Smart Sand Inc.

11/12/2025 | Press release | Distributed by Public on 11/12/2025 05:13

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of the Company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related information contained herein and our audited financial statements as of December 31, 2024 contained in our Annual Report on Form 10-K. We use contribution margin, EBITDA, adjusted EBITDA and free cash flow herein as non-GAAP measures of our financial performance. For further discussion of contribution margin, EBITDA, adjusted EBITDA and free cash flow, see the section entitled "Non-GAAP Financial Measures." We define various terms to simplify the presentation of information in this Quarterly Report on Form 10-Q (this "Report"). All share amounts are presented in thousands.
Forward-Looking Statements
This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed herein and in the section entitled "Risk Factors" in our Form 10-K for the year ended December 31, 2024. Our estimates and forward-looking statements are primarily based on our current expectations and estimates of future events and trends, which affect or may affect our business and operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to us. Important factors, in addition to the factors described in this Report, may adversely affect our results as indicated in forward-looking statements. You should read this Report and the documents that we have filed as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. The words "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "intend," "potential," "might," "would," "continue" or the negative of these terms or other comparable terminology and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements speak only as of the date they were made, and, except to the extent required by law, we undertake no obligation to update, to revise or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. As a result of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this Report might not occur and our future results, level of activity, performance or achievements may differ materially from those expressed in these forward-looking statements due to, including, but not limited to, the factors mentioned above, and the differences may be material and adverse. Because of these uncertainties, you should not place undue reliance on these forward-looking statements.
Overview
The Company
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™
SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
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.
We incorporated in Delaware in July 2011 and began operations at our Oakdale, Wisconsin facility with 1.1 million tons of annual processing capacity in July 2012. After several expansions, our current annual processing capacity at our Oakdale facility, which has access to both the Canadian Pacific and Union Pacific rail networks, is approximately 5.5 million tons. In 2020, we acquired our Ottawa, Illinois mine and processing facility, which has an annual processing capacity of approximately 1.6 million tons and access to the Burlington Northern Santa Fe rail network. In March 2022, we acquired our Blair, Wisconsin mine and processing facility, which has approximately 2.9 million tons of total annual processing capacity and contains an onsite, unit train capable rail terminal with access to the Class I Canadian National Railway. We commenced operations at the Blair facility in May 2023. In total, we have annual processing capacity of approximately 10.0 million tons across all of our operating facilities.
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. In September 2025, we completed the expansion of our terminal in Dennison, OH. 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.
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.
In 2021, we expanded our product line to offer Industrial Sand through IPS. In 2023, we completed the installation of blending and cooling assets at our Ottawa, Illinois facility that we believe provides additional opportunities to increase our customer base in the IPS business. While sales of IPS to customers have been a small portion of our overall sand sales, we expect to continue to expand and diversify to serve the major industrial markets throughout North America, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, recreation and more.
Market Trends
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.
We experienced an increase in the volume of sand sold in 2024, which was followed by a slowdown in the first quarter of 2025. We have experienced an increase in the volume of sand sold in the second and third quarters 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 leading to increased drilling and completions of natural gas wells to support this growing demand.
SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
Demand in the IPS business is relatively stable as customers are spread over a wide range of industries including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, recreation and more. The IPS business is primarily influenced by macroeconomic drivers such as consumer demand and population growth. We believe that as this business grows, it may provide us with the ability to diversify a portion our sales into more stable, consumer-driven products to help mitigate price volatility in the oil and gas industry.
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, throughout 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.
SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
GAAP Results of Operations
Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
The following table summarizes our revenue and expenses for the periods indicated.
Three Months Ended September 30, Change
2025 2024 Dollars Percentage
(in thousands)
Revenues:
Sand revenue $ 91,643 $ 62,232 $ 29,411 47 %
SmartSystems revenue 1,137 926 211 23 %
Total revenue 92,780 63,158 29,622 47 %
Cost of goods sold:
Sand cost of goods sold 76,766 55,601 21,165 38 %
SmartSystems cost of goods sold 1,079 1,070 9 1 %
Total cost of goods sold 77,845 56,671 21,174 37 %
Gross profit 14,935 6,487 8,448 130 %
Operating expenses:
Selling, general and administrative 9,086 9,703 (617) (6) %
Depreciation and amortization 589 633 (44) (7) %
(Gain) loss on disposal of fixed assets, net (110) 1,063 (1,173) (110) %
Total operating expenses 9,565 11,399 (1,834) (16) %
Operating income (loss) 5,370 (4,912) 10,282 209 %
Other income (expenses):
Loss on extinguishment of debt - (31) 31 Not meaningful
Interest expense, net (320) (344) 24 7 %
Other income 28 53 (25) (47) %
Total other expenses, net (292) (322) 30 9 %
Income (loss) before income tax expense (benefit) 5,078 (5,234) 10,312 197 %
Income tax expense (benefit) 2,076 (5,136) 7,212 140 %
Net income (loss) $ 3,002 $ (98) $ 3,100 3,163 %
Revenues
Revenues were $92.8 million and tons sold were approximately 1,472,000 for the three months ended September 30, 2025. Revenues for the three months ended September 30, 2024 were $63.2 million, during which time we sold approximately 1,189,000 tons of sand. The key factors contributing to the increase in revenues for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, were as follows:
•Sand revenue was 47% higher at $91.6 million for the three months ended September 30, 2025 versus $62.2 million for the three months ended September 30, 2024. The higher sand revenue was due to higher sand volumes sold along with higher average sand prices. Higher average selling prices in the current period were primarily driven by changes in the delivery location mix rather than frac sand pricing. Sand revenue for the three months ended September 30,
SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
2025 also included $4.4 million related to contractual charges for tons sold in excess of certain contractual thresholds in a prior period which was not recognizable under ASC 606 until the current period.
•SmartSystems revenue was approximately $1.1 million for the three months ended September 30, 2025 compared to $0.9 million for the three months ended September 30, 2024. The increase in SmartSystems revenue was due to higher utilization of our SmartSystems fleet.
Cost of Goods Sold
Cost of goods sold was $77.8 million and $56.7 million for the three months ended September 30, 2025 and 2024, respectively. The increase in cost of goods sold for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, was primarily due to higher sales volumes. The cost per ton to produce our sand was higher in the current period due to increased mining costs and increased freight and transloading costs. Freight and other delivery costs were higher due primarily to the delivery location of frac sand sales.
Gross Profit
Gross profit was $14.9 million for the three months ended September 30, 2025, compared to $6.5 million for the three months ended September 30, 2024. The increase in profitability for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was primarily due to higher sales volumes and the excess tons payment in the quarter, which were partially offset by higher freight and transloading costs due to delivery location.
Operating Expenses
Selling, general and administrative expenses decreased to $9.1 million for the three months ended September 30, 2025 compared to $9.7 million for the three months ended September 30, 2024. The decrease in selling, general and administrative expenses was primarily due to $1.3 million in banking and legal fees associated with refinancing our ABL facility in September 2024 partially offset by higher royalty expense due to increased sales volumes for the three months ended September 30, 2025.
Interest Expense, net
We incurred $0.3 million and $0.3 million of net interest expense for the three months ended September 30, 2025 and 2024, respectively.
Income Tax (Benefit) Expense
For the three months ended September 30, 2025 and 2024, our effective tax rate was approximately 40.9% and 98.1%, respectively. We are required to record our interim period income tax (benefit) expense 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 (benefit) expense 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.
As of September 30, 2025, we have recorded a liability for uncertain tax positions included in our balance sheet, related to our depletion deduction methodology. As of September 30, 2025, we determined that it is more likely than not that we will not be able to fully realize the benefits of certain existing deductible temporary differences and have recorded a partial valuation allowance against the gross deferred tax assets, which is included in liabilities, long-term, net on our balance sheet, and a corresponding increase to the income tax expense on our condensed consolidated statement of operations.
SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
Net Income (Loss)
Net income was $3.0 million for the three months ended September 30, 2025 as compared to net loss of $0.1 million for the three months ended September 30, 2024. The improvement in net income in the current period relative to the prior year period is primarily due to the increase in total tons sold due to increased demand combined with lower operating expenses.
Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
The following table summarizes our revenue and expenses for the periods indicated.
Nine Months Ended September 30,
Change
2025 2024 Dollars Percentage
(in thousands)
Revenues:
Sand revenue $ 240,697 $ 212,971 $ 27,726 13 %
SmartSystems revenue 3,411 7,038 (3,627) (52) %
Total revenue 244,108 220,009 24,099 11 %
Cost of goods sold:
Sand cost of goods sold 214,097 183,470 30,627 17 %
SmartSystems cost of goods sold 3,347 5,168 (1,821) (35) %
Total cost of goods sold 217,444 188,638 28,806 15 %
Gross profit 26,664 31,371 (4,707) (15) %
Operating expenses:
Selling, general and administrative 27,439 28,924 (1,485) (5) %
Depreciation and amortization 1,812 1,978 (166) (8) %
(Gain) loss on disposal of fixed assets, net (830) 1,069 (1,899) (178) %
Total operating expenses 28,421 31,971 (3,550) (11) %
Operating income (loss) (1,757) (600) (1,157) 193 %
Other income (expenses):
Loss on extinguishment of debt - (1,341) 1,341 Not meaningful
Interest expense, net (978) (1,226) 248 20 %
Other income 223 224 (1) - %
Total other expenses, net (755) (2,343) 1,588 68 %
(Loss) income before income tax expense (2,512) (2,943) 431 15 %
Income tax (benefit) expense (2,679) (2,199) (480) 22 %
Net income (loss) $ 167 $ (744) $ 911 122 %
Revenues
Revenues were $244.1 million and tons sold were approximately 3,965,000 for the nine months ended September 30, 2025. Revenues for the nine months ended September 30, 2024 were $220.0 million, during which time we sold approximately 3,799,000 tons of sand. The key factors contributing to the change in revenues for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 were as follows:
•Sand revenue increased to $240.7 million for the nine months ended September 30, 2025 versus $213.0 million for the nine months ended September 30, 2024. Total volumes increased by approximately 4% while sand pricing per ton was slightly higher in the current period. Sand revenue for the nine months ended September 30, 2025 also included
SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
$4.4 million related to contractual charges for tons sold in excess of certain contractual thresholds in a prior period which was not recognizable under ASC 606 until the current period.
•SmartSystems revenue was approximately $3.4 million for the nine months ended September 30, 2025 compared to $7.0 million for the nine months ended September 30, 2024. The decline in SmartSystems revenue was due to lower utilization of our SmartSystems fleet.
Cost of Goods Sold
Cost of goods sold was $217.4 million and $188.6 million for the nine months ended September 30, 2025 and September 30, 2024, respectively. The increase was primarily due to higher volumes sold in the current period and the related increase in production costs, and freight and transloading costs.
Gross Profit
Gross profit was $26.7 million and $31.4 million for the nine months ended September 30, 2025 and September 30, 2024, respectively. The gross profit for the nine months ended September 30, 2025 was lower, compared to the nine months ended September 30, 2024, due primarily to lower utilization of our SmartSystems fleet and increased freight and transload costs associated with higher sales volumes in the current period.
Operating Expenses
Selling, general and administrative expenses were $27.4 million for the nine months ended September 30, 2025 compared to $28.9 million for the nine months ended September 30, 2024. The decline in selling, general and administrative costs was driven by higher banking and legal costs associated with debt refinancing in the prior year. The gain on disposal of assets of $0.8 million for the nine months ended September 30, 2025 was primarily related to the sale of vacant land that was part of a previous acquisition.
Interest Expense, net
We incurred $1.0 million and $1.2 million of net interest expense for the nine months ended September 30, 2025 and September 30, 2024, respectively.
Income Tax (Benefit) Expense
For the nine months ended September 30, 2025 and September 30, 2024, our effective tax rate was approximately 106.6% and 74.7%, respectively. We are required to record our interim period income tax (benefit) expense 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 (benefit) expense 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.
As of September 30, 2025, we have recorded a liability for uncertain tax positions included on our balance sheet, related to our depletion deduction methodology. As of September 30, 2025, we determined that it is more likely than not that we will not be able to fully realize the benefits of certain existing deductible temporary differences and have recorded a partial valuation allowance against the gross deferred tax assets, which is included in liabilities, long-term, net on our balance sheet, and a corresponding increase to the income tax expense on our condensed consolidated statement of operations.
SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
Net Income (Loss)
Net income was $0.2 million for the nine months ended September 30, 2025 as compared to net loss of $0.7 million for the nine months ended September 30, 2024. Net income improved in the current period primarily due to higher sales volumes and lower operating expenses partially offset by the increased cost of goods sold. Our income tax (benefit) expense further contributed to our net income for the current period. 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. 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.
Non-GAAP Financial Measures
Contribution margin, EBITDA, adjusted EBITDA and free cash flow are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial condition and results of operations. Gross profit is the GAAP measure most directly comparable to contribution margin, net income is the GAAP measure most directly comparable to EBITDA and adjusted EBITDA and net cash provided by operating activities is the GAAP measure most directly comparable to free cash flow. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measures. Each of these non-GAAP financial measures has important limitations as analytical tools because they exclude some but not all items that affect the most directly comparable GAAP financial measures. You should not consider contribution margin, EBITDA, adjusted EBITDA or free cash flow in isolation or as substitutes for an analysis of our results as reported under GAAP. Because contribution margin, EBITDA, adjusted EBITDA and free cash flow may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
Contribution Margin
We use contribution margin, which we define as total revenues less cost of goods sold excluding depreciation, depletion and accretion of asset retirement obligations, to measure our financial and operating performance. Contribution margin excludes other operating expenses and income, including costs not directly associated with the operations of our business such as accounting, human resources, information technology, legal, sales and other administrative activities.
We believe that reporting contribution margin and contribution margin per ton sold provides useful performance metrics to management and external users of our financial statements, such as investors and commercial banks, because these metrics provide an operating and financial measure of our ability, as a combined business, to generate margin in excess of our operating cost base.
Gross profit is the GAAP measure most directly comparable to contribution margin. Contribution margin should not be considered an alternative to gross profit presented in accordance with GAAP. Since contribution margin may be defined differently by other companies in our industry, our definition of contribution margin may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. The following table presents a reconciliation of gross profit to
SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
contribution margin.
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
(in thousands, except per ton amounts)
Revenue $ 92,780 $ 63,158 $ 244,108 $ 220,009
Cost of goods sold 77,845 56,671 217,444 188,638
Gross profit 14,935 6,487 26,664 31,371
Depreciation, depletion, and accretion of asset retirement obligations 6,786 6,700 20,419 20,111
Contribution margin $ 21,721 $ 13,187 $ 47,083 $ 51,482
Contribution margin per ton $ 14.76 $ 11.09 $ 11.87 $ 13.55
Total tons sold 1,472 1,189 3,965 3,799
Contribution margin was $21.7 million and $13.2 million, or $14.76 and $11.09 per ton sold, for the three months ended September 30, 2025 and 2024, respectively. Contribution margin was higher compared to the same period in 2024 primarily due to increased sales volumes and the excess ton payment of $4.4 million partially offset by higher logistics costs related to the delivery location of our frac sand sales. Contribution margin was $47.1 million and $51.5 million, or $11.87 and $13.55 per ton sold, for the nine months ended September 30, 2025 and 2024, respectively. The decline in overall contribution margin for the nine month period ended September 30, 2025, when compared to the same period in 2024, was primarily due to the increase in logistics costs due to higher sales volumes, delivery location mix of our sales and increased mining costs.
EBITDA and Adjusted EBITDA
We define EBITDA as net income, plus: (i) depreciation, depletion and amortization expense; (ii) income tax expense (benefit) and other results of operations based taxes; and (iii) interest expense. We define adjusted EBITDA as EBITDA, plus: (i) gain or loss on sale of fixed assets or discontinued operations; (ii) integration and transition costs associated with specified transactions; (iii) equity compensation; (iv) acquisition and development costs; (v) non-recurring cash charges related to restructuring, retention and other similar actions; (vi) earn-out, contingent consideration obligations; and (vii) non-cash charges and unusual or non-recurring charges. Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors and commercial banks, to assess:
•the financial performance of our assets without regard to the impact of financing methods, capital structure or historical cost basis of our assets;
•the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities;
•our ability to incur and service debt and fund capital expenditures;
•our operating performance as compared to those of other companies in our industry without regard to the impact of financing methods or capital structure; and
•our debt covenant compliance, as adjusted EBITDA is a key component of critical covenants to the FCB ABL Credit Facility.
SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
We believe that our presentation of EBITDA and adjusted EBITDA will provide useful information to investors in assessing our financial condition and results of operations. Net income is the GAAP measure most directly comparable to EBITDA and adjusted EBITDA. EBITDA and adjusted EBITDA should not be considered alternatives to net income presented in accordance with GAAP. Because EBITDA and adjusted EBITDA may be defined differently by other companies in our industry, our definitions of EBITDA and adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. The following table presents a reconciliation of net loss to EBITDA and adjusted EBITDA for each of the periods indicated.
Three Months Ended
September 30, 2025 		Nine Months Ended
September 30, 2025
2025 2024 2025 2024
(in thousands)
Net income (loss) $ 3,002 $ (98) $ 167 $ (744)
Depreciation, depletion and amortization 7,179 7,161 21,619 21,574
Income tax (benefit) expense and other taxes 2,076 (5,136) (2,679) (2,199)
Interest expense 364 383 1,081 1,286
EBITDA $ 12,621 $ 2,310 $ 20,188 $ 19,917
Net (gain) loss on disposal of fixed assets (110) 1,063 (830) 1,069
Equity compensation 834 765 2,602 2,072
Acquisition and development costs - 8 - 316
Loss on extinguishment of debt - 31 - 1,341
Cash charges related to restructuring and retention of employees - - 33 148
Bank and legal costs related to financing not closed - 1,294 - 1,294
Accretion of asset retirement obligations 269 249 832 747
Adjusted EBITDA $ 13,614 $ 5,720 $ 22,825 $ 26,904
Adjusted EBITDA was $13.6 million for the three months ended September 30, 2025 compared to $5.7 million for the three months ended September 30, 2024. The increase in adjusted EBITDA for the three months ended September 30, 2025, compared to the same period in 2024, was primarily due to higher sales volumes of sand sold and the excess ton payment partially offset by the increase in logistics and production costs associated with those sales. Adjusted EBITDA was $22.8 million for the nine months ended September 30, 2025 compared to $26.9 million for the nine months ended September 30, 2024. The decrease in adjusted EBITDA for the nine months ended September 30, 2025, compared to the same period in 2024, was primarily due to higher logistics costs due to the delivery location of frac sand sales and higher mining costs.
Free Cash Flow
Free cash flow, which we define as net cash provided by operating activities less purchases of property, plant and equipment, is used as a supplemental financial measure by our management and by external users of our financial statements, such as investors and commercial banks, to measure the liquidity of our business.
Net cash provided by operating activities is the GAAP measure most directly comparable to free cash flows. Free cash flows should not be considered an alternative to net cash provided by operating activities presented in accordance with GAAP. Because free cash flows may be defined differently by other companies in our industry, our definition of free cash flows may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. The following table presents
SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
a reconciliation of net cash provided by operating activities to free cash flows.
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
(in thousands)
Net cash (used in) provided by operating activities $ 18,159 $ 5,810 $ 21,746 $ 16,829
Purchases of property, plant and equipment (3,385) (2,135) (9,597) (5,135)
Free cash flow $ 14,774 $ 3,675 $ 12,149 $ 11,694
Free cash flow was $14.8 million for the three months ended September 30, 2025 compared to $3.7 million for the three months ended September 30, 2024. Free cash flow was $12.1 million for the nine months ended September 30, 2025 compared to $11.7 million for the nine months ended September 30, 2024. The increase in free cash flow for the three and nine months ended September 30, 2025 was primarily due to positive cash flows from operating activities due to higher net income and higher conversion of working capital to cash.
Liquidity and Capital Resources
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 September 30, 2025, cash on hand was $5.1 million and we had $30.0 million in undrawn availability on our FCB ABL Credit Facility.
Based on our balance sheet, cash flows, current market conditions, and information available to us at this time, we believe that we have sufficient liquidity and other available capital resources, to meet our cash needs for the next twelve months.
Material Cash Requirements
Dividends and Share Repurchase Program
On July 23, 2025, our Board of Directors declared a special dividend of $0.10 per share of common stock, which was paid on August 14, 2025 to stockholders of record at the close of business on August 4, 2025. The dividend payment returned approximately $4.4 million to our shareholders.
On October 3, 2024, our 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.
Under the Repurchase Program, we have repurchased 1,003,602 shares of our common stock for $2.1 million. The remaining amount that may be repurchased as of September 30, 2025 is $7.9 million.
SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
10b5-1 Trading Plan
On May 22, 2025, we entered into a written trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. We implemented this written trading plan in connection with our Repurchase Program. The trading plan permitted the purchase of up to a total of $1.5 million of our shares (including commissions). The number of shares of Company common stock to be purchased on any purchase day was up to the maximum daily target volume allowable under Rule 10b-18 of the Exchange Act. We purchased $1.5 million of shares under the 10b5-1 Trading Plan and the plan was terminated in July 2025.
Capital Requirements
We expect full year 2025 capital expenditures to be between $15.0 million and $17.0 million, excluding any acquisitions. Our expected capital expenditures for 2025 are primarily to open new mining areas for development, efficiency projects at Oakdale, Blair and Ottawa facilities, expansion and customization of our newly acquired Ohio terminals and potential investment in one or more new terminals. We expect to fund these capital expenditures with existing cash from operations, equipment financing options available to us or borrowings under the FCB ABL Credit Facility.
Indebtedness
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 September 30, 2025 was $6.9 million. Minimum cash payments on this facility for the remainder of 2025 are anticipated to be $0.7 million. Our various notes payable are primarily secured by heavy equipment. Total debt under these notes payable as of September 30, 2025 was $5.3 million. Minimum cash payments on these notes payable for the remainder of 2025 are anticipated to be $0.4 million. There were no outstanding borrowings on our FCB ABL Credit Facility as of September 30, 2025.
Operating Leases
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 September 30, 2025 were $26.0 million. Minimum cash payments on operating leases for the remainder of 2025 are anticipated to be $2.5 million.
Mineral Rights Property
The Company is obligated under certain contracts for minimum payments for the right to use land for extractive activities. The annual minimum payments under these contracts are approximately $2.5 million per year in the aggregate for the next 12 years.
Off-Balance Sheet Arrangements
We had outstanding performance bonds of $19.7 million as of September 30, 2025.
Contractual Obligations
As of September 30, 2025, we had contractual obligations for the FCB ABL Credit Facility, VFI Equipment Financing, notes payable, operating and finance leases, delivery of sand, royalties and similar minimum payments for the rights to mine land, capital expenditures, asset retirement obligations, and other commitments to municipalities for maintenance.
Environmental Matters
We are subject to various federal, state and local laws and regulations governing, among other things, hazardous materials, air and water emissions, environmental contamination and reclamation and the protection of the environment and natural resources. We have made, and expect to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures.
SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
Seasonality
Our business is affected to some extent by seasonal fluctuations in weather that impact the production levels for a portion of our wet sand processing capacity. While our dry plants are able to process finished product volumes evenly throughout the year, some of our excavation and our wet sand processing activities have historically been limited during winter months. As a consequence, we typically have experienced lower cash operating costs in the first and fourth quarter of each calendar year, and higher cash operating costs in the second and third quarter of each calendar year when we have overproduced sand to meet demand in the winter months. These higher cash operating costs are capitalized into inventory and expensed when these tons are sold, which can lead to us having higher overall cost of production in the first and fourth quarters of each calendar year as we expense inventory costs that were previously capitalized. We have indoor wet processing facilities at two of our plant locations, which allow us to produce wet sand inventory year-round to support a portion of our dry sand processing capacity, which may reduce some of the effects of this seasonality. We may also sell frac sand for use in oil and natural gas producing basins where severe weather conditions may curtail drilling activities and, as a result, our sales volumes to those areas may be reduced during such severe weather periods.
Customer Concentration
For the nine months ended September 30, 2025, Equitable Gas Corporation and Encino Energy accounted for 27.7% and 12.5% of total revenue, respectively. For the nine months ended September 30, 2024, revenue from Equitable Gas Corporation, Encino Energy and Liberty Oilfield accounted for 29%, 13.8%, and 11% of total revenue, respectively.
Critical Accounting Policies and Estimates
There have been no material changes in our critical accounting policies and procedures during the nine months ended September 30, 2025.
Use of Estimates
The preparation of interim statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates used in the preparation of these financial statements include but are not limited to: impairment considerations of assets, including intangible assets, fixed assets, and inventory; estimated cost of future asset retirement obligations; fair values of acquired assets and assumed liabilities; recoverability of deferred tax assets; inventory reserve; and the collectability of receivables; and certain liabilities.
Actual results could differ from management's best estimates as additional information or actual results become available in the future, and those differences could be material. Future economic performance is uncertain due to current high inflation and other economic concerns. We continue to actively monitor the global impact of current events, but we are unable to estimate the impact of future events on our financial position and results of operations or give any assurances that these events will not have a material adverse effect on our financial position or results of operations.
Smart Sand Inc. published this content on November 12, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 12, 2025 at 11:13 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]