Smart Sand, Inc. Q2 FY2023 earnings call

• Smart Sand delivered strong operating and financial results in Q2 2023, with 1.1 million tons sold, $19M contribution margin, and $11.4M adjusted EBITDA. Free cash flow positive for 2023. - Bakken demand strong through Q3, Marcellus expected lower in Q3 but pick up in Q4. - Expanding Waynesburg terminal in Southwestern Pennsylvania to be completed by year-end, Blair facility operational with first Canada shipments. - Commissioned white paper on benefits of Northern White sand vs regional sand. - SmartSystems performance improving with SmartPath technology, Industrial Product Solutions growing with 70% QoQ sales volume increase.

In the second quarter, Smart Sand sold approximately 1.1 million tons. Contribution margin was $19 million and adjusted EBITDA was $11.4 million. For frac sand segments: In the Bakken, strong demand through the end of Q3, expected moderation in Q4. In the Marcellus, activity moderated in Q2 due to lower gas prices, expected lower in Q3 but pick up in Q4. The Blair facility in Wisconsin made first shipments to Canada, with expected sales volumes in Canada to be 10%-15% of tons sold in the second half. SmartSystems performance improved with the addition of SmartPath technology, operating two fleets with lower maintenance costs. Industrial Product Solutions sales volume increased 70% over Q1, representing approximately 5% of overall sales volume.

• Expect sales volumes in Q3 to be in the $1 million to $1.2 million range. - Capital expenditures for 2023 still expected $20 million to $25 million, including Blair facility, Waynesburg expansion, and IPS investment. - Free cash flow expected positive for 2023.

• Potential impact of dunes sagebrush lizard listing on Permian regional sand supply, affecting demand for Northern White sand. - Seasonal variability in demand, especially in certain basins. - Dependence on railroads for logistics, which could impact delivery times and costs.

Q: Give an update on industry supply and demand for frac sand, specifically Northern White, and demand outlook for second half of 2023 and 2024 A: Expect moderation in demand in Q4, fundamentals good for Northern White. Canada seen as bright spot.

Q: Regarding gross profit improvement based on sales mix, is margin improvement from Canada deliveries?

A: Margin improvement in Q2 due to lower production costs. Sales in Canada on FOB mine basis, pricing lower but margins similar to US.

Q: Current capital spending level, new normal or expected to subside?

A: 2023 CapEx $20M-$25M, maintenance tie-up and efficiency capital ~$10M-$15M annually, with growth initiatives adding $5M-$10M.

Q: Percentage of volumes under long-term contracts?

A: Roughly 50% of volumes under contracts, half in 6-18 month terms, some multiyear.

Q: Canadian market competitors and competitive framework?

A: Mostly Canadian National originations like Source Badger, seeing strong activity.

Q: White paper reception in Texas, interest in Northern White sand?

A: E&Ps in Permian looking at production, Dunes Sagebrush Lizard issue impacting Permian, Northern White on radar.

Q: Cash flow positive for year, second half outlook; markets with better profitability?

A: Second half may not be as positive, but full year positive. Strong in Bakken, Marcellus, Canada; SmartSystems and Industrial Product Solutions additive.

Q: Spot market pricing in Texas and impact on contracts; cost movements and COGS?

A: Spot pricing soft in Texas, Northern White pricing moderating. Cost improvements from mining efficiency investments, higher volumes spreading fixed costs.

Q: Frac sand demand per stage, growth outlook?

A: Growth seen, longer laterals, more sand per stage; SmartSystems' Smart Belt technology supports longer laterals, with reserve base and production capacity to meet demand.