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Smart Sand Revenues Up Year-Over-Year; Makes Acquisition


Smart Sand Inc. announced that first-quarter revenues were $42.6, a slight decrease compared to fourth quarter 2017 revenues of $43 million. The decrease in revenues was primarily due to higher production costs and lower freight revenue, offset by higher sales volumes and a higher average price per ton sold.

First quarter 2018 revenues increased by 70 percent compared to first quarter 2017 revenues of $25.1 million. The increase in revenues year over year was primarily due to higher sales volumes and higher freight revenue, resulting from increased shipments to customers to whom we bill freight charges.

Overall tons sold were approximately 723,000 in the first quarter of 2018, the highest in company history, compared to approximately 706,400 tons sold in the fourth quarter of 2017 and 559,000 tons in the first quarter of 2017, increases of 2 percent and 29 percent, respectively.

Net income was $1 million, or $0.02 per basic and diluted share, for the first quarter of 2018, compared with net income of $10.9 million, or $0.27 per basic and diluted share, for the fourth quarter of 2017 and net income of $1.0 million, or $0.02 per basic and diluted share, for the first quarter of 2017.

The decrease in net income compared to the fourth quarter of 2017 was primarily due to a one-time tax benefit of $8.5 million, or $0.21 per basic and diluted share, that was booked in the fourth quarter 2017 due to the changes in the U.S. tax laws that were enacted in December 2017.

“The demand for frac sand, and in particular Northern White, continues to be strong,” stated Charles Young, chief executive officer. “We sold record quarterly volumes from our Oakdale facility in the first quarter and we anticipate strong demand for our expanded nameplate capacity, which is currently ramping up and is expected to be fully operational in the second quarter. We continue to take steps towards becoming a fully integrated ‘mine to the wellhead’ supplier of frac sand. During the first quarter we partnered with Canadian Pacific to offer our customers competitive, efficient rail services, acquired rights to operate a unit train capable transloading terminal in the Bakken, and signed a new long-term take-or-pay contract with a large exploration and production company for delivery of frac sand at our terminal in the Bakken. Additionally, we entered into a definitive agreement to acquire Quickthree Solutions Inc., a manufacturer of portable vertical frac sand storage solutions at the wellsite. This deal is expected to close by the end of May.”

Smart Sand also agreed to acquire substantially all of the assets of Quickthree Solutions Inc., a manufacturer of portable vertical frac sand storage solutions at the wellsite. Smart Sand will acquire Quickthree’s current production facilities and intellectual property. Smart Sand plans to make offers of employment to all current Quickthree employees.

The transaction provides for an aggregate purchase price of up to $42.75 million consisting of $30 million payable at closing and up to $12.75 million in potential earnout payments as systems are built and made available for sale or lease over a three-year period.

The transaction will be financed through a combination of cash on hand, advances under the company’s credit facility and, at the option of the company, the issuance of 728,004 shares of Smart Sand common stock valued at $5 million.

Closing of the transaction is expected to occur by May 31, 2018, and is conditioned upon satisfaction of standard and customary closing conditions.

“This is an important acquisition for our company and puts us one step closer to becoming an integrated, full service provider of frac sand and logistics support to deliver sand from the mine to the wellhead,” said Young. “Upon completion of this acquisition, we will have the technology, production capacity, and management team to compete in the last mile market. We see multiple opportunities for us to develop this line of business.”