# DEAR FELLOW SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-equipment-services/NASDAQ_SND_2022/NASDAQ_SND_2022.mmd` · pages 2-8_

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DEAR FELLOW SHAREHOLDERS,

2022 was a pivotal year for Smart Sand. We significantly improved our operating and financial performance over 2021 results while staying true to our core values of a strong balance sheet and efficient, low-cost operations with a continued commitment to high safety and environmental standards. We did this by:

• Increasing Frac Sand sales volumes at both our Oakdale and Utica mining and processing facilities;

• Improving the utilization and operating profitability of our last mile business;

• Establishing new product markets with our Industrial Products Solutions;

• Staying focused on being an efficient and lost cost sand producer; and

• Remaining committed to low leverage levels.

We continue to execute our long-term strategy of providing sand and logistics services from the mine to the wellsite while broadening our product offering and customer base in the industrial sand market. We sold a record 4.3 million tons of sand in 2022 and believe we are in the early stages of a multi-year upcycle for our business. Our low leverage and financial discipline have allowed us to sustainably grow our business at a time when many of our peers have been scaling back or reorganizing. We took advantage of our financial strengths and operating focus on the Northern White sand market to acquire the Blair, Wisconsin mine and processing facilities from Hi-Crush. This facility was idle. We are in the process of to bringing Blair online in 2023 to allow us entry into Canada, which is a growing and predominantly Northern White sand market.

Our primary focus is to continue to be the premier provider of Northern White sand for the hydraulic fracturing and industrial sand markets. With the acquisition of Blair, we believe we are now the second largest supplier of Northern White sand in North America. We now have direct access to four Class I rail lines, and efficient connections to all locations Class I rail lines in North America. We operate three in-basin terminals and have access to a broad network of third-party terminals. We also provide efficient and cost-effective wellsite sand storage and management with our SmartSystems equipment and services. We believe we have created one of the most efficient logistics services for delivering Northern White sand to the market.

The key markets that we serve today are the Marcellus and Utica basins in the northeastern United States, the Bakken basin in North Dakota, the operating basins in Colorado and Wyoming and now the operating basins in Western Canada. We strongly believe that our high-quality Northern White sand leads to better long-term well results and outperforms regional sand in nearly every measurable way, most importantly in crush strength and conductivity. Northern White sand continues to be the frac sand of choice in the Bakken, Marcellus and Utica basins and we believe that there remains a value proposition in the other operating basins, such as the Eagle Ford and Permian basins in Texas and New Mexico. Recent studies by Rystad Energy have shown that the use of high quality Northern White sand can lead to better long term well results than using lesser quality regional sand.

While the Permian and other operating basins in Texas, Oklahoma and New Mexico are currently still primarily supplied by regional sand suppliers, long term well performance in these basins continues to deteriorate and we believe some producers in these markets may start to look to start using Northern White sand again. Smart Sand doesn't need to sell into these basins to be successful, but they offer us incremental opportunities to expand the markets we serve.

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## FINANCIAL STRENGTH

Smart Sand remains focused on increasing our operating cash flow and maintaining low debt levels. In 2022, while managing increased working capital demand due to our increased sales activity, we generated $5.4 million in net cash provided by operating activities and reduced our debt levels by approximately $7.3 million. Over the last three years, we have reduced our debt levels by $18.4 million.

## SHAREHOLDER VALUE

We remain committed to creating long term value for our shareholders. With that in mind, we recently repurchased approximately 5.18 million common equity shares from Clearlake Capital Group which represented approximately 11.3% of our outstanding shares. This transaction demonstrates our continued commitment to deliver long-term value to our shareholders. We believe this repurchase of Clearlake's equity position demonstrates our focus on shareholder returns and is a beneficial investment in the future of Smart Sand. We will continue to strive to create long-term value for our shareholders through improving financial operating performance.

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## STRONG COMMITMENT TO
SAFETY AND ENVIRONMENTAL
PERFORMANCE

At Smart Sand, safety is our first priority. We prioritize safety and environmental stewardship for the betterment of our employees and the communities in which we operate. With respect to safety, we work collaboratively with our employees to identify and minimize workspace hazards to contribute to a safe and healthy workplace.

As to the environment, we strive to find ways to reduce our negative impact on the land, air, waste, and atmosphere in the communities where we operate. We are members of the Wisconsin Green Tier program, a marquee public/private partnership, under which the Wisconsin Department of Natural Resources worked with us on a plan to meet applicable legal requirements and to improve our facility from an environmental perspective. We continue to work to protect wetlands, reduce usage and impacts of heavy equipment, reduce fuel usage of equipment and vehicles and define best practices for onsite water management. Sustainability has always been part of the Smart Sand story and we continue to identify new opportunities for improvement.

We believe our products and services provide our customers with a more efficient and environmentally friendly solution to meet their frac sand needs for the completion of oil and gas wells in North America. We believe that to reduce truck traffic, accidents and emissions, bulk commodities, like frac sand, should move by rail to terminals that are close to completions activity. Our assets are uniquely situated to accomplish this. By utilizing high-quality Northern White sand that is delivered in bulk by rail in close proximity to drilling locations, oil and gas producers can greatly reduce the number of trucks being utilized to deliver sand to the wellsite. We believe that this will reduce overall carbon emissions through less truck traffic while also leading to a safer environment in the surrounding communities by reducing the number of trucks on the road.

Additionally, our SmartSystems provide a more efficient option at the wellsite for the delivery and storage of frac sand which leads to less truck traffic as well.

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We are proud of our performance in 2022. We believe that we are well positioned to compete effectively in the frac sand and industrial sand markets. By working with our railroad partners and utilizing our network of in-basin terminals, combined with our SmartSystems wellsite storage solutions, we believe that we provide our customers sustainable, efficient and cost-effective frac sand and logistics services. Sand is an integral part of the completion process, and we are well positioned to continue to be a leading provider of high quality Northern White sand to the marketplace. Our sand is also well suited to meet industrial sand applications and we will continue to look for ways to expand our market share in the industrial sand markets.

In a commodity business, there will invariably be up and down cycles. Therefore, we will continue to be focused on being a low-cost producer with a strong balance sheet that will allow us to operate through any market cycle. We believe we can continue to deliver positive long-term operating results while staying true to our core principles of safely and efficiently providing and delivering high-quality Northern White sand to the market. We are excited for the future of Smart Sand and believe that we will continue to be the model for long-term success in our industry.

Sincerely,

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Charles E. Young
Chief Executive Officer

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