# DEAR FELLOW STOCKHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-equipment-services/NASDAQ_SND_2021/NASDAQ_SND_2021.mmd` · pages 2-8_

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DEAR FELLOW STOCKHOLDERS,

In 2021, we saw our business begin to recover from the COVID-19 pandemic and we continued to execute our long-term strategy of providing sand and logistics services from the mine to the wellsite. We sold a record 3.2 million tons of sand in 2021 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 were scaling back or reorganizing. As we move forward, we continue to center our business strategy around:

• Being a low-cost producer of high-quality Northern White sand;

• Maintaining prudent debt levels, and being one of the lowest leveraged companies in the frac sand supply and services industry;

• Integrating our recent acquisitions to drive profitable growth;

• Delivering efficient and sustainable supply chain logistics from the mine to the wellsite;

• Increasing utilization of our assets;

• Driving volume through our newly completed, unit train capable transloading facility in Waynesburg, Pennsylvania to expand market share in the Appalachian Basin;

• Diversifying our revenue streams by establishing and growing a less cyclically driven industrial products business;

• Working with customers to provide flexible solutions to meet their long-term sand needs; and

• Maintaining our commitments to safety, quality and community.

We believe that the quality of our offerings is what keeps our customers coming back to us over-and-over again.

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## FINANCIAL STRENGTH

Smart Sand remains focused on generating positive free cash flow and maintaining low debt levels. In 2021, we generated $21 million in free cash flow, and reduced our debt by approximately $7 million. Over the last three years, we have reduced our debt levels by approximately $26 million. The recent downturn provided a harsh reminder of the need to prudently manage our cash flows and debt levels. As the market improves, we believe that we have sufficient working capital and liquidity to support business operations to the take advantage of the upcycle. We have not drawn from our ABL credit facility, and we continue to be one of the lowest levered companies in the frac sand industry. As we have said time and time again, we believe maintaining a strong balance sheet and prudent debt levels are essential to remaining successful and competitive in our industry.

## WAYNESBURG TERMINAL

Our newly-constructed, unit train capable transloading terminal in Waynesburg, Pennsylvania is up and running. The terminal has more than four miles of track, is located on Norfolk Southern's Class 1 rail line and services the Marcellus shale in southwestern Pennsylvania, West Virginia and eastern Ohio. Our Waynesburg terminal can currently transload approximately one million tons of frac sand per year, and there are opportunities to expand the facility as we grow our market share in this area. The terminal will also serve as the new Northeastern hub for our SmartSystems last-mile wellsite storage solution. We look forward to our Waynesburg terminal driving incremental opportunities to grow our business, including our SmartSystems utilization, as we did with our Van Hook terminal in the Bakken. The new terminal is exciting for us not only because it expands our presence in the Appalachian basin, but also because it provides Environmental, Social and Governance ("ESG") benefits to our customers in the region by reducing trucking mileage and associated carbon emissions related to sand delivery. We believe that bulk commodities belong on rail and that sustainable logistics must include terminals close to our customers' drilling activity.

## RECENT ACQUISITION

Our recent acquisition of the Blair, Wisconsin frac sand mine highlights our plan to add high quality assets at a reasonable price. This facility provides direct Canadian National Railway access and meets our requirements of logistics and operational efficiency with multi-unit train capability. Blair provides an additional source of 40/70 sand which is currently in high demand in the energy market and has annual capacity of approximately 2.8 million tons. While providing additional access to key U.S. basins, the Blair facility now provides us the ability to compete in the Canadian frac sand market.

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"In 2021, we invested in both people and capital to start to build out our Industrial Product Solutions business... We are penetrating the glass, building products, foundry, and recreation markets throughout North America."

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## INDUSTRIAL PRODUCT
SOLUTIONS

The volatility of the oil and gas sector over the last few years has reinforced the importance of diversification into sectors with less variability. In 2021, we invested in both people and capital to create our Industrial Product Solutions business and have been pleased with the initial results. We began selling and through our Industrial Product Solutions business in the fourth quarter of 2021 and are excited about our prospects in 2022. We are working toward penetrating the glass, building products, foundry, and recreational markets throughout North America. Further, we expect to broaden our service capabilities with blending/packaging as well as adding finer grade products in the second half of 2022.

## GROWING OUR WELLSITE
STORAGE SOLUTIONS
BUSINESS

We remain committed to the continued development of our SmartSystems wellsite storage solutions. We believe this system provides the most efficient and sustainable solution for sand management at the wellsite. Also, consistent with our emphasis on safety, our SmartSystems include both active and passive dust suppression and are engineered to operate safely with minimal respirable silica. In 2021, we successfully deployed our proprietary SmartPath™ transloader, which provides fast and efficient unloading of frac sand while also allowing us to maintain the small footprint enjoyed by our customers. We believe the market's emphasis on more efficient, sustainable and environmentally responsible operations will lead to increased adoption of our SmartSystems solutions.

## IMPROVING OUR STRONG
SAFETY AND
ENVIRONMENTAL
PERFORMANCE

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. At Smart Sand, safety is our first priority. As to environment, we strive to reduce our impact on the land, air, waste, atmosphere, and the communities we operate in. 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. In addition to documenting seven years of compliant operations, we have worked on protecting wetlands, reducing usage and impacts of heavy equipment, reducing fuel usage of equipment and vehicles and defining best practices for onsite water management. We undertake similar efforts at all of our facilities, including our transload operations in North Dakota and Pennsylvania, as well as our Utica, Illinois mining facility. Sustainability has always been part of the Smart Sand story and we continue to identify new opportunities for improvement.

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We are proud of our performance in 2021 as we emerged from the pandemic into the early stages of an upcycle. Delivering record volumes just one year after a very sharp downturn was an extraordinary achievement. 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. We also 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 goal. By working with our railroad partners to deliver competitive shipping costs and continuously improving our SmartSystems wellsite storage solutions, we believe that our customers will look to us as the leader in providing sustainable, efficient and cost-effective sand and logistics services to deliver our product to the wellsite. 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.

We will do this with the strong focus on safety and environmental awareness that we have built our reputation on over the years. While in 2021 we focused primarily on volume growth, we are now increasingly focused on improving returns to our stockholders. We are excited to be a low-cost producer with an unlevered balance sheet in the early stages of an upcycle. Our ability to manage our finances, reduce expenses, and increase efficiencies during the global pandemic allowed us to increase our footprint within the industry while many of our peers were pulling back. 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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