Solaris Oilfield Infrastructure(SOI) - 2024 Q1 - Quarterly Results

First Quarter 2024 Results and Shareholder Returns Overview Solaris Oilfield Infrastructure delivered strong Q1 2024 free cash flow, enabling significant shareholder returns and maintaining a robust financial position Executive Summary & Key Highlights Solaris Oilfield Infrastructure reported strong free cash flow generation in Q1 2024, enabling continued shareholder returns - Solaris started the year with strong free cash flow generation, continuing to harvest cash from prior organic investments[2] - The company expects continued growth in free cash flow to support shareholder returns, maintain a healthy balance sheet, and provide flexibility for future investments[3] Key Financial Highlights | Metric | Q1 2024 Value | | :-------------------------------- | :------------ | | Revenue | $68 million | | Net income | $7 million | | EPS (diluted Class A share) | $0.14 | | Adjusted pro forma net income | $7 million | | Adjusted pro forma EPS (fully diluted) | $0.16 | | Adjusted EBITDA | $23 million | | Cash flow from operations | $17 million | | Free cash flow | $14 million | | Shareholder returns (Q1 2024) | $13 million | | Cumulative shareholder returns (since 2018) | $172 million | Shareholder Returns Program Solaris continued its commitment to shareholder returns, approving a Q2 2024 dividend of $0.12 per share and repurchasing 1.1 million shares in Q1 2024 - Solaris' Board of Directors approved a Q2 2024 cash dividend of $0.12 per share of Class A common stock, payable on June 17, 2024[5] - The company repurchased 1.1 million shares for approximately $8 million during Q1 2024, with approximately $15 million remaining in the current share repurchase authorization[4] - Since initiating the repurchase authorization in Q1 2023, Solaris has repurchased 4.3 million shares, representing approximately 10% of total current outstanding shares[4] - Pro forma for the Q2 2024 dividend, Solaris has returned approximately $178 million to shareholders through dividends and share repurchases since 2018, increasing dividend per share by 20% and reducing total shares outstanding by 7%[6] Free Cash Flow, Capital Expenditures & Liquidity Solaris generated positive free cash flow of $14 million in Q1 2024, despite seasonal working capital use - Free cash flow after asset disposals was positive $14 million in Q1 2024, including a seasonal working capital use of $5 million[7] - Capital expenditures in Q1 2024 were approximately $3 million, down 55% from Q4 2023; full-year 2024 capital expenditures are expected to be less than $15 million, an approximately 75% year-over-year reduction[7] Liquidity and Net Debt Position | Metric | As of March 31, 2024 | | :----------------- | :------------------- | | Cash on balance sheet | $3 million | | Borrowings outstanding | $30 million | | Liquidity | $41 million | | Net debt | $27 million | Detailed First Quarter 2024 Financial Review This section provides an in-depth analysis of Solaris' Q1 2024 financial performance, including revenue, net income, and operational activity Financial Performance Analysis Solaris' Q1 2024 financial performance showed sequential growth in revenue and Adjusted EBITDA, driven by increased lower-margin ancillary last mile logistics services and improved system pricing Key Financial Performance Metrics (Values in Millions USD, except EPS) | Metric | Q1 2024 | Q4 2023 | Q1 2023 | QoQ Change | YoY Change | | :-------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Net income | $7M | $7M | $12M | Flat | -41.7% | | EPS (diluted Class A share) | $0.14 | $0.14 | $0.23 | Flat | -39.1% | | Adjusted pro forma net income | $7M | $7M | $11M | Flat | -36.4% | | Adjusted pro forma EPS (fully diluted) | $0.16 | $0.15 | $0.24 | +6.7% | -33.3% | | Revenue | $68M | $63M | $83M | +7% | -18% | | Adjusted EBITDA | $23M | $21M | $25M | +7% | -10% | - The sequential increases in revenue and Adjusted EBITDA were driven by an increase in lower-margin ancillary last mile logistics services activity and improved system pricing[12] Operational Activity In Q1 2024, Solaris operated 102 fully utilized systems, which remained flat quarter-over-quarter but decreased 14% year-over-year - Solaris earned revenue on 102 fully utilized systems (sand and top fill systems) in Q1 2024, which was essentially flat with Q4 2023 but down 14% from Q1 2023[13] - The company followed an average of 64 industry frac crews on a fully utilized basis in Q1 2024, flat with Q4 2023[13] Unaudited Consolidated Financial Statements Presents Solaris' unaudited consolidated statements of operations, balance sheets, and cash flows for Q1 2024 and comparative periods Consolidated Statements of Operations The Consolidated Statements of Operations provide a detailed breakdown of Solaris' revenues, operating costs, and net income for the three months ended March 31, 2024, compared to prior periods Consolidated Statements of Operations (Thousands USD) | Metric | March 31, 2024 | March 31, 2023 | December 31, 2023 | | :------------------------------------------ | :------------- | :------------- | :---------------- | | Revenue | $64,635 | $77,828 | $60,069 | | Revenue - related parties | $3,255 | $4,894 | $3,278 | | Total revenue | $67,890 | $82,722 | $63,347 | | Cost of services (excluding D&A) | $39,887 | $53,223 | $36,870 | | Depreciation and amortization | $9,934 | $8,417 | $9,518 | | Selling, general and administrative | $7,990 | $6,538 | $7,229 | | Other operating (income) expense, net | $123 | $(338) | $489 | | Total operating costs and expenses | $57,934 | $67,840 | $54,106 | | Operating income | $9,956 | $14,882 | $9,241 | | Interest expense, net | $(799) | $(459) | $(912) | | Income before income tax expense | $9,157 | $14,423 | $8,329 | | Provision for income taxes | $(1,857) | $(2,486) | $(1,370) | | Net income | $7,300 | $11,937 | $6,959 | | Less: net income related to non-controlling interests | $(2,983) | $(4,368) | $(2,658) | | Net income attributable to Solaris Oilfield Infrastructure, Inc. | $4,317 | $7,569 | $4,301 | | Less: income attributable to participating securities | $(277) | $(350) | $(214) | | Net income attributable to common shareholders | $4,040 | $7,219 | $4,087 | | Earnings per share of Class A common stock - basic | $0.14 | $0.23 | $0.14 | | Earnings per share of Class A common stock - diluted | $0.14 | $0.23 | $0.14 | | Basic weighted average shares of Class A common stock outstanding | 28,587 | 31,214 | 29,024 | | Diluted weighted average shares of Class A common stock outstanding | 28,587 | 31,214 | 29,024 | Consolidated Balance Sheets The Consolidated Balance Sheets present Solaris' financial position as of March 31, 2024, compared to December 31, 2023, detailing assets, liabilities, and stockholders' equity Consolidated Balance Sheets (Thousands USD) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------------ | :------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $3,424 | $5,833 | | Accounts receivable, net | $46,411 | $44,916 | | Total current assets | $62,885 | $67,141 | | Property, plant and equipment, net | $320,885 | $325,121 | | Goodwill | $13,004 | $13,004 | | Deferred tax assets | $45,861 | $48,010 | | Total assets | $457,070 | $468,297 | | Liabilities | | | | Accounts payable | $12,266 | $12,654 | | Accrued liabilities | $16,489 | $20,292 | | Total current liabilities | $35,315 | $37,201 | | Credit agreement | $30,000 | $30,000 | | Payables related to Tax Receivable Agreement | $68,846 | $71,530 | | Total liabilities | $147,222 | $152,717 | | Stockholders' Equity | | | | Total stockholders' equity attributable to Solaris Oilfield Infrastructure, Inc. | $200,131 | $205,983 | | Non-controlling interest | $109,717 | $109,597 | | Total stockholders' equity | $309,848 | $315,580 | | Total liabilities and stockholders' equity | $457,070 | $468,297 | Consolidated Statements of Cash Flows The Consolidated Statements of Cash Flows outline the cash generated and used by Solaris across operating, investing, and financing activities for the three months ended March 31, 2024, compared to the same period in 2023 Consolidated Statements of Cash Flows (Thousands USD) | Metric | March 31, 2024 | March 31, 2023 | | :------------------------------------------ | :------------- | :------------- | | Net income | $7,300 | $11,937 | | Depreciation and amortization | $9,934 | $8,417 | | Net cash provided by operating activities | $16,875 | $16,849 | | Investment in property, plant and equipment | $(3,358) | $(18,949) | | Proceeds from disposal of property, plant and equipment | $10 | $123 | | Net cash used in investing activities | $(3,348) | $(18,826) | | Share repurchases and retirements | $(8,092) | $(14,427) | | Dividend paid to Class A common stock shareholders | $(3,648) | $(3,656) | | Borrowings under the credit agreement | $4,000 | $18,000 | | Repayment of credit agreement | $(4,000) | $0 | | Net cash used in financing activities | $(15,936) | $(4,683) | | Net decrease in cash and cash equivalents | $(2,409) | $(6,660) | | Cash and cash equivalents at beginning of period | $5,833 | $8,835 | | Cash and cash equivalents at end of period | $3,424 | $2,175 | Non-GAAP Financial Measures & Reconciliations Details Solaris' use of non-GAAP financial measures, including reconciliations for Adjusted EBITDA, Free Cash Flow, and Adjusted Pro Forma Net Income About Non-GAAP Measures Solaris utilizes non-GAAP financial measures such as adjusted net income, adjusted diluted EPS, Adjusted EBITDA, and Free Cash Flow to provide investors with additional insights into core operating results and facilitate period-over-period comparisons - Management believes adjusted net income, adjusted diluted EPS, and Adjusted EBITDA provide useful information by reflecting core operating results and facilitating comparisons across periods, removing effects of varying interest expense, depreciation, and other non-comparable items[17][30] - Non-GAAP measures should be considered in addition to, not as a substitute for or superior to, GAAP measures[17][32] - Adjusted pro forma net income and EPS assume full exchange of Solaris LLC interests for Class A common stock, adjusting for non-recurring items to evaluate performance period over period and relative to competitors[38][39] EBITDA and Adjusted EBITDA Reconciliation This section provides the reconciliation of Net Income to EBITDA and Adjusted EBITDA, highlighting adjustments for depreciation, interest, taxes, stock-based compensation, and other non-recurring items for Q1 2024 and prior periods EBITDA and Adjusted EBITDA Reconciliation (Thousands USD) | Metric | March 31, 2024 | March 31, 2023 | December 31, 2023 | | :-------------------------- | :------------- | :------------- | :---------------- | | Net income | $7,300 | $11,937 | $6,959 | | Depreciation and amortization | $9,934 | $8,417 | $9,518 | | Interest expense, net | $799 | $459 | $912 | | Provision for income taxes | $1,857 | $2,486 | $1,370 | | EBITDA | $19,890 | $23,299 | $18,759 | | Stock-based compensation expense | $2,217 | $1,980 | $1,911 | | (Gain) loss on disposal of assets | $12 | $(361) | $(4) | | Credit losses | $300 | $0 | $650 | | Other | $268 | $200 | $6 | | Adjusted EBITDA | $22,687 | $25,118 | $21,322 | Free Cash Flow Reconciliation This section reconciles net cash flows provided by operating activities to free cash flow, demonstrating the company's liquidity after accounting for capital expenditures Free Cash Flow Reconciliation (Thousands USD) | Metric | March 31, 2024 | March 31, 2023 | December 31, 2023 | | :------------------------------------------ | :------------- | :------------- | :---------------- | | Net cash flows provided by operating activities | $16,875 | $16,849 | $23,583 | | Cash used for capital expenditures, net of proceeds from disposal of assets | $(3,348) | $(18,826) | $(7,173) | | Free cash flow | $13,527 | $(1,977) | $16,410 | Adjusted Pro Forma Net Income and EPS Reconciliation This section provides the reconciliation of net income attributable to Solaris to adjusted pro forma net income and the calculation of adjusted pro forma earnings per fully diluted share, assuming the full exchange of all outstanding LLC interests Adjusted Pro Forma Net Income and EPS Reconciliation (Thousands USD, except per share data) | Metric | March 31, 2024 | March 31, 2023 | December 31, 2023 | | :---------------------------------------------------------- | :------------- | :------------- | :---------------- | | Net income attributable to Solaris | $4,317 | $7,569 | $4,301 | | Reallocation of net income attributable to non-controlling interests | $2,983 | $4,368 | $2,658 | | Loss on disposal of assets | $12 | $(361) | $(4) | | Credit losses | $300 | $0 | $650 | | Other | $268 | $200 | $6 | | Incremental income tax expense | $(626) | $(779) | $(976) | | Adjusted pro forma net income | $7,254 | $10,997 | $6,635 | | Weighted average shares of Class A common stock outstanding | 28,587 | 31,214 | 29,024 | | Potentially dilutive shares | 15,543 | 15,224 | 15,252 | | Adjusted pro forma fully weighted average shares of Class A common stock outstanding - diluted | 44,130 | 46,438 | 44,276 | | Adjusted pro forma earnings per share - diluted | $0.16 | $0.24 | $0.15 | Corporate Information & Disclosures Provides essential corporate details, including company profile, conference call information, forward-looking statements, and investor relations contact Company Profile Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) specializes in providing mobile equipment that enhances supply chain and execution efficiencies for oil and natural gas well completions across various U.S. basins - Solaris Oilfield Infrastructure, Inc. provides patented mobile equipment to improve supply chain and execution efficiencies in oil and natural gas well completions[18] - The company's systems are deployed across oil and natural gas basins in the United States[18] Conference Call Information Solaris hosted a conference call on April 26, 2024, to discuss its Q1 2024 results, with details provided for live access and subsequent audio replay via phone and webcast - Solaris hosted a conference call on Friday, April 26, 2024, at 8:00 a.m. Central Time to discuss Q1 2024 results[15] - Participants could join via dial-in or live webcast through the Investor Relations section of the company's website[15] - An audio replay of the conference call was made available for approximately seven days via phone and the company's website[16] Forward-Looking Statements This press release contains forward-looking statements regarding Solaris' business strategy, future profitability, capital expenditures, and market conditions - The press release contains forward-looking statements concerning business strategy, future profitability, capital expenditures, and market volatility[19] - These statements are based on current expectations and assumptions but are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict[19][20] - Readers are cautioned not to place undue reliance on forward-looking statements, and the company undertakes no obligation to update or revise them, except as required by law[20] Investor Relations Contact For investor relations inquiries, individuals can contact Yvonne Fletcher, Senior Vice President, Finance and Investor Relations - Contact for Investor Relations is Yvonne Fletcher, Senior Vice President, Finance and Investor Relations[42]