Smart Sand Inc (SND) 2023 Q2 法說會逐字稿

Good morning, and welcome to the Smart Sand Second Quarter Investor Conference Call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Chris Green, Corporate Controller. Please go ahead.

早上好，歡迎參加 Smart Sand 第二季度投資者電話會議。 （操作員說明）請注意，正在記錄此事件。我現在想將會議交給公司財務總監克里斯·格林 (Chris Green)。請繼續。

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.

早上好，感謝您參加 Smart Sand 2023 年第二季度財報電話會議。今天的電話會議上，我們有創始人兼首席執行官查克·楊 (Chuck Young)；李·貝克爾曼，首席財務官；和首席運營官約翰·楊。

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 9, 2023.

在開始之前，我想提醒所有參與者，我們今天發表的評論將包括前瞻性陳述，這些陳述受到某些風險和不確定性的影響，可能導致實際結果或事件與預期產生重大差異。有關此類風險和不確定性的完整討論，請參閱公司的新聞稿和我們向 SEC 備案的文件。 Smart Sand 不承擔任何更新或修改任何財務預測或前瞻性陳述的意圖或義務，無論是由於新信息、未來事件還是其他原因。本次電話會議包含時效性信息，僅截至今天（2023 年 8 月 9 日）直播時準確。

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 a reconciliation of gross profit to contribution margin, net income to adjusted EBITDA and cash flow provided by operating activities to free cash flow.

此外，我們將在本次電話會議中參考貢獻邊際、調整後 EBITDA 和自由現金流的非 GAAP 財務指標。這些指標與我們的公認會計準則結果結合使用時，可以為我們和我們的投資者提供有用的信息，以更好地了解我們的業務。請參閱我們最新的新聞稿或我們的公開文件，了解毛利潤與邊際貢獻、淨利潤與調整後 EBITDA 以及經營活動提供的現金流與自由現金流的調節表。

I would now like to turn the call over to our CEO, Chuck Young.

我現在想將電話轉給我們的首席執行官查克·楊 (Chuck Young)。

Thanks, Chris, and 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. Additionally, 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 our strong balance sheet that will allow us to continue to successfully manage through the operating cycles in the oil and gas industry.

謝謝克里斯，早上好。 Smart Sand 又一個季度實現了強勁的運營和財務業績。第二季度，我們銷售了約 110 萬噸，貢獻利潤為 1900 萬美元，調整後 EBITDA 為 1140 萬美元，均較 2022 年第二季度業績和 2023 年第一季度業績有了顯著改善。此外，今年上半年，我們產生了約 1200 萬美元的自由現金流，其中本季度約 1100 萬美元。我們預計 2023 年自由現金流將保持為正值。本季度，我們償還了約 1300 萬美元的債務。我們致力於維持強勁的資產負債表，這將使我們能夠繼續成功地管理石油和天然氣行業的運營週期。

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.

我們的重點業務戰略是以高效和可持續的方式為整個北美的客戶提供優質的北部白沙，繼續為我們的股東帶來強勁的財務業績和長期價值。沒有我們員工的奉獻和辛勤工作，我們不可能取得這些成果。我要感謝我們的員工為 Smart Sand 所做的努力和持續承諾。

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 and 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.

第二季度，我們看到對北方白壓裂砂的需求持續強勁。巴肯的活動較第一季度大幅增加。我們目前預計到第三季度末該盆地的需求將強勁。通常，一年中的第二和第三季度是巴肯沙子需求最強勁的時期，因為大多數生產商計劃在夏季完成大部分完工活動。由於該盆地正常的季節性放緩和竣工活動，我們目前預計第四季度的活動將放緩。我們相信，憑藉位於北達科他州的范胡克碼頭，我們能夠以最高效的方式將北白岩壓裂砂輸送到巴肯，這使我們能夠繼續成為北白岩這一關鍵市場的市場領導者。

As we highlighted on our first quarter call, activity did moderate in the Marcellus in the second quarter due to lower gas prices, with sales volume into this basin were still at healthy levels. Tons sold in the Marcellus were lower than the first quarter shipments was slightly higher than the same period a year ago. Currently, we expect activity in the Marcellus to be lower in the third quarter, where we're seeing signs of sales volumes into the Marcellus should pick up in the fourth quarter.

正如我們在第一季度電話會議中強調的那樣，由於天然氣價格較低，第二季度馬塞勒斯盆地的活動有所放緩，該盆地的銷量仍處於健康水平。 Marcellus 的銷售噸數低於第一季度，出貨量略高於去年同期。目前，我們預計第三季度馬塞勒斯的活動將會減少，但我們看到馬塞勒斯的銷量應會在第四季度回升的跡象。

We believe long-term natural gas fundamentals are strong and completion activity in 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.

我們相信，長期天然氣基本面強勁，馬塞勒斯的完井活動將隨著時間的推移而增長。我們目前正在擴建賓夕法尼亞州西南部的韋恩斯堡碼頭，以便我們能夠利用馬塞勒斯未來預計活動增加的機會，並增加我們在這個關鍵的北部懷特市場的市場份額。此次擴建預計將於年底前完成。

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% to 15% of tons sold in the second half of this year.

我們位於威斯康星州的布萊爾工廠已投入運營，本季度我們首次向加拿大發貨。雖然仍占我們總銷售額的一小部分，但我們預計該市場的銷量將繼續增長。由於布萊爾直接位於加拿大國家鐵路線上，我們在加拿大壓裂砂市場的競爭中處於有利地位。我們目前預計加拿大的銷量將佔今年下半年銷量的 10% 至 15%。

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 and the well completion designs.

我們專注於將壓裂砂從礦山到井場的成本效益、高效和可持續輸送，使 Smart Sand 成為巴肯和馬塞勒斯市場壓裂砂的市場領導者。我們相信布萊爾工廠現在為我們提供了成為加拿大市場北部白沙市場領導者的機會。我們相信，北方白砂無疑是優於區域砂替代品的支撐劑。雖然我們的主要重點將繼續是增加我們在北方白河主要市場的市場份額，但我們相信北方白河砂可以帶來更好的長期油井結果，二疊紀和伊格爾福特以及其他擁有區域砂的市場的勘探與生產公司可以通過使用北方白砂和完井設計來提高其長期油井性能。

We commissioned the white paper that you can read on our website to build 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 spend over time as producers will have to drill less wells to deliver the same or higher production levels.

我們委託您在我們的網站上閱讀這份白皮書，該白皮書以Rystad Energy 所做的一項研究為基礎。Rystad Energy 是一家領先的能源諮詢公司，該公司自2018 年以來評估了特拉華州和米德蘭盆地的油井結果，比較了使用Northern White 砂完成的油井的性能到用區域砂完成的井。這些研究的結果是驚人的。他們清楚地證明了生產商在完井設計中使用北方白砂作為支撐劑來改善油井結果的潛力。通過選擇北部白砂而不是區域砂，生產商有可能顯著改善長期油井結果，這將導致更高的產量、更高的自由現金流，並最終隨著時間的推移降低資本支出，因為生產商將需要鑽探更少的井來交付相同或更高的生產水平。

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 to 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.

此外，二疊紀盆地的區域沙子供應可能面臨威脅，因為沙丘鼠尾草蜥蜴計劃在未來 12 至 18 個月內被列為瀕危物種。該清單可能會影響二疊紀的採砂作業和供應，從而可能導致該盆地對北部白砂的需求增加。現在判斷沙丘鼠尾草蜥蜴的上市可能對二疊紀地區的沙礦或對北白的潛在需求增加有多大影響還為時過早，但這是我們正在密切關注的事情。

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 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 are continuing to look to grow our other business lines.

需要明確的是，Smart Sand 不一定要向美國西南部的運營盆地出售沙子才能取得成功，這些盆地目前主要由區域性沙子供應。正如我們強勁的財務業績所證明的那樣，我們將繼續通過服務當前主要的北方白人市場來提供穩健的運營和財務業績。然而，我們相信我們可以充分、可持續地向二疊紀盆地和伊格爾福特盆地提供高質量的北部白砂，特別是這對於Smart Sand和勘探與生產來說是雙贏的，我們可以擴大這些市場和勘探與生產的銷量可以從更好的長期油井結果中受益，隨著時間的推移，他們將能夠產生更高的自由現金流，因為他們鑽探的每口井都會產生更多的產量。儘管我們的壓裂砂銷售依然強勁，但我們仍在繼續尋求發展其他業務線。

The performance of SmartSystems last mile offering continues to improve. We added our smart belt technology to our service offering, which allows us to handle greater volumes of sand at the well site while reducing our ongoing maintenance requirements. We operated 2 SmartSystems fleets with our smart belt system in the second quarter and saw a substantial improvement in our operating results due to lower maintenance costs. Additionally, with the new valve technology, our SmartSystems 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.

SmartSystems 最後一英里產品的性能不斷提高。我們將智能皮帶技術添加到我們的服務中，這使我們能夠在井場處理更多的沙子，同時減少我們的持續維護需求。第二季度，我們使用智能皮帶系統運營了 2 個 SmartSystems 車隊，由於維護成本降低，我們的運營業績大幅改善。此外，借助新的閥門技術，我們的智能係統可以支持更大的體積直接進入壓力泵送設備的攪拌機，從而與井場的其他砂輸送選項相比，為生產商和壓力泵工提供更高效的最後一英里輸送。

We are investing in additional smart belts to add to our existing fleet to further extend these savings. We expect to have 9 fully functional SmartSystems 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.

我們正在投資購買更多智能傳送帶，以添加到我們現有的車隊中，以進一步節省成本。我們預計從 2024 年開始，將有 9 個採用這項新技術的功能齊全的 SmartSystems 為市場提供服務。我們預計未來最後一英里產品的運營盈利能力將持續改善。

Our Industrial Product Solutions business also continues to grow. Industrial Product Solutions 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.

我們的工業產品解決方案業務也在持續增長。本季度工業產品解決方案銷量比第一季度增長 70%，約佔本季度總銷量的 5%。我們正在投資伊利諾伊州尤蒂卡工廠的冷卻和混合能力，這將使我們能夠更積極地向鑄造市場和其他工業應用進行營銷。這項投資預計將於年底前完成。我們預計 2024 年剩餘時間內銷量將保持在 5% 或更高的範圍內，並在此基礎上繼續增長。我們致力於工業產品解決方案市場，以幫助我們實現石油和天然氣以外的業務多元化，並更有效地利用我們的資產基礎。我們正在花時間打造這項業務，以取得長期成功。

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.

一如既往，我們將繼續關注未來。我們專注於從現有的優質資產基礎和物流能力中獲得更高的回報，同時保持審慎的槓桿水平，使我們能夠在石油和天然氣行業的運營週期中成功管理我們的業務。

Our goal is to consistently deliver free cash flow and to be a market leader of delivering high-quality Northern White sand to frac in industrial sand markets. And we will always keep our employees and shareholders interest in mind in everything we do. And with that, I'll turn the call over to our CFO, Lee Beckelman.

我們的目標是始終如一地提供自由現金流，並成為工業砂市場中提供優質北方白砂進行壓裂的市場領導者。我們所做的一切都將始終牢記員工和股東的利益。接下來，我會將電話轉給我們的首席財務官 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 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.

謝謝，查克。現在我將回顧第二季度的一些亮點。我們2023年第二季度的銷量為110萬噸，與第一季度120萬噸的銷量相對一致。 2023 年第二季度的總收入為7480 萬美元，而2023 年第一季度的總收入為8240 萬美元。2023 年第二季度的總收入略有下降，主要是由於2023 年第一季度銷售噸數減少和確認的合同缺口收入。

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.

本季度的銷售成本為 6,210 萬美元，而上季度為 7,070 萬美元。下降的主要原因是季節性生產成本下降。每年第二和第三季度的生產成本通常較低，因為我們在溫暖的月份建立庫存，以支持今年晚些時候進入冬季時的銷售需求。此外，由於我們的盆地內銷售組合的變化，我們的貨運費用連續下降。

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 disposable 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 SmartSystems fleets. Adjusted EBITDA was higher sequentially due to the higher contribution margin and lower operating expenses.

第二季度總運營費用下降至 960 萬美元，而 2023 年第一季度為 1,320 萬美元，這主要是由於上一季度可支配固定資產淨虧損 190 萬美元以及支付的 2022 年年底獎金2023 年第一季度。2023 年第二季度，貢獻邊際為1900 萬美元，調整後EBITDA 為1140 萬美元，而第一季度貢獻邊際為1780 萬美元，調整後EBITDA 為840 萬美元。邊際貢獻率的增加主要是由於我們的 SmartSystems 車隊的生產成本降低和利潤率提高。由於較高的貢獻邊際和較低的運營費用，調整後的 EBITDA 環比較高。

For the second quarter of 2023, contribution margin per ton was $17.57 per ton compared to $14.89 per ton in the first quarter of 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 with 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.

2023 年第二季度，每噸貢獻邊際為每噸17.57 美元，而2023 年第一季度為每噸14.89 美元。2023 年第二季度，我們通過經營活動產生了1,610 萬美元的淨現金，從而產生了1,080 萬美元我們花費了 520 萬美元的資本支出後的自由現金流。年初至今，截至 6 月底，我們已產生 1190 萬美元的自由現金流。截至第二季度末，我們的信貸額度沒有未償還借款。截至第二季度末，我們擁有約 550 萬美元的現金和現金等價物。

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 to $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 to $17 per ton, consistent with the last 3 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 this year.

在現金和信貸額度的可用性之間，我們目前擁有超過 2400 萬美元的可用流動資金。目前，我們預計第三季度的銷售額將在 100 萬美元至 120 萬美元之間。我們認為第三季度每噸貢獻利潤將保持在每噸 14 至 17 美元的中兩位數範圍內，與過去三個季度一致。第三季度的收入缺口將與第一季度的收入缺口類似。 2023 年記錄的報告缺口收入大部分與每年第一季度和第三季度確認缺口收入的 1 份合同有關。該合同將於今年第三季度到期。

We still expect capital expenditures for the year to be in the $20 million to $25 million range, which includes the capital expenditures related to the start-up 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.

我們仍然預計今年的資本支出將在 2000 萬至 2500 萬美元範圍內，其中包括與現已投入運營的布萊爾設施啟動以及韋恩斯堡航站樓擴建和投資相關的資本支出查克在評論中提到的尤蒂卡的冷卻和混合能力。我們仍然預計今年自由現金流為正。

This concludes our prepared comments, and we will now open the call up for questions.

我們準備好的評論到此結束，現在我們將開始提問。

(Operator Instructions) And our first question comes from Patrick Ouellette of Stifel.

（操作員說明）我們的第一個問題來自 Stifel 的 Patrick Ouellette。

This is Pat on for Stephen Gengaro today. Could you give us an update on industry supply and demand for frac sand? 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?

今天是 Stephen Gengaro 的 Pat on。您能給我們介紹一下壓裂砂行業供需的最新情況嗎？專門針對北方白的它是什麼樣子的？您預計下半年到 2024 年的需求將如何發展？

Yes. So as Chuck had kind of said in his comments, we expect some moderation in demand in the fourth quarter. It's hard to say what that's going to be. The fourth quarter is always kind of a little bit of a shot in the dark at this time of the year. But certainly, the fundamentals look good on Northern White right now. The market has been relatively in supply and demand balance. And so we think that it's promising for the rest of this year from a volume perspective. And we also think that Canada is going to be a nice bright spot for us kind of going into the third and fourth quarter this year.

是的。正如查克在評論中所說，我們預計第四季度的需求會有所放緩。很難說那會是什麼。每年的這個時候，第四季度總是有點像在黑暗中進行的嘗試。但可以肯定的是，目前北方懷特的基本面看起來不錯。市場供需已相對平衡。因此，我們認為從銷量角度來看，今年剩餘時間是有希望的。我們還認為，在今年第三和第四季度，加拿大將成為我們的一個不錯的亮點。

Great. Okay. And then just building off talking about Canada. Regarding gross profit, you noted improvements sequentially based on sales mix of the basins you were delivering to. So is any of that margin improvement coming from the deliveries to Canada?

偉大的。好的。然後就開始談論加拿大。關於毛利潤，您注意到根據您所交付的盆地的銷售組合而連續改善。那麼，利潤率的提高是否來自向加拿大的交付？

Well, again, as we highlighted in our press release and comments, part of the margin improvement was lower production costs in the second quarter because we capitalize 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. So that was basically a driver of that. Pricing was relatively flat in the second quarter versus the first quarter. In Canada, we do expect that to help overall sales, but most of our sales in Canada right now are on an 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. So the margins in Canada right now seem to be fairly similar to what we're seeing in the U.S.

好吧，正如我們在新聞稿和評論中強調的那樣，利潤率改善的一部分是第二季度生產成本的降低，因為我們將庫存成本資本化，通常，我們在第二季度和第三季度的生產成本較低，然後隨著我們減少庫存，我們將在第四季度和第一季度看到略高的價格。所以這基本上是一個驅動因素。與第一季度相比，第二季度的定價相對持平。在加拿大，我們確實預計這將有助於整體銷售，但目前我們在加拿大的大部分銷售都是以 FOB 礦山為基礎的。因此，這實際上會導致我們的定價比平均銷售價格略低，儘管我們與此相關的運費會減少。因此，目前加拿大的利潤率似乎與我們在美國看到的非常相似。

Next question comes from [Jim Barrett] of Barrett Investments.

下一個問題來自 Barrett Investments 的 [Jim Barrett]。

Lee, this maybe 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 SmartSystems? Or do you expect spending to subside on '24 and '25?

李，這也許是問你的問題。鑑於 Blair 的加入和 SmartSystems 的增長計劃，你們今年目前的資本支出水平是否是新常態？或者您預計 24 年和 25 年支出會減少嗎？

Well, this year, we're expecting to spend about $20 million to $25 million, which included specific growth initiatives at Blair, the expansion of Waynesburg, as we highlighted as well as the IPS expansion. So every year, we evaluate, but I can say generally that our maintenance tie-up and efficiency capital is probably going to be typically in the $10 million to $15 million a year. And then depending on growth initiatives, we might see another $5 million to $10 million. So I think we'll continue to range under our current operating structure with our 3 mines and probably a $15 million to $25 million CapEx per year depending on growth initiatives each year.

嗯，今年，我們預計支出約 2000 萬至 2500 萬美元，其中包括布萊爾的具體增長計劃、我們強調的韋恩斯堡的擴張以及 IPS 的擴張。因此，我們每年都會進行評估，但我可以概括地說，我們的維護合作和效率資本通常每年可能為 1000 萬至 1500 萬美元。然後，根據增長計劃，我們可能會再看到 500 萬至 1000 萬美元的收入。因此，我認為我們將繼續維持現有 3 個礦山的運營結構，每年可能有 1500 萬至 2500 萬美元的資本支出，具體取決於每年的增長計劃。

On a separate note, can you tell us how much of your volumes currently are under long-term contracts?

另外，您能否告訴我們目前您的銷量中有多少是長期合同？

Well, roughly today, about 50% of our volumes are under some term -- portion of contract. That goes. Our contract structure today go anywhere from kind of 6 to 18 months for maybe half of those volumes, and we do have a few long-term contracts that go out multiyear.

嗯，大約在今天，我們大約 50% 的銷量是在某個條款下的——合同的一部分。這些都不在了。如今，我們的合同結構的期限從 6 到 18 個月不等，其中可能有一半的數量，而且我們確實有一些為期多年的長期合同。

I see. And Chuck, could you -- the Canadian market, can you tell us who are your sand competitors to service those customers? And just give us sort of a sense of what the competitive framework is in that -- up there?

我懂了。查克，加拿大市場，您能告訴我們誰是為這些客戶提供服務的競爭對手嗎？讓我們了解一下競爭框架是什麼——在那裡？

Yes. So basically, the Canadian market, for the most part, we see its Canadian National originations. So Source, Badger, companies like that are existing companies. But 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.

是的。所以基本上，加拿大市場，在很大程度上，我們看到的是它的加拿大國家起源。 Source、Badger 之類的公司都是現有公司。但我們看到了這個市場以及那裡的勘探與生產活動。看起來非常非常強。管道基礎設施正在到位，我們對這個市場感覺非常好。

Okay. Good. And my last question is the white paper that was on your website that highlighted the superior economics of using Northern White sand in markets like the Permian and Eagle Ford. Any reception from the customers in Texas as to the -- is that generating any additional interest? Or are you still in the very early innings of educating customers as to the relative narrative of the different types of sands?

好的。好的。我的最後一個問題是你們網站上的白皮書，該白皮書強調了在二疊紀和伊格爾福特等市場使用北部白沙的優越經濟效益。德克薩斯州客戶的任何反應——這是否會產生任何額外的興趣？或者您是否仍處於教育客戶有關不同類型沙子的相對敘述的早期階段？

Yes. I think in general right now, you're seeing a lot of the E&Ps really looking at their production in their wells in the Permian and looking for ways to impact that. So we definitely think it's on the radar. Additionally, the dunes sagebrush lizard thing has a way of not only impacting sand mining down in the Permian Basin, but also could have potential impact on people in their acreage holdings on drilling down there. So I think in general, there's kind of a concern on what's going on down there. Again, we're not spending capital on this right now down there, but we are very much watching this.

是的。我認為總的來說，現在你會看到很多勘探與生產公司都在認真關註二疊紀油井的生產，並尋找影響這一產量的方法。所以我們肯定認為它已經在雷達上。此外，沙丘鼠尾草蜥蜴不僅會影響二疊紀盆地的採砂，還可能對那裡的人們進行鑽探產生潛在影響。所以我認為總的來說，人們對那裡發生的事情感到擔憂。再說一遍，我們現在並沒有在這方面投入資金，但我們正在密切關注這一點。

The next question comes from [Jonathan Catlin] of Catlin Capital Management.

下一個問題來自 Catlin Capital Management 的 [Jonathan Catlin]。

Congratulations on a terrific quarter. I just had two questions. You say that you're going to be cash flow positive for the year. You're already I think, substantially cash flow positive for the year. Does that mean the second half, we're going to see negative cash flow? And number two is just more of a general question. This quarter was kind of the performance seems a bit surprise, analyst estimates -- estimated loss, you did -- you had a substantial gain. It looks like your business is evolving and -- it looks like you are moving into more profitable areas of the market. Can you just kind of give some color on where those areas -- which markets are you seeing better profitability in and how sustainable they are?

祝賀您度過了一個出色的季度。我只有兩個問題。您說今年您的現金流將為正。我想你今年的現金流量已經基本為正。這是否意味著下半年我們將看到負現金流？第二點只是一個更普遍的問題。這個季度的表現似乎有點令人驚訝，分析師估計——估計損失，你做到了——你獲得了實質性收益。看起來您的業務正在不斷發展，並且您正在進入更有利可圖的市場領域。您能否介紹一下這些領域的具體情況——您在哪些市場中看到了更好的盈利能力以及它們的可持續性如何？

Well, I'll answer the first question. We do 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 to $25 million as we complete these projects that Chuck highlighted in his comments. So we could see a little higher CapEx in the second half of the year. And 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. So 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 -- have strong overall free cash flow for the full year.

嗯，我來回答第一個問題。今年上半年我們確實擁有強勁的自由現金流。我們預計下半年的資本支出可能會稍高一些。上半年我們花費了約 920 萬美元。當我們完成 Chuck 在他的評論中強調的這些項目時，我們指導了 2000 萬到 2500 萬美元。因此，我們可能會看到下半年的資本支出略高。通常情況下，我們在第三季度的庫存營運資金會增加一些，而在第四季度應該會有所放緩。因此，我預計我們下半年的自由現金流不會那麼積極，但我確實預計下半年會產生一些正的自由現金流，並且整體自由現金流強勁全年。

And then in terms of markets, John and Chuck can join in. But I think again, we believe because of our logistics advantages 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 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. So the real upside potential for us is to 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.

然後在市場方面，約翰和查克可以加入。但我再次想，我們相信，由於我們的物流優勢以及我們在范胡克碼頭和韋恩斯堡碼頭的投資，我們將繼續引領我們成為尤其是巴肯和馬塞勒斯的市場領導者，我們仍然預計仍將是這些市場的強勁領導者。我們相信未來我們可以在加拿大做同樣的事情。因此，我們真正的上行潛力是基於我們的低成本生產以及我們真正高效的運輸，繼續增加我們在馬塞勒斯和巴肯的市場份額，假設鐵路繼續與我們成為良好的合作夥伴並尋求擴張並在加拿大建立同樣的模式。

And so we don't necessarily talk about our individual profitability by basin but those 3 basins continue to be -- we still see good long-term prospects in those -- in all 3 of those basins in terms of being primary Northern White. And then additionally, while it's still a small part of our business, our SmartSystems continue to get traction as we improve their operational efficiencies. So we expect it to continue to be additive to overall contribution margin going forward. And we are starting to make inroads into Industrial Product Solutions. As we said, it's 5% of our sales this quarter, substantial improvement quarter-over-quarter. So we see those 2 as being additive on top of the frac sand business that should help us potentially positive as well as we go forward.

因此，我們不一定會談論我們按流域劃分的個別盈利能力，但這三個流域仍然是——我們仍然看到這些流域良好的長期前景——在所有這三個流域中，就主要的北白種而言。此外，雖然它仍然只是我們業務的一小部分，但隨著我們提高運營效率，我們的智能係統將繼續受到關注。因此，我們預計它將繼續增加未來的整體邊際貢獻。我們開始進軍工業產品解決方案領域。正如我們所說，佔本季度銷售額的 5%，環比大幅改善。因此，我們認為這兩者是壓裂砂業務的補充，這應該有助於我們潛在的積極因素以及我們的前進。

Yes. And the only thing I'd add to that is that 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. So that's certainly something that's providing a little bit of tailwind on operating results here. So hopefully, that continues. We think that these investments have been made were something that we've been looking at doing and we're seeing some advantage for them.

是的。我唯一要補充的是，多年來，我們進行了一些投資——對礦場運營效率的資本投資。這些已經開始帶來一些紅利。因此，這無疑為這裡的運營業績提供了一些推動力。所以希望這種情況能夠持續下去。我們認為這些投資是我們一直在考慮做的事情，並且我們看到了它們的一些優勢。

Next question comes from Stephen Gengaro of Stifel.

下一個問題來自 Stifel 的 Stephen Gengaro。

I was wondering -- so we hear a lot or a lot -- we definitely heard about spot pricing softness in Texas. And I was curious given the different 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 kind of impact any existing contracts?

我想知道——所以我們聽到了很多——我們肯定聽說過德克薩斯州現貨價格疲軟。我很好奇，考慮到北方白葡萄酒不同的供需驅動因素以及你們產品的目的地，你們對現貨市場有何看法？這對現有合同有何影響？

Yes. So obviously, we keep an eye on what's happening down in Texas, and there has been some moderation in the pricing there. Not entirely sure what's driving that. I think there's a lot of supply down there, and any hiccups in demand can impact that market pretty dramatically. In Northern White, we -- in certain cases, we see pricing moderating depending on grade of sand -- size of sand grain and those types of things. But it's hard to pin down exactly an individual market and is something softening. We keep a close eye on it.

是的。顯然，我們密切關注德克薩斯州發生的事情，那裡的價格有所放緩。不完全確定是什麼推動了這一點。我認為那裡有大量的供應，任何需求的波動都會對該市場產生相當大的影響。在北懷特，在某些情況下，我們看到定價會根據沙子的等級、沙粒的大小和這些類型的因素而有所調整。但很難準確確定單個市場，而且情況正在變得疲軟。我們密切關注。

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. But given that Northern White has been in relative supply and demand balance over, call it -- since the downturn of COVID and some of the mines are no longer in existence, we've seen that supply demand to remain in balance. And so I don't know, Stephen, if that continues. I don't -- I haven't heard of any additional supply coming onboard or coming online in Northern White to any great degree. So any kind of demand upset either on the upside or the downside has the potential to affect that. But mostly what we see when prices are moderating, there is more seasonality or rigs moving and things like that. But right now, it seems like the market is in relative balance.

我們與客戶密切合作。我們與鐵路部門密切合作，確保我們繼續提供有競爭力的產品。但考慮到北白礦一直處於相對供需平衡狀態，自新冠疫情的低迷和一些礦山不再存在以來，我們已經看到供需保持平衡。所以我不知道，斯蒂芬，這種情況是否會繼續下去。我不知道——我還沒有聽說北懷特有任何額外的供應在船上或上線。因此，任何類型的需求擾亂，無論是上行還是下行，都有可能對其產生影響。但大多數情況下，當價格放緩時，我們會看到更多的季節性或鑽井平台移動之類的事情。但目前看來，市場處於相對平衡狀態。

Great. And then one other for me. Have you seen much change? And you might have mentioned this, I got cutoff, did you see 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 -- basically, based on the COGS line, has there been any positive movements we should be thinking about as we go forward from here?

偉大的。然後再給我一張。你看到了很大的變化嗎？您可能已經提到過這一點，我被打斷了，您是否看到成本方面有很大變化 - 我知道您已經做了很多工作並且在管理成本方面做得很好。但基本上，根據銷貨成本線，我們在繼續前進時是否應該考慮任何積極的變化？

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. So we would expect that to really start helping margins and costs as we go into 2024. And again, that's also driven by higher volumes. To the extent we get higher volumes and increase our utilization, we do have kind of high fixed operating leverage. So as we can sell more volumes and spread our fixed costs, that helps drive our costs per ton down as well. So assuming we can 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 '24.

嗯，我認為正如我們強調的和約翰之前談到的，我們已經進行了投資來提高我們的效率，特別是在我們的奧克代爾工廠的採礦方面，我們實際上只是開始這些流程。因此，我們預計，進入 2024 年，這將真正開始改善利潤和成本。同樣，這也是由銷量增加推動的。就我們獲得更高的銷量和提高利用率而言，我們確實擁有較高的固定運營槓桿。因此，由於我們可以銷售更多數量並分攤固定成本，這也有助於降低我們的每噸成本。因此，假設我們能夠維持或增加我們的產量並不斷提高我們的採礦效率，特別是在這些新舉措上，我希望在每噸成本的基礎上提供幫助，降低我們進入 24 年的成本。

And if I could just slip one more in. When we think about the kind of evolution of frac sand demand or usage per stage, that's obviously improved over the years. Where does that stand now? Is it stabilizing? Do you still see modest growth? How should we think about that?

如果我能再插入一個的話。當我們考慮壓裂砂需求或每階段使用量的演變時，多年來情況明顯有所改善。現在情況如何？穩定了嗎？您仍然看到溫和增長嗎？我們應該如何思考這個問題？

Well, I think -- we are seeing growth, right? The stages are -- the laterals continue to get longer, folks want to pump more sand per stage. They want to do the stages faster. And really when we think about 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 kind of logistics costs 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. So you have to be thinking about this from the mine to the wellsite.

嗯，我認為——我們正在看到增長，對吧？這些階段是——支管繼續變長，人們希望每個階段泵送更多的沙子。他們希望更快地完成各個階段。實際上，當我們考慮這種增長以及我們在任何特定盆地中壓入井中的沙子數量時，我們實際上會回到我們在這些電話中經常談論的物流成本，這確保您有能力可靠、可持續地輸送一定數量的沙子並將其放入孔中。因此，從礦井到井場，您都必須考慮這一點。

Chuck had mentioned, we've launched this new smart belt technology for our wellsite solutions. And that was driven primarily by the requirement for forcing huge amounts of sand down the well in a short amount of time. And 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 comports with what these guys are going to do to fine grain sand. So we feel like we're -- and we have the logistics infrastructure with rail to make that sand delivery into the market.

查克提到，我們已經為我們的井場解決方案推出了這種新的智能傳送帶技術。這主要是由於需要在短時間內將大量沙子壓入井中。我們認為我們在這方面有一個很好的捕鼠器，並且有能力支撐這些較長的支線。我們當然有儲備基地。我們有5億多噸沙子。我們當然有生產能力。我們擁有大約 1000 萬噸的年產能，並且我們擁有與這些人將要進行的細粒沙處理相匹配的正確組合。所以我們覺得我們擁有鐵路物流基礎設施，可以將沙子運送到市場。

Yes. We put our system, our last mile system up against anybody's system on how much sand can be pumped down a hole a day. And I think that people are starting to really recognize that.

是的。我們將我們的系統（最後一英里系統）與任何人的系統進行比較，以確定每天可以將多少沙子泵入洞中。我認為人們開始真正認識到這一點。

(Operator Instructions) This concludes our question-and-answer session. I would like to turn the conference back over to Chuck Young for any closing remarks.

（操作員說明）我們的問答環節到此結束。我想將會議轉回給查克·楊（Chuck Young）發表閉幕詞。

Thanks for joining us on our second quarter call. Look forward to speaking to you again in November.

感謝您參加我們的第二季度電話會議。期待十一月再次與您交談。

Conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

會議現已結束。感謝您參加今天的演示，您現在可以斷開連接了。