On a per-ton basis, the contribution margin for the industrial and specialty product segment was $42.50 per ton, which represents an increase of 4% when compared with the first quarter. Oil and gas segment reported revenue of $193.3 million for the second quarter, an increase of 59% when compared to the first quarter. Excluding the customer settlement of $48.9 million, revenues increased 19% sequentially. volumes for the oil and gas segment increased 17% sequentially, while sandbox delivered loads increased 16% compared to the prior quarter, driven by strong completions activity coupled with supportive commodity prices. Excluding the customer settlement, segment contribution margin increased 57% sequentially and benefited from improved pricing as well as the reduction in manufacturing and logistics costs. Again, excluding the customer settlement, The oil and gas segment contribution margin on a per ton basis was $11.17, an increase of 34% when compared to the first quarter. Turning to the cash flow statement, I am pleased to report that we delivered meaningful cash flow from operations in the second quarter. Subtracting $3.6 million of capital expenditures, our free cash flow totaled $64.7 million. Looking at the balance sheet. The company's cash and cash equivalent to June 30th increased 38% sequentially to $212.7 million. And as Brian stated, we have received the additional $45 billion from our customer settlement. Also, at quarter end, our $100 million revolver had $25 million drawn, which as stated earlier has been completely paid down, leaving $78 million available under the credit facility today after allocating for letters of credit. Our capital discipline, improvements in net debt, and strong adjusted EBITDA results afforded us the ability to deliver on our strategy to de-lever the balance sheet. To recap, as of today, we have received a total of 90 million dollars of cash provided by the customer settlement. Half of this cash was received in the second quarter and the remaining balance was received earlier in July. This week, we paid off our outstanding revolver balance of 25 million dollars and are now below four times levered on a net debt to trailing 12-month EBITDA basis. This reduction in revolver balance will reduce our interest payments by approximately $1 million annually. Also, I'd like to remind you that we expect to receive the remaining balance of approximately $21 million of IRS refunds related to the CARES Act by the end of the year. With the assistance of the customer settlement, the IRS refunds, and future organic cash flow generation, we continue to expect our leverage ratio to be between three and four times in 2024. Looking out to the second half of 2021, we anticipate minimal adjustments to EBITDA. For the year, we expect to remain disciplined around SG&A and forecast a single-digit percent decrease in 2021 versus the prior year. We expect depreciation, depletion, and amortization to be up slightly for the full year compared to 2020. We also believe our full-year effective tax rate will be a benefit of approximately 25%. For the full year, we continue to expect our 2021 capital spending to be in the range of $30 to $40 million and directed primarily towards maintenance and growth projects. Our strategy for growth, guided by returns, capital discipline, and cash generation is coming to fruition. With the broader market recovery underway, our new product offerings, coupled with our value-added capabilities and strong underlying businesses, We expect to be free cash flow positive and plan to further reduce net debt by the end of the year. And with that, I'll turn the call back over to Brian.
spk01: Thanks, Don. We've had a strong year so far and have delivered on our commitments to strengthen our balance sheet, expand our industrial product portfolio, and to sustainably grow bottom line profits across the enterprise. I believe that we are outperforming and out-executing our competition and we continue to have a laser focus on improving efficiencies and delighting our customers. Additionally, our demonstrated ability to quickly and effectively respond to changing market conditions has proven to be a unique advantage and positions us well to take advantage of future opportunities to create value for our stakeholders. And with that, operator, would you please open the lines for questions?
spk05: Ladies and gentlemen, the floor is now open for the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys. One moment, please, while we pull for questions. Our first question is from Stephen Gingaro. Please proceed with your question.
spk00: Thanks. Good morning. Good morning, Stephen. So a couple things, if you don't mind. And I'd like to start just quickly with this settlement on the oil and gas front. And I was just curious if there was any additional color you could add or if there's anything else outstanding out there that you could potentially see settle on in coming quarters or months. I'm just trying to think about just making sure we're not missing anything else that might be out there.
spk01: Well, thanks for the question, Stephen. I think the first comment I would make about this is that we certainly take our customer contracts very seriously, and our philosophy is that we always try to uphold our commitments, and we expect that our customers will do the same. As we talked about in prepared remarks, we came to this agreement with a customer in late June and have the resolution of $128 million of consideration with $90 million in cash. Unfortunately, the settlement is confidential, so I can't really share any further details, but what I can say is that we generally try to work with customers to resolve these kind of differences And if we can't reach agreement, though, we're certainly willing to assert our rights and seek a cash payment. As I think everyone on the call who's familiar with oil and gas knows that there's a lot of pushing and shoving that happens as markets go up and down in terms of contracts. And I can't really comment on other pending similar disputes on the advice of counsel.
spk00: Okay, thanks. And then when we look at the – The oil and gas contribution margin, I mean, if you strip out the settlement, I think it was a little bit north of $11, and you guys did, I think, $8.35 in the prior quarter. I think it's pricing and also sandbox that's driving that. How does that number evolve going forward? I was always thinking kind of close to $9 or $10 as a rule of thumb, but how do you think that looks in the second half and in 2022 given – maybe a little bit of pricing and the strength in the market?
spk01: So I would say in general, we've given guidance that we think that contribution margin is probably in the $10 per ton range, plus or minus. And as you mentioned, things may go up or down on a quarterly basis. I think all it takes is a few million dollars of cost or sort of issues one way or the other in a quarter and can move at a plus or minus a dollar fairly easily so i feel like we'll oscillate around that um that ten dollar number and uh perhaps uh don might give us some more color on what the second half and next year might look like yeah i would agree with brian look we we've been pretty consistent here on the on the ten dollars per ton um and i would i would just agree with brian on a go-forward basis that that's what we're planning and again
spk02: It could move up and down. If you take Q1, Q2, add it, divide by two, you're right at that 10. So we've been pretty consistent.
spk00: Thanks. And then on the ISP side, you sort of highlighted the long-term growth opportunities and the success of some of the new product introductions as well as price increases. Are you seeing, and I'm just thinking about sort of a similar contribution margin per ton number, but maybe I'll ask, are you seeing the pricing that you're pushing for? Are you getting net pricing improvements, or is most of this offsetting cost inflation? And I'm just trying to figure out if that margin per ton creeps up a little bit as we go forward.
spk01: So we are working very hard to offset whatever sort of cost inflation we get, Stephen, but There are times where we get some extra margin out of that, and certainly that's an aspiration. But the prime reason for pushing the price increases right now is to offset the increased cost that we've seen in labor, materials, transportation, et cetera. And certainly I think our team is doing a very good job at that.
spk00: Okay. Thank you, gentlemen.
spk01: Thanks, Stephen.
spk05: And our next question is from JB Lowe with CD. Please proceed with your question.
spk03: Hey, morning, guys. Good morning, JB. How are you? The first question is on the oil and gas side. I was just wondering, like, we've heard that there's been some capacity that's been coming back online, definitely in the Permian, perhaps elsewhere, you know, Pricing may have been a little bit of a tailwind in 2Q. I'm just wondering if you've seen any pricing pressure now that you've seen some capacity coming back online and that completion activity is going to be kind of flattish in 3Q from your commentary. What do you guys think about pricing in the 3Q?
spk01: So we have definitely seen some pricing come back online over the last month or some capacity come back online over the last month or so. I think know what what we're seeing at this point is that in our case in particular we've had and have a number of really attractive contracts and I think what will happen as we go through the rest of the year as those contracts finish and what I mean by that is we all know that everyone in terms of operators are going to stay within their budget so when they finish their drilling and completions program for the year those volumes that we're currently placing with them, we'll have to move those out into the spot market. So I think we'll probably see the mix of spot tons go up a little bit higher as we get further into the second half here. And given that capacity that you mentioned, spot tons are going at prices that are a little bit less than contracts. So I think in sort of that vein, we'll see a bit of a reduction perhaps and expect that that will happen as the year goes on. We also talked about the fact that we're seeing a lot more drilling activity out there. I think everyone knows that the number of duck wells has gone down substantially, I think over 30% by our count in the first half of 2021 versus where we were at the end of 2020. And we're seeing operators ramp up drilling programs. I was just looking the other day, I think Drilling rigs are up about 40% now year-to-date. And so we're also watching carefully to see what the balance is between the drilling and completions spending as the year goes forward. So we're looking at all those dynamics, you know, net-net. When we look at it, I think we'll be sort of flattish second half to first half in terms of total volumes and total contribution margins. We do have the ability if prices are a bit lower to go get more volume. We frequently have turned down volumes and stayed very disciplined, but we have the capacity and the kind of cost footprint to do that. So I know it's a kind of long-winded explanation to your question, but there's a lot going on out there. No, that's good.
spk03: Yeah, no, that's helpful, particularly about the spot becoming a bigger percentage and the dynamics there. The other question was just on the cleantech side. I'm wondering if you guys can, between, you know, sand for solar panels and sand for turbine blades and maybe throwing in cooler granules for energy efficiency and whatever other products you think are relevant, what percentage of your, I guess of your total business, but if you want to just break it out, what percentage of the ISP business that stuff is today, that would be helpful.
spk01: So I think we're somewhere around 8% of the ISP business today when you add all that in and When you look at what's coming in the pipeline and the growth of those sectors that you mentioned, I think we can pretty easily double our profits in clean energy over the next few years. Solar panels are growing like crazy. Wind turbine blade fabrication is going up. We really just started into the green diesel area, and that, I think, is going to become a major opportunity for us as well. So I feel really good about where we are today and the trajectory of all that, JB.
spk06: All right, great. Thanks so much, guys. Thanks for the questions.
spk05: And our next question is from Dan Tuts with Morgan Stanley. Please proceed with your question.
spk04: Hey, thanks. Good morning. Good morning, Dan. So I just wanted to ask, In the ISP segment, you guys laid out some impressive organic growth targets. Just wondering, to the extent that you're looking, I'm wondering if you're seeing any attractive M&A opportunities and your interest level in any potential acquisitions, whether a bolt-on or otherwise. But just any comments there would be great.
spk01: Thanks for the question, Dan. I think our primary focus right now is in... basically developing the new applications that we have and making sure we have enough capacity to serve some of the growth that we talked about, so things like solar panels, cristobalite, cool roof granules, et cetera. We're always looking at opportunities in terms of M&A, but I would say right now it's probably less of a focus for us, and we have so many organic growth opportunities in front of us I would say that's the primary focus of the team today.
spk04: Yeah, sure. That makes sense. And then on the oil and gas side, I just wanted to ask a question around market share, both for prop and sandbox. And I just, at least on our industry level demand numbers, it looks like your prop and market share jumped a decent bit in 2Q. And just wondering if, you know, if you guys think that's, and also if you could comment around market share and sandbox, if that's still kind of in the 33% range or if there's any upside to that number. But yeah, just any comments around market share and profit and sandbox would be great.
spk01: So the numbers that you quoted are pretty consistent with what we believe as well. We think we're around 14% plus or minus for the sand market share into oil and gas. And we definitely did take share in Q2, no doubt about that. Sandbox has been pretty consistent in that sort of 30% to 35% market share range. So I feel like both of those are sustainable. And just given our cost position in oil and gas, particularly in the prop and side, I feel like we'll hold that share. And there may be quarters where we actually jump up to a higher share as well. As I was responding to one of the questions earlier, we certainly have the ability to go and get more product volume if we need to, to maintain or grow profitability as the market's ebb and flow.
spk06: Great. Thanks very much for the color. I'll turn it back. Thanks, Dan.
spk05: Our next question is from Samantha Hartwood. at Record ISI. Please proceed with your question.
spk07: Hey, guys. Thanks for taking my question. I wanted to dig a little bit more into the solar component of ISP. You know, Brian, you mentioned that it's growing like crazy. And I was just wondering if you guys are starting to see some of the impact of the Biden administration perhaps banning silicon imports from a Chinese company or, you know, solar, talking about how they're going to increased domestic production. You know, I realize it's a really small part of your overall business, but I was just wondering if, you know, some of those conversations are happening where you're expecting more of your domestic customer to be, you know, increasing demand for your products for the solar panels.
spk01: That's a really, really astute observation, Samantha. We're definitely seeing that. And if I look at our main solar panel customers, I know at least one of them is is looking at doubling their capacity potentially, and I think we'll see more investment coming behind that. As we said in our prepared remarks, we think we're already in about 50% of North American solar glass production, and I think that will continue to grow. We have a great product. It's well positioned in terms of geography nearby the producers, and we've got great contracts there. And just sort of extending that, you talked about the actions of the Biden administration. And we're also watching this whole infrastructure bill that might be coming through the first one and potentially the second one. And I think when you look at the opportunities there for U.S. silica, they're really amazing. I was looking at the infrastructure bill, at least the proposal online the other day, and a couple of things caught my eye. They talked about fixing highways, rebuilding bridges, upgrading ports airports and transit systems one and then two things like building preserving and retrofitting more than two million homes and commercial buildings modernizing schools upgrading hospitals etc and if you look back in u.s silica's portfolio and that kind of end uses that we support we're big in residential and commercial construction which seems to be a primary focus of this bill so things like roofing materials insulation paint court surfaces, tile, grout, window glass, etc. We're also big in foundry, so cast metal parts that go into the construction itself, but also for the heavy mobile equipment that's necessary to do a lot of these proposed activities. Concrete, we have a lot of sand and high-strength additives that go into that market. Roads, we mentioned today that we have a new limestone business that we're starting to grow. Limestone is an underlayment for that. And then green diesel, you have to power all this heavy mobile equipment. And I think a lot of the diesel that does it will be the green diesel. So there's a lot for us as well in this whole infrastructure spending program, assuming that that gets improved.
spk07: And I take it that once you're qualified, like your material is qualified, it's pretty sticky with the customers where they won't be going to the lowest price on the wind.
spk01: We typically are number one or number two in all those markets domestically. And there's a lot of stickiness, as you said. So there's product qualification. There's geographic proximity. Typically, we're relatively proximate to our customers. And there's a high switching cost for customers, big qualification period. So kind of once we're in, we're in. But with all those things that I just mentioned, for example, we're already supplying those end use markets. Those are not new end uses for us. It's just a question of how much growth could come in those end uses.
spk07: Great. And Don, a quick question on just your cash balance. Is there an opportunity to actually take out a chunk of some of your debt? Is there an opportunity to maybe retire it in the open market? I think it's just not very efficient to just keep letting the cash go over time. So what sort of vehicles are you exploring to maybe attack some of the other debt that you have on your books there?
spk02: Yeah, we always look at that. And we're gaining more and more confidence in the overall cash flow for the company. So we did pay off the revolver, as you saw. So we're looking at potentially doing some more of that as we roll through the year.
spk00: um and it'll depend on you know what our forecast looks like but that's definitely a use of cash that uh that we're looking at thank you thanks samantha and our next question is from stephen gangaro with steve please proceed with your questions uh thanks just two quick ones uh would you uh do you have any comments on sort of the second half 21 consensus of around 100 million in EBITDA?
spk02: Yeah, I think, look, we're not really giving guidance out there, as you know. So I would say it's in the zip code. But other than that, we really don't comment a whole lot as far as guidance goes.
spk00: Okay, thanks. I didn't think so, but I figured I'd try. Just the other question I wanted to just hit on is when we think about the ISP volumes and the mix, and you've laid out sort of the roadmap here as we go forward, and I'm fairly certain it's sort of lower volume but higher contribution margin per ton. But my question is around any material capex necessary and And does any of this sort of cannibalize your ability to continue making what you're already making?
spk01: So there's no cannibalization. Typically, we're talking about brand new sort of opportunities here, Stephen. So a lot of this is white space. And I think we can fund the kind of growth, base growth that we've talked about, the 10% to 15% per year growth. plus or minus within our existing capital spend. Now, we do have a fair amount of cash on the balance sheet now, and we project to have somewhere between $275 to $300 million on the balance sheet by the end of the year. So if some of these applications hit in a bigger way than we thought, we certainly would have the opportunity to sort of supercharge that growth. But by and large, we're not talking about massive amounts of capital for the base plan of continuing to grow 10% to 15% per year.
spk00: Excellent. Thank you again.
spk05: And again, as a reminder, if anyone has any questions, you may press star 1 on your telephone keypad. Doing so will ensure you're spot into the question and answer queue.
spk06: And thank you.
spk05: At this time, I'd like to turn the floor back over to Mr. Shitton for closing comments.
spk01: Thank you, Operator. So as we bring the call to a close today, I'd like to leave you all with three key thoughts. First, we have a strong and diverse product portfolio that we're strategically enhancing to support a variety of rapidly growing, environmentally important value chains that are driving the transition to cleaner energy. And we talked about a number of those today on the call. Second, we're poised to benefit from the ongoing recovery in the U.S. economy as well as the proposed additional U.S. government infrastructure spending and highlighted several examples of the kind of products and end uses that are right in our sweet spot that could grow substantially with that additional spending. And finally, our continued capital disciplines should provide us the ability to sustainably generate positive free cash flow and further strengthen our balance sheets. Thank you again for dialing into the call today, and we look forward to speaking with all of you again next quarter. Stay safe and be well.
spk05: Ladies and gentlemen, thank you for your participation and interest in U.S. Silicon. This concludes today's event. You may disconnect your line and log off the webcast at this time.
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