Good morning, and welcome to the Smart Sand second quarter investor conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Chris Green, Corporate Controller. Please go ahead. Good morning, and thank you for joining us for Smart Sand's second quarter 2023 earnings call. On the call today, we have Chuck Young, Founder and Chief Executive Officer, Lee Beckelman, Chief Financial Officer, and John Young, Chief Operating Officer. Before we begin, I would like to remind all participants that our comments made today will include forward-looking statements, which are subject to certain risks and uncertainties that could cause actual results or events to materially differ from those anticipated. For a complete discussion of such risks and uncertainties, please refer to the company's press release and our documents on file with the SEC. Smart Sand disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 9th, 2023. Additionally, we will refer to the non-GAAP financial measures of contribution margin, adjusted EBITDA, and free cash flow during this call. These measures, when used in combination with our GAAP results, provide us and our investors with useful information to better understand our business. Please refer to our most recent press release or our public filings for our reconciliation of gross profit to contribution margin, net income to adjusted EBITDA, and cash flow provided by operating activities to free cash flow. I would now like to turn the call over to our CEO, Chuck Young. Thanks, Chris. Good morning. Smart Sand delivered another quarter of strong operating and financial results. In the second quarter, we sold approximately 1.1 million tons. We generated $19 million in contribution margin and $11.4 million in adjusted EBITDA in the quarter, both solid improvements over second quarter 2022 results and first quarter 2023 results. In the first half of the year, we generated approximately $12 million in free cash flow, including approximately $11 million in the quarter. We expect to remain free cash flow positive for 2023. In the quarter, we paid down approximately $13 million in debt. We are committed to maintaining a strong balance sheet that will allow us to continue to successfully manage through the operating cycles in the oil and gas industry. Our focused business strategy of providing high-quality Northern White sand in an efficient and sustainable fashion to our customers throughout North America continues to deliver strong financial results and long-term value for our shareholders. We could not have achieved these results without the dedication and hard work of our employees. I want to thank our employees for their efforts and continued commitment to Smart Sand. In the second quarter, we saw continued strong demand for Northern White frac sand. Activity in the Bakken increased substantially from the first quarter. We currently expect to see strong demand in this basin through the end of the third quarter. Typically, the second and third quarters of the year are the strongest demand periods for sand in the Bakken, as most producers plan the majority of their completion activity in the summer months. We currently expect activity to moderate in the fourth quarter due to normal seasonal slowdown in completion activity in this basin. With our Van Hook Terminal in North Dakota, we believe we have the most efficient movement of Northern White frac sand into the Bakken, which allows us to continue to be a market leader in this key Northern White market. As we highlighted on our first quarter call, activity did moderate in the Marcellus in the second quarter due to lower gas prices, but sales volume into this basin were still at healthy levels. Tons sold in the Marcellus were lower than the first quarter shipments, but slightly higher than the same period a year ago. Currently, we expect activity in the Marcellus to be lower in the third quarter, but we're seeing signs that sales volumes into the Marcellus should pick up in the fourth quarter. We believe long-term natural gas fundamentals are strong, and completion activity in the Marcellus will grow over time. We are currently expanding our Waynesburg terminal in southwestern Pennsylvania to allow us to take advantage of the expected increased activity in the Marcellus in the future and to increase our market share in this key Northern White market. This expansion is expected to be completed before year-end. Our Blair facility in Wisconsin is operational, and we made our first shipments into Canada this quarter. While still a small portion of our overall sales, we expect sales volumes to continue to grow in this market. With Blair being directly on the CN rail line, we are well positioned to compete in the Canadian frac sand market. We currently expect sales volumes into Canada to be 10%-15% of tons sold in the second half of this year. Our focus on cost-effective, efficient, and sustainable delivery of frac sand from the mine to the well site has established Smart Sand as a market leader of frac sand in the Bakken and Marcellus markets. We believe the Blair facility now provides us an opportunity to become a market leader of Northern White sand in the Canadian market as well. We believe Northern White sand is undeniably a superior proppant to regional sand alternatives. While our primary focus will continue to be on growing our market share in primary Northern White markets, we believe Northern White sand leads to better long-term well results, and E&P companies in the Permian and the Eagle Ford and other markets that have regional sand can improve their long-term well performance by using Northern White sand in their well completion designs. We commissioned a white paper that you can read on our website that builds on a study done by Rystad Energy, a leading energy consulting firm that evaluated well results in the Delaware and Midland Basin since 2018, comparing the performance of wells completed with Northern White Sand to wells completed with regional sand. The results of these studies are striking. They clearly demonstrate the potential for producers to achieve improved well results using Northern White Sand as the proppant in their completion designs. By choosing Northern White Sand versus regional sand, producers have the potential to significantly improve long-term well results, which should lead to higher production, higher free cash flow, and ultimately lower capital spent over time, as producers will have to drill less wells to deliver the same or higher production levels. Also, regional sand supply in the Permian Basin is potentially facing a threat, as the dunes sagebrush lizard is now scheduled to be listed as an endangered species in the next 12-18 months. This listing could impact sand mining operations and supply that is based in the Permian, that could lead to increased demand for Northern White Sand in this basin. It is too early to tell how big of an impact the listing of the dunes sagebrush lizard may have on regional sand mines in the Permian or potential increased demand for Northern White, but this is something we are keeping a close watch on. To be clear, Smart Sand does not have to sell sand into the operating basins of the southwestern United States that are currently primarily supplied by regional sand to be successful. As demonstrated by our strong financial results, we will continue to deliver solid operating and financial performance by serving the current key Northern White markets. However, we believe we can deliver high-quality Northern White Sand sufficiently and sustainably into the Permian and Eagle Ford basins, in particular, which can be a win-win for Smart Sand and E&Ps. We can expand sales volume into these markets, and E&Ps can benefit from better long-term well results, which over time should lead to them to be able to generate higher free cash flow as they generate more production from every well they drill. While our frac sand sales remain strong, we're continuing to look for, to grow our other business lines. The performance of SmartSystem's last mile offering continues to improve. We added our SmartBelt technology to our service offerings, which allows us to handle greater volumes of sand at the well site while reducing our ongoing maintenance requirements. We operated two SmartSystem fleets with our SmartBelt system in the second quarter and saw substantial improvement in our operating results due to lower maintenance costs. Additionally, with the new belt technology, our Smart Systems can support higher volumes directly into the blender of the pressure pumping equipment, leading to more efficient last mile delivery for producers and pressure pumpers compared to other sand delivery options at the well site. We're investing in additional Smart Belts to add to our existing fleet to further extend these savings. We expect to have nine fully functional Smart Systems with this new technology available to serve the market starting in 2024. We expect to see continued improvement in the operational profitability of our last mile offering going forward. Our Industrial Product Solution business also continues to grow. Industrial Product Solution sales volume this quarter increased 70% over first quarter results and represented approximately 5% of our overall sales volume in the quarter. We are investing in cooling and blending capabilities at our Utica, Illinois, facility, which should allow us to more aggressively market to the foundry markets and other industrial applications. This investment is expected to be completed by year-end. We expect sales volumes to be in the 5% range or better for the remainder of 2024 and grow from there. We're committed to the Industrial Product Solutions market to help diversify our business beyond oil and gas and to more effectively utilize our asset base. We are taking the time to build this business for the long-term success. As always, we will continue to keep our eye on the future. We are focused on generating higher returns from our existing quality asset base and logistics capabilities, while maintaining prudent leverage levels that allow us to successfully manage our business through the operating cycles in the oil and gas industry. Our goal is to consistently deliver free cash flow and to be a market leader of delivering high-quality Northern White sand to frac and industrial sand markets. We will always keep our employees' and shareholders' interests in mind in everything we do. With that, I'll turn the call over to our CFO, Lee Beckelman. Thanks, Chuck. Now I'll go through some of the highlights of the second quarter. We sold 1.1 million tons in the second quarter of 2023, which is relatively consistent with first quarter sales volumes of 1.2 million tons. Total revenues for the second quarter of 2023 were $74.8 million, compared to $82.4 million in the first quarter of 2023. Total revenues were slightly lower in the second quarter of 2023, primarily due to lower tons sold and contractual shortfall revenue recognized in the first quarter of 2023. Our cost of sales for the quarter were $62.1 million, compared to $70.7 million last quarter. The decrease was primarily due to lower seasonal production costs. Production costs are typically lower in the second and third quarters of the year as we build inventory over the warmer months to support sales demand later in the year as we enter the winter months. Additionally, we had lower freight expenses sequentially due to a shift in our in-basin sales mix. Total operating expenses decreased to $9.6 million in the second quarter, compared to $13.2 million in the first quarter of 2023, due primarily to a $1.9 million net loss on disposal of fixed assets included in the previous quarter, as well as year-end 2022 bonuses that were paid in the first quarter of 2023. For the second quarter of 2023, contribution margin was $19 million, and adjusted EBITDA was $11.4 million, compared to the first quarter contribution margin of $17.8 million and adjusted EBITDA of $8.4 million. The increase in contribution margin was due primarily to lower production costs and improved margins for our SmartSystem fleets. Adjusted EBITDA was higher sequentially due to the higher contribution margin and lower operating expenses. For the second quarter 2023, contribution margin per ton was $17.5 7 per ton, compared to $14.89 per ton in the first quarter 2023. For the second quarter of 2023, we generated $16.1 million in net cash provided by operating activities, leading to $10.8 million in free cash flow after we spent $5.2 million on capital expenditures. Year to date, through the end of June, we have generated $11.9 million in free cash flow. We ended the second quarter of no outstanding borrowings on our credit facility. We had approximately $5.5 million in cash and cash equivalents at the end of the second quarter. Between cash and availability from our credit facility, we currently have available liquidity in excess of $24 million. Currently, we expect sales volumes to be in the $1 million-$1.2 million range in the third quarter. We believe third quarter contribution margin per ton will remain in the mid-double digit range of $14-$17 per ton, consistent with the last three quarters. Shortfall revenue in the third quarter will be similar to the first quarter shortfall revenue. The majority of the reported shortfall revenue being recorded in 2023 is related to 1 contract that recognizes shortfall revenue in the first and third quarter of each year. This contract expires in the third quarter of this year. We still expect capital expenditures for the year to be in the $20 million-$25 million range, which includes the capital expenditures related to the startup of the Blair facility, which is now operational, as well as the expansion of the Waynesburg terminal and investment in the cooling and blending capabilities at Utica that Chuck mentioned in his comments. We still expect free cash flow to be positive for the year. This concludes our prepared comments, and we will now open the call up for questions. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Once again, that was star then one to ask a question, and at this time, we will pause momentarily to assemble the roster. Our first question comes from Patrick Ouellette of Stifel. Please go ahead. Hey, this is Pat. I'm for Stephen Gengaro today. Thanks for taking the time to answer the questions. Sure. How are you doing? Could you give us an update on industry supply and demand for frac sand and, and what it looks like specifically for Northern White, and maybe how you expect demand to play out in the second half of the year and into 2024? Yeah. As Chuck had kind of said in his comments, you know, we expect some moderation in demand in the fourth quarter. It's hard to say what that's gonna be. The fourth quarter is always kind of a little bit of a shot in the dark at this time of the year. Certainly the fundamentals look good on Northern White right now. You know, the market has been relatively in supply and demand balance, you know, we think that, you know, it's promising for the rest of this year from a volume perspective. We also think that Canada is gonna be a nice bright spot for us, kind of going into the third and fourth quarter of this year. Great. Okay, thanks. Just building off, talking about Canada. Regarding gross profit, you noted improvements sequentially based on sales mix of the basins you were delivering to. Is any of that, margin improvement coming from the deliveries to Canada? Well, again, as we highlighted in our press release and comments, part of the margin improvement was lower production cost in the second quarter, because we capitalized inventory costs, and typically we have lower production costs in the second and third quarter, and then we'll see a little higher in the fourth and the first quarter as we draw down inventory. That was, you know, basically a driver of that. Pricing was relatively flat in the second quarter versus the first quarter. In Canada, we do expect that to, you know, help overall sales, but most of our sales in Canada right now are on a FOB mine basis, so that actually will lead our pricing to be a little lower on an average sales price, even though, we'll have less freight expense associated with that. The margins in Canada right now seem to be fairly similar to what we're seeing in the U.S. Okay, great. That's very helpful. I'll turn it back. The next question comes from Jim Barrett of Barrett Investments. Please go ahead. Good morning, everyone. Good morning. Lee, this may be a question for you. Your current level of capital spending for this year, is that the new normal, given the addition of Blair and growth plans for SmartSystem, or do you expect spending to subside in 2024 and 2025? Well, this year we're expected to spend about $20 million-$25 million, which included specific growth initiatives at Blair, the expansion at Waynesburg, as we highlighted, as well as the IPS expansion. E very year we evaluate, but I can say generally that, you know, our maintenance type and efficiency capital is probably gonna be typically in the $10 million-$15 million a year. Depending on growth initiatives, we might see another $5 million-$10 million. Well, I think we'll continue to range under our current operating structure with our three mines and probably a $15 million-$25 million CapEx per year, depending on growth initiatives each year. On a separate note, could you tell us how much of your volumes currently are under long-term contracts? Well, roughly today, about 50% of our volumes are under some term portion of contracts. That goes, our contract structures today go anywhere from kind of 6-18 months for maybe half of those volumes, and we do have a few long-term contracts that go out multi-year. I see. Chuck, the Canadian market, can you tell us who are your sand competitors to service those customers? Just give us sort of a sense of what the competitive framework is in that up there. Yeah. Basically, the Canadian market, for the most part, we see Canadian-- it's Canadian National origination. You know, Source, Badger, companies like that, are existing companies. We see that market and the activity that's going on with the E&Ps there, it looks to be very, very strong. The pipeline infrastructure is being put in place, and we're feeling really good about that market. Okay, good. My, my last question is the, the white paper that was on your website, you know, that highlighted the, the superior economics of using Northern White sand in markets like the Permian and Eagle Ford. Any reception from the customers in, in Texas, as to the, is that generating any additional interest, or are you still in the very early innings of, you know, educating customers as to the relative merits of the different types of sands? Yeah, I think in general, right now, you're, you're seeing a lot of the E&Ps, you know, really looking at their, their production and their wells, in the Permian, and looking for, you know, ways to impact that. We definitely think it's on the radar. Additionally, this dunes sagebrush lizard thing has a way of not, not only impacting sand mining down in, in the Permian Basin, but also, you know, could, could have potential impact on people in, in their acreage holdings on drilling down there. I think in general, there's kind of a concern on what's going on down there. You know, again, we're not spending capital on this right now down there, but we are very much watching this. Okay. Well, thank you both very much. Thank you. Thank you. The next question comes from Jonathan Catlin of Catlin Capital Management. Please go ahead. Hi, good morning, gentlemen. Congratulations on a terrific quarter. I just have two questions. You say that, you're gonna be cash flow positive for the year. You're already, I think, substantially cash flow positive for the year. Does that mean in the second half, we're gonna have to see negative cash flow? Number two is just more of a general question. You know, this quarter is, was kind of the performance seems a bit surprising. You know, annual assessments were estimated a loss. You did you had a substantial gain. You know, it looks like your business is evolving and Looks like you are moving into more profitable areas of the market. Can you just kind of give some color on where those, which, which markets are you seeing better profitability in and, and how sustainable they are? All right. Well, I'll answer the first question. We did have strong free cash flow in the first half of the year. We will see, potentially a little higher CapEx in the second half of the year. We spent about $9.2 million in the first half. We've guided $20 million-$25 million as we complete these projects that Chuck highlighted in his comments. We could see a little higher CapEx in the second half of the year. Typically, we'll have a little bigger build of working capital for inventory in the third quarter. That should moderate some in the fourth quarter. I would expect us to not be as positive free cash flow in the second half of the year, but I do expect to generate some positive free cash flow in the second half of the year and be, you know, have strong overall free cash flow for the full year. Then in terms of markets, John and Chuck can join in, but I think, again, you know, we believe because of our logistics advantages and, and what we've invested in the Van Hook Terminal and the Waynesburg terminal in particular, continue to lead us to be market leaders in the, in the Bakken and the Marcellus in particular. And we continue to expect to still be strong leaders in those markets. And we believe going forward, that we can do the same thing in Canada. The real upside potential for us is continue to grow our market shares in the Marcellus and the Bakken, based on our low-cost production, as well as our really efficient movement, assuming the railroads continue to be good partners with us, and look to expand that and build that same model into Canada. We don't necessarily talk about our individual profitability by basin, but those three basins continue to be. We still see good long-term prospects in all three of those basins in terms of being primary Northern White. Additionally, while it's still a small part of our business, our SmartSystems continue to get traction as we improve their operational efficiencies. We expect it to continue to be additive to overall contribution margin going forward. We are starting to make inroads into Industrial Product Solutions. As we said, it's 5% of our sales this year, this quarter. Substantial improvement quarter-over-quarter. We see those two as being additive on top of the frac sand business that should help us potentially positive as well as we go forward. Yeah, the only thing I'd add to that is that, you know, over the years, we've made some investments, capital investments in operational efficiency at our mine sites, and those are starting to pay some dividends. You know, that, that's certainly something that's providing a little bit of tailwind on, you know, on operating results here. Hopefully, that continues. You know, we think that, you know, these investments that have been made were, you know, were something that we've been looking at doing and we're seeing some advantage from them. Thank you very much. That's very helpful. Thank you. Next question comes from Stephen Gengaro of Stifel. Please go ahead. Thanks. Good morning, gentlemen. Morning, Stephen. I was wondering, We hear a lot. We definitely have heard about spot pricing softness in Texas. I was curious, given the different, the supply-demand drivers for Northern White and the destinations for your product, what are you seeing in sort of the spot market, and how does that kinda impact any existing contracts? Yeah. You know, obviously, we keep an eye on what's happening down in Texas, and there has been some moderation on the pricing there. Not entirely sure what's driving that. I think there's a lot of supply down there, and, you know, any hiccups in demand can impact that market pretty dramatically. In Northern White, you know, in certain cases, we see pricing moderating, depending on a grade of sand, you know, size of sand grain, and those types of things. It's hard to pin down exactly, you know, an individual market, and it's something softening. You know, we, we keep a close eye on it. We work closely with our customers. We work closely with the railroads to make sure that we're continuing to offer a competitive product in there. Given that Northern White's been in relative s upply and demand balance over, you know, call, you know, since, since the downturn of COVID, you know, and some of the, you know, mines are no longer in existence, you know, we've seen that supply-demand to remain in balance. You know, I, I don't know, Stephen, if that continues. You know, I don't-- I haven't heard of any additional supply coming on board, you know, or coming online in Northern White to any great degree. You know, any kind of demand upset, you know, either on the upside or the downside, has potential to, to affect that. You know, mostly what we see when prices are moderating is more seasonality or, or, you know, rig, rigs moving and things like that. You know, right now, it seems like the market is in relative balance. Great. Thank you. And then one other for me. Have you seen much change, and you might have mentioned this and I got cut off, but have you seen much change on the cost side as far as... I know you've done a lot of work and done a good job managing the cost side, but on the COGS line, has there been any positive movements we should be thinking about as we go forward from here? Well, I think as we highlighted, and John talked about earlier, we have made investments to improve our efficiency, particularly around mining, at our Oakdale facility, and we're actually just kind of starting those processes. We would expect that to really start helping, you know, margins, and costs as we go into 2024. Again, that's also driven by, you know, higher volumes. To the extent we get higher volumes and increase our utilization, we do have kinda high fixed operating leverage. As we can sell more volumes and spread our fixed costs, that helps drive our, our costs per ton out as well, down as well. Assuming we can, you know, maintain or increase our volumes and keep improving our mining efficiencies, in particular on these new initiatives, I would expect to help, on a cost per ton basis, bring down our cost down going into 2024. thank you. If I could just slip one more in. When we think about the kinda evolution of, of frac sand demand or usage per stage, now that's obviously improved over the years. Where does that stand now? Is, is it stabilizing? Do you still see modest growth? How should we think about that? Well, I think in a word, that we are seeing growth, right? You know, the stages are, the laterals continue to get longer. Folks wanna pump, you know, more sand per stage. They wanna do the stages faster. Really, you know, when we think about, you know, this growth and the amount of sand that we are forcing down the well, in any given basin that we're operating in, it really comes back to kinda logistics calls that we talk about often on these calls, which is making sure that you've got the ability to deliver the quantities of sand reliably, sustainably, and get them down the hole. You have to, you have to be thinking about this from the mine to the wellsite. Chuck had mentioned, you know, we've launched this new SmartBelt technology for our wellsite solutions. That was driven primarily by the requirement for forcing huge amounts of sand down the well in a short amount of time. You know, we, we think that we've got a good mousetrap on that and the ability to support these longer laterals. We certainly have the reserve base. We have over 500 million tons of sand. We certainly have the production capacity. We have about 10 million tons of annual capacity available, and we have the right mix that, you know, comports with what these guys are looking to do, the fine-grained sand. We have the logistics infrastructure with rail to, you know, to make that sand delivery into the market. Yeah. We put our, we put our system, our, our last-mile system, up against anybody's system on how much sand can be pumped down a hole a day. I, I think that people are, are starting to really recognize that. Okay, great. Now, thank you for all the details, gentlemen. Thanks, Stephen. Once again, if you would like to ask a question, please press star then one. This concludes our question and answer session. I would like to turn the conference back over to Chuck Young for any closing remarks. Thanks for joining us on our second quarter call. Look forward to speaking you, to you again in November. Conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.