SOI Solaris Oilfield Infrastructure Inc

Second Quarter 2024 Summary Results and Highlights

• Revenue of $74 million
• Net income of $10 million and $0.20 per diluted Class A share; Adjusted pro forma net income* of $6 million and $0.13 per fully diluted share
• Adjusted EBITDA* of $21 million
• Generated $19 million of cash flow from operations and $18 million in free cash flow*
• Returned a total of $5 million to shareholders in second quarter 2024 through dividends, resulting in $178 million cumulatively returned to shareholders since 2018
• Announced third quarter 2024 dividend of $0.12 per share on July 29, 2024, to be paid on September 6, 2024, which, once paid, will represent Solaris’ 24th consecutive dividend
• Announced entry into definitive agreement on July 9, 2024 to acquire Mobile Energy Rentals LLC (“MER”), a premier provider of distributed power solutions, for an initial purchase price of approximately $200 million, consisting of $60 million of cash and the issuance of approximately 16.5 million shares of the Company’s Class B common stock at a price per share of $8.50; proposed transaction remains subject to shareholder approval, receipt of regulatory approvals, and other customary closing conditions and is expected to close in the third quarter of 2024

Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) (“Solaris” or the “Company”), today announced second quarter 2024 financial and operational results.

“Solaris delivered another quarter of strong free cash flow as we continue to generate cash from our core sand handling equipment business and the organic additional fleet investments we made over the last few years,” Chairman and Chief Executive Officer Bill Zartler commented.

“The MER acquisition will provide Solaris an exciting opportunity to diversify into the growing distributed power market, which will provide an additional business line that we expect to deliver continued strong shareholder returns from a new earnings base with access to new end markets, including oil and gas production, midstream and downstream, as well as various commercial and industrial applications. We remain on track to close this transaction in the third quarter 2024.”

Shareholder Returns

A previously announced cash dividend of $0.12 per share of Class A common stock was paid on June 17, 2024 to holders of record as of June 7, 2024, and a distribution of $0.12 per unit was paid to holders of units in Solaris Oilfield Infrastructure, LLC (“Solaris LLC,” and such holders “Solaris LLC Unitholders”), subject to the same payment and record date, totaling approximately $5 million.

On July 25, 2024, Solaris’ Board of Directors approved a third quarter 2024 cash dividend of $0.12 per share of Class A common stock, to be paid on September 6, 2024 to holders of record as of August 23, 2024, and a distribution of $0.12 per unit to Solaris LLC Unitholders, which is subject to the same payment and record dates, or approximately $5 million in aggregate.

Solaris did not repurchase shares during the second quarter of 2024. Approximately $15 million remains in the current share repurchase authorization.

Pro forma for the announced third quarter 2024 dividend, Solaris has returned approximately $183 million to shareholders through dividends and share repurchases.

Cash Flow, Capital Expenditures and Liquidity

Net cash from operating activities was $19 million in the second quarter of 2024 and free cash flow* after asset disposals was positive $18 million in the second quarter of 2024, including a working capital use of $4 million.

Capital expenditures in the second quarter of 2024 were approximately $1 million.

As of June 30, 2024, Solaris had $5 million of cash on the balance sheet. Solaris ended the second quarter of 2024 with $16 million in borrowings outstanding and $53 million of liquidity. Net debt* (defined as total debt outstanding less cash) at the end of the second quarter of 2024 was $11 million.

Second Quarter 2024 Financial Review

Net income was $10 million and $0.20 per diluted Class A share, for second quarter 2024, compared to first quarter 2024 net income of $7 million and $0.14 per diluted Class A share, and second quarter 2023 net income of $12 million and $0.24 per diluted Class A share. Adjusted pro forma net income* for second quarter 2024 was $6 million, or $0.13 per fully diluted share, compared to first quarter 2024 adjusted pro forma net income of $7 million, or $0.16 per fully diluted share, and second quarter 2023 adjusted pro forma net income of $11 million, or $0.25 per fully diluted share.

Revenue was $74 million for second quarter 2024, which was up 9% from first quarter 2024 and down 4% from second quarter 2023. Adjusted EBITDA* for second quarter 2024 was $21 million, which was down 8% from first quarter 2024 and down 22% from second quarter 2023. The sequential increase in revenue was driven by an increase in lower-margin ancillary last mile logistics services activity. On an Adjusted EBITDA basis, this was more than offset by a sequential decline in fully utilized systems, resulting in a sequential decrease in Adjusted EBITDA. The decreases in revenue and Adjusted EBITDA from the second quarter 2023 were primarily due to a decrease in fully utilized systems.

During the second quarter of 2024, Solaris earned revenue on 92 fully utilized systems, which includes sand systems and top fill systems. Total fully utilized systems were down 10% from first quarter 2024 and down 15% from second quarter 2023. Solaris followed an average of 56 industry frac crews on a fully utilized basis in the second quarter of 2024, compared to 64 industry frac crews in the first quarter of 2024.

Footnotes

*

See “About Non-GAAP Measures” below for additional detail and reconciliations of GAAP to non-GAAP measures in the accompanying financial tables.

Conference Call

Solaris will host a conference call to discuss its results for second quarter 2024 on Friday, August 9, 2024 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time). To join the conference call from within the United States, participants may dial (844) 413-3978, or for participants outside of the United States (412) 317-6594. Participants should ask the operator to join 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 at 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 7967465. 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 Non-GAAP Measures

In addition to financial results determined in accordance with generally accepted accounting principles in the United States (“GAAP”), this news release presents non-GAAP financial measures. Management believes that EBITDA, Adjusted EBITDA, Net debt, Free cash flow, Adjusted pro forma net income and Adjusted pro forma earnings per fully diluted share provide useful information to investors regarding the Company’s financial condition and results of operations because they reflect the core operating results of our businesses and help facilitate comparisons of operating performance across periods. Although management believes the aforementioned non-GAAP financial measures are good tools for internal use and the investment community in evaluating Solaris’ overall financial performance, the foregoing non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included in the accompanying financial tables.

About Solaris Oilfield Infrastructure, Inc.

Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) provides mobile equipment that drives supply chain and execution efficiencies in the completion of oil and natural gas wells. Solaris’ patented systems are deployed across oil and natural gas basins in the United States. Additional information is available on our website, www.solarisoilfield.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Examples of forward-looking statements include, but are not limited to, our business strategy, our industry, our future profitability, the volatility in global oil markets, expected capital expenditures and the impact of such expenditures on performance, management changes, current and potential future long-term contracts, our future business and financial performance and our results of operations, and the other risks discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the U.S. Securities Exchange Commission (the “SEC”) on February 27, 2024. 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.

Additional Information About the Proposed Transaction and Where to Find It

In connection with the proposed transaction, the Company filed a definitive proxy statement on Schedule 14A on August 7, 2024 (the “Proxy Statement”), and has commenced mailing of proxy cards, prior to the special meeting, in connection with the solicitation of proxies from the Company’s stockholders in connection with the matters to be considered at the Company’s special meeting scheduled for August 30, 2024. Additionally, the Company will file other relevant materials with the SEC in connection with its proposed transaction with the equityholders of MER. The materials filed or to be filed by the Company with the SEC may be obtained free of charge at the SEC’s web site at www.sec.gov. Investors and security holders of the Company are urged to read the Proxy Statement on file with the SEC and other relevant materials when they become available before making any voting or investment decision with respect to the proposed transaction because they contain or will contain important information about the transaction and the parties to the transaction.

Participants in the Solicitation

The Company, MER and their respective directors, executive officers, other members of their management and their employees, under SEC rules, may be deemed to be participants in the solicitation of proxies of Company stockholders in connection with the proposed transaction. Investors and security holders may obtain more detailed information regarding the names, affiliations and interests of certain of the Company’s executive officers and directors in the solicitation by reading the Company’s Proxy Statement on file with the SEC and other relevant materials filed with the SEC in connection with the transaction when they become available. Information concerning the interests of the Company’s and MER’s participants in the solicitation, which may, in some cases, be different than those of the Company’s stockholders generally, are set forth in the Proxy Statement relating to the transaction.

No Offer or Solicitation

This press release is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

SOLARIS OILFIELD INFRASTRUCTURE, INC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

 

2024

 

2023

 

2024

 

2024

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

69,640

 

 

$

69,925

 

 

$

64,635

 

 

$

134,275

 

 

$

147,753

 

Revenue - related parties

 

 

4,246

 

 

 

7,277

 

 

 

3,255

 

 

 

7,501

 

 

 

12,171

 

Total revenue

 

 

73,886

 

 

 

77,202

 

 

 

67,890

 

 

 

141,776

 

 

 

159,924

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services (exclusive of depreciation and amortization)

 

 

46,131

 

 

 

45,652

 

 

 

39,887

 

 

 

86,018

 

 

 

98,875

 

Depreciation and amortization

 

 

9,565

 

 

 

9,071

 

 

 

9,934

 

 

 

19,499

 

 

 

17,488

 

Gain on reversal of property tax contingency (1)

 

 

(2,483

)

 

 

—

 

 

 

—

 

 

 

(2,483

)

 

 

—

 

Selling, general and administrative

 

 

8,259

 

 

 

6,825

 

 

 

7,990

 

 

 

16,249

 

 

 

13,363

 

Other operating expense (income), net (2)

 

 

560

 

 

 

(125

)

 

 

123

 

 

 

683

 

 

 

(463

)

Total operating costs and expenses

 

 

62,032

 

 

 

61,423

 

 

 

57,934

 

 

 

119,966

 

 

 

129,263

 

Operating income

 

 

11,854

 

 

 

15,779

 

 

 

9,956

 

 

 

21,810

 

 

 

30,661

 

Interest expense, net

 

 

(685

)

 

 

(879

)

 

 

(799

)

 

 

(1,484

)

 

 

(1,338

)

Income before income tax expense

 

 

11,169

 

 

 

14,900

 

 

 

9,157

 

 

 

20,326

 

 

 

29,323

 

Provision for income taxes

 

 

(1,345

)

 

 

(2,659

)

 

 

(1,857

)

 

 

(3,202

)

 

 

(5,145

)

Net income

 

 

9,824

 

 

 

12,241

 

 

 

7,300

 

 

 

17,124

 

 

 

24,178

 

Less: net income related to non-controlling interests

 

 

(3,616

)

 

 

(4,709

)

 

 

(2,983

)

 

 

(6,599

)

 

 

(9,077

)

Net income attributable to Solaris Oilfield Infrastructure, Inc.

 

 

6,208

 

 

 

7,532

 

 

 

4,317

 

 

 

10,525

 

 

 

15,101

 

Less: income attributable to participating securities (3)

 

 

(410

)

 

 

(383

)

 

 

(277

)

 

 

(676

)

 

 

(700

)

Net income attributable to Class A common shareholders

 

$

5,798

 

 

$

7,149

 

 

$

4,040

 

 

$

9,849

 

 

$

14,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share of Class A common stock - basic

 

$

0.20

 

 

$

0.24

 

 

$

0.14

 

 

$

0.35

 

 

$

0.47

 

Earnings per share of Class A common stock - diluted

 

$

0.20

 

 

$

0.24

 

 

$

0.14

 

 

$

0.35

 

 

$

0.47

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares of Class A common stock outstanding

 

 

28,335

 

 

 

29,542

 

 

 

28,587

 

 

 

28,461

 

 

 

30,373

 

Diluted weighted average shares of Class A common stock outstanding

 

 

28,335

 

 

 

29,542

 

 

 

28,587

 

 

 

28,461

 

 

 

30,373

 

1)

Represents reversal of a portion of previously recognized property tax contingency following a settlement agreement with Brown County Appraisal District.

2)

Other operating expense (income), net includes the gains or losses on the sale or disposal of assets, credit losses or recoveries, sublease income, transaction costs and other settlements.

3)

The Company’s unvested restricted shares of common stock are participating securities because they entitle the holders to non-forfeitable rights to dividends until the awards vest or are forfeited.

SOLARIS OILFIELD INFRASTRUCTURE, INC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

 

 

June 30,

 

December 31,

 

 

2024

 

2023

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,059

 

$

5,833

Accounts receivable, net of allowances of $401 and $104, respectively

 

 

49,864

 

 

44,916

Accounts receivable - related party

 

 

4,422

 

 

2,378

Prepaid expenses and other current assets

 

 

6,544

 

 

4,342

Inventories

 

 

8,858

 

 

6,672

Assets held for sale

 

 

—

 

 

3,000

Total current assets

 

 

74,747

 

 

67,141

Property, plant and equipment, net

 

 

312,077

 

 

325,121

Non-current inventories

 

 

1,186

 

 

1,593

Non-current receivables, net of allowance of $692 and $862, respectively

 

 

1,069

 

 

1,663

Operating lease right-of-use assets

 

 

10,061

 

 

10,721

Goodwill

 

 

13,004

 

 

13,004

Intangible assets, net

 

 

339

 

 

702

Deferred tax assets

 

 

44,789

 

 

48,010

Other assets

 

 

492

 

 

342

Total assets

 

$

457,764

 

$

468,297

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

15,845

 

$

12,654

Accrued liabilities

 

 

18,307

 

 

20,292

Current portion of payables related to Tax Receivable Agreement

 

 

2,684

 

 

—

Current portion of credit agreement

 

 

16,000

 

 

—

Current portion of operating lease liabilities

 

 

1,378

 

 

1,385

Current portion of finance lease liabilities

 

 

2,507

 

 

2,462

Other current liabilities

 

 

2,976

 

 

408

Total current liabilities

 

 

59,697

 

 

37,201

Operating lease liabilities, net of current

 

 

10,782

 

 

11,541

Credit agreement, net of current

 

 

—

 

 

30,000

Finance lease liabilities, net of current

 

 

1,212

 

 

2,401

Payables related to Tax Receivable Agreement, net of current

 

 

68,846

 

 

71,530

Other long-term liabilities

 

 

44

 

 

44

Total liabilities

 

 

140,581

 

 

152,717

Stockholders' equity:

 

 

 

 

 

 

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, 30,338 shares and 30,448 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

 

 

283

 

 

290

Class B common stock, $0.00 par value, 180,000 shares authorized, 13,674 shares issued and outstanding as of June 30, 2024 and December 31, 2023; convertible into Class A common stock on a one-for-one basis

 

 

—

 

 

—

Additional paid-in capital

 

 

184,626

 

 

188,379

Retained earnings

 

 

19,692

 

 

17,314

Total stockholders' equity attributable to Solaris Oilfield Infrastructure, Inc.

 

 

204,601

 

 

205,983

Non-controlling interest

 

 

112,582

 

 

109,597

Total stockholders' equity

 

 

317,183

 

 

315,580

Total liabilities and stockholders' equity

 

$

457,764

 

$

468,297

SOLARIS OILFIELD INFRASTRUCTURE, INC

condensed CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

Three Months Ended June 30,

 

 

2024

 

2023

 

2024

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income

 

$

17,124

 

 

$

24,178

 

 

$

9,824

 

Adjustment to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

19,499

 

 

 

17,488

 

 

 

9,565

 

Loss (gain) on disposal of assets

 

 

44

 

 

 

(18

)

 

 

32

 

Stock-based compensation

 

 

4,876

 

 

 

3,904

 

 

 

2,659

 

Amortization of debt issuance costs

 

 

87

 

 

 

71

 

 

 

44

 

Allowance for credit losses

 

 

126

 

 

 

(2

)

 

 

(174

)

Inventory write-off

 

 

325

 

 

 

—

 

 

 

102

 

Deferred income tax expense

 

 

2,908

 

 

 

4,853

 

 

 

1,181

 

Other

 

 

(100

)

 

 

(162

)

 

 

(131

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(4,480

)

 

 

8,442

 

 

 

(2,685

)

Accounts receivable - related party

 

 

(2,044

)

 

 

(1,863

)

 

 

(1,701

)

Prepaid expenses and other assets

 

 

(2,439

)

 

 

(520

)

 

 

(3,390

)

Inventories

 

 

(2,104

)

 

 

(5,801

)

 

 

(1,656

)

Accounts payable

 

 

3,303

 

 

 

3,047

 

 

 

3,434

 

Accrued liabilities

 

 

1,109

 

 

 

(8,728

)

 

 

4,255

 

Property tax contingency

 

 

(2,483

)

 

 

—

 

 

 

(2,483

)

Payments pursuant to Tax Receivable Agreement

 

 

—

 

 

 

(1,092

)

 

 

—

 

Net cash provided by operating activities

 

 

35,751

 

 

 

43,797

 

 

 

18,876

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Investment in property, plant and equipment

 

 

(4,021

)

 

 

(40,130

)

 

 

(663

)

Cash received from insurance claims

 

 

326

 

 

 

69

 

 

 

326

 

Proceeds from disposal of property, plant and equipment

 

 

55

 

 

 

165

 

 

 

45

 

Net cash used in investing activities

 

 

(3,640

)

 

 

(39,896

)

 

 

(292

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Share repurchases and retirements

 

 

(8,092

)

 

 

(25,757

)

 

 

—

 

Distribution to non-controlling interest unitholders

 

 

(3,282

)

 

 

(3,489

)

 

 

(1,641

)

Dividend paid to Class A common stock shareholders

 

 

(7,289

)

 

 

(7,044

)

 

 

(3,641

)

Payments under finance leases

 

 

(1,214

)

 

 

(1,326

)

 

 

(612

)

Proceeds from issuance of insurance notes payable

 

 

3,553

 

 

 

1,520

 

 

 

3,553

 

Payments under insurance premium financing

 

 

(991

)

 

 

(823

)

 

 

(577

)

Payments related to debt issuance costs

 

 

—

 

 

 

(91

)

 

 

—

 

Cancelled shares withheld for taxes from vesting of restricted stock

 

 

(1,570

)

 

 

(1,355

)

 

 

(31

)

Borrowings under the credit agreement

 

 

4,000

 

 

 

35,000

 

 

 

—

 

Repayments of credit agreement

 

 

(18,000

)

 

 

—

 

 

 

(14,000

)

Net cash used in financing activities

 

 

(32,885

)

 

 

(3,365

)

 

 

(16,949

)

 

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

(774

)

 

 

536

 

 

 

1,635

 

Cash and cash equivalents at beginning of period

 

 

5,833

 

 

 

8,835

 

 

 

3,424

 

Cash and cash equivalents at end of period

 

$

5,059

 

 

$

9,371

 

 

$

5,059

 

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

Capitalized depreciation in property, plant and equipment

 

$

232

 

 

$

202

 

 

$

112

 

Capitalized stock based compensation

 

 

300

 

 

 

296

 

 

 

166

 

Property, plant and equipment additions incurred but not paid at period-end

 

 

412

 

 

 

3,402

 

 

 

412

 

Reclassification of assets held for sale to property, plant and equipment

 

 

3,000

 

 

 

—

 

 

 

—

 

Additions to property, plant and equipment through finance leases

 

 

70

 

 

 

1,926

 

 

 

70

 

Cash paid for:

 

 

 

 

 

 

 

 

 

Interest

 

$

1,414

 

 

$

1,028

 

 

$

656

 

Income taxes

 

 

520

 

 

 

198

 

 

 

444

 

SOLARIS OILFIELD INFRASTRUCTURE, INC RECONCILIATION AND CALCULATION OF NON-GAAP FINANCIAL AND OPERATIONAL MEASURES (In thousands) (Unaudited)

EBITDA AND ADJUSTED EBITDA

We view EBITDA and Adjusted EBITDA as important indicators of performance. We use them to assess our results of operations because it allows us, our investors and our lenders to compare our operating performance on a consistent basis across periods by removing the effects of varying levels of interest expense due to our capital structure, depreciation and amortization due to our asset base and other items that impact the comparability of financial results from period to period. We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding trends and other factors affecting our business in addition to measures calculated under generally accepted accounting principles in the United States (“GAAP”).

We define EBITDA as net income, plus (i) depreciation and amortization expense, (ii) interest expense and (iii) income tax expense. We define Adjusted EBITDA as EBITDA plus (i) stock-based compensation expense and (ii) certain non-cash items and extraordinary, unusual or non-recurring gains, losses or expenses.

EBITDA and Adjusted EBITDA should not be considered in isolation or as substitutes for an analysis of our results of operation and financial condition as reported in accordance with GAAP. Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA should not be considered alternative 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 the GAAP financial measure of net income to the non-GAAP financial measure of Adjusted EBITDA.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

 

2024

 

2023

 

2024

 

2024

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

9,824

 

 

$

12,241

 

 

$

7,300

 

$

17,124

 

 

$

24,178

 

Depreciation and amortization

 

 

9,565

 

 

 

9,071

 

 

 

9,934

 

 

19,499

 

 

 

17,488

 

Interest expense, net

 

 

685

 

 

 

879

 

 

 

799

 

 

1,484

 

 

 

1,338

 

Provision for income taxes (1)

 

 

1,345

 

 

 

2,659

 

 

 

1,857

 

 

3,202

 

 

 

5,145

 

EBITDA

 

$

21,419

 

 

$

24,850

 

 

$

19,890

 

$

41,309

 

 

$

48,149

 

Property tax contingency (2)

 

 

(2,483

)

 

 

—

 

 

 

—

 

 

(2,483

)

 

 

—

 

Accrued property tax (3)

 

 

(1,794

)

 

 

—

 

 

 

—

 

 

(1,794

)

 

 

—

 

Stock-based compensation expense (4)

 

 

2,659

 

 

 

1,924

 

 

 

2,217

 

 

4,876

 

 

 

3,904

 

Loss (gain) on disposal of assets

 

 

30

 

 

 

4

 

 

 

12

 

 

42

 

 

 

(357

)

Credit (recoveries) losses

 

 

(174

)

 

 

(2

)

 

 

300

 

 

126

 

 

 

(2

)

Transaction costs (5)

 

 

1,013

 

 

 

—

 

 

 

45

 

 

1,058

 

 

 

—

 

Other (6)

 

 

127

 

 

 

49

 

 

 

223

 

 

350

 

 

 

249

 

Adjusted EBITDA

 

$

20,797

 

 

$

26,825

 

 

$

22,687

 

$

43,484

 

 

$

51,943

 

___________________________

1)

United States federal and state income taxes.

2)

Represents reversal of a portion of previously recognized property tax contingency following a settlement agreement with Brown County Appraisal District.

3)

Represents reversal of previously recognized accrued property tax expenses following a settlement agreement with Brown County Appraisal District, included in cost of services in the condensed consolidated statements of operations.

4)

Represents stock-based compensation expense related to restricted stock awards and performance-based restricted stock units.

5)

Represents transaction costs incurred for activities related to acquisition opportunities.

6)

Other includes the net effect of inventory write-offs and other settlements.

FREE CASH FLOW

Free cash flow is an important supplemental measure to assess our liquidity but should not be considered as an alternative to net cash flow from operating activities presented in accordance with GAAP.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

 

2024

 

2023

 

2024

 

2024

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash flows provided by operating activities

 

$

18,876

 

 

$

30,274

 

 

$

16,875

 

 

$

35,751

 

 

$

43,797

 

Cash used for capital expenditures, net of proceeds from disposal of assets

 

 

(618

)

 

 

(21,139

)

 

 

(3,348

)

 

 

(3,966

)

 

 

(39,965

)

Free cash flow

 

$

18,258

 

 

$

9,135

 

 

$

13,527

 

 

$

31,785

 

 

$

3,832

 

ADJUSTED PRO FORMA NET INCOME AND ADJUSTED PRO FORMA EARNINGS PER FULLY DILUTED SHARE

Adjusted pro forma net income represents net income attributable to Solaris assuming the full exchange of all outstanding membership interests in Solaris LLC not held by Solaris Oilfield Infrastructure, Inc. for shares of Class A common stock, adjusted for certain non-recurring items that the Company doesn't believe directly reflect its core operations and may not be indicative of ongoing business operations. Adjusted pro forma earnings per fully diluted share is calculated by dividing adjusted pro forma net income by the weighted-average shares of Class A common stock outstanding, assuming the full exchange of all outstanding units of Solaris LLC (“Solaris LLC Units”), after giving effect to the dilutive effect of outstanding equity-based awards.

When used in conjunction with GAAP financial measures, adjusted pro forma net income and adjusted pro forma earnings per fully diluted share are supplemental measures of operating performance that the Company believes are useful measures to evaluate performance period over period and relative to its competitors. By assuming the full exchange of all outstanding Solaris LLC Units, the Company believes these measures facilitate comparisons with other companies that have different organizational and tax structures, as well as comparisons period over period because it eliminates the effect of any changes in net income attributable to Solaris as a result of increases in its ownership of Solaris LLC, which are unrelated to the Company's operating performance, and excludes items that are non-recurring or may not be indicative of ongoing operating performance.

Adjusted pro forma net income and adjusted pro forma earnings per fully diluted share are not necessarily comparable to similarly titled measures used by other companies due to different methods of calculation. Presentation of adjusted pro forma net income and adjusted pro forma earnings per fully diluted share should not be considered alternatives to net income and earnings per share, as determined under GAAP. While these measures are useful in evaluating the Company's performance, it does not account for the earnings attributable to the non-controlling interest holders and therefore does not provide a complete understanding of the net income attributable to Solaris. Adjusted pro forma net income and adjusted pro forma earnings per fully diluted share should be evaluated in conjunction with GAAP financial results. A reconciliation of adjusted pro forma net income to net income attributable to Solaris, the most directly comparable GAAP measure, and the computation of adjusted pro forma earnings per fully diluted share are set forth below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

 

2024

 

2023

 

2024

 

2024

 

2023

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Solaris

 

$

6,208

 

 

$

7,532

 

 

$

4,317

 

 

$

10,525

 

 

$

15,101

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reallocation of net income attributable to non-controlling interests from the assumed exchange of LLC Interests (1)

 

 

3,616

 

 

 

4,709

 

 

 

2,983

 

 

 

6,599

 

 

 

9,077

 

Loss (gain) on disposal of assets

 

 

30

 

 

 

4

 

 

 

12

 

 

 

42

 

 

 

(357

)

Property tax contingency (2)

 

 

(2,483

)

 

 

—

 

 

 

—

 

 

 

(2,483

)

 

 

—

 

Accrued property tax (3)

 

 

(1,794

)

 

 

—

 

 

 

—

 

 

 

(1,794

)

 

 

—

 

Transaction costs (4)

 

 

1,013

 

 

 

—

 

 

 

45

 

 

 

1,058

 

 

 

—

 

Credit (recoveries) losses

 

 

(174

)

 

 

(2

)

 

 

300

 

 

 

126

 

 

 

(2

)

Other (5)

 

 

127

 

 

 

49

 

 

 

223

 

 

 

350

 

 

 

249

 

Incremental income tax expense

 

 

(578

)

 

 

(983

)

 

 

(626

)

 

 

(1,204

)

 

 

(1,763

)

Adjusted pro forma net income

 

$

5,965

 

 

$

11,309

 

 

$

7,254

 

 

$

13,219

 

 

$

22,305

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding

 

 

28,335

 

 

 

29,542

 

 

 

28,587

 

 

 

28,461

 

 

 

30,373

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potentially dilutive shares (6)

 

 

15,990

 

 

 

15,365

 

 

 

15,543

 

 

 

15,722

 

 

 

15,294

 

Adjusted pro forma fully weighted average shares of Class A common stock outstanding - diluted

 

 

44,325

 

 

 

44,907

 

 

 

44,130

 

 

 

44,183

 

 

 

45,667

 

Adjusted pro forma earnings per share - diluted

 

$

0.13

 

 

$

0.25

 

 

$

0.16

 

 

$

0.30

 

 

$

0.49

 

(1)

Assumes the exchange of all outstanding Solaris LLC Units for shares of Class A common stock at the beginning of the relevant reporting period, resulting in the elimination of the non-controlling interest and recognition of the net income attributable to non-controlling interests.

(2)

Represents reversal of a portion of previously recognized property tax contingency following a settlement agreement with Brown County Appraisal District.

(3)

Represents reversal of previously recognized accrued property tax expenses following a settlement agreement with Brown County Appraisal District, included in cost of services in the condensed consolidated statements of operations.

(4)

Represents transaction costs incurred for activities related to acquisition opportunities.

(5)

Other includes the net effect of inventory write-offs and other settlements.

(6)

Represents the weighted-average potentially dilutive effect of Class B common stock, unvested restricted stock awards, unvested performance-based restricted stock units and stock options.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240808967944/en/

Yvonne Fletcher Senior Vice President, Finance and Investor Relations (281) 501-3070 IR@solarisoilfield.com