Solaris Oilfield Infrastructure(SOI) - 2024 Q4 - Annual Report

Financial Performance - Total revenue for the year ended December 31, 2024, was $313.1 million, an increase from$ 292.9 million in 2023, representing a growth of 6.4%[325]. - Service revenue decreased to $263.2 million in 2024 from$ 269.5 million in 2023, a decline of 2.4%[325]. - Net income attributable to Solaris Energy Infrastructure, Inc. was $15.8 million for 2024, down from$ 24.3 million in 2023, a decrease of 35.5%[325]. - Operating income for 2024 was $52.8 million, an increase from$ 49.9 million in 2023, reflecting a growth of 3.8%[325]. - Earnings per share of Class A common stock decreased to $0.51 in 2024 from$ 0.78 in 2023, a decline of 34.6%[325]. - Net income for the year ended December 31, 2024, was $28,918,000, a decrease of 25.4% from$ 38,775,000 in 2023[329]. - Operating cash flow for 2024 was $59,367,000, down from$ 88,261,000 in 2023[329]. - Adjusted EBITDA for 2024 was $124.4 million, up from$ 115.1 million in 2023, indicating a year-over-year increase of 8.9%[418]. Acquisition and Growth - The acquisition of Mobile Energy Rentals LLC was completed for a total purchase consideration of $323.1 million, which included$ 65.9 million allocated to intangible assets related to customer relationships[305]. - The acquisition of Mobile Energy Rentals, LLC (MER) on September 11, 2024, constituted 48% of total assets and 12% of total revenues for the year ended December 31, 2024[316]. - The acquisition of MER is expected to enhance the company's capabilities in providing mobile, configurable equipment solutions and logistics services across various industries[399]. - The fair value of identifiable net assets acquired from MER was $232.1 million, with goodwill recognized at$ 91.0 million[409]. - The company recognized $4.4 million in acquisition-related costs for the year ended December 31, 2024, primarily consisting of legal and consulting fees[411]. Financial Obligations and Risks - The company incurred a senior secured term loan of$ 325 million to fund the MER Acquisition, along with a new revolving credit facility of up to $75 million[138]. - The financing agreements impose significant financial covenants, including restrictions on incurring additional debt and maintaining certain leverage and fixed charge coverage ratios[139]. - Solaris Inc. expects substantial payment obligations under the Tax Receivable Agreement, with estimated termination payments of approximately$ 115.6 million if terminated immediately after the filing of the Annual Report[180]. - The liability under the Tax Receivable Agreement (TRA) was $77.3 million, representing 85% of anticipated net cash savings from tax benefits[308]. - Changes in tax laws or regulations could adversely affect Solaris Inc.'s operating results and cash flows, increasing future tax liabilities[155]. Market and Operational Risks - The company faces potential limitations on utilizing its NOLs due to ownership changes, which could adversely affect future income and cash flows[137]. - Regulatory initiatives related to hydraulic fracturing may increase operational costs and limit future exploration and production activities, adversely impacting the company's business[141]. - Increased attention to climate change and ESG matters may lead to reduced demand for hydrocarbon products and increased compliance costs[145][146]. - The company may face increased scrutiny and litigation risks related to its ESG commitments and practices, particularly concerning allegations of greenwashing[151]. - Solaris Inc. is subject to stringent environmental and occupational health and safety laws, which may expose it to significant costs and liabilities[143]. Stockholder and Governance Matters - Significant stockholders, including Yorktown and legacy equity holders of MER, collectively hold approximately 41% of the voting power, which could influence management decisions and deter hostile takeovers[163]. - The exclusive forum provision in the amended and restated certificate of incorporation may limit stockholders' ability to bring claims in favorable judicial forums, potentially discouraging lawsuits[172]. - Certain directors and officers may have conflicts of interest due to their responsibilities with competing entities, potentially affecting business opportunities for Solaris Inc.[166]. - The amended and restated certificate of incorporation allows for the issuance of preferred stock, which could adversely impact the value of Class A common stock[167]. Cash and Assets Management - The company's cash and cash equivalents increased significantly to$ 114.3 million in 2024 from $5.8 million in 2023[323]. - Total assets rose to$ 1.1 billion as of December 31, 2024, compared to $468.3 million in 2023, marking a growth of 139.0%[323]. - Cash and cash equivalents at the end of 2024 were$ 159,867,000, significantly up from $5,833,000 at the end of 2023[330]. - Total segment assets increased to$ 907.0 million in 2024 from $401.1 million in 2023, a growth of 126.5%[424]. Revenue Recognition and Customer Relations - The majority of service revenue is derived from mobile proppant and fluid management systems, with revenue recognized based on the transfer of control to the customer[372][373]. - Revenue from Systems is primarily recognized over time, with customers billed a fixed daily rate based on service days utilized[376]. - Last mile logistics services revenue is recognized over time based on the output method as proppant is transported, charging a fixed rate per ton[380]. - Major customer A contributed$ 54.6 million, or 17.4% of total consolidated revenue in 2024, compared to $35.1 million, or 12.0% in 2023[430].