U.S. Silica Holdings, Inc.

Greetings and welcome to the U.S. SILICA second quarter 2022 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Patricia Gill, Vice President of Investor Relations. Thank you. Please go ahead.

Thank you, and good morning, everyone. I'd like to thank you for joining us today for U.S. Silica's second quarter 2022 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, which are predictions, projections, or other statements about future events, are based on current expectations and assumptions, 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. We do not undertake any duty to update any forward-looking statements. Additionally, we may refer to the non-GAAP measures such as adjusted EBITDA, segment contribution margin, and our consolidated leverage ratio during this call. Please refer to today's press release or our public filings for a full reconciliation of adjusted EBITDA, the net income, and discussions of segment contribution margin and the consolidated leverage ratio. And with that, I would now like to turn the call over to our CEO, Mr. Brian Shin.

Thanks, Patricia, and good morning, everyone. We delivered an exceptional second quarter with outstanding sales volume, revenue, earnings, and cash generation across the company. By capitalizing on the strength in our underlying markets and improved operational efficiencies, we generated a 77% sequential increase in adjusted EBITDA and $88 million of cash flow from operations. We continued to experience robust customer demand during the quarter, and we implemented numerous price increases and surcharges across both business units to fight inflationary impacts. In addition, I'm extremely proud of our organization's execution during the second quarter as we creatively improved international logistics performance, increased plant outputs, and delivered world-class safety performance. I'm also pleased to report that the positive market conditions are continuing, and we expect the momentum to carry over into the second half of the year. We've already started off strong with our recently announced repurchase of $100 million of debt earlier this month. And given that we expect substantial operating cash flow generation in the second half of 2022, we should see continued meaningful reduction in our net debt as planned. Donna will discuss the details of our Q2 performance in just a moment. But first, let's review some of the significant trends that we saw during the quarter. In our oil and gas segment, the supply and demand balance in the sand and last mile logistics market remains very tight, and we were effectively sold out due to strong well completion demand, particularly in West Texas. As a result, spot prices were around $50 per ton, and our sand and sandbox sales prices and margins continued to move higher. Given the expectation for a multi-year energy upcycle, Customers have been determined to secure sand supply and are signing attractive multi-year contracts, including paying cash up front. During the second quarter, we took advantage of operational efficiency gains at key mine sites to maximize production in sold-out assets. For example, we delivered record sand production in West Texas during the months of April and May, and at Sandbox, our last-mile logistics business, we realized a new single-day record of delivered loads in June. Overall, our oil and gas segment finished the quarter with strong momentum and we expect further sequential profitability increases in Q3. In our industrial segment, customer demand remains strong across end uses and market segments. As discussed on last quarter's call, the transitory seasonal issues from Q1 were resolved and we realized a very strong rebound in Q2 driven by price increases and surcharges across all major product lines to combat inflation, improved product mix, and greater operational efficiencies from initiatives such as leveraging alternate shipping ports and packaging automation. We also recorded record quarterly shipments at our Mill and Georgia facility driven by strong demand for our Everwhite Cristobalite and Coolroof Granule product lines. And our Vail, Oregon facility also delivered record shipments of Diatomaceous Earth during the quarter. The main takeaway here is that our industrial segment rebounded substantially during Q2, and we expect further successes in the second half of the year. Moving to corporate news, in mid-June, we announced that our board of directors concluded their strategic alternatives review for our industrial and specialty product segment. After extensive evaluation and deliberation, the board determined that retaining ownership of the ISP segment represents the best path forward for U.S. silica, its shareholders and other stakeholders since announcing the strategic review last year the macro environment has improved dramatically as evidenced by our recent quarterly results and robust outlook for the second half of 2022 with expected increases in profitability cash generation and further strengthening of our balance sheet for the rest of my time this morning i want to give an update on the exciting growth opportunities in our industrial portfolio and then finish with a summary of our outlook for the third quarter and the second half of 2022. Innovation and the profitable expansion of our industrial product portfolio remain top corporate priorities. During the quarter, we had numerous successes and milestones achieved supporting the expansion of future contribution margin dollars, including delivering record sales from our new West Virginia limestone and aggregates plant in June. We reached a $250,000 tons per year run rate, with line of sight to doubling that in the near term. We received very favorable customer feedback on a highly specialized treated silica for use in outdoor coating applications, and we expect to begin commercial sales for this product in 2023. We also ramped up 300,000 tons of new annual sand and clay sales to U.S. industrial customers under long-term contracts for a total of more than $4 million of incremental annual run rate contribution margins. We closed several new sales of our DSECT organic pesticide product and have additional opportunities for use on numerous crops, including cabbage, oranges, grapefruits, mushrooms, and table grapes. We received very positive customer feedback on our newest white pigment product, and we filed a patent application to protect this breakthrough technology. We're also trialing our new renewable diesel catalyst filtration product with multiple customers and we're progressing with contract negotiations. And finally, we are establishing a pilot plan for the expansion of our research and development efforts. Our strategic investments in product development and new technology have helped position our industrial segment as a leader in advanced materials and high-value minerals. We continue to make exciting progress executing our industrial growth plan, and I look forward to providing additional updates on future calls. Now let's turn to our business and market outlook. Overall, 2022 is setting up to be very strong for U.S. silica. During the second half of this year, we expect a constructive commodity price backdrop and strong and steady industrial-based demand augmented by new product growth and new customer acquisition. With this expected strong performance, we should generate significant cash flow from operations in Q3 and Q4 and continue to strengthen our balance sheet. For Q3 specifically, we are extremely well positioned for success. We expect both our oil field, profit, and sandbox offerings to remain essentially sold out, with sequential tons flat to slightly up off of very high volume levels from the prior quarter. Additionally, we expect to see a competitive but still disciplined market and forecast sequential profit improvements driven by enhanced sand customer contract mix, improved pricing, and increased sandbox deliveries. In total, we expect third quarter oil and gas segment contribution margin dollars to be up by 4% to 7% sequentially. Turning to our industrial and specialty product segment, we forecast that demand will remain strong and stable, and our base case is that Q3 financials will closely align with what we delivered in our very strong performance in Q2. And with that, I will now turn the call over to our CFO, Don Merrill, who will discuss our financial results in more detail. Don?