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Solaris Energy Infrastructure, Inc.(SEI) - 2024 Q3 - Earnings Call Transcript
SEISolaris Energy Infrastructure, Inc.(SEI)2024-11-05 19:27
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Financial Data and Key Metrics Changes - The company reported third quarter 2024 revenue of 75millionandadjustedEBITDAof75 million and adjusted EBITDA of 22 million, which includes only a 20-day contribution from the newly acquired Power Solutions business [11][30] - Adjusted pro forma net income was 4million,withadjustedproformaearningspershareat4 million, with adjusted pro forma earnings per share at 0.08 [30] - The Logistics Solutions segment generated revenue of 70millionandadjustedEBITDAof70 million and adjusted EBITDA of 24 million, reflecting a 5% sequential decline in revenue [32] Business Line Data and Key Metrics Changes - The Solaris Logistics segment maintained an average of 91 fully utilized systems, flat compared to the second quarter [23] - The newly established Solaris Power Solutions segment generated approximately 5millioninrevenueand5 million in revenue and 3 million in adjusted EBITDA during its 20-day contribution [34] - The company expects to deploy an average of at least 240 megawatts on contracted revenue during the fourth quarter, up from approximately 156 megawatts in the third quarter [37] Market Data and Key Metrics Changes - The demand for power solutions is driven by the rapid growth of artificial intelligence computing applications, particularly in data centers [16] - The company has signed new customer contracts for more than 80% of its pro forma capacity under agreements for two to four years [10] - The U.S. drilling and completion levels remained choppy, with activity in the Logistics Solutions segment expected to decline by roughly 10% in the fourth quarter due to seasonal impacts [25] Company Strategy and Development Direction - The company has rebranded to Solaris Energy Infrastructure to reflect its broader service offerings, including Power-as-a-Service [8] - The focus is on expanding the power solutions business organically and through acquisitions, with plans to grow the power generation fleet from approximately 150 megawatts to an expected 535 megawatts by the end of the third quarter of 2025 [20][21] - The company aims to enhance shareholder returns while investing in growth, with a commitment to returning approximately 190milliontoshareholderssince2018[11][28]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthatdelaysforgridconnectivityareextending,impactingcustomerneedsforreliablepowersolutions[18][63]−Thecompanyanticipatesasignificantinflectioninfreecashflowduringthesecondhalfof2025followingthecompletionofcurrentgrowthcapitalplans[27][46]−Managementexpressedconfidenceinthegrowthpotentialofthepowersolutionssegment,drivenbystrongdemandandlong−termcontracts[20][72]OtherImportantInformation−Thecompanyclosedona190 million to shareholders since 2018 [11][28] Management's Comments on Operating Environment and Future Outlook - Management noted that delays for grid connectivity are extending, impacting customer needs for reliable power solutions [18][63] - The company anticipates a significant inflection in free cash flow during the second half of 2025 following the completion of current growth capital plans [27][46] - Management expressed confidence in the growth potential of the power solutions segment, driven by strong demand and long-term contracts [20][72] Other Important Information - The company closed on a 325 million senior secured term loan and finalized a new credit facility providing additional liquidity of up to 75million[42]−Thecompanygeneratedoperatingcashflowofapproximately75 million [42] - The company generated operating cash flow of approximately 11 million and deployed 58millionforcapitalexpendituresduringthequarter[44]−Theboardapprovedafourthquarterdividendof58 million for capital expenditures during the quarter [44] - The board approved a fourth quarter dividend of 0.12 per share, marking the 25th consecutive dividend payment [47] Q&A Session Summary Question: Availability of equipment and profitability per megawatt deployed - Availability of equipment remains tight, but the company has managed to secure some additional resources [50] - Profitability per megawatt is expected to remain flat to up over the next several years due to strong demand [52] Question: End market and customer distribution - Currently, 75% of power is directed towards data center customers, with significant demand from hyperscale facilities [54] Question: Options for solar turbine capacity beyond Q3 - The company is in active discussions regarding future commitments and contractual arrangements for additional capacity [58] Question: Capacity growth and market opportunities - The company has contracted approximately 450 megawatts, with visibility into additional growth opportunities for 2025 [72] Question: Natural gas requirements for profitability - Customers are responsible for purchasing gas, and the company's solutions are competitive with alternative baseload power [75]