Solaris Energy Infrastructure, Inc.(SEI) - 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 4.0%[325]. - The company reported a basic earnings per share of $0.51 for Class A common stock in 2024, down from$0.78 in 2023[325]. - Net income for the year ended December 31, 2024, was $28,918,000, a decrease of 25.5$38,775,000 in 2023[329]. - Operating cash flow for 2024 was $59,367,000, down from$88,261,000 in 2023[329]. - Total revenues for 2024 reached $313.1 million, an increase from$292.9 million in 2023, representing a growth of 6.8%[418]. - Solaris Logistics Solutions generated $274.5 million in revenue, down from$292.9 million in 2023, a decrease of 6.3%[418]. - Solaris Power Solutions reported $38.6 million in revenue for 2024, with no revenue reported in 2023[418]. - Adjusted EBITDA for total segments increased to$124.4 million in 2024 from $115.1 million in 2023, a growth of 8.9$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$323.1 million, which included $186.4 million in equity consideration and$136.7 million in cash[400]. - The acquisition of MER is expected to enhance capabilities in providing mobile, configurable equipment solutions and logistics services across various industries[399]. - The company has re-evaluated its reportable segments post-MER acquisition, now reporting two distinct business segments based on revenue-generating activities[414]. 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]. - Future ownership changes or changes to U.S. tax laws could limit the company's ability to utilize its NOLs, adversely affecting operating results and cash flows[137]. - The company may incur additional indebtedness in the future, which could limit operational flexibility and increase the risk of defaults under financing agreements[138]. - 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]. - The company’s payment obligations under the Tax Receivable Agreement are not contingent upon the continued ownership interest of TRA Holders, which may create conflicts with Class A common stockholders[183]. Market and Regulatory Environment - The company is subject to stringent environmental and occupational health and safety laws, which may expose it to significant costs and liabilities[143]. - Increased attention to environmental, social, and governance (ESG) matters may lead to reduced demand for hydrocarbon products and increased costs for the company[146]. - The company faces risks related to potential regulatory changes regarding hydraulic fracturing, which could limit future oil and natural gas exploration and production activities[141]. - The company is exposed to potential litigation risks related to ESG commitments and may face increased scrutiny from regulatory bodies regarding its environmental practices[151]. Stockholder and Corporate Governance - Significant stockholders, including Yorktown and legacy equity holders of MER, collectively hold about 41% of the voting power, which could influence management decisions and deter hostile takeovers[163]. - The amended and restated certificate of incorporation allows for the issuance of preferred stock, which could impact the value of Class A common stock[167]. - Certain directors and officers may have conflicts of interest due to their responsibilities with competing entities, potentially affecting business opportunities[166]. - The exclusive forum provision in the amended and restated certificate of incorporation may limit stockholders' ability to bring claims in favorable jurisdictions[172]. - Solaris Inc. is dependent on distributions from Solaris LLC to cover taxes and corporate expenses, which could materially affect its liquidity and financial condition[156]. Cash and Assets - 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]. - Total cash and cash equivalents at the end of 2024 increased to $159,867,000 from$5,833,000 at the beginning of the period[330]. - Total segment assets increased to $907.0 million in 2024 from$401.1 million in 2023, reflecting significant growth[424]. Internal Controls and Compliance - Solaris Inc. is subject to compliance with the Sarbanes-Oxley Act, which may strain resources and increase costs, potentially distracting management from core operations[185]. - Solaris Inc. may face challenges in maintaining effective internal controls over financial reporting, which could lead to errors in financial statements and affect investor confidence[187]. - The company maintained effective internal control over financial reporting as of December 31, 2024, according to the audit opinion[312].