Third Quarter 2017 Highlights
- Record net income of $7.4 million; a
$6.3 million increase from second quarter 2017
- Record adjusted EBITDA of $11.2
million; 50% increase versus second quarter 2017 and up 549%
year-over-year
- Record revenue of $18.5 million; 38%
increase versus second quarter 2017 and up 289% year-over-year
- Record 4,564 revenue days; 35% increase
versus second quarter 2017 and up 202% year-over-year
- Added 15 proppant management systems to
the rental fleet; total of 59 systems at quarter-end
Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) (“Solaris” or
the “Company”), a leading manufacturer and provider of patented
mobile proppant management systems for oil and natural gas well
sites, today reported financial results for the third quarter 2017,
as further described in the Company’s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2017, filed with the Securities
and Exchange Commission (the “SEC”) today.
Third Quarter 2017 Financial Review
Solaris reported net income of $7.4 million for third quarter
2017, compared to net income of $0.7 million in third quarter 2016
and net income of $1.1 million in second quarter 2017. Third
quarter 2017 net income included certain non-recurring expenses,
including approximately $617,000 of IPO-related compensation
expense, $41,000 related to a loss on disposal of assets and
$36,000 of non-recurring transaction costs.
Adjusted EBITDA for the third quarter was $11.2 million, an
increase of $9.5 million from third quarter 2016 and an increase of
$3.7 million compared to second quarter 2017. A description of
adjusted EBITDA and a reconciliation to net income, its most
directly comparable GAAP measure, is provided below.
Revenues were $18.5 million for the quarter, an increase of
$13.7 million, or 289%, compared to third quarter 2016, and an
increase of $5.1 million, or 38%, compared to second quarter
2017.
During third quarter 2017, the Company generated 4,564 revenue
days, the combined number of days that its systems earned revenue
during the quarter, a 202% increase from third quarter 2016, and up
35% compared to second quarter 2017. Customer demand and adoption
rates for Solaris’ systems continue to grow as proppant consumption
levels increase across the industry and customers realize the
benefits of Solaris’ technology.
Capital Expenditures and Liquidity
Driven by strong customer demand and continued customer adoption
of our proppant management systems and services, the Company
invested $27.6 million in capital equipment during third quarter
2017 and added fifteen systems to the fleet, ending the quarter
with 59 systems. These investments help address rising customer
demand and are expected to drive future earnings and cash flow
growth for Solaris. The Company’s third quarter capital
expenditures included $4.8 million in long-lead item purchases made
in connection with the construction of the Kingfisher Facility.
As of September 30, 2017, the Company had $54.0 million in cash
and $20.0 million of availability under the undrawn credit facility
for total liquidity of $74.0 million.
Operational Update
We currently have 68 systems in the rental fleet, with more than
90% of the systems deployed to customers who are renting multiple
Solaris systems.
We recently began operations with our new non-pneumatic loading
option, which provides additional proppant transportation
flexibility, allowing our customers to use belly-dump trucks in
addition to the industry standard pneumatic trucks to fill and
maintain inventory in our systems.
In August, Solaris broke ground on the Kingfisher Facility and
construction is progressing on schedule. Solaris plans to take
first delivery of proppant at the facility in January 2018, with
the final completion of the initial phase by August 2018. Solaris
is engaged in discussions with additional tenants interested in
obtaining capacity at the Kingfisher Facility.
Outlook
We are currently manufacturing approximately six systems per
month. We have been able to reach this manufacturing rate through
selective outsourcing of certain components of our systems. Based
on our accelerated manufacturing cadence, we have increased our end
of year system outlook to between 74 to 76 systems, an increase
from the previous guidance of 68 to 72 systems. In addition, we
have refined our 2017 capital expenditure guidance to between $85
million to $95 million as a result of the increased system
deliveries.
Solaris recently executed customer agreements to term up the
rental of mobile proppant management systems for a minimum of
twelve months. These long-term arrangements provide enhanced
visability into future earnings and highlight the critical nature
and value of our services.
Solaris’ Chief Executive Officer Greg Lanham commented, “We are
excited about the continued adoption of our technology and service
offering. As the industry continues to pump ever increasing amounts
of sand per well and transition towards manufacturing style
development of plays – including multi-well pads and multi-zone
development of acreage – innovative and integrated logistics
solutions are required to help drive supply chain costs down and
provide certainty of execution. We believe our current fleet of 68
systems represents the industry’s leading market share for new
technology proppant handling solutions. We continue to increase
system deployments with our existing customers and gain adoption
with new customers.
“We are also excited about the continued adoption of our
proprietary inventory management system, PropView™. We currently
have more than 125 registered third-party users of PropView™, with
users spanning across the supply chain – from E&P procurement
departments to pressure pumping logistic teams to last mile
trucking companies. We believe the integration of our well site
systems and the Kingfisher Facility with PropView™ uniquely
position us to provide insight across the supply chain which we
expect will drive continued market share growth.”
Upcoming Conference Participation
Solaris will participate in Cowen and Company’s 7th Annual
Energy and Natural Resources Conference in New York. Solaris’ Chief
Executive Officer, Greg Lanham, will participate on a panel
discussion during the afternoon of December 4, 2017, and the
Company will meet with institutional investors on December 4 and
December 5, 2017.
Conference Call
The Company will host a conference call to discuss its third
quarter 2017 results on Friday, November 3, 2017 at 7:30 a.m.
Central Time (8:30 a.m. Eastern Time). To join the conference call
from within the United States, participants may dial (866)
807-9684. To join the conference call from outside of the United
States, participants may dial (412) 317-5415. When instructed,
please ask the operator to be joined to the Solaris Oilfield
Infrastructure, Inc. call. Participants are encouraged to log in to
the webcast or dial in to the conference call approximately ten
minutes prior to the start time. To listen via live webcast, please
visit the Investor Relations section of the Company’s website,
http://www.solarisoilfield.com.
An audio replay of the conference call will be available shortly
after the conclusion of the call and will remain available for
approximately seven days. It can be accessed by dialing (877)
344-7529 within the United States or (412) 317-0088 outside of the
United States. The conference call replay access code is 10113199.
The replay will also be available in the Investor Relations section
of the Company’s website shortly after the conclusion of the call
and will remain available for approximately seven days.
About Solaris Oilfield Infrastructure, Inc.
Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) manufactures
and provides patented mobile proppant management systems that
unload, store and deliver proppant at oil and natural gas well
sites. These patented systems are deployed in many of the most
active oil and natural gas basins in the United States, including
the Permian Basin, the Eagle Ford Shale and the SCOOP/STACK.
Solaris’ new high-capacity transload facility being built in
Kingfisher, Oklahoma will serve customers with operations in the
SCOOP/STACK. Additional information is available on the Solaris’
website, www.solarisoilfield.com.
Website Disclosure
We use our website (www.solarisoilfield.com) as a routine
channel of distribution of company information, including news
releases, analyst presentations, and supplemental financial
information, as a means of disclosing material non-public
information and for complying with our disclosure obligations under
SEC Regulation FD. Accordingly, investors should monitor our
website in addition to following press releases, SEC filings and
public conference calls and webcasts. Additionally, we provide
notifications of news or announcements on our investor relations
website. Investors and others can receive notifications of new
information posted on our investor relations website in real time
by signing up for email alerts.
None of the information provided on our website, in our press
releases, public conference calls and webcasts, or through social
media channels is incorporated by reference into, or deemed to be a
part of, this Current Report on Form 8-K or will be incorporated by
reference into any other report or document we file with the SEC
unless we expressly incorporate any such information by reference,
and any references to our website are intended to be inactive
textual references only.
Forward Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Examples of
forward-looking statements include, but are not limited to,
statements we make regarding the outlook for the construction and
operation of our new Kingfisher Facility, current and potential
future long-term contracts and our future business and financial
performance. Forward-looking statements are based on our current
expectations and assumptions regarding our business, the economy
and other future conditions. Because forward-looking statements
relate to the future, by their nature, they are subject to inherent
uncertainties, risks and changes in circumstances that are
difficult to predict. As a result, our actual results may differ
materially from those contemplated by the forward-looking
statements. Factors that could cause our actual results to differ
materially from the results contemplated by such forward-looking
statements include, but are not limited to the factors discussed or
referenced in our filings made from time to time with the SEC.
Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date hereof.
Factors or events that could cause our actual results to differ may
emerge from time to time, and it is not possible for us to predict
all of them. We undertake no obligation to publicly update or
revise any forward-looking statement, whether as a result of new
information, future developments or otherwise, except as may be
required by law.
SOLARIS OILFIELD
INFRASTRUCTURE, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share
data)
(Unaudited)
Three Months Ended
Nine Months Ended September 30, September 30,
2017 2016 2017 2016 Revenue
Proppant system rental $ 15,062 $ 3,846 $ 34,560 $ 8,679 Proppant
system services 3,416 902 7,631
2,189
Total revenue
18,478 4,748 42,191 10,868
Operating costs and expenses Cost
of proppant system rental (excluding $1,523 and $857, and 3,748 and
$2,418, of depreciation and amortization for the three and nine
months ended September 30, 2017 and 2016, respectively, shown
separately) 641 386 1,588 1,181 Cost of proppant system services
(excluding $129 and $42, and $283 and $111, of depreciation and
amortization for the three and nine months ended September 30, 2017
and 2016, respectively, shown separately) 3,933 1,501 8,640 3,301
Depreciation and amortization 1,742 959 4,276 2,739 Salaries,
benefits and payroll taxes 2,942 635 5,687 1,992 Selling, general
and administrative (excluding $90 and $60, and $245 and $210, of
depreciation and amortization for the three and nine months ended
September 30, 2017 and 2016, respectively, shown separately) 1,176
543 3,653 1,842 Other operating expenses (38 ) —
3,770 — Total operating cost and
expenses 10,396 4,024 27,614
11,055 Operating income (loss) 8,082 724
14,577 (187 ) Interest expense (27 ) (5 ) (71 ) (14 ) Other income
(expense) (32 ) 6 (119 ) 7
Total other income (expense) (59 ) 1
(190 ) (7 ) Income (loss) before income tax expense
8,023 725 14,387 (194 ) Provision for income taxes (617 )
(14 ) (1,137 ) (26 ) Net income (loss) 7,406
711 13,250 (220 ) Less: net (income) loss related to Solaris LLC —
(711 ) (3,665 ) 220 Less: net income related to non-controlling
interests (6,027 ) — (8,049 ) —
Net income attributable to Solaris $ 1,379 $ —
$ 1,536 $ —
Earnings per share of Class A common stock - basic
(1) $ 0.13 $ — $ 0.14 $ — Earnings per
share of Class A common stock - diluted (1) $ 0.12 $ —
$ 0.14 $ — Basic weighted average
shares of Class A common stock outstanding (1) 10,100 — 10,100 —
Diluted weighted average shares of Class A common stock outstanding
(1) 10,563 — 10,552 — (1) – Represents earnings per share of
Class A common stock and weighted average shares of Class A common
stock outstanding for the period following the reorganization
transactions and IPO.
SOLARIS OILFIELD INFRASTRUCTURE,
LLC AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands)(Unaudited)
September 30,
December 31, 2017 2016 Assets
Current assets: Cash $ 53,996 $ 3,568 Accounts receivable, net
9,543 4,510 Prepaid expenses and other current assets 4,011 403
Inventories 6,675 1,365 Total current assets 74,225
9,846 Property, plant and equipment, net 100,006 54,350 Goodwill
13,004 13,004 Intangible assets, net 67 36 Deferred tax assets
29,648 — Other assets 239 — Total assets $ 217,189 $
77,236
Liabilities and Members’ Equity Current liabilities:
Accounts payable $ 5,209 $ 705 Accrued liabilities 4,733 2,144
Current portion of capital lease obligations 33 26 Current portion
of notes payable — 169 Current portion of senior secured credit
facility — 31 Total current liabilities 9,975
3,075 Capital lease obligations, net of current portion 186
213 Notes payable, net of current portion — 282 Senior secured
credit facility, net of current portion — 2,320 Payable related to
parties pursuant to tax receivable agreements 11,475 — Other
long-term liabilities 154 — Total liabilities
21,790 5,890 Commitments and contingencies Stockholders' and
members’ equity Members’ equity — 69,267 Preferred stock, $0.01 par
value, 50,000 shares authorized, none issued and outstanding — —
Class A common stock, $0.01 par value,
600,000 shares authorized, 10,100 shares issued and
outstanding as of September 30, 2017 and
none issued and outstanding as of December 31,
2016
101 —
Class B common stock, $0.00 par value,
180,000 shares authorized, 32,366 shares issued and
outstanding as of September 30, 2017 and
none issued and outstanding as of December 31,
2016
— — Additional paid-in capital 60,657 — Accumulated earnings
1,536 2,079 Total stockholders' equity attributable to
Solaris and members' equity 62,294 71,346
Non-controlling interest 133,105 — Total
stockholders' and members' equity 195,399 71,346
Total liabilities, stockholders' and members’ equity $ 217,189 $
77,236
SOLARIS OILFIELD
INFRASTRUCTURE, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
For the Nine Months Ended
September 30,
2017 2016 Cash flows from
operating activities: Net income (loss) $ 13,250 $ (220 )
Adjustment to reconcile net income (loss) to net cash provided by
(used in) operating activities: Depreciation and amortization 4,276
2,739 Loss on disposal of asset 451 — Provision for bad debt — 85
Unit-based compensation 2,097 108 Amortization of debt issuance
costs 35 — Amortization of prepaid expenses and other assets 879 —
Deferred income tax expense 1,059 — Other (19 ) — Changes in assets
and liabilities: Accounts receivable (5,033 ) (2,169 ) Prepaid
expenses and other assets (4,504 ) 3 Inventories (6,675 ) 507
Accounts payable 4,504 154 Accrued liabilities 2,679
(439 ) Net cash provided by operating activities
12,999 768 Cash flows from investing
activities: Investment in property, plant and equipment (49,015 )
(5,926 ) Investment in intangible assets (34 ) (25 )
Net cash used in investing activities (49,049 )
(5,951 ) Cash flows from financing activities: Payments under
capital leases (20 ) (19 ) Payments under notes payable (451 ) (142
) Proceeds from borrowings under the credit facility 3,000 —
Repayment of credit facility (5,500 ) — Proceeds from pay down of
promissory note related to membership units 4,303 — Payments
related to debt issuance costs (111 ) — Proceeds from issuance of
Class A common stock sold in initial public offering, net of
offering costs 111,075 — Distributions paid to unit and option
holders (25,818 ) — Net cash provided by (used
in) financing activities 86,478 (161 ) Net
increase (decrease) in cash 50,428 (5,344 ) Cash at beginning of
period 3,568 6,923 Cash at end of
period $ 53,996 $ 1,579 Non-cash activities
Investing: Capitalized depreciation in property, plant and
equipment $ 492 $ 515
Financing:
Notes payable issued for property, plant and equipment — 257
Accrued interest from notes receivable issued for membership units
142 250 Cash paid for: Interest 96 14 Income taxes 45 35
SOLARIS OILFIELD INFRASTRUCTURE, LLC
AND SUBSIDIARIESRECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
INFORMATION — ADJUSTED EBITDA(In
thousands)(Unaudited)
We view EBITDA and Adjusted EBITDA as important indicators of
performance. We define EBITDA as net income (loss), plus
(i) depreciation and amortization expense, (ii) interest
expense and (iii) income tax expense, including franchise
taxes. We define Adjusted EBITDA as EBITDA plus (i) unit-based
compensation expense and (ii) certain non-cash charges and
unusual or non-recurring charges.
We believe that our presentation of EBITDA and Adjusted EBITDA
provides useful information to investors in assessing our financial
condition and results of operations. Net income is the GAAP measure
most directly comparable to EBITDA and Adjusted EBITDA. EBITDA and
Adjusted EBITDA should not be considered alternatives to net income
presented in accordance with GAAP. Because EBITDA and Adjusted
EBITDA may be defined differently by other companies in our
industry, our definitions of EBITDA and Adjusted EBITDA may not be
comparable to similarly titled measures of other companies, thereby
diminishing their utility. The following table presents a
reconciliation of Net income (loss) to EBITDA and Adjusted EBITDA
for each of the periods indicated.
Three months ended
Nine months ended September 30,
September 30, 2017 2016
2017 2016 Net income (loss) $
7,406 $ 711 $ 13,250 $ (220 ) Depreciation and amortization 1,742
959 4,276 2,739 Interest expense, net 27 5 71 14 Income taxes (1)
617 14 1,137 26
EBITDA $ 9,792 $ 1,689 $ 18,734 $ 2,559 IPO bonuses (2) 617 — 4,046
— Unit-based compensation expense (3) 795 36 1,172 108 Loss on
disposal of assets 41 — 451 — Non-recurring organizational costs
(4) — — 348 — Change in payable related to parties pursuant to tax
receivable agreements (83 ) — (83 ) — Other (5) 36
— 36 — Adjusted EBITDA $ 11,198
$ 1,725 $ 24,704 $ 2,667
__________________
(1) Income taxes include add-back for federal and state
taxes. (2) One-time cash bonuses of $3.1 million for the
nine months ended September 30, 2017 and stock-based compensation
expense of $0.6 million and $0.9 million with one-year vesting for
the three and nine months ended September 30, 2017, respectively,
were paid or granted to certain employees and consultants in
connection with the Offering. (3) Represents unit-based
compensation costs of $0.7 million and $0.9 million for the three
and nine months ended September 30, 2017, respectively, related to
restricted stock awards, with three-year vesting. Also includes
$0.1 million and $0.3 million for the three and nine months ended
September 30, 2017, respectively, related to options under the
Plan. (4) Certain non-recurring organizational costs
associated with Solaris’ IPO. (5) Non-recurring transaction
costs.
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Solaris Oilfield Infrastructure, Inc.Kyle Ramachandran, (281)
501-3070Chief Financial OfficerIR@solarisoilfield.com
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