Solaris Oilfield Infrastructure(SOI) - 2023 Q1 - Quarterly Report

Cautionary Statement Regarding Forward-Looking Statements Forward-Looking Statements and Risk Factors 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][14] - Key risks include volatility in oil and gas prices, geopolitical events, inflation, supply chain constraints, customer consolidation, and competitive pressures[10] PART I: FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2023 Condensed Consolidated Balance Sheets 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 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 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 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][45] - 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] - The liability under the Tax Receivable Agreement was $71.5 million as of March 31, 2023[70] - For Q1 2023, three customers accounted for 13%, 12%, and 11% of total revenues, indicating significant customer concentration[72] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong revenue growth, market outlook, liquidity management, and non-GAAP financial measures Recent Trends and Outlook 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] - The company's growth in fully utilized systems has outpaced the general rig count trend, driven by new technology and product offerings[91] Results of Operations 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] 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 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] - Under the new share repurchase program, the company bought back 1,641,000 shares for $14.4 million, leaving $35.6 million available[111] - Net cash from operating activities increased to $16.8 million in Q1 2023 from $6.3 million in Q1 2022[114] Item 3. Quantitative and Qualitative Disclosures about Market Risk 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] Item 4. Controls and Procedures 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] - The remediation plan includes evaluating alternative software and enhancing risk assessment procedures for third-party IT systems[136] PART II: OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Other Items (3, 4, 5, 6) 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] - The company reported no defaults on senior securities and no mine safety disclosures[147][148] Signatures Report Authorization 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]