Aris Water Solutions, Inc. (NYSE:ARIS) Q4 2023 Earnings Conference Call February 29, 2024 9:00 AM ET Company Participants David Tuerff - Senior Vice President, Finance and Investor Relations Amanda Brock - President and Chief Executive Officer Bill Zartler - Founder and Executive Chairman Stephan Tompsett - Chief Financial Officer Conference Call Participants Eli Jossen - JPMorgan Don Crist - Johnson Rice Selman Akyol - Stifel John Daniel - Daniel Energy Operator Greetings and welcome to the Aris Water Solu ...

Aris Water Solutions, Inc. (ARIS) reported $104.13 million in revenue for the quarter ended December 2023, representing a year-over-year increase of 25.7%. EPS of $0.17 for the same period compares to $0.15 a year ago.The reported revenue represents a surprise of +6.63% over the Zacks Consensus Estimate of $97.65 million. With the consensus EPS estimate being $0.19, the EPS surprise was -10.53%.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they c ...

Aris Water Solutions, Inc. (ARIS) came out with quarterly earnings of $0.17 per share, missing the Zacks Consensus Estimate of $0.19 per share. This compares to earnings of $0.15 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -10.53%. A quarter ago, it was expected that this company would post earnings of $0.16 per share when it actually produced earnings of $0.17, delivering a surprise of 6.25%.Over the last four quarters, t ...

Core Insights - Aris Water Solutions, Inc. reported strong financial and operational results for Q4 and the full year 2023, highlighting significant growth in water volumes and profitability [2][3][4]. Financial Performance - Total water volumes increased by 4% quarter-over-quarter and 16% year-over-year [2]. - Net income for Q4 2023 was $13.0 million, with a full-year net income of $43.4 million, compared to $4.8 million in 2022 [8][9]. - Adjusted EBITDA for Q4 2023 was $49.3 million, up 37% from Q4 2022, and $175.0 million for the full year, a 17% increase from 2022 [9][10]. - Diluted adjusted net income per share for 2023 was $0.88, reflecting a 14% increase from 2022 [2][8]. Operational Highlights - Recycled produced water volumes grew by 8% in 2023, with record volumes achieved in Q4 [2][4]. - The company facilitated over 118 million barrels of recycled produced water in 2023, significantly reducing groundwater withdrawals [4]. - Adjusted operating margin per barrel improved by 11% year-over-year in Q4 2023, driven by cost-saving initiatives [2][9]. Capital Expenditures and Liquidity - Full-year capital expenditures totaled $156.4 million, with a forecasted reduction to $85 - $105 million for 2024 [2][10]. - The company maintained a strong balance sheet with a leverage ratio of 2.4x and $329 million in available liquidity as of year-end 2023 [11][12]. 2024 Outlook - The company anticipates a positive free cash flow in 2024 due to improved asset efficiency and a lower capital reinvestment requirement [3][14]. - Full-year produced water volumes are expected to grow by approximately 2-5%, while water solutions volumes are projected to remain flat [3][14]. - Adjusted EBITDA for 2024 is forecasted to be between $180 - $200 million, representing a 9% increase at the midpoint compared to 2023 [3][14].

Part I [Business and Properties](index=8&type=section&id=Items%201.%20and%202.%20Business%20and%20Properties) Aris Water Solutions provides full-cycle water handling and recycling for Permian Basin energy operators, emphasizing ESG and supported by extensive infrastructure - The company operates as a leading environmental infrastructure and solutions firm, focusing on full-cycle water handling and recycling for energy companies in the Permian Basin[22](index=22&type=chunk)[23](index=23&type=chunk) - Aris's business operates as a single segment with two main revenue streams: Produced Water Handling and Water Solutions[35](index=35&type=chunk)[36](index=36&type=chunk) Key Operating Metrics (in kbwpd) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Produced Water Handling Volumes** | 1,042 | 873 | 707 | | **Water Solutions Volumes** | 450 | 411 | 240 | | **Total Water Volumes** | 1,492 | 1,284 | 947 | Asset Overview as of December 31, 2023 | Asset Type | Installed | Permitted, Not Installed | | :--- | :--- | :--- | | **Pipelines (Miles)** | 745 | 220 | | **Water Handling Facilities (Number)** | 66 | 35 | | **Water Handling Capacity (kbwpd)** | 1,750 | 1,180 | | **Water Recycling Facilities (Number)** | 23 | 21 | | **Water Recycling Capacity (kbwpd)** | 1,500 | 1,300 | - For FY2023, affiliates of ConocoPhillips, Chevron, and Mewbourne Oil represented approximately **62% of total revenue**[49](index=49&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from oil and gas industry volatility, customer concentration, regulatory changes, and financial obligations - Business operations are heavily dependent on volatile oil and gas capital spending in the Permian Basin, influenced by commodity prices[120](index=120&type=chunk) - For FY2023, the three largest customers accounted for approximately **62% of revenues**, with ConocoPhillips alone representing about **33%**[144](index=144&type=chunk)[145](index=145&type=chunk) - Regulatory initiatives on seismic activity from TRC and NMOCD could restrict produced water handling, impacting operations and financials[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - As a holding company, Aris Inc. relies on distributions from Solaris LLC to cover taxes, expenses, and Tax Receivable Agreement payments[209](index=209&type=chunk) - The Tax Receivable Agreement requires Aris Inc. to pay **85% of net cash tax savings** to TRA Holders, with substantial and potentially accelerated payments upon change of control[236](index=236&type=chunk)[237](index=237&type=chunk)[240](index=240&type=chunk) [Unresolved Staff Comments](index=82&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[263](index=263&type=chunk) [Cybersecurity](index=83&type=section&id=Item%201C.%20Cybersecurity) The company maintains a NIST-aligned cybersecurity program with Board oversight, management committee, and no material incidents reported - The Board of Directors, via its Audit Committee, oversees enterprise risk management, including cybersecurity and data privacy[266](index=266&type=chunk) - A management-level Cybersecurity Committee, led by the VP of Information Technology, implements and monitors cybersecurity practices[267](index=267&type=chunk) - The company has not experienced any material cybersecurity incidents and is unaware of material cybersecurity threats impacting its business or financials[270](index=270&type=chunk) [Legal Proceedings](index=84&type=section&id=Item%203.%20Legal%20Proceedings) The company is not involved in any pending legal proceedings with a material adverse effect on its financials - Management confirms no pending legal proceedings are expected to have a material adverse effect on the company[271](index=271&type=chunk) [Mine Safety Disclosures](index=84&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[271](index=271&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=84&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Aris Class A common stock trades on NYSE, with quarterly dividends subject to Board discretion and debt covenant restrictions - The company's Class A common stock is listed on the NYSE under the ticker symbol **ARIS**[272](index=272&type=chunk) - For each quarter of 2023, the Board declared a dividend of **$0.09 per share** on Class A common stock, with a similar dividend for Q1 2024[275](index=275&type=chunk)[343](index=343&type=chunk) - Dividend payments are restricted by Credit Agreement and Notes indenture covenants based on leverage and fixed charge coverage ratios[277](index=277&type=chunk)[278](index=278&type=chunk)[280](index=280&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=88&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Aris reported significant FY2023 growth with total water volumes up **16%** and revenue up **22%**, driven by higher volumes and strong liquidity Financial and Operating Highlights (FY 2023 vs. FY 2022) | Metric | FY 2023 | FY 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Water Volumes (kbwpd) | 1,492 | 1,284 | 16% | | Total Revenue | $392.1M | $321.0M | 22% | | Net Income | $43.4M | $4.8M | 805% | | Adjusted EBITDA (Non-GAAP) | $175.0M | $149.0M | 17% | - Total revenue increased primarily due to a **19% rise in Produced Water Handling volumes** and a **9% rise in Water Solutions volumes**, alongside higher recycled water prices[319](index=319&type=chunk)[325](index=325&type=chunk)[326](index=326&type=chunk) - Direct operating costs increased **28% to $178.0 million** in 2023, driven by higher volumes, labor, maintenance, electricity, and workover expenses[316](index=316&type=chunk)[324](index=324&type=chunk) - As of December 31, 2023, the company held **$5.1 million in cash**, **$426.0 million in total long-term debt**, and **$323.9 million** available under its Credit Facility[342](index=342&type=chunk) - Capital expenditures for 2024 are forecasted between **$85.0 million and $105.0 million**, based on contracted customer development outlooks[351](index=351&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=119&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from commodity price fluctuations, impacting customer activity and direct contract rates, and interest rate changes on its variable-rate Credit Facility - Revenue is indirectly exposed to crude oil and natural gas price volatility impacting customer activity, with direct exposure from a WTI-tied contract and skim oil sales[391](index=391&type=chunk)[392](index=392&type=chunk) - The company faces interest rate risk on its variable-rate Credit Facility; a hypothetical **1% increase** would raise annual interest expense by approximately **$0.3 million** on the **$26.0 million** outstanding balance[392](index=392&type=chunk) [Financial Statements and Supplementary Data](index=120&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) FY2023 consolidated financial statements show total assets of **$1.34 billion**, total revenues of **$392.1 million**, and net income of **$43.4 million**, with strong operating cash flow Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $108,550 | $138,993 | | Total Assets | $1,340,481 | $1,303,366 | | Total Current Liabilities | $96,698 | $91,414 | | Total Liabilities | $652,588 | $646,279 | | Total Stockholders' Equity | $687,893 | $657,087 | Consolidated Statement of Operations Data (in thousands) | Account | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Total Revenue | $392,118 | $321,001 | | Gross Margin (Revenue - Cost of Revenue) | $137,513 | $113,997 | | Operating Income | $83,866 | $34,506 | | Net Income | $43,412 | $4,797 | | Net Income Attributable to Aris Inc. | $18,888 | $1,700 | Consolidated Statement of Cash Flows Data (in thousands) | Account | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $183,873 | $70,213 | | Net Cash Used in Investing Activities | ($149,582) | ($136,925) | | Net Cash (Used in) Provided by Financing Activities | ($30,350) | $7,779 | | Net Increase (Decrease) in Cash | $3,941 | ($58,933) | [Controls and Procedures](index=168&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes - The principal executive and financial officers concluded disclosure controls and procedures were effective as of December 31, 2023[579](index=579&type=chunk) - Management assessed and concluded internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework[580](index=580&type=chunk) - No material changes to internal control over financial reporting occurred during the last fiscal quarter[582](index=582&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=170&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement - Required information is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders[585](index=585&type=chunk) [Executive Compensation](index=170&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2024 Proxy Statement - Required information is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders[586](index=586&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=170&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the 2024 Proxy Statement - Required information is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders[586](index=586&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=170&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the 2024 Proxy Statement - Required information is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders[586](index=586&type=chunk) [Principal Accountant Fees and Services](index=170&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement - Required information is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Shareholders[587](index=587&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=170&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits filed with the Form 10-K, with most schedules omitted as not applicable - This section lists financial statements and exhibits filed with the Form 10-K; all required schedules were omitted as not applicable[588](index=588&type=chunk) [Form 10-K Summary](index=172&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K summary is provided - None[589](index=589&type=chunk)

Exhibit 99.1 Source: Aris Water Solutions, Inc. February 28, 2024 Aris Water Solutions, Inc. Reports Fourth Quarter and Full Year 2023 Results and Provides 2024 Outlook HOUSTON, Texas, February 28, 2024 – Aris Water Solutions, Inc. (NYSE: ARIS) ("Aris," "Aris Water" or the "Company") today announced financial and operating results for the fourth quarter and year ended December 31, 2023. FOURTH QUARTER AND FULL YEAR 2023 HIGHLIGHTS ● Increased total water volumes 4% quarter-over-quarter and 16% annually ● Gr ...

RICHMOND, Va.--(BUSINESS WIRE)--Jacinto J. Hernandez, a director of Altria Group, Inc. (“Altria”), retired from service on our Board of Directors effective February 23, 2024. Mr. Hernandez will continue to serve Altria as a strategic advisor under a 5-year advisory services agreement. "We thank Jacinto for his service on our Board," said Kathryn McQuade, Altria’s independent Board Chair. “Our Board benefited from his industry experience and financial expertise.” “I joined Altria’s Board because I am ins ...

With 2024 now underway, many investors are looking ahead to opportunities for market-beating returns in the coming year. I’m especially excited about the prospects of finding hidden gems primed for explosive growth at reasonable valuations. Buying early into the right growth stories can lead to doubling your money or more within a relatively short timeframe.After weathering a turbulent couple of post-COVID years in the broader market, I believe we could see another standout year for growth stocks in 2024 as ...

The market expects Aris Water Solutions, Inc. (ARIS) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended December 2023. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The earnings report, which is expected to be released on February 28, 2024, might help the stock move higher if th ...

Bim Investment Thesis Aris Water Solutions, Inc. (NYSE:ARIS) is a water handling and recycling solutions provider headquartered in Houston, Texas. In this thesis, I will analyze its third-quarter results along with its future growth prospects. I will also be analyzing its valuation at the current price level and the upside potential in its stock price. It experienced a significant increase in revenues and an improvement in operating and net profit margins. The organic growth in the revenues and a favo ...