Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38090 SOLARIS OILFIELD INFRASTRUCTURE, INC. (Exact name of registrant as specified in its charter) Delawa ...

Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) Q3 2023 Earnings Conference Call October 27, 2023 9:00 AM ET Company Participants Emily Boltryk - Director of Finance and Investor Relations William Zartler - Founder, Chairman and Chief Executive Officer Yvonne Fletcher - Senior Vice President, Finance and Investor Relations Kyle Ramachandran - President and Chief Financial Officer Conference Call Participants Luke Lemoine - Piper Sandler Stephen Gengaro - Stifel John Daniel - Daniel Energy Partners Donald C ...

Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) July 28, 2023 9:00 AM ET Company Participants Yvonne Fletcher - SVP, Finance & IR William Zartler - Chairman & CEO Kyle Ramachandran - CFO & President Conference Call Participants Luke Lemoine - Piper Sandler Stephen Gengaro - Stifel Sean Mitchell - Daniel Energy Partners Operator Good morning, and welcome to the Solaris Oilfield Infrastructure Second Quarter 2023 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would like no ...

[Report Information](index=1&type=section&id=Report%20Information) [Company Information](index=1&type=section&id=Company%20Information) This section details Solaris Oilfield Infrastructure, Inc.'s SEC filing, including report type, exchange listing, filer status, and outstanding shares as of July 24, 2023 - Filing Type: Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023[2](index=2&type=chunk) - Registrant: SOLARIS OILFIELD INFRASTRUCTURE, INC[2](index=2&type=chunk) Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | Value | | :-------------------------------- | :-------------------- | | Trading Symbol(s) | "SOI" | | Exchange on which registered | New York Stock Exchange | | Filer Status | Accelerated filer | | Class A Common Stock Outstanding (July 24, 2023) | 30,477,237 shares | | Class B Common Stock Outstanding (July 24, 2023) | 13,671,971 shares | [Cautionary Statement Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) [Nature and Risks of Forward-Looking Statements](index=4&type=section&id=Nature%20and%20Risks%20of%20Forward-Looking%20Statements) This section warns that forward-looking statements are predictive, involve inherent risks and uncertainties, and advises against undue reliance, listing factors that could cause actual results to differ - Forward-looking statements are predictive, depend on future events or conditions, and include words like 'believe,' 'expect,' 'anticipate,' 'intend,' 'estimate'[9](index=9&type=chunk) - Factors that could cause actual results to differ materially include: domestic capital spending, global economic developments, geopolitical risks (e.g., war in Ukraine), industry consolidation, inflationary risks, rising interest rates, supply chain constraints, customer defaults, technological advancements, competitive conditions, and regulatory changes[10](index=10&type=chunk)[14](index=14&type=chunk) - The company undertakes no obligation to publicly update or revise any forward-looking statement unless required by law[13](index=13&type=chunk) [PART I: FINANCIAL INFORMATION](index=7&type=section&id=PART%20I:%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with notes on accounting policies and transactions [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows financial position as of June 30, 2023, with increased total assets and liabilities, primarily from property, plant, equipment, and credit borrowings, while equity slightly decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2023 | December 31, 2022 | Change | | :-------------------------------- | :------------ | :---------------- | :------- | | Total assets | $484,330 | $462,576 | +$21,754 | | Property, plant and equipment, net | $325,441 | $298,160 | +$27,281 | | Cash and cash equivalents | $9,371 | $8,835 | +$536 | | Total liabilities | $175,874 | $145,447 | +$30,427 | | Borrowings under the credit agreement | $43,000 | $8,000 | +$35,000 | | Total stockholders' equity | $308,456 | $317,129 | -$8,673 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2023, revenue decreased 11%, but operating and net income rose due to lower costs; for six months, all three metrics increased year-over-year Statements of Operations Highlights (Three Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change (YoY) | | :-------------------------------- | :--- | :--- | :----------- | | Total revenue | $77,202 | $86,711 | -$9,509 (-11%) | | Operating income | $15,779 | $10,322 | +$5,457 (+52.9%) | | Net income attributable to Solaris | $7,532 | $5,453 | +$2,079 (+38.1%) | | Income per share of Class A common stock – basic | $0.24 | $0.16 | +$0.08 (+50%) | Statements of Operations Highlights (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change (YoY) | | :-------------------------------- | :--- | :--- | :----------- | | Total revenue | $159,924 | $143,626 | +$16,298 (+11.3%) | | Operating income | $30,661 | $17,735 | +$12,926 (+72.9%) | | Net income attributable to Solaris | $15,101 | $8,955 | +$6,146 (+68.6%) | | Income per share of Class A common stock – basic | $0.47 | $0.27 | +$0.20 (+74.1%) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Statements detail changes in stockholders' equity for six months ended June 30, 2023, showing a decrease due to **$14.4 million** in repurchases and **$3.7 million** in dividends Changes in Stockholders' Equity (Six Months Ended June 30, 2023, in thousands) | Activity | Amount | | :-------------------------------- | :------- | | Balance at January 1, 2023 | $317,129 | | Share and unit repurchases and retirements | $(14,427) | | Dividends paid | $(3,656) | | Net income | $11,937 | | Balance at June 30, 2023 | $308,456 | Changes in Stockholders' Equity (Six Months Ended June 30, 2022, in thousands) | Activity | Amount | | :-------------------------------- | :------- | | Balance at January 1, 2022 | $297,876 | | Dividends paid | $(3,441) | | Net income | $5,722 | | Balance at June 30, 2022 | $304,595 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For six months ended June 30, 2023, operating cash flow **increased 103% to $45.5 million**, investing cash used **rose 27% to $39.9 million**, and financing cash used **decreased 58.5% to $5.0 million** Cash Flow Summary (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :------- | | Net cash provided by operating activities | $45,460 | $22,394 | +$23,066 | | Net cash used in investing activities | $(39,896) | $(31,409) | -$8,487 | | Net cash used in financing activities | $(5,028) | $(12,131) | +$7,103 | | Net increase (decrease) in cash | $536 | $(21,146) | +$21,682 | | Cash at end of period | $9,371 | $15,351 | -$5,980 | [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering business, accounting policies, property, debt, equity, taxes, concentrations, commitments, and related party transactions [Note 1. Organization and Background of Business](index=12&type=section&id=Note%201.%20Organization%20and%20Background%20of%20Business) Solaris Oilfield Infrastructure designs and manufactures specialized equipment, provides field support, logistics, and software to U.S. oil and gas operators, reducing costs during well completion - Business Description: Designs and manufactures specialized equipment, provides field technician support, last mile logistics services, and software solutions for oil and natural gas well completion[27](index=27&type=chunk) - Geographic Focus: Deploys equipment and services across active oil and natural gas basins in the United States[27](index=27&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=12&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines key accounting policies, including presentation, estimates, revenue recognition, disaggregation of revenue, and recent accounting standards, notably the TRA amendment replacing LIBOR with SOFR [Basis of Presentation and Consolidation](index=12&type=section&id=Basis%20of%20Presentation%20and%20Consolidation) Solaris Inc. consolidates Solaris LLC's financial results, reporting non-controlling interest, with statements adhering to GAAP and SEC rules, incorporating all necessary recurring adjustments - Solaris Inc. consolidates the financial results of Solaris LLC and its subsidiaries, reporting non-controlling interest for units not owned by Solaris Inc[28](index=28&type=chunk) - Financial statements are prepared in accordance with GAAP and SEC rules, reflecting all normal recurring adjustments[29](index=29&type=chunk) [Use of Estimates](index=12&type=section&id=Use%20of%20Estimates) Consolidated financial statements require management to make significant estimates and assumptions impacting assets, liabilities, revenues, and expenses, where actual results may differ - Significant estimates include stock-based compensation, useful lives and salvage values of long-lived assets, goodwill and long-lived asset impairment evaluations, net realizable value of inventory, income taxes, Tax Receivable Agreement liability, collectability of accounts receivable, and determination of the present value of lease payments and right-of-use assets[33](index=33&type=chunk) [Revenue Recognition](index=12&type=section&id=Revenue%20Recognition) Revenue is recognized under ASC Topic 606 upon transfer of control, reflecting expected consideration; contracts often have multiple performance obligations with prices allocated by stand-alone selling prices - Revenue recognition follows ASC Topic 606, based on the transfer of control of services and products to the customer[34](index=34&type=chunk)[36](index=36&type=chunk) - Contracts typically contain multiple performance obligations (e.g., equipment, last mile logistics, labor services), with transaction prices allocated based on relative stand-alone selling prices[37](index=37&type=chunk) [Disaggregation of Revenue](index=14&type=section&id=Disaggregation%20of%20Revenue) Revenue is disaggregated into 'Wellsite services' and 'Transloading and Other'; Q2 2023 wellsite services revenue decreased, while six-month revenue increased year-over-year Revenue by Activity (in millions) | Activity | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Wellsite services | $77.1 | $86.5 | $159.6 | $143.1 | | Transloading and Other | $0.1 | $0.2 | $0.3 | $0.5 | | **Total revenue** | **$77.2** | **$86.7** | **$159.9** | **$143.6** | [Recently Issued Accounting Standards](index=14&type=section&id=Recently%20Issued%20Accounting%20Standards) The company adopted ASU No. 2020-04, extended by ASU No. 2022-06, for LIBOR transition, and amended the Tax Receivable Agreement on June 27, 2023, to replace LIBOR with SOFR plus a margin - ASU No. 2020-04 (Reference Rate Reform) guidance, extended by ASU No. 2022-06, is effective until December 31, 2024[39](index=39&type=chunk) - The Tax Receivable Agreement was amended on June 27, 2023, to replace LIBOR references with the 12-month term SOFR plus **71.513 basis points**[39](index=39&type=chunk)[72](index=72&type=chunk) [Note 3. Property, Plant and Equipment](index=14&type=section&id=Note%203.%20Property,%20Plant%20and%20Equipment) Net property, plant, and equipment increased from **$298.2 million** to **$325.4 million** as of June 30, 2023, primarily due to increases in systems and related equipment and systems in process Property, Plant and Equipment, Net (in millions) | Metric | June 30, 2023 | December 31, 2022 | Change | | :-------------------------------- | :------------ | :---------------- | :------- | | Systems and related equipment | $402.0 | $369.3 | +$32.7 | | Systems in process | $37.5 | $30.1 | +$7.4 | | Property, plant and equipment, gross | $468.6 | $425.3 | +$43.3 | | Less: accumulated depreciation | $(143.2) | $(127.1) | $(16.1) | | **Property, plant and equipment, net** | **$325.4** | **$298.2** | **+$27.2** | [Note 4. Senior Secured Credit Facility](index=15&type=section&id=Note%204.%20Senior%20Secured%20Credit%20Facility) Solaris LLC amended its Credit Agreement on April 28, 2023, increasing available borrowing to **$75.0 million**; as of June 30, 2023, **$43.0 million** was outstanding with an **8.10%** interest rate, and the company was compliant with all covenants - Credit Agreement Amendment: Increased available borrowings from **$50.0 million** to **$75.0 million**, with a maximum capacity of **$100.0 million**, effective April 28, 2023[42](index=42&type=chunk) Senior Secured Credit Facility Status (as of June 30, 2023, in millions) | Metric | Amount | | :-------------------------------- | :----- | | Borrowings outstanding | $43.0 | | Ability to draw | $32.0 | | Weighted average interest rate | 8.10% | - Covenant Compliance: The company was in compliance with all covenants under the Credit Agreement as of June 30, 2023[48](index=48&type=chunk) [Note 5. Equity](index=17&type=section&id=Note%205.%20Equity) This note details equity activities, including dividend distributions, the **$50.0 million** share repurchase program, and stock-based compensation, resulting in a decrease in outstanding Class A common stock [Dividends](index=17&type=section&id=Dividends) Solaris LLC paid **$4.9 million** in Q2 2023 dividends and **$10.1 million** for the six months ended June 30, 2023, with Solaris Inc. using its portion to pay quarterly cash dividends to Class A common stockholders Dividend Distributions (in millions) | Period | Total Solaris LLC Unitholders | To Solaris Inc. | | :-------------------------------- | :---------------------------- | :-------------- | | Three months ended June 30, 2023 | $4.9 | $3.4 | | Three months ended June 30, 2022 | $4.9 | $3.4 | | Six months ended June 30, 2023 | $10.1 | $7.0 | | Six months ended June 30, 2022 | $9.7 | $6.9 | [Share Repurchase Program](index=17&type=section&id=Share%20Repurchase%20Program) The Board authorized a **$50.0 million** share repurchase plan on March 2, 2023; as of June 30, 2023, **3,078,500 shares** were repurchased for **$25.8 million** (average **$8.38/share**), with **$24.2 million** remaining - Share Repurchase Plan: Authorized on March 2, 2023, for up to **$50.0 million** of Class A common stock[50](index=50&type=chunk) Share Repurchase Program Status (as of June 30, 2023) | Metric | Value | | :-------------------------------- | :-------------------- | | Shares repurchased (Six months) | 3,078,500 shares | | Aggregate cost (Six months) | $25.8 million | | Average price per share | $8.38 | | Amount remaining for future repurchases | $24.2 million | | Accrued stock repurchase excise tax (Six months) | $0.3 million | [Stock-Based Compensation](index=17&type=section&id=Stock-Based%20Compensation) The LTIP was amended in May 2023, reserving an additional **4,700,000 shares**; as of June 30, 2023, **5,521,494 awards** were available, with **$11.7 million** unrecognized expense for restricted stock and **$1.7 million** for PSUs - LTIP Amendment: An additional **4,700,000 shares** of Class A common stock were reserved for issuance under the LTIP as of May 17, 2023[52](index=52&type=chunk) Stock-Based Compensation Status (as of June 30, 2023) | Metric | Value | | :-------------------------------- | :-------------------- | | Total stock awards available for grant | 5,521,494 | | Unvested restricted stock shares | 1,508,797 shares | | Unrecognized compensation expense (restricted stock) | $11.7 million | | Outstanding performance-based restricted stock units (PSUs) | 172,212 units | | Unrecognized compensation cost (PSUs) | $1.7 million | - PSU Performance Criteria: **50%** based on total shareholder return relative to peers, and **50%** based on absolute total shareholder return[57](index=57&type=chunk) [Income Per Share](index=20&type=section&id=Income%20Per%20Share) Basic and diluted income per share for Class A common stock significantly increased for both the three and six months ended June 30, 2023, compared to the prior year, with certain potentially dilutive shares excluded due to their antidilutive effect Income Per Share of Class A Common Stock (Three Months Ended June 30) | Metric | 2023 | 2022 | Change | | :-------------------------------- | :--- | :--- | :----- | | Basic Income per share | $0.24 | $0.16 | +$0.08 | | Diluted Income per share | $0.24 | $0.16 | +$0.08 | Income Per Share of Class A Common Stock (Six Months Ended June 30) | Metric | 2023 | 2022 | Change | | :-------------------------------- | :--- | :--- | :----- | | Basic Income per share | $0.47 | $0.27 | +$0.20 | | Diluted Income per share | $0.47 | $0.27 | +$0.20 | - Potentially dilutive shares excluded from diluted EPS calculation due to antidilutive effect: **15,370,598** for Q2 2023 and **15,299,846** for YTD 2023[61](index=61&type=chunk) [Note 6. Income Taxes](index=22&type=section&id=Note%206.%20Income%20Taxes) This note details the company's income tax structure, effective tax rates, deferred tax position, and obligations under the Tax Receivable Agreement, which was amended to replace LIBOR with SOFR [Income Taxes](index=22&type=section&id=Income%20Taxes) Solaris Inc. is subject to federal and state income taxes, while Solaris LLC is a partnership; effective tax rates for Q2 and YTD 2023 were **17.8%** and **17.5%**, respectively, with deferred tax assets deemed realizable Income Tax Expense and Effective Rates (in millions) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Income tax expense | $2.7 | $1.9 | $5.1 | $3.6 | | Effective tax rate | 17.8% | 19.0% | 17.5% | 20.2% | - The effective tax rate differed from the statutory rate primarily due to Solaris LLC's treatment as a partnership for United States federal income tax purposes[63](index=63&type=chunk) - The company believes it will be able to realize its deferred tax assets in the future, which primarily relate to its investment in Solaris LLC and net operating loss carryovers[64](index=64&type=chunk)[65](index=65&type=chunk) [Payables Related to the Tax Receivable Agreement](index=22&type=section&id=Payables%20Related%20to%20the%20Tax%20Receivable%20Agreement) The company made **$1.1 million** in TRA payments in January 2023; as of June 30, 2023, the liability was **$71.5 million**, and the agreement was amended to replace LIBOR with SOFR - Payments Made: **$1.1 million** in January 2023 under the Tax Receivable Agreement[67](index=67&type=chunk) - Liability (June 30, 2023): **$71.5 million**, representing **85%** of anticipated future tax savings from increases in tax basis and imputed interest[68](index=68&type=chunk) - Amendment: The Tax Receivable Agreement was amended on June 27, 2023, to replace LIBOR references with the 12-month term SOFR plus **71.513 basis points**[72](index=72&type=chunk) [Note 7. Concentrations](index=24&type=section&id=Note%207.%20Concentrations) The company faces customer and supplier concentration risks; in Q2 2023, two customers accounted for **15%** and **11%** of revenues, and one supplier for **15%** of purchases - Customer Concentration (Three Months Ended June 30, 2023 Revenue): Two customers accounted for **15%** and **11%** of the Company's revenues[73](index=73&type=chunk) - Customer Concentration (As of June 30, 2023 Accounts Receivable): Three customers accounted for **12%**, **12%**, and **10%** of the Company's accounts receivable[73](index=73&type=chunk) - Supplier Concentration (Three Months Ended June 30, 2023 Purchases): One supplier accounted for **15%** of the Company's total purchases[74](index=74&type=chunk) - Supplier Concentration (As of June 30, 2023 Accounts Payable): One supplier accounted for **14%** of the Company's accounts payable[74](index=74&type=chunk) [Note 8. Commitments and Contingencies](index=24&type=section&id=Note%208.%20Commitments%20and%20Contingencies) This note addresses potential liabilities from tax matters and litigation, including a **$3.1 million** accrued liability for an unfavorable property tax ruling under appeal, with no other material litigation expected [Tax Matters](index=24&type=section&id=Tax%20Matters) The company recognized a **$3.1 million** accrued liability as of June 30, 2023, for an unfavorable property tax ruling in Brown County, Texas, which is currently under appeal with a final ruling expected in H2 2023 - Property Tax Contingency: **$3.1 million** accrued liability as of June 30, 2023, related to an unfavorable ruling in Brown County, Texas, regarding property tax exemptions[75](index=75&type=chunk) - Appeal Status: An appeal was filed with the Eleventh District of Texas – Eastland Court of Appeals, and a final ruling is anticipated in the second half of 2023[75](index=75&type=chunk) [Litigation and Claims](index=26&type=section&id=Litigation%20and%20Claims) Management believes no pending litigation, disputes, or claims are expected to have a material adverse effect on the condensed consolidated financial statements - Management's opinion: No pending litigation, disputes, or claims are expected to have a material adverse effect on the condensed consolidated financial statements[77](index=77&type=chunk) [Note 9. Related Party Transactions](index=26&type=section&id=Note%209.%20Related%20Party%20Transactions) The company engages in transactions with related parties, including administrative services from Solaris Energy Management, LLC and business dealings with THRC Affiliates, involving revenue, cost of services, and contingent payments Related Party Transactions (in millions) | Metric | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Payments to Solaris Energy Management, LLC (administrative services) | $0.3 | $0.8 | | Revenue from THRC Affiliates | $7.3 | $12.2 | | Cost of services from THRC Affiliates | $0.6 | $1.7 | - THRC Holdings, LP, an entity affiliated with certain customers and suppliers, held **11.1%** ownership of the Company's Class A common stock as of June 30, 2023[81](index=81&type=chunk) - Contingent Payments: Solaris may be required to pay up to **$4.0 million** to THRC Affiliates through 2024, contingent upon meeting minimum Services revenue thresholds[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results, including business overview, industry trends, detailed revenue and expense analysis, non-GAAP reconciliations, and liquidity [Overview](index=27&type=section&id=Overview) Solaris Oilfield Infrastructure provides specialized equipment, field support, logistics, and software to U.S. oil and gas operators, focusing on efficiency and cost reduction during well completion, with revenue from mobile proppant and fluid management systems and logistics services - Core Business: Designs and manufactures specialized equipment, provides field technician support, last mile logistics, and software solutions for oil and natural gas well completion[86](index=86&type=chunk) - Primary Revenue Sources: Mobile proppant and fluid management systems, last mile logistics management services[86](index=86&type=chunk) - New Technologies: Proprietary top fill equipment and AutoBlend™ integrated electric blender contribute to revenue[86](index=86&type=chunk) [Recent Trends and Outlook](index=27&type=section&id=Recent%20Trends%20and%20Outlook) Demand for Solaris's offerings is driven by drilling activity; despite a decline in U.S. Land Rig Count, Solaris's system count and earnings have outpaced trends due to new technology and pricing, with continued outperformance expected Commodity Prices and Rig Count | Metric | Q2 2023 Average | 2022 Average | 2023 YTD Change | | :-------------------------------- | :-------------- | :----------- | :-------------- | | WTI Oil Prices | Over $70/barrel | $94/barrel | Softened | | Henry Hub Natural Gas Prices | $2-$3/MMBtu | Over $6/MMBtu | Down | | Baker Hughes US Land Rig Count | N/A | N/A | Down ~14% | - Company Performance: Fully utilized total system count growth has outpaced the rig count trend due to new technology-led growth with new and existing customers, and increased pricing[89](index=89&type=chunk) - Outlook: Expects continued earnings growth from new product lines to allow earnings to outperform the trend in underlying oil and gas activity[89](index=89&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) This section compares financial performance for the three and six months ended June 30, 2023, versus 2022, detailing changes in revenue, operating costs, and income, highlighting drivers and efficiencies [Revenue](index=28&type=section&id=Revenue) Total revenue decreased **11%** to **$77.2 million** for Q2 2023 due to lower last mile tonnage, but increased **11%** to **$159.9 million** for the six months, driven by demand and pricing, with fully utilized systems rising from **83 to 113** Revenue Performance (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Total revenue | $77,202 | $86,711 | $159,924 | $143,626 | | Change (YoY) | -$9,509 (-11%) | N/A | +$16,298 (+11%) | N/A | | Fully utilized systems (period end) | 108 | 88 | 113 | 83 | - The decrease in Q2 2023 revenue was primarily due to a decrease in last mile tonnage, partially offset by an increase in total fully utilized systems[93](index=93&type=chunk) - The increase in YTD 2023 revenue was primarily related to an activity-driven increase in demand for products and services and updated pricing[93](index=93&type=chunk) [Cost of Services](index=28&type=section&id=Cost%20of%20Services) Cost of services (excluding depreciation) decreased **25%** to **$45.7 million** for Q2 2023 due to lower last mile tonnage, remaining flat at **$98.9 million** for six months, improving as a percentage of revenue to **59%** and **62%** respectively Cost of Services (excluding depreciation, in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Cost of services | $45,652 | $61,237 | $98,875 | $98,908 | | Change (YoY) | -$15,585 (-25%) | N/A | -$33 (0%) | N/A | | As a percentage of revenue | 59% | 71% | 62% | 69% | - The decrease in Q2 2023 cost of services was primarily related to a decrease in last mile tonnage[94](index=94&type=chunk) [Property Tax Contingency](index=30&type=section&id=Property%20Tax%20Contingency) No additional property tax contingencies were recognized in Q2 or YTD 2023; the **$3.1 million** accrued liability for the Brown County ruling remains, with an appeal decision expected in H2 2023 that could be material - No additional property tax contingencies were recognized during the three and six months ended June 30, 2023[96](index=96&type=chunk) - A **$3.1 million** accrued liability related to an unfavorable Texas District Court ruling on property tax exemptions remains, with an appeal ruling anticipated in the second half of 2023[96](index=96&type=chunk) [Selling, General and Administrative Expenses](index=30&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) Selling, general and administrative (SG&A) expenses increased **13%** to **$6.8 million** for Q2 2023 and **19%** to **$13.4 million** for the six months, primarily due to increases in headcount and professional fees Selling, General and Administrative Expenses (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | SG&A expenses | $6,825 | $6,062 | $13,363 | $11,273 | | Change (YoY) | +$763 (+13%) | N/A | +$2,090 (+19%) | N/A | - The increase in SG&A expenses was primarily due to increases in headcount and professional fees[97](index=97&type=chunk) [Other Operating Income](index=30&type=section&id=Other%20Operating%20Income) Other operating income significantly decreased **89%** to **$0.1 million** for Q2 2023 and **67%** to **$0.5 million** for six months, primarily due to lower gains on asset sales and sales tax rebates compared to prior year Other Operating Income (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Other operating income | $125 | $1,114 | $463 | $1,423 | | Change (YoY) | -$989 (-89%) | N/A | -$960 (-67%) | N/A | - 2023 other operating income primarily relates to gain on sale of assets and sales tax rebates, partially offset by excise tax for share buybacks[98](index=98&type=chunk) - 2022 other operating income primarily related to change in the TRA liability, credit losses, gain on insurance claims, and write-off of prepaid purchase orders[98](index=98&type=chunk) [Provision for Income Taxes](index=30&type=section&id=Provision%20for%20Income%20Taxes) Income tax expense increased to **$2.7 million** for Q2 and **$5.1 million** for six months ended June 30, 2023, driven by operating gains, with effective tax rates of **17.8%** and **17.5%** respectively, due to partnership tax treatment Provision for Income Taxes (in millions) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Income tax expense | $2.7 | $1.9 | $5.1 | $3.6 | | Change (YoY) | +$0.8 (+42.1%) | N/A | +$1.5 (+41.7%) | N/A | | Effective tax rate | 17.8% | 19.0% | 17.5% | 20.2% | - The change in income tax expense was attributable to operating gains[99](index=99&type=chunk) - The effective tax rate differed from the statutory rate primarily due to Solaris LLC's treatment as a partnership for United States federal income tax purposes[99](index=99&type=chunk) [Comparison of Non-GAAP Financial Measures](index=30&type=section&id=Comparison%20of%20Non-GAAP%20Financial%20Measures) This section reconciles Net Income to EBITDA and Adjusted EBITDA, both non-GAAP measures, which significantly increased for the three and six months ended June 30, 2023, driven by changes in revenues and expenses [EBITDA and Adjusted EBITDA](index=30&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) EBITDA increased by **$7.4 million** to **$24.9 million** for Q2 2023 and **$16.4 million** to **$48.1 million** for six months; Adjusted EBITDA rose by **$5.8 million** to **$26.8 million** and **$15.1 million** to **$51.9 million** respectively, driven by revenue and expense changes - EBITDA is defined as net income, plus depreciation and amortization expense, interest expense, and income tax expense[101](index=101&type=chunk) - Adjusted EBITDA is defined as EBITDA plus stock-based compensation expense and certain non-cash items and any extraordinary, unusual or non-recurring gains, losses or expenses[103](index=103&type=chunk) EBITDA and Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income | $12,241 | $8,289 | $24,178 | $14,011 | | EBITDA | $24,850 | $17,454 | $48,149 | $31,796 | | Adjusted EBITDA | $26,825 | $21,064 | $51,943 | $36,804 | | Change in Adjusted EBITDA (YoY) | +$5,761 (+27.3%) | N/A | +$15,139 (+41.1%) | N/A | [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity sources (operating cash, credit borrowings, equity), capital uses (operations, capex, repurchases, dividends), and cash flow activities, concluding current liquidity is sufficient [Overview](index=34&type=section&id=Overview) Solaris's liquidity comes from operations, credit, and equity; capital is used for operations, capex, repurchases, and dividends; as of June 30, 2023, **$9.4 million** cash and **$32.0 million** credit available are deemed sufficient for future needs - Primary Liquidity Sources: Cash flows from operations, borrowings under credit agreements, and proceeds from equity offerings[111](index=111&type=chunk) - Primary Uses of Capital: Funding ongoing operations, capital expenditures (organic growth, fleet development/maintenance/upgrades), share repurchases, and dividend payments[111](index=111&type=chunk) Liquidity Position (as of June 30, 2023, in millions) | Metric | Amount | | :-------------------------------- | :----- | | Cash and cash equivalents | $9.4 | | Borrowings outstanding under Credit Agreement | $43.0 | | Ability to draw under Credit Agreement | $32.0 | - Liquidity Outlook: Management believes current liquidity is sufficient to address future cash needs for the next 12 months and beyond[112](index=112&type=chunk) [Share Repurchase Program](index=34&type=section&id=Share%20Repurchase%20Program) The Board authorized a **$50.0 million** share repurchase program on March 2, 2023; as of June 30, 2023, **3,078,500 shares** were purchased for **$25.8 million** (average **$8.38/share**), with **$24.2 million** remaining - Authorization: **$50.0 million** share repurchase plan authorized on March 2, 2023, with no set term limits[113](index=113&type=chunk) Share Repurchase Program Status (as of June 30, 2023) | Metric | Value | | :-------------------------------- | :-------------------- | | Shares purchased | 3,078,500 shares | | Aggregate cost | $25.8 million | | Average price per share | $8.38 | | Amount remaining under authorization | $24.2 million | [Cash Flows](index=34&type=section&id=Cash%20Flows) This section summarizes cash flow activities for the six months ended June 30, 2023, compared to 2022, showing significant increases in operating cash flow and a decrease in net cash used in financing activities Cash Flow Summary (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :------- | | Net cash provided by operating activities | $45,460 | $22,394 | +$23,066 | | Net cash used in investing activities | $(39,896) | $(31,409) | -$8,487 | | Net cash used in financing activities | $(5,028) | $(12,131) | +$7,103 | | Net change in cash | $536 | $(21,146) | +$21,682 | [Significant Sources and Uses of Cash Flows](index=34&type=section&id=Significant%20Sources%20and%20Uses%20of%20Cash%20Flows) Operating cash flow increased due to higher profitability; investing activities rose from capital expenditures; financing cash used decreased, driven by **$35.0 million** net borrowings offsetting repurchases and dividends - Operating Activities: Net cash provided increased by **$23.1 million** for the six months ended June 30, 2023, primarily attributable to increased profitability from operations[116](index=116&type=chunk) - Investing Activities: Net cash used increased by **$8.5 million** for the six months ended June 30, 2023, primarily due to capital expenditures related to new technologies and enhancements to the fleet[117](index=117&type=chunk) - Financing Activities (Six months ended June 30, 2023): Net cash used was **$5.0 million**, primarily related to **$25.8 million** in share repurchases, **$7.0 million** in quarterly dividends, and **$3.5 million** in distributions to unitholders, partially offset by **$35.0 million** in net borrowings under the Credit Agreement[118](index=118&type=chunk)[120](index=120&type=chunk) [Capital Sources](index=36&type=section&id=Capital%20Sources) The company's senior secured credit facility serves as a key capital source, providing flexibility for its financial operations - The Senior Secured Credit Facility is a primary capital source for the company[122](index=122&type=chunk) [Future Sources and Uses of Cash](index=36&type=section&id=Future%20Sources%20and%20Uses%20of%20Cash) Material cash commitments include Credit Agreement, TRA, leases, and purchase obligations; within twelve months, **$0.1 million** in commitment fees, **$3.5 million** in interest, and **$14.6 million** in purchase obligations are expected - Material cash commitments consist primarily of obligations under the Credit Agreement, Tax Receivable Agreement, finance and operating leases for property and equipment, and purchase obligations[124](index=124&type=chunk) Expected Cash Payments (next twelve months, in millions) | Metric | Amount | | :-------------------------------- | :----- | | Commitment fees on Credit Agreement | ~$0.1 | | Interest on Credit Agreement | ~$3.5 | | Purchase obligations | ~$14.6 | [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No material changes occurred in the company's critical accounting policies and estimates during the three and six months ended June 30, 2023 - No material changes in critical accounting policies and estimates during the three and six months ended June 30, 2023[128](index=128&type=chunk) [Recent Accounting Pronouncements](index=36&type=section&id=Recent%20Accounting%20Pronouncements) No recently adopted accounting standards were implemented during the reporting period; refer to Note 2 for information on recently issued accounting standards - No recently adopted accounting standards during the reporting period[130](index=130&type=chunk) [Off Balance Sheet Arrangements](index=36&type=section&id=Off%20Balance%20Sheet%20Arrangements) The company has no material off-balance sheet arrangements, except for purchase commitments under supply agreements, and is not materially exposed to related financial risks - The company has no material off-balance sheet arrangements, except for purchase commitments under supply agreements[133](index=133&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that the company's exposure to market risk has not materially changed since December 31, 2022, and provides specific disclosures regarding credit risk - The company's exposure to market risk has not changed materially since December 31, 2022[134](index=134&type=chunk) [Credit Risk](index=37&type=section&id=Credit%20Risk) Most accounts receivable have **60-day** or less payment terms; as of June 30, 2023, three customers accounted for **12%**, **12%**, and **10%** of receivables, with risk mitigated by credit evaluations and payment monitoring - Majority of accounts receivable have payment terms of **60 days** or less[135](index=135&type=chunk) - As of June 30, 2023, three customers accounted for **12%**, **12%**, and **10%** of the company's total accounts receivable[135](index=135&type=chunk) - Credit risk is mitigated by performing credit evaluations and monitoring customer payment patterns[135](index=135&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were ineffective as of June 30, 2023, due to a material weakness in ITGCs related to a third-party system, with a remediation plan initiated and no other material changes to internal control [Disclosure Controls and Procedures](index=37&type=section&id=Disclosure%20Controls%20and%20Procedures) As of June 30, 2023, disclosure controls and procedures were ineffective due to a material weakness in ITGCs, specifically regarding user access, change management, and segregation of duties for a third-party IT system supporting financial reporting - Disclosure controls and procedures were not effective as of June 30, 2023[136](index=136&type=chunk) - The material weakness is related to ineffective ITGCs in user access, application change management, operating system and logical access controls, and segregation of duties for a third-party IT system supporting financial reporting for last mile logistics services[137](index=137&type=chunk) [Remediation Plan for Material Weakness](index=37&type=section&id=Remediation%20Plan%20for%20Material%20Weakness) Management initiated a remediation plan to strengthen internal controls, including developing internal software to replace the third-party IT system, enhancing risk assessment for internally developed systems, and implementing an IT management review and testing plan for ITGCs - Remediation efforts include developing and implementing internal use software to replace the third-party IT system[139](index=139&type=chunk) - The plan also involves developing enhanced risk assessment procedures and controls related to internally developed third-party IT systems[139](index=139&type=chunk) - An IT management review and testing plan will be implemented to monitor ITGCs, with a specific focus on systems supporting financial reporting[139](index=139&type=chunk) [Changes in Internal Control over Financial Reporting](index=39&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Except for the identified material weakness and ongoing remediation efforts, no other material changes occurred in the company's internal control over financial reporting during the quarter ended June 30, 2023 - No other material changes in internal control over financial reporting during the quarter ended June 30, 2023, apart from the identified material weakness and remediation efforts[142](index=142&type=chunk) [PART II: OTHER INFORMATION](index=40&type=section&id=PART%20II:%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigation, but management believes no pending matters would materially affect financial condition or results, except for a **$3.1 million** property tax liability under appeal, which could be material - The company is involved in routine litigation, disputes, or claims related to its business activities[145](index=145&type=chunk) - Management's opinion: No pending litigation, disputes, or claims are expected to have a material adverse effect on financial condition, cash flows, or results of operations[145](index=145&type=chunk) - A **$3.1 million** accrued liability for an unfavorable property tax ruling in Brown County, Texas, is under appeal, with a final ruling anticipated in the second half of 2023; resolution could be material[146](index=146&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) No material updates to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022, have occurred - No material updates to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[147](index=147&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on equity security transactions not registered under the Securities Act, detailing issuer purchases of Class A common stock under the authorized share repurchase plan and for tax withholding obligations [Unregistered Sales of Equity Securities](index=40&type=section&id=Unregistered%20Sales%20of%20Equity%20Securities) There were no unregistered sales of equity securities during the reporting period - No unregistered sales of equity securities during the reporting period[148](index=148&type=chunk) [Issuer Purchases of Equity Securities](index=40&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) For the six months ended June 30, 2023, the company purchased **3,229,041 shares** of Class A common stock at an average price of **$7.89/share**, including **3,078,500 shares** under the **$50.0 million** repurchase plan and **150,541 shares** for tax withholding Issuer Purchases of Equity Securities (Six Months Ended June 30, 2023) | Metric | Value | | :-------------------------------- | :-------------------- | | Total Number of Shares Purchased | 3,229,041 shares | | Average Price Paid Per Share | $7.89 | | Shares Purchased as Part of Publicly Announced Plan | 3,078,500 shares | | Maximum Dollar Value Remaining Under Plan | $24,212,452 | - The total shares purchased include **150,541 shares** bought to satisfy tax withholding obligations upon the vesting of restricted stock[155](index=155&type=chunk) [Item 3. Defaults upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - No defaults upon senior securities during the reporting period[151](index=151&type=chunk) [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) There are no mine safety disclosures to report for the period - No mine safety disclosures[152](index=152&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) During the three months ended June 30, 2023, no director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended June 30, 2023[153](index=153&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including amendments to key agreements and plans, along with certifications from the Chief Executive Officer and Chief Financial Officer - Key exhibits include amendments to the Certificate of Incorporation, Bylaws, Credit Agreement, Tax Receivable Agreement, and the Long Term Incentive Plan[154](index=154&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 are included[154](index=154&type=chunk)[157](index=157&type=chunk) [SIGNATURES](index=45&type=section&id=SIGNATURES) [Report Signatures](index=45&type=section&id=Report%20Signatures) The report was officially signed on July 27, 2023, by William A. Zartler, Chairman and CEO, and Kyle S. Ramachandran, President and CFO, confirming its submission - The report was signed on July 27, 2023[163](index=163&type=chunk) - Signatories: William A. Zartler (Chairman and Chief Executive Officer) and Kyle S. Ramachandran (President and Chief Financial Officer)[163](index=163&type=chunk)

[Cautionary Statement Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) [Forward-Looking Statements and Risk Factors](index=4&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) The report's forward-looking statements are based on current expectations and subject to significant risks and uncertainties - The company identifies several key factors and uncertainties that could materially affect its financial results[10](index=10&type=chunk)[14](index=14&type=chunk) - Key risks include **volatility in oil and gas prices**, geopolitical events, inflation, supply chain constraints, customer consolidation, and competitive pressures[10](index=10&type=chunk) [PART I: FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2023 [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$473.0 million** as of March 31, 2023, driven by higher PP&E and borrowings Key Balance Sheet Items (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,175 | $8,835 | | Total current assets | $86,005 | $88,743 | | Property, plant and equipment, net | $313,299 | $298,160 | | **Total assets** | **$472,998** | **$462,576** | | Borrowings under the credit agreement | $26,000 | $8,000 | | Total liabilities | $162,588 | $145,447 | | **Total stockholders' equity** | **$310,410** | **$317,129** | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a **45%** year-over-year revenue increase to **$82.7 million** and net income growth to **$7.6 million** Statements of Operations Highlights (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total revenue | $82,722 | $56,915 | | Operating income | $14,882 | $7,413 | | Net income | $11,937 | $5,722 | | Net income attributable to Solaris | $7,569 | $3,502 | | Diluted EPS | $0.23 | $0.11 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net operating cash flow increased to **$16.8 million**, while total cash decreased by **$6.7 million** for the quarter Cash Flow Summary (in thousands) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $16,849 | $6,269 | | Net cash used in investing activities | ($18,826) | ($11,507) | | Net cash used in financing activities | ($4,683) | ($6,131) | | **Net decrease in cash** | **($6,660)** | **($11,369)** | [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Key disclosures include an expanded credit facility, a new share repurchase program, and significant customer concentration - On April 28, 2023, the company amended its credit agreement, increasing total available borrowings from **$50.0 million to $75.0 million**[44](index=44&type=chunk)[45](index=45&type=chunk) - A new share repurchase plan of up to **$50.0 million** was authorized, and the company repurchased **1,641,000 shares for $14.4 million** during the quarter[53](index=53&type=chunk) - The liability under the Tax Receivable Agreement was **$71.5 million** as of March 31, 2023[70](index=70&type=chunk) - For Q1 2023, three customers accounted for **13%, 12%, and 11%** of total revenues, indicating significant customer concentration[72](index=72&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong revenue growth, market outlook, liquidity management, and non-GAAP financial measures [Recent Trends and Outlook](index=27&type=section&id=Recent%20Trends%20and%20Outlook) Despite market volatility, system count growth outpaced rig count trends due to new technology adoption - Oil and natural gas prices were volatile in Q1 2023, with WTI oil prices ranging from the **high $60s to low $80s** per barrel[90](index=90&type=chunk) - The company's growth in fully utilized systems has **outpaced the general rig count trend**, driven by new technology and product offerings[91](index=91&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Revenue grew **45%** year-over-year to **$82.7 million**, with Adjusted EBITDA increasing to **$25.1 million** Comparison of Operations (in thousands) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total revenue | $82,722 | $56,915 | | Cost of services (excl. D&A) | $53,223 | $37,671 | | Selling, general and administrative | $6,538 | $5,211 | | Operating income | $14,882 | $7,413 | - The number of fully utilized mobile proppant systems increased from **75 in Q1 2022 to 92 in Q1 2023**[96](index=96&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net income | $11,937 | $5,722 | | EBITDA | $23,299 | $14,342 | | **Adjusted EBITDA** | **$25,118** | **$15,740** | [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Primary liquidity sources are cash from operations and borrowings, supporting a new **$50.0 million** share repurchase program - As of May 3, 2023, the company had approximately **$34.5 million** available to draw under its amended credit agreement[110](index=110&type=chunk) - Under the new share repurchase program, the company bought back **1,641,000 shares for $14.4 million**, leaving **$35.6 million** available[111](index=111&type=chunk) - Net cash from operating activities increased to **$16.8 million** in Q1 2023 from **$6.3 million** in Q1 2022[114](index=114&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Market risk exposure remains unchanged, with a notable credit risk from customer concentration in accounts receivable - As of March 31, 2023, one customer accounted for **13% of total accounts receivable**[132](index=132&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were deemed ineffective due to a material weakness in IT general controls for a third-party system - A **material weakness** was identified related to ineffective IT general controls for a third-party IT system supporting last-mile logistics services[134](index=134&type=chunk) - The remediation plan includes evaluating alternative software and enhancing risk assessment procedures for third-party IT systems[136](index=136&type=chunk) [PART II: OTHER INFORMATION](index=39&type=section&id=PART%20II%3A%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company accrued **$3.1 million** for a property tax dispute in Texas, which it intends to appeal - Following an adverse ruling in a property tax case, the company has recognized a liability of **$3.1 million** and plans to appeal the decision[142](index=142&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported since the 2022 Annual Report on Form 10-K - The company reports **no material changes** to its risk factors since its 2022 Form 10-K filing[143](index=143&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **1,641,000 shares** under a new **$50 million** plan initiated in March 2023 Issuer Purchases of Equity Securities (March 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Plan | Max Value Remaining Under Plan | | :--- | :--- | :--- | :--- | :--- | | March 1 - March 31 | 1,788,838 | $8.82 | 1,641,000 | $35,557,509 | - Total shares purchased include **1,641,000** under the public plan and **147,838** to satisfy tax withholding obligations[146](index=146&type=chunk) [Other Items (3, 4, 5, 6)](index=41&type=section&id=Other%20Items%20(3%2C%204%2C%205%2C%206)) This section notes an increase in the credit facility to **$75.0 million** and lists filed exhibits - On April 28, 2023, the company amended its credit agreement to increase available borrowings by **$25.0 million**, bringing the total facility to **$75.0 million**[151](index=151&type=chunk) - The company reported **no defaults** on senior securities and **no mine safety disclosures**[147](index=147&type=chunk)[148](index=148&type=chunk) [Signatures](index=44&type=section&id=SIGNATURES) [Report Authorization](index=44&type=section&id=Report%20Authorization) The report was duly authorized and signed by the CEO and CFO on May 4, 2023 - The Form 10-Q was signed and certified by the Principal Executive Officer and Principal Financial Officer on **May 4, 2023**[163](index=163&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38090 SOLARIS OILFIELD INFRASTRUCTURE, INC. (Exact name of registrant as specified in its charter) Delaware 81-522 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38090 SOLARIS OILFIELD INFRASTRUCTURE, INC. (Exact name of registrant as specified in its charter) Delaware 81-5223109 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 9811 Katy Freeway, Suite 700 (Mark One) ...

[PART I: FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) Solaris Oilfield Infrastructure, Inc. reported significant Q2 2022 growth, with revenue up 146% to $86.7 million, net income of $5.5 million, and total assets reaching $442.4 million [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$442.4 million** by June 30, 2022, driven by higher accounts receivable and property, plant, and equipment, while cash decreased to **$15.4 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $15,351 | $36,497 | | Accounts receivable, net | $66,854 | $33,120 | | Total current assets | $92,944 | $81,068 | | Property, plant and equipment, net | $267,816 | $240,091 | | **Total assets** | **$442,420** | **$406,223** | | **Liabilities & Equity** | | | | Total current liabilities | $58,544 | $29,299 | | Total liabilities | $137,825 | $108,347 | | Total stockholders' equity | $304,595 | $297,876 | | **Total liabilities and stockholders' equity** | **$442,420** | **$406,223** | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2022 revenue surged **146%** to **$86.7 million**, resulting in operating income of **$10.3 million** and net income of **$5.5 million** Statements of Operations Summary (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $86,711 | $35,179 | $143,626 | $63,848 | | Operating income (loss) | $10,322 | $(2,032) | $17,735 | $(4,121) | | Net income (loss) attributable to Solaris | $5,453 | $(1,211) | $8,955 | $(2,380) | | Diluted EPS | $0.16 | $(0.04) | $0.27 | $(0.08) | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly increased to **$22.4 million** for the first six months of 2022, despite a **$21.1 million** overall decrease in cash due to investing and financing activities Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22,394 | $4,040 | | Net cash used in investing activities | $(31,409) | $(7,670) | | Net cash used in financing activities | $(12,131) | $(10,460) | | **Net decrease in cash** | **$(21,146)** | **$(14,090)** | [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, debt, equity, and contingencies, highlighting wellsite services as the primary revenue source, an undrawn **$50.0 million** credit facility, a **$3.1 million** tax contingency, and significant customer concentration Disaggregation of Revenue (in millions) | Revenue Source | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Wellsite services | $86.5 | $34.9 | $143.1 | $63.3 | | Transloading and Other | $0.2 | $0.2 | $0.5 | $0.6 | | **Total revenue** | **$86.7** | **$35.2** | **$143.6** | **$63.8** | - The company has a **$50.0 million** revolving credit facility with a **$25.0 million** uncommitted accordion option. As of June 30, 2022, there were no borrowings outstanding[45](index=45&type=chunk) - A property tax contingency of **$3.1 million** was recognized in Q2 2022 following an unfavorable court ruling regarding the disqualification of equipment for certain property tax exemptions. The company intends to appeal the ruling[69](index=69&type=chunk) - For the six months ended June 30, 2022, one customer accounted for **20%** of total revenues. As of June 30, 2022, two customers accounted for **14%** and **10%** of accounts receivable[65](index=65&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes significant revenue growth to increased demand and higher commodity prices, with Q2 2022 Adjusted EBITDA reaching **$21.1 million**, supported by strong liquidity [Recent Trends and Outlook](index=24&type=section&id=Recent%20Trends%20and%20Outlook) Q2 2022 saw WTI oil prices between **$95** and **$120+** per barrel, driving growth in North American drilling activity and a **32%** increase in the company's fully utilized systems - WTI oil prices ranged from **$95** to over **$120** per barrel between April and June 2022, supporting growth in North American drilling and completion activity[81](index=81&type=chunk) - The Baker Hughes Land rig count increased by **29%** from the start of the year to the end of June 2022. The company's fully utilized systems increased by **32%** since the fourth quarter of 2021[82](index=82&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Q2 2022 revenue increased **146%** to **$86.7 million**, driven by a rise in fully utilized mobile proppant systems, with cost of services at **71%** of revenue and a **$3.1 million** property tax contingency expense - The number of fully utilized mobile proppant systems increased from **53** for the three months ended June 30, 2021, to **84** for the three months ended June 30, 2022[86](index=86&type=chunk) - Cost of services as a percentage of revenue was **71%** for Q2 2022, consistent with **71%** in Q2 2021 (calculated from table data)[88](index=88&type=chunk) - A property tax contingency of **$3.1 million** was recognized related to a court ruling on the disqualification of equipment for certain tax exemptions[89](index=89&type=chunk) [Comparison of Non-GAAP Financial Measures](index=28&type=section&id=Comparison%20of%20Non-GAAP%20Financial%20Measures) Adjusted EBITDA significantly increased to **$21.1 million** in Q2 2022 and **$36.8 million** for the first six months, reflecting higher revenues and improved operating results Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $8,289 | $(1,870) | $14,011 | $(3,795) | | EBITDA | $17,454 | $4,720 | $31,796 | $9,324 | | **Adjusted EBITDA** | **$21,064** | **$6,498** | **$36,804** | **$12,616** | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2022, the company maintained strong liquidity with **$15.4 million** in cash and **$50.0 million** available credit, despite increased capital expenditures of **$32.3 million** for fleet enhancements - As of June 30, 2022, the company had **$15.4 million** in cash and cash equivalents and **$50.0 million** of available borrowing capacity under its Credit Agreement[104](index=104&type=chunk) - Net cash from operating activities increased to **$22.4 million** for the first six months of 2022, compared to **$4.0 million** for the same period in 2021[106](index=106&type=chunk) - Capital expenditures for the first six months of 2022 were **$32.3 million**, a significant increase from **$7.7 million** in the first half of 2021[28](index=28&type=chunk)[107](index=107&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes in market risk exposure were reported, though credit risk concentration remains, with two customers representing **24%** of accounts receivable as of June 30, 2022 - As of June 30, 2022, two customers accounted for **24%** of total accounts receivable, down from **42%** for two customers as of December 31, 2021[123](index=123&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective at a reasonable assurance level[126](index=126&type=chunk) - No changes occurred in the company's internal control over financial reporting during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[127](index=127&type=chunk) [PART II: OTHER INFORMATION](index=36&type=section&id=PART%20II%3A%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is appealing an unfavorable district court ruling regarding property tax exemptions, which led to a **$3.1 million** accrual in Q2 2022 - Following an unfavorable ruling by the 35th District Court of Brown County, Texas, regarding property tax exemptions, the company recognized a **$3.1 million** liability in the three and six-month periods ended June 30, 2022. The company intends to appeal[131](index=131&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) No material updates to risk factors were reported since the Annual Report on Form 10-K for the year ended December 31, 2021 [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2022, the company repurchased **1,675** shares of Class A common stock at an average price of **$12.39** per share to satisfy tax withholding obligations for employee restricted stock vesting Issuer Purchases of Equity Securities (Q2 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 1 - April 30 | 505 | $11.41 | | May 1 - May 31 | 256 | $11.25 | | June 1 - June 30 | 914 | $13.25 | | **Total** | **1,675** | **$12.39** | [Other Items (3, 4, 5, 6)](index=36&type=section&id=Other%20Items%20%283%2C%204%2C%205%2C%206%29) No defaults upon senior securities, mine safety disclosures, or other material information were reported for the quarter, with Item 6 detailing filed exhibits - The company reported no information for Item 3 (Defaults upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38090 SOLARIS OILFIELD INFRASTRUCTURE, INC. (Exact name of registrant as specified in its charter) Delaware 8 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38090 SOLARIS OILFIELD INFRASTRUCTURE, INC. (Exact name of registrant as specified in its charter) Delaware 81-522 ...