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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________
FORM 10-Q
_____________________________________________________

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2024
OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from ___ to ___
Commission file number 001-37936
SMART SAND, INC.
(Exact name of registrant as specified in its charter)

Delaware | 45-2809926
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number)
1000 Floral Vale Boulevard, Suite 225 |
Yardley, Pennsylvania 19067 | (215) 795-7900
(Address of principal executive offices) | (Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, par value $0.001 per share |  | SND |  | Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated Filer ☒ | Smaller reporting company | ☒ | Emerging Growth Company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Number of shares of common stock outstanding, par value $0.001 per share, as of May 6, 2024: 42,574,948

TABLE OF CONTENTS

|  | PAGE
PART I | FINANCIAL INFORMATION |
ITEM 1. | Financial Statements | 3
| Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023 | 3
| Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (Unaudited) | 4
| Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2024 and 2023 (Unaudited) | 5
| Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023 (Unaudited) | 6
| Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (Unaudited) | 7
| Notes to the Condensed Consolidated Financial Statements (Unaudited) | 8
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17
ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk | 27
ITEM 4. | Controls and Procedures | 27
PART II | OTHER INFORMATION | 28
ITEM 1. | Legal Proceedings | 28
ITEM 1A. | Risk Factors | 28
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 28
ITEM 3. | Defaults upon Senior Securities | 28
ITEM 4. | Mine Safety Disclosures | 28
ITEM 5. | Other Information | 29
ITEM 6. | Exhibits | 30
SIGNATURES | 31

1

Certain Definitions
The following definitions apply throughout this quarterly report unless the context requires otherwise:

“We”, “Us”, “Company”, “Smart Sand” or “Our” |  | Smart Sand, Inc., a company organized under the laws of Delaware, and its subsidiaries.
“shares”, “stock” |  | The common stock of Smart Sand, Inc., nominal value $0.001 per share.
“ABL Credit Facility”, “ABL Credit Agreement”, “ABL Security Agreement” |  | The five-year senior secured asset-based lending credit facility (the “ABL Credit Facility”) pursuant to: (i) an ABL Credit Agreement, dated December 13, 2019, between the Company and Jefferies Finance LLC, as amended from time to time (as amended, the “ABL Credit Agreement”); and (ii) a Guarantee and Collateral Agreement, dated December 13, 2019, between the Company and Jefferies Finance LLC, as agent, as amended from time to time (as amended, the “Security Agreement”).
“Oakdale Equipment Financing”, “MLA” |  | The five-year Master Lease Agreement, dated December 13, 2019, between Nexseer Capital (“Nexseer”) and related lease schedules in connection therewith (collectively, the “MLA”). The MLA is structured as a sale-leaseback of substantially all of the equipment at the Company’s mining and processing facility located near Oakdale, Wisconsin. The Oakdale Equipment Financing is considered a lease under article 2A of the Uniform Commercial Code but is considered a financing arrangement (and not a lease) for accounting or financial reporting purposes.
“Exchange Act” |  | The Securities Exchange Act of 1934, as amended.
“Securities Act” |  | The Securities Act of 1933, as amended.
“FASB”, “ASU”, “ASC”, “GAAP” |  | Financial Accounting Standards Board, Accounting Standards Update, Accounting Standards Codification, Accounting Principles Generally Accepted in the United States, respectively.

2

PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SMART SAND, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

| March 31, 2024 |  | December 31, 2023
| (unaudited) |
| (in thousands, except share amounts)
Assets |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 4,598 |  |  | $ | 6,072 |
Accounts receivable | 37,698 |  |  | 23,231 |
Unbilled receivables | 79 |  |  | 2,561 |
Inventory | 25,584 |  |  | 26,823 |
Prepaid expenses and other current assets | 3,210 |  |  | 3,217 |
Total current assets | 71,169 |  |  | 61,904 |
Property, plant and equipment, net | 251,384 |  |  | 255,092 |
Operating lease right-of-use assets | 20,472 |  |  | 23,265 |
Intangible assets, net | 5,678 |  |  | 5,876 |
Other assets | 558 |  |  | 163 |
Total assets | $ | 349,261 |  |  | $ | 346,300 |
Liabilities and Stockholders’ Equity |  |  |
Current liabilities: |  |  |
Accounts payable | $ | 9,935 |  |  | $ | 16,041 |
Accrued expenses and other liabilities | 15,402 |  |  | 11,024 |
Deferred revenue | 2,375 |  |  | 1,154 |
Current portion of long-term debt | 22,045 |  |  | 15,711 |
Current portion of operating lease liabilities | 9,554 |  |  | 10,536 |
Total current liabilities | 59,311 |  |  | 54,466 |
Long-term debt | 2,445 |  |  | 3,449 |
Long-term operating lease liabilities | 12,070 |  |  | 14,056 |
Deferred tax liabilities, net | 12,697 |  |  | 12,101 |
Asset retirement obligations | 20,172 |  |  | 19,923 |
Other non-current liabilities | 38 |  |  | 38 |
Total liabilities | 106,733 |  |  | 104,033 |
Commitments and contingencies (Note 12) |  |  |
Stockholders’ equity |  |  |
Common stock, $0.001 par value, 350,000,000 shares authorized; 46,164,730 issued and 38,706,008 outstanding at March 31, 2024; 45,858,022 issued and 38,486,762 outstanding at December 31, 2023 | 39 |  |  | 39 |
Treasury stock, at cost, 7,458,722 and 7,371,260 shares at March 31, 2024 and December 31, 2023, respectively | (14,419) |  |  | (14,249) |
Additional paid-in capital | 182,646 |  |  | 181,973 |
Retained earnings | 74,323 |  |  | 74,539 |
Accumulated other comprehensive loss | (61) |  |  | (35) |
Total stockholders’ equity | 242,528 |  |  | 242,267 |
Total liabilities and stockholders’ equity | $ | 349,261 |  |  | $ | 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 March 31,
|  |  |  |  | 2024 |  | 2023
|  |  |  |  | (in thousands, except per share amounts)
Revenues: |  |  |  |  |  |  |
Sand revenue |  |  |  |  | $ | 79,719 |  |  | $ | 80,019 |
SmartSystems revenue |  |  |  |  | 3,333 |  |  | 2,331 |
Total revenue |  |  |  |  | 83,052 |  |  | 82,350 |
Cost of goods sold: |  |  |  |  |  |  |
Sand cost of goods sold |  |  |  |  | 68,967 |  |  | 68,738 |
SmartSystems cost of goods sold |  |  |  |  | 2,274 |  |  | 1,975 |
Total cost of goods sold |  |  |  |  | 71,241 |  |  | 70,713 |
Gross profit |  |  |  |  | 11,811 |  |  | 11,637 |
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative |  |  |  |  | 10,350 |  |  | 10,764 |
Depreciation and amortization |  |  |  |  | 674 |  |  | 592 |
Loss (gain) on disposal of fixed assets, net |  |  |  |  | 3 |  |  | 1,889 |
Total operating expenses |  |  |  |  | 11,027 |  |  | 13,245 |
Operating income (loss) |  |  |  |  | 784 |  |  | (1,608) |
Other income (expenses): |  |  |  |  |  |  |
Interest expense, net |  |  |  |  | (489) |  |  | (441) |
Other income |  |  |  |  | 96 |  |  | 48 |
Total other expenses, net |  |  |  |  | (393) |  |  | (393) |
Income (loss) before income tax expense |  |  |  |  | 391 |  |  | (2,001) |
Income tax expense |  |  |  |  | 607 |  |  | 1,598 |
Net loss |  |  |  |  | $ | (216) |  |  | $ | (3,599) |
Net loss per common share: |  |  |  |  |  |  |
Basic |  |  |  |  | $ | (0.01) |  |  | $ | (0.09) |
Diluted |  |  |  |  | $ | (0.01) |  |  | $ | (0.09) |
Weighted-average number of common shares: |  |  |  |  |  |  |
Basic |  |  |  |  | 38,555 |  |  | 41,272 |
Diluted |  |  |  |  | 38,555 |  |  | 41,272 |

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 March 31,
|  |  |  |  | 2024 |  | 2023
|  |  |  |  | (in thousands)
Net loss |  |  |  |  | $ | (216) |  |  | $ | (3,599) |
Other comprehensive loss: |  |  |  |  |  |  |
Foreign currency translation adjustment |  |  |  |  | (26) |  |  | (66) |
Comprehensive loss |  |  |  |  | $ | (242) |  |  | $ | (3,665) |

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)
Three Months Ended March 31, 2024

| Common Stock |  | Treasury Stock |  | Additional Paid-in Capital |  |  |  | Accumulated Other Comprehensive (Loss) Income |  | Total Stockholders’ Equity
| Outstanding Shares |  | Par Value |  | Shares |  | Amount |  |  | Retained Earnings |  |
| (in thousands, except share amounts)
Balance at December 31, 2023 | 38,486,762 |  |  | $ | 39 |  |  | 7,371,260 |  |  | $ | (14,249) |  |  | $ | 181,973 |  |  | $ | 74,539 |  |  | $ | (35) |  |  | $ | 242,267 |
Foreign currency translation adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (26) |  |  | (26) |
Vesting of restricted stock | 288,817 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 642 |  |  | — |  |  | — |  |  | 642 |
Employee stock purchase plan compensation | — |  |  | — |  |  | — |  |  | — |  |  | 6 |  |  | — |  |  | — |  |  | 6 |
Employee stock purchase plan issuance | 17,891 |  |  | — |  |  | — |  |  | — |  |  | 25 |  |  | — |  |  | — |  |  | 25 |
Restricted stock buy back | (87,462) |  |  | — |  |  | 87,462 |  |  | (170) |  |  | — |  |  | — |  |  | — |  |  | (170) |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (216) |  |  | — |  |  | (216) |
Balance at March 31, 2024 | 38,706,008 |  |  | $ | 39 |  |  | 7,458,722 |  |  | $ | (14,419) |  |  | $ | 182,646 |  |  | $ | 74,323 |  |  | $ | (61) |  |  | $ | 242,528 |

Three Months Ended March 31, 2023

| Common Stock |  | Treasury Stock |  | Additional Paid-in Capital |  |  |  | Accumulated Other Comprehensive (Loss) Income |  | Total Stockholders’ Equity
| Outstanding Shares |  | Par Value |  | Shares |  | Amount |  |  | Retained Earnings |  |
| (in thousands, except share amounts)
Balance at December 31, 2022 | 43,088,106 |  |  | $ | 43 |  |  | 2,010,961 |  |  | $ | (5,075) |  |  | $ | 178,386 |  |  | $ | 69,890 |  |  | $ | 227 |  |  | $ | 243,471 |
Foreign currency translation adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (66) |  |  | (66) |
Vesting of restricted stock | 4,750 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 779 |  |  | — |  |  | — |  |  | 779 |
Employee stock purchase plan compensation | — |  |  | — |  |  | — |  |  | — |  |  | 7 |  |  | — |  |  | — |  |  | 7 |
Employee stock purchase plan issuance | 21,810 |  |  | — |  |  | — |  |  | — |  |  | 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, 2023 | 37,937,360 |  |  | $ | 38 |  |  | 7,188,267 |  |  | $ | (13,923) |  |  | $ | 179,205 |  |  | $ | 66,291 |  |  | $ | 161 |  |  | 231,772 |

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

SMART SAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

| Three Months Ended March 31,
| 2024 |  | 2023
| (in thousands)
Operating activities: |  |  |
Net loss | $ | (216) |  |  | $ | (3,599) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |  |  |
Depreciation, depletion and accretion of asset retirement obligations | 7,241 |  |  | 6,553 |
Amortization of intangible assets | 199 |  |  | 199 |
Net loss on disposal of fixed assets | 3 |  |  | 1,889 |
Amortization of deferred financing cost | 26 |  |  | 26 |
Accretion of debt discount | 47 |  |  | 47 |
Deferred income taxes | 596 |  |  | 1,669 |
Stock-based compensation, net | 642 |  |  | 779 |
Employee stock purchase plan compensation | 6 |  |  | 7 |
Changes in assets and liabilities: |  |  |
Accounts receivable | (9,344) |  |  | (74) |
Unbilled receivables | (2,640) |  |  | (1,363) |
Inventory | 1,240 |  |  | 101 |
Prepaid expenses and other assets | (240) |  |  | (676) |
Deferred revenue | 1,220 |  |  | (1,058) |
Accounts payable | (6,730) |  |  | 1,165 |
Accrued and other expenses | 4,087 |  |  | (560) |
Net cash (used in) provided by operating activities | (3,863) |  |  | 5,105 |
Investing activities: |  |  |
Purchases of property, plant and equipment | (1,646) |  |  | (4,018) |
Proceeds from disposal of assets | 1 |  |  | 1 |
Net cash used in investing activities | (1,645) |  |  | (4,017) |
Financing activities: |  |  |
Repayments of notes payable | (1,340) |  |  | (1,513) |
Payments under finance leases | (56) |  |  | (86) |
Payment of deferred financing and debt issuance costs | (425) |  |  | — |
Proceeds from revolving credit facility | 6,000 |  |  | 14,000 |
Repayment of revolving credit facility | — |  |  | (7,000) |
Employee stock purchase plan issuance | 25 |  |  | 33 |
Purchase of treasury stock | (170) |  |  | (4,428) |
Net cash provided by financing activities | 4,034 |  |  | 1,006 |
Net (decrease) increase in cash and cash equivalents | (1,474) |  |  | 2,094 |
Cash and cash equivalents at beginning of year | 6,072 |  |  | 5,510 |
Cash and cash equivalents at end of period | $ | 4,598 |  |  | $ | 7,604 |
Supplemental disclosure of cash flow information |  |  |
Purchases of property, plant and equipment in accounts payable and accrued expenses | $ | 1,544 |  |  | $ | 1,975 |
Treasury stock purchased with debt | $ | — |  |  | $ | 4,425 |

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

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 SmartSystems TM 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 facility, with on-site rail infrastructure and wet and dry sand processing facilities, has access to two Class I rail lines which enable the Company to process and cost effectively deliver products to its customers. 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. Currently, 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 Utica, Illinois and New Auburn, Wisconsin. The Utica facility annual processing capacity is approximately 1.6 million tons and it has access to the Burlington Northern Santa Fe Class I rail line through the Peru, Illinois transload facility. The Company began operating the Utica, 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 Blair facility 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 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 SmartSystems TM 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 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 Utica, 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 then 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. These terminals will service the Appalachian Basin and are expected to commence operations in the second 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 SmartDepot TM silo includes passive and active dust suppression technology, along with the capability of gravity-fed operation. The self-contained 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 Smartbelt TM 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 Tracker TM, allows customers to monitor silo-specific information, including location, proppant type and proppant inventory.
8

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 that are reported on each line item under revenues. Sand revenue now includes sand sales, shortfall, railcar rental, and transportation. SmartSystems revenue is primarily from 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.
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 March 31, 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
9

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:

| March 31, 2024 |  | December 31, 2023
Raw material | $ | 1,509 |  |  | $ | 467 |
Work in progress | 6,076 |  |  | 9,391 |
Finished goods | 9,237 |  |  | 8,244 |
Spare parts | 8,762 |  |  | 8,721 |
Total inventory | $ | 25,584 |  |  | $ | 26,823 |

NOTE 4 — Property, Plant and Equipment, net
Net property, plant and equipment consisted of:

| March 31, 2024 |  | December 31, 2023
Machinery, equipment and tooling | $ | 41,748 |  |  | $ | 40,632 |
SmartSystems | 31,127 |  |  | 30,651 |
Vehicles | 4,240 |  |  | 4,082 |
Furniture and fixtures | 1,466 |  |  | 1,466 |
Plant and building | 215,098 |  |  | 213,756 |
Real estate properties | 7,209 |  |  | 7,209 |
Railroad and sidings | 35,719 |  |  | 35,491 |
Land and land improvements | 40,528 |  |  | 40,519 |
Asset retirement obligations | 22,910 |  |  | 22,910 |
Mineral properties | 7,442 |  |  | 7,442 |
Deferred mining costs | 4,207 |  |  | 3,802 |
Construction in progress | 5,742 |  |  | 6,270 |
| 417,436 |  |  | 414,230 |
Less: accumulated depreciation and depletion | 166,052 |  |  | 159,138 |
Total property, plant and equipment, net | $ | 251,384 |  |  | $ | 255,092 |

Depreciation expense was $6,981 and $6,342 for the three months ended March 31, 2024 and 2023, respectively.
10

SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars, except per share data)
(UNAUDITED)
NOTE 5 — Accrued and Other Expenses
Accrued and other expenses were comprised of the following:

| March 31, 2024 |  | December 31, 2023
Employee related expenses | $ | 2,128 |  |  | $ | 1,767 |
Accrued equipment expense | 155 |  |  | 524 |
Accrued professional fees | 471 |  |  | 461 |
Accrued royalties | 3,124 |  |  | 3,149 |
Accrued freight and delivery charges | 3,226 |  |  | 2,066 |
Accrued real estate tax | 1,703 |  |  | 1,044 |
Accrued utilities | 1,217 |  |  | 604 |
Sales tax liability | 403 |  |  | 486 |
Income tax payable | 935 |  |  | 865 |
Other accrued liabilities | 2,040 |  |  | 58 |
Total accrued liabilities | $ | 15,402 |  |  | $ | 11,024 |

NOTE 6 — Debt
The current portion of long-term debt consists of the following:

| March 31, 2024 |  | December 31, 2023
ABL Credit Facility | $ | 14,000 |  |  | $ | 8,000 |
Oakdale Equipment Financing | 6,854 |  |  | 6,462 |
Notes payable | 983 |  |  | 1,011 |
Finance leases | 208 |  |  | 238 |
Current portion of long-term debt | $ | 22,045 |  |  | $ | 15,711 |

Long-term debt, net of current portion consists of the following:

| March 31, 2024 |  | December 31, 2023
Oakdale Equipment Financing | $ | — |  |  | $ | 1,388 |
Notes payable | 1,972 |  |  | 1,519 |
Finance leases | 473 |  |  | 542 |
Long-term debt | $ | 2,445 |  |  | $ | 3,449 |

11

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:

| ABL Credit Facility |  | Oakdale Equipment Financing |  | Notes Payable |  | Finance Leases |  | Total
Remainder of 2024 | $ | 14,000 |  |  | $ | 5,695 |  |  | $ | 936 |  |  | $ | 198 |  |  | $ | 20,829 |
2025 | — |  |  | 1,724 |  |  | 708 |  |  | 265 |  |  | 2,697 |
2026 | — |  |  | — |  |  | 826 |  |  | 254 |  |  | 1,080 |
2027 | — |  |  | — |  |  | 567 |  |  | 62 |  |  | 629 |
2028 | — |  |  | — |  |  | 217 |  |  | 7 |  |  | 224 |
2029 and thereafter | — |  |  | — |  |  | 53 |  |  | — |  |  | 53 |
Total minimum payments | 14,000 |  |  | 7,419 |  |  | 3,307 |  |  | 786 |  |  | 25,512 |
Amount representing interest | — |  |  | (437) |  |  | (352) |  |  | (105) |  |  | (894) |
Amount representing unamortized lender fees | — |  |  | (128) |  |  | — |  |  | — |  |  | (128) |
Present value of payments |  |  |  |  |  |  | 681 |  |  |
Less: current portion | (14,000) |  |  | (6,854) |  |  | (983) |  |  | (208) |  |  | (22,045) |
Total long-term debt | $ | — |  |  | $ | — |  |  | $ | 1,972 |  |  | $ | 473 |  |  | $ | 2,445 |

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. The available borrowing amount under the ABL Credit Facility as of March 31, 2024 was $20,000 and is based on the Company’s eligible accounts receivable and inventory. The Company had $14,000 outstanding and $6,000 available to be drawn under this facility as of March 31, 2024. The weighted average interest rate on our ABL credit facility for the three months ended March 31, 2024 was 8.25%.
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 are pledged as collateral under the Oakdale Equipment Financing. The Oakdale Equipment Financing bears interest at a fixed rate of 5.79%.
Notes Payable
The Company has entered into various financing arrangements, primarily to finance heavy equipment purchases as well as its manufactured wellsite proppant storage solutions equipment. Upon completion of the equipment manufacturing, title to certain equipment may pass to the financial institutions as collateral. As of March 31, 2024, these notes payable bear interest at rates between 3.99% and 7.49%.
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. José Feliciano resigned from our board of directors as of December 31, 2023 and the promissory note was repaid in May 2023.
12

SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars, except per share data)
(UNAUDITED)
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 Location |  | March 31, 2024 |  | December 31, 2023
Right-of-use assets |  |  |  |  |  |
Operating |  | Operating right-of-use assets |  | $ | 20,472 |  |  | $ | 23,265 |
Financing |  | Property, plant and equipment, net |  | 673 |  |  | 908 |
Total right-of use assets |  |  |  | $ | 21,145 |  |  | $ | 24,173 |
Lease liabilities |  |  |  |  |  |
Operating |  | Operating lease liabilities, current and long-term portions |  | $ | 21,624 |  |  | $ | 24,592 |
Financing |  | Long-term debt, current and long-term portions |  | 681 |  |  | 780 |
Total lease liabilities |  |  |  | $ | 22,305 |  |  | $ | 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 months ended March 31, 2024 and 2023 was as follows:

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
Finance lease cost |  |  |  |  |  |  |
Amortization of right-of-use assets |  |  |  |  | $ | 57 |  |  | $ | 94 |
Interest on lease liabilities |  |  |  |  | 18 |  |  | 16 |
Operating lease cost |  |  |  |  | 3,387 |  |  | 3,195 |
Short-term lease cost |  |  |  |  | 9 |  |  | 9 |
Total lease cost |  |  |  |  | $ | 3,471 |  |  | $ | 3,314 |

13

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 three months ended March 31, 2024 and 2023 is as follows:

|  | Three Months Ended March 31,
|  | 2024 |  | 2023
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows used for finance leases |  | $ | 18 |  |  | $ | 16 |
Operating cash flows used for operating leases |  | $ | 3,553 |  |  | $ | 3,316 |
Financing cash flows used for finance leases |  | $ | 56 |  |  | $ | 86 |
Right-of-use assets obtained in exchange for new operating lease liabilities |  | $ | 244 |  |  | $ | 1,413 |
Weighted average remaining lease term - finance leases |  | 3.0 years |  | 3.0 years
Weighted average discount rate - finance leases |  | 9.62 | % |  | 8.98 | %
Weighted average remaining lease term - operating leases |  | 2.7 years |  | 2.9 years
Weighted average discount rate - operating leases |  | 6.53 | % |  | 5.83 | %

Maturities of the Company’s lease liabilities as of March 31, 2024 are as follows:

|  | Operating Leases |  | Finance Leases |  | Total
Remainder of 2024 |  | $ | 8,257 |  |  | $ | 198 |  |  | $ | 8,455 |
2025 |  | 7,836 |  |  | 265 |  |  | 8,101 |
2026 |  | 4,387 |  |  | 254 |  |  | 4,641 |
2027 |  | 2,127 |  |  | 62 |  |  | 2,189 |
2028 |  | 975 |  |  | 7 |  |  | 982 |
Thereafter |  | 25 |  |  | — |  |  | 25 |
Total cash lease payments |  | 23,607 |  |  | 786 |  |  | 24,393 |
Less: amounts representing interest |  | (1,983) |  |  | (105) |  |  | (2,088) |
Total lease liabilities |  | $ | 21,624 |  |  | $ | 681 |  |  | $ | 22,305 |

NOTE 8 — Asset Retirement Obligations
The Company had a post-closure reclamation and site restoration obligation of $20,172 as of March 31, 2024. The following is a reconciliation of the total reclamation liability for asset retirement obligations.

Balance at December 31, 2023 | $ | 19,923 |
Accretion expense | 249 |
Balance at March 31, 2024 | $ | 20,172 |

14

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 March 31,
|  |  |  |  | 2024 |  | 2023
|  |  |  |  |  |  |  |  | Revenue |  | Percentage of Total Revenue |  | Revenue |  | Percentage of Total Revenue
Sand revenue |  |  |  |  |  |  |  |  | $ | 79,719 |  |  | 96 | % |  | $ | 80,019 |  |  | 97 | %
SmartSystems revenue |  |  |  |  |  |  |  |  | 3,333 |  |  | 4 | % |  | 2,331 |  |  | 3 | %
Total revenue |  |  |  |  |  |  |  |  | $ | 83,052 |  |  | 100 | % |  | $ | 82,350 |  |  | 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 three months ended March 31, 2024. As of March 31, 2024, the Company had $184,180 in unsatisfied performance obligations related to contracts with customers. The Company expects to perform these obligations and recognize revenue of $98,950 and $85,230 in the remainder of 2024 and 2025, respectively.
NOTE 10 — 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.
For the three months ended March 31, 2024 and 2023, the effective tax rate was approximately 155.2% and (79.9)%, respectively, based on the annual effective tax rate net of discrete federal and state taxes. For the three months ended March 31, 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 three months ended March 31, 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 months ended March 31, 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 11 — Concentrations
As of March 31, 2024, four customers accounted for 63% 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 March 31, 2024, 60% of the Company’s revenues were earned from three customers. During the three months ended March 31, 2023, 57% of the Company’s revenues were earned from three customers.
15

SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars, except per share data)
(UNAUDITED)
As of March 31, 2024, two vendors accounted for 29% 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 March 31, 2024, two vendors accounted for 35% of the Company’s cost of goods sold. During the three months ended March 31, 2023, two vendors accounted for 35% 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 12 — 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
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. The cases are currently in the discovery phase and at this time, the Company is unable to express an opinion as to the likely outcome in the matter.
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 March 31, 2024 was $19,727.
16

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 used 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;
17

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 Utica, 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 operate this terminal under a long-term agreement with Canadian Pacific Railway. 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 rights to operate a terminal in Dennison, Ohio. We expect these two Ohio terminals to become operational in the second quarter of 2024. We also have rights 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 allow us 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 self-contained 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 Utica, 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, 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 in 2024.
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 first 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 exhausted their budgeted spending earlier in the year. Activity has improved in the first quarter of 2024 as customers ramped up activity based on 2024 budget plans. Pricing for sand moderated in the second half of 2023 due to lower demand and has stabilized in the first quarter of 2024. High levels of inflation have led to increasing operating expenses in 2023 and the first quarter of 2024. Softening economic activities in certain countries, the continuation of the war in Ukraine, the conflict in the Middle East, along with President Biden’s pause on liquified natural gas permits could impact oil and natural
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SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
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 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 has 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.
19

SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
GAAP Results of Operations
Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
The following table summarizes our revenue and expenses for the periods indicated.

| Three Months Ended March 31, |  | Change
| 2024 |  | 2023 |  | Dollars |  | Percentage
| (in thousands) |  |  |  |
Revenues: |  |  |  |  |  |  |
Sand revenue | $ | 79,719 |  |  | $ | 80,019 |  |  | $ | (300) |  |  | — | %
SmartSystems revenue | 3,333 |  |  | 2,331 |  |  | 1,002 |  |  | 43 | %
Total revenue | 83,052 |  |  | 82,350 |  |  | 702 |  |  | 1 | %
Cost of goods sold: |  |  |  |  |  |  |
Sand cost of goods sold | 68,967 |  |  | 68,738 |  |  | 229 |  |  | — | %
SmartSystems cost of goods sold | 2,274 |  |  | 1,975 |  |  | 299 |  |  | 15 | %
Total cost of goods sold | 71,241 |  |  | 70,713 |  |  | 528 |  |  | 1 | %
Gross profit | 11,811 |  |  | 11,637 |  |  | 174 |  |  | 1 | %
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative | 10,350 |  |  | 10,764 |  |  | (414) |  |  | (4) | %
Depreciation and amortization | 674 |  |  | 592 |  |  | 82 |  |  | 14 | %
Loss (gain) on disposal of fixed assets, net | 3 |  |  | 1,889 |  |  | (1,886) |  |  | (100) | %
Total operating expenses | 11,027 |  |  | 13,245 |  |  | (2,218) |  |  | (17) | %
Operating income (loss) | 784 |  |  | (1,608) |  |  | 2,392 |  |  | 149 | %
Other income (expenses): |  |  |  |  |  |  |
Interest expense, net | (489) |  |  | (441) |  |  | (48) |  |  | 11 | %
Other income | 96 |  |  | 48 |  |  | 48 |  |  | 100 | %
Total other expenses, net | (393) |  |  | (393) |  |  | — |  |  | — | %
Income (loss) before income tax benefit | 391 |  |  | (2,001) |  |  | 2,392 |  |  | 120 | %
Income tax benefit | 607 |  |  | 1,598 |  |  | (991) |  |  | (62) | %
Net loss | $ | (216) |  |  | $ | (3,599) |  |  | $ | 3,383 |  |  | 94 | %

Revenues
Revenues were $83.1 million and tons sold were approximately 1,336,000 for the three months ended March 31, 2024. Revenues for the three months ended March 31, 2023 were $82.4 million, during which time we sold approximately 1,195,000 tons of sand. The key factors contributing to the increase in revenues for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 were as follows:
•Sand revenue was relatively constant at $79.7 million for the three months ended March 31, 2024 versus $80.0 million for the three months ended March 31, 2023. Total volumes increased by approximately 12%, however, average sand prices were lower in the first quarter of 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.
•Smart Systems revenue, was approximately $3.3 million for the three months ended March 31, 2024 compared to $2.3 million for the three months ended March 31, 2023. The increase in SmartSystems revenue was due to higher utilization of our SmartSystems fleet and expanded use of our SmartBelt technology.
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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 $71.2 million and $70.7 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The increase was primarily due to higher freight and transloading costs at in-basin terminals as a result of higher volumes sold in the current period.
Gross Profit
Gross profit was $11.8 million and $11.6 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The increase in the gross profit for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily due to higher sales volumes partially offset by lower average sales prices of our sand relative to the cost to produce and deliver products to our customers. Smart Systems contributed more to gross profit as a result of higher utilization.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased to $10.4 million for the three months ended March 31, 2024 compared to $10.8 million for the three months ended March 31, 2023, due to cost reduction measures put in place by management, which were partially offset by additional costs incurred related to financing activities. Additionally, in the first quarter of 2023, we recorded a $1.9 million net loss on disposal of fixed assets 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 $0.5 million and $0.4 million of net interest expense for the three months ended March 31, 2024 and March 31, 2023, respectively.
Income Tax Expense
For the three months ended March 31, 2024 and March 31, 2023, our effective tax rate was approximately 155.2% and (79.9)%, respectively, based on the annual effective tax rate net of discrete federal and state taxes. 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.
As of March 31, 2024, we have recorded a liability for uncertain tax positions included on our balance sheet, related to our depletion deduction methodology. As of March 31, 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 $0.2 million for the three months ended March 31, 2024 as compared to net loss of $3.6 million for the three months ended March 31, 2023. Gross profit was consistent in both periods. An increase in operating income for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, was primarily attributable to higher total volumes and lower total selling, general and administrative expenses, driven by cost-saving measures by management to reduce our overall operating costs. The three months ended March 31, 2023 also included a $1.9 million net loss on disposal of fixed assets as we reconfigured one of our wet plants to increase the efficiency of its operations and upgraded some of our mining equipment in the prior period.
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
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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 March 31,
|  |  |  |  | 2024 |  | 2023
|  |  |  |  | (in thousands, except per ton amounts)
Revenue |  |  |  |  | $ | 83,052 |  |  | $ | 82,350 |
Cost of goods sold |  |  |  |  | 71,241 |  |  | 70,713 |
Gross profit |  |  |  |  | 11,811 |  |  | 11,637 |
Depreciation, depletion, and accretion of asset retirement obligations |  |  |  |  | 6,697 |  |  | 6,159 |
Contribution margin |  |  |  |  | $ | 18,508 |  |  | $ | 17,796 |
Contribution margin per ton |  |  |  |  | $ | 13.85 |  |  | $ | 14.89 |
Total tons sold |  |  |  |  | 1,336 |  |  | 1,195 |

Contribution margin was $18.5 million and $17.8 million, or $13.85 and $14.89 per ton sold, for the three months ended March 31, 2024 and 2023, respectively. The increase in overall contribution margin for the three months ended March 31, 2024, when compared to the same period in 2023, was primarily due to higher tons sold and the increased utilization of our SmartSystems fleet. The decrease in contribution margin per ton sold was primarily due to lower average sand sales prices for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.
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
22

SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
restructuring, retention and other similar actions; (vi) earn-out, contingent consideration obligations; and (vii) non-cash charges and unusual or non-recurring charges. Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors and commercial banks, to assess:
•the financial performance of our assets without regard to the impact of financing methods, capital structure or historical cost basis of our assets;
•the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities;
•our ability to incur and service debt and fund capital expenditures;
•our operating performance as compared to those of other companies in our industry without regard to the impact of financing methods or capital structure; and
•our debt covenant compliance, as Adjusted EBITDA is a key component of critical covenants to the 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 March 31,
|  |  |  |  | 2024 |  | 2023
|  |  |  |  | (in thousands)
Net loss |  |  |  |  | $ | (216) |  |  | $ | (3,599) |
Depreciation, depletion and amortization |  |  |  |  | 7,200 |  |  | 6,551 |
Income tax expense and other taxes |  |  |  |  | 607 |  |  | 1,845 |
Interest expense |  |  |  |  | 496 |  |  | 442 |
EBITDA |  |  |  |  | $ | 8,087 |  |  | $ | 5,239 |
Net loss on disposal of fixed assets |  |  |  |  | 3 |  |  | 1,889 |
Equity compensation |  |  |  |  | 581 |  |  | 736 |
Acquisition and development costs |  |  |  |  | 308 |  |  | 271 |
Cash charges related to restructuring and retention of employees |  |  |  |  | 107 |  |  | — |
Accretion of asset retirement obligations |  |  |  |  | 249 |  |  | 200 |
Adjusted EBITDA |  |  |  |  | $ | 9,335 |  |  | $ | 8,335 |

Adjusted EBITDA was $9.3 million for the three months ended March 31, 2024 compared to $8.3 million for the three months ended March 31, 2023. The increase in Adjusted EBITDA for the three months ended March 31, 2024, compared to the same period in 2023, was primarily due to higher sales volumes, increased IPS sales and higher utilization of our SmartSystems fleet.
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.
23

SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
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 (used in) operating activities to free cash flows.

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
|  |  |  |  | (in thousands, except per ton amounts)
Net cash (used in) provided by operating activities |  |  |  |  | $ | (3,863) |  |  | $ | 5,105 |
Purchases of property, plant and equipment |  |  |  |  | (1,646) |  |  | (4,018) |
Free cash flow |  |  |  |  | $ | (5,509) |  |  | $ | 1,087 |

Free cash flow was $(5.5) million for the three months ended March 31, 2024 compared to $1.1 million for the three months ended March 31, 2023. The decrease in free cash flow for the three months ended March 31, 2024 was due to a decrease in net cash provided by operating activities for the three months ended March 31, 2024 in comparison to the same period in 2023. The decline in cash provided by operating activities was attributable to an increase in working capital to support higher sales volumes.
Liquidity and Capital Resources
Our primary sources of liquidity are cash flow generated from operations and availability under our ABL Credit Facility and other equipment financing sources. As of March 31, 2024, cash on hand was $4.6 million and we had $6.0 million in undrawn availability on our ABL Credit Facility. We are in the process of refinancing this 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
Capital Requirements
We expect full year 2024 capital expenditures to be between $15.0 million and $20.0 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 ABL Credit Facility.
Indebtedness
Our debt facilities include the Oakdale Equipment Financing, various notes payable and our ABL Credit Facility. Our Oakdale Equipment Financing is secured by substantially all of the assets at our Oakdale facility. The outstanding balance under the Oakdale Equipment Financing as of March 31, 2024 was $6.9 million. Minimum cash payments on this facility for the remainder of 2024 are anticipated to be $5.7 million. Our various notes payable are primarily secured by heavy equipment purchases as well as some of our manufactured SmartSystems. Total debt under these notes payable as of March 31, 2024 was $3.0 million. Minimum cash payments on these notes payable for the remainder of 2024 are anticipated to be $0.9 million. There was $14.0 million outstanding on our ABL Credit Facility as of March 31, 2024, which matures December 13, 2024. We are in the process of refinancing this facility.
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SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
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 March 31, 2024 were $21.6 million. Minimum cash payments on operating leases for the remainder of 2024 are anticipated to be $8.3 million.
Mineral Rights Propert y
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 at March 31, 2024.
Contractual Obligations
As of March 31, 2024, we had contractual obligations for the ABL Credit Facility, Oakdale 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, same of our excavation and our wet sand processing activities have historically been limited during winter months. As a consequence, we typically have experienced lower cash operating costs in the first and fourth quarter of each calendar year, and higher cash operating costs in the second and third quarter of each calendar year when we have overproduced sand to meet demand in the winter months. These higher cash operating costs are capitalized into inventory and expensed when these tons are sold, which can lead to us having higher overall cost of production in the first and fourth quarters of each calendar year as we expense inventory costs that were previously capitalized. We have indoor wet processing facilities at two of our plant locations, which allow us to produce wet sand inventory year-round to support a portion of our dry sand processing capacity, which may reduce certain 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 three months ended March 31, 2024, revenue from Equitable Gas Corporation, Halliburton Energy Services and Encino Energy accounted for 37.4%, 11.4% and 11.2% respectively, of total revenue. For the three months ended March 31, 2023, EQT Production Corporation, Encino Energy, and Liberty Oilfield Services accounted for 32.5%, 13.3%, and 10.8%, respectively, of total revenue.
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SMART SAND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
Critical Accounting Policies and Estimates
There have been no material changes in our critical accounting policies and procedures during the three months ended March 31, 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 ABL Credit Facility bear interest at a rate per annum equal to an applicable margin, plus, at our option, either a LIBOR rate or an alternate base rate (“ABR”). The applicable margin is 2.00% for LIBOR loans and 1.00% for ABR loans. There was $14.0 million outstanding borrowings under our ABL Credit Facility as of March 31, 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 three months ended March 31, 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 have been no changes in internal control over financial reporting for the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, 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 months ended March 31, 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 March 31, 2024, no shares were sold by the Company without registration under the Securities Act of 1933, as amended.
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. MSHA is expected to adopt similar rules as part of its “Long Term Items” for rulemaking. Airborne respirable silica is associated with work areas at our site and is monitored closely through routine testing and MSHA inspection. If the workplace exposure limit is lowered significantly, we may be required to incur certain capital expenditures for equipment to reduce this exposure.
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.
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ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS

3.1 |  | Second Amended and Restated Certificate of Incorporation of Smart Sand, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 15, 2016)
3.2 |  | Second Amended and Restated Bylaws of Smart Sand, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 15, 2016)
31.1* |  | Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2* |  | Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*† |  | Certification Pursuant to 18 U.S.C. adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*† |  | Certification Pursuant to 18 U.S.C. adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
95.1* |  | Mine Safety Disclosure Exhibit
101.INS |  | Extracted 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.

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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.
May 13, 2024 | By: | /s/ Lee E. Beckelman
|  | Lee E. Beckelman, Chief Financial Officer
|  | (Principal Financial Officer)

| Smart Sand, Inc.
May 13, 2024 | By: | /s/ Christopher M. Green
|  | Christopher M. Green, Vice President of Accounting
|  | (Principal Accounting Officer)

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