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美国
证券交易委员会
华盛顿特区20549
 _____________________________________________________
表格 10-Q
 _____________________________________________________ 
☒根据1934年证券交易法第13或15(d)节的季度报告
截至季度末2024年9月30日
或者
☐根据1934年证券交易法第13或15(d)节的转型报告书
过渡期从___到___
佣金文件号 001-37936
Picture1.jpg
SMARt SAND公司。
(根据其章程规定的注册人准确名称) 
特拉华45-2809926
（设立或组织的其他管辖区域）（联邦纳税人识别号）
1000 Floral Vale Boulevard, 225套房
Yardley, 宾夕法尼亚州 19067
(281) 231-2660
，（主要行政办公地址）（报告人电话号码）
在法案第12(b)条的规定下注册的证券：
每一类的名称交易标志在其上注册的交易所的名称
纳斯达克证券交易所SND纳斯达克全球精选市场
请通过勾选标记来指示注册申请人(1)在过去的12个月内已提交证券交易法第13或15(d)条要求提交的所有报告(或者在注册申请人需要提交此类报告的较短期间内提交了此类报告)和(2)过去90天内一直受到该类申报要求的约束。Yes ☒否 ☐
请通过勾选符号表示，注册申请人是否在过去12个月（或注册申请人需要提交和发表此类文件的较短期间）内，按照《S-T规则405》规定提交并发表了每个互动数据文件。Yes ☒否 ☐
勾选以下选框，指示申报人是大型加速评估提交人、加速评估提交人、非加速评估提交人、小型报告公司或新兴成长型公司。关于“大型加速评估提交人”、“加速评估提交人”、“小型报告公司”和“新兴成长型公司”的定义，请参见《交易所法规》第12亿.2条。
大型加速型申报人 ☐加速量申报人 ☐
非加速申报人  ☒
更小的报告公司☒新兴成长公司 ☐
如果是新兴成长公司，请打勾表示注册人已选择不使用根据交易所法第13(a)节提供的任何新的或修订后的财务会计准则延长过渡期符合要求。☐
请使用对勾符号表示公司是否属于外壳公司（如法规第120亿.2条所定义）。 是☐不是☒
2024年11月5日，每股面值为0.001美元的普通股的流通股数： 42,919,298


目录
  页码
 
   
 
 
 
 
 
  
  
  
  
 
1

某些定义
除非情境要求其他，否则本季度报告中以下定义适用：
“我们”，“我们的公司”，“Smart Sand”或“我们”Smart Sand, Inc.是根据特拉华州法律组建的公司，及其子公司。
“股份”，“股票”Smart Sand, Inc.的普通股，面值每股0.001美元。
“前ABL授信设施”，“前ABL授信协议”，“前ABL担保协议”根据适用：(i) 2019年12月13日与Jefferies Finance LLC签订的前ABL授信协议（经修订，即“前ABL授信协议”）；及(ii) 2019年12月13日与Jefferies Finance LLC代理签订的担保和抵押协议（经修订，即“担保协议”）实行的五年期有担保基于资产放贷授信设施（即前ABL授信设施）。该设施于2024年9月3日终止。
“FCb ABL授信设施”，“FCb授信协议”，“FCb担保协议”公司于2024年9月3日签署了一项为期五年的新高级担保资产信贷协议（“FCb ABL信贷协议”），根据：（i）公司、参与方的子公司借款人和担保人、作为发卡银行、摇号贷款人和代理人的第一公民银行，以及不时参与方的其他放贷方之间的信贷协议（“FCb信贷协议”）；以及（ii）公司、参与方的子公司借款人和担保人、以及第一公民银行信托公司作为代理人之间的担保和抵押协议（“FCb安保协议”）。
“Oakdale设备融资”，“MLA”日期为2019年12月13日的五年主要租赁协议，由Nexseer Capital（“Nexseer”）签署，并与相关租赁计划一起（统称为“MLA”）。 MLA被构建为公司位于威斯康星州Oakdale附近的矿山和加工设施的几乎所有设备的出售租回。 Oakdale设备融资被视为《统一商法典》第2A条下的租赁，但在会计或财务报告目的上被视为融资安排（而非租赁）。 MLA和所有计划于2024年6月28日全额支付并终止。
“VFI设备融资”
日期为2024年5月9日的四年主要租赁协议，由Varilease Finance，Inc.（“VFI”）签署，并于2024年6月26日签署相关租赁计划（统称为“VFI设备融资”）。 VFI设备融资被构建为公司拥有的特定SmartSystems"wellsite proppant storage equipment的出售租赁回。 VFI设备融资被视为《统一商法典》第2A条下的租赁，但在会计和财务报告目的上被视为融资安排（而非租赁）。TM 沙特沙智能砂公司为其拥有的特定wellsite proppant存储设备签署的为期四年的主租赁协议。 VFI设备融资被构建为公司拥有的具体安全设备的出售租回。 该VFI设备融资被视为《统一商法典》第2A条下的租赁，但在会计和财务报告目的上被视为融资安排（而非租赁）。
“证券交易法”1934年修订的证券交易法案。
“证券法”1933年《证券法案》的修订版本。
FASB，ASU，ASC，GAAPFinancial Accounting Standards Board，Accounting Standards Update，Accounting Standards Codification，Accounting Principles Generally Accepted in the United States，分别。

2

PART I – FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
SMART SAND, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2024December 31, 2023
(unaudited)
 (in thousands, except share amounts)
Assets  
Current assets:  
Cash and cash equivalents$7,215 $6,072 
Accounts receivable24,164 23,231 
Unbilled receivables2,743 2,561 
Inventory27,839 26,823 
Prepaid expenses and other current assets2,786 3,217 
Total current assets64,747 61,904 
Property, plant and equipment, net241,889 255,092 
Operating lease right-of-use assets22,742 23,265 
Intangible assets, net5,282 5,876 
Other assets1,151 163 
Total assets$335,811 $346,300 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$10,860 $16,041 
Accrued expenses and other liabilities12,427 11,024 
Deferred revenue1,351 1,154 
Current portion of long-term debt3,664 15,711 
Current portion of operating lease liabilities9,497 10,536 
Total current liabilities37,799 54,466 
Long-term debt9,906 3,449 
Long-term operating lease liabilities13,964 14,056 
Deferred tax liabilities, net9,884 12,101 
Asset retirement obligations20,670 19,923 
Other non-current liabilities38 38 
Total liabilities92,261 104,033 
Commitments and contingencies (Note 13)
Stockholders’ equity
Common stock, $0.001 par value, 350,000,000 shares authorized; 46,573,353 issued and 39,016,629 outstanding at September 30, 2024; 45,858,022 issued and 38,486,762 outstanding at December 31, 2023
39 39 
Treasury stock, at cost, 7,556,724 and 7,371,260 shares at September 30, 2024 and December 31, 2023, respectively
(14,624)(14,249)
Additional paid-in capital184,390 181,973 
Retained earnings73,795 74,539 
Accumulated other comprehensive loss(50)(35)
Total stockholders’ equity243,550 242,267 
Total liabilities and stockholders’ equity$335,811 $346,300 

 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

SMART SAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) 
 Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
 (in thousands, except per share amounts)
Revenues:
Sand revenue$62,232 $74,869 $212,971 $227,332 
SmartSystems revenue926 2,031 7,038 6,694 
Total revenue63,158 76,900 220,009 234,026 
Cost of goods sold:
Sand cost of goods sold55,601 61,490 183,470 189,878 
SmartSystems cost of goods sold1,070 1,012 5,168 5,424 
Total cost of goods sold56,671 62,502 188,638 195,302 
Gross profit6,487 14,398 31,371 38,724 
Operating expenses:
Selling, general and administrative9,703 8,917 28,924 28,634 
Depreciation and amortization633 647 1,978 1,868 
Loss (gain) on disposal of fixed assets, net1,063 (92)1,069 1,821 
Total operating expenses11,399 9,472 31,971 32,323 
Operating income(4,912)4,926 (600)6,401 
Other income (expenses):
Loss on extinguishment of debt(31)— (1,341)— 
Interest expense, net(344)(276)(1,226)(940)
Other income53 198 224 405 
Total other expenses, net(322)(78)(2,343)(535)
Income (loss) before income tax expense (benefit)(5,234)4,848 (2,943)5,866 
Income tax expense (benefit)(5,136)(1,879)(2,199)(3,569)
Net (loss) income$(98)$6,727 $(744)$9,435 
Net (loss) income per common share:
Basic$— $0.18 $(0.02)$0.24 
Diluted$0.00 $0.18 $(0.02)$0.24 
Weighted-average number of common shares:
Basic38,926 38,253 38,735 39,153 
Diluted38,926 38,412 38,735 39,239 

 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

SMART SAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(in thousands)
Net (loss) income$(98)$6,727 $(744)$9,435 
Other comprehensive (loss) income:
Foreign currency translation adjustment38 (147)(15)(254)
Comprehensive (loss) income$(60)$6,580 $(759)$9,181 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

SMART SAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED) 
Nine Months Ended September 30, 2024
 Common StockTreasury StockAdditional Paid-in Capital Accumulated Other Comprehensive (Loss) IncomeTotal Stockholders’ Equity
 Outstanding
Shares		Par ValueSharesAmountRetained
Earnings
 (in thousands, except share amounts)
Balance at December 31, 202338,486,762 $39 7,371,260 $(14,249)$181,973 $74,539 $(35)$242,267 
Foreign currency translation adjustment— — — — — — (26)(26)
Vesting of restricted stock288,817 — — — — — — — 
Stock-based compensation— — — — 642 — — 642 
Employee stock purchase plan compensation— — — — 6 — — 6 
Employee stock purchase plan issuance17,891 — — — 25 — — 25 
Restricted stock buy back(87,462)— 87,462 (170)— — — (170)
Net loss— — — — — (216)— (216)
Balance at March 31, 202438,706,008 $39 7,458,722 $(14,419)$182,646 $74,323 $(61)242,528 
Foreign currency translation adjustment— — — — — — (27)(27)
Vesting of restricted stock89,911 — — — — — — — 
Stock-based compensation— — — — 840 — — 840 
Employee stock purchase plan compensation— — — — 6 — — 6 
Restricted stock buy back(24,702)— 24,702 (52)— — — (52)
Net loss— — — — — (430)— (430)
Balance at June 30, 202438,771,217 $39 7,483,424 $(14,471)$183,492 $73,893 $(88)$242,865 
Foreign currency translation adjustment— — — — — — 38 38 
Vesting of restricted stock303,087 — — — — — — — 
Stock-based compensation— — — — 866 — — 866 
Employee stock purchase plan compensation— — — — 6 — — 6 
Employee stock purchase plan issuance15,625 — — — 26 — — 26 
Restricted stock buy back(73,300)— 73,300 (153)— — — (153)
Net loss— — — — — (98)— (98)
Balance at September 30, 202439,016,629 39 7,556,724 (14,624)184,390 73,795 (50)$243,550 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

Nine Months Ended September 30, 2023
 Common StockTreasury StockAdditional Paid-in Capital Accumulated Other Comprehensive (Loss) IncomeTotal Stockholders’ Equity
 Outstanding
Shares		Par ValueSharesAmountRetained
Earnings
 (in thousands, except share amounts)
Balance at December 31, 202243,088,106 $43 2,010,961 $(5,075)$178,386 $69,890 $227 $243,471 
Foreign currency translation adjustment— — — — — — (66)(66)
Vesting of restricted stock4,750 — — — — — — — 
Stock-based compensation— — — — 779 — — 779 
Employee stock purchase plan compensation— — — — 7 — — 7 
Employee stock purchase plan issuance21,810 — — — 33 — — 33 
Purchase of treasury stock(5,175,688)(5)5,175,688 (8,845)— — — (8,850)
Restricted stock buy back(1,618)— 1,618 (3)— — — (3)
Net loss— — — — — (3,599)— (3,599)
Balance at March 31, 202337,937,360 $38 7,188,267 $(13,923)$179,205 $66,291 $161 231,772 
Foreign currency translation adjustment— — — — — — (41)(41)
Vesting of restricted stock228,036 — — — — — — — 
Stock-based compensation— — — — 833 — — 833 
Employee stock purchase plan compensation— — — — 8 — — 8 
Restricted stock buyback(48,131)— 48,131 (77)— — — (77)
Net income— — — — — 6,307 — 6,307 
Balance at June 30, 202338,117,265 $38 7,236,398 $(14,000)$180,046 $72,598 $120 $238,802 
Foreign currency translation adjustment— — — — — — (147)(147)
Vesting of restricted stock247,368 — — — — — — — 
Stock-based compensation— — — — 860 — — 860 
Employee stock purchase plan compensation— — — — 5 — — 5 
Employee stock purchase plan issuance16,611 — — — 23 — — 23 
Purchase of treasury stock(69,530)— 69,530 (124)— — — (124)
Net income— — — — — 6,727 — 6,727 
Balance at September 30, 202338,311,714 $38 7,305,928 $(14,124)$180,934 $79,325 $(27)$246,146 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7

SMART SAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
 20242023
 (in thousands)
Operating activities:  
Net (loss) income$(744)$9,435 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and accretion of asset retirement obligations21,090 20,359 
Amortization of intangible assets596 596 
Net loss on disposal of fixed assets1,069 1,821 
Amortization of deferred financing cost89 79 
Accretion of debt discount92 140 
Loss on extinguishment of debt1,341 — 
Deferred income taxes (2,217)(4,096)
Stock-based compensation, net2,348 2,472 
Employee stock purchase plan compensation18 20 
Changes in assets and liabilities:
Accounts receivable(933)11,888 
Unbilled receivables(181)(244)
Inventory(1,015)(5,770)
Prepaid expenses and other assets(39)4,856 
Deferred revenue196 (4,942)
Accounts payable(6,219)(3,871)
Accrued and other expenses1,338 907 
Net cash provided by operating activities16,829 33,650 
Investing activities:
Purchases of property, plant and equipment(5,135)(16,126)
Proceeds from disposal of assets81 123 
Net cash used in investing activities(5,054)(16,003)
Financing activities:
Proceeds from the issuance of notes payable9,755 — 
Repayments of notes payable(9,540)(8,952)
Proceeds from revolving credit facility16,975 15,000 
Repayment of revolving credit facility(24,975)(15,000)
Payments under finance leases(167)(323)
Payment of deferred financing and debt issuance costs(1,129)— 
Payment for debt extinguishment costs(1,227)— 
Employee stock purchase plan issuance51 56 
Purchase of treasury stock(375)(4,629)
Net cash used in financing activities(10,632)(13,848)
Net increase (decrease) in cash and cash equivalents1,143 3,799 
Cash and cash equivalents at beginning of year6,072 5,510 
Cash and cash equivalents at end of period$7,215 $9,309 
Supplemental disclosure of cash flow information
Purchases of property, plant and equipment in accounts payable and accrued expenses$1,517 $2,351 
Treasury stock purchased with debt$— $4,425 
Fixed assets purchased with debt$2,214 $— 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8

SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 1 — Organization and Nature of Business
The Company was incorporated in July 2011 and is headquartered in Yardley, Pennsylvania. The Company primarily operates as a fully integrated frac and industrial sand supply and services company. The Company offers complete mine to wellsite proppant supply and logistics solutions to our frac sand customers in the oil and natural gas industry. These operations include the excavation, processing and sale of sand, or proppant, for hydraulic fracturing operations as well as proppant logistics and wellsite storage solutions through its SmartSystemsTM products and services. The Company also provides sand to customers for industrial uses through its Industrial Product Solutions (“IPS”), such as glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, and recreation.
Sand Mines and Processing Facilities
The Company’s integrated Oakdale, Wisconsin facility, with on-site rail infrastructure and wet and dry sand processing facilities, has access to two Class I rail lines, the Canadian Pacific Railway through its onsite rail terminal and the Union Pacific Railway through its nearby Byron, Wisconsin facility. The Company commenced operations at its mine and processing facility near Oakdale, Wisconsin in July 2012, and subsequently expanded its operations in 2014, 2015 and 2018. The annual processing capacity at the Oakdale facility is approximately 5.5 million tons.
In September 2020, the Company acquired two frac sand mines and related processing facilities in Ottawa, Illinois and New Auburn, Wisconsin. The annual processing capacity at the Ottawa, Illinois facility is approximately 1.6 million tons and it has access to the Class I Burlington Northern Santa Fe railway through the Company’s nearby Peru, Illinois transload facility. The Company began operating the Ottawa, Illinois mine and Peru, Illinois transload facility in October 2020. The Company currently has no plans to operate the New Auburn facility for the foreseeable future.
In March 2022, the Company acquired a frac sand mine and processing facility in Blair, Wisconsin. The annual processing capacity at the Blair facility is approximately 2.9 million tons and contains an onsite, unit train capable rail terminal with access to the Class 1 Canadian National Railway. The Company commenced operations at the Blair facility in April 2023.
Transload & Logistics Solutions
The Company also offers proppant logistics solutions to its customers through, among other things, its network of in-basin transloading terminals and its SmartSystemsTM wellsite proppant storage and management capabilities. The Company has direct access to four Class I rail lines and the ability to access all Class 1 rail lines within the United States and Canada. The Company’s network of terminals and rail line access enables it to provide cost-effective delivery options to its customers.
The Company has several in-basin rail terminals. The Company acquired rights in March 2018 to operate a unit train capable transloading terminal in Van Hook, North Dakota to service the Bakken Formation in the Williston Basin. In 2020, the Company, as part of its acquisition of the Ottawa, Illinois facility, obtained rights to use a rail terminal located in El Reno, Oklahoma. In September 2021, the Company acquired the rights to construct and operate a transloading terminal in Waynesburg, Pennsylvania to service the Appalachian Basin, including the Marcellus and Utica Formations, which became operational in January 2022 and was further expanded in the fourth quarter of 2023. In December 2023 and January 2024, the Company acquired rights to use transloading terminals in Minerva, Ohio and Dennison, Ohio, respectively, which service the Appalachian Basin. The Minerva terminal became operational in the second quarter of 2024 and the Dennison terminal became operational in the third quarter of 2024.
The Company’s SmartSystems offer proppant storage solutions that create efficiencies, flexibility, enhanced safety and reliability for customers by providing the capability to unload, store and deliver proppant at the wellsite, as well as having the ability to rapidly set up, takedown and transport the entire system. The SmartDepotTM silo includes passive and active dust suppression technology, along with the capability of gravity-fed operation. The SmartPath® transloader is a mobile sand transloading system designed to work with bottom dump trailers and features a drive over conveyor, surge bin, and dust collection system. The Company has developed the SmartbeltTM a belt system to pair with its SmartPath, which allows for feeding sand directly into the hopper at the wellsite. Rapid deployment trailers are designed for quick setup, takedown and transportation of the entire SmartSystem, and they detach from the wellsite equipment, which allows for removal from the wellsite during operation. A proprietary software program, the SmartSystem TrackerTM, allows customers to monitor silo-specific information, including location, proppant type and proppant inventory.
9

SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars, except per share data)
(UNAUDITED)

NOTE 2 — Summary of Significant Accounting Policies
The information presented below supplements the complete description of our significant accounting policies disclosed in our 2023 Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 11, 2024.
Revision of Previously Issued Financial Statements
The Company has reclassified some prior year line items on its condensed consolidated statements of operations to conform to the current financial statement presentation. These reclassifications have no effect on previously reported total revenue or net income. The Company changed the names and types of revenue and cost of goods sold that are reported on each line item on its statements of operations. Sand revenue and cost of goods sold now includes sand sales, shortfall, railcar rental, and transportation. SmartSystems revenue and cost of goods sold is primarily the rental of our patented SmartSystems equipment and related services provided to customers. There has been no change in the manner in which we recognize revenue or costs.
Basis of Presentation and Consolidation
The accompanying unaudited quarterly condensed consolidated financial statements (“interim statements”) of the Company are presented in accordance with the rules and regulations of the SEC for quarterly reports on Form 10-Q and therefore do not include all the information and notes required by GAAP. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. All adjustments are of a normal recurring nature. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. The consolidated balance sheet as of December 31, 2023 was derived from the audited consolidated financial statements as of and for the year ended December 31, 2023. These interim statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2023.
Use of Estimates
The preparation of interim statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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 value of acquired assets and assume liabilities; recoverability of deferred tax assets; inventory reserve; 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. Additionally, global events such as the ongoing conflict in Ukraine and the recent conflict in the Middle East may affect oil and natural gas prices and significant volatility in the oilfield service sector. The Company is currently unable to estimate the effect of current or future events on its future financial position and results of operations. Therefore, the Company can give no assurances that these events will not have a material adverse effect on its financial position or results of operations.
Employee Retention Credit
The Company qualified for federal government assistance through employee retention credit provisions of the Consolidated Appropriations Act of 2021. As of September 30, 2024 and December 31, 2023, the Company included $522 in prepaid expenses and other current assets on its consolidated balance sheets related to receivables for the employee retention credits. The calculation of the credit was based on employees continued employment and represents a portion of the wages paid to them. For income tax purposes, the credit will result in decreased expense related to the wages it offsets in the period received.
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting, which updates various reportable disclosure requirements, primarily through incremental disclosures of segment expenses in both annual and interim reporting. The Update is effective for the Company as of the annual reporting period beginning January 1, 2024 and interim periods beginning January
10

SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars, except per share data)
(UNAUDITED)
1, 2025. While the Company is still in the process of evaluating the effects of ASU 2023-07 and its related updates on the consolidated financial statements, at the time of adoption, it believes the primary effect will be updated note disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes, which updates various disclosures including enhancing the income tax rate reconciliation and income taxes paid disclosures by requiring greater disaggregation of information. The other amendments in this Update are intended to improve the effectiveness and comparability of disclosures. The Update is effective for the Company for the annual reporting period beginning January 1, 2025 and for interim periods beginning January 1, 2026. While the Company is still in the process of evaluating the effects of ASU 2023-07 and its related updates on the consolidated financial statements, at the time of adoption, it believes the primary effect will be updated note disclosures.

NOTE 3 — Inventory
Inventory consisted of the following:
 September 30, 2024December 31, 2023
Raw material$574 $467 
Work in progress7,754 9,391 
Finished goods9,216 8,244 
Spare parts10,295 8,721 
Total inventory$27,839 $26,823 

NOTE 4 — Property, Plant and Equipment, net
Net property, plant and equipment consisted of:
September 30, 2024December 31, 2023
Machinery, equipment and tooling$41,832 $40,632 
SmartSystems
32,299 30,651 
Vehicles3,800 4,082 
Furniture and fixtures1,368 1,466 
Plant and building218,055 213,756 
Real estate properties6,980 7,209 
Railroad and sidings35,728 35,491 
Land and land improvements40,704 40,519 
Asset retirement obligations22,910 22,910 
Mineral properties7,442 7,442 
Deferred mining costs3,838 3,802 
Construction in progress4,612 6,270 
419,568 414,230 
Less: accumulated depreciation and depletion177,679 159,138 
Total property, plant and equipment, net$241,889 $255,092 
Depreciation expense was $6,946 and $6,776 for the three months ended September 30, 2024 and 2023, respectively, and $20,924 and $19,661 for the nine months ended September 30, 2024 and 2023, respectively.
11

SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars, except per share data)
(UNAUDITED)
During the three months ended September 30, 2024, the Company relocated its manufacturing facility from Saskatoon, Canada to Oakdale, Wisconsin in the United States and recorded a net loss of $1,063 on the disposal of fixed assets related to this relocation.

NOTE 5 — Accrued and Other Expenses
Accrued and other expenses were comprised of the following:
 September 30, 2024December 31, 2023
Employee related expenses$1,988 $1,767 
Accrued equipment expense
201 524 
Accrued professional fees641 461 
Accrued royalties2,652 3,149 
Accrued freight and delivery charges1,872 2,066 
Accrued real estate tax2,061 1,044 
Accrued utilities1,225 604 
Sales tax liability366 486 
Income tax payable817 865 
Other accrued liabilities604 58 
Total accrued liabilities$12,427 $11,024 

NOTE 6 — Debt
The current portion of long-term debt consists of the following:
 September 30, 2024December 31, 2023
Former ABL Credit Facility$— $8,000 
VFI Equipment Financing2,432 — 
Oakdale Equipment Financing— 6,462 
Notes payable1,034 1,011 
Finance leases198 238 
Current portion of long-term debt$3,664 $15,711 

Long-term debt, net of current portion consists of the following:
 September 30, 2024December 31, 2023
FCB ABL Credit Facility$— $— 
VFI Equipment Financing6,793 — 
Oakdale Equipment Financing— 1,388 
Notes payable2,723 1,519 
Finance leases390 542 
Long-term debt$9,906 $3,449 
12

SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars, except per share data)
(UNAUDITED)

The follow summarizes the maturity of our debt:
FCB ABL Credit FacilityVFI Equipment FinancingNotes PayableFinance LeasesTotal
Remainder of 2024$— $735 $266 $59 $1,060 
2025— 2,940 1,217 272 4,429 
2026— 2,940 1,148 262 4,350 
2027— 2,940 888 65 3,893 
2028— 1,225 538 7 1,770 
2029 and thereafter— — 240 — 240 
Total minimum payments— 10,780 4,297 665 15,742 
Amount representing interest— (1,555)(540)(77)(2,172)
Present value of payments588 
Less: current portion— (2,432)(1,034)(198)(3,664)
Total long-term debt$— $6,793 $2,723 $390 $9,906 

FCB ABL Credit Facility
On September 3, 2024, the Company entered into a $30,000 five-year senior secured asset-based credit facility with First-Citizens Bank & Trust Company. The FCB ABL Credit Facility provides for non-amortizing revolving loans in an aggregate principal amount of up to $30,000, subject to a borrowing base comprised of eligible inventory and accounts receivable. Additionally, obligations under the FCB ABL Credit Facility are guaranteed by certain of our wholly-owned domestic subsidiaries and secured by a first-priority security interest in certain non-real estate assets. Borrowings under the FCB ABL Credit Facility bear interest at a rate equal to the secured overnight financing rate (“SOFR”) plus a margin of 2.75%.
The ABL Credit Facility contains a number of covenants that, among other things, restrict our ability to incur liens or other indebtedness, make certain restricted payments, merge or consolidate and dispose of assets. In addition, the FCB ABL Credit Facility requires us in certain limited circumstances to maintain a minimum fixed charge coverage ratio of 1.1 to 1.0. The FCB ABL Credit Facility also contains certain affirmative covenants and events of default customary for facilities of this type. The Company was compliant with all requirements of this facility.
The available borrowing amount under the FCB ABL Credit Facility as of September 30, 2024 was $30,000 and is based on the Company’s eligible accounts receivable and inventory. The Company had no borrowings outstanding and $30,000 available to be drawn under this facility as of September 30, 2024. The combined weighted average interest rate for all variable debt for the nine months ended September 30, 2024 was 8.04%.
Former ABL Credit Facility
On December 13, 2019, the Company entered into a $20,000 five-year senior secured asset-based credit facility with Jefferies Finance LLC. This facility was terminated on September 3, 2024.
VFI Equipment Financing
On June 28, 2024, the Company entered into an equipment financing arrangement with VFI with a principal amount of $10,000. The VFI Equipment Financing is legally comprised of a Master Lease Agreement and one lease schedule. The VFI Equipment Financing is considered a lease under article 2A of the Uniform Commercial Code but is considered a financing arrangement for accounting and financial reporting purposes, and not a lease. The collateral under the VFI Equipment Financing includes the majority of the Company’s SmartSystems equipment. The VFI Equipment Financing bears interest at a fixed rate of 8.56%. The Company used the net proceeds to repay in full and terminate the Oakdale Equipment Financing, and the remainder was added to working capital. The VFI Equipment Financing matures on May 8, 2028. The Company has the right to reacquire the underlying equipment on the lease schedule upon maturity for one dollar.
13

SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars, except per share data)
(UNAUDITED)
Oakdale Equipment Financing
On December 13, 2019, the Company received net proceeds of $23,000 in an equipment financing arrangement with Nexseer. Substantially all of the Company’s mining and processing equipment at its Oakdale facility were pledged as collateral under the Oakdale Equipment Financing. The Oakdale Equipment Financing bore interest at a fixed rate of 5.79%. This facility was paid in full and terminated on June 28, 2024.
Notes Payable
The Company has entered into various financing arrangements, primarily to finance heavy equipment. As of September 30, 2024, these notes payable bear interest at rates between 3.99% and 8.49%.
On February 28, 2023, the Company purchased 5,176 shares of the Company’s common stock from Clearlake Capital Partners II (Master), L.P., an affiliate of Clearlake Capital Group (“Clearlake”), for $8,850, of which $4,425 was paid in cash and the remainder was financed through an unsecured promissory note, bearing interest of 10.00%, issued to Clearlake. This purchase represented all of the common stock previously owned by Clearlake and approximately 11.3% outstanding shares of the Company’s common stock as of immediately prior to the purchase. At the time of purchase, Clearlake was a related party to the Company, and José Feliciano, the Co-Founder and Managing Partner of Clearlake, was on our board of directors. The promissory note was repaid in May 2023 and Mr. Feliciano resigned from our board of directors as of December 31, 2023.

NOTE 7 — Leases
Lessee
The operating and financing components of the Company’s right-of-use assets and lease liabilities on the consolidated balance sheets were as follows:
Balance Sheet LocationSeptember 30, 2024December 31, 2023
Right-of-use assets
   OperatingOperating right-of-use assets$22,742 $23,265 
   FinancingProperty, plant and equipment, net582 908 
Total right-of use assets$23,324 $24,173 
Lease liabilities
   OperatingOperating lease liabilities, current and long-term portions$23,461 $24,592 
   FinancingLong-term debt, current and long-term portions588 780 
Total lease liabilities$24,049 $25,372 
Operating lease costs are recorded as a single expense on the statement of operations and allocated to the right-of-use assets and the related lease liabilities as depreciation expense and interest expense, respectively. Lease cost recognized in the consolidated statement of operations for the three and nine months ended September 30, 2024 and 2023 was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Finance lease cost
   Amortization of right-of-use assets$58 $89 $173 $232 
   Interest on lease liabilities14 21 48 55 
Operating lease cost3,452 3,692 10,232 10,305 
Short-term lease cost4 9 22 27 
Total lease cost$3,528 $3,811 $10,475 $10,619 
14

SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars, except per share data)
(UNAUDITED)
Other information related to the Company’s leasing activity for the nine months ended September 30, 2024 and 2023 is as follows:
Nine Months Ended September 30,
20242023
Cash paid for amounts included in the measurement of lease liabilities
   Operating cash flows used for finance leases$49 $55 
   Operating cash flows used for operating leases$10,823 $11,112 
   Financing cash flows used for finance leases$167 $323 
Right-of-use assets obtained in exchange for new operating lease liabilities$9,033 $7,805 
Weighted average remaining lease term - finance leases2.6 years3.4 years
Weighted average discount rate - finance leases9.56 %9.63 %
Weighted average remaining lease term - operating leases2.8 years2.7 years
Weighted average discount rate - operating leases7.10 %6.32 %

Maturities of the Company’s lease liabilities as of September 30, 2024 are as follows:
Operating LeasesFinance LeasesTotal
Remainder of 2024$2,583 $59 $2,642 
202510,639 272 10,911 
20266,665 262 6,927 
20273,842 65 3,907 
20281,750 7 1,757 
Thereafter472 — 472 
Total cash lease payments25,951 665 26,616 
Less: amounts representing interest(2,490)(77)(2,567)
Total lease liabilities$23,461 $588 $24,049 

NOTE 8 — Asset Retirement Obligations
The Company had a post-closure reclamation and site restoration obligation of $20,670 as of September 30, 2024. The following is a reconciliation of the total reclamation liability for asset retirement obligations.
Balance at December 31, 2023$19,923 
Accretion expense747 
Balance at September 30, 2024$20,670 
15

SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars, except per share data)
(UNAUDITED)

NOTE 9 — Revenue
Disaggregation of Revenue
The following table presents the Company’s revenues disaggregated by type and percentage of total revenues for the periods indicated.
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
RevenuePercentage of Total RevenueRevenuePercentage of Total RevenueRevenuePercentage of Total RevenueRevenuePercentage of Total Revenue
Sand revenue$62,232 99 %$74,869 97 %$212,971 97 %$227,332 97 %
SmartSystems revenue926 1 %2,031 3 %7,038 3 %6,694 3 %
Total revenue$63,158 100 %$76,900 100 %$220,009 100 %$234,026 100 %
The Company recorded $1,154 of deferred revenue on the consolidated balance sheet as of December 31, 2023, all of which has been recognized in the nine months ended September 30, 2024. As of September 30, 2024, the Company had $106,508 in unsatisfied performance obligations related to contracts with customers. The Company expects to perform these obligations and recognize revenue of $24,191 and $82,317 in the remainder of 2024 and 2025, respectively.


NOTE 10 — Earnings Per Share

Basic net income (loss) per share of common stock is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, excluding the dilutive effects of restricted stock. Diluted net income (loss) per share of common stock is computed by dividing the net income attributable to common stockholders by the sum of the weighted-average number of shares of common stock outstanding during the period plus the potential dilutive effects of shares of restricted stock outstanding during the period calculated in accordance with the treasury stock method, although shares of restricted stock are excluded if their effect is anti-dilutive. The number of shares underlying equity-based awards that were excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive was 1,158 and 1,915 for the three months ended September 30, 2024 and 2023, respectively. The number of shares underlying equity-based awards that were excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive was 1,158 and 1,922 for the nine months ended September 30, 2024 and 2023, respectively. In periods with a net loss, there is no difference between basic and diluted net loss per share of common stock. The following table reconciles the weighted-average common shares outstanding used in the calculation of basic net (loss) income per share to the weighted average common shares outstanding used in the calculation of diluted net income per share.
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Weighted average common shares outstanding38,926 38,253 38,735 39,153 
Assumed conversion of restricted stock— 159 — 86 
Diluted weighted average common stock outstanding38,926 38,412 38,735 39,239 


NOTE 11 — Income Taxes
The Company calculates its interim income tax provision by estimating the annual expected effective tax rate and applying that rate to its ordinary year-to-date earnings or loss. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs.
16

SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars, except per share data)
(UNAUDITED)
For the three months ended September 30, 2024 and 2023, the effective tax rate was approximately 98.1% and (38.8)%, respectively, based on the annual effective tax rate net of discrete federal and state taxes. For the nine months ended September 30, 2024 and 2023, the effective tax rate was approximately 74.7% and (60.8)%, respectively, based on the annual effective tax rate net of discrete federal and state taxes. For the three and nine months ended September 30, 2024 and 2023, the statutory tax rate was 21.0%. The computation of the effective tax rate includes modifications from the statutory rate such as income tax credits, tax depletion deduction, carrybacks, and state apportionment changes, among other items.
The Company has recorded a liability for uncertain tax positions included in its consolidated balance sheet of $2,240 as of December 31, 2023. There was no material change for the nine months ended September 30, 2024.
The Company determined that it is more likely than not that it will not be able to fully realize the benefits of certain existing deductible temporary differences and has recorded a partial valuation allowance against the gross deferred tax assets, which is included in the long-term deferred tax liabilities, net on its consolidated balance sheets. At December 31, 2023, the Company recorded a partial valuation allowance against the gross deferred tax assets on its consolidated balance sheet in the amount of $874. There was no material change for the three and nine months ended September 30, 2024.
The Company’s federal income tax returns subsequent to 2017 remain open to audit by taxing authorities. The Company has not been informed that its tax returns are the subject of any audit or investigation by taxing authorities.

NOTE 12 — Concentrations
As of September 30, 2024, four customers accounted for 71% of the Company’s total accounts receivable. As of December 31, 2023, four customers accounted for 70% of the Company’s total accounts receivable.
During the three months ended September 30, 2024, 67% of the Company’s revenues were earned from four customers. During the three months ended September 30, 2023, 40% of the Company’s revenues were earned from two customers. During the nine months ended September 30, 2024, 54% of the Company’s revenues were earned from three customers. During the nine months ended September 30, 2023, 41% of the Company’s revenues were earned from two customers.
As of September 30, 2024, two vendors accounted for 26% of the Company’s accounts payable. As of December 31, 2023, one vendor accounted for 11% of the Company’s accounts payable.
During the three months ended September 30, 2024, two vendors accounted for 33% of the Company’s cost of goods sold. During the three months ended September 30, 2023, one vendor accounted for 21% of the Company’s cost of goods sold. During the nine months ended September 30, 2024, two vendors accounted for 36% of the Company’s cost of goods sold. During the nine months ended September 30, 2023, two vendors accounted for 33% of the Company’s cost of goods sold.
The Company’s primary product is Northern White sand, and its mining operations are limited to Wisconsin and Illinois. There is a risk of loss if there are significant environmental, legal or economic changes to the geographic areas of our mines, the oil and natural gas producing basins they serve, or the transportation routes between them.

NOTE 13 — Commitments and Contingencies
Litigation
In addition to the matters described below, the Company may be subject to various legal proceedings, claims and governmental inspections, audits or investigations arising out of our operations in the normal course of business, which cover matters such as general commercial, governmental and trade regulations, product liability, environmental, intellectual property, employment and other actions. Although the outcomes of these routine claims cannot be predicted with certainty, in the opinion of management, the ultimate resolution of these matters will not have a material adverse effect on our financial statements.
Cory Berg, et al. v. Hi-Crush Blair LLC, LLC et al., Case No. 2019-cv-65, Trempealeau County, Wisconsin
Leland Drangstveit, et al. v. Hi-Crush Blair, LLC, et al., Case No. 2019-cv-66, Trempealeau County, Wisconsin
17

SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars, except per share data)
(UNAUDITED)
On April 22, 2019 and September 29, 2021, Cory Berg, et al. and Leland Drangstveit, et al., respectively (collectively, the “Plaintiffs”), filed complaints and an amended complaint in separate actions against Blair, certain of its subcontractors and its and their respective insurance companies in the Circuit Court of the State of Wisconsin in and for Trempealeau County (Case Nos. 19-CV-65 and 19-CV-66, respectively). The Plaintiffs allege that Blair and its subcontractors were negligent and created a nuisance by, among other things, generating excessive noise, light and dust. The Plaintiffs are seeking unspecified monetary damages and other relief. The insurance companies included as defendants have asserted counterclaims seeking declarations as to their rights and liabilities under their respective applicable commercial general liability insurance policies. HCR has agreed under the Purchase Agreement to indemnify the Company for any actions or omissions of HCR or its affiliates (including Blair) that occurred prior to the closing of the Company’s acquisition of Blair. In late August, several of the defendants, including Blair, agreed to settlement terms with the Plaintiffs, and the parties expect to finalize settlement paperwork in the fourth quarter, which will result in a dismissal with prejudice of all claims against Blair.
Bonds
The Company has performance bonds with various public and private entities regarding reclamation, permitting and maintenance of public roadways. Total aggregate principal amount of performance bonds outstanding as of September 30, 2024 was $19,727.

NOTE 14 — Subsequent Events
On October 3, 2024, the Board of Directors of the Company declared a special dividend of $0.10 per share of common stock, which was paid on October 28, 2024 to stockholders of record at the close of business on October 15, 2024.
On October 3, 2024, the Board of Directors of the Company also approved an eighteen month share repurchase program under which the Company may purchase up to $10.0 million of its ordinary shares (the “Repurchase Program”). Pursuant to the Repurchase Program, the Company may repurchase its ordinary shares from time to time, in amounts, at prices and at such times as it deems appropriate, subject to market conditions and other considerations. The Company 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 the Company to acquire any particular amount of ordinary shares and the Repurchase Program may be modified or suspended at any time at the Company’s discretion.

18

SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
ITEM 2.  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, 2023 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, 2023. 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: (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™ portable wellsite storage silos, SmartPath® transloader and SmartBelt™ conveyor;
19

SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(iv) access to all Class I rail lines; and (v) the industry experience of our senior management team make us as a highly attractive provider of sand and logistics services.
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 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 1 Canadian National rail network. We commenced operations at the Blair facility in the second quarter of 2023. Our total annual processing capacity of our operating facilities is approximately 10.0 million tons.
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. The Minerva terminal became operational in the second quarter of 2024 and the Dennison terminal became operational in the third quarter of 2024. We also have the right to use a rail terminal located in El Reno, Oklahoma. These terminals allow us to offer more efficient and sustainable delivery options to our customers. Additionally, we have longstanding relationships with third party terminal operators that provide us with access to all oil and natural gas exploration production basins of North America.
We offer to our customers portable wellsite proppant storage and management solutions through our SmartSystems products and services. Our SmartSystems provide our customers with the capability to unload, store and deliver proppant at the wellsite, as well as the ability to rapidly set up, takedown and transport the entire system. This capability creates efficiencies, flexibility, enhanced safety and reliability for customers. Through our SmartSystems wellsite proppant storage solutions, we offer the SmartDepot and SmartDepotXL™ silo systems, SmartPath transloader, SmartBelt conveyor, and our rapid deployment trailers. Our SmartDepot silos include passive and active dust suppression technology, along with the capability of a gravity-fed operation. Our SmartPath transloader is designed to work with bottom dump trailers and features a drive over conveyor, surge bin, and dust collection system. Our SmartBelt conveyor is designed to work with our SmartPath transloader to directly feed sand into the blender. Our rapid deployment trailers are designed for quick setup, takedown and transportation of the entire SmartSystem, which allows for efficient removal from the wellsite during operation. We believe the system has the ability to keep up with any hydraulic fracturing operation. We have also developed a proprietary software program, the SmartSystem Tracker™, which allows our SmartSystems customers to monitor silo-specific information, including location, proppant type and proppant inventory. We believe that our SmartSystems reduce trucking and related fuel consumption for our customers, helping them reduce their carbon footprint in their daily operations.
We have 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 will provide new opportunities to increase our customer base in the IPS business. While sales of IPS to customers were a small portion of our overall sand sales in 2022 and 2023, going forward, 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.
During 2023 and through the third quarter of 2024, supply and demand for Northern White Sand has been in relative balance. We saw an increase in the volume of sand sold in the first half of 2023 followed by a slowdown in activity later in the year due to customers having frontloaded their budgeted spending earlier in the year. Activity also improved in the first half of 2024 as customers ramped up activity based on 2024 budget plans followed by a decline in the third quarter of 2024. Pricing for
20

SMART SAND, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)

sand has trended downward since the second half of 2023 due to stabilized supply and demand. High levels of inflation led to increasing operating expenses in 2023, which have continued at increased levels through the third quarter of 2024. Softening economic activities in certain countries, the continuation of the war in Ukraine, the conflicts in the Middle East, along with President Biden’s pause on liquified natural gas export permits could impact oil and natural gas prices and overall oil and gas activity thereby leading to substantial volatility in demand and pricing in the future. The continued volatility in oil and natural gas demand and the current availability of sufficient supply of sand has led to continued reluctance by some customers to enter into long-term contracts. As such, some customers have instead trended toward purchasing their frac sand supply in the spot market or under short term supply agreements at current market prices. We cannot predict macroeconomic events or if pricing trends for our products will continue, increase, decrease or stabilize.
Supplies of high-quality Northern White frac sand are limited to select areas, predominantly in western Wisconsin and limited areas of Minnesota and Illinois. We believe the ability to obtain large contiguous reserves in these areas is a key constraint and can be an important supply consideration when assessing the economic viability of a potential frac sand processing facility. Further constraining the supply and throughput of Northern White frac sand is that not all of the large reserve mines have on-site excavation, processing or logistics capabilities, which impact the long-term competitiveness of these mines due to lower efficiency and higher cost structures. Historically, much of the capital investment in Northern White frac sand mines was used for the development of coarser deposits in western Wisconsin, which is inconsistent with the increasing demand for finer mesh frac sand in recent years. As such, competitors in the Northern White frac sand market have shuttered or idled operations at certain facilities due to the higher demand for finer sands and due to lower cost regional sand sources that have eroded the ongoing economic viability of mines with coarser reserve deposits and inefficient mining and logistics facilities.
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 will provide us with the ability to diversify our sales into more stable, consumer-driven products to help mitigate price volatility in the oil and gas industry.

21

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, 2024 Compared to Three Months Ended September 30, 2023
The following table summarizes our revenue and expenses for the periods indicated.
 Three Months Ended September 30,Change
 20242023DollarsPercentage
 
Revenues:
Sand revenue$62,232 $74,869 $(12,637)(17)%
SmartSystems revenue926 2,031 (1,105)(54)%
Total revenue63,158 76,900 (13,742)(18)%
Cost of goods sold:
Sand cost of goods sold55,601 61,490 (5,889)(10)%
SmartSystems cost of goods sold1,070 1,012 58 6 %
Total cost of goods sold56,671 62,502 (5,831)(9)%
Gross profit6,487 14,398 (7,911)(55)%
Operating expenses:
Selling, general and administrative9,703 8,917 786 9 %
Depreciation and amortization633 647 (14)(2)%
Loss (gain) on disposal of fixed assets, net1,063 (92)1,155 1,255 %
Total operating expenses11,399 9,472 1,927 20 %
Operating income(4,912)4,926 (9,838)(200)%
Other income (expenses):
Loss on extinguishment of debt(31)— (31)Not meaningful
Interest expense, net(344)(276)(68)25 %
Other income53 198 (145)(73)%
Total other expenses, net(322)(78)(244)313 %
Income (loss) before income tax expense (benefit)(5,234)4,848 (10,082)(208)%
Income tax expense (benefit)(5,136)(1,879)(3,257)173 %
Net (loss) income$(98)$6,727 $(6,825)(101)%
Revenues
Revenues were $63.2 million and tons sold were approximately 1,189,000 for the three months ended September 30, 2024. Revenues for the three months ended September 30, 2023 were $76.9 million, during which time we sold approximately 1,219,000 tons of sand. The key factors contributing to the revenues for the three months ended September 30, 2024 being lower, as compared to the three months ended September 30, 2023 were as follows:
•Sand revenue was 17% lower at $62.2 million for the three months ended September 30, 2024 versus $74.9 million for the three months ended September 30, 2023. The lower sand revenue was due to lower sand volumes sold along with lower average sand prices.
22

SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)

•SmartSystems revenue was approximately $0.9 million for the three months ended September 30, 2024 compared to $2.0 million for the three months ended September 30, 2023. The decrease in SmartSystems revenue was due to lower utilization of our SmartSystems fleet.
Cost of Goods Sold
Cost of goods sold was $56.7 million and $62.5 million for the three months ended September 30, 2024 and 2023, respectively. The decrease in cost of goods sold for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily due to reduced costs of production on lower volumes sold and cost initiatives to reduce labor and maintenance expenses.
Gross Profit
Gross profit was $6.5 million for the three months ended September 30, 2024, compared to $14.4 million for the three months ended September 30, 2023. The decline in profitability for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 was primarily due to the combination of lower sales volumes and lower average sales prices on our products.
Operating Expenses
Selling, general and administrative expenses increased to $9.7 million for the three months ended September 30, 2024 compared to $8.9 million for the three months ended September 30, 2023, due primarily to $1.3 million in banking and legal fees associated with refinancing our ABL facility. Additionally, in September 2024, we closed our Saskatoon, Canada manufacturing facility and relocated it to the United States. We recorded a net loss of $1.1 million on the disposal of fixed assets related to this facility.
Interest Expense, net
We incurred $0.3 million and $0.3 million of net interest expense for the three months ended September 30, 2024 and 2023, respectively.
Income Tax Expense (Benefit)
For the three months ended September 30, 2024 and 2023, our effective tax rate was approximately 98.1% and (38.8)%, respectively. To estimate the interim period income tax expense (benefit), the company calculates the estimated effective tax rate for the full year and applies that rate to the net income for the period. The computation of the effective tax rate includes modifications from the statutory rate such as income tax credits, tax depletion deduction, carrybacks, and state apportionment changes, among other items that are specific to our Company.
As of September 30, 2024, we have recorded a liability for uncertain tax positions included in our balance sheet, related to our depletion deduction methodology. As of September 30, 2024, 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.
Net (Loss) Income
Net loss was $(0.1) million for the three months ended September 30, 2024 as compared to net income of $6.7 million for the three months ended September 30, 2023. Gross profit was negatively affected in the current period by the decline in sales and as well as increased operating expenses due to the ABL refinancing and closure of the Saskatoon facility.
23

SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
The following table summarizes our revenue and expenses for the periods indicated.
 
Nine Months Ended September 30,
Change
 20242023DollarsPercentage
 (in thousands)
Revenues:
Sand revenue$212,971 $227,332 $(14,361)(6)%
SmartSystems revenue7,038 6,694 344 5 %
Total revenue220,009 234,026 (14,017)(6)%
Cost of goods sold:
Sand cost of goods sold183,470 189,878 (6,408)(3)%
SmartSystems cost of goods sold5,168 5,424 (256)(5)%
Total cost of goods sold188,638 195,302 (6,664)(3)%
Gross profit31,371 38,724 (7,353)(19)%
Operating expenses:
Selling, general and administrative28,924 28,634 290 1 %
Depreciation and amortization1,978 1,868 110 6 %
Loss (gain) on disposal of fixed assets, net1,069 1,821 (752)(41)%
Total operating expenses31,971 32,323 (352)(1)%
Operating income(600)6,401 (7,001)(109)%
Other income (expenses):
Loss on extinguishment of debt(1,341)— (1,341)Not meaningful
Interest expense, net(1,226)(940)(286)30 %
Other income224 405 (181)(45)%
Total other expenses, net(2,343)(535)(1,808)338 %
Income (loss) before income tax benefit(2,943)5,866 (8,809)(150)%
Income tax expense (benefit)(2,199)(3,569)1,370 38 %
Net (loss) income$(744)$9,435 $(10,179)(108)%
Revenues
Revenues were $220.0 million and tons sold were approximately 3,799,000 for the nine months ended September 30, 2024. Revenues for the nine months ended September 30, 2023 were $234.0 million, during which time we sold approximately 3,498,000 tons of sand. The key factors contributing to the change in revenues for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 were as follows:
•Sand revenue declined to $213.0 million for the nine months ended September 30, 2024 versus $227.3 million for the nine months ended September 30, 2023. Total volumes increased by approximately 9%, however, average sand prices were lower in 2024 as supply and demand shifts have become more in balance compared to the same period in 2023. We also recognized higher contractual shortfall revenue in the prior year.
•SmartSystems revenue, was approximately $7.0 million for the nine months ended September 30, 2024 compared to $6.7 million for the nine months ended September 30, 2023. The increase in SmartSystems revenue was due to slightly higher utilization our SmartSystems fleet in early 2024.
24

SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)

Cost of Goods Sold
Cost of goods sold was $188.6 million and $195.3 million for the nine months ended September 30, 2024 and September 30, 2023, respectively. Cost of goods sold remained relatively flat with reduced freight on a per ton basis due to a shift in delivery location and more tons sold at the minegate, partially offset by higher total cost of production due to higher volumes sold.
Gross Profit
Gross profit was $31.4 million and $38.7 million for the nine months ended September 30, 2024 and September 30, 2023, respectively. The gross profit for the nine months ended September 30, 2024 was lower, compared to the nine months ended September 30, 2023, due primarily to lower average sales prices of our sand relative to the cost to produce and deliver products to our customers.
Operating Expenses
Selling, general and administrative expenses were consistent in total at $28.9 million for the nine months ended September 30, 2024 compared to $28.6 million for the nine months ended September 30, 2023. Cost reduction efforts in most SG&A accounts were largely offset by higher royalties on larger sales volumes and bank and legal fees associated with the refinancing of our Former ABL Credit Facility. Additionally, in September 2024, we closed our Saskatoon manufacturing facility and disposed of fixed assets there and recorded a net loss on the disposal of $1.1 million, compared to a $1.9 million net loss on disposal of fixed assets in 2023 as we reconfigured one of our wet plants to increase the efficiency of its operations and upgraded some of our mining equipment.
Interest Expense, net
We incurred $1.2 million and $0.9 million of net interest expense for the nine months ended September 30, 2024 and September 30, 2023, respectively.
Income Tax Expense (Benefit)
For the nine months ended September 30, 2024 and September 30, 2023, our effective tax rate was approximately 74.7% and (60.8)%, respectively. To estimate the interim period income tax expense (benefit), the company calculates the estimated effective tax rate for the full year and applies that rate to the net income for the period. The computation of the effective tax rate includes modifications from the statutory rate such as income tax credits, tax depletion deduction, carrybacks, and state apportionment changes, among other items that are specific to our Company.
As of September 30, 2024, we have recorded a liability for uncertain tax positions included on our balance sheet, related to our depletion deduction methodology. As of September 30, 2024, 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.
Net Loss
Net loss was $0.7 million for the nine months ended September 30, 2024 as compared to net income of $9.4 million for the nine months ended September 30, 2023. Gross profit was negatively affected in the current period by the decline in sales.
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
25

SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)

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 contribution margin.
 Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
(in thousands, except per ton amounts)
Revenue$63,158 $76,900 $220,009 $234,026 
Cost of goods sold56,671 62,502 188,638 195,302 
      Gross profit6,487 14,398 31,371 38,724 
Depreciation, depletion, and accretion of asset retirement obligations6,700 6,573 20,111 19,088 
      Contribution margin$13,187 $20,971 $51,482 $57,812 
      Contribution margin per ton $11.09 $17.20 $13.55 $16.53 
Total tons sold1,189 1,219 3,799 3,498 
Contribution margin was $13.2 million and $21.0 million, or $11.09 and $17.20 per ton sold, for the three months ended September 30, 2024 and 2023, respectively. Contribution margin was $51.5 million and $57.8 million, or $13.55 and $16.53 per ton sold, for the nine months ended September 30, 2024 and 2023, respectively. The decline in overall contribution margin for both the three and nine month periods ended September 30, 2024, when compared to the same periods in 2023, was primarily due to lower average selling price of our sand, partially mitigated by cost reduction measures throughout the Company.
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
26

SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)

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 ABL Credit Facility.
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, 2024		Nine Months Ended
September 30, 2024
 2024202320242023
 (in thousands)
Net (loss) income$(98)$6,727 $(744)$9,435 
Depreciation, depletion and amortization7,161 6,985 21,574 20,285 
Income tax expense and other taxes(5,136)(1,879)(2,199)(3,569)
Interest expense383 304 1,286 1,203 
EBITDA$2,310 $12,137 $19,917 $27,354 
Net loss on disposal of fixed assets 1,063 (92)1,069 1,821 
Equity compensation765 850 2,072 2,388 
Acquisition and development costs 8 70 316 341 
Loss on extinguishment of debt31 — 1,341 — 
Cash charges related to restructuring and retention of employees— — 148 18 
Bank and legal costs related to financing not closed1,294 — 1,294 — 
Accretion of asset retirement obligations249 235 747 670 
Adjusted EBITDA$5,720 $13,200 $26,904 $32,592 
Adjusted EBITDA was $5.7 million for the three months ended September 30, 2024 compared to $13.2 million for the three months ended September 30, 2023. The lower Adjusted EBITDA for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 was due to the combination of lower sales volumes and lower average sales prices of our sand. Adjusted EBITDA was $26.9 million for the nine months ended September 30, 2024 compared to $32.6 million for the nine months ended September 30, 2023. The decrease in adjusted EBITDA for the nine months ended September 30, 2024, compared to the same period in 2023, was primarily due to lower average sales prices of our sand.
27

SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)

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 a reconciliation of net cash provided by operating activities to free cash flows.
 Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
(in thousands, except per ton amounts)
Net cash provided by operating activities$5,810 $12,477 $16,829 $33,650 
Purchases of property, plant and equipment(2,135)(6,881)(5,135)(16,126)
Free cash flow$3,675 $5,596 $11,694 $17,524 
Free cash flow was $3.7 million for the three months ended September 30, 2024 compared to $5.6 million for the three months ended September 30, 2023. Free cash flow was $11.7 million for the nine months ended September 30, 2024 compared to $17.5 million for the nine months ended September 30, 2023. The positive free cash flow for the three and nine months ended September 30, 2024 was primarily due to management’s focus on reducing operating expenses and focus on lower capital expenditures. The decline in average selling prices in 2024 has negatively affected free cash flow.
Liquidity and Capital Resources
In September 2024 we refinanced our former $20.0 million ABL facility to a new $30.0 million FCB ABL facility. 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, 2024, cash on hand was $7.2 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 October 3, 2024, the Smart Sand Board of Directors declared a special dividend of $0.10 per share of common stock, which was paid on October 28, 2024 to stockholders of record at the close of business on October 15, 2024. The initial dividend payment was approximately $3.9 million.
On October 3, 2024, the Smart Sand Board of Directors also 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.

28

SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
Capital Requirements
We expect full year 2024 capital expenditures to be between $8.0 million and $10.0 million. Our expected capital expenditures for 2024 are primarily for process improvement and efficiency projects at our mine sites, upgrading mining equipment and the build out of our new Ohio terminals. We expect to fund these capital expenditures with 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, 2024 was $9.2 million. Minimum cash payments on this facility for the remainder of 2024 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, 2024 was $3.8 million. Minimum cash payments on these notes payable for the remainder of 2024 are anticipated to be $0.3 million. There were no outstanding borrowings on our FCB ABL Credit Facility as of September 30, 2024.
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, 2024 were $23.5 million. Minimum cash payments on operating leases for the remainder of 2024 are anticipated to be $2.6 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 13 years.
Off-Balance Sheet Arrangements
We had outstanding performance bonds of $19.7 million as of September 30, 2024.
Contractual Obligations
As of September 30, 2024, 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.
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
29

SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)

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, 2024, EQT Corporation, Encino Energy and Liberty Oilfield Services accounted for 53.9% of total revenue. For the nine months ended September 30, 2023, revenue from EQT Corporation and Liberty Oilfield Services accounted for 27.6%, and 12.9% respectively, of total revenue.
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, 2024.
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.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
The majority of our debt is financed under fixed interest rates. Borrowings under the FCB ABL Credit Facility bear interest at a rate equal to the secured overnight financing rate (“SOFR”) plus a margin of 2.75%. There were no outstanding borrowings under our FCB ABL Credit Facility as of September 30, 2024. We do not believe this represents a material interest rate risk.
We have considered other changes in our exposure to market risks during the nine months ended September 30, 2024 and have determined that there have been no additional material changes to our exposure to market risks from those described in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024.
ITEM 4.  CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of such date, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There were no changes that occurred during the third quarter of fiscal year 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Effective July 1, 2024, the Company upgraded its enterprise management and accounting system. Management has maintained its control environment during this transition through risk evaluation, monitoring, communication and separation of duties. Detective and preventative controls have been maintained or enhanced in the new system. We will continue to evaluate whether there are changes that materially affect or are reasonably likely to have materially affected, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
From time to time we may be involved in litigation relating to claims arising out of our operations in the normal course of business. The disclosure called for by Part II, Item 1 regarding our legal proceedings is incorporated by reference herein from Part I, Item 1. Note 14 - Commitments and Contingencies - Litigation of the notes to the condensed consolidated financial statements in this Form 10-Q for the three and nine months ended September 30, 2024.

ITEM 1A.  RISK FACTORS
There have been no material changes to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended September 30, 2024, no shares were sold by the Company without registration under the Securities Act of 1933, as amended.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On October 3, 2024, the Board of Directors of the Company approved an eighteen-month share repurchase program under which the Company may purchase up to $10.0 million of its ordinary shares (the “Repurchase Program”). Pursuant to the Repurchase Program, the Company may repurchase its ordinary shares from time to time, in amounts, at prices and at such times as it deems appropriate, subject to market conditions and other considerations. The Company 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 the Company to acquire any particular amount of ordinary shares and the Repurchase Program may be modified or suspended at any time at the Company’s discretion.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
None.

ITEM 4.  MINE SAFETY DISCLOSURES
We are committed to maintaining a culture that prioritizes mine safety. We believe that our commitment to safety, the environment and the communities in which we operate is critical to the success of our business. Our sand mining operations are subject to mining safety regulation. The U.S. Mining Safety and Health Administration (“MSHA”) is the primary regulatory organization governing frac sand mining and processing. Accordingly, MSHA regulates quarries, surface mines, underground mines and the industrial mineral processing facilities associated with and located at quarries and mines. The mission of MSHA is to administer the provisions of the Federal Mine Safety and Health Act of 1977 and to enforce compliance with mandatory miner safety and health standards. As part of MSHA’s oversight, representatives perform at least two unannounced inspections annually for each above-ground facility.
We are also subject to regulations by the U.S. Occupational Safety and Health Administration, which has promulgated rules for workplace exposure to respirable silica for several other industries. Respirable silica is a known health hazard for workers exposed over long periods. In April 2024, MSHA adopted its final rule lowering the permissible exposure limit for respirable crystalline silica, establishing an action level for respirable crystalline silica, implementing medical surveillance for metal/non-metal mines and updating the respiratory protection standard. Airborne respirable silica is associated with work areas at our site and is monitored closely through routine testing and MSHA inspection. We do not expect this to have a material affect on the Company or its operations.
32

Our operations are subject to the Federal Mine Safety and Health Act of 1977, as amended by the Mine Improvement and New Emergency Response Act of 2006, which imposes stringent health and safety standards on numerous aspects of mineral extraction and processing operations, including the training of personnel, operating procedures, operating equipment, and other matters. Our failure to comply with such standards, or changes in such standards or the interpretation or enforcement thereof, could have a material adverse effect on our business and financial condition or otherwise impose significant restrictions on our ability to conduct mineral extraction and processing operations. Following passage of The Mine Improvement and New Emergency Response Act of 2006, MSHA significantly increased the numbers of citations and orders charged against mining operations. The dollar penalties assessed for citations issued has also increased in recent years.  Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this Report.

ITEM 5.  OTHER INFORMATION
None.
33

ITEM 6.  EXHIBITS
3.1
3.2
10.1
10.2
31.1*
31.2*
32.1*†
32.2*†
95.1*
101.INSExtracted XBRL Instance Document - the instance document does not appear in the Interactive Data File as XBRL tags are embedded in the Inline XBRL document.
101.SCH*XBRL Taxonomy Extension Schema
101.CAL*XBRL Taxonomy Extension Calculation Linkbase
101.DEF*XBRL Taxonomy Extension Definition Linkbase
101.LAB*XBRL Taxonomy Extension Label Linkbase
101.PRE*XBRL Taxonomy Extension Presentation Linkbase
104*Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Filed Herewith.
†
This certification is deemed not filed for purposes of section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

34

Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. 
 Smart Sand, Inc.
   
November 12, 2024By:/s/ Lee E. Beckelman
  Lee E. Beckelman, Chief Financial Officer
  (Principal Financial Officer)
 
 Smart Sand, Inc.
   
November 12, 2024By:/s/ Christopher M. Green
  Christopher M. Green, Vice President of Accounting
  (Principal Accounting Officer)

35