Solaris Energy Infrastructure, Inc.(SEI) - 2025 Q2 - Quarterly Report

Cautionary Statement Regarding Forward-Looking Statements This statement outlines the inherent risks and uncertainties associated with forward-looking statements in the report - The report includes forward-looking statements concerning business strategy, future profitability, capital expenditures, and financial performance, which are subject to various risks, uncertainties, and assumptions[9] - Key factors that could cause actual results to differ materially include domestic spending levels, access to capital markets, changes in tariffs and trade barriers, global economic developments, geopolitical risks, inflation, interest rates, supply chain constraints, and various operational and regulatory risks[10][12] PART I: FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Solaris Energy Infrastructure, Inc.'s unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with comprehensive notes providing detailed explanations of the company's financial position and performance for the periods ended June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity as of specific dates Condensed Consolidated Balance Sheets (in thousands) | Asset/Liability/Equity | June 30, 2025 | December 31, 2024 | Change | | :--------------------- | :------------ | :---------------- | :----- | | Total Assets | $1,472,730 | $1,122,881 | +$349,849 | | Cash and cash equivalents | $99,626 | $114,255 | -$14,629 | | Accounts receivable, net | $114,070 | $71,774 | +$42,296 | | Equipment held for lease, net | $671,741 | $339,932 | +$331,809 | | Total Liabilities | $692,407 | $456,152 | +$236,255 | | Long-term debt, net of current portion | $369,518 | $307,605 | +$61,913 | | Convertible notes | $149,267 | $0 | +$149,267 | | Total Stockholders' Equity | $780,323 | $666,729 | +$113,594 | Condensed Consolidated Statements of Operations This section details the company's revenues, expenses, and net income over specific reporting periods Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Total revenue | $149,328 | $73,886 | +$75,442 | $275,660 | $141,776 | +$133,884 | | Operating income | $35,569 | $11,854 | +$23,715 | $57,624 | $21,810 | +$35,814 | | Net income | $24,129 | $9,824 | +$14,305 | $37,097 | $17,124 | +$19,973 | | Net income attributable to Solaris Energy Infrastructure, Inc. | $11,955 | $6,208 | +$5,747 | $17,275 | $10,525 | +$6,750 | | EPS - Basic | $0.30 | $0.20 | +$0.10 | $0.44 | $0.35 | +$0.09 | | EPS - Diluted | $0.30 | $0.20 | +$0.10 | $0.44 | $0.35 | +$0.09 | Condensed Consolidated Statements of Changes in Stockholders' Equity This section outlines the changes in the company's equity from various transactions over time Key Changes in Stockholders' Equity (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Balance at December 31, 2024/2023 | $666,729 | $315,580 | | Stock-based compensation | $5,020 | $4,179 | | Net income | $24,129 | $9,824 | | Capital contribution from non-controlling interest in Stateline | $86,023 | $0 | | Dividends paid (Class A common stock) | $(9,554) | $(7,289) | | Balance at June 30, 2025/2024 | $780,323 | $317,183 | - The company's total stockholders' equity significantly increased from $666.7 million at December 31, 2024, to $780.3 million at June 30, 2025, primarily driven by net income and a substantial capital contribution from non-controlling interest in Stateline[22] Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :----------------- | :----------------------------- | :----------------------------- | :----------- | | Operating Activities | $49,903 | $35,751 | +$14,152 | | Investing Activities | $(336,999) | $(3,640) | -$333,359 | | Financing Activities | $266,271 | $(32,885) | +$299,156 | | Net decrease in cash, cash equivalents and restricted cash | $(20,825) | $(774) | -$20,051 | - Net cash used in investing activities dramatically increased by $333.4 million, primarily due to significant investments in property, plant, and equipment and equipment held for lease, reflecting the growth of the Solaris Power Solutions segment[27] Notes to the Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the financial statements Note 1. Business and Basis of Presentation This note describes Solaris Energy Infrastructure, Inc.'s business operations and the accounting principles used for financial reporting - Solaris Energy Infrastructure, Inc. provides mobile and scalable equipment-based solutions for distributed power generation and raw material management for oil and natural gas wells[28] - The company operates through two business segments: Solaris Power Solutions (mobile turbines for power generation) and Solaris Logistics Solutions (specialized equipment for oil and natural gas well completion)[28] Note 2. Variable Interest Entities This note details the formation and financial impact of Stateline Power, LLC, a consolidated variable interest entity - On April 28, 2025, Solaris formed Stateline Power, LLC, a variable interest entity (VIE), to provide off-grid power to a data center campus under a long-term equipment rental arrangement[31][32] - Solaris contributed $86.4 million in non-cash assets for a 50.1% equity interest and is the primary beneficiary, consolidating Stateline's financials within the Solaris Power Solutions segment[32][37] Stateline's Assets and Liabilities (as of June 30, 2025, in millions) | Category | Amount | | :------- | :----- | | Total Assets | $246.2 | | Equipment held for lease, net | $199.9 | | Total Liabilities | $71.8 | | Long-term debt, net of current portion | $70.7 | Note 3. Business Segments This note provides financial and operational details for the Solaris Power Solutions and Solaris Logistics Solutions segments - Solaris Power Solutions provides configurable natural gas-powered mobile turbines for data centers and energy customers, while Solaris Logistics Solutions designs and manufactures equipment for oil and natural gas well material management[47] Segment Financial Information (in millions) | Metric | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | Solaris Power Solutions | $75.6 | $0 | $125.0 | $0 | | | Solaris Logistics Solutions | $73.7 | $73.9 | $150.7 | $141.8 | | Capital Expenditures | Solaris Power Solutions | $183.5 | $0 | $325.6 | $0 | | | Solaris Logistics Solutions | $1.5 | $0.6 | $3.7 | $3.7 | | Adjusted EBITDA | Solaris Power Solutions | $45.7 | $0 | $77.6 | $0 | | | Solaris Logistics Solutions | $22.7 | $28.2 | $48.7 | $54.1 | - Solaris Power Solutions' Adjusted EBITDA now contributes over two-thirds of total segment Adjusted EBITDA, reflecting significant growth since its establishment in Q3 2024[46] Note 4. Summary of Significant Accounting Policies This note outlines the key accounting policies and principles applied in preparing the financial statements - The company adopted ASU No. 2023-07 (Segment Reporting) effective January 1, 2024, retrospectively applying enhanced disclosure requirements for significant segment expenses[56] - The company consolidates entities where it has a controlling financial interest, including Variable Interest Entities (VIEs) where it is the primary beneficiary, having both power to direct activities and the obligation/right to absorb losses/benefits[61][63] Note 5. Prepaid Expenses and Other Current Assets This note details the composition and changes in the company's prepaid expenses and other short-term assets Prepaid Expenses and Other Current Assets (in millions) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Prepaid expenses and deposits | $7.3 | $7.3 | | Short-term loan to third party | $7.6 | $0 | | Prepaid purchase orders | $2.4 | $0.1 | | Total | $17.5 | $8.4 | - A new secured demand note receivable of $7.6 million was extended to a third party on April 3, 2025, classified as held to maturity with no allowance for credit losses deemed necessary[91][92] Note 6. Property, Plant and Equipment This note provides a breakdown of the company's property, plant, and equipment, net of accumulated depreciation Property, Plant and Equipment, Net (in millions) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Oil and gas logistics equipment | $456.7 | $447.2 | | Total Property, plant and equipment, gross | $502.4 | $496.1 | | Less: accumulated depreciation | $(214.6) | $(197.3) | | Property, plant and equipment, net | $287.8 | $298.8 | - Depreciation expense for property, plant and equipment was $9.3 million for Q2 2025 and $18.7 million for H1 2025[93] Note 7. Equipment Held for Lease This note details the company's equipment held for lease, including power generation turbines and construction in progress Equipment Held for Lease, Net (in millions) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Power Generation - Turbine | $224.2 | $133.6 | | Construction in progress | $362.9 | $153.6 | | Total equipment held for lease, gross | $691.1 | $345.9 | | Less: accumulated depreciation | $(19.4) | $(6.0) | | Total equipment held for lease, net | $671.7 | $339.9 | - Depreciation expense for equipment held for lease was $6.1 million for Q2 2025 and $13.4 million for H1 2025, with no comparable expense in 2024 due to recent acquisitions[95] - Capitalized interest related to equipment held for lease was $4.1 million for Q2 2025 and $6.9 million for H1 2025[94] Note 8. Intangible Assets This note provides a breakdown of the company's intangible assets, including customer relationships and trademarks Intangible Assets, Net (in millions) | Category | Gross (June 30, 2025) | Accumulated Amortization (June 30, 2025) | Net Book Value (June 30, 2025) | Net Book Value (December 31, 2024) | | :------------------- | :-------------------- | :--------------------------------------- | :----------------------------- | :--------------------------------- | | Customer relationships | $66.0 | $(7.5) | $58.5 | $64.0 | | Trademarks | $8.0 | $(1.3) | $6.7 | $7.5 | | Total identifiable intangibles | $74.1 | $(8.9) | $65.2 | $71.5 | - Amortization expense was $2.9 million for Q2 2025 and $6.3 million for H1 2025, significantly higher than the prior year due to recent acquisitions[97] Note 9. Accrued Liabilities This note details the various accrued liabilities, including employee-related expenses and operational cost accruals Accrued Liabilities (in millions) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Employee-related expenses | $10.2 | $9.5 | | Operational cost accruals | $5.7 | $9.8 | | Taxes payable | $3.2 | $2.6 | | Interest payable | $1.8 | $0 | | Total Accrued liabilities | $25.2 | $23.2 | Note 10. Debt This note provides details on the company's outstanding debt obligations, including term loans and future maturities Outstanding Debt (in millions) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Term loan | $325.0 | $325.0 | | Stateline term loan | $72.0 | $0 | | Total debt, net of debt financing costs | $386.2 | $315.7 | | Long-term debt | $369.5 | $307.6 | - Stateline entered into a delayed draw term loan facility on May 23, 2025, with a maximum principal of $550.0 million, of which $72.0 million was drawn as of June 30, 2025[102][103][104] - The Stateline Term Loan bears a variable interest rate (Floating Rate) initially, converting to a fixed rate of 9.85% upon conversion, and is non-recourse to the Company, secured solely by Stateline's assets[105][106][109] Expected Future Principal Maturities of Debt Obligations (in millions) | Year Ending December 31, | Long-term Debt | Convertible Notes | | :----------------------- | :------------- | :---------------- | | 2025 (remainder of) | $8.1 | $0 | | 2026 | $19.7 | $0 | | 2027 | $25.6 | $0 | | 2028 | $25.9 | $0 | | 2029 | $277.6 | $0 | | Thereafter | $40.1 | $155.0 | | Total future principal debt payments | $397.0 | $155.0 | Note 11. Convertible Notes This note describes the issuance and key terms of the company's 4.75% Convertible Senior Notes due 2030 - On May 2, 2025, the Company issued $155.0 million aggregate principal amount of 4.75% Convertible Senior Notes due 2030, with net proceeds of $150.3 million, primarily to support the Solaris Power Solutions segment's growth[116][117] - The notes are convertible into Class A common stock at an initial rate of 37.8896 shares per $1,000 principal amount (conversion price ~$26.39/share), subject to anti-dilution adjustments and specific conversion conditions[118][119][125] Convertible Notes Components (as of June 30, 2025, in millions) | Component | Amount | | :-------------------------- | :----- | | Principal (par value) | $155.0 | | Unamortized debt discount and costs | $(5.7) | | Net carrying amount | $149.3 | | Estimated fair value (Level 1) | $207.9 | Note 12. Fair Value Measurements and Financial Instruments This note explains the company's fair value measurement hierarchy and concentrations of credit risk - The company uses a three-level fair value hierarchy for financial instruments, with most short-term instruments approximating fair value due to their nature, and variable-rate debt and lease obligations using Level 2 inputs[126][127] - Significant credit risk concentrations exist with cash and cash equivalents exceeding FDIC insured limits, and two customers accounting for 43% and 16% of total accounts receivable as of June 30, 2025[128][129] Note 13. Equity and Non-controlling Interest This note details changes in equity, non-controlling interests, and dividend distributions - Solaris LLC paid $8.1 million in dividend distributions to unitholders in Q2 2025, with $4.9 million paid to the Company for Class A common stock dividends[130] Non-controlling Interest (in millions) | Entity | June 30, 2025 | December 31, 2024 | | :----------- | :------------ | :---------------- | | Solaris LLC | $295.0 | $311.1 | | Stateline | $86.2 | $0 | | Total | $381.2 | $311.1 | - In H1 2025, 2,127,606 Solaris LLC units were exchanged for Class A common stock, increasing the Company's ownership interest in Solaris LLC[134] Note 14. Earnings Per Share This note outlines the calculation of basic and diluted earnings per share for various periods Earnings Per Share Calculation | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to Class A shareholders (millions) | $11.4 | $5.8 | $16.5 | $9.8 | | Basic weighted average shares outstanding | 37,818,102 | 28,335,491 | 37,001,762 | 28,461,172 | | Diluted weighted-average shares outstanding | 37,818,102 | 28,335,491 | 37,001,762 | 28,461,172 | | Basic EPS | $0.30 | $0.20 | $0.44 | $0.35 | | Diluted EPS | $0.30 | $0.20 | $0.44 | $0.35 | - Potentially dilutive shares, including Class B common stock, convertible notes, and restricted stock awards, were excluded from diluted EPS calculation as their inclusion would have been antidilutive[136] Note 15. Income Taxes This note provides details on income tax expense, effective tax rates, and the Tax Receivable Agreement liability Income Tax Expense and Effective Rates | Period | Income Tax Expense (millions) | Effective Tax Rate | | :-------------------------- | :---------------------------- | :----------------- | | Three Months Ended June 30, 2025 | $6.0 | 19.8% | | Three Months Ended June 30, 2024 | $1.3 | 12.0% | | Six Months Ended June 30, 2025 | $9.9 | 21.0% | | Six Months Ended June 30, 2024 | $3.2 | 15.8% | - The effective tax rate differed from the statutory rate primarily due to Solaris LLC's treatment as a partnership for U.S. federal income tax purposes[138] - The liability under the Tax Receivable Agreement was $73.7 million as of June 30, 2025, representing 85% of anticipated tax savings from basis increases and imputed interest[144] Note 16. Concentrations This note identifies significant customer and supplier concentrations impacting revenues, receivables, and payables - For Q2 2025, two customers accounted for 45% and 12% of total revenues, and 43% and 16% of accounts receivable[147] - For Q2 2025, one supplier accounted for 42% of total purchases, and two suppliers accounted for 51% and 20% of accounts payable[148] Note 17. Commitments and Contingencies This note describes the company's legal proceedings and significant purchase commitments for power generation equipment - The company is involved in legal proceedings, including an intellectual property infringement lawsuit by Masaba Inc. and a putative class action lawsuit by Stephen Pirello, both of which management intends to vigorously defend[152][153] Purchase Commitments for Power Generation Equipment (in millions) | Commitment Type | Amount | | :----------------------------------- | :----- | | Short-term (due within 12 months) | $222.4 | | Long-term (2025 expected payments) | $138.1 | | Long-term (2026 expected payments) | $382.7 | | Total purchase commitments | $743.2 | - Purchase commitments include $450.4 million related to Stateline, expected to be funded by the Stateline Term Loan and cash flows, with no recourse to the Company[154] Note 18. Related Party Transactions This note details transactions with related parties, including services, leases, and convertible note purchases - The company incurred $0.2 million in Q2 2025 for services from Solaris Energy Management, LLC, owned by the CEO[157] - KTR Management Company, LLC, a related party, is involved in a commercial real estate lease and equipment purchases, with $0.1 million rental expense in Q2 2025 and $2.0 million equipment purchased in H1 2025[160] - BlackRock Portfolio Management LLC, a >5% shareholder, purchased $55.0 million of the Convertible Senior Notes[161] Note 19. Subsequent Events This note reports significant events occurring after the reporting period, including dividends and tax law changes - On July 23, 2025, a quarterly cash dividend of $0.12 per share of Class A common stock was approved, payable September 26, 2025[162] - The 'One Big Beautiful Bill Act,' signed July 4, 2025, may impact future tax liabilities by allowing 100% expensing of certain qualified property costs and modifying interest expense deduction limitations[163][164] - On July 28, 2025, 4,000,000 Solaris LLC Units were exchanged for Class A common stock, increasing the Company's ownership interest[165] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Solaris Energy Infrastructure, Inc.'s financial performance and condition for the three and six months ended June 30, 2025. It covers an executive overview, recent developments, market trends, detailed analysis of revenues, costs, and cash flows, and a discussion of liquidity and capital resources, highlighting the significant growth in the Solaris Power Solutions segment Executive Overview This section provides a high-level summary of the company's business, recent developments, and strategic initiatives - Solaris provides mobile and scalable equipment-based solutions for distributed power generation and raw material management in oil and natural gas wells, serving energy, data centers, and other commercial/industrial sectors[168] - Key recent developments include the formation of Stateline Power LLC for off-grid data center power, the issuance of $155.0 million Convertible Senior Notes to support growth, and Stateline's $550 million delayed draw term loan facility[169][170][171] Market Trends and Outlook This section discusses key market trends, growth drivers, and future capital expenditure plans for the company's segments - Solaris Power Solutions segment is experiencing significant growth, with its Adjusted EBITDA now contributing over two-thirds of total segment Adjusted EBITDA, driven by demand for power in the U.S., especially from the AI computing sector[173][174][175] - Approximately 75% of the 1,700 MW expected delivered capacity for Solaris Power Solutions is committed under long-term commercial agreements, with 67% for data centers and 8% for energy[176] - Solaris Logistics Solutions' demand is influenced by oil and natural gas well drilling activity; Q2 2025 saw a 4% decrease in fully utilized systems due to lower crude oil prices[180] - Total company capital expenditures remaining in 2025 are estimated at $295 million, with the majority supporting Solaris Power Solutions' growth, and funding expected from available cash, operations, credit facilities, and Stateline debt financing[177][178] Results of Operations This section analyzes the company's financial performance, including revenue, cost of revenue, and operating expenses Revenue Performance by Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :---------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Solaris Power Solutions | $75,625 | $0 | +$75,625 | $125,000 | $0 | +$125,000 | | Solaris Logistics Solutions | $73,703 | $73,886 | $(183) | $150,660 | $141,776 | +$8,884 | | Total Revenues | $149,328 | $73,886 | +$75,442 | $275,660 | $141,776 | +$133,884 | - Cost of revenue (exclusive of D&A) for Solaris Power Solutions increased by $28.3 million (Q2 2025) and $44.8 million (H1 2025) as the segment was established in Q3 2024. For Solaris Logistics Solutions, it increased by $4.8 million (Q2 2025) and $16.2 million (H1 2025), mainly due to higher last mile and ancillary service costs[184][185][188] - Depreciation and amortization increased significantly by 92% (Q2 2025) and 97% (H1 2025) due to the Solaris Power Solutions segment's new assets. Selling, general and administrative expenses rose by 80% (Q2 2025) and 86% (H1 2025) due to increased headcount, professional fees, and stock-based compensation[190][192] - Interest expense increased by $4.8 million (Q2 2025) and $9.2 million (H1 2025) due to higher outstanding borrowings and effective interest rates[194] Liquidity and Capital Resources This section discusses the company's sources of liquidity, cash flow activities, and future capital commitments - Primary liquidity sources include cash flows from operations, $56.0 million available capacity under the revolving credit facility, and proceeds from Convertible Senior Notes ($150.3 million net) and Stateline's delayed draw term loan ($72.0 million drawn, $446.5 million remaining capacity)[196][199][200][203] - As of June 30, 2025, cash and cash equivalents totaled $139.0 million, with $39.4 million of Convertible Senior Notes proceeds remaining restricted for capital expenditures[206][200] Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :----------------- | :----------------------------- | :----------------------------- | :----------- | | Operating Activities | $49,903 | $35,751 | +$14,152 | | Investing Activities | $(336,999) | $(3,640) | -$333,359 | | Financing Activities | $266,271 | $(32,885) | +$299,156 | - Net cash used in investing activities increased by $333.4 million, primarily due to $325.6 million for turbines and ancillary equipment for Solaris Power Solutions[212] - Future cash commitments include $743.2 million in purchase commitments for power generation equipment, with $222.4 million short-term and $520.8 million long-term, including $450.4 million for Stateline[204][154] Critical Accounting Policies and Estimates This section confirms no material changes to the company's critical accounting policies and estimates - There have been no material changes to the company's critical accounting policies and estimates since December 31, 2024[217] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states that Solaris Energy Infrastructure, Inc.'s exposures to market risk have not materially changed since December 31, 2024, and refers to the Annual Report on Form 10-K for comprehensive disclosures on market risk - Market risk exposures have not materially changed since December 31, 2024[218] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures as of June 30, 2025, and reports no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of June 30, 2025[219] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[220] PART II: OTHER INFORMATION Item 1. Legal Proceedings This section details the ongoing legal proceedings against Solaris Energy Infrastructure, Inc., including an intellectual property infringement lawsuit by Masaba Inc. and a putative class action lawsuit by Stephen Pirello, both of which management believes are without merit and intends to vigorously defend - The company is defending against an intellectual property infringement lawsuit by Masaba Inc. (U.S. Patent No. 11,780,689), with an IPR instituted by USPTO in January 2025[223][152] - A putative class action lawsuit, Stephen Pirello v. Solaris Energy Infrastructure, Inc., et al., was filed on March 28, 2025, alleging misleading statements related to the MER Acquisition, which the company believes is without merit[223][153] Item 1A. Risk Factors This section updates the risk factors, highlighting new and evolving risks such as the adverse effects of tariffs and trade measures, specific risks associated with the Stateline Power LLC venture (including customer concentration and financing), and potential impacts from short selling strategies and related litigation. It also addresses risks related to the Convertible Senior Notes, including repurchase obligations, potential dilution, and accounting implications - Tariffs and other trade measures could increase material input costs, supply chain delays, and negatively impact global economic demand for power generation solutions[225][226] - Risks associated with Stateline include reliance on a few large customers, potential need for additional debt/equity financing, complex regulatory frameworks, difficulties in finding alternative lessors, and management time dedication[228][233] - The company may be subject to short selling strategies and related litigation, which could lead to stock price instability, negative publicity, and diversion of management's time[230][231] - Risks related to Convertible Senior Notes include potential inability to repurchase notes for cash, dilution of ownership interests upon conversion, and adverse effects on reported financial condition and results due to accounting methods[232][235][236][241][243] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section clarifies that while the Convertible Senior Notes offering was registered, the Class A common stock issuable upon conversion has not been registered under the Securities Act. It also provides details on the initial and maximum conversion rates for these notes - The Convertible Senior Notes offering was registered, but the Class A common stock issuable upon conversion has not been registered under the Securities Act[245][246] - The initial conversion rate is 37.8896 shares of Class A common stock per $1,000 principal amount (approx. $26.39/share), with a maximum conversion rate of 51.1508 shares (approx. $19.55/share) and a maximum of 7,928,374 shares issuable[247][248] Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Maximum Dollar Value of Shares that May Yet be Purchased Under the Plan (2) | | :---------------- | :----------------------------------- | :--------------------------- | :------------------------------------------------------------------------- | | April 1 - April 30 | 1,693 | $18.40 | $15,440,555 | | May 1 - May 31 | — | — | $15,440,555 | | June 1 - June 30 | 1,947 | $27.77 | $15,440,555 | | Total | 3,640 | $23.41 | | - Shares purchased were to satisfy tax withholding obligations upon vesting of restricted stock, with $15.4 million remaining under the $50.0 million authorized share repurchase program[254][207] Item 3. Defaults upon Senior Securities This section explicitly states that there were no defaults upon senior securities during the reported period - No defaults upon senior securities were reported[250] Item 4. Mine Safety Disclosures This section states that there are no mine safety disclosures to report - No mine safety disclosures were reported[251] Item 5. Other Information This section incorporates disclosures from Item 2 regarding unregistered sales of equity securities and confirms that no Rule 10b5-1 trading arrangements were adopted or terminated by any director or officer during the three months ended June 30, 2025 - Disclosures from Item 2 (Unregistered Sales of Equity Securities and Use of Proceeds) are incorporated by reference[252] - No Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during Q2 2025[253] Item 6. Exhibits This section provides a comprehensive list of all exhibits filed as part of the Form 10-Q, including various agreements, certificates of incorporation, bylaws, indentures, and certifications required by the Sarbanes-Oxley Act - The report includes various exhibits such as the Contribution Agreement, Amended and Restated Certificate of Incorporation, Indenture for Convertible Senior Notes, Loan and Security Agreement for Stateline Power, LLC, and CEO/CFO certifications[255][258] SIGNATURES This section provides the official signatures for the Quarterly Report on Form 10-Q - The Quarterly Report on Form 10-Q was signed by William A. Zartler (Chairman and CEO) and Kyle S. Ramachandran (President and CFO) on July 31, 2025[263]